SVB Collapse Explained, D2C Brands That May Fail, And Suli's Next Venture

Um, Sean, you want to set us up? What are we doing? What are we doing here?

Uh, well, this is the first time the three of us have been on a pod. So, so at least come on, I think three or four times. Somehow you've never been here during, during those, even though y'all are friends, you know each other. And, uh, That's just strange to me. But I think this— we'll see how this goes. I mean, I think this will be fun, the three of us here. I wanted Sully to come on because there was a whole bunch of like rich people, smart people shit that was going on over the weekend. There was the Silicon Valley Bank disaster, bank run, all that good stuff. There's stuff going on in the stock market. And so Sully's the guy I go to whenever I have questions. I said, all right, well, just bring him on the pod instead. I'll ask you the questions here. Instead of just texting or calling. And so that was my, that was my idea.

Did you guys, did you guys get impacted by this at all?

I had money in Silicon Valley Bank through my, my fund. So our venture fund had money through AngelList. AngelList keeps all their money or kept all their money in Silicon Valley Bank. And so we were lucky that I started hearing about it and I was like, yeah, I think we should get out. And, and so we ended up— we had like $1.5 or $1.6 million in that account. Um, maybe a little more actually, because they hold some for management fees. And then we got it all transferred out to a bank I've never heard of. They were like, you want to move to Grasshopper Bank? I was like, you could put it in the fucking field outside your office. You know, you can put it anywhere. Just don't leave it in the bank where the— where it's like a bank run is going on. Yeah, exactly.

Couch, dude, we'll be fine.

Um, so we got— we got out like literally in the nick of time. Um, so yeah, we were almost impacted, but not— not in a— like major, major, major way. Like there were some people that were stuck tens of millions or even $100 million. So I'm sure you heard some crazy stories. Like, what did you hear? How did it play out from your perspective?

Yeah.

It looks like you're about to steal $70 million of other people's money and put it in your pocket.

But I think were people right away, was it like, let's see what happens. Cause you know, the, the series of steps was I saw the stock price go down. That was the first text I woke up to, Sam, in our group chat. Somebody showed the stock was down 30 or 40%. And it just seemed like a stock problem. It seemed like, oh, the company is, you know, getting hammered. But like, dude, I feel like I've seen that 5 times in the last, you know, 5 months with some— but not a bank is down 40%. But then somebody was like, oh yeah, could this mean that the bank goes under? And then the wheels started turning in my head. And fortunately, I had seen— I had seen and not acted on 2 crypto, like, bank runs in the last year and been burned by those. So my— I'm a criminal underreactor. I don't really react even in cases of emergency, which is good because in normal life, usually things are not an emergency and it serves me well. But when there is an emergency, I'm also pretty laid back. And so this time I was, I was smart enough to be like, hey, we should do something right now. Don't wait. Don't wait to see how this plays out. There is no upside in waiting to see how this plays out. Did people recognize it right away where you were like, hey, this could trigger a bank run?

Yeah. And I think in the beginning of the day, no, everyone was kind of chill about it. But, uh, A ton of VCs, I think starting with Peter Thiel, said to their portfolio companies, if you have money in SVB, take it out and take it out immediately, like right now. Do whatever you need, get it out of SVB.

And let me explain, I'm the least educated on finance stuff here, so let me explain from a 5-year-old's perspective what happened here. So basically Silicon Valley Bank, it's like the 19th largest bank in America, something like that, top 20.

16th.

16th, and it's usually used by Silicon Valley-based startups and other people who related to startups. And so what happened was during 2021, '22, when VCs were going crazy and startups were raising a huge amount of money, they used Silicon Valley Bank. So they took on tens of billions of dollars of new bank accounts. But the— and so they had all this new money. And so what they did was they bought long-term bonds that yielded a rate of like 1.5%, which in a way it was them thinking like, we're just going to be conservative and like and not do anything crazy here with all this extra money. Then Fed increases the rate to 3 and 4%, and their customers, which is startups with new cash, are burning tons of money and lowering their deposits or their savings and checking accounts. And then it became public on Wednesday at the quarterly earnings, at the earnings report, that they said, we bought these 1.5% bonds, which is not good because the Fed recently raised the rates to 3 and 4%, which means our 1.5% long-term bonds are now devalued. We have to sell a bunch of them at a huge loss. People heard about that. Social media went crazy. VCs tweeted, get your money out immediately. Everyone starts pulling their money out. And then by Friday, uh, the Fed step— or the government steps in and says, uh, we gotta stop this. They're gonna run out of money. This is not good. Everyone's gonna get hurt. Is that a good summary of, from a, from a, from a dummy's perspective of what happened?

Yeah, I think that's pretty good. Um, I think that all of those things could have happened except if You know, Silicon Valley is just such an insular place, but also such a viral place where everyone talks to each other. So I think if it wasn't for the fact that it was Silicon Valley and everyone talks to each other, there wouldn't have been a bank run this fast. Like, um, on Thursday when the bank run happened, $42 billion— people tried to wire out $42 billion in one day out of Silicon Valley Bank.

How much money did they have? $100 billion?

They have something—

$200?

And what happened when people tried to do that? It just said, uh, no? I mean, what was the— what, what did they see on their screen?

In the beginning of the day, it was working. So, uh, this guy wired out $70 million, a bunch of other people at that SV Angel event, we're wiring money out, no problem. Uh, come the afternoon, they couldn't log in to Silicon Valley Bank, so it just wouldn't let you log in. In fact, I tried to log in yesterday. I have a Silicon Valley Bank personal account, and it also said, uh, you can't log in until Monday.

And were you affected by this, Suli? Because you've— I know in the past your company's used Silicon Valley Bank. I think you, you raised money from them. So first, were you affected? And second, why does everybody use Silicon Valley Bank? I think they said 50%— this on their website. I don't know if it's true, but 50% of venture-backed startups use Silicon Valley Bank. That's crazy. Is it just the brand or did they do something that, that was like advantageous to startups?

Yeah, they do a couple of things. So one, they have strong relationships with all the VCs. And—

or so they thought.

Yeah, so they thought. So they've, they've had strong relationships with everybody. So all the VCs are like doing their own banking. All the LP, all the venture funds are doing banking at Silicon Valley Bank already. And then they host tons of events around Silicon Valley and sponsor tons of events. So you just see their brand name everywhere as the bank that you should use.

Um, and it kind of has like an elite vibe a little bit, which is stupid because— or that's not stupid, but the, the, a lot of media headlines were like, bank used by the rich and famous or tech elite is going under. And so the sentiment was like, oh, screw them, which maybe that is partial part of the reality. A lot of rich people do use them, but like payroll companies use them. And when you— there was a lot of companies like Rippling that The Hustle used for payroll years ago where You pay your payroll to pay your employees. Rippling is the— is the middleman. They hold on to your money for 3 or 4 days and then they pay your employees. Rippling used them. And so 300,000 or 400,000, 500,000 employees of companies, both blue collar and white collar, weren't going to be able to pay their bill or weren't going to be able to receive their paycheck. So it's not just like, you know, the elite. Yeah, it's kind of a— the name's a little bit of a misnomer for who it represents.

