ブートストラップでFCF50億ドルへ——AppLovinのアダム・フォロウギ

Uh so let me give you a little bit of context on when we went public and why this became a pretty big opportunity. We went public in COVID in April 2021. Company was worth about $28 billion. Went up to 40 billion first 6 months. We're all excited. Stock goes down from there literally every day for all of '22. We got to a floor of I think like $3.8 billion. We went from $115 a share to $9 a share. So you're running a business and the whole world is telling you your business is trash. Like Like what What do you do? At the same time, interestingly, we went out with $700 million of EBITDA in '21. We did a billion dollars plus of EBITDA in '22. So like fast growth, executing on the business. Yet public market investors were telling us business is terrible like and and it was what it was.

It is a tough space to understand. First of all, like we were We're in advertising and we're in gaming and those are two tough places to be in the public markets. The other challenge was that we went out in COVID and there were just way too many IPOs. And once you learn the public markets, which I've learned a lot more um as we've been public for now 4 years, you need really big investors to start buying shares in companies early on cuz you have your private company investors trying to sell shares. So on the one hand, you have this imbalance. You've got a flood of shares that are going to come to the market. And with all the COVID IPOs, the big funds, the companies like Fidelity, BlackRock, etc., they weren't doing as much research on any new IPO cuz they couldn't tell the difference. There was just too much hitting the market. So we ended up with a cap table that didn't have support. And then shares started selling into the market, stock crumbles. You start going down every day, people look at the company and go, "This company's Something's wrong with this company. Like what's happening?" And it's really hard to look past the stock price and go, "Let me look at the fundamentals and try to assess what's going on." And and yeah, you're you're out there. It's like catching a falling knife. Like what do you do as an investor? So we were thrown out. It's easy to go, like, we're down 92% hang it up, like, what are we going to do? Start getting reactive, defensive. Um, instead of that, what what we ended up doing was going two things. One is the whole world doesn't like our shares. So, if no one's going to buy our shares, why don't we just start buying our own shares? And so, we kicked off a really successful buyback. The company at the bottom was worth $3.8 billion market cap and we were generating over a billion dollars of EBITDA. So, you think about the cash flow to to market cap, it was about 1/5 that we were generating every single year. Well, in theory, we could buy back 20% of the shares of the company just in the next year if we really believed in the path we were on. So, we kicked that off. But, we did it a little bit differently than what most companies do. Most companies go out and say, "I'm going to buy shares from the public markets and just take shares back." But, you don't know who's on the other side of that trade. On the other hand, we knew that we had a cap table where about 50% of the shares were going to sell at some point over the coming years. We had private equity investors that owned roughly 50% of the shares of the company alongside some other founders that were no longer there. So, instead of going to the public, we went to the shareholders that we knew were going to sell and got them to agree to sell back to us over time. And so, for the following 18 months, we ended up deploying somewhere around $6 billion of buybacks of our own capital and we levered some to buy back shares in the company. And over time, that ended up creating somewhere in the neighborhood of 50-60 billion dollars of actual proceeds from the buyback, one of the more successful buybacks in the history of the company.

We levered as well.

So, as a private company

I mean like a lot of times like people like to be conservative when it comes to cash. And so one to to lever up is scary to people, but then two to lever up to buy your own shares when everyone's telling you that your your company is a piece of … that's really scary to do. I never believed in saving cash for a rainy day. I feel like I'm a big believer in what we're building. I believe in where we're going. So, if I believe in the future and we're really high cash generative business, we should always be buying back our shares. So, at a bottom point where the valuation became that juicy, there's no reason to be afraid of it. And the good news is I mean I don't have a lot of experience with boards and we can talk about that in a bit, but our board was very supportive because it's not it's rocket science. You look at a a multiple of five times cash flow and you go, "Okay, why don't we just buy all the shares? Buy as much as you possibly can." And so, because it was so cheap and we had a lot of conviction on our future growth prospects, we just hit it and hit it as hard as we could.

When we first started the business, I went out and talked to VCs to raise capital and I got turned down by all the top VCs. So, a million dollars over a four million dollar valuation at some point in spring 2012.

All rejected. That's what I pitched. I would have given up a quarter of the company for um a million bucks. What would have would have been a big payday for those VCs.

What what year is this though because I think people 2012 cuz people hearing you say we're in advertising games, now those are some of the most profitable businesses in the world. What wasn't happening in 2012 though? What was

Your previous advertising business was desktop-based.

So, the advantage that you had here starting this other company, which is Apple 11, right? Is you saw the shift uh from traffic from desktop to mobile at the very beginning.

Why?

