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This Week in Startups
TWiST News: Headphones.com, How Sound Takes Down Drones, TollBit Secures Series A | E2031
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- [00:00]
A
Quarter milli check non dilutive funding. You guys are my heroes. That's amazing. Wow. The cap table stays pure. I like it. That's that Canadian socialism at work. They, they love you see, Jason, it's.
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B
Good for business here they are incubating the youths.
- [00:18]
A
Yeah, but you know what? They didn't have to convince venture capitalists to clear market. So that's the only problem. In all seriousness, with these gifts, other governments do it too. New Zealand, Japan. I've seen it all around the world where grants are given. Sometimes people get better at pleasing the grant committee than they do at selling venture capitalist on 100 times return, which are two different things.
- [00:43]
B
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A
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- [01:30]
A
All right. Hey everybody. Welcome back to this week in Startups. I'm Jason Calacanis, angel investor here in Austin, Texas. Yes, living in Austin these days. I invest in about 100 startups per year to about 150 episodes of this Week in Startups. 50 episodes of All In. So 100 startups a year, 200 podcasts and yeah, then try to get a little skiing in and spend time with the family. How are you doing, Alex Wilhelm?
- [01:57]
B
I'm doing fantastic. I'm really digging our live news. Just push in general. This is our third show in three days, which I think is the most live news we've done in a row, at least since I joined the team. So.
- [02:08]
A
Correct. And there's so much news out there. Technology is impacting everything in the world constantly. Yesterday we had a really good discussion about election integrity. Last week we talked about robo taxis and built a model. How long would it take to build out a robo taxi fleet just to service the United States? And doing really all kinds of double clicks, deep dives into what's happening in the world of technology from, you know, first principles and doing some math even to figure out what's happening in the industry and something that's Happening in the industry in a major way is obviously what's going on with AI. And so today I wanted to talk a lot about Claude AI, because they have that new product. I don't know what the name of it is, but you can basically take over your web browser. Is there a name for it or is it just Sonnet?
- [02:58]
B
It's the computer use API attached to currently Claude 3.5 sonnet.
- [03:05]
A
Okay, so you have Claude AI. It's the name of the company. The version of their LLM is Sonnet for 3.5 version number. And then they call this the computer interface.
- [03:21]
B
Computer use.
- [03:22]
A
Computer use. Okay. Terrible branding. Seven names. And it still doesn't explain what it is. It should just be quad browser or something.
- [03:30]
B
Yeah, I mean, you'd think so. But I do think computer use does kind of say what it does on the 10. Now, as a recap, if you were with us yesterday, we talked about this. Just got to touch on it at the very end of the show. But, Jason, it caught your eye after we recorded, because there was a story about a pizza that was procured not by a human.
- [03:53]
A
Right. I mean, once you give developers this tool, it's going to unleash any number of interesting demonstrations. And so this one was particularly interesting. A bunch of developers got together, and it seems like they told DoorDash, hey, we need to feed a couple of people. And it went and ordered pizza. Now, it didn't need any intervention to do this. And this is what we've always hoped Siri would do, or Alexa, we always wanted to say, siri, order me a pepperoni pizza and a regular pizza, a cheese pizza, medium. Have it ask us, you know, some questions, when do you want it delivered, which pizzeria do you prefer? And then just go do it. And here we are. It's going to do it. And if you look at the new iOS 18, Alex, every single app has a checkbox to allow superintelligence, essentially, Siri, to review your behavior in that app. It doesn't take a genius to figure out why they're asking for permission. They want Siri to. To have watched you use Uber to call a car United to book a flight. And they want to be able to have you say, hey, Siri, book me a flight on United going from Austin to San Francisco tomorrow in business class or premium economy. Let me know the pricing. I don't like middle seats. And here you go. It would be able to actually figure all that out. And it feels like it's close to figuring all that out, huh?
- [05:24]
B
Yeah, it really is. So I went, actually went out and went through a bunch of videos of people using this in action. And I picked one, Jason, from a founder. So we're going to watch a short clip here. It's about one minute, and it's from Mustafa Ergisi, now he's the founder of AI to SQL IO. I'm not going to lie. I don't know what that does, but I wanted to give them a shout out. But this clip, if we could get that on the screen.
- [05:47]
A
All right, here we go.
- [05:50]
B
So here is a. Essentially him using it live. So this is what it looks like when you play with it. And he put together a question. Go out, find different headphones on the web and then pull the data for the different headphones into a spreadsheet. Now we can watch how it thinks. So on the left, if you're watching the video on YouTube, it literally kind of walks you through the steps that it's doing and the actions it's taking. And it's not lightning fast because the Internet only moves so quickly, Jason. But I love seeing the steps here. So very encouraging.
- [06:19]
A
Yeah, I mean, this web scraping has existed, if you know what business process outsourcing is. You know, people in Manila, India, doing repetitive tasks. And then there are companies primarily based in Manila, Israel, India, that do web scraping as a service. There are tools that you can use as a developer to write these. And essentially you train it and say, hey, I just want to grab the price. Here's the price on the page. I want to grab the reviews. I want you to look at the number of reviews and you kind of train it as to what you're trying to do. And then it goes and launches web browsers, virtual machines, basically, in the sky, and it fires off the browsers. And this is why when you load Facebook websites, Instagram, etc. TikTok, LinkedIn, you only get to see so much today, right? It will look at your IP address and then if you're not logged in, not let you scrape it, because these tools are so prevalent. There's a lot of legal issues around this, but the vision here is absolutely fantastic because you could, with very little work, say, just tell me the price of these headphones. Tell me when the prices change. And when the prices change, send me a text message or an email or open that webpage for me and just buy it. You could just say, buy it when it hits 600 bucks, like a buy or sell order for a stock. So really clever stuff going on here. And this is going to change everything. And I think this is why we're seeing that static team size, Alex, that we've been talking about.
- [07:49]
B
Yeah, no, I. I'm so excited about this. People are kind of focusing on a couple of the anecdotes that Anthropic put out in their release about this. You know, at one point in time, the system went off and kind of watched videos in a different tab and whatever. All of that to me is sounds. It sounds a little spooky, but I think it's probably just mistakes being made. But once I can have this embedded in my os, which now feels no more than a year or two away, then it's going to learn, Jason, and it's not going to. You're not going to have to tell it. I prefer middle seats. It's going to know. It's going to know. You fly on United pretty soon. I'm going to be like, look, can I just see a couple flights for tomorrow? Because I wanted to go to Austin and it's going to show me the things that I like and it's going to talk to me. And as long as I can make it my own, I'm very, very excited about this. I don't mean to sound too bullish, but I think this fricking rocks.
- [08:34]
A
This is where it's all going. We made an investment in a company called Athena. You can go to athena wow.com and sign up for a virtual assistant. A big part of their vision is to watch a virtual assistant work for you and learn and then have the assistant become bionic and using AI. And so that is kind of the underappreciated part about Athena is that they are really smart. Human assistants who are doing repetitive tasks for you are going to train their AI over time. And that's why that product is doing so, so amazing. If you don't have an Athena assistant, it's kind of sweeping the startup community. Athena wow. Com is my link and they give you like a month free or something crazy. It's a really generous offer. So. And I was the first investor in Jonathan's first company, Marco's Thumbtack. They came to me with Athena and they're like, hey, we want you to be. Jonathan said, I want you to be the first investor in this company. I said, why do you want me to be the first investor in this company? If your own money from Thumbtack and you've done really well. He said, you're my lucky charm. I feel like I need you on the C table first because you were the first investor in Thumbtack, which warmed my heart because you know, as investors you do very little in the scope of helping a startup. You know, you give them some money and then you hope that you get out of their way and support them on the margins. Alex. But it's very rare that I think a venture capitalist makes a massive contribution to the trajectory of an outlier company. And so it's just nice to hear that you had an impact.
