How We Got Fred Wilson, Benchmark and Index to Invest $94M | Why Robinhood's Strategy is Wrong

0:00 We gave nonfounders a percentage of the company that usually founders get. For the first eight months to building, no one on our team took any pay. And it was mostly because today we have Paul Erlang, a co-founder and CEO of FOMO on the show. Now FOMO is a wild story. Despite the company being a wild success today, they only have 17 team members, no internal hierarchy, and they have no one-on-one meetings. One thing that I discovered, if you're trying to raise another round, wait to announce your last round.

0:31 >> I love non-obvious stories. And when you unpack this one, there are so many gems to uncover. >> Everything is about momentum. >> Ready to go. [music] Paul, I am so excited for this, dude. I want to start with one that I'm always fascinated by, which is, are you more motivated by the thrill of winning or the fear of losing? >> This is going to be a hot take, but I don't really I don't think I'm driven by either too much. I think it's more of like doing the thing for the pleasure of actually doing the thing. Like me and my co-founder talk about this all the time where I think the biggest fear is losing what we have now. I think like every day waking up, going to the office, getting to work with an incredible team and building what we're building. I think one specifically because of what we're building, but also just getting to work on something really cool, like an interesting problem with amazing people.

1:30 I think that's what actually motivates us. >> I think it's important to set context for those that don't know what FOMO is. How would you describe FOMO in 30 seconds? >> Yeah, FOMO is a mobile trading app. Right now, it's mostly onchain assets, meaning like onchain native assets, Bitcoin, Ethereum, attention based assets, etc. Um but we're soon going to launch globally um access to equities and uh perpetuals uh non US obviously we'll kind of work with the government there as as that comes but the goal is to be able to give global access to uh markets to individuals that don't have that access. It's also social so you could see what your friends are holding in real time follow them. I know everyone's wanted like a real-time Nancy Pelosi stock tracker so maybe if she trades on FOMO we could finally get one.

2:17 I think that'd be an interesting addition to the angel round. Um, speaking of interesting additions to angel round, when we think about early rounds, you did an only angel round. Yeah. In the early days, no institutions, and you had 140 angels. Why did you decide to do this? And how would that inform how you advise founders? >> It was pretty intuitive to us. So I think if you're running a B2B business, you hire a big sales team and it's not an easy job, but it's a lot of outbound repetitive. When you're starting a consumer product, it's a very different problem space because there's a lot of great products that just never get off the ground. So we knew we needed to start this solve this cold start problem like get people on the app. So when we raised the initial round it the goal was to create distribution and we think that our best users should have some ownership in the product and early on what we're able to do is get people motivated by allowing them to invest in the product and create as large of a distribution channel as possible and not all those people are traders like there are definitely builders in the industry and we've been able to leverage tons of them as we continue to build but I think that initial round was really core to the su success of FOMO >> who is the single best angel.

3:30 >> There's this angel investor named Aaron Harris. He is XYC. You know Aaron? >> Yeah, I had him on the show years and years ago. >> Aaron is an incredible angel investor. Um he is an incredible partner. Um he understands financing really well and I think that when you're financing for a business, it is one of the most important decisions you make because a small change in a term sheet could completely change the trajectory of your company. So, I think having him there in our court to really help us work through some of that as first-time founders was really helpful.

4:03 >> That's so funny. I He was like one of the first 15 guests I ever had on the show. He was a YC partner at the time. Can I ask you when you reflect back on that journey, if you were to advise a consumer founder on how to scale to your first thousand users? I love Kevin Kelly's essay a thousand true fans. If you were advising on first thousand users, what would your biggest advice be? >> Talk to them. You need to keep iterating until you have 10 people, 100 people, a thousand people using it. And when you have 10 people using it, get the feedback from them and then iterate on that feedback and then 100 people. And this is actually one of the big largest competitive advantages for our company is in the onchain and crypto industry specifically, the users are very passionate about using the products. So we have Telegram channels with a lot of the top traders on FOMO. And when we put out our web app, for example, we did it a week prior and we gave early access.

4:54 The web app probably became twice as good just in that week because we were able to get early feedback from people who were actually passionate. And these people are just users of the product. We didn't pay them. There's no other strings attached, but they just loved it. So I think that the most important thing is just getting user feedback um and iterating on it. >> I have a product too, which is the show itself. And my challenge is user feedback varies. Some people love some things and some people hate the same thing. How do you determine when a user is right and you should ingest it and make changes versus when you should stick to your core product road map or thesis and ignore their feedback.

5:31 >> Yeah. I think you just have to be super epistemically modest because sometimes a user doesn't even know what's actually best for them. When you get feedback from a user, you really need to like listen to your instinct on what the fundamental product experience is and your intuition and then see if that fits in your larger vision. And honestly, I think that certain product conditions could potentially kill the product like that one. So ones like that that actually have this large potential outcome, you need to be very thoughtful in implementing.

6:02 >> Why do you not agree with the financial super app theory then? you know, if you have a Revolute or a Robin Hood or a New Bank or any of these big providers where it's like the bundled provider is the one that wins >> and you I I trade on Revolute today. Um why is that the wrong approach and actually you need a trading app? >> Because everything app means not intentional. It means let's just throw everything in there for the user to access. What is the glue between these things? And at FOMO, we think it's the social graph. We think that you can express a thesis. I think that the straight of Hermuse is going to close.

6:36 Well, I can buy oil on hyperlquid ps. I could short US equities that are relying on oil. I could buy the prediction market that the straight's going to close. And I can express my opinion in all these different things. And the reason these different market types exist is to you express conviction on a belief whereas all these other apps are just everything super apps and there's no intentionality behind why all those things have to exist in the same place.

