Acquired - Meituan

0:00You've been a VC in my heart for a long time. I take offense to that and awesome, thank you. Welcome to season eight, episode three of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund PSL Ventures. And I'm David Rosenthal and I am an angel investor based in San Francisco. And we...

0:40are your hosts. Ben, you're a bio there. It's a little different this time. Congratulations, my man. Thank you. Very long Seattle. Excited for the future of the Pacific Northwest. It's very exciting. Well, well deserved. Promotion to managing director. Well, thank you. And I mean, frankly, it's most exciting just to have a new $100 million early stage fund to invest in Pacific Northwest entrepreneurs, who also might be acquired listeners. Well, today we are talking about a company that Frankly, it couldn't be further from the Pacific Northwest. Well, maybe it could. I suppose if you're on the east coast of the United States, you might be literally halfway around the world. But today we dive into a Chinese app that started as a group on clone by a founder who had previously started a Facebook clone at a Twitter clone. But this bike sharing Yelp-esque door dash of China is much more than a clone. This AI-powered delivery company is also a ride sharing company.

1:39It's a real world supermarket, a merchant analytics platform, a fintech platform for those merchants who need loans, a travel booking app for consumers and a way to buy cheap movie tickets. So what on earth is going on? So you're saying it's like door dash and Airbnb and square and booking.com and Expedia and Uber and Instacart.

2:04You know, Fandango, Safeway, the list goes on and on. So Maytwan is what people have dubbed a super app. And if you're confused, well, so were we before we started the research. So over the course of this episode, we will dive into unpack this curious company, how it became China's third largest tech company behind only 10 cent and Alibaba. And it was founded over a decade after each of those two companies. It's pretty crazy. It's like, Frankly, amazing that it's in the same category as those or are quickly rising into that same category. And of course, wildly displacing by do the classic third in the big three Chinese tech companies. Yeah. Alongside Pinduo duo as well, which we covered last summer. This story is honestly amazing. I mean, we'd heard we'd reference me to one on the show. Oh, it's the super app. It's this really interesting Chinese thing that is unlike anything in the West.

3:02This story is incredible. Frankly, a shame we haven't told it before now. Indeed. Well, that's why we have eight seasons of acquired. Well, are you an acquired Slack member? If not, what have you been waiting for? It is a spectacular community discussing, of course, all things acquired and recent episodes. But more importantly, it is just a genuine and smart group of people having thoughtful, nuanced, and respectful discussion about the tech and investing news of the day.

3:29You can join at acquired.fm slash slack if that sounds like your cup of tea. All right listeners. Now is a great time to talk about a new partner of ours here on acquired LaGoura, the agentic operating system that is redefining how the world's best legal teams work.

3:48Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. LaGora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm.

4:15for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lagores Bed here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

4:44And they recently launched LaGora agent offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And LaGora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early LaGora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. LaGora now has over 100,000 lawyers on the platform from 1200 legal teams in 50 countries, and crazily, they went from 1 million to 100 million in ARR in about 18 months. Truly insane numbers. And that is the real test.

5:36Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, you can learn more at logora.com slash acquired and just tell them that Ben and David sent you. Well, lastly, to keep this short and sweet, if you are not an acquired LP, you should totally become one.

6:03Aside from all the things we tell you about the LPE program on every episode, we just shipped a killer episode on the state of SAS in 2021 with Emergence Capital's newest general partner, Jake Saper, where he dove deep on their recent investment thesis, Deep Collaboration. You have to say deep in a deeper voice, deep collaboration. Deep collaboration. I'll handle deep collaboration. It's also been a big month for acquired guests and hosts in terms of promotions to general partner.

6:33It is the wave is upon us. Well, we of course explored the insane state of tech valuations right now in the frenzied market we are in with Jake as well as deep collaboration. So tune in LPs or feel free to join at acquired.fm slash LP. If you are not and we can't wait to see you there. Well, David, before you take us in, listeners, as always, this show is not investment advice. David and I may have investments in the companies we discuss on this show and it is for educational and entertainment purposes only. That's my disclaimer. It is your show to run now. Take us in. Tell us everything. Well, I sure hope it's for both of those purposes. I mean, equal measures. Okay. Before we dive in, we have to say a big, big thank you to the TechBuzz China podcast. They did an excellent job covering Maituan and its crazy story. I think among all English language reporting on

7:31Chinatech for Maituan specifically. They did a fantastic job along with as always the evolving for the next billion podcast by GGV and Bernard Leong at over at Analyze Asia. You used all of their work in this podcast. They're all fantastic. Definitely go check them out if you follow Chinatech and you definitely should be following Chinatech no matter where you live. Okay, so Maituan we start history and facts back in February.

8:01We're in early March now, so I'm right about the same time of year, of 1979 in Leng Yan, China, which is a small by China standards, at least, city of about 2 million people in the southern part of the Chinese coast. Kind of not too far from Hong Kong, but like a, in Shenzhen, six-hour drive, sort of north of there, a few of a sense of Chinese geography. Are you like on Google Maps? Yes.

8:29Okay. Like this is a very descriptive explanation here. Well, the more these episodes we do, the more I get to know China's geography. But yes, I was on Google Maps. And we start, so in February 1979 in Longyang with the birth of a baby boy named Wang Xing. And Wang is going to be our protagonist here, one of our protagonists through this story. And this was a pretty interesting time in family he was born into. So this was right at the beginning of Deng Xiaoping's reform and opening in China that we talked about on the Alibaba episode a lot. I also talked about on the 10th and the episode. And Xing's father was one of the very kind of first early generation of entrepreneurs in China after the reform and opening part of that. Let some people get rich first doctrine. And so his father

9:25owned a cement factory. So a long way from a tech entrepreneur, but he was a real like small business entrepreneur in China in the 80s and 90s. So Schinger is up to be doing this sort of new middle class, upper middle class family. And in middle school, he gets interested in computers, like so many of us, and he convinces his parents to buy him a clone. This is going to be appropriate of an Apple too. And then shortly thereafter, he convinces them to upgrade to a PC. Wait, there were Apple too clones? Of course there were. It's China. So I don't know if it actually ran Mac OS, but it was, you know, some like knockoff of an Apple too. Wow, crazy. Totally crazy. So then he upgrades to a PC.

10:15And he also, and this is pretty unique, he convinces his parents to get him a modem. So this is in like the early 90s. The internet was barely a thing anywhere, but especially not in China as we've talked about on previous episodes. So he starts going online and doing what early internet users in China did at the time was they would go on the kind of proto message systems, the Bolton board systems in China, which literally like every future Chinese tech billionaire was hanging out.

10:55On these BP I know I feel like I'm like I swear to God I've heard this story before It's like I don't know like Cooper Cafe in Palo Alto or something. It's like literally all of them. They're all hanging out on these BBS's pony ma's there Jack Ma's there William Ding from Daddy's is there of course Colin Wang from Pindu Oduo is there You just named five of the ten most valuable Chinese companies totally or at least Chinese tech companies. It's amazing. So she's there. He does very well in school He ends up going to Singhua University in Beijing, which is one of if not the best university in China, where he studies electrical engineering. So he's like very much on the path here. He graduates in 2001 and he does what every beautiful, you know, future Chinese internet billionaire would do. He goes to the US for grad school. Didn't you go to university of Delaware? Yeah. So this is where his path diverges a little bit. And David, like this is...

11:54What 15 minutes from the hospital where you and I were both born. Yeah, and it's like probably 15 minutes from the hospital. I was actually born in Philadelphia. You were born in that's right, but you're all right next door neighbor or something was a doctor at the hospital. I was born. It's crazy, but I went to high school in Wellington, which is the biggest city in Delaware. Let me tell you Delaware at this time like, you know, I love it. It's very beautiful place, but like I was there Going to high school at the same time as shing was going to grad school at UD, you know, 30 minutes away. This was not an internet hotbed. Far from it. It was an engineering hotbed, interestingly enough with DuPont and Gore, with all the sort of materials and mechanical, but no, like it actually pretty good CS school later down the road, but not at this point. No, like literally nobody is thinking about starting.

12:46tech companies in Delaware in 2001, 2002, 2003. I can guarantee that from first hand experience. So I have to imagine that this was like pretty serious culture shock for him. So he stays a couple of years. But then unlike many of the other personalities we just talked about, he ends up dropping out because he wants to get into tack in the internet and you'd think, see, maybe this isn't the right place to do it. And in 2003, this website does show up among students on the University of Delaware campus. A new kind of hot social networking site. I think they actually raised some money from some pretty prominent venture capitalists on university campuses. And Xing is like, this is it. I have found

13:44my calling. I'm gonna go recreate this in China. Of course, we're talking about Friendster. I'm gonna say, I thought Facebook was starting in 2004. Yes, yes it was. Quick diversion down Friendster. Is it there like some affiliation with like Reid Hoffman and Mark Pinkis? Like isn't the Friendster story deep into people who went on to build you know phenomenally successful social products later?

14:07I think so. I always give the FriendStory story and the FriendFeed story mixed up. Oh, that was Brett Taylor. Yeah, that was Brett Taylor. And that was like after Facebook. That was like a 2006-70. It was like an aggregator, right? Yeah, yeah, yeah. Let's put a pin in this. I think we owe FriendStory an episode or at least an LP episode. Yeah, so we got to dive into the history there, especially because it would go on to seed Maytawant. So, she leaves Delaware. He moves.

14:36Back to China, he goes back to Beijing, and he hooks up with some of his former Singhua classmates, and he starts, duo duo you. Apologies if that's not the exact correct pronunciation. Yeah, we probably need to say that for several things on this episode. Yeah, several things. We apologize. We're trying our best. Literally translates as many friends, and the idea is he's gonna, you know, just like he saw a friend stare kind of take hold of it.

15:04The U.D. campus, he's going to target college campuses in China, build up this social networking site. Unfortunately, like Friendster, it doesn't really work. It's probably too early. It's too early for Friendster in the US. In China at the time, college students, yeah, they probably were using computers, but your average person did not have access to a PC. Mobile was still distantly on the horizon.

15:32So he tries to pivot to do a you into a sort of different kind of service still for students for Chinese students studying abroad to kind of stay in touch with each other. That doesn't work either. But then in 2005, as he said, Facebook arrives on the scene and so she's like, ah, okay, I've got it this time. And he realizes that maybe he made a mistake the first time.

16:00And that was that he didn't clone Friendster exactly thoroughly enough. He's not gonna make that mistake this time. So he and the team, they create a new site, they call it Xiao Ne, which literally means on campus, and they take Facebook, they take Facebook, thefacebook.com and they recreate it.

16:22To the exact pixel like the same shade of blue the same text the same layout the same everything literally the early versions of the site had the footer at the bottom a Mark Zuckerberg production. No way. How like how do you clone that is that like they didn't know.

16:42What it meant. So they were like, no, he definitely do it. Because people in China were hearing about Facebook. And so I think the idea was like, it's like, let's convince people this is. We're going to pretend to be Facebook. Fascinating. Amazing, amazing. But it works. A lot of people start using it. A lot of Chinese students start using it. It works so much that just like the real the Facebook, they need to start buying servers more than they can afford to pay for themselves. I feel like I'm watching a knockoff of the social network. It is totally a knockoff of the social network. This is so great. It's even better by the twist that this story is going to take later on. So they probably try and go raise money. They can't raise money. I bet VCs at the time are like, this is crazy. You literally say a Mark Zuckerberg production at the bottom. I'm not going to invest in this.

17:35Well, the Chinese venture ecosystem is also dramatically underdeveloped. I mean, you think Sequoia, China only started in 04. And like, I think the venture ecosystem before they got there certainly existed, but it wasn't anything like what the US venture ecosystem looked like in the .com era. No, and I don't think it was particularly risk seeking. We'll get to this later, but yeah, Dianping.

17:58actually was one of Sequoia China's first investments. And that wasn't until 2006, which is the same time for him as this. And David, your drop in names we haven't gotten to yet, Maytwan will eventually emerge with the on ping become Maytwan, Dion ping and then drop the Dion ping. It's cleaner and go just to Maytwan. And that's how we get that. But yes, you already are putting in an interesting point that is the company that they ended up merging with and buying later in a mega crazy merger. That'll be a huge point of this episode.

18:26already existed by this point. And this guy is working on a Facebook clone. Totally. So what they decide to do, they end up getting an offer from another entrepreneur in China named Joe Chen to buy the company. So they sell the company to him for $2 million in October 2006. And Joe obviously wouldn't have bought it if he didn't see the potential for this thing. And you know, the Facebook of China, that sounds like something this could become. He's like, well, But the name, though, you know, Facebook already at this point is starting to expand beyond colleges. And if you really want to go big, you want to be, you know, the Facebook for everything. And so this name of on campus, see, not so great. Let's change it to a new one that, you know, a new one that incorporates everybody. Literally, why don't we call it everybody? Why don't we call it Ren Ren? So yes. Oh, this became. This became.

