Generated Transcript

[00:00:15] David Hornik
Hello and welcome to. Oh my God. You just wanted to hit me. Welcome to VentureCast. I am David Hornik of August Capital.

[00:00:26] Howard Hartenbaum
And this is Howard Hartenbaum hitting David Hornik of August Capital.

[00:00:30] David Hornik
And we are back after a hiatus. Hiatus? Why did we have a hiatus?

[00:00:36] Howard Hartenbaum
It’s only like three weeks.

[00:00:38] David Hornik
You sure felt longer.

[00:00:41] Howard Hartenbaum
Why did we have a hiatus?

[00:00:42] David Hornik
You had to go to Germany for a board meeting.

[00:00:45] Howard Hartenbaum
Yeah, that was it. It’s all my fault.

[00:00:47] David Hornik
Exactly.

[00:00:48] Howard Hartenbaum
I almost got stuck there because of all the volcanic ash.

[00:00:52] David Hornik
Yeah, it makes you think twice about having board meetings out in Europe, doesn’t it?

[00:00:57] Howard Hartenbaum
I was thinking it would be fun to get, get like trapped there for.

[00:01:00] David Hornik
A while, like I can’t come back.

[00:01:02] Howard Hartenbaum
I’d be emailing, I’d be like, you know, I’m sorry, David, I can’t do venturecast because I’m stuck in Paris.

[00:01:08] David Hornik
Yeah, I always. I did think, now, obviously if you don’t have money, you’re kind of bummed out because you’re stuck. You’ve kind of stretched to take this vacation and then suddenly you have another week and you can’t get out. But if you have, if you have money, you can afford to do it, then just go. All right, let me know when I’m out of here. In the meantime, I’ll be at the.

[00:01:23] Howard Hartenbaum
Musee d’ Orsay or lying on the.

[00:01:26] David Hornik
Beach or whatever in Paris.

[00:01:28] Howard Hartenbaum
To each his own.

[00:01:29] David Hornik
Whatever. I’m just saying, wherever you are. What beach in Paris?

[00:01:32] Howard Hartenbaum
I wouldn’t go to Paris. I would leave Paris.

[00:01:34] David Hornik
You’d be like, I’m stuck in Paris. And then you get on the tgv.

[00:01:37] Howard Hartenbaum
That’s exactly what I would do.

[00:01:39] David Hornik
And down to the south of France.

[00:01:41] Howard Hartenbaum
I prefer nature over city. Like nature boy, Nice.

[00:01:47] David Hornik
That’s all fine by me. So what’s happening?

[00:01:52] Howard Hartenbaum
Nothing has happened in the world in the past three or four weeks since we’ve done this.

[00:01:56] David Hornik
Let’s see, the market has dropped a mere, what, 1100 points since last we did VentureCast.

[00:02:04] Howard Hartenbaum
Yeah, it was at an 18 month high and now it’s back to like where it was six months ago or so.

[00:02:09] David Hornik
That kind of sucks if you have stock. Well, it’s not even that. I mean, see, I’ve had, I’ve been having this conversation with, with my wife because, you know, we’re gonna take a trip to Europe this summer and the euro’s been dropping and she said, oh, you know, that’s great, look, the euro’s dropping against the dollar. It’s like, well, that’s not necessarily great. In the long run. Right. I mean, it’s fine for the dollar to be strong against the euro, but not if it’s because the European economy is crashing and burning and taking us down with them.

[00:02:40] Howard Hartenbaum
Yeah, currencies, you know, every five years or so they swing hard in the other direction and if you just wait, they come back. There’s always a good reason for it.

[00:02:49] David Hornik
I never quite understood how it is that the euro got so much stronger than the dollar to start.

[00:02:54] Howard Hartenbaum
Could be our debt.

[00:02:56] David Hornik
Oh, that. But yeah, so it’s interesting. So I think that obviously from where we sit in Adventure World, the biggest challenge with the market dropping 1100 points is it looked like for a second there, there might be a public market where we could take our companies public again.

[00:03:13] Howard Hartenbaum
I think we’ll be waiting for a while. Now.

[00:03:15] David Hornik
That sucks, right? I mean, now these M and A deals, there’s been. The M and A market’s kind of heated up. There are more M and A deals getting done, but they’re not getting done at very good prices. Right? I mean.

[00:03:28] Howard Hartenbaum
Well, I think it sucks more if you’re, you’re. Regardless of the prices. Imagine if you’re a company in Europe and you’re trying to get acquired by a big company like Nokia and now probably going to go through some big restructuring as a result of what’s going on there.

[00:03:40] David Hornik
Nokia’s.

[00:03:41] Howard Hartenbaum
I’m sure they are. You heard it here first. All right, July 1st.

[00:03:45] David Hornik
Did you, did you read this thing that Yahoo is about to announce some giant deal with Nokia, that their solution to their, to their like, mobile strategy is that they’re going to do some big deal with Nokia. That’s their answer. How’s that sound to you?

[00:04:00] Howard Hartenbaum
Doesn’t seem like a good idea to me.

[00:04:01] David Hornik
If you were running Yahoo, would that be you or Carol Bartz? You go, we could do something with, you know, with the iPhone or, you know, Maybe this new Phone 7 platform or you know, figure out how to develop on Android or. Well, Nokia is coming around. You wouldn’t have gone with Nokia.

[00:04:24] Howard Hartenbaum
I know a lot of nice people that work there. It just seems like they’re a little bit behind the curve right now and coming out with the, with what people want.

[00:04:32] David Hornik
I mean, if Apple could help. I mean Apple, excuse me, if Yahoo could help them drive a platform strategy and they could go arm and arm, that could be great. I don’t think that’s what’s going to happen. But I mean that, you know, sometimes.

[00:04:45] Howard Hartenbaum
When I travel in the US to some other place and I look at what type of laptops they’re using. And they’re not all Apple. It makes me remember how in Silicon Valley, you know, we’re a little bit of a different market here. But now when I travel a place like Utah for example, and I’m sitting in the airport and I’m looking around and there’s people all on iPhones.

