SPEAKER_01: All right, everybody, welcome to this week in startups got a couple stories, news stories that I just wanted to give you my opinion and my hot takes on. Next two stories include companies that both signal a peak and the end of ZURP. But for different reasons, Uber was of course, a poster child for state private longer growing all costs. And, you know, it's just one of the great investments of the last decade. And now the company that was considered a money loser forever would never be able to make money. It was a broken business subsidizes subsidized by VCs. Well, now that company has hit profitability in three of its last four quarters. And according to reports is going to be joining the S&P 500 soon. This is incredibly important because if you join the S&P 500, a bunch of people have to programmatically buy your stock. On the other hand, FTX and Sam Bankman freed, they were the poster child for the COVID era crypto craziness that we saw all the stimmy checks, and then this entire crypto madness. Well, SPF you know, is this millennial prodigy that was going to become the first trillionaire, right? He was gonna save the world. However, he got caught stealing $8 billion worth of customer funds and his entire empire collapsed, as we've seen in the past week. And now he's facing 100 plus years in jail, not just similar to Bernie Nadeau. So let's talk about these two stories and how they signify the nail in the coffin for ZURP. The end of an era, as we say, and then we'll touch on Biden's executive order on AI in the discussion that the boys had on all in when I wasn't in town.
SPEAKER_04: This Week in Startups is brought to you by Squarespace. Turn your idea into a new website. Go to squarespace.com slash twist for a free trial. When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain. House of Macadamia is the next big health trend. Get a free month supply of macadamia milk with any order at House of macadamias.com slash twist by using code twist 20 and CLA innovation takes balance. CLA CPAs, consultants and wealth advisors can help you get from startup to where you want to end up. Get started now at CLA connect.com slash tech. Uber reported its q3 earnings today.
SPEAKER_01: The shares are up 4% after Uber reported yet another net profitable quarter full disclosure, I still have a big stake in Uber. It's worth noting Uber shares have almost doubled this year in 2023. That's why I'm in such a good mood. It's up 97% year to date. Two things that drive my mood how my Knicks are doing and how my Uber sock is doing. Among other things. Uber's market cap is right around that hundred billion dollar mark for the first time since 2021. And as I said in the intro, three of the last four quarters, they've been profitable on a net basis. But Uber actually slightly missed on analyst expectations for its top line revenue because of some accounting changes and earnings per share results, but they did beat massively on its gross bookings. I mean, this is just extraordinary gross bookings $35 billion up 21% year over year. And then revenue, which is what they take right bookings, a bunch of that money goes to the drivers, they take this, you know, 9.3 billion of that that's their actual revenue that includes their advertising business. So they have a blended take rate of 26%. App Store, Apple gets 30%. Patreon, some of those services, substack, they take 10% Uber gets 26%. Now, Uber did not disclose its ad revenue for this quarter, but it mentioned there are now 445,000 ad merchants in the system. That's up more than 70% year over year now it's worth noting. Those are in two buckets, I believe there are some where it's Monday Night Football or you know, Netflix, promoting to you when you're waiting for a ride for your Uber, they only accept really high end ads for the Uber transportation app. Then there's premium placement. So when you open up Uber eats, and you're gonna go shopping, it shows you the restaurants you always order from and the stores you always order from. They can restaurant can insert themselves into that for a fee and try to intercept you and let you know about their offerings. There's two ways for them to make money from advertising kitchen. No 2.4 billion trips. So the B in Q3, that's 25% year over year. And the monthly active users Uber has a name for this monthly active platform customers. In other words, they have to do a transaction is 142 million, let that sink in 15% year over year 142 million people transacted on the service drivers earned a total of 15.9 billion, including their tips in Q3. Also up 24% year over year and they have, I think 6 billion drivers in the network. Now it's extraordinary. You compare that to McDonald's, you compare it to Walmart, Apple, Starbucks, Uber has more employees than they do now, of course, 80% of them 90% of them are doing part time. But it's still extraordinary. Q3 net income 221 million includes a $96 million loss from unrealized loss from Uber's equity holding so it's even better than that 221 million that means their net income is more like 315 Q3 free cash flow 905 million unrestricted cash and