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Episode 32: The Snap Inc. IPO

Episode 32: The Snap Inc. IPO

Sat, 04 Mar 2017 11:25

Snap! Acquired is live on the scene reporting from the "Super Bowl" of 2017 tech events: Snap Inc's hugely anticipated (and just plain huge) IPO. What does the future hold for this plucky “camera company”? Will Snap's IPO endure as tech's most important picture-frame since the 2012 debut of Facebook, or is it destined to fade as just another snapshot? We debate!
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people misused the crap out of literally. And they're like, oh, he literally had him eating out of his hand. It's like, no, he didn't. He figuratively had him eating out of his hand. But last year, the whatever, Marion Webster added an additional definition to literally, to mean figuratively. So it literally means that some total of everything that it means and everything that it doesn't mean. Welcome to episode 32 of acquired, the podcast where we talk about technology, acquisitions and IPOs. I'm Ben Gilbert. And I'm David Rosenthal. And we are your hosts. Today's episode is the Super Bowl for our world, the Snapchat IPO. It's been long awaited, highly speculated, and everybody's got an opinion. And they are not all the same. So we're recording right now on Friday, March 3rd, exactly 21 hours after trading originally started. Trading is underway for day two. And hopefully we should be able to get this out to you guys by probably tomorrow over the weekend and get some pseudo real-time discussion going here on Snapchat. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the Founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and Founders. So we knew there's a natural fit. We know the host of Founders. Well, David Senra, hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how they group us together. And then they say it's like the best curriculum for Founders and Executives. It really is. We use your show for research a lot. I listened to your episode of the story of Akiyama Rita before we did our Sony episodes. This incredible primer. You know, he's actually a good example of why people listen to Founders until acquired. Because all of history's greatest entrepreneurs and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research to him. But I think this is one of the reasons why people love both of our shows and there's such good compliments is unacquired. We focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of Founders. Listeners, the other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third, fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them. Because in my opinion, the greatest entrepreneur to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20 year old Steve Jobs, he's talking about Edwin Land's My Hero. So the reason I did that is because I want to find out like I have my heroes who were their heroes. And the beauty of this is the people may die, but the ideas never do. And so Edwin Land had passed away way before the apex of Apple. But Steve was still able to use those ideas. And now he's gone and we can use those ideas. And so I think what requires doing what Founders trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost history. I love that. Well, listeners, go check out the Founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and Founders, go check it out. All right, listeners. So as you know, we also like to try new things on the show. And we have a little bit of a format switch today, which we'll tell you about. One thing that I wanted to try is is reading some of our iTunes review here on acquired. So when you guys leave one that we think is particularly worth reading on the air or funny or I don't know extra complimentary or something, we're going to read them kind of like the Bill Simmons mailbag, but for iTunes reviews. So here's one. They aren't scalpers that want to create fake problems or to short a stock. Well, thanks, Spencer Camp. We appreciate it. And here's another. It's as if you are reliving the story with them as an insider from Peach 1987. That's a thank you. We appreciate that. Ben has been a real trooper here. He was post surgery and now he's back great show. MG MG MG 3141. Well, to to ever know as me personally and knows that I had I had knee surgery last year. Thank you. MG MG really appreciate that. Ben has indeed been a trooper. Yeah, thank you, David. That's all good. You're welcome. You know, excited to. Yeah, excited to talk snap. So if you like the show and want us to read your comment on the air, leave a review on iTunes. And we've also got a slack. I just looked. We are 475 strong of people hanging out talking M&A, IPOs, tech and general. And there's been so much great discussion on the snap IPO. Oh my god. Shout out to everyone in slack. Yep. Yep. And honestly, there's a lot of good content on this show that came from the discussion yesterday. So join us. It's fun. So without any further ado, snapchat. Yeah. David, we're talking about this before the show. But we should really only spend a couple minutes, I think, on the history of the company. Yeah. Listeners, if you listen to episode 12, a lot of you, I think, have joined us since then. But we talked about this. What if acquisition where Facebook made a three-billion dollar. Yep. Made a three-billion dollar offer to buy snapchat back in. Shoot them. It was the end of 2013, right? Time runs so fast. Anyway, it was episode 12 for the, you know, as Ben mentioned, we're not going to cover the sort of all the story and drama around the founding of snap, of snap, which was then snapchat in the early years here. But go listen to that episode. I listened to it again yesterday to get prepped. And if I do say so myself, I actually think it held up really well, even though the show has evolved a lot since then. It's a good episode. We recommend it. Yeah. That was the episode. It's funny when you do these things that, when you do something new for an episode, it sort of races the bar and you can never go back down. And that was one of the episodes where David and I did much more research than we had previously done before in kind of SETA, a little bit of a new standard for ourselves. So, you know, I like that episode. I'm cursing it a little bit, but I also feel like it holds up. So that's sort of the, that's part one of the snapchat story. This is part two and we will, and I'll likely have a part three years. I think the only thing that we know for sure going forward is there will be more parts to this story. It is not over. Yes. So with that, we pick up our story for, for Snapchat. In last we left them, it was fall of 2014. And Evan and Bobby, the plucky co-founders, had fended off the previous year, $3 billion acquisition offer from Facebook. They'd launched Snapchat stories. They'd hit 50 million daily active users. They'd just settled the famous lawsuit with their Alsted co-founder, Reggie Brown, that we talked about a lot on the last episode. Interesting that that has been a total non-narrative in the IPO. I think I'd saw like one new story about him. Yeah, hey, it's settled. What's it going to talk about? So things are going pretty well for the Snapchat, Snapchat founders and the company. Fast forward through the next two years. It kind of would have been easy for them to say, yeah, we're going to ride this gravy chain, but they have been pretty hard at work since then. They are not resting on their laurels. So since fall of 2014, in rough order, here's kind of what's happened with Snapchat. They've launched Discover, which then became publisher stories. They launched lenses. They launched geo filters. They launched a whole ton of new chat features, which are actually pretty cool. And I probably use that more than anything else on Snapchat these days. They launched memories being able to save snaps. They acquired Bitmoji. They integrated that into Snap. And they launched Spectacles, which we've talked about in hot takes in the past. On top of it all, they're now a hardware company. Yeah, on top of it all, they're a hardware company now. On the business side, they've also been hard at work. Revenue has grown almost 10X over the past year. But they also, this past October, October 2016, they launched their ad API, which was a huge milestone that advertisers can now buy ads through partners and through agencies and buy at scale without ever talking to Snap. So huge achievement for them. So you could sort of say that the freight train has been rolling down there in Venice Beach in Southern California. Yeah. And that revenue stats interesting because in late 2014, that's when they made their first dollar of revenue. So it's really only been just over two years. And now they're doing $400 million a year in revenue. And obviously all these multiples that we're going to talk about are just absolutely bananas for any sort of comparable stock public market stories that you would tell about it. But in two years to go from not monetizing your user to users at all to doing about $400 million in revenue is quite the acceleration. Yeah, very impressive. But along the way, there is one thing that happens to foreshadow later in the episode here that we're going to talk much more about later. In the last six months, their user growth has slowed. And some say many say that that's a result of something else that