Passing on Investing in Twitter and Building a Social Investment Network

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  • Howard Lindzon, CEO and Co-Founder StockTwits

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About Howard Lindzon

The first Soapbox in our new Command Center was a blast. Everyone had a great time as Howard Lindzon, CEO and Co-Founder of StockTwits, regaled us with stories about investing.

Howard let slip that he once tried his hand at being a stand-up comic, and it showed. He was funny, irreverent and had a few well-placed zingers. But it wasn't all jokes. He gave us some great insights on investing, why he passed on Twitter and investing in people.

Feel free to listen to the podcast as you read through the summary of the event below.

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Have a Sense of Humor

Over the years, Howard has plunked down investment capital in companies such as, and Tweetdeck. But he once passed on Twitter in the early days of the social media giant. But hindsight is 20/20, as the old worn-out saying goes, because when it comes to investing, everyone is going to make a mistake.

We are all flawed, truly. In the market, we're the most flawed. Even good people are 50% wrong all the time.

In other words, you can't beat yourself up over a call, or what might have been. You can't get angry or frustrated. As Howard said:

You've got to have a sense of humor about it. And you've got to talk about the stuff you're wrong about more than the stuff you're right about.

That's Howard's vision around finance and investing. It's what's guided him as he's navigated through stocks and opportunities over the years, even if a few of his calls have been more misses than hits.

You want to be in the batter's box. We're all going to swing and miss, but it's good to swing and miss.

Passing on Twitter

But Howard failed to step up to the plate when it came to investing in Twitter. Fred Wilson, who is a darn good investor as Howard put it, tried to get Howard to jump on board.

Howard, however, has rules to go along with his vision of investing. And he sticks to his guns on them. One rule is that he doesn't invest in companies that have huge valuations. It's just not his thing. When it came to Twitter, he was asked to invest $25,000 and the social media network was, at the time, valued at $17 million.

It was one of those too rich for my blood.

Fred, who had invested in Howard's daily financial satire webshow, then turned to Jeff Pulver to invest. Howard joked that every time he sees Jeff, his fellow investor gives him a big hug.

But that's not the end of Twitter stock for Howard. He eventually got a bunch of stock when Tweetdeck, which he invested in, was snatched up by Twitter. Or as Howard joked:

I ended up with a lot of Twitter shared but not because I'm smart.


Howard's story with Twitter doesn't end at stock. Howard had hit upon the idea of creating a hashtag to differentiate tweets about Microsoft stock from tweets complaining about Windows. So he came up with using the $ — or cashtag. Which was the beginning of StockTwits.

Fred Wilson told Howard he should create a business. And he did. That was in 2008, at the height of the market crash. But StockTwits has made it through and has raised $8.6 million.

However, Twitter started using the cashtag. But before that happened, Howard dumped his Twitter stock. It also prompted him to write a sternly-worded blog post on Twitter's usage of the cashtag. He wrote:

You can hijack a plane but it does not mean you know how to fly it.

Howard joked with us that quote would make a great book title. Seriously, however, he said he was just angry at the time and being sarcastic. It wasn't a surprise, said Howard about Twitter using the cashtag. He was more surprised that they didn't just buy StockTwits and start using their domain expertise.

Investing in People and Domain Expertise

When it comes to investing, it's also about people more than scale. What's really important is having that domain expertise, which not a lot of new businesses take into consideration. As he joked:

I'm 48. I got domain experience up my ass. I can lend domain experience. I'll barter domain experience.

He invests in people and ideas, looking at a picture of where things will be in 10 years rather than worrying about scale. And that'll come from social leverage if you keep doing consistent stuff.

Our talk continued with Howard as he spoke about honesty and the internet. We'd like to thank Howard for coming up all the way from San Diego to join us and for everyone who made our first soapbox in our new home a blast!

Don't Miss Out on Our Next Soapbox


Ryan: I want to welcome everyone to our first Soapbox in our new home. Our first guest in our first Soapbox in our new home, I should say. Our guest has bet on,, and TwitDoc.

Hard to believe he once passed on investing in Twitter in the early days. He's also responsible for coming up with the cash tag that differentiates Microsoft stocks from tweets just complaining about Windows.

Now Twitter is using the cash tag. I want to get into all of that, but please, welcome from warm, sunny San Diego, my home town, Howard Lindzon. Of course, you're originally from Toronto, I believe, right?

Howard Lindzon: Yes. Born and raised in Toronto. Is my mic . . . Can you hear me?

Ryan: Yes. Can we . . .

Howard: Everybody hear me?

Audience: Yes.

Howard: All right.

Ryan: All right. How is San Diego? I haven't been back in six months.

Howard: San Diego is sold out. There was a Seinfeld episode where he was like, "Oh, I want to come to, in Italy, that place." "Oh, no, we're sold out." Yes, San Diego is booming. There's no room, and you guys should be happy up here in your flat and barren white wasteland.

