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Episode 43: The Square IPO

Episode 43: The Square IPO

Wed, 16 Aug 2017 21:59

Unicorns and ratchets and lawsuits, oh my! Our heroes dive into the history of Jack Dorsey’s famous “other” company, Square. Was the Square IPO a canary in the coal mine signaling doom & gloom for the so-called unicorn companies of the early 2010’s, or a mispriced and misunderstood diamond in the rough? Acquired weighs in.

Topics Covered Include:

  • Square’s deep origins in the early 90’s in St. Louis, MO with the initial meeting of its co-founders, Jack Dorsey & Jim McKelvey
  • McKelvey’s side glass blowing business and the “inspiration” for Square that came much later in the late 2000’s
  • The complicated involvement of Washington University (in St. Louis) professor Robert Morley, who had worked for years developing payment card reading technology
  • The company’s early meeting with Scott Forstall at Apple, and its “significant” impact on the its name and design
  • The real disruptive innovation of Square and its business model (hint: not just building a mobile card reader)
  • Square’s massive payments deal with Starbucks in 2012 and its impact on the company
  • The evolution of Square’s business from a simple card reader to cloud-based Point of Sale (PoS) system and entire suite of merchant tools & business management services
  • The drama leading up to Square’s IPO (including at Jack Dorsey’s “other” company, Twitter), dynamics and narratives affecting its pricing, the effect of IPO “ratchets”, and the company’s performance over the ~2 years since

The Carve Out:

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I also don't think there's anything that we want to edit or cut. Oh, that was great. We're getting good at this. Welcome back to episode 43 of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. Today, we are covering the 2015 Square IPO to much, much demand from a lot of our listeners out there, from David from myself, living on our Google Doc for way too long. We now have enough distance from it that we feel comfortable. It retrospectively covering it as an acquired episode. Yeah, this one is going to be fun. I've been looking forward to this for a while. Yeah, we've never said that on a podcast in trouble before. Basically, this whole show is just like what Ben and I want to do, and what we want to learn about. We did our survey and we had a tremendous amount of feedback that said, it seems like you guys just going to do whatever you want to do. And we hope that you guys like that because that is indeed how this works. Well, you know, that's the best product advice out there is solve your own problem, right? That's right. Speaking of our survey, we promised you guys that someone would win a pair of AirPods, and while they are still shipping because of Apple's excellent, excellent six-week delay, which congratulations to Apple for creating a product that has that much demand. They're still in the mail, but we've got a winner. So shout out to Tom, who we will leave his last name anonymous, but Tom, we have reached out to you over email and congratulations, and thank you to everyone that took the survey. It means a bunch to us. Yeah, thank you. We got some great data. And not just data, but feedback from you guys that hopefully you'll start to see incorporated in the show. Yeah, we heard you loud and clear, we do not need to do hot takes. We get a lot of feedback about the hot takes. We're not doing it unless we really need to. We're not doing the hot takes. Like today. Yeah. We love reviews. So listeners, if you have a minute right now, you can pause this very podcast, pop open the Apple Podcast app, and you likely are already in it. If you are reflective of our analytics and go and write a quick review, we really appreciate it. It's how we grow the show. It's how we bring on more guests, and it's how we do even better content. So thank you for doing that. 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 founder. 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. It's 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. 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 Hero's, 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 a founder 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. Yeah, do anything else before we dive in? No, let's do it. So I start with the history and facts. As always. Well, today we start not where I think many listeners might think we would start when looking at Square and the Square IPO, which would be Jack Dorsey, of course, the man most associated with Square. But we actually start back in 1991 in St. Louis, Missouri, with another man named Jim McKelvie Jr. Who was a co-founder of Square. And Jim had been born in 1965. He was raised in St. Louis, and his dad was actually Dean of Engineering at Washington University in St. Louis. And Jim Jr., his dad was Jim Sr., Jim Jr. went there for undergrad. He majored in computer science. And he also got really into glass blowing while he was in college. As an artist, he was a budding, a budding, a dail to Hulu, shout out to Northwest Artists here. The other University of Washington area after college. So this is the late 80s now. Jim worked for IBM for a couple years. And then he got the startup bug, and he went and he started his own company, which was called Mira Digital Publishing. Now, if you're wondering what all of this has to do with Square and Jack Dorsey just bear with me for a minute here. So Mira, this is again late 80s, early 90s. Initially, they created a product that was a competitor to Acrobat, to Adobe Acrobat and PDFs. But unfortunately, Adobe existed, and so that didn't work out too well. But they went at it for a couple years, and then Jim started to realize, Adobe was going to win the market. The whole landscape in technology was changing as the internet was coming. And so he decided to pivot the company. And this was mid-90s now. This was 1995. So he wanted to pivot the company into going into publishing, actually, into conference publishing. But nobody else in the company really was on board with this idea, with this pivot, except for one person. And that was his 15-year-old intern, summer intern, who was in high school. And that person's name was Jack Dorsey. So Jack, that's a connection. That is, we are reaching way back here, get acquired. And Jack had also grown up in St. Louis, Missouri, many years after Jim. And it got in a summer job in high school working for Mira. But Jack was totally on board with the pivot. And so he was kind of the first person to get bought in. And that's how the relationship between the two official co-founders of Square started. All right, so they knew each other for years then before the founding of Square. Like, you know, all the way through Twitter, all the way through, even before that, obvious, take us through that. So, well, obviously many, many years go by. And a lot happens. M'Kelby, you know, he pivots the company. They get into conference publishing. But he also kind of rekindles his love of glass blowing. And he starts another company called Third Degree Glass Factory. And he starts blowing glass again. And he gets really well known for making glass faucets. So like faucets on your sink. They're really beautiful. You can go rolling to it in the show notes. And so, he still exists today. And he makes glass faucets. So this was many years later. This was kind of late 2000s, around 2008, 2009. They're beautiful works of art. And so we were selling them. But he couldn't get set up with all the, you know, financial institutions, his bank, and credit card companies to be able to accept credit cards. So we had to sell them by cash or check. And that was really kind of limiting the amount of $2,000 glass faucets that he could sell. Yeah, you got to imagine if just one of those sales falls through. I mean, that's a huge deal. You know, depending on your lifestyle, like if you're a glass blower and you're kind of a starving artist, and you know, you just have one of those fall through, changes your whole life. It totally does, right? And not to mention, I mean, you have to do the work. You have to blow the glass. You're doing all this by hand, putting all this effort into it by yourself before you even try and sell it. And then if you can't sell it to a lot of your potential customer base, because you can't accept credit cards, that's kind of a problem. You know, we live in a square world now. So we're used to seeing all the food trucks with square readers. But like, if you think about the type of business owner who was able to get approved for a merchant account these days, you had to be tremendously established. I mean, it was really unfriendly to entrepreneurs and not tech entrepreneurs, but like, you know, people who are starting these little businesses. And in fact, to get ready for this episode, I talked to someone that had a business that had, you know, around a hundred K of cash in the bank that was doing like a quarter million dollars in sales a