equivalents over 5 billion. It's got a ton of cash Uber is going to be a money printing machine is my prediction, they are going to start doing share buybacks if the if the stock is still underpriced, you really think this should be a $70 share. Most of the price targets out there are 6768 69 $70 I think and I'm sure that'll change but you know, everything's undervalued and the stock market wants you to prove to them that you can be profitable. They held Amazon to that standard, they hold other people to that standard. But once you get through the J curve, and you have a profitable company after making all those investments, well, then you can just turn the dial like Google does for ads or Tesla does with the price of their cars. And you know, these really strong companies can almost pick what they want their earnings to be, I think in my mind, they can just say, Hey, let's have this many ads on Google, let's make the price of the cars this price, or let's make the price of the rides this amount, and that is extraordinary. So we close the book on the zerp era, out of control investing and spending and blitz scaling. And now we are back to profitability, dividends, stock buybacks, congratulations to Uber, Dara and the team over there and all of the alumni of Uber. Congratulations. I believe the best is yet to come have some really cool products coming to I love the idea of like an Uber assistant, like a task rabbit, take out your phone, and get somebody for 40 5060 bucks an hour to come help you with either business or personal tasks like a personal assistant type thing, or a family assistant type thing could be huge. And I know they're testing that it's that's public knowledge. And just, you know, for some fun with numbers and charts, having been there from the beginning of this company before they even launched. Looking at annualized revenue from 2014 to 2022. Here in this table started out with $400 million in 2014. And then this year, I think they'll hit 40 billion or something like that they're doing over 9 billion, as we said, if you just take that, let's just round up to 40 billion for 2023. And you compare that that's 100 times what they were making in 2014 100 times, not 10 times 100 times. And this is one of the things about networked businesses, marketplaces, they can really sneak up on you how big they can get. And, you know, the other piece of it that's really interesting is the growth of Uber from last year to this year, if it winds up being you know, they go up 6789 billion dollars, let's just say it's 7 billion in added revenue, you know, if you look that they increased what they did in those three years 2014 2015 2016. And if you took $40 billion, that would be the first six years of the of these company reports here from 2014 to 2019. I think that's about 40 billion. So the the last couple of quarterly updates here, when you start looking at the quarterly updates, you know, what you really it's big numbers are kind of confusing to the human brain. But when you look at how much these big companies, whether it's Google, Facebook, Apple, Microsoft, how much revenue they add, you know, in their later years, when you get to years 11 1213 2021 22, they might be adding more revenue than they did in their first decade as a company, the percentage growth goes down massively in these companies. But the actual real number billions of dollars in growth is just mind boggling. And this chart is super indicative of how it's been for them. 2018 into 2019. They're growing, they're figuring it out. The blue part of the of this bar chart is rides mobility, they call that I call it rides. And then the red is delivery, obviously of the pandemic, and then boom, you see delivery just explodes, it doubles. And then of course, it sticks around and door dash is also doing great. You can check out their earnings on your own. But these numbers have gotten very large and it's very attractive. What's next for Uber? You know, I think it's getting too big to be bought. I always felt like Amazon, Apple, Google, you know, one of these companies would buy it. When it was worth 30 4050 billion, they would put it in offer for 60 or 100 billion, but now at 100 billion, it's going to be very hard for somebody to buy it, especially in the Lena Khan era of no acquisitions. It would be amazing if Amazon owned Uber. I'm not advocating for this. But if you just think about your Amazon Prime, and then having some preferential treatment on Uber, and then then being able to use the Uber network to deliver from there, you know, warehouses and everything and you know, your Uber rides, you know, Amazon Uber would be just an incredible, incredible product. And if, you know, Travis and Tim Cook hadn't gotten into it, I always thought Apple would have been amazing acquire an extension for them, although I don't know if they want to operate in the real world. They've never released the Apple car. So and then for Google, it's obvious, you know, they have Waymo and so Waymo is going to be part of the Uber network with what's happened with cruise, which we're, we won't talk about today, but you can read the New York Times story. And you can read the rebuttal from the CEO of cruise. There
