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Well this is a moment in time and I just Took it put it right on my bag I said Elon I'm stealing a mug he said yeah Have one take that then I just only need One I don't know that much C his face But I mean it's so Classic David how you doing I'm doing Well I'm in Miami right now one of the Portfolio perks is off set up for me Whenever I come in but you're based in New York am I correct I'm based in New York yeah that's that great view where Is your office we're in one world we're On the 85th floor amazing so that's 85th Floor oh my Lord how many floors are in The building I think they call it 100 But I think if you actually count it's Probably like 92 93 but I think there's Some marketing going on you think what They do is they make the lobby like 10 Floors and then they yeah gives them a Little bit of air cover how how's your Tooth doing it's good the swelling's Down and um I was talking to my wife and I'm like everybody's commenting in on YouTube of how bloated and how fat my Face looks and she's like well it's Welcome to being a woman everybody just Talking about all your you know outside Qualiity and giving you a hard time but Uh anyway the swelling's down my energy Is off the off the charts I did a cold Plune today so I'm ready to go let's get To liquidity episode 13 we made it and

We've got the uh we got the liquidity Conference liquidity Summit go to Liquidity pod.com you'll see the summit Page supposed to be 100 people I Extended it to 125 David because you Gave me so many great recommendations LPS 25 thank you very much for that You're you're a men and it's just uh GPS LPS three days in Napa uh we get there The first week in June Sunday Monday Tuesday Wednesday Sunday we arrive have Some food and play poker just hang out Monday talks All Day dinner poker at Night Tuesday we have talks then in the Afternoon we do activities you go Painting cooking class clay pigeon Shooting we got a bunch of different Things to do in Napa it's such a great Place to go then we do food and poker Again Wednesday we have a closing brunch So it's pretty pretty fun agenda what's The overall Vision you haven't told me That much you know I'm trying to build Relationships with all these different GPS in the world because we've gotten Earlier and earlier and the way as you Know David for well people will Judge an early stage program like Founder University or accelerator or why Combinator or Tech Stars is how many of Those companies goes on go on to get Future funding usually it's like 10 20 30% and so in order to get those numbers Up um and we need to meet seed funds and

Series a funds and show them our Inventory in other words hey these are The founders we've invested and we think Are interesting and then match them so I Just want to build relationships also I Want to have fun and I just find three Days together only GPS only LPS no Founders no service providers you know Like 50 service providers a month try to Get into the event lawyers accountants Head Hunters real estate brokers because They they're looking to sell but we we Want to have like a no sales kind of Situation so there's other big events Out there there's tons of family office Events but this is my small one to pair With the podcast and what David and I Are doing here just to build Relationships with people that we think Are high quality to help us all trade Notes and become better at what we do That's absolutely I'm excited and Jessica's coming so awesome all right Well hang out with us as well absolutely You and I this the same thing Beauty and The Beast right you get a 10 you put it With like a four you average out to a Seven Beauty and the brains beauty and The Brain maybe I think it's in my case It's Beauty the brains in the Beast all right let's get Started this week in startups is brought To you by net Suite the number one Cloud Financial system bringing accounting

Financial management inventory and HR Into one platform giving you one source Of Truth by popular demand net s has Extended its one-of-a-kind flexible Financing program for a few more weeks Head to netsuite.com Liquidity open phone create business Phone numbers for you and your team that Work through an app on your smartphone Or desktop twist listeners can get an Extra 20% off any plan for your first 6 Months at open phone.com SL Twist and hidden layer generative AI is Is revolutionizing Industries hidden Layers AI detection and response Solution secures your generative Ai and Llms for malicious attack helping you Generate more by enabling seamless and Secure generative AI visit hidden Layer.com twist to learn more welcome Back to this week's liquidity podcast With me today I have Jeff Richards Managing partner at notable Capital Formerly known as ggv we have Ryan Den CEO of unicorn startup Electric.ai and of course we have Jason Calacanis from the launch fund I'm your Moderator David weisbord co-founder of 10x Capital today we have several great Topics on the docket down rounds Something most people don't talk about How do they work and are they as bad as They sound and we'll discuss how large Corporates such as United Airlines are

Integrating AI today we'll finish with a Latest three investments from Jeff and Jason let's Dive Right In This September Pittsbur reported that down rounds Accounted for 11% of all VC deals more Than any time in the past two decades That being said down rounds were still Nowhere close to do numbers where they Reached a record high of 58% of all Rounds Jeff when you look at 2024 do you Take the over under the 11% of down Rounds that you had last year it's a Great question David let's zoom out a Little bit so to me the down round thing And I answer this question coming from Having been a Founder you know back in The late 90s and early 2000s which was Which was kind of a crazy time to raise Money and then deal with the aftermath Of the Doom bubble where I raised Capital and dealt with you know all Kinds of different structures but the Down Round question you mentioned and we Don't talk about it much it's a little Bit like Hollywood in OIC or plastic Surgery nobody really knows who's done What so I I don't it's very hard to make Sense of that data uh if you asked the Question of what percent of private Companies that raised in 21 or 22 have a Lower stock price today in the public Markets it's almost all right almost Every small cap and midcap tech company Has a lower stock price today and they

Would all love to be back where they Were but they're down 60 70% you look at The software Market uh multiples peaked In 21 at 20x forward Revenue today They're at 5 to six so even if you grew Your business 3x or 4X in the last two To three years you're fighting a Headwind where multiples came down 75% So I just don't know that's I I know the 11% data point I I think it's a hard one To get your head around because the Reality companies that are raising money Today are good companies uh it is a very Hard Market to raise capital in if You're not a pure AI infrastructure play And so those companies are great Companies we've seen a very challenging Fundraising Market I'd be curious to he What Jason has seen over the last 12 Months but I can tell you that you know Just dealing with the headwind of of Market multiples folks that have been Able to raise at a flat round that's That's the new U and Frank frankly as an Invest or as a Founder if you're playing The long game and you're looking five 10 Years out an up or down round in the Near- term is it going to impact the Long-term Outlook of your business you Think about companies like square or Door Dash that did down rounds did Rounds with structure they went on to Build multi10 billion do companies it Just didn't impact them in the long run

So we Our advice to Founders focus on The long run get whatever you need to Get done to move on get the capital you Need to build your business and go build Your business yeah when when a market Crashes this severely and tide goes out You figure out who's wearing swim trunks And who isn't uh as the famous Expression goes I like your Jeff plastic Surgery one although with these Celebrities when they start doing stuff To their face with the uh Botox like When they start do I heard 20 30 year Olds are doing Botox anyway sometimes if They go too far you can tell there Really are two types here uh David there Are down rounds okay you raised at 100 Million now you're raising at 50 okay we Get it then there's cram down rounds and So cram down rounds are different beast And I just want to talk about those for A second because those are also Happening and they're happening with Very notable companies and these are Also referred to as pay to play rounds As well that's actually a Hollywood term If you hire somebody to do a movie if The movie gets made they get paid movie Doesn't get paid made they still get Paid pay to play what's happening with The cram down rounds is a Founder goes Out they try to raise money they can't There's too much of an overhang in the Company companies making let's say $10