year, but was new sort of a few years old, and couldn't get an merchant account with a bank. I mean, how insane is that? It's totally insane. I mean, thinking back on it now and how much square. Yeah, and other, you know, financial startups like Stripe and the online world have changed the way this all works. But even just a few years ago, you know, you needed to be super established doing tons of revenue before, you know, the financial system would, would kind of let you in. So Jim's got this problem. He thinks maybe technology can solve it. So he calls up, you know, a good buddy who just actually coincidentally got forced out of his current startup. And that was Jack who had been CEO of Twitter famously from 2006 to 2008. And then was forced out of the company. And so he's looking for a job. It's late 2008. And his old first boss, Jim calls him up. It says, I've got this problem. Yeah, I'm thinking back to like my first boss now. And imagining ever getting that phone call, like I was an umpire. So it'd be the guy that ran the summer umpire's group. But yeah, I can't really imagine. Well, you could have started BAM tech. That's right. More on that later. So I just told this whole story about the origins of Square. And it's a great story. And it's the official story. Now, is it the true story? Uh, that's a little more complicated. Yeah, David, why have I heard that there was like seven founders of Square? Yeah. So there was, there was a little more going on behind the scenes than that. And impossible to know exactly what. It is true that Jim was Jack's first boss. Um, and then he called him up in late 2008, uh, right after Jack was forced out of Twitter with an idea to start a new company. It turns out that probably most likely and Jack's actually talked about that. That idea wasn't Square. It was to start an electric car company and compete with Tesla. Um, well, that's very different. You know, it's almost like accepting payments, you know, uh, plugging into your audio jack on your phone almost. Yeah. But at some point along the way, a third person gets involved. Um, and that person's name is Robert Morley. Robert or professor Morley was a professor at Washington University in St. Louis. And, uh, and I believe it was that Jim and Jack initially approached him about potentially helping with this electric car idea. And Morley says, no, that's, that's terrible idea. Um, but I've got this thing in my research that I'm really focused on and have been working on for years, decades. Um, and that's around card reading technology, uh, payment card reading technology. And I've got this device that, um, you can plug into a mobile phone and it'll read credit cards that according to Morley's side of the story, uh, got Jim and Jack really interested in this idea. And it was also true that Jim, you know, was a glass blower and couldn't sell his faucets via credit card. So they get really excited, turn them on to the potential of using mobile phones to accept credit cards rather than the super expensive and really clunky and big point of sale systems that, you know, NCR would sell National Cash Register or other, you know, sort of big Fintech companies. And, and so one way or another, they start working on it. Morley, who was never kind of officially part of the company, um, he did in 2014 before they went public. He did sue the company for both patent infringement on the card readers and for forcing them out at the founding stage. And Square and the company and he settled in 2016 for $50 million. So more than $50 million, you know, everybody's happy and Square is a great company today. Man, so you have to imagine like, how does that all go down? If you're, if you're Morley, like, it's based on a lot of his research. Uh, he had all these conversations. It seemed like he was in presumably they would sign some documents when he parted ways. But, you know, are you just sitting there thinking like, well, you know, at some point I'll get a pay to add to this. So I'll just wait till the exact right time to sue. Yeah, I mean, it's, uh, I don't know. I haven't talked to Morley or Jim or Jack for this episode. So, uh, and I doubt they would tell us anyway. Yeah. Yeah. But note, I'll pull forward a tech theme here. Um, that, that this is not the first time we've heard this. I mean, there's so many scenarios where, you know, right around acquisition, right around an IPO, this lawsuit comes in. And it's around the founding of the company and it's, it's really messy. And you could take away a lesson that's like, hey, have your, your documents all buttoned up from, from your founding, uh, era, but I think the real take away is like, hey, like true, you know, be, have everyone be fair and equitable. Yeah. Yeah. And, you know, I mean, at the end of the day, everybody's probably pretty happy here. But I think this also highlights this whole thing, both the official story and the unofficial story. Um, highlights what I think Jack in particular is really, really great at. Like what his superpower is. And we'll talk about this more in the episode. But he gets the power of stories and the official, you know, square origin story is super powerful. Right? Like, um, you know, I'm trying to sell, I'm an artist. I'm, I'm making glass faucets and I can't sell them, but I have to make them upfront. And, uh, and I'm locked out of access to the modern financial industry. Yeah. Just resonates with so, so many people. And I think I'll pull for it another tech theme because we have so many good tech themes that, that I think it's worth doing these sort of like popcorn ones early. Um, reinvented founder stories. I think are probably more common than actual organic, you know, live as it happened. Founder stories. Like when you hear the, the picture perfect, too good to be true. Um, you know, entrepreneur post IPO describing this simple insight that they had when they were. You know, who knows if this one's actually true or not. So, uh, but, but I'll pick on it and say, I don't, I don't have any information, but with Zillow, right? You hear, you hear Rich talk about, uh, Rich Barton talk about how he and Lloyd were, we're both looking for houses after leaving Expedia and they couldn't believe that it wasn't online. Like, you gotta think that it's much more like, hey, we should start a business together. Here's a few sectors I'm interested in. Let's assess the viability of this. Um, I think it looks a lot more like a, uh, what Travis Kalanick would describe as a jam session between, um, very entrepreneurial minded people than it does this like, uh, you know, uh, idea popped me on the head one day. Indeed. It's a good story though. And it's a great story. And, and I think like, you know, like I was saying, it's, uh, you need a story to communicate. Like, it's not necessarily bad or wrong to create these founding mythologies because that's part of how you communicate, you know, to your own. You know, to your potential customer base, what the company does to the employee base, like you, you embody the culture and the values of a company in these stories. Yep. Yep. And there's so many great things that fall out of it. Like you're engineering, you know, what's it you're doing agile, like your user stories, like you have your first user story, right? Like you have your very first, uh, when you're describing your market, like it's, it's very easy for, you know, an investor or a partner or a customer to conjure up the, you know, Jim, the glass blower in their head. Yep. Yep. Well, speaking of stories, we've got a couple more before we're done with history and facts here. And they're pretty good. So, 2009, one way or another, the company's often running. Jack is the CEO. He's still the executive, he's the chairman, either chairman or executive chairman at Twitter, but he's basically like barred from the company. There's a whole book hatching Twitter all about this, which actually haven't read. So, you know, I don't really need to, but I think there's, you know, at one point they shut off his email account. So, he's all in on square at this point. And Jim is the co-founder and he's the head of hardware. And so, they get to work. They have a name. They have, you know, a really great name. They have an iconic design for the card reader that's going to plug into, into phones, iPhones and Android's. What's that name that they have? The name starts with an S and then a Q and then a U. It's Squirrel. And the card reader design also totally iconic and matches the name perfectly. It's an acorn. So, yeah, they go down this path. And fortunately for the world and for square. Before they launch, they go to Apple. They go to Cupertino and they meet with Scott Forrestal, who at the time is, you know, like the most important person besides Steve Jobs when it comes to the iPhone. And we've talked a lot about Scott on this show. And of course, Jack is, he's been forced out of Twitter, but he's a celebrity. So, it's, you know, they're in it. This isn't just some, you know, rinky-dink startup from St. Louis. No offense to St. Louis, but easy