EP 9: Facebook Execs Go Extremely Remote, Bored Ape Yacht Club’s Gaming Era, Ethereum Regret and Nikita’s Back Once Again!

(01:26) Facebook executives flee but not in a super disconcerting way yet (09:34) Yuga Labs raised $450 million dollars to let Bored Ape Yacht Club try to do a thing (21:53) Democratizing NFTs for everybody as long as everybody has $250,000 (29:33) Why you’d mess with NFT success kinda just because it’s cool (35:43) How Vitalik Buterin just wanted his World of Warcraft stuff and now there are million dollar monkeys https://www.wsj.com/articles/mark-zuckerberg-and-metas-leadership-take-remote-work-to-the-extreme-11648040580?mod=tech_lead_pos5 https://www.theverge.com/2022/3/22/22991272/yuga-labs-seed-funding-a16z-bored-ape-yacht-club-bayc-metaverse-other-side https://time.com/6158182/vitalik-buterin-ethereum-profile/ Follow the show: https://twitter.com/cartoonavatars https://www.instagram.com/cartoonavatars/ https://www.tiktok.com/@cartoonavatars Follow the hosts: https://twitter.com/zck?s=21 https://twitter.com/nikitabier?s=21 https://twitter.com/loganbartlett?s=21 Mixed and edited: Justin Hrabovsky Produced: Andrew Nadeau and Rashad Assir Executive Producer: Josh Machiz Music: Griff Lawson Show Notes: Wall Street Journal - Facebook Executives: https://www.wsj.com/articles/mark-zuckerberg-and-metas-leadership-take-remote-work-to-the-extreme-11648040580 Leaked BAYC Deck: https://twitter.com/LeonidasNFT/status/1505058932758360064?s=20&t=AaGm3EcwEjQOheuHGSMPkQ Axie Infinity video: https://www.youtube.com/watch?v=0GFSDdt35xI Vitalik on the future of Crypto: https://time.com/6158182/vitalik-buterin-ethereum-profile/ Vitalik at ETH Denver: https://tech.hindustantimes.com/tech/news/ethereum-founder-vitalik-buterin-says-crypto-welcomes-another-winter-71645295910461.html Executive Producer: Rashad Assir Producer: Leah Clapper Mixing and editing: Justin Hrabovsky Check out Unsupervised Learning, Redpoint's AI Podcast: https://www.youtube.com/@UCUl-s_Vp-Kkk_XVyDylNwLA 🎥 Subscribe on YouTube: https://www.youtube.com/channel/UCugS0jD5IAdoqzjaNYzns7w?sub_confirmation=1 Follow on Socials 📸 Instagram - https://www.instagram.com/theloganbartlettshow 📱 X - https://twitter.com/loganbartshow 🎬 Clips on TikTok - https://www.tiktok.com/@theloganbartlettshow About the Show Logan Bartlett is a Software Investor at Redpoint Ventures - a Silicon Valley-based VC with $6B AUM and investments in Snowflake, DraftKings, Twilio, and Netflix. In each episode of The Logan Bartlett Show, we sit down with the people behind today’s most important startups and extract the tactics, lessons, and frameworks they’ve learned the hard way. Conversations span hiring to GTM, product, growth, fundraising and everything in between - collectively forming the ultimate playbook to make you a better CEO, investor or board member. Tap follow and enable notifications to stay ahead of the game.

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

• 0:03Logan Bartlett?

  Welcome to the ninth episode of Three Cartoon Avatars. I'm your host, Logan Bartlett, and I am joined again today by my esteemed co-hosts Nikita Beer and Zach Kukoff.

• 0:21Logan Bartlett?

  How are we doing, guys?

• 0:22Speaker 01

  Okay. Okay.

• 0:24Logan Bartlett?

  You've been better, Nikita?

• 0:26Speaker 01

  Yeah, uh, just got back from Mexico, uh, recovering slowly and steadily.

• 0:32Logan Bartlett?

  But actually, like, sick, right? Like, like, some food poisoning or something?

• 0:37Speaker 01

  Oh, a little bit of, uh, traveler's stomach, uh, ailments, but, uh, doing all right.

• 0:43Logan Bartlett?

  I appreciate it. You powering through for us. I, uh, I wonder, some might compare to this to, like, uh, Michael Jordan's flu game or whatever. Like, a real heroic performance coming out here and, and performing on a podcast when you're feeling...

• 0:55Speaker 02

  That reference is gonna really land for the five listeners of ours who both are interested enough in tech drama to tune into this and also like the NBA.

• 1:03Logan Bartlett?

  I think that play, I, I, The Last Dance was very popular, uh, over the course of COVID. I think a lot of people will know the, the, uh, flu game reference, but yes. Well, Nikita, we appreciate you powering through for us. I, uh, we might, we might let you, uh, take breaks along the way or something. If anyone here is just Zach and I for an extended period of time, it, Nikita might have tapped out along the way. All right. So, uh, Wall Street Journal came out with an article entitled "Facebook Executives Taking Remote Work to the Extreme." And basically, it went through and, uh, talked about how a ton of the different executives are really pushing the envelope of remote work and not being in California.

• 1:42Logan Bartlett?