And why would you want to go from B2B to direct to consumer?

So, a married guy is building a dating app. And you every time I see you, you're in the same clothes.

Well, you just wanted to have an app because you saw everything shifting there?

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Were you already rich at the time?

Were you bootstrapping because you wanted to bootstrap or bootstrapping because the VCs would not take

Were the other two companies you started before this? Did you also bootstrap those or you raise money for that too?

Okay. So now you have this idea, you have this app recommendation app. What happens next?

How did you find distribution for it?

What was their alternative? Like what if they don't go with you, what else could they What other decision could they make at the time?

How?

That's a really interesting insight. And so, there was no other alternative for the game developer at the time or the app developer rather, that there was no other platform like yours doing what you were doing.

They had your same idea, though.

Independent of one another.

Why do you think the VCs turned you down when you had two successful advertising businesses before, and yet they're funding the competitor of yours that has the same exact idea without the the the previous success in there?

What do you mean that was it?

How much profit do you think you were making on a on a monthly basis out of that million?

Six years later.

Oh, this story's wild. We're definitely getting to that.

Can you give us some examples of that?

What was the number?

Still only 400 million?

if you would have made that mistake?

What's your market cap today?

to go back to the mistakes you're making uh without like where you're just saying the mi- mistakes in the capital markets that you think you could have avoided if you had a a board. We'll go back to that. But, um I want to take a small tangent because Raph, who maybe you should should explain who that is, he sent me a bunch of notes on you.

And the reason it just came to mind cuz uh he he remembers being getting an email. I think he actually sent me the the the copy from the email where you're like, "I'm pretty sure we can build a billion-dollar business here, guys."

And then like a few months later it was like, "Maybe it could be a $10 billion business."

Raph is though because he's a crazy story. So, he's a high school dropout. He started working for me in my old company when he was 16.

He's He'll turn 34 this year. So, yeah, he's worked alongside me for about 18 years. And so, I mean, I consider him little brother, like co-founder, person of the company. He's made a huge difference. And when we started here, he ended up He was the first business hire alongside this other guy at the time.

Yeah, he tried He tried to hire me first on business he was working on and I laughed in his face.

At that point in time.

Yeah, he was 19.

And I I I spun it to like I got a good opportunity for you though. And he shut that down and came over. But he was great. He For the first 6 months, he lived in the office. And and uh we're in downtown Palo Alto.

Yeah, he actually lived in the office. He had a bunk bed in the office. I can't remember where he showered. I think we had a dingy shower. But um one day someone tried to break into the office at middle of the night. We caught him on video. It's hilarious. But I think that was it. He was like, "All right, it's been 6 months. I got to get the hell out of here." But he He was 24 hours a day. What his super skill is is he strikes deals and does them better than almost anyone. And he can sit down with you and have a conversation today. 15 years later, he'll remember every word in that conversation. I forget what I did yesterday. So, as the counterpart to me, he was great. Um and so, he ran our business development efforts and he was really helpful in it. Now, he runs marketing and growth marketing. That's why you guys ended up intersecting. But we ended up with like just this group of people that almost were outcasts from other places. Like one of the things that I always looked at for hiring were find people who have a chip on their shoulder. Someone who has a reason to push hard. And I had that myself. And and we can talk about that if you care, but that was always what drove me. I had a reason to be driven. And so I always looked for that in people. And you have this kid who's high school dropout like anywhere else, he's not getting the job at Big Tech. Like but skills that smoke everyone else when it comes to selling, the charisma through the roof. And so seeing that, I knew bring that person in, empower that person, and they're going to be hungry and they're going to push and they're going to push harder than others. And that was a formula we always had.

talks to advertisers. He'll laugh and go, "Dude, you asked me for an extra 5,000 bucks a day. You're a … billionaire. What are you doing?" Yeah. Like all of us are that way. I mean, but but it again it comes back to you got to have a chip on your shoulder. It has to be a reason cuz it's easy to go, "I have a lot of money. I'm not going to take that conversation." But that's not how it is.

Yeah, sometimes you don't forget where you came from. I mean, mine was that my family was uprooted out of Iran. We ended up coming here when I was four, but my dad had one of the the most successful real estate development companies in the country. So he he was loaded, very successful back in the day. Thousands of people worked for him. And we got booted out of our country. And so growing up, I could just tell a a big part of him was lost and he wasn't whole. And so I felt this obligation and I like it didn't kick in for me till later, but I always felt this obligation that I got to do whatever I can to to prove that I can have the utmost success because he gave everything up to to bring us over. So that's never gone away. I I think to this day, one, this notion that like you can reach a point of success like I don't know what that is, but it's a moving target. Nowhere near that moving target. And two, always got to be pressing. And so, I always looked for people on the team that had some reason to have a grudge or a chip on their shoulder, something that would motivate them. If they didn't have that and life was really easy, those were not people that I was going to introduce to the company.

