0:10

Hello, and welcome back to Equity,

0:12

a podcast all about the business startups where

0:14

we unpack the numbers and the new ones behind the

0:16

headlines. It is Friday, November

0:19

eleventh. This is Alton, and I'm joined today

0:21

by Marian Azovetto, one of my oldest

0:23

friends. Marianne, how

0:24

are you? Doing great, Alex. How are you?

0:26

It's shorts and t shirt weather once

0:28

again here in mid November on the East Coast.

0:30

So I'm excited and also terrified

0:32

for the planet. But the good news is I am

0:34

not alone on the East Coast and jointly with

0:37

us, Mary Anne. We have Becca Skutak from the TC

0:39

Plus team. Becca, welcome back to the show. Oh,

0:41

thanks for having me. Natasha is off today and to Becca

0:44

has very kindly stepped in to fill

0:46

the void. And it's great to have all three of

0:48

us because there has been so much going

0:50

on. This this week has felt like

0:52

a year. I think I'm exhausted.

0:55

I'm curious just up top. How are you guys holding

0:57

up?

0:57

Yeah. Same. Like, very, very

0:59

long week just taking in so

1:01

much. Yeah. How we're holding up?

1:03

Not well. Not well. I

1:06

I think having an election of of great

1:08

import in the nation at the same time when FTX

1:10

decided to melt down and Elon's

1:12

doing his thing and the socks are going, blah.

1:15

It's it's too much. I think we should all get a refund

1:17

on this week. Anyways, we do have a

1:19

great show for you today. We are gonna talk about deals

1:21

from Ernesto TELUS app and Harmonic.

1:23

So we're gonna start with a pretty good solid start

1:25

up focus. Then we're gonna talk about meta and other

1:27

social media layouts with a small touch

1:30

of what's going on with Twitter just to keep you up

1:32

to date. And then we're gonna close with what's

1:34

left of Crypto. And yes, we

1:36

did talk about that earlier this week on a Twitter

1:38

live, but more things have happened. Many

1:40

things have happened. So We have to do an update

1:42

yet again. But to start, and I'm

1:44

very excited about this. We're gonna talk about rug

1:46

pulls, but not in the Crypto NFC

1:49

context. Becca, one what's going on? And why is

1:51

Peloton involved?

1:52

Yeah. So this was sort of

1:54

the deal of the week that makes you go, what

1:56

is happening right now in Venture?

1:59

so

1:59

earlier this week, a company called Ernesta

2:02

raised a twenty five million series a round

2:04

to sort of create a new d to c

2:06

custom rug company. What's

2:08

interesting about that other than the fact that

2:10

rugs in the start up community, I have

2:12

never intersectioned as far as

2:15

I remember, is that it's

2:17

John Foley's new startup, the

2:19

former CEO and cofounder of Peloton,

2:22

which This definitely raised a lot of

2:24

questions. Who

2:24

knew John Foley was a rug guy? Why

2:26

was this what he thought of after Peloton?

2:29

Wow. He's making another bet on D2C? Like,

2:31

Just a

2:31

lot of questions came

2:34

out of that, that just the randomness

2:36

of it, but this took out of because, like, diving

2:38

deeper in. There's a lot of

2:39

questions about the actual deal itself

2:41

and sort of like what this says about what

2:43

VCs are doing right now. It's a

2:45

twenty five million dollar series a on

2:47

a pre launch company with no product

2:49

market fit that John Foley,

2:52

if following timelines correctly, has only been working

2:54

on full time since September. So

2:56

definitely raise a lot of questions. Well,

2:58

it just goes to show how equitable

3:00

the venture capital market is. There's no bias

3:03

towards prior there's no bias towards

3:05

generic white men whatsoever and that anyone

3:07

can raise money today because obviously if a random

3:09

can raise twenty five million dollars for a direct

3:11

to consumer rug, prelaunch startup.

3:13

There's infinite capital available, Becca. Is

3:15

that right, or am I just annoyed?

3:17

It's going. I mean, it feels right. And on

3:19

the one hand, something I try to out in

3:21

the piece though is the thought of venture

3:23

capitalists backing John Foley

3:25

again in the future. That

3:27

is not

3:27

particularly surprising because he

3:30

obviously Peloton isn't doing what

3:32

they were doing in twenty twenty and sort of they've

3:34

seen sort of a fall of grace in

3:36

that way. but jafel didn't commit

3:38

fraud. There was no lying to investors. It's

3:40

not like an out of Newman type shock

3:42

for the fact that VCs are backing

3:45

him again. But the timing of this

3:47

when, like, so many companies can't raise

3:49

and everyone seems

3:50

to be having issues, getting time

3:52

with investors, all of this just seemed

3:54

a little too on the nose for what we've

3:56

been seeing this year. Yeah. I have

3:58

to say I was pretty surprised,

3:59

but then not. It is

4:02

disturbing, like, how quickly people

4:04

who are repeat founders can just

4:06

raise more money from investors so

4:09

early in the stage of a company. It's

4:11

offensive. Again, as we've repeatedly

4:13

written about women and people of

4:15

color struggling to raise capital

4:17

when they've got far more attraction, like

4:20

way more attraction than this company does.

4:23

It it's really just infuriating

4:25

to be honest. I mean, no offense John

4:27

Foley. I don't really know much about him. This doesn't

4:29

have to do with him on a, like, personal level

4:32

or professional level. It's just he represents what

4:34

is wrong with Venture today. In this particular

4:37

case, that's just

4:38

how I feel about it. You know, on on the point

4:40

about he didn't do any fraud and so

4:42

forth, it's true, Becca. But I mean, if he

4:44

had, we could have added a zero to this particular

4:46

round, given that we've seen people before

4:49

who have engaged in activities you might consider

4:51

to be fraudulent. raise a lot more money

4:53

for their pre launch companies. So twenty five million

4:55

is kinda like chump change for this class

4:57

of founder. And

4:58

not to mention, I mean, a d to

5:00

c custom rug company, I mean, Who

5:02

is sitting in their house thinking right now, man,

5:04

I wish I could custom design a rug

5:06

for this room? I mean, like, what?