19:20Unbelievably, Renren. This is Renren. Whoa. And we're talking about. And David, what is Renren? Renren is the Facebook of China. I presume many listeners know about Renren. It's a public company. But yeah, they became enormously successful. Literally, we're called the Facebook of China, which is funny, given that they started as a pixel for pixel clone of the Facebook of China.

19:44and they raised a bunch of money from SoftBank and Massa back in 2009, 2010. And then they went public on the New York Stock Exchange in 2011. Before Facebook, they were the Facebook IPO. Before Facebook, they raised $740 million in the IPO at almost a $6 billion market cap. And Wang Xing created the whole thing, but he sold it for $2 million.

20:12which you could justize him for, but it actually was the right decision if you knew what he was going to go on and create and how much more valuable that would become. 100% the right decision. I mean, it was either sell it or it was going to die. And hey, he's still a kid, right? And he gets $2 million. Great. So what does he do? He says, guys, I can do this all day.

20:34this is like 2007. I'm just going to spin a wheel and like roll some dice, pick whichever US internet company web 2.0, you know, hot company. I'm going to, I'm going to recreate. Let's go on to the next one. So he sold, he sold what we become ran ran at the end of 2006 by the beginning of 2007. He's back in the game with fun fo, which literally means have you eaten, but it's a kind of idiom that's more like, hey, what's up in China?

21:03What do you think that is? What is the network that people are using to send? Hey, I'm eating my breakfast and my breakfast is Twitter. It's Twitter. He creates Twitter again. It's just like at this one is supposedly I didn't actually go look into these screenshots or whatnot, but it was I think even more insidious that you could like clever would be another way to put it that you could actually think that you were using Twitter based on how they did the domain names and stuff. It also becomes a huge hit.

21:32So we're talking about 2007. Twitter launched in 2006 out of Odio, like midway through 2006. Funfo gets two million users right off the bat. So that may have been more users than Twitter at the point in time. Unfortunately, though, for Wang Xing, it's so successful that it attracts the attention of the CCP. Because it's like Twitter, you can say whatever you want on there and people are spreading political dissent on there. So the CCP shuts it down for a period of time. I don't know that this is exactly but I think it might have been like 12 or 18 months that it was shut down. It's honestly amazing that Renren didn't get shut. I mean, I'm sure that the deal was struck there so that hey, you get to exist as long as we get to, you know, have some content moderation on there. But the fact that he was able to build and sell a successful social media company in China is kind of amazing. Yeah.

22:29Actually, as a good point, I didn't look into this, but maybe part of selling it and Joe getting involved was maybe around that, but I don't know. That's speculating. So fun foe gets set down. And then it does eventually reopen. And I think it's still live today. But in the intervening era, Sino Weibo and Tencent, you know, move into the micro-blogging space and, you know, it doesn't become a winner. But, you know, hey, long shins like, well, Second time, I guess that was technically the third time he had Friendster and then he had Facebook and then he had Twitter. That didn't work. Okay, I'll go on to the next one. And so now we're in sort of late 2009, early 2010. And there is a very particularly obvious US tech company tech and quotes company that makes sense to clone at this point in time.

23:24Am I thinking of the right company there were the fastest ever company to a billion dollars in revenue? I also thought that billion dollars in revenue same thing as you. I went and looked it up as fastest ever to a billion dollars in valuation at the time very different than revenue. We're talking about Groupon of course which took the world took the US by storm in the later nine. They were losing their heads in the tech community for this company. Completely.

23:53Completely go and God, I mean, now it's kind of cute, right? Like companies, we know companies that are valued at a billion dollars before they've, you know, come out of stealth. But at the time, it was, you know, when serious A's were getting done at like a six million dollar post that a company, you know, a year old would be worth a billion dollars. Completely lunacy. And also people were when you say tech company and quotes like Groupon took.

24:19scores of salesmen pounding the payments in order to go and convince local businesses to do this thing. Their turn rates were terrible because it was awful for the businesses and they would leave immediately. And so they had this awful cost structure, this awful retention lifecycle problem with customers, but they had so much capital in relative to other tech companies that like it was go-go time, pump it all in. Well, it was revenue. They probably did hit a billion in revenue pretty quickly because it was one of those things where like you could pump capital in and get revenue. You just didn't get any profits out of it or anything defensible. So in March 2010, Wang Xing and the team incorporate Mei Tuan coming from Mei, which means beautiful and Tuan, which means together, beautiful together. And at this point, you know, he's developed, despite his not yet, you know, hitting it.

25:15big with his cloning factory. He's developed quite a bit of a reputation in Chinese tech entrepreneurial and venture capital circles. And the Chinese VC industry has matured a lot by 2009, 2010. So right off the bat, they raised $12 million from Sequoia China when they launched in early 2010. And then a year later, in the beginning of 2011, they raise another 50 million dollars from Alibaba. So this is pretty big. Again, these numbers seem quaint today, but at the time, like, 12 million dollar essentially seed from Sequoia in China. Like, that's huge. You're entering this mega hot space. Then you raise 50 million bucks from Alibaba. Like, this company is crushing it. And we'll talk about this more later. So I just want to tease it here a little bit, but

26:13you know, raising money from an Ali Baba Tencent. I guess we used to say bye-do but it hasn't come up much in this episode or frankly in recent conversations. They're a VC and a big tech company. They're, you know, they're a Fang company and a VC all in one. And so they give you a ton of capital because they have a ton of capital and then they can also really help your business. I don't want to get too far ahead of my skis but for anyone wondering, Ali Baba, why are they leading the series A?

26:42That's how China works. That's very much how China works. So there's just one problem, though, which is that for all of Wang Xing's capability, vision in a certain sense, it really is vision in knowing what to clone and how to make it adapt it for the Chinese market, all the capital behind them, all the great resources. He's not the only one who has this idea that, hey, Groupon might work in China too. In fact, he's not...

27:08even one of like a dozen or one of like 50 or one of a hundred he is literally one of five thousand entrepreneurs in China who would have the same idea and start group on companies you think we're exaggerating at this period is is like known in Chinese tech history as the the period of the quote unquote thousand group on war and Thousand is under estimating there were there were five thousand companies at one point twenty to thirty new Groupon clones, getting started every single day in China, including Groupon itself, which did a JV with Tencent to enter China, which if you're going to enter China, you got to do it with Tencent. They do a JV. If anybody can succeed here, it's Groupon called Gao Peng. And this just turns into like, this becomes a blood bath on the order that like is

28:01Unbelievable. People in the US, you know, in Western markets think, oh man, food delivery in the US, that was a blood bath. There were like four different players that were going after this. China scale is all we need to say. It's like, oh, in that previous company we're talking about, it's like, oh, well, they had only two million users. Like everything in China scale is so much bigger and faster and more competitive and, you know, more gritty. And I mean, the 996 thing is real. Like if you hit on to something, You better be working 99 hours a week, six days a week, or else someone else is going to with your idea. Yeah. Well, definitely somebody else is going to. So the other thing you know, like you said, Ben, the nature of the Groupon business is there's not really any tech involved like you need a website basically, but the business is local.

28:58salespeople going to merchants restaurants, karaoke bars, massage parlors, you know, and the like and walking in the door and signing them up to get on Groupon and then running marketing stunts, you know, in local cities getting users to sign up. And every city is just as hard to sign up as the previous city. Like you don't really have scale advantages by being already in 50 markets. It's just like, well, no one's in this market yet. So it's War to win that market. Yep. Now unlike many of the other thousands of competitors, wang shing figures out in this process, you know, people were thinking up until this point, you got to remember like the technology adoption curve, the computing adoption curve in China looked very different than the West, you know, most users in

29:55China never experienced the internet on PCs. They just went right to mobile. Right. And at this point in time, even that was only just starting to happen. So the people who did use the internet in China were in the tier one elite coastal cities in Beijing and Shanghai in Hongzhou, you know, the big insingen in Hong Kong, people that had access to computers. So most of the startups were focused on those cities. But Wang Xing realized Hey, the tier two, the tier three, the smaller cities, people are starting to get mobile phones, or they have access to the internet in internet cafes. And this product, the Groupon product, is actually a really good fit for those cities. So he and the company expanded to many, many more cities than a lot of their competitors. And that was one of the key things that helped them

30:51I won't say win because nobody won here, but survive. Become one of the few remaining last standing. Become one of the few remaining last standing companies. And also, you know, having Sequoia and particularly Alibaba capital and might find them helps a lot. But by the end of 2011, so this whole cycle plays out in like one year, maybe 18 months. By the end of 2011, there are just a very, very, very small number of these companies left. There's Maiton. There's the operations of the BAT themselves, which they have small operations, but mostly they've invested in companies. And then there is a very, very different company that is still left standing called Dion Ping that we've referenced. Yeah, which is fascinating for them watching

31:44You know, this thousand group on war come up around them. They're not in that space really. They had to pivot into that space. It's so fascinating thinking about if you are running the Dianne Ping business, like what do you do when all that means happening around you in a very near adjacency. It's funny. We'll tell the story now. I mean, I could maybe argue they shouldn't have gotten into this at all because they had a great, great business. But the net result of them getting into it is that they then become Maituan Dianne Ping and now they're The fourth largest internet company in China. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI first world, that doesn't hold up anymore. Yep. Your risk surface changes every week now.

32:39A vendor turns on an AI feature or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this, quote unquote, shadow AI running with no security review at all. Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap, and the way that they close that gap is Vanta agent.

33:07Think of it as a GRC engineer, that's governance, risk, and compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes and cuts the time that you'd spend on vendor assessments in half. In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like ramp, cursor, and snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment. And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here. And literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at Vanta.com slash acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. OK.

34:06So, unlike Maituan and Wang Xing, who weren't just unabashed about copying, it's like, that was their thing. They're like, yeah, we copy. We do it better. Like, that's what we do. Dian Ping, which literally means reviews in Chinese, was actually like a genuine innovator. I don't know if they were unique among Chinese tech companies in this era, but they were certainly special and were and are...

34:34An incredible internet company. So people sort of derasively at the time would call Dianping the Yelp for China, but A, it wasn't as way more than Yelp. And B, Yelp was the Dianping for the US because Dianping was founded in 2003 and Yelp was founded in 2005. Totally. It was crazy realizing that in the research, I'm like Yelp for China. This company started like when I was entering high school. Yeah.

35:02Back when Wang Xing was still at the University of Delaware, who was when the young thing was founded. So the founder, this super, super sharp guy, named Tao Jiang. And Tao was, so he was on the, evolving for the next billion, then called 996 GTV podcast and talked about his journey, great episode, willing to it in the show notes. So he had been a consultant in the US, and then a technology consultant.

35:32And then went to Wharton and did his MBA at Wharton and he had been planning he graduated in 2013 and he had been planning kind of like all the you know future internet billionaires at the time that he was going to go back to China after doing his MBA at Wharton and he would pick a US tech business bottle to clone and you know raise money and run that playbook then but unlike shing who you know is very confident in his abilities shall we say Tao is He kind of looked around at the landscape in 2003 and he was like, I don't know all the good ideas have already been cloned already. Like, I don't know why I would be able to do something better that's already being done in the US. But I do kind of want to start a company. You know, I've had all this great experience in the US and, you know, one thing that I really like doing while being an MBA student in Philadelphia, not far from the University of Delaware, was I would use this as a Gat Guide.

36:29when I would go out and go to restaurants in Philly, I wonder if there's some innovation to be done there about basically bringing Zagat online. And the thing is in China, restaurants are kind of different. And there is nothing like the Zagat guide in print or online. And it actually would be way more useful because in China, you can order pretty much anything at any restaurant. You really, really want to know what the good stuff is in each restaurant. Otherwise, you might order. They might have four or five fantastic dishes that they do better than anywhere else. But when you get the menu, it's literally a Chinese menu. It's like a book. You could order anything you want. You don't really know. I need kind of a guide to all these restaurants. He's like, well, maybe this could be useful. I'll code it up. So he moves back to China after graduating. And he moves to Shanghai, which was not a tech hub at the time. And he codes.