6:59 >> Do you compete with a cowshi then? Yeah, I mean we haven't integrated prediction markets yet and I'm not sure exactly where it fits in on our road map. I think it's very interesting there. I think our first version of the product would be built on something like a poly market and koshi. Those are are are great businesses and I think that there's a lot in flux around the regulation of these businesses. So we want to watch and see what happens um and then move from there. But I think it's really important because um listen public markets have been how retail gets access to to capital and we talked about this and we were talking about Shopify and how amazing that was that retail investors got private scale returns in the public markets when it launched at what two billion and is where it is now. And I think this this is becoming earlier and earlier, right?

7:51 If you have pers that are preipo and then you have prediction markets that from a year ago >> just sorry just so people understand what is a per that is pre preipo. >> Yeah. So taking a step back what a per is is you're basing a a bet. You're placing a bet on a price basically SpaceX will go up. You think it will go down. >> Exactly. And instead of me selling you SpaceX stock, I just bet you that SpaceX will go down. you're betting me it's going to go up and then we trade money.

8:19 Um, so what you can do is you have a price on the exchange that people just agree like you're like I think SpaceX should be this much. I think I'm willing to sell this much at that price. So I will sell you that much at that price and then we're betting on it going up and down as a side bet. And you actually don't need the transfer of the underlying asset because of that because it's synthetic. Um, and what's beautiful about that is you can trade these things without necessarily having that underlying price. So what we saw with Cerebrris is when that IPO happened, the hyperlquid price started to converge to that price at IPO, right? And there were people there are pictures of people on the New York Stock Exchange with the hyperlquid UI up and and people looking at those markets. And I think that's really cool and interesting. But with preIPO with prediction markets, retail gets access to these markets earlier and earlier.

9:10 >> Can I ask you when you look at Robin Hood today who provide or want to provide a lot in terms of trading capabilities, do you think they were [clears throat] wrong to go so broad so quickly? >> I think a lot of people that are on Robin Hood would have never been on a brokerage otherwise. Um, I see some criticism of like, do I want to have my retirement account in the same place as I can trade prediction markets in sports bet? And I think that they can do better tooling for users to self-guard against some of those products, but I understand why they horizontally scaled. They grew their business and they were able to saturate the US market, but they weren't able to go global. And I think this is why they're focused on onchain assets because onchain is global from day one.

9:54 And if they could tokenize equities and a lot of the stocks that are existing on Robin Hood, then they could give global access to these assets. I think that as they go global, they could be less focused on horizontally scaling all these products and really capturing a larger market. >> Do you worry about the casinoization of public markets? And what I mean by that is just like a detachment from reality because of social media, because of retail exuberance and businesses were based on core fundamentals. Now, GameStop is a good example, but social media and movements can drive such price swings that it just becomes the [ __ ] wild west in a casino.

10:34 >> Do you worry that now the public markets is just a wild west in a casino? >> Yeah, I think casino is kind of a derogatory way to view it. I think somewhat it's somewhat empowering, right? like hedge funds have determined the value of stocks for the longest time and this group Wall Street Bets saw a bunch of shorts on this stock and was like screw the hedge funds we're going to have to have them cover call the shorts and the price is going to skyrocket and it was kind of cool to see a group of retail investors coalesce and be able to kind of fight back against the institutions and I think this is a really cool correlary to FOMO because FOMO is a public network whereas you had to be on Wall Street Bets on Reddit it in FOMO everything happens on real time so people in retail can coordinate there and I do think that attention drives a lot of things I think whether it's sports cards or like everything is speculative to a degree right like why are you buying diamond rings it's because we've kind of agreed as a society that this is worth this value why are you buying gold most financial assets are speculative and yeah I I understand the the view that the view on fundamentals and when you're buying business you're buying the cash flows in that business, but most people when they buy a stock, they're not looking to get dividends. They're looking to just sell at a higher price. So, in that framing kind of everything becomes speculative and I'm not going to take a normative view of whether that's good or bad.

11:58 >> Going back to the story, when you had the angel round and we got to the thousand true fans, what's your biggest advice to founders on product market fit? >> I think you have to stay humble because at any moment you could lose it. And I think that it's everything is about momentum. So when you have momentum instead of like taking the gas off the pedal and be like okay like this is working. It's like no you need to double down 10 times harder. And every day we come in and we're like listen we need to ship these features today or else we're going to lose everything we have now.

12:27 And I guess it's somewhat of a a fear mindset but it's really just like trying to continue to keep pressure on so we continue moving forward cuz once you lose momentum the boulder just starts rolling down the hill. You know you need to keep pushing it up. One of the biggest mistakes I think I see with founders is like they're terrified of launching and not having any adoption. And so they make it a more diluted diluted message for more and more people. It doesn't mean anything to anyone. And then they launch and it's like it's the most mid product ever because they tried to make it so bland for everyone.

12:59 >> 100%. And actually Chaan had a really good point here because there's this balance I've always tried to find between shipping fast and doing things perfectly. And I'm I've been a perfectionist and I'm like this detail everything needs to look perfect and now I'm like we have 50 60,000 daily active users. Um we need this to be perfect from day one or else we're going to lose that user base. And Cha was pushing us like well what if you shipped faster just like think through this. Let's steal me on that side. And I was like well look at Apple. Everyone envies that company. They always ship perfect feature products. And then we were talking about how lithium ion batteries exploded. How the first iPhone like was glitching out all the time. And I think looking back, you look through hindsight with rosecolored glasses, but actually most companies don't ship perfect products and you have to find this balance between shipping something and I think a good framing is the one you're using that a specific user base might want to adopt and it could grow from there rather than just building something for everyone and something that what you think meets this bar of perfection.