Yeah. The other reason, um, we use them at TinyCo, uh, and this might be my greatest personal achievement, was I got, uh, free tickets to the NBA Finals, uh, from Silicon Valley Bank where they invited me to hang out in their box and watch the game. So, uh, you know, there's a bunch of perks like that for using Silicon Valley Bank. And then also if you raise any debt, they're a huge, uh, venture debt provider in Silicon Valley. So oftentimes when companies will raise an equity round, uh, they'll also raise a little bit of debt. So they'll raise, you know, $10 million of equity and $3 to $5 million of debt sometimes, depending on kind of what their capital needs are. And so when you raise debt from Silicon Valley Bank, they require that Silicon Valley Bank is your exclusive banking provider. So all of your deposits have to be at Silicon Valley Bank as well. That way they've got visibility into it and that kind of thing. So a ton of startups will get debt and then they have to use Silicon Valley Bank as their bank. So they have no other choice.

And over the weekend, basically there was a bunch of people, we have a bunch of our mutual friends where they were just like sitting there Friday to Saturday and Sunday morning thinking, I think I just had all my money's gone. I don't know what's going to happen. I was with like maybe a dozen people and they're like, you know, I've had hundreds of thousands or tens of millions of dollars. I just don't have that. And I have no idea how I'm going to pay my employees. I don't know what's going to happen. Sunday night, we find out that everything's going to be fine. The, the corporation Silicon Valley Bank is going under. If you're a stockholder in that, I think you're going to lose everything. If you're a bondholder in that company, I think you're going to lose everything. But if you're a depositor, if you are a customer, you're going to be made whole. And so it's no big deal. I think you can access your money now. Uh, is that right? Is that how this is currently being resolved?

Yeah, that's exactly right. So the, um, Federal Reserve and, um, US Treasury Department were like, if Silicon Valley Bank depositors lose their money, this is going to create a systemic risk. That systemic risk is everyone who has money in these 2,000 local community regional banks is going to take their money out Monday morning because they're afraid that their personal bank will have a bank run also. So which would— this is literally what—

run also, right? Like, anybody being proactive would be triggering an actual bank run across many, many other banks. And so they had to, they had to basically get people to chill before Monday morning.

Yeah, exactly. Like, First Republic Bank is a bank that I use and a ton of other startups use. And in fact, First Republic Bank, um, provides— is the bank that Mark Zuckerberg uses to get loans for him from— for buying a house or just getting a loan against his stock. Um, and there were rumors over the weekend, a bunch of my finance friends in New York texted me and said, hey, do you have any money at First Republic Bank? If so, get it out Monday morning.

Well, so today it's down 65%. So even though this happened, uh, why is it still down so bad?

I think people are just still afraid that there's going to be, uh, some— the depositors are still going to take money out of First Republic Bank.

There was a funny— there was a funny, um, headline and it said that, um, you know, when you think of this, you think of like literal pitchforks and like guys wearing straw hats and like torches standing outside of the bank because there was like a headline that says people are rallying outside the bank just banging on doors to get in. And you think like you know, like a pitchfork mob. And it was really— it was like 8 or 9 like Asian guys wearing Facebook book bags and like North Face sweaters, and they, and they were smiling at the camera. Like, this, this article, like, they look really happy and they are like waving at the camera. Uh, and I saw that because it was a pretty funny thing.

Well, I think that was part of the problem here was like, like you said, in Silicon Valley everybody's so tightly networked that like word spread like wildfire, and then back in 2008 when the global financial crisis happened in the sort of the other bank failures happened, there wasn't really like, like Twitter was very new at that point in time. Smartphones had only come out that same year. So it wasn't like as fast. So this was basically like a bunch of people who are all incestuous and all talk to each other a ton. On top of that, you can now do online banking and just quickly log into your phone or your laptop and wire out $70 million. You don't even need to go to the bank. Like normally it's like bank run, there's going to be a huge line. And that huge line itself is a barrier to this happening. But in this case, everybody talked about it. Everybody moved it out digitally and word started spreading. You know, basically fear started spreading across Twitter, TikTok, and other places. And it just felt like it's the end of the world, you know, move now. And that sped this whole thing up into a one-day, like, tsunami, financial tsunami that hit. Um, what do you think about—

like, it's crazy because the— I bet the CEO of Silicon Valley Bank woke up Thursday morning and was like, what's the big deal, guys? This is gonna be fine.

And, uh, was it a big deal, Sully? Like, besides the, the, the fear, was it actually that big? Like, was the, was the business itself at risk?

Um, there is some— there's a real problem with the Silicon Valley balance sheet, uh, because of the, the sort of depositors taking money out in general. So even before Wednesday, um, because of all of the startups that— because the startups are the ones that bank at Silicon Valley Bank, they were withdrawing money every week to pay payroll and, uh, because of their burn rates. Um, so there was already a problem, but I think that, you know, regulators are monitoring bank balance sheet on a monthly basis very closely. So they were like, this is all fine up until that point. And so nobody thought this was a problem. Like, the Silicon Valley Bank CEO was like, this isn't a problem. Regulators thought this isn't a problem.

Yeah, but he had one line that was bad. He goes, I— we don't panic. I think he said, don't panic.

And I want you— I want to get your reaction to two people. So Peter Thiel, some people are like, oh, Peter Thiel strikes again. He's the, you know, this guy's the menace. And then they're like, he brought down Gawker, he got Trump elected, and now he, he triggered the bank run of Silicon Valley Bank. So Peter Thiel, you know, do you think that that's a Is there, is there any truth to that? And then the other side is Mark Souster, who's another VC down in LA, who basically came out during the process and was like, this is like, like, you should— companies, you should keep your money there, support Silicon Valley Bank. It supported us. Uh, there's, you know, we don't have to have this hysteria. If we don't do the bank run, there's— there won't be a bank run. I'm, you know, keep your money there. And if, you know, for people who had listened, he could have caused them to basically, you know, lose or lose access to the majority of their money. So what do you think about those two people and where do you place the sort of— how much blame or credit do you give to those people?

I do think Peter Thiel has a ton of power. He's like this godfather of Silicon Valley. You know, we had a tiny co— we had Marc Andreessen on our board and he would never mention what anyone else says except he would constantly mention what Peter Thiel says. So I think—

what's an example? Um, and why?

And, and do you think that, I mean, I don't think he's the bad guy in this situation because basically what happened with him was, uh, It'd be like if a, just a normal person went to the bank account and they tried to, or the ATM, they try to withdraw money and the ATM's glitching and they're like, this doesn't feel right. Hey family, uh, I think you should bounce and go get your money out of this. This is like glitching. This does not look good because I believe Peter Thiel, he did a ca— I think Silicon Valley invested in Founders Fund or something like that. Uh, is that the story? Or he did some type of capital call, uh, and Silicon Valley could— didn't pay up right away. Is, is that right?

That?

