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After raising $200M in February... we raised another $445M in July! Your favorite computer company is capitalized to the gills--enough to weather the supply chain upheaval even! Come for co-founders Steve and Bryan describing the raise; stay for tax, debt, and credit talk with Scott Orn.
Previously, on Oxide and Friends:
Some of the topics we hit on, in the order that we hit them:
- Oxide blog: Our $445M Series D
- Hacker News: Our $445M Series D
- Hacker News: Oxide Computer raises $445M (SEC Form D)
If we got something wrong or missed something, please file a PR! Our next show will likely be on Monday at 5p Pacific Time on our Discord server; stay tuned to our Mastodon feeds for details, or subscribe to this calendar. We'd love to have you join us, as we always love to hear from new speakers!
Creators and Guests
What is Oxide and Friends?
Oxide hosts a weekly Discord show where we discuss a wide range of topics: computer history, startups, Oxide hardware bringup, and other topics du jour. These are the recordings in podcast form.
Join us live (usually Mondays at 5pm PT) https://discord.gg/gcQxNHAKCB
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Oh, hey, guys. I'm talking at my desk.
Bryan Cantrill:It's great. Are the green undercarriage lights on on your desk, Scott? Just give us visual.
Scott Orn:Actually, Alan complained about that the other day because I guess it was throwing off a bunch of light at him. But that was Steve's doing actually, by the way.
Bryan Cantrill:Yeah. I mean, I think that's
Steve Tuck:Well, in fairness in fairness. I mean, I changed the color from red to green. Okay. It's not like...
Scott Orn:It was actually user error because I didn't even know I turned them on. Just to
Steve Tuck:be clear, like, I I I did not turn on lights. I took the red light that was glaring in my eyes to a nice oxide green.
Bryan Cantrill:Okay. Now you seem to be quoting directly from the police report that Alan filed with every DVD.
Steve Tuck:Okay. Alan Alan was was not happy.
Scott Orn:Yeah.
Bryan Cantrill:Alright. We are... I think we're I think we're here. We got Steve. Yeah.
Bryan Cantrill:Steve's here in the litter box with me, Steve. Series D is why we're here. Actually, or should we- I gotta
Steve Tuck:stop meeting like this.
Bryan Cantrill:We do need something like this. Should I just segue as in a little bit? Because I was... So we did the Series D and then I went very much off the grid to up by Hetch Hetchy in the Yosemite Wilderness. Adam, have you
Adam Leventhal:ever been up there?
Bryan Cantrill:Have you been up to Hetch Hetchy? No. You know, I'm gonna really recommend... Hetch Hetchy was a very... So a dam that provides all of the water or much of the water in San Francisco.
Bryan Cantrill:Very controversial when it was built. The really extraordinary part of the Yosemite Wilderness that is not that traffic. I'm gonna really recommend it. But it did the... So we were on a very remote 10 mile stretch from Hetch Hetchy to this lake, Lake Eleanor, where they built a dam starting in August 1917, and they were done ten months later.
Bryan Cantrill:It was really very remarkable is what I'd like to say. It was very inspiring for building big things is what I'm saying. And maybe for conquering the environment in a way that is no longer considered to be appropriate in big companies. So don't know where I'm going with that one. Other than that, I've been very much off the grid.
Bryan Cantrill:It Beautiful country. It is beautiful country. Yeah. It is. It's really outstanding.
Bryan Cantrill:So I'm not sure, you know, I did not keep up with the social medias after about sundown on Friday, but it feels like we were kind of done on Friday. Friday was the sun rose and set on our Series D investment or raise rather.
Steve Tuck:Certainly on Hacker News.
Bryan Cantrill:On Hacker News. Did it did it go anywhere else?
Steve Tuck:I know. Mean, there were the, you know, the the weekenders kinda pick things up on LinkedIn.
Bryan Cantrill:Oh, yeah. There we go.
Steve Tuck:But, yeah. Hacker News Hacker News is pretty quiet.
Bryan Cantrill:Alright. So how how do we wanna, structure this? So we we announced that we we did our walk and talk. Adam, what did you think of our walk? Our our our...
Bryan Cantrill:What's the plural of walk and talk? Walks and talk?
Adam Leventhal:Well, I mean, did you do a walk and talk? Because I saw you guys did a Friday FAQ together.
Bryan Cantrill:Yeah, I did a walk and talk.
Adam Leventhal:Did I missed it? Because all I saw was Steve's nodding walk.
Steve Tuck:You saw my talk and you noted in the comment section, there is no walk.
Adam Leventhal:Yeah. I was like, what is this? I don't even, I don't even know what that format is where you just stand in front of a screen and talk. Yeah. Know.
Adam Leventhal:Confusing to me. Doesn't... It's No. Fair. It's nonsense.
Adam Leventhal:And Bryan,
Bryan Cantrill:I I Well, I confess
Adam Leventhal:The algorithm failed me.
Bryan Cantrill:I'm a little cross following.
Adam Leventhal:Give me the walk and talk.
Bryan Cantrill:That... It didn't give you the walk and talk. There was one astute observer, also an investor in Oxide. Noticed that a car blew the stop sign in a crosswalk that I was in and was a little concerned about me getting run over by a car. That was a reasonable concern on walk and talk.