Ryan: Right, right. It's always 78 degrees in San Diego, by the way. I want to kind of get started and kind of go back a little bit in time, before you founded StockTwits and you were a hedge fund manager.

You created daily business satire podcasts, and you made investments in several companies. You passed on Twitter, Zynga, and you failed to check in at Foursquare in the early days.

Howard: Yes, all three, back to back-to-back.

Ryan: Why pass on those companies?

Howard: I have to go, I have to go. Forget how dumb I am. You are idiots to be here listening to me. That's what people want to talk about. What can I teach you about that? I think the honest thing to teach, and I talk to my kids about this, too, because we're all flawed. Truly, in the market, we're the most flawed, because even good people are wrong 50% of the time.

Not as bad as baseball, but we're wrong. I think I was inspired, just because I did stand-up comedy as a kid, and that's the worst. Anything after stand-up comedy is easier than stand-up comedy, so stocks is like a step-up. I'm a Jew and I can't play baseball, so you go into stocks.
I think what makes us different, or what my philosophy around investing and traveling and being a parent and husband is that you've got to have a sense of humor about it, and you got to just talk about stuff that you're wrong about more than the stuff that you're right about. That's my vision around finance.

It's a very nichey thing, but it's working. You don't have to be completely honest, and social web has helped us be more honest, and I can give you my philosophies around all those products.

The way I look through life is, I watch Seinfeld, I go, "Who doesn't think like? That's what happens to all of us." That's why they are the Tiger Woods of television shows, because they talked about stuff that was happening to us. I didn't answer your question.

Ryan: Why did you pass it?

Howard: There's no good reason. I have rules. If you invest like I do, in the market, you're going to be wrong all the time. Again, I forgot to answer the question. You want to be in the batter's box.

We're all going to swing and miss, but it is good to swing and miss. I mean, as long as I'm being talked about. The risk is not being asked. You say no long enough to a good deal, people go, "He's an idiot." You're going to swing and miss.
I'm proud that I was there. The reason I was there to get the investment, and it was a gift, basically, and there's a funny story beyond that. Is Fred Wilson, I had basically cold called to invest in my startup idea called Wallstrip.

It was one of many startup ideas, but the one that CBS bought in 2007, which was a daily financial kind of satire podcast, or a web video show back when YouTube was started.

We all made money, and Fred thought I was smart. Fred's a pretty damn good investor. This is flaw in his end. Everybody's not perfect. He offered me to invest 25 grand, but the valuation was $17 million. This was during the nasty market.
I was like, "You are fucking insane." I was tweeting at the time, like "I went to the bathroom." I was kind of doing Foursquare of bathrooms. Foursquare didn't exist, and I was using by BlackBerry, which I thought would never . . .

In 2007, I was like, "You'll pry a BlackBerry out of my cold, dead hands." Those were half my tweets. Apple phone? It's retarded.

I would like, "I'm peeing here." I'm so dumb that I actually used to be peeing while I was tweeting. Once you drop your first phone in the bathroom . . .

Ryan: Yes, that can be nasty, [inaudible 06:03]

Howard: Yes. He offered me to invest, and I go, "You know what would be interesting, Fred? Twitter for stocks." I said, "I don't know how they're going to monitor, blah, blah, blah," all of the stupid questions that you ask. The real reason I passed, though, I'm an angel investor and I have a philosophy around price and what I'm willing to do. It was just way out of my whale house.

I was used to investing in companies at $2 million or $3 million valuation, so it was one of those too rich for my blood. The funny story is, he hung up. He was like, "All right, no harm, no fowl," and he called Jeff Pulver. Whenever Jeff sees me, he hugs me.

Jeff said yes, so Jeff made like four million off that phone call. I think 25 grand would be worth $4 million, but you wouldn't see me here, because I'd be on a yacht, so you win.

Ryan: Exactly, exactly. You later invested in TweetDeck, so there must have been still something appealing about that 140 . . .

Howard: I was using TweetDeck at the time, and I cold called Ian, truly, in London. I was like, "Ian, this is better than Twitter. Let me invest." Ian didn't want money. We invested, a group of us, Betaworks and myself. I got a whole bunch of us involved.

He's a real product guy, Ian, and I still haven't met him. This is the difference between Twitter and TweetDeck. That was a $700,000 valuation. That, just, "I'll invest as much as I can in something like that." It was just like, from my years of investing, some of the stuff that comes in front of you and you kind of sift as fast as you can. You don't have a lot of time.

Ryan: Right.

Howard: They don't really need me. That just made sense, and it was like, "Phew, whatever I can get." I couldn't get a lot of it. He didn't raise a lot of money. Ian only raised a little bit of money. And that was how I ended up with Twitter shares. I also invested in Betaworks, which ended up starting Summize. That was a large investment of mine.

