Hi, I'm Eric Newcomer. And I am Madeline Rinbarger.
And this is the newcomer podcast.
Each week, Eric and I discuss the VC deals and the drama that
went down. Let's do it.
Here we go. Let's dive in.
Welcome back to the Newcomer Podcast.
It's our last show of the year, Eric.
I mean, it's flown by. I know.
Yeah, it's crazy. It's a very busy December for
me. We've survived our events, but
have a very ambitious plan for Newcomer next year.
And I think as we're going to get to on this show, it seems
like tech itself might be positioned for a better year
next year than we expected. So we'll definitely be a busy
year for us and big slate of stuff to talk about in this
episode. So excited to get into it.
Yes, let's jump in. I'd say bullish on 2025 if it's
anything like this, the last couple of weeks of December that
we've had. First.
First up off, of course, is Servicetitan saw its stock price
pop during its IPO this week. Huge.
I feel like we are tech is desperate to make a mountain of
out of a molehill out of this one.
I mean, Servicetitan, good company, not like a
transformational iconic company that everybody's heard of, but
positive IPO. Uh, Servicetitan helped avoid
some of a brutal ratchet, though.
I think the late stage investors still got a little extra money,
but they had a lot of pressure to go public, uh, thanks to
their deals with late stage investors.
And thank God they got that extra push because they had a
successful IPO. We saw a pop.
I don't know what. What's the mood?
The mood seems really positive. I mean, the shares opened at
101. They had continually raised the
share price ahead of the IPO, which was, you know, priced at
71, which was a big jump up from what we first thought it was
going to be. And, you know, there's been some
investors in the deal that it's just a really big win for them.
I think a lot of people were really hoping for something like
this at the end of the year as a positive signal.
Part of what motivated Certos Titan to go public at the end of
the year and not wait a year was, you know, this ratchet
mechanism. What are your thoughts on this?
Is this like a good bet going forward?
Does this work well for companies or how do investors,
you know, take it? I mean ratchets, you know, like
a four letter word among VCs partially because early stage
VCs are the ones getting diluted potentially by ratchets.
I mean I I have two views. On the one hand, it's like
ratchets are bad when founders use them to prop up a high
valuation for vanity, right? And they would argue that it's,
you know, employee recruiting or that they really believe in the
valuation and they don't want to sacrifice it.
But it's dangerous when a founder is delusional about what
their company is worth. So they cut a deal that works
out well in the upside but underestimates the risk and the
downside. So Servicetitan getting out and
doing OK, I guess they they correctly calculated.
On the other hand, you know, I think it's easy to be like, oh,
ratchets, you're just chasing a high valuation that's not
defensible. On the other hand, you know,
these founders certainly understand hopefully the terms.
And, you know, often they're raising a ratchet when they
can't get sort of equity at terms they prefer.
And so, you know, these are sophisticated investors doing
deals. So I don't have any real moral
problem. The the big problem I have is
just the valuation itself. You know, the world, founders,
reporters, media, we all love valuations.
And of course, the more complicated math and terms that
go into evaluation, the more bullshitty they are.
So often ratchets are just a reminder that we all place too
much stock in private valuations, and they're flawed
measures of how good a company is.
And that's why ultimately we often want these companies to go
public where there's an ongoing market for a company stock and
their market cap is more more serious than the idea that you
can get one person or a couple, a small number of firms to
invest with complicated terms that inflate your valuation.
I wanted to highlight my favorite tech meme account tweet
on this whole thing. It's from Buku.
Is it Buku Capital? It's one of my favorite accounts
like. Buku Capital bloke or yeah yeah
yeah yeah. Long time follower.
He has a picture of Stringer Bell from The Wire and it says,
I want you to put the word out there that we back up and he's
quote, tweeting Bill Gurley, who's, uh, whining about IPOs,
leave money on the table and everybody should do a direct
listing, which is obviously, you know, Bill Gurley's, uh, hobby
horse, you know, his obsession. And yeah, I do think there's a
truth to it. It's like, man, we're really
back to normal if Gurley's out there making the case for direct
listings because you only, you know are will it you, you don't,
you don't quibble about the small stuff if you're worried
about big existential questions around whether tech companies
can go public at all. You're only sort of making the
case for direct listings. Once IPOs are so good that
you're like, Oh well the balance is is money that you're giving
to bankers to give away to their friends instead of making sure
us VCs and founders get get as much money.
Get a fair share. Shares, yeah.
Right. It seems like it's very much,
you know, just if we're, if we're in this debate like that's
the bull signal, right? Good, good.