happened in August 2016. And that's Instagram launched Instagram stories. So much more to come on that for on later in the show. But an important, very important moment in the last last year of Snapchat's life. But undonted, they proceeded with their much rumored IPO filing. Almost exactly a month ago, February 2nd, they publicly file their S1. And it's pretty clear when you read this document kind of right off the back that this is not your ordinary dry SEC S1 filing. You know, others have talked about this, including Ben Thompson. But if you haven't gone and read it, like we seriously recommend it. This is an incredible document. Whatever happens with Snapchat in the future, you know, go read at least the the our business section, which starts on page 93. And we'll link to this in the show notes. And we're just going to spend a lot of time talking about this document. It's incredibly compelling, concise, clear writing. And the personality of the company just bleeds through. I mean, I would say I think this is almost I think this might be a watershed moment in thinking about something we've talked a lot about on this show. But like what is the the tool of going public? Like you get to write this document and you get to speak directly to this huge audience base that especially for a company like Snapchat, you know, is not currently your core user base. And it's a tool that clearly the company thought about it and this way and is using it as such. Yeah. And so one like one for listeners who haven't read the S1 because why would you go read S1's? But David and I did. And there's there's a point where they talk about how part of Snapchat's culture and ethos is that they're kind. And this is a quote. When we say kind, we mean the kind of kindness. Sorry. When we say kind, we mean the type of kindness that compels you to let someone know that they have something stuck in their teeth. Even though it's a little awkward. Like could you imagine reading that in an S1? Like, you know, and even Ben, you know, you said, why would you know, why would you go read an S1? Like I really think this is this is a document worth reading. Yeah. For many reasons. Also the road show video. It's like an incredibly well-produced way that that snap really told their story. And I'm not I'm not totally sure if it's still available because I think they pull those things down after the after the IPO. But there's there's lots of little clips of it floating around and it's it's not just your standard, you know, person standing in a conference room next to a PowerPoint narrating it for a bunch of investment bankers. It's really like a consumer grade compelling story. It's almost like something that came out of Hollywood because it did. So we'll we'll get to the actual IPO pricing two days ago in a minute. But sticking on the S1, you know, the most surprising thing I think is is just the nature of this document. But but there are two other surprises in the document that I think a lot of the investor community wasn't necessarily expecting. And the first one is that there's a there's a unique voting structure for the common shares that are being offered in this IPO. And what's unique about it is you don't have a vote. So this has literally never happened before. Companies have gone public with dual class or even three classes of of share structures that allowed management and founders to retain, you know, effective voting control of the company. But and David, those examples are there's there's Facebook and Google didn't go public this way, but have modified to sort of I think they think they did both go public with those dual class shares. Okay. And it's something they learned from the New York Times. Yeah. So historically, a bunch of media companies have had this news corpus had it the New York Times. And a bunch of others it was for whatever reason it was invoked with publishers and media companies, you know, at some point in the 20th century. And tech companies have really sort of taken this tool and run with it. But this is like this is breaking your ground here. So, you know, the thing about those other IPOs Facebook, Google, even the media companies like usually there's a 10 to 1 voting structure where each share of the founders stock has or the CEO stock has 10 votes to every one of the public stock. And there's a market for those stocks. So if the founders and CEO sell the stock, then you know, you can buy that with with separate voting shares. And that's important because you know, not for individuals voting necessarily, but like activist hedge funds, activist hedge funds have made use of this to amass a voting block in a in a stock and then use that to agitate to try and get a representative elected to the board of directors. It's been a tool they've used. So snaps as and for other reasons too to like the Carl icon has done this with with Apple and I think with eBay to advocate for a buyback or a distribution more dividends or all sorts of things. And there's a view probably not unjustified that that's really an annoying thing that you want to avoid. But you know, this is an extreme case of no, you get no votes not now not ever. And what a what a baller move to say like, hey, you know, we're going to sell what is like 19% of this company, you know, and we think at this price point that even with no ability to have any influence, even if all of you get together on the future of this company, it's still going to be over subscribed. Yeah. And what's crazy is it's not even just, there are actually three classes of Snapchat shares. There's what they're selling to the public. You get no votes. There's shares that existing investors, VCs have in the company, they get one vote. And then there's shares that Evan, Evan and Bobby have and they get 10 votes. And if Evan and Bobby ever sell their shares, then they automatically convert to the other investor shares. So there is one vote, but but essentially it's set up such that, you know, if something were to happen to one of them and they've actually filed proxies with each other, then this is in the S1. If something happens to one of them, the other gets essentially full voting control and perpetuity of the company. Wow. Crazy. So that's one. And then the other surprise in there, and this actually, I'm really surprised that this has not gotten a lot of press. There's this thing, I don't know if you saw this bin. This little thing called the quote CEO award in the S1. Now this is what this is. I have never seen this before. So Evan, Evan speak all the CEO of Snapchat. Upon completion of the CEO of the IPO on Wednesday, he got essentially a bonus of an additional 3% of the company after the IPO. So he already had a 24% equity share in the company. And the company essentially gifted him as a bonus for completing the IPO another 3% even after the delusion of the IPO. And so at the $17 IPO price, which we'll talk about in a sec, that's worth $625 million that the company gave to Evan for successfully completing the IPO. Well, that's, I've never seen this before. That's a weird incentive. Like, I mean, to be interesting to see, like, when, I guess once you already committed to going public, it sort of makes sense to incentivize the CEO behind the company to complete it. I mean, why would his incentive not be aligned? I mean, he owns 24% of the company, which at the IPO was worth almost $4 billion. You know, but somehow I would, I'm sure it will never come out, but I would love to know how those negotiations went down. Well, it's him negotiating with the board or with the syndicated investors taking in public. Well, it must have been everybody. But it has not gotten a lot of press. And I'm quite surprised about it. And then I could imagine a situation if you have an external CEO come into a company and you can incentivize that person by, you know, a bonus if they successfully complete an IPO. But this is where Evan's literally a founder and along with Bobby, the largest shareholder in the company. Very, very interesting. Yeah. So despite that, on Wednesday March 1st, two days ago as we're recording this, Snapchat prices its IPO, they priced it at $17 a share, which is above the range that they'd indicated of $15 to $16, which is there's a whole theatrics to this. You always put a price of love, the range below what the sort of murmur on the street was for months before, right? People were thinking more in that, that $20 range. Yep. And not that much higher. Don't remember exactly what it was, but not that much higher than the share price that they sold equity in their last private round at. But regardless, that gives them a $24 billion market cap at pricing. And then yesterday on Thursday. Which yeah, right, that that is an up round from their previous financing, despite talks of that that $14 to $16 per share range would have been a down round. And that would have been, that would have been kind of crazy because they know that would have been bad. Yeah. Yeah. A whole bunch of, you know, recently issued stock options that are actually currently worth less than their stock price. So that if that had been the case, then there would have been a lot of finger crossing that the stock did pop and that by the time employees could sell it there, their lock that when the lockup time ended that it would actually be above the initial strike price of of their option