37:28builds the website himself. Wow. I didn't realize he was a technical founder. Yeah. I believe he had done technology consulting before Wharton. The story is he built it himself. So like super small scale, small ambition. Like he wants to build a company, but he's not thinking like Wang Xing here. It takes off like wildfire. And in contrast to the Group Hunt business model, online reviews for restaurants and in particular for dishes within restaurants is actually an amazing internet native business because of the asset that you build. It has an unbelievable moat around it. If you really hit the critical mass of not just restaurants, but then the dishes at each place that are good, like who can compete with you? Once you know every restaurant and every dish, especially when those restaurants have a Chinese menu with a zillion options on them, like this is a pure sort of internet native data play. Yeah. So he does end up hiring and building a company around this, which we'll get into in a sec. But they come up with a

38:24bunch of key innovations. So Yelp hasn't even been started yet. And they have, you know, so it's ratings and kind of a guide to restaurants. But like you said, Ben, it's not just the restaurants. It's the dishes at each restaurant that you can individually rate. You can also rate and see category ratings for each restaurant like the food, the decor, the service, you know, you want to know like, you know, go ahead, Yelp, the thing that sucks about Yelp is like, there's a four-star restaurant. Every restaurant has a four-star restaurant. Why is it four-stars? Is it that like, the food is really good, but the service sucks. Yeah, and they've tried to get into this, but yeah, I think it's safe to say Yelp has just not executed well as a public company. In the last five to ten years, it's just been disappointing. Totally. Very disappointing.

39:09Then there's stuff like, you know, on Yelp, you see the dollar signs, even on all US review platforms. It's like, oh, this is a three out of four dollar sign restaurant. Well, what does that mean? Like, you know, so on Dianne Ping, you see the actual average price of checks of bills at restaurants. So you can be like, oh, yeah, I know exactly what this price is. It leads to much, much, much better discovery. They focus on photos and even short video like way before Yelp or Google Maps or anybody realized that was important. Yeah, I was reading that Dion Ping is in some ways a reviews hub like Yelp. But in other ways, it's a content business that they're actually good at sort of building a massive trove of curated content and presenting that in a thoughtful, beautiful way to the user. Yeah, yeah. I mean, this whole idea, you know, the Instagramming of food, it didn't start with Instagram. I mean, Dion Ping in no ways is Instagram. But like, that's kind of where it

40:05Start like, oh, I'm going to take a really nice picture of this meal that I'm about to eat at a restaurant. Now I'm going to put it in my review on Dian Ping. They also go much deeper into the value chain. This I think was one of the things that Yelp whipped on more than anything else was on Dian Ping. You see the reviews, but you can also book a reservation at a restaurant. You can order ahead what you want to eat at the restaurant. You can get discounts at the restaurant and they do go in a small way into delivery from the restaurant. It never made any sense to me while all those are separate businesses in the US. You got yellow, you got open table, you got grub hub. All the elements were there, but it was such a bad experience for the consumer to do that across three separate apps. So, dumping takes off spreads like wildfire and Shanghai and then bleeds out to other kind of tier one coastal elite cities. Like we said, it becomes one of Sequoia China's very first investments. There is 1.5

41:03million dollars from Nielsen in 2006. Do you know what Sequoia China's first fun size was? I don't know. I can't remember if Doug said on our episode. My sense is it, it was still a large fund. This million and a half dollar check, I do not think was like a big bet for them. No, no, no. But this was not a capital intensive business. And then do you know who leads their series B? Is it Google? It is Google. Yes.

41:31Tech science, strategic investor in China, not by you, not Alibaba, not Tencent, it's Google. And Google, who can't do business in China at this point? So at least I don't think they were. I think this was right before they got kicked out of China. So how did this happen? Cause I remember seeing this and I sort of just like accepted it at face value. Cause like, yeah, Google GV or Google capital or capital G has been investors in at least companies. But like Right, this was what, 2005, 2006 were in there? 2007 was what was going on. I don't know. I don't know exactly how it came to be other than, you know, the nature and dynamics of the Tianping business was very much like Google. Like, they sold advertising much in the same way that Google sells advertising. It was an educational high touch, very high margin experience. You know, they didn't have feet on the street at local stores. All the assets, you know, it was, it was an internet business. It was great.

42:29And was Google investing in other Chinese companies at this point? Not that I know of. I don't know how the relationship came about. Maybe perhaps through Sequoia, because Sequoia was along with Kleiner, where one of the TV season Google and on the board and perhaps that's how it came about. So the campaign goes along. It's doing great, building a wonderful high margin internet business. And then 2011 hits and the thousand group on War era. And so then all of a sudden, you know, they've had the food and restaurant market in China, at least in Tier 1 cities, the internet food and restaurant market completely to themselves with this wonderful business. That market didn't even exist in Tier 2 and Tier 3 cities. And now you've got 5,000 competitors, including this crazy Wang Xing guy, backed by Alibaba, also backed by Sequoia, going around with these foot soldiers. That's what they do what they call them. They're like armies, going into these restaurants and being like, hey.

43:28Sign up for these group bonds. So crazy, such a terrible, terrible business model. Terrible business model. So Dion Ping's trying to like, gosh, what are we going to do? How are we going to compete with this? They know they realize that this is a completely different company, completely different DNA, much worse business to get into, not to mention, they're not even in the tier two and tier three cities. But they kind of decided like, well, crap.

43:58We got to play the game on the field. Right, is this the wave? Is this the technology shift? And interestingly, it wasn't a technology shift. It was like a societal behavior shift. The technology shift was to mobile at this point, which is crazy to think about for the first six, seven years of Dion ping, six years, people were just using it on PCs. Totally. And mobile wasn't really a thing yet, or at least not in the smartphone way that we know it today. But yeah, what they chose to sort of react to was Ooh, there's this big business model transformation going on that we need to be a part of. And other companies are going to steal our customers. And, and I think the, the really strategic insight that they have, which because they do, despite having much less capitalization and a different business model, it's them it made to on at the end of this that are left standing. The strategic insight they have is that because we have this other, you know, for lack of a better term, Yelp like business,

44:50our Dion ping business, because that's what it is. Yelp is the Dion ping business, the inferior clone. We have more A touch points with consumers, so we can in theory acquire consumers better. They're coming in through multiple front doors. We'll have to go spend and subsidize to get them in through the front door for a group on product, you know, for new customers in new cities.

45:15But for our existing customers that are already using us, we've got the free real estate right in front of us. Every time they want to go out to eat, they're going on Dianne Ping. It's like, okay, great, they've got an advantage there. They also have a, in the medium to long-term capital advantage in that the Dianne Ping business is a great cash flow dynamic, you know, high margin business, which can be used to fund.

45:42in a non-delutive way, whereas everyone else is just taking on as much capital as they possibly can to compete with us. Exactly. And then finally, at this point, I don't know how much this is the case. Certainly it is the case today. They have this huge data asset, right? Like they know what consumers like. Because literally the customers tell them. And then if you've been a Dion being user for a long time, they know which restaurants, which karaoke bars, which massage powder, which experiences you like.

46:11And then for new users, you can do collaborative filtering and AI and whatnot and predict pretty well what people are going to like. That's a huge advantage in this business. Yeah. If you can structure data that was previously unstructured, there are so much more interesting things you can do with it. Like understand what people's preferences are in order to target them with different offers. Yep. Yep. Yeah. So by the end of the dozen group on board, it's Maytwan. It's Dion ping left.

46:39But they're kind of sitting there looking at each other. Both of them obviously very smart in their own ways. And they're like, huh, this whole group buying business, we've won, we've gotten a scale, our revenue numbers are much bigger than they used to be. But we're not getting any technology leverage out of this business. I mean, literally it is a discounts business. We add another $100 million in revenue.

47:05Very little of that is flowing to our bottom line and our cost structure margins are not improving. We need every new restaurant we sign up. We need more people in our sales army. Every new customer, literally the whole business is we're subsidizing customer experiences. Tao actually says publicly at this point that he predicts even at the end of this, that he predicts the entire group buying space is just going to die, that there's no future in it.

47:30and Groupon had gone public, oh my god, doing this research, just brought back so many memories. Remember when Groupon went public and that was like literally the high watermark, they never traded above their IPO price. I remember when they fired the CEO and they went Andrew Mason one, you know, left to go spend more time with his family just kidding the board fired me. That moment sticks in time for me as a pivotal moment in tech history. Such a character. And so like, not his fault too, like it was just a bad business.

47:57So their market cap was down 90% from IPO price within like 8 to 10 months Wow, and so that's the moment that we're sitting in here and This is now late 2012 and there is this interesting thing going on I have thought before doing the research that the whole food delivery online to offline, which is the tiny version of talking about this, originated in China and that it was Dordash and Uber Eats and Postmates that sort of copied it here in the US. It basically emerged at the same time in both places. So right around the same time as Tony and Stanley and the Andy and crew in Evan at Stanford, we're starting to think about food delivery in Dordash.

48:53Was the same time that Maituan and Dian Ping are kind of looking around and be like hmm We have all these restaurant customers. We have all these people who visit our properties who are consumers Is there something better we can do here? There's something better we can do here and DD of course existed at this point in China and and Uber in the US And so you have this whole new, you know, the it's like burned in my memory of like the great why now of Dordash of like hey It's about the labor supply that has mobile phones that we can now bring on these gig economy laborers and direct them and coordinate them in a way that was completely impossible before. Well, this is existing in China too now with ride sharing and DD. So they both go hard into basically converting this failed group buying business into a food delivery business.

49:49And so Dion Ping still have sort of a successful Yelp-like business going on at this point. That has continued from 2003 all the way through 2021 and the future. And it's arguably one of if not the most important linchpin of the whole combined company. Yeah, it's fascinating because as you just repainted there, you know, it was Tony and company at DoorDash thinking about this.

50:14If you were a wine further back, of course, you have Grabhub and Seamless and I think just eat in the UK, exists already at this point. And there was a player in China that will get to in a minute. Oh, interesting. But of course they didn't actually have the delivery fleet themselves. They were just the, you can order with us and then it'll be on the restaurant to take care of whatever they want to do. It's also worth noting, you know, in the US, how quickly we forget that Uber Eats totally stole DoorDash's business model. DoorDash.

50:41came up with something. Uber Eats was doing something completely different and they were like, oh no, shoot that. And that's actually even better for us given the fact that we already have all these drivers. So all this to say, I think you are totally right to say the discovery sort of happens simultaneously with DoorDash and Maytwan and Dion Ping. But it totally is worth noting that like food delivery wasn't new. It was organizing food delivery in this way that was new. And you hit on one really important thing and then another one that is a totally the same dynamic with these companies. Well, the one that's most the same is, you know, Tony and teams core insight with DoorDash, one of their core insights was suburbs. Like, hey, you might think that this food delivery would only work in a dense city like New York City. Like Galford was talking about on the special episode we did with them. But no, actually there's huge, but there's even more demand for this product in suburbs where they're not great food options.

51:37And logistically, it's easier, too, because you can park and you can move around easier as a career and whatnot. So wait, was that the case also in China? It was. So of course, food delivery works great in the Tier One dense cities. But remember, because of this group buying craze, Maytwan and then Dion Paine had expanded out to hundreds of cities across all of China. And similarly, you know, if you live in Shanghai or Beijing and they'll like, well, nowadays you use Maytwan and it's great for food delivery, but even before that, You could get anything you wanted any time you wanted with minimal effort. If you live in a tier two or tier three city and you're just getting a mobile phone for the first time, you were not having that experience. You don't even have e-commerce because Alibaba doesn't serve you. Pinduo Duo doesn't exist yet. Yep. Exactly. Exactly. So it's not quite suburbs versus urban versus cities in China. It's more tier one versus lower tier cities, but the other dynamic.

52:35the drivers. So, unlike, you know, DoorDash had to build up their driver, their career staff from scratch, both Meituan and Dion Ping, but especially Meituan, they'd just recruited this massive army of foot soldiers to go do door to door, group on sales to merchants. It's not that hard to give those folks a cheap Android phone and a scooter and convert them into careers. Huh, smart.

53:04And not only that, but they had the whole management organization structure built out as well around that. So wait, were they employees? Is there the same sort of like concern over the delineation in China that there is in the US? That's a good question. I don't know. I think it is different, but it doesn't seem to be as much of a big deal. The US, it was like the biggest issue was, well, yeah, sure, mobile's here, but They also can't be full-time employees because that won't work into our cost structure. They have to be only paid for the time that, you know, the phone tells them, okay, now in order. And in China, I do wonder, maybe we should do a, this feels like a good sort of LP topic to dive into, worker classification in China and understand that better. Yeah, I have no idea. That would be fascinating to understand better. So in May of 2014, Maituan goes out, Bungshin goes out.

53:57and raises $300 million from Alibaba, Sequoia, his existing investors, and General Atlantic, new investor, and rolls out this food delivery thing from the get-go at 100 cities across China. So let's review investors here real quick. So Maitsuan has Sequoia, China. They have Alibaba, and they got Alibaba to double down in a big way, and then they got General Atlantic. Yep. And Dion Ping has...