[00:05:07] David Hornik
Everyone’s on iPhones everywhere. Yeah, it’s amazing. But Nokia does actually this is the thing though. Nokia is huge, right? Worldwide, Nokia is huge. But from a next gen platform or things going mobile, smartphone, etc. You know, I think the momentum has swung away.

[00:05:26] Howard Hartenbaum
Yeah, but you know, they’re aware of it, they’re not denying it. So I wouldn’t count them out.

[00:05:31] David Hornik
No, I don’t count them out.

[00:05:32] Howard Hartenbaum
They only make like 500 million phones per year or something right now and.

[00:05:37] David Hornik
Their stuff is good. Well, anyway, it’s interesting. So did you see that AdMob got approved? They’ve approved the AdMob deal.

[00:05:46] Howard Hartenbaum
So I was betting against that. I didn’t bet any money against it, but anybody who asked, I said, I can’t see any way how the administration is, FCC is going approve that. I look at this and just say to myself, our administration wants to like bash companies and this is a good way of bashing them, not letting them do what they want to do. So based on that alone, I thought they were going to say no to the deal.

[00:06:12] David Hornik
You know what I think happened? I think so. My understanding is that while this thing was trying to get done, Steve Jobs was annoyed about it and he made a bunch of noise and tried to, he tried to influence the process. Right. By through various means, he and Apple tried to influence the process. And I think that if he hadn’t done that, then the process would have worked its way through and they would have said, nah, this is not a great idea. But meanwhile, Apple bought their own and then Jobs sort of made a bunch of noise. And I think that the government said, you know, look, if you’re so. If you’re so hell bent on getting in the way of this thing, it must be fine for competition, right? You know, can’t possibly be that much of a problem for competition if you’re so. If you’re, you’re so angry about it. So it’ll be interesting. But you know, the most amazing thing to me, I was reading, I’d heard this actually, but then it was reported And I think TechCrunch that on this $750 million AdMob deal, there was a $700 million breakup fee. So if it hadn’t happened, the AdMob team actually the company would have received $700 million in compensation for the deal not happening and get the company back and then go do whatever they want, resell it for 750 million bucks, whatever. So do you think they were hoping that, that it would get blocked or do you think they’re, they’re just glad to be out of limbo and go, you know, build a company?

[00:07:39] Howard Hartenbaum
Well, I think that, you know, there’s different people at the company. There’s probably a lot of junior people there who were happy to go to Google because it’s safe and secure and it’s a good place to work. And if they were, if the deal was canceled, then maybe, you know, the future wasn’t as secure. They’re different people.

[00:07:57] David Hornik
Yeah, no, it’s just, it’s interesting. I mean it’s a bit, it’s, it was a big deal. On the other hand, you know, look, mobile advertising, it’s not like mobile, when I looked at it, it’s like, you know, we’re just in moment one of mobile advertising, right? And the fact that Apple now has launched its own platform and etc. I mean there’s going to be a ton of activity as behavior moves to these smartphones, moves to mobile, moves to the iPad. You know, there’s going to be, there’s just going to be a ton of activity. And so the idea, at least from where I sat, that AdMob was somehow, the acquisition of AdMob by Google was somehow anti competitive or would create some problems, you know, come off it.

[00:08:40] Howard Hartenbaum
I’m surprised at how when these deals get announced, how it impacts some other entrepreneurs. And right after the deal was announced, I was talking to another entrepreneur in the mobile ad space and he said to me, well, our revenue is almost 5 million a year. And I said, well what is almost? He said well it’s three and a half but if you round it up it’s fine. And so if you look at their valuation and they were probably doing about 20 million in revenue and you do the math and we’re worth at least a $200 million pre money right now. I just said that’s a lot of money and maybe somebody paid it, maybe somebody didn’t, but it wasn’t me. I liked the guy. I just thought that the company being worth $200 million with three and a half million in revenue was a little bit, it’s a stretch, overly optimistic. It’s a stretch, but I like optimistic Guys, just not overly optimistic.

[00:09:27] David Hornik
No, but, you know. Yeah, you could be optimistic without having unreasonable expectations about your valuation. Right. I had one guy pitch me, and I won’t mention the company, but it’s a company, you all know, and it’s a company that was acquired by a big company and whatever. But when they came to pitch me, they were very. It’s a very early on. And slide number three was. And were raising $80 million or something. And up until then, I thought it was just a standard series B pitch, and suddenly was. They were raising $80 million. And I said, hang on a second. Is that a typo or that’s the valuation you want or whatever? No, no, no. We need to raise that much money to take our service to the next level. We’re going to raise $80 million.

[00:10:07] Howard Hartenbaum
And I said, you know, IPL was raised 80 million.

[00:10:09] David Hornik
I was like, well, you know, either you intend to sell the vast majority of your company or your expectations for where your understanding of where you are are very different from where I think you are. You know, we’re not. This is. We’re not talking about Groupon with, you know, tens of millions in revenue or anything else. This was a company with zero millions of revenue. You know, some relatively interesting technology, but very unproven. And it was like, well, this is what we need was gonna drive valuation. So it did. I mean, that deal didn’t get done.

[00:10:43] Howard Hartenbaum
And what did they do? Do you know what they did in the end?

[00:10:46] David Hornik
Yeah, they sold. Oh, no. They never raised it. And they ended up selling to somebody. To a big company.

[00:10:51] Howard Hartenbaum
Yeah.

[00:10:53] David Hornik
Which is fine. Like, they, you know, they got. They got. They got a deal done. That’s fine. I’m not. Look, you’re a lot to. I mean, who am I? I’m just a vc. I sit in a. You pitch me a business, you tell me how much money you want to raise or don’t want to raise, and I say, okay, I’ll invest that or not, but if you don’t want to do it, then great.

[00:11:13] Howard Hartenbaum
$80 million.

[00:11:14] David Hornik
A lot of money for any company to raise.

[00:11:17] Howard Hartenbaum
That’s like an amount you might raise in an ipo.