to get a meeting with Scott. And Scott points out to them that, hey, you know, they're having lunch at Apple at the cafe there. And Apple actually uses another company called Squirrel Systems that does their point-of-sale system at the cafe. And so, so Jack's like, well, that's not a good idea. So, they change the name to square. And then fortunately, they also change the design of the card reader to be a square. And it is worth noting at this point that square was not a point-of-sale company. So, it wasn't this obvious like you would have searched other point-of-sale systems to realize, oh, there's a squirrel systems. If you remember, at the beginning of square, I mean, it was more about accepting credit cards on the go and just this single-dongle that plugged into your iPhone. And even an iPad app, let alone this ubiquitous, you know, every coffee shop on the planet uses square or register as their point-of-sale system. And so, you could imagine like you think you're competing in this category of, we're just working with kind of the un, not the underbanked, but like the under-emergent accounted right now. We're providing this new, you know, mobile payment system. Mobile is new. It's only two years since the iPhone. You really don't think you're going to be competing really in that point-of-sale market on people that stand behind a counter. I remember when Square first came out being really excited and getting a reader myself. I mean, I wasn't a business. I didn't sell anything. I thought it was like, oh, this is great when I sell stuff on Craigslist. I can take payment on credit card. That's what I thought I would use it for. In fact, I even used it like what people use Venmo for today because I was so excited. My buddy Andy and I were taking a backpacking trip and we both bought the same backpack. And I put them both in my credit card and I was like, hey, pay me with square. And I like pulled out on the way home. I like pulled out my card reader and accepted his credit card. Knowing that I was going to take. Yeah, yeah. Yeah, like I got less money. I took the fees as the merchant. I paid the fees as the merchant. But it was like too cool not to do it. You wanted to take payment on a credit card on your phone. I never, you know, as a person, I'd never been able to do that. I know. It's pretty cool. That's the end of the fun stories of the history and facts for first square. But I think this is really the key innovation. I mean, part of it is the hardware thing and we talked about the lawsuit and morally. Part of the innovation was being the technology to accept payments on your phone. But the bigger part of it was enabling anyone to accept payments. Like we were talking about, there was this huge barrier to doing so and entering the industry and what square was able to do. And it also, I think, was technology innovation, but it was on the back end. They were able to let so many people like you and me, you know, been consumers into this world of accepting payments because they got really, really good at fraud prevention. And this was the part of the reason why the industry didn't let anyone in before was protectionism probably. But the stated reason was fraud. That if you let anybody accept payments, you're just opening the door to tons and tons of fraud happening. Yeah, I think you nailed it. And there's a couple of amazing data points here. So I think you're right that the thing that square did that is entirely differentiating is unlocked a completely new set of people who could do it. And it's a set of people who could accept transactions, right? They did it in an incredibly design focused way. So every POS system ever has sucked, right? It's just been awful. And they invented this category of sort of cloud point of sale, which is really the big market than there. And now it's not as much mobile, you know, mobile card reader as much as it is cloud, cloud point of sale system. And with like the micros of the world there that are sort of the, you know, tethered to a phone line point of sale system and really hard to integrate with. And so when you look at, you know, the market they were entering. So they did three things really well. They did the incredible amazing user experience as a merchant. They unlocked new new merchants that can never be merchants before. And they did the best job of reducing fraud with this new merchant class. And so when you look at, you know, this square device was revolutionary, but it wasn't the first. I mean, into it had something called go payment that was totally already catching on. It wasn't even like, oh, well, you can find prior art or something like that. Like it was, it was totally happening. But square had a phenomenally better experience. And I think they had a reader to that's right afterwards, but it launched pretty quickly afterwards. And the square folks called that the triangle because it was shaped like a triangle and was copying square in a lot of ways. And the interesting data point around this is both PayPal. And I think varifone was the other one that that basically weren't doing the underwriting the way that square does. And they were taking huge losses. And they were actually subsidizing payments when they realized, oh, crap, there's this entire new class of merchants emerging. They didn't have the the underwriting system and basically the machine learning system. And I mean, that wasn't the all the rage yet. But effectively machine learning system to constantly be learning and constantly be basically re underwriting that that merchant after every transaction. You know, whether new merchants and existing merchants were going to be fraudulent or not exactly exactly. And so varifone this is crazy. Varifone actually shut down their competing product because of fraud losses because they were taking kind of a 1% loss on on every transaction from every customer. And when they shut down, they very publicly accused square of subsidizing the small businesses. And as funny that like squares like actually a core competency of our business is we're really, really good at this. And the trick that they were using is a really interesting one. And obviously they have this incredibly sophisticated, you know, team that does this. But they basically would only take on a little risk at first. So you couldn't do these sort of, you know, a bunch of transactions and massive transactions at first. They would just say, hey, we're not going to put you through a bunch of hoops. We're just going to give you a little bit, you know, that basically a little bit of credit. We're going to we're going to let you, you know, start rack and rack and up your transactions till we trust you. And with every time that you completed a transaction. And it wasn't a charge back and it wasn't fraud and wasn't all these things. They basically gave you a little bit more rope. And so that way they could actually get you started quickly and trust you more over time, which was just nothing. It was completely innovative in this industry. Yep. And just to put a data point around that, you know, when square started, there were 30 million businesses in the US that had under $100,000 in revenue. And that's just businesses. People that had already, you know, incorporated a business, but only six million of those could accept credit cards. So 24 of the 36 million, you know, small businesses in the US under $100,000 in revenue could not accept credit cards. Like that's just unfathomable today. Man, if you were like visa master card American Express, you did just besides yourself at the market, this unlocks for you. Yeah, totally. So 2010, they launched, you know, as square, not as squirrel. And with the square reader, not the a corn reader. And they make the card reader free. So if you want to join square, you sign up online, you enter some information. It's it's pretty easy. You give them your address and then they send you a card reader in the mail for free versus like, you know, buying a $2,000, $5,000 point of sale system from, you know, Fairfone or NCR, whomever. It's a game changer. Yeah, like on top of technology innovation, just massive business model innovation. Totally. And then once you start accepting payments, it's a street two and three quarter percent charge on every credit card transaction, which is different from how it worked with large providers at the time. That would be a sliding scale. It would depend on what type of card people were using if you were using the. David, have you replied for a merchant account before? No. So I when I was working on a startup in college, I actually applied for a merchant account. And you get this thing that's like maybe 12 to 15 pages thick. And it has, I don't know, 50 to 100 lines on each page. And each one is a different scenario where you have a different fee structure for each card. So there's zero way that you could ever like put that in a spreadsheet and calculate it yourself and make sure they're charging you right or perhaps model out what your average fee is going to be, you know, for your business because