Exits Are Back, QSB Stock & The New America Party? | E2148

Key Concepts

• Qualified Small Business Stock (QSBS) Exemption
• AI investment trends
• Exits and IPOs in the startup ecosystem
• Tokenization of private company stock
• TikTok divestiture and trade deal implications
• Prediction markets (Poly Market)
• CoreWeave acquisition of Core Scientific
• Rollups and acquisitions strategy

Travel and Personal Anecdotes

• Jason's extensive recent travel schedule to Austin, Singapore, Los Angeles, San Francisco, and Santa Barbara.
• Alex's travel plans to New York and San Francisco.
• Jason's yearly whitewater rafting trip on the Snake River.
• Mention of Jason's Tequila launch in LA.
• Reference to a Tesla Supercharger station powered by solar and batteries.
• Discussion of smog conditions in Los Angeles in the past compared to the present.

Politics and the "America Party"

• Discussion about the lack of fiscal responsibility in both major political parties.
• Proposal for Elon Musk to create a new political platform focused on energy, fiscal responsibility, government efficiency, pronatalism, and recruitment-based immigration.
• Idea for the "America Party" to target Senate and House seats and require candidates to sign an agreement to balance the budget.
• Reference to Germany's "debt brake" as a historical precedent for balanced budgets.
• Consideration of whether pronatalism and deficit reduction can coexist without raising taxes, potentially conflicting with the Grover Norquist pledge.

Venture Capital and Exits

• Positive trend in venture-backed startup exits in Q2, the largest since 2021, totaling $67.7 billion according to Pitchbook.
• Discussion of Superhuman's acquisition by Grammarly as an example of smaller exits.
• While IPOs are being discussed more, public listings are still on track for the fewest in a decade.
• Analysis of recent IPOs like Chime, CoreWeave, and Circle, highlighting their strong stories related to crypto regulation and the AI infrastructure boom.
• Hopes for business software and consumer tech IPOs in the future, with Stripe and SpaceX mentioned as potential big players.
• Robinhood's stock performance and its new venture into tokenized stocks.

Tokenization of Private Company Stock

• Discussion of Robinhood offering access to OpenAI equity through a tokenized SPV (special purpose vehicle).
• Consideration of whether tokenizing SPVs is a positive innovation or over-financialization.
• Mention of Jersey, a company that tokenizes secondary market stock purchases, allowing investment in companies like SpaceX.
• Concerns about the potential disconnect between token prices and actual equity value, leading to market distortions.
• The need for consumer education and SEC regulation in the emerging market for tokenized private company stock.

Open Phone Advertisement

• Open Phone is a business phone system for teams that streamlines customer communications.
• Sona, Open Phone's AI agent, handles calls 24/7 and provides call summaries.
• Twist listeners can get 20% off their first 6 months at openphone.com/twist.

Liquidation Preferences Explained

• Explanation of liquidation preferences in venture capital deals.
• Example of a company selling for $3 billion, but preferred shareholders with a 2x liquidation preference receiving $2 billion, leaving only $1 billion for other shareholders.
• Importance of information rights and board seats for investors to understand the cap table and potential risks.
• Analogy of making investment bets with incomplete information, similar to playing poker with only one card.

AI Investment Trends

• AI startups are commanding a significant share of deal value, reaching roughly 2/3 of overall deal-making.
• Approximately one-third of deals are in AI startups, indicating a concentration of investment in the AI sector.
• Discussion of the definition of an "AI company" and the spectrum of companies using AI in various ways.
• Advice for companies from the previous "ZERP" generation to reframe themselves as "AI-first" companies.
• Global perspective on AI investment, with North America and Europe leading in the percentage of venture capital dollars allocated to AI.

Monarch Money Advertisement

• Monarch Money acts as a personal CFO, helping users track their finances and investments.
• It pulls all accounts together, charts net worth over time, and allows for budget visualization.
• Users can sync their finances with their partners for transparent financial management.
• Twist listeners can get half off their first year at monarchmoney.com with the code twist.

Qualified Small Business Stock (QSBS) Exemption

• Explanation of QSBS, which allows investors in C-Corps with assets under $50 million to avoid capital gains tax on up to $10 million of their investment if held for 5 years.
• Details of the expansion of QSBS in the "big beautiful bill," including reduced holding periods for partial exemptions (3 years for 50%, 4 years for 75%, 5 years for 100%), increased cap from $10 million to $15 million (adjusted for inflation), and increased asset limit to $75 million.
• Scenario: investors make note whether it’s worth less than 50 million, and that it qualifies for QPS. If starting the company and buying a billion dollars in servers, can’t claim it’s under 50 million. It would not work for CoreWeave, XAI at certain investment levels, but would work for software companies and social networks.
• The fact that the tax is for federal tax. This can save someone a couple of million dollars.

TikTok Divestiture and Trade Deal Implications

• Update on the potential forced divestiture or ban of TikTok in the US.
• TikTok is preparing a new version of its app, internally called "M2," which users will need to download separately in September.
• This is interpreted as a sign that TikTok is taking the US threat seriously and the Chinese government is willing to allow the divestiture.
• The divestiture is potentially linked to a larger trade deal between the US and China.
• Reciprocity argument: If US social media platforms are not freely available in China, TikTok should not be allowed in the US.
• Concerns about TikTok's potential for spying, data collection, and influence by the Chinese government.

Dangers of Sharing Information on Social Media (Anecdote)

• The first Trump administration (Bolton targeted by Iran) and offered 20 million reward
• A friend of Jason’s who was from an elite force (but not Navy Seal), had to stop using Facebook because AL Qaeda was interested in him. He said he was worth 15-20 million dollars to America, because they had trained him over a decade
• Discussion of how adversaries can use social media to gather information and track potential targets, potentially leading to assassinations or compromise.

Poly Market and Prediction Markets

• Discussion of Poly Market, a prediction market platform.
• Example of the Philadelphia Eagles leading predictions for the next Super Bowl champion.
• Consideration of whether investments in prediction markets are subject to new gambling taxes.
• Advocacy for individual choice and freedom in areas like gambling, crypto, and startup investing.

CoreWeave Acquisition of Core Scientific

• CoreWeave, a cloud provider focused on AI compute, is acquiring Core Scientific, a crypto mining company pivoting to AI.
• CoreWeave is issuing approximately $9 billion worth of shares for the acquisition.
• Core Scientific's stock price declined after the announcement, indicating investor pessimism about CoreWeave's valuation.
• Discussion of CoreWeave's high market cap ($76 billion) and its potential to use its stock to acquire other assets.
• The deal shows CoreWeave’s is using the high market cap to buy other assets.
• If stock is based on more reality, it’s important to sell now.

Rollups and Acquisitions Strategy

• Speculation on whether the Grammarly-Superhuman deal was a stock deal.
• Idea for creating a "rollup" of consumer subscription apps to consolidate infrastructure and leverage innovation across the portfolio.
• Examples of successful rollups, such as IA (IAC) and Match Group.
• Discussion of the current state of the dating app market, with potential opportunities for new startups to address user frustrations.

Closing Remarks

• Call to action to follow Jason Calacanis and Alex Wilhelm on X.com.

Synthesis/Conclusion

The discussion encompasses a wide array of topics from the current state of venture capital and IPOs to the potential of tokenized private equity, the geopolitical implications of TikTok, and even the intricacies of political parties and fiscal policy. The conversation emphasizes the importance of innovation, the role of government regulation, and the individual liberty in financial decision-making. The hosts provide a balanced perspective, acknowledging the potential benefits and risks associated with emerging technologies and financial instruments, while consistently advocating for individual choice.