[00:11:19] David Hornik
In the good old days, that was an ipo. Remember the good old days.

[00:11:23] Howard Hartenbaum
You mean when we had IPOs?

[00:11:24] David Hornik
When there were IPOs? No, when there were small cap IPOs. When you could have a company that had, you know, $40 million in revenue but was growing nicely and, you know, maybe was profitable around the edge of profitability. And you just go, oh, all right, let’s Take that public and get some capital to go build it. That’s not the case anymore.

[00:11:41] Howard Hartenbaum
It’s interesting language. It was raising money to build the business instead of an exit, which is very different psychology. We’re having an exit, not we’re raising money to build our business.

[00:11:52] David Hornik
Yeah. Now, if you look. I mean, actually, one of the things that. When I was talking to the guys about joining August Capital, the thing that I appreciated about the guys who are now our partners is that they would talk about the businesses they’d built and what they were, how big they were now, what they had become. It was important to them, not just that they had made a lot of money in the process of helping fund companies, but that they were involved in the, you know, early days of Microsoft and Intuit and sun and Compaq and whatever else. And those companies had become big, interesting businesses. Right. A little bit like Skype. Right. I mean, for you to have been involved in the. In the very early days of Skype is amazing. And that there was a huge MA transaction is amazing. It was great.

[00:12:38] Howard Hartenbaum
But what makes me happy is every time I see somebody’s business card and there’s a Skype ID on it, that kind of makes me happy.

[00:12:43] David Hornik
Yeah. Because I’m watching the TV or I’m.

[00:12:46] Howard Hartenbaum
Watching TV and there’s a commercial about some great app you can get on the iPhone, and they’re using Skype as an example. Or Oprah is on there, and she goes, no, we have somebody calling in on Skype. That always makes me happy.

[00:12:56] David Hornik
Yeah. Because it’s become something important. Right. It’s become a big, important thing. It’s not, you know, that’s. I think that’s huge. I think that’s what’s interesting about this business is that you can be involved in technology to build some big something that impacts people’s lives. Right. And that’s not about an exit. Yeah. We’re investors. Ultimately, we need to make money for our limited partners. But the way we do it, at least in August, is to try and be engaged in companies that have big impact and therefore get value from that impact, as opposed to, oh, here’s a point in time where we can, you know, get a big exit on a thing that we know will crash and burn.

[00:13:32] Howard Hartenbaum
Yeah.

[00:13:32] David Hornik
Like, I just don’t. I can’t think of a time where we even considered a deal that, you know, while we thought would make a bunch of money, was not a long term business.

[00:13:41] Howard Hartenbaum
Yeah.

[00:13:43] David Hornik
That’s just what. Yeah, there you go. That’s it.

[00:13:45] Howard Hartenbaum
That’s It. There you have it.

[00:13:48] David Hornik
By the way, we should apologize for our audio. I. I don’t know how it will.

[00:13:52] Howard Hartenbaum
Ultimately sounds good to me here.

[00:13:53] David Hornik
Sounds good in here. But we had technical difficulties. This is a classic, like the ultimate and stupid technical difficulties. We went to record venturecast on our high quality microphone with our high quality digital audio recorder, only it was missing a memory card and we know who took it and we are going to find you. So we couldn’t do it. We can’t record. No memory card means no recorder, which is just unbelievable. Like, you know, of all the stupid things to get in the way.

[00:14:22] Howard Hartenbaum
So we are now recording right into the Mac using GarageBand.

[00:14:26] David Hornik
Yeah, direct. This is Mac direct into GarageBand. This reminds me, actually I’m about to head off to the All Things Digital Conference and I forget when this was. I don’t know. It was a number of years ago because it was when EV Williams and his team were building a company called Odeo. They were not yet building what has become Twitter, but back in the day when we were talking about podcasting and making podcasting accessible or whatever, Odeo was proposing that, no, they had already started building this very simple tool for podcasting. And Steve Jobs was speaking at All Things Digital and he was up there and he was taking questions and I was a big GarageBand user, son was recording music on it, etc. And, and so I thought, oh, I’ll go get in line and I’ll ask him the question, the obvious question, which is, so when are you going to make it easy to do podcasting on. On GarageBand? But I hate the people who get up and ask questions like, don’t you hate that? It’s always the same. People go and stand up and ask questions and then you go like, I don’t care about that question.

[00:15:30] Howard Hartenbaum
Or usually they tell you something about themselves and then they ask the question.

[00:15:34] David Hornik
Exactly. I’m like, hi, I’m Howard Hardenbaum from August Capital and I was the earliest investor in Skype. And now I have a number of really interesting investments, including Live Mocha and Spoopo. And finally they’re like, do you have a question, Mr. Hartenbaum? Like, no, I just wanted to tell you how awesome I was and talk.

[00:15:52] Howard Hartenbaum
About how awesome I think I am.

[00:15:54] David Hornik
I want to talk about Swoopo and, you know, Live Mocha and August Capital. My buddy Brad, who founded Exclusive Resorts, was telling me the tale of. He went to the shareholder meeting for Warren Buffett’s for Berkshire Hathaway, and he had just started Exclusive Resorts and this was entirely his target market. And it was a question and answer session. And my understanding is that he got up and he said, you know, hello, Mr. Buffett, my name is Brad Handler and I’ve just recently started a new company that’s called Exclusive Resorts that allows for people to buy subscriptions, to join in a residence club with multi million dollar homes for those people who don’t want to buy these men, you know, blah, blah, blah, blah, blah, blah, blah. And I’m wondering what advice you would have for a young entrepreneur who starting such a business and Warren Buffett, being no fool, sort of laughed and he said, well, I’d start by asking that question, you know, which of course Brad, having no shame, was perfectly happy to say, oh, thank you, sir. That’s Exclusive Resorts www. I’m Brad Handler. So anyway, I didn’t ask the question, but it was literally a month and a half or something before then. Apple launched the next generation of GarageBand that included podcasting mode. And it basically destroyed the need for Odeo and for these podcasting tools. Because it was perfectly clear this was the simplest way. It made perf sense. Why would you. Why would you do anything else? Get a really cheap microphone or just do what we’re doing today and boom, you have a podcast now.