it's literally like, oh, if someone types in their card number versus swiping it, it's different. If it's this card that is, you know, a visa signature instead of a visa or is underwritten by this bank or whatever every single one is different. Yeah, I mean, and if you're like, you know, your retailer or cafe or a fruit, like your margin is already super small to begin with. So now you're just like, they can't even calculate, you know, whether you're profitable on things that's just terrible. Can we just pause for a minute and say the credit industry is like the biggest fast one pulled of all time. Like can you imagine? So like, let's say we live in a world where like the credit card system was never established. And suddenly this guy's like, oh, I'm going to start a credit card and he comes to you as a retailer and he says, hey. People can pay with this thing instead of cash and they're going to want to use this can really easy. And I'm actually going to take like 3% of your entire business. So, yeah, but I'm not even going to tell you how much I'm going to take. Like I'm just going to run some voodoo and then you got to trust me. Right. Unbelievable. I mean, this is a little bit of like the better consumer experience always wins out. Like if somebody gets in the provides the way that people are going to pay for services at your business. That is the easiest thing and there's sort of a network effect going on like it's going to happen. There's another another tech theme pulled forward. Then it's going to happen. But like what just can you imagine how resistant retailers must have been when this first started of like suddenly you got three percent of decades. And you know, the other thing that this, you know, hypothetical shyster named credit card would pull on these businesses is not only am I going to take a, you know, undefined and uncalculable percentage of your sales. Rather than, you know, when you take cash, then you have the cash like it's there. It's in your cash register. Yeah, by the way, I may take this away from you. Yeah, I mean, I may take it away from you one via charge back, but two, even if I don't take it away from you, I'm not going to give it to you for like 30 to 45 days. Unreal. You know, so when you took credit cards before that money wouldn't show up in your bank account for at least 30 days. And if you're a small business trying to meet payroll, trying to, you know, pay off your suppliers like that's a problem. So the other big products feature that Square had was they deposit the funds into your bank account within one to two business days, which again was huge compared to the industry at the time. Yeah, that's pretty incredible. Yeah, you know, how they did all this and they launched pretty quickly after they were founded. I don't know. I mean, that would be a great story of building all this like this is not easy stuff. Okay, so at Pioneer's Grille Labs, we work on all these startups and we've started like 60 and we've sort of killed a lot of them along the way and we spun out six and you know, the every single one, whether it's a successful thing that actually launches or an early project you're working on. Like it is so hacked together and the consumer experience is so like almost to there at the start, you're just trying to prove that like your one insight is true. And I remember when I found out about Square, like the first press release, you go to the website and it's like one of the best designed websites I'd ever seen because it's like a huge tenant for for the company and a principle that Jack believes in. And in fact, like I was doing like web design at that time and web development and people would just keep pointing back to square like, oh, make it look like that. And every iteration for years was like the gold standard of beautiful design website. And when my square reader arrived, it was beautiful. The packaging was Apple caliber, like the messaging was all perfect. There was nothing about this company, at least as a customer that felt like scrappy or new or at experiment or it's like it was like birthed as a perfectly formed product. Yeah, it would be great. It would be super fun to have somebody if you're out there who was there in the early days of square to come on and do a follow up with us about like, how did you build all this stuff in like 12 months or less. Yeah, cool. In 2009 and 10, you know, no less when it was definitely not as easy as now to build all this stuff. Right. And it really speaks to Jack as a product visionary too. I mean, when people refer to him as jobs like, I mean, I think in the way that Steve Jobs and Johnny Ive and those folks could conceive of something and then release it perfectly into market the first time. Square Square has iterated quite a bit in a very apple way of small interactions over time and small iterations over time. But amazing how good it was at first. Yeah. So they launched in 2010 before they launched they had raised a series A from coastal adventures in 2009. But they launched and then basically they just grow like wildfire. I mean, we've talked about all the reasons why this was a complete game changer for, you know, small merchants and people they didn't even accept payments at all before launch in 2010. And there is a series B from Sequoia from roll off both who was some partner at Sequoia and had been the CFO of PayPal in 2011. Then a couple months later in 2011, there is a hundred million dollar series C from Kleiner. 2012, there is another two hundred million dollars from Chris Saka who and Rizvi Traverse Chris had used that vehicle to buy up a lot of secondary shares in Twitter. Famously, and then he used the same same vehicle to invest in square. And and then simultaneously well right after that, then they do this enormous deal with Starbucks in late 2012. And this was going to be this was such a huge announcement at the time. So so Starbucks invested as part of this round into square and committed to transferring to to moving all of their payments at all Starbucks own stores in the US onto square technology. And up into this time, you know, square was for the customer we've been talking about the sort of small merchants, but the idea that a, you know, fortune 500 retailer would move everything on the square was just pretty shocking at the time. Yeah, and you know, I actually didn't dig that much into this deal, but to me, it's it's shocking that square was anywhere close enough to feature complete to make this deal make sense. I mean, I think there's a lot of discussion will do about this deal of the financials of it, but the from a product perspective, I remember being shocked that like was Starbucks going to like contribute to I guess square probably had to do a ton of sort of custom development effort. And it probably forced them to enable a lot of the functionality in the in the square register that that they have today. Yeah, well, and we talked about this a little bit in the Starbucks episode with Dan. But I think a couple of things, you know, one square wasn't ready. This was a really bad deal. And you know, I joked earlier that the end of the fun stories in this episode for square, at least until the very end of this episode. But this was the beginning of the end of the fun. But, you know, I read a lot of, you know, things written by Jack and interviews with him, you know, looking back on this and preparing for the episode. And, you know, he does say. And he's probably right that what it forced, what this deal forced square to do was become enterprise class in terms of, you know, payments and fintech and security really quickly. I mean, they basically had no choice. Yeah, yeah, that's interesting. And it also, I mean, it really also, I guess gave them gave them those product features to move a lot more of their business to to this point of sale market instead of the mobile card payments. And I think the difference is subtle. And I mean, it's best simplified as going from iPhone to going to iPad. But they forked the code base. It became square and then a different app called register. If you look at the vast majority of their revenue today, they have on a per quarter basis, 482 million in transaction based revenue and everything else pales in comparison. It's like 59 million and subscription and service is based hardware revenue. They actually, they do 10 million, but 14 million of that is a loss. And the vast majority of that 482 million is really in that, really in the point of sale category that is not quite where they started. I mean, they've, they've used that that as a wedge to get into the merchants that otherwise wouldn't have been able to get an account. And now they're in this, they're in this rising tide of cloud point of sale. And, and you know, I was thinking about this before the episode, a lot of a lot of the growth ahead of them is really just this industry of cloud, that growing much more so than, then, you know, square being able to, to continue to bring on more people that wouldn't have been able to be merchants before or perhaps