  And so, uh, one, one executive splitting time between California and Madrid, another one splitting time between Hawaii, LA, and Cape Cod. Um, they're, they're even talking about how, uh, Zuckerberg's been bouncing around quite a bit. I think, uh, he's spending time between Hawaii and California for the most part. And so, it's clear that, uh, that this company that was once always in person, Nikita, when you, when you worked there, has now really pushed the envelope of what remote means. I guess, Nikita, from your perspective, how big of a surprise is this that they're doing it? Any interesting observations about, about how Facebook's operating now?

• 2:19Speaker 01

  Yeah, I mean, it's it comes as a pretty big surprise that this is happening because, I mean, I I used to sit next to Zuck near his office. And every Monday morning, he would have all these names of, you know, he would have Javier, he'd have Guy Rosen, Alex Schultz, all in a glass box together, talking very closely. And that's how they did Monday morning meetings all the time. And it's it is funny, though, that everyone is going back to their home country. So I I think part of it is probably a retention thing. These guys have been there for like over a decade. They have so much institutional knowledge. They've made huge amounts of money.

• 2:59Speaker 01

  If it's probably better to keep them around, even if they aren't as engaged, and let them like resume their lives that they left behind to move to Silicon Valley. And I'm I'm sure they've built up, you know, quite a bit of relationships out here as well, but they probably want to go back to family. So I I think that that's part of the reason. It does seem, based off the numbers that were in that article, they're building out pretty big offices there. So I I think they're definitely going to invest in it. It's not going to be like purely remote. They're still going to have kind of a satellite there.

• 3:34Logan Bartlett?

  Do you think internally they're justifying this as like, hey, we're dog fooding a bunch of our apps in this metaverse world and location doesn't really matter anymore? Like, is there some propaganda going on internally to justify this? Or is it just, hey, fuck it, our executives want to live where they want to live?

• 3:50Speaker 01

  Well, I think the only departure from what Facebook was doing before is the fact executives are going to be remote too. Because even when I was working there in in person onsite, you connected to a lot of different teams over video call while you were onsite at the office. Because you'd go to the meeting room, dial in, and then connect you to someone maybe 250 feet away in another meeting room. So you'd still be effectively remote. So I think the the departure from where they are today, or at least pre-COVID, was that the executives aren't showing up on for the Monday morning meetings in Zuck's glass box.

• 4:31Speaker 02

  I mean, it sort of feels, Nikita, you're the experts who tell me what you think, but it sort of feels like in a world where product velocity has to slow for a variety of external reasons, right? Like, we know that there are regulatory hurdles now. We know you can't ship a feature that having 13 lawyers, look at it. Is there really a need for the executives to keep their foot in the gas pedal 100%? I'm not saying it's not the best thing for the business. I'm saying if you are being limited by external forces anyway, why not at least live your life alongside it? I could see that thinking working pretty well.

• 5:01Logan Bartlett?

  Zach, you're implying that working remote means that you're not going to be working as hard, which I want you to know, after kicking that hornet's nest last week and getting everyone very upset, I will tell you, the zealots of remote work come out in full force when you make any comment to that end. So let me come out as a remote work stan here and say that I don't think the trade offs of of remote mean that you're not working as hard.

• 5:27Speaker 02

  Wow, Logan Bartlett trying to get himself un-excommunicated, some might even say just communicated, into the church of remote work again.

• 5:35Logan Bartlett?

  I'm backtracking my way right back into remote work.

• 5:39Speaker 02

  I'll be the heretic here. I'll be the Martin Luther of remote work. I'll tell you, that's probably an offensive joke for somebody.

• 5:46Logan Bartlett?

  That's good. I think that's good. Religion's out these days.

• 5:49Speaker 01

  But to your point, Zach, on, does the momentum just need, just, does it need to slow down? I think they're probably facing more competitive pressures today than they are in any time of the company's history. They are losing the content entertainment vertical to TikTok. They're losing close friends to iMessage and a little bit on the Snapchat side. So I think if anything, the the velocity of product development actually needs to accelerate because, and also because the regulatory requirements are also much higher. As a product manager there during my last year, like, I had to get, you know,

• 6:30Speaker 01

  seven to eight lawyers to approve any product change I did that went out. And that's, that took about 30 to 40% of my day to day was just talking to lawyers and getting approvals. So I think you'd probably want to work at an even higher frequency if you want to execute in this market. So, yeah, that's at least, I don't think they're throwing in the towel.

• 6:54Speaker 02

  Well, no, I guess the question is, sorry, I think you're framing it a nice way. The question is, if you're, you know, Facebook employee X, right? And you know, you have to spend 30% of your time dealing with the 18 lawyers who need to sign off on changing button placement, right? In your new product or whatever the case might be. How is it? How are you not demotivated by that? I think that would demotivate most people. And if you're feeling demotivated, maybe then the calculus is, you know, if we're slowly sliding down anyway, it might as well be in Hawaii while we slide down instead of being in, you know, Menlo Park.

• 7:28Logan Bartlett?

  I think we're all dancing around the main thing that this is probably just people trying to avoid small talk with Zuck in the office, right? And so this is like everyone just kind of backing away slowly. So, you know, you don't have to like bump into him at the water cooler anymore.

• 7:43Speaker 02

  What do you mean? You don't want to have 20 minutes of stilted barbecue sauce conversation? That's how I start all of my Zooms now, actually voluntarily.

