Sheel Mohnot on tariffs, Circle's IPO, and why early-stage VCs should keep deploying through the chaos

now about China. It's like DJI, Unitry, Tik Tok, Deep Seek. There's like seven different really important questions. Uh, maybe we'll talk about it with Shield. Maybe we won't. But let's bring him in to the studio and welcome him to the show. Welcome. Boom. Back with a suit. Looking great. How you doing? Looking good.

Looking good. No. No Apple Watch. No Apple Watch. There we go. We'll get you on bezel now. That's the next step. We've We We've dradicalized you from the Apple Watch. Next is radicalizing you to bezel. Yeah. The tariffs haven't hit the secondary market yet. So, it's a great buying opportunity. This is financial advice.

Go to getbessel. com. Download the app. Just pick out a Just for you. Not for the listener. For you specifically. You specifically. I want to see a an Adamar pig or or Royal Oak on you. Something like that.

Um, well, uh, you've had a bit you I feel like you've been uh the timeline's been in turmoil and you've been at the center of it. Been turmoil. I guess I guess Chimath knows who you are now. Uh, now that that people reminded him that he would use your content in his newsletter. Yeah. Um, but uh, so funny. Whole thing.

The whole the whole thing was the whole thing was funny. I'm I'm sorry. Uh I'm I mean I honestly probably good metrics I'm sure were up and to the right. So Elon the creator payout this month are flowing.

It's going to go from 200 bucks to 100 except he shield doesn't get paid for for screenshots of his content with just this is why I can't believe this Twitter this this app is free and this is why I'm never deleting this. I'm never deleting this app because of the interaction. Yeah, exactly.

Anyway, uh yeah, can you give us just your your highlevel reaction and how you've been processing the tariff news? Kind of set the table for us and then we'll dig in. Yeah. Wow. Right into it. Okay. Um I'm kind of like I've always been more of a free market kind of guy. Um and I think free market American. Yeah.

American. I've been an American guy. And I I I tend to think competition makes us better. And I also like spent time like living in protectionist India. Sure. And so for those who don't know like until the 90s India was a closed economy like they had super high tariffs on all foreign goods and it sucked.

There were there were two local car manufacturers and the cars were like built in the 50s and they like didn't get any better from the 50s until the 90s because India had so much protections on their local car industry. Yep. And that was terrible. So like they didn't innovate. They never improved the quality.

They were super high so people couldn't afford the prices were super high so people couldn't afford them. And so that's what really scares me. And then you might say that would never happen in America, but you'd be totally wrong because that's exactly what has happened in the US ship building industry. Mhm.

So like the Jones Act basically says that if you if you're shipping goods between two US ports, you need to use a US-built ship crewed by US citizens and owned by US citizens. So like it's super protectionist to the US ship building industry. And US ships suck.

They're like five times as expensive as other ships and they've never had to innovate because they have these protections. And then it totally distorts the markets in general. Like on the east coast, I'm in New York right now.

On the east coast, a lot of like the east coast gets some fuel from internationally because it's easier to ship here than it is to get it from Texas. And that's just like a perversion of markets that exist because of the Jones Act. So anyway, so I think like all these things like I'm totally anti-p protectionist.

Um there's a question of like what is Trump doing is like with it's not really a reciprocal tariff now everybody realizes it was a funny situation last Wednesday when people were like what the [ __ ] are these numbers and then you know the guy who did the math was like oh this is about our trade deficit not reciprocal tariffs.

Um I think like if you if like now people are coming around and saying oh this is all about lowering trade barriers. I think that's [ __ ] because like you have Lutnik saying like we need millions of Americans screwing in tiny iPhones or whatever.

Um and and you and they also say that the tariffs are going to replace income taxes. So if those things are true, then it's not about leveling the playing field to zero. It's about like putting these tariffs in place to reshore. And I I personally don't like that. Trump also said something too.

you know, there's this focus on trade deficits, but we're completely ignoring like services and specifically like digital services, right?

So, it's like like uh like Switzerland, for example, you know, we have a trade deficit because they have 8ish million people and we have hundreds of millions and then they like make all the world's fine watches, which we just talked about. But then like they also probably love Netflix.