Because I loved the Betaworks studio model in 2007 when I saw them. John Borthwick, Andy Weissman, and I invested in Betaworks. We kind of swapped, and then Summize happened. I ended up with a lot of Twitter shares, but not because I'm smart.

Ryan: Just by investing in other companies, it came full circle.

Howard: It came full circle. I think the lesson is, and again, back to the philosophical, is just, we're little people. We have no institutionals, I don't have a Bloomberg. I'm face to face. I read all day. The social networks have totally, obviously, amped up our smartness and our ability to suck in knowledge from the right people, so

I'm very bullish on that whole idea. It's trends, if you can catch the trends right. You're not going to catch every pitch, but you're going to catch the fat part of a trend, and we're still riding it. For all the Twitters that I've passed on, I have some other huge ones that just made sense to me at the time. Price was one of those things.

Ryan: Is there a level of gut instinct going on when you invest, as well?

Howard: Yes. You set these parameters. For me, it's like, "If it's above $5 million, why are you calling me?" Now the stuff is like, "Why call me when they were $0 million." It's like, "I can't." You immediately have to just say no. Any good investor is like, "These are my rules, why are you calling me?"

If you've done any work on me or read my blog, it's like, "I don't know what I'm doing. At $10 million, I have to start thinking, how does this exit for $00 million?" I'm not a venture capitalist.

None of these things should be spreadsheetable anyways, at this early stage, because we're all iterating, including StockTwits four years, so how do you build spreadsheets?
A $10 million idea to me is like, "Oh my God, this must already be a business." I'm comfortable with that $2 million or $3 million, good team. I love people with domain experience. I think that matters more than anything right now.

Everybody is starting companies, but nobody has domain experience. I'm 48. I got domain experience up my ass. I'll lend domain experience, I can barter some domain experience.
I think a lot of these kids that are starting, and they call it a series A crunch. It's really a crunch around knowledge, a crunch around experience. It's just everybody getting nervous. It will pass, because everybody's learning, at least, right now. I'd rather have everybody learning and failing than going to school for four years at some level.

I'm not with Peter Thiel. I think he's lunatic, because school is great, but I'm just saying, there's a trade-off that's good. What was the question?

Ryan: It was passing on Twitter, but I think we surpassed that question.

Howard: Is everybody satisfied that I'm an idiot? I think we could all just nod our heads.

Ryan: It almost goes back to what you're saying about having domain experience. If you don't, you just kind of fail and fail again, and stop learning along the way.

Howard: You wander, and you wander, right? I'm Canadian, so maybe I'm a little more conservative. I failed through my 30s. I had tremendous success in my 20s. Not because I'm smart, I just hit a good deal, or hit a fat pitch.

In the 30s, I struggled, and in my 40s, I'm like, "What am I good at?" The 40s are the pressure years. You're screwing up in your 20s and 30s, it's like . .

Ryan: Oh no, I have three more years.

Howard: Nothing even happens until you're 40. I was on my fourth wife by then, and I had a lot of experience. [Pip], of course, one of them. No, 18 years. I think the 40s is all about domain experience.

I think that's getting understood. That's undervalued right now in Silicon Valley, and it's undervalued on Wall Street. MBA is still completely overvalued. Domain experience and price.
If I'm investing on the stock market, it's the complete opposite. It's just about can I get out, it's about liquidity. In the early stage, I can't get out, so price is everything. I don't care how the PE of Amazon is, it's nonsense on TV.

It's all mood and price, and can I get out, because we're all small investors. At the early stage, it's very important to me, because I can't get out, what am I paying? So I don't feel like an idiot when I can't get out.

Ryan: Gotcha, gotcha. That love of stocks, you even carried a little bit further when you did get stock in Twitter, and then you went in on to create the cash tag. Was that kind of almost the birth of StockTwits? Tell us about that aha moment where you said, "Ah, I need to do this."

Howard: I'm waiting for the aha moment, but the expensive moment that I'm still paying for was when I was with Fred. I was like, "This has got to be . . . People will talk about . . ." Like, you know, with BlackBerry and the PIN. All the brokers were using private network on the BlackBerry.

Everybody had a PIN number and everybody was trading inside information, so brokers obviously adapted the PIN. I was like, "I'm not a broker, and none of these guys are right anyways, so people will just text ideas and share."
The haters or the nonbelievers say, "Well, why would anybody good share a good idea?" I can't argue that point. I don't know, but I do know from YouTube and from Twitter that people share a lot of stuff. That was my bet, right? It was at an open PIN.

When I saw Twitter, I didn't get it, per se, but I got the idea that people would do stocks. The cash tag came from me using Twitter a lot and trying to figure out who was talking about Apple and trying to separate "Oh, I went to the market to buy a green apple," from "I love apples", or do I, I think, "I was just at the Apple store, it's crowded, and I'm [long] Apple".
The whole idea of the dollar sign was, we already speak a language. That's the domain experience. The RIC code and the stuff that Bloomberg and Reuters have is such a crime, the ways they categorize stuff, but good crime for them.

