The AI secondary shares market is giving Beanie Babies economics | Equity Podcast

AI Search to Productivity Agents

• You.com, an AI company, has shifted its focus from AI search to more complex productivity agents and raised $50 million. (3m42s)
• The CEO, Richard Socher, believes that competing with companies like Google on simple questions is not a viable strategy. (4m30s)

You.com's New Approach

• You.com aims to focus on answering multi-step, complex questions that may require light coding and provide transparency by showing its work process. (5m5s)
• UD.com does not have its own large language model (LLM) but uses a system that assigns tasks to other LLMs, such as Claude and ChatGPT, based on their strengths. (6m2s)

UD.com's Multi-LLM System

• UD.com claims that its system, which combines the strengths of multiple LLMs, allows it to perform more complex tasks than any single LLM. (6m56s)

Dub Club: A Marketplace for Sports Betting

• Dub Club is a marketplace that connects amateur sports bettors with "cappers," who are professionals in the gambling industry that provide insights and research to help people win more bets. (8m25s)
• Dubuc Club has a three-strike system to vet cappers on their platform and remove those who provide inadequate advice. (11m28s)

Airbase Acquisition

• Airbase, a corporate spend startup, has been acquired by publicly traded company Pelocity for 325 million dollars. (12m31s)
• Including the cash on Airbase's balance sheet, the total value of the deal is closer to 400 million dollars. (15m37s)

Real Estate Lawsuit and Settlement

• A former real estate reporter discusses a significant lawsuit against the National Association of Realtors. (16m15s)
• The lawsuit led to a settlement where the National Association of Realtors agreed to pay over $400 million in damages and abolish a participation rule requiring side agents to offer compensation to buyer brokers. (16m33s)

Josh Sitzer and Landan

• Josh Sitzer, a plaintiff in the lawsuit, was motivated by frustration as a seller over the 6% commission fee to buyer's agents. (17m2s)
• Sitzer co-founded a company called Landan, which offers flat rates for home tours and making offers, aiming to help home buyers. (17m33s)

Landan's Launch and Impact

• Landan launched in beta recently and is one of the first companies to emerge after the lawsuit settlement. (17m52s)
• The discussion highlights the structural issues in the real estate market, where fees have increased significantly over time, making home buying more expensive. (18m1s)

Landan's Services and Redfin's Response

• Landan offers services such as $49 per home tour and $199 for an offer prep session, with a flat fee option of $1,799 for more comprehensive services. (20m2s)
• Redfin responded to the story, expressing skepticism about the flat fee model based on their past experiences in a competitive housing market. (20m43s)

Redfin's Perspective on Landan

• Redfin considers the company being discussed a "brother-in-arms", but also a small startup. Redfin's public statement about the company suggests concern about the startup's activities. (22m31s)

AI Investment Frenzy

• Venture capitalists (VCs) are demonstrating a strong desire to invest in artificial intelligence (AI) startups. This eagerness has led them to purchase stakes in each other's Special Purpose Vehicles (SPVs) at high prices. SPVs are investment funds created for a specific purpose, in this case, to invest in AI startups on the secondary market. (23m8s)

Access Control and FOMO in AI Investments

• The high demand for AI startup investments has created access control issues, with companies limiting who can buy secondary stakes. To overcome this, VCs are willing to pay significant premiums to invest in SPVs, even if it means paying inflated valuations. This behavior is driven by fear of missing out (FOMO) on potentially lucrative opportunities in the AI sector. (25m13s)

Inflated Valuations in the AI Market

• Investors are bidding high valuations for AI companies in the secondary market, exceeding even rumored valuations for companies like OpenAI. (26m52s)

Risks of Investing in SPVs

• Venture capitalists (VCs) who invest in other VCs' Special Purpose Vehicles (SPVs) at high premiums face a risk because their returns depend on the underlying company's exit valuation, which needs to exceed the premium paid. (27m4s)

AI Bubble Concerns

• The current market resembles a bubble, similar to the Beanie Babies craze, where investors are buying into AI companies at inflated prices, hoping to sell at even higher prices in the future. (28m24s)