Million in Revenue last round they Raised that 200 million somebody put 30 Million into the company for 50% they've Got you know some cash left but they're Still burning but they're back to Growing so there's there's a company Here but nobody wants to invest at that Valuation and they don't want to invest With the 30 million they can't raise Money they're still losing money what do They do they go to market where they Have somebody inside the company who's One of the three or four investors and They say hey here's an idea have you Considered a cram down r Uh or a pay to play around and then they Go to every single investor and say uh We're taking all of the preference stack 30% is owned and preferred they're Getting 5% of the company you know that 30% goes down to five you're getting cut By whatever that is 80% uh so you go From owning 10% of the company to two And by the way it's common Shares so you lose all your protective Provisions you don't get out first you Don't have information rights you no Longer have pra unless We're in we're raising 10 million for 20% of the company the $50 million Valuation right now you've already put 10 million in now to keep up your Percentage here's how much you have to Put in okay so you want to get back to

10% ownership you know and it's a $50 Million company you have put five Million in new Capal in and uh then the Founders they keep their common uh so They're fine and you know um the whole Thing starts over again it creates a lot Of bad feelings but it also forces People to put up or shut up but if your Fund is completely employed so Jeff what Fund is ggv on we're on fund uh eight Yeah now notable Capital so if this was From fund two or fund three the fund's Fully deployed what would you do Jeff if You're faced with this and I'm sure You've been faced with some of these Cram Downs now you're in this like very Weird precarious situation you've got to Reer write the thing from first Principles and it's it's contentious it Sucks it's hard and then how do you come Up with the number I've had situations Where own 1% of the company they're like You're now own 0.00 1% of the company I'm like is that fair and it's never Fair when you get to that point people Are grasping at straws right as you know I mean you're in a desperate situation The Founder's desperate for Capital and You have a sharkish type investor who's Coming in and saying look I could own 80% of this company put in $5 million And own 80% of a company that was valued At 30 million but very often what you Have is a untenable situation where the

Company's essentially out of money in Many cases they've already raised Venture debt they've got to pay a debt Provider back and so you've got a Crossover PE type firm that comes in and Says look we'll pay off the debt Provider we'll buy up a huge chunk of The company it's a really challenging Situation I don't know about you Jason I Think we're in the early days of that Happening we're in the second inning Because companies raised so much money In 2021 that they've been able to run Through 22 run through 23 which was a Tough year for most and unless you Extended your runway for a very long Period of time which Ryan can talk about Because he did that you're now in a Challenging situation and you're going To your investors and saying gosh this Is the only option I have on the table And it just gets very painful and some Investors have blocking rights to do the Next round so now you're in this like You want to talk about a game of chicken Uh or a standoff you know okay I can Block the round and I'm not putting any More money in and we're six weeks to add A cash so I'm I'm literally dealing with I don't know you know we have 400 Portfolio companies historically maybe 250 are active I'm dealing with you know Couple of these a month so this is a Very real thing happening in the market

There's two ways to protect yourself you Know as a founder and as a management Team number one uh be profitable number Two have a big cash reserve and when the When when the sun is shining you get That hay right and so I literally was on A board call the other day and I'm like We're crushing it shall we put $10 Million and sell 10% of the business for $10 million or 10% of the business for $15 million would we do that and the Person's like we have 18 months a Runway I'm like yeah we do let's we're strong Raise money when you're strong the less Your business spends on operations Multiple systems and on delivering your Product and service the more margin you Have the more money you keep right you Want to get fit in this new era here in Silicon Valley and in Tech broadly but With higher expenses on materials Employees distribution and borrowing of Course everything is costing more so to Reduce cost and headaches smart Businesses are graduating to netsuite by Oracle netsuite is the number one Cloud Financial system bringing accounting Financial management inventory and HR Into one platform giving you one source Of Truth with netsuite you're going to Reduce your it cost because netsuite Lives in the cloud and it can be Accessed from anywhere this means you Cut the cost of maintaining multiple

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Paid and that's not unreasonable is it To have like if you're putting money in At that ridiculous valuation no Absolutely and there's a bunch of funds Who who make make a lot of money going Around essentially just making making Those types of offers but what I'm Hearing in the market I get at least one Sometimes two calls a week from other Growth stage Founders I have the you Know fortunate or unfortunate benefit of This my third Venture back startups I've Seen a lot of messed up stuff um and so I get a lot of calls and the most common Thing I hear is Founders are trying to Defy gravity to avoid facing the music And so what that means is for example is Doing a lot of really unnatural things You know oh if we can just add another 10 million in net new then maybe when we Go back out to to raise the money we can We can clear the last round valuation But to Jeff's point which he's done a Phenomenal job coaching me and his other Founders on is that doesn't matter what Matters is are you building a good Business particularly today now that the Tide's gone out everybody has a sharper Pencil yeah you might be putting up Impressive net new numbers but your ca's Also through the roof your intention Your retention hasn't moved anywhere and Those are things that are really just Only going to make your your your

Business weaker um you know in in the Long run so so that's one another one That I think way too many Founders think That oh well someone will do the round It just might be a terms we don't like Uh also not true um there is a really Finite amount of it is so much and if I Sort of put my investor hat on um and The you know 35 or so some OD uh Companies i' I Angel invested in like That's another thing I hear a lot too And like the reality is many investors And um Jason and Jeff keep keep me Honest on this one but many cases you'd Rather cut a check into a clean Story without a lot of hair on it and Sort of know what you're getting versus Going back to the hoop on something that Maybe you've been in for a long time It's the terms are complicated a lot of Bells and whistles uh and so I think That's another thing that that Founders Really have to let sink in it's advice They give all the time is like there Might not be a round out there for you And you have to operate as if um the Money is far from guaranteed at any Price so I gave two pieces of advice hey Uh get to break even have a war chest You're giving a third uh given to you by Jeff which is have great business Fundamentals um like the business you Know which I guess is close to you know Uh what we would call getting to break

Even Etc but Jeff the C's got to be Right because people are going to Re-evaluate this thing from first Principles they're gonna just reer write It from a blank sheet of paper uh in These kind of situations and I think What's happened Jason is as you know in A zero interest rate environment people You know when you're getting literally Zero to keep your money in a t bill or Bank account you're highly incentivized To throw money into the market into risk Capital right I want to bet on startups I want to bet on crypto I want to bet on Whatever When rates went up and people are Getting paid 5 six 7% or they're getting Paid N9 or 10 or 11 in a credit fund Those family offices Sovereign wealth Funds you know the big giant pools of Capital of the world that couldn't wait To pump their money into Silicon Valley Are suddenly gone and so there's a lot Fewer investors putting money into the Market and you know one of the things That I've been very public about on Twitter is when I got into venture Capital in 2008 the US Venture Capital Market was supposedly around $28 billion A year somehow it ballooned up to $300 Billion a year in 21 and 22 I would Argue most of that was not Venture Capital it wasn't going into seed A and B series C companies it was the 10

Billion into stripe at 50 billion not Really Venture Capital that's midcap Tech those are IPOs or IPOs and so what You have is the folks that were doing Those rounds or even the growth rounds At 500 or a billion or a billion five They have the option of buying public Companies at those prices they can say Gosh I can buy a public company doing 500 million of Revenue at three billion Why would I take a flyer on this private One that has an inconsistent history a Rookie management team etc etc and so The investor base that is evaluating Your deal in your company has more time And they're more Discerning and to Ryan's point the bar has been elevated And so the way that they're looking at Businesses today the way that we're Looking at businesses is just we're We're having we have very high bar and It's a great place to be as an investor It's why I'm bullish on the next five Years I know you are as well but as a Found founder my advice to Founders has Been take the bull by the horns you know If you're sitting on the beach and it's 80° out and you're putting sun lotion on And all of a sudden it starts hailing And it's 30 degrees don't pretend like It's 80 degrees out and it's sunny it's Not Sunny anymore it's cold prepare for The cold right get profitable cut burn Get your business into a mode where it's

