16 Minutes on the News: Neuralink & Brain Interfaces, TikTok, FaceApp, iHeartRadio

0:00:02 – Hi, everyone, welcome to the A6NZ podcast.
0:00:03 I’m Sonal.
0:00:05 Sonal Choksi, our editor-in-chief,
0:00:07 and I’m excited to share a new show from us today.
0:00:10 16 Minutes, a short news podcast,
0:00:12 where we cover recent headlines of the week,
0:00:13 the A6NZ way.
0:00:14 Why are they in the news?
0:00:15 What’s hype?
0:00:16 What’s real from our Vantage point?
0:00:19 And what are our experts’ quick takes on the trends?
0:00:21 Today’s episode is a little over 16 minutes,
0:00:22 covering TikTok with General Partner
0:00:24 for Consumer Connie Chan,
0:00:26 FaceApp with Operating Partner for Security,
0:00:28 and former CISO@Box, Joel de la Garza,
0:00:29 iHeartRadios Direct Listing
0:00:31 with Operating Partner Jamie McGurk.
0:00:35 But we began with A6NZ Bio General Partner, VJ Pande,
0:00:37 on the recent headlines around one of the companies
0:00:40 co-founded by Elon Musk, Neuralink,
0:00:43 and go over that news for the first half of this episode.
0:00:45 – Elon Musk this week announced advances in BCIs,
0:00:48 or brain computer interfaces, or neural interfaces,
0:00:50 and it’s something that people have been talking about forever.
0:00:52 And while they did acknowledge it’s a long road,
0:00:54 he even hinted, and this is where it gets a little crazy,
0:00:57 but sci-fi cool, he even hinted at the option
0:00:59 of merging with AI in the future.
0:01:01 What’s interesting is they announced a sewing machine,
0:01:03 which is basically a robot that sews
0:01:06 in delicate flexible electrodes called a neural lace,
0:01:08 which by the way is not a marketing term
0:01:09 that Elon Musk invented.
0:01:12 It’s actually a term from the culture sci-fi series
0:01:14 from Ian Banks, which was written
0:01:16 from the late 80s to 2000s.
0:01:18 The processor is an application-specific
0:01:20 integrated circuit, and basically it monitors
0:01:23 brain activity, decodes it, and ideally in the future,
0:01:25 way future claim is that you could even potentially
0:01:28 translate machines to not just read,
0:01:30 but actually even write to the brain.
0:01:32 But the paper they release, which you can download,
0:01:34 it’s called an integrated brain machine interface platform
0:01:36 with thousands of channels, was not peer reviewed,
0:01:37 it’s a white paper.
0:01:39 So I think we wanna figure out, Vijay,
0:01:40 like what’s hype, what’s real here,
0:01:43 especially given the trend of brain computer interfaces,
0:01:45 like where are we really in this journey?
0:01:46 – Well, you know, if you think
0:01:47 about like what this technology can do,
0:01:48 there’s different styles.
0:01:50 Like so one style is to be non-invasive.
0:01:52 That sounds appealing, ’cause you don’t have to like,
0:01:54 literally go into your brain.
0:01:56 But the reality is there’s just very little information
0:01:58 you can get out if you’re non-invasive.
0:01:59 Now, of the invasive categories,
0:02:01 there’s one maybe slightly less invasive technique
0:02:03 where actually they go through your femoral artery,
0:02:05 which is the artery on your leg, near your femur,
0:02:07 and it’s a well-known path to go from there
0:02:09 all the way into your brain.
0:02:11 And they insert through the femoral artery
0:02:12 something that would go into your brain.
0:02:14 So this is invasive, but you’re not drilling holes
0:02:15 in your head.
0:02:18 I don’t know how reliable you can depend
0:02:19 on where it’s gonna stay there.
0:02:21 What Neuralink’s doing is literally drilling
0:02:26 multi-millimeter holes and then sewing wires
0:02:27 directly into your brain.
0:02:28 Like flexible electrodes.
0:02:29 Flexible electrodes.
0:02:32 And so this has the greatest chance for bandwidth
0:02:34 and getting real information out and in.
0:02:36 It’s almost like a direct connection.
0:02:39 I think, you know, all of us have sort of a,
0:02:41 ooh, the ouch kind of reaction to that.