I'm going to guess I'm going to guess that like a lot of people in Switzerland are subscribed to Netflix and we're just like completely ignoring all of that and and you know yeah I I have a we're the richest most prosperous country in the history of the world. It's [ __ ] awesome.

We can afford to buy all their [ __ ] Like they don't need to buy stuff from us. They can't afford it. We can afford it. Yeah. So the steelman here is like uh first off do you think DJI and the consumer drone market is a problem? And then if so, what is your solution if not just ban DJI tariff DJI?

Like we did a deep dive on GoPro versus DJI and it really just felt like China was like we are going to kill GoPro in the drone market and they put so much firepower behind it and I'm like I still get that there's some weirdness going on here and it's an important industry and it's dual use and there's a million different factors.

So how do you walk through that specific example narrowly? Let's let's bl let's take away the blanket tariffs. Walk through that for me and and how would you solve this in a more free market uh more progressive fashion. Yeah. So that's a great question.

So So first, like we have tariffs on every country, not just our enemies. Yeah. Um with Trump, but China specifically, I I do think China is playing unfairly. Yeah. And and they're our enemy and we we shouldn't let our enemy get data on the United States. like that could be really bad.

There definitely are national security issues with drones. Y um I also think we should ban Tik Tok. Sure. Um and so I think those things can be dealt with, but they have nothing to do with tariffs. Yeah.

I guess one of my one of my scenarios would have been if I could if I could replay everything with everything I know now, maybe you you see what's happening with DJI and and GoPro and you say, "Hey, we are the richest country in the world. Uh we do have China buys a bunch of our debt.

Let's lever up essentially and create a drone buying program from the government to stimulate demand for Americanmade drones. Essentially backs stop uh GoPro. Let them get down the learning curve. Hey, if they make these drones in America, we're going to buy them even more uh and and and let us develop that.

And then we are competitive and we say hey it is a little bit we're we're still shifting the invisible hand putting our hand on top of the invisible hand but uh it's still somewhat of a free market in the sense that like just like what we did with EVs with Elon like anyone could have gone for those electric vehicle uh incentives Elon did a great job taking advantage of it totally like and we got a great product you know and sold really well eventually.

Yeah I think that's absolutely right. I think and like look we we moved in this direction already. Yeah. Like the chips act and IRA both y did did make good moves like yeah they they enable they subsidize US chip manufacturing that are critical um for military systems and and other stuff.

I think they they have made some moves away from foreign chips. Um and so that all that all stuff is good. I think like leading with a carrot is way better than leading with a stick personally. And I think like the the ideas you you mentioned, John, are spot on. And by the way, like we helped Tesla along the way.

Like we loaned the US taxpayers loan $500 million to Tesla. Like that kind of thing. I'm totally in support of enable US manufacturing to be better to compete on an even playing field by being more innovative, not by blocking like other countries from from competing. Yeah. Yeah.

Uh Jordy, uh bummer to see the IPO window close. Uh we had CLA, StubHubs. We'll see if Circle gets out. Uh CLA would have been especially nice for fintech broadley to get some marks. Circle still at 86% on poly market for this year. Yeah, they might just be like, you know, crypto. We're we we were born in the darkness.

We're going out. We're going out. Did you did you have a take on the circle IPO in general? I saw a lot of people uh just were not kind of loving uh the S1 uh particularly just based on how much they were paying Coinbase to like distribute the token.

I'm curious if you had a had a had a take uh on the IPO or dug into it at all. And you don't need to have any knowledge to have it. You don't need to have any knowledge to have a take. By the way, that part of Yeah. No, I I would say like on on Circle in particular, like I saw all the same stuff you saw.

um Coinbase gets half of the revenue from circles token, all this other stuff, but I don't I don't have a strong take on how the IPO will perform. I I tend to think that these things are somewhat like initially somewhat disconnected from the reality of what's going on.

So like I think you know we talked about Bridge last time I was on and I think there became this stable coin hype and I bet if Circle was public at that point they would have gotten a huge bump for no particular reason. Totally. Um but I think overall stock market Yeah.

Like what does what does Poly Market say about CLA? Is there a market for that? Oh I don't know. Jord. Well, Clara, I think officially pulled their It pulled Well, the thing is these tariffs are especially especially bad for CLA, right?