grant. But none of that's an issue. It actually did price above their last round. It did price above and like we said, at a $24 billion market cap at pricing opens trading yesterday. And the market likes it. So 44% pop on the first day of trading closed the first day at $24.48 almost over 200 million shares were traded, which is a lot. And the value, the market cap, the valuation of the company at the end of the day, $34 billion. And then this morning, Friday morning, the market continues to like it. It's up another almost 20% trading in the kind of $29 range. So so far, a successful IPO, we have not had any Facebook like disasters. No. And they did take longer to start trading yesterday. But that was by no means because of a, you know, technical hiccup like like with Facebook. But, you know, because actually the despite the fact that the IPO price was $17 started trading immediately at $24. So, you know, the trade offs there when you look at who won and who lost, snap left a good amount of money on the table, about a billion dollars on the table by not initially setting it in that $23, $24 range. Snap syndicate investors that or bankers that took them public didn't get their cut of that billion dollars. But everyone that bought the IPO at 17 got to take advantage of that that short term bump. And realistically, we'll talk about this as we grade the IPO. But this all really accrues as value to snap because in getting this positive momentum, it's great for hiring. It's great for customers. It's great for the story around the company that they they went out and the amount of that's been huge. And that this, you know, by all indications thus far has been a quite successful IPO. It's going to be great for the company. But that said, you know, we're talking this is a lot of mechanics here. And one day in. And one day in. Even though we're we're lauding the S1, it is still pretty, a lot of it is pretty dry stuff. You know, what we want to spend the bulk of this episode talking about and the really interesting thing to think about is like, okay, you know, what what happens next? There's all this buzz out there right now. People have all sorts of different opinions about, you know, snap is doomed. Instagram is going to kill them or or Evan Speagles. The once in a generation, you know, product genius. Where does the truth lie? And so that's what Ben and I have been thinking about over this past week. And we thought we thought we're going to the best way to do this is we're going to introduce a new section to the show that we might use for IPOs going forward. And we're going to call this narratives. And our idea is that there are really two narratives that are being told throughout an IPO. There's the N IPO process. There's the narrative that the company wants to tell through their S1 through their road show. And and all of the the statements that they get to make, both written and and otherwise. And then there's the narrative that pops up around it in the media, in the investor community, in the tech community, everybody reacting to what's happening. And so we thought we distilled what we think are kind of the the three most important points of both the narrative that snap has been trying to tell over the past month. And the narrative that the media and the investor press has been telling. And we're going to talk about each of them and sort of judge how much we agree or disagree with them. We are. So so let's start with snap. You know, you read the the S1 you watch the road show video and what immediately pops out and this got tons of press. But I think it was just a brilliant way of positioning that the company took. You know, they say you read it and it says we are a camera company. They don't say we're a mobile company. They don't say we're an app company. They don't say we're a social network. Snap is a camera company. Yeah. I mean, the first thing they came to mind, I'm like reading a lot of the S1s in Italy. So the first thing that comes to mind is oh, I see they don't want to be comped against Twitter. That that makes sense. But the interesting thing is you start to read more and more and more. And this is my biggest takeaway from this whole thing based on the insane like let me just give a quick like snap at their $33 billion market cap is trading at about 80 times their sales. Facebook IPO to like 28 times their sales even Twitter was like 56. We're just in like off the charts territory for what their market cap is relative to the revenue that they're doing. And when you when you start to peel apart like why are they saying they're a camera company. The big thing that that stands out here is that they don't want investors to buy this IPO based on the product right now the the social graph right now. The the growth rates in the last six months like they don't want to be priced on any of that. They want you to believe that they've done these incredible innovative things transforming what we think of as a camera and what we use cameras for. And they want you to buy on the idea and hold on the idea that they're going to continue to do that and reinvent the camera for the future. And that they you know in typical Evan Spiegel snapchat fashion they're they're unique and they believe that they are indeed a different and new type of company they're going to do things their own way. And like who are you to to say what kind of company this is there a camera company and you don't even know what a modern camera company looks like. Well this is what you know when I say this is brilliant it's just it's such an unexpected and audacious statement to put out there that it captivates you and then when you read through the S1 and you watch the roadshow video it's very compelling how they present it you know the sort of you know famously at this point the first you know user manual for how to use snapchat is the S1 and they go through and just really exquisite detail about all the product thinking that has gone into how they've created snapchat. But what it does you know this is what I said when I when I introduce this what what it does by positioning it as a camera company is it completely draws attention away from what here to four and still is the narrative on the media investor and tech side of the aisle here about snapchat which is that they are a social network which is competing with the social network which is Facebook and Instagram and WhatsApp. Yeah. The other two things I want to say quickly about this idea and positioning of a snap as a camera company is one it makes lenses really interesting. So lenses you know obviously it evokes a camera but lenses are the one sort of piece product feature that snapchat has that Instagram doesn't yet and what's interesting is you know you read through the S1 and I was I was thinking like okay well like how how many people actually use lenses and apparently a third of snapchat users use lenses every day and that's what you know and you read through and all the technology investments and infrastructure investments that snap is making a lot of that is going into the technology powering lenses which starts to make you think about the next generation after mobile and augmented reality and then of course their spectacles you know is snap kind of setting up using the IPO and their S1 to set themselves up as being positioned for the next wave in tech and putting a stake in the ground that they believe that's going to be augmented reality. Oh man yeah it's super interesting to think about you know when they say you know snap is a camera company well like code act was a camera company and then like today like is Apple a camera company or you know Sony and Samsung make the actual the actual actual lenses that go in there so are they the number one camera quote unquote camera manufacturer in the world and you know I'd be a little bit more skeptical of snap saying they're a camera company and except that they have they actually do the full stack and making the hardware now of of spectacles and realistically those are probably OEM then by by the same folks that that make the actual lenses and actual sensors that are in smartphones but as you continue to extrapolate that so let's look at Apple as a camera company we we crossed over from um from like pure optics based cameras into hybrid optics and software based cameras like several years ago in the smartphone generation there's with such tiny little lenses and sensors and they're they're so close to each other there's not a lot of like actual physics that that would produce high quality images and we have to like do a lot of really tricky faking and and kind of like post production and software that the user is never exposed to and that's suddenly with with the iPhone 7 plus become extremely visible with with the fact that there's two lenses there's a they never expose the fact that you're switching from wide to telephoto there's just this like you know smooth slider into 2x and the thing that it's really doing there is like it's always in real time compositing a a mashup of of the two lenses and doing a lot of really advanced computation on the fly not just for portrait mode but always to be taking advantage of of both of those lenses and and I think that's that's actually a great analogy to what lenses in snapchat are doing right like yep that is augmented reality um and that requires a lot of