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Joe Lonsdale on why Oscar is going public via IPO versus SPAC

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Joe Lonsdale, 8VC founder who also co-founded Palantir, joins Yahoo Finance Live to discuss his firm’s move to Austin and the concept of creating a new city for tech, Palantir’s place in the market, and why it makes sense for Oscar Health (which 8VC backs) to go public via IPO instead of a SPAC.

Video Transcript

BRIAN SOZZI: One of the hottest tech stocks around this year is Palantir, which is up a cool 24% year to date. The gains come as investors poke around the market looking for the next big transformational name in tech. Let's welcome in Palantir Co-Founder Joe Lonsdale. He's also the founder of tech VC firm, 8VC.

Joe, good to finally speak with you here. Before we get into your views on where tech might be going in the future, talk to us about Austin. You're one of the first tech leaders to say, you know what? We had enough-- we had enough of California. We're moving to Texas. How is your team on the ground? What do you make of the current situation there?

JOE LONSDALE: Well, it's definitely been a rough week. I talked to the governor a couple of days ago. He thinks everything will be back to normal in a couple of days. But I mean, they haven't seen weather like this almost ever. They clearly need to prepare the power production for a really serious winter for next year so it doesn't happen again.

Other than the last week-- it's like how is the play [INAUDIBLE]. This is like another, you know-- other than last week, it's been great there. We really love it there. There's great people, there's great business climate, there's great entrepreneurs, there's great barbecues. So we're really enjoying Texas.

BRIAN SOZZI: I know, great barbecue, indeed. I was reading a couple stories on you, and you have floated the idea of wanting to create a new city. It's something that I've talked to recently with Walmart's e-commerce chief, outgoing e-commerce Chief Marc Lore. This new city, and you want to maybe create in Austin, what does that new city look like?

JOE LONSDALE: You know, one of the things we do as technology entrepreneurs is you're constantly looking for conceptual gaps in the world. You're constantly saying, how does this work right now, and how could it work if it was done in a way using all available common sense and technology and the best processes?

And so, you know, what we're seeing with cities is there's just so many better ways to run cities than the ways they're run right now. And I think there's probably a lot of different ways you can get 5 or 10,000 acres within less than an hour of Austin or less than an hour of other major cities. So you want to do it within a good state, a state that lets you have a lot of flexibility, that you can do more innovation if there's less regulatory barriers, less committees to deal with, obviously.

And so-- and you know, there's just a lot of different things you could due. You could use the Boring Company with Elon and fix transportation. You could use APIs for permitting so it's really fast and easy to build. You could bring in all sorts of people and use new green technology. So there's a lot of fun ideas we have for what to do there.

JULIE HYMAN: Hey, Joe, it's Julie here. I want to switch to some of your investments. And yes, you're well known as co-founder of Palantir, but I got to ask you about one of your companies that you've invested in that had some news this morning. That's Oscar Health. We learned that it's going to be filing for an IPO, sort of tech-forward health insurance company.

And I'm curious why IPO and not SPAC right now, since that has become such a popular way for companies to go public. I mean, no, but seriously, as you're weighing exits and consulting with some of your companies in your portfolio about this, how are you making those decisions?

JOE LONSDALE: Yeah, well, you know-- so I guess we've had about eight companies go public if you include Oscar over the last several months. And I think three of them have done the SPACs. You know, I'm pretty agnostic. If you have a really good group running a SPAC that's going to add value and if they're able to bring in good long-term investors, that's positive.

A lot of SPACs, you're seeing a lot of short-term investors. And I think these companies don't want to have to deal with the volatility of people jumping in and jumping out, looking for a quick game. So I think it's really important to find good long-term investors if you're going to do the SPAC. I think the SPACs give a little bit too much money to the sponsors. I think it's a little bit cheesy.

So you have to make sure they're paying enough and they're not making too much money off the company for ways that aren't helpful. But I mean, overall, both methodologies work. I think SPACs are a good thing overall. It's great to get more companies public and to make them available to retail investors. So overall, it's a positive trend.