5:08

So Me, I think that.

5:10

I need a new rug in my office. But

5:13

but you custom made, really?

5:14

I what's the price point? Do we

5:16

actually know Becca what the price point's gonna

5:18

be on these D2C rugs? because III

5:21

hate to go against Mary Anne and then have

5:23

the grong.

5:23

No. We don't. And that adds

5:25

to the whole maybe if I saw what these drugs

5:28

look like or the prices, I could see

5:30

sort of like the need here, but

5:32

none of that info is out yet. I mean,

5:33

maybe the investors know that. but we

5:35

surely don't at this point. Okay. So the

5:37

rug in my office has survived a

5:40

puppy. Other dogs, winters

5:42

and me tracking mud into my office. And

5:44

and I'm not gonna lie a whole bunch of coffee spills.

5:46

So like it's time. This rug needs to go. Like it's

5:49

been abused. And buying a rug is

5:51

not the funnest thing because they're large.

5:53

At the same time, options exist. And so

5:55

I I'm so curious, like, what will this company

5:57

do that is distinct? And also, as

5:59

I've written about, DTC companies are a

6:01

loyal the out of favor right now. So it feels

6:04

it feels like the Mad Libs startup.

6:06

Yeah. I mean, last thing I'll say, I feel like this

6:08

is targeting a very niche segment

6:10

of the population, the very wealthy, because

6:13

really I mean, how many people first

6:15

of all, who would even want one, but okay. Say

6:17

you did. Like, how many people can forward

6:19

to do this because I'm gonna assume this is not

6:21

gonna be a cheap thing, really. I mean, come on.

6:23

I doubt he's gonna be marketing to the masses.

6:26

Right? So, I mean, do we really

6:28

need this? Like, there's so much more in the world

6:30

that is, like, more important to be

6:32

using technology to fix. Like, do

6:34

do rich people really need more

6:36

rugs? And do they have to be custom?

6:38

I'm I'm sorry. I just don't get this at

6:40

all. Yeah. No. That was, like, one of the big things

6:42

that stuck out to me. I was, like, the seams

6:44

like a classic example of a solution

6:46

being created for a non problem. Right.

6:48

I have never found buying rug to be difficult.

6:51

I've bought quite not quite a few honestly,

6:53

which again adds to the weirdness of this

6:55

because you don't buy these things that often. That's

6:57

true. You don't own that many of them. That's true.

7:00

And, like, I just got back from this Trump

7:02

in India and I spent a couple times

7:04

talking to artisans there at

7:06

different rug places, different

7:09

rug emporiates and the like. And they're saying

7:11

like, I don't know. It's just like, you

7:13

can get a custom made rug there,

7:15

you can get a family made rug there, and I just

7:17

found them to not be that crazy expensive.

7:19

And a lot of places like that, they pay to ship it

7:21

to your house for free. They even made a comment

7:24

where they could never do it

7:25

online because the colors would never line

7:27

up. And then I got back and saw

7:28

this news literally four days later, and I was

7:30

just like, whoa. Okay. Never thought

7:33

my vacation was gonna inform something

7:35

about my job. but I was just like,

7:38

this just doesn't add up to me at all.

7:40

So I'm trying to make a point about

7:42

how sizes here and I was going through

7:44

coverage of John Foley selling

7:46

his fifty five million dollar Hampton's

7:49

mansion. And I I can't get the square footage

7:51

actually nailed down in the seconds that I have, but

7:53

I'll just say this. Maybe if you have a fifty five

7:55

million dollars house in the Hampton's, you need more

7:57

rugs, and so maybe you have this burning

7:59

issue in your soul that says, hey, you know what we need to

8:01

do is make custom rugs easier to get it. I don't

8:03

wanna go to store. I'm a Hampton's

8:05

person. So I'm too busy, so I'll make a company

8:07

and then leave this little funded. don't

8:09

know. Let's move on. Mary Anne, there's stuff

8:11

going on in the world of savings.

8:14

And there's a new company called TELUS app

8:16

that has raised some money. And if I understand it

8:18

correctly, they are trying to make extra

8:20

large loans to people to buy a second

8:22

home, and then they're gonna somehow make that into an interest

8:25

product. So talk us through it. Yeah. It is a

8:27

bit complex. I'm gonna do my best to

8:29

to simplify and explain what TELUS

8:31

is doing. First of all, they're actually a six year

8:33

old company. They've been around a few years. They're

8:36

just kind of just now emerging from

8:38

stealth. And what they do, it's it's a model

8:40

I've not yet heard of. So they have

8:42

like a savings product for retail

8:44

consumers and they say they offer higher

8:47

yields three point eight five, up

8:49

to I think four point something,

8:51

four point five, which is pretty good considering

8:54

that, you know, most savings account,

8:56

interest rates are dismal. And they claim, you

8:58

know, this is a more safe alternative than

9:00

crypto or stocks right now, which, you know,

9:02

obviously crypto. has gone

9:04

to this week. So yeah. Anyway, that's

9:06

one side of their business. So then they use

9:08

that money that they're getting from the retail

9:10

consumers to fund what is this Scribe

9:12

as a super jumbo loan. So say

9:14

you've got a house already. You wanna

9:17

buy a bigger house, but you don't yet wanna

9:19

sell the one you're living in. Well, you're not gonna

9:21

get traditional

9:21

loan. Okay? Because you've already

9:23

got so much money tied up in your current house.