I mean, there is a long time and I don't know I don't know if I'm past this yet or not, probably not. I'd wake up every morning and go I got to check stats. Are we going bankrupt today or are we still doing well? And it's like certainly like at the scale we're operating at we're probably not going bankrupt, but like you check to make sure like lights are still on, things are still working. And like I have I wake up at the exact same time every day. I do the same exact morning routine every day. Check the same stats. And it just gets me going.

Sometimes. I mean, my wife will accuse me of that, but I think you know, it's it's it's more popular these days. I I don't know that I'm autistic, but

Yeah, I can I can I can look people in the eye when I talk most of the time, but

Yeah, I mean, if you knew me 25 years ago, I'd be deemed a lot more antisocial autistic than I am. I've learned I I think a lot of good founders can follow patterns and figure out how to do things. There was a point in time where I never would have sat in this chair across from me. I would have been too nervous. I'd be dripping sweat. Like my first interview out of college, I walked in with a suit and like I literally walked out drenched. It looked like I I got out of a rainstorm. So, there was a point in my life where I was a lot different when having communication as a requirement. Now I know that it's just a requirement to do on the job, so I got to do it well. And so I think a lot of people, whether it's autism or like just figuring out how to functionally be appropriate on the things that are necessary to get forward, people who do well in these types of roles have to solve that.

So let's go back to the mistakes you thought you were making.

the the not taking the big offer was a a bonus for me because if we had a board of investors, I may have faced pressure to take the offer. And so being able to make my own call on that was like, "Okay, this is great. Like I don't actually have that pressure." The the downside was the second you say no and parts of your team know that you turned down that much money and they can run the math and go, "We would have made this much." You end up with under of pressure to do something. So This was late 2015. And I used to be a finance background. I was a derivatives trader out of school. Um and so I understood multiples. I understood capital market arbitrage. And late 2015, what was going on in the markets then and was that you had China investors buying a lot of US tech companies because the Chinese capital markets had just opened up. You know the the market over there, their NASDAQ and A shares back then was dripping. And so you had these investors coming in and saying, "I'm going to deploy China capital into US company and then go list that US company in China, make a big spread, call it a day." Um and so I went out to talk to some of these investors and ended up announcing, I think it it was some it was some point in 2016. I don't remember the exact date, but I announced a private equity investment in the company of billion dollars over 1.4 billion dollar valuation. So fast forward less than a year, company is growing

and Orient Hontai Capital

Um was the name. And this was like like a small team. I met four guys, really good guys. Like we hung out in China, got along. So I liked them. And they came in, they invested.

We're still growing 100% year over year. Um I think at the time part of the dollars were based on us doing 85 million of EBITDA in 2016.

And so like deal structure was like if you can knock this if you can beat this number you get full value. Now the structure of the deal was a little interesting. It was to clear out most of the cap table. My shares mostly would remain. Anyone else who wanted to roll could. And then we take the company public in China. Now I don't speak I speak maybe five words in Mandarin. I wouldn't have been a great China public company CEO. They thought I'd be charismatic and appear well, but no communication probably not a good idea. The other thing I didn't know, and this is where a board would have been helpful, is at the same time President Trump had just been elected to his first term and so this was actually fall to going into winter of 2016. So President Trump had just been elected geopolitical climate was getting worse. China US there were there was a lot of suspicion around like what are these Chinese companies doing buying all these US tech companies. I felt like it's just an arbitrage like whatever people are trying to make money who cares. I didn't even know what a state-owned business was at the point in time. It turned out like in in you announced the deal you still have to go through regulatory and we're doing a cross-border transaction and the regulatory body that governs cross-border transactions is committee called CFIUS and so this committee exists to go is there a national security threat with this foreign money coming into the US to invest in a US company? I didn't know what this was but announced this deal people think you got rich everyone's congratulating you and I'm like okay well what do I have to do now? What's the next step? It turned out the next step was you got to go to DC and you got to convince this committee this made up of like like every government agency I there was NSA CIA FTC DOJ like everyone was in the room.