[00:17:37] Howard Hartenbaum
And that was, you know, Evan was quite lucky because now he’s got Twitter instead.

[00:17:40] David Hornik
Well, that’s what I was gonna say. Like good news, right? Exactly. What is, thanks to Apple, what did Ev do next? He bought back the shares in his company, so no one else owned anything. Yeah, thanks, Apple, man. That Apple. Thank you, Apple.

[00:17:53] Howard Hartenbaum
Yeah. And then they could have bought Twitter back later. They could have just bought Odo cheap and said, now build me Twitter.

[00:17:58] David Hornik
Yeah, this Odeo thing, I don’t know.

[00:18:00] Howard Hartenbaum
About that, but you got any other ideas?

[00:18:01] David Hornik
What else have you got? Jack? Then Jack would say, I got this thing. I got two. I got this thing that’s kind of this SMS thing, really short, 140 characters. You can say whatever stupid thing you’re doing and people will read it. Or I got this other thing where you plug this thing into your iPhone and you can take credit cards. Which do you want? What do you think Apple would have chosen?

[00:18:22] Howard Hartenbaum
Apple would have said, thank you for your ideas, sir, and kicked them out the door and then built them both themselves.

[00:18:29] David Hornik
Exactly. That is exactly what they would have done. Bastards. That’s not Apple. Bastards.

[00:18:34] Howard Hartenbaum
I just mean, like, so large companies. I had a call with an entrepreneur. We’ll pick on Google for a bit here.

[00:18:42] David Hornik
Someone.

[00:18:43] Howard Hartenbaum
Okay we’ll pick out a large company, large company X. The entrepreneur calls me and says, hey, Google, I’m sorry, some large company X. We’ll call it Facebook.

[00:18:53] David Hornik
No, they’re not doing that.

[00:18:54] Howard Hartenbaum
Development teams, you know, they said they wanted to talk to me and I was kind of excited. And I went in there and they asked me what I was doing and I told them all these great things and what I thought. And then they said, thank you very much, there’s the door. And I kind of left feeling like I’d been dirtied a little bit. If you ask the guys at the corp dev guys later say, hey, what happened in that meeting? And they will say, well, the meeting went great. The guy came in, he told us all these great ideas. We thought, you know, what if we acquire them? That’s a lot of work. It costs a lot of money. We got all those great ideas, now we can just figure out which ones we want to use.

[00:19:29] David Hornik
Yeah, let’s just go do that. But in this instance, it was even worse. Right. Weren’t there like business people in the room taking notes?

[00:19:35] Howard Hartenbaum
Yeah, not just the corp dev guys, but guys from the different from the business sections coming in and saying, wow, this is interesting. You’ve got some good ideas. And I guess the lesson is that if you go and talk to a large company, you know, and they may dangle the possibility of a guy, you know, corp dev guy who might want to buy you, but maybe they just listen to everything you have and you’ve got great ideas and they say, thank you very much.

[00:20:01] David Hornik
It’s like seller beware. It’s not buyer beware, it’s seller beware. Right. I mean, you just have to, I mean, we’ve heard this story plenty of times where, and there are certain companies that are kind of notorious for it. Where they do, they do fact finding missions, right? Where they say, oh, well, we’d love to talk to you. Okay, we’ll come in. But you just have to be a little cautious. Right? I mean, and the challenge is, of course, it’s hard to sell something without telling someone about it. Right.

[00:20:31] Howard Hartenbaum
Well, in this case, I think entrepreneur needs to be more careful and not talk about the future. Because the big company can look at your product, at what it is right now, and they can evaluate do they want that or not. Does it, does it have the technology that they need. But when you’re the guy who’s been thinking about this for years and you’re the expert or the world expert in a space, and you basically outline the future for this large company, the large company is going, wow, we don’t have a guy like that here. Thanks for the great ideas. And that’s, I think, where the risk is. It’s not so much in the product you have, it’s in where it’s going.

[00:21:03] David Hornik
Yeah, but I mean, a little bit you have to sell that you’re the vision, you know, and that you have it built into something interesting, whatever else. So it’s always this tricky. We have this when people pitch us, right, where they say, what’s the best way to not get funded? It’s to not answer a question asked by a vc. I’ve had plenty of instances where I say, oh, that’s really interesting. So how do you do that? And an entrepreneur will say, well, you know, I’d really rather not say.

[00:21:29] Howard Hartenbaum
And then we say, we’d really rather not give you money.

[00:21:31] David Hornik
I mean, we don’t, unfortunately, we don’t say it because that would be rude. But it’s sort of unwritten. It’s the unwritten, you know, truth, which is, look, if you want us to fund you, it’s impossible for us to get excited about your business if you don’t actually tell us how you do it. And yes, is that a risk? Sure, it’s a risk. Not in the same way that it’s a risk telling a big company everything about what you do when they might want to buy you. But if you go and meet with credible venture investors who have good reputations, you should feel no qualms with telling them what it is you’re doing and how you’re doing, because it’s in our interest to help you do the things that are most interesting. We’re not, I don’t know, an instance in which, you know, it’s like, wow, that’s a really interesting idea. I should pass that on to someone else or we should go build it ourselves or whatever.

[00:22:22] Howard Hartenbaum
Because we’re investors, our job is to give you money, not to listen to your ideas and give them to somebody else.

[00:22:28] David Hornik
But companies are different, right? Their job is to figure out how to build the things they need to build to meet their, you know, meet the demands of their customers, et cetera. And so oftentimes these MA conversations become, they become fact finding missions.

[00:22:43] Howard Hartenbaum
So whenever an entrepreneur says to me, well, I’d rather not answer that question, I always like to ask another, follow on very quickly, like, are there any mental health issues in your family? To see if they answer the same way. And then of course they say, well, no, they’re not I say, well, you’re able to answer that question. What about the better question?

[00:23:03] David Hornik
Then there’s Howard’s way of doing this job.