processing power and and augmented reality thus far in virtual reality have been these really clunky things that nobody wants to cost a lot of money that it's unclear what you do with them you know um yep but snapchat just makes that really easy uh it's just all behind the scenes and as we learn we'll talk about this in a minute it's costing them a lot in hosting fees and technology resources to be able to do that yeah totally so that to close on that what I think when they say they're a camera company uh the world has moved to a place now where a camera is not just a physical thing a camera is a full hardware software services stack and that starts when you think about what a quote unquote camera is that way and the the fact that maybe it's a hardware software services network stack that starts to let a lot more credibility to oh I see snapchat is really the full stack of the modern camera yep so we go on to number two yeah let's do it so the the second uh uh main point in snaps narrative that they'd like you to believe is that they are a brand advertising business which is fundamentally different than the gigantic elephant in the room major uh major ad networks on the internet right now of facebook and google and what they're really saying there is we are attacking tv not print media and for anyone who's um who hasn't played around with the the snap ad platform versus facebook or google's ad platforms um on facebook and google you can do pretty incredible targeting and you get to really finally uh get extremely granular on what type of demographics you're you're reaching and you also you know like when you're when you're using google remarketing and things like that like you can you can track people around the web and you can do all sorts of things snapchat is this super like at least right now privacy first we're not going to give you incredible targeting you you buy big broad swaths like you would a television commercial and and you just reach a bunch of people so they're fundamentally you know driving for scale there the way that you need scale for for brand advertising businesses and the other thing is that you can't really uh uh like click through a snapchat um there's there's no way with those snapchat ads to you know land on someone's site and have them optimize conversion rates and all these things in the same way that google and and facebook with their app install platform like are like that's what they are totally it's it's like conversion machines yeah yeah it's more like here's a new Chevy think about Chevy a lot yeah well and there's just like there are a couple really really important points here um you know one snap is making the argument here um that as Ben said you know they are going after tv after television um they are not going after you know it in a lot of ways um the internet advertising to this point has been a reinvention of kind of the classified ad you know um the the director response um tv has persisted but tv is is is not measurable uh in anywhere near the same degree that traditional online advertising is um and and it's smaller like the the number of people in the u.s. who watch tv um it is large but relative to the number of people who use google who use facebook you know etc like it's much smaller but what tv has that facebook that google don't is engagement and the whole snaps whole narrative around this is we have engagement yes we're smaller than facebook yes we're smaller than instagram yes we're even smaller than twitter um but they make they make go to great lengths in the s1 talking about you know the average snapchat user opens the app 18 times a day this is on average for 20 to 25 minutes 25 to 30 minutes in snapchat every day and and they argue that that is the same level of engagement that uh television has historically seen yeah and we should call out that uh despite the fact that there's way more time spent in front of a a screen be it desktop or a phone screen interacting with apps in the web then uh then there is on tv that sort of happened a while ago where people are spending more time on the internet than they are in front of a tv but until 2017 this is the first year that this is actually going to happen the ad spend has totally lagged it so the the ad spend on television has has outpaced digital ad spend and finally we're gonna um have this catch up where the the dollars are five to ten years behind the switch in uh in engagement so snap is is i think they even say this in their roach of video and possibly there s one that they they really have a tailwind here of you know the the the dollar spend from from advertisers is that they're looking for a place in a a digital format because that's where all the ad buying is shifting because that's where all the attention and engagement is and they're looking to buy the sorts of you know incredibly broad coca-cola style blanket the entire world with advertising um for for their brand and they're they're looking to they're looking for a place to deploy those dollars in you know the produce the effect that they were used to spending and brand advertising is just it it i actually don't know the numbers but it's it's significantly larger than this direct response advertising that's dominated the web to date. Yep and um and so then uh let's jump to the to the third uh the third piece critical piece we we see in in snaps narrative um which is really the um you know taking one you know we are this revolutionary camera company we're not what you think we are we're a new vision um and we're going after this market that is very different from what other internet companies have gone after before um the reason we're we're able to do this is that our our founder co-founder and CEO Evan Spiegel is a once in a generation product genius and this has been a a narrative around snap for a long time um actually you know again to to plug our our previous episode you know shameless self promotion here um uh the previous snap showed a chat episode we actually dive into Evan's history um and he's not just some random kid who dropped out of college to found you know another app company um it was pretty clear from his early days at Stanford that he was he had some very special talent he talked his way into the D school which is normally reserved only for graduate students and is probably the most famous design school in the world David Kelly who founded the D school and was the founder of IDO um the consulting firm ended up becoming Evan's um you know direct advisor um and Scott Cook that that chairman and and of Intuit and famous um you know Silicon Valley luminary uh he um he met Evan while he was at Stanford he hired him immediately to help work on a product that he thought was super important it into it you know he does have a lot of talent yeah and and that is on display in the s1 i mean you read the product section and um like Ben was saying I mean it's some of the most clear thinking um really compelling understanding of users and problems and why snap product um why their products are built the way they are totally and it's we should also call out they talk about uh they don't really in the in the s1 talk about Evan's beagle as the product genius that's sort of like the uh the hint hint nudge nudge and like the way that the media has sort of spun this but they talk about you know snap is an innovation company and that we as a company have done these things and they they definitely don't refer to him as like a a once in a lifetime product genius but the implication is clearly what they want to imply yeah yeah and uh you know that they have an Apple-esque secrecy about them but it is uh uh it would be really interesting and we'll probably hear this in the ensuing decade from folks that have left snapchat to kind of talk about you know what is the product development process there and uh and and how does it um you know how does it sort of all come from the top or are there a lot of trusted lieutenants and I do know from um just kind of talking to a couple of folks there that they do the kind of old school Microsoft style thing of having internal teams that compete so it's in actually the same way Apple sort of just did too with you know two different teams working on the iPhone at the same time where you know that a vision is laid out and and there are two people working in secret that don't know what the other person is working on kind of leading very small teams that are seeing who can who can uh better fulfill that vision and often you don't necessarily know that that there's another person working the same thing that you're working on but there's definitely this notion of you know what we're doing it requires a lot of creativity and a lot of invention and a lot of newness and that comes from multiple people exploring different incarnations of the same vision. Yep so that snaps narrative here you know one work camera company we're not a social network two we're a brand advertising business we're attacking tv or not attacking facebook and google three we as a company and our founder you know co-founder Evan and and actually you know if you watch the the roach of video Bobby Bobby Murphy the CTO and co-founders is super elevated in that as well yeah so it's wrong to say just Evan but Evan and Bobby are are you know this team is once in a generation you know we are the next you know Apple and