SPEAKER_01: seems to be a lot of human intervention in rides as much as every couple of minutes, some human is intervening. So I think that com combined with them getting their license pulled, there's some lack of disclosure here that is making people feel, I don't know, less trustworthy over self driving. And then maybe people are starting to think it's 10 years out, not two years out. So and Waymo, those cars are super expensive. And in order to deploy a fleet of Waymo is still going to take a decade. So human drivers, I think have a decade behind the wheel for being the majority of rides. But over time, who knows, we might see, you know, Uber when you open up the app, just like you can pick all different types of cars and services from Lincoln town cars and black to pool and packs and green, you can take a Waymo consumers may not want to some consumers may we only want to have nobody in the car, maybe they'll be allowed in some jurisdictions and not others, I suppose it's going to be jurisdiction by jurisdiction. So it's going to be a slow rollout either way. Could be 10 or 20% of rides in the next decade. And I think if Uber captures some number of them, it would be really much easier for Waymo, cruise and other folks to just be part of the Uber network. And you know, let people pick from there and just split a little bit of economics with Uber and for Uber, which wants to be the everything app, it would be great for them to just have all those options in there just like in some cities that Uber allows you to get a cab. If your landing page is terrible, I'm out right most consumers are it's 2023 you can't have an ugly website, stop selling for okay or good and have great and great means you're using Squarespace it's out of the box beautiful. These websites have templates made by the world's greatest designers that are going to engage your audience let you sell anything. And Squarespace over the past decade has just added feature after feature on top of the gorgeous templates that are designed for mobile. And the drag and drop web design with their fluid engine is just perfect, easy to use. And you get built in analytics, marketing, channel analysis, sales data, all that stuff, you know, goes beyond page views and site visits and time and all that. And with Squarespace, you can create an online store, or you can start a blog, click of a button, right? Easy peasy, lemon squeezy, you can create a subscription business for members only content, you're seeing a lot of that out there. It's simple, it's cost effective, it's gorgeous, and they keep adding feature after feature after feature. That's when technology is at its best, isn't it? When you pay one price, but the product gets better and better and better. You get that with your Tesla, you get that with your iPhone, you get that with Squarespace. These are the legendary brands of the internet of this era, go to Squarespace.com for a free trial. And when you're ready to launch, I want you to go to Squarespace comm slash twist. And they're going to give you 10% off your first purchase of a website or domain go to squarespace.com slash twist because they know we sent you a free trial. So that's it. Looking at the next part of this puzzle here as we end ZURP SPF Sam Bankman fraud I'm sorry, freed was found guilty on all charges. This happened last Thursday in New York City. We no longer have to say allegedly when talking about the $8 billion he stole from customers. Here are the official charges for which SPF was found guilty two counts of wire fraud, two counts of wire fraud conspiracy, one count of securities fraud, and one count of money laundering conspiracy. There are also other charges that he faces but because of his extradition from Bahamas, those are going to have to be settled in another court case. Sentencing March 28 2024. That's got to be hard for him and his family. Between now and then it's going to be a tough time to be wondering how long you're going to be in prison possible sentence 115 years in prison. This will be at the discretion of Judge Lewis Kaplan reporters noted that he consistently seemed annoyed at SPF and his antics in the courtroom. SPF of course tried to defend himself and he testified. Maybe that was a mistake. Maybe it makes no difference. Maybe that was in order to help him on appeal. He was officially charged 11 months ago. So trial lasted five weeks. And that's your nail in the zurp coffin for crypto I believe there'll be plenty of other people who will get you know, charged etc. But this was the well, this was the big one. Moby Dick, he's been taken out. And I think it's the end of the era. Of course, if you really want to dance on the grave of the zurp era, we work is now bankrupt.
SPEAKER_03: Isn't it amazing that this all happened within like five days of each other? I mean, it is extraordinary producer coming in
SPEAKER_01: Almost joining SP 500 SPF going to jail for possibly 100 years
SPEAKER_03: and we were going bankrupt within five days of each other. It's just like it's like poetry.