Like it's consumer discretionary spend that you use BNPL on and consumer discretionary spend in a recession or with high tariffs like goes goes to the toilet. Yeah. So, like you're not buying that extra $2,000 item that you didn't exactly need and that's what you were bmppling anyway. I think we've seen a firm stock.

Oh, yeah. I think a firm stock got cut in half. Yeah. I want to go deeper on Circle because I feel like it's one of those companies that if they're about to IPO, I can't even name the founders. I don't know all the big investors.

Like, it's this it's this fascinating this is case with a lot of uh a lot of crypto companies, but even Bridge like we heard the story of like who made the money on this? Okay, they got acquired by Stripe.

Like they're very much in the Silicon Valley world and Circle obviously is but has been hasn't really told their story in the way. And so it's interesting like they could have a meme stock moment where it's like the it's the primary way that you get exposure as a public markets investor to stable coins broadly I guess.

And that could be a good narrative. It could just be a meme stock because hey crypto it's you know whatever. Um, but but they haven't really told their story in a way that's broken through, at least with me.

Um, I don't know if you if you've processed it any differently, but yeah, I think it's certainly less less hyped than a lot of the others. The CEO, Jeremy Aair, I um I went to a stablecoin conference a couple months ago and he spoke and and so he's very sharp. Um, and he's he's been at it for a very long time.

He's like of a different slightly different generation than us. like he he started a company that IPOed in in like the 90s like do boom and then he was actually a venture capitalist like he worked at General Catalyst for a little while. Oh, cool.

Um and then and then launched circle whatever 10 or 15 years not obviously not 15 years ago. Yeah didn't exist but but you know a while that was the best time to launch a stable coin before Bitcoin getting really early. I mean, they're working. Here's the bullcase for USC and like and and it's here here's my bullcase.

Sure. So, Tether is like the most profitable financial institution ever, right? Like it's literally what what are they is it is it $8 million million per employee or something in profit? I forget the actual you probably shared it at some point, Shield, but it's like some absurd number.

They're more profitable than like any of these other major financial institutions. The risk with Tether is like it's opaque. you don't fully know what's going on. Like there could be people for a long time said there could be systemic risk, you know, associated with Tether.

Uh they they've been accused of of a lot of stuff over the years. Constantly. Yeah. Yeah. But but they're dominant from a market cap standpoint. The second the second biggest stable coin uh is uh is USDC at a $60 billion market cap. And a market cap is obviously just one to one with the supply, right?

Um and then you go down the list, the next one is D, which is also uh you know run in this very like cryptonative way from what I know.

And then you are to to get to the next stable coin made from a sort of true traditional western institution, you have to go to first digital USD which is under a $2 billion market cap and below that is PayPal USD USD which is an $800 million market cap.

And so to me, I'm looking at Circle and it's like here's like the power the dominant, you know, they're 80 they have 80 times the circulating supply as their next like regulated, you know, western institution and they have USDC. Like it's a pretty good ticket.

I mean the crazy part is we not super sophisticated but but it you know brand matters. I mean, we talked to Zach Pere at Plaid and we were like, if you had, you know, full authority, you were like the president, could you speed up wire transfers and a he was like, absolutely, but it's not going to happen.

And so, it's like, yeah, maybe stable coins are here to stay and and all the the pitch about just, hey, it's just going to you're just going to be able to transfer money two days faster. Like, that's enough. Even though it seems like you should just be able to speed up the government transfers.

What's your what's your read on any sort of predictions on venture right now? I think that the lesson in v the lesson in venture since 2020 has just been take advantage of chaos, invest through market cycles, never stop deploying. I remember in 2022 we were talking about the the what is it denominator effect?

Denominator effect. Yeah, denominator effect. But then it didn't fully play out.

We saw this I mean we saw like a again a bifurcation of like the big funds raising all the money on paper but you know if you're a specialist fund with like a strong story you can you know still get get funds done but but I'm curious first about venture market and then I want to kind of ask more about portfolio stuff.

Yeah.

First, like maybe a fun tidbit for you guys is like just the last few days obviously markets have been in various states of turmoil and um venture capitalists are some of them are like trying to seize the day where um like for example there have been a couple companies in our portfolio that some investors have been really trying to invest in um but the companies are well capitalized and don't need the capital and now the investors are like hey market's in turmoil might this be a time that you consider taking my money.