Attractive to those new investors who Have a much higher bar than they used to But take the bull by the horns be Responsible for your cash Runway be be Responsible for your cap table don't run Into a situation where you're passively Going out to raise capital and ending up With a bunch of term sheets you don't Really want and David I think one of the The situations here is if all this Advice is being given for two or three Years on you know various podcasts of Note quietly in back rooms with uh Investors and Jeff talking to his Portfolio me talking to my portfolio Brad gers out there saying Get Fit to Public companies you know like the Weather change the game changing on the Field was known for two full years here And and people knew it was a hot market For the the last two years of this Nonsense and they were saying it if You're a founder and you cannot navigate Your firm financially uh at scale or you Know getting to scale through This uh what probably is going to happen Is people behind the scenes are going to Say this person isn't Fit to serve it's a hard thing to say Because you know we're such a a pro- Founder community and being founder Friendly is critical for people like Jeff and I to get deals with people like Ryan we want to be seeing as founder

Friendly but you have to ask if it's Been four years you didn't do any Layoffs and you ran this thing off a Cliff and you had $40 million in money In the bank and you still burned a Million dollars a month knowing all of This well are you the best person to Lead the next stage of this company and I think a lot of people will just say no Um and that's what I'm hearing in the Back yeah I think what's really happened Is a lot of those Founders that didn't Change were basically paralyzed it's People go through crisises it's not that They necessarily take wrong action is That they take no action so they've kind Of been sitting around to to Jeff's Point you know hoping that more Capital Will come in and there'll be this kind Of Messiah that comes in and saves them Rather than doing the difficult things And the difficult things you have to Wake up every morning I've been a Founder twice and you have to eat that Frog do the difficult thing every day And then the next day do the difficult Thing it could be 18 24 months of eating Crap until you basically are able to to Be above water juggling multiple devices And apps to run your business is a mess Open phone is here to make it simple by Simplifying your business Communications With one easy to use app open phone has Rethought every detail of what a modern

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Million then you kind of started to see The market how did your operations Evolve as the market changed wholesale Change across the board I mean so you Know exactly you know to the point that That that all of you are making and you Know Jason I'm glad you brought the the Point that you you just did like I ran Into um one of the partners at at Diverse at an event he said we're doing More CEO Searches than we ever have in the last Decade and that's because at some point Your investors your board they're going To be sitting around the table and They're saying like yes you're an Operator yes you're a Founder but you're A steward of this capital on behalf of Us and our LPS you have a real Responsibility to figure out where does The next incremental dollar need to go Or or not go right and I was just having This conversation with uh with someone Internally there's uh there's a company That I I won't name but doing you know Low nine figures uh AR raised a lot of Money um kind of at the peak had never Done any layoffs staff would openly Admit um that that there was a lot of Bloat and know they announced a 5% Riff the 5% my coo said he goes that'll Get rid of the Cheetos in the break room And and not much else I mean that's it's It's no man's land and so it's not just

About making changes but are you Actually making the changes to an extent That they're they're going to makes Sense and and really Bend The Arc of um Of of the business and I think it's Doubly hard when you're coming off the The sugar high of raising money every Six to eight months at a huge uptick Never had to worry about money at Le you Know for years and years and and yeah Correct in our case you know we raised Over hundred million across two rounds Between the end of 2021 and and and Early 2022 four months after we raised Our series D extension I went went back Uh to the board of the investors and Said we're going to do our first riff And then we did another one and then we Did another one um and then we we Committed to completely rewiring our go To market motion completely reimagining The uh product and the feature and the Functional all of that to really guide Us in a Direction Where We could still Deliver on the mission of the company But we could do it orders of magnitude More efficiently uh and more effectively Than we were doing it before I had to Learn that hard way my first two Companies even though they both had Small but successful exits were weeks Away from running out of money and and What I knew coming out of those Experiences in my first two companies is

It's always in the final days when the When the movie's almost over that you go Ah but we were just starting to figure It out we were just I mean how many Times ask question Ryan you did three Riffs when you look back on it should You have done two should you have done One should you have ripped the bandaid Off quicker and then take me through the Psychology of being a founder and how Absolutely Arduous painful and how much suffering Goes into doing these reductions in Workforce layoffs it's unbelievable and Obviously we would have we would have Loved to have just one and done I mean That is always you you want to you want To cut deep you want to do it once uh And and and move on and be able to focus And and know you have the team I think That the difference with us is we were Going from a model that was sort of a Mix of software and Services a big Inside sales model to really reimagining This as pure SAS Bottoms Up product L Growth and so it wasn't clear until a Little bit further into the cycle Exactly what the go to market mode you Know exactly what the sort of 2.0 Version of the business was was going to Look like only then did it become clear Hey here's a cost structure that makes a Lot more sense with what we know the Business is is today and I don't think

That not every business has that problem I will say though I think that there are A lot more companies out there that need To do a much more s of wholesale Rewiring of how they make money how they Serve their customers you know I think We all know it's like yo you can't cut Your way to growth uh you can and you Can't you can't cut your way to growth If you're just going to do the same Thing you've been doing for the last Seven years with less Money if you commit to running a more Efficient business and you and you Commit to the product and the Organizational change to do that you can Absolutely spend less money and act and Grow faster and this is the high degree Of difficulty je Ryan and Jeff I like Your input on this because you and I Were former Founders who are now Capital Allocators you know you're being asked To cut costs and at the same time Innovate in Product uh and then increase sales and So seemingly this seems like well these Are counterintuitive wait we have to Invest to get growth it turns out Slowing down getting rid of uh you know Excess in an organization and excess can Come in many forms it could come in you Know just undisciplined marketing spend Undisciplined product development Whatever it is undisciplined t& and and

An office space whatever it is um but if You start getting efficient and then you Start having constraint what you find in An organization is uh people figure out How to do things quicker and this is one Of elon's Tricks is he just says you Know they're like oh this going to take Six months he like okay I I give me a Way to do it in six um days and I'm on a Board right now and they showed me it's A it's an e-commerce company I we which One and they're they they stayed away From Amazon for a long time they Believed in building direct but they They had competitors and knockoffs just Crushing it on Amazon so we we could not Not be on Amazon so we said okay we have To have an Amazon strategy out of the Gate it goes explosive and so they're Like we're going to double Amazon next Year and I said hold on a second we're Going to double Amazon next year give me A plan for 10x Amazon this year and they Were like what I'm like yeah we're we're Starting from a very low point it's low Single digit percentages of our sales Give me a 10x show it to me in 10 days And then 10 weeks after that I want to See if we hit 10x or not and then I want To plan to go 10x again and you know Most times that unrealistic thing you Know um you would think on its face Jeff You know you seem like a lunatic you Know what it did it worked inspired

People and it worked yeah and people are Like wow we we think we got a 5x from This we found this other thing there's Subscribe and save you know we didn't Realize how big amazon is and this other Goo we found this consulting firm that Said we can do coupons and we discovered Coupon and I'm like this is what I'm Talking about let's do less with more And I I did the same thing with our team I want to meet more Founders I want to Do more introductory calls because I Believe deal flow is your destiny in This business so I said how do we do a 100 firsttime calls per week oh my God 100 F I mean look at Jeff's eyes but What 100 calls a week we were 21 person Firm that's great it's just a lot it's a Lot 7 people I said okay here's how I Want you to do it call it an Introductory call tell the founder we Don't want to waste their time framing Matters it's only going to be 15 minutes Of them presenting their company and Five minutes of us explaining to them How we Invest and making sure we understand Their vision and then determining if a Second call with a more senior person is A good idea for them because we don't Want to waste our time so we reframed It you know shout out Scott Adams Creator jilbert um we reframed it he's He's big on reframing but that's a