SPEAKER_01: It happens in threes. They always say that, you know, like you'll have some, you know, famous baseball player pass away an actor and then you know, some singer right? It always happens in groups of threes. So there you have it. Uber is profitable. Nobody ever said that would happen. We were coast bankrupt. And you know, they're working out all the leases crazy. And then finally, I wasn't able to make all in last week I was busy with LP meetings, still raising lunch fun for it's going extraordinary more than halfway done, but it takes time to raise these funds. And I've been on the road like crazy doing meetings. But the best he's had a really good take. I think the strongest part of the episode was this discussion of the AI executive order that Biden put out there. It's a convoluted 100 page document. I've reviewed it and the summaries of it. To just summarize it for you. The document focused on what it calls dual use foundational models. The executive order defines these as an AI model that's trained on broad data, okay, duh. It generally uses self supervision contains at least 10 billion parameters, okay, it's got a certain scale is applicable across a wide range of contexts, whatever that means, and it's general. And that exhibits or could be easily modified to exhibit high levels of performance at tasks that pose serious risk to security and national economic security, national public health or safety. I mean, give me a break. Like a Volvo that you drive down the street could put everybody at risk. super vague, probably on purpose. It's just extraordinary that we can't close the southern border, but we can do this and companies building these dual use foundational models are now going to have to report to the government activities related to training, developing or producing these models, ownership and possession of the model weights and results of any developed models performance and relevant AI red team testing. That's like doing bad things, creating bombs, etc. And the yellow calls out large scale GPU clusters, companies or individuals that own large scale GPU clusters have to report any acquisitions or developments, including the locations of these clusters and the amount of total computing available. freeburg gave a big rant that was really great, you know, and his point was awesome. You know, like we've only only five years into this, and it's way too early to regulate. And if they do regulate, why are we regulating these like little tiny techniques? Because they're all going to change, obviously. Why don't we just look at the outcomes? Like, did somebody commit a crime with this? Did they do fraud? Did they steal somebody's copyright or content? Great quote from freeburg, come out and say, here are the standards by which we want to regulate you. This is the size that the model can be these are the types of models you can use, it's going to look like a medieval literature in three years, none of this stuff is even going to apply anymore. And he's absolutely right. The pace of change is nuts. You try to regulate something like this, you know, based on the techniques for building it or the the cluster size, it's not going to work. Chamath actually wrote a substack blog, the case to regulate AI if you remember back in May, but he mentioned on the pod that the EO didn't really address his concerns. He said this was a kitchen sink EO because it wasn't specific. It's really convoluted, but he thinks people are trying to do the right thing. Sachs said he thinks the technique here is the administration is unconsciously trying to make it so arduous for companies to self report that they eventually just give up and say give us one agency instead of 20 agencies to do this. I think this is a lot of manipulation by people who are paying off politicians. I'm a simple guy here, I just say follow the money. You got a bunch of people who have leads in the AI space, they're going to make a ton of donations, they're going to give money to politicians to create regulations to pull up the ladder behind them. So some startup that I invest in, that's got three people isn't going to have a team of 10 people to do all these regulatory requirements. And so this is classic regulatory capture, as Bill Gurley gave in his awesome talk, I think that this thing needs to get ripped up by the next administration and throw in the garbage and start over with a better framework. Next up, an awesome founder, who is building an awesome product in an old slow boring industry, car dealerships, and I've invested in this company, and I'm just going to start sharing in these news programs, some of the companies I'm investing in, because I want you to know, you know how I think about investing. If you want us to invest in your company, us being the 21 person launch fund, you can go to launch.co slash apply launch.co slash apply, you apply for funding, we have three different ways to invest founder university, the accelerator or direct, you fill out your form, we read it within 2448 hours, get in touch with you schedule a meeting and hopefully we're off to the races. So stick with us. Okay, I got a funny story to tell you House of Macadamia is graciously sponsored the all in summit. And to wow the crowds, they created a special edition salt and vinegar pack of macadamia nuts. And guess what people went crazy for them dozens have been messaging the founder Brandon, asking him to make the salt and vinegar nuts available on the website. Listen, you've heard me rave about the health benefits of macadamia is, but don't take it from me. The most health conscious people in the world are eating them. Dr. Andrew Huberman. I like his pockets. I started listening to it. He mentioned he snacks on macadamia is in his GQ profile. And that guy Brian Johnson, he was on the podcast when he wasn't a health lunatic. He's trying to versus aging, and he eats macadamia. So all you really need to know House of macadamia is products are delicious, and they support good health. My favorite dry roasted chocolate dip macadamia is you know, I get my chocolate dipped in there. And they also have a dip snack bar. So I put a couple of those in my backpack, I put a couple of them in my little roller. So I have a healthy and delicious snack. I make a better decision. Listen, I've had a candy bar, which you know, like sometimes they break down and buy one of those. Not a good choice for me. Now I make a better choice House of macadamia is they got a new product macadamia milk, get a free month supply of macadamia milk with any order at House of macadamia is calm slash twist. That's a free month supply of macadamia milk with the code twist 20 at House of macadamia calm slash twist. Alright, everybody, welcome to this week in startups, our next founders building in the car dealership space sounds pretty boring, right? Well, this is where a lot of the major businesses come from. So car dealerships are one of those big sleeping giant industries. motive is a website builder for car dealerships makes it so much easier for shoppers to find and finance cars. Of course, this might sound like a tough industry to adopt software. But you'd be surprised at the size of this market and how much these dealerships can gain from a beautiful and intuitive website. john payback is the CEO and co founder, we're investors in the company. How we doing, john? How's our investment doing?