And if you get the rights back, it's good. But you got to be really careful which SPACs you're dealing with.

MYLES UDLAND: Hey, Joe, it's Myles here. I'm curious right now, from your perspective, just what are you most interested in? Because as someone who is outside of tech and I'm trying to figure out what the conversation is, it seems to me, and I'm assuming I'm wrong, that it's about-- it's about SPACs. It's about where you're going to move. It's like a metatake on what people are actually doing in technology.

JOE LONSDALE: Well, yeah, you know what, I think-- that's a great question. You know, it's like, what do people talk about versus what are people actually focused on? I think the thing you're actually focused on in my world is where are the big gaps in the world? What's possible now that wasn't possible five years ago? What are the worthwhile problems to solve that are going to create value?

So we're looking at a lot of things in logistics, in bio, in health care. Oscar is a great example of a company that saw a lot better ways for health insurance to work, a lot better ways to coordinate with providers using data, a lot of better ways of using telemedicine to engage with their clients and to save costs by having certain things be over telemedicine.

Because of what they've done, they set an example for the industry where there's a lot more telemedicine in certain areas. And they were the first mover of getting free telemedicine, which actually saves money overall, makes it better. And it's just all these different ways you can use data and technology to improve processes and industries.

And so I think the big thing we're talking about is, where are those gaps now? Where are the big gaps are going to be over the next few years, thanks to what's happening with the kind of core of the technology world? And I think the renaissance in biology, I think health care, I think logistics, I think defense, these are all areas where there's big gaps.

BRIAN SOZZI: Joe, do you think the market understands what Palantir does and what its future might entail?

JOE LONSDALE: You know, it's hard to know what the market understands or not. But it seems like they at least appreciate Palantir a little better than they did when it first came out. You know, what Palantir has done from a technology perspective is extremely difficult. There's probably over $100 billion of areas that used to be IT services that could be addressed in this much higher margin way as a product.

And so Palantir is just getting going versus the size of the space it's going after. And I think people appreciate that this kind of IT data infrastructure is solving hard problems for big governments, big companies with IT data infrastructure. It's a very viable area. And it's pretty clear Palantir does things there no one else can do.

So at least the market is starting to understand that. I think this is a very esoteric area, and so obviously most people don't know the specifics of it. But they see the top people and the top talent behind it and the growth. And they see the network effects in the areas it's operating. So I think the market is starting to appreciate it, which is great.

JULIE HYMAN: Joe, I know that 8VC exited its Palantir stake. I'm curious if you still own it personally? And also--

JOE LONSDALE: Yeah, so we didn't actually exit it ourselves, we distributed it to the investors who invested with us. And so everyone gets to own the shares directly as opposed to through our vehicles. As a founder, I still own a lot of shares as a founder. I'm very bullish on the company. I intend to own a lot of shares in the company for the next 10 to 20 years.

I have no idea where the price goes over the next year or two. That's not what I get paid for in general. But I do know this is a very important company that's going to grow a lot over the next decade. And it's still attracting a lot of the best people in the world and still solving some of the hardest problems.

So I definitely can't tell you about the stock short term. I can tell you it's a core holding for me for the long term that I'm very proud to keep in the portfolio.

JULIE HYMAN: So you held on to your shares through that lockup expiry, which-- where we saw a little turbulence last week?

JOE LONSDALE: You know, yeah, I held on to almost all of them. I started it when I was 21 years old, and I was middle class when I started it. So you need to pay for your house and stuff. But in general, I've kept most of my old things, yes.

JULIE HYMAN: Helps to do those things, doesn't it? All right, Joe, thank you so much for spending some time with us today. Joe Lonsdale is the Palantir co-founder and also founder of 8VC, which has quite a broad portfolio of different tech-related investments. Hope to see you again, Joe, appreciate it.