Concept of psychology for decades you Know to be only 20 minutes well now if It takes an hour to write the coverage Or whatever you know round it up to two Hours of work for an associate or a Researcher okay yeah they could do three A day four a day okay so now you do 15 20 of these a week okay how many people Do you need you need five people is that Possible I did 70 last week 60 or 70 so I'm almost to 100 it all goes in a Database it's going to be pretty good For returns I it's a game changer the Other thing I'd add Jason you know Ryan Gave some great context into what he did I think the the Broader uh I some additional color I Would give on his scenario because I was I was uh involved with it dayto day but He has a great set of advisers around Him he has Dick C and Adam Bane who used To on Twitter he's got um Tim we've got A CEO on our board we've got Emanuel Scola who was the chief customer officer At toast we've got Bob Goodman from B Myself Ryan's got a good sounding board Of people and as we were heading into The late stages of 21 and into 22 he was Raising all this Capital he wasn't Afraid to call us either and say hey Guys there's some things in the business That aren't working and I think we Should put them on the table and talk About them that led into that summertime

Conversation in 22 Ryan I remember when You called me and said hey I think we Got to blow this thing up like we got Things that are just not working in this Business and I want us to be in five or 10 years I want to be a higher margin Higher growth Channel driven business And here's how I think we should do it a Lot of Founders are afraid to have that Conversation with their board and with Their investors and so a lot of credit To Ryan some of that's being a third Time founder to have the confidence to Do that but a lot of it was building the Relationships with those people over the Years he didn't just pull that board Together in the summer of 22 you know Off of some angelist recruiting site he Had carefully handpicked these folks Over years and built relationships and So when the time came to really deal With this sort of like wartime mode he Had good people around him and and one Of the things I see in the market today Is I get these Founders coming to us Jason at series B and C who are still Burning a ton of cash and I say well who Who are your mentors and advisor and They said gosh do you have any Recommendations they don't have anybody They have nobody that's giving them Good Counsel and in many cases they've got Junior investors on their board who Aren't giving them great advice and so

It can be a really challenging and Lonely place to be if you're a CEO so One of my main ADV pieces of advice I Know Ryan you share this with folks all The time who are at series A and B is Cultivate those relationships with Advisers board members people who Actually want to have a uh an interest In helping you be successful because you May not think you need them today when Things are going well but when you hit Stormy seas it's invaluable I don't know Ryan if you want to add any color to That but to me it was a huge part of Your process yeah absolutely um but you Know the other part of it too though Just kind of Jason going back to your Your your comment too about when you Throw that audacious goal out there like Jeff something you talk about a lot is Just creating situations where there's Nowhere to hide right and like that's One of them when you go to a team and You say oh yeah I know we only put 100 Customers on the new product last Quarter so this quarter we a thousand You don't have any more money or any More people to do it the right people Are going to jump out of their chair and Be like I don't I don't know how we're Going to do it but like man like we're Going to you know we're we're going to Go try and and and the wrong people are Going to kick and scream and come back

To you the next week with all the Reasons why um you know why they can't Do it but but now more than ever as Companies are making changes like this Like that's one of the things that that I think and it's a piece of advice to Give to other Founders is like that's What you need to ask of your people it's Not about the little incremental Improvements each quarter if you're Going to reduce cost let's really reduce Cost and if we're going to launch new Product we want to scale quickly like Let's really figure out how uh you know How how far we can take it and and all Of that is is made much much easier by Having people around the table who are Ex operators who bring a diversity of Viewpoints and um you know in my case Seven out of ten times I bring a Question to someone like Tim or Emanuel On my board they might just agree with Me or kind of repeat back but it's You're building that muscle memory and That and that validation to trust your Instincts and and make decisions faster And so I think all of these things are Critical right now listen we all know Gener of AI is revolutionizing every Industry in fact we talk about it here On this podcast every week and companies That are slow to leverage this Technology well they're going to risk Falling behind their competition but new

Innovations also bring new threats how Do you safely accelerate your company's Gen AI adoption while also managing the Risk well let me tell you about hidden Layers AI detection and response Platform it's a security solution Specifically designed for gener of AI And large language models llms you know That it provides your security team with Visibility and tools necessary to detect And prevent threats like leaking of Confidential information we've seen that A couple times as well as malicious Prompt injection that's a serious threat And model theft right people are Starting to steal that's just the truth Of it folks people will steal your Innovations that's going to enable your Company to harness the power of AI and To do that securely and confidently it's Trusted by leaders in finance Tech Healthcare and even the US Department of Defense the dod hidden layer helps you Generate more by enabling seamless and Secure generative AI so here's your CTA The old call to action with hidden layer Go from pause to possibilities and step Into the future of secure AI Innovation Learn how to protect your gender of AI Today by visiting hidden layer.com twist That's hidden layer.com Twi speaking of cutting costs United CIO Chief Information Officer Jason burnom Is going Allin on AI United is

Reportedly using AI for everything from Chat Bots to Pilot announcements and We'll be piloting AI applications across The entire company Ryan you're founder In CEO of electric.ai you were early on The AI thesis and you help small Businesses integrate IT solutions Including AI what are you seeing across The thousands of smbs that you service My guess is that this Airline CEO A year and a half ago was all in on web 3 so I mean I'm H I'm half joking but I I'm I'm somewhat wary of uh people that Make big splashy public announcements I Am not poo pooing the the commercial Applications and the the potential Business transformation that a lot of These these new tools can can bring Specifically for us at electric we're Making it really easy for small Businesses They Don't Really Care how we Do it they care that it gets done they Care that they can click a button and The computer gets provisioned and sent To uh the new hire they care that they Can click a button and we can tell them A whole bunch of things about how they Can make their environment more secure I Think uh AI for the time being is Certainly a useful uh buzzword it's a It's a useful hook it's getting a Certain type of early adopter smv Customer um in into our funnel but but Specifically on this end of the market

You know if you do a great job with your Software it kind of disappears in the Background and so you know I think Ultimately you know one of the things we Talk about a lot internally is that you Know AI didn't over you know all of a Sudden overnight change the fundamentals Of product management right you start With the problem and work backwards and I think there's a lot of great things That that AI can do to accelerate the Solutions that you want to deliver to Your customers um you know beyond that I Think I probably have a bit more Skepticism than than some people I'm Very curious Ryan you fractionalize IT Services for electric do you see the Fractionalization of AI in the future Where large companies will have their Internal AI teams and tools but you'll See smbs benefit from broader platforms Yeah specifically I think like vertical SAS and and smv vertical SAS stands to Gain the most from from AI as we've Probably all seen playing around in These in these llms they do much better When they can uh index something more Specific than the entire internet right And so when you're dealing with a Constrainted set of problems uh a Constrainted set of intended Solutions And like many vertical SAU companies are Sitting on a a pretty juicy Proprietary uh data set you can do some

Really cool stuff with that and you can Produce I think extraordinary um Customer outcome so that's that's the Part I get really excited about is you I Think a lot of these companies don't Need to be built um new from scratch I Think there's a lot of great companies That might have been around 7 10 12 12 Years that are actually in pull position To become the next great AI story Because they have a 90 yard head start With an existing solution existing data Existing uh set of customers and you Know now with the air cover of uh all This macro uncertainty and and a lot of Businesses rewriting the way they do Things this is a great time for I think A lot of those companies to reimagine Themselves and what they can do with This technology Jee I see you nodding Your head how do you see Enterprise Companies integrating AI yeah I think I Think look Ryan makes a great point About companies wanting to sort of jump Onto the bandwagon we we see this in Venture Capital you know uh you go back A decade ago and there were folks Creating funds dedicated to mobile apps There were people who created you know Clean tech funds that sort of were there And then went away so I think look I've Been in Silicon Valley since 1995 we you Get these Paradigm shifts every decade Or so we had it with Doc and the