SPEAKER_00: Doing pretty good. I'm trying to make you proud.
SPEAKER_01: And then people can go see the website ride motive.com. How'd you come up with the idea? How did you get your first customers? How's the business going? So I got my start. In the auto industry, I was in high school,
SPEAKER_00: I was the inventory photographer at a couple of dealerships in the hometown, where I grew up. And through that experience, I kind of got like a bird's eye or like fly on the wall view of every facet of the business from like a participatory perspective. That was really helpful because it exposed me to the problems that dealerships face, which, first of all, it eliminated this like preconceived notion that like dealerships are these small businesses, even the smallest franchise dealership is actually quite large. I mean, we're talking seven figures in gross revenue annually and in larger cities. I mean, these are like, you know, multimillion dollar net profit businesses per year. They're huge, and their problems span far and wide across every department. And it was really energizing for me to see that basically anywhere you throw a stick, there's this massive problem to solve, and a ton of budget to really devote to solving those problems. And, and so, through my experience, as the inventory photographer, I realized that dealership websites are not consumer friendly at all. They are incredibly hard to navigate, they're loaded with these third party tools and plugins and live frames, you know, these chatbots that like bombard you from the second you get there. And, you know, in an age where almost every auto brand is like trying to reimagine their consumer experience, the most important part of it, the actual retail experience is pretty poor still. So that was the initial idea is like, let's just make a consumer experience that's actually quite nice, something you would want to do.
SPEAKER_01: Shopify for car dealerships, like Shopify for car dealerships, a simple platform, dealerships can
SPEAKER_00: make and manage their website. And for consumers, it's like really easy to actually find a car. Like, ultimately, that's what you're there to do is like find a car.
SPEAKER_01: I know when I go to the Corvette configurator, you know, at that website is Chevy, it's going to be beautiful and amazing. But when you wind up at your local dealer, and you know, I was buying a suburban, we needed to have a car for Tahoe. I think it's gonna be the last gas powered one we ever have to buy. But it's kind of our escape vehicle. You know, we were going to three or four different dealerships trying to find it all of them had a different experience than there was like the Chevy suburban website is just confusing and ugly. And then I compare that to my experience buying Tesla's. And it's elegant and simple, and app like and really tight. So when you go to these dealerships, the thing I was confused about is they run very independently of the brands they sell, huh. And so they're, I don't understand exactly how that works. But I guess the larger brands are not saying you have to use our software. They're saying the opposite. You have to have your own website.
SPEAKER_00: Yeah, it's very complicated. franchise law is very complicated in the automotive space. And it sort of forces brands to operate at an arm's length when it comes to business decisions that the franchisee makes. And so that is why there is this massive software industry for auto dealers. First of all, the brands don't have necessarily the resources to create custom software that is perfectly tailored for what they need. And second of all, you know, it's that sort of hairy franchise problem that that allows this industry to exist. But more importantly, I think it's actually like by design an important way that cars are sold. I think net net, it's actually pretty positive for both communities and for the auto industry that you have these sort of independent entities that are trying to sell cars, because ultimately, they they exist as like a consultant, you know, when you go into buy a new car to your local Chevy dealership, they're there to help you through that transaction, they can buy your existing car, they can help you understand your financing situation. And comparing that to buying a car online, like with Tesla, which is clearly sort of a very seamless experience, if you know what you're doing. But if you have a lot of questions, there's really not a whole lot of resources for you. There's no one for you to call and and so dealerships play an important role in that regard. And I think that's part of why there is room for sort of both the models to exist.
