This Week in Startups
01:06:35 · D.A. Wallach
[01:06:35] S1: Yeah. It's... I think it's crazy. And it's... Look. On the one hand, you've got the the investor or sort of so called investor side of this, which it occurs to me is almost like freelance investment banking. It's like there's this new industry of freelance investment banking where people's... They're not investors, brokers. They're unlicensed brokers who charge a fee and they make their money on the trade. And it's an interesting thing that has emerged, I think exactly as you alluded to, to fill this gap between public and private markets. And it really speaks to the failures of the public market system that we have today. I mean, what should have been happening for the past decade is these amazing growth companies should have gone public much earlier. And the average American saver should have had a shot to participate in that growth and see their retirement account go up as Palantir goes up, as SpaceX goes up. But instead, the, you know, the poor lowly public markets investor is left with the dregs after all these freelance investment bankers take their cut. And the reason it's been allowed to happen is because the founders have had so much leverage and everyone has been so permissive to enable these founders to have dual share classes, complete autocratic control of their companies. So it's like, why would the founder go public? They don't have to, they're in control of their business. Money is easy to find anywhere. They can have all these supplicants who are fee takers on the deal, who are doing, you know, freelance investment banking out there wherever. And and so it's like, you know... And by the way, you know, like, my my... You know, I've got the cleanest dirty shirt, but mine's a little dirty too. I've done a couple of these. Right? Everyone has because it's been free money. And so it's like... But it's not a good system. Like, what we want is shareholder capitalism. Like, America needs to innovate. We've got amazing entrepreneurs. The broad public should have a shot at participating in these companies. They should go public earlier. Sequoia doesn't need a $10,000,000,000 fund. Let your great winners go public to get all that growth capital.
01:08:52 · Jason Calacanis
[01:08:52] S0: Better system. I agree. I I think what they need to do is get rid of the concept of accredited investors. And this is another thing that Trump was really making great progress on, being so pro capitalist, that will probably revert under Democrats and be protectionist again. I've been shouting, why can't people who have under a $150,000 a year salary or 200,000 a year salary on the weekends take a course and become a sophisticated accredited investor? If you want to take that course, you wanna learn how to your own money to work, and then you want to start a syndicate and you're not an accredited investor, or you want to buy into these companies, let them join that class. And then let venture capital firms have 10,000 members. Why can't I have 10,000 people in my venture firm and have them put 1,000 each? This could get very interesting. You could have a much different world if people who are quote unquote poor, middle class, too stupid to invest in this class. Well, if they could invest in a venture firm and pay their 2 20? Put a thousand. Put 10,000 to work. Do five years of $10,000 capital cost, $2,000 each. Like, an Uber driver could participate in investing in Uber because they were driving Uber and they saw how popular and how much the customer love was. You're an HR person. You see LinkedIn having an impact. You're able to buy $25,000 worth of LinkedIn with your four zero one ks. You know, they should allow anybody to get in here. That would be another way for there to solve your problem, D. A, which is give access earlier to a wider swath of people. And I've thought about starting my next fund offshore. And there are some countries, I wouldn't be able to have American LPs, but there are other countries that allow anybody to participate, or they have a sophisticated investor test. We got to get this done. Talked to the head of the SEC about it. They're working on it.
01:10:48 · Elana Gold, Thomas Tunguz, Jason Calacanis
[01:10:48] S2: It's so crazy because I always said you could really go gamble your life savings away, go on debt, but you can't go invest in startups if it's something that you believe in. And if you go, who has a huge voice, and you want to go raise publicly, suddenly now you're not just an accredited investor, you have to be a qualified purchaser. Now you need, what, dollars 2,500,000? And so I think it's so crazy, this aspect of like, hey, could go gamble away your life savings, spend it all on whatever it is that you want to buy, but you can't go invest in Startups. [01:11:15] S3: You could put it on Black [01:11:16] S0: or rent, put it on Black. [01:11:18] S3: Then just to go back to the original point, think about how different the narrative would be if every American had exposure or could have had exposure to Anthropic at the Series D and beyond, and you could ride it the whole way. And so that data center down the street is actually what's paying for your kid's college.