I was just trying to figure out a way to organize the discussion on Twitter. Hash tag was just so much SPAM. People were doing #goog, or G-O-O-G, but how do you really pull that in? That's where we came up with the dollar sign, and luckily I kind of had to start talking that way.
I sent it to Fred Wilson. He goes, "This is genius." He goes, "You should start a company." I said, "Well, fuck you." I still was working at CBS, because CBS had bought my last company, and I bought myself out of the contract, because CBS didn't really want to do anything in finance except pay me.

We started StockTwits in the fall of '08, during the crash, and I've proceeded to raise $8.6 million, and we have 14 people who despise me, so they're happy I'm here.
Now, we've gone on to build our own separate platform. We're battling trying to create a product and a user experience that people who love stocks and love talking about them all day long come to StockTwits and share information, and they can send it to Twitter. I've really kind of learned how to plumb.

My experience with Twitter and Realtime, I'm super bullish on Realtime. I get to do both. I've been running a business, or learning how to run a business, and we've been at it four years. I also invest. I'm truly on both sides of the table.

Ryan: Right, right. With StockTwits, though, you guys are like at about what, more than 200,000 investors over an audience of over 40 million?

Howard: Yes.

Ryan: What makes StockTwits unique as that social platform for investors? How is it revolutionizing the way we think about investing and banking in general?

Howard: Revolution? I don't know. There's revolutions in my head, and there's revolutions that are in reality. I think we're just clever and unique and hustling, and really love stocks. If you love something, you, I don't know. StockTwit doesn't work for me, right?

I'm connected all the time, I love the idea of being connected to smart people. I just wanted to filter the conversation, meaning, I talk about everything on my Twitter stream, or I don't know what the hell I'm doing.

Sometimes it's jokes, sometimes it's TV, sometimes it's stocks. I needed to compartmentalize that. Some people don't want all that.
I'm not going to change. I'm going to do what I do, but some people want to be able to filter and curate, and they don't want to care about Twitter, they care about stocks, so that's what we've been doing. I think our domain experience helped. I'm scratching my own itch.

I was like, "I know there are smart people out there who are both talking about stocks." Also, a lot of smart people on Twitter, Facebook, LinkedIn, who know so much about stocks, but could care less about talking about them, and that's like TechCrunch and [TechName] and like all the products that we use.

That's a lot of smart people talking about these companies, but no care in the world about whether they're passing financial information or trading information. How do you glean all this? How does it make you a smarter person?
You can let it get very complicated. I like to keep it very simple. You find smart people. You only can manage so many ideas at once, and you kind of really stay focused, but you have all this other stuff going on, and it's really fun right now.

We have close to 300,000 registered users. It's a very narrow audience of people who love stocks, so it's probably about a million uniques a month on the website. Mobile is growing really fast, and nobody knows how to measure that stuff.

So I won't lie to you there, but yes, we're growing really fast, and we're trying to figure out, just like everybody else, how to make money off this stuff.

Ryan: Right. How is StockTwits now evolving from that kind of like 140 characters talking about stocks and a hashtag, how are you progressing that?

Howard: That's a good question. That's where product and marketing, this is all the stuff that these kids starting out don't have experience at, including myself. Okay, so we've got minimum viable product and we've got somewhat of a product market, but we probably had product market fit the first day.

It's just a small market and a really tight fit. I tricked my VCs into giving me money, so now you got to do something.

Ryan: How do you trick them?

Howard: Oh, you lie, like everybody.

Ryan: Okay. Gotcha. I just wanted to make sure, you know.

Howard: There's no trick, you just look them in the eye and tell them something else.

Ryan: I do that every day.

Howard: That's what I learned on Wall Street. I forget, we were talking about how the product evolved. We were trying to do everything else we can, but really we were about what's happening now, curated down to stocks.

What we've done differently is, Twitter, we have this vision around curation and behavior, and the message boards didn't work. As soon as you leave people alone to themselves, like Jurassic Park, they're going to come at the fence, they're going to keep coming at the fence, and eventually they're going to have sex together, and two guys are going to have a baby.
That's the long run, but short term, they don't know all this, so they're just misbehaving. We have house rules. The one thing we want to do on StockTwits is, "Hey, it's for us."

Even though we're VC backed, this is like, you got to behave. Meaning, it's free and you can talk about being negative, but as soon as you start talking Obama and all the other nonsense, stuff that's just not on topic, you can go on Twitter.