Yeah. So, you know, every Yeah. Yeah. You don't have to be really living up to the vulture capitalist name. I like it. Making money. Um Yeah.

How do you how do you even think about uh there's going to be some enterprising founders that are like, "Look, I'm building a startup around that's that's, you know, uh built to help solve, you know, global supply chains or or something like you know, the chaos is a ladder. I'm going to take advantage of this.

" To me, it's like, okay, if we're entering this sort of protectionist phase of deglobalization, maybe it's too early to make um bets.

But um yeah, how do you do you see companies like actually being able to make something out of the chaos or are you just telling your your portfolio, you know, just stay focused on the customer, ignore the noise, that kind of thing? It's really like stay focused on the customer, ignore the noise.

I think we don't have any companies that are like super exposed for some reason or the other. Um I saw you guys have J Malik coming on later today which sounds like he timed that perfectly. It is crazy. Yeah.

Uh like literally I mean there's a few of those companies that have been I mean that's been the thesis for a while just general reindustrialization but uh they really hit a royal flush uh this week. Yeah. Um so you know it's mostly stay the course.

I think there like people are saying okay venture capital dollars are going to decline but as you know like the way it works is we raise a fund every few years. Yeah. And we have plenty of capital so like it's not like you know an LP there's some impact on the markets today and that means we don't have money tomorrow.

It's like if there is any impact it's a few years out though it doesn't change how we invest.

Now the later stage investors it is a different equation because for them they have a certain timeline they're hoping these companies go public and if the public markets are kind of frozen that makes things difficult and and like they're thinking on an IRR basis like has their opportunities have declined if if they can't if the companies don't get out in a reasonable time.

Yeah. So mostly just texting founders in the portfolio have you seen this with a with a screenshot of the market data? That's just what I always do. Yeah. Exactly. Uh I want to get your reaction to this uh post from Seml over at Haystack.

He says, "Seed is again going to be the hot zone where nearly every VC fund will want to invest just like when COVID struck and in the early and in early 2022. VC shifted early to balance large checks by firing $3 million seed bullets. LPs should expect median seed entry prices to be up 50% in the next vintage.

Does that seem like a good take or what do you think? No, I like I love semol. Yeah. Um but I don't know if I buy that. Um I think high, right? That's the thing. Yeah. Please don't Please please please make don't tell the founders. Don't tell the founders. They're like, "Wait a minute.

I I can raise the my my safe by 50% with one stroke of a pen. Let's do it. " Yeah.

It doesn't it doesn't make sense to me because so um we we started this fund in 2019 and actually like the seed valuations 2021 was an insane time especially in fintech like everything we were investing in seemed like it was like turning to gold and then you know and then maybe turning to [ __ ] afterwards.

Um but classic but but then but actually like seed valuations have actually increased from that time and it's basically kind of been as like a straight line upwards and what he's talking about actually started happening in 2022 and a lot of the funds invested at seed in companies you know and and the problem is if you're a multi-billion dollar fund and you write a $2 million check into a company and you invested in the wrong company in the category like you don't get a chance to write a $250 million check into the right company.

Mh. So, I think it's pretty foolish when those funds invest at seed. And we have a bunch of examples now of like of friends of ours who took money from a multi-stage, but like the multi-stage doesn't care about them that much because of the small amount of money. So, I don't know.

I I'm skeptical that this is going to happen again. Uh or that it's going to reacelerate and prices are going to go up. I don't know. We'll see. Well, we should make a bet and have Peter Walker from Carta give us the data in a year. I love his stuff.

Uh can you talk about uh there's this meme of like, oh, for a while if you're building a consumer or something like you're going to get steamrolled by what if Google builds it, right? Uh, and there was this story that Google is allegedly paying some AI staff to do nothing for a year rather than join rivals. Hilarious.

I want your reaction to that. But then I also want to know like is there does that meme exist in fintech? Is there is is there an idea that oh MX or Visa or JP Morgan are going to build this? And has that ever actually happened in practice? Well, yeah.

And even potentially on that I'm curious like OpenAI wants to run your entire life. Yeah. Have you have you heard any sort of like rumors or is any concern around people saying, "Oh, I'm building a consumer agent, you know, uh for financial consumer financial services.