9:26

So tell us after using

9:28

like their strict underwriting criteria,

9:30

their

9:30

words, We'll loan you that money

9:32

at a higher interest rate than what

9:34

you would get for a traditional loan so

9:37

that you can purchase that house. And

9:39

then that loan usually

9:41

ends up getting refinanced, so

9:43

that owner is not paying

9:46

those outrageous interest rates long term

9:48

which TELUS says minimizes its

9:50

risk for default because the

9:52

loans end up getting refinanced anyway. Did that

9:54

make sense or was it just too complex? I understand

9:57

I just have a lot of questions. So

9:59

if they

9:59

refinance the loans, it won't

10:02

be generating the sort of yield required

10:04

to create the income needed

10:06

to pay the interest on the consumer deposits.

10:09

Right? Right. I mean, it seems risky

10:11

to me, but I guess they're counting on

10:14

volume. That's the thing. So when I was reading

10:16

this, it my question is how many people are out there?

10:18

This is the exciting question we had with the DTC

10:20

drug company. How many people out there fit this

10:22

profile and need a super

10:25

super jumbo mortgage. Because

10:27

it seems that every dollar of mortgage, they can

10:29

create dollar of deposits and take the higher

10:31

rate on the mortgage and you just have to pay the deposits,

10:33

which is how credit unions work. Right? And

10:35

it's they've worked that way for a long time. So the model

10:37

kind of functions. But and to have a very

10:39

exotic mortgage product to create

10:41

the yield to allow for a higher interest

10:43

rate. Consumers haven't got I think you're gonna have a lot

10:45

more demand for the savings product than the mortgage.

10:48

For sure. Yeah. Oh, I mean, for sure,

10:50

there's definitely way more people who want

10:52

to earn more money on their savings,

10:54

earn more interest on their savings. And people

10:56

who who need these super jumbo loans that

10:58

kinda goes

10:58

back to our earlier point. That part of the

11:01

business targets, you know, obviously very

11:03

already wealthy, people,

11:04

and they only do that in California, but

11:06

retail consumers

11:07

all over can can put deposits.

11:09

So they're saying that most importantly,

11:12

they want to give people away to save

11:14

more money, make more

11:16

money on their savings, that that's

11:18

what they say. Andresen Horowitz believed

11:20

so much in this model They led a

11:22

sixteen million dollars seed round for the

11:24

company earlier this year, which

11:27

I thought was interesting. And other

11:29

backers that you might not

11:31

spect were cofounders of

11:33

YouTube and

11:34

Lime. I'm perplexed by this,

11:36

and I keep trying to figure out exactly how

11:39

it works Becca, how many of your

11:41

friends need an extra super jumbo

11:43

mortgage just out of curiosity? The same amount of

11:45

friends who need that custom rug start up, which

11:47

is zero. And then how many of your

11:49

friends would like to earn twenty x more interest

11:51

from zero point two percent to four percent on their

11:53

money? I mean, probably everyone. A hundred

11:55

percent. So oh, yeah. Okay. Alright. So just they gonna

11:58

cap how much money I can I can save? And if

12:00

so, then it's just kind of like a constrained money market

12:02

account, which feels more like a bond.

12:03

I know. They they say they've run out more than

12:05

eighty million dollars so

12:07

far. And average loan size

12:09

is about two million. So, I mean,

12:11

we'll see how this

12:12

goes. They're gonna forty deals.

12:15

This whole thing is pretty good about forty deals.

12:17

They say they've had some as low

12:19

as like hundreds of thousands and some like

12:21

four to five million. That's just an average it's

12:23

not like every loan. A couple hundred k is not

12:25

super don't understand this. Alright. Well, you know what?

12:27

I didn't understand FTX, and that went

12:29

great. So I'm sure.

12:32

We'll see what happens. I was just drawn to

12:34

the story because I've never heard of this

12:36

model. It was just very unique, very different.

12:39

I would like to know where this company is a

12:41

year from now. I mean, digital mortgage companies

12:43

aren't doing well. They claim that their revenue

12:45

grew fifty five percent third quarter

12:47

over second. I'd like to see where they are year

12:50

from now. Yeah. I think one of the

12:52

big questions that

12:52

stuck out to me from reading your story

12:55

on this is that it's mobile first,

12:57

which

12:57

is something yes fintech as

12:59

a whole realm. Mobile first

13:01

makes a lot of sense in a lot of cases. But

13:03

for like a mortgage

13:04

focused start, I thought that was just

13:07

so Oh, is it just mobile first

13:09

for the accounts? Yeah. Oh, gotcha.

13:11

It's mobile first for the retail consumers.

13:14

The way they market the the loans

13:16

is they partner

13:16

with brokers, mortgage brokers.

13:18

So the mobile first is more

13:21

about trying to get customers for

13:23

the savings product through, like,

13:25

channels like Instagram, TikTok, Google,

13:27

that sort of thing. Okay. That makes a lot

13:29

worse. Maybe I need to clarify that

13:31

in the because if if you thought that,

13:33

then others might too. Okay. Well, that's because

13:36

we think that way because Rocket Mortgage has

13:38

ads on sports games. And they're like, holding

13:40

up a phone. They're like, push a button, get a mortgage.

13:43

And I'm like, that's a terrible idea. Like,

13:45

why would you do that? You should think about this a

13:47

long time first because you shouldn't

13:49

impulse buy a a house like you would

13:51

a t shirt. I mean, maybe for John Foley, but like, you

13:53

know, for the rest of us mere mortals, we should probably

13:56

think about sinking up that much of our assets

13:58

in there. Another thing that I'm curious about is,

13:59

like, this model during

14:02

a epic downturn in the housing market

14:04

seems speelessly timed.

14:06

Yeah. I mean, again, I thought so too, especially

14:09

when we've been writing about so many layoffs in

14:11

this space and and just companies that aren't

14:13

doing well. So I was really intrigued that they've managed

14:15

to grow their revenue by fifty five percent

14:17

the last quarter. So

14:19

again, I think maybe because they're targeting

14:21

a very niche segment of the

14:23

population. I'm not a hundred percent

14:25

sure, but it was unique enough to catch

14:27

my attention. Absolutely. And our skepticism should

14:29

not be in the indication that it won't work.