0:02:42 So they make analogy to Lasik,
0:02:45 which if we were, let’s say, 50 years ago,
0:02:46 and I told you that, hey, look,
0:02:48 I’m gonna have these lasers
0:02:49 and they’re gonna fix my eyes.
0:02:52 And by cutting them and reshaping the eyeball
0:02:54 on the lens, I’m gonna do that on the ball.
0:02:55 I think everyone would think that’s insane.
0:02:57 – That’s actually super interesting analogy.
0:02:59 So Lasik, when it was new, it sounded very invasive,
0:03:00 but now it’s like cookie cutter.
0:03:02 – Now, I mean, it’s still, I don’t know
0:03:03 if everyone like loves the idea of Lasik,
0:03:05 but it’s pretty standard, you know?
0:03:08 And so it sounds like there’s a huge adoption issue
0:03:10 or concern, but really I think the question is,
0:03:11 what can it do?
0:03:12 – Okay, so where are we in the technology now
0:03:14 for what it can do and where do you,
0:03:16 given your vantage point in the bio world,
0:03:19 think BCIs or brain computer interfaces are interesting.
0:03:21 – Yeah, it’s interesting to think about where you can start
0:03:22 because start with a population
0:03:24 that really probably is in dire need.
0:03:26 People that are paraplegic, quadriplegic,
0:03:28 their lives are obviously very limited
0:03:30 compared to what they were at birth.
0:03:31 – In terms of movement.
0:03:32 – In terms of movement.
0:03:35 And really just in terms of access to the rest of the world,
0:03:37 because their brains are just like ours,
0:03:40 but they can’t move their limbs and it’s just really tragic.
0:03:41 A natural place to start would be,
0:03:42 and I think where they’re starting,
0:03:44 is just in communication.
0:03:45 And it’s not just typing,
0:03:47 but it’s really being able to use a computer.
0:03:49 And you think about what that means,
0:03:51 that’s the difference between being in the modern world
0:03:53 and being isolated from the modern world.
0:03:55 That would be a huge game changer.
0:03:57 – And is it only for paraplegics and quadriplegics
0:03:58 or are there other like sort of
0:04:00 neurological movement disorders where it could play?
0:04:02 – I think in time, I think they’ll,
0:04:05 would you shift from cases where it’s sort of a easy,
0:04:08 it’s so hard to avoid puns like no brainer,
0:04:10 easy, no brainer kind of a thing to where,
0:04:14 okay, maybe it’s less obvious, but become more accepted.
0:04:16 – Maybe, who knows, 20, 30, 100 years from now,
0:04:18 we could get to the Lasik point.
0:04:19 But let’s talk about the timing.
0:04:21 The company’s been around for two years.
0:04:23 Five years is roughly the FDA process
0:04:25 for them to get to human trials with five patients,
0:04:26 or so they claim.
0:04:27 They said the road is long.
0:04:29 So given the evolution of BCIs,
0:04:31 and then as a topic that’s been around forever,
0:04:33 where do you see, not prediction,
0:04:36 but where are we in the evolution of this entire journey?
0:04:39 – It’s clearly very early in this journey.
0:04:41 What’s interesting though is that we’re actually talking
0:04:45 about even if it’s just a trial, putting this in patients.
0:04:47 – ‘Cause right now I think it’s only in rats implanted.
0:04:48 – And in monkeys.
0:04:50 – And that’s right, he claimed on stage,
0:04:51 I think it surprised his president,
0:04:52 who’s like, “What, are we talking about this now?”
0:04:54 And he realized this, which is so funny
0:04:55 and so typical musk.
0:04:58 – And so to be in humans, that’s a pretty major job.
0:05:00 – Is it, ’cause I was gonna say,
0:05:02 don’t people argue that our DNA is very similar
0:05:02 to that of monkeys?
0:05:03 – Oh yeah, no, but I’m just thinking
0:05:05 from a cultural point of view, not from a technology.
0:05:07 The thing is that actually humans are probably easier
0:05:09 than mice because mice brains are really little.
0:05:11 So actually ironically, I think that part would be easier,
0:05:12 but the reality is now you’re talking about people,
0:05:14 and you don’t wanna mess around with people.
0:05:16 – Okay, so the swimming social acceptance
0:05:17 is a separate issue altogether.
0:05:21 Technologically, and this is the heart of what you love
0:05:22 when science becomes engineering.
0:05:23 – Yes.
0:05:25 – Where is the engineering reality of this?