[00:23:06] Howard Hartenbaum
Then they yell at me, and they tell all their friends, this guy asked me about my mental health, and I had to lie to him.

[00:23:12] David Hornik
Yeah. I gotta say, Howard, while I’m always entertained when you and I do hear a pitch together. Yeah. I’m a little concerned. I just think you never know. If you’re gonna ask someone about their.

[00:23:25] Howard Hartenbaum
Health, you should call me out on the spot. I didn’t ask about their health. It was their family’s mental health. I was looking for genetic quality or.

[00:23:32] David Hornik
You know, like, do you have any criminal record? Which actually would have served as well in a couple of instances.

[00:23:38] Howard Hartenbaum
So what’s funny is, when you ask the question, sometimes you get responses that you don’t expect. Like some entrepreneurs. About two years ago, we asked that question, they said, oh, yeah, you know, did drug dealing and spent time in prison.

[00:23:51] David Hornik
Yeah. All right. Thanks. You know, anyway. Which, by the way, I mean, truthfully, it depends on the circumstances, whether that’s, you know, whether that rules you out or whatever, but.

[00:24:02] Howard Hartenbaum
Yeah, but I like that they’re honest.

[00:24:04] David Hornik
Yeah.

[00:24:04] Howard Hartenbaum
You know, absolutely. I would be. I’d be much more unhappy if you find out later. If you ask a question and they don’t tell you the truth and you find out later. I can trust a guy who tells me the truth.

[00:24:12] David Hornik
Yeah. No, that’s the reality, is we. You know, if you. If you don’t tell the truth, we find out, then you’re done.

[00:24:17] Howard Hartenbaum
And if we find out the truth, then it’s. It’s here or there, depending on what.

[00:24:20] David Hornik
It is, and have a conversation anyway. But, you know. But if you don’t tell us about. If you don’t. When we asked. So how do you do that? You know, like the perpetual motion machine that we saw.

[00:24:33] Howard Hartenbaum
Yeah.

[00:24:34] David Hornik
You weren’t here yet, were you? When. When they sat down with Andy and described the perpetual motion machine? And Andy’s like, yeah, only it’s not possible. Possible. They’re like, is that not. It’s not happening. You know, this isn’t. Yes, it is. Look, you know, volts in, volts out, whatever. He’s like, no, that’s just. It’s. It’s just not the case.

[00:24:53] Howard Hartenbaum
If you want the money, you got to show me how it works.

[00:24:55] David Hornik
Yeah.

[00:24:55] Howard Hartenbaum
If I show you how.

[00:24:56] David Hornik
Truthfully, if he could have shown us that it was, in fact, a perpetual. And how it worked, done right. Like, you know, talk about the ultimate not worrying about fossil fuels. Can you believe by the way, that this, that this oil is still leaking into our ocean and it’s like, well, we have such short term, you know, attention span that we, that now they don’t even bother reporting it on the news. Oh, by the way, biggest, biggest disaster is ongoing. I mean, you know, until it destroys some coast or kills off a platypus or whatever.

[00:25:30] Howard Hartenbaum
It’s like, you know, public service reminder, no smoking near the coast of Louisiana.

[00:25:36] David Hornik
Yeah, the southern shore. The entire southern coast of the United States is not.

[00:25:42] Howard Hartenbaum
That is the end of offshore drilling in our lifetime.

[00:25:45] David Hornik
I hope so.

[00:25:46] Howard Hartenbaum
It is finished.

[00:25:48] David Hornik
Well, look at, you know, we’re only now starting to talk about nuclear power again after. What was that?

[00:25:55] Howard Hartenbaum
Offshore nuclear power plant.

[00:25:57] David Hornik
Yeah, maybe that’s the answer. No. Remember Three Mile island now all this fuss when we were kids and they had this near meltdown and, and since.

[00:26:05] Howard Hartenbaum
Then they had the Chernobyl meltdown which was a lot worse.

[00:26:08] David Hornik
That’s way worse.

[00:26:09] Howard Hartenbaum
But it wasn’t here.

[00:26:09] David Hornik
Killed a ton of people. Yeah, I was actually in Europe at that time and wandering around Switzerland or something and they were putting the cows inside and I’m wandering the hills. Hey, it’s pretty out here.

[00:26:21] Howard Hartenbaum
There’s no cows.

[00:26:23] David Hornik
Yeah, why aren’t there cows? Could I have some more of that milk and cheese?

[00:26:27] Howard Hartenbaum
God. I read stories about how they sent the soldiers in there with like no protective gear and 15 minute type of, you know, 15 minutes of shoveling sand on it or whatever they were doing. They all came out with burns and they just took them off to the hospital and they’re all died. It was just terrible. The soldiers were so brave for giving their lives to save a lot of other people. And they knew it was like going into battle. Like you’re going into battle with no weapon and they’re shooting at you, you are going to die. It’s for the public good. And the soldiers just did their job. Knowing that they, many of them didn’t understand, but many of them did is incredible stuff.

[00:27:03] David Hornik
We don’t.

[00:27:04] Howard Hartenbaum
So anyway, death and nuclear.

[00:27:06] David Hornik
Yeah, what else? Nice transition. Nice transition. Well, seriously, death. The death of nuclear destruction. Yahoo buys Associated Content. Honestly, I mean, what is it? This is a second story, second, you know, conversation where we rip on Yahoo. And I don’t like to do that.

[00:27:25] Howard Hartenbaum
Because, well, I don’t understand associated content. I just don’t understand those businesses because the content is not something that I want to read. I mean, I understand how it’s a business and I understand how it Makes money.

[00:27:36] David Hornik
But it’s a trick, right? It’s a trick. Does anyone want to read this content? Does anyone pretend that the content is being created because people want to read it?

[00:27:48] Howard Hartenbaum
Maybe there’s a lot of people that they just want to consume content on a certain topic and they really don’t care what it is. And it’s sort of like people who say, I’m hungry. They don’t care if it’s really bad fast food. Maybe it’s a similar kind of thing. I just need something to put into my mouth that will fill my stomach. I know it’s bad for me or it’s not good for me. Maybe it’s similar.