14:02 >> And I think now you have to ship faster than ever. >> Exactly. Because you can. Yeah. >> And everyone else is. >> Okay. And so then tell me we we have this kind of product market fit moments and we see these strategic inflection points. How does benchmark come into the fray? >> Yeah. So we did this angel round. Um we were making some money. Um most of our team was not taking any pay. So like for the first eight months to building no one on our team took any pay and it was mostly because most of us are senior engineers and we were taking a bet on the company and that was really important to us. Most of you are not paying any pay. Everyone will be going, "What? Slaves? Slaves?" You have a very generous ownership program. Can you just talk to me about that and how you think about giving employees a lot more equity?

14:50 >> Yeah, we capitalize the founding team extremely well. Um, I think this is going to become more and more true. >> When you say extremely well, I'm so sorry to be a dick, but like what does that actually mean? So many founders listen. Like, should I give everyone 1% each? >> Yeah. I think well it's it's hard like everyone it depends who but like yes top performers 100% in fact more than more than that right I think we gave nonfounders a percentage of the company that usually founders get and it was mostly this core group of original people that didn't take any any pay and I think what's really important here is all those people feel like owners of the business because if those five to seven to 10 people build this business for the next 10 years, there's literally nothing stopping us. And we talked about this and work life balance and how do you push your team to work harder and our team is is senior enough and also has enough ownership where they feel like FOMO is theirs.

15:48 >> So if you basically give five to seven 2 to 3% each, then they're so bored in that you get kind of extended founder team. >> Exactly. >> Okay. Get you totally. So we haven't been paid for 8 months. Cool. Sorry. Please go. >> Yeah. And it wasn't necessarily just the pay. I think that was fine. But we saw Robin Hood and Coinbase and those are both very volatile businesses. Like you've seen their stock price movement.

16:12 It's because financial markets are volatile, right? You have like the short and long-term debt cycle and we were taking a big risk in starting a company and we were starting to feel like we found product market fit. But why are we going to take the risk of a sudden market turn just wiping us out? and we were five to 10 years focused. So at first we were like let's not take any venture capital. We'll do this angel round. We'll just build and find product market fit. And then when benchmark kind of came around we were more open to the idea to take money to protect the downside.

16:45 >> How did they come around like they slide into your DMs? So, no. Um, so for the series B, that was all inbound, but the series A, we actually did run a process because we're like, we should have raised money here. And the benchmark intro came from Aaron. So, going back to the most helpful angel. One thing that we discussed earlier that is kind of funny is Se and I didn't really know the venture game and we're we're just builders, right? And we didn't really know who Benchmark was. I'd heard some stuff about how they invested in Uber, but I didn't understand uh kind of like the tears of VCs or anything like that.

17:20 So, when we met with Chaan, it was just a very natural conversation. And out of all the conversations we had, he got it instantly. Like, he had this deep intuition about what we were building, we had very high conviction on what we were building. So to find someone else who has the same vision and conviction off the bat as us who doesn't historically do deals in our industry um it was yeah just an amazing conversation. How was the partnership meeting?

17:46 >> Yeah the story is we met with Chaan on Friday. We ended up talking with the whole partnership that following Monday and a funny story from that is we were talking with the entire partnership and we were going through the pitch deck and I remember Peter Fenton was actually on his phone most of it and I was like kind of bummed out cuz I was like damn he's not interested. He's focusing on other things. He's doing emails and I remember as soon as we finished the pitch the first thing he said to us he goes guys I love the app. I've been on it the entire time and that was kind of this like deep breath moment where we're like, "Okay, he sees the vision like we do. They love it and it just really felt like a natural fit."

18:22 >> The benchmark offer the highest price. >> I think it was close but not exactly the highest. >> Do you think VCs can king make? And what I mean by that is when you have a benchmark behind you, do you see a needle moving trajectory change? Well, yeah, I definitely think benchmark being on our side helped us in that sense, but that's not the reason we did it. Mostly because we were naive to that, right? Which is kind of a funny set of uh circumstances, but yeah, definitely I think that there are some venture funds that their strategy is just to follow on companies like Benchmark, etc. And we had a lot of inbounds and the partners we ended up working with were not those partners. I think there were like very intrinsic reasons why we worked with the partners we did for our series B.

19:05 >> But um yeah, I think a lot of people just kind of follow investment. And this is a little bit of a separate topic, but one thing that I discovered was if you're trying to raise another round, wait to announce your last round. Cuz as soon as you announce a round, you get tons of inbound from other investors and it takes up time to kind of tell them, "No, we're not raising right now." So in the future, that's kind of a note to self that if you really want to raise capital in the near future, you can just wait to announce your round until you're ready.

19:37 >> I completely agree. I also think like it's really important for founders to know that just cuz a VC wants to meet you, it doesn't mean they want to do your round. Like VC's jobs is to meet companies. And I always say this to our companies like don't get distracted to a point. Like focus on what you need to do because a VC's job is to meet with people. Like never forget that. Okay. So we we have them leading the round. Do you think that founders should take a discount for tier one investors?

20:03 >> This is the person you're going to call every week for every decision you make. You have to like them and they have to be someone that you trust. If you trust them more than the other person, like I don't think the decision should be pick the highest tier VC. I think it's pick the person that you trust will help you scale your business the best. And it's not going to be someone who's giving you product advice, right? like the founders have to build a company, but someone who might know how to build a company because you don't have experience doing that or someone that just trusts you and your intuition. So, >> it's one of my biggest concerns actually is always like when founders say, "Oh, I'd love help on either product."