0:05:27 – Where the engineering comes in is that,
0:05:29 I think much like, we’ve seen Moore’s Law
0:05:31 and other things on the computer side,
0:05:33 once you can make this interface,
0:05:35 then the advances on the computer side
0:05:36 get to translate over.
0:05:39 So for instance, machine learning is a very, very natural way
0:05:41 to take the signals out of our brain
0:05:43 and then use that to interpret what you mean
0:05:44 and what’s going on.
0:05:45 And so as machine learning gets better and better
0:05:48 and that’s sitting on Moore’s Law and other areas of compute,
0:05:49 that will just come along for the ride.
0:05:52 The other one is I suspect the sewing will get better and better
0:05:54 and that you’ll have more and more electrodes in there
0:05:56 and be able to sort of pinpoint other areas.
0:05:58 And so year after year after year,
0:06:01 if it only gets, let’s say 20% better every year,
0:06:03 that’s a dramatic change over 10 years.
0:06:04 – So bottom line it for me though,
0:06:07 because getting that the social thing can happen,
0:06:08 getting that engineering,
0:06:11 it can be empowered by Moore’s Law,
0:06:13 still not sure where it feels a little nutty
0:06:16 that there’s literally electrodes floating around
0:06:18 in our juicy, gooey brain.
0:06:20 And that’s pretty much like a mess if you think about it,
0:06:21 like reality of a hardware.
0:06:23 – But you know, people have artificial hearts.
0:06:24 – Oh, that’s a good point.
0:06:26 – People who have Parkinson’s often have devices
0:06:28 that are actually in their skulls
0:06:30 that are put there to sort of mediate that.
0:06:33 So there’s actually a lot of precedent for this.
0:06:36 I think in all those cases, the alternatives are pretty dire.
0:06:37 – I mean, right now,
0:06:39 if they don’t have like transmitters right now,
0:06:40 they actually get from their rats,
0:06:42 I think they’d take it out by a USB-C sticks.
0:06:44 So in this case, you probably for a while,
0:06:45 I assume you’re gonna be wired tethered.
0:06:47 But again, for this population,
0:06:50 it’s better than they have limited mobility, unfortunately.
0:06:51 – Right, they already have wheelchairs
0:06:53 and devices that they’re tethered to already.
0:06:54 Any final thoughts?
0:06:57 – Yeah, you know, I think this is like a great example
0:06:59 of something we talk about in the firm
0:07:02 is sometimes really great ideas look like bad ideas.
0:07:03 And what makes them great
0:07:06 is that they’re just so inherently controversial
0:07:08 and it’s so inherently paradigm shifting.
0:07:10 And I don’t know what could be more controversial
0:07:13 than paradigm shifting and drilling holes in your head
0:07:15 to access the internet or something like that.
0:07:17 Now, also bad ideas look like bad ideas.
0:07:19 So time will tell and there are many other players.
0:07:21 And that’s what partially makes this particularly exciting
0:07:22 is that there’s gonna be, I think,
0:07:24 in time, an ecosystem of alternatives.
0:07:25 – By the way, DARPA tweeted,
0:07:26 “They’re the ones who pioneered
0:07:28 “the sewing machine technology with UCSF
0:07:30 “and funded it as part of their thing.”
0:07:32 So what Musk is doing is actually using that technology.
0:07:34 But the funnier part is this paper.
0:07:36 So I came out of academia, I’m an editor,
0:07:38 I care a lot about bylines.
0:07:39 I think it’s crazy that the author said,
0:07:43 “Elon Musk and Neuralink, he didn’t list his authors.”
0:07:45 Like, do you think that’s okay if you run a lab?
0:07:48 – Yeah, I mean, I think especially if you wanna reach
0:07:50 the academic audience, that’s not the way to do it.
0:07:51 I don’t know if an average person cares
0:07:53 about the individual authors in there,
0:07:54 but if I were in the company,
0:07:57 I’m sure I would love to sort of have my contributions.
0:07:58 – Yes, exactly.
0:07:59 Well, maybe when they do a peer-reviewed paper,
0:08:01 this is how I justified it to myself.
0:08:03 They might then do that paper with the actual authors,
0:08:05 whereas this was like a marketing white paper.
0:08:07 – You could also choose to interpret it
0:08:07 in a more positive way,
0:08:09 which is that he wants to really acknowledge
0:08:10 the whole company.