Because it's China for one and because we at this point we're large-scale data platform we're sitting on a lot of mobile devices and I'm like okay what do we know about people people like solitaire games like who cares but like I guess like the belief would be that if someone nefarious gets access to your technology they could do worse things with the data than than what we had access to. And so that that was the general idea but I I marched into to DC and I'm like I don't know what I'm doing I hired a law firm no board no one's no one's guiding me everyone's just like oh billion dollars get the cash call it a day. On the other side I got this Chinese investor who these poor guys that I was working with seemed like great guys they get their billion dollars out of China so I'm like okay you're doing your part like money's ready to go but we we walked into DC and it was just icy it was it was cold I mean, first of all, like I'm a Persian CEO and then at the time CTO had just transitioned to be one of our first engineers, this Russian guy. So, I'm like, this Persian guy and this Russian guy

And selling to a Chinese company with like four Chinese investors. I'm like, that this this might not go off. Um and so, the first meeting was like, the government agency still was like, get the Chinese people out of the room. Like, it's not like just you guys. Um and so, we we go through this process and I just realized like this took the better part of I think it was over a full year, actually, of just going back and forth with DC like it trying to to navigate this process with our lawyers and they're just like, this is just not going to work. There's no way we're going to get over the finish line. And I don't I don't want to be made an example of with trying to do a Chinese deal getting blown up.

voice concerns, but I'm pretty good at reading a room and it's like, when you give them a lot of information and you're talking about people playing solitaire and on the other side they're taking a bunch of notes and really asking you questions that have nothing to do with solitaire, you start realizing what the concern is, which is in the wrong hands as a platform that's as large as ours, it could become something that's that's risky. And so,

They won't specifically say that. That's what they're That's what they're trying to assess it for. Now, we're they're we're selling 70%, right? This is a company that I've had full control over. And so, you have this Chinese party that turned out to be a state-owned partially state-owned private equity firm fund. Again, I didn't even know what that meant, but turns out to be partially state-owned. And they're going to invest this money into us and they're going to get 70% control. So, what could they do with that control?

I mean, it's very hard, right? Like, it's not like there are engineers on the front lines, but can they exert pressure on an American to then go against Americans' best interests? That that becomes a concern, right? Like what can they do for that kind of money? These are things I had no I wasn't aware of whatsoever. So again, I had no one to turn to. There's no one to talk to about this stuff. So not having a board, you're going through this and I'm like, okay, well, had I had a board, I probably wouldn't have made this mistake. I would have saved some time. The and there would have been plenty of alternative means to get liquidity to the team. I just thought good valuation, good number, a billion dollars cash, and I still retain my own ownership and run the business forward. So, we go forward and the business was doing really well. For this one-year plus period, we couldn't issue options. Everything was frozen. We weren't really hiring people. Yet the business doubled again. We got to like I think it was 2017, you're talking over well over a hundred million dollars. We would have thought we cleared whatever numbers we told them. Everything's going well. If I had a board, they'd say, "Just rip up the deal. This is a mess. Walk away. Your business is worth much more than the 1.4 billion-dollar valuation now." On the other hand, I've always felt like if anyone bets on me, especially as someone who's like just always had a you're not going to bet on me mentality, and I'm going to prove to you how wrong you are. I feel like if anyone bets on me, takes an investment in our business, got to be loyal the other way. And so, these four guys bet on us. They took made an investment and or thought they were making an investment. And so, I didn't want to leave them hanging. I also didn't know what happens to a group of of people from China that take a billion dollars offshore and then the deal blows up. Like what happens to the money? What happens to those people? So, I didn't want to deal with any of that. And so, I ended up finding a way to get them a deal that then we could unravel later. We ended up doing it so that instead of their billion dollars being in an equity investment for 70% where they would get control, which is what triggers this scrutiny, we ended up pivoting it to a billion-dollar convertible note that if on conversion we pay them back the money plus interest, they would get 10% of the business. So under 10% there's no control, and then they can come along for the ride. We did that deal, we dividend out a billion dollars to shareholders. Think of it as like a liquidity round pre-IPO. I knew that like, okay, we're going to get the the money in my team's hands. No one's selling their shares, but now I'm stuck with this massive convertible debt that I got to go unwrap. And so I called a few private equity funds. One of them was KKR, and that's what brought me to KKR as an investor in the business. Their partner Harold Finn and his team looked at the the company. I think he would tell you, you got an email that came across his desk that said this goofy name company AppLovin is looking to raise some private equity. My evaluation looks good. And he would have said like, just based on the name, I wouldn't have invested and ran for the other way. But his team rolled up their sleeves, they started looking, and then Harold rolled up his sleeves, started looking, and we all realized this is the good idea. Bring in traditional US capital, get some debt, clear out the Chinese convertible debt, give them their ownership, off we go, clean cap table. And so, we did that. I believe it was in the summer of 2018, and we had to build the first board that I'd ever been part of. We had myself, Eduardo Vivas, who's Raph's older brother, and then Harold Sham in this three-person board.