20:40 Exactly. >> I'm like or hiring engineers. I'm in all honesty, if you're not the one hiring engineers, we got a problem. >> That's the founder and CEO's main job. It's like sales. selling to selling to future employees, selling your product and vision. >> I can help you get some employees, but like hiring core, >> I sure, I'll jump on final calls, but I shouldn't be doing pipeline for you there. >> The best people you're going to hire are not going to come from a recruiter and they're not going to come from like a one-time intro. It's people that you spend months building a relationship with. That those have been all our best hires.

21:18 >> So, we raised this round from benchmark, right? and suddenly we have like 20 million bucks or so in the bank. It changes when you're scaling from 0 to 1 to 1 to 10. In that scale phase that pre this latest round, which we'll get to, but in that 1 to 10, what are your biggest lessons and reflections on that? Hiring too fast is something we're very very vigilant of. Some of the biggest mistakes I've seen in other people scaling from 1 to 10 is they start to acquire businesses. And when you acquire businesses, you're not you're not interviewing all the people that you're bringing over. So you end up just adding tons of bloat all of a sudden to your business, right? And I think that could be a huge issue. So it's so funny. I think we're in like the biggest paradox moment ever where like, you know, we're replacing everyone with tokens. You we don't need engineers anymore. We're replacing everyone with tokens. And then you speak to every single founder and you ask, "What's your biggest problem?"

22:11 And they're like, "Oh, hiring." >> Yeah. >> I'm like, "Which one is it?" Well, I think how you reconcile it is the best people are just so much more valuable now because it's like you can use you can use chat GPT to make art, but you need to have like the creative direction behind it. Like your software engineers are your architects and they're doing amazing things, but now they use AI to do like the lower level things maybe a B tier or a lower level engineer would do.

22:36 >> So, do we just have dramatically smaller teams? >> Yeah, I think so. And which is why it's okay to give more equity early. That's that's kind of how we saw things. And >> how do we think about structuring the teams of the future then? >> Yeah. So, currently FOMO is extremely horizontal. We don't have meetings, one-on- ons. Um, we don't really have any hierarchy. Everyone is kind of self-reporting. And I think as we scale to a certain number, that will have to change. You >> What number are you at today?

23:07 >> We're at 17 total. >> Easy. >> Yeah. What will you be in a year's time? >> Hopefully below 25. >> Wow. Okay. We are really not scaling pad count. >> Listen, maybe maybe things change, but currently we really don't see a need. We did have a bottleneck on our engineering side. We just hired two to three incredible engineers. Uber and Microsoft have both put question marks around the productivity gains that come from AI tooling in in engineering, saying they are questioning it. Do you think that's moronic and you unwaveringly see it or do you actually say, "Yeah, we get a load more code, but we're not faster."

23:49 >> I think it's definitely faster. I think it's not just a lot more code, but it's a lot faster to thoroughly review even than write. So, for example, Tina, she's a staff level front engineer of ours. Um, she built our feed. she is building sliders for our new product. There's like all these like small things on the front end that probably would take a while to implement and learn. You have to go watch YouTube videos or or go search to find libraries. And she has experience with a lot of this, but some of like the small components are new.

24:22 Um, but if you could ask AI to do it, they'll kind of give you an overview of how to build this thing. They'll even write the code for you. And then Tina will go back through and even restructure and rewrite most of the code. But having the framework of understanding how to write it, I think just speeds up the learning process significantly even for the best engineers. So the the the product velocity like I told you that we just dropped everything to ship this new product we're shipping next week. We built this product in three weeks and this product is basically what entire other apps their entire product is. You know, we built our web app in one month.

24:57 >> So funny. Paul Graham said last night, the new question that he asked all YC Batch members is how do we like AI protectify your product? How do we put in nonAI features that build defensibility? And I think the social graph for you is unwaveringly one of those. >> Exactly. >> Which I think is really interesting. Can I when we go back to the enabling powers of AI that come from, you know, some of the tooling that we've mentioned there?

25:24 Um what are the team using today? Is this all claw code? Is this cursor? Is this codeax? I'm just fascinated by distribution of tooling. >> Yeah. So, we have an internal AI policy to make sure that we're only using enterprise account that there's not sensitive things being uploaded, etc. I think that's really important. Um, and then within those guidelines, most of our engineers are using cloud code and codecs. Yeah. >> Has that changed over time? >> I don't think so for us. I think we have seen some frictions like these models degrade and then the cloud code credits got really expensive recently. So there's definitely some frictions there.

25:59 >> How price sensitive are you? >> Not at all. We don't have enough engineers that it's really really hurting our bottom line yet. Um once it starts to do maybe we'll have some kind of quota there, but no. >> Do you think there is a time when it will? >> Yeah, I think depending on how big we get and how much we use it, maybe. Um currently the trade-off is anor like it just makes no sense to limit it. For me the core question on on AI bluntly as an industry is and it is determined by one question which is like what percent of developer salaries will we see spent on tokens right now you know if you look at Mark Benning off he said they spend 300 million on anthropic that's about 3.8% 8% of developer salary spent on tokens.

26:42 If it stays there, paying a trillion dollars for OpenAI and Anthropic is grossly overvalued. If it goes to 20%, which is what many think it is, 20% of dev salaries goes to tokens. They're $5 trillion companies. >> Yeah. >> Can you feasibly see yourself spending 20% of dev salaries on tokens? >> Definitely. Yeah. I mean, it depends on the price of the tokens. I I hope that there's a race to the bottom and these major models are kind of commoditized and they get cheaper. Um and there's not like I don't know uh price collusion, you know.

