Join us for the Acquired Arena Show in Seattle on May 4! >>

Reverse Interview with Ben and David at Vanta

Limited Partner Episode

April 7, 2022
April 7, 2022

We dropped by Vanta's all-hands in SF a few weeks ago for Christina to interview us for a change! We decided to turn the mics on and record it as an LP episode. We discussed lessons learned from building Acquired, the shape of the show's growth trajectory, how we think about the business, and dive into our own origin story.

Also -- JOIN US FOR THE ACQUIRED ARENA SHOW!!  May 4th, at 5 PM in Seattle! You can RSVP at https://acquired.fm/arenashow. Hope to see you there!

We finally did it. After five years and over 100 episodes, we decided to formalize the answer to Acquired’s most frequently asked question: “what are the best acquisitions of all time?” Here it is: The Acquired Top Ten. You can listen to the full episode (above, which includes honorable mentions), or read our quick blog post below.

Note: we ranked the list by our estimate of absolute dollar return to the acquirer. We could have used ROI multiple or annualized return, but we decided the ultimate yardstick of success should be the absolute dollar amount added to the parent company’s enterprise value. Afterall, you can’t eat IRR! For more on our methodology, please see the notes at the end of this post. And for all our trademark Acquired editorial and discussion tune in to the full episode above!

10. Marvel

Purchase Price: $4.2 billion, 2009

Estimated Current Contribution to Market Cap: $20.5 billion

Absolute Dollar Return: $16.3 billion

Back in 2009, Marvel Studios was recently formed, most of its movie rights were leased out, and the prevailing wisdom was that Marvel was just some old comic book IP company that only nerds cared about. Since then, Marvel Cinematic Universe films have grossed $22.5b in total box office receipts (including the single biggest movie of all-time), for an average of $2.2b annually. Disney earns about two dollars in parks and merchandise revenue for every one dollar earned from films (discussed on our Disney, Plus episode). Therefore we estimate Marvel generates about $6.75b in annual revenue for Disney, or nearly 10% of all the company’s revenue. Not bad for a set of nerdy comic book franchises…

Marvel
Season 1, Episode 26
LP Show
1/5/2016
April 7, 2022

9. Google Maps (Where2, Keyhole, ZipDash)

Total Purchase Price: $70 million (estimated), 2004

Estimated Current Contribution to Market Cap: $16.9 billion

Absolute Dollar Return: $16.8 billion

Morgan Stanley estimated that Google Maps generated $2.95b in revenue in 2019. Although that’s small compared to Google’s overall revenue of $160b+, it still accounts for over $16b in market cap by our calculations. Ironically the majority of Maps’ usage (and presumably revenue) comes from mobile, which grew out of by far the smallest of the 3 acquisitions, ZipDash. Tiny yet mighty!

Google Maps
Season 5, Episode 3
LP Show
8/28/2019
April 7, 2022

8. ESPN

Total Purchase Price: $188 million (by ABC), 1984

Estimated Current Contribution to Market Cap: $31.2 billion

Absolute Dollar Return: $31.0 billion

ABC’s 1984 acquisition of ESPN is heavyweight champion and still undisputed G.O.A.T. of media acquisitions.With an estimated $10.3B in 2018 revenue, ESPN’s value has compounded annually within ABC/Disney at >15% for an astounding THIRTY-FIVE YEARS. Single-handedly responsible for one of the greatest business model innovations in history with the advent of cable carriage fees, ESPN proves Albert Einstein’s famous statement that “Compound interest is the eighth wonder of the world.”

ESPN
Season 4, Episode 1
LP Show
1/28/2019
April 7, 2022

7. PayPal

Total Purchase Price: $1.5 billion, 2002

Value Realized at Spinoff: $47.1 billion

Absolute Dollar Return: $45.6 billion

Who would have thought facilitating payments for Beanie Baby trades could be so lucrative? The only acquisition on our list whose value we can precisely measure, eBay spun off PayPal into a stand-alone public company in July 2015. Its value at the time? A cool 31x what eBay paid in 2002.

PayPal
Season 1, Episode 11
LP Show
5/8/2016
April 7, 2022

6. Booking.com

Total Purchase Price: $135 million, 2005

Estimated Current Contribution to Market Cap: $49.9 billion

Absolute Dollar Return: $49.8 billion

Remember the Priceline Negotiator? Boy did he get himself a screaming deal on this one. This purchase might have ranked even higher if Booking Holdings’ stock (Priceline even renamed the whole company after this acquisition!) weren’t down ~20% due to COVID-19 fears when we did the analysis. We also took a conservative approach, using only the (massive) $10.8b in annual revenue from the company’s “Agency Revenues” segment as Booking.com’s contribution — there is likely more revenue in other segments that’s also attributable to Booking.com, though we can’t be sure how much.