0:08:12 – Ah, it could be the other interpretation.
0:08:14 – There’s generous and non-generous interpretations of this.
0:08:15 – I like your glass half full view
0:08:17 of the world of VJ Pande.
0:08:18 Thanks for joining. – Yeah, thank you.
0:08:19 – So the next item on our list,
0:08:22 TikTok has actually been in the headlines plenty of times,
0:08:24 but it’s the third most installed app worldwide
0:08:27 since Q1 of this year behind WhatsApp and Facebook messengers.
0:08:31 It has 1.2 billion MAUs, monthly active users or something
0:08:32 in the last reading.
0:08:34 So given that phenomenon is happening
0:08:35 and it’s been happening for a while,
0:08:38 the news this week was about them having
0:08:40 a huge influence at VidCon,
0:08:42 which builds itself as the world’s largest celebration
0:08:43 of digital video and online creators.
0:08:46 Basically a huge ask conference for a video.
0:08:47 It’s sponsored by YouTube,
0:08:49 but ironically it was not dominated by YouTube.
0:08:52 It was actually dominated by TikTok stars,
0:08:54 according to Taylor Lorenz, a writer at The Atlantic.
0:08:55 This is actually the first time
0:08:58 that TikTok had such a huge presence at VidCon,
0:09:00 but on top of it, the other recent news
0:09:03 is that there’s talk of banning it in India,
0:09:06 which is its biggest overseas market.
0:09:08 The question here, Connie, for you is,
0:09:09 what is going on with TikTok?
0:09:11 Tell us really quickly, what is TikTok?
0:09:14 Frankly, the ability to do short 15 second videos
0:09:15 is a very familiar model.
0:09:17 Vine tried that, many people have tried that.
0:09:19 – It’s a series of short video apps,
0:09:21 but the difference between that and say like a YouTube
0:09:24 is rather than search for anything, there’s no search bar.
0:09:27 The app completely dictates what you see
0:09:28 by using AI algorithms.
0:09:30 – It’s purely AI driven.
0:09:32 There’s no preference selection,
0:09:34 except by what you choose to watch.
0:09:35 – Yeah, I mean, if there’s a TikToker
0:09:37 that you really love, you can follow them.
0:09:39 But when you initially start,
0:09:41 that whole entire feed is dictated by the platform.
0:09:45 So it chooses things that are high quality or high impact,
0:09:46 and it surfaces that.
0:09:49 And that’s why it was such a big deal at VidCon,
0:09:50 because you had all these people
0:09:52 who had trouble becoming famous on YouTube,
0:09:55 because YouTube’s been around for so long right now.
0:09:58 It was so much easier to become an influencer 10 years ago
0:09:59 than it is today.
0:10:00 But on TikTok, it’s different,
0:10:04 because you create one really hit piece,
0:10:07 it can through AI be shown to a ton of people worldwide,
0:10:09 because it’ll trigger the algorithm
0:10:11 to share it with a lot of people.
0:10:13 And that’s how you can gain followers really quickly.
0:10:15 Whereas on YouTube, unless you’re searched
0:10:16 or unless a friend shares it,
0:10:18 it’s much harder to get surfaced.
0:10:19 The article talked about how someone
0:10:22 who tried to become famous on YouTube
0:10:25 struggled for a really long time getting followers.
0:10:27 But on TikTok was able to amass a following far greater
0:10:29 and a much shorter period of time.
0:10:31 – So this particular segment is focused
0:10:34 on our friend Taylor’s piece in the Atlantic on this.
0:10:36 She has an open-ended question at the end though,
0:10:37 which I think is worth answering,
0:10:39 which is how are they gonna make money?
0:10:40 – The answer to me is really obvious,
0:10:45 because TikTok is the English version of a Chinese app,
0:10:46 same company, right?
0:10:47 This is just the American– – All by Byte Dan.
0:10:49 – English version, all by Byte Dan’s.
0:10:51 And then the Chinese one is called Dohing.
0:10:54 And it has a bunch more features and monetization methods
0:10:56 that you just don’t see in the English version yet.
0:10:59 And if you just imagine that stuff translating in America,
0:11:01 which I think it perfectly can–
0:11:04 – Yeah, yeah, I mean, a lot of it is around e-commerce.
0:11:08 A lot of it is around becoming a super app actually even,
0:11:11 allowing people to find restaurants or even book hotels.