Uh, I didn't see anything about that. Um, and, uh, yeah, I don't know what that is. What I know is that he basically— Peter Thiel was the— was one of the people in Silicon Valley that was like, this is not good, everybody take your money out. And then, you know, all the other venture firms heard that and sent emails to their portfolio companies saying the same thing. Like, on Thursday, you know, I'm an investor in a bunch of venture funds, a bunch of them emailed their LPs and said, hey, this is our exposure to Silicon Valley Bank as a fund. We're talking to all the portfolio companies and trying to get them to remove all their money out of Silicon Valley Bank. So really, they caused the bank run.

You're an— you're an LP in, like, you're an investor in a bunch of funds, uh, like maybe, what, like 15 or so big venture funds? Uh, yep. Did they have their money tied up? And I'll ask— I'll tell you why I think this is something was a little fishy here. So on that Thursday or Friday when it was all going down, um, VCs were simultaneously telling their portfolio companies, hey, get safe, but at the same time were basically saying, hey, the Fed needs to come in and ensure that all the depositors are going to be made whole. Um, and they were saying it anytime somebody uses the, like, what I call like the single mother story, it like makes me very suspicious. And what I mean by that is they were like, you have to do this because jobs are at stake. These companies have to make payroll. And if they can't make payroll next week, you know, this is going to cause jobs to be lost. And you know who works those jobs? Single mothers. And like, they're basically, it was all about payroll, small businesses, jobs, saying all the political like buzzwords. To get like Washington to do something because, you know, nobody wants to go be like, hey, I'm a venture fund. We had $90 million in Silicon Valley Bank because they gave us lines of credit and we were— we had to keep our money in there and we're stuck. You know, we're way above that FDIC limit. And if we're not made whole, we're screwed. Was that the case or is that just my conspiracy? Should I take off the conspiracy hat or is that— do you think was that a part of it?

Yeah. I mean, I saw a bunch of videos of David Sachs and Jason Kalkanis and stuff saying that kind of thing. I might— I'm skeptical that any of that matters. I think the way that, um, Jay Powell and Janet Yellen look at this is, uh, there is a systemic, systemic risk to the banking system. So, you know, taking a step back from Silicon Valley Bank, like, the, the American financial system is this amazing black magic that exists, and it is a source of tremendous amounts of prosperity in America and in the world. Like, if you go in places like Pakistan, where I was born, you don't have a, um, you don't have access to a credit card, you don't have a FICO score, you don't have, uh, the ability to go get— buy a piece of property and get a 30-year mortgage on it that the government backstops. Um, you are constantly worried about the, uh, your currency being inflated because you're not sure that, um, the, the government is gonna— isn't gonna just print so much money that your rupee that's worth, uh, 100 rupees is worth— yeah, your life savings basically disappears because of inflation. And you're not worried when a company that's a publicly traded company reports earnings that those are lies in the United States. Like, there is so much stuff that is amazing in America from a financial infrastructure perspective that the rest of the world does not have. And the Federal Reserve coming in and bailing out Silicon Valley Bank and doing it without using any taxpayer money, making all the depositors whole, wiping out all the equity holders, wiping out all the unsecured debt holders. Like, that's the right thing.

And one, where'd the money come from?

Yeah, if it didn't come from taxpayers, where does that $25 billion backstop come from?

And also, bailout, I don't think it's the right term because they didn't bail out the bank. The bank is out of business or, or it's dead, but they bailed out the depositors, right?

The customers. Yeah. And, and you know what people were saying on the internet?

Single mothers.

Yeah, because they need that third home in Truckee.

Yeah. What people were saying on Twitter, which I agree with, is that, hey, when you put money into a bank, you're not thinking of this as buying, um, a risk asset. You're just thinking of it as, I literally have cash. I could store it under the mattress, but that would be silly. I'm going to store it with the bank. And the bank is going to do a better job of taking care of my money than me by storing it under my mattress. And that's an important American value.

Yeah.

Like, that is a super important American value.

That is the product that the banks sell. Yeah.

Is safety and security and trust.

Faith that your money is safe. And if that product, if people start to question that product, the banking system doesn't work and you're one step away from people saying, dude, who cares about this little green piece of paper? I don't know if anyone's going to care about this or if this is going to have any buying power tomorrow. Right. Money also has the same thing where the only attribute that matters is belief in its value. And banks have the same thing. It's belief in the safety there.

And where'd the money come? Where'd the money come from though? You didn't answer that.

Um, yeah, the FDIC is basically, is funded by other banks. So, um, think of it as an insurance fund and banks pay a premium to that fund. And the FDIC insurance fund has $100 billion in fees that it's collected from banks.. And in fact, um, in the Federal Reserve letter that they printed, they released yesterday, they said any other fees, any other money that we need is going to come from a special assessment of other banks.

Oh, wow.

So they had this money and they said, we're going to make up to this much available, not just to Silicon Valley Bank, but any bank that, um, that needs a loan against their, their other, like their long-term assets. If they have the same kind of duration mismatch where they have, yeah, they own, like they're good for the money. They just can't get it out today. It's in 30 years they'll have enough money. Um, for sure. It's just that today the value of that mortgage that they owned, uh, you know, had gone down 30% or whatever.

Yeah, that's right.

They said, we'll give you a loan against that asset.

Uh, in the meantime, who are the, uh, who are the winners here? Um, to me, the winners are other community banks and other banks that have this problem. So yesterday that, uh, the government announced this new brand new program on like, uh, one sheet of paper.

It was like a Google Doc. I saw it.

Uh, yeah, yeah, it's so funny that they, uh, release stuff in the way that they do. Um, they created a new program called the Bank Term Funding Program, and that's basically going to prevent the Silicon Valley Bank problem that they had with the long-duration bonds. So basically, Silicon Valley Bank had a $1.8 billion loss because they sold a bunch of 10-year duration bonds, and they have to sell them on for 70 cents on the dollar. And what the Fed announced is that if you're a bank and you've got a bunch of 10-year paper that's worth 70 cents on the dollar, you could get a loan from us for all of it. You can get a hundred— uh, you can get dollar-for-dollar loan. So if you've got $90 billion of 10-year paper that's now worth $60 billion, we will give you a loan for $90 billion so that you can not have this problem. Yeah, you can basically not have liquidity problem.

And then the other winners were like, there's a lot of like startup banks like Mercury. It seems like they were like just like crushing it. I think Brex was another one. Like they're just killing it, right?

Well, I think the best thing for them. So I think the real winners is First Republic. Because they would have been wiped out today, probably. And many others like First Republic. So they got, you know, the bullet just whizzed past their ear. And, you know, luckily that was the last bullet. And now there's no more bullets coming today.

And there's 2,000 community banks in America. And so like all a bunch of those would have had a bank run today or this week if the Fed didn't do what they did.

Mercury and a bunch of these other startup banks, basically when everybody needed to move out of Silicon Valley Bank, it's like, who's the fastest? What's the next bank name I know that I can open up an account now? Um, and Mercury and others were, were, were beneficiaries of that. Now they got billions of dollars, billions and billions of dollars of inflows yesterday, or sorry, Friday. Now I think that a lot of that would've skipped town this week. So I think they would've been a middleman because who the hell is going to keep their money in a startup bank? Um, when this is your fear, you're not going to keep $10 million or $20 million. You might have moved it there just because you needed a quick safe haven, but you weren't going to move in there. You were going to still next week go to Chase or Wells Fargo or whatever and go put the bulk of the money there. So now I think they're in much better shape because instead of being just a middleman, they might keep a lot more of that, that depositor, uh, you know, those, those depositor relationships now.