SPEAKER_01: Yeah. And so you build this better mousetrap. How do you get your first dealership because, you know, here on this weekend, startups, we're always talking about zero to one, not zero to one, like, you know, not having a product having a product, but from zero to $1. How do you get the first dealership to say, Okay, I'm going to use this startup software, I'm going to be the first person up the hill and to use it, tell us that story and, and how you lock down that first dealership,
SPEAKER_00: I think more philosophically, like, the problem has to be really painful for a startup to get their first customer with an MVP. The problem has to be very, very painful. Otherwise, you know, the customer will just use some more developed piece of software. And that was kind of our situation. Like we had this, I mean, a hardly usable platform when we launched. And we literally knocked on doors and approached a few local dealerships and saying, Hey, you know, what do you think of your website? Would you be willing to give this a shot? And I mean, their loyalty to their existing sort of solution was was so minimal that they moved to us when we had zero features and really zero capability. The only thing that we had was like a promise and a vision and, and thankfully, like working with those early dealers allowed us to build a product that was had maybe a greater mass appeal. What's interesting about our business, you ask how you go from like zero to one. What was interesting is how we went from like one to 10 and 10 to 50 and now 50 to, you know, 150. unique to our business, we have this flywheel where it's really quite elegant, like we launch a website with a dealership. And at the bottom of the website, we have our logo and it says made by motive. Other dealers go to that website and they see, hey, that website looks better than mine, who did it, they scroll to the bottom, they see that logo, they click it, they submit a demo request, they sign up. And then we launched their website, other dealers see their website and just sort of the flywheel starts to build its own momentum. And, and so really, once we got like, just a tiny bit of escape velocity, we're just sort of bouncing off the ground. It started to pick up really on its own. Oh, so the phone starts ringing the email starts, right? demos are coming
SPEAKER_01: in because other dealers see our website in the wild and they
SPEAKER_00: reach out. It's a wonderful flywheel. Yeah. And it's kind
SPEAKER_01: of in some ways like the perfect market one. Nobody discovered it. It feels like some ancient, you know, vestige or something dealerships, but they're not going away. They're going to be here forever. And these old school dealerships have tons of profits. So they and now they're probably getting handed down from generation to generation. Now you've got young people taking over for their parents who own correct. And they are like, why is this software so terrible, we need to upgrade it. And they grew up on phones, and they know about Tesla's website and how easy it is to order from Tesla or even Rivian. And they're like, Hey, we need to catch up. And of course, they're going to go look and study. And like you said, you go from having to do the hard sell to order taking now it's not exactly that easy. But what is the process of demoing for them and closing? How do you what have you learned about that process now that you get it out in the wild, you got that virality because it's got the logo on the bottom powered by how do you close them? And what's what's the process from doing a demo to closing some best practices there you can share?
SPEAKER_00: Yeah, I mean, it's pretty simple. On our end, the industry has consolidated pretty dramatically the dealership industry that is so you know, there's sort of this idea that like every car dealership is independently owned small business. A lot of them now are part of larger auto groups. So 510 1530 40200 stores in a single entity. And so a lot of times we'll have one of those auto groups reach out and say, Hey, you know, we're unhappy with our current provider, you know, we'd like to do a demo for the whole group. And so we sort of get many rooftops in one deal. So our deal sizes can be quite large, but still in that regard, they're fairly simple. So once we do the demo, usually there are many, I guess, stakeholders and that decision, I mean, it's to get set some context over 95% of a car dealership sales on average come from website leads, right. So this is like, pretty core to their multimillion dollar business. And so it's a big decision to change websites, it's like changing the building that you're in, you know, like moving addresses, it's a huge decision. So usually the owners involved, general managers, marketing people, and then even salespeople, business development representatives, I mean, the whole company kind of gets involved in the decision, which, which does create some complexity in the in the sales process. But, but really, like, it's for the better, because when everybody is bought into the solution, then the rollout becomes like confetti in the air, as opposed to this sort of situation where you're ripping out some technology that somebody liked and wasn't aware of the change. So despite the inclusion of a ton of stakeholders, it's pretty simple once once they see the demo, we do maybe one or two demos and it's and it's, you know, on implementation.
SPEAKER_01: All right, everybody, Steven Estes is a principal at CLA Clifton Larson Allen is a professional service provider that specializes in CPA tax consulting and wealth advisory. Welcome to the program, Steve, thank you for having me tell us
SPEAKER_01: a little bit about what a startup should expect to pay in terms of managing their taxes, managing their accounting outsourcing the whole thing in those first couple years, you know, for the early stage startups, it really just depends
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SPEAKER_01: this remote work that can trigger filing taxes in multiple jurisdictions, correct, right? Once you have
SPEAKER_02: an employee there and you're registering with that state, the state's aware of your presence. So if they don't receive a tax return, you might be getting a lot of notices for failure to file get started right now at CLA connect comm slash tech. Let
SPEAKER_01: them know your boy Jake house sent you CLA connect.com slash tech to get started right now. So how many dealerships are there here in the US? And I know you've you've gotten a well over or let's just say hundreds, I guess, what's the march to kind of capture this market? And how do you think about that? And then of course, with investors, then comes the big Oh, what's the tam here, right? What's the tam now as an early stage investor, just to inform the audience, I don't have to worry too much about tam because we're going to be the earliest investors but now series a series B investors, they might look at and say, Hey, is there an ability to get this thing to hundreds of millions in revenue? Or is it only going to get to 25 million in revenue? So how do you think about how many dealerships are out there? And how big can this get?