Yeah. So, one of my co-founders, Scott John Kristynak, was in charge of technology.

He was CTO originally. So, he built a really good team. So, I would say like, a really good manager's job is build a really good team and eventually get replaced. And the first engineer, that was the lead engineer at the time, this guy Basil Shikin, um just became so good that in 2016, we swapped him into the CTO role, um and John then at that point was transitioning out.

Yeah. And so like, I I've always had this belief that like, a lot of people get complacent with the leaders that they have, and those leaders, if they're not at that moment as good for the role as someone underneath, that person underneath is going to leave and start a new business. So, like you owe it to every single person and you owe it to your company to make sure the best person is in the right role at any given time. And and actually this like fast-forwarding to just last week, we just announced Basel's going to going to shift gears to a different role in the business. And one of the people that he hired who's built a whole bunch of our new technology and now runs the team is going to transition to CTO. So, the same thing happened again. So, this always happens that every role I've seen is if we were complacent and said you're VP you could have been here 10 years. The person underneath who's been here 2 years is just much better and we're not getting into that VP role is going to leave. I don't want to lose the best talent. I want at any given moment the best talent in the most important roles. And so, we always do that trade and if you don't do that trade it's really depressing cuz you end up with these really long tenured people who who end up in all these really important seats, but all your fresh blood is churning despite having more upside. You could have given them room to grow and you could have transitioned. And so, we did we did the average chance we can get. And then the other co-founder was ahead of product type person and I think he transitioned out it was about 3 4 years ago. And really like what changed over time for both of them and then like I think just generally like a lot of the people that were early at the business when you go through this transitional period of like private fast growth small team to we're going to go public we're going to be a bigger company, it changes what people the types of people that you may need for that next chapter. And so, there was this transition on the team across the board where we were constantly changing those like 50 100 person type company people who really wanted to hustle with no structure to people that could actually continue to hustle with less structure than what most public companies have but more than a 50 person startup.

Yeah. right.

almost I I know.

Having discussions, having discussions.

So, so the way it worked so so actually like I sort of calculated to my ownership today.

After the convertible note round, we diluted about 50 to 55%. Until today. So, if I took I own about I'd say about 12% of the company. I owned back then about 24, 25%. So, that dilution is all the dilution we've had between the convertible note conversion to the Chinese, pay out the Chinese, convert them to 10% equity, bring in KKR, eventually go public.