[00:28:09] David Hornik
That’s sad. But I don’t want to make that.

[00:28:11] Howard Hartenbaum
Food and I don’t want to eat it either. But there’s a lot of people who do make it and eat it. It’s a whole industry around that food.

[00:28:18] David Hornik
Well, there are a whole bunch of these companies that are like Associated Content, that are, that are creating content. But the point is it’s all about, you know, it’s, it’s all about collecting up eyeballs for, you know, it’s junk. I just don’t. I just. So I, I would have assumed that Yahoo is above that. It’s just my guess, but.

[00:28:42] Howard Hartenbaum
Or maybe they have a bigger vision in mind that we’re unaware we can give them the benefit of.

[00:28:46] David Hornik
Or maybe it’s really great content and we don’t know anything possible. Maybe. I don’t know. It’s just sort of mystifying to me.

[00:28:58] Howard Hartenbaum
Anyway, it’s kind of fun to pick up like an old newspaper now and then 50 years ago and look at what the stories were. And part of the neat thing about the articles is that they were based, we believe they were based on truth and actual reporting. And I don’t think that the content that’s being created by associated content, that 50 years from now when somebody will read it will really matter at all.

[00:29:20] David Hornik
Yeah. Yeah.

[00:29:22] Howard Hartenbaum
So by those standards, not that exciting.

[00:29:24] David Hornik
So I was just reading. I was just reading that Refaat Ali is leaving paid content, which was sort of one of the very first, most serious, most, I think, most thoughtful, early kind of blog journalism pieces. And he’s a great guy and he’s done and done really interesting stuff. And so that was sort of interesting, right? That after a number of years of pounding away, he’s moving on to do other things. I mean, to a certain extent, Om Malik has done the same where he’s got a bigger group and he’s writing less, but he’s still engaged, he’s still involved. But as folks like Griffa and Ohm and Mike Arrington and others, you know, start stepping away from it, it’s interesting to see if these things are institutions or whether they’re really about personal, you know, are these personalities? Right?

[00:30:20] Howard Hartenbaum
I think it’s more likely they’re personalities, yeah.

[00:30:24] David Hornik
Well, that’ll be interesting, right? I mean, clearly, like, you.

[00:30:27] Howard Hartenbaum
You know, that’s how I got Apple.

[00:30:29] David Hornik
You can’t read all things digital without It’s. It’s all about Kara. Right. Kara’s voice is all over it. Right. So I’m sure there are other people who write for it or whatever. But, you know, when you read it, I. By and large, you go and, oh, it’s good. It’s like.

[00:30:42] Howard Hartenbaum
And when she’s picking people to write and she’s deciding what type of content to edit, it’s her fingerprint all over it.

[00:30:48] David Hornik
Yeah. Yeah. So anyway, I think it’s awesome. I’m more power to all of these folks who have the staying power, including folks like Brad Feld pounding away on the Venture stuff day in and day out. Because, I mean, I have so much crap going on. It’s like, well, I got a blog, but I got these other things. I mean, it’s been weeks since we’ve podcast. That’s just wrong.

[00:31:13] Howard Hartenbaum
I think it was my fault, though. It wasn’t your fault. You can always podcast without me. I don’t mind.

[00:31:17] David Hornik
I really can’t. Because then it’d be like, you know what I think? And no one would listen.

[00:31:21] Howard Hartenbaum
So we were at some.

[00:31:21] David Hornik
Who would care?

[00:31:22] Howard Hartenbaum
We were at some conference about two weeks ago, and some guy comes up, and I introduced myself. He goes, oh, you’re the David Hornik.

[00:31:28] David Hornik
Sidekick that you said. That’s not.

[00:31:32] Howard Hartenbaum
I don’t know. I was kind of flattered.

[00:31:35] David Hornik
I don’t even think that happened, though. There was some conversation. There was some conversation. Did he call you my sidekick, though? I think you called. I think.

[00:31:44] Howard Hartenbaum
I wish I recorded it because I would have played it back for you.

[00:31:47] David Hornik
All right, so, Howard, Howard, Howard, you’re a car guy. You worked at Honda. In fact, you just recently asserted to me that you would like to go back to building cars someday.

[00:31:58] Howard Hartenbaum
I can go to newme now and build electric cars.

[00:32:00] David Hornik
Well, that’s. I was gonna ask you, like, look at.

[00:32:02] Howard Hartenbaum
I have built cars in the factory line before, and it’s fun.

[00:32:05] David Hornik
Really? You’ve, like, done the. Done the deeds.

[00:32:07] Howard Hartenbaum
I’ve done the deeds. 5, 30am Shift in Marysville, Ohio.

[00:32:11] David Hornik
Wow. How long did you do it? A couple weeks.

[00:32:14] Howard Hartenbaum
Six weeks total. A month on the car plant, in two weeks in the Anna, Ohio engine factory.

[00:32:20] David Hornik
That’s awesome. I think it would be fun for about that much. And then it probably was like, oh, I’m so glad I don’t have to do this for my entire life.

[00:32:27] Howard Hartenbaum
When you go home after work though, you feel like you actually did something.

[00:32:32] David Hornik
I agree with that. Even like doing like, you know, going on a good hike up a mountain or whatever and you come back, you feel like you’ve accomplished more than just sitting in front of your computer. Like when you finish email. Oh, I got through the email.

[00:32:44] Howard Hartenbaum
There’s more.

[00:32:44] David Hornik
It’s like, who gives a shit? Yeah, right. And then more comes up and whatever else. Whereas like you built a car, that’s just awesome.

[00:32:50] Howard Hartenbaum
Well, you only actually do this little tiny thing on the car. In my job it was to put the, the wiring or called the cabin harness into the body. Body comes out of paint and then you have this huge tentacle of wires that you have to put into the car. And some goes into the engine compartment where you’re going to hook up the battery and various parts, alternator and various parts of the engine. Some goes inside the car where you can hook up the lights and the powered seat. Some goes in the trunk for all that type of stuff. It was a job and it was kind of fun. And speaking of that, now we see that Toyota and Tesla are getting into bed together.