- [10:05]
B
Yeah, I think VCs often step in when there are problems, but on outlier companies things tend to kind of click along and go pretty quickly.
- [10:12]
A
Okay, there are more than 50,000 venture backed startups in the United States alone. This means marketing has to be perfectly targeted. You got a lot of competition out there or you're just going to fade into the background and your money will go with it. All your ad spend will be for naught. You gotta make sure you target the right prospects. So how are you gonna do that, especially in a business to business context? Well, the answer is obviously LinkedIn ads where you can precisely reach the professionals who are likely to find your ad relevant. Just think about it. Wouldn't it be great to target your ads by the job title or the industry, the location that that company is, you know, and maybe even a very specific company. Maybe you got a list of 20 lighthouse customers that you want a bear hug that you want them to know about your product or services. LinkedIn ads is going to help you do that by building a relationship and driving results. LinkedIn is the environment where people are receptive to business. They're not there for food or politics or entertainment or music. They're there to do business. A billion members, 130 million of them are decision makers and 10 million of them are C level executives. So start converting your B2B audience into high quality leads today. Get a hundred dollars from your boy. JC How? LinkedIn.com thisweekinstartups to claim that credit again. LinkedIn.com this Week in startups, no spaces, no dashes, terms and conditions apply because they're giving you a hundy.
- [11:36]
B
I'm curious though what startups will do with Anthropic's new tool because we've talked a lot about AgentIC, AI or AI agents and Sierra's working on this, the Brett Taylor startup, Microsoft Salesforce, all the big companies. But to me it's always been a little bit behind closed doors if you will. But here there is a thing you can just go play with and then hopefully use. And so I'm hoping this opens the aperture for use cases style and also just bringing more intelligence to more stuff on the desktop. I'm blown away.
- [12:04]
A
Energentic. Having the ability to control one's actions, goals and destiny, autonomy, basically being human is agentic. So when you hear that fancy term applied to AI just means the AI is kind of autonomous, like an agent, and it's working on your behalf, I can tell you what's going to happen. I came to the conclusion in the shower today.
- [12:24]
B
Okay, hit me, Alex.
- [12:25]
A
I had a shower moment. I think we are going to see a cataclysmic. Maybe it's too dramatic a word, but that's the word that came to my mind. A cataclysmic employment landscape for white collar in the coming years.
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B
Tell me more about which parts of the white collar economy you think this is going to hit the hardest or first.
- [12:52]
A
I'm having a hard time seeing finding places where it doesn't hit. So, you know, people would have said creatives previously, right? But when we did artwork for a little bit on Monday and we had our Foundry University things, that artwork was a six or seven out of ten. It was done by ChatGPT. And it was extraordinary how I didn't even consider for a minute using an artist, because the cost of an artist would be whatever, 500 to $1,000 per illustration. Even an offshore one might be 2 or 300 and it would take them a day. So the time it takes, plus, you know, the cost would have made it cost prohibitive. So but you can do it, you know, basically for free. So creatives, I think, are going to be hit very hard. Then I look at developers and I think the bottom third of developers, if they don't level up, are going to be essentially, you know, that work will be done by a senior dev, kind of having three or four junior devs reporting into them. And the junior devs are essentially agents, like we're seeing here, because you can now tell these agents, go make me Spotify, go make me Twitter. And it will go make it now. It's going to have bugs in it. But that's what young developers do too, is they submit bad code and the senior developer fixes it. So I think that that's happening right now. And I met somebody, I was at a show for Alexis Gay. She has a really cool show called Unprofessional. You know, the artist, the comedian. And I went to see her in Austin with Bill Gurley. He tweeted about it. It was quite charming. She's got A wonderful story about working at a company called redacted. It's well worth seeing. She's going to do a northeast tour. So shout out to Alexis Gay. And she is Yay, Alexis gay on all the socials. Y a y Alexis Gay. And her joke is my parents named me Alexis gay. And then for 12 years in school everybody was like, Alex is gay and me. Hugs is part of her funny bit in the show.
- [14:59]
B
She's, she's hysterical. We actually had her on my old show at TechCrunch. We had her on Equity once. She's just a treat.
- [15:04]
A
She's a treat. Yeah. So you know, I was just thinking how so I met somebody from Grammarly who just happened to be at the show, a really nice guy and who lives in Austin, is a fan of the shows, the pods. And I was just thinking how Grammarly took what we do. Alex. And you're, you're a 10 out of 10 writer. I'm, I'm, I hope I'm up there too in the nines or tens. But you know how it is to like manage bad writers and have to like, you're just like come on man. I've taught you about, you know, spelling out the numbers under 10. I've taught you about the Oxford comma. You're not getting it. And then Grammarly just does all that work. Now you don't need an editor to do that first 90% pass. You do need an editor to tell you like you missed the story or move this graph up to the top. It's your strongest one. Start with this, work back backwards, whatever it is. So the only things I see not being impacted by this in the short term are manual labor trades, persons, tradesmen. Although we have a company, master tech that is making automotive technicians bionic. So you know, they're, they put in to the system, they're working on a Toyota. It's making this kind of sound, it's this alarm is going off and it kind of guides them. So a junior tech again could become a senior. So I think we're going to see half of white collar jobs go away.
- [16:34]
B
So there's a really fun parallel 50%. Okay, fine, time frame then 50%.
- [16:41]
A
I think it's going to be 10% a year for three or four years in compounding I think we're going to lose 10% of jobs. And I, I, I'm just watching it. Like these companies with the static team size, Alex, have been getting smaller year after year after year for three or four years now. They use the COVID of the pandemic to make cuts. Then they use the COVID of get back to work. You know, Amazon is sticking to their five days a week in office. If you don't like it, the head of AWS just doubled down. He's like, buy if you don't like it. We understand, go find another job. That's the gentleman's riff. We talked about it and then I just keep seeing Disney 10% more, 5% more. That 5 or 10% that's occurring now is not just because the companies were too fat. It's because the top third of the staff is using AI and making that bottom 5% obsolete. Now, you can always make a team better by cutting the bottom 10%. Everybody knows that. That's well established. Cut the bottom 10% of any team, replace them, you're going to do better. That was Jack Welch's thing to do it every year, 5, 10% ref. Because just that's just the nature of sports and performance, etc. But yeah, I think this is going to occur. 5 to 10% a year, depending on the industry for four or five years straight. And we'll be sitting here and companies will be twice the size with half the people.
- [18:07]
B
Well, that does imply that whomever wins the upcoming presidential election is going to have a really weird economic trajectory to. And good luck to them.
- [18:18]
A
I mean, it also makes it. I think it makes me realize that the president, you know, can maybe, you know, on the margin, steer an economy in certain directions, but the economy is going to do what the economy is going to do. Technology has a much bigger impact than any president. And I think what the second and third order effects of the cataclysmic white collar contraction. Cataclysmic contraction of this cataclysmic contraction, I think if I'm right, is going to be the story of this generation is what happens to people who made 100k or 200k working at TechCrunch or the marketing department at Salesforce or somewhere and their job just went completely into Claude AI got completely consumed into, you know, 01 canvas. Do I sound crazy to you?
- [19:15]
B
No. And here's why you mentioned that the software developer in your model will have several people working for them and they'll be individual AI agents. You also said in your Grammarly bit that you can have now technology do the first draft for you, but you do need someone more senior to look at and say, hey, you missed the story. But in both examples you have a human doing orchestration and then you have technology underneath them handling the grunt work work. But both examples are actually kind of the same, albeit in different industries, different jobs, but they kind of feel the same. So I think what we're going to end up with is increasing economic power of the best and decreasing economic viability of the lower half, to use your 50% point. And I just don't know if we're ready as a, as a species to deal with that kind of economic change at the time frame you're describing. It can get messy.