14:32

just we have a lot of questions. And if they do find

14:34

a way though to take a certain debt product

14:36

and give the yield back to regular

14:38

folks as interest, cool. I mean, how's that?

14:40

If it works, then yes. Right. Also

14:42

just having something new that

14:45

caught your eye in fintech, I feel like we

14:47

I then pitch so many repeat companies

14:49

trying to do the exact same thing

14:50

that it is refreshing to see

14:52

someone be like, actually, we're taking a new take.

14:54

on something and doing a new model. That is

14:56

nice to see. Yeah. Exactly. The

14:58

proverbial breath of fresh air. Speaking

15:00

of not New ideas. Harmonic.

15:03

Okay. I'm I'm being kind of unfair. Harmonic

15:05

as company just raised a twenty three million dollars

15:07

series a, led by Sozo Ventures, which I'm actually

15:10

not familiar with. But there's participation

15:12

from Kraft, who I am familiar with.

15:14

And harmonic is is very interesting.

15:17

So what they're doing is they're going out around the

15:19

Internet essentially and collecting all the

15:21

data they can about private companies and

15:23

then essentially aggregating that into one place

15:25

that you can access with a I

15:27

think we wrote a quote, text based startup

15:29

search query tool. So it's kind of like Google

15:31

for startups, but with a very tailored data

15:34

set. And not to go back and talk about

15:36

my personal work history, but used to work for a company called

15:38

Mattermark. I was building a new team there before

15:40

they kind of went under. And they

15:42

were doing something kind of similar, aggregating

15:45

information on private companies and providing that

15:47

to investors and other folks to make decisions. crunch

15:49

based collects data in a similar fashion and

15:51

has a crunch based score. I

15:53

I just this strikes me as cool, but Becca,

15:55

the thing that I don't think that I see here is

15:57

proprietary data. Because I feel like they're gonna

16:00

go out there and click all stuff that you and I already look

16:02

for by hand. But to me, without something

16:04

that's you truly unique and special, it's

16:06

kind of another aggregator with some ML thrown on

16:08

top. Yeah. No. And I think what starts me

16:10

from reading the piece too is the way that

16:12

the founder talked about it as they were

16:14

like, well, we don't do it like Crunchbase and

16:16

PitchBook. We find this other public data.

16:18

And I'm just curious why have so much

16:21

conviction that they're sort of finding this in a different

16:23

way. because I know just from someone

16:25

who, you know, turns to both textbooks, CB

16:27

Insights, Crunchbase pretty much equally,

16:30

they all have different stuff, but I don't think

16:32

one's better at finding x than the

16:34

other, and I'm would

16:36

have a hard time believing that this company in particular

16:38

has, like, cracked code on, like, how to find the most

16:40

accurate, especially accurate public

16:43

data when there are other companies, you know,

16:45

searching for the exact same types of numbers.

16:47

Yeah. I was intrigued by a

16:49

couple of things about the company. Yes.

16:51

I agree with your points. I guess part of what

16:53

they're trying to sell is rather than you having

16:55

to take the time to do all

16:56

this research. They're doing

16:57

it for you. But when you go to the

16:59

home page and it looks like how the way

17:02

that they're the queries are divided

17:04

up, It's not just by funding, which, you

17:06

know, is largely what what Crunchbase does,

17:08

but they track head count growth and

17:11

social media, which I'm

17:13

not a hundred percent sure how

17:15

that's valuable to people.

17:17

I mean, maybe I don't know. So investors

17:19

have taken a lot of alternative signals

17:22

and use those over time. I mean, the early examples

17:24

of this were, like, people that first use satellites to

17:26

track cars and parking lots to guess how

17:28

certain companies were gonna perform. for

17:30

like holiday sales. Right? And so grabbing

17:32

social media data is a kind of reasonable

17:35

thing to throw into the mix, but it's

17:37

been done. And SEC filings have

17:39

been collected, and in corporation documents,

17:41

pitch book, it's those. And what

17:43

other data exhaust? are

17:46

they gonna be able to kind of collect? And

17:48

then why does it really help?

17:50

Because one thing that investors love to do

17:52

is meet founders. They like to

17:54

dig into companies unique situation. So

17:57

at best, does this just let people, like,

17:59

find companies they

17:59

might want to talk to? And if so, how helpful

18:02

is that? Yeah. I mean, I do think

18:04

it is interesting how they are actually tracking percentage

18:06

change in followers. For example,

18:08

that a company might have, which might signal,

18:11

like, interest, but that could be positive

18:13

interest. It could be negative interest. Right? Like, I

18:15

mean, it depends on the company. But

18:18

yeah. I I don't know. I mean, So

18:20

apparently, a lot of organizations including

18:22

Brex, Ramp, Excel, Index

18:25

Ventures, Carla, used

18:27

the product. So I mean, I

18:29

guess there's something that that these organizations

18:31

and companies find valuable. Oh,

18:33

I figured it out. Okay. What is Crunchbase

18:36

becoming? Slowly. Marianne, you and I both

18:38

used to work there. They were coming a sales tool. Yeah. Yeah.

18:40

And I think Harmonic is too. Right? I mean, that's

18:42

part of what they're trying to do. Yeah. I I was just

18:44

thinking about it more as inputs versus outputs when

18:46

I was framing my thinking about this. But now

18:48

that I think about it, if you're a salesperson

18:51

and you think you have a yeah. Okay. Oh,

18:53

okay. I can see this. Yeah. If you look

18:55

at it from that that perspective, then I

18:57

think this becomes a little bit more

19:00

you you get it a little bit more. Right? Yeah.

