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SPAC talk with Chamath Palihapitiya, David Friedberg, David Sacks & Jason Calacanis | from Episode 7 - YouTube
Channel: All-In Podcast
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i think jamaat's point is right though there is聽
uh so so much more liquidity available through聽聽
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access to retail and international market聽
um participants um in in a public setting聽聽
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than there is in a private setting and it聽
is because of this liquidity premium and聽聽
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the easy access to putting capital in um it's聽
just extraordinary how much as i've watched聽聽
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close friends and companies and companies i've聽
invested in i'm sure you guys have done the same聽聽
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transition from private to public uh the聽
valuation jump is extraordinary like uh on聽聽
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on a metrics basis right so whatever the metric聽
might be you get public there is this flurry of聽聽
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of market participation as a result it drives聽
up there's a multiplex when i thought you're聽聽
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be sorry can i just say something that's such a聽
such an important smart thing that friedberg said聽聽
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so jason for example like all of us ha we're all聽
still in the private markets and i'm not trying to聽聽
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take away from the private markets but what david聽
said is so important if you used to look at a sas聽聽
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deal you'd price that sas deal 10 times arr right聽
then there's a little bit of inflation you know uh聽聽
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the rates go up um the prices that people pay聽
go up now all of a sudden we're paying 12 times聽聽
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15 times now it's 20 times if you're growing 100聽
rate over year so what's happened the market has聽聽
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become more efficient and the excess return is聽
getting eaten up and so you're like okay well聽聽
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that's still really good and you wait four five聽
six years and you think you're going to get paid聽聽
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the crazy thing is like once that聽
company transitions to the public markets聽聽
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i mean all of a sudden if you actually turn the聽
investor base over and you actually create a float聽聽
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so that public market guys can buy it they'll pay聽
30 times that's right 35 times 40 times so there's聽聽
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a massive multiple expansion so companies should聽
be going public sooner if you think about this聽聽
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like if i'm trying to raise money for one of my聽
companies i'm gonna call on my 10 20 30 friends聽聽
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that i know that are investors in private聽
markets and say hey guys do you want to look聽聽
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at this company and maybe i'll get two or three聽
interested parties and maybe we'll kind of agree聽聽
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on what a fair valuation would be if i could take聽
that same company and instantly make it available聽聽
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to a million investors and all i need to do by the聽
way is raise 10 million dollars all i need is some聽聽
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small number of them to write a couple hundred聽
dollar check and i'm able to fill that that round聽聽
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out the valuation as a result of the liquidity聽
available in that market is so much higher聽聽
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because there everyone's gonna there's gonna be聽
much more participation in bidding and so you know聽聽
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what i think chamoth has tapped into with the spat聽
vehicle and um what robinhood is realizing and and聽聽
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i don't think that we all talk about this enough聽
but there's this massive massive massive market of聽聽
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international investors of small of international聽
retail investors who are now rushing into u.s聽聽
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equities freeburg didn't we see that in the ico聽
craze as well where you you i think if we took聽聽
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anything from the ico craze it was and the global聽
appetite for risk and the dot-com boom before that聽聽
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and i think we have to give bestdc a lot of credit聽
here for leading the smack movement i mean what's聽聽
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your take on everybody copying you down this聽
backpack champ at this point i had desktop metal聽聽
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as an early angel investment that just spacked um聽
i thank you yeah and they told me that thank you聽聽
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for the markup um and i've been hearing like i i'm聽
get if i'm getting inbound as an angel investor聽聽
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from i literally got a cold email from some high聽
profile people they're like hey can you do you聽聽
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have anything for us to spack i mean this is like聽
the third or fourth time people are coming down to聽聽
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my [ __ ] level of angel investing saying can you聽
introduce us to the calm guys can you introduce聽聽
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them to robin and i'm like i think you can go聽
direct to them but what is your take on how many聽聽
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specs have been created to juice like literally聽
single-handedly restarted the smack movement i聽聽
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think i don't think you've ever got a record about聽
this uh i'm really proud of what we did when we聽聽
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created this thing two years ago i said i want to聽
basically create a new way of doing ipos i called聽聽
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it ipo 2.0 i reserved ipo a through z on the nyse聽
i i hope um uh to fulfill that and i think i will聽聽
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um but taking a step back for a second in the year聽
2000 there were 8 000 public companies in america聽聽
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on the american stock exchanges and in the year聽
2020 there are 4 000 so we've shrunk in half the聽聽
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number of public companies while at the same聽
time we've you know 10x the amount of comp uh聽聽
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the amount of capital and the number of people so聽
we don't have a large enough surface area in the聽聽
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public markets that's why companies are better聽
off going public because they're going to have聽聽
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a much more receptive audience of people that聽
are dying to own growth of any kind what's the聽聽
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earliest and the media and that people should聽
go public well so so here's the thing so like聽聽
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if you're like one of 30 companies in a venture聽
portfolio that's growing at 50 plus percent聽聽
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you're one of 30. but when you go public you're聽
one of one you know when you're growing 50 60聽聽
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you you become very unique all of a sudden聽
you're a sort of a one percent kind of a聽聽
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company you're an outlier and so you get treated聽
you know incredibly well so that's the backdrop聽聽
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i think a company should be going public around聽
year five year six um what revenue footprint uh聽聽
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about 50 million you know at 50 million and when聽
they're doubling i think that they should be going聽聽
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up and you know it allows them to build capital聽