27:17 >> Sure. >> But yeah, so hopefully they get cheaper with time, energy gets cheaper, um compute gets cheaper, and then these things get cheaper. But at the current state, absolutely. I think 20% is definitely within reason. Going back to what we said there about like hey you just have like the really great people in terms of like design toge ratios. Does that change in this new world? >> Right now we only have one designer but yeah I do think that design becomes more and more important right especially for like some of these bigger businesses that do have a lot more mid-level engineers and doing tasks that AI can kind of take over pretty easily. If design becomes more and more important, do we double down on Figma and that is the stage where art and creativity is like fundamentally performed or to your point earlier, do we move to a world of speed and iterations where we just prototype it and we use other tooling rapid and lovable and you name it to get fast product out the door.

28:16 >> I think it's somewhere in between but mostly the latter actually. I think Figma has a huge advantage here because humans want some control. So, for example, on FOMO, we could just be an LLM, you execute trades, etc. Maybe in the future we have an interface that allows you to do that, but I still want to go to Harry's profile, see in this beautiful view everywhere you've trade and and be able to track that through a graphical user interface. Someone on Figma will be like, I want this design.

28:42 It generates you the graphic, the vector file, and then you could still manipulate it and do whatever you want. And I think that's really important to have the hybrid because humans still want to feel like they're in control. So with Lovable, it's much harder because they haven't built the human centric software. I think it's much easier to add the LLM on top, especially as it becomes commoditized by all these major models. >> Why have we not had a big social company since Snap?

29:07 >> It's really hard. Consumer is so difficult. Some small mistakes could be pretty existential. Like for example, Clubhouse that started to take off. that was doing really well. Everyone was using it during COVID and they had a very core user base that loved them. But then they started bringing on all these celebrities and it overshadowed the core user base that actually would love the product with people that don't really care about the product. >> I remember when it was like Mark Andre just sharing wisdom on a Sunday evening.

29:36 >> Exactly. >> And it was the most amazing behind the scenes like fascinating lesson from the B and it was so spontaneous and cool. What do you learn from that? >> That it's very important to find native creators to your platform. So instead of going out and bringing on all these creators from other platforms, they already established that like Logan Paul, he got big on Vine, right, for the first time. And I think when there is a new social platform, there is a outside strategic advantage for creators to build an audience on that platform early because they'll be known as the creator of that platform. So I'm not trying to get LeBron James to trade on FOMO. I want these native creators.

30:19 >> It's so interesting to hear. It's like um Charlie D'Amelio I think you know obviously on Tik Tok >> on Tik Tok where it's like the lesson there is you have to make internal champions and you can't bring an Instagram star to Tik Tok and say like hey ple your audience really really interesting >> exactly >> be real was another one that I was in. Is there any lessons for you from be real cuz that too had the clubhouse hype cycle that didn't sustain. I think it didn't I think be real didn't have the feedback loop. It required people to do something every day and people don't want to have to do something every single day and I think as soon as you lose that you lose momentum very quickly.

31:02 >> Is there a way to synthetically create momentum within a user journey? >> Absolutely. So for example, one of the most important things on FOMO are the share cards. So when you if I go to Harry's positions, I can see all of your positions and share any of your positions and these beautiful share cards on any other social media platform or your fumbles. So let's say you sold too early and then the price rockets, then I could see how much you missed out on. And what this does is it creates this feedback loop where I can fully publicly share your things on other platforms and then people want to see that in real time. So then they come to FOMO and then you're building this growth feedback mechanism within the app that every single time there's a top person that's having a top trade whether it be this guy Iceman who turned he turned 10K to $2.5 million overnight in one night on FOMO. There's another guy Remis he turned I think it was $300 into $1.5 million in a month and then these are being publicly shared on other social media platforms and then is driving attention to our platform.

32:01 >> Why aren't you also a media company? And and the reason I say that is because if you were to do amazing shorts with each of maybe they don't want it and they want to stay anonymized, but if you were to do amazing shorts on turning $300 into a million dollars, I mean that is the most viral crap content for Tik Tok. >> You have a great intuition. I think that we're building a huge media armfo right now. It's external to the product. So we're doubling down on content creators.

32:31 We're doing tons of partnerships with streamers. We're trying to do like a lot of the clipping content, etc. And we want to become one of the largest media like media businesses for a tech company in the world. >> You mentioned clippers there when we're talking about media. It is a new form of media. It is a dominant form of media. How have you approached that first? >> It's kind of a game you have to play because of how attention works on these social media platforms now.

32:57 >> How do you budget for it? How do you work with UGC? What does that actually look like? >> So, we actually have this all in house. We have these creator managers. They're fully in house and we manage a group of of 30 to 40 creators. We're constantly getting rid of the bad ones, adding new ones, and doubling. >> Makes a bad creator. What makes a good creator? >> It's honestly a numbers game. It's just based on their impressions. So, like when you're building a product, it's a lot about intuition. What your users will like. when it comes to like growth especially on these platforms it's just based on metrics like imp how many impressions they're driving how many conversions they're driving etc and the ones that the cost like the whatever the CPM or the CAC based on the uh the the acquisition cost versus the the lifetime value of the user if that ratio isn't right then you'll just kind of turn out that >> how do you determine acquisition costs is it on a per download basis or is it on a per funds and like uh deposited basis >> it's revenue to us right So it's someone who has to deposit and trade. So depositing is free if you trade um and then we take the total amount uh that we earn on any given month I guess from people who trade from those channels that are directly attributed and then how much it costs us to get those users.