Booking.com (with Jetsetter & Room 77 CEO Drew Patterson)
Season 1, Episode 41
LP Show
6/25/2017
April 7, 2022

5. NeXT

Total Purchase Price: $429 million, 1997

Estimated Current Contribution to Market Cap: $63.0 billion

Absolute Dollar Return: $62.6 billion

How do you put a value on Steve Jobs? Turns out we didn’t have to! NeXTSTEP, NeXT’s operating system, underpins all of Apple’s modern operating systems today: MacOS, iOS, WatchOS, and beyond. Literally every dollar of Apple’s $260b in annual revenue comes from NeXT roots, and from Steve wiping the product slate clean upon his return. With the acquisition being necessary but not sufficient to create Apple’s $1.4 trillion market cap today, we conservatively attributed 5% of Apple to this purchase.

NeXT
Season 1, Episode 23
LP Show
10/23/2016
April 7, 2022

4. Android

Total Purchase Price: $50 million, 2005

Estimated Current Contribution to Market Cap: $72 billion

Absolute Dollar Return: $72 billion

Speaking of operating system acquisitions, NeXT was great, but on a pure value basis Android beats it. We took Google Play Store revenues (where Google’s 30% cut is worth about $7.7b) and added the dollar amount we estimate Google saves in Traffic Acquisition Costs by owning default search on Android ($4.8b), to reach an estimated annual revenue contribution to Google of $12.5b from the diminutive robot OS. Android also takes the award for largest ROI multiple: >1400x. Yep, you can’t eat IRR, but that’s a figure VCs only dream of.

Android
Season 1, Episode 20
LP Show
9/16/2016
April 7, 2022

3. YouTube

Total Purchase Price: $1.65 billion, 2006

Estimated Current Contribution to Market Cap: $86.2 billion

Absolute Dollar Return: $84.5 billion

We admit it, we screwed up on our first episode covering YouTube: there’s no way this deal was a “C”.  With Google recently reporting YouTube revenues for the first time ($15b — almost 10% of Google’s revenue!), it’s clear this acquisition was a juggernaut. It’s past-time for an Acquired revisit.

That said, while YouTube as the world’s second-highest-traffic search engine (second-only to their parent company!) grosses $15b, much of that revenue (over 50%?) gets paid out to creators, and YouTube’s hosting and bandwidth costs are significant. But we’ll leave the debate over the division’s profitability to the podcast.

YouTube
Season 1, Episode 7
LP Show
2/3/2016
April 7, 2022

2. DoubleClick

Total Purchase Price: $3.1 billion, 2007

Estimated Current Contribution to Market Cap: $126.4 billion

Absolute Dollar Return: $123.3 billion

A dark horse rides into second place! The only acquisition on this list not-yet covered on Acquired (to be remedied very soon), this deal was far, far more important than most people realize. Effectively extending Google’s advertising reach from just its own properties to the entire internet, DoubleClick and its associated products generated over $20b in revenue within Google last year. Given what we now know about the nature of competition in internet advertising services, it’s unlikely governments and antitrust authorities would allow another deal like this again, much like #1 on our list...

1. Instagram

Purchase Price: $1 billion, 2012

Estimated Current Contribution to Market Cap: $153 billion

Absolute Dollar Return: $152 billion

Source: SportsNation

When it comes to G.O.A.T. status, if ESPN is M&A’s Lebron, Insta is its MJ. No offense to ESPN/Lebron, but we’ll probably never see another acquisition that’s so unquestionably dominant across every dimension of the M&A game as Facebook’s 2012 purchase of Instagram. Reported by Bloomberg to be doing $20B of revenue annually now within Facebook (up from ~$0 just eight years ago), Instagram takes the Acquired crown by a mile. And unlike YouTube, Facebook keeps nearly all of that $20b for itself! At risk of stretching the MJ analogy too far, given the circumstances at the time of the deal — Facebook’s “missing” of mobile and existential questions surrounding its ill-fated IPO — buying Instagram was Facebook’s equivalent of Jordan’s Game 6. Whether this deal was ultimately good or bad for the world at-large is another question, but there’s no doubt Instagram goes down in history as the greatest acquisition of all-time.

Instagram
Season 1, Episode 2
LP Show
10/31/2015
April 7, 2022

The Acquired Top Ten data, in full.

Methodology and Notes:

  • In order to count for our list, acquisitions must be at least a majority stake in the target company (otherwise it’s just an investment). Naspers’ investment in Tencent and Softbank/Yahoo’s investment in Alibaba are disqualified for this reason.
  • We considered all historical acquisitions — not just technology companies — but may have overlooked some in areas that we know less well. If you have any examples you think we missed ping us on Slack or email at: acquiredfm@gmail.com
  • We used revenue multiples to estimate the current value of the acquired company, multiplying its current estimated revenue by the market cap-to-revenue multiple of the parent company’s stock. We recognize this analysis is flawed (cashflow/profit multiples are better, at least for mature companies), but given the opacity of most companies’ business unit reporting, this was the only way to apply a consistent and straightforward approach to each deal.
  • All underlying assumptions are based on public financial disclosures unless stated otherwise. If we made an assumption not disclosed by the parent company, we linked to the source of the reported assumption.
  • This ranking represents a point in time in history, March 2, 2020. It is obviously subject to change going forward from both future and past acquisition performance, as well as fluctuating stock prices.
  • We have five honorable mentions that didn’t make our Top Ten list. Tune into the full episode to hear them!