0:11:13 You have leaderboards of top brands.
0:11:16 Basically commercials you can instantly buy, right?
0:11:20 In the US we’ve talked about when is this interactive TV
0:11:21 world ever gonna happen.
0:11:22 I don’t think it’s gonna happen on the TV.
0:11:23 It’s gonna happen on the mobile.
0:11:25 And short videos are a great way to do it,
0:11:27 because short videos are in essence commercials
0:11:28 you wanna watch.
0:11:29 They can become commercials you wanna watch.
0:11:30 – That’s such an interesting idea.
0:11:32 What’s fascinating to me, because in China
0:11:35 you have a lot of these TikTok or Dohing short videos,
0:11:39 and you can purchase directly there with like three taps.
0:11:42 Right after the video loops twice, a little thing pops up.
0:11:44 You can click in, you can buy it,
0:11:46 and it gets delivered to you.
0:11:48 I’m talking like buying physical things.
0:11:50 Fruit is a huge category.
0:11:51 – What?
0:11:52 – I’m not kidding.
0:11:54 Fruit, random gadgets, like for the fruit,
0:11:57 the grower who’s growing oranges,
0:11:59 he’s showing you his orange farm,
0:12:00 or he’s squeezing the orange juice.
0:12:02 So you see how juicy it is,
0:12:04 and then you can just buy a box of oranges.
0:12:05 – That’s a thing.
0:12:06 Oh my God.
0:12:06 – That’s a huge thing.
0:12:07 – That’s fantastic.
0:12:09 The fruit meme is way better than a 10X engineer meme,
0:12:10 I gotta say.
0:12:12 Well Connie, thank you for joining this segment.
0:12:15 All right, so we’re doing the next segment on FaceApp,
0:12:17 which is an app that is in the headlines this week.
0:12:20 First of all, what it does, it basically morphs your face.
0:12:22 So if you’re a woman, you can change your gender
0:12:23 into a man, vice versa.
0:12:25 It can show you how you age,
0:12:26 like how you look when you’re old.
0:12:28 And of course people are freaking sharing this,
0:12:30 ’cause how interesting to share it.
0:12:32 Now I personally am too vain to share something like that,
0:12:33 so I would not even share that.
0:12:36 The reason it’s in news is not because it’s going viral,
0:12:37 ’cause that’s not news.
0:12:40 The news is that there are claims of Russia
0:12:43 collecting facial recognition data based on this.
0:12:46 And it’s so concerning that a US senator
0:12:49 wrote a letter to the FBI and FTC asking for investigation
0:12:52 into its potential national security threat,
0:12:54 and its risk to the privacy of Americans,
0:12:55 given the fears of election hacking.
0:12:57 The privacy policy basically says,
0:12:59 you’re allowed to have a perpetual, irrevocable,
0:13:01 non-exclusive, royalty-free, worldwide, fully paid,
0:13:05 transferable, sub-licensible access to your photo,
0:13:07 but that’s kind of what all apps already do.
0:13:09 So what I really wanna talk to you about Joel,
0:13:11 especially as a security expert,
0:13:13 I wanna get your take on should people be worried,
0:13:14 the people who downloaded this,
0:13:16 or is this just app business as usual?
0:13:18 – Well, I’m a strong believer in the fact
0:13:20 that you should never waste a crisis, right?
0:13:22 And so any opportunity we have to get privacy
0:13:24 front of mind in people is really important
0:13:26 because consumers just don’t really appreciate
0:13:27 or understand privacy.
0:13:30 That said, I think that you actually really,
0:13:32 risk is a really funny thing,
0:13:33 and it varies from person to person.
0:13:35 And so does the average teenager
0:13:36 need to care about this?
0:13:37 Probably not.
0:13:40 If you are a Democratic or Republican politician
0:13:42 that is in the public space,
0:13:44 it’s probably a bad idea that you give your access
0:13:46 to your photos to anybody, right?
0:13:47 – Why?
0:13:48 I don’t understand the distinction there, to be honest.
0:13:50 – Well, there may be photos in there
0:13:52 as a high-profile individual
0:13:54 that may make you susceptible to things like blackmail.
0:13:56 When you’re a public official,
0:13:58 when you’re working in the national security space,
0:14:00 when they say something as a threat to national security,
0:14:02 they don’t always mean that like,
0:14:04 they’re gonna get the launch codes and take our weapons.
