Current state of public & private markets, Archegos debacle, US debt issues, wealth tax & more

The episode opens with the usual comic cold open and self-deprecating banter before the hosts settle in. They note the regular cast is present: Friedberg, Sacks calling in from an undisclosed remote location, and Chamath, who says he is "punchy" and high on endorphins after a workout, deflecting a joke about how much money he lost that day.

Chamath reflects on a punishing stretch in the markets, calling the early-March selloff a "ludicrous day" from which things have largely recovered, leaving him doing decently for the year. He says the last 30 days taught him to deal with drawdowns and made him a better person for it. He describes having lost more money than he ever thought he would make, enough to "bail out a small country," watching it evaporate in a day and then come back. These are his characterizations of his own trading.

The hosts turn to retail participation and the surge of SPACs, citing a statistic that roughly 245 to 250 SPACs were raised in the first quarter, on top of about 250 the prior year. They say more SPAC capital was raised in Q1 than in 2020, 2019 and 2018 combined, with the group settling on figures of around 110 billion dollars across close to 298 deals. These numbers are cited on the show.

Chamath adds color on the quality problem: many of these sponsors were questionable, including, in his telling, people who had run companies into the ground or been pushed out over sexual impropriety, yet "any random dog and cat" could raise a SPAC in Q1. He predicts real difficulty on the back end, with deals constantly retraded so that IPOs that should have priced at a given level get discounted 20 to 30 percent, and many side deals cut to get them done. He declines to name specific sponsors to avoid giving them airtime.

Chamath frames the SPAC wave as early innings: these vehicles have two years, roughly a 700-day shot clock, to put money to work, and the group is only about 90 days in. He predicts crazy behavior in the final six months before expirations around November 2022, while the market holds people accountable in the meantime. On his own PIPE discipline, he says they now back off aggressive 2025 projections, want to see 2023 numbers, and price with a margin of safety, which forces sponsors to recut deals repeatedly, citing one that retraded three times and ended 35 to 40 percent below its starting price.

A host says a friend at one of the bulge-bracket banks told him there were about 50 PIPEs in the market last week and they expect only about five to get done, versus a quarter or two earlier when 80 to 100 percent were getting done, often meaningfully oversubscribed. These figures are a secondhand claim relayed on the show.

Chamath says that he and other PIPE investors are now demanding much better terms, so the pressure will fall not on founders and companies but on sponsors, who will have to put up a lot of their own money to get deals done. This, he argues, is where the wheat separates from the chaff, since most sponsors are in it for a quick buck, and the ones who cannot post the money and let a deal die are the "charlatans." A host notes a related deleveraging as funds that bought SPACs in the aftermarket unwind, creating a logjam on the back end. These are their interpretations.

Chamath shares a framework a friend gave him, contrasting "inception-to-date" risk with "year-to-date" risk. A hedge fund, he says, lives in the year-to-date business because compensation is driven by current performance, forcing it to manage short-term volatility through codified, parametric rules: when something falls by set percentages, you sell more, and eventually close the position.

When many hedge funds run year-to-date risk parametrically and inflation fears, rising bond yields and a factor rotation out of tech hit at once, he says, everyone runs for the exits. Others, including Buffett and, he says, his own operation because it has no external LPs, manage inception-to-date risk and can treat these buckets differently. He points to the Archegos blowup that week as an exogenous event that amplifies the forced, irrational year-to-date decisions, driving the market's massive swings. This is his analysis.

Asked about private company valuations, Sacks calls it a very frothy time with levels about the highest he has seen, noting hot seed deals getting done in the high twenties. A host flags Fisker as a public-market example that surprised him, saying it had already fallen twice.

Sacks walks through how seed pricing has changed. He explains that a "cap" on a convertible SAFE note effectively sets the valuation, so where pre-revenue seed deals used to be a 5 to 10 million dollar cap and a bit of revenue might be 15, with the hottest Y Combinator deal at 18 to 20 million, hot pre-revenue seed deals are now going for 27 to 30 million. He says a round is usually a 10 to 20 percent dilution event, roughly 3 to 6 million dollars, and is still called a seed because it is the first money in, even as price levels across seed, A and B have roughly doubled in about a year.

A host says the froth is pushing him, as a private-market investor, to do fewer new deals and instead help his existing portfolio raise capital while valuations are high, shoring up their balance sheets. He says he told his team to go through the portfolio, estimates doing about 30 percent fewer deals, and reports it is working.

Chamath likes the approach. He was trained to invest through the cycle but says he has issues with that, favoring active risk management, especially with one's own capital. He argues the incremental SaaS company may not be great and that a 30-million pre-money stretches reality, whereas Sequoia has shown him the value of doubling down on winners: with finite money, he would rather write a big check into a company he thinks can 10x than spread many seed checks across companies with a 90 percent failure rate at very high prices where he owns little.

Sacks offers a different philosophy: as a VC he is ultimately a price taker, since entrepreneurs can run a process and get competing bids, so his real decision is which deals to be in, not what to pay. He argues that chasing value leads you into mispriced but weaker companies rather than the best ones, and that while vintage pricing affects returns to some degree, being in the right companies matters most.