19:02

At the same time, though, we are seeing, you know,

19:04

people constrain S and M spend,

19:07

sales and marketing spend. So I wonder how this

19:09

company is gonna perform Well, belts

19:11

are tightening. I mean, like, Crunchbase just

19:13

raised a fifty million dollars series

19:15

D. C. What was it? d. c

19:17

or d? Yeah. d. I think

19:19

given how long I worked there in the fact that I'm still

19:21

a crunched pay shareholder. I should know that. I don't. There is

19:24

bunch of money, so there must be juice in the sales model. And

19:26

so maybe Hamada can pull this off. Okay. actually kind

19:28

of okay with this now that I've reframed it in my mind.

19:30

I think I was too stuck in my matter mark

19:32

perspective. Yeah. And and I agree.

19:34

I do think like we talked about, like, yeah,

19:36

we could friend all this stuff ourselves. But, like, having

19:39

it all in one place, them doing the work. I can see

19:41

where that would be convenient. for

19:43

people. So -- Mhmm. -- it is interesting. I

19:45

think, again, just like, with TELUS,

19:47

I'm curious to see where this company is gonna be

19:49

a year from now. And maybe, like, right now,

19:52

It's an example of a company where

19:54

that might do very well in a downturn because,

19:56

you know, everyone's trying to make more money

19:59

because it's

19:59

not as easy to raise capital as it was

20:02

like a year ago. So maybe this is a kind of product

20:04

that will actually do well -- Yeah. -- during a downturn.

20:06

Alright. Let's put startups aside and talk about

20:09

some big companies. And instead of

20:11

having good news about funding rounds and lots of exciting

20:13

things, the ax has swung. Yeah.

20:15

Yeah. This week, Meta confirmed that

20:17

it was cutting thirteen percent of its work force,

20:19

which amounted to about eleven thousand

20:22

people being laid off, which is huge

20:24

amount. Really, they employed about eighty

20:26

seven thousand people around the world. We all knew this

20:28

was probably coming. don't think

20:31

we realized there'd be quite so many people.

20:33

And what's interesting is that they actually were

20:35

were hiring just as recently as what

20:37

the third quarter. Right? I mean, I think

20:39

second quarter, they had eighty three thousand

20:41

five hundred and fifty three employees. Third,

20:44

eighty seven thousand three hundred and fourteen,

20:46

which is almost a four thousand

20:49

person gain, and then now they're

20:51

laying off eleven thousand. I mean, like,

20:53

what were they thinking? It's only it's only

20:55

three quarters of hiring, Mary Anne. I mean,

20:57

really really going back to where they might word by

20:59

that rate of change Q1I mean, it's not that

21:01

big of a deal. And the absolute number,

21:04

the raw figure is huge. But given the scale

21:06

of the company, actually feels more like

21:08

a haircut than a decapitation. But

21:10

Becca, thoughts. I just think it's

21:12

just after everything that's happened with the

21:14

small layoffs we've seen just like every

21:17

company seems to be cutting staff in some way

21:19

or another. So I

21:19

think what really does stand out here is

21:22

the number. especially because I know from

21:24

chatting with some

21:24

meta employees last weekend, some of the stuff

21:27

with Twitter, they were all like, yes,

21:29

like meta's

21:30

so pumped that we are not the main character.

21:32

This week, like, our earnings were

21:34

not great, and, like, it is sliding

21:36

under the radar. And then this come out, and it's like,

21:38

okay. WAP WAP not anymore.

21:39

I mean, I think it's sobering, to be

21:41

honest. I mean, really, like, you know,

21:43

this is the first major layoff. Right? I think

21:46

first layoff ever, right, for this company.

21:48

So I feel like it's it's it

21:50

is just very sobering for big tech for

21:52

startups. So, like, it's like if meta is laying

21:55

off this many people, like, what does that

21:56

say about just the overall market

21:58

right now. Mhmm. This

21:59

is a little personal thing. I I just

22:02

wanna share. I've already shared it with you guys, but,

22:04

you know, my daughter's ex kindergarten teacher

22:06

who was incredible, left

22:09

the profession few years ago. She just it

22:11

was just too much for her. She was underpaid, too

22:13

much dress. She most recently

22:15

had a job at Meta doing very, very well,

22:17

was very excited about it, and sadly, she

22:19

was among those laid off. So I just,

22:21

you know, again, like we write about these lay offs,

22:24

all the time. We we don't enjoy reading

22:26

and writing about them, but it really hits differently

22:28

when we know people impacted. And

22:30

so I'm really bummed for for people

22:32

like her and others who were on work

22:34

visas, things like that. Another quick

22:36

point though, I've seen on social

22:38

media that people are applauding the way that

22:40

Mark Zuckerberg approach this.

22:42

I'd like to talk about that a little bit and see what

22:44

you all think. Oh, Mary Anne, please. I'm gonna

22:47

appropriately sit down, put my feet up. and

22:49

shut up. Go

22:49

for it. No. No. I mean,

22:52

I I actually don't have a a solid,

22:54

like, take on it. I mean, a lot of

22:56

people are, like, praising it. I mean, he was very

22:58

try taking up accountability, which is the new trend.

23:00

It feels like among CEOs and founders

23:02

when they have to lay off is like, you know, you have

23:05

to take accountability and say you're sorry and

23:07

he did all that. I think the severance package

23:09

was very generous, sixteen weeks of severance,

23:11

plus

23:11

two weeks extra for each year of service.

23:13

I don't know, like, for the people who

23:15

got laid off, I don't know how how

23:17

much all that really meant to them. I mean, maybe from

23:19

the outside, it looks like really great and sincere.