Nothing else. So, like again, the IPO if I recall was about I think we sold about like 7, 8% float. So, which is really low and probably a mistake in hindsight. You want to sell more float. If If anything like you need float to like lower volatility. We've been one of the more volatile companies. If you push up valuation to where your round and IPO is just like a series D series E. For us it was our series B. Um but you end up doing the IPO and we we did $2 billion I think over $20 billion valuation. Too low a float makes you more volatile and if the valuation is lower and you can do a 10 to 15% float, you end up attracting better investors who can end up being long-term with you. If you push the valuation where you can't fill a bigger round, you end up with more volatility and less blue chip investors and you're signing up for just a much more volatile time in the public markets, which we saw. No, uh since then I don't think I've had a single acquisition discussion with anyone. Um, and by that point in time, I'd realized, well, first of all, we paid a billion dollar dividend, right? Like, and so, everyone was much wealthier than than when they started Me Too. That's more money than than I know what to do with. So, we were past the point of worrying about liquidity, and we were much more in the mode of like, okay, let's let's run this long and see what we can do at that point. Yeah, so so the you know, every level that we've gone up, I voice something aspirational, but I got to believe it to voice it. And so, when we first when when we were ripping like 2012, 13, 14, I think I first said like, we're going to be a billion dollar company in 2014. When we did the the Chinese round and we announced it, I did an all-hands where I said, look, like, we're still growing super quickly. We just did a print over a billion dollar valuation. This is going to be a 10 billion dollar business. Period. Like, now we have to do the work to get there, and we had a plan. When we went public, there was some point in time I mean, first like, we were down like 15% day one, and I was like, buckle up. One, it's going to be volatile. Investors like don't tend to like our story. Apparently, I suck at selling it to investors. But beyond that, it was look, this … motivates me. Like, I love it when people tell us we suck. They tell us we suck, let's prove them wrong. The business is going to be much bigger. We got a plan to get to a hundred billion dollars. So, I laid that out in This was after we went IPO. Stock dropped like 15%. I was trying to rally the troops, but I also believed it. I had a plan to grow the grow the business now. 25 billion. So, it's a 4x. So, like, it sounds reasonable. When we went to under 4 billion, I was like, … Like, a 25x is a lot further away. Like, people who were working on the business, we believe there's a path to a trillion dollar outcome. And we don't set time. It's just that this business can be as big as what you would need to be a trillion dollar business. And we actually just did a comp plan to some of the key people that is built on on triggers to give them much bigger payouts, but the highest one is a trillion dollars. So, at every moment in time, if I believe in a future plan and and think that it could get to that big, I want to voice that to my team cuz I know that at least my past, they've seen that if I voice something big and I'm still working my butt off, they follow and eventually we'll get to a good place. So, we closed the deal in 2018. Yeah, we went public in April 2021. So, it was about 3 and 1/2. It changed a lot, so when we first started, we grew really quickly and and we cleared over $100 million of EBITDA and we had a very simple algorithm. In advertising business, the algorithm is key if you're doing performance ads. So, our very early algorithm was, if you play a solitaire and you play a poker game, people who play solitaire and poker also play these games. And it just pushed you games. And you'd see game game game game game. Eventually, you'd download off a simple algorithm like that. What we realized um as really machine learning technologies evolved and and Facebook built this fantastic platform over the 2010s, once they got their mobile marketing platform out, they really did turn ads into content. If you have a very powerful algorithm on showing users ads that are really good for them, the consumer is going to discover products that they want to buy through the ads. And when you can do that, you can show people an endless amount of ads. They don't care about the ads that they're seeing. They're not disruptive. They're actually something that they can engage with. And what I saw was and and I inferred that their their algorithm was way more potent than what we had at the time. And now obviously the simple like rules-based algorithm wasn't going to cut it. And so, in 2018, we started realizing we've got to upgrade to machine learning capability. Other companies are doing it. Facebook's way ahead of us. In order to do that, we need data. And the data that we had were games that people were playing. The data that Facebook had, of course they had the social graph, but they're pixeled on most of the websites in the world. Advertiser data is very, very important in predicting an advertiser relevant outcome. So, by that I mean like if you're a consumer and you're on 40 different sites and you're browsing for different products and you buy four in the last year, that's a very good data set to predict what are you actually interested in. And if you don't have that visibility, which Facebook has and you don't. Facebook had we didn't. And so, if we were going to go build a much more robust model, it's very hard to just do it with solitaire and poker data and whatever else other games we had in the system. We needed advertiser data. Now, in in this case for us, it was inside mobile games, what are you actually spending on? If we could get that data, we could train a model that was a lot more powerful than what we had. What you buy is very much predictive of what you'll buy next. And so, that that was critical for us to go get our hands on that data. We were unable to convince advertisers to share that data with us. Even though they were sharing it with Facebook and Google, they would not share it with us. We were just the small startup, um even though billion-dollar company, just this other company in the space that didn't have a need for the data because we didn't yet have a model. So, in order to solve that problem early on, I went out and and we just kicked off buying some gaming studios. So, actually like the business from KKR investment to IPO ended up looking wildly different than an advertising business because we ended up with like 14, 15 different game studios across all categories of gaming that we ended up owning so that we can not only understand what the game developer needs from marketing platform and a monetization platform, but also use their data inside our model. And so, we we bought the studios, we launched our first Axon 1 model. That Axon name is the name of our our advertising model. The first one was more traditional machine