54:26Still at this point fairly little capital because they've been living off the cash flow from the D&Ping product and they've been around ten years they've been around ten years From also Sequoia China and Google but Google's tapped out at this point. They're not gonna invest anymore in China But not Tencent or Alibaba or Baidu like they're uninvolved to this point to this point so Tencent being the Brilliant folks, they are and seeing everything going on in the country through their ownership and operation of WeChat, which we'll talk about more in a minute. They see this dynamic too, and they approach Dianne Ping and they invest an undisclosed amount in Dianne Ping, but must have been a very large amount of capital into the company in early 2014, so right around the same time. So now we get 10 cent backing.

55:21Deonping, of course, Tencent and Ali Baba are brutal rivals and Baidu too, but you know, poor Baidu, we'll get to them in a minute. So they dump all this money into Deonping, but Tao and Deonping, you know, they know they see they're building up their own food delivery operations, but they're not moving as fast as Maituan and Wang Xing. They still have the internet company DNA, not the, you know, Wang Xing DNA. So at Tencent's urging, John Ping goes out and leads a $80 million strategic investment in another company in the space. In fact, in the OG company in the food delivery space in China, a company called Ulama, which I think I'm saying that right, it is spelled ELE.ME.

56:17And this is going to become a very important player in the story, but I think it's pronounced Willima. And what they do is basically create what Maituan is today. So they integrate the Willima delivery courier network into the Deonping experience. So you're in the downping out. And you know, you're looking at reviews, you're choosing where to go to eat. And you've got right there integrated food delivery.

56:47from these restaurants that you can see what dishes are great. You might experience when you're going out to eat, you'll see the calls to action in the app to go to Ulamah food delivery next time instead of going to eat. It's a pretty powerful combination. So wait, who let the investment in Ulamah? Dehan Ping did. So there's still a private company. So Dehan Ping raised money from Tencent. Tencent.

57:14and they had to obviously like cash flows that generated a big profit on their balance sheet. And they invested some 80 million of that into Lema. So now it's unclear how much that was. I think it was probably a joint and knowing a little bit about Tencent. They operate very collaboratively, like a joint. Hey, you know, Tencent probably thought this was a good idea. Tal and Jan Ping were like, yeah, this is a good idea. This will be a great way to learn. We can partner, you know, maybe this leads to an acquisition. We'll also be building this up on our own, et cetera.

57:43Okay, so we're like totally in Tencent Dianping land here. Yeah, while Alibaba is doubling down on Maituan, so we're setting this up that this is gonna be a, it's like a two on one fight of Dianping and Ilama together united against Maituan. Clever. Very clever. So Ilama, a little bit of brief history on them. They're actually kind of like the real door dash story of China. So it was started in a college dorm room by college students in Shanghai in 2008 so like way back and so that's what two two and a half years or so before Maituon is founded yeah so before the whole group buying craze like it was they were way too early to this space

58:28And the story is that they were like big PC gamers in college the founders and they didn't want to leave their dorm rooms to go get food and you know, so they started a food delivery business just like Tony back at Stanford. They're running around campus delivering food themselves. The CEO, Mark Jung, he actually goes to work as a delivery career for restaurants that do it themselves. Just like Tony went and worked for like FedEx and stuff. Like there's so many of these China stories that are like I feel like I'm listening to an old version, like an old episode that we did. I know. Going through them. So they bootstrap for a couple years again. They're too early to the space. They raise a little bit of money from GSR and then from Matrix China in early 2013. That was a very prescient investment kind of right at the right time. And then later in 2013, once it starts becoming clear that hey, group buying kind of sucks, this online to offline food delivery thing is the next wave.

59:26Ulama raises a big new round, a series C, from a new financial investor who has a very well-honed and educated point of view, shall we say, on the space. Who do you think that investor is, Ben? Is this before the 10 cent down paying round or after? Before. Before, okay? Not 10 cent, not Ali Baba, financial investor. So that 80 that came in from them was after this. So this is the round immediately proceeding. Yep. Pure financial investor.

59:56They really see where their space is going. Let's see, they see where the space is going. So someone else in food delivery, who bet big on, I don't know. Sequoia, China. How gangster is that? So Sequoia, they are in Mayton. They are in Dianfei. They got eyes everywhere. They are in Ula. Neil Shen, you dog. Oh my gosh. That's crazy. Legend.

1:00:25I thought that was like, oh, that's too easy. It's going to be like a naspers or like a fidelity or like this is just another one of those like the China ecosystem is so different. That could never happen in the US. Could you imagine being an Uber and Lyft? Yeah. And postmates and doored at like, right, right. That's crazy. Totally crazy. So quickly after that, then the Dion ping slash $10 and $80 million round happens in Nilemma. And then Shortly after that, Tencent is like, oh yeah, this thing is working. We'll back up the truck. How about another $350 million from us? So this is where things get nuts. And at this point, Tian Ping, I believe, is still running their own food delivery operations in some cities. But like the strategic weight is behind dilemma at this point.

1:01:17We should say to listeners worth speaking in dollars here because that's the best way that David and I can compare apples to apples to everything going on in the US. And of course, previous episodes too, but of course, this is all actually happening in R&B. Yes, yes, of course. So this is where things just go like completely off the rails. So Mato on couriers and Olima slash Yanping couriers literally start fighting in the streets.

1:01:42There's blood in the streets. So there are viral videos that start going around in China that government gets involved. They have to broker peace here. Videos of gangs getting into brawls on the streets and turf wars over restaurants and delivery routes. What incentives do they possibly have? It's not like they have huge upside in the company. Why are you fighting for your tribe? I think the culture, I've mentioned a little bit ago that the management structure and culture from the group buying days. It's a very militaristic culture. So if you go on Vuitton's website now and go on there, English language investor relations, they have a video, an amazing video kind of showing the operations of the company and the super app and everything you can do with it. But when they show the courier network, it's like military style like lines and rows of couriers with like a commander out in front giving the orders. It's crazy. It's interesting.

1:02:40quite like the independent gig laborers in the US. No, so that doesn't sound like it. So it feels to me like they're employees and they found some way to make that work. Yeah. So throughout for 2014, 2015, the two, you know, camps are sort of neck and neck. By the way, also, we should have said this market is exploding. So the food delivery market in China is about four times bigger than the food delivery market in North America.

1:03:09And it is growing at a 30% annual Kager, the whole market. So both of these two camps are kind of neck and neck in 14, 15. They each have about 30% market share. And then in August 2015, Ulama raises another $630 million. Maituan had raised in January of that year another $700 million. So like huge huge huge amounts capital pouring in. Yeah. And that Ulama raise comes in August of 2015. And that's right before the shoe drops on October 8th 2015. The announcement of the center. I mean, I remember reading about this when it happened here in the US and thinking, oh, wow, that's interesting. But now knowing all the context behind this, Maytwan and Dian Ping announced that they're merging. So you've got these two rivals, but it's almost like a proxy war with Dian Ping and Maytwan.

1:04:15And you say proxy work is it's between 10 Cent Nali Baba. Well, it's between 10 Cent Nali Baba, but it's also between Maytwan and on the streets, literally on the streets, it's between Maytwan and Ulama. And then in terms of capital, it's between 10 Cent Nali Baba with Sequoia also on both sides. Sequoia on all three sides here. David, I need a diagram. I know. I know. Oh, my gosh. Uh, where's in China? And then Maytwan and Tianfeng are merging. So poor Ulama, their whole Strategic Advantage was the product integration with Dion Ping. And they just raised their new investors. They just raised $630 million of capital. Two months later, their main strategic partner, their product advantage, not only goes away, goes away to their direct competitor. Oof, brutal. Wow.

1:05:09So without spoiling it for the audience, I only know of Ulema because of how they come into play later in this story and knowing all of this history about them, that they were actually a 10 cent investment, that they were actually a Dion ping investment and partner is going to be astonishing, given where they end up that this war. What's about to happen? So supposedly, once the May 21 and Dion ping merger happens, 10 cent and Sequoia supposedly go to and say, because remember, they're investors in ulema and they're like, hey, look, writings on the wall here. I think what makes sense is, why don't you sell your assets to this new, you know, combined company. Clearly, they're gonna be the winner here. Like, let's all just consolidate. You'll get some small piece of this. We'll all be happy. And of course, Tencent.

1:06:02And Sequoia are going to be very happy if this happens. Right. Because now they're the largest shareholders in what is a company that just has room to run that no longer is just going to be a monopoly at this point competing. Yeah. Yeah. So to his eternal credit, Mark, the CEO of Woolboss, like, screw you guys. No way am I going to do that. And fortunately he has one strategic option left on the table.

1:06:28Is it the party who just sold their entire steak in Maytwan? Indeed it is. It's Alibaba. So walk us through this. For folks listening, one thing that happened as a result of this Alibaba backed Maytwan and Tencent backed Dion Ping merging is that in a part of that merger where I think Maytwan was slightly the larger shareholder. And it was kind of a merger of equals, but Maytwan won out a little bit.

1:06:57Alibaba decides now is the time to get out and not only to this side, now's the time to get out, they back the like scrappy, smaller party who we all thought was kind of screwed in this whole thing. Not necessarily smaller, but definitely they were at a strategic mega disadvantage. Now, yeah. How does Alibaba decide to sell their steak and the combined Maytwan, Dion, pink? So I think this is my interpretation here. I think what happened is Alibaba must have been So pissed at this because remember, Alibaba's like, you know, they're like the grossly put like the Amazon, you know, in China, like e-commerce is their thing. Talbot, T-Mall, like that is their home turf and financial services around that, whereas Tencent, you know, despite Red Run games, social networking, you know, while they're bitter rivals, they can kind of coexist, you know, in separate spheres here.

1:07:56But now you've got this hyper strategic new market developing where they each have these investments, but it's encroaching much more on Alibaba space than it is on Tencent space. Like Tencent getting into local commerce food delivery is just purely additive to them.

1:08:15That's offense. Whereas for Alibaba, this is defense, like because it's not a big leap to think, oh, I could deliver food while I could deliver like e-commerce stuff too. Totally. It's like, if you're an e-commerce player, this emerging world of online to offline or as people sort of refer to it, the sort of Amazon of services, this local, it's cut it sort of like the Amazon Prime.

1:08:35That is going to encroach someday on Amazon, because if you think about the US, like right now we have a difference between Amazon and Amazon Prime, at some point everything will just be two hours. And so you have to imagine that if you're Ali Baba, you're like, whoa, this fleet of people delivering stuff super fast in every city in China, that is where we need to be at some point. Yeah, and now all of a sudden, we can't hold on, we can't stay involved in May 20, I'm paying.

1:09:03because Tencent, our bitter enemy, is now right here alongside us as fellow 20% shareholder in this company, learning everything and just getting all this upside while we're, you know, this is like strategically very threatening to us. And so why wouldn't you try and box Tencent out? Like my sense here is like, look, Alibaba bet right on the larger surviving company of the two. I mean, of the two, it was Dion ping that merged into mate one. And so if I'm Alibaba, I'm like, get the hell out of here. Tencent. Yeah. Well, and what was Sequoia's role in all this? Total. Well, never know, but right. There's a lot that's super untold here. Totally. I completely agree. I would love to have been a fly on the wall for those conversations. Yeah. Someone, I mean, the dollar sign got to the place where Alibaba was down to sell their stake. Yep.

1:09:56that I mean, that just had to be what happened. Yeah. So Alibaba sells their entire steak in Meituan Damping for $900 million. And I'm marked from Ulama turns around. And, you know, enemy of my enemy is now my friend. Alibaba invests one and a quarter billion dollars into Ulama for a 25% steak right off the bat. And then they don't stop.

1:10:22In 2017, they put another billion dollars into Olima. So Baidu had a poor Baidu, did have the number three player in the space. They had homegrown, built up a food delivery business. It had like 15%-ish market share, 15%-20% market share. So less than Olima and May 20, on Ping. But they bought it. Consolidated that into Olima. And then in April 2018, Alibaba buys the rest of the company does a wholesale acquisition of Ulema for nine and a half billion dollars, which was until that point. And I think may still be the largest dollar size China tech acquisition in history. Wow. Crazy. All in this sort of same market. Yep. Like we haven't even gotten all the crazy stuff that Maituan does these days. But this is purely the like food delivery.

1:11:21and restaurant recommendations and reviews and, you know, kind of dead-ish group on corner of the business. Yeah. And at this point, Alibaba's pumped more than $10 billion into this business. Because they bought Lumaugh outright for nine points, something billion? Outright for nine point five, and they had invested. A billion five. Yeah. A billion five plus the money they had invested into, into Maituan back in the day.

