TP2: why VCs panic sell 💸 & unicorns break 🦄 — mark suster — [trading places] 

**Mark Suster** (0:00)
It's investing in the pattern, rather than one occurrence, and it's about relationship building, not about transactions.

**Aman Verjee** (0:10)
And the question really for him, is vertical SaaS dead? Is AI coming to kill it, and are the platforms gonna kill it?

**Dave McClure** (0:16)
I'm not sure that a lot of LPs had that framework for emerging managers, whereas now I think they are also adding, hey, have you figured out how to return capital, not just get good marks? All right, here we are for the second episode of Trading Places. Aman, what are we talking about this week in the news?

**Aman Verjee** (0:59)
Hey, Dave. Well, I think we got some big news from ByteDance, the biggest, baddest secondary on the planet. This is the owner of TikTok. They're doing a tender offer, buying back shares from their employees and early investors from their own balance sheet at a $330 billion valuation.

**Dave McClure** (1:16)
How much is ByteDance making these days in revenue?

**Aman Verjee** (1:18)
Well, they said Q2 was $48 billion in revenue. Just as a comparison, Meta was $47.5 billion in revenue for Q2.

**Dave McClure** (1:28)
Wow. So ByteDance is making more money than Meta?

**Aman Verjee** (1:32)
Yeah, they're generating more revenue than Meta, but they're not quite as profitable. Their profit margins are... They said they made $33 billion in profit in 24, Meta did $62 billion in profit in 24 So they're about half as profitable, but only one-fifth the value.

**Dave McClure** (1:49)
And why is that valuation so much lower than Meta? What's going on there?

**Aman Verjee** (1:54)
That's a good question. Meta is a much... It is, as I said, two X the profit, it's probably three X the MAU, so it's a much bigger and more scalable company with a more diverse set of revenue. ByteDance, almost all of its revenue is from TikTok. And then there's, of course, just the regulatory risk that TikTok has from its US business, where there's current legislation and potential enforcement about banning TikTok or forcing a divestiture or sale before it can continue to operate. So I think that is the largest factor in the discount.

**Dave McClure** (2:22)
But that's gone back and forth, right? Wasn't ByteDance supposed to have been banned even six months ago, and then it got an extension, and then Trump seems to be now more in the ByteDance camp? And what's going on there? Are we going to ban TikTok or not?

**Aman Verjee** (2:37)
I don't know. The history there is Trump banned it in his first term, tried to ban it in his first term, Congress said no, then Congress banned it, and Biden said yes.
And then Trump said yes. And then Trump said no, wait, I'm going to give it 90 days. No, we're going to pass 90 days.

**Dave McClure** (2:53)
Yeah, we're way past 90 days.

**Aman Verjee** (2:55)
We're way past 90 days. Only, by the way, if you had to guess how much of TikTok's revenue comes from... Let's start with users. What percent of TikTok's users do you think are American? What percent of the global user base?

**Dave McClure** (3:05)
I would say, you know, 10, 20 percent of their user base is US.?

**Aman Verjee** (3:10)
Yeah, it is their biggest market, 136 million users, but that's only 13 percent of their total user base. I kind of like the rule at 330, even if you just had to value the non-U.S. properties, I think that's still a bold case word. And I don't know what's gonna happen in the US., but I will tell you, my 14-year-old daughter loves TikTok and is very thankful for the current... She hates the president and everything else, but she's like, this is the one thing he did. So I'm gonna guess politically that it's not a great move politically to ban it, and that they'll find some way to let the thing operate in the US.

**Dave McClure** (3:43)
But what I think is amazing is, if there were not any legislative controversy or concerns about this company, it might be valued at like three times, you know, two or three times where it is right now. You could argue ByteDance is a trillion-dollar company that's only valued at 330 billion because of all the, I guess, the dark clouds that might be hanging over it. And if those dark clouds ever got resolved, boy, ByteDance could be worth a lot of money. All right, well, pretty interesting. What's on the IPO calendar coming up?

**Aman Verjee** (4:16)
Well, do you want to talk about Klarna? That's going to be one of our, at the FinTech company that is coming on and come again. And by the time this pod launches, it will be in the public markets. And they've had quite a well ride, Dave. Can you share their finding?