learning, but huge upgrade over the first system. And revenue growth started happening really quickly once you brought that to market, but we couldn't do it without owning these studios ourselves and being able to feed data into the model to train it. We moved really quick. We have an idea and we just go. And so one of the nice things at KKR was they were actually supportive of this. It wasn't like let's start analyzing like what it is we're doing. It's like Adam's got an idea, let let's go behind him and we just made this investment. So we got to believe he knows what he's doing. And so it was idea to first acquisition almost right away. It was we have a studio to go buy. Um it was a studio called PeopleFun. And then we were building up our own studio internally, too. And then everyone was supportive cuz the logic was really, really sound. Now the the fear and why a bigger board might have said, "Hey, we don't want to do this." is we're platform servicing gaming companies. And everything I've done in my career is be transparent all the time. Like your reputation and trust can break down at any moment if you violate trust on the other side of things. And so I'm a very transparent person and we end up in this space where we're servicing the gaming clients and we're now going we're going to compete with you. And so in their mind it was okay, the ad platform's becoming now vertically integrated competitor. And the proof for this was Amazon does this all the time, right? Like why wouldn't the distribution platform build their own brands? In our case it was build the brands to get data. It's very hard if you're a client on the other side and you see this to believe that they're still they've still got your best interests in mind. And so that would have been the reason you wouldn't choose to do something like this. That was what ended up over time. So like the the fact There there was a moment in time where a lot of people stopped trusting us in the in the space because our games were growing really quickly. We were feeding their data into our model. And so, the early adopters of our apps on one platform were our own games. So, then you start seeing our games grow. On the one hand, you had companies that go, "You're competing with us." who just chose not to work with us. We said, "Fine. That that's not only logical, it's okay cuz we made this bet and we're going to live with it and it's really good for our business potentially." On the other hand, you had smaller businesses small to medium-sized inside gaming. They just need any win they can get. And so, we ended up with these companies that then said, "Okay, your own studios are sharing your model data. We're going to share your model data and help us grow our business." Yes and no, right? Like, you go, "That's great." But then if I feed you data, that's helping your own game, so am I fueling a competitor to become better? That's what the concern would be, right? It's like, you're using my data to effectively get into the space and compete with me. Now, you have to know who's on the other side of it. One other interesting data point about me is, growing up I played games, but as an adult I hate games. I don't I don't spend a minute playing games. So, like, it wasn't like I I mean, it just consumes time. It's addictive. Like, it it's like, for me, myself, like, I don't have the patience to like get good at games. So, therefore, I suck at games and I don't like sucking at things, so I don't play games. You talk to these game developers and they they like what they had to really realize is like, the company run through me can't be a game developer. I don't even care about the game content. I cared about the data and I cared about the distribution platform. So, once they started realizing, "Okay, they're never going to be a good game developer. This is clearly a strategy. It's a means to an end." it started changing things. But it required I I know a lot of the game developers in the space. A lot of us are now quite close and over time, like, over the last decade, a lot of us have grown up in this industry together, so we've become close. So, it just required a dinner, a lunch, sit down, ask me whatever question you want. I'll say in hindsight, the mistake I made is I'm very transparent when I sit down with people and they start asking me questions, but I didn't convey to the community of game developers directly and explicitly, we're getting into gaming business and here's why. And so, people started finding out on their own and then thinking there was some malicious intent when there never was. But then once they sat down with me, it was like, okay, now we can overcome that and like get down to business. How are we going to grow your business? And so, as a company, we've always had a belief that if our clients are improving their business, we're whole. We're we're good to go. I mean, the gaming in the mobile gaming space, there's very little VC funding. A lot of these companies are bootstrap businesses. The founders are the key people. The founders are the marketers. Um most of the companies we work with are not even in the states. They're in Europe and Asia. And so, these types of businesses, they need partners that are there to help them. And for a moment's time, because I was not proactive in in talking about what is our strategy, I broke trust down. Then we got back together, sat down with the the companies in the space. And trust comes back really quickly when you you realize like it's a communication error, not a desire to deceive. We ended up going forward and all of these companies over from when we launched Auction One Model in 2020 to today, they all work with us in much, much bigger scale. And our platform's become the dominant one in gaming. We're we're probably I I don't I don't know how big, but maybe even almost the over 50% of the marketing dollars in the space back to our platform because the the developers on the other side are seeing the best best best returns that they've ever seen in their existence on the dollars that they're spending on our platform. So, their businesses are growing really healthy rates. It's been powered by this desire to by from us to build this technology the way we did and and interest from them to trust us as the platform to do right by them. And that evolved over the last few years, but it's gotten to a really great place. Align with the fact that we were never going to be good at gaming. We got to a place where the business had grown so much that every advertiser in mobile gaming was now starting to connect into our models and and work with us the right way. Once we got to that point, we realized we don't need these studios. Headache, it's a distraction. As you said, the the ad core team on advertising is only 400 people. Well, to run studios is a huge lift. You need a lot of head count. There were 1,500 plus people on those businesses and it was distributed over the world. So, we got to a place where we said we just can't manage this. It's not in our DNA. We don't know what's going on. We're not paying attention to it. And we ended up um selling it off to this company whose whose founder