• 7:51Speaker 01

  I mean, if of all companies, though, to work onsite at Facebook was pretty nice. I mean, if you ever just got sick of working, you just go to one of the chefs and have a fancy steak made. So, I mean, it was, it was a pretty comfortable place. I didn't mind being in the office there. So, yeah, but I think at the end of the day, like, a lot of the company was already run in a remote way even before COVID, except the executives. Now, the executives probably have made a ton of money and they don't want to lose the institutional knowledge and know-how that they have.

• 8:31Speaker 01

  So they're, they're probably just moving back and this is, this is a retention strategy.

• 8:37Logan Bartlett?

  By the way, this is kind of a side, but anytime they do these remote work articles that are like pro remote work, they, they bring in like, you know, resident businessman to comment on like the trade-offs of, of remote work, right? And so this time it was Bill George, senior fellow at HBS, which honestly sounds like a made up person. Like, I'm sure he's a wonderful person, but he says, "Your people want to see you. They want to know you're there. Yes, you can Zoom or Microsoft Teams or something to stay in contact, but there's a lot to be said for presence." And I feel like this actually could just be a made up character that like, you know, serves as resident HBS person weighing in on these topics, right? It's like he probably gets called in for all these remote articles just to weigh in on this stuff.

• 9:21Speaker 02

  Yeah, man who works at an institution that spends an inordinate amount of time teaching you how to have a good presence thinks presence might still be important. That's shocking, unpredictable to me.

• 9:31Logan Bartlett?

  So another topic we wanted to hit this week was Yuga Labs, which is the creator of Bored Ape Yacht Club, raised $450 million in a round led by Andreessen Crypto. So the plans for the business was actually to build a gaming-focused metaverse named Meta RPG that will be compatible with a host of different NFTs, but including Bored Apes. And what's interesting is they're planning on building a system described as an in-game app store that will allow players to create characters using NFTs they own or ones from scratch as

• 10:11Logan Bartlett?

  well. It was interesting that the deck was actually leaked on the internet. And so we were able to get a view into the actual financials of Yuga Labs. And it looked like last year they actually made $127 million in net revenue, and that had a 95% profit margin. So all the revenue was actually made on the resale of Bored Apes, which they have some transaction fee that nets back to them. So it's interesting. I mean, obviously, Bored Apes exists so much in the cultural zeitgeist these days, and it's something that everyone's very aware of. But the vision for this company that they're selling in this deck is very much

• 10:55Logan Bartlett?

  on the come, right? It's about creating this game. It's about their community. It's all these things that are kind of intangible or on the come. And I kind of walked away being like, this is an interesting asset in some ways, but also a very expensive seed round to get done at $4 billion, raising $450 million. So Nikita, what were your thoughts on this?

• 11:20Speaker 01

  I think it reminded me of like a pitch deck in like 2012 where they have this insanely audacious vision for a consumer product and they have some silly wedge, but the leap of faith that these investors had to take seems huge, especially at that price. Like, I mean, let's say you're Facebook and you're proposing building a new product like events or groups. I mean, you literally have people's attention while they're scrolling. So that's not that big of a leap of faith. What you have with bored apes is you have images in people's wallets. So the fact they actually have this optimistic view that they can create

• 12:02Speaker 01

  a game where people onboard that they actually enjoy it, that there's just so many conditional and I've always felt like when you build a product, like if you want it to be successful and de-risk it, you need to limit the number of conditional statements. And that's also the same way I approach a lot of consumer investments is what is the number of layers of conditional statements that must be true for this product or thesis to succeed? And here it's like layered on like crazy. Like you have these people who bought these things for speculative purposes. They're stored in wallets, not on desktops or like inside of a Fortnite type app or like Steam or something. Anyway, but I just don't see how

• 12:45Speaker 01

  that this like numbers really make sense to invest at this valuation for that particular vision.

• 12:52Speaker 02

  Well, I mean, I'll say one thing, right? I'm not a consumer investor, but how many seed rounds do we see that have 100 million revenue? Like, how many seed rounds do we see that are basically at scale? The answer is none, right? I actually, Nikita, far be it for me, but I'll take sort of the over on their ability to build a really slick game. Now, I think there's two questions, right? If the first question is, can they build a game that's fun? I mean, God, my answer would be no, probably. But if they can be. The second question is like, can they build a game that is addictive or compelling or has people coming back to it? I actually think their ability to generate revenue from the game makes a lot of sense for me, right? If you're effectively coming on because you've bought, I don't know if you guys saw this in the deck,

• 13:33Speaker 02

  the plan is to roll out land sales for a virtual world. And the land has like loot box style elements to it where you have different creatures and magical resources you might roll and get lucky to have on the plot of land you buy. So if you're asking me, do I think bored apes can generate a bunch more revenue on people buying speculative assets with land that have loot box style, random elements to it? Yeah, I think they can make another 100 million this year doing that. And I think they can probably do that for another couple of years. And I even sort of see a world where they can get enough people trading these things back and forth, enough speculation slash the elements of collect them all, call it Pokemon style, whatever, that people actually want to engage with this thing.

• 14:16Speaker 02

  Maybe not to play it in the way you might play a traditional game, which is notably fun, but at least in the way you might have played Farmville, you know, 15 years ago, which was at least compelling.

• 14:26Logan Bartlett?