And is it possible that other than the equity holders and the people directly impacted by this, that just like the average American might be impacted positively by this in the next 6 to 12 months because maybe the Fed won't be doing more rate increases. So then, you know, maybe you can get a mortgage in for 4.5% or 4% in 6 or 12 months because the, you know, the government is like, oh, hey, we kind of like achieved our mission because these guys screwed up. Like inflation might not be as bad now because of, of this big loss. Is that accurate or is that too much of a reach?

I personally think that's too much of a reach. I definitely see people saying that on Twitter and CNBC, but I think inflation is rampant and is— has nothing to do with the Silicon Valley Bank problem. And basically in 2 weeks, people will have forgotten Silicon Valley Bank problem and they'll have all— they have all their money as of today. Um, so like it's back to business as usual, and business as usual still has massive inflation, and the Fed is going to continue to raise rates, in my opinion.

I— this showed me how naive I am because I was under the impression that if I kept a bunch of cash in the bank, that was me doing the safe thing. I wasn't investing this money or trying to get yield on it. I was saying, look, you know, I just want to keep this in the bank so that, you know, just in case. And the, the $250K FDIC thing was this like idea that existed. I had never heard it ever coming to play. Like in 2008, I was a sophomore in college. Like I didn't care or know, I didn't have a bank account, you know, like I didn't do anything at that time.

Yeah, you thought Lehman Brothers was where you like buy khaki pants. Like you thought it was like a clothing company. I thought like, oh, you got that new pair of Lehman?

Exactly. I was like, are they hosting Thursday this week?

What's going on?

So it's like You know, this is kind of my first time for this coming into play. Did you like, cause I was like, who the hell is going to take, if you have $5 million, are you really going to go open up 20 bank accounts each with a $250K limit? Like that sounds so inconvenient and outrageous.

I think that's what a lot of people do.

But did you see that Giannis does this? Uh, Giannis the Greek freak announced, um, that he has 50 bank accounts at different banks, each with up to $250,000. That's how he kind of secures against this.

Well, I saw Jared Kushner when he, uh, when Jared Kushner became whatever his his role was in the government, what section, I forget what he was, but he, uh, had to release like his, his income. And I remember, or his, his net worth. And I remember looking through it all and he had dozens of bank accounts and it just said $250,000 in each account. And I was like, why?

And, and this is one of the reasons why. I mean, this seems, is, is this normal? And I, you know, I'm just the only guy who didn't do this.

I try not to go above too much above $250,000, but for my business I did. But personally, no, I try not to go above $250,000.

So you spread it across. How many accounts exactly then, Sam? What would that be?

Yeah, give us the count.

This is our new way to trick people into telling us their liquid net worth is to be like, "You're an FDIC-regulated guy, right?" Yeah.

I was surprised that Giannis only has 50 banks.

I was like, "That means—" No, because that story is from his rookie year. So he came over from Greece where Greece was having the banking crisis. And so that was his rookie year that, that his, he and his agent did that. Now he's worth like $200 million. There's no way he could be doing that at this point. He's got some other, you know, but rich people have this, right? Like if you're at JP Morgan and you got $20 million plus, they'll do an auto, like sweep into a bunch of accounts for you. I think, um, I'm not sure exactly how it works, but I'm pretty sure there are, there are products that exist that will do this. They just seem niche to me and seemed like I don't know, a tool for the paranoid. It didn't seem like a thing that, uh, um, I needed to worry about personally.

Yeah. It's so funny because, um, my father, you know, immigrant to the US, uh, always worried about the banking system and the US dollar is always like, let's go buy gold bars and bury them under the house. Uh, just so that we know that our money is secured. And then he's also like, let's go open bank accounts in Swiss banks. Cause those are the safe banks and they're not going to have this problem.

Um, because those also don't do fractional reserve, right? Like a Swiss bank is, I think, one for one. Um, they don't, they don't keep, you know, just a fraction of your cash in the bank.

What's an example of a Swiss bank and how do you— I mean, I've only seen like Wolf of Wall Street where they like go to Switzerland with like cash in hand. Is that— that's not actually how you do that. I mean, how do you open a Swiss— I don't even know how you would open a Swiss account.

Um, you know, I think Credit Suisse is, uh, actually a Swiss bank, but it also has a bunch of was seen as dangerous for a while. I don't even know the name of a Swiss bank, but I bet you can just open a bank account online and wire the money without having to attach cash to Margot Robbie and send her to Switzerland.

But that would be cool if you could.

I can't find this client info.

Have you heard of HubSpot? HubSpot is a CRM platform, so it shares its data across every application. Every team can stay aligned. No out-of-sync spreadsheets or dueling databases. HubSpot. Grow better. All right. We— I think we did a good job covering the Silicon Valley Bank. But, Sully, you actually had a few other things that I thought were interesting, one of them being the Allbirds, right? What a shit company, man. They are really— it's not working out for them, is it?

Yeah. Allbirds is, in my opinion, the ugliest fucking shoe I've ever seen in my life. And I remember seeing these, um, like 5 to 7 years ago in Silicon Valley. All the venture investors that I knew were wearing them around town. And I was like, you, you are ugly. Your shoe is ugly. You're ugly. This sucks. This is not a good looking shoe. And I've heard, I saw this tweet that I think is the best way to describe it. Allbirds, socially acceptable sweatpants for your feet. Yeah.

I'm not a big fan of them either, but basically they've raised, uh, $200 or $300 million in funding. They've done $300 million in revenue. Market cap is, uh, down from $4 billion to $200 million. Is that right?

How much of the founders do you think, uh, how much do they own?

Um, I didn't look at how much the founders own. I bet they owned a lot of it before, uh, when it went public. And I didn't look at, you know, kind of how much have they sold off, but I bet a decent amount.

So what's going to happen with that?

We're going to like cut every corner here. There's like, you know, we don't have running water in the office today. Uh, we're doing that every, every other day until this thing is profitable. Silly. What do you think of this in terms of like D2C? So like, I think people have basically— I think D2C got hot. People started a bunch of brands, a bunch of investors came in and funded these companies like they were tech companies, but they weren't tech companies. Casper, Allbirds, and then some like Warby Parker and others that they got that broke out. And then, you know, so on one hand, if I— if that's all I knew, if I was just sitting from afar, I would have been like, this space doesn't make sense. Then and now it's playing out where it's like, yeah, these companies are not profitable. They're not doing that well. You know, I think they're burning $100 million a year or something like that. Like they're just— they're very mature companies that are still losing a ton of money. And I would have just— my opinion would have just been that. But you and your brother, like your brother built Native Deodorant, it was a profit, you know, basically raised almost no money. Uh, what did he raise? Like $500 grand for that business? Is that, is that all he ever raised? $500,000. Yep. Raised $500,000, built it up basically by himself with like, you know, a very, very small lean team, you know, packing deodorant, like, you know, at the kitchen table, at your kitchen table in your apartment and sold that thing for $100 million when it was highly profitable. Um, that whole way, you know, then you have that model and you've had a, you know, you, you, we don't talk too much about your business, but you've been involved in a very different style of D2C that is. Highly profitable, lean and mean, raise zero capital or very minimal capital. And I feel like nobody even knows about those businesses. Those are like, you know, more under the radar. Everybody only hears about the big VC ones, uh, you know, like Away Luggage and stuff like that. What is, what is your take? Are you sort of like that other way is dumb or are they actually just two different games and, you know, both, both, both are valid? Yeah, I think they're two different games.