Sponsor:

  • Thanks to Silicon Valley Bank for being our banner sponsor for Acquired Season 6. You can learn more about SVB here: https://www.svb.com/next
  • Thank you as well to Wilson Sonsini - You can learn more about WSGR at: https://www.wsgr.com/

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Transcript: (disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)

Christina: Hello. I'm here with David and Ben from Acquired. We're going to try to turn the tables on them a little bit and ask them some questions. I have some questions prepared to kick it off. A few folks have sent me questions, which is great. We also have the slider open and we're gonna keep it open through this. Put questions in there if you'd like them to.

David: Before we start, (a) thank you; (b) where did you get those shoes and where can we get a pair?

Christina: For folks who can't see the video, I have my llama shoes on, my official all-hand shoes. If you all can find Kylie's screen on the Zoom and maybe pin it for yourself, you'll be able to see it. Sorry, this is the very first live interview in Vanta history as you might be able to tell. Thank you for your patience as we figure it out.

Ben: This is good. David's going to play IT consultant.

Christina: Great. While they do that, Ben, do you want to briefly introduce yourself?

Ben: Sure thing. Hey, everyone. I'm Ben Gilbert. I'm one-half of the Acquired podcast, background in engineering, product management. Today, a general partner at Pioneer Square labs in Seattle writing seed stage investments. and have a burgeoning podcasting, seven-year bootstrap project turned media empire.

David: And I'm David Rosenthal. I'm the other half of the burgeoning media empire. I feel a special Internet kinship with Christina because I, too, started my early career as an associate at a venture capital firm and never intended to be a founder. Are we founders? I don't know what we are.

Christina: You're definitely founders.

David: But we're something that's not that.

Christina: Excellent. We're going to start a little bit of softball, but what's your founding story? I tried to listen to your first episodes. I tried to do my research, I'm not nearly as good as you all—we'll get to that in a moment—but it sounded like you went out for drinks.

At some point, all good podcasters started over beer. That's the line. You're thinking about what makes some acquisitions work, some don't. Somehow you decided to start a podcast late 2015, but what was that actually like? What happened?

Ben: It's funny that the first episode came out in October of 2015, but when we went out for drinks it was February. I think all good creative ideas need some amount of activation energy to get over the hump of the default state of doing things, which is nothing. You have to remember, this is before every millennial had a podcast. Now there are over 2½ million podcasts. I think at that point, there are about 100,000 podcasts like all other internet media forums are super longtail-distributed.

As weird as it is to say, there weren't that many good podcasts, which is certainly not a problem now. We've been fans of the medium for a long time. I listened to a lot of very nerdy Apple podcasts. The Talk Show With John Gruber was one I'd listened to for 6–7 years already at that point. I pitched David on two different ideas, one of which was Acquired and the other of which was...

David: What was the other one?

Ben: We didn't know how to title it, but it was companies that successfully created $2 billion innovations. My postulate was there aren't that many, so let's do a podcast trying to highlight the ones that did. You were like, well, I hate that idea because we will very quickly run out of episodes.

David: Yeah, it turns out. That was a problem with the original vision for Acquired, too, which was, we're going to do a podcast about technology acquisitions that went really well.

Ben: We got seven.

David: Yeah, but you start small.

Ben: Yeah. For folks that don't listen, now it's also IPOs, and company stories.

Christina: Excellent. To that point, kind of like the best startups. You all had your addressable market, and it just expanded over time. From acquisitions to companies, to corporate analysis, to pop stars. Did you all think about that as it was happening? How conscious was that?

Ben: Super conscious and we were really nervous about becoming bland. I think the natural state of companies and media properties, in my opinion, is they overgrow their mandate and lose sight of the job to be done with their customers.

I thought the thing that made Acquired good and cool originally was we have this very specific format for evaluating acquisitions and we stick to it. We're not the people that randomly also have interviews, this, that, and the other thing.

Actually, you starting the Slack community, David, and us aggressively serving our audience to realize the job to be done with our listeners, wasn't to help them formulaically understand acquisitions. It was to tell the stories of great businesses, how they came to be, and analyze their strategy. One implementation of that is the format that we currently have, but there could be others. I think it was understanding why our audience trusted us with their time.

Christina: How did you do that?

David: How did we expand?

Christina: Talk to your audience, get to that, like crisper jobs to be done. It is not acquisitions. It might not even be podcasts.