SPEAKER_00: Right. So in the US, really North America, most car dealerships operate similarly to how they do in the US. So you know, there is some sort of market expansion there. But in the US alone, there are 17,000 franchise dealerships, which means a dealership that has a Ford sticker on its door or a Chevy sticker. And then there's about 40,000 independent like used car lots that sell used cars and no new cars. So there's a pretty huge market, especially considering the the deal size. But just looking at the auto software market alone, the average franchise store spends 40 to $50,000 a month on software and technology solutions. And thankfully, the industry is so specialized that our platform runs a but to many other segments of the car buying process. So I mean, really, to grow the market, there's not only sort of expanding the customer type, the ICP, but also sort of running ourselves into these adjacent categories that we can sort of draw a circle around and say, Okay, that's our next target. And then to sort of close the loop here, there are a ton of adjacent industries, I call them the wheeled vehicle industries, which is basically anything that has wheels is pretty similar to a car dealership, large tickets, RVs, ATVs, go karts, golf carts, whatever it might be, their motorcycles, whatever, nailed
SPEAKER_00: it. They're all kind of the same in terms of the core operating principles. So our platform fits in quite nicely with maybe just a little bit of retooling. So there's a huge market. Let's talk a little bit about your entrepreneurial journey.
SPEAKER_01: This is your third startup. I always tell angel investors, I love founders who have a little scar tissue in there on there. You know, Travis was on his third startup, you had two startups, I think both failed or both didn't return capital and you shut them down. Yeah,
SPEAKER_00: yeah, both failed more or less graveyard.
SPEAKER_01: What did you learn from each that has led to you to be so successful with this one with motive? Well, I'd say I'm
SPEAKER_00: successful so far, you know, we'll see if I know I would
SPEAKER_01: invest if I didn't think it was successful so far. So definitely successful. So far, you're ringing the register, and you have a product that people can't live without. Right. That's a just by the way, most startups never build an essential product that people can't live without nor monetize it. So you've got like, now scaling is the last piece here, right? And defending the franchise would be the you know, the next two pieces. And, you know, can you scale it? And can you go into other verticals? So I'd say you're halfway there. Tell me what did you learn from the first two and then you know that you took into this one? And how much easier is it just for people who are first time founders? So they understand like, hey, these are the hard lessons. And then here's how much easier it can get when you get your third one.
SPEAKER_00: Yeah, there's a couple of like, broad strokes notes here. I mean, for both companies that failed, really, I made the sort of raw startup mistakes that they tell you not to make like, you know, you take forever to ship. You don't listen to customers, you know, you build things that you think you want and not what they want. And you spend wildly on on dumb ideas. And looking back, if I just simplified what I was trying to do to its essence and just like, gotten very scrappy, I would have been way more successful. And I think both both businesses could still be successful if someone did them today properly. But ultimately, it's just like start simple and, and I would have been a little bit more successful on those on those past ventures. So to unpack that you didn't listen to customers enough. You
SPEAKER_01: needed to do more product discovery. And you were building products for yourself, maybe not for, you know, the actual customer base, and you were going slow, and going slow. Explain why product velocity matters, and then how you sped things up? What was the technique to get things to move faster and have product velocity?
SPEAKER_00: Yeah, I mean, so like, as far as moving slogans, I mean, it wasn't like we were unable to take action. It was like we were trying not to move quickly in a way, you know, like, like taking forever to make product decisions trying to sort of, like, stick our finger in the air and say, Okay, is this what the world wants, instead of really asking what the world wants. And so that was where the failures came in. And by the time we realized that we were making all of the mistakes they say not to make, you know, it was way too late. So I mean, that's really the thing is, is you need to, like, you know, fail quickly enough where you have time to correct it, as opposed to trying to create this, like perfect solution right away, which was just not going to work. Yeah. And then you asked, what makes it easier this time around, I would say, like, like getting the, like getting your teeth cut on just like the general like operating functions of a business has really helped like understanding what a P&L is and like how you should run your accounting department and like how your books should be done. Like all these things that like really I was like pulling my hair out about in the beginning as if they were like the biggest problem, like having a handle on that is really helpful because then you can just focus on like the core of making your startup work and not like how do I file for an LLC. And so I think having those failed startups beyond just learning to, you know, increase velocity was like getting my teeth cut on those like basic sort of organizing principles of running locking and tackling is you could get
SPEAKER_01: knocked on your butt. Because you could wind up having all of this operational legal accounting debt build up. You know, people talk about technical debt, you know, this other stuff, profit builds up. And once you become a really solid founder, it's part of why we started founder University was to and we're going to have our seventh cohort. So apply now at founder dot university for a plug there was because people didn't know Oh, I have to do an IP assignment. Oh, I need to be a Delaware see, oh, I need to have cash based or accrue a cruel based accounting not cash based. Oh, I need to do this IP assignment. Oh, I need to have employee stock option plan. Oh, I need to do a foreign I'd be yeah, it's nice to be able to have an opinion on those things
SPEAKER_00: after the first couple of times where it's like, you know, you don't need to like, reinvent the wheel. You don't need you don't need to innovate on how you form your C Corp. Yeah, it's like, you should just get like, standardize everything. That's right. You just get it done and you get started with your business. Yeah, yes, have great vendors who do it right.