Who, who's doing that, that you think that they have a good shot? Yeah, maybe.

Um, yeah, FIGS, in my opinion, is a great example because, uh, they're like— one of the problems with Allbirds is they're a fashion brand, and at some point the world turns against you. And, um, like, I believe that Allbirds are ugly. I think other people are gonna arrive at a similar conclusion at some point. And then Allbirds is going to have to find the next style to get to that place, uh, to, to kind of continue to succeed. Um, FIGS is basically a uniform, so, uh, it doesn't need to be better looking over time. Yeah, but that's a bullshit.

I think you're wrong there. I think that, I think that that strategy is not bad. Like, look at Louis Vuitton. You know, they've been around for 300 years and it's always been cool. I think that their execution, they just picked a lame thing. So I don't think, I don't think it's a bad strategy. I think they just, it's a stupid shoe, or at least that's what, that's what a lot of people think.

Yeah. I mean, Nike is a great example of a business that, um, has scaled to, you know, more than a $100 billion market cap, I want to say. And, uh, they're a fashion brand that serves, um, you know, the super high end as well as the low end. Um, so they figured out how to do it. So I think there is a playbook to go raise venture money, um, or private equity money and get to scale. Um, I just think a lot of the, uh, the companies that have raised money have been undisciplined. They've hired too many people. Like Grove Collaborative. Um, what do they do? Grove Collaborative is a San Francisco-based startup that's 10 years old. It's also publicly traded. They started out being this marketplace of kind of natural products. So I've saw them as, um, I would see ads for them saying get free Mrs. Meyer's, uh, kit, and I'd click on those ads because I was like, free stuff, sign me up. And they're basically trying to give you, um, get you involved in a— get you enrolled in a subscription of buying a bunch of home products. Got it.

Okay, cool idea, cool idea.

So what companies do you like? You're saying all the companies you hate on here, you have Wish, you have Grove, you've talked about Allbirds, uh, you don't like Box. Yeah. Which is like Costco online. Yeah. Uh, what do you like?

Um, I think there's a bunch of companies that are, uh, awesome businesses that are worth less than they were in March of 2020. Um, so they're trading at less than pre-COVID valuations and I love those companies, but, uh, some of them are the ones you hear about all the time, which is, uh, Facebook, Amazon. I think those are two great businesses. And their, uh, stocks are great.

You and I were walking in, in SoHo in New York and after some meetup, and I, uh, I, I won't say the amount. You can say the amount if you want, but you said, I just bought blank amount of stock in Squarespace. And my jaw like kind of dropped. I was like, what did you really, why? And you were like, told me how much you love that company. And it was a very large amount. Um, and so are you still into Squarespace?

Uh, yeah, you have like a long history with SquareSpace. Let me ask you a different, different question. Um, at one point you tweeted out something like, hey, if we, you know, if a guy happened to have $50 million liquid and wanted to double it, um, you know, what's your best idea? And you got like 100 replies. I remember going through them and being pretty unimpressed with most of the ideas. It didn't seem like I was— I thought, you know, you— some, some great stuff would come out of there, but I But maybe in something like this, 100 people reply and it's really 3 interesting ideas. Did you get anything interesting or what did people say when you tweeted that out? And did you get any interesting ideas on what to do with your money from that?

And can you, and I remember seeing that, uh, why doesn't that happen in practice? Right. Company's got $700 million in cash. It's trading at $300 million. Uh, why doesn't, you know, it seems like the, the, the, like the video game move is You buy the $300 million company, you shut it down tomorrow so it stops burning cash, and you distribute $700 million out. You profited $400 million. Why doesn't that happen in practice, or does it happen in practice?

So there are people like Bill Ackman, Carl Icahn that are activist investors that do this kind of thing. They do it with Apple, even Netflix. Carl Icahn will basically go buy 5% of a company and then call up management and say, hey, we want you to do X, Y, and Z, and if you don't, we're gonna just keep being a thorn in your side. Um, and so, and we're gonna try to remove your board directors and put our board directors in. Uh, we're gonna threaten to fire you as CEO. They do a bunch of this kind of stuff. Um, and generally what will happen is the CEOs will just listen to Carl Icahn and do what he says, or do something else that makes their stock price go up 10, 15, 20%, that, um, and then Carl Icahn will sell his position, make billions of dollars, and be like, great, that was fun. Um, with something like Wish, uh, it's— if you tried to go buy up Wish stock, it's so thinly traded that you would basically drive the price up and you would never be able to buy 51% You'd have to, you'd have to pay, you know, $700 million, $800 million market cap to basically own 51% of it.

Dude, it seems like most of the companies that you've mentioned, or a lot, many of the companies you mentioned went public via SPAC. Has there been one SPAC that has worked out?

Uh, that is a great question. I have no idea.

And for the, like, I remember Chamath was all about SPACs. I don't pay attention to the public market, so I'm a little, I'm definitely out of my depth here, but I know enough to know that he was big on SPACs. What are these guys, what's their reputation right now? Which is they got in, did they make money? They made money going up and making it happen. And so now are they just like, oh, fuck y'all. Like, you know what I mean? Like, are they just like, uh, they don't care?

And so how does the math work? So I remember, I think I had heard at one point You have to put up 3% of the capital to own, but you own 20% of the company when it goes public. Is that right? Or did I misunderstand?

Yeah, I don't remember the math, but it's something along those lines, which is for taking the company public, you get— it's probably not 17%, but you get something like 5% or 10% of the company's stock for basically taking it public. And you don't take any risk. You basically raise money from a bunch of institutions. Um, you hold that money for up to 18 months. You have 18 months to find a target that you want to take public. You find a target, you make a deal with them to take them public. Um, all those investors that have gave you money 18 months ago, they can either keep their money in the deal or, uh, sell it. And get their $10 back. Um, and so a bunch of people will sell because they're like, oh, this isn't going to work. Sell. I want to sell my stock. So oftentimes, um, the SPAC, which is publicly traded, will be trading at $10, and then it'll get— and the target will get announced. We're going to, um, take, uh, Grove Collaborative public, and then the stock will drop immediately when, uh, The target gets announced because everyone is selling and is like, oh, this isn't gonna— this isn't a good target.

So what's his reputation then? I mean, is— or is he just like so— I mean, he's so rich, you don't give a fuck about his reputation?

Well, did you guys say the thing that's on this doc, which was, uh, the reverse Robin Hood, steal from the poor and give to make himself rich?

No, not— yeah, I was waiting for you because I know— I don't— I mean, I don't know enough to know about him and like his whole shtick, but Sean, you have a strong opinion about it.