  I think what's interesting, I think of games, Nikita, you could speak to this, but games is like the hardest, least forgiving venue that like exists out there. You think enterprise software is like the easiest and most forgiving, especially in like vertical markets? And then you work your way down to like, you know, prosumer and then like dev tools. And then it's like, you know, whatever, narrow consumer apps. And then it's broad based consumer apps and then it's games. Like, these are so complicated to play. It involves communication. It involves like navigation. It involves like so many different elements of it. And there's a reason you see people like Stuart Butterfield pivoting from, you know, making a game into making a Slack and building that into a beautiful app.

• 15:10Logan Bartlett?

  Or the Discord founder as well, uh, came out of making a game as well because games are so difficult. And so when you do anything else, it's like pretty easy to do. Now, so that's what makes me really skeptical about this is games in general are like the, the hardest of hard mode to start on here. Now, do I think they're going to be able to galvanize a ton of creators to help them? Obviously with the amount of money they have, both in terms of this 455 million dollar raise or whatever it was, as well as the free cash flow they're spitting off, they're going to be able to pay like a lot of people. I also think here. It's gonna be more forgiving than the average game, right? And people are gonna be more willing to absorb some of the friction in it.

• 15:54Logan Bartlett?

  Because I've never played Axie Infinity, but that game itself, everyone that plays it says it's just terrible. For people that don't know, it's like a crypto kind of MLM, uh, where you recruited people to build Pokemon and like then, you know.

• 16:10Speaker 02

  And it's all in the, it's all in the Philippines, too. It's like 90% people in the Philippines who are doing the work. It's like a taxi medallion system where you own the thing.

• 16:18Logan Bartlett?

  Like a play to earn game, but everyone says it sucks. It's like not a good game, but like there are users of it, right? And so I do think this community will allow a little more forgiveness because people like the apes. But this is almost as hard of a, of a feat to accomplish as you possibly can in the world of consumer.

• 16:39Speaker 02

  Well, they, they've made a game, they, they did make a game. And I, I don't know that game performed, I don't know if it was any fun. But like notably, when I think about the kind of game they're pitching in the deck, it doesn't feel like Axie Infinity, which is basically just grinding and clicking buttons over and over again, repetitive M Turk style work with just two more degrees of, uh, money laundering in between it. It feels far more like the, you might get long-term in like an Eve Online, right? Where it's, uh, effectively, hey, um, you know, we think that we can do something pretty slick and build an economy around these things. And, and perhaps in the way that people have built, you know, uh, incredible amounts of energy and time focused on building Eve Online clans and et cetera, et cetera.

• 17:22Speaker 02

  Like just enough of like the gambling element of the loot box, plus a little bit of the creature you have some degree of engagement to. Plus the fact that it's not button clicking M Turk style is enough to keep people fairly engaged.

• 17:35Speaker 01

  I, I wonder if like, because they just need to serve their, uh, NFT holders. Like I, I think the stat I read in the deck was they had, I don't know, it was 20 or 30,000, uh, users for that game that you mentioned, Zach. Um, which is considered a complete and utter failure in every other part of the tech industry. So I mean, if they just need to build something for those, you know, 36,000 NFT holders to speculate, then yes, I think they can succeed. If they're trying to build actually a consumer accessible game, I really give it like a 1% probability of succeeding. Even if you throw money at something like all these, you know, AAA game studios that have been created over the last two decades, most of the games flopped.

• 18:20Speaker 01

  And the ones that didn't flop usually were copies of a formula that worked in the past. Like Fortnite was a copy of PUBG. You know, World of Warcraft was a copy of a bunch of other RPGs that preceded it. I think if they, I think that's probably their best bet is to just pick something that's already working and just add four day characters as the, as the in-game assets.

• 18:45Speaker 02

  Yeah, I think that makes sense, but more to the point, I think you, you framed the question really well. Right? Like this doesn't have to be EA.

• 18:52Logan Bartlett?

  Why doesn't it need, like, how can they profit if it's just the users on the, like, of the people that own board apes? It needs to be bigger than that for it to work, right?

• 19:02Speaker 02

  It probably needs to be slightly bigger, but if they're, if they're making a hundred million a year in revenue on secondary sales of board apes, let's not assume it's going to continue forever. Right? But assume you can double or triple the user size and introduce new things to them to speculate on that have some long tail of longevity to them. Like they're, if they're taking a tax on every bit of transaction and they can get 50,000 people, which is to Nikita's point, still would be considered a failure, right? A most broad ranging consumer apps. But if they can get 50,000 people to semi regularly speculate or participate in in-game economy where they're taking a secondary tax and everything they're doing, and they can get that up to two or $300 million a year in revenue, that's, but let's, let's be clear for a minute. That's a success. Like that might not be a hundred

• 19:43Speaker 02

  and 50 billion dollar business, Uber, et cetera, et cetera. But that's a successful business that can very easily go public and have a great business for everybody involved.

• 19:52Speaker 01

  I guess what's interesting though is like the, when you're looking at the board apes user base, these are all high net worth individuals effectively. Like what no other human on the planet would spend, you know, $200,000 on a ape image. So.

• 20:07Speaker 02

  What do you mean, Nikita? I passed on buying a house so I could buy a, a board ape. I could have been living in a nice studio on the Tenderloin, but instead I have my board ape.

• 20:15Logan Bartlett?

  Yeah, Zach, Zach now has to eat lentils because he, he has a board ape.

• 20:19Speaker 02

  That's right. I'm up to my eyeballs on mortgages on board apes.