SPEAKER_01: standardize it so that you could focus on, you know, your team, your product and your customers.
SPEAKER_00: Well, that's another thing to the vendor piece. It's like, knowing who to install to do certain functions without having to like go through the process of vetting vendors is really nice. So like having some some priors on like, okay, this works. This doesn't because really, to say all of that, it's like, I did not figure out how to actually create a successful startup by failing in the previous two rather, I just figured out how to like, focus on doing that.
SPEAKER_01: Yeah. I mean, it's you, if you don't have an AV person for your house, or a handyman, let's say, and then you have a great one, the experience of trying to solve, you know, little things around your house could be absolutely cumbersome, or it could be elegant and simple. And once you have the right vendor, everything just as easy. So you know, getting those right vendors dialed in not promo for anybody here, but, you know, Cruz, as but one example of an accountant, they do such a good job for early stage that I always recommend them because I just don't want my founders to have problems. And there's like tons of other accounting services that do a great job for small and medium sized businesses. But you got to get that stuff, right? Tell me as we wrap here, how do you study customers? What are your techniques for listening to customers and developing the product? Because you can get lost in the wilderness building tons of new features, or you can study your customers and make the existing feature set better and better and better and increase their utilization and the value they get from existing stuff. So walk me through that,
SPEAKER_00: particularly with my business, and I would say uniquely to my business. There is a lot of customer communication. We play a really important role in this incredibly large industry and in this important place within the business. And so they contact us a ton to go through new ideas, initiatives, things that they want to do with their with their website. And so we're we're constantly getting feature requests. And so we have had to build some processes around how to prioritize those. And you know how a decision is made when something gets done. I would say that that the biggest thing that's been important for us is to not necessarily like build exactly what the customer wants, but almost kind of let feedback accrue over time. I've never had a problem in this business in particular of getting feedback, but really, it's like, how do you make it actionable? And by letting it accrue, you sort of let the dots connect naturally, because sometimes you'll start to get similar or like adjacent feature requests from other customers have similar profiles. And you can start to sort of merge those in your head like, okay, well, this person wants to be able to do this function on the search results page. And this person wants to be able to do this function on the vehicle detail page, how can we like, knock out both of those birds with one really elegant primitive or one really elegant solution. And so on our end, we have a way of connecting all of these these feature requests where rather than just sort of doing one off features that aren't really coherent, we let them build up and then we sort of, you know, aggregate them into and delight releases. So that's how we handle customer feedback. And what's also unique about our, our product is that a lot of the customer feedback comes from the business, but it's really a consumer product, right? consumers are interacting with it. So we're, we're able to like, analyze what consumers do on our platform and work from that as well.
SPEAKER_01: Awesome. Well, listen, continue success. Thanks for letting me invest in your startup. Hopefully, we can be helpful to you on this journey, or at least provide some capital and some support. And you know, reach out if you ever need help and you're are you hiring right now? And do you have or do you have any specific positions you need to fill? Because sometimes we actually help people find people here?
SPEAKER_00: Yeah, absolutely. Yeah. If you are a skilled operator or skilled engineer, we would love to talk to you.
SPEAKER_01: Awesome. So a great job. And we'll see everybody next time. Oh, and how can people reach you?
SPEAKER_00: They can go to our website and apply on there or they can request a mobile as well. ride motive.com. Got it. Awesome. All right. And we'll see you all next time on
SPEAKER_01: this week in startups. Great job, brother.