I've known a very long time. It's a great guy. This company triple.dot out of the UK. They bought the whole thing and that was important to us. We didn't want to go through and say we we own 15 studios. We're going to sell off one at a time just to make a profit. So, instead we just priced it down enough to make it enticing to a company like triple.dot to just take the whole thing off our hands. And we did that. I believe that was about a year ago. From beginning to end, I want to say five years roughly. You have to have one of the craziest like employee to market cap ratios. So, how are you able to run a $150 billion company that's making what, a couple billion a year in cash flow? I mean, run Okay, so 5 billion or there a little bit more uh per year with 400 350 to 400 employees in the main business. How are you able to do that? Why'd you tank in 2022? Okay. Did you go public So, wait, go into more of the thinking cuz this sounds like it's going over several years from 22 to 23 to 24. We're only talking about the ads business. We're not talking about the other uh you own like a SaaS company that I think has Let's Let's just focus on this. So, now you're you know, 350 to 400 of them today. What were you back then? That's excellent. Do you think there's a certain size, like a limit to how many If you want to If you're running a company, you want a team of all A players. Do you think there's a an upper bound to how many employees you can have? So this leads me to another thing that I find remarkable about you that even to this day, if anybody wants to hire anybody in the company, they have to get an approval directly from you. I really think what's remarkable to you is you just took this insight that everybody agrees on, right? That the value of your company is just the talent, the level of talent that you're you have in your employees, your team. You only want to work with A players. There is some kind of upper bound to it. I remember the reason I asked you the question earlier is because like Steve Jobs said that he had only ever seen one company in his entire history and his entire experience that was all full of A players. He says it was Pixar. He said but they had 400 employees and at the time Apple had like 3,000. So he says of course I have 3,000 employees, they can't all be be A players. But what's remarkable is everybody agrees on it but no one actually does the the difficult job of like making sure that you don't alienate these A players and and essentially surrounding them with Bs and Cs and other and other less talented people because you jump to the right conclusion. They're going to leave and in many cases they'll just go start their own company. So, we've now spent many hours talking about the way you think about building your business. The way I would describe it, if I had to like distill it down to just handful of words, I would say it's ruthless efficiency and like hyper competence. Is this in response, cuz it's not common, especially in the startup VC world where it's just like they just throw money at everything, they have thousands of people or over hire and everything else. Is is your like ruthless efficiency and hyper competence in response to something or is this just how you've always been? I'm curious what happened to your better funded competitors that started either around the same time or after yours? The reason I ask is I talked to Michael Dell about this. You know, there's a million people doing what he was trying to do, and in many cases they were doing it in the same city that he was trying to do. All better funded than him. Some had raised, you know, I think over a hundred million dollars. He smoked every single one of them. What happened to these competitors you mentioned earlier? You know with your if your Axon model is good or not immediately, right? Cuz you're like essentially the in you're in the business of selling revenue, I think is the way you put it, right? So, explain when you knew it was working the way it is now and what was happening before. Like what was the the model before that? I remember seeing a graph this like inflection point. When somebody might have heard you say, "Hey, you know, we we're not we don't we don't have like specific market cap goals, but we do have a plan in place for some of the key players for compensation that goes all the way up to like a trillion-dollar market cap." Might sound a little crazy, but not if it seems like you just have a ton of tailwinds, like AI tailwinds for the specific business, not only the actual part what the product is, but your like ruthless efficiency and hyper competence with only like having a small team of A players. Obviously, you have somebody who really gets it, they could be it's not one employee, you don't really have 400 employees, you could have 40, you know, them doing the work of 4,000. Explain like how just even the last like three or four years, how AI has transformed the way you're running the business and the impact on the business. So, you go from gaming to e-commerce. You literally just My next question was going to be like, "Well, what other kind of businesses do you want to expand out to?" You really believe that you can do this for every single segment? When you have this many people who are playing games and they're middle-aged, the only limit is the technology for targeting and the customer on the other side. And I fundamentally believe the biggest opportunity we have in as a business is help the small to medium-sized businesses. We don't have a sales force, so eventually we'll get the large enterprises cuz they're going to come to a platform as big as ours, but we're not out there selling them. We want to help the small to medium-sized businesses. What made us really successful in gaming was going to the companies that really didn't have much support that most of the other businesses are getting, like they're 10 people. Let's work together, let us grow your business. There's a company that recently exited out of Turkey in mobile gaming that I believe was like 10 15 people and sold for a billion dollars. They sold under 1 year from launch for a billion dollars. Almost all of their business growth on the marketing and monetization side was built on our platform and they had a fantastic game that was super innovative around that, but because our platform's built for this, we were able to help a company like that and that makes us feel really good. So, if we can translate that into these other categories, the local laundromat or to the company that is spins up a Shopify store and is selling lipstick and has some cool spin on selling lipstick and they launch on our platform, they can really ramp up, we'll feel really good about ourselves. Eventually we hope to tackle the consumer market and enterprise market. There's no reason not to cuz again on the other side of your billion users and they're adults, they have jobs as well. If we get to the point where our technology can do the targeting across every consumer category, I'm pretty sure it's going to have no limit when it comes to the enterprise side as well. Yeah, thanks for having me. This was really cool.