Madeline, you you've been sort of eyeing the IPO market with
Servicetitan doing well. What companies does that sort of
give a potential nudge out the door that might have been
considering it next year? So the big talk of the town is
obviously data bricks. I've heard kind of mixed signals
actually on that one. Some sources are saying that's a
lock for 2025. Some are saying no, no, no, it's
2026 because they just had this really big capital raise.
So that one I think will be soon.
But they did acquire some capital pretty recently that
could hold them off for a bit if they want to.
So that may not be one. Obviously, people have their
eyes on Stripe. I think some more interesting
ones that I've been hearing about, you know, are Chime of
Figma maybe again Chime I. Believe next year.
Yeah, Chime, that seems likely. Some people told me canvas.
So quite a quite a slate there. There's a lot of deca corns kind
of waiting in the wings. So there's a lot to choose from,
but. The problem with data bricks and
Stripe is what you're touching on.
Their ability to raise these insane private rounds just takes
off so much pressure. I mean, Stripe is doing so well
that they can, you know, you know, buy shares from their own
employees. So it's sort of there is a
continued sort of perpetual private company anyway.
We can talk about the psychology of these big companies staying
private all day. But I think the point here is
clearly there's a lot of hope right now that a positive
Servicetitan IPO will mean that everybody's a little more
enthusiastic going into next year, which certainly the
software world, you know, it's, it's been brutal.
You know, it's been a good time for AI, but the classic sort of
software company? Much harder.
In private markets news, we had a massive capital raise this
week with Crusoe, friend of the pod Chase Lochner, but.
Chase, he's run staple at Cerebral Valley.
Some of our dinners, the character, I think one time,
yeah, we had somebody bail and we had like Chase, I just met
Chase and put him on stage in Cerebral Valley.
I mean, he's a great, very charismatic guy.
Sort of fun story of like they, you know, they got into AI cloud
compute business from working crypto and you know, they're all
about using sort of captured energy.
So both the creative business. Yeah, the most successful crypto
to AI pivot of all time maybe. But yeah, they they're, they're
doing quite well. They raised a 600 million series
round led by Founders Fund, notably a fund who really likes
to take a big chunk of the round, so they delivered on
that. Fascinating founders fund bet
you know, we've said it before, but you know a lot of their
successful investments have been these growth stage deals.
High conviction with with this one at a time when many people
think if AI continues to accelerate we'll have sky high
energy costs and really need to build up infrastructure.
Yeah, absolutely. It seems like also, you know,
Founders Fund has a pretty prominent position in open AI.
So I feel like they're here with this high conviction bet where
they're taking a big chunk of this.
They're going all in on every part of the the stack needed to
power the AI future. Moving on to our main story,
Alphabet had a bunch of wins last week.
I just am shocked. Insane.
I mean quantum chips announcement was great, so
they've made big progress there. They have the best public
company offering in generative AI, which they just updated
their models. And then a sort of unforced
error from General Motors abandoning Cruise means that
Waymo, which already, you know, is in the lead, is now sort of
uncontested again, except Tesla, which of course, is, you know,
an automaker building their own autonomous technology.
So if you're an automaker without self driving
capabilities, it seems like Waymo is your only potential
partner. So yeah, what did I miss?
Any Google wins or I mean the stock price is up too.
Yeah, the price is surging. I mean, it's just been an all
around great period for them in a time when I think a lot of
people were really writing them off.
They had, you know, a lot in the AI race specifically, and this
Gemini News is just really promising for them too, I think.
And I, you know, I thought you and Jonathan had the right take
in the newsletter, which was this has been a company that
people are like, oh, they're their lunches are too good, you
know, they're too soft. And and certainly, you know,
I've known Google people who didn't seem like they were in
the office super long hours, but.
I think about that part in Silicon Valley where they're
unassigned, you know, at huli, right?
Like that's the classic Google negative stereotype.
But, you know, the counter to that is that sort of, you know,
researchers require a little bit, you know, of Slack and time
to think. And, you know, in some ways
Google was setting itself up as a very researcher friendly
company. Of course we knew that, you
know, the Transformer paper came out of Google and all those
people left. And so maybe it's like, OK,
they're going to discovering things, but then everybody else
is going to eat their lunch and execute.
But now we're starting to see some signs that no, with this
advanced technology, they're still very capable of producing
results. And so that's made the market
and I think Silicon Valley more bullish on Sundar, even as what
the government's trying to break them up.
So we'll see if you know Google as we know it, Alphabet as we
know it. Still exists, right?
Totally. I think, I think it's really a
story of not counting them out at this point.
They're bets that they've made that are these sort of wonky
research bets that seemed like long time horizons since we've
hit those time horizons that it seems like they're paying off
and it seems like despite all of the criticism, they are turning
them into products, which is pretty impressive.
So obviously they have a lot of competition, but not really on
self driving. So I mean.