01:11:18 · Thomas Tunguz, D.A. Wallach
[01:11:18] S3: Then just to go back to the original point, think about how different the narrative would be if every American had exposure or could have had exposure to Anthropic at the Series D and beyond, and you could ride it the whole way. And so that data center down the street is actually what's paying for your kid's college. [01:11:33] S1: What these asset manager scam artists are going to do, what they're in the process of doing is they're gonna try and foist all of these private vehicles that can hold these private company securities on savers. So the the argument is well underway that the average person should be able to hold private equity in their 401 account, should be able to hold private credit in their 401 account. Now, the reason this is happening is because ETFs have commoditized active public equity management. All the money's gone from that. You can't charge 2% anymore to pick a bunch of great tech stocks in a mutual fund. And so what all these big asset managers have done is they've tried to find new strategies that they can launch where they can still charge. And that has been the private stuff. So I think this is all rotten. I want these companies public earlier. I'm sorry. If you've got a $5,000,000,000 company that's doing $800,000,000 in revenue, why can't you be public? What are you scared of? Why can't you disclose your financial? Why do we need to wait so long to see Anthropic's financials?
01:12:47 · Thomas Tunguz
[01:12:47] S3: There's two regulatory reasons. The first, just to put this into perspective, I was working with a company that was about to go public. The financing cost of an IPO of 25,000,000 this was ten years ago, 25,000,000 on a company generating $100,000,000 in revenue. So just the expenses associated with that transaction compared to a private market transaction, which would have been $506,100,000 dollars were inordinately high. I think the second thing that really changed this and really allowed a lot of private companies to remain pub... Private is the Jobs Act. The Jobs Act allowed a private company to massively increase the number of shareholders. And it used to be there were two reasons why you needed to go public. The first was you needed access to a huge quantum of capital that's not available in the private markets. That's clearly changed. And the second was you needed to raise from more and more people, and so at some point you exceeded the shareholder count. So there you need to go public. Both of those have been relaxed, and I think the second order unanticipated effect of both of them has been that the total number of publicly traded companies is significantly less. And the reality is the private markets, you know, you can look at private credit, which has absolutely exploded, right? Global private credit is $4,000,000,000,000 That comes out of the, 2,008 legislation because now the banks are no longer allowed to lend, so you need to find lenders in the different private credit markets. But I agree with you. I think there is a transparency that really needs to start to happen because a lot of retail capitalists are starting to come into privates. Privates are exploding because really tough for them to go public for one reason or another or just unattractive. And so we have this new emerging market that has a lot of opacity. Mean, you figure out how to make it more transparent, but I would argue not regulate it in the same ways that we have in the past because otherwise we'll just recreate the same problems that we were the same second order consequences that the original regulation produced.
01:14:31 · D.A. Wallach, Jason Calacanis
[01:14:31] S1: Well, I think we've got I think the one possibility that maybe hasn't gotten enough heat yet, and it kind of harkens back the tokenization stuff in the crypto world, is what's... What you're seeing with Hyperliquid, you know, in particular. Explain what it is because [01:14:48] S0: I don't know if everybody understands what [01:14:49] S1: Hyperliquid is. Platform, It's a protocol. You know, it's a crypto ish kind of concept where decentralized market participants are basically able to create effectively... Think of it as synthetic securities, whereby you can bet on anything. You can bet on private company valuations, you can bet on individual company milestones. If it were a pharmaceutical company, you could bet on an individual clinical trial, not just need to buy the entire Pfizer stock and their huge portfolio where the one trial you have an opinion on is not gonna move the needle on the overall valuation. And this really marries with what we've seen happen in the prediction markets world. I believe we may be right on the doorstep of this whole conversation we just had becoming totally irrelevant because it's kind of gonna supersede. I mean, it conceptually supersedes the regulated securities market entirely. Just as an end run around the whole thing, it's permissionless. I don't need some SPV hustler to get me into Palantir or rather to Andreessen Horowitz or something. I can just like make a bet on it in some weird synthetic market. [01:16:09] S0: This is, I think this is Hyperliquids market for Anthropic. I'm not sure yet.