1:11:49Plus, they had their own internal operations that they were spinning up to. It's insane. I want to talk for a minute about the attractiveness of the opportunity to be the winner in this space. And there's two quotes that I want to bring up from Tao Zheng that he had on the great next billion podcast by GGV Capital. The first one is, if you have three or even two players in a market like this, nobody's going to make any money. The second one is even more damning, which is In this kind of business, the only rational way is to merge unless you think you can kill the other guy. And he had sort of described that young paying had been talking with Maytwan about merging for two years. You can sort of understand why when you flash forward to today and look at how freaking profitable the combined company has gotten. But at this time, no one's making any money. It's just a knife fight of investors pouring money in much like door to ash and Uber Eats.

1:12:43fighting for market share, subsidizing customers, it is a complete race to the bottom. Yeah. And what's so wild about these betrayals, double crosses, triple crosses, and the end state of Alibaba and Tencent being on separate sides here is like, there is never going to be a merger. Another merger between Meituan Dianpeng and Ulema. Like, it is now a fight to the death. Unfortunately for Alibaba. And I think, I mean, there's a lot of stuff going on.

1:13:12around commerce in China and Alibaba with Pinduoduo and JD and everything we've talked about in previous episodes. But Alibaba share price has not done well over the past couple of years, especially in comparison to Tencent and others and Maituan and Pinduoduo. This is a big reason. They are losing big time in this space to Maituan. So 2016 when Ulama bought Bidu's business, they then became larger than Maituan Dianping. So they had the upper hand. 2017 though, they lose Maituan grows hugely the combined company. Ulama and Alibaba lose majority market share. And then by 2018. So we're like two years in here. Maituan now has 60% market share. Ulama's down to 38%.

1:14:05and then by 2019, Maytwan's just further pulling ahead, they have 67% market share, will must down to 30%. So this is Maytwan Dion ping with that line of, unless you think you can kill the other guy, which they're doing. Which they're killing. Yeah, yeah. So we've talked about this a little bit already, but why are they doing it? It's the Dion ping part of the business that's so strategic. Like consumers have this reason to come to the app.

1:14:34and engage with it much more deeply than you would if you're just ordering food delivery. So this is where the whole super app side of the thing really comes in. I mean, if you think about it, it makes so much sense. The amount of time that I waste flipping back and forth between, I look at stuff on DoorDash. I'm like, oh, that looks good. Can't really trust the reviews.

1:14:57So I flip over to Yelp, which is my source of truth for reviews. I'm like, how many stars do they have on Yelp? You can't really trust those either. Totally. I'm like, ooh, three and a half stars, so zero stars. Okay. Skip. But I am bouncing back and forth between the two. It makes so much sense for that to be one platform. Totally. It's such a horrible product experience. Same deal. I'm sure everybody has this. Yeah, I want to order something, but I want to try something new that's not in my usual list of restaurants. I have no freaking clue.

1:15:26You know, I look on DoorDash, I look on Yelp, I can't figure it out. Right. And DoorDash and Uber Eats have every incentive to push me to click buy because they participate in the transaction. Yelp's incentives are actually the pure one here because they're just an advertising based business. They don't care if I actually dine at that restaurant. They're more neutral in this party. So I, you know, you can sort of trust their reviews more. That's why I always feel like I'm looking at these reviews and, you know, Uber Eats and DoorDash and I'm like, I don't know. Yeah.

1:15:55Totally. And based on, you know, I've talked to people in the past at both of these companies and I'm like, guys, I need reviews. Why don't you give me reviews, just give me reviews in the product. And they're like, well, it's complicated because, you know, the restaurants are our partners. And like, we want to like, yeah. Yeah, I'm curious how it makes one gets around it or how made one has sort of dealt with that. Well, I think it's because the Dion ping assets, you know, there's millions of reviews in the system and very detailed granular down to the dish level.

1:16:25that are just already built in in there. They're there. It's not like they're creating new ones, but it already exists. So Wang Xing and Mei Tuan, he's not satisfied with just that. He's like, I'm going to press the advantage here. I've got people coming to my app. What else can I do with them in the app to sort of increase the cross sell opportunity, increase my customer acquisition, front doors, increase the value I'm customers are getting out of using my app. They get into travel.

1:16:52This is crazy. They get into hotels. Do you know how they know about the travel industry? Well, because Neil Shen started a C-trip. C-trip, yep, exactly, which was the dominant and primarily be to be focused, but the dominant player in Chinese travel. Yeah, C-trip was the booking.com of China. Like they were dominant. Like all travel hotels, flights, domestically in China, you were doing on C-trip.

1:17:14And still huge. It's still huge, but they only have 20% market share now, and Mayton has 46% market share of travel in China. Unbelievable. Which they launched five years ago? Yeah, or less. It's as if an expedia launched four or five years ago, and then Boom has close to a third of the market share. So travel is huge for them, and importantly has a much better margin structure than food delivery.

1:17:42They're getting a huge portion of the contribution margin in the company is coming from this travel business, which is getting traffic from the food delivery business and their reviews business. You can start to see the flywheel go in here. They get into local services. So you know, this is very adjacent to restaurants and to all the reviews in the platform. Massages, karaoke, local events, experiences, ticketing, just book all that right on the app.

1:18:08Hmm, they get into home services. You want your drag cleaning done. You want your laundry done. You want your house cleaned. Stuff that you would use like thumbtack for in the US. Great. Bring it all in the app. It's so fascinating. They get into transportation. They start competing with D.D. and then I think they partner with D.D. later. They get out of the rideshare and game directly. They buy mobile bikes so you can book bikes in the app.

1:18:32They get into groceries so like the Instacart type business you want groceries delivered great You want a shop in person in a grocery store and pick out your items Create just scan them right there in the grocery store on the meadow on app and pay and walk out the store and have somebody a career come and bring them and deliver them to you It's so fascinating because if you would have told me before starting the research on this company the Chinese super app. I would have been like Oh, we chat, but we chat, you know is kind of like the app store launcher, or like the app launcher, like it's your home screen in a way where it's like, oh, here's a bunch of different apps that integrate, you know, that I can get to from my chat experience and integrate with my chat. This one's like an app that enables you to do anything in the physical world. Yep. Well, it's funny. You say that Ben, because both of these things are true. A lot of people use the mates one app that you can download from whatever app store you're using on whatever phone you're on.

1:19:30Just as many of not more people use the Maituan mini program on WeChat. So this is why Tencent is just so dominant. Like, hey, they invest in the best companies on the platform because they see the uses on WeChat. They did this with Pinduo Duo. They've done this with Maituan. They put their hand on the scale, you know, either in light touch ways. But many programs on WeChat, is it's a full-fledged app experience right there within WeChat. So Tencent and the WeChat ecosystem is getting all the benefits out of this. So like Tencent is a major e-commerce player in China without having to build any of their own e-commerce themselves. And they're just like, it would be an exaggeration to say they're eating Alibaba's lunch at this point, but between Pinduo duo and Maituan, they've got these huge monster players that they're invested in.

1:20:22And are being used through their ecosystem on WeChat and Alibaba's boxed out. Yeah, it's crazy. From a capital allocator perspective, 10cent is like Berkshire Hathaway. They don't care about owning these companies. They don't want to control them, as Warren said, in his most recent letter to shareholders. They're indifferent to whether they control them or not. But they look at great businesses and say we want to own some of that. So they're like Berkshire in that way.

1:20:51They're like Facebook in that they own the most dominant messaging and social network app so they're sort of like they're a fang company They're Berkshire, but they're also Sequoia and they're like Apple in the App Store. They're like Apple in the App Store, but they're also like Sequoia like they're one of the best pure sort of financial investors who also then puts their hand on the scale to send you traffic like they're a highly trafficked destination with WeChat and then they just decide who to open that up to and of course like you said in light touch ways but undeniably people decide to take money from them because that opportunity is available oh and by the way they might do it to your competitor if you don't take their money right as we've seen crazy it's just it's incredible so September 2016

1:21:42Maytwan hits 5 million transactions a day that they're doing across all of their verticals on the platform March 2070 and so like what's that six months later? They hit 10 million transactions a day on the platform By 2018 they have 600 million active users. They have over 50% market share of food delivery their crushing dilemma They do over 10 billion dollars in revenue growing a hundred percent year over year God, doubling at that scale. Unbelievable. And that's when they launched their IPO. So they go public in September 2018. And this was a big IPO, big China IPO at the time. But like so many things, it was like, oh, wow, like that's impressive. But at least I was. I didn't understand the extent of all of this. Me neither. So they raise about $3 billion at a $50 billion market cap when they

1:22:40co-public, which is up from 30 in their last round that they did. Yep. And then in 2019, they grow another 50%. They do 15 billion dollars in revenue. They turn profitable. They do a billion dollars in operating cash flow. They're net income positive. And then COVID hits. And this is interesting. I think unlike Dory Dash where COVID was an unalloyed good for Door-dash. It's a little more complicated for me, too. Ultimately, I think it was good. But remember, their hotel business and their travel business is also a big part of the platform. So that got crushed, as you might imagine. And the highest margin part of the platform. And the highest margin. Yeah. It accounts for a smaller part of their revenue, but a big part of their profits. Big, big part of the profits. So Q1 2020, they're...

1:23:37Total revenue is down 12% across the company and hotel and travel is like crushed. And Q1 of 2020 in China is like Q2 of 2020 in the US. Right. It was all it all hidden in December, January. Yep. By Q2 of 2020, though, revenue is back up total revenue, up 9% year over year for the company. And people are starting to wake up, you know, around the world at this point, they're like, Oh, wow, wait, COVID is.

1:24:07good for tech companies and good for these next generation, commerce and delivery platforms. So the stock starts to go on a tear. In May of 2020, the stock goes from a $65 billion market cap at the beginning of the month. So, you know, up modestly from the IPO at the end of 2018, but, you know, flat-ish.

1:24:33to hit 100 billion market cap by the end of May, 2020. By October, it hits 200 billion dollars market cap. By February of this year, just a couple weeks ago, of 2021, it's 300 billion dollar market cap becomes the third largest market cap tech company in China behind Tencent and Alibaba.

1:25:00and it's traded down a little bit since then it's now at a 270 billion dollar market cap as we record this but wow what a story absolutely I mean there is a stock market story going on here there is a pandemic story going on here there is an execution machine story going on here and I think the biggest one that I want to talk about in a minute is a business model and profitability story going on here yeah All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part. Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like the risks are real.

1:25:57Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower. Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

1:26:24and service now can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approval, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security. Service now already runs more than 100.

1:26:43billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates. And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

1:27:06So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com slash acquired and tell them that Ben and David sent you. Well, David, I want to sit with some of these numbers from today and like unpack them a little bit and understand the company's position and how much it has changed in the last year. Because if we look at this, let's talk about the largest tech companies in China right now. There's 10 cent number one.

1:27:32the $850 billion market cap. So worth understanding for those out there, China doesn't have a trillion dollar tech company, though that is a strictly US phenomenon right now. I bet it'll change soon, but that is what it is today. Alibaba hasn't seen the sort of reward that Tencent has. It's sitting there around $675 billion. Maytwan, where we just talked about between 270 and 300 billion. It's a pretty deep drop, sort of obviously between Alibaba and Maituan, so they're not yet in the league of that sort of company. But they're right there, neck and neck with Pinduo Duo. It's a $200 billion company, which we've covered, bite dance, the parent company of TikTok. And what's the other? Do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know, do you know

1:28:25You know, who would be in here, but is not publicly traded as Huawei. Yeah. Right. That we've covered before. Right. Of course. So you've got, you know, Pinduoduo by Dance, then Quaishao, JD, Baidu, Xiaomi, down from there. So, mate's one is in sort of rare error here. And a lot of that, of course, is because of the stock run out from the last year. But the growth story.

1:28:46in terms of profitability for this company is absolutely insane. So as David mentioned, they've been profitable since Q2, I believe it was of 2019. But then in the last year, they grew their profits, their sort of operating profit line from $225 million a quarter to $1 billion a quarter. So like, they just kind of figured out, oh, there's where the operating leverage is in our business.

1:29:10It's when we tack on a bunch of other businesses that we can amortize the cost of acquiring these customers over all these different revenue streams. And we can get them to I think that now it's 27 transactions per user per year across 475 million transacting users. So you just have this situation where like, this is bananas.

1:29:34Totally. Like your Airbnb, you get half a transaction a year. You're Dordash. I can't remember what their number of transactions is per year, but whatever this is, this super app, it's Dordash plus its FanDango plus it's, I don't think ride healing is included in here. Cause like you said, they're more of a partner in that now. But like, they just own this big basket of transactions that they've already acquired you for. So that's 30 transactions a year.

1:30:00across a user, an active user base that is roughly the size of, I'm guessing like the population of all of North America. I don't know what the population of Mexico is. Right, because the US is what, 360 or something, 360 million? I thought it was like 330 or 340, but somewhere in Canada is that another 30 million to that. I don't know what the population of Mexico is, but like more than the whole population of the US in Canada. Yep, it's wild.