David: [...] Ben, what you would say. My recollection of how this happened is conversations with our audience for sure helped inform, but mostly it was just our own thoughts as we went along and being like, is this still interesting? What would be interesting to us? And just trusting our gut on that.

The Slack community was like, oh, the Slack was brand new. This is how old we are. We're like, this would be fun, what if we just launch a free Slack, tell everybody to join, and see what happens? And then that worked really well. Then we were like, well, what if we do IPOs? Like, add that. That doesn't seem like too much of an expansion. And then we just kept dreaming bigger and bigger.

I think one of the things that we learned from that and then we got a bunch of reinforcing feedback from the audience was like, look, if you guys are interested in something, we feel that as listeners, if you're not interested in something, we also feel that. That gave us a lot more confidence to do Taylor Swift, pop stars, and what have you.

Ben: I think the risk in creating a product for yourself is that it's a small market. We were fortunate that this is a little bootstrap thing we were doing, not some big venture scale business. We felt no pressure or mandate to make sure that we created the largest possible addressable opportunity.

It was coincidental and fortunate that by chasing our own problem to solve or things we were curious in about, that happened to be a large enough market, in particular, because of the people that we then attracted. It's like the Bezosian and you get the shareholders that you ask for. Like, we're super smart founders, people at tech companies, hedge fund managers, and university endowment people.

David: Fentons?

Ben: Fentons, yeah. I think there's a core tenet that we have that treats the audience as smart. And as long as you do that, good things will continue to happen.

Christina: You call it a little bootstrap business. You don't have to give numbers, but just for folks who maybe are not me, what’s the sense of size, scale of your burgeoning empire?

Ben: Two hundred and fifty thousand subscribers across a bunch of different podcast platforms. Every episode gets about 100,000 downloads in the first three months.

David: Basically, what's cool about that is that it's doubled every year for seven years. In the early days, it was like, well, we started the first year with, I don't know, 1000, 2000 people would listen to every episode.

Ben: But you grow 100% for seven years.

David: You double that for seven years and you're like, shoot, I've got more people that couldn't fit in the biggest sports stadium in the world are listening to our audience. It was like, wow.

Ben: By growing reasonably slowly there, it is a curated group. That's the other thing.

Christina: Reasonably slowly?

Ben: But it really is. If you were to say it feels slow in the moment, it doesn't feel like being here at Vanta where there are a zillion new people joining in every all hands. I'm sure we could look at the Slack analytics and it would look like that in the community. But it doesn't feel like any episode is meaningfully more gigantic. No episode is ever 10% bigger than our next highest episode.

Christina: Interesting.

David: To your specific question, this was not a business at all for 3½ years, 3 years. Literally, zero revenue.

Ben: We were super reluctant on sponsorships. We were hardcore no sponsorships. They make podcasts bad.

David: We formed a Washington State LLC a couple years in. We're just like, we should probably do that. Then over the past few years, revenue has been ramping on that same curve to the point where, for me at least, it's now being founder, co-host, whatever on Acquired is like, that's what I do.

Ben: Former venture capitalist, now podcast co-host.

David: Former venture capitalist, yeah.

Christina: Former venture capitalist is the best title.

David: The best title.

Christina: Awesome. We have a question, actually, of an employee named Utsav who's on the call. He runs a podcast called Software at Scale. He interviews engineering leaders who are building software at scale. He's curious, how do you all foster the community you have over the last few years around Acquired? You mentioned the Slack community. You might want to explain that a little bit, but also, I'm sure it's broader than just that.

David: I think the most important thing is what Ben said, which is, you get the community, listeners, and the behavior you ask for. The model that you set for that is what people follow. I don't think we have ever had a trolling or abuse problem in our community. Maybe occasionally on Twitter, something will happen.

Ben: Not maliciously. There's some spam, but not...

David: Yeah, but in the Slack community, never. We have 12,000 people in there now. I think we're just modeling that behavior. If you're Barstool Sports, you're going to get a rowdy community. If you're Acquired, you're not.

Ben: There are also ways to grow an audience quickly, which feel like a smash-and-grab job. You can spike your Twitter following by saying something super controversial and deciding that you're going to make yourself the martyr of the moment about some issue.

A lot of people do that, a lot of people succeed in that, but it has the cost—long-term—of attracting trolls. I think as long as you're willing to not grab at easy growth and do that stuff—which never has felt authentic to either of us personally—then it makes a large scale community more sustainable.

Specifically about the question asked of how do you foster that, David, you've been really good about being diligent at identifying people who have made connections in the community, and then highlighting and celebrating that. When founders meet in the Slack, or on an LP call, or surfacing, hey, this company is looking to hire these three key roles and we put it in the email that we send out when that person has been very participatory in the community, it's the general platform rule of trying to create way, way, way more value than you capture.