stealing share from other cloud, POS providers like like Clover or there's all these other new ones launching that it's really like they kind of pioneered this category. And then really solidified their position in the category by forcing themselves to do all this work much of it probably from the Starbucks deal. And now it's just like they get to sit on top all that industry accelerates. Yeah, well, I would agree, but I would argue for a slightly different framing of it, which is it's not just cloud POS and actually think the software and data products, you know, line item of other revenue they have is hugely important. What this really did is it took square from being just payments rails system for anybody to, you know, except credit card payments to a whole suite of a solution for a merchant of any size really, but a world class suite of tools for a merchant to run their business of which payments is probably the most important part that's accessible to anybody from the coffee shop down the street to Starbucks. And that's what I think this deal did. And so if you look at what you know the point of sale system itself and the square register, it's no longer just about taking payments. It's about managing your inventory, managing your skews, managing your employees, time, time punching in and out. And I think that's really good. And then since then square has added so many different features, you know, yeah, payroll for employees square capital to do lending against your revenue, you know, appointment booking basically everything you would need if you're a business to manage and run your business. And I think that all really happened or started because of this Starbucks deal. Yeah, I could see that I like that framing. It is it is worth noting and I think it's another business model innovation that they're bundling all this stuff in largely for free or for a very reasonable cost and the way that they monetize it all is is through the transaction. So so for square, it's not like what else can we sell through this channel? It's more like what can we add to this channel? What can we add to make the lives of small business owners easier so that number one they stick around longer and continue to use this product number two, their business does better so that we both do better. Yeah, well, it's a flywheel, you know, it's an acquired flywheel. They do charge, you know, it's like a WS right like they charge some amounts of fees for some of their services and some of the services are free like they bought caviar and so for restaurants, you know, caviar and food delivery is an option that they offer, you know, and then there's square capital, which is loans and they make money off of those businesses. But really the beauty is in helping the merchant grow their business, which grows transaction volume. So square makes more money and then they use more square services so they make more money from the ones that they charge for and the whole thing drives itself. Yep, yep, great point. And so this Starbucks thing, I mean, it leaves them with a massive hangover, right? Like this is something where this is actually this underscores the point. So I was looking at the investor site earlier and checking out the way they break out revenue and I mentioned subscription and services based revenue and hardware revenue. There's actually a fourth breakout, which is Starbucks transaction based revenue and it's obviously that now that the deal is over at zero, but it's still on all their year over your comparisons because it was broken out separately. It was something that was just extremely, you know, that there was the generated good revenue from it, but extremely costly to the business. Well, let's jump forward and accelerate through the end of history and facts here, where we'll cover all this. So last we left them 2012, they'd raised this huge round star, done the Starbucks deal. They were valued. I think it's three and a quarter billion dollars in that round. Remember, this is 2012, the company was founded in 2009, then in 2014, kind of rather than go public, they're toying with going public, they decided instead to raise a $150 million series E from the Singapore sovereign wealth fund and Goldman Sachs, we're going to come back to Goldman in a minute. And that's a that $6 billion valuation and that round becomes pretty important in a minute. So, you know, in the meantime, growth is great. They're growing payment volumes hugely, they're growing revenue hugely. And they're making money off of the transactions. They're making real margin dollars off of it. They're still paying down their fixed costs, but the business is working. And I think they were coming out of that that Starbucks thing and looking toward the IPO, they were close to break even if you look at that at them today, you know, they just took a $16 million net loss on last quarter. But if you look at the way that that's really come down, I mean, you're right, David, on a sort of a transaction rate. Yep. And so they are they've completely paid down their fixed costs and you know, they have a bright future ahead now. So all this is going on, this is throughout 2014, 2015 rolls around, not a good year for Square. Well, so the first thing that happens June 2015, Dick Costello resigns as the CEO of Twitter and Jack Steve Jobs moment comes back as interim CEO of Twitter, which is also a public company at this point squares not public yet, but they're preparing to go public on the back of all this momentum. But during the year, they realize this, this, the Starbucks deal is this a terrible deal and they are financially now it strategically was great for the company for all the reasons we said, but because of the pricing that they're giving Starbucks, they're just losing money on, on every transaction that is that they're handling for Starbucks. They did, they did renegotiate that at one point, right? They did renegotiate, but the outcome of the renegotiation is is basically that they're just going to Starbucks is going to pull out and because part of the renegotiation was that square no longer had to be the exclusive provider for Starbucks for payments and Starbucks could get better pricing elsewhere. So they, they over time basically just start pulling out of the deal. So that's throughout 2015, then October of 2015 square is all working to go public throughout the throughout the year is dealing with all these these things and they eventually do go public in November, October 5, 2015 Twitter announces that Jack is an interim CEO, he's permanent CEO of Twitter and also permanent CEO of square. So he's he's truly like Steve Jobs with you know Apple and Pixar at this point. Was he CEO of Pixar while being CEO of Apple? I think he was. Yeah. Wow. Well, parallels in more ways than one, but this yeah, I totally remember this moment of like, okay, so can you can you do that? Like is that? Yeah. What is that possible and everybody knew square was that it hadn't been publicly announced yet, but everybody knew they had privately filed a deal. To go public and we're going to do our narrative section that we now do on IPOs in a minute. But let's just say the narrative was not good in the press. So November rolls around square had announced their public filing. They done their road show all while Jack is also now the new CEO of Twitter and they go public at on November 19th, 2015 at $9 a share. Which equates to a $2.9 billion valuation. Now remember the last round they did was at a $6 billion valuation. So it is as then got widely reported in the press. It is ratchet time. And that and that $9 per share was below the published range of what they were shooting for $11 to $13 per share. So they priced under the range. They said they were aiming to do the IPO at $11 to $13 a share. They ended up pricing even under that. Basically the whole tech world thought, you know, this is like the first unicorn to die. Oh, yeah. So this, I mean, this is a moment where everyone thought the music had stopped. Like the doors were closed on the tech IPO market. People were worried about a global financial crisis or at least a recession. And square was trying to tell this other story of like, no, it's great. Like we're doing better than ever. And we've got sound fundamentals, which is totally true. But like this, the story that they were telling the world. I mean, everyone's thinking, like, are you crazy? Like nobody's IPOing right now. So they did. And so as a result of it, and this got so much press, this ratchet. So at the last round that they'd done, which remember Goldman Sachs was a big part of investing into this last round. And then Goldman Sachs lived the IPO. It was $150 million. And I think Goldman invested $50 million. I could be wrong on that. They did. So the terms of that round though were that the company essentially promised those investors in that round, a 20% return on their money at IPO. So not just would they get their money back at the same valuation, but they would also get a 20% return. And the mechanism by which that played out, remember