• 20:23Speaker 01

  But I mean, really, it's it's it's an interesting new like realm of consumer where you have such a small user base with such like deep pockets. Because previously, when you were building a game or a consumer product, you're dealing with, you know, either like a very wide reach of people who are middle or lower class. And you're collecting a small amount of money from everybody. I mean, look at look at Facebook, look at, you know, all these social networks that have gotten reach. So it's almost like they have all the whales of these, you know, games like Farmville concentrated in one cluster.

• 21:00Speaker 02

  Right. That's to me is a reason for optimism. If you told me I could I could put money into Farmville, but just the whales, right? And then sell them new products to juice the amount of money I get out of each whale. I maybe I'm just completely missing something here, but that doesn't seem like a crazy bet to me at all.

• 21:16Speaker 01

  It's a little different than whales for like, you know, a mobile game or a, you know, Facebook game, because these are actually sophisticated people that are expecting upside. But on the other hand, Farmville is people who are being, you know, psychologically manipulated into opening their wallets and buying currency they can never trade out of the game.

• 21:36Speaker 02

  I like to think anybody who spends $500,000 on an ape photo is psychologically manipulated in some sense. They may not know it, but they I don't know if we can call that sophistication, Nikita.

• 21:46Logan Bartlett?

  What's interesting is they they they use all this like egalitarian language of how they're going to democratize NFTs. And if you look, there's one of the articles actually had like the NFT collections associated with with Bored Ape Yacht Club has at most 40,000 users, right? And the entry price for these things is 250 grand, right? Just to get one. And so it's sort of like, I looked it up, Solo House has 120,000 users. Like, this is 3X more exclusive than Solo House and costs the price of like a Bentley or whatever, a Rolls Royce. And so it's interesting that they're they're giving us all this Robin Hood language of

• 22:29Logan Bartlett?

  how they're going to democratize all these things, but they're coming at it from such a privileged point in the ecosystem, right? And so it's just, it's kind of a weird dichotomy that they're going to be the ones that democratize the access to, you know, all of this stuff when it's such a high-class thing that that have a Bored Ape at all.

• 22:48Speaker 02

  I do kind of wish they had leaned into the exclusivity element. It's okay to be a business for wealthy people. It's fine to say we're a 95% plus margin business, selling $500,000 JPG photos and $100,000 plots of land in the metaverse to people. That's not, there's nothing wrong with making money that way.

• 23:07Logan Bartlett?

  When you say it like that, it does sound a little ridiculous, but it sounds a little bad.

• 23:11Speaker 02

  Yeah, interesting.

• 23:13Logan Bartlett?

  Like, if you count your pitch, I'm not sure that would resonate. But there is, to your point, there is precedent of starting with a premium product and slowly pushing it down, like in opening the market, right? Apple obviously started like that. Tesla started like that. Like, there is a precedent for this. But to some extent, it's just the Robin Hood language that kind of bothered me. It's like, you know, lean into the fact that you're a premium product and say you might open it a little bit, not like you're gonna, you know, open this to everyone.

• 23:42Speaker 01

  I think it's, I think it's fine that that's their target market, but it is completely against the ethos of Web 3 and the crypto community in general. Like, the reason they form this hostility towards centralized platforms is that they're screwing the everyday man and like, but realistically, the everyday man now has access to social networks, has access to communication tools. So I just, it doesn't really add up if the only people who have access to this, this product space are high net worth individuals who drive Lambos and...

• 24:17Logan Bartlett?

  That's what's interesting is if you go through the deck itself, like, one of the first couple of slides is that they're listing all the celebrities that have Bored Apes, right? And it's going through and being like, it's Justin Bieber and Serena Williams and Jimmy Fallon and Shaq, right? And like, they're leaning into this celebrity aspect of the whole thing as like part of their brand.

• 24:38Speaker 02

  Nikita, has there ever been a revolution that didn't just end up with a different entrenched group of people on top? Like, that's the problem. Yeah, sure, it's against the ethos of Web 3. I totally hear that, right? But ultimately, there is a different group. Like, if you bought a Bored Ape early, or you bought a CryptoPunk or a MeBit, which now Bored Ape's recently acquired both, both of those IPs, right? Like, if you purchased in early, you probably are now the new high net worth person who's made substantial wealth into this. Ultimately, yeah, you have to be high net worth now to join the party? Sure. Is this a good business or not? And it seems clear, at least from the deck that we saw, that it probably is a pretty good business or is a real shot of being a pretty good business, even if it's a business and not a social crusade, which is okay.

• 25:22Logan Bartlett?

  And you think it's a good business? Like, obviously, it's insane to see a business that has grown at this, like, rate, right? $127 million in net revenue, 95% profit margins in the first year. Like, obviously, by the definition of, you know, is this a

• 25:38Speaker 02

  Business.

• 25:38Logan Bartlett?

  It's, it's obviously a good business. The question is, will that sustain, right? The value of this business isn't a function of the historical revenue or free cash flow. The value of the business, the folks that are investing in are saying, "Hey, this is worth $4 billion today, and we think we can 3, 5, 10x that over the course of the next 5, 10 years," right? And by that definition, that's where it starts to break down for me, is that will this stay? Like, are we top-ticking the point in time that the financial profile looks as good as it is? You can tell they're already clinging to something that doesn't exist, which is this future game.

• 26:20Logan Bartlett?

