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With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Evan Meagher, VP of Finance at Logikcull, a powerful DIY Legal platform, talks about having a remote workforce, 2021 business predictions, bitcoin, and more

Posted on: 03/03/2021

Evan Meagher

Evan Meagher

VP of Finance - Logikcull

Evan Meagher of Logikcull - Podcast Summary

Evan Meagher Evan Meagher, VP of Finance at Logikcull, a powerful DIY Legal platform, talks about having a remote workforce, 2021 business predictions, bitcoin, and more.

Evan Meagher of Logikcull - Podcast Transcript

Scott: Hey, it’s Scott Orn at Kruze Consulting and welcome to another episode of Founders and Friends. And before we start the podcast, let’s give a quick shout out to Rippling. Rippling is the new cool payroll tool that we see a lot of startups using. Rippling is great for your traditional HR and payroll. They integrate very nicely, but guess what? They did another thing, they integrate into your IT infrastructure. They make it really easy for when you hire someone to spin up all the web services and their computer, which sounds kind of like not a huge deal, but actually we did this study at Kruze, we spend $420 on average just getting a new employee’s computer up and running and their web servers up and running. It’s actually a really big deal. It saves a lot of money and the dogs are eating the dog food. We see a lot of startups coming in to Kruze now using Rippling. Please check out Rippling. Great service. We love it. I think we have a podcast with Parker Conrad. You can hear it from his own words, but we’re seeing them take market share so shout out to Rippling. And now to another awesome podcast at Kruze Consulting’s Founders and Friends. Thanks.
Singer: (singing). It’s Kruze Consulting. Founders and Friends with your host, Scotty Orn.
Scott: Welcome to Founders and Friends podcast. This is Scott Orn at Kruze Consulting and my very special guest today, Evan Meagher from Logikcull. Welcome Evan.
Evan: Hey, it is good to be here. I think this is my sixth time on the podcast.
Scott: Oh, maybe yeah. Or five maybe.
Evan: Five or six, because we did…
Scott: We did the CFO one PPE.
Evan: We were sitting round table on the PPE. Five or six and you did get my name right the first time this time.
Scott: Yeah, and you’re also, people don’t know this. Evan actually sings the intro song for the Kruze Consulting Founders and Friends podcast, which is unbelievable.
Evan: That’s it.
Scott: It’s actually one of my favorite things in life and I get so many comments, positive comments. People love it.
Evan: You just made my day.
Scott: You are the man.
Evan: You made my day.
Scott: That was amazing. I think what it cost? Five bottles of booze for your man mate?
Evan: It was 450 bucks. Yeah. It was four bottles of whiskey and one of a tequila.
Scott: That way the rest of the next practice session was going to be off the hook.
Evan: Exactly, exactly.
Scott: Hey, we thought we always do this kind of end of the year. It’s the end of 2020 right now, going 2021. This will probably be published the first, second week of 2021.
Evan: Right on.
Scott: And we got a couple, some topics just broad ranging topics. The first one was remote work and what’s going to happen in 2021 with everyone. At Kruze, we’ve been remote for a long time, but we still had the San Francisco office. But I think all five of the other people in San Francisco, there’s seven total, five left to other states.
Evan: Wow.
Scott: And that’s us, that’s our reality. We hire nationally. Been doing it for years. Logikcull, you want to give an update on Logikcull, your company? And then let’s talk about what we think is going to happen late 2021.
Evan: Yeah. Well, so let’s say, well, we were already 70% remote. The company was founded on the East Coast in Washington, DC. We were services provider, a professional services organization. And then, when we converted to a software company and said we’re going to be a SaaS platform, all the engineers were, so we relocated the headquarters to San Francisco and all the engineers were like, so I could sell my six bedrooms in Silver Springs, Maryland and get a studio in San Francisco. I don’t think my wife and three kids would like that.
Scott: Yeah, hard to recruit. I actually remember talking to you about someone you were trying to recruit and you couldn’t get them over the hump because it’s just too expensive.