Internet we had it with um cloud and Mobile I think this is a massive paradigm shift I think this is probably bigger than Those because the world is ready for it The infrastructure is there the compute Is there you know if you think about the S&B segment where Ryan plays one of the Reasons we're so bullish on that segment It's 42% of US GDP it's 55% of us Employment smbs 15 years ago didn't have Any technology most of them didn't even Have internet access in their shop now They're running Shopify for e-commerce They're running Square for payments They're running toast inside their Business they're running Homebase for Payroll and time clock management They've all bought technology and the Layer is there for now as to to Ryan's Point for the incumbent vendors to roll Out AI features and modules that make Those businesses more productive I think One of the cool things there it's not Going to be a headwind for labor okay in Big Tech we're definitely seeing a Headwind for labor because of AI we saw That you know Jason mentioned the Efficiency wave with Zuck and Elon and Others um and I think everybody's gotten Religion around the idea you can build Much bigger companies today than you Used to with less headcount in small Business if you take the average 10

Person shop the owner is doing Accounting the owner is doing Finance The owner is doing sales marketing Payroll Etc so when you give them an AI Tool built on top of their existing Software or a module on top of their Existing software that can do those Things for them it's going to make that Shop that much more productive it's not Going to allow them to eliminate Headcount inside the shop because Nobody's doing those functions inside The shop if you take that 42% of US GDP In America and you give it a five or 10% Boost because of AI That's huge that's Huge for our economy and so one of the Things I'd love to see us you know get The narrative out there's a lot of Negative headlines around AI it's going To reduce labor the robots are coming Etc etc I'm not saying those are valid Questions I just don't know why nobody's Focusing on the potential benefit of This technology particularly the small Business which is almost half of our Economy I think it's going to be huge And we're betting big on it I think for LPS it's a category that will generate a Ton of returns as Ryan mentioned that'll Probably come from companies we've Already funded one of the challenges in The Venture Capital world today it's not That easy to go fund new ideas in AI Other than the infrastructure space in

The application layer space it's a Little bit hard to imagine a brand new Company today coming in with something With AI that will display a call it 100 Million AR business that already has Thousands of customers because they're Rolling out that same functionality Depends on the depends on the category Yeah I might take the other side of it I I think it's a low probability that Somebody coming with an AI first Solution displaces the incumbent but It's possible and so you know when they Do it'll be big yeah yeah or they can You know m&a can can take them out so It's just such a transformative uh Technology and I don't see a world in Which all workers do not become a Minimum of one or two% more efficient Every month because of it I I'm picking The lowest possibility 2% that means every 35 months Everybody's twice as good at their jobs Just take the rule of 72 right um now if People were you know became you know 5% 6% maybe even 7% better at their jobs Every month which I do think in certain Jobs is not just possible but probable We can all think of a developer getting 7% better every month at writing code we Can all think about a writer or a Researcher or an sdo or an account Executive getting 7% every month that Means every 10 months or 10.2 months you

Can look up the rule of 72 they're gonna Get twice as good at their jobs and so This is why I think it's it there's you Know like all of these hype waves Whether it's mobile broadband Cloud you Have this weird you know overhyped Underhyped you know moments that happen Overfunded underfunded um you got to Take a Relentless paced approach to this As a founder for those Founders who are Listening and as an investor I think you Just have to let the founders show you How they're using it and then look for Those those Clues we have an incredible Company called podcast.com And they did a very simple thing for us And the podcast the liquidity pod.com Uses them and uh so does this week in Startups.com it started with taking Every episode transcribing it by the way That used to be a $500 to $1,000 per Hour to get a decent transcript you know Then it became an international thing And it because it used to be like $5 a Minute here $10 a minute in the US International made it $1 to $3 a minute Using people in Manila but you know it Had error rates now it's getting better And better and better now it's telling Us the chapters in each of these then It's giving us what Clips we should do Now it's uploading those clips to Twitter and Linkedin for us so you start Looking you know every quarter this

Company pocket ai.com uh which we've Invested in three times They release something that we buy I pay $500 a month for this and I'm like Charge us 2,000 a month th000 a month That we'd still pay it but anyway and Then our producers here at this podcast And you know uh and at this week Startups they free up 10 hours a week Well what can they do with that 10 hours They can do better research uh for each Episode they can book better guests There's always something to do to make This better um and then they came to me Today and they said oh by the way um if You tell us who your next guest is we're Going to go out for all the web find the Podcast YouTube videos social medias of That person and build you some notes and I'm like okay here we go now this idea Of getting 7% better a month that being A podcast producer is here and who are They going up against a WordPress site Is what we used to use but it didn't Have any of this functionality the word Press site was just you know shout out To my friend Matt Mullen wag and Brian Alvi over there fantastic the greatest Publishing platform in the world but you Start thinking about ini like podcasting And then you put AI on it and you have a Team of you know right now they're three People but they were 30 people oh my Lord like what they're going to do is

Just gonna you know free us to do so Much more work so I I am over the moon With the application layer imagine every Small business in America you're you're Running a $500,000 a small business that Does $500,000 a year and you get a 10% Bump in cash flow because you're better At sales and marketing you're better at Finance and Accounting you're saving on Your taxes that 50k almost just sort of Appears out of nowhere it doesn't hurt Anyone where does that 50k get spent it Gets recycled back into the growth of The business potentially gets recycled Into Moree head count so I just think Longterm I put a long Thread about this On Twitter I started writing and just Kept going I just don't see how this Isn't a huge Tailwind for our economy I Feel like this Paradigm and you and I Live through the Doom era Ryan I'm not Sure how old you are if you did but I Feel like if you take all the different Paradigm shifts we lifted live through And I live through the PC era which was After client server and the cloud era The online era Broadband error mobile Error Cloud error I think that's all the Errors and then AI it feels like this is the culmination Of all the in other words everything has Been a setup to this point and we're Seeing and we're funding companies in The preced stage that get to 250k in

Revenue per year with two people three People and they're like yeah I'm like How much you going to raise and normally It would be $3 million seed run and They're like Y how about 500k for 5% and I'm like well you going to go out and Raise why not raise 2 million like I Don't think we know how to where we Spend it now whoa that's a very Interesting moment for LPS and VCS to Noodle On maybe they don't need as much money From us maybe we're the problem maybe Dropping too much money into this you Know system the same way in America we Dro too many calories on America and 6 70% of the country got fat who's Responsible for that you know big a we Had a really great idea there was this Thing called dwarf wheed and they they Did these wheat studies of how to get More calories out of a hectoring um you Can look up the dwarf wheat studies I Think it happened in Mexico and all These great scientists came together Into all these hybrid versions of Wheat And the book wheat belly and other Things go over this they were so good at Concentrating calories into the wheat Shaft that they made it so fat and the Hus so thin that it made it a super Wheat that wheat spiked your blood sugar And made you fat and the reason they Call it dwarf is because it was so fat