[00:33:23] David Hornik
How do you like that? Actually, I had just had a conversation with a buddy literally yesterday where I said, I just don’t see how Tesla’s gonna be able to be a self sustaining independent company and blah blah, blah. Just seems hard to imagine are they even gonna get out their coupe and whatever. And then I come home and I read that Tesla’s done this deal where Toyota’s investing 50 million bucks and Tesla’s basically buying this plant from them and is gonna reopen it with a thousand people. I guess it used to be 4,000, but still a thousand people are gonna be employed and building a us built car. Maybe it’s, I mean it’s a joint venture or something. So I don’t know, is it going to be a Tesla or is it going to be a Toyota?

[00:34:04] Howard Hartenbaum
I don’t know all the details yet, but it’s probably going to be all of the. It may be Tesla first, but then all of the guts inside the Tesla will go into a variety of bodies. That’s my guess. So maybe they start taking some form of the Prius, you know, e. Prius or something and using all the Tesla guts and just putting all that stuff in there and that will make it go faster for them.

[00:34:24] David Hornik
So you think it’s a very smart.

[00:34:25] Howard Hartenbaum
Move by Toyota that they could have the first all electric car in full production? I guess Nissan is launching some, but they won’t get up to speed as fast as Toyota can.

[00:34:34] David Hornik
Now with the Tesla partnership, it really shifted things from me thinking, ah, you know, I just don’t see Tesla being existing in a year.

[00:34:44] Howard Hartenbaum
I walk my dog every morning around two blocks and one of my neighbors about a block away has this piece of crap car in front of his house with a license plate frame on the back that says my other car is a Tesla. And I was walking, we’re talking like, I mean, he’s probably listening to this, but it’s like a 19, you know, 81 Chevy white thing with rust on it. And like if you could sell it for $500, if you tried to give it away to one of those things, they wouldn’t take it even though it runs. And every time I walked by, I thought, God, that guy, he loves Tesla. He loves car. Have one. He’s got this. My other car is a Tesla joke. And about a month ago I’m walking by and his garage door was open and there was a Tesla.

[00:35:30] David Hornik
See, you’re Mr. High and Mighty, Mr. O. It’s too bad you can’t afford it.

[00:35:35] Howard Hartenbaum
Beautiful orange Tesla in his garage with gray stripes on it. And maybe he works at Tesla, I don’t know, but he has a license plate frame on that one that says, yes, it’s fast and no, you can’t drive it, but speak. Every time I think of Tesla, I think of my neighbor with his piece of crap car.

[00:35:54] David Hornik
So here’s for those of you who are not from Silicon Valley, this story will horrify you. It sort of horrifies me to tell you the truth. I mean, it’s sort of, in some ways it’s like everything that the worst thing that Silicon Valley has to offer. But there’s a private school, a private girls school right here in Silicon Valley. And the Tesla had just come out. Like the first set of Teslas had just rolled out and people were getting those first hundred or whatever. And a friend of mine’s kid wanted to go to the school dance and want to be driven in the brand new Tesla that her dad had. I was all excited about this, you know, wow, this is great. I’m Gonna have, I’m gonna have the prestige, the honor, you know, whatever, of driving up to this school dance in a Tesla. And as it was reported to me, when she arrived at this dance, the person in front of her was driving a Tesla and the person behind her was driving a Tesla. Like it was all the rich dads with their Teslas who were showing off. Unbelievable. It’s exactly why I’m so thrilled to be driving my Mini.

[00:37:01] Howard Hartenbaum
Well, Andy, did you hear our partner Andy Rapoport said he was driving on Skyline Drive last weekend and he was speeding along in his Audi and he came up on a bunch of flashing lights. So he slowed down and he saw a young couple there, probably a young Googler with his girlfriend holding him.

[00:37:17] David Hornik
That’s mere speculation.

[00:37:19] Howard Hartenbaum
A young, wealthy, successful, but young, you know, like mid-30s type, standing there with his girlfriend looking at his Tesla wrapped around a tree. And the car was completely total.

[00:37:30] David Hornik
Well, you know, they’re fast. Yeah, it’s kind of sad.

[00:37:33] Howard Hartenbaum
I mean, you get your beautiful car and you’re taking your girlfriend for a drive.

[00:37:37] David Hornik
Hey, at least they were outstanding, right? I mean, you know, how much do you think it costs to insure a Tesla? Do you think that there’s like a premium on it? Because.

[00:37:44] Howard Hartenbaum
I don’t know.

[00:37:45] David Hornik
I don’t either. So anyway, they’re gonna build this.

[00:37:48] Howard Hartenbaum
They should get by the mile. That’s what they should get. Yeah, I want car insurance by the mile.

[00:37:56] David Hornik
Just so. Yeah, so you can have your fifth car, that you can have an extra car.

[00:38:00] Howard Hartenbaum
Yeah, you drive it like a thousand miles a year. You only pay for that thousand miles.

[00:38:04] David Hornik
Yeah, but like a, insuring a Tesla for a thousand miles is like insuring my, my minivan for 40,000 miles. Probably, probably the same. But that, but that would be perfectly fair, right? Like it should be opportunity cost, except.

[00:38:16] Howard Hartenbaum
You pay for 12 and he pays for 12,000 and then he gets ripped off and you get a good deal.

[00:38:21] David Hornik
All right, I don’t know that I have a problem with that. Plus, if you know you’re driving the Tesla, that’s doing well.

[00:38:27] Howard Hartenbaum
There’s a thing published every year about the cost per mile of driving of various cars. And last year, the worst, if I recall, was the Audi R8. Seriously, $2.79amile operating cost.

[00:38:42] David Hornik
And it was like tune ups and tires, everything.

[00:38:45] Howard Hartenbaum
Depreciation and gas and insurance. But it was the most expensive car out there. Production car, $2.79amile. Honey, I’m gonna go buy some milk. And the store is mile there and a Mile back. It costs more for the car than the milk.