I mean, a super macro theme. You know, we talk a lot about
venture, but the big public tech companies keep dominating, you
know it. I mean, people counted out
Facebook Meta for a while and that company was a great sort of
public investment. People then counted out
Alphabet. Now.
It's been great public investment.
Microsoft is obviously crushing it.
So, man, the tech giants just continue to win.
And, you know, if in a Trump world, it feels like, oh, they
can do deals again, Yeah, I remain pretty bullish on those
companies. And lots, lots of excitement
that they can just gobble up the startup winners going forward.
For sure, definitely. You mentioned that Alphabet's
work on Quantum was getting the startup world excited.
How much is the Quantum world delivering?
You know, I wrote about Righetti many years ago.
It seems like that's a now public company that has
struggled. Or what's your sense of the
startup world's answer to what Alphabet has produced here?
Yeah, I think it's pretty early. From my understanding, startup
funding to Quantum companies, it spiked this year to 1.7 billion.
According to Pitchbook, there were across 73 deals.
Last year there were 93 deals, but there weren't, they weren't
as capital intensive. So the overall funding total was
lower, but it's the highest total for funding in a year for
quantum computing yet in the venture market.
So obviously there's some excitement around that.
I think people are exploring different ways we can develop
compute as we get, you know, further into the future.
That seems really promising. But the main thing I get from
talking to quantum founders, even obviously who are very
bullish on this technology is that it's early days.
The use cases are still kind of far.
So for these sort of moon shot bets, as exciting as Alphabet's
breakthrough is with these chips, and it does have, you
know, a lot of founders equally excited and jealous that this
has happened. It's it's still we're still in
early innings. It's not necessarily like we're
going to see the killer quantum use case or product yet, but
it's very promising right now. Very Silicon Valley, always
early. We talk fantasize about the
technology when it's in early innings.
It'll take take a while, but. You got to have the video.
AI Open AI was once sort of in this it's a research project
period with some exciting ideas. And now you know, I'm talking to
ChatGPT. I'm talking to ChatGPT more and
more every day. What do you talk to ChatGPT
about Eric? I mean, I do too, but yeah.
I'm trying to use it as like my To Do List where it's sort of a
dynamic To Do List where I updated on what I've done.
And then it's like come back to me with what I need to do and
like cross off things. It's, you know, if anything,
it's smart formatting. But it's also nice in that
ideally it keeps sort of a running track record of what I
need to do. And, you know, in some ways I
think what it delivers honestly, is it's like very affirming
relative to, to to list. It's it's like, yeah, OK, you
know, this is you've gotten a lot of stuff done today.
You know, it's good job. It's good of being sort of a
little supportive while keeping track of things, doing the
formatting. So it brings a lot of little
things that a traditional word processor doesn't on ChatGPT.
I actually, like had a long conversation with ChatGPT about
Google's Quantum announcement because they claimed that their
discovery pointed to like multiple universes.
And I, I found that somewhat hard to believe or like, at
first I was enticed, but then I was like, really.
And, and so it honest, honestly, it was a good way to sort of dig
into quantum mechanics and the current research.
And basically, you know, there are people real, you know,
scientists who think that quantum is evidence that there
are multiple universes and perhaps.
Some people think it really does prove the multiverse theory,
yeah. Right.
That it's that the processing is actually happening in other
universes. Where is there other people who
think the the the waveforms sort of contain embedded information
and just the ability to access basically their probability
computing power is in our time just able to get a lot of
information very efficiently. And, and so I came away from my
discussion with chat GP not convinced that anything about
Google's finding uniquely pushed us towards multiple universes
versus just the wave functions having embedded information.
But I'm I'm not the most knowledgeable about it.
I was. Going to say beyond GPT, you did
write about quantum back in the day a little bit So but yeah,
your prospect is, you know, we're still early days.
Where? Where do you land?
On the actual business, putting aside the deep philosophical
questions about the. Universe.
Yes, exactly. Let's get to the facts.
It takes too long. You know, a lot of things often,
you know, even though Silicon Valley doesn't like to say it,
you'd, you'd like to be like the second company, you know, once
it's a sure thing and somebody's making some money on it.
Can you fast copy a lot of these things?
I mean, like we're, we've sort of referenced open AI did not
come up with the transformer paper.
They were in a good position to sort of seize on it.
And so to some degree, you know, I, I think if I were building a
quantum company, I might wait another five years and then copy
all the good work that everybody's done.
But, you know, so much of it is, do I have the right
sophisticated team at the exact moment where the breakthroughs
are finally becoming commercially, commercially
viable? And yeah, I, I guess I don't
think we're at that moment yet. So if I were starting the
quantum computing startup, I'd wait a couple of years and then
try again once we feel a little closer.