1:30:29It's a huge number of users, transacting with I think six and a half million merchants 27 times per year. Then when we go into segments, the largest segment of that growth was food delivery, but obviously they had lots of growth in hotel and travel and would have had even more stands pandemic in the last year, which I do think will rebound in a big way over the next couple of years.

1:30:53new initiatives has actually been a huge revenue driver for them has yet to be a big source of profitability. But that's things like actually setting up grocery stores. They're really going hard. They're doing things like local flower delivery, local medicine delivery, and having these hubs of actual grocery stores. Yeah, when you hear Tony and Dordas talk about all the things Dordas can do in the future. Just look on over at Maituan and like.

1:31:18Take whatever they're doing today and cut it by three-quarters and that's like the vision for Dordash. That's such a good way of putting it. And Dordash is already priced as if this is going to happen for them. Like, Maituan here is trading at 14x revenue and...

1:31:36DoorDash is trading somewhere in that same neighborhood, around 1516X. And so investors have sort of decided that this phenomena that happened when you win food delivery and you can tackle these other businesses on to is just like going to go well for DoorDash, which is totally fascinating. I want to get into the product aspects of this, but one of the big things for me in this story is like the primacy of the Dianne Pink product and what it all unlocked and the fact that it is a 18-year-old product, right? So, like, DoorDash may be able to recreate this and whatnot, but like, they don't have the benefit of an existing front door type product, compounding mode type product, and they've got business model, you know, orthogonalism here, where their restaurant partners don't really want the level of granularity of reviews that you would need.

1:32:34right, you know, the only way to arrive at the end point that Maituan has arrived at is by inheriting 15 plus years of these existing relationships and data with restaurants in this particular way. One other two other things I want to put in context here for Maituan and its current valuation. So on a scale of the business, let's just take a revenue, as opposed to GMV or profits, but which we should say revenue is only growing like 30% per year, not the monster, three to 400% that we're seeing in profits. Yep. But on a size, on a scale versus Dordes, we don't yet have full year numbers for 2024 May, because they haven't reported Q4 yet. But let's just take 2019 full year 2019 numbers. As we said, they did about 15

1:33:29billion dollars in USD of net revenue in 2019. And net revenue being that is all their take of all the food delivery plus all their just like revenue from all their other businesses selling movie tickets and book and travel and all that stuff. Yep. Door dash in 2020. So with the benefit of COVID, which accelerated their business.

1:33:53I forget exactly. 3X revenue from 2019 to 2020. Yeah, they 3X revenue in 2020. Even with that 3X in 2020, a year later for DoorDash, they did $2.9 billion in net revenue. So we're talking about a business that is at least 5X the scale already of DoorDash. Likely 6 to 7. Likely 6 to 7X the scale. Now let's turn to the profitability side of the equation here. So like we said, they generated a billion dollars in 2019 against sticking to 2019 in operating cash flow. Zoom, which obviously is a completely different business and much higher margin, you know, incredible gross margins, incredible business on every dimension. They just reported the other day, 2020 numbers, Q4 2020 in full year, 2020 numbers. And they did one point

1:34:50$5 billion of operating cash flow in 2020. So like already, Mayton is doing more operating cash flow likely than Zoom. That's a really good guy because I've never thought to compare those. That's a really good. Obviously completely different businesses, but Zoom in my mind is like the canonical pure software margin, incredible cash flow monster. Yeah. And just the scale of Mayton, like I think of Zoom and DoorDash on opposite ends of the spectrum. And here's Mayton that's doing 6, 7x the scale of revenue of a door dash and more cash flow down in this than zoom. Yeah, there's so many dimensions of business model awesomeness that is accruing to them. I mean, one is like they've squashed their competitors. They have pricing power. The other that we talked about is that just they're layering on all these other sources of revenue on top of CAC they've already paid.

1:35:43Or at least for new customers that they're acquiring, they're able to spread that across so many different transaction types that they'll do. Another one that we haven't talked about is that like Amazon, they're now making a lot of money on online marketing services, which is pure profit revenue. You have users buying stuff on your property as soon as you introduce the ability to advertise to them.

1:36:06you get to keep 100% of those dollars that the merchants are paying you. It's unbelievable gross merchant business as good as it gets. And so 16% of revenue is now the ads business that they've layered on top, which is a business that you only get to earn the right to have when you have a scale business where people are coming to your destination and buying things on it. So there's like yet that other level of just leaning into operating leverage there. Well, then there's even another level beyond that.

1:36:36of they're also selling B2B SaaS to merchants on every type on platform. So, you know, you're a restaurant, right? Like all the services that Square provides you, except for the core payments infrastructure, but like, you know, managing your inventory, doing your booking system, like all that stuff, your payroll, your HR. Well, and Beethoven's happy to sell that to you.

1:37:00Not to mention now, they have your financial data. They're happy to be your lender also. They're pulling the sort of square capital game here where they're given loans to merchants. Totally. Which, as we've also covered on many an episode, is an excellent, excellent business to be in. So they have figured out how to do food delivery and not lose money, and that is a massive understatement. So all these things point you in a direction of, oh my God, this company is a monster.

1:37:29Like, how could you be short? Like, what's the concern here? Maybe travel doesn't come back and that's their highest margin revenue. So, you know, if that doesn't come back, that's a big deal. Yeah, seems unlikely it's not going to come back, though. I think it already is coming back. And it's clear that like, they're taking share in that space. Yeah. So I think, you know, look, this company is a juggernaut. Like, there's just no two ways about it. I do think two.

1:37:59I wouldn't say bear cases, but things like to be watchful of that I could see. One is they obviously have a fantastic relationship with Tencent, Tencent owns 20% of the company. I think everybody's very happy with that. But as much of a juggernaut as Maituan is, Tencent is even more of a juggernaut as we keep harping on on this episode and frankly on this entire show.

1:38:25If that relationship were to sour at all, because Tencent is the ultimate top level in a source of and control of traffic in the Chinese ecosystem right now. Now we do a bite dances is on the rise there, a threat to Tencent and whatnot. But for the time being, Tencent is dominant. Any fracture in that relationship would certainly be detrimental to me. So for the 50% of their customers, Who use their mini program? Do they actually own the customers or does Tencent really own the customers and they're just letting me to one use them like what I guess the true test of this would be if Tencent got mad and punted the mini program You know made it hard to find or kicked it off completely How many of those people would actually go and download me Twons app directly right right? I mean, I think a lot yeah, there's nobody else out there that has the scale of

1:39:23different service lines and merchants and reviews, most importantly, the review database and asset as Maiton. So I think it's very defensible, but it's a dependency of the business. I think the other, this is more forward-looking than risks the existing business, but we didn't talk as much about what's in the new initiatives line for Maiton. And there are a lot of things.

1:39:50But the biggest and the most important strategically right now is community group buying, which for those of you who aren't familiar with it, despite sharing two words with group buying and the group on space is quite a different phenomenon than a uniquely Chinese phenomenon right now, but it's hugely strategic. Well, and just to explain it super quickly, it's group buying and e-commerce, not group buying at your favorite local boutique.

1:40:17Like, it is you inviting your friends in a fun way to shop with you for something that's going to be shipped to you and the cost structure is totally different to operate that type of business than a group on business. Yeah. And there's that. So what you're describing is Pinduo duo's business, which is a competitive front as well. Oh, I thought that's what you were learning alluding to. No. So it's actually, well, that's, that's part of the whole ecosystem. But very specifically around groceries is where the war is, the big front is right now. So Pinduo duo does, as we talked about in our episode and does exactly wait.

1:40:46you just described, then community group buying, though, is kind of like a grocery store meets multi-level marketing. And so the idea is that a member of a community becomes a selling agent for the goods producers in this case, mostly groceries. So like you're a farmer, you're making, you know, producing groceries of the like agent from various communities.

1:41:15brings people into them as a group, buy from you. So you're disintermediating the whole grocery store value chain. And this is a major front that Maituan has invested in hugely in adding to the app. And so you can, as a group leader, start a group, build relationships with producers, get clients, make money, run a business here, and then as customers, You get much better produce at a much better price. And a lot of this traffic is flowing through wechat too. So the two leading players right now in this space are Maituan and Pintu Oduo, which is also broadening into this business. So you weren't really thinking about like, ooh, Maituan's not going to be successful in taking PDD's core business. Your thinking is for the next frontier they're chasing that they're both chasing.

1:42:12And we'll have overlap. They may not win that. Yeah. I think one of the themes that I see from this episode is like the more stuff you control, particularly in China Tech, the better your company is and the better your economics get and the more your flywheel spins and the more customers you get. Yeah. And so part of the thesis is like Maytwan because of their incredible strength already can keep winning every front.

1:42:38But if they don't win every front, you know, they could end up like Alibaba, where all of a sudden they're losing on a bunch of fronts. Right. Oh, man. There's a big game of King of the Hill going on constantly and you get to always be defending your turf and be trying to find the next one. Totally. Now, I can. That's the future. Like I don't think that's a bear case for me to on right now or been to I do. Right. Man, it's so funny. Okay. So we have danced around the idea of power, but we haven't named any yet. So why don't we formalize that?

1:43:07and get into our power section here. So of the seven powers, the Hamilton Helmer, seven powers of counter-positioning scale economies, switching costs, network economies, process power, branding, or cornered resource, the first one that really, really, really hits me here are scale economies, where mate's one has been able to become very profitable very quickly because of scale economies. And I think the way to think about it is sort of the Netflix comparison where because Netflix has the most viewers, they can pay the most for content because they can amortize it across the most viewers. It's like, hey, there's already 475 million people using Maytwan and transacting. Can we put something else in front of them that they could potentially also transact with? And

1:43:57The fixed cost to stand up whatever that business are are the cheapest for me to on relative to anybody who's standing it up and doesn't have all those people they could spread out the fixed cost of standing up that business to that's sort of how I think about it. Yeah, they can go invest You know, I don't know what they probably have announced how much they're investing in community group buying but they can go invest billions of dollars into it And it's worth it right because they have 600 million users that they're gonna stick that in front of Yeah, or if, like, let's say the business is cheap to stand up but expensive to acquire customers. Like, it's not for Maytwan. Right, right, because they already have all the customers and they just cross sell across, yep, totally. So that's the big one that hit me like a ton of bricks when I was like, why is Maytwan so freaking profitable? So the other one that I was thinking about and I'm not, maybe we can talk through this live. I don't know what the right taxonomy is here, whether this is a cornered resource or switching costs.

1:44:57But the power of the review database, but the reviews themselves and then all of the data around it for recommendations is enormous here. And I think we showed in the story, like just such a key part of what's become defensible in this space. And I already thought that Yelp blew it on so many fronts in the US, but this is just such a stark contrast of how valuable Yelp could have been and how not valuable they are. So I think this is switching costs, because once you're on the, as a consumer, once you're on the Deon Ping review platform, I don't think it's necessarily a cornered resource in that you could go use another.

1:45:47review platform and somebody else could stand up or review platform and have all the listings that Dion ping has. But as a consumer, you wouldn't get the benefit of all the 18 years worth of review data that's already in there. Right. Ha. And you're the more simplistic angle on that would be, well, it is a cornered resource and it's made to one's cornered resource and no one else has all those reviews. Yeah. So maybe it's that too. I was thinking about it like in a slack context of like, yeah, I could switch from slack to some other messaging platform for my company, but then I'd lose all the message history that I have. Either way, whatever you want to call it, I think that's a big power. Yeah, for sure. What's interesting to me here is they don't really have network economies. Like a lot of the times when we do stuff on this show, the answer is network economies. It's like, it's interesting for a 10 cent backed company. It is not a social business.

1:46:43It's just not, I mean, maybe they will be in this group buying thing, but it's not where their power comes from now. Like if your friends switches to something else, you don't care. When you care, I suppose if like your favorite restaurant is not on there anymore. Right, right. I think there's some lightweight social features of like, you can play on trips together, you can book restaurants together, you can do orders at restaurants together, that kind of stuff.

1:47:09I do think there's a two-sided network effect of the merchants and which you alluded to, the merchants and the consumers. As a consumer, you want to have all the merchants on there and as a merchant, you want to have all the consumers. But that's not that defensible. There are other platforms like Ulima that have all the merchants and could have all the consumers, too. Yeah. Anyway, I think we're speaking the same language here that lots of scale economies Maybe a cornered resource and if not a cornered resource, then definitely switching costs. Yeah. Is there counter positioning here to versus who? Well, I'm thinking about C trip. And I don't know enough the detail about how they won the travel market from C trip. But I would imagine that they were probably able to subsidize the consumer side.

