Rec Room Part II (with CEO Nick Fajt)

**David Rosenthal** (0:00)
Ah, okay, good to know. So we should not ship tomorrow then.

**Nick Fajt** (0:04)
Don't do it tomorrow. Please wait until Wednesday. Yeah.

**David Rosenthal** (0:07)
Good day. Glad we asked.

**Nick Fajt** (0:09)
I'm going to send you the press release. So you just, it has the embargo at the top.

**Ben Gilbert** (0:23)
Welcome to season eight, episode four of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I am the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

**David Rosenthal** (0:38)
And I'm David Rosenthal, and I am an angel investor based in San Francisco.

**Ben Gilbert** (0:43)
And we are your hosts. In 2018, we did an episode on the early stage Seattle startup Rec Room.
Founder and CEO Nick Fajt joined us at the time to talk about their seed round that they had raised from Sequoia. At that time, they were a popular app in the slow to develop VR landscape with a couple hundred thousand users and zero dollars in revenue. Earlier today, Rec Room announced in the Wall Street Journal that they had raised $100 million at a $1.25 billion valuation from existing investors Sequoia and Index Ventures. They are now a product that spans across many platforms from, of course, virtual reality, but also to Xbox, PlayStation, and iOS. They have had astonishing growth numbers over the last year where they grew revenue 660% and now have over 15 million lifetime users, two million of which are creators on the platform.

**David Rosenthal** (1:40)
Ooh, and we knew them when.

**Ben Gilbert** (1:44)
Indeed. The background of all of this is that 2020 was a heck of a year for the entire metaverse category. You have Epic and Fortnite's growth. They're currently rumored to be raising at a $28 billion valuation. And of course, Roblox's blockbuster IPO that they pulled last December because there was too much demand and instead raised private capital and then did their direct listing this month and are now valued at $40 billion.

**David Rosenthal** (2:12)
The price was too high.

**Ben Gilbert** (2:14)
It was too high. You could say it's been a transformative year for Rec Room and the entire industry, to say the least. So today we are back to tell part two of the Rec Room story. And again, with the best person in the world to join us, Nick Fajt. So Nick, welcome back to Acquired.

**Nick Fajt** (2:33)
Thanks for having me back. I'm excited to dive back in.

**Ben Gilbert** (2:36)
This is great.

**David Rosenthal** (2:36)
I think you are the first repeat guest on the main show.

**Nick Fajt** (2:41)
Wow. All right. Cool.

**David Rosenthal** (2:43)
Love it.

**Ben Gilbert** (2:44)
Yeah. And over so many different stages of your company. I mean, the premise of part one was how to raise your seed round with this guy we know who's raised it from Sequoia. And he's got this cool company and who knows about this very speculative space. And here you are, like a mature grown up company back to tell all of us how to do it.

**Nick Fajt** (3:01)
And it was just a straight line from those two points. There was no hardship in between, yes.

**Ben Gilbert** (3:07)
As it always is, especially in consumer entertainment, I'm sure. Well, listeners, are you an Acquired Slack member? If not, what have you been waiting for? It is a spectacular community discussing, of course, recent Acquired episodes. But more importantly, it's just a genuine and smart group of people having a thoughtful, nuanced, and respectful discussion about the tech and investing news of the day. Fun fact that I just learned is one listener recently hired three other smart members of the Acquired community this month into his company directly from the Slack community. You can join at acquired.fm slash Slack. This is a great time to tell you about one of our very favorite companies, Crusoe.

**David Rosenthal** (3:49)
So Crusoe, as listeners know by now, is a clean compute cloud provider specifically built for AI workloads. NVIDIA is one of their major partners, and literally Crusoe's data centers are nothing but racks and racks of A100s and H100s. And because Crusoe's cloud is purpose built for AI and run on wasted, stranded, or clean energy, they can provide significantly better performance per dollar than traditional cloud providers.

**Ben Gilbert** (4:15)
Yes, we talked about that on our ACQ2 episode with Crusoe CEO Chase Lockmiller.

**David Rosenthal** (4:21)
The other element that makes Crusoe special is the environmental angle. Crusoe, of course, locates their data centers at stranded energy sites. So think oil flares, wind farms that can't use all the energy they generate, etc. And uses that power that would otherwise be wasted to run your AI workloads instead.