Uh, I mean, I want to hear Sully's opinion. I don't think I have that strong of an opinion.

Yeah, you give him a hard time, dude.

You give him a really hard time.

You know, I think Chamath is super smart, super successful. I love his, uh, you know, those cashmere sweaters that he wears on the All In podcast. They look dope. I gotta buy me some. Um, but what he's done with the SPACs is literally the opposite of Robinhood. He's stolen from the poor and given to himself. And I'm surprised that his reputation is not tarnished in the public markets or in— what is it? CNBC.

Let me ask you a question. Is it that he ended up, you know, dumping on retail because it was always designed— it was kind of designed that way, it was going to be that way, or, oh, well, the market's just turned and everything's down, you know, like I don't fault Jeff Bezos because my Amazon stock is down, you know, like that's out of their control. It's a good business, blah, blah, blah. Versus no, the way these were set up, it was a bit of a house of cards, you know. Um, he was going to make money and at some point this was going to happen because these fundamentally didn't make sense.

Which one, which one is it more? Yeah. You're asking is the, what's the intention? Yeah.

Do you think, do you think he knew and that the intention was, ah, this is probably how it's going to play out, but let's just see.

Um, to me, these are pump-and-dump schemes, uh, like in Wolf of Wall Street. If the company is sound and, uh, going to go public, generally the companies will go public on their own, uh, using the traditional IPO path or a direct listing. Um, you know, that's what Squarespace, Spotify, Slack, all these companies that went public during the same era that he was doing these SPACs. The companies that go public through SPACs are trying to rush to get public. And it's not the Airbnbs of the world, it's the Growth Collaboratives of the world and SoFi of the world that are doing it.

Yeah, businesses that, that are not as sound. Now, what they would say was like the very first one I think he did was Virgin, and it was, look, this is a company that you'd have to be a real, like, you know, tech investor to understand. It's got a really long-term huge vision and, you know, they needed somebody who believed and they didn't want to, you know, take their chances with the, with the short-term minded stock, you know, uh, you know, IPO stock market. So some version of that was like you had to be a true believer in technology innovation and you had to be smart enough to understand how big this business could be. That's why I'm taking it public. And so it kind of made sense on the first one. And then pretty soon it was like, just putting lipstick on the pig and selling it. And that's how it felt to me, at least. And so I'm kind of of the same opinion, which is I think obviously he's smart and obviously he's successful. I don't think those are arguable. I think that he's also very pompous. You know, I don't love his personality. I also think that what he did with the SPACs, I think, you know, seems to be more like, like more like the pump and dump or putting lipstick on a pig. Like, you know, these weren't great businesses, it was what can I do to just, you know, to get something to cash here? Um, because he, again, he had a free roll in a lot of these. Exactly. And so, you know, and I, and I find him to be, you know, somewhat disingenuous when he, when he talks. Like, you know, I remember before he took MetroMile public, it was, uh, Buffett had GEICO, I have MetroMile, and here's why it's better, blah, blah, blah. Fast forward like less than a year and MetroMile is, you know, sold for 30 cents. On the dollar to Lemonade because it was whatever, not in good shape at that time. And then, you know, no mention of it ever again. You know, it's like, yeah, on to the next.

Yeah. The thing, you know, there's a bunch of people that were pumping Bitcoin or other crypto products, and when they tweet, there's a ton of people that reply to their tweets saying, fuck you, I lost my life savings because of your— because I took your financial advice. When Chamath tweets, I look to see what the responses are. There aren't many people that are like, hey, you screwed all the, you know, the public moms and single moms and families on, on these SPACs.

Dude, I was with your brother one time, Sully, and we were hanging out and someone was talking about a get-rich-quick scheme and how like, I think someone, they were like saying like, you know, no one likes a great get-rich-quick scheme. And your brother goes, Whoa, whoa, whoa, whoa, whoa. Getting rich quick is the best way to get rich. And, uh, and your brother's pretty funny because sometimes he'll say funny stuff, but it's like, oh yeah, you're right. That is like, that's way better. And Sean was talking about Chamath and Virgin. He's like, you know, we don't care about the short term. It's, it's for the long term. And a lot of times when I, when I read about this, these, uh, public markets and they talk about long term, I'm like, yeah, I think you're, I, I I kind of care about the short term. I definitely care about the short term a bit too. So, and they like use that word long term to disguise like bad shit. Like, you know, it's about the long term. It's not about the short term. Just hold. It's the long term. I'm like, I don't know, getting rich quick and in a short amount of time. That's, that sounds nice too. I would like it not to fail in the short term. That would be nice.

There's this Warren Buffett quote where somebody is like, some reporter is like, hey, what you talk about is pretty simple and sounds like anyone can do it. Uh, why aren't more people applying the Warren Buffett strategy and becoming billionaires? And his response was, everyone wants to get rich quickly. I'm about getting rich slowly and nobody has the patience to do it. Yeah. But here's my issue with that.

And when he talks about that, he keeps talking about the long-term and he's 95. Uh, it's like, bro, there, there, there ain't a long-term. Have some fun. Yeah. There is no long— you don't have long-term anymore. Stop talking about long-term. Maybe long-term stops when you're 60. It's like, enjoy it. Yeah.

Yeah, dude, I agree. I agree. Um, Sean, what were you gonna say?

Uh, I was gonna say, uh, you had shared this blog post about a good, a good quest, which is, uh, I think, uh, a guy from Founders Fund, I think wrote it a while, a while back. I remember reading it and being like, this is actually pretty interesting. Um, it seemed like something, uh, that maybe resonated with you. Can you explain the idea of a good quest? And then I wanna hear you guys, uh, talk about it.

And he points out, he's like, most—

I don't know, man, but this guy, look, but throughout, bro, his former job, he, he, he used to work at Mike's Hard Lemonade. I don't know if I can trust this guy. Did he really?

That's how he knows, dude. That's the experience.

He did the total opposite. He works at Anduril, a defense company. But like, I don't know, man, this guy worked for Nerf. Like, sorry, go ahead, I'm an idiot.

Yeah, he's a co-founder of Anduril. So he points out this thing, which is like, you know, the average person is not capable of going on one of these good quests. So if you're brilliant, if you really are in that kind of like top 1% of talent and motivation and ability, it's kind of like your moral imperative. Like you kind of got to be the ones doing this because who else, if not you, then who is sort of the mindset that he has. And so I would say that like You know, I think you're awesome, but you, you yourself are like, I want to go on a good quest. You've been telling me this for like 5 years. Yes. And you're like, I spent my whole life building these like mousetraps that make a bunch of money because I just see them. I just see them. They're obvious. This widget, I could sell this widget and make a bunch of money. And you've done that. Are you— did this blog post tip you over the edge to do a good quest or did it have the opposite effect and turn you off and say, actually, You know, F this guy and F this whole like noble quest bullshit. Maybe next week.

Um, you know, I went to this, uh, SV Angel event in San Francisco last week. Um, and I'd been to San Francisco in a really long time because I was having this like existential question myself of, uh, should I be going on good and hard quests versus easy quests? Um, And, you know, easy quests are great because you have a great quality of life. Like, uh, you don't work that hard. Um, you can go play tennis in the middle of the day or work out at noon. Like, my brother every day at noon will go work out for 2 hours in the middle of the day.