the IPO happened at essentially half of the valuation of that round. So not only did they not get a return, they lost money. The way it played out is the company had to issue additional stock to those investors when the IPO happened and $93 million of additional stock. Now that's not not terrible relative. You know, the company had a $2.9 billion market cap, but it's a lot and room and also this got issued as stock. So if those investors held that stock since then the company's basically just killed it because they had sound business fundamentals and lots of growth potential ahead of them in a huge tam. So now they're trading at $25.59 as of today up hugely, almost a $10 billion market cap. And so if those investors had held onto that stock, the stock that they bought in the private round initially and then what they got in the ratchet, you know, they would just be making huge returns right now. Okay, so let me talk about the conflict here. This because this blows my mind when we were digging into this and really figured this out like. So the way IPO's work is that the bankers get basically banker fees for for taking the company public. And so Goldman Sachs gets about $10 million in banker fees from this IPO, which makes a lot of sense given where it price, you know, given given all those things. They also get 90, whatever 90 something million dollars in that ratchet because they they participated in a huge way in that previous round. When you look at this, the incentive for Goldman as the lead underwriter on this IPO is to actually price it lower because their banker fees that they get as a percentage of the valuation of the company is actually significantly less than the amount of money that they would get from it being being a price lower. And so obviously, you know, it's different people at Goldman doing this, but it's kind of shocking that that's possible that you would pick Goldman if given their conflict there. It's totally crazy. I mean, banks have long argued that, you know, you should let it's been kind of like common wisdom in startup world that if you're thinking about going public, you know, and a bank wants to participate in sort of a, you know, mezzanine round before you go public, you should do that because then you're going to align incentives with them if they ultimately do take you public where, you know, the higher they price the stock, the more money they're going to make because they're already a shareholder in your company. But if you have a ratchet like this, then just as you said, Ben, you've set up the incentive for them to price the stock lower because perverse. And it's totally perverse. And, you know, who knows what did Goldman intentionally, you know, guide the company to, you know, price the IPO to low who knows. But here we are. And the facts of the matter are just like you said, Ben, the company's killed it over the last, you know, year and a half. And the stock is is now up, you know, almost three times since the IPO. And let's talk about why they've killed it. So, so square, you know, as we both argued in different ways, I think me that they were sort of the creator of this new new category of cloud, POS, and they're the most well recognized name in it and they're doing extremely well. And so, well, in this, you know, massive rising tide. So, so they'll continue to kind of grow with that industry. And your point of view was that, yeah, and indeed they also are bundling all these other amazing services to make these businesses perform better. And make all a cart fees on those, but also increase the number of transactions that they take a piece of. So great the company's doing well. And the other magic to this whole thing is this is the sort of business that also has zero churn because for square on a per cohort basis. So for folks that aren't familiar, a cohort is like a whole bunch of people who are becoming new customers in the same time frame. So they would all come in and their net churn was zero. So basically what that meant is the way that this business works is the they would lose customers, they would churn out at a certain rate. But the amount of money that the customers from that cohort who stayed there would generate from growing their business was exactly approximately equal to the business that square was losing from these customers that churned out of the cohort. So it actually, if you look at every new cohort they add, they flatten out over time and make a consistent amount of revenue for the company, basically indefinitely. And so it makes a lot of sense for once square has this this cact to LTV ratio where they can figure out, you know, boy, when we deploy X in marketing spend, we make it back, you know, plus 30% or so with in less than two years. And we're able to just keep pouring money on to do our marketing efforts and we just keep getting basically zero net churn cohorts that all stack on top of each other forever. So very predictable business in an industry that's absolutely arising tied. It's something where if you look at it, you know, on its fundamentals rather than than as like a speculative who knows if this will actually pan out thing like it seems like it's a great growth company. I mean, we've basically talked about the content of the narrative section here, but it's really it's like a tale of two stories, a tale of two companies here, you know, it was the best of times it was the worst of times. If you listened to the press around the time of the square IPO and I think, you know, I remember, you know, lots of investors sort of, you know, talking to and chattering, you know, it was like this is the worst of times like this is the death knell for all these unicorn companies and, you know, square is like prime example of super overvalued and it turns out that their actual business, which is payments is a super crappy business really low margin. If any margin and and you know example number one of that is look at this Starbucks deal like it sucks squares losing so much money on it. And that means, you know, they'll never be able to serve large merchants. And so this company is doomed right like that was the narrative that was so dominating the press cycle and the investor cycle. But, you know, I think the lesson here is like in any kind of situation like that, you really got to dig into the company's fundamentals, whether the narrative is like this company can do no wrong or whether this company is doomed. You know, when squares narrative through the whole thing you read their IPO, you read the you read the S1, you know, they say they actually say in the S1, you know, like we serve small business merchants like we make commerce easy. We make it acceptable to everyone like we're not a payments company. We're about, you know, helping merchants increase their business and because of these flywheel effects that, you know, is good for us to. Yep. And boy, that's really it's funny. I mean with it. It's the not to talk about Rich Barton in every episode now, but when you hear him talking, he talks about the name Expedia and the name Zillow, like picking an empty vessel and then you get to fill it with with your marketing and you get to fill it with your product and your brand that you know the value prop to customers like squared was not a payment word, right? Like it's something that they can choose to fill with whatever they want to be. And the way that snap is a camera company and we all said, oh snap is a camera company like square isn't a payments company, you know, square is a small business company. And I think that that's that's got a lot of power to it. Yeah, I mean, there's a there's a great interview with Jack or he talks about he's asked for like what a square and he's like, well, look, there are three things that every business needs whether you're, you know, whether you're, you know, he says, you know, whether you're Facebook or Twitter or whether you're, you know, a coffee shop, you need access to capital and capital can be, you know, raising money, but it can also be, you know, sales from your customers, like we were talking about earlier, if you can access the money from your city, the capital from the sales you're making to customers because you're not getting it for 30 to 45 days. That's a huge problem. So you need access to capital to build and grow your business. You need to acquire customers and then you need to retain customers and build loyalty and like what squares done, I think, is, or at least what Jack would say square is trying to do is to help small businesses, what businesses of all types, physical businesses, do all three of those things better. So drifting toward what would have happened otherwise, let's talk about access to capital a little bit and this will help us guide a little bit of, you know, what our criteria for for grading this toward the end of the episode will be kind of twofold. So one is always, you know, did this IPO allow them to do something that they previously couldn't do before like was it a good business decision to IPO and the two components of that are