23:22

I'm not sure, but I do

23:24

appreciate the taking

23:25

accountability though either way. I

23:27

think what stood out to me from the

23:29

package specifically is just

23:31

how

23:31

long employees will have healthcare

23:33

because I know

23:35

that's a thread

23:36

that's been devastating to watch this

23:38

whole layoff period across other companies

23:40

of people posting on

23:42

LinkedIn and Twitter as well about

23:44

the loss of health insurance whether they're

23:46

either currently dealing with health crisis or

23:49

say it's someone

23:50

who a family who's expecting or

23:52

sort of have kids who have sort of needs like

23:54

this. Like, that's I think what stood out

23:56

to me is because that I feel, especially

23:58

you're coming out of a company

23:59

like meta, not everyone makes the same amount

24:02

of money at meta obviously, but it is definitely a higher

24:04

tier

24:04

paying type of roles

24:06

generally for sure. But health insurance is where

24:09

you can really kinda get kicked when

24:10

you're down no matter what. Yeah. So

24:12

having something like that I feel like that

24:14

is what really stood out to me as being like

24:16

a smart way to sort of give employees

24:19

who have been laid off that breathing room to find that

24:21

next thing. Six months is definitely generous.

24:22

Six months is good, but

24:25

I think that should be the legally required minimum.

24:27

Agreed. Like

24:28

if we're gonna have employer run

24:30

health insurance in this country as we mostly do,

24:33

I think there should be some standards attached to

24:35

it because I think American corporations get away

24:37

with just shirking the responsibilities. The

24:39

human aspect here though is why I felt

24:41

reaction to Twitter's layoffs was so gross

24:43

because so many people, Elon

24:45

fans, mostly it seemed, were cheering

24:48

the idea of Twitter being gutted. And,

24:51

you know, you can argue that Twitter had

24:53

some fat to cut on its operations.

24:56

Sure. I mean, name a company that after two thousand

24:58

twenty one that didn't have little bit, But

25:00

fundamentally, these are just folks. Right?

25:03

They're not These aren't the peep These aren't

25:05

people who are usually independently wealthyers. employees

25:08

who have kids or or as in one woman's

25:10

case was eight months pregnant when she was fired

25:12

capriciously. People just

25:14

are just

25:15

jerks makes

25:16

me hesitant. Yeah. Yeah. I

25:18

think the ability

25:19

for people who have been laid

25:22

off to sort of get the human connection

25:23

back with meta two is important.

25:25

like, they're offering. You can

25:27

either join. think they're like group calls. You can

25:29

join and ask questions or you can set up

25:31

stuff to talk to people more directly. because

25:34

I know I we've talked about this on

25:36

the podcast before and it's come up in these stories

25:38

where it's like how

25:38

do you lay someone off at a tiny

25:40

company? How do you lay someone off at a big company sort

25:42

of what point does it become not

25:44

right to call everyone individually? When does

25:47

it become overwhelming? There's no good playbook

25:49

for stuff like this. So the fact that it's not

25:51

many people And it seems like there's at

25:53

least I mean, who knows how they'll actually go?

25:55

We can't make a jump in a bag yet, but

25:57

it seems like they're pretty careful in setting up

25:59

avenues

25:59

where people want to talk to someone

26:02

real person in

26:03

sort of live that they can.

26:05

And I feel for layoffs

26:07

that large, that's unexpected, but

26:10

definitely a better way to go about it if people

26:12

really do need that sort of time

26:14

to ask questions. Yeah. The way this has been handled

26:17

is I think that it made me feel more warm

26:19

fuzzies from Mark Zuckerberg than anything else in

26:21

the last couple of several years. Ever. I

26:24

would agree

26:24

with that too. think I think he has done

26:26

a pretty good job overall. in

26:28

addressing this. Still doesn't take away

26:31

from the fact though that he's he's

26:33

sunk so much money into this metaverse,

26:35

which probably didn't help in terms of,

26:37

sorry, leading to this.

26:38

Do you know what I would do Mary Anne if I

26:40

was in charge of a company worth a trillion dollars and I

26:42

had complete voting control over it? would

26:44

do some wild Like,

26:46

the metaverse thing is so not

26:48

crazy. I would I would invent like flying

26:51

dragons that are made of titanium because

26:53

I had a trillion dollars to fuck around with.

26:55

Like, the metaphor thing is relatively middle

26:57

of the road. It may not work. We all make

27:00

giggle at reality labs. Right? Yeah.

27:02

That losing all this money. But, like, it's still pretty

27:04

mainstream tag they've been on for years. I don't

27:06

know. Try to find a second act as hard. Just look

27:08

at Alphabet. But Twitter layoffs as

27:10

well. Mary Anne, there's been a a lot of conversations

27:13

about not just people who are fired, but also who

27:15

are leaving. So who's left

27:17

recently that we care about?

27:18

Yeah. Zach just wrote about today

27:21

or yesterday when you hear this, Twitter's

27:23

chief information security officer

27:25

resigned. And that's huge. And

27:27

we're hearing that other top execks

27:30

on that realm are also leaving, although

27:32

not confirmed. This is

27:33

pretty disturbing overall for

27:35

what's

27:36

going on at Twitter. I mean, it's been a show all

27:38

week. But this is like taking things

27:40

to another level when you start to see people

27:42

who are involved in compliance because it's it's

27:45

supposedly

27:45

it's rumored. I think chief privacy officer,

27:48

chief compliance officer, in addition

27:50

to the chief information security officer.

27:52

If that's true that they have all left, I mean, that's

27:54

very worrisome in the should

27:56

be

27:57

paying a lot of attention.

27:58

Yeah. because there are some consent

28:01

degrees. Right? Here, the Twitter has agreed

28:03

to do certain things with new products to protect

28:05

to protect user security or data. I'm butchering

28:07

that, but it's close enough. And III wonder

28:09

if those are being met. Because if not,

28:11

the back of the fines could be the billions. Yeah.

28:14

I mean, we're talking about this from the US lens

28:16

too. I mean, I can only imagine European

28:18

privacy and security regulations right now.

28:21

that news being like, oh, boy.