Evan: Fortunately, so our engineering team has been basically a 100% remote. But all SG and A and go to market for the most part was still headquartered in SF. We actually closed our San Francisco office before the shelter in place. We were a week or two ahead of London Breed. And so, we closed it on, I think the fifth of March. And then within three weeks, our CEO who already kind of felt like one of our secret weapons in recruiting was like, “Hey, we’ll pull you wherever, Canada, UK, New Jersey, whatever.” And so, he was just like, “Yeah, we’re fully remote forever. Why would we ever pay a 100,000 for a month, for an office?” Honestly, that’s one of my big predictions for 2021 is man, the bid asks spread on San Francisco commercial real estate right now is vast. And I just think a lot of the startups, the big companies will go back to offices on hybrid or floating, hotel kind of what they call it basis. But that’s my son in the background. World cameo. There he is. Hello son. But small companies are going to be like, “Rent? Why would I pay rent?” COVID and 2020 has shown this work. This whole Zoom works, Hangouts work, Squadcast, they work.
Scott: Well it’s not just the corporate rent, it’s the individuals who work at a company’s rent. I think that’s actually the bigger pull. I have the same prediction for you, by the way, we’re aligned on this one, that basically people are not going to come back. The company would say, “Come back.” People are not going to come back. And you’re going to have basically a choice, whether you want to recruit half a new team or if you’re going to accommodate people. And I think people are going to accommodate. And the reason is you can, the Kruze team, we had one person move to Texas, one person move to Virginia, two people move to New York. One other person I’m forgetting where they went to. But everyone out, even New York is slightly cheaper than San Francisco, which I can’t believe I’m even saying, probably not for long, but it’s also an opportunity for people to have different life experiences and try different things. And especially if you don’t have a kid, you guys are doing a great job. You should let the audience know where you’re recording from right now.
Evan: Oh sure. Well I am in New Orleans, Louisiana. My wife and I, so we had a child in June, our first. Most people don’t wait until age 41 to have a child, but some of us are late bloomers. And then we kind of were unable, he still hasn’t met his grandparents. He’s only met one relative, my sister-in-law who lives nearby. Because of COVID, my parents haven’t been able to travel. Neither of my wife’s parents been able to travel. We were basically kind of driving across the country and spend a month. I’m not going to do a week with a six-month-old in a car. Forget that, that’s impossible because you can only really drive about five hours a day with a six-month-old baby, four months old when we first left. We did a month in Boulder. That was a three-day drive, five hours a day from San Fran. And then a month in Austin, Texas. We are now in New Orleans. And then we’re trying to figure out our next move. I think we might, we were going to try to continue to the East Coast, I don’t think it’s going to happen. But anyway, it’s been interesting seeing different states, frankly, deal with COVID differently. But in the meantime, just getting back to your topic, the remote thing works at all but the largest companies. The FAANG companies that pay the most anyway, Facebook, Amazon, Netflix, whatever, Google. Everyone else is, every secretly after a conference, I’ll just chat with someone and they’ll be like, “Yeah, we know that we’re going to ask people to come back but it’s one of those things. If you turn on the lights, you’re going to see all the cockroaches in the kitchen, you’re going to find out that 40% of your workforce now lives in Sun Valley or Vail or Hawaii.” Or, “Oh, I don’t have to screw around on BART and pay 2,800 for a crappy studio.” And so realistically, all of our, as I just said to an employee an hour ago, “Dude, we have no assets other than our checking account.” The only thing we have is people. As much as I think CFOs, the shortsighted ones, are going to be grumpy and say, “Ah, we’re paying San Francisco wages for someone who moved to Spokane and they’re just pocketing that difference.” Well, who cares? For one time, it’s like, who cares?
Scott: I have a video on YouTube on that exact topic because I’ve seen people talking about how they got to rearrange this or adjust this down and I’m just like, you’re just asking for trouble. You’re asking for pissed off people.
Evan: Yeah. In an industry where all that matters is your talent.
Scott: It doesn’t matter. Yeah. And the cost of losing one of those people will probably change, will probably suck up the whole benefit you get from reducing people’s salaries slightly. It’s just a totally bad idea. And I think I got a little bit of flack on YouTube. Some people commented saying this was wrong or you’re not very smart or things like that. First of all, YouTube commenters.
Evan: I’m sure that you were called multiple ethnic slurs that do not [inaudible] within 10 minutes. Whatever.
Scott: It’s the reality, you just don’t want to piss people off. It’s not worth it.