" But then OpenAI might be like, "Oh, by the way, we launched a partnership with Chase and or we launched a partnership with Cash App. Yeah, we can analyze your credit score now with an agent and that that model that that rapper company got got steamrolled. " Yeah. What what's your take on all that?

Okay, so first thing I think you said was the rest invest situation. Yeah. where um and so I thought it was really funny because did you guys watch Silicon Valley the TV show? Oh yeah. So good. And there's that obviously there's a the phrase rest invest. I learned it from that show. Um and it's certainly Google.

I had no I had no idea that that that phrase was like popularized in some way by the show. Oh yeah. Yeah. I thought it was I thought it was a 2021 like big tech thing. No no no. This was a thing going back a decade. If you haven't seen it, you got to go back and watch.

It's so So I never could I never could get into it because I It was just too close to reality. Like the most like it was like I watch TV cuz like I want to like you know not think but then watching Silicon Valley it's like oh that's an email I need to reply to. I I should follow up with that founder.

Like my first company, Soilent, was in the intro to Silicon Valley, like in the intro sequence, and they're just like making fun of me every single day. And I'm like, also, one of the creators went to my high school and so like I knew him and he's like actively poking fun at me every single episode. Amazing.

That's amazing. It was great. But yeah. Yeah. It's very silly that Google would let this even leak out. I don't know how that happened, but totally. It's crazy. I mean, the the things you hear out of Google are so crazy. It's wild.

Um I think more more so than any other big co like my wife works at Meta and they've like really got their [ __ ] together like the year of efficiency stuff like that. I think probably before then it was had stuff like this but not now. Um okay so that was that was topic one.

I think topic two was like what if X company builds this and is that the case in in fintech? Yep. I I I don't think so.

Like in fact you actually had look one one of the sponsors ramp so um stripe had built ramp stripe had a corporate card and it didn't work like they ended up investing in ramp and deprecating that card. So I think people have tried to do stuff. There is the what if Stripe does this?

What if Plaid does this and there are in some cases I think that's totally valid but for the most part I think there's plenty of green space out there and you know Stripe has been inquisitive obviously we talked about that before bridge um there's nothing I'm super afraid of.

I will say in some categories like for example um in wealth management there was the wealth fronts and betterments of the world the robo advisors and people said okay like we're not charging 2% we're going to charge you 25 bips but the reality is that the service offered by somebody who's charging 2% is different than what they offer at 25 bips and the 25 bip solution was fairly easy for Vanguard to build and Vanguard became by far the largest robo adviser in the world.

Got it. Um, but I'm not I'm not afraid of that in general. Um, infant too much player. Do you think uh humanoid robots present an opportunity for lone sharking as a service? You know, like come break your legs autonomously. Break your kneecaps. It's like, hey, we're going to offer you this great rate, whatever.

It's secured against your kneecaps. It's funny like um we our our tagline for our fund when we started it was everything is fintech. It it would be funny if we invested in a humanoid robot company and then just we were like dead pan like what do you mean like obviously the use cases for lone sharks. Yeah obviously.

Um, I mean, I was talking to a sales guy. I'm curious. I'm curious like my thought goes with um uh the Do you think that AI can can get is already or could get materially better at underwriting than than a human just spending, you know, months on an opportunity?

And is that something that do you think that fintech broadly has fatigue around investing in like AI lending just because it's been sort of this like ongoing narrative?

Isn't there like what what's the uh what's the public company that was sort of promising this for a while something um I mean there was Metro Mile which was better underwriting up but even Metro was better underwriting for your car insurance based on how you drive.

They put a GPS tracker and uh like a a gyroscope in there basically see if you're stomping on the brakes every two seconds give you a higher insurance premium. Uh a lot of promise there but not a lot of uh you know massive adoption over time. I think they didn't execute that well.

And I think with Metro Mile, the there's actually Routt has done a better job of it. But Metro Mile, it was primarily just mileage based, the number of miles you drive, and then Root gives you a phone. You put your your phone and it like checks if you're breaking hard and where you're driving and stuff like that.

Um, so I I think that there are opportunities to be used in insurance. in underwriting for loans in particular, it can be tricky because um you're the regulatory framework in the United States, Equal Credit Opportunity Act, Bur Reporting Act, etc.