  Clearly, they don't believe that they're going to continue to just generate transaction fees off of

• 26:25Speaker 02

  Of course.

• 26:26Logan Bartlett?

  As a sustainable thing. And so, sure, reverse looking, it's a good business. Forward looking, I don't know.

• 26:33Speaker 02

  Listen, it's a great business. If I were in their shoes, would I go out and raise capital? Probably not. If I were in their shoes, right, I would just pull stuff, pull money out of this. Like, this is a phenomenal, I mean, I hate the term "lifestyle business" because it's such a pejorative term for what are ultimately 95% of businesses. But this is an amazing, quote-unquote, "lifestyle business" where you could just pull capital out of this thing forever. There's no reason you have to go do thing two and thing three and thing four and continue to try to take it out. But if you're asking me, do you think there's a reasonable chance that they can get thing-two launch, the two-step here actually works? Yeah, I could see a two-step here. And I could see the next thing, at least generating another reasonable year or two of revenue. Now, do I know in five or 10 years?

• 27:18Speaker 02

  No, but I also don't do crypto, I don't do consumers. So you're asking the absolute least qualified person to pontificate, which is also the premise of the podcast.

• 27:26Speaker 01

  As a founder, I don't think I would sign up for that commitment if it was producing that amount of cash in year one. And I mean, all crypto companies, generally, they make more money in year one than every subsequent year, like, on average. So I'm surprised they didn't just treat it like a cash cow and not go out. But what I've found a certain pattern is a lot of people that are outsiders in tech in Silicon Valley, they kind of want the prestige of having a venture fund get involved, and they don't actually understand what that implies and that what commitment, like, now they're stuck to do this for 10 years, when they could be flying in their jets and Lambos today.

• 28:07Logan Bartlett?

  I mean, Nikita, you're like puncturing the whole premise of our business model here by telling founders that they don't need venture capital and that they can, they can just keep on, keep it on without our money.

• 28:18Speaker 01

  If it's a business that you just pressed a button and suddenly you have $100 million rolling in, I'd probably take the $100 million and not be obligated to any institutional entities. But if I'm building something long term and trying to IPO, and the value hasn't been realized yet, yeah, go get the venture money and build.

• 28:41Speaker 02

  I mean, it's a good point, Nikita. And it's a funny aside. I mean, there is a venture fund, who will remain nameless, who basically dominated early stage from, call it, you know, 2009, 2010, all the way through 2015, 2016, basically by running the playbook you just described, right? They were the cool kids' club. And if you moved to SF and you didn't know the first person there, and you didn't have a social life, if you took money from this fund, they were like the cruise director, right? You had now a full social calendar, you got to go to all the really cool, hypey events, you got to go hang out with all the other founders you looked up to. And that prestige element made a lot of people, both who would have raised from other firms, and also who probably should not have raised at all, raise money from this fund instead of going with the

• 29:25Speaker 02

  classic tier one funds, by which, of course, I mean, GC and Redpoint, who we all know and love.

• 29:31Logan Bartlett?

  Well, I think what's interesting, I mean, why do you raise money at all, right? They're like sort of a fundamental question of why you raise money. And crypto and this business specifically kind of breaks all the fundamental reasons you you raise money for the most part, right? For the most part, you raise money because you need cash to fund, you know, dig a hole, hire people and fund for future growth, right? What's interesting here is like, these guys did not need that. And so we don't know the mix of secondary and primary. We hear 400 and whatever, 50 million dollars, but it could be that they just decided, hey, for 5% of our company, let's take 225 million dollars, line our pockets, we'll get it in USD, fuck this ETH stuff, right?

• 30:14Logan Bartlett?

  Let's like go buy our Lambos and our house. And then let's take a swing and go for the fences on this, right? And at the end of the day, the only, the only reason they would do what they did is kind of an ego play and swinging for this to be as big as it possibly can, right? Like, these guys now have a life-changing amount of money, just based on last year's free cash flow alone, right? And so the only reason to do anything else is to see if if what they started, how big it can go, how important they can be, all of that. And so from that vantage point, I guess I kind of get it, right? In that you're taking 5% or 10% out and giving it to a venture capitalist. You're not 100% beholden to them.

• 30:59Logan Bartlett?

  Sure, I'm sure Andreessen's joining the board or something, but I There's Chris Lyons, right? Yeah, Chris Lyons from Andreessen's joining the board. And so I'm sure he'll have a voice at the table. But at the end of the day, I assume they're just going for the professionalization a little bit, the legitimacy that comes with Andreessen crypto investing and saying, hey, fuck it, let's go for it. Maybe we can build the next Disney of this decentralized world. And if not, we can still afford our private, you know, G6 planes because of the money we've taken out.

• 31:29Speaker 01

  I think your first point, though, about them, like us not knowing how much is primary and secondary is pretty interesting because if they paid out a dividend to themselves, they're going to pay ordinary income taxes. But if this was a equity sale, it's going to be capital gains. So I might see the merit here. And if a large amount, and it's if it was just a raise in name only, that actually seems pretty strategic.

• 31:58Speaker 02

  This is I can't wait for Nikita to teach 16 year olds on TikTok tax minimization strategies when this clip goes viral.

• 32:04Logan Bartlett?