Immediately, when we built our own platform, we were like, send the lunatics to Twitter and let them figure that problem out over on Twitter. StockTwits is going to at least have some common sense about it. We sacrificed volume for utility. Very tough decision, and we battle it every day.
The second thing is, I had to lie. It was terrible. No, so the second thing we did which was important is penny stocks. I'm really not a believer in any utility and companies on the bulletin board, or [Pink Hits]. It's all a gamble, in a way, in many ways, but you can manage risk on larger companies.

We eliminated the penny stocks, which means you give up 80% of potential traffic, but you get rid of 90% of the SPAM, just like that. Once you take away their will to talk about nonsense then...You put up walls.

It sucks. It's not viral, and it's not something that VCs love, but it's very interesting. That's the basic philosophy of how we're evolving.
And then, what do you do with this data? The question is, is this data valuable? Who will pay for it? We're solving all those problems. We've been revenue focused from day one, which may have hurt us, may not, but we're focused on revenue, always.

Ryan: Right. You mentioned something about roadblocks and setting those up, and all of that. I'm kind of curious. How do you also keep investors honest on your platform?

Howard: There is no honesty. Everybody's a liar. I think you have to start with that assumption, because then it's easier to like . . . It's no joke. If you believe everybody's telling the truth, you're going to be sorely disappointed in life.

Again, this is why everybody should learn the stock market and investing, whether it's 10 bucks or $1,000. Then, you'll realize that everybody is out to get you.

It's easier to start with that philosophy and go backwards than to start at, "Oh, I'm going to make money," because you're not going to make money. You're going to bat 50/50 at best, so it's about managing your losses.
The other things is, everybody is out to get you. What's great about Twitter or short message is, you can't hide your true self. Facebook, I could be a 700 pound Filipino person on Facebook. Truly, I'd still be Howard Lindzon.

I can frame my discussion over there. Twitter, within two days, you are who you are, right? You're either interesting or you're not. I don't care what you look like on StockTwits, I just care what your ideas are matched up against a timeline.

That's the true differentiary. It's not what you look like or smell like or how much you weight, or the color of your skin on StockTwits. It's like, "What did you say last week when the market was crashing?" I can look, you can't fake that.
People that tell me, "Oh, bologna." I said, "Listen, just invest some time. Nothing's free." Even though StockTwits is free, you have to put in some time and go check out our suggested list and do your own homework. I just think it's easier than ever to do that. Whether the guy calls himself Slingshot64 or Asshat45 isn't what you should judge a guy on their ideas.

It's about the idea flow. Are they consistently good? Will they talk to you? It's behavioral. We've learned this with Tumblr and Facebook and Twitter. It's not about the avatar. I like being myself, it keeps me honest. I just don't want to be six people.
The Web allows you to have many different identities: the creative identity, the true identity, the picture identity. I think we all have to just figure that out. I can't teach people that stuff.

Ryan: Right. For yourself, staying true to yourself, it's also evident in your blog. I kind of wanted to ask you about something you'd written on your blog. You had sold your Twitter stock, and then Twitter starts using the cash tag. I just want to quote this, "You can hijack a plane, but it does not mean you know how to fly it." What did you mean about that in that situation?

Howard: That should be a book. It's poetic. I don't know what I meant. I was really angry. I knew they were going to do something. I mean, they should have done it four years ago. They did it to the hash tag.

Again, what does it mean? It's just a dollar sign. We didn't own it. We could have tried to patent that four years ago, and I don't know, and then someone would have sued us for trying to patent it.

I think it's execution, and nobody can read your playbook going forward. We're not talking about investing $30 million in fabs and patents. We didn't have that type of investment.
We got to get a hold our ourselves. I was being sarcastic, just like, "Okay." If I go search $wag on Twitter, it's ethnic people talking about swag. Wag is Walgreens, so if you come to StockTwits, we're talking about Walgreens.

They have their thing, which is machines, and they're getting judged on volume of tweets per second. It's a great business if you raise a billion dollars. God bless them, someone needed to do it. Is that efficient? No.

They didn't need a billion, they don't need 1,600 employees, and their sales are great because they have 500 salespeople. Their sales should be good, they have 500 salespeople.
It is what it is. They've taken it. There was no doubt they were going to take it, and that's why I raised money to build the separate platforms, for this day would come. That was our bad, and now we got to go execute on our own.

When LinkedIn turned off Twitter, stock's up 60%, right? Would it have made sense for them to buy us and use our knowledge? I'm shocked that they didn't three years ago. Nothing shocks me anymore. You got to go roll with the punches and execute on your game plan. Does that help?

Ryan : That does help. Interestingly enough, it kind of goes back to what you talk about, also the domain expertise, and then breaking off and creating StockTwits, you firmly believe in building communities of experts.

You'd said in an interview that you had hoped that StockTwits would inspire other experts in their fields to go build these communities. Do you see that as the future of social networking? Is it going to be these best of breed experts forming their own little ecosystems?