1:48:03in order to gain share in a way that C-trip couldn't because made to on has as we've said all these other businesses that they're also getting contribution dollars from their customer base. Maybe I think the way that I sort of think about counter positioning is why is it that C-trip would be doing something harmful to their own business by chasing this and I'm not sure they would it's just that it would be really expensive for them to go and acquire all these customers so it's.

1:48:31more like scale economies. Yeah. Yeah. I think you're right. As always, we feel they're open for interpretation, but we need Hamilton to tell us that's okay. All right. What would have happened otherwise? The way we want to do this section is what would have happened if they didn't merge. And the answer is, only one of them would have been left standing. The question just is, how do you get there? They both could have raised one more round of capital and then merged or One of them could have raised one more round of capital and then they would have squashed the other one and I think it just becomes this thing of like if they both kept raising huge amounts of capital eventually they both just go out of business because those businesses were not profitable and Arguably there's some point where you've taken on so much capital where your business can't get valuable enough to justify a combination but

1:49:21I think it was just kind of like a high stakes game of chicken where, you know, they had been talking for years and when was the right time to merge and, you know, how much dilution can we spare before, like, how many new shareholders do we have to bring on before we actually do get to merge and say, okay, you own this much, I own this much, and we get profitable. And Tao Zhang talks about this on the evolving for the next billion, nine, nine, six podcasts that, yeah, they've been having conversations for years. Maybe Ola Ma knew about it. Maybe they didn't, but yeah, this was going to happen at some point.

1:49:51Yep. Yep. Playbook. Yeah. You said you have a bunch of them, right? I do have a bunch of them. So one of them is the thing we haven't talked about yet, which is the joy of being in a growing market. So e-commerce in 2017 was a 20% saturation industry that had saturated, you know, 20% of all commerce. Real world services was only 5%. So while Alibaba is definitely in this growing, you know, segment where more commerce is shifting to online that it was way more opportunity in the retail services industry. And that leads to the sort of excitement that investors and entrepreneurs had around the offline to online or as they refer to it the O to O business, which ended up actually becoming the key to

1:50:40Sort of ascending to become one of the top three Chinese tech companies you had you know an e-commerce company which was sort of online to offline but a far less complex version of a previous generation by do which is a digital only company research and Tencent which is gaming and social a digital only company and so your way of getting to capture enough margin dollars to become as big and successful as a business as one of those was this offline to online movement. And they were sort of the ones that emerged successful in that. And it was in this crazy, fast growing plenty of headroom ahead of it thing where you had only 5% penetration in 2017. It's also a good thing like to highlight in the West, I don't think we think as much about the fact that like what this story proves, which is that like everything can come online.

1:51:33I think if you were to ask people in China, certainly if you were to ask one thing, whether there were any category of dollar spend in China that he could not bring on the platform someday, he would say, absolutely not it can all be on the platform. Literally, they're going to rural farmers and they're selling online directly to customers facilitated by Maituan.

1:51:56karaoke. Any activity you want to do, any store you want to visit, you pay with Maytwan in a store. You go shop, you want to go shop in a local grocery store in the equivalent of a safe way. Cool. That's cool. Like do it with the Maytwan app while you're there in the store.

1:52:11And David, I know this is like a personal investment thesis of yours, which is don't bet on the incumbents to effectively go through digital transformation in the long run. You just bet on tech companies to figure out how to successfully move the needs served by those incumbents online. Yeah. But I think it's even from that perspective for me, this is eye-opening and only possible because China leapfrogged in a very real sense with bringing their population online.

1:52:40But just like all these things that you would never even think could be a digital transaction can become a digital transaction. That's a great point. Speaking of things that we don't do as much in the West, I think this thing that made one did in amortizing their customer acquisition costs over a crap ton of businesses that they put in front of the customer. Like American companies don't do this as much. It's like taking our large customer base and offering Completely different things to them. I mean, Amazon's probably the best example by bundling more and more things into Prime to sort of expose you. Like, I never would have thought, like, oh, this company that sells books, or let's even say it's further in their journey, that like this company that has the everything stories, also going to be one of the top two players in movies, like in streaming movies. Like, I wouldn't have bet on that. But Amazon is a really good job of understanding your customer and we're gonna put more and more stuff in front of you.

1:53:33I don't know that other companies do that as much. People kind of stick to their lane. This was my other big playbook theme. I really wanted to highlight, for me, which is thinking about exactly what you said, through the lens of how China and Maytwan and seeing what everything that's going on there, Amazon's the best at this in the West, and they're getting like a sea on a careful scale.

1:53:56Like Uber really wanted to do it and sold this vision of, there's Uber everything. We're gonna eventually be able to move all this stuff around. And it doesn't matter if you're taking a ride or something's taking a ride to you, you're gonna get it through Uber. And like it just didn't happen. And I think what's also really interesting for me is that the product experience, the customer experience, is so much better when it all works together. And just like the dichotomy of like, how the food ecosystem works on Maituan in China versus the super crappy that I now see way version it works in the US of like reviews are disconnected from the food which is disconnected from the dishes which is disconnected from how I order it for delivery which is disconnected from how I order it in the restaurant which is disconnected from how I book the restaurant like that's a crappy customer experience right I look it up on Yelp and then I book it on

1:54:54Rezzy or talk or open table, and then the billing is completely separated from all those things. But if I order it at home, then actually I should go to DoorDash, even if it's coming from the same restaurant, it's like, it's a nightmare. Total nightmare. It's a great point. Yeah, the vertical integration not only creates a business that can capture more profits, but also a better consumer experience. Yeah. It's like the ultimate irony given that Wang Xing and everything in China started as just copying the US.

1:55:24And now it's like wow the US is so far behind Yes, that's a huge point I want to drive home on this episode is like the world and we've talked about this on other episodes too, but China is not the place copying all the American companies at this point There's so many things including payments infrastructure and like FinTech generally Social buying like the US culturally has not adopted social buying the way that that it has in China. And everything that May 21 is doing, it's hard to even put a category on it because it's offline to online. It is the services economy. And we don't have a direct comp. We have 20 companies that roll up to that sort of same thing. And I think that there is a huge point to take home, which is China is leading in innovation on mobile and on the internet in a way that in many categories, the US will be years before they come to. Totally. All right, what else you got?

1:56:18All right, so another big one that we didn't really talk about, which was a secular trend going on in China that enabled all this to happen was the growth of the middle class. You know, the fact that tier two and tier three cities became an addressable population that could spend on things like smartphones and then things that, you know, were apps on smartphones wouldn't have been possible a decade, two decades before this came online, 100%. So I think that's a big...

1:56:45realization. And then the continued diffusion of wealth out from, you know, I feel like a couple of years ago, when all this was getting started, you know, online offline in Maytwan and TN thing, it was second and third tier cities. Now it's fourth tier cities. It's the countryside. It's, you know, that's what community group buying is about. That's a really good point. I hadn't followed this sort of continued dispersion of wealth throughout the, you know, the lower middle class as much.

1:57:14I would be remiss if I didn't underscore again 10 cents unique strategy of both being a financial investor and a thumb on the scale partner. You know, it's a little you got to make the deal because otherwise someone else is going to it's just a it's a wild amount of leverage that they have in any deal and then they sort of come through like that's just a deep deep pile of capital available to you to go chase an opportunity and push someone else out of business and they'll give you traffic on top of the opportunity and like Most of what you're spending your capital on is traffic anyway, so Tencent actually can afford to invest less in your company and invest more in the form of traffic, but they don't, they do both. It's huge amounts of capital and huge amounts of traffic, so it's an unbelievable business and it's something that is not done for one reason or another in the US, probably for antitrust concerns. Yeah, probably. Two quick things on that. One was we didn't talk about the valuations of the last rounds that

1:58:12Deonping and Maituan raised before they merged, but it exactly reflects what you're saying. So Maituan raised 700 million at a seven billion dollar valuation, and Deonping raised like three, four hundred and a four billion dollar valuation, because Tencent's like, we bring the traffic. Right. You'll sell us 10% of your company. Yeah. You're not going to need it. As you strike raising, you know, these pitances at a hundred billion dollar valuation. Yep. Yep. Yep. And then the other thing is, um, I think it was on our Roblox DPO preview analysis with Mario. Was it you or Mario who said, uh, I think it was Mario that was said, uh, Tencent is like the most interesting man in the world because Roblox is entering China with a JV with Tencent. I was like, I don't always enter China, but when I do, I enter with Tencent. You have to. I mean, it's crazy and Tencent owns.

1:59:0350% of that or 49% of that JV. It's like for us bringing you into the country and the privilege of that happening, we're gonna take half of your revenue. Bananas. It's crazy. So I brought up antitrust there and that's a thing that we didn't talk about on this episode at all. What does antitrust look like in China? Because if they're able to squeeze Ulama out and really be the only player and really have pricing power over consumers and over restaurants and over all these, like that's something that in the US would get Deeply scrutinized and especially in the climate that we're in now. So how does that work in China? That's a good question. Honestly, that's probably the biggest risk from like an investment thesis standpoint of anything in China, which is I don't know, but I think it basically the way it works is whatever the Communist Party wants to do or allow or not allow. I have no idea. But yeah, if the business model and free market dynamics are such that you just have as much

2:00:02room to run as you want on pricing and profitability as you want. Like in our system in the US, we would frown upon that. In another system, you could imagine someone saying, okay, well, we just have to have a cut. Yeah. And I don't really know how it works. I don't know whether it's a cut or more like that's cool. You keep doing that. But if stuff starts happening that we don't like politically, kind of like Wang Xing's Twitter clone back in the day.

2:00:30You know, the plug gets pulled on you. And when we're seeing that risk with Alibaba now with Jack Ma and the anti-PO plug getting pulled. So that risk is real. Yeah. It's a great point. Okay. Couple more here. So we are seeing food as the go-to-market strategy for a company that is ultimately getting into all consumer services. You know, we thought about it in this way of like getting free profit dollars because you've already paid off your costs and expanding in all these other businesses. But what we're actually seeing here is like land and expand but in consumer. It's like this classic B2B concept where you have a go-to-market wedge, you get embedded, and then you start selling more and more stuff. Like this does exist in the US, but it's what enterprise companies do. Sales force. Oh my gosh. You bet. You bet. So there's definitely an element there.

2:01:23of this land and expand leads to more stickiness, more retention. In the very same way that you do in the enterprise and David to your point on switching costs, that's where the real switching costs come from. When you're buying everything from one provider, it's hard to rip that provider out. Yeah, totally. All right, so that is all I've got for Playbook. Do you have any more? Nope. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig. Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale. Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what

2:02:16changes actually created value for customers, and how fast you can use that signal to guide what you shipped next. This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to Statsig.com slash acquired to get started.

2:02:45All right, well, value creation and value capture. So long time listeners will know there's two elements to this. One, how does the value that they're capturing in the world compare to the value they create? They do a good job of that like Google or they do a bad job like Wikipedia or, of course, not a good foundation, but. Groupon created a lot of value for consumers, not for merchants. That's a great point. Unfortunately. And then secondarily, you know, the more altruistic one value creation versus value destruction.

2:03:15So on this first one, they're doing a damn good job capturing value. I think if they were in a knife fight still, you'd be like, guys, like you can't seem to turn a profit in this business. I'm worried about the long term. That's no longer a concern. So I think kind of a no brainer here on creating a ton of value and capturing their fair share of it. And probably will capture it even more in the future. Value creation versus value destruction.

2:03:40You know, in the US, we feel a lot of people feel very strongly that these food delivery companies are not great if you own a restaurant, you know, that it's not great to participate, but you also kind of have to participate because they're aggregating, you know, that door dash new breeds are capturing more and more of the consumers. And the couriers to, you know, there've been strikes union organizing. For sure, everyone's getting squeezed. So what dynamics?

2:04:10carry over to Maytwan. Like is it as gnarly or gnarlier for restaurants using Maytwan as it is for Dordash? Because you could imagine it's even worse because they also have the platform that says your restaurant to one star restaurant. And then they're trying to extract some big percentage of foreigners. Oh, by the way, they have all the customers. Yeah, I don't know. I didn't find anything one way or the other in my research. And in part, it's because like You know, we're all reading newspapers all the time in the US. There's going to be many, many people who feel fine writing a takedown piece of some US based tech companies. Like we're not really reading the Chinese press that's critical of these businesses. Well, I don't know. This is like way out there at the limb speculation for me. So listeners who know much more about China or live in China, feel free to correct me in the Slack or email us at acquired FM at gmail.com. But I think

2:05:06the government in China. One of the things that would make them upset and come after a monopoly platform would be, like I think it's in the government's best interest in China for restaurants and local businesses to be successful. And if Maytwan were putting them out of business, I think the CCP would want to go have a chat with Wang Xing. That's a great point.