Um, you could have a sick pad in, in New York and maybe a place in LA and, and travel all over the place. I mean, you guys have a pretty nice life.

Yeah. Yeah. Like he's going to go to Japan, uh, next week, um, just for fun to look at, uh, go to the cherry blossom festival. Um, so, you know, he's, uh, it's very easy to be seduced by like quality of life and easy quests in my opinion.

I like how you're using your brother here instead of yourself. You do all the same things. You're just like, yeah, using him as like this guy.

It's way easier to use him, uh, than kind of look in the mirror, look in the mirror more closely. Um, and so, you know, I went to that event and, uh, Sam Altman spoke and he was basically like, um, everyone thinks OpenAI is an overnight success. I've been working on this for 7 years, goddammit. And so have all of these other AI, um, scientists and AI engineers. And it took us 7 years to make ChatGPT what it is today. That's not that long. It's not that long, but it's a really long time. Basically, they didn't launch a product for maybe 5 years or something along those lines. And now—

He had every quest at his disposal. He could have just simply sat back and angel invested and done, become as proficient at pickleball as one can be. He was running YC at the time and he left probably the the best job in Silicon Valley, which is running YC. Yeah, probably the highest paid, lowest effort job you could have. Like, it's up to you how hard you want to work there.

But exposure to new people, new entrepreneurs, new ideas constantly. You get to do all the fun shit.

You get to see all the smartest people. You get to be the kingmaker. Uh, you know, you have the infinite money glitch if you're, if you're doing that.

And everyone in Silicon Valley is coming to kiss your ring.

He quit to go do this nonprofit AI thing. And I remember at the time, I remember literally at the time, this was like, what did he do this? Like 2016 or 2019 or something like that. He had been funding it as his own personal passion project basically up till then. Then he left YC to do that. And I remember thinking at the time, I should probably just go follow Sam Altman. If he is going to do this with his time, there's really no better signal in the world that this is the right place to be. Unfortunately, I didn't act on that, but I remember having that thought back in 2018, 2019.

Yeah, it's, it's funny to me that you say that like 7 years is not a long time. Um, cause yeah, I guess in a sense it's not, but, um, 7 years at the same time seems like infinity. Um, when you're working on a startup and you're, there's no immediate gratification. Like I can't think of the last time I was able to work on something for 7 years without some form of immediate gratification.

I mean, there was, there was, there was milestones. Uh, look at this guy, the, the Trey Stevens who started Andral, like funding rounds, winning certain contracts, some type of press. I mean, that's like pretty cool. You know, there you got, you can get your dopamine, you can get your dopamine hit, but what are you going to do? Are you going to quit doing this small boy shit that makes a lot of money? Are you going to start doing something like legitimate that like actually matches your IQ? Um, yeah, I want to try and do a hard quest, but what, what's, what's the, what are the handful of ideas or industries that tickle your fancy?

I think doing something in healthcare would be really amazing and transformative. I think healthcare in America is so bad. It's shocking to me. Like, you know, my mom had a bunch of medical problems last year and just getting access to doctors is insane. Like, if you want to see a specialist, you have to wait 60 or 90 days to go see a specialist, specialized doctor. And, um, a friend of mine who's a doctor was like, here's how you solve this. Here's a concierge, uh, medicine practice. You pay them $30,000 a year. I had one.

It was $25 grand a year. Yeah.

You pay them $25 grand, $30 grand a year, whatever it is. And all they do is they are able to get you appointments faster because they're able to text the doctors because they know the doctors personally because they used to work with them and say, hey, can you do me a favor and see my guy, uh, next week instead of 3 months from now?

Um, it's kind of like gangster a little bit. Like, it's like, uh, it's like the doctors are— it's run by the streets, you know what I mean? It is pretty weird. It's not cool. Yeah, it's not cool.

It's broken. And then the other really fucked up thing is, um, if you have a medical problem and a neurologist will be like, this is a cardiologist problem, and the cardiologist will be like, this is a neurologist problem. And the two of them are like Superman and Clark Kent, which is they're never in the same room at the same fucking time. So you can't actually get real information about what the problem is. And they never talk to each other. They talk to each other through handwritten notes in the dark of night. So it doesn't work.

Do you have a tangible idea on this or you're just like healthcare? Healthcare is just too big of a word. It doesn't mean anything.

Yeah, it is too big of a word. One idea that I've been tinkering around with is remote monitoring of patients. So, uh, you know, my mom, um, lives in Dallas. I'm sometimes there, sometimes traveling. And, um, I want to have some device that she has that is like monitoring her blood pressure, um, her blood sugar, uh, her heart rate, and, uh, reporting that to me and to all these other doctors in, um, you know, real time so that if there's a problem, you know it faster. And so that you can go track this stuff right now when you go to the doctor. And if you have blood sugar problems or, um, high blood pressure problems, they're like, what was your blood pressure last week versus what is it right now? What was your blood sugar last week versus what it is right now? That we—

it's always reported, uh, self-reporting. Yeah, it's always wrong.

Yeah, it's self-reported and, um, it's just so broken. And I think being able to track this stuff in a more automated, seamless, seamless way would be really interesting. Device. Yeah. Like I got a Whoop and, uh, you know, that's doing some extra tracking, but yeah, some kind of embedded device that's like continuous glucose monitor plus, um, some way to measure your blood pressure and, uh, kind of keep it in one, one place. Um, the other thing that I think is a really interesting idea is that I went to Georgia Tech in 2003, and at the time they were working on building a smart home. And one of the ideas they had for a smart home was a smart toilet. So imagine when you're using the toilet, every time you use the toilet, it texts you and says, dude, uh, you're eating too many french fries, right?

Stop. Stool sample, basically.

Yeah. Stool and urine sample and, uh, are measuring in real time what's up.

Wasn't there a company that was doing that in San Francisco that was totally a fraud? Was it uBiome?

Is that what they were doing?

It wasn't a smart toilet though. I think you had to send it to them. Ah, okay.

Well, fuck that. That's, that's kind of weird, right? I can't even, how do you get a, well, I don't know, but, uh, no, those are interesting. I've seen people like tinkering around with this idea. I do think it's very fascinating. I have no idea how you do it. What do you shit in a net and it like takes a little strain? Uh, I don't know.

I don't know what the mechanics are, but I think it's an interesting idea that like, let's put it, let me ask you a different way.

I think you have a very good way of thinking about problems. And I, what I mean by that is, um, every time I've come to you with an idea, like two things happen that, that are different with you than with most people. One is you're like, I'm not, you don't sit there and ask like, uh, Is this feasible? How would we do it? You know, like that question comes late later. It's like, first let me decide on like the big idea and you know, how, how could, you know, would this be amazing if it happened? Okay. Then I'll go find a way to make it happen. Or like, you know, your brother, when he started the deodorant company, I remember somebody was like, Moise, do you know anything about deodorant? He's like, no, I know nothing about deodorant, but in 6 months I'll know everything there is to know about deodorant. And sure enough, you know, built a very big deodorant brand. So like the, kind of like not being limited by what I know today is like, you know, I would say one factor. And the other is like, um, you're not one, at least from what I could tell, like you don't really consider like plan Bs or like if this fails or why would this fail. Uh, you, I remember when we started a thing together, you were like, yeah, I just, I was trying to do that. And you were like, I don't know, man. I don't really think that way. I just sort of, I decide to win and then I do it and I just plan to win and I don't really focus on the rest. Am I, am I correctly understanding that or no?