Howard: The best knee surgeon in the world could go use all these products to go siphon off and start a newsletter. Maybe that's what that person wants to do that's the best knee surgeon. That's the person traveling to all these shows in Switzerland, learning about all the orthopedics.

It's just one idea. That's why we all use social media, is to become our special purpose, as Steve Martin would say. We all now have the tools to become experts a lot faster than we did 30 years ago, when it was just a phone and a secretary. Now, I don't have an assistant. It's all me.
I'm very bullish on verticals. As an angel investor, it's a little easier to invest in verticals than a VC. It's very tough in this day and age to be a VC in software. Houzz raised a ton of money, which is a really cool website my wife likes, like Pinterest for housing.

And then, Zillow invests and starts their own, just one little vertical. Verticals are hard, but again, domain expertise matters, and focus matters. I just don't think those businesses are going to be that big.

I practice what I preach. I've invested in a company called WitStream, which is someone just like me, Lisa Cohen. It's a great app. She just curates comedians from Twitter, and she's created this hysterical . . . I don't want to hear Dick Costello talk about the Grammys.

I want to hear comedians talk about the Grammys, because they look at their TV making up stuff. That's who's funny.
Twitter is very hard to curate for more than what you really love as one subject. I really believe there will be siloed experts in communities. Where I want to laugh, I open up WitStream, because I know there are six topics that are funny in the world, and they're just no holds barred on those six topics. Is that a business?

I don't know, but it's damn good product. You invest a little less money, and you lower the market expectations, and you swing for $10 million exits or $5 million exits.
The companies that are leading right now, Google, Apple, LinkedIn, Facebook, they have so much cash. People who are bearish right now are crazy, because there's just so much cash in these big companies, and they're going to have to spend the money on people.

We're all training ourselves right now, so I'm super bullish. Don't go buy stocks based on that, but I'm super bullish. I look at the world as the glass is half full, and I would tell people not to chase. Let stuff come to you, because there are so many ways to let information come to you. Set up filters and curations around topics, and be patient.

We're in a major trend. If a guy like me can pass on these things, or at least be in the game and still actually have some home runs, I think there's no excuse for everybody out there not to be able to do what I'm going.
That's kind of the way I write my blog. Sometimes, I'm like, "I can't believe this shit is happening to me." It's more like, "What a bunch of idiots these people are." It's like if I'm doing this...

I think that's what part of the charm is. I can't believe I'm living in San Diego doing this stuff. It's great.

Ryan: Awesome. We're the best California breed as exists. That's all the questions I have, Howard. I want to throw it out to the audience and see if they have any questions and all that good stuff. Who's first? Anyone? Bryan.

Bryan: [inaudible 00:30:10] Twitter and Facebook.

Howard: Andy Swan is a good friend of mine. He's like 7-feet tall, Kentucky boy. He's just a very cynical guy, he's a stock guy, a friend of mine, and we invest together. He would just put the widget on his site, and I go, "He uses it . . .., I'll give it like a in the ninth chance that I gave it". I really just started saying nonsensical things.

I look at Twitter, and I did stand-up as a young man, or boy, or idiot, and I failed so bad. It was such a stupid thing to do. In Toronto, if you're Jewish, you do stand-up and you make fun of your mom, on Skype. Now we do it on Skype.
What got me interested, it was like, this is a great thing. Nobody is listening to me, and I should just say whatever is on my mind, and maybe get a laugh, an LOL out of people.

I forgot that people that are smart followed me, and they really did think I was funny. Everybody was just encouraging me to say nonsensical things. I look at Twitter, and I still think it's just more of a canvas. It's just a very lightweight canvas. I say, imagine walking into a movie theater.

Everybody is quiet, just before the movie's going on. The lights are out. You barge in through the back door and scream an obscenity, and then you walk out, and you look back in, and you see what the reaction is. Everybody has a focus group, right? It costs zero. That's why Twitter is successful.
Is that worth anything? No. That's their problem. They've taken that problem on themselves. That's going to be their cross to bear. It's very hard, at scale, I predict, but I was wrong at $20 million, so $10 billion, I'm probably wrong again. They don't make soap, so how could they really be worth something?

Audience Member: How does StockTwits plan to make some money, by selling advertising, for instance?

Howard: From day one, we created a blog. We've made some mistakes along the way around revenue, because we were revenue focused, because I'm an old man. From day one, we were like, "What? We're not giving this shit away for free."

We feel like we're the lightest way for a financial person to start talking publicly. Give people all the tools, and then let them create their own stores, and what have you. We take a piece of that and run their whole back end.

We have ads, and then obviously our data. Financial companies love our data. We have high margin, simple business right now. It's not huge, but it could be a very good business.
The people we hate buy our data. They're not doing anything sinister with it, because they're idiots, but they like to have it. It's just their tax. We're taxing them for them being criminals, I guess. That's how I get up every morning.