2:05:35Yes, there's a check in a balance in that way. Hmm. Well, listeners, if you know more about this, we'd be very, very curious. Yeah. Totally. All right. So grading. Is there any scenario where it was not an A plus for these two companies to merge and for, let's define this real quick, if you're a shareholder of Maytwan or a shareholder of the on ping in 2016.

2:05:58is there any way that you could have had a better return on your dollar than these companies combining and achieving not only the profit but the market cap that they have today. Yes. 100% if your name is Ali Baba. This was an F minus. Oh yeah. Because if you think about it, their cost basis was they invested at rounds from the series valuation of what a billion dollars through 30 billion dollars. I'm sure way less than a billion. The series B was 50 million dollars in May, so you know, I don't know. Maybe the valuation was 300 something. Okay, so they got obviously a very nice markup by these companies merging and at a combined value of, I guess, what would the combined value be? I don't know. At the IPO, at least it was 54 or 56 billion. Was the combined value 30 billion? At the merger, I think I want to say it was more like 15. Okay.

2:06:58So you know nice return the downside actually for them well two downsides one their first blunder was getting out of Something that would then you know go stack another 300 billion dollars of market cap on top of that or just shy of 300 the second mistake was investing in the competitor Yeah, the biggest biggest overall mistake was allowing this to happen I mean, maybe there was nothing they could have done to avoid it, but now they have an existential threat competitor to Alibaba that exists out there with Tencent as the primary shareholder that's just been destroying them in this market and potentially in many more to come. Yeah. And they're doubly exposed. I mean, they're exposing their core business, but they made a huge bet on the rival that didn't pay off. Yep. We should be clear to all the muscle exists. It's not dead. The story is not over.

2:07:53It's like by, you know, most standards. Yeah. They're probably a lot of listeners in China right now were screaming at us, like, well, Emma is not dead, which is totally true. But May's one has 67% market share. So then the question becomes, if you were 10 cent, was there any better outcome than these companies merging? 10 cent is just so gangster. They're like Sequoia China, but with traffic. Yeah. And that's exactly what they're like. Sequoia China is.

2:08:20Only slightly less gangster. I think Tencent and Sequoia did better in this transaction than the company itself. Here's a question. Has Sequoia done better on Maytwan or DoorDash? That's a good question. So I pulled up at the IPO. Sequoia passed on seed, but they invested in series A and everything afterwards in DoorDash. So according to the Wall Street Journal.

2:08:48Sequoia invested around 400 million into Betuan, Dianping, all of them over the years. And at IPO, their shares were worth about $5 billion at IPO. So that's a $4.9 billion. So $4.5 billion return at IPO, but then the company is up 6x.

2:09:14since IPO. Well, just think about they own 10% of a 270 billion dollar company. Right. If they held. So it's a 27, 20, I don't know, it's 26, 25 billion dollar absolute return. So how much did Sequoia return on DoorDash ballpark? So pre IPO Sequoia owned a little over 18% of DoorDash. I forget what the delusion was in the IPO, but let's assume Ten percent. That seems reasonable. It seems reasonable. Okay, so that would take them down to what? I don't know. Let's make it easy. Fifteen percent that they own of which probably a little more than that of Doridash. So now 15% of where they're trading today at a market cap of 50ish billion. Yep. So seven billion. So yeah, they're doing a lot better on Mayton. It's no competition way better on Mayton.

2:10:13fascinating. It was closer on DoorDash when at the end of IPO day, but no competition now. You know what this also makes me think of for a long time, this rule-inventure capital that I remember it, a drone I remember afterwards, like always, you know, ownership, ownership, ownership, ownership, ownership is paramount. I wonder if that's different now. I certainly have a different perspective. Like 18% ownership in DoorDash. Well, yeah, I mean, that's great. But like, shoot.

2:10:41I'd take five percent ownership and mates on over that. Yeah, just I mean it gets back to the thing that packy flagged for all of us a few weeks ago, which was what is the likelihood that you could become a you know mega mega outlier multi hundred billion dollar company. And I don't know David. I still think it's important from an early stage investment perspective because.

2:11:04There are still very few mate ones yeah like if the argument was there's more mate ones being created than ever and there are you know a dozen two dozen three dozen You know nearly a dollar or soon to be trillion dollar companies that be one thing To me it's at least the way I sort of rationalized it is sure all the valuations got bigger But it's still incredibly rare to be one of those Whatever we want to call this class of company. Yeah, I think that's totally true On the other hand, I do think there's some trickle-down effect here, where like, depending on your fund size, I think there are a lot more of one to $10 billion companies out there than people imagined a few years ago. Very true. Order of magnitude if not two more. Yep. So if you're a fund size of, call it less than $500 million, ownership maybe isn't quite as important as you thought it was. Hmm. That's an interesting idea.

2:11:59Well, I think that about wraps it for grading. We have some good carve outs today. Yeah, that we should hit here before we head home. Do you want to start? Yeah, I can start. So my carve out is a great short book that I just read. I broke my rule about not reading any recent books, but this one felt like not too much of a commitment and just a really interesting timely topic called Extra Terrestrial.

2:12:26by Avi Loeb. Have you heard about this pen? No. It's great. So Avi is the chair of the Harvard Astronomy Department. And the book is about, do you remember Umua Moa, the extraterrestrial, the visitor from the other solar system a few years ago that came through our solar system? This was all over the news and it was picked up by telescopes. It was this very odd object that entered our solar system.

2:12:55it's very rare for objects outside our solar system to enter our solar system had all these like really interesting properties scientists weren't sure what was and there was all this bus like oh could it be like an alien spaceship and then over the years you know the scientific consensus has basically said like oh it was a really flat shaped inner solar system asteroid comment I guess it would be anyway obvious written this book and he's a widely respected, you know, incredible scientists. He's the chair of the Australian Department at Harvard. And he's like, I don't know what this was. The properties of this thing are such that to decide it is a natural phenomenon, you have to bend over so backwards on so many dimensions that like if you outcomes razor this thing, obviously the answer that comes out is this was extraterrestrial technology.

2:13:51And he's basically like, look, can I prove that? I don't have a photograph of it, but he goes through all the evidence. Oh, fast. And he's really going against the scientific community here. And it's popular. It's a pop book. This isn't like a scientific article. But he makes this great point. He's like, you know, Pascal's wager, which is does got exist. And Pascal's famous wager is like, well, if you think about the consequences of one or the other, you're probably better off believing God exists because You'll be happier probably during life, and then if God doesn't exist, you're better off. It's low cost for you to do so. Yeah, exactly. And so, Dr. Loeb proposes what he calls the Muamua wager of question is, was this alien technology or not? And similar to Pascal's wager, it's low cost to humanity to believe it was, but the upside is enormous.

2:14:47versus the other way around, if you believe it wasn't, there's no upside, it's to status quo, and the potential cost is enormous. And so he's like, well, if we believe, and he actually really genuinely believes it was extraterrestrial technology, well, what does that open up for humanity? It opens up our minds to think about, well, if other civilizations out there can traverse light years, well, how could we do that?

2:15:17That's really cool. It's really cool. I should read just to get my head out of just to read something different. You know, I feel like consume a lot of the same media or they can media that keeps me in the same head space. Yeah, it's really and it's like a hundred pages. That's awesome. All right. Adding it to the list. My carve out is my favorite sub stack and it is called Ludwig's learnings and it's a guy named John Ludwig. He's a principal at Founder's Fund and We actually cited his work on the SPAC episode, the SPAC LP episode that we did. His writing spans so many different topics, but every single one I read, I'm like, oh my god, yeah, wow, that's, huh, that is really well-reasoned, logical, and the outcome is a little scary.

2:16:05and makes me sort of question things and the first one was, I maybe even talked about it on the show around internet tailwinds, they're slowing down, mobile tailwinds slowing down and sort of moving into a new type of businesses that will be created in the future that are just less favorable business models than existed over the last 20 years and all these interesting decelerating trends which For all the conventional tech wisdom around everything continues to accelerate. I found it was fascinating. You know, around like, can we possibly have any more time in front of screens? No. So can there be bigger advertising businesses? Like, here's the only ways you could make them bigger. There's a lot of things like that in the piece that I found was really interesting. The second most recent one that I thought was great was around timeless versus time full advice.

2:16:49And it was around, here's a few examples of sort of five pieces of advice that are generally widely held to be true. But if you just go to a different part of history, it would be terrible advice. So why do we hold them to be timeless? And maybe you should do the opposite now. And they're very like, they're things that we all take to be like very sage pieces of wisdom. That was a really good piece. That was really good. One of them was home ownership, right? It's a good idea to own a home.

2:17:17And he was like, if you look at the tax advantages and you look at the massive increase in demand for homes, of course, the prices were going up because more people than ever could buy homes, wanted to buy homes. Is that the case now? There's all these reasons why you should actually examine that, you know, new tax incentives, all sorts of stuff. And then the most recent one was around this go-go time that we're in right now that he calls finance as culture, which is, of course, everything that we're seeing with stocks only go up and everybody, you know, pop culture discusses finance and has various elements of finance that drift in and out of it. Finance has become sports, finance has become entertainment, finance has become conversations with friends and examines. What are the reasons that this could either, you know, pop or continue and sort of which camp do you want to believe? I just find all of his writings so good. And John, if you're listening, thanks for really writing really thought provoking work. Totally. 100% agree. Should we do one bonus carve out that

2:18:17It relates to both of our carve-outs. I think we got to say today, given the Founder's Fund connection, is Starship. Holy smokes. Holy smokes. Flew came back, landed, and waited like a whole minute or two before it blew up. A whole minute. I mean, that's enough time for people to deplane when it lands on Mars. Totally. If it blows up only a minute afterwards, then we're funny. No, it's an unbelievable accomplishment. And actually, I was thinking when I watched that video, of it landing earlier today and they have some beautiful footage of it. I was wondering related to your first carve out of like, well, did we just pass some tests like in Star Trek? There's this thing called the prime directive where you can't interfere with a species who hasn't discovered warp technology yet. And when it came back and landed, I was like, do we just hit some threshold? Is there like somebody going to pop out and, you know, we get to meet aliens now? And obviously, you know, it's not warp technology. It's just a bigger rocket.

2:19:14So exciting for what it means for the future space travel on every dimension. So cool. Just think about how many starlink satellites they can launch off of a starship. I don't know if that's part of the plan or not, but like they can launch six to seven times as many and is totally part of the plan. Yeah. Incredible. I think it's 60 in a Falcon 9 deployment versus a 400 in the starship deployment. That'd be so cool. If like two years from now, we're all on starlink internet.

2:19:43Yeah, I mean, I literally had someone in my house today coming and fixing the internet. So if there was a more foolproof system, then the, my decibel readings were off, getting from the pole to the inside of my house, which then got split. So it increased the decibel readings. I learned a lot. I didn't know decibels were involved with coax cables and sending signal, but it is. And it was a pain. And it would be great if, I don't know, maybe Starlink has sort of the same way that it ends up getting internet to your router. But yes.

2:20:12a better system than the ISPs we all deal with would be wonderful. That would be wonderful. All right, listeners, that's it for today. Yeah, I think you should join the Slack. I think you should come join us. We want to talk to you about this episode. We want you to talk to other smart people. I'm differing from my scripts here, but David and I just did some research and we realized that over 50% of the messages in the acquired Slack are DMs. And most of them are not to us because we just don't get that many of them.

2:20:40Yeah, it's kind of cool. We're doing more with the Slack and we're looking at Slack, the company actually gives you some cool analytics and graphs. And if you look at the daily active usage and weekly active user graphs for the acquired Slack, it's at a small level, but they're on an exponential curve. It's super cool. For sure.

2:21:03For sure, and it's mesh, you know, it's not hub and spoke so like everyone is talking to each other sometimes with us in channels, but also sometimes, you know, finding co-founders and finding investors and finding customers and making hires. It's just really cool. So I freaking love the community that we've developed here and you should join us in the Slack. If you want to be a deeper part of what we're doing, join the LP program. We'll be on Zoom calls with you once a month and LPs. We've got one of those coming up. So we'll see you soon. And yeah, then you'd get to hear Jake.

2:21:31Tell us about Sass in 2021, which was a privilege to talk to him about such a fun guy. So all right. If you like this episode and you're still listening, which would be shocking to me, if you made it this far into us just telling you all the different ways that you can be a part of what we're doing. Well, it's like the end of Ferris Bueller, you know, and you're still here. What are you doing here? Go home. I'm looking at the time count where we'll cut some of this that we're recording, but we're at three hours and nine minutes. Like go home.

2:22:00All right, I'm cutting us off. Listeners, thank you so much. Share this episode. We'll see you next time. See you next time.