34:08 >> Do you see commonalities in uh in uh talent that works and that that doesn't? >> Absolutely. And this is the most important lesson that I've learned early on. you create a form of content or you find a creator that has a form of content and they're working and you're like, "Okay, now figure out the next thing that works." That is completely wrong. What you want to do is continue to iterate on that and make it better and better and better until it works better and better and better and then replicate and just have that type of content being replicated. So, this is something that we're still building out the muscle for, but it's like users are more likely to convert if this is the type of font, if this is the color of the font, if this is the placement of the font, if it's this person talking versus this person talking, and you figure out these things, and you kind of just double down on what works.

34:55 >> Any reflections now from UGC building this Clipper content management system that other founders should know if they're thinking about it? >> So, so I guess there's two things here. One, you need to make sure that you're the lifetime value of the user is actually worth it. But two, you don't always have to go for the lowest hanging fruit. And this is a journey that we're on now where you have someone whose lifetime value might be, let's say, $30 and you're only spending 80 cents on them. But then there's another user that you actually need to spend $3 on because they need to see it 10 times instead of two times to actually convert. So, you should actually start to increase your CAC even if the LTV stays the same to capture a larger and larger audience as long as the CAC is lower than the LTV.

35:44 >> Does CAC go up or down over time? Some people >> up definitely. Well, I guess I guess it's I guess there's opposing forces, right? The for the force that makes it go down is that you get better at the game and you iterate. But the force that makes it go up is that each incremental user usually you get the lowest hanging fruit, right, to convert. So each incremental user is harder to convert. So they cost more to convert.

36:09 >> And then also it goes down because of like brand proliferation, which is like when you just become the default provider or the number one, >> inherently you just get people because you are the number one. And you know we're an investor in this business airwall and like they're on the side of shirts like football shirts. >> Yeah. >> And so like brand marketing comes into play. Brand marketing is a very difficult one to understand. >> Brand marketing is actually one of the hardest things because you don't see the direct benefit. It's so important but it's not like you don't really even know what the CAC is >> and you could spend infinite amounts of money and not even see conversion.

36:48 You try attribution by looking at uh kind of like hyper local search results by looking at conversions on a per account basis and whether that was like in the vicinity of North London where Arsenal played at a certain time of the game. >> But it's really freaking hard. The thing I say actually on brand marketing is look for immortal assets. And what I mean by immortal assets is like if you sponsor a podcast, make sure that the podcast has it in perpetuity. Like if you sponsored an episode that we did with Bill Gurley, it still gets thousands and thousands of plays per month even though it was recorded 3 years ago. That's quite valuable. If it's a billboard and in 2 weeks it's gone, that's not that valuable.

37:27 >> What are some other examples? >> A football shirt. There are kids all around the world wearing Manu shirts from 10 years ago with a Vodafone logo on it. That's pretty valuable to have people still wearing your massive logo in the thousands and thousands from 10 years ago. >> Do you see what I mean? >> Yeah. I think >> and there's a lot of assets like that which are immortal versus very transient. Every single big founder I've had, Nick at Revolute included, said the single biggest mistake he made about our marketing was he did not appreciate brand marketing enough early enough.

38:01 >> Yeah. At a certain point, building a product transfers from like a game of intuition to a numbers game because you just have so many users that like one of the early stories from Robin Hood I love is that the deposit amounts from people with iOS were twice the ones from people with Android. And their assumption was just oh like people with iPhones just have more money so they're depositing more money. And what they realized through data is actually there was something on the loading screen where it took like twice as long to load for Android. So people were just turning off and not using it. And as soon as they fix that, then the prices converged. So I think there's a lot of unintuitive things that data can explain. And at a certain point when it becomes a numbers game, it really is data driven and that's we haven't gotten there yet, but that's something we're aware of >> as we move forward. uh a very exciting announcement on index and USV doing the series B two of the best investors in the game. I have to ask how did that come about?

38:58 >> Yeah, so we weren't in a position where we necessarily need to raise capital and we were pretty opportunistic about it. I think after the a um we got some inbound and we took some time. We didn't really talk to investors. We were just building products and um we were talking with USV for actually a few months. We really like Fred. We spent a lot of time with Fred. He he's incredible. He has a talk about VCs not being focused on the product, but Fred actually has a really good product intuition. Uh I think it's very rare for VC and just the conversations with him and >> well this is like the combination of two of his biggest passions in decentralized networks and their network effects.

39:36 Exactly. Like this is like right in the mesh. So, I think it was actually the one of the other times besides the Chaan conversation where there was this aha moment, but we didn't get to speak with Fred during the series A. So, I think right after >> I I don't exactly know. I think Fred was traveling and the times just didn't match up. But, um, but it worked out now, right? >> No, this is what I [ __ ] hate about my job, though, which is like a holiday like that. I'm I'm not saying it was Fred, but like a holiday in general can lead to like hundreds of millions of dollars lost.

40:08 It's all opportunity costs. >> Yeah, it's all I know. And but like >> Okay. And so you meet him for this round. >> So he comes he comes to the office. We're building a relationship with him. He's he was actually super helpful on a few things even when he wasn't an investor and we just really appreciate that. And then we got inbound from some other investors and I remember the first time we talked with index ventures. Um they were just amazing partners. I think benchmark doesn't really have as many resources like these multi-stage funds have so many resources for founders. the series A announcement we did all the PR in house like we didn't have anyone any help with anything and I think having know the history of index being very involved in Robin Hood and USB being very involved in Coinbase and then even aside from the fact just Julia being Julian Yan being such amazing partners and the same with Fred um at USV we were opportunistic and thought it was time to do the rounds it was really great timing for us I think the capital is going to be high leverage average for us to >> how big is the round?