Audience Member: Do any institutional guys participate on StockTwits, or is it all individual?

Howard: Good question. I think it's 70% individuals and about 30%
institutions, and the right 30%, now. They're all listening. We're the fastest place to just get the pulse on the crazies, because people trust our brand. The curation helps the institutions.

They can make fun of us behind the doors, but they know that the people managing the zoo are trusted people. We just want to make something great for ourselves. I think the institution loves us, they just don't use their real name. There's rules in the financial industry, and a lot of us just banged us, and rather just pay for the data and put it behind their wall and just watch it.

Audience Member: Yes. If they're registered, they'd learn [Inaudible 00:34:05].

Howard: There are so many dumb rules, unfortunately, and it's not going to get better. Neval [SP] at AngelList, I don't know if anybody uses AngelList, he's a true entrepreneur, one of my favorite entrepreneurs and friend.

What he's done around that beg for forgiveness, not ask for permission is not only did he create a platform where people could actually invest $1,000 in a start-up, God bless people, because it's still better than investing in a penny stock where you don't know the market cap and all that bullshit.

And the legal nightmares and the SCC stuff. I'd rather invest a 1,000 bucks alongside Mark Andreessen at a stupid price than invest in a bulletin board stock. Good for Neval on that.
I've definitely been a contributor in helping build that community. More importantly, he went to Washington and fucking changed laws. Me, if I came back ten years younger, I'd be living in Washington just screaming about Reg. FD.

StockTwits replaces the news wires. I picked the wrong people to fight against, so I got to be more creative. They're never going to give up this battle, Bloomberg and Reuter.

While Google and Facebook and LinkedIn and everybody is fighting, Bloomberg is laughing, laughing at what is going on in Silicon Valley as he prints money in his private corporation.

The data is better outside than it is inside. He's charging $2,000 for his social network, and it's basically just a chat product for hedge funds. Chew on that.
That's why I keep investing in finance, because that wall is coming down. It may not be during my lifetime, but I want to be part of that, because it's just bullshit.

People need to be taught that they're going to get screwed, come in with my philosophy, is like, "Fucking check the paperwork. Look your partners in the eyes, there's no excuse for them not to do it anymore. Read the paperwork, and then you're going to get fucked."

I think if people came in with that, it's like health insurance. We're dealing with 1929 security laws. I'm an idiot, so beyond that, I just want to be part of this revolution.
Neval is a big part of it, and I'm an investor. I'm an investor in eToro. I also invest in a lot of things that StockTwits can't do. eToro, which is like StockTwits for the rest of the world, you can actually trade on it. Oh, God, it's craziness. It's like Zynga for men.

Seriously, that's the tagline that I came up with, and they still use it. They do $50 million in sales this year. I invest a lot around my space, and a lot of failures, too. I don't want to name names, but it's littered with failures along the way.

Bloomberg and Reuters are not going to go quietly, and they're pretty nasty. You don't want the SCC calling you. Hats off to Neval for dealing with all that stuff.

Audience Member: Building a little bit on that, what's your perception on the level of diversity in terms of company innovation and finance versus say, social e- commerce? My perception is, it's a lot less. Why do you [Inaudible 00:37:25]?

Howard: The rules are holding it back. The financial world is still Wall Street and Park Avenue in London, rules, and clubbed. Bloomberg is $2,000 a month. You can't negotiate, and that's a pretty damn good wall. That's not going to come down.

Google and Twitter are going to have to get together and bring that wall down. That's not where Silicon Valley's head is at. That's my opportunity, or my nightmare. Social is overdone, and financial is underdone.

There's like a paired trade there somehow, and that's kind of where I fit in, I think, but it's not easy.
It's hard to fight the government. I think that makes venture capitalists not want to invest in finance. When they have invested in finance, cha-ching has become wealth front. There's nothing interesting, right?

There's personal capital. Schwabb has done all this stuff. Why do you want to compete with Schwabb, when in the end, you're going to have to hire people to . . . People want to yell at somebody when the market is down.

They don't want to look at their computer and see red and green. They want to call some guy and go, "You motherfucker. The market was down," and just hang up. It's like AT&T. I used to call AT&T just to yell.

Ryan: I still call AT&T just to yell, and I don't use them anymore.

Howard: Yes, and the smart people hang up on you before you. If I worked at AT&T, I would just hang up on everybody, because what are the odds of getting the same person again? I forget the question. I was talking about something that was so important.

I was talking about how you, oh, in the financial world, it's such a small market in terms of people that love the markets. It's so overtechnologized, or whatever, with bells and whistles.