28:24

They are so much more serious. I mean, we all

28:26

know that. There's so much more serious about this stuff than

28:28

we are. So I can I really can

28:30

only imagine where this will go from

28:32

here. Europe is like the sobered up, like,

28:34

mid thirties version of the punk rock

28:36

America and economy is actually now how

28:38

I'm gonna think about everything because they are just

28:40

the they're, like, the United States government,

28:42

but, like, in a suit with ten years of mature denials

28:44

built. That's how the e regulatory structure

28:46

feels. Oh, god. They're gonna eat him alive, aren't they?

28:49

Oh, yeah. Oh, boy. We were gonna go

28:51

through a a layoff list of of major

28:53

layouts. And I decided to prepare this the

28:55

show because thought it'd be useful. The problem is it's

28:57

actually not because I decided to constrain

29:00

the layoffs that was gonna bring up to just things

29:02

since August. So kind of like that

29:04

last couple of months time frame, and just

29:06

to lay off over two hundred and fifty people.

29:08

And it was a very long list.

29:10

It's not like ten names. It's like a lot of names.

29:13

So of a moot thing to bring up, but

29:15

was anyone else surprised at just the number of companies

29:17

that have cut stuff in the last couple months because

29:19

even though I've been covering it, I was shocked. Not

29:21

really honestly. I mean, I think

29:23

I think it's pretty widespread like we talked

29:25

about. I mean, the the post pandemic world

29:28

was just, you know, I think a lot of people

29:31

overestimated how well that

29:33

their

29:33

business would do.

29:35

So I I feel like it was pretty widespread.

29:37

I wasn't shocked, which is kind of sad, I guess.

29:39

Yeah. And I think what shocked

29:41

me more about it is realizing just

29:44

how many employees some of those companies

29:46

had. That's something that's always surprised

29:49

me. Just I feel like I've always worked at

29:51

well, obviously, owned by Yahoo! Not

29:53

a tiny company, but working in media. I feel

29:55

like I've always worked at differently decently small companies.

29:58

So even before layoffs

29:59

started happening, just

29:59

something about covering startups has always

30:02

surprised me how big some companies

30:04

are for what they do or sort of where they're

30:06

at in the progression. So

30:08

the layoffs themselves were surprising, but

30:10

then

30:10

I'm always reminded, you look at the percentage

30:12

and you're like, whoa. Wait. That was that

30:14

was ten percent of the company. Like, I'm surprised

30:16

there was how many people working

30:18

on this or that many people at this stage, which

30:20

I mean, obviously, just speaks to what vendor

30:22

I mean, not this is an exclusive to venture,

30:25

but wrench about companies speaks to kind of

30:27

the craziness in that space for the last four years,

30:29

but that tie is kind of what's been surprising

30:31

me the most. Yeah. Well,

30:34

speaking of layoffs, FTX has

30:36

laid off its market cap, its market reputation,

30:38

its relationship with regulators, its US political

30:41

clout, and I think all good well

30:43

in the crypto community in the last couple

30:45

of days. Where should we pick up this thread?

30:47

It's my question because there's been so much going on. Should

30:49

we give an overview guys or should we just pick up in

30:51

the last couple bits of news? I'm torn. Yeah.

30:53

That's hard to say. I mean, obviously, the it

30:55

kind of all started with by announcing. It was

30:57

going to buy FTX. Right?

31:00

Was it non US assets? Yeah. And

31:02

then they backed

31:02

out and all sorts of shit has come

31:04

out since.

31:05

Well, I okay. I'm gonna in

31:07

that back a little bit further. It turns out that the rise

31:09

of FTX and its sister company Alameda,

31:11

which was its kind of trading sister

31:13

company -- Was a little bit more

31:16

full of machinery that we might have thought. And there was

31:18

apparently some lending back and forth and some

31:20

counterparty risk as they say. And

31:22

that was not really, I think, made clear

31:25

to us on the reporting side

31:27

or the public side. And then

31:29

finance kind of helped to engender

31:31

a run on the bank if you will. I think

31:33

that's a legally safe way, saying that. FTX

31:36

became apparently much more fragile than we

31:38

thought that it was. And then the most recent thing is

31:40

the Biden's deal has fallen apart. There is

31:43

squawking from American regulatory bodies.

31:45

and it appears that FTX

31:48

could go to zero becca and Sequoia actually

31:50

talked about that. We're talking this little bit all in

31:52

Slack about

31:53

Sequoia's memo that went out yesterday. One,

31:55

I can't think of a time in my

31:58

experience covering this face that I've ever

31:59

seen. that an LP memo like

32:02

that purposely made public by the

32:04

firm in question and them

32:06

running down the company to

32:08

zero was, I mean, probably accurate

32:10

but it's just stark to see especially

32:12

at this point

32:14

in the process because, I mean,

32:16

hard to believe

32:16

anything that Sam Baker and

32:18

Freddie is saying right now, but he is saying, like,

32:20

the company may be in talks, like, some stuff may

32:22

be able to come back. Like, they may be able to

32:24

sort of save or gain

32:26

some of that liquidity that they're missing,

32:28

obviously, especially with finance walking away.

32:30

But Sequoia to just already be like, no.

32:33

we're ready to get done at zero. It's a loss.

32:35

Like, even with what happens from here,

32:37

like, that's very telling about

32:39

sort of how venture will approach this. especially

32:42

going forward.

32:43

Right. I mean, just earlier this year, FTX

32:45

was valued, what, thirty two billion dollars

32:48

has raised about two billion

32:50

dollars to date. Sinkoya being

32:52

so public about this is it's obviously making

32:55

a point that it wants to distance itself

32:57

from FTX and Connie who

32:59

wrote the the piece about it Her assumption

33:01

is that most investors are going to,

33:03

so if FTX is looking for its

33:05

backers to bail it out, probably

33:07

not gonna happen here. But no.

33:10

VCs won't throw more

33:12

-- More light. -- after that. has sinking

33:15

ship. Oh, yeah. I mean, like, if you if you add way

33:17

to the sinking ship, it doesn't gain buoyancy.