Christina: Cool. For folks who haven't listened to Acquired, try to summarize a little bit. It's long episodes and one did—I don't know—seven hours, depending. Really in-depth research into a company.

David: We are the hardcore in history of technology.

Christina: Yes, that's okay. That's right, but you guys are really good at the Internet, too. You go and find new Peloton CEOs YouTube that has 14,000 or 1400 views, whatever. What is your secret to all this research? And also, how good are you?

David: There's this amazing startup. It's really awesome. It's going to change the world. It's called Google. Seriously, you would be amazed.

Christina: But everyone else has Google.

David: But not everybody else uses it.

Ben: People don't scope with date operators. If we want to get a feel for like, in 2014, what was the media narrative around Facebook at the time of IPO, which is 100% different than today or even six months ago? You can scope to search to make sure you're only getting results from a certain date.

Absent doing that, you're never going to find those articles because good luck searching Google or searching any website for Facebook earnings announcement, or is Facebook going to be successful? You'll never find it unless you're specifically looking at certain dates. That's one example. David's favorite one is industry conferences on YouTube. When you're doing research on...

David: Alumni Zoom interviews of CEOs, high school principals.

Ben: Yeah, it's a common thing to Google that person's name and look for recent articles about them. But I think if you're willing to do 5% more work than the large group of people you are pseudo-competing with, most of the time, that shows up as 200% the product because I think most people stop in the same place, which is like, well, I read three or four recent articles. `

If you're like, well, come on, there's got to be something from before, let me look on different platforms, let me see if there's an old Quora to talk about a customer, an old Quora answer, which are usually awesome, or weird subreddit dedicated to the company where people are finding more unique stuff than we're finding. The internet's a big place and I feel like we just have 15 or 20 different little ways to search for stuff that's not right on the surface.

Christina: It's a bit of the principle, like do 5%–10% more and it actually pays off.

David: Yeah, I think we have a secret weapon, too, which is we publish 16 stories per year. We do interviews, too, and that's much easier to prep for and uncanonical wisdom. Spotify told us the other day, we need to be a weekly podcast. That is the accepted behavior. We're like, that's not our advantage being 16 times a year podcast and that gives us the time to do 20 Google hits instead of 3.

Christina: To that 16 episodes a year, I imagine you're practicing what you do constantly. How do you practice Acquired without "doing Acquired"? What is all the other stuff you do?

Ben: We almost never rehearse episodes, but we will can episodes if they're feeling bad. We've had one that we've never released, we had an interview that we got halfway through, and bagged it and said, hey, can we come back another day, it's just not working, which was TSMC or Standard Oil.

David: Standard Oil part.

Ben: We got an hour and a half in and we both just were like, can we start over in three hours? Because we're never a live show, we always can be treating the real thing as if it's a rehearsal, and we can throw it away if we want, which I think is helpful.

David: The other answer is, the way we practice is we play. We only do 16 episodes a year, but then we do the interviews, and then we do the LP show. We are publishing 50 times a year. We're doing this every week, but the big stories are not as frequent.

Ben: There's also something to collecting super fans in the right places. Christina, if we ever are curious about anything in security or security broadly, rather than us spending four hours to orient ourselves, I probably would DM you in the Slack and say, give me the three places I should start and help me find the narrative in here, like, where's the forest for the trees?

We ask three or four people who should know. We did that for Square and the episode suddenly fell into place. The narrative we were telling from a former employee was like, we checked it with two or three other people, then suddenly, we were like, oh, this is the undertone, real narrative behind what's interesting about this business. I feel like those shortcuts are huge, too.

Christina: Yeah, asking for help. It's like in school, you're trying to train and you can't. Ask for help on your homework and on real life all the time. Ask all the time.

David: It's such a great point.

Christina: Cool. One more podcast question, at least for me. Lots of people start podcasts maybe after drinks at a bar. Most of them do not go for seven years and seven-hour episodes, and all of that. What makes you all different?

Ben: I think we just actually like it. The numbers are fun to look at in the analytics afterwards. Now I'm, of course, like any other person running any business, hooked on the dopamine hit of like, oh, I have to, let's open it up and see. I will never profess to be one of those people that's like, oh, I don't look at the analytics. I look a lot at the analytics.

David: I look at the analytics.

Ben: If you look through our iMessage history, it's all these screenshots of like, okay, well, I made another spreadsheet, and I graphed it this way, and if you think about it, here's this and that.

Anyway, that aside, I think we actually are completely obsessed. We found a thing that if we weren't doing Acquired, I wouldn't have a reason to investigate quite as many things. But if you're like, you have four hours, here's a Wikipedia page to start on, go down the Internet rabbit hole, I'd be like, there's no greater way that I'd like to spend my time than this. I think that is not universally true.

David: I think the other thing is we're actually really good friends. It's just like I could never do this without you and doing it together is the most fun thing. We finished recording a five-hour session for an episode and no bathroom breaks. We'll just go. We both get to the end and we're like, that was amazing. When are we doing the next one?