0:14:07 They often mean that you’re gonna get some kind of information
0:14:09 that you can use as leverage over a public official.
0:14:12 And if you look at most of the national security investigations
0:14:14 that happen in this country,
0:14:15 they’re usually over someone trying
0:14:17 to get negative information,
0:14:20 or they’re over some form of kind of information leakage,
0:14:21 right?
0:14:23 – So that helps explain the national security side.
0:14:25 I’m very patriotic, and of course,
0:14:27 I’m worried about people hacking elections or other things.
0:14:29 It did strike me as kind of xenophobic, actually,
0:14:32 to just blandly accuse an entire country
0:14:34 of anything that comes out of Russia and China
0:14:35 and all these other countries is dangerous.
0:14:37 Like, that just feels like a little bit of fear mongering.
0:14:38 – I think the important thing
0:14:39 that we should be talking about,
0:14:41 rather than saying that Russia, China,
0:14:42 and these countries are evil,
0:14:45 that’s just kind of a ridiculous position to take, right?
0:14:47 I think the real discussion we should be having
0:14:50 is that every country conceives of privacy in a different way.
0:14:51 – What’s the US is?
0:14:53 – Well, in the US, generally,
0:14:57 we’re in this weird place where convenience or features
0:14:58 or user experience, right,
0:15:01 will always trump privacy and security.
0:15:02 So if I can provide you with a widget
0:15:05 that gives you 15 minutes of joy,
0:15:07 there’s some amount of private data
0:15:08 that you’ll let me extract from you.
0:15:11 And so I think the fundamental problem here
0:15:15 is that US consumers generally undervalue their private data,
0:15:17 whereas I would say German or European
0:15:20 or people that have very strong data protection cultures
0:15:21 have a much higher price on their data.
0:15:23 But these apps are global.
0:15:24 I was going to say these glass,
0:15:27 ’cause it’s like global apps, these apps are global.
0:15:29 And so is their infrastructure.
0:15:30 Like in the case of FaceApp,
0:15:33 specifically the servers are in the US,
0:15:35 or so they claim in their response to the concerns.
0:15:38 They also claim that images are deleted within 48 hours
0:15:39 from the upload date.
0:15:42 So I guess my question for you is,
0:15:44 as a user in a practical way,
0:15:46 how should someone who’s not a politician
0:15:47 with a high profile,
0:15:49 how should someone really think about
0:15:50 whether they should trust these apps or not?
0:15:53 I mean, there’s the no brainer kind of answer
0:15:54 to that question, which is that if you have stuff,
0:15:55 you don’t want other people to see,
0:15:57 don’t give them access to apps
0:16:00 that let them get access to that information.
0:16:03 And so generally, I think, be conscious and cognizant
0:16:05 of the fact that these apps are taking information,
0:16:06 they may be taking information
0:16:08 that you’re not fully aware of.
0:16:10 The way that these companies present their terms of service
0:16:12 is really designed so that they get people
0:16:14 to kind of buy in and accept that transfer.
0:16:15 – Quite frankly, I don’t know anybody
0:16:17 who really fucking reads them.
0:16:18 I just accept.
0:16:20 I’ve never read a policy.
0:16:21 – I must shamefully admit
0:16:22 that I am one of those people that does.
0:16:24 I’m also gonna be home alone on Friday,
0:16:28 but the fact of the matter is that this language
0:16:30 and this legalese is just done to confuse consumers.
0:16:33 And so exercise some level of practical caution.
0:16:36 Understand that access to your private information
0:16:37 is actually really important.
0:16:39 And as we move into this new world
0:16:40 and you look at these new apps,
0:16:43 these are essentially becoming massive data collection efforts.
0:16:44 – And just wait till we add Neuralink
0:16:47 and BCIs into this whole equation.
0:16:48 Well, thank you for joining, Joel.
0:16:52 So let’s do the last segment of the news on direct listings.
0:16:54 Our next agency expert is Jamie McGurk,
0:16:57 who runs our corporate development function
0:16:59 and is a former investment banker.
0:17:02 We recently put out a post all about direct listings,
0:17:04 which explains what they are, how they work,
0:17:06 and especially given this new trend of companies
0:17:09 like Spotify and Slack having done them.
