David Rosenthal: recommendation

Transcript context

…Yup. And boy, it's funny. Not to talk about Rich Barton in every episode now but when you hear him talk and he talks about the name Expedia and the name Zillow, like picking an empty vessel and then you get to fill it with your marketing and you get to fill it with your product and your brand that the value prop to customers, like Square was not a payment word. It’s something that they can choose to fill with whatever they want to be. In the way that Snap is a camera company and we all said, “Oh, Snap is a camera company.” Like, Square is a payments company. Square is a small business company and I think that’s got a lot of power to it. There’s a great interview which Jack, he talks about, and he’s asked sort of like, what is Square? And he’s like, well, there are three things that every business needs. And he says whether you’re Facebook or Twitter or whether you’re a coffee shop, you need access to capital, and capital can be raising money but it can also be sales from your customers, like we were talking about earlier. If you can’t access the capital from the sales you’re making to customers because you’re not going to get for 30-45 days, that's a huge problem. So you need access to capital to build and grow your business. You need to acquire customers and then you need to retain customers and build loyalty. Like what Square has done I think, or at least what Jack would say Square is trying to do, is to help small business, well, businesses of all types, physical businesses do all three of those things better. So drifting toward what would have happened otherwise, let’s talk about access to capital a little bit. This will help us guide a little bit of our criteria for grading this toward the end of the episode will be kind of two-fold. One is always did this IPO allow them to do something that they previously couldn’t do before, like was it a good business decision to IPO. The two components of that are the idea of it and the execution of it. So kind of working backwards from them and thinking about access to capital, after the Starbucks thing, they’re left in this place where they’re near cash flow positive, like that is right on the horizon. They know that when they spend marketing dollars, this very predictable thing happens where they are able to get a return on that marketing spend. So it's really about hey, let’s go get some more capital so we can keep taking advantage of scale, getting closer to cash flow positive and pour some dollars on this business. So then you have this decision of do you do that from the private markets like we did our Series D and we did with our Series E, or do we go to the public markets. This isn’t really talked about enough but if you look at sort of liquidation preference in all these venture rounds and all of that stacking on top of each other, the valuations are a little silly because think about it this way. If you’re a public company and somebody says “I will give you a valuation of $1 billion and I will own X shares that are worth 20 percent of the company”, then they actually own X shares that are worth 20 percent of that company. But if a private investor –…

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