Steve jobs here that's the snap narrative so let's talk about the investor narrative the media and the investor narrative and actually taking taking a quick pause I didn't even you know we were laying out the structure this episode and I'm formulating my thoughts I didn't really realize that the picture they're they're painting by taking these little you know it were product innovators and we respect your privacy and work a camera company and we're not a software like all these things are like we're the next apple like compost against apple don't compost against twitter yep exactly there's just one problem with that and that's that snapchat is a advertising based business not a consumer products business yeah at least today right which is the perfect lead in into what the slightly more skeptical investor narrative is and point number one here which anybody who's been been following you know the story is will be unsurprising is hey snapchat has a growth problem a user growth problem and that problems name is Instagram yeah yeah and there's a pretty interesting graph of their their user growth that looks a lot like an s curve like kind of slower in in the beginning of 2014 speeds up you get a nice steep slope till about what q2 of 2016 and then you have like three three quarters in a row of kind of like leveling off and that really aligns kind of coincidentally with the the the lots of Instagram stories yeah exactly and that's what Kevin's room you know it says like hey snapchat invented this format and we we are taking this format and we are bringing it to our network because we the Facebook universe is the dominant social network and yes snapchat will tell you their camera company but like you know you share you share your pictures with your friends and we are the friends company yeah and it's interesting to give a little bit more context to so snapchat has what like 160 million active users something so SNESO snap has 158 million daily active users and you know when you when you look at that it it totally pales in comparison to to Instagram and and Facebook proper but the important delineation there is that it's basically domestic versus international like there are the snapchat got real good saturation in the US they have very very little adoption in in other countries and and not only do they not have a great adoption but they're not monetizing well elsewhere anywhere and one here's here's where yes very true but this is where the rubber really hits the the road you know in since Instagram launched Instagram stories to compete much more directly with snapchat product wise in august 2016 from the quarter before then until now Instagram has added a hundred million daily active users they went from 300 million to 400 million in seven months wow which is an acceleration of their growth a huge acceleration in that same time snapchat is flatlined they added 15 million DAU in the same in the same period which is lower growth than they much lower growth than they had earlier than that so like this is a this is not a good narrative for snap yeah and so then the question is if you start to think about sort of what each of these companies has going for them Facebook and Instagram have a structural advantage where they can buy their time and wait and know that they have great teams that that can implement these features in an appropriate way for those platforms and then get those insane hundred million DAU spikes like that by figuring out the right way to incorporate that mechanic into their product what snapchat has going for them is they fundamentally believe that or I guess to invest in snapchat right now and we can revisit this later in the conclusion you have to believe that snapchat can do things that are more innovative and more interesting in a product sense for new users then Facebook will be able to leverage their structural advantage in the industry and copy and so what that sort of comes down to is can because I don't think there's necessarily like a time window advantage let's say Facebook copies everything three months or six months after after snapchat I don't think that snapchat's going to have this advantage of like they're going to get out ahead and they're going to they're going to you know get enough users in that short window I don't think that's going to happen I think the thing that you have to believe is that snapchat can figure out a thing to do that gets a whole bunch of new daily active users that Facebook is not in the position to copy that having that existing network and that those existing products doesn't give them the leverage to to you know keep building these roadblocks for snapchat well in this for me is really you know in our in our episode that actually is going to come out after this but that we recorded recorded earlier this week with with across a for episode with the internet history podcast coming out next week thank you Brian that was blast but I talked about how when the uberdidi episode we did with Bradstone this episode and and that that one that's coming out next week really has made me think about competition and modes and man does Facebook and then the Facebook universe the Facebook app universe including Instagram they have this enormous mode as long if you think about this as a competition between social networks Facebook is the social network they have it it exists and then you look at who where is snapchat core user base it's in teens preteens and then teens who were building their social graph online for the first time and they could build that on snap but Facebook has literally the entire existing world so snap can go after the young folks and that's you know they have certainly made inroads and Facebook is definitely paying attention but Facebook and Instagram have everybody that they can bring they can bring a gun to a knife fight yeah and then that the I continue to think like it will will snapchat be able to come up with something where that's actually not an advantage where like exactly there's the imagine like there's a battle in a canyon and there's the you know incumbent that's got a hundred thousand soldiers that are all blocking the middle of the canyon is there something where like you know snapchat can get up on the side of the canyon and and tip to along and and even like waltz past all them and they can't do anything about it because they can't get up the canyon like is there another dimension here other than tons of users that are already using that app on their phone that is just going to completely blindside Facebook you know is it is it is it is hardware that they're not on is it it's hard to imagine what these things could be but the the the the dollars into snapchat I think have to be a bet that they will figure that out yep and and I think this is this gets at the heart of what snapchat is trying to say which is work hammer company and to be a bowl on snapchat right now you have to believe that they are they are going to basically pivot the market into a dimension that Facebook can't compete with them on and and and they are doing that like you know they have lenses um Facebook and Instagram can't match them on that the technology is fundamentally better and different um with snapchat um but but when you start thinking where does that play out does that does that lead us into augmented reality well of course Facebook has Oculus um and and but I would also say you know they have stumbled a bit um so it is a much more even playing field there but I think that's the bet you have to make if you're going to bet on snapchat right now that they're going to outrun Facebook into this new paradigm yeah and perhaps you know one of the things or actually the criteria that we evaluate if an IPO was successful or not which we actually we won't be able to fully do on this episode since it's so recent but what did that capital infusion in in this case the 3.4 uh 3.4 billion dollars that they raised from selling those shares what does that capital infusion allow the company to do that they wouldn't have been able to do otherwise like did they did they effectively use IPOing as a vehicle to raise capital to code do something new as a as a company and um maybe it's it's to to do new hardware stuff like maybe it's to fear what that next front well they've already shown you know they think of themselves as a hardware company right right right I think actually now they're selling it's it's not just the um many machines with uh with spectacles I think they sort of quietly stood that up online and you can order them and ship now I think that's all right um so that's uh yeah we we've we've rattle on that but they're really quickly to cover um and then wrap up on narratives um there two other aspects to to the you know the sort of press narrative about snapchat right now um one is that snap has an infrastructure problem um and you know they've uh it came out as part of the IPO that they've agreed to pay Google they primarily run on Google Google Cloud engine two billion dollars over the next five years they're also paying Amazon and AWS another billion dollars um to supplement that with AWS um and as a result of all this spending relative to the still you know large and impressive but um minor revenue they have compared to Instagram and Facebook um snapchat's actually gross margin negative uh or was until very recently so