Ben: Yeah.

Christina: How early did you know this was going to be a thing in your lives?

Ben: Eight months ago?

Christina: Wait, really?

Ben: The funny thing about only doubling per year, in the first few years it just doesn't feel meaningful. By year four when we've got 10,000+ listeners or whatever it was, tens of thousands, we're still not in the top 50 even tech podcasts. It still feels recent to me, where we're like, oh, there's a real.

David: I'm curious, too, actually, for you and Vanta, the company. You guys were bootstrapped for a long time. We were bootstrapped too. We're a two-person Washington State LLC, so we hadn't raised a bunch of money. There was no expectation that this was going to be a thing. Then we just kind of woke up one day and we were like, oh, it is. What was your experience like with that?

Christina: A little more constructed, honestly. The goal was always to make it a Vanta thing and have it grow like this. I think the early days were a little bit of having worked in VC, and seeing how the incentives can get a little crosswise, and how companies just lose their center and be like, oh, we're doing well because shiny VC thinks we're doing well. I'm like, look, shiny VC is trying to do their job and is probably a smart person, but it doesn't matter what they think.

David: Let's be honest, three quarters of the time, they really don't know what's going on.

Christina: They try. Everyone's trying, everything is hard, a general universal framework. I think it was just kind of conscious like, no, no, no. We're doing well. We're going to believe that. We have the cash to sustain this. Why not?

To focus-thing mindset on that was very conscious, but the goal was always to grow very quickly. The joke in the early days, and it was something we're proud of and also mortified by, was like, oh, we just can't spend all our money, poor us.

David: Really, actually, that's not funny anymore.

Christina: Yeah, it's not funny at all. It's just this cute line that VCs get excited about. But then if they really think about it, they're probably just not investing as they should. They're running the business well. That is also true.

David: There are counterexamples to us, too. There are podcast companies out there that have raised a lot of money and raised large funds.

Christina: Yeah, when is your Spotify deal coming?

David: We don't have a Rogan-style deal, but we did just do a big partnership with them at the beginning of this season for video, which is amazing. Spotify has been so good to work with. The video product is really cool.

For anybody who Spotify is your main podcast player, when you listen to us, when you listen to All-In, when you listen to This Week in Startups, and a few other pods, video will pop up and then sync. This is really hard to do on the back end. You can watch the video for a while, stop, go for a walk, listen to the audio, and it all stays synced. Versus, we used to post videos on YouTube and like, oh, I could watch on YouTube, but then if I want to go for a walk, you know. It's cool.

Christina: Do you have any vaccine tips for us? It's been the subject of Joe Rogan on Spotify. No, you don't have to answer that.

David: No comment.

Christina: Okay, I'm going to ask one or two more and then we'll turn it over to audience and Vantan questions. Let me start with a spicy one. You're known for grading companies in your episodes. You're sitting at a company. I'm curious who could grade Vanta based on what you know about us?

David: We have the best [...] in which we just turn the question around. We can't grade Vanta yet. We don't know what's going to happen, so we put it back on the founder.

Ben: How will we grade Vanta then? This is actually good.

Christina: Yeah, like what would an A+ outcome look like versus a solid B or a gentlemen's B?

Ben: We have the great, great benefit of, at this point, mostly getting to pick the sponsors that we work with, which is like—

Christina: I can tell because I get pinged by people who asked me about the sponsorship all the time.

Ben: Oh, really? In part of the spots that you did contribute greatly to that, because it tells a pretty fascinating story about why you should be interested in compliance, security, and dot dot dot Vanta. I actually think it has a lot to do with the nature of the format and the way that you handle it.

All this to say, we get a lot of cool DML about, hey, so and so wants to sponsor, and we kind of analyze the business to decide like, should we? Because our goal is to build long term relationships with companies that we feel our audience, being lots of founders and technical folks, is it going to work out for them? We need our sponsors to be successful in order for that to mean that we have a good business on our hands.

When I was thinking about Vanta, I was looking at it and I was like, I don't totally understand yet how they price, but this thing feels super, super sticky. Once you get a certain certification, again, knowing very little about the industry, I was like, I think you need it forever because you start attracting customers that will start requiring it and it seems really unlikely that someone would ever rip you out and put someone else in.

I'm sure it happens, but I think the way I would analyze it would be: (1) Is it true that it's sticky, like really sticky? (2) Can you capture an appropriate amount of value that you're creating over time? Because it's also one of these things where I could see people not understanding how valuable it will be for the customers they can attract by having a certain certification, so they aren't willing to pony up even though it makes tons, and tons, and tons of sense for them. Pricing feels hard to me for your business.

Christina: Yes, it is. We still price the way we priced three years ago, which I think serves customers. I don't think it serves us. I think it's a tremendous opportunity for Vanta, truly. But yeah, I don't think anyone's figured that out.