But as I said on the last podcast, happy for people to
burn money trying to build it because we want it.
But yeah. You want your investments.
Shares as an investment. Moving on.
I did want to shout out a couple honorable mentions this week.
They weren't our top stories. We love we.
Love upstart venture capital firms, so we do not.
Leave them off. The roster we have.
To mention them two that really came out were Laud Ventures
raised a debut $150 million fund to back precede and seed stage
technical startups founded by Pete Sonsini, Andy Kowinski,
who's the Co founder of Data Bricks, and Andrew Kriyakov.
It's a great team. Again, an example of emerging
managers work when you have like a powerhouse team behind you.
So clearly this is one of those cases.
But yeah, I'm bullish. I feel like one of, you know, a
premise of newcomer has been data bricks is underrated and I,
you know, early on did a bunch of scoops and their valuations
and you know, Ollie Goatsy, the CEO has been prominent cerebral
Valley Cincini, you know, did the data bricks investment for
NEA and was a star over there and is now off with his own
firm. So I guess if my data bricks
bullishness holds, then I'm bullish on law adventures.
So we'll be interesting to see what they do the other emerging.
Fund this week that announced a dimension big fund.
Dimension raised an upward oversubscribed fund to $500
million to invest across the stages.
So not just, you know, early stage or late stage, they'll do
it all in tech, bio and AI. It's Zavin Dar, Adam Gilburn and
Non Lee also came out of, you know, prominent firms were Eric,
you know, you broke dimension one on your news on the
newsletter back in the day and they're back at it again with
even more capital. Love those.
Guys, exciting firm don't claim to understand what every company
they invest in does, but godspeed, you know interesting.
You know, ZOV broke off of Lux, so did Adam.
Adam. Was at Lux too.
Oh yeah. Adam and Bilal just left.
So I mean, we're in this moment where and I think we're
agonizing about in our own sort of how we're writing about this
stuff at once. It's like the big firms are
getting more dominant and then interesting partners are, you
know, shaking off. And obviously some of those
interesting partners maybe don't have the performance, so they're
not surviving the big funds. And then other ones are
superstars and think, well, why are my bosses getting the
management fees I should? And so as you know, observers,
it can be hard sometimes to separate one from the other.
But we're would love you feel glad to e-mail us and tell us
who's who. But yeah, but clearly the
dimension team has one over their LP's.
I think Zav, you know, is in runway.
I know he has another successful Lux investment under his there
is in beta. Biosciences, yeah, on the
biotech side as well. So they'll they'll cross that
while there is this sort of flight to quality with the mega
firms and LP capital. If you are a star player at one
of those mega firms and you decide to break off the the
tough market for emerging managers does not apply to you.
If you're in that case, there are I'm going to call.
Bullshit on your term flight to quality.
I feel like we should start calling it like flight to
consensus or flight to cab flight.
To existing capital, yeah, quality.
You know, it's like it's a flight to a safe bet that's not
going to get you fired as an LP with you know, but but yeah, the
mega funds, however they're doing a flight to.
Consensus. That's a better term for it.
Yeah. Flight to consensus.
There, that's it. I take that one.
That's good, really exciting for.
Both of these teams and can't wait to see what they do in the
new year. Wow covered a lot of.
Ground we went from. I know some ChatGPT IPOs.
Yeah so new finds. This was a lot happening.
As reporters, you know, we cheer for news.
And so it's a, it's a good sign that in December, I don't know,
positive IPOs, Google doing well, Yeah, makes me a little
more optimistic about next year than maybe I was a month ago.
Oh, yeah. I put in AI.
There's an annual discount to newcomer right now.
It's 30% off. So maybe, you know, wait.
Oh. My gosh, what a fantastic
holiday gift. Wow, what a loyal employee.
Yeah, better than what? Better than.
Could you do then? Pay, make, you know, make our
business possible, you know, but seriously, you know, we, we
appreciate everyone who subscribes.
It's a good moment to jump on board.
And then also, I'd say, you know, you can always e-mail, uh,
Madeline and I, you know, our first names at newcomer.co.
Always open to topics and thoughts.
Just reminder that we do our best when you all weigh in.
And so I don't want this podcast to be 1 directional.
And so feel free definitely. And I need to do a post, maybe
the podcast. I can always preview the posts I
should be writing like default off the record.
Or it's like, I think people get worried that if they send us our
thoughts, we're going to like trick them and put it on the
record. Definitely not.
You know, I when we're publishing people, they they
know about it and we want information more than we want
you to be nervous that we're going to trick you to put your
emails to us on the record. So definitely reach out with the
comfort that we won't spill the beans and on that.
Note send us your scoops in the new year.
Thanks so much. All right, Thank you.
Have a happy holidays.