41:12 >> It's we're raising 75 million. >> 75 million. How much do index do? >> Index did 55. >> 55 and then USV dude >> 15. >> 15. Okay. And the price >> the price is 550 million. >> Okay. >> Post money. >> Did you come to them with like a this is the round size and this is the price? Did you kind of come to it together? There was an early conversation far before the term sheet where we discussed what price range would make sense for us I think we weren't looking to do a round right so they were like what price would be interesting to you and we set a number and I think that kind of helped anchor the conversation and yeah when they were open ears to that I think that yeah that anchored the conversation in a way where we had a great conversation from there. when you have 75 80 million bucks in the bank following around like this, what can you do now that you couldn't do before? Yeah. So, there are a few things. One, it obviously kind of helps us even more in the former point about market cycles. Our team is scaling. I mean, we're making money. We have much more money in the bank than we ever raised.

42:17 >> Is that difficult? Actually, Brian at Coinbase has said before the chat, I think he said it on the show with me, which is like the challenge of his business is just like volatility and how it impacts culture and morale in some cases where it's like it's just hard when it's a [ __ ] depressed crypto period. >> Exactly. >> And you're like, [snorts] >> Exactly. And that's why I mean that's why giving away so much ownership is important, but also having this capital really keeps motivation high during those periods cuz we know no matter what we can build through it. And it's not like we're scraping by, right? We're like building in a way where we're really being able to take the risk that we need to cuz we have the capital to back them. Our plan is to kind of verticalize all of our infrastructure and own as much of it as we can inhouse cuz it just makes the product experience that much better for our users.

42:58 >> How do you determine what you buy versus build? >> Anything that has to do with the core product, meaning the things the users face, you kind of have to build yourself. For example, some of our competitors, they just acquired trading terminals and then built that into their product. But FOMO web is like a whole different experience. You have the same social graph. You could place a trade there under one identity, open it on your phone, and it's this social trading experience on a on a web that no one has ever done before. So that's something that was like very obvious that we just have to build this. But then something like data infrastructure, right? Maybe someone who's already set up bare metal servers so we don't have to pay so much money to AWS or Google Cloud or someone who does indexing for us or these things that are behind the scenes that would take so long for us to build up the expertise to those are something that's something that obviously makes sense to to kind of acquire to bring in house.

43:50 >> America likes to [ __ ] on Europe, but when we look at the numbers right now Europe is kind of [ __ ] on America when it comes to fintech. It's our fintech provider Revolute which has stolen the show and I think on the next round will be considerably more valuable than Robin Hood. Why is no one in the US built something that Europe has? Yeah, I think it's true. I mean listen because every country has different brokerage laws. Europe is a lot lar like a lot larger in terms of like there's so many countries in Europe and I think Revolute has been able to kind of saturate all of Europe at once and has been able to grow globally a lot faster than Robin Hood.

44:31 Robin Hood has done a great job. I think they have a little over 20 million funded accounts in the United States and we were discussing before how they've horizontally grown into other product categories. their biggest move with onchain uh tokenized equities is to be able to finally distribute these things globally and I think it's really important look at Facebook look at WhatsApp like all of these business social businesses that really scaled are global from day one and I think that's really really important um so I don't know if it necessarily answers your question of Europe versus US but I think the reason is your ability to saturate a larger group of people >> are you a social company or are you a financial company >> we're trading at first. I think that's really important um because the what the social features do is they at least right now in its current form is they allow you to become a better trader by having transparency to what the best people are doing. So you could instantly discover you can instantly get notified.

45:27 You could follow people. But I do think over time you want to create momentum for people to use the app. Maybe even if they're not trading, you don't want to obuscate what the app is good at. We have to always be the best trading app in the world because the top traders won't use us otherwise. However, over time, if you build these other social products, maybe the people who aren't necessarily trading every day can interact on the platform more. Um, so I'd say we're much heavier on the trading side today, but heading in the direction of becoming more social.

45:58 >> Dude, I want to do a quick fire around with you. I could talk to you all day, but I say a short statement. You give me your immediate thoughts. Does that sound okay? >> Okay, let's do it. >> So, what have you changed your mind on in the last 12 months? how important social is on FOMO. I think we were doubling down on the trading product and assume that people will come to trade and then the social graph will grow from there. But you need to be very intentional about the social graph. And I think that's something that is very momentum based and as soon as you start losing momentum there, people stop using the app and then the whole thing could kind of unravel.

46:26 >> Revolute versus Robin Hood. >> I I'm a Robin Hood user cuz I'm in the US, so I'm going to say Robin Hood, but I do think Revolute is very well positioned. Um, honestly, it's really hard. Maybe Revolute. It's a close It's a That's a close one. >> That feels like your heart says Robin Hood and your head is saying Revolute. >> I think that's right. Can we cut that one? No, I'm kidding. [laughter] >> What's your biggest advice to someone studying computer science at university today?

46:53 >> Use less AI. >> Use less AI. >> I think use less AI because you're going to have AI at your disposal. And all of the best engineers today had to learn not using AI to become really really good. And I think that when you're in practice in your job, you're going to use AI. But I think this is with me my this is a controversial take. I try to use AI for as little of my writing as possible because I think if I use AI for all my writing, I'm not going to be able to write anymore and I'm not going to be able to remember what is good writing.

47:23 Um I'm pretty scared of that to be honest. >> I agree with you, especially on social posts. I completely agree with you. Some of my team were using you chat for social post and I was just like it's [ __ ] and I can tell there's no humor, there's no personality, there's no texture to it. But I'm like with with engineers and with coding, [ __ ] if I'm advising CS students, use it as much as freaking possible cuz you're >> I'm not an engineer, so don't [laughter] take my advice on that one. Uh >> tell me, uh that that's very funny. Um what investor do you not have that you would most like to have?