the idea of it and the execution of it. So kind of working backwards from that and thinking about access to capital after this Starbucks thing, they're left in this place where they're near cash flow positive like that is right on the horizon, they know that they when they spend marketing dollars is very predictable thing happens where they are able to get a return on that marketing spend. So it's really about hey let's let's you know go get some more capital so we can we can keep taking advantage of scale getting closer to cash flow positive and pour some dollars on this business. So you know then then you have this decision of will do that from the private markets like we did with our series D and we did with our series E or do we go to the public markets. This isn't really talked about enough but if you look at sort of the liquidation preference in all these venture rounds and all of that stacking on top of each other, the valuations are a little silly because think about it this way if you're a public company and somebody says I will give you a valuation of one billion dollars and I will own you know X shares that are worth 20% of the company then they actually own X shares that are worth 20% of that company. But if a private investor price goes down or the company gets sold for you know 200 million dollars like tough luck. Yeah exactly you still own exactly 20% of that company. Whereas in the private markets the reason or one of the reasons that we have all these inflated valuations is because the risk that the investor takes by putting money in is dramatically reduced by the preference. So the way that that sort of works is you can say hey I'm going to take 20% of this company and give you 200 million dollars and value you at a billion dollars but you know if you're if you sell for less than a billion like if you sell for 500 million I'm still going to take my 200 million back right right to your return like the ratchet. So like I'm going to take my 200 million and I'm going to take a 20% return and so you you know founders employees rest of the shareholders in the company you thought you just sold for 500 million but you actually sold for you know whatever call it 200 million at that point. So you know in this scenario you take huge private round on huge private round on huge private round and you build up all this liquidation preference all this money that's going to go to these investors that are happy to say sure we'll give you a higher valuation because it's you know it's lower risk for us. So if you want that higher valuation sure like but but if you know if things go south and then we're going to get get the money off the top before any of the common shareholders do and so you get yourself into this situation where suddenly you have a $6 billion valuation you start to realize that the public markets aren't going to give you that $6 billion valuation because it's a very different climate out there. You know you have a lot a lot of people on that road show that you're talking to that are all talking with each other it's not a small conversation between a CEO and and a few partners that at a firm it's much more like you know that it gets pushed down if there's a narrative out there that wants to push it down. So I think depending on the story that's told when you're when you're IPOing you can really get burned by that and that's what sort of square was realizing was uh oh we are not going to be able to IPO at $6 billion or it's looking like we're not going to be able to and there was like a nine month period for square where they're issuing all these stock options as part of the compensation so employees are hired in they're given you know 25% of their of their compensation the form of stock options but you know it turns out those stock options. So it turns out those stock options have a strike price where the valuation of the company $6 billion dollars right. And to the valuation is only 10 I mean it's not it's $4 billion higher but on a percentage basis if you got stock options then you know it's relative to the performance of the company and the growth of the company since then you know you're not really being rewarded for that. And people started to sort of realize this where they're hired in and they're like wait a minute you know I'm never going to be able to or in any short amount of time like these stock options that I was given aren't going to be worth anything. And so I'm being under compensated for my work and so they start losing employees and they're gonna you know if they go do another private round it's going to have to be either a down round or a flat round or they go up then there's even more liquidation preference that goes on top and so they sort of have to go public it and I'll do that. And a lot of ways to get all that liquidity and make it so that when you issue the restricted stock units to your employees, that's an option for you. And I think they actually started issuing RSUs before they went public, but it was a little bit of a two little to late situation where you have all these employees over nine months to a year whose stock options are worth nothing in realizing it. Well, I mean, I think for me, this just highlights like when you are talking about valuations of companies and investing in companies, and that's actually only part of what we do is start up investors as who is talking about in the opt-sware episode. The most important thing is helping build companies. But when you have your investor head on, that's why you really need to value companies based on fundamentals. Which is a little bit so hard to do in the early stages, right? But by the time Square was raising these rounds, like it was possible. And if you're a founder and a company too, you also want your company to be valued on fundamentals, right? Like taking a $6 billion valuation because you can get it and it feels good is like all nice and well, but you just screwed your employees, you know? And if you take it with all this structure. And it's, you know, we're not accusing anybody of doing that because it's one of these things where like the whole world is telling you yes and it seems like it's the train's going to keep going and then you're going to IPO and you're going to do another up-round and it's all just going to happen. But when you start reasoning from fundamentals, it does get a little scary. I completely agree with you Ben. Like I don't know, you know, the Square management team personally, but I seriously doubt they were actively trying to screw their employees. No, they seem like incredible, incredible leaders and operators. So it is okay. So we're in what would have happened otherwise. And in thinking about that, you know, one option and this is, I think, really hard to expect this of someone. But one option is back when they had that, I think they're Series D that was Starbucks in City and Sokka was in the neighborhood of 3.5 billion. Instead of that private round, they could have just tried to go public. And doing that earlier might have, you know, been able to do a flatter or up IPO at a higher valuation or maybe at that 3.5 billion dollar valuation, at least up from their Series C from Cliner Perkins. And you know, it's hard to do that because the business wasn't as mature yet and it's really hard to want to face that sort of public scrutiny. But as you say, the business was fairly mature then and their model was pretty, you know, the fundamentals of the business has been the same for a very long time. Yeah. I wonder if, you know, it would have been interesting to see if they'd gone that path. I wonder though if the Starbucks deal was just too volatile at that point. And if, you know, they were still figuring out, you know, how bad it was. And again, good from a product and company building and sense, but bad from a financial sense. I wonder if that's what would help them back. Right. Oh, that's interesting. Well, there we are. There we are. That's why, you know, machine learning hasn't come to startup management yet. Yeah. It really is, I mean, it takes being really hard in the weeds doing the research on this stuff, being a venture capitalist, being someone with early stage shares or, you know, being a founder of a company that goes through many rounds of this stuff to really like see how this plays out. And I mean, I think you really see the value of experience. Like every time I look into one of these companies, my eyes gets open by all the different scenarios that happen from staying private longer, from doing huge rounds, from really doing the math on what are all the possible outcomes. It's gotten hairier and hairier. I like the story that the very first term sheet was a two line piece of paper that said, I will invest in your company for a valuation of this where I get this percent. And like now, you know, you go into a eight page term sheet and then a hundred pages of definitive docs and all these different terms. And it's, you know, the complexity has just grown exponentially in the last 50, 60 years. Yep, which is not necessarily