Evan: Yeah. There was a good discussion actually on BAO, operators guild that we’re both part members of, and one person who’s smart and I respect, I think they’re thinking about this a little bit, maybe a little bit too cerebrally and a little bit too much. Not a criticism, but more as like a, what I would call the lawyerly thinking of parade of imaginary horribles. In this parade of imaginary horribles, well, what if you have someone who goes from San Francisco and takes a San Francisco salary with them and goes to Biloxi, Mississippi and then you hire someone else in that exact role, customer service rep or whatever in Biloxi and that person is of a protected class and you’re going to give them a lower salary than someone who let’s say is a white male or whatever. And yeah, well that would be a problem, but here’s realistically what’s going to happen. Most companies, no matter how fast they’re growing, they’re not growing so quickly that they’re going to immediately have to hire so many people in so many different locales that they’re going to have an apple to apples comparison. Number two, basically what you say to those people when they move to a lower cost area, it’s like, “Okay, great. We’re not going to reduce your comps. Just know that if you were expecting a three to 5% bump every year, might be a little while because we’re going to get you back into band eventually.” Anyway, I just I don’t think it’s as big an issue.
Scott: I think that too. Write a policy about it. I don’t know. I think it’s crazy. Yeah. It’s going to be really interesting though. Because I live in San Francisco still. I like it here. I’m seeing the housing prices come down pretty dramatically. We decided not to buy, we’re going to wait another year here, hopefully knock on wood we can afford at some point.
Evan: That’d be great.
Scott: But I’m not going to buy before, all the people who want to sell a house right now, still think everything’s going to come back to normal. And I know it’s not.
Evan: Yeah, it’s not. Yeah.
Scott: I still remember talking to a real estate agent six months ago when COVID first hit. And I was like, “You don’t understand, people are moving out of the city like crazy. You don’t understand.” Our real estate agent was not in San Francisco so he didn’t really understand it. And of course, anyone who’s selling their house doesn’t want to live out here.
Evan: Doesn’t want to hear it. Yeah, exactly.
Scott: I think it’s going to be really good for society. First of all, not everyone’s going to be crammed into the city I love and making my life stressful and crazy and there’s just going to be more opportunities in other places. It’s going to be really cool.
Evan: I agree. This is a finance and business podcast, but societally, places are not made great when people have to be there.
Scott: Yeah, that’s a great point.
Evan: So many people that live in New York only because they have to, whereas San Francisco, there’s all these people who are just, when tech took over the world, there’s all these people that would never have lived in San Francisco 30 years ago because it’s San Francisco was for artists and the LGBT community and eccentrics and Bohemians and artists and musicians. And yeah, those people can’t afford to live in San Francisco. And so, you have all these people who do not match any of those and are not really in with the culture. A lot of people look like me, they’re here only because, well, that’s where Google is going to pay me 300K a year. That’s good for your career, but it sucks for the culture of the city. Gentrifies the hell out of it. And also, those people aren’t like stoked. I always had this weird thing with another executive I worked with who’s since moved back to the Midwest and all he would do is complain about San Francisco. Complain about the cleanliness. He would complain about the homeless population. We butted heads on a lot of things, but it’s like, you know how many people would kill to live here? This place the coolest city in the world and you’re just crapping on it all the time. I think it’s going to be better for San Francisco to try it out. I love San Francisco but I don’t want to be there.
Scott: I think the other thing is, people who have moved don’t know this, but we have a young family, when I go to the park, it’s all young families. All young families. Even a lot of the young single people have left, but the people with families, with kids in school aren’t leaving or haven’t left as much, I would say. And is becoming pretty rapidly, affordable again for young families. Used to have to move to the burbs. Especially if private school wasn’t an option or there’s a crazy lottery in San Francisco at schools. If you don’t know this, that makes it really hard to get into a school that you live by. But I think that’s going to change, which is pretty cool. Okay. Let’s go for topic number two, PPP, was that a success or not? What do you think?