their infrastructure costs were higher than um then the revenue they were making from advertising that's before even paying any of their payroll costs or their hardware costs yeah and in fact this the losses are so huge this may actually be the first company to file for an IPO that has a cost of revenue alone higher than revenue in the trailing 12 months before IPO I mean they're they're constantly we've joked on the on the you know uber dd episode about ride sharing going gross margin negative like well snapchat is gross margin negative as well or was until very recently and it's almost entirely due to uh to infrastructure costs I think a second um a second cost there is rev share to uh to publisher partners but um I mean the cost of revenue in 2016 was 452 million dollars so a large amount of that I mean if if you figure out how much they're paying to to google your over a year a lot of that is is for the google cloud infrastructure and I think the way that snap wants you to view this is we are paying a lot of money to stay nimble right now like you the that um people that are pushing back on snap would say number one why don't you have your own infrastructure to buy now why don't you invest in your own data centers number two how the heck are you using so much compute in google status centers like why why is it so expensive on a on a compute per user basis and I think it's it's just you know the the nature of all this really advanced augmented reality stuff that they're doing completely on the fly I think it's lenses yep well I think it's a combination of lenses and the fact that they are um delivering and storing just an enormous amount of of it's not photos it's video on snap um I mean the bandwidth costs are enormous yeah and the the the the thing you have to wonder is and also the thing you would have to believe as an investor to want to want to do this is does paying a ton for google to handle their infrastructure and keep that completely outsourced allow them to try things faster which is the true kind of inherent value the company is that they can experiment get things right and roll out really good products quickly like do do you believe that and do you believe that it's worth all these computationally expensive things that that they're doing on a per user basis because the the cloud costs it's not like those are fixed and that like it'll be amortized by all these users coming on like that skills linearly with users yeah yeah so number one I think you have to say is is it worth it to to be paying that on a per user basis number two uh should they be paying that premium to to keep it outside the company so they can move yep and then so that's the that's the second part of the press narrative and then the third part is um you know actually I think and when you look at how the IPO performed uh when you know with priced above the range and then traded up and you know had the 44% pop yesterday and is trading up again on day two I think the third part of the um world at large narrative is that yes despite those problems um Snapchat and Evan and Bobby really are fundamental product geniuses um and they deserve the credit that they are lablishing on themselves in the IPO um but uh but I think the market has shown over the last two days that they're willing to give Snapchat a pass um for now huh but they'd better deliver soon uh yeah sure the I mean the the frenzy in the excitement that I'm I'm I'm attributing all of the uh oversubscribed nature of the IPO the pop and trading the pop the next day like we just haven't had a a big IPO in texas Twitter like I think this is really yep um you know the this is a great stat 15 the 15 US based tech companies that went public in 2016 raised a total of 1.44 billion dollars and snap raised 3.4 like it was it was the first social media yeah the first social media I was in 2013 in Twitter it's the first tech IPO of 2017 there's incredible pent up demand so I'm gonna I'm gonna evaluate the you know massive volume of uh of people buying shares at at pent up demand but I think but I think the rationale that you have to believe to buy those shares is that this is a special company and if you just look at the numbers and you compare it to and if you think it's a social network and you compare it to Facebook and Instagram um it's not a special company it's actually a pretty bad one but and here's the craziest thing too like they're they're gross market margin negative uh we're making bets on the people theoretically coming up with future products that haven't been invented yet and we're buying on a story and that to me doesn't sound like an initial public offering it sounds like a seed deck like it sounds like if I'm an adventure firm those are the things that I look for like team uh like product sensibilities like these are the things that I would write a you know one or two million dollar check for for somebody that hasn't built anything yet not this sort of ways in which I would be evaluating a public security that's such a good point and I think man thinking about this this way I think nothing better encapsulates the time in which we're living in tech where an IPO prospectus and process looks like a seed deck and a seed process I don't know if that's a good thing or a bad thing yeah actually the reality in which we live today I'm getting all worked up over here and I don't I actually I agree with you like it even though it is like this company was gross margin negative I want to highlight this this company was gross margin negative that means they were selling dollars for 50 cents or 90 cents or whatever until like a couple months ago and they are now a you know 35 billion plus market cap public company yeah and it's it's not just like Twitter where they weren't profitable because of their massive operations and then actually Twitter never became like going public without being net income positive is is a common thing yeah but going public while being gross margin negative is a very uncommon thing yeah yeah David I if you have any dollars to sell me I got I got 50 cents for yeah and then go go run a business off that revenue I am a VC anyway so at the point of all this we've we've spent a long time on this section and listeners let us know what you think of it but I think what's just so fascinating about this event and this company is you can paint it as Snapchat has very effectively as this is the future and this is the most compelling most interesting you know company to hit the public markets since Facebook and that we are writing a very different wave than Facebook or you can paint it as like this is the beginning of the end here and and and both the moment that we're at right now is just so interesting because there are great arguments on both sides yeah and I think it the best way to summarize it is this is the public market sitting down with Evan Spiegel at a table looking him in the eye and saying and Evan saying to public investors do you trust me exactly and you know going back to the start of the show you know Evan getting this bonus this huge bonus you know almost more than 600 million dollars in in stock grants for a successful IPO you know it's really coming down to to that yep yep yep all right so we move on quickly to the the rest of the show do what would have happened otherwise yeah yeah so I mean the thing I'm sitting here wondering is do they have to go out now could they have continued to fund their operations by what they had in the bank raising more private money is it advantageous for them to go out now we'd love to hear your thoughts on that they had no choice I mean they were burning money I think where did I put the I had the numbers in my notes don't have a mob hand but I think snap had even after the huge amount of money they just raised in the private markets like less than a year ago they had just about a billion dollars in cash on hand and they burned free cash flow of almost I believe 700 million dollars last year and that's I'm sure going to be even larger this year so like they were going to be out of cash if they didn't get this capital infusion one but two also I think like we've talked about like this was their opportunity and this was the time for them to tell their story yep yep I guess it the name of the section is what would have happened otherwise so that we have to sort of explore other options could they have been acquired and who would have acquired them at this point there 10 times more valuable than the last time Facebook tried to acquire them but I mean for what they dumped on WhatsApp would they have let's let's say it was even let's say it's the standard public market 40% premium like they they I think what was the they went out at 24 billion dollar market cap so you know would what like 33 34 35 would Facebook have paid that much for them and would they have accepted it I don't know I mean we ended our our last Snapchat episode with you know I I was arguing that we were asking the question should Facebook have offered more to try and buy Snapchat back in 2013 and I argued no because because just this the vision and the culture of the culture of Snapchat and their vision of their product is just anathema to what Facebook is and and and we've seen that play out even more so now I mean Facebook you know they have Instagram they have Instagram stories that's doing great Instagram's