- [20:05]
A
And I think the way this messiness works out is there'll be abundance in other parts of the economy and that abundance will be that services and costs of products will plummet. So the cost of a tutor is now zero. I told you the other day I started doing. I realized finding a tutor to do history with my daughter.
- [20:26]
B
Yeah.
- [20:27]
A
Was going to be more work than simply when I pick her up and I drop off at school doing history quizzes and talking to ChatGPT. Yeah. So I am not going to hire a tutor, but my daughter is going to experience having a tutor. That's kind of crazy when you think about it, right? And so your costs are going to go down in terms of living and the products and services you use are going to go up in terms of what they're offering. And so it's kind of like buying a flat screen TV right now. Did you ever go through this process? Like it used to be 5 to $10,000 to be at the top of the curve and now it's like 2000. A thousand and you could get a giant screen TV for 500 if you don't care about bells and whistles. Founders, do you want to sell to bigger customers? I know you do. You got to get that ACV trending up and you want to push your churn down. Right? Sounds good. But to sell to those big buyers, you need to clear all of these compliance checks. You know that that means you got to have things like SOC 2 sorted out. What's SOC 2? It's a standard and ensures that companies keep their customer data safe. And if you aren't SOC2 compliant, you can kiss those big deals goodbye. You're not going to land the Lighthouse customers. You're not going to be able to operate at the highest end of the market. But Vanta makes it really easy for you to get and renew your SoC2 compliance. On average, Vanta customers are compliant in just two to four weeks. Can take months without Vanta and they automate compliance for gdpr, HIPAA and more. So you can sell to Bigger customers in whatever markup your startup is going after. Vanta is going to save you hundreds of hours of work and up to 85% on compliance costs. Stop slowing your sales team down and use Vanta. Get a thousand dollars off@vanta.com twist. That's vanta.com twist for $1,000 off your SoC2. I think it's a very interesting moment in time for the economy and you know, I wanted to have somebody on the program today who I met over email who's a fan of the show and, and he is the founder of headphones.com he told me a really charming story over email. We become friends since about how he saw the episode with the founder of. Com and yeah, when he was on the pod we talked about com.com and owning a four letter domain name and so maybe you could introduce our guests and we'll talk a little bit about premium domain names.
- [22:54]
B
Yeah. So hey, trust me, Jason, we are going to mention hi Fi headphones. I even grabbed some data for you on that exact point. Everyone, please welcome the show. It's Andrew lissimore. He founded headphones.com in 2016 with his brother. He is the CEO and if you think you like audio gear, headphones and speakers that sound delightful, well, wrong, because he has you beat. Andrew, welcome to the show.
- [23:16]
C
Thanks very much. Great to be here. Jason and Alex.
- [23:19]
A
So maybe, you know, you could tell the story of how you got the headphones.com domain and the little connection to this week in startups and you know, how the business is going and then we'll get into how AI is going to impact your business.
- [23:32]
C
Yeah, I was going to say first, I'd love to address the fact that of all the examples you guys could have used for your clothing, you did this terrifying headphone, terrifying and incredibly exciting headphone example. So I don't know if that was on my behalf but man, my heart just started pounding myself that night. Like I gotta leave this thing and get to work. But yeah, that's. That stuff's super exciting. I'll give you the kind of crazy story about how we ended up with our domain and it was super unlikely that I like, if you eight years ago told me I'd be here with this company, I would have said not a chance. In fact, if I had like whiteboarded out this business idea to myself eight years ago, I would have said this is a stupid idea and I wouldn't have done it. So things kind of just took their own course. And it started when I was in Austin, actually I'm Canadian. I live in Vancouver technically. But I was working in Austin for a SaaS company. I was a VP of marketing. It was Andreessen Horowitz back and I was working really hard because it was my first big role at a startup and being from a corner of Canada felt just pretty excited and special just to be able to participate in the big venture world with big investors and everything. So I was working hard just to try to prove myself, kind of got burnt out. And I started buying super expensive audio gear and it was like a way. I don't know the first time I did it, I think I just like, I like gear and I like music and it felt so good when I got it and I was playing around with it that I just kept doing it. And I'm now married to Monica, who at the time I was dating and she's a CFO and an accountant and very financially intelligent. And she said, Andrew, this has got to, this has got to stop. You're spending way too much money on this stuff. How many pairs of headphones can you wear at one time? And I said, you know what? You're totally right. Except I like this so much, I want to keep doing it. So I devised this stupid idea to save what would become my marriage. It wasn't yet, but this relationship and still be able to enjoy headphones, which was, I'll start this little business selling them on the side. And it, it was like, who wants to go compete in this is 2016, 2017. Who wants to go compete with Amazon and Best Buy in consumer electronics? Like it seems, it seemed foolish, but I thought as long as this thing breaks even, then I can have all the gear I want at my house and Monica will get mad. So that was, that was the catalyst, the first step.
- [25:54]
A
And you decided you would start selling the product. This sounds like a familiar refrain. You have an addiction. And then the most logical thing for anybody addicted to any substance or product or service.
- [26:07]
C
Yes, that's rock.
- [26:09]
A
To sell that service. Yes. This is. I think there's many, yeah, adult R rated films and dramas about this. Like it's. Yeah.
- [26:17]
C
It is a common pattern. And the thing is, even though it seemed like a dumb idea and probably was, I liked it so much that I just brute forced it in the early years and just made it work because I was like, if I can have a chance to do this instead of being a SaaS executive for a B2B SaaS company, I'm going to take it. So I started selling all kinds of high end audio gear, including speakers and amplifiers and headphones, and realized through some not too tricky analysis that shipping 300 pound speakers and selling them online was not super efficient. And also that person who I had to pay money to acquire probably buys one pair of speakers in their lifetime, maybe two if they're 300 pounds. But headphones were light. People would buy multiple pairs for different purposes. They wear out, so people replace them. The margins were interesting and I could store a million pairs in a warehouse and ship them pretty cost effectively. So I thought, okay, here's the plan. I'm going to sell these headphones. But I couldn't sell the stuff that was on Amazon and Best Buy because they had that locked down and had built a great service to deliver those products. So I found this whole world of audio that I didn't even know really existed at the time. It makes sense that it did, but this ultra high end kind of world. So it's not because I'm snobby about it, but it's just because I kind of had to. It was the only place that was underserved by the incumbents. And so I found headphones that cost up to $50,000 and our average order is over a thousand on the site.
- [27:43]
A
Yeah.
- [27:44]
C
And that's kind of area we played in because I thought, you know, Amazon's built for efficiency and you know, your margins. My opportunity, they can't really service the kind of customer that's going to spend $10,000 on a pair of headphones and probably won't be able to in the near future. So then I had to try to convince these really high end audio brands. And they kind of operate a bit like luxury brands where they're, they're snobby, they're really protective of distribution. And I'm at this point like a guy on a couch.
- [28:11]
A
Yeah.
- [28:12]
C
Young, pretty young guy on a couch. And these are mostly European companies too. So they've got the European attitude about things. And so I was, I made a list, I think probably of 50 different ways that I could try to hack credibility. In fact that I did that because I kept getting no's and I finally got a yes. And then they looked up my corporate address and they're like, this looks like a condo. And then they ended up saying no. So I gotta, I gotta like change my approach here and look credible. So one of the things I wrote on the list was if I got the domain headphones.com.
- [28:42]
A
Yeah.