Evan: Yeah, I guess I try to keep my politics out of this podcast. We got a good thing going here, Scott. I don’t want to screw it up by talking politics, but put it this way. You have a largely dysfunctional political situation in the United States right now with two sides that are so far apart. The fact that they got anything done at all is frankly, almost a pleasant surprise. Our efforts pale in comparison to what other countries have done. But the fact that anything got done at all, probably pretty impressive. And ultimately as much as you know that there’s going to be all sorts of stories. And there already were when Shake Shack, a public company takes $10 million or whatever. And so invariably there will be fraud and embezzlement and the thing is that’s going to happen when you spin up a trillion dollar loan program from scratch in 90 days. That’s how it works, not even 90 days, 60 days, 45 days. And those will get high profile press because nothing sells papers and generates clicks like fraud and malfeasance and embezzlement from the government’s teat. But the truth is, I look at the people in our boat and the people on the operators guild, all of whom are in cash consuming companies that employ a material percentage of high income workers around the United States, and we all would have laid people off. Not all, but the vast majority would have. It worked. And yes, would it theoretically have been better? Does it denote a bit of a corporations are our people and maybe more important than people that unlike other countries, we didn’t just like give American people money. We had to funnel a lot of it through businesses. Yeah. But I describe the world as it is not as I would like to be. And number two, it ultimately it worked. People have been laid off. It’s just not set up like other countries to just cut checks directly to people. We don’t have that legal mechanism, that monetary policy mechanism. This was kind of the best they could do on short notice. It worked.
Scott: I think it did too. We have the companies that raise like $50 million and huge valuations are what captures the headlines in the venture ecosystem. But there’s a lot of companies that are two to five million raised and employing 20 to 30 people. And this stabilized a lot of those companies. And we have 350 clients right now, probably 200 of those took PPP money. And I think pretty broadly, it worked really well. And I can tell you, there’s no fraud in those companies. Now that’s 200 and they’ve a very professional accounting firm.
Evan: Of course. The best.
Scott: But, so there’s definitely some frauds in sketchy places. But I think it worked. And it was a very stressful time. Actually, it was the least fun part of my career probably ever. And I worked in like tech M and A in 1999.
Evan: Did you? Were you a robbie? Where were you?
Scott: Yeah.
Evan: Oh, no kidding.
Scott: 99. 99, 2000.
Evan: I did not know.
Scott: That’s when I started my career so I didn’t know better, but that was very difficult. And this was rivaled that. It was incredibly intense, but everyone got it done. I was actually emailing with one of our founders today. And he was like, “Oh yeah,” he’s like, “actually the forgiveness thing seems to be going pretty well.” And I was like, “Yeah, because the accountants and the banks have time now.” That was probably my one thing. There’re so many things were changing so rapidly in March and April. It was really hard to give good advice, but that’s not really an issue now. And everything’s pretty thought out and it’s easy to get your forgiveness application in if you followed all the rules. And now there’s just the day we’re taping today is December 28th. The new bill just got signed, I think late last night. There’s going to be PPP too, basically for companies that have a 25% reduction in revenue. But we don’t know the rules yet. It’s going to take another week for the rules that come out for that. But even that I respect. There’re some companies that took it worse than the others. Let’s help people preserve their lives and their jobs and their savings and all these things they’ve worked really hard for. I think it was a win.
Evan: Yeah. I agree. Things that we didn’t do that I feel like we should have done as a society is pay people to not go to restaurants. Pay restaurants to stay closed. Those are the biggest factors it seems are our meals. But we didn’t do that of course. Pay bars to stay closed. And it’s been interesting, on this magical mystery tour across the United States, it’s been interesting seeing which states are not taking it seriously in which are. But that’s what we really should have done. The states that are not taking it seriously, it would have been better if we had just paid those bars and restaurants to remain closed and shut down. But it is what it is. This is not a podcast about epidemiology.
Scott: Okay. That one was a win. Yes. We both agree. A number three topic, is there anything else you want to cover besides before you go?
Evan: I was just going to say number one, I did not know that you were at JP Morgan during the go-go late nineties. That’s interesting.
Scott: Well I wasn’t, I was at Hambrecht and Quist, which is one of the tech boutiques.
Evan: They got acquired.
Scott: We were acquired by Chase JP Morgan. I did 1999. Started work as a fresh-faced young man, 22 years old in August 1st. And I remember the summer. The summer of 2000, I had three, maybe five days off. That includes weekends. I had five days where I didn’t work that whole summer. It was miserable. Because that was, the market was still really high so everyone was still doing M and A and it was crazy. But hey, I got three years of experience in one year. It’s a personal cost there. Things didn’t go my way in a relationship and some other bad stuff. But hey, I got a lot of knowledge I was able to pass on to people during this crisis.
Evan: There you go. I have those memories as well.
Scott: I’ve been working for, well, I did two years of business school. Basically, been working for 21 years now, which is mind blowing to me. Crazy.
Evan: That’s crazy. Yeah. The other thing I was just going to say is that I did not realize how heavy a toll the PPP process took on you, because you always maintain such a positive disposition.