[00:38:59] David Hornik
Forget a mile there. Forget it. How about 10 miles there?

[00:39:02] Howard Hartenbaum
I’m just saying it costs more than the milk.

[00:39:04] David Hornik
56 bucks. If it was 10 bucks, 10 miles there and 10 miles back. $56 in depreciation and wear and tear.

[00:39:11] Howard Hartenbaum
That’s my commute. It would cost me 56 bucks to go to and from work. That’s more money than somebody works in a full day at minimum wage.

[00:39:19] David Hornik
That’s just wrong. On the other hand, I did see Iron Man 2, and they have that new Tesla Roadster. I mean, the. The R8 Roadster. It’s beautiful, but stupid, you know, like too much money. We wouldn’t do that, would we, Howard? We would not. We wouldn’t be so crazy. Would we have.

[00:39:38] Howard Hartenbaum
Well, Lexus has this new car called the lfa, and they were trying to get me to buy one and I just couldn’t bring myself.

[00:39:45] David Hornik
You didn’t do it in the end? You weren’t flirting with it?

[00:39:48] Howard Hartenbaum
I was thinking about it, but then I saw the price and I kind of.

[00:39:51] David Hornik
It’s literally like hundreds of thousands, right?

[00:39:53] Howard Hartenbaum
I mean, it’s like something 375,000.

[00:39:56] David Hornik
That’s just silly.

[00:39:57] Howard Hartenbaum
And it’s. And it’s really fancy looking. And if you’re driving around town, you just look like a dick.

[00:40:01] David Hornik
Right? Well, that is exactly the problem.

[00:40:03] Howard Hartenbaum
I mean, it might be fun to drive at night when nobody can see you, but you don’t want to show up.

[00:40:08] David Hornik
You’re confused, though, because people who buy it want to be recognized, right? Like, you know, this is like being listed in the program as the gold sponsor or whatever.

[00:40:17] Howard Hartenbaum
Yeah, I’m always listed in a gold sponsor. Anonymous.

[00:40:20] David Hornik
See, there you go. That’s what you claim. And we have no way. We have no way to determine if that’s true. Now everywhere I go, I’ll be like, oh, Howard was here. Another Anonymous must have been Howard. He’s so generous. That Howard is immensely generous.

[00:40:35] Howard Hartenbaum
I give everywhere. I’m Mr. Anonymous.

[00:40:37] David Hornik
Yeah, exactly.

[00:40:38] Howard Hartenbaum
That must be it.

[00:40:40] David Hornik
Well, I unfortunately have to go to a school play this afternoon. My son, as I understand it, is playing a flower, and he would like me to be there. Now, here’s the best. As if it’s not enough that he’s a flower, and I suspect that it’s not like the greatest literary work of genius, but it also happens to be in Spanish because he’s in the Spanish immersion program. His entire school is taught in Spanish, and so his play will be in Spanish. And while it is very cool to hear my son speak in Spanish with this very authentic Spanish accent. I don’t speak Spanish, Howard. I will have no idea what he is saying.

[00:41:20] Howard Hartenbaum
Isn’t there some iPhone app you can get where he talks into it and then you push a button and then it says, I hate my father. Why isn’t my daddy in the audience?

[00:41:31] David Hornik
Wait a moment. There he is. There’s my Spanish. It’s good, isn’t it?

[00:41:42] Howard Hartenbaum
Perfect.

[00:41:43] David Hornik
We didn’t suck up to anyone. Do you want to suck up to anyone? We were kind of running out of money. You think Paul Graham is the person?

[00:41:51] Howard Hartenbaum
Well, we’re kind of happy for him. He just raised his new fund.

[00:41:54] David Hornik
He did. Another eight million dollar fund, which was.

[00:41:57] Howard Hartenbaum
Four times his last fund.

[00:41:58] David Hornik
Haven’t we sucked up the ball before?

[00:42:00] Howard Hartenbaum
It’s just the first one that popped into my head.

[00:42:03] David Hornik
You always want to suck up the. Paul, I’m gonna. I’m gonna suck up to. No, fine, fine. I’ll put suck up to Paul.

[00:42:11] Howard Hartenbaum
Well, we just did. Who else you got?

[00:42:13] David Hornik
No, forget it. Forget it. That’s. Paul’s enough. He’s got an eight. He’s got an eight and eight and a quarter million dollar fund.

[00:42:20] Howard Hartenbaum
And so if you want 30k or 20k or whatever, he gives out 6k a person.

[00:42:25] David Hornik
But he’s gonna do more companies. I think that. Yeah, I think we should suck up to Jessica. Yeah, I mean, Jessica’s fun too, right?

[00:42:31] Howard Hartenbaum
I hear that Jessica actually is the one who does all the work.

[00:42:34] David Hornik
Of course she does all the work. What? Paul pontificates if you’re listening to this, which of course, Paul, we know you’re not, but if you were listening to this, you’re an excellent pontificator. But we just want to suck up briefly to Jessica because she’s just as smart and she does all the work while you’re standing in front and taking the glory.

[00:42:55] Howard Hartenbaum
Yeah. So, Jessica, you’re fantastic.

[00:42:57] David Hornik
Yeah, Jessica deserves it. Not that. Paul, you’re fine. Don’t get us wrong, and we look forward to seeing you. And we’re sucking up to you, too.

[00:43:06] Howard Hartenbaum
But Jessica, good choice in coin with Jessica.

[00:43:10] David Hornik
All right, there you have it. Well, that’s it for me. I’m David Hornik from August Capital.

[00:43:15] Howard Hartenbaum
Howard Harttenbaum from August Capital.

[00:43:17] David Hornik
And this has been Venture Cast, venturecast.

[00:43:22] Howard Hartenbaum
Every time he pauses, I don’t know if I’m supposed to say anything or just keep quiet. Like usually I. Me to.

[00:43:27] David Hornik
You are the worst at it. If you. If honestly, if this is what you’re like when I ask you to keep quiet. You’re the. You are the worst listener ever. That’s impressive.