11x in Trouble and China's AI Acceleration | E2103

11X Startup Controversy, Chinese AI Advancements, and Founder Friday Initiatives

Key Concepts:

• 11X: Startup accused of misusing customer logos and potentially misreporting revenue.
• Contracted ARR (CARR) vs. ARR: Contracted ARR includes future annual recurring revenue, while ARR is actual recurring revenue.
• Risk of Ruin: The risk of losing an entire bankroll or investment due to a single, large bet.
• Ideal Customer Profile (ICP): A detailed description of a business's most valuable customer.
• Founder Friday: A community initiative for founders to share wins, fails, and receive feedback.
• DeepSeek: A Chinese AI company rapidly advancing in AI model development.
• Xiaomi SU7: Xiaomi's entry into the electric vehicle market, a luxury car rivaling Porsche.
• Whiz: A successful company where the person with the pain point, budget, authority, and user role was the same individual.

11X Startup Controversy

• Allegations: 11X, backed by Andreessen Horowitz, is accused of misusing customer logos (e.g., ZoomInfo, AirTable) and potentially misreporting revenue.
• Logo Misuse: ZoomInfo claims 11X continued using their logo for four months despite demands to stop and threats of legal action. AirTable stated they were never a customer and didn't authorize logo usage.
• Revenue Reporting: Allegations suggest 11X may have been "massaging" revenue numbers after customers broke their one-year contracts, effectively turning them into trials.
• Contracted ARR vs. ARR: The discussion clarifies the difference between contracted ARR (includes future revenue) and actual ARR (money in the bank).
• Company Response: 11X stated they never claimed customers they didn't have but regretted not removing logos promptly.
• Jason's Perspective: The situation suggests poor internal organization or excessive rule-bending. He emphasizes the importance of owning mistakes and accountability.
• SEC Implications: Jason recounts his experience with the SEC, highlighting the potential for securities fraud if revenue is misrepresented when selling company shares.

Michael Saylor and MicroStrategy's Bitcoin Strategy

• Audacious Bet: Michael Saylor's strategy of investing heavily in Bitcoin with MicroStrategy (MSTR) is described as audacious and insane, with potentially high reward or complete disaster outcomes.
• Peer Pressure: Saylor is accused of pressuring other companies, like GameStop, to invest in Bitcoin, creating a "pump" and potentially a Ponzi-like scheme.
• Conflict of Interest: Saylor personally owns a significant amount of Bitcoin (17,732 coins bought at an average of $9,882 each), creating a conflict of interest as his personal wealth is tied to MSTR's Bitcoin strategy.
• GameStop's Potential Move: GameStop is considering adding Bitcoin as a treasury reserve asset, prompting Saylor's peer pressure tactics.
• Risk of Ruin: The discussion touches on the "risk of ruin" concept, emphasizing the danger of putting all available funds into a single, high-risk investment.

Chinese AI Advancements

• Rapid Development: Chinese AI companies, like DeepSeek, Alibaba, and Ant, are rapidly releasing new AI models and technologies.
• DeepSeek's Pace: DeepSeek has released multiple versions of its foundation and reasoning models within a year, showcasing incredible speed.
• Model Examples: Alibaba released QWEN-32B (32 billion parameter reasoning model) and Ant introduced a new cost-effective training method.
• Downward Pressure on Pricing: The availability of free, open-source AI models from China could create downward pressure on pricing for commercial AI services.
• Security Concerns: Concerns are raised about using Chinese AI products due to security risks and data privacy.

Xiaomi's Expansion into Electric Vehicles

• Xiaomi SU7: Xiaomi, known for phones and lifestyle products, has entered the electric vehicle market with the SU7, a luxury car rivaling Porsche.
• Competitive Pricing: The Xiaomi SU7 Ultra is priced at around $73,000 USD, significantly lower than comparable luxury EVs.
• Ambition Unleashed: The move highlights the ambition of Chinese companies to compete in various industries, including automotive.
• Copying and Innovation: Chinese companies are rapidly copying and improving existing technologies, creating downward pressure on prices and more choices for consumers.

Ideal Customer Profile (ICP) and Whiz's Success

• Four Personas: When selling a product, you face four personas: the person with the pain point, the person with the budget, the person with the authority, and the person who will use the product.
• Mega Hit: A "mega hit" occurs when all four personas map to a single person, leading to rapid product adoption.
• Whiz Example: Whiz's success is attributed to the fact that the security person/developer had the pain point, budget, authority, and user role.
• Ideal Customer Profile (ICP): The discussion clarifies that the ideal customer profile is a singular, well-defined target.
• Uber Example: The ideal customer profile for Uber Black in its early days was a CEO or VC with a six-figure salary who traveled frequently.

Founder Friday Initiatives

• Founder Friday Format: Six founders meet around a table for one hour, sharing wins and fails (2 minutes each) and providing feedback to each other.
• Community Building: The goal is to create a supportive community where founders can learn from each other's experiences.
• Sponsorship Opportunities: Lawyers, accountants, and cloud companies can sponsor Founder Friday pods.
• City Spotlights: Cities with active Founder Friday chapters will be featured on the show, sharing their biggest lessons.
• Founder Friday Bracket: A March Madness-style competition featuring 16 startups from Founder Friday communities around the world.

Conclusion

The episode covers a range of topics, from the controversy surrounding 11X and MicroStrategy's Bitcoin strategy to the rapid advancements in Chinese AI and Xiaomi's entry into the EV market. It also highlights the importance of understanding the ideal customer profile and the value of community initiatives like Founder Friday. The discussion emphasizes the need for accountability, ethical behavior, and continuous learning in the fast-paced world of startups and technology.