Scott: Thanks, buddy. Appreciate it.
Evan: It’s true.
Scott: I definitely try to have a positive outlook on life. Yeah, that was tough. It was nothing like I’ve ever seen before. Because we have a lot of clients and everyone needed help and it wasn’t just the PP thing, but everyone was thinking about or restructuring their company.
Evan: Of course.
Scott: It was nuts. And just the stress of this killer disease out there and I have asthma. Somebody who can get it. Do you remember, we didn’t really know how contagious this thing was or how to stop it.
Evan: GDP contracted by 32% quarter over quarter.
Scott: Crazy.
Evan: And as I pointed out, I don’t think the GDP of Hiroshima contracted by 32% in Q2 of 1945. I’m dead serious. I don’t think it did, Q3.
Scott: It was bad. It was bad.
Evan: Bananas.
Scott: I’ll never forget, it was April, second or third week in April, everyone was running around with their heads cut off because a lot of people, VCs are telling their portfolio companies to have three years of cash and all this kind of stuff. And it was just nuts. And then I started seeing actually Andreessen Horowitz led two series A’s and companies that became our clients. These were new companies. This was deals done after COVID. And I was like, oh. The good VCs are back to fishing. They smell opportunity. And that was the moment actually, when my stress level went way down, because then I was like you know what? The good companies are going to get funded and it’s going to be all right. And the venture capitalists know opportunity and they’re going to put money to work. And so, after that, I saw those two and we were very fortunate to get them as clients because they’re pretty big cool companies. I was like, oh, the world’s going to be okay. Now we have this crazy unique view, only the venture capitalists know before us and the founders, but I could extrapolate across the rest of the portfolio, knew what was going to happen.
Evan: Yeah, you do, you guys do have some good insider information.
Scott: Yeah, it’s good.
Evan: You have your finger really on the pulse of the Bay. That’s pretty fascinating.
Scott: Yeah. It’s nice.
Evan: Yeah. You should find a way to, I know you’ve worked on stuff, but in a not insider trading way, what are the ways that you could, because there’s value just in your knowledge and. Obviously you already do some things there, but it’s an interesting asset that you guys have. It’s just cool.
Scott: Yeah. It’s an asset that helps a lot of companies. We can give good advice because we see what’s happening other places at all.
Evan: Right on. For sure.
Scott: And those two companies that got funded by Andreessen Horowitz, but what we could tell, I was telling other companies, that had the credentials to raise more money. I was like, they’re going to be writing checks. VCs are going to write checks.
Evan: Honestly, this is a bit of a tangent, but I will just say when we did our podcast in the early days of VP, or as I call it the holy shit podcast, we’re like, what’s going on? With a CFO, it’s kind of turntable. I said, which I stole directly from one of our VCs. It was like, 2020 is a pass-fail year for startups.
Scott: That’s a good saying, I like that.
Evan: And if you pass, honestly, everybody deserves a gold medal this year. If you survived this year, not just as a startup, any year you survive as a startup is a gold medal year to begin with. Running a startup is hard. But especially 2020. And then just as a human being, if you just Google the Ant-Man 2020 meme, I don’t know if you’ve seen it, but it’s like, it’s the scene from Ant-Man where they just keep cutting back and forth from Michael Pena to Paul Rudd where, he’s catching Paul Rudd up on what happened. And it’s like, “Yeah. And then there were all these riots and then murder hornets and then some do some dude in China ate a bat so I don’t have a job.” And it just goes, but it goes on for, I’m not joking, 40 pages. And you’re just and there’s stuff that happened that in any other year would have been the biggest news story ever. And you don’t even remember it because I happened in June. Because that’s the year it’s been.
Scott: I think we’re definitely done.
Evan: Anyone listening to this, if you made it through 2020, I don’t care. You get a gold medal, you get a gold medal. Everybody gets a gold medal.