David: The thing I would say real quick is, we're actually working on our favorite themes from seven years of Acquired. We're doing a cool event around. One of them is the Jeff Bezos saying when he launched AWS, which is the analogy to German beer brewers in the 1800s when electricity was invented, that we made you talk about.

Christina: It sounds familiar. Yes.

David: This is like our hobbyhorse. It's just so true with tech and startups. Don't do stuff that doesn't make your beer taste better. All that matters is your product. Basically all of our partners, like Vanta, Vouch, Modern Treasury, you go down the list and this is just such a deep theme.

Ben: It's crap that it's not your core competency that you don't want to do. And if you could find someone to do it that's really, really, really good at it—set it and forget it—it's worth a lot of money.

It's funny, we're actually thinking, should we be on TikTok? Dave and I looked at each other and we're like, hello, other elder millennial. Are we going to be effective at doing TikTok? Probably not. Is there someone who could help us with that? Yes. Should we pay good money for that? Yes. As long as you can find an outsource provider of something you view as non-core that's set it and forget it, you should always do that.

David: But the value to an executive leadership team for peace of mind, and then to the company, and not have to deal with this, that's infinitely elastic. You can't charge $10 million a year, but for a big company you could. It would blow my mind if you guys compete on price.

Christina: Appreciate it. Cool. Okay, some questions that are in the slider that I'm going to read out for folks. Let's see. Emmett. I think it's maybe inspired. I'm stepping here, I'm sorry. Is there a podcast that doesn't exist today that you wish someone would start? What opportunities are there in the podcast landscape?

David: The landscape is so different than when we started. The other thing that we got incredibly lucky with is we got featured in our first year by Pocket Casts and Apple. Spotify wasn't doing podcast yet, but that was amazingly beneficial. That game's done. It used to be that if Apple featured you, that would make your podcast...

Ben: It was my first app. I got 20,000 downloads a day when I shipped an app in 2009 because, oh, my God, you shipped an app, thank God, let's feature them in the App Store.

David: Exactly getting featured in the App Store. Some people have taken that as like, well, this game is done, you can't break through. But you can break through, like, All-In has broken through. I don't have a specific answer of something I want. I think the more different you are, the better. The less you adhere to rules of like, must be weekly. must be an interview-based podcast, must be X, must be Y, like break all of those rules. Because the more different you are in a sea of 2½ million podcasts, the better.

Christina: Yeah, great.

Ben: I don't know because in the Peter Thiel parlance, I don't have a secret here that is exploitable. But I would say the framework for the secret is probably, is there something that's shrouded in mystery where if you're thinking about starting a podcast, you have unique access to be able to unshroud that?

To go back to the All-In example, it's like, hey, check out some billionaires talking publicly about their private jets instead of trying to be as veiled as possible about it. That's catnip for so many people to be like, okay, I'll listen to this. This is crazy, They're giving hot takes about the world. I'm in.

The question is, what other things right now are either not well understood because they're just difficult to understand and you can uniquely be good at explaining them on a show or you have a unique position to be like, F it, I'm liking them?

David: This is how it really is.

Ben: Yeah.

Christina: Securing the plans. It all goes back there. You mentioned your seven-year wrap up, but then I was curious how the podcast has changed your perspective on startups, like things you used to believe about startups or tech companies you no longer do.

Ben: For me, I started my career as an indie iOS developer. I was pretty sure that I had such good product chops that I could make a better widget and that was a durable competitive advantage. If you would have asked me in 2012, I would have told you for sure, that app sucks and I can design a better one. Then the people will see it.

Christina: The path will take over the world.

Ben: Exactly.

Christina: I think it's canonical.

Ben: Have you seen the radio menu?

David: Were you at USV when Path was big?

Christina: Yeah, and the Bubblegum UI.

Ben: It's beautiful.

David: It had such a lasting impact on design, too.

Christina: For only 10,000 users.

Ben: But inspired so much more to come after. The Google floating action button feels derivative. I guess doing Acquired has shown me, that is in Hamilton Helmer's Seven Powers parlance during the take-off phase of a business, unique UI or better, whatever it is, user experience in some way, shape, or form is a better way to wedge into the market and make your presence known, but it's not a durable competitive advantage.

Strategy is a real thing. All profits are arbitraged away eventually, unless you have something that makes it so other people can't compete with you quickly. That to me has been the big realization of like, okay, zoom out and don't look at in months, but look in years and decades. All profits will get competed away unless… And figure out your unless. Otherwise, enterprise value goes to zero because your free cash flow is negative or neutral.

Christina: Our board member, Andrew at Sequoia, it's a software recurring revenue of software business. It's just like the best business anyone has ever created. They're wonderful. The flip side of that competitive advantage is really real.