My philosophy is, you're just handing people nuclear weapons. The more stuff you're giving them to lose money in their accounts, that age is over. Scwabb and e-Trade and Ameritrade, they blew their brains out. God bless them. They were the bubbles.
They build infrastructure, and it's more infrastructure than we need. All we really need to do is follow smart people. Lindzon bought Amazon. Six of my friends just bought Amazon. I'm in. Let me click a button, and I'm in. Alert me when they're out. That's the way I see financial.

It's an alerts based system and a rewards based system based on I'll do what my smart friends are doing. That's StockTwits. If you're only telling me when you did good stuff, I'm going to see it on your stream.

Where it's all going is, my pocket rings, oh my God, six of my smartest friends just bought Amazon. I don't even have to look if Amazon is down or up. I can just put $300 in, or $3,000 in, and then I'll get an alert when they're selling, and then I'll make that decision myself.
I still believe people have got to make those decisions themselves. You made the money, you should manage your money. Everything else is just a lot of noise right now, and people hating on things. You got to learn this stuff. It's a language. Does that help?

Audience Member: Absolutely.

Audience Member: Do people realize what's your signal to noise ratio, outpost, pink sheet [Inaudible 00:40:34]?

Howard: Our signal to noise on StockTwits?

Audience Member: Yes.

Howard: I think it's depending on what you think. Everybody has got their own signal to noise ratio. Most people come to StockTwits and leave, because they go, "The signal to noise is too high." For 99% of the population, no matter how much you curate, the signal to noise is too much.

If you go to Yahoo! Finance, their front page is just the dumbest headlines, right? You might as well go to BuzzFeed, which everybody does, or Techmeme or wherever I go, because that's where I get my news. Signal to noise is always high.

There's no answer, because you have to tune it. You have to invest time. I think we're lower than every other site, but if you're just coming there expecting for money to show up in your lap, no. I think you have to mine it. We just give you the tools to do that. We're there every day.
If you sign up and put your picture up there and follow me, you're going to get a welcome note from me during the day saying, "Hey, can we help?" That's our difference. Twitter had us do it for them, right? Genius, by them.

Not many companies have that leverage to allow the users to teach each other how to use the product. Now Twitter has 300 people teaching. Now they know how hard it is, because they have to hire people to actually do what we could have done as an open system. Again, the trade-offs that we all make.

Ryan: We have time for one-

Audience Member: Sorry. So, what's the strategy to sort of minimize SPAM going forward?

Howard: Going forward, we built our own tools. It's a good question. 90% of the SPAM, just based on two rules. No penny stocks, and just swearing and behavior base. People get bored of being bad. We have the community flag stuff, and then we have rules about links. We've spent four years doing it, so we have a pretty good system.

Again, most people are wrong. It's just as long as they behave and they're not spamming. By spam, I mean just talking about the same thing all day. We tell them. We'd get online and say, "Guys, there's other people here."
It's about sharing idea. The community starts behaving a certain way. New people come in and move the markets in different ways, and different strategies and styles take over, but it's very subtle.

Ryan: One more question. I think we have time for one more, if anyone has one. Bryan?

Bryan: Go back to that. Joe Gebbia from AirBnB was here. He spoke about investing in things that don't scale. I'm curious. As an investor and an entrepreneur, how do you look at that? You talked about finding things that make you excited, but they may not scale. Investment strategy, how does that [Inaudible 00:43:24]?

Howard: It's the question. Some people like orange, some people like red. Anything that I've invested in that scaled, I was lucky. I'm not good enough. I passed on Twitter, Zynga, and what was the other one? Foursquare. I passed on those three, so I don't even know scale.

Fred knows scale. Certain VCs know what scale looks like and can predict it. They have the coefficients worked out and the teams. They happen in clusters. I don't have the time. I invest in people and ideas. Scale is all relative to the price that you got in at, right?

I try and map out, here's how I think the next ten years will play out. This is such a big trend, and there will be this many acquisitions, this CEO is smart enough in evaluations at such point that I think we can get out, and this would be a win for us, that's my scale.
My scale is like, what does the picture look like, and where do we fit in on the picture? When an entrepreneur sends me a deck, I'm like, "I really only need to see one slide. Where are you, and where does everybody else that's trying to be you fit in on this log scale? What is the market cap? What's your domain experience?"

I can go through a deck pretty quickly to see. Some people are only horny for scale. I am more about winning. I don't care about home runs or triples, it's just the idea of winning.
My scale comes from what I call social leverage, which is the name of our fund, which is this philosophy of just keep doing consistent stuff. Good people, right price, good timing, big trends, and you build this massive scale around your network, which is what I call social leverage.

Which replaces the era of financial leverage we went through, which is one guy in one room with all the money leveraging it. It's a great tactic, but it's not really a good strategy, because it blows up. There's only one way to get out. That's my philosophy, hopefully that covers it.

Ryan: Awesome, very good. Well, thank you very much Howard, for stopping by. Coming all the way from San Diego for our first Soapbox in our new building. Thank you, everyone, for coming. Thank you.

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