Scott: Yeah, that’s a good way of saying it. I like it. Hey, it’s Scott Orn at Kruze Consulting. And before get back to the podcast, quick shout out to ChartHop. ChartHop is one of my favorite new SaaS tools on the market. And basically, what ChartHop does is it puts your org chart in the cloud. And I always like to say, it brings transparency to your organization. And so, everyone in your organization can see who they report to. They can see the full org chart of the company and how their group relates to other groups. It also has a lot of information on the individuals in the company. And so, you can click on the ChartHop profile and just get where people live, their experience, Slack handles, all this kind of stuff. And it’s just a really great tool. The other thing is, ChartHop has started doing some cool stuff around compensation and budgeting planning. And so, you can actually start seeing what the cost structure of the company look like during certain kind of scenarios. I’m loving ChartHop. Check it out, charthop.com. We use it at Kruze. Really like it and I can’t recommend it enough. All right. Back to the podcast. Okay. We were going to call the next topic goals, but I also want to do fun predictions. I’m going to say my first fun prediction. By the end of 2021, these are business predictions. Disney+ will have more subscribers than Netflix. Put it on a piece of paper right now. It’s going to happen.
Evan: Interesting.
Scott: I think it’s going to be pretty huge. I’m finding I watch Disney+ a lot. I have a kid, but I watch Disney+ a lot more for even adult stuff. We watched that Soul movie on Christmas. There’s a bunch of other good stuff. There’s a ton of Star Wars stuff going. The Mandalorian is my favorite show right now. That’s my first prediction. Do you have anything? I’m springing this on you.
Evan: You know what? I think there’s actually who controls the content, controls the universe. And I think Disney just has all the good content. I want to take the other side of that trade, a $1 bet, just because because I’m all about that action. But yeah, I think actually, I believe you, I believe your thesis. I’ll do a related one. The CBS All Access streaming service, the premium, that will have fewer subscribers then Founders and Friends. That no one will adopt. I’m the short side of the trade. And so anyway, okay. I’ll buy that.
Scott: I keep trying to watch Diego the Explorer for my kid on Apple TV. And it keeps trying to subscribe to that CBS thing. It’s I don’t think people care about that.
Evan: Actually. This is horrible. You edit this part out so that I’m not smeared, but I actually signed up for a free trial just because I’m big into post-apocalyptic stuff and the new Stand. Stephen King’s The Stand. I wanted to check it out.
Scott: Is it good?
Evan: Good cast. It’s badly cut. I only know it, they do so many flash forwards you can’t follow the plot. And I have read the book twice, whatever. Only I can follow the plot because I read it recently.
Scott: Read the book.
Evan: Anyway, it’s bad.
Scott: Okay my next prediction is for those who don’t know, Bessemer has a cloud software index, which we all should have bought this index five years ago, six years ago. It’s now up 1,100%, well 11x basically. And it’s got Shopify, I’m checking it out right now. It’s up 11, about 1,150. It’s destroying the NASDAQ. It’s got PayPal, Adobe, Salesforce, Shopify, ServiceNow, Zoom, Square, Atlassian, Workday, Twilio, CrowdStrike. There’s so many of these companies, I’m just looking at the average enterprise value divided by annualized revenue. It’s 22x.
Evan: That’s insane.
Scott: Right now. That’s a revenue multiple. That’s not a profit multiple.
Evan: It’s not EBITA.
Scott: Now the growth rate is 38% on average, which is really good. And the median is 18x and the median growth rate is 27%. Now again, these companies have the average gross margin is 70%. These are very profitable. Shared cashflow like crazy companies. I’m going to say this is going to take a 30% haircut. The best way at the end of 2021. By the way, I’m long tons of these stocks, the classic you buy what you use. And I used them and I use Shopify. But it’s been a great year returns wise, but I think this is going to come down I would say 30%. If we look at this next year, just know from the 1,150 right now, is there a number, let me just click this real fast. 2,648, I think that’s going to be call it 2,000, call it about 1,800. I think there’s going to be a correction. It’s too, too hot.
Evan: Yeah. It’s too rich.
Scott: It feels like 1999 again, unfortunately. Because I don’t want to go through that again, but I think it does feel like that.
Evan: I’ve been in it for six years now. But the thing is, weighing machine in the longterm, voting machine in the short term. Right. I’m with you. I like that prediction.
Scott: I highly encourage people to Google this index and look at it and kudos the Bessemer. They did a heck of a job putting this together.
Evan: Yeah. I don’t even know. Can I share my screen?
Scott: We don’t have a screen sharing on Squadcast.
Evan: Whatever.
Scott: Do you have another prediction or do you need me?
Evan: I do. I’ll do one. Well, we already did the one. I put it into the chat. I don’t think that’s going to work, but it’s the index is in the chat if that’s helpful.
Scott: People aren’t going to see that unfortunately.