  I was gonna say, this is, this is like, this is like founder secondary 404 from, from Professor Beer out here explaining tax strategies. No, but I, I agree. I mean, honestly, if, if all they're doing is taking 5% out and de-risking the ability to really go for it, in that sense, it makes sense. And maybe they have the wedge to go do it. It just feels like they're selling a hope and a dream that's way beyond where they are today.

• 32:30Speaker 02

  And isn't selling a hope and a dream way beyond where you are today, the definition of every early-stage financing round? Like, this is, I guess what I'm saying is, ultimately, the level of scrutiny being applied here, I get it, it's a big dollar amount, right? I understand people feel like there ought to be more scrutiny. But the level of scrutiny, even in this conversation that the three of us are having, relative to the dozens of not great investments that we all know happen every week, but don't have a slide full of celebrity investors or a slide full of celebrity participants, I would say selling a hope and a dream is sort of endemic to being in venture capital.

• 33:08Speaker 01

  I think, I agree, like, we have to get, we have to cut them some slack here, which is, they are the market leader in

• 33:15Speaker 02

  Yes.

• 33:15Speaker 01

  crazy new industry. I mean, the, the term that always kind of irks me, but I, it has a merit, I guess, is, it is a blue chip NFT. Like, as if we've already established that NFTs are like, this, like, investing in, I don't know.

• 33:31Speaker 02

  It's, it's the General Electric of NFTs, Nikita. It's, it's basically part of the S and P 500 for NFTs.

• 33:38Speaker 01

  Yeah, so it signals that this is a resilient asset that will have stability. So I mean, I think it's a classic Andreessen move to invest in the market leader. Like, the top venture funds always do that. And but I guess it's still, to me, extremely speculative. The vision deck was felt like reading a consumer seed stage deck in 2012. So I think time will tell. I, you know, I'm certainly rooting for them from the sidelines.

• 34:13Speaker 02

  You like the sidelines. Nikita, when do you join venture?

• 34:17Logan Bartlett?

  Yeah, honestly, though, to put Zach's point on a finer, in a finer lens, like, if we divided everything here by 100, right? And they raised 4.5 million at a $40 million valuation, and they did 1.2 or 1.3 million in revenue last year, we would all, we would all be like, okay, that all makes sense, right?

• 34:40Speaker 02

  That makes sense. That would be one of the best deals. That would be one of the cheapest deals I have seen in quite some time to be at a million in revenue, raising at a $40 million post would be obscene.

• 34:49Logan Bartlett?

  Well, sure, but if it's all just wash trading revenue, then, you know, that's the catch.

• 34:54Speaker 02

  I'm sorry, suddenly money laundering revenue doesn't count?

• 34:57Logan Bartlett?

  Yeah, it's different. It's discounted. It's discounted at a different level. But if we divided everything by 100, like, all of this makes a lot more sense. I think it's the gravity of the numbers, right? 4 billion, 450 million, all of that stuff, and still calling it a seed that I think is what, you know, people get hung up on, and the reason it gets attention beyond just the cultural way awareness that this, this thing has.

• 35:19Speaker 02

  But do you think it would get that level of scrutiny if it were, instead of being March of 2022, if it were November of 2021? Like, in, in before there was talk of the market resetting, et cetera, et cetera, this, I feel like, wouldn't have appeared to be some insane price or an insane round.

• 35:37Logan Bartlett?

  So that's actually a decent segue to the other topic we wanted to hit here was an article from Time last week that was entitled "The Man Behind Ethereum Is Worried About Crypto's Future." So Vitalik Buterin is the 28-year-old founder of Ethereum. He created the cryptocurrency nine years ago as a way to leverage the blockchain for uses beyond currency. I think what's interesting is one of the quotes he had in this article, you could tell he was kind of looking out at what he created, almost in this Frankenstein-ish, like, "Oh my gosh, I've created this monster." And it's gone well beyond what he originally intended, to the point of the Bored Apes and everything we just talked about. And so one of the quotes that I thought was really interesting from him was, "Crypto

• 36:22Logan Bartlett?

  itself has a lot of dystopian potential if implemented wrong. The peril is you have $3 million monkeys and it becomes a different kind of gambling. There are definitely a lot of people that are just buying yachts and Lambos. If we don't exercise our voice, the only things that get built are the things that are immediately profitable. And those are often far from what's actually best for the world." So Vitalik's sort of highlighting a lot of the things that we spoke about with this, the exclusivity of Bored Ape Yacht Club and the finiteness of users and the price point and all that. Nikita, do you have thoughts on this article and Vitalik's perception or presentation of what crypto is right now?

• 37:00Speaker 01

  Yeah, I think his point around people gravitating toward things that are immediately profitable really explains kind of the emergence of NFTs. NFTs are, compared to building software or building a company, it's probably the easiest thing you could do. You're literally getting an artist on Fiverr to draw some doodles and then you go and sell them. And let's be real, like this art, most of NFT art, at least the blue chip NFTs like CryptoPunks and Bored Apes, it's not remarkable art by any measure. And I'm not an artist or anything. But I think the reason NFTs are like taking off is because, one, it's easy, and two, they can't be regulated as securities.

• 37:44Speaker 01

  Like when we had the ICO clampdown... In 2017, because it's art, it's not a unregistered security. And so you can create these scarce things that effectively function as securities. People buy them as an asset expecting it to appreciate. But you can make it defensible from SEC regulation by saying it's art. So it seems like almost the most natural extension of what people would do to make the most amount of money in crypto. And I think it goes to show like, like, people will take the path of least resistance in every sort of space to profit.