- [28:42]
C
These companies would have to say yes. They totally have to. I just glossed over It. It didn't seem very realistic, but I did. In my list of attacking these ideas, I emailed the who is on the domain? The guy wrote me back like an hour later, and thank God he wasn't a domainer. Like, he wasn't. It wasn't. I didn't enter that shady world of having to get a domain from someone who's hoarding a bunch of domains. It was a British entrepreneur who'd moved to Silicon Valley in the first dot com boom. Super nice guy. And he promptly told me he wanted $1.2 million for the domain and I didn't have any money. Of course, Monica would have been thrilled for me to pay 1.2 million for a domain. But I didn't give up because I thought, okay, I've got this guy. We're talking. He's not like a shady domain guy. Maybe I can just connect with him on a human level. So I just kept working at it and working at it, and what I was kind of solving for was, how do I get this thing and not be on the hook for millions of dollars or even hundreds of thousands of dollars if this business doesn't work? This is super early. And I thought there was a really good chance the business wouldn't work. So I negotiated this kind of cascading payment schedule with him over six months. And I think he took a big risk to do this with me. I think he just kind of saw a little bit of his young self in my persistence that finally just caved and did it. And this is like eight years ago, eight and a half years ago. Now we're still friends. And he did great off that deal and so have we. So I think it really worked out. And I think the lesson I took from that is the outcome was kind of binary for me with getting this domain. So if the business doesn't work, I don't want to owe anything. I want to give it back and owe nothing. If it works, if I overpaid for it a little bit, it's not going to be that big of a deal. So that's kind of how I negotiated the agreement.
- [30:37]
A
Amazing. We switched to Beehive and it has been huge for this week in startups, we have this Twist500 newsletter. I've been working on this entire platform where we're trying to find the 500 most important private companies. So twist500.com, and we've been using Beehive for this email newsletter. Beehive B E E H I I V It's a service that's built for growth. And when you're doing an email list or a podcast, you want growth and they've baked it into it. Beehive was co founded by one of the minds behind Morning Brew. You know that incredible newsletter. Well, you can get access to the tools that helped build Morning Brew to millions of readers. And if you're interested in making a little money with your newsletter, Beehive can do that too. Because Beehive has an ad network. So it's a no brainer for folks who want to drive revenue and want to grow. There's a million platforms, there's a million tools out there. But a tool that solves those two problems, growth and revenue, that's the winning tool in my mind. That's why we moved over to it. They have an AI post builder, they got a referral program, the list goes on and on. It's super affordable at $39 per month. But we got a great deal for you now. 30 day free trial and 20% off your first 3 months. Just head over to beehive.com twist for 20% off your first 3 months. Beehive B E-E-H-I-I-V.com twist hit the rewind button, write the URL down, sign up now and get that discount. Great job to the Beehive team. We really love the product. So you were able to get a great deal on it and then people started respecting the headphones.com domain. It made people respect it and people were willing to buy it now when.
- [32:17]
C
Actually I should just stop you. Jason didn't immediately respect it because back then there was a lot of those link farms on those kind of canonical domain names.
- [32:26]
D
Yes.
- [32:26]
C
Which I hadn't really considered. I thought this is, this is super credibility. And I got a lot of people expecting like a link farm, like so.
- [32:33]
A
Like just pay 50 cents a click, a dollar a click, kind of.
- [32:36]
C
So we had to work pretty hard.
- [32:37]
A
Search traffic, slow the search traffic through as opposed to actually building a site where, you know, people can get good information. And then you sent me a pair of like incredible headphones. Thank you very much. That was incredibly generous of you. As a thank you. And this brand, Bathy's, I couldn't believe it. This, these are the Bathy, these are the focal.
- [33:00]
C
Technically, yeah, they're French, so they don't really care if these things, if it's hard to pronounce.
- [33:05]
A
And then there are the utopias, which I have as well. And I went down the rabbit hole. I had no idea. Alex that there was an entire onion you could peel here of the file size. So I signed up for a service called Qobuz Cobuz.
- [33:20]
C
Yeah. Also French, so also don't get another French company.
- [33:23]
A
And all of the files are flac files. Then I have a name. Is it name N A I M?
- [33:30]
C
That is. Yep. Nailed it. British.
- [33:32]
A
British amplifier that goes. It's a headphone amplifier that streams directly from Qobuz, and then it goes into these utopias with these special cables. And I couldn't believe that the albums I fell in love with from Pink Floyd or Dire Straits could sound so much better. The soundstage, as they call it. Like, I. There were things happening in the music that I did not hear on. You know, these things which are great for a phone call or you're listening to a podcast. I guess it's okay. And then I started getting into the speaker game, and I just bought a pair of these Keefes. K E F Kef.
- [34:11]
C
Yeah, kefs.
- [34:13]
A
And then these things are incredible. I can't believe this concept of soundstage again with the desktop speaker. So is. Are the. Is this, like, an actual known thing and this is why people get addicted to it, or is it the aesthetics and the obsession that people are into? Because I've now gone into all the subreddits, I've started going down the rabbit hole, and I see all these websites where people are literally using testing tools to test all the different frequencies and.
- [34:43]
C
Ways we have an $80,000 testing tool.
- [34:47]
A
Talking about wine, Alex.
- [34:49]
C
That's actually a good analogy. The wine.
- [34:51]
A
Yeah. So tell me how much of this is reality versus aesthetics versus, like, a hobby that people have lost their minds on? Because I actually buy that I'm hearing something completely different than I experienced for the first 50 years of my life.
- [35:07]
C
Yeah, you definitely are. First, I'll say that it's sad that someone like you, who loves music and can certainly afford this stuff, has waited this long to be able to be exposed to it. And that's something I'd like to change. It's kind of an opaque world where you feel like you need to do a lot of research and dive down these communities to kind of figure out what's worth buying. On the flip side, you have companies like Sonos, great product, Bose, Apple, kind of spending a lot of money to tell you that those are the only things worth buying, regardless of how much you can. You can afford. And, you know, we don't manufacture this stuff, so we're not really able to change it at the source to make it more approachable. But I do wish it was a lot easier for people to know exactly what to get to be able to experience what you did, because it is real. I will. I'll caveat this with saying there's of course diminishing returns as you spend more money. But that's not to say that they're not super noticeable. So. And there's a subset of people who just love great, well crafted experiences. I think they actually have. They're more sensitive in the sense that they're like sensitive to the senses, like sight, touch, detail, sound, for sure. And the way that I. The way that I've thought of this is. And that's kind of the way I justified it for myself even before I started the company is people like that get so much joy and pleasure out of using something that's better than the average thing. And they don't just get that joy when they buy it and it goes away. Like the hedonic adaptation, which happens to most people, they get it every time they pull that thing out to use it. And so the way I thought about it is that the net present value of the joy that you're going to get out of that thing, if you're that kind of person, is so high that it makes sense to go and optimize and try to find the best possible thing to buy. You were talking about aesthetics. I care about that a lot and I think that's just part of what makes a great product. So there's people that. And there's subsets, of course, in this hobby of. There's people who are purely chasing the best audio and they don't care if it looks totally ridiculous. They're usually single, They've got those wild things on their head. And I could show you some of these and you just immediately laugh. But they're just. They don't care.
- [37:20]
B
Yeah.
- [37:21]
C
There's people like me who, you know, I like great furniture, I like art, I like design and architecture, I like great products and industrial design. And I like a balance. You know, I want something that sounds incredible, but I also want it to feel great when I hold it and I want it to look really nice. And to me, the gestalt of all those things put together makes an awesome experience. So I think that's kind of where most people are. And those are the people we kind of like to focus on as customers.