Evan: Yeah, that’s what I thought. Google BVP NASDAQ index and it will come right up. We already did my prediction that the only companies, CFOs, CEOs who try to enforce you must return to San Francisco, they’re going to find out 40% of their workforce no longer works there. And the only people who are actually going to reduce salaries will be the people who are the top of the market payers anyway, the FAANG companies. And maybe the other big companies. The other one, other than that, Facebook isn’t going to say, “Hey, you moved to Spokane. We’re going to cut your comp by 20%. And that’s still higher than what you would make.” And people are going to say, “Rrrr,” because they have quarterly targets to hit because they’re public. Their investors are, they’re always going to demand that. All the other small companies are just going to be like, “Okay, one time, take your New York, San Francisco salary to Austin, Texas and you’re fine.” Financially though, continuing we already did that one, but I just want to put a fine point on it. Continuing your stock market valuation, I think you will continue to see a lot of that kind of SaaS cloud index has been driven by the last 10 years of investors falling in love with the predictability and understandability of SaaS, traditional SaaS subscription businesses. Paid upfront, 98% recurring revenue, net negative revenue churn. All the good things. But increasingly, I think you will see high valuations placed on usage-based revenue.
Scott: Interesting.
Evan: Which five to six years ago you, there was not. And by the way, Logikcull does a big portion of its revenue in usage base, because that’s how our customers want to buy. We’ve had this conversation on a podcast before.
Scott: Yeah, I love it.
Evan: How to sell the customers something they want to buy.
Scott: Pay for what you get.
Evan: Exactly.
Scott: Pay what you use.
Evan: Pay as you go, I think will be the new, I don’t know, I don’t want to say dominant paradigm, but it will achieve parity in investors’ eyes on Wall Street and on Sand Hill Road. And five, six years ago, that was not the case. When Twilio, one of our advisors, the former CFO of Twilio. And he was like, “Man, we were the first ones out there really doing usage-based revenue.” And fortunately, they were there to evangelize and he basically said, “Look, there’s always going to be some segment of Wall Street that they’re just going to beat you up because you don’t look enough like Salesforce or you don’t look enough like subscription business X, NetSuite. Stuff that’s always on, you do not churn and they’re just going to beat you up so you just don’t talk to those investors. You got to get people talk to investors who get it and who understand usage.” My two-fold prediction is number one, there will be, an OpenView, one of our investors has done a great in their capital markets write up on how usage base revenue was very much in vogue. I think you will continue to see when there is a good pricing market fit, that is to say like in legal e-discovery tools, it’s not something that our usage is not consumed in a second like Twilio that’s an API thing. But it’s also not, the usage is not like an HRIS or ERP or CRM where it’s always on. Or whatever security monitoring any, we’re kind of in between, project based. You will continue to see investors value that as highly as subscription revenue, if all numbers must go up and to the right. If they don’t, even your predictability is out the window and I don’t have confidence that you’re 50 million in revenue today is going to be 85 next year, then you’re not going to get those rich multiples.
Scott: I think that’s a really great prediction and a really great, could you mind sending me the OpenView thing? Because I want to look at that. That’s super interesting. We are kind of usage based. We have very good barometers of what a company basically needs to pay and it does work. We know the complexity at certain head count and dollar amounts and expense amounts and things like that. We basically built that. I think that’s really cool. Okay, my prediction, number five prediction is because you have two, I have two. There’s an index called the S&P/Case-Shiller San Francisco Home Price index. I think, and this index right now is that 278 as of September. We don’t have, this is why the Federal Reserve does this. I think this will go down, I’d say 20%. I think it’s going to be loosely about 230. Yeah, 235 end December 2021.
Evan: Got it. I believe that. I would even believe more than twenty. Geez, I could see even more than 20. But I’d say 20 makes sense. Is there a comparable for commercial real estate?
Scott: Oh, good idea.
Evan: That’s what I want my other prediction to be.
Scott: Could be San Francisco or just all commercial real estate?
Evan: San Francisco. I would like to short that to 50% is my price target. I think that’ll be a 50. We were talking earlier the bid ask spread on commercial real estate in San Francisco right now, it’s collateralized mortgage backed obligations in September of 2008. It’s no one wants to touch these things. They’re absolute toxic assets. Again, pay as you go. It’s the same thing. People only want to pay for what they use when all their employees move away, they don’t want to be locked into, a lease is basically a subscription. They don’t want to be locked into it.