Um they you're not allowed to discriminate on the basis of race and gender and some of these other things are tied to that. So that that can become tricky and you're actually you have to respond you have to give people the reason why they were denied like an it's adverse action notice.

So you can't have a blackbox model that's like here's all the data. They just give you a massive matrix of weights and they're like this is why you were denied. Figure it out. Totally. So that tensor number 76 was activating for you so get out of here. Yeah.

Um so actually you know if we didn't have that lending would be probably more efficient. Mhm. And like you'd better be able to target the right customer, but we do have those things for a reason. And so we can't have a blackbox model.

Um and so so there actually companies we invested in a company that's like in part detecting bias in in AI underwriting for this purpose to make sure that you're compliant. Yep.

Um, and yeah, so anyway, I think it can be used and can be super useful, but because of those regulatory bound like guidelines, I'm not sure it's going to like be a step change in underwriting. Yeah, makes a lot of sense. Uh, Jordy, last question. You want to let Shield get out of here? No, this is great.

Always a pleasure. Always fun. Super fun, guys. Looking forward to the next one. Yeah, this is great. Likewise. Have a great rest of your day. Godspeed. We'll talk to you soon. Uh, well, we got some breaking news. Another massive funding announcement coming in to the studio.

Victor from Craya, is that how you pronounce it? Craya uh is coming in. Uh AI video company that just announced a massive uh fund raise. Uh let me let me look up if I can find the the details um of this fund raise so I can get everyone up to speed before we bring Victor in here. The website is craya i ka.

Uh, and they just announced a huge funding round, $83 million, just a couple million over uh over uh Jay. Uh, not that it's a competition. They got Andre Horowitz Bane Capital in the in the round. Um, the past 14 months at Craya have been hectic.

We rolled out over 50 major product updates, grew to over 20 million users organically, and they 20x their revenue, all with a team of eight working out of a living room in San Francisco. That is fantastic. You love to see growth like that. Doesn't happen every day, but it's happening more and more in AI.

So excited to bring Victor into the studio and talk about that. Uh they write um the numbers are exciting, but they can miss something crucial. The team behind it all. Craya is the work of a small, talented group of imaginative, incredibly dedicated people. And yes, most of us still live together. That's fun.

Uh, until now, we've never shared metrics or announced our funding. Heck, we didn't even have a blog until a few hours ago. Those details always felt secondary compared to what truly matters to us, making AI intuitive and controllable for creatives.

Now, after the release of our redesign, the growth of our team, and recent funding, it feels like the perfect time to open up about what inspires us and what we're building towards.

So, they write, "We're living through a moment where everyone talks about automation, APIs, and how AI and software are eating the world, perhaps too much. Don't get us wrong. While AI is powerful, transformative, and is going to radically change creative work, creatives aren't going anywhere.

40,000 years ago, we painted red ochre onto cave walls. Later, we drove. We drew with graphite on paper. Today, it's complicated. We use cameras to digitize light through glass lenses and silicon sensors, transferring data through metal wires to illuminate the LEDs, lighting up the screen you're reading on.

Now, how do you know I didn't print this out? I could have printed this. Uh, the printer still works at TBPN. We might have shifted to laptops, but you never know. Too much push back. Don't assume anything. No, I am reading this on the screen. Paper usage. Uh, and uh, old tools.

Do we have Victor in the waiting room yet, by the way? Not yet. Old tools and workflows will disappear, but our creative itch won't. And I agree with that. Excited to dig into that with him. Uh, we will build new and more powerful tools to keep doing what we've always done.

Master new mediums for self-expression and storytelling. AI will render some tools obsolete, but not the people behind them. We see AI as a new medium that that lets us express ourselves through any format, text, video, sound, and even 3D. Such a medium needs better, smarter and more controllable tools.

That's where Craya comes into play. They say it won't replace AI will not replace creativity. Creativity is not disappearing, but the walls between creative mediums are. Traditionally, excelling in one creative medium rarely translated smoothly into another.

AI changes that and we're bringing Victor into the studio to tell us more about Craya and the fundraising. So, welcome to the stream, Victor. You here? Yo, how you doing? What's going on? Yeah, I'm here. Great. Uh, can you give us a briefing? Great. Great to meet you guys.