• 38:29Speaker 01

  And I think I'm not that surprised that this is what has is now characterizes the crypto industry as a bunch of landing pages and a bunch of JPEGs. That's effectively what what Vitalik has spawned.

• 38:45Speaker 02

  Yeah, it's interesting because obviously, you know, to your point, he's so different from what he's created in so many ways. Like, think about where Vitalik came out of, right? Teal Fellow moved to SF in the halcyon days of 2012 or even earlier. I don't have the stat in front of me, but moved to SF in the kind of halcyon days when weird people lived in hacker houses and didn't have a lot of outside world influence and built interesting nerdy shit for each other, right? And that whole Teal Fellow crowd were mostly folks who didn't come out of the classic East Coast schools and didn't do a finishing school stint at McKinsey or Google Now or Goldman back then. But really loved like nerd sniping, deep technical questions.

• 39:29Speaker 02

  And for him to have come out of that world and then created a world which feels diametrically opposed in basically every way, the Miami Starfucker Lambo experience. I mean, it is one of the greater ironies of tech that we've seen probably the last few years.

• 39:44Logan Bartlett?

  It really is such an irony that, I mean, in a very literal sense, what's empowering Ethereum forward are these NFTs and this speculation. And it's actually at odds. In a very literal sense, because of gas fees clogging up the network from from becoming what he wants it to be. And so it's this weird tragedy that like, in the same way, it's now being evangelized and democratized. And people are getting metamask wallets and they're they're figuring out Ethereum, how it all works. That's also inhibiting the ability to do all the stuff that he actually wants it to do. And if you go through, he's he's trying to get it to make sure it can actually take through.

• 40:27Logan Bartlett?

  You know, it can take off in larger socio-political issues like like housing and voting systems and distribution of public good. And, you know, obviously, there's been some benefit to Ukraine that's now happened. And like, that's what he wants it to be. But what's enabling it today is inhibiting that, which is just like a tragedy that I think that he's struggling with.

• 40:49Speaker 02

  Do you think he's more upset over the negative environmental impact and making a bunch of awful people rich? Or creating the worst kind of guy to talk to at a party?

• 41:00Speaker 01

  I think it's fascinating because like the origin story of Vitalik is that he created this because he couldn't take his in-game assets from World of Warcraft out of the game. So it was it was motivated by like, like this philosophy of liberty and having control of of your stuff. And that's a very like Bitcoiner type thing, like a libertarian type view. And it's it's primarily philosophical. It's not about, you know, making money. And now Ethereum is like the the primary protocol for Web three speculation and all these kind of financialization of assets.

• 41:41Speaker 01

  And it's funny, he's at the helm of this, but he doesn't have any of those attributes that a typical person in crypto does. At least the crypto of 2022. And it, I mean. It's funny, he went to ETH Denver too. I don't know if any of you guys saw that recently, but I mean, crypto has turned into monthly parties. There's, next week is NFT LA, last month was ETH Denver. And it's funny, he's actually now starting to participate in them and trying to, I guess, shape the narrative on how, where this industry goes. I certainly don't think he's enjoying it that much. He's not the type of person that goes to, you know, nightclubs and concerts and...

• 42:24Speaker 02

  In fairness, that is probably the strongest praise I've ever heard of him. The kind of person who wouldn't enjoy ETH Denver is the kind of person who I mostly want to be friends with.

• 42:32Logan Bartlett?

  It is funny though, if you look at like, he's such a hesitant leader of all of this. And I, I didn't know a ton about him, you know, before a couple of months ago. And it's clear he has like a pretty good sense of humor about himself. Like, you know, the Tom Brady thing recently where people were calling him like crackhead or emaciated Tom Brady. And he was, he was saying, oh, I don't even know who Tom Brady is. He clearly has like this, this wholesomeness about him. And if you look at him on stage of ETH Denver, I mean, he literally looks like a deer in the headlights. Like, what is going on here? Where did I, like, how did I end up here from what I created? And so I feel like there

• 43:16Logan Bartlett?

  is this like, I want more of him in the world just because he seems like such an authentic, interesting, thoughtful person that is so diametrically opposed to so many elements of the crypto community. And so as a nice counterbalance to everything else out there and just as an interesting character in the world, I'm like very pro Vitalik being out there more and doing all this stuff.

• 43:40Speaker 01

  I don't know how much of an impact he can have on the industry at this point. It feels like he has a mind of its own in that the kind of snake oil salesmen have taken over. I think this, this cycle is gonna, this bubble's gonna have to pop before it can be reshaped. Cause I mean, even the tickets for NFT LA are $6,000. Like it's...

• 44:05Speaker 01

  Those are the VIP tickets. I think the regular ones were over 1,000. The fact they have VIP tickets, and that's what they're peddling to people to get access to the parties, is more of a testament, I think, to this entire industry being materialistic. But yeah, I think we're gonna have to see this bubble pop before Vitalik can change any of the cultural norms in crypto.

• 44:36Logan Bartlett?

  All right, that'll do it for the ninth episode of Three Cartoon Avatars. Thanks, everyone, for joining us.

• 44:42Speaker 02

  Yeah, Nikita, we're glad you were able to power through this week.

• 44:45Speaker 01

  I'm gonna go vomit right at the end of this, but thank you.

• 44:48Speaker 02

  I do that after every episode.