- [37:46]
B
It's interesting to me because when I think about people who do care about the aesthetics and the sound quality and have an ear for this, I feel like they would be doing their own research and testing. But there is a reviews portion of the headphones.com service. I'm curious, how important is that for driving people into the E commerce funnel for you guys?
- [38:03]
C
Yeah, I wouldn't even say it's a portion. I'd say we're. This is kind of facetious, but we're like a media and reviews company that monetizes through E commerce is how I would look at it like that. E commerce is our business model. And this is like early on when I was a SaaS executive, I was doing SaaS market again like 2014 and 2015. And even then I kind of just realized the cost of acquiring customers through digital platforms like Facebook and Google was just going to go up over time. They'd kind of get better at capturing value and there'd be more people competing for the same. The same real estate. And there's all the privacy stuff that was also making it harder to target and also going to push those costs up. So before I decided to jump into this with both feet, I thought I need some strategy to acquire customers where I don't have to constantly look for digital arbitrage to acquire customers. Find some quick thing that works with the algorithm for three months until everyone else discovers it and I gotta find something else that's not like a fun way to build a business, at least not for me. So I tried some stuff and what I landed on was this idea that the kind of people that are buying really expensive headphones can. They can see through ad disguised as a review. So I thought, you know what I'm gonna do? I'm gonna build like a. A community and content side of the business. And I'm going to focus 100% on two things. Building awareness through that content and building trust. Nothing to do with sales.
- [39:29]
A
You know, here's the. I think it's a really great, powerful observation. Here are the. The KEEF K E F KEF KEF KEF Wireless Engineering Foundry from.
- [39:41]
C
They provided speakers for the BBC actually is how they. They started.
- [39:45]
A
And these are a little bit controversial because they don't have like a traditional audio in. It uses USB C as the input. And it's got a ton of different ways you can put stuff into them. It's got its own app, but again it's got the. These products are so sophisticated and they're so well crafted. You can see the craftsmanship in these, Alex, in terms of how they're built. And I think that that to me is like one of the really interesting aspects of this journey is there? And here's the name Amplifier for those of you who are wondering.
- [40:24]
C
Beautiful in person too.
- [40:26]
A
This thing is so heavy and it has a ridiculous, it's kind of ridiculous how heavy it is. The thing's got to weigh 20 pounds, 15 pounds. And it's, you know, the size of a small personal pizza box. But the interface and the remote control is so heavy. And that dial on the top, you can spin it and it's got like a motion to it and that's your volume. And then all of them will stream directly from the provider like Qobuz or Apple or I guess a lot of people use the JZ one that title. So, you know, there's incredible craftsmanship here that I love. And I think the best description I heard of a luxury product is that luxury begins where necessity ends. And I think necessity, you know, with a pair of AirPods is, you know, totally fine. But you know, when you start getting into these luxury products, they, you know, it doesn't need to weigh as much as it weighs, it doesn't need to have this smooth motion. But it does.
- [41:36]
B
Yes. Because I would pay 500 more for something that had a really beautiful dial like that dial on top. When you explained to me how it spun, my first thought was I want that.
- [41:44]
A
Yeah. And then there's something like Dax Digital audio analog converters. Yeah, digital analog converters. And these headphones have. I mean I'm not, I don't make this like the whole thing, but the DAC from my understanding really does increase the experience of listening to the details in the music from these high res files.
- [42:06]
C
I think I can actually explain this in an interesting enough way for everyone.
- [42:10]
A
About what a DAC is built in. Right. This has a DAC built in that's.
- [42:13]
C
Been tuned for those headphones.
- [42:14]
A
Yeah. And when you turn the switch you can either do like Bluetooth Alex, or you can put it in DAC mode and then you have to put a USB C cable in and run the USB C cable to your iPhone in order to have the high res files go over and you can't get phone calls. But because you need the bandwidth and it turns out Bluetooth doesn't have the bandwidth to do proper.
- [42:36]
C
Yeah, it wasn't built for continuous streams, it was packets going back and forth. So it wasn't built for the stream.
- [42:42]
B
Well, that's why Bluetooth is garbage and always has been in my view, for audio.
- [42:46]
C
Yeah. The thing about a DAC that's kind of interesting is, you know, all the the files, Jason, that you're, you're getting from Qobuz, for example, those FLAC files, as you know, they're all ones and zeros. So what the DAC's doing is it takes in those ones and zeros and then it converts them into an electrical signal that's then able to move what's a magnet in the ear cup in most headphones and that magnets that ring around you can picture in speakers a little bit more easily. That big ring and that magnet's going back and forth. Oh, there we go. Thank you for the graphic. Real time. It's that moves to create the sound, the sound wave. And so what you used to have with like Apple and your, your iPhone and a lot of companies is one of the bill of materials that they know consumers, the average consumer doesn't care a ton about. So they're putting a really cheap one into your, your gear. And so companies that are really focused on, on a great audio go and you know, they spend years and tons of R and D on this one. Little discipline to make the best possible conversion. And so it's part of that chain. So of course it starts with the recording and the track and then the quality of that track in terms of digital or analog and how high res it is. The cables do matter a little bit. Not as much as a lot of people say, but if everything else is dialed in, the cables start to matter and then the headphones, the DAC and the amp, those are all part of your audio chain. And once you get into the really, you know, the upper echelons of all this stuff, you're, you're optimizing every little millimeter nanometer of that chain. And I kind of Jason to help you out because I wanted to find what's the perfect thing to give people kind of peak experience in audio without having to worry about all that stuff. It's really what you did. Like Qobuz, that name unit that's beautiful industrial design, streams Qobuz directly powers your headphone, has a DAC and then that focal Utopia, which is my favorite headphone in the world. It's very expensive, ridiculously expensive. But that whole package together is like if you just want to skip to the end, save yourself all the time and fiddling right to the Utopia worth.
- [44:48]
A
Four or five grand. And man, I mean I wear them every night and I love them. And sometimes if I'm getting a little fatigued, what do you think of my friend Phil Kaplan? Pud has these new crazy headphones. You can see them here.
- [45:01]
C
So we become great friends. And like he hasn't just. So he's become in a few short months, a legend in the headphone world. The headphone subreddit has over a million subscribers or members. And if you. And they've been around for whatever since Reddit basically started. And if you go look at the top posts of all time. Pud's posts, which start this year are like five of the top 15 or five of the top 20. And then he's crossed over. He had a Tweet with like 50,000 likes on it when someone just tweeted about these crazy designs. So obviously that's outside of the audiophile sphere. Yeah. Pud and I have become great friends. He's just actually someone called him Steve Jobless, which I love because it's like only a guy like him. Exactly. With enough idle time and resources can go and do something like this. Like these ideas. Not many people go and actually make them a reality. And I love the Britishness of how he. He poses in these pictures. Always so seriously. He goes and takes these things out in public places. It does photo shoots with them.
- [46:04]
A
What he's doing is just absolutely deranged and wonderful that it exists in the world.
- [46:11]
C
Exactly. And it brings a bit of levity to what's become a pretty stuffy hobby, which I love. Like I. I want to just ruin. And this term audio file, it's just become this gross kind of nerdy gate kept term. And I think an audiophile is just someone who loves sound. Right. And you don't need to know anything. You just need to know you like sound. That's the definition of it. This is a guy who's just bringing like joy. He came to it. We were at a live Headphone show in LA two weeks ago and he brought all this stuff and this show has thousands of people at it and there's just this swarm. He had like this entourage of people around him the whole time laughing. Millions of pictures were taken.
- [46:52]
A
He created distro kid people who don't know which is a distribution system. And before that he did.
- [46:57]
C
He has created real things that are incredibly creative.
- [46:59]
A
Real things in the world. World.
