Overheard

• "Will he go into destroy mode if I say no?" That was the text from Instagram's founder Kevin Systrom to Benchmark investor Matt Cohler unveiled this week as part of the big antitrust hearing. (Mark Zuckerberg's destroy mode was likely, Cohler said.) It's a fascinating look into how M&A deals come together and the role investors play in giving advice and guiding founders — and a reminder that texts aren't as private as you think.
• "microsoft....... notice me" The funny Twitter plea came from Vine creator Dom Hofmann, who has a newish startup called Byte. It's just one of a growing number of U.S.-made TikTok alternatives, which may be more appealing as the Trump administration considers ordering TikTok to sell its U.S. operations. Microsoft is reportedly the surprise suitor.
• "People will invest less if they think they are going to be making less money," health entrepreneur Alexis Borisy told my colleague Shakeel Hashim. Biotech investors are pushing back against a new Trump order that would cap drug prices (and innovation?).
• I apparently missed one piece of criteria in last week's micro solo capitalists column. As Paul Andersen pointed out, there's also a benefit in having a three-letter Twitter handle, like Sahil Lavingia's (@shl) or Jeff Morris Jr's (@jmj). Too bad @biz will always be taken.

Biz on Biz

The emerging network of Square founders

Startup "mafias" are the stuff of legend in Silicon Valley. It started with Fairchild Semiconductor and the Traitorous Eight and continued with other networks like Netscape and Oracle. The best-known example, thanks to a Fortune photo shoot, is the PayPal Mafia, a group of early employees who went on to create companies like YouTube, LinkedIn and Yelp.

• But the idea of a startup mafia is a term that's often used too loosely and is over-hyped, says Founders Fund investor Keith Rabois, one of the original PayPal mafia members. He defines a startup mafia as an alumni network that's generated at least three or more truly iconic companies worth billions of dollars.
• "They're extraordinarily rare," Rabois told me. "It's about once in a decade that you see a substantial network, a so-called 'mafia,' that turns into a second- and third-generation successful founder network."

While investors have been excited about potential Uber and Airbnb alumni networks, complete with their own funding groups, there's a new emerging startup mafia: the alumni of Square.

• Rabois, who used to be Square's COO, argues that the creation of a "mafia" isn't tied to the success of the company, but the type of people it attracts. He said he would have conversations with Jack Dorsey about how to attract more founder-types to the company and encouraged entrepreneurs to build within Square (hence the development of things like the Cash app).
• In the unicorn category are companies like Opendoor ($3.8 billion valuation) and Faire ($1 billion). The founding team of the real estate startup included Rabois, who used to be Square's COO, and Ian Wong, who is now Opendoor's CTO. Wholesale marketplace Faire was started by Square alums — CEO Max Rhodes, CDO Daniele Perito, COO Jeff Kolovson and CTO Marcelo Cortes — and 10% of the company is ex-Square employees, said Rhodes.
• DoorDash is arguably a Square mafia company after its co-founder Tony Xu interned at the company in 2012 before starting the food delivery service valued today at nearly $16 billion. It's since hired a lot of Square employees and even purchased Square's food delivery business, Caviar, exactly a year ago.

Then there are the smaller Square mafia startups that are beginning to gain traction, and many have some association with fintech. "It's not just pure play fintech, but applying some sort of interesting innovation to a different industry," Rhodes said.

• A (non-exhaustive) tally of emerging companies includes: rent-to-own home startup Divvy Homes (Adena Hefets), ISP provider Common Networks (Grace Chen, Jessica Shalek, Mark Jen and Zach Brock), identity verification platform Persona (Rick Song), credit for new business owners company Hatch (Thomson Nguyen), design studio 1.0 (Robert Andersen), remodel project management app Punch List (Kyle Zink), crypto platform Anchorage (Diogo Mónica and Nathan McCauley), anti-money-laundering startup Hummingbird (Joe Robinson, Jesse Reiss and Ryan Gerard), banking app Indie (Lauren Myrick and Connor Dunn), micromobility software Ride Report (William Henderson), and dental benefits platform Level (Paul Aaron).
• One of the key values of Square was learning to break the rules, Rhodes said. And that includes questioning the financial system that isn't as perfectly designed and rationally regulated as many people think. "The thing we learned at Square is that's not really true," he said. "There's a lot of things about the way that it works that are kind of legacy and don't really make sense, and there's a lot of opportunity in taking on a lot of the messiness of the financial system and the risk associated with it in order to make things better for customers."

The Square startup growth spurt has meant growing investor attention, too.