growing faster than ever why would they pay 35 billion dollars for Snapchat right now yeah you're right yeah yeah they have a lot of you list yeah yeah let me throw out another hypothetical future for you and this could still happen so this is not somebody buying Snapchat but rather the reverse so we live in a world where Twitter or I'm sorry Google and Facebook are the the vast majority of of social network based advertising that's that's being bought and they're they're totally eating into all programmatic in display also they're the mega giants and Facebook gets these economies of scale for their advertisers by adding additional networks into the portal so they have channel these advertisers the advertisers are used to buying ads on Facebook they buy Instagram and then suddenly bam now I can also just upload a different image size and advertise on Instagram too so what if Snapchat's way of getting into that competition is starting to aggregate anyone that's left so you know right now Twitter is is valued at 11 billion dollars their market caps 11 billion and that's probably too high like if that was lower than somebody would probably actually pick them up but right now they're kind of priced too high for anybody to to feel good about that purchase if they continue to topple snapchat's got new money in the bank they've got this really you know really high market cap where they could do a stock deal like what if Snapchat bought Twitter and then enabled advertisers to have a single portal to buy you know buy advertisements on both platforms and then sort of win on a spree it feels completely antithetical to me to snapchats DNA and perhaps there actually is no economies of scale since those ad formats are so different but it sure paints an interesting picture of what could snapchat start to do with this cash they've just raised and this this concrete you know public market validated valuation yeah actually that's really interesting I think what an also another interesting question is what if it's not Twitter but what if it's Fox or what if it's you know what if it's a television media company that Snapchat would buy well they've got that relationship with Viacom I don't know if that's still exists but they were that Viacom was I think they might have dissolved that but Viacom was their channel channels sales for a while for all the the Snapchat ads yeah I mean in Snapchat is they are an LA based company you know the chairman of the board is I believe it's is it Michael Litten I think who was the Sony entertainment CEO you know that that is in in in as in many ways Hollywood and media and television is as core to snapchats DNA as Silicon Valley and tech is totally totally and though one other before we talk to move into tech themes this is probably this is right on the border of what would happen otherwise in tech themes is there a it was this the right way for snap to go out and did it get them the right investors so what I mean by that is you know snap to company that even more so than any of these other tech companies is going to potentially have a real tough time with these quarterly earnings and if they got themselves a bunch of retail investors that were short term and excited for the pop and got in because it was all this like excitement and demand and they didn't get these long term investors like that here's the here's the counter example Amazon was extremely clear in their S1 and and somehow built this incredible investor base who was willing to wait decades for them to start being profitable yeah it's that great line that Tom said on on our episode of you know that Jeff always says you get the investors you ask for yep yep and big question for me here is did snapchat ask for the right investors did they get the right investors and will they be able to stand up to the scrutiny of of quarterly earnings calls for those investors but here's here's where it comes back though to the beginning of the show you know the investors they got what do they not have they have no say in the company whatsoever that's right huh so it doesn't matter well I mean it matters in the sense that like their share price would like well yes of course they have a say in the share price but snap just to raise all this money that they can use to fund all the product development for the next you know at least a couple of years they have this room to run honestly they just raised their they basically raised they just use their seed ground for yeah for their for their next wave that they're tackling yeah interesting questions so we move on to tech themes yeah let's do it so we'll be quick here since we spent so much time on and I feel like covered a lot of this on the rest of the show but for me I mean the biggest one here thinking about all this was just you know what we've talked about so much on this show of waves and technology waves and thinking about how snap very clearly despite what they're saying in the rest one you know they started with the mobile wave and they were a social network on mobile but the future of snap if it will be the one that they want is going to be them writing a very different wave and I'm just reminded of two things one the Facebook story and our Facebook IPO episode and how you know Facebook was writing the web 2.0 wave and then realized in the IPO process that they needed to paddle over and conquer the mobile wave and I wonder it seems to me very clear that something similar is going on with snap right now yeah and are they paddling over into the AR wave is that we're well whether it's AR or you know I don't know how yet how we're going to characterize this wave but it is well it's you know I think snap says it really well it's the camera wave you know it is when a camera becomes about inserting technology into the world around you yeah yeah it's interesting most of my tech themes we've covered you know a lot of like winter take all network effects and the the ability to copy well chord cutting moving from TV to to mobile F morality how it's the anti Facebook you can really be yourself but the one that we haven't really touched yet is that the viral coefficient of snapchat is different than the more successful social experiences like Facebook and there to me the a big risk factor is that their key product pro is also potentially their key business con where on Facebook and LinkedIn and Twitter like it's a it's a follower grab I am directly incentivized to have a wider audience because the way that you use those platforms is to try to get as much engagement as you can on on those those platforms like it's it's this called social media because it's truly media it's you speaking to an audience and people engage with you but it's more media than communication and with snapchat being more communication in the way I use snapchat is there's like five to ten friends that I have a that I snap with at all and that happens in kind of a power law distributed way where like and maybe that's not exactly the right mathematical distribution but like there's one person that I snap with the most then a few other people that are kind of and then the rest of those that those ten are not that much and so the reason why I think their product has such high engagement but the like the issues that we're talking about our in growth are the fact that the product itself lends itself really well to engaging a bunch with a very small set of users which isn't great for growing into new markets so as we start to think about the network effect here like the fact that there's a ton of people in in North America using it and some people in other markets using it it doesn't necessarily mean that it's going to catch on in Belarus because there's nobody in Belarus that has somebody that wants to snap them somewhere else because it's all about these small pockets and yeah I want yeah it's and it's interesting you're seeing apps like like snow which I build is snow part of line I think it's the it's the Chinese Snapchat I think it's it's it's either Japanese or South Korean but but but anyway it is it's that it's the you know Asian Snapchat it's a really good point reminds me of you know the Uber versus Airbnb like Airbnb is a very clear global network effect because people travel Uber not so much yeah something similar happening here yeah totally that was a we we talked about that with with Brad's don't listeners on the the previous episode and Brad made this great point that Airbnb actually is a stronger global network effect than Uber does because with Airbnb you you know you're traveling to all these places you're bringing Airbnb to new places you're looking for Airbnb in new places and with Uber like other than the technology being hard there's not as much of a network effect mode because how hard is it really to download whatever the version of Uber isn't in another city and that's why we're seeing all these clones take get so much traction yeah and maybe I'll I'll pile on with one more real quick tech theme but yeah while we're talking that that episode with Brad too was just it was such a treat to have him on can't recommend it enough to to listeners but one of the concepts he talked about was that like there was this idea in ride sharing that raising capital was a moat and an advantage and it turned out not to be and looking at snapchat like it made me think about that as well like