slowly it allows them to basically contain control聽聽
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it minimizes dilution um i think it's a really聽
powerful model and then on the number of spax what聽聽
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i would say is i think it's really good that the聽
market is getting diversified i think what's going聽聽
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to happen is like the the thing with spax is it's聽
going to be no different than in some ways the聽聽
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banks that preceded us which is that there's going聽
to be a distribution you can go to goldman sachs聽聽
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and that will mean some one thing you can go to聽
merrill lynch or b of a or ubs or jeffries it'll聽聽
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mean other things you can go to allen and company聽
it'll mean yet another different set of things and聽聽
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i'm sure there's going to be a you know an聽
organization that uh is all about cost some聽聽
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is going to be all about relationships um so i聽
just think that's going to be the distribution聽聽
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my personal perspective it's probably us and maybe聽
one or two other people who really dominate the聽聽
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space and i'll and i'll tell you the only reason聽
why i say that i think it's going to be really聽聽
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important when these people try to get these facts聽
done what they're going to realize is it's really聽聽
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hard and it's hard for a couple reasons number聽
one is you have to marry operational insight and聽聽
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public market sophistication and the founder will聽
get really smart about being able to figure out聽聽
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whether this person is just a financial arbitrager聽
or if the person has enough operational experience聽聽
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to deeply understand the business why you have聽
to translate it to the public markets well聽聽
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that's one huge thing that i think that people聽
will um will start to will start to hone in on聽聽
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anyways there's a bunch of other things聽
but um are you now competing with it聽聽
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with the 50 million yeah yeah sure um i'm i'm cool聽
with that you know i invest well before that so聽聽
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i'd be i'd be happy for you probably have a bigger聽
portfolio 50 million dollar investment yeah it聽聽
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is it's great for for for me and jason and i you聽
know i i think chamoth deserves a ton of credit on聽聽
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on this whole spac thing it is i don't know if聽
all the listeners um are aware of this but this聽聽
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back thing's become a huge wave um there's a聽
ton of people creating them kevin hartz is a聽聽
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new one reed hoffman has a new one they're you聽
know the east coast hedge fund guys pincus and聽聽
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um and then the east coast hedge funds like聽
bill ackman whatever they're all creating them聽聽
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so chamath has really started a wave here聽
and i think the appeal of a spac to a founder聽聽
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i'll put in a plug of why i think it's a聽
good idea for a founder to consider this聽聽
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is because you essentially what founders are used聽
to is doing you know private rounds right you聽聽
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agree on a on an amount raise an evaluation and聽
it's a percent dilution and you're done that's it聽聽
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and it's simple right and and when you ipo and聽
need to raise money it's not like that you have聽聽
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to then work with an investment bank they'll put聽
together a book you do like a road show you do聽聽
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this whole dog and pony thing you don't know how聽
much money you're going to get at the end of that聽聽
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process or what the valuation is going to be and聽
then on top of that we know statistically bill聽聽
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gurley's published all the stats the investment聽
banks are going to rip you off so you know so that聽聽
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what a spac does is it prices like a late stage聽
private round you just agree with a spec promoter聽聽
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on a valuation an amount raised and then on聽
top of it you get kind of a direct listing聽聽
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along with it and all of a sudden you start聽
trading as a public company and so a spac is like聽聽
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a combination direct listing plus private round聽
and i think that's going to be appealing to a lot聽聽
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of founders as they start to discover this more聽
and more saks in a way you're saying it's going聽聽
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to feel more like doing a series d then it does聽
a road show and yeah i think that comfort level聽聽
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for somebody like robin hood or聽
com or data stacks or thumbtack or聽聽
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any of these companies that you and聽
i are every company in your portfolio
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this is i think this is going to be the new thing聽
for early stage investors is we're not going to聽聽
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count unicorns anymore we're going to count specs聽
we're going to count public listings right and聽聽
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and i think that's the other thing by the way the聽
other the other thing that i'll say to founders is聽聽
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one is i think you need to you need to think聽
about do these people have the combination聽聽
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of operational and financial acumen in the public聽
markets um and investing experience in the public聽聽
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markets and the uh operational credibility to聽
describe the business and i think you can trade聽聽
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off one for the other if one is so deep meaning if聽
warren buffett was doing us back you'd say well he聽聽
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has no operational experience but he's so credible聽
in the public markets then you know that's all聽聽
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that matters but you need to be super super deep聽
in one or have a really brilliant and thoughtful聽聽
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level of credibility in the publics meaning an聽
early stage investor who isn't married to somebody聽聽
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who can basically say i know how hedge funds work聽
i've made them money and i'm gonna make them more聽聽
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money and mutual funds etc is troublesome the聽
second thing is for founders you have to really聽聽
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make sure you understand what is in it for the聽
person that's doing this back i mean in every deal聽聽
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i write a minimum of a hundred million dollars聽
personally and that's a lot and so i skip in聽聽
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the game i feel very much at risk and so i take聽
a lot of time to make sure these things go well聽聽
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and then the third is that for the spa person聽
what i'll tell them is they're gonna find聽聽
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that there's a bunch of landmines um and i'm not聽
gonna you know say it up front because i think聽聽
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it'll be fun for them to find out themselves聽
along the way but these things are hard the聽聽
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first one took me two and a half years uh聽
they're hard yeah they're hard they're hard
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