• Square alum Ayo Omojola and two current employees, Rohini Pandhi and Nicolas Chinot, are currently raising an investment syndicate to invest in Square alumni's companies or other payments-related companies that are mission-aligned with Square.
• Rhodes also was able to piggyback off Square's institutional investors like Sequoia and raise from firms that already knew the company and could do a lot of backchanneling on Rhodes and other company leadership.

Whether the emerging Square network turns into a "mafia" as iconic as PayPal's remains to be seen. After all, this could end up being another one of those articles that calls an early mafia network before it really develops into anything — or, these companies could turn into another Silicon Valley legend.

Inside Track

• Finding a startup idea is never easy. Run The World founder Xiaoyin Qu went on a journey to launch her online events platform — a month before COVID hit the U.S.
• LPs are paying a premium for experience with most money going to follow-on funds, says Sapphire Partners' Beezer Clarkson. Here's what she says investors need to know about fundraising this year.
• Instead of recognizing CEOs and founders, Floodgate released the Anchor List to highlight the 24 best operators, of which several come from DoorDash.
• Coatue's Dan Rose worked with Jeff Bezos in 2004 to develop the Kindle. He wrote down the 10 lessons he learned, but also dropped the bombshell that Bezos almost died in a helicopter crash at the time.

Need to Know

• Apple wants companies like ClassPass and Airbnb to pay up. Startups that scrambled to turn their services virtual during the pandemic are now being told to pay Apple's 30% revenue commission on apps. It's a practice that Epic Games CEO Tim Sweeney calls "absolutely abhorrent."
• SPACs made up one-third of IPO filings this year, according to Silicon Valley Bank, and there may be more. The Wall Street Journal reported that fintech startup Affirm is preparing to go public, and a SPAC could be on the table.
• Anthony Levandowski could face up to 27 months in prison. He agreed to plead guilty in March to taking documents from Google to Uber.
• From Protocol: Meet the VC who raced this year's (virtual) Tour de France. Threshold Ventures' Kristen Faulkner raced four out of six stages to help her team win first place.
• This week in VC history: Former Facebook CTO Bret Taylor launched Quip seven years ago as a "mobile word processor." It sold to Salesforce a few years later, and now Taylor is COO and "the future of Salesforce."
• And your weekend reading: From a rubber chicken bong to Jesus shoes, MSCHF is a venture-backed startup that's somewhere between an art collective and an amazing internet cult.

Five Questions With...

Andreessen Horowitz's Anish Acharya

What's an idea you wish you had first?

One of my favorite ideas is prize-linked savings. It's a great example of social and psychological engineering to encourage positive financial choices. The simple concept is that every person who saves money in a given month is entered into a "lottery," where the winner receives the aggregate interest generated in that given month. Because these are small dollar amounts, the interest any individual account generates isn't meaningful, but in aggregate it can be. This idea has its roots in post-World War II England, where citizens were encouraged to save by purchasing premium bonds, and has been employed with great success many times since. I love this idea because it exploits our cognitive biases for our benefit!

What's one startup or product that failed that you wish were still here today?

One product that I miss a great deal is the cassette tape! The tape had many magical qualities, among them: For the first time, listeners could (easily) participate in the creation and distribution process by making their own mixtapes. This ushered in a whole generation of creativity (and awkward romantic gestures, but that is a different story).

More importantly, the medium doesn't lend itself to skipping ahead or behind in the way that playlists, CDs or vinyl readily do. So when you bought an album on cassette tape, you had to listen to the work linearly and largely in its entirety, which allowed artists to express themselves in ways that are much more interesting than they can on a radio single.

What's a secret obsession of yours that most people don't know about?

As you might have guessed, I'm a huge music person, and I've been spinning records as a DJ for about 25 years. I have an obsession with vinyl from the '90s, so you'll often find me either digging for records at the local record store or, more recently, online.

What's one of the worst predictions you've ever made?

I predicted that Android would be a huge flop after seeing the G1. It was a much, much worse product than the (original) iPhone! Despite being late to the game, Google caught up through speed of iteration and picking the exact right place to enter the value chain, which I think is a testament to the fact that being right often matters more than being first.

What's one problem you wish an entrepreneur would solve?

Music has the best product and the worst business model — artists end up capturing so little of the value they create both directly in the work they create and indirectly in the cultural influence they wield. So building a product or platform that allows artists to own and monetize their music and cultural influence is a product I'd love to see in the world.

The other product I'd love to see is a better rewards card for non-prime consumers. Consumers with prime credit scores (most of whom have rewards cards) effectively get a 2% "rebate" on all their purchases in the form of rewards, while those with non-prime credit do not. That means that everything is effectively 2% more expensive for folks with poor credit, which feels like a fundamental inequity that needs to be solved through product and technology.