0:17:12 So the news here, though, is that iHeartRadio,
0:17:15 which this shocked me because first of all,
0:17:17 I’m into podcasting and they’re an audio company
0:17:19 and they’ve been around for a while
0:17:20 and they just announced a direct listing
0:17:21 and that shocked the hell out of me.
0:17:23 So like that’s the news, like what’s going on?
0:17:25 – No news, actually.
0:17:26 – Okay, you’re telling me
0:17:28 we shouldn’t bother recording this episode now?
0:17:30 – So I guess what people don’t realize is
0:17:32 this product has been around for a long time.
0:17:34 There were two primary use cases previously
0:17:36 for doing a direct listing.
0:17:38 One was companies emerging from bankruptcy
0:17:40 and the other was companies being spun off
0:17:41 of larger companies.
0:17:41 – Ah, interesting.
0:17:44 – And so iHeartRadio falls into the former category
0:17:45 emerging from bankruptcy.
0:17:48 So the direct listing product has been
0:17:51 more or less repurposed by Spotify and Slack
0:17:55 in recent history as an alternative to the IPO.
0:17:57 They don’t suffer the dilution of a traditional IPO
0:17:59 and there’s no lockup period.
0:18:01 So traditionally you would have a 180 day lockup period
0:18:03 in a traditional IPO and that goes away.
0:18:08 So there’s strong momentum for a new way of going public.
0:18:09 – I mean, basically the point of direct listing
0:18:11 is that the company’s not raising capital.
0:18:12 – They’re not raising capital
0:18:14 and they’re not doing so at an artificially low valuation
0:18:16 that exacerbates the dilution
0:18:18 that they would otherwise get from fundraising.
0:18:21 – Right, but just in the big picture why this matters,
0:18:22 why do you think it’s gonna be such a big trend
0:18:24 in terms of the importance of it?
0:18:26 – In our blog post we talked about several different features
0:18:27 of the direct listing
0:18:30 and why we think that it’ll be more popular.
0:18:31 You know, I think the short soundbite
0:18:34 is that there’s a lot of things broken
0:18:36 about the legacy IPO process.
0:18:38 Who really benefits?
0:18:39 Is it in the company’s best interest to raise capital
0:18:41 or to go public in this way?
0:18:42 – Yeah, by the way, a lot of those are structural things
0:18:44 that are due to lack of technology
0:18:47 and transparent information and just time and old policies.
0:18:49 – Doing things the way that things have always been done.
0:18:51 So it’s more of an inertia argument
0:18:54 as to maybe why the legacy IPO has persisted
0:18:56 as long as it has.
0:18:57 You know, it works at raising capital
0:18:59 and it works as entering the public markets.
0:19:01 It just so happens there is a better way.
0:19:02 That’s the trend that we see.
0:19:03 That’s what you and I wrote about.
0:19:05 – So to bring it back to iHeartRadio,
0:19:07 then why this is different Spotify and Slack
0:19:09 versus the iHeartRadios of the world?
0:19:11 – So I think iHeartRadio got a lot of attention
0:19:14 because it fell in close time proximity to Slack.
0:19:15 It also has a business model
0:19:17 that is very similar to Spotify.
0:19:19 I think they drafted off the PR headlines of those two
0:19:20 about the direct listing,
0:19:23 but the emerging from bankruptcy use case
0:19:24 is a well-worn path.
0:19:26 It just so happens that they had similarities
0:19:28 to two of the recent more, you know,
0:19:30 the newer use case direct listing.
0:19:31 – Thank you, Jamie, for that.
0:19:33 And just to be clear to everyone listening,
0:19:34 please note that the content here
0:19:36 is for informational purposes only,
0:19:38 should not be taken as legal business tax
0:19:39 or investment advice
0:19:41 or be used to evaluate any investment or security,
0:19:43 including the ones that we mentioned.
0:19:44 It’s not directed at any investors
0:19:47 or potential investors in any A6 and Z fund.
0:19:49 And honestly, any investments or portfolio companies
0:19:52 mentioned, referred to or described in this episode
0:19:54 are not representative of all A6 and Z investments.
0:19:56 And so there can be no assurance
0:19:58 that the investments will be profitable
0:19:59 or that other investments made in the future
0:20:01 will have similar characteristics or results.
0:20:03 You can find a full list of investments
0:20:05 at asixandz.com/investments
0:20:07 and more details on our disclosures
0:20:08 at asixandz.com/disclosures.
0:20:12 And thank you everyone for joining our news segment today.