The husk that it would break the long Strand of a wheat like you know amber Waves of gold kind of situation so they Just said oh let's just make them Shorter so they don't fall over Sometimes you can just make something so Efficient that it makes everybody fat And the reason we're fat today is just Bread and calor when you started talking About superweed I thought you were Talking about something else that's very Popular here in California different But it's a great point because if you Think about it like my my first company Uh started in 2007 okay back then it was Impossible to raise money if you did Raise money maybe you raised a few Million bucks maybe may maybe really big You raised like 10 or 20 and that was Like the absolute most and like there Was a time when we all believe like Software is efficient software Businesses have these big margins and You can you know and I think there There's almost kind of like uh it's come Full circle in that sense because um you Know Jason you're point it's like this Culmination of all of of all these Different eras right like this you know And Jeff to your point about the Productivity increase right like this Isn't an AI headwind That's going to you Know negatively impact the average

American worker like this is an AI Stimulus that no one's really talking About yet and back in the 99 2000 era we Raised money to build data centers we There was no AWS we ran little mini data Centers all over the country that's Where the money how much did that cost Cost a fortune right it cost a fore what Did it cost first startup to put up your Collocation it was so expensive it was So we weren even the world SAS hadn't Been invested invented we were an asp Back then but you had to raise Capital To buy Hardware build your own data Centers pay for the bandwidth and then Amazon came along to solve that for Everybody so I just think this is the ne This is knowing what we know now about How transformational AWS was it's hard Not to look at this wave and say gosh This is going to be a huge turbocharger For our economy 10x whats did yeah that Went from I think the average starter Probably spent 500k in the first year to Set this up about 250k and servers I Know we did at Mahalo when I did my last Start at Mahalo we spent about4 million Dollar putting servers together and Putting bandwidth together at a Collocation facility plus you had to Have two CIS admins sis Ops people so You were at about half million dollars And then steady state probably a half Million dollars a year so first three

Years we probably spent 1.5 million our Friends at Microsoft uh our friends at Oracle Um they're being really aggressive and Trying to get into the startup community And I've had good relationships with Both of them um they'll offer our Startups you know 100,000 $250,000 in Credits and that covers them for the First five years so it went from 1.5 Million over three years to Free I mean that's extraordinary and Just going up a level Jason you know David you mentioned LPS how are they Looking at this whole AI universe and There's been a lot of capital thrown Thrown into the infrastructure layer all That money that is being spent on Infrastructure not only by Amazon Microsoft Google Etc but some of the Newer companies open Ai and anthropic And you know these other companies that Are raising capital is going to benefit The startup community that we're talking About and I think I think the output of That one of the reasons all of us are Bullish on the next three five seven Years you're going to have more well-run Companies that need to raise less Capital the founders are going to own More investors will get a better return On their capital and the outcomes could Be bigger we should have more profitable Companies where the outcomes are bigger

Because some of those infrastructure Companies today are absorbing they're Going to spend a lot of money I mean one Of the challenges Sam has publicly Talked about with open aai he had to go Out and raise billions of dollars to Build out the infrastructure for open AI It wasn't doable on a shoestring budget But once all that infrastructure was There it's kind of what level three did For the internet way back when go back 20 years ago somebody had to build out All the bandwidth that we're now running On the internet on and it was very Expensive and there was a bubble and it Popped And level three stock tank but the Output of that was there was fiber Everywhere and we take sort of gig to The home for granted but you know wind Back the clock 15 17 20 years ago you Couldn't get fiber to the home yeah look At this the headline you just put up all That fiber that people thought was crazy Yeah 2002 it people thought it was crazy And today it's all getting used and Think about all the amazing things that Are happening in science and Healthcare And Banking and all these other things We're in the first or second inning of Even understanding what this next wave Of AI is going to do you know they Overbilt fiber to the point at which the Companies went out of business yeah they

Invested so much and they couldn't sell It they went out of business and then Google and other folks bought this fiber Up it became there was a term dark fiber Fiber laying around Jeff and I are all Have to remember these days yeah yeah Yeah um and the the the Paradox the Irony was internet traffic they were Correct internet traffic continued to Grow who was the beneficiary the Beneficiary of all this was YouTube and Netflix uh Dropbox you couldn't build Applications like that in the 90s in Fact my friend Mark cubin who did Broadcast.com said YouTube and Netflix Are insane it will never work they will Break the internet and in some ways he Was right if everybody had gotten onto Netflix at the same time YouTube at the Same time and it had gotten to where it Is now but we we were able to keep up With it a lot of other things happened With compression and storage and Plumbing cost of storage but sometimes It overbuild and a glut it kind of makes People be like oh yeah you know I can Get uh Truffles and lobster at a lower Price yeah let's make you know Lobster Sandwiches for everybody and we'll Charge 20 bucks like if there were too Many lobsters available and you know in New York at the turn of the century Lobsters were so available it's what Poor people ate they were considered

Like the Cockroaches of the ocean in the Take them out of the East River in the 1800s and that's what poor people ate Because everybody else was like oh my God you want to eat those things those Bottom Feeders like nobody wants that Supply went down they became Elite uh Items but it's really such a great thing And I I just wonder are we going to be Sitting here in two or three years and There's h100s and data centers Everywhere and the software developers Have figured out how to build these Language models so efficiently and small And in verticals that you don't need all This um and you know people like grock Doing inference so well and efficiently They you know get rid of 99% of what People need in terms of compute this Could go in the opposite direction if we Overbuild so I I'm fascinated to watch This um one of the things I think with These generational transfers is that Every time the game changes you Mentioned the early 2000s it was about Who could fundraise 510 million Pre-product then it went to the Engineering phase whereas who could Build the best product one of the Inevitable things that I think we'll see In the next 5 to 10 years is who could Distribute their product in the most Effective way you see the rise of Influencers you see other clever ways to

Hack distribution I think will be an Inevitable battle line once you have Products that are able to scale very Quickly and very cost effectively well One of the reasons I love where Ryan is Sitting is he is sitting at the Epicenter of the way small businesses Buy software and technology that you Know if you wind back the clock to why Besser and notable and bu of other good Firms got excited about his vision was Here's a $500 billion category where Small businesses spend on technology and We're going to sit at the center of that And you know Ryan you mentioned earlier We're joking that you bought the domain For $50 because nobody was buying AI Domains but you were ahead of the curve And I think we're seeing that today a Lot of businesses that we were pretty Excited about at series B and C and D Got started seven eight years ago and Made the bet on this AI Trend before it Was cool yeah exactly and also you know Jason your point about you know like YouTube for example being the Beneficiary of you know kind of in the Com era everyone laying all this fiber And building the infrastructure I think Folks in the application layer uh we're Going to reap a lot of benefits of a lot Of the money being put on the ground now I mean you know one one thing we we've Talked about internally here is if you

Think about like who was the biggest Winner as a result of refrigeration Technology it wasn't the refrigerator Companies it was Coca-Cola should gave Us another minute to figure that out I Like who was it I was going to think ice Cuz ice you know you had to um there Were people who were taking ice from Canada or something cutting it up or Whatever putting in boxes putting in Boxes and were ice delivery so like then All of a sudden you could make your ice At home and that was like pretty crazy I'm also wondering if like meat and milk Going bad and you know you could have Your milk for longer but that's more Efficient on the consumer side but yeah Coca-Cola warm Coca-Cola is awful right So ice cold Coke is delish yeah and so I Think you know all of this stuff to me It kind of feels like a a tail is old This time right you know you look at Sort of like the size of a computer that Would be you know needed to to do you Know basically what a Casio watch uh Could do today um you know it's it's the Same I mean how many times has this Cycle repeated itself so I think yeah The point about yeah some some Engineers Somewhere are going to figure out how You know they can operate their own Models with uh vastly less compute That's probably something that will Happen um and and again I think folks in