Ben: And it's easier than ever to start a SaaS business. It's harder than ever to scale them and it's more expensive than ever to scale them, but I think Patrick from ProfitWell does this analysis showing like, it used to be that you had a reasonable way to break through as a vendor, but everyone now has 7000 vendors for every single… there's some chart that got really, really packed.

For me, it's trying to figure out the unless. Finish the sentence of, why is it that people are going to have a hard time competing with us, either existing incumbents because they're too big and therefore X, or other startups because we've somehow closed the door behind us? That sounds monopolistic to say, but you do need to figure out how to create a big wake behind you such that it's difficult to do exactly what you're doing.

Christina: Do you think the Seven Powers framework works for startups? I think the startup incumbent, that seems clear, but in the age where there were 9000 SaaS companies every day, and UI can be copied, and all of that.

David: I think Hamilton Helmer in Seven Powers is very helpful for a company of Vanta stage. I think Hamilton would probably be the first to say, in the takeoff phase, it's about finding product-market fit that is a very different thing. And he would say—we just did another episode with him that we're going to release in—you got two mountains to climb as a company and as a founder. The first mountain is product market fit. Naturally, as a founder, you get to be like, oh, I've made it, this is great, I'm exhausted, I want to relax for a bit.

Ben: Everything rolls downhill now. It's all easy.

David: It's all easy.

Christina: When I go to sleep, the company doesn't go to sleep.

David: Right, and that feels amazing. It should feel amazing, but your job is only half done. You got a whole another mountain to climb, which is like, okay, how are you going to build power? How are you going to build durability? How are you going to deal with new entrants and why you're not going to be?

Christina: How can you raise your price 10X all the time?

David: Yeah, exactly.

Christina: Totally.

Ben: It shows up in pricing power.

Christina: Yeah, that's very real.

Ben: It's hard and it's super different for every business. Reading the Seven Powers framework, to your point, will not tell you how to achieve power in your business. You need creativity to come up with the set of raw ideas that could create power in your business. But then, I think it's the framework to help analyze, okay, which one of these is actually doable?

Christina: I was going to say actually, when you've seen people just dive in well, they're reading the book, they're using the framework, they're brainstorming, like what, again? What is the equivalent of using Google's date operators for this?

David: For building power in your business? Oh, man. Gosh, if you knew, you should go back to being an investor.

Christina: Easy questions.

Ben: It's tricky. It's so easy in hindsight to look and say, oh, Netflix has scale economies. But if you're Netflix eight years ago, how do you figure out? If we grow faster than anybody else and then more customers, then we can pave more for any given piece of content and therefore maintain our lead.

David: I'm thinking back to the interview we just recorded with Hamilton and his partner, Chenyi, who's awesome, a total rising star. One of the things that the thrust of what they said, that feels like as good a shortcut to me as any, is making sure you're figuring out how you create more value for your customers, your ecosystem, then you capture, and make that sustainably grow. If you can do that, you'll get power.

Ben: Right. It's not that lock-in comes from doing things that are user hostile, it comes from things that are growing the pie, and grow your value, and the customer's values such that they can't go get that value if they switch to a—

David: Netflix is a beautiful example. The longer a period of time that Netflix exists, the more valuable it is to their customers regardless if anything changes. It's like, oh, okay, something like that. I can't tell you what it is for your business, but if you can figure that out, that's the path's power.

Christina: One last question. I know we're slightly over, so obviously, folks need to drop, you should drop. That creating more value than you're extracting and doing that continuously, you mentioned that when you're talking about building the Acquired community. A top loaded question from Rick. In building that community, what worked, what didn't, what fell flat? Again, I'm going to go back to search operators, but any specifics here?

Ben: Empowering channel leaders was a thing that David asked me if we could do and I was like, I don't know if we should do that. Several ideas, actually, that David asked me, I'm skeptical at first and we try it. Austin Federa leads the digital assets channel. Fifty percent of the value of the Acquired Slack is in the digital assets channel. To people talking about crypto sharing, things that you won't read about for two or three more weeks.

David: Austin runs marketing at Solana and was probably employee 20, something like that.

Ben: Empowering people within your community when they're passionate about something and running with it, I think is the number one experiment that succeeded. I think any experiments that have failed have been things that were overly reliant on you and I to do all the work of creating it and on an ongoing basis because we are not a startup that is scaling with headcount. There are things that just atrophy without us paying attention to them.

David: Us making an episode and releasing on podcast feed and on YouTube, like, that scales.

Ben: Because that thing can [...].

David: As [...] to DMs as the community scales that does that, sadly.

Christina: Excellent. Thank you all so much for coming by entertaining the questions. It's really nice to have you.

David: It's such a joy.

Christina: For folks who are in the San Francisco office, we're all going to stick around for lunch. So please come up for that. Otherwise, for folks who are on Zoom, thank you so much. Happy all hands. Happy Wednesday. See you all on Slack.

Ben: Thanks, Vantans.

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