Scott: I know, usage based. That’s exactly it. I love it. I love it. Okay. I cannot find, San Francisco does have these stats, but they haven’t updated 2020 yet.
Evan: Publish them tend to be commercial real estate agents who don’t want to report that their business is in the tank. I get it.
Scott: I don’t have a good number for this. But we can look on the next one. There’s a CPI for greens. Let’s see. As we’re talking here, I don’t really see anything. Okay. But I agree with you. CVRE has something. Let’s see. No, they don’t have any there.
Evan: They may have it, but they may not want to share it.
Scott: Yeah. Another good prediction. I’m trying to think of something stock market related.
Evan: I think you will have a tepid recovery as the Biden administration is hamstrung by a split Congress. I think it will be difficult or if not impossible, depending on how the Georgia runoffs go, to inject the necessary amount of capital to restart economic growth in a meaningful way. I would not be up super bull on the broader stock market. I think tech will probably continue to do pretty well.
Scott: I’ve been trying to get my head around that and tax rates, because I feel like tax rates need to go up because there’s been so much deficit spending. Oh, you know what we should do on tax. We should do Bitcoin. What we think the price of Bitcoin will be.
Evan: Oh man.
Scott: But I’m trying to figure out if rates will go up or if it’ll get blocked or what’s going to go on. I’ll say that by the end of 2021, tax rates will have gone up just from right now, the average marginal tax rate will have gone up 1.5%. An absolute number. If it’s 33% right now, it’ll go up to 34 and a half basically will be my prediction.
Evan: That makes sense. I would have to, I’m not a tax guru, so I don’t know how to weight the averages, but I would probably look at just for simplicity sake, the top marginal tax rate, and I would say that goes up 6%.
Scott: Okay. We’ll say the average marginal tax rate goes up 1.5 and the top goes up 6%. I can see that happening too.
Evan: Still lower than the days of under comrade Eisenhower for the record.
Scott: Okay, the final one we’re going to do and then we’re going to let these people return to their lives here, is the price of Bitcoin. As I type this in right now, it is $26,941.
Evan: Holy cow.
Scott: I don’t really have an explanation for it. I own a tiny bit. I’m very excited that it has gone up crazy. I don’t know why it’s gone up except for maybe the deficit spending and everyone talking about it in there at Christmas dinner kind of stuff. What do you think, Evan, is the price of Bitcoin on December 31st 2021?
Evan: It’s funny because you catch me, one of the things I do in my spare time is write case studies for Harvard Business Press publication.
Scott: Oh, I didn’t know that. That’s cool.
Evan: Yeah, I do one or two a year and I’m writing one on blockchain technologies. Which one thing that I definitely learned when I started writing it was how little I knew about blockchain technology. I’ll take a wild swing. And I’ll say it’s 13,000.
Scott: 13, so half. Cutting it in half.
Evan: I think there’s incredible volatility. And I think it’s unsupported.
Scott: I’m going to say 18,000. I think it’s going to get cut pretty. It’s gone by the way, for people we’re recording this, has gone up a $1,000 a day for the last week. I’m not making some crazy predict. Yours is good. Yours is aggressive.
Evan: What are we going to do?
Scott: I do think it’s pretty cool that we could potentially have a reserve currency for the whole world now instead of the US dollar. It’s pretty awesome. I got to take my hat off to everyone who is involved in Bitcoin or crypto, anything. It’s super cool. And you can kind of see up close, the dollar versus Bitcoin is what the deficit spending is doing to us in real time. But it’s a really impressive number right now. There’re probably people who’ve become 100 millionaires in the last three weeks.
Evan: And they were teenagers who turned nothing into $10 million and they don’t ever have to work. And it’s like, oh, what’s that guy’s life going to be like? He doesn’t need to do anything. Anyway whatever.
Scott: For those who don’t know. We’re recording, today’s December 28th, 2020. December 28th, 2019, bitcoin was that $7,300. It’s up three and a half X, more than three and a half X since last year this time. Which is pretty impressive.
Evan: Well sweet.
Scott: All right, buddy. I love the projections. Good talk. Have fun in New Orleans and going across the country. I’m very jealous.
Evan: Right on.
Scott: And take care of that baby. Good talking to you.
Singer: (singing). It’s Kruze Consulting. Founders and Friends with your host, Scotty Orn.

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