33:19

The question is just what will individual

33:22

FTX users get back

33:24

if anything? Hopefully, they get back a

33:26

hundred percent, but we'll see. Jackie,

33:28

our senior computer reporter on TC

33:30

Plus noted that volume on FTX,

33:32

it's cratered so much that even if it did

33:35

somehow survive, I don't think

33:37

it's ever going to survive. Right?

33:39

I mean, like, who's gonna trust them now? So

33:41

the question really is just how much how much

33:43

damage is there once the smoke clears

33:45

from the impact?

33:46

And you make such a good point there too about

33:48

the users because I feel like when we had

33:51

sort of the issues with Robinhood and some of,

33:53

like,

33:53

the Wall Street Pets stuff from last year,

33:55

users and users losing money and

33:57

sort of

33:58

consumers losing money was a much bigger

33:59

part of the conversation than it has been

34:02

thus far, at least from what I've seen from FTX.

34:04

it seems like a lot more asset

34:07

recovery as far as the business goes and

34:09

sort of investors and sort of like that

34:11

type of player. Maybe I've missed it, but that

34:13

is something I thought last night

34:14

as I was going through things

34:16

toward the end of the day was that I

34:18

felt like I had seen significantly

34:19

less coverage on sort

34:21

of the actual human aspect of

34:24

this in the people who just wanted to

34:26

try invest in their money, of course. Obviously, you

34:28

take risks doing that, no one doesn't know that,

34:30

but you also don't back to thirty billion

34:32

dollar company to evaporate overnight either.

34:34

Right. So I just feel like that hasn't been

34:36

as big of the conversation with FTX.

34:38

thus far, and I'm not sure why, but

34:41

definitely something that I noticed. So

34:42

you're saying, you know, you know, when you're taking risk,

34:45

investing in crypto, you're taking risk

34:47

because you think, okay, the prices

34:49

might be volatile. You're not you're not taking

34:51

risks and thinking that the company

34:52

is going to crash and burn a few months

34:54

late.

34:54

You know what I mean? So yeah. And then

34:57

And I think Jackie tweeted recently, there was about

34:59

five billion dollars of withdrawals on

35:01

Sunday alone, FTX,

35:03

which is insane. Yeah. But you know what?

35:06

Why would they be operating on a fractional

35:08

reserve basis? Maybe maybe you shouldn't

35:11

make your own token and then

35:13

print it and then give it to your sister

35:15

company to borrow against and get yourself

35:17

levered up to the freaking neck. And then

35:19

so that way you can get exploded over

35:22

the weekend. like humans

35:25

don't learn much over

35:27

time and excessive cleverness

35:29

in the financial world seems to be something that

35:31

we have to relearn every five years.

35:34

But like, how did no one

35:36

sit him down? SPF and be like,

35:38

this is dumb. You're gonna get caught. and

35:40

it's gonna blow up. It's it's illegal. Right?

35:42

I mean, it's illegal. You know? Where

35:45

are they based? What are the rules? I don't

35:47

know, but it's really messed up though if it's if it's

35:50

not. Like, if it's true that you can get away with doing

35:52

that kind of thing, I mean, that's just that's just really

35:54

messed up. Yeah. By the time this show comes

35:56

out Friday morning, I presume something else

35:58

massive will have happened in the FTX

35:59

world. But as we're sitting here, it seems

36:02

to be just question of what happens to consumers

36:04

And then how fast do you wind down the business? There

36:06

was AA2 to three about it today. And

36:09

yeah. SPF has gone from from nobody

36:11

to savior, to pariah faster than

36:13

I can really remember anyone else doing it. The word

36:16

ignorance comes to mind. The

36:17

other thing too is because this is

36:18

all focused on the non

36:19

US part of FTX. I

36:22

just am like, what happens to

36:24

FTX US? Like, would anyone

36:26

really be like, wow, that's place

36:28

to put my money now? It's like, what

36:30

what is the actual

36:32

future for that side of it even if it

36:34

isn't in this financial kind of bind

36:36

right now? I

36:37

can't imagine. It's just gonna, like,

36:39

go on swimmingly from here. can summarize

36:41

my my view about what will happen to FTX dot

36:43

u s by saying this. coin based shares

36:46

Thursday afternoon as we record this are up

36:48

eleven percent on the day. That's your answer

36:50

right there. Yeah. That's your answer right there. I mean, so it's

36:52

gonna be great for Coinbase. Well, no. I

36:54

mean, it's bad for the overall market, but

36:56

it may temporarily limit domestic competition

36:58

for Coinbase. I guess is what I'm trying to say. Yeah.

37:00

I mean, that makes sense. Even though even

37:02

though SBF claiming that FTX US

37:05

is a hundred percent liquid. Like we

37:07

said to me, he's gonna really have faith with

37:09

having money Yeah. -- on this exchange. hard

37:11

to maintain liquidity when no one's arriving

37:13

at the well with a cup. Alright. But

37:15

we have stopped. Becca, as always, having

37:17

on the show is an absolute treat I love doing

37:19

this. And while I'm on parental leave, you're gonna

37:21

be around quite a bit. So we're looking forward to that.

37:23

Mary Anne, as always, thank you for being here and all

37:25

of your expertise. Teresa, and Kell, and everyone

37:28

else. Thank you, and we'll be back on Monday

37:30

morning. See you then. Bye. Bye. Equity

37:33

Friday is are hosted by myself, editor

37:35

in chief of TechCrunch plus Alex Wilhelm

37:37

and TechCrunch senior reporters Natasha

37:39

Mosquenes and Mary Anne Asvedo

37:41

for produced by Teresa Locum Solo with editing

37:44

by Kellogg. Bryce Durbin is art illustrator

37:46

plus a stringer leads audience development and

37:48

Henry Pickett manages TechCrunch video

37:50

products. Thanks so much for listening and we'll be back

37:52

next week.