- [47:00]
B
Well, also his book F Companies about his time@f companies.com is the reason why I was initially interested in startups. So I'm. I've been a Philip Kaplan fan since I was at the public library growing up. Andrew, before we let you go, one quick question about the back to the funnel of points about the business and so forth. I really wanted to get your take on what it's like to have a business that benefits from organic search traffic in this era of fading Google dominance. And I'm just kind of curious how that's impacted how you run the company and how you approach reaching out to, to net new people apart from coming on shows like this.
- [47:33]
C
Yeah, it's kind of sad, right? Like we kind of peaked too late in terms of being able to dominate on Google. I'll say. Our philosophy around Google, I think was always the right one, where this was another one of those things where we didn't want to have to constantly chase the algorithm. We thought let's just create the most useful stuff for our target market. That's our North Star. And eventually Google should catch up, which it did. So we're like number one or two when you search for headphones now, which is pretty cool considering we sell stuff that's a thousand dollars and above. So we were at kind of a handicap for that one. But yeah, the SERP now is a big money making engine for Google and they've kind of wiped the organic stuff below the fold. So it's not nearly as powerful as it used to be. It's a cool kind of vanity thing. But what we have done is YouTube is the second biggest search engine still, I think. And so we've really focused on YouTube which is a great place for people to learn about this stuff. We do tons of YouTube content and so we're actually acquiring way more customers through that channel. And it also has the benefit of being able to be highly educational. And we kind of keep. I alluded to this earlier, but we kind of keep this wall between the sales and marketing side of the business and our content side so that we can make sure it's as authentic and trustworthy as possible.
- [48:45]
A
You know, I think that that comes across because the difference for people between, you know, a thousand dollar or I think these Batis 699 are now much cheaper. Yeah, they're 699.
- [48:57]
C
They were a thousand.
- [48:58]
A
Yeah, they were a thousand. And so that's a pretty good entry price when you think about like my wife likes the Bose and they're getting into that range. AirPods 399. Yeah, good. AirPods are 299 maybe or 250 or something. So I think it's worth the investment if I'm being totally honest. But I understand everybody's at a different point in life, so. And maybe this isn't in the budget but man, I do think that this.
- [49:20]
C
Changes your experience to that point, audio is one of the few ways that you can change your mental state really reliably. Reliably, yeah. So, you know, it's kind of. It's like one of life's true pleasures. You can change your environment. So for a certain subset of people, it's totally worth it if you can afford this stuff. I'd never recommend that someone spend $4,000 on headphones. It's crazy. But if you have $4,000 to spend on headphones, I've got the ones that are going to make your life great. But really, at any price point, you can optimize and get way better sound than you're getting with your stock Bose, Sony, and Apple stuff.
- [49:54]
A
Awesome. Everybody go to headphones.com. andrew, you're awesome. Really excited to have met you. And I saw you at the All In Summit, and you're just a great entrepreneur and come back on the show anytime, and we'll see you soon.
- [50:08]
C
Thanks so much for having me.
- [50:09]
A
Love what you guys are doing in Austin. Yeah, yeah, we'll do all right. Very good. And you know, the guest train doesn't stop here, Alex. We see stuff in the news. We see people building interesting things and we have them on the show. So this story we both saw and we thought, interesting. Let's talk. Because military tech's becoming a big thing. So why don't you queue up our next guests and let's talk about what they've done.
- [50:33]
B
Yeah. So our next guests are kind of a four for one. We're not just bringing on one person. We are bringing on four students from the University of Toronto. We'll have them. Come on now. They are actually in a conference room, all queued up. Hey, there they are. And just to show everyone's name, we have Asad Isaac, we have Anna Polyatovya, we have Parthman Mahindra, and Michael Aquaviva. Sorry, I tried to get all those right, guys.
- [50:57]
A
I think you did okay.
- [50:58]
B
Yeah, we prepped before the show, but, Jason, what's cool is they took second prize in a competition, beating Boeing, building anti drone technology using sound waves. This is the coolest science fair project I've ever heard of, and they're building a company out of it.
- [51:12]
A
Okay, so this started as a project. I don't know who wants to speak for the team, but maybe you could explain how drone warfare is changing what's going on in the battlefield, and then how you approach coming up with a product to, you know, maybe help counter drone warfare.
- [51:34]
E
Of course, I can take that one. Like, like, you Mentioned drone warfare is, is changing the landscape of war as we know it. We know about the unfortunate situations in, in Eastern Europe, in the Middle east as well. And we can see drones being used for more than what, what was what we bargained for. In a sense, that drones are used for surveillance, they're used for delivering munitions, they're used as kamikaze drones that, with, with bombs attached to it. And that's changed the landscape of war completely. Now soldiers are not just fighting other soldiers, they're fighting robots that are remotely controlled few hundred kilometers away. And with the advent of cheaper rotary drones, we see the price to acquire them has gone down so significantly that one can build a drone for 50 bucks in your house and strap munitions to it and do whatever you want with it. And as of now, there's no reliable ways of getting these Red team, these drones down. The ways that exist are using special microwaves, lasers, or other fancy drones that you just launch up and you hit the other thing.
- [52:52]
A
Kamikaze drones, you could say.
- [52:53]
E
Exactly. Yeah. But each of those pieces costs like 50 grand, like $50,000. It just makes no sense to keep purchasing these, these expensive kamikaze drones to counteract $50 drones that some guy just built in his, in his basement.
- [53:10]
A
Let me point you there on the, the handcraftedness of these drones. So when we see drones being used in Ukraine or in Gaza, Israel, you know, different fields of combat, they are being hand built, people have the parts and they put them together and they manufacture them locally. Is the reason they do that is because the drones that you would buy from DJI out of China, which is obviously a very controversial issue because the Chinese government owns DGI by default. Any company in China is owned by the Chinese government by default. Those have all kinds of protections in them. With my DJI drone, I can't fly in certain airspace. I can't ram it into something. It will not allow you to do that. So you can just buy the parts, almost like a 3D printed gun and just do whatever you want. Correct?
- [54:04]
E
Obviously, yeah. And with the advent of websites like instructables and so on and so forth, you can build your drone for much cheaper than what you would procure DJI drones for. And there's obviously ways to counteract the limitations of DJI drones by using third party. And we see some of that especially with the DJI FPV drones, the drones with the, with the field of view vision glasses. So yeah, like you said, it is, it is a very interesting field.
- [54:32]
D
Right now I'd like to pop in here specifically about the custom side drones started in the hobby sphere. Most of these drones are developed by people who just wanted to take pictures and wanted to compete and fly their drones around. And so DJI and these other companies kind of came onto what was like a hobby community where people were building these things on their own. So it's kind of like this already existed, these components, the different software, it was all open source. So for a fraction of the cost and for a completely different use case, you have these kits available and very detailed instructions and all the troubleshooting you could possibly need to create a vehicle that flies.
- [55:22]
A
And here's you mentioned instructables, here's that website. And they just have tons of different quadcopters that you can build from scratch. And this is what is happening. And you can build these for what? What do you think? The drones that drop. And I think they drop stuff, right. Is a. Is the key way they've been using them in Ukraine is to drop a grenade on other soldiers. So they build some sort of arm that has the pin and the grenade is active and then at some point they release it and boom.
- [55:58]
E
Pretty much. And each of these drones can be manufactured for under 50 USD from. From what we saw, that is. That is very scary.
- [56:07]
B
But so plus that means, though, that if we have to have a solution, then that costs less than $50. And that's why I think the use of sound and lasers and microwaves is attractive. Because the cost to use each individual bullet or cycle is effectively zero.
- [56:23]
E
Yeah, pretty much. That is. That is where we come in with our solution.