snap has raised so much money and now with the IPO even more money but they're still you know they were gross margin negative um you know that hasn't helped them build a great business thus far yep yep all right should we grade it cool all right let's grade this sucker cool so listeners we should again clarify that we are grading on the criteria of what will this move allow them to do like was the IPO a good move and and did the idea of doing this IPO number one was it well executed number two does it does it put them in a good position and so um I have to set aside a lot of my feelings of the company in general like if I feel like they're set up for success and they're not way ahead of their skis in terms of the well actually I guess they're related because the fact that they're they've got a market cap that is so ahead of of of revenue is is is totally tied into this but um I guess the point I'm making is if they were going to IPO and they needed to IPO they did it extremely well like I am an A on execution on this thing so far a day in and yeah and their ability to raise the capital that they you know fighter flight do or die needed to raise and do it at least so far really well and I think that that's an A with like a ridiculous amount of variance I thought about you David never talking about before the show like should we even grade it I mean I think that it's it's too early to tell but um an A on execution and A on the what it sets them up to do in the future staying nimble potentially making interesting acquisitions um I don't know actually how this will help them grow into new markets I think that's still the biggest scariest thing for me but uh in terms of how to go raise money and the way that that best set them up for success this is an A yeah well and I think um the the parallels to our Facebook IPO episode are just so great right now are so perfect and so apt um you know we graded the Facebook IPO and I think we I think we gave it two grades you know a grade for the actual IPO itself and then a grade for how that event you know influence the trajectory of the company over time um and the IPO was terrible but right what was what we learned from that story was that experience really made Facebook what it is today it kind of drove them to much further greatness um and I think I completely agree with you like this um this IPO was brilliantly executed by snap you know they told their story so well and position themselves uh perfectly um you know one need only look at how the performance has gone over the last two days granted it's still very early but versus Facebook's first two days um but the question and the real grade that matters um you know we're gonna have to come back for at least you know round three if not four and five down the road on this one yep yep yep I totally agree I almost feel silly for giving it an like a like there's just so much variance and so much we don't know but well but I think we we can definitely grade execution on the IPO and no question this was an A yeah um you know they took they were a huge headwinds here with you know Instagram stories launching and growth slowing and being gross margin negative um and they've spun this this great story about snap as a camera company snap as a brand advertising company snap as the most innovative and interesting product company of our generation um and and it's worked really well totally totally before we move on to carve out I have a couple little uh kind of fun fun points to note about this IPO um one is that there's a great Chris Soca tweet from yesterday where he points out that he's like you know congratulations to snapchat but guess who who's not celebrating and and making it big from this IPO and uh he goes me the guy that didn't answer this email and he has this email that he just has unanswered in his inbox from from Bobby in twenty thirteen twenty twelve twelve yes saying hey really enjoyed your talk would love to have you the office and chat and uh yeah it's just it's a reminder of what a crapshoot seed stage investing is totally um we'll put a we'll put a link to that in the uh in the show notes and then uh another one is is really interestingly so you get this sort of 24 hour window to go and talk publicly about all your financial stuff um after your your IPO before you start being um really held to uh to all the SEC regulations about what you're disclosing and when and normally you see all these these execs taking advantage of this going on all these different shows and talking to media outlets after on the day their IPO drumming up support for it and like speak and and uh all the other execs weren't anywhere to be found they uh they headed over to Goldman Sachs which was one of their IPO managers and it wasn't their lead left because that Morgan Morgan Stanley led the IPO and they hung out there for the day and they did one example uh one interview with the the LA Times to kind of promote um the the LA startup ecosystem and it's just like Snapchat going to be Snapchat you know they're they don't do things the way everyone else does things I think if if there's one lesson from you know the whole all of Snapchat story as far is exactly that yep yep yep cool should we move into Carvets let's do it all right so mine so listeners for acquired we have done three episodes this week we we did the episode with uh with Brad Stone we uh we've got this one and then shortly here after we'll have a super cool episode with uh um Brian McCullough from the internet history podcast as a crossover so I have I've not been doing as much uh much reading as I'd like to this week but I have uh I did listen to um Bentopson on the Bill Simmons podcast and I haven't listened to the Bill Simmons podcast in a while it's so freaking good like there's it's largely about sports so if you don't like sports most episodes won't apply to you but uh number one the episode with Ben is great he compares uh Bill Bill has these incredible sports analogies so he compares like Twitter to Twitter is like the Milwaukee box of tech companies and they have like this great analysis of that that's good and uh and and it's just so what's uh what's Snapchat uh I don't I don't know I don't think they got there see there the cabs of the warriors or maybe it's the team that will de-throw in one of them I don't really know yeah it's uh uh if Instagram and Snapchat you know who's the cabs and who's the warriors right right but that that episode's great the milk I'm milk and glad well was on a few episodes back that was really great and uh it's just such an enjoyable personality to listen to when I feel like uh honestly David and I as podcasters um are always looking for for who's producing really great content and how they're doing it and things we can add to this show so I know that I've definitely taken a page from uh from Bill's book yeah um mine uh I'll do real quick uh but it but it's apt I started listening to um Sunsu's The Art of War uh this week on audiobook and I finished it because it's incredibly short um which I'd forgotten I'd read it a long long time ago that's so appropriate for Snapchat so appropriate because as we talked about on the last episode after uh Zuck came down to came down to LA and I can't remember if it was when he offered to buy Snapchat or when he said he would hey we're gonna launch poke and we're gonna crush you um uh I think it was the first time when he said yeah we're gonna launch poke we're gonna crush you um Evan went out and he bought copies of The Art of War and he gave them to each one of his employees and uh um but it's such a good book and and uh um you know applicable as as many people many much ink has been spilled to business and so many other things in life but um but the the coolest thing about it and I think what um you know doesn't uh a lot of people don't appreciate about it is that um the the book is about not fighting and that the idea that the um the best victory that you can achieve is is a whole victory where you don't destroy the other side you capture the other side um and and that uh actually fighting and actually entering entering into battle is terrible because you're you know even if you win you're you're damaging what you want to capture um and you're sustaining you know damage yourself um and I think it's just so apt for when you think about how snap has played this whole you know in the past couple of years really but but this whole IPO process we're not gonna fight Facebook directly um you know we're not a social network we're a camera company like it's got Sunsie's fingerprints all over it love it it's perfect well uh indeed I think that's our show we uh listeners thank you so much for joining us um we uh we love iTunes reviews uh leave us a good one and we'll read it on the mailbag next time um it helps us grow the show it helps us uh bring on more sponsors potentially it helps us bring on better guests um it helps and more listeners find us and and set the flywheel and motion so we really appreciate that any uh any sharing you want to do uh um twitter or facebook obviously all those things help snapchat it's actually unclear if it helps since it's unmeasurable um uh join us in the slack uh go to acquired dot fm it's pretty easy to join uh a little sidebar on the right we uh we have great conversation there till next time we'll see you next time thanks everyone