The application layer who are solving Very specific um often vertically Oriented business problems stand to be Some of the biggest Winners and it's all tied together in The economy right I had lunch yesterday With a guy who started a chain of Restaurants he's got several locations In the Bay Area and he was telling me How he started his business pre pandemic But just as door Dash was starting to Get scale and he said I don't know if You could build my business today Without that I rode Tailwind on Uber Uber Eats door Dash we built a social Media business where people understand Who what our brand is we've got we're Doing a lot of volume he has a location In San Francisco that the area no longer Has as many people living there no Longer has people coming into the office And so the foot traffic went way down But their door Dash traffic has gone way Up and so there's just there's all these Interplays in the economy that I don't Think we quite understand yet I think Economists are really you know Everybody's projecting recession for the Last two years it didn't happen why not People are having a very hard time Getting in their head around all these Different variables we've got a record Number of people that have started small Businesses right 10 15 million small

Business applications in the last three Four years we've never seen anything Like it and nobody can get their heads Around it well guess what they've got Shopify they've got Square they've got All these tools and technologies that They can use to launch a business today So it's just I just think we're in the Middle of a really interesting time Frame where all these things are Connected and AI Jason back to your Point about productivity it's going to Be a Turbocharger it's going to be like Lighter fluid on a fire that's just Getting going around technology it's Going to be it's a good reason to be Long having said that I do think we're Just entering into the it's overhyped Cycle so back half of 24 it's overhyped Stocks are going to take a hit people Are GNA be on TV saying all these guys Have no real AI yep and then in 25 and 26 you'll see these things that come out Of nowhere and everybody's like oh my God I can't believe all the success I Think there's like a major macro Discussion that has occurred for the Past two or three years that we're going To need to reset going into 20 or as we Wrap up 2024 and go to the back back Nine which is wait a second all these Layoffs were done companies got stronger We thought that earnings were going to Go down but earnings are a function of

How much you spend to make money and the Earnings are doing fabulous and the Efficiency means you can be Uber and Uber I think didn't add any employees For two years but they keep growing 30% and you know obviously we saw what Happened at X but meta getting rid of 20 Or 30 000 people I'm not sure what the Exact number was and you know he's going To do it again there's a rumor he's Going to do another 10 it's like already You you 5x your stock from $92 where I Bought it it's up to 500 or whatever it Was it took a little hit today but There's a macro discussion here of how Come unemployment is so low how come Inflation you know gets to 3% we can't Get it back down we're still at five Whatever we're at you know in terms of Like the rate cuts and we're not having Rate Cuts Like what is going on in the Actual economy in America that you know we it feels like People should be in a panic and then I Open up like Tik Tok or Twitter and I I Start seeing because I like to look at Layoff talk which is like a very Specific Tik Tok um because I I I like To have my finger on that because I'm I'm hiring I'm gonna I'm gonna hire Three four five people this year um and I'm investing in our business I'm like Hm these people are saying they can't Find jobs or that they're finding jobs

That are 50% that are offering 50% less Salary and I'm like huh so that's what's Going on here it it's not that the Economy is going to crash or something It's that I think leadership is taking It really seriously this you know get Fit movement that Brad gersner talked About a whole bunch or that Elon kind of LED and I think Brad kind of named it After that and then pushed Zuck to do it And he did it now it's got all this Momentum about getting fit you know part Of getting fit is saying you know what We used to pay 150k for your position But we can have somebody out of school Do it for 70 and you know what there's People in Portugal and Manila who will Do it for 35 and that's a very weird thing that Occurred Jeff because you you mentioned Remote work essentially I think what Remote work is such a major driver of This hug what lead what leadership Figured out during covid I know I did Was that you know hiring somebody in Another country who doesn't care about Stock Options or carry in a venture firm like This they don't have this in Portugal or Manila whatever so that's like they Don't even want it they you would have To like spend months explaining it to Them for them to even care about it and They probably wouldn't they would think

It's some kind of a scam putting that Aside I I have uh two virtual uh folks I'll talk about this another I'm going To make an announcement about the this Virtual investment I made next week in a Virtual uh assistant company and I'm the First investor in it um but I don't want To spoil it yet got to announce next Week and this Company um we have two virtual Assistants for $36,000 a year Each and then I compare them to Entrylevel Americans and they're both in the Slack they're and they cost half the Price and somebody else manages them and Trains them and if they don't work out They give you a new one next week and I'm like huh I don't know there's about A third of jobs I could see these folks Doing uh hm what are the constraints Jason so obviously they could replace Many other the functions but what Functions could remote not replace you Tell me you know because how much of What we do is in person now and did you See the uh New York there was a Restaurant that had a uh you know the Standard you said you're an investor in Toast by the way je Jeff no but one of The a former exact from toast is on the Board of electric with Ryan Emanuel Scala she's terrific I mean think about How toast just has change the restaurant

Business you don't need waiters you just Transformational and by the way if You've got kids and you got to order an Extra round to dumplings trying to flag A waiter down for 10 minutes is death But ordering it and getting it to your Table in 10 minutes is life you know Especially when you know two eight year Old daughters are fighting over who got The last dumpling they had a person from Manila Philippines somewhere or India It's it's like 1:00 am. their time They're taking new yorker's orders over Zoom they're literally just in a zoom Window and zoom basically 24 hours a day For free and so you can order from the Kios or you can order from the woman on The Computer okay that person's getting paid I can tell you what people in Manila get Paid cashier in Manila gets paid a Dollar an hour um a serious person you Know with a college education gets paid Five an hour so you start thinking you Know 10,000 12,000 a year is like what a Ed college educated person gets two or $3,000 a year is what a cashier would Get a non-trained person a very you know Entry level first rung so um Yeah it's kind of nuts and if a Restaurant can figure it Out what's happening in Corporate America Ryan I just hired a phenomenal Executive

Assistant in the Philippines he's Fantastic on top of things uh hard to Imagine going back and yeah got us Thinking internally you know what what Yeah what you know what what else is There right U and I think you know I Think to when I moved back to New York City in 2016 and you know Google had that big Office over uh over to meat packing and Had a couple friends who worked there oh Come by we've got this sushi chef and You know the stuff and they go over There and there's a table full of Product managers bragging about the fact That they can't remember the last time They did any meaningful amount of work In a given day and they're all making You know5 six 700,000 a year and I think Rightfully you know that was the biggest Heist in tech for a long time was like I'm just going to go there and hang out And do nothing for a while and like make Way too much money and then people are Surprised when those jobs start Evaporating so I think there's going to Be a flight to Quality there's going to Be a flight to um what are the things That you as a human can do and you can Do better than um you know than than Anyone else um but you know even even For us you know we've got some Phenomenal State Side Engineers we also Have a lot of excellent people uh in

Brazil both uh ic's and and and Engineering managers and so it's it's Hard for me to imagine a world where to Be competitive you don't think globally And don't think much more holistically About where everyone sits and what that Means for the business and that process Of working with those folks overseas has Gotten so smooth I have another company That I'm involved in where Jason back to Your point about setting aggressive Goals I remember we were having a December board meeting and the founder Said we want to move all of our Basically front end Le gen and go to Market to this other area uh in Argentina by June and see the board Members said well why don't we do it by April and he said well that seems a Little crazy we got a lot of and Ultimately he said you know what let's Do it we'll do it by April because we're Going to learn in that three-month Window from April to June we're gonna We're going to make some mistakes we're Also going to learn a ton guess what Rolled it out did it cut their C in half It's going to be the reason that he's Pointing the company towards Profitability later this year so savvy Sophistic ated Founders they're not Waiting they're figuring this stuff out AI is going to play a role offshore is Going to play a role and all of it is