- [56:27]
A
Right. So let's see your solution. What did you build? And this was part of a competition or how did you guys get started as a entrepreneurial group?
- [56:37]
E
Anna is the best person to answer this question.
- [56:40]
D
So we all met together, the programs that we have for engineering. And we saw this challenge that appeared for everybody, and we met together, we were brainstorming ideas. And you can see at the same time how in the world all these problems are emerging. You have different market solutions for it. And we started to think, what do we have? What resources do we have to do this in a viable way? And also maybe not using the current solutions of lasers or microwaves or anything like that.
- [57:08]
A
So show us how it works.
- [57:10]
D
All right.
- [57:10]
A
A little graphic and maybe we can walk through your solution and what you figured out. And then of course, I. The obvious question will be, well, if you put this out publicly, I guess countermeasures are now going to happen. So Maybe we'll talk about escalating tools, but yeah, explain to us what you built.
- [57:30]
D
Basically, what we realize is we're combating really cheap, easy, accessible drones. And since we don't have a lot of money, we fall into whatever solution we can make up with is probably going to be a viable strategy, combat the situation. So the way we work is that we disrupt the electronics that are present in the drone. So the drone needs to know where it is. And for certain kinds of drones and other kinds of drones, the operator needs to be able to see around the drone. So we're targeting these electronics. So on one end we're targeting the navigation system, the way the drone is able to know where it is in the world. So for a certain class, and the other side, where it's just the operator flying through his vision, we also want to be able to interfere with the electronics that are relating to his field and his camera system. So the way we do that is using our ultrasonic sound waves, these are able to, we're able, we were able to find the effect that they had on the actual electronics that are inside these drones, across all varieties of drones, from really expensive DJI drones to fixed wing drones, to the consumer kits that people built. So we also tested with these hobby kits that hobbyists had actually built. And on a wide variety, we were able to notice that there are some effects that can really hamper how a drone flies. And there we're working towards full spoofing of this idea of where the drone is. And so if you can fully control that, you have a lot of control over the what, where the drone thinks it is, or just a general like problem in that sense.
- [59:12]
B
I want to, I want to ask about this. So you essentially shoot sound waves at a drone and then those frequencies can disrupt the electronics inside of it, confusing the drone. Is it the same frequency or tone for each type of drone or do you have to know like, oh, that's a dji. Therefore we want to shoot this frequency at it to actually disrupt it.
- [59:31]
D
So it's there. There's a range of frequencies. Different drones operate under different frequencies and different frequencies have different effects. And we've been cataloging different effects at different frequencies for the different drones. So that's part of the system is identification of the drones. And we also have part of our thing where we are actively identifying. So when we hit an object with the sound wave, it also emits something back. So part of the solution is also to measure and read what's going on and that inter as well as camera footage and just knowing like how drones have various signatures and using a lot of that to fine tune what we want.
- [60:15]
B
Yeah. Okay. And then talk to me about distance because when I was going through the competition, your guys results, I know you're working at I think the 50 meter range, but you guys want to push that out to the 100, 150 meter range. So how efficacious will sound be at a further distance.
- [60:30]
D
So the 100150 range is what talking to industry experts, that's what they feel like is that range that sweet spot where this technology fits in their existing workflows and their existing solutions that they have. And so that's where our goal comes from. With our testing indoors we've been able to push past 50. We look at the actual like the physics behind how sound travels and what are the capabilities and it's very well within like the physical like our understanding of like the medium that is air and sound. So we are very much in like this number isn't like we're pushing cutting edge science. This is something that we can reach realistically. It's about getting there in a cost effective manner. Getting there in a way that also is deployable and works for us.
- [61:20]
A
And you do this from a truck, right? Like you have a truck on the ground that would be on the perimeter of like say a military base or whatever, the target was a hospital or you know, God forbid.
- [61:32]
D
There's two sides to our thing because of how non destructive we are. We are focusing on urban environments where you have civilians. So part of this is that we didn't feel confident that we were going to work with dangerous technology with the limited resources we have. So our technology is very safe to humans. It's incredibly, it's a, if you look at ultrasound, which is kind of what we're focusing on, it's the most safe version in medical imaging as well because it has the least effect on humans. So when it's in an urban environment we look at having these arrays as we call them, positioned around the perimeter and they work together so they are able to direct from different directions on the target. We designed our system that we went to Alberta to work with cars. It was based off the 12 volt car system. So that is also another side of it where it's on a vehicle that is patrolling or it's on that side, on that side.
- [62:28]
A
But now this has become a business. Have you venture capitalists have reached out and funded you as a startup or where are you at with this? Turning into a company.
- [62:37]
D
So that's kind of where we are right now. But I'm going to let Michael answer that question because that's.
- [62:40]
A
Everybody gets a chance. I like this. So four co founders of this team.
- [62:45]
E
So up until now we've mostly, I.
- [62:48]
D
Mean we went to the competition. This was back in end of May, beginning of June. And up until then we were just.
- [62:53]
E
Focusing on perfecting this technology, trying to.
- [62:56]
D
Get it working to the level of readiness that we were looking for.
- [63:00]
E
Since then we've been working on incorporating.
- [63:02]
D
Some of the feedback that the experts in the field told us that we need to work on.
- [63:06]
E
So looking at solutions to improve the.
- [63:08]
D
Range is one of those things that we've been working on. And now we feel like we're at a stage where we're ready to bring on potential investors to, you know, grow this.
- [63:17]
A
I know 1 no one likes to incubate. Are you, are you all still in school? What's the story here? How close are you to graduation?
- [63:25]
E
We are.
- [63:26]
D
So we're all, we're all fourth year engineering students.
- [63:29]
E
So we're basically wrapping up. We have this last year to go.
- [63:32]
D
And then yeah, we're all done or studied after that.
- [63:36]
A
All right. And so you just need like an incubator style check, a small seed check to get going and to, you know, basically not take jobs working for Boeing. So what's going on here?
- [63:47]
E
Yeah, just to answer that question, we're super passionate about this tech and we, we are, we are dedicated to continuing this project. We were fortunate enough to win like for us it was a pretty generous price by the Canadian Department of Defense.
- [64:03]
A
How much was it? 100 grand.
- [64:06]
E
270 USD.
- [64:08]
A
Wow. Quarter million, Quarter milli check. Non dilutive funding. You guys are my heroes. That's amazing. Wow. The cap table stays pure. I like it. That's that Canadian socialism at work. They, they love you see Jason, it's.
- [64:26]
B
Good for business here they are incubating the youths.
- [64:28]
A
Yeah, but you know what? They didn't have to convince venture capitalists to clear market. So that's the only problem. In all seriousness, with these gifts, other governments do it to New Zealand, Japan. I've seen it all around the world where grants are given. Sometimes people get better at pleasing the grant committee than they do at selling venture capitalists on 100 times return, which are two different things. The, the, the grants are given by people who want to feel good about the pitch and not get fired and typically come from academia, et cetera. And then the, on the other side, the Venture capitalists tend to be rabid and care about share price and appreciation and how big the market is. So you got to get, you know, if you. It's fine to get this money. It's, it's non dilutive. It's incredible. You don't dilute your shares, Alex. But at some point you do need to get on the venture train if you want to build a high scale business. Because there's a lot of competition.
- [65:24]
B
Yes. And that's why I'm going to make sure to shout out the name of their company. Actually. Anna, can you move your head your right. There you go. There you go. It's Prandtl Dynamics is the name of the company. And just for fun, guys, tell us why you picked that name. Because I know there's a fun history.
- [65:38]
A
Behind it and clearly they, they spent the 270 on the product, not the logo, which I like to see. That's a good sign, that logo.