a bad thing. I mean, there's a lot more to it. Yeah. Yeah. There's tons of real value being created. So it makes sense to have all these provisions and carve it all up. But yeah, but I think you're right. And I think this is actually moving into tech themes. I didn't have this down, but this is a great one, which is like just the value of experience and when it comes to startup management and startup investing and that could be, you know, lived experience or synthetic experience, right? Like that's why we do this show. But Divina, you're happy to get some synthetic experience here at your expense. Exactly. Exactly. These decisions have a lot at stake in theirs. There's, you can't just, you know, devise an algorithm for the right way to move forward. The only thing you can have is experience and, you know, be a good judge made up. Great people around you. Yeah. What else you got for tech themes? Boy, I really, I really didn't save much. Yeah. Yeah. Yeah. I mean, well, well, I mean, one thing that I will say, and this might not be a tech theme, but it is incredible facing that tough period that they went through a good amount of attrition and employees, a CEO splitting his time while being another CEO, a massively botched Starbucks deal, through all this, they've really pulled out nicely. Like, the company's in a pretty great place right now. It has predictable growth. You know, they're introducing new products to sell to existing businesses. And who knows? Maybe they'll all move into a negative turn, or maybe they already are a negative turn. Who knows? But it is really a testament tool. A lot of the things they did right that they've come as far as they have. Yeah. My tech theme I want to get in quickly is timing. And it's funny. I feel like the timing of the IPO was so bad. I mean, we're going to get into creating in just a minute here, but man, they really messed up the timing on this one. But the timing of the company and the product, like I think this is just a fantastic example of what we talk about a lot on this show of writing waves and timing those waves, right? But the growth in consumers wanting to pay via credit cards, coupled with the growth in mobile devices, you know, and a right at 2009, 2010, that creating this, you know, massive opportunity to disrupt, you know, the payments and the merchant industry, merchant services industry. And just instant product market fit. Instant. Yeah. It's so, so rare. I mean, that's like a, it's like an iPhone style event that happens so rarely. There were something gets released and just everyone is like, yep, nailed it. Yep, nailed it. Yep. Yep. All right. That's what I got for tech themes. Should we grade it? Let's do it. Let's do it. So I'm going to start from an A because it was like, you know, we'll start at the top. They needed cash. They were the future looked bright. They were near a cash flow positive. I'm going to knock them down to. It's a fundamental perspective, as we talked about, I think it was the right time to go public. They had ironed out the Starbucks deal. The future was bright. Yep. Then I'm going to knock it down to a B because I think they did it around or two to late. Not only would the climate have been better to IPO, but the fundamentals of the business would have justified going public earlier. And you know, it's a hard thing to expect of people, but you know, that knocks it down to a B for me. The whole Goldman, the SACs thing, like unbelievable botch. Oh my gosh. If I was an employee, I'd be so infuriated. And I think that for me, it's a sea. Like it's a good idea that was at the wrong time with terrible execution. Yeah. Man, it's so I'm so tempted to do like a, you know, a Facebook IPO style grading here in that like, I want to separate out the company and the performance of the company, which I think is just fantastic. Truly I think one of the best tech companies, you know, built in the past 10 years, one of the very, very best from the IPO execution. But you know, I do think kind of like what saved the Facebook IPO for me and all of me to give it to grades was I think they really learned and Mark talks about how like the IPO was a forcing function that you know, really turned into kind of a company saving event for them and realizing they had this huge problem with mobile. I'm not sure that the same thing happened to a square. I think they, they just kind of messed things up financially as you were talking about Ben. So I'm going to resist the temptation to do two grades, although I do want to make clear I have so much respect for a square as a company and as a, you know, company going forward. But I think the IPO process, I'm not going to be as harsh as you because again, they probably needed the money and I think had they gone public earlier, they probably hadn't had the Starbucks deal higher and down enough to, you know, that would have been a huge problem. So I'm willing to be a little more generous, but I'm going to be minus. Yeah. Well, you know, in this hypothetical world, I can predict that it went well and it is funny how like we only know how the exact reality played out, right? We don't know how the alternative reality played out. So it's not fair really to say that that would have been better, but yeah. All right. Good. I'm glad you didn't, I'm glad you didn't give it two grades because I was going to rip on you pretty early. I could feel it coming. That's why I pulled back. It reminds me that what's the, who's lying out of any way, a line where he's like the show where all the, all the facts are made up and the points don't matter. Feels, feels like that. Yeah, that's what we do here required. All right. I know it's being a witch. I know you all said you hate follow ups, and so we're just not going to do them. But in this case, we have to say we were right. Yeah, we got a brag. Yeah, we got a brag. Disney acquired, you know, a majority stake in BAM tech, exactly as we predicted they would. Maybe it was sooner. I think we were, we should go back and listen, but I think it was like sometime in the next year or two, but it was like four or five months later. Yeah, so good timing, Ben speaking of timing. Yeah. Yeah. So that's unbelievable. Like can we just rewind a second and think about like a holy crap, Disney's pulling all their content off of Netflix and doing a Disney direct offering. It's their own streaming service through BAM tech directly to consumers. Like this is, I can't wait to see how this all shakes out. Yeah, seriously. Future episodes to come. Yeah, multiple, multiple. All right, Carvouts. Oh, Carvouts minus so perfect for today. It combines everything we've talked about. So Nick built in has who wrote hatching Twitter. He was at the New York Times. Now he's at Vanity Fair. He has a great new podcast called Inside the Hive and he had Bob Eiger, the Disney CEO on. And it was great. We'll link to it in the show notes, but you know, Bob talks about their M&A strategy and Lucasfilm and Pixar and Marvel and you know, the Disney flywheel. It's great. You guys will love it. I certainly did. Awesome. I got to check it out. So mine is a book that is currently being written. But if you guys haven't checked out Get Books before, it is a really interesting product. It's like GitHub for Books and you can sort of look at the contribution history and the revisions of a book while it's out there in public and you know, can be written and revised in real time for people to read it. So it's a complete thing that you can go read, but it's interesting as the world changes. It continues to be rewritten. And the book itself is called World After Capital and it is written by Albert Wenger of Union Square Ventures. It is so interesting. Like it is one of these things where you often get focused in your own niche or your own work and you read the things that are related specifically to your job, but you don't think about the macro implications of what we're all doing. It's a really interesting book where he sort of argues that we are moving past a world where capital is the expensive and scarce thing and that capital is cheaper than ever. It's less meaningful than ever before and that knowledge. And he talks about attention a little bit but really focuses on knowledge as being the scarce resource. And what does that mean in a world where knowledge is the scarce resource and talks a lot about AI, machine learning. So if that stuff is your jam and you like to be a futurist a little bit and have a little bit of a sociology bent to it, go check it out. That is a really, really cool book and you can read it in pieces as you would expect from a nice web based publication. That's awesome. I didn't know if Git books existed. I'm going to have to check that out and it's awesome. Yeah. Well, that's what we got today. Thank you so much to you guys for listening. Check out the Slack We're nearly 900 and would love to have you join us. And lastly, pause this podcast right now and go leave us a review on iTunes. We really sincerely appreciate it. So thanks everyone. We'll see you next time.