Connected because of remote right we are Now much more comfortable as a society Working remote think about our industry I mean we're a tiny microcosm of of of The universe but how much more effective Are we as investors meeting people over Zoom than we were five years ago I Remember driving around San Francisco Walking up and down street you maybe met Two or three people in a day now I can Meet five or six Founders in in a day Half hour it's better for them it's Better for us if there's a great fit we Get together in person I met somebody Today we're getting together tomorrow in Person for lunch it's a way better model It's way more efficient you apply that On a bunch of other industries that Really matter to our economy and I just Think it's going to be not only the Virtual piece but the AI piece is going To be a huge a huge tailwind and to your Point Ryan how much time did you spend Raising money for your startup Preco and like going to Sano Road and Taking meetings you even in an Aggressive day we said I'm going to do Four meetings a day you know that's a Lot and you'd have a driver and you Would be you know two hours at Sequoia Two hours at cliner two hours I mean at My last company it got to a point where My co-founder and I said he goes Literally he's like you need to stay in

The office and run the company I'll go Handle this because even at the seed Stage it was a full-time job and you Know every every round you know at at Electric Co you know onward was hop on Zoom do the thing get back to work yeah I mean and you had this weird thing Where as human beings if you're going to Fly out for a meeting well of course I'm Going to take you for a meal of course We're going to have a meeting and we Probably should do one other thing so You flew out I mean to fly out and do a Half hour meeting be like bye I mean It's was like Ryan Ryan Ryan can attest To this he crushed me in Soul cycle Before we invested oh yeah well I I give I give Jeff give Jeff a lot a lot of Credit I think he emailed me on a Monday I said hey I think the round's coming Together quickly he's like we can be There tomorrow to take you for dinner I Said hey what I promised the team I Would go with them to souls after work He goes I'm there love it show up we had The little barbecue we had the little Barbecue steak and and uh and soul cycle And Ryan Ryan put thankfully there was Somebody else on the team I'm a larger Human being there was somebody else who Was my size who rode in the back with me We I didn't have to be too embarrassed There under the candl light at Soul Cycle but Ryan was clocking you know

However fast you were riding while I was In the back huffing and puffing well What matters is you might you might have Lost the soul cycle class but you won The deal yeah I was gonna say that's how you know Around us truly over subscribe Jeff when Uh when you get beaten in Soul cycle Yeah yeah it was fun Though on that note uh let let's wrap up With Jeff's latest three Investments and Also Ryan uh could tell the audience a Little bit about electric and what You're looking for in the market yeah Ryan you get a full plug go for it tell Us about the company who your customers Are and who you're hiring thank you yeah Electric is the easiest way for small Businesses to manage it you want to man Man your devices software uh get more Secure we are designed specifically for Companies that don't have any inhouse IT Staff so if you are a small business and You care about the security of your Employee and customer data and you care About your staff not wasting time doing Things like buying and provisioning Computers go to Electric.ai check it out sign up for a Premium product online um and anything Else you need I mean feel free to hit me Up directly I'm very easy to reach and We love our Customers uh who who are you hiring for

You hire a bunch of it professionals Across the country to work on this uh no You know at the moment we we really Don't have have too many open positions We've just got a absolutely absolutely Rocking team so um speaking of remote Work do people want to put employee Monitoring systems on is that becoming a Thing it keeps coming up like um and you I wouldn't do it the high-end employees We have but call centers record Everything on a computer if you want to Work from home for Jet Blue doing Customer support you don't expect that Like the screen's not recorded the whole Time and they're tracking you and how Many calls you're doing and I looked Into it because I wanted to increase Productivity at our company and I was Like hey is there a way people could get A private report or maybe that in their Manager of just how much work they did Because we can see it in slack in notion And Google Docs like we could see your Activity so if you think somebody was Screwing around you could say how many Days did they log into slack and I look At I don't look at it every month but I've looked at maybe twice in the last Year just who logs into slack every day Right um and it was pretty interesting To see who was like 30 of 30 days and Who was 19 of 30 days and did they take That famous incident when Marissa took

Over his C Yahoo and they had like 10,000 employees that were all working From home and I guess they pulled the Records for their VPN and ultimately What she found is the vast majority oflo When they were working from home uh were In fact not working because they weren't Even logging into the VPN so they Couldn't actually engage any work think What a lot of companies realized was That was more a function of working at Yahoo at that time it was with anything Else yeah so do people want remote Employee monitoring and what's the best Practice there yeah we don't we don't we Don't see that you know um and that's Also something that we we always we Always tell our customers you know we Have an agent that's installed on the Machine that cannot see anything that You're actually doing it's really just Looking at the health and the security Of the device we've no idea what you're Doing um but yeah I mean I think you Know the the what we see across Particular startup customers the the Departments where that that really Matters is ultimately either sales or or Engineering pretty easy for engineering Teams to see just what you know the Amount of code that folks are committing And pretty easy looking at Salesforce Reports uh who's actually getting in There and making calls so um I don't

Want to say it's a solved problem but I Think for the the people where it Matters a lot of the tools they use Today can kind of tell them who's busy And who's not all right lightning round Jeff you're a three go all right three Companies we recently invested in uh we Have a company called Homebase that is Uh kind of an operating system for small Businesses so 200,000 merchants in America roughly two million workers are On the app this is obviously something I'm very passionate about we talked About it earlier in the Pod great Company John Walman terrific founder he And rousi have built this thing over the Last decade So note to Founders it takes time to Build great companies but this is a Company that is you know valued in the Hundreds of millions of dollars north of 50 million in ARR growing very quickly Doing well uh and just a company that We're really excited about and extremely Well run I and I will just tell you know Note to the world out there it is very Challenging to raise Capital right now Uh at this stage for companies and this Is a real Testament to the cohort data The margins you know all the things we Talked about earlier these guys have Their stuff together and it's uh it's Just an impressive team that we think is Building in a great space similar to

What HubSpot did toast did Square did Shopify did going after this you know 40% of the economy that is small Businesses so home base really exciting Company second I'll give you arteria It's uh an AI bet Ryan mentioned earlier Vertical AI so uh this is a company That's going after the banking industry Probably also will go after insurance Health Care energy places where a lot of Uh contracts agreements documentation a Lot of data surrounding all of that very Important to the businesses you think About the banking industry literally Executing contracts and trades every day There a lot of data there they've built A proprietary set of uh of AI that can Extract information from that and help Companies make better decisions on the Fly and also just understand risk Exposure and things that are really Important to these very large companies That are very important to our economy And then the third one is a company Called forell hopefully all of you guys Have heard of Rell uh it's an incredible Infrastructure company modern developer Platform every month over a million Developers are building new projects on Versel and launching them huge Beneficiary of what's happening with Geni and and just an amazing founder in Garmo who has also become a great Co-investor for us and great angel

Investor that we've partnered with on a Number of new Investments so forel is One of those companies that we think is Very well positioned to take advantage Of everything that's happening in AI uh It's on the infrastructure side so not Something you will hear as much about Unless you're a developer in which case You probably love Rell so another Company we're excited About fantastic take us out David what a Great episode I love having Ryan on Because Ryan is an angel investor and a Founder that is really Dynamic to have You have both of those hats on and and Jeff great job excellent well it's been Another great episode of the liquidity Podcast I love the discussion for Jeff Richards Ryan denah Heath Jason calanis This is your host David Weiser thanks For listening