- [65:46]
B
That's not how you make friends, Jason. That's.
- [65:48]
A
No, I disappointed. Somebody made that logo in Microsoft paint.
- [65:54]
B
I think the paint's generous. I think they use one crayon on top of the tv.
- [65:57]
A
I think they. Somebody literally took a Sharpie on the whiteboard and then took a picture of it and told ChatGPT to refine it.
- [66:04]
B
Well done, Jason.
- [66:06]
E
We discussed not on the podcast.
- [66:09]
A
It's definitely the way to go about it. But yeah, tell us where the name comes from.
- [66:14]
E
Prandtl is the name of a German scientist and aerospace pioneer. Luffy Pantal. That's his name. And the reason we came up with this is we had to submit a proposal for this competition by the Canadian military and we realized the deadline was about 24 hours away and we still had to come up with a name. And in my, in my aerodynamics class the day before, I read about this panel guy and one of the numbers he created and I, and I thought to myself, okay, I think like using, using a renowned scientist as a name of a company is a good way to go. I mean look at Tesla. And so we just decided on Prandtl Dynamics.
- [66:55]
B
I think it's fantastic. By the way, Jason, I looked up the guide, Ludwig Prandtl and it turns out I have absolutely no idea what he discovered, even after reading several entries about it. So thank God this is not this Week in Physics. But guys, we really, really appreciate it. Thanks for coming on and honestly, I hope to see your technology live in Ukraine to keep them safe asap.
- [67:14]
A
And I look forward to writing your first check and being your first Investor. This sounds like a great idea. And my team will be calling you and we'll do a little get to know each other, deeper meeting. And, you know, I just. I love this thread we're pulling here, which is people start building interesting things, get them on the show. If I invest, great. If other people invest, that's fine too. You know, startups need attention. You know, as somebody told me, you know how kids spell love, Alex? Me, me, me, T, I, M, E. Ah, okay. Time. So, you know, when you get that precious time to read to your daughters or your sons or your they thems, just take that in every chance you get and just, yeah, spend that time. And then founders, I think, are the same. When you're starting out as a founder, you. Somebody just paying attention to what you're doing and showing interest in it is so valuable because they might have feedback and that discussion might motivate the team. And, you know, that's really what this podcast has been all about, is just celebrating founders and talking to them. So congratulations to them.
- [68:26]
B
Yeah, I especially love bringing on students. You know, if founders bring a certain level of energy, a student founder somehow is fractionally more, and it never gets old.
- [68:34]
A
And if you have tips for us, he's AlexWaunch Co and I JMcaunchCo. Just co. We don't have the dot com.
- [68:44]
B
We have the co. We're not headphones dot com. We are the headphones co of launch. Com. Jason, before we go, I want to throw in one quick little note about a company on the Twist 500. We've talked about them together. We've actually had the founders on the podcast. Tollbit raised a Series A, which I think is a good indication that the Twist 500 is on the right track. But they raised a $24 million Series A LED by Lightspeed, all about this idea of licensing data from people who have content and the big, big AI companies. I'm so stoked about this. My question for you, are you shocked that they raised a $24 million Series A in 2024? Seems like a big one.
- [69:24]
A
That tends to be a big one. And it generally means the opportunity. Okay, so there's a lot of reasons of why you could have a large Series A. So when we look at this company, is there a major. Is there major competition for them that's already been funded? Is there a hardware component like that would typically be why the Series A would be larger. So maybe we could. You could tell me a little bit more about the company, what they do, and then what you think they would use this money for.
- [69:56]
B
So, so essentially we've talked a lot on the show and also in the Twist 500 newsletter about AI data licensing. A lot of companies out there like OpenAI, are cutting individual deals with providers out there. You've seen deals with Axel Springer, other publishers. Essentially, AI models want to have unique and accurate data, and it yields better models and better training. So that's kind of the landscape. A lot of folks went out there, scraped the whole Internet and a lot of people were like, hey, I don't like that. So now there's a big tension between people who have words and information and AI model companies. Tolbit and also Human Native, another company on the Twist 500, want to sit in between those two parties, create a marketplace. So that way if you own data, you can license it, and if you need data, you can pay for it. And I thought they were going to experiment for a couple of years, Jason, find their footing and then eventually raise. But the fact that they raised this Series A so quickly after their series seed, I guess, because that was back in earlier this year, and we have a chart, by the way, of their.
- [70:53]
A
Funding history, I don't think that they need a ton of money to do what they're doing. They don't have to build the language models or anything. But this seems like part of the overfunding of AI companies in general. And people think AI is such a big opportunity that they will overfund it or they'll give them credit for work yet to be accomplished. So when people feel very aggressive about a space, in other words, they're convinced the total addressable market is very large. In other words, there's a big prize. When people think there's a big prize, what they'll do, Alex, is instead of saying, I'm going to give you credit for your series, your seed series, like your seed funding, I'll just go head and give you credit for your Series A. Or, I'm doing a Series A, but the size and the valuation will be like a Series B. So sometimes people will just squint a little bit and say, you know what? I really want this deal. I'm willing to overpay for it, or I'll overfund it, or I'll put the seed and the Series A together. Sure. Which is kind of what this feels like. Because think about it, $24 million, this business is a bunch of business development people and some software to handle this licensing and the back end. It's not that complicated. If each person was A total, you know, employment of 150k including benefits, office space, computers and everything. You know, that's a, you know, it's.
- [72:23]
B
A lot of money. It doesn't. They only have like 10 employees, as that chart kind of pointed out.
- [72:27]
A
If you have 10 employees, that's 1.5 million a year. Maybe if you were absurdly generous and they were getting 200k in total comp from the intern all the way up to the CEO or 250, even with a fancy office space or something and you were wasting money, you'd still only be at a couple million dollars a year in salaries. And so this is perplexing that you would raise that much money.
- [72:49]
B
So I have a hypothesis here. Well, first of all, you had, you said earlier on that you raise more money if you have competition. Human Native, also Metro funded. So there is that element to it. But the company said as part of its series they announced that it has secured partnerships with both AI companies and has onboarded 200 publishers. So my thought there is, I wonder how much of this money is going to go to guarantees that they're going to use to bootstrap the publisher side to ensure enough data to actually have a marketplace. Because everyone talks about the cold star problem in the marketplace space, Jason. So maybe they can use this money, hand out some guarantees and then get the whole ball rolling, crush the competition and build a huge marketplace that lasts for a long time. Uber is a marketplace.
- [73:31]
A
Yeah. And there is a new startup called Created by Humans which is out now. Trip Adler is the founder of Scribd and we put a small check into that one. So awesome. If you know Trip Adler, he's pretty awesome. So there are three or four companies going after this and we'll have Tripp Adler on the pod next week, hopefully. So to my team, let's get our investment in this space. We place the bet here too. Trip Adler, we'll have you on next week. We've been talking to him about coming on the program. We were just waiting for the announcement and Sacks is also David Sachs and I are both investors in that less people think Sachs and I hate each other. We may fight about, I don't know, January 6th or you know, other small details, but we still are friends and having dinner this week.
- [74:17]
B
And so when you have, when you sit down and just eat with them, I presume you're not shouting at each other.
- [74:23]
A
No. And even on the pod, I mean it gets heated, but I mean it's just a. The nature of politics today I have a flight and I will see you all tomorrow. He's Alex x.com Alex I'm x.com Jason. The site formerly known as Twitter, great place to communicate with us and subscribe. We do it live three days a week. It happened to be Monday, Tuesday, Wednesday this week, but I think we're going to lock into in 2023aMonday, Wednesday, Friday, live show for everybody to enjoy and keep pace with the industry. Will see you all next time. Bye, bye, bye.