But can this be big? Would this be big if it worked? And can I get customers? Yeah. Yeah. Those are the two. And often, you know, one thing that happens, I look at a lot of startup like investment deals with Suli and it'll be like Here's these great people, there's this great technology, great product, blah, blah, blah. And he'll just be like, cool. So how are you going to get customers? And you'd think this appears to be a baffling question to so many founders, or they'll say something and he'll be like, okay, so what do you mean? So what do you mean? Where are you going to go? Or have you done that? Tell me about 3 times in your life that you've done that. And then he's sort of like, I'm in or out based on their ability to get customers.

And I think it's It's like the—

I told you that my meme of the year is that Midwit meme. It's like the genius and the idiot, the way they think is aligned. And the analyzer who's taking into account 75 variables actually ends up with the wrong answer more often than not. And like this idea of like, can it be big? You know, if it worked, would it be big? And can I get customers? Is the sort of the Midwit meme, like, you know, in real life. Yeah.

I don't think you need to know more than that. In fact, um, Sam and I were on this call where this guy was pitching, uh, I think it's the company was called Firefly. It was pitching, um, ads on top of Ubers and taxi cabs in, uh, like this physical device that was on top of the—

and they're around now, but I think at the time he wanted a $100 million or maybe $60 million valuation. And, uh, it was crazy. I remember being off that call and I was like, huh?

Yeah. Sam messaged me and was like, this is bananas. Can you believe this guy? Uh, this guy's valuation and the audacity. Um, and he was, uh, I think at the time losing money, um, on each individual device for years. Um, so yeah, there, there are often times where people, I, I'm shocked by how many people are like, cool, I figured out what the product is, but I have no idea how to get customers. I have no idea what the economics of that look like. And that's where companies go to die.

Um, how'd that company end up, by the way?

Did it, did it do it? Still exists, but I have no idea. Got it. Um, I'm drinking water, this water here. This is a $25 bottle of water because it's like pure water that's been filtered. Um, it— I'm in LA right now. It turns out that if you drink tap water in LA, supposedly according to this guy, it has pharmaceuticals in the water.

What's that, from Erwan or something?

Yeah, I think this is from Erwan. And this water is basically pure in a way that you can't get water anywhere else these days. And so it costs $25 a bottle. This is insane. And it tastes just like water.

And your point is?

Yeah, so super interesting idea. I didn't talk to this guy or anything, but I wonder what their distribution strategy is. Uh, cause I think putting $25 water at Erwan or Whole Foods is like an inadequate distribution strategy to get to meaningful scale for this.

Well, I'll give you the counterexample. I was doing some research on the Nelk Boys. Um, who, and I won't do the full thing about the Nelk Boys and their kind of business empire, but one thing that stood out was I was watching this clip and it was John Shahidi, who you guys might know. Cause he's like, kind of came, he was like in Silicon Valley, then he transitioned into like Hollywood influencer stuff. When he had his like mobile app Shots get popular from like a bunch of Vine stars.

And is John their manager?

That's what, like what we did with the audience, right? It's like, cool. I'm going to build up a big podcast. We didn't sort of intentionally go about it this way. We just wanted to do a podcast, but once you realize, oh cool, I could just build up a huge audience. I can come up with great products after, uh, I don't even need to like know what product it would be going in. Yeah.

I didn't understand that with The Hustle. I was like, why are you guys investing? And they're like, because building an audience is really hard. And I was like, that's not that hard. I just do this, this, this, beep bop boop, and you got it. And then I kind of, later on I realized that when to build an audience that's engaged, it's kind of, it is a little formulaic, but it's also a lot of luck and kind of catching lightning in a bottle where, and then once you have it, it's, uh, very, very, very, very valuable. Now that I don't have it anymore, I'm like, ah, I get it. That was hard. Yeah.

It's amazing to see people all around, uh, the world doing this now and all these verticals, like, you know, Doug DeMuro. Um, did this, then, uh, got an audience, then started Cars and Bids.

Dude, I was early on that, man. Sean, I was telling you, Doug DeMuro, that, that Cars and Bids, it's gonna be big. Now his competitor was just in the New York Times last week for selling a billion dollars with the cars.

Congrats on, uh, investing on that when you called it.

Yeah. Yeah. About that. Yeah. Did you try to invest in Doug DeMuro's thing? Uh, maybe like a DM on Twitter was about the extent of it. Uh, but all, so no, it was most, I just, it was I talked the talk, I didn't walk the walk. And also I didn't have a lot of money at the time. I think he— it's, it's about 4 years old, but no, I, I, I talked the talk. That's about all I did.

It's also amazing because, uh, these guys will, um, are often bootstrapped, right? Because they basically start with no audience, they just start making an audience, and then, uh, once they have an audience, they're generating so much profit from the audience through YouTube videos or whatever, uh, so they don't even need outside capital. So I think even if you chased him down, he might have been like I'm already making money. I don't need to raise money. Um, so it just turns a lot of Silicon Valley stuff upside down of like, you know, distribution first that generates profit, then use that profit to, um, make product.

Suli, did you look at the feedback from your last episode? People loved you. They like your voice. They say that you're calming and I agree. Great.

All right. I, uh, I only listen to feedback that like Sean or Ben Levy texted me.

You had very positive feedback. People liked you. They said that you're calming, that they would do anything that you'd say, things like that. Very— it got a little weird. Yeah. Thanks for doing this. Thanks for doing this. Hopefully, uh, people enjoyed the, uh, Silicon Valley Bank breakdown and a few other things. And, uh, if you made it this far, we're doing a meetup actually, Sean, tomorrow. You're not going to make it. We had— we have it like sold out like right away, 500 people. But, uh, we'll be doing another one April 28th-ish, and we'll announce that more info on that soon. Yeah.

I got one quick thing I want to plug, which is, um, you know, Sean has this guy who's his right-hand guy who helps him on all these different projects. Uh, I want to find a right-hand guy to, uh, help me with a bunch of projects. So like source and diligence investments, um, research random business ideas I have. Uh, come work for me full-time for the next 5 or 10 years and, uh, let's go do something amazing. And where do they find you? You can find me on Twitter and DM me.

All right. And is your hand— what's your handle? It's S-U-L-I? Just Suli?

No, it's my full name. S-U-L-E-M-A-N-A-L-I. All right.

That's good. You're one of the very few people that has taken advantage of this to actually promote something, but you did it at the end. You could have done it in the beginning, but that's all right. Fuck it.

Only the strong made it here. That's— he filtered them out. That's right. He filtered out the weak, the weak people. All right, we're outta here. That's the pod. Cool.