47:58 >> Ribbit Capital. Have you pitched them? >> We spoke with them. Yeah, I really like Mickey and the team. They're they're great. >> What sports team do you want? >> The New York Knicks. >> Really? >> Not even a question. [gasps] >> That's amazing. >> I mean, it's topical right now. >> You can give one piece of advice to yourself starting FOMO again. What would you tell yourself if you knew everything you know now? >> Have the hard conversations sooner.

48:23 I think the hardest thing about being a CEO is having hard conversations. Whether that's with employees, whether that's with early investors, whether that's with friends who are helping you, all these things. And I think that people try to avoid confrontation and avoid having the hard conversations because it sucks. But have those sooner and just be completely transparent and honest and come from the best place you can and they'll understand. >> Often when you have a hard conversation, it's not as bad as you think. you feel a sense of accomplishment and then you actually take on more hard things because you're like it wasn't as hard as I thought. It leads to like a domino effect of taking on hard things. Do you know what I mean?

49:04 >> That's exactly what I've realized too. >> Um 996, how do you feel about this grind slot hustle culture? >> Yeah. I think at FOMO there's no we don't put numbers to it. There's no 996. I think if you give, and this might be unique to our business, but if you give a lot of ownership to a team that takes a lot of ownership, right? Like these people are fully autonomous and they really care about they're doing, they all feel like they're owners of FOMO.

49:31 They feel like they're owners of the business. So, I trust that they're going to do their best work. And there are times where people are don't have to work on the weekends. And then there are times where we're building a new product like this week and we're working all weekend, but people love to do it. I think you can't beat a team that's having fun. and we're just loving what we're doing. So, it I'm always on in the sense that if something comes up, I have to work on it. But we love what we do.

49:58 >> What's your greatest strength, but also your greatest weakness? I have strongly hel like loosely held strong beliefs and in the sense that I I think that sometimes the downside of is sometimes you just need to make the decision and but I always listen like whenever there's a decision at FOMO you're asking we're asking every single per person especially the core team what they think about it and we're talking it out and coming to the right conclusion I think it's definitely more of a strength than a weakness because it's forcing function for us to strongman the other side always because we're always like what if we did it this way or I have the opinion that's inverse to yours let's talk it out but I do think that sometimes you need to just make a decision and we get hung up on things >> has Trump made business better in the US >> I think there's been a lot of positive movement on regulatory clarity um but at the same time I think that sentiment for crypto has also gone down significantly um from the general public >> what has driven that crypto sentiment downgrade.

51:02 >> The goal for FOMO, as cheesy as it sounds, is to be a beacon of light. It seems like everyone else in crypto has always been so short-term focused. And I think in any early industry you go to, the industry at first is kind of like riddled with like the shortterm gains and the people who are like taking advantage further for themselves and then someone's got to like come with the broom and sweep up the mess. And our goal is to like create a product that's for our traders and something that they'll love and something that's with them for the long term. And I think what's given such a bad rep is there's no consumer protection here on a lot of these products. So people will buy it's it's so hard to do in the first place, but then they get over the the the the leap of actually doing the thing and then they just lose all their money. So you and it's not because they didn't know that this coin might go down. It's because it was a scam coin and there was actually a real one they were trying to buy, but they bought the wrong one.

51:52 There was no warning signal and I think people just got burned so many times in a row that it led to all this negative dogma. That's called a triple layer anthropic SPV. >> Yeah, [laughter] there you go. And this hairy is why pers are so important because with the perp you don't actually need to trade the underlying thing. So like we could have a per on whether anthropic will go up or down but we don't need to actually transfer the underlying anthropic asset. So if anthropic goes all secondary asset transfers are null, it doesn't matter because we're just betting on the price of the thing. You're never actually exchanging the underlying thing with me.

52:26 Does that remove SPVS? >> Yeah, you don't need an SPV for a per. >> How do you expect? And the because you're going to now have Anthropic, OpenAI, and SpaceX. >> Yeah. >> Where you'll have pers on the platform. I guess >> it's going to be really interesting to see what happens. I think there's only so much demand in the retail markets and I think SpaceX being first to market is going to be very interesting. I'm curious to see how much capital they'll raise from retail. I think like 30% is devoted to retail. Now, will there still be a ton of retail interest if people get burned on SpaceX in anthropic or open AI? I think if SpaceX performs well, the OpenAI anthropic IPOs will also go very well. I think if SpaceX performs poorly, then those are going to have a hard time.

53:12 >> Final one for you. What's the kindest thing that anyone's ever done for you? >> I mean, the true answer is like my parents giving me everything I have. That's like I feel like maybe everyone kind of has a similar thing there, but yeah, I do really owe them everything. I think that there were parts of my upbringing that were tough, but I think like my dad, for example, didn't have much savings and like worked his way to help pay for my college and like that was like one of the most incredible things anyone's ever done for me. And my goal is to just continue to give back to them. Um, but but yeah, I think like my probably my parents giving me everything I've had today. So >> my mother is absolutely the same. My mother taught me it's not what you say, it's not what you do, it's how you make people feel that matters.

53:58 >> Absolutely. >> And um I always say like call your parents up and tell them how much you love them because there's a time when they won't be there and you'll regret not making that call. >> Exactly. >> Dude, this has been such a pleasure. Thank you so much for letting me be a part of the journey. Thank you so much for coming. It is so good to do in person and you've been fantastic. >> Thanks for having me on. It was a pleasure.