Bryan Cantrill:So that would have been a gory walk and talk to end And
Scott Orn:You would
Adam Leventhal:have something to show the police, I guess. Something to show
Bryan Cantrill:the police. It feels like it would have done... It it feels like it would have done numbers.
Steve Tuck:It would have done higher numbers for sure.
Adam Leventhal:I mean, I mean, it feels like that's I think he would have been embarrassed, like, taking that into... That footage into the police station, and he did show it done for a $100.
Bryan Cantrill:Can you imagine? Hey, everyone. Hey, everyone.
Steve Tuck:Here again.
Bryan Cantrill:Yeah. I... Yeah. Wow. We we raised money again.
Bryan Cantrill:You can just be like, you know what? Solve your own problem. I... You know what? This guy...
Bryan Cantrill:This is actually justified as it turns out. There's there's actually some... There there... There's some d bag riders in the law that allow this driver to do it. The driver could hear you is what the police...
Bryan Cantrill:What I bought this was. The driver could actually hear you from afar. It's like, hold on. I'm gonna take another lap. I'm gonna get him this time.
Bryan Cantrill:No. So it was... We were... I did do the walk and talk and Steve did his talk and talk.
Steve Tuck:Stand and talk.
Bryan Cantrill:Stand and talk. Which were... Did you get anyone calling out over that on the... I got I got a lot of a lot of people like these...
Steve Tuck:Yeah. People love
Bryan Cantrill:it. People love the fact that it's like the... I mean, it's not polished.
Steve Tuck:It's the... No. No. It is definitely not that. Not accused of being polished.
Steve Tuck:But they like they like hearing us describe why the heck we raised again.
Bryan Cantrill:Okay. So why did we raise again?
Steve Tuck:Because we did do this exact episode probably what? Six, seven months ago?
Bryan Cantrill:Yeah. I'm sure it feels like too recent.
Steve Tuck:And even then we were describing... We had to describe why we were raising again.
Bryan Cantrill:Right.
Steve Tuck:Because we had talked about raising the Series B in, what was that? October? Something talked about it?
Bryan Cantrill:Yeah. Yeah. Yeah.
Steve Tuck:So why did we raise again? Because we, when we were raising the Series C, we were describing expecting to be profitable and having you know being well capitalized. Yes. Having raised the Series B. Yeah.
Steve Tuck:And wanting to ensure that we could show the broader enterprise market we were here to stay and that we were not going to get acquired and that we were going to be well capitalized to go build the business across manufacturing supply chain everything else. We were staring at some pretty big contracts we had to go fulfill and, so it made sense. So we raised $200,000,000 Series C and then, again would not be too far into the future that we were contemplating raising a Series D which was not necessarily our idea in that we were not out seeking to fundraise. But we had yet bigger orders. We had even bigger orders to go fill much much bigger.
Steve Tuck:And so our backlog had increased substantially and we were furiously building out manufacturing capacity and expanding on our supply chain commitments. But it was sort of the intersection of the investment community, very interested in oxide. The Us looking at what were going to be some very substantial supply chain needs and ensuring that we had the right capital to go be opportunistic and also to be able to get kind of the financial infrastructure in place so that these next much larger orders were going to be achievable.
Bryan Cantrill:Yes. And we were able to raise quickly, fortunately. Got a great lead in Eclipse. Ended up raising a little more than we intended. Yes.
Bryan Cantrill:Because we had more investor interest than
Steve Tuck:we could
Bryan Cantrill:accommodate. And that way, you know, people describe that as having a good problem to have. And it is kind of, but it was also, you know, we, for us, we really wanted to reward those folks that had been early believers in Oxide. And it's it's a little disappointing when you can't give them the allocation that they want in a round. It kinda sucks.
Steve Tuck:It was... I mean, on the one hand, it was great because we had a lot of long term investors that wanted to be meaningful investors in the next round which is always terrific. That alone had us pretty deeply oversubscribed before we even got to what was a bit ironic, but, you know, lots of other investors, some of which we had met in the Series C and A and B.
Bryan Cantrill:Oh, yes. Yeah. All they... All all of those folks come back.
Steve Tuck:All came back.
Bryan Cantrill:Yeah. And we had one extremely prominent investor who shall remain nameless. I actually only like made passing reference to the fact that they had passed on us in earlier rounds. I mean, he was very funny about it. He's like, no, no, I get it.
Bryan Cantrill:I get it. We deserve it. I... Like, give me my spanking. I mean, he was really like kind of into it.
Bryan Cantrill:He really wanted me to like... And like, you
Steve Tuck:know No. No. I mean it.
Bryan Cantrill:Yeah. No. I mean exactly. Hit me. Harder.
Bryan Cantrill:I deserve it. Which is like... That stuff is actually... I don't... I find that to be, like, less emotionally satisfying than a past me would have thought it would be.
Steve Tuck:Yeah. For
Bryan Cantrill:sure. I thought a past me would be disappointing without, like, it doesn't it doesn't... It's not that vindicating. No. It's like that's...
Bryan Cantrill:I I don't... I didn't move the needle that much. Well, no.
Steve Tuck:Especially, I mean, because you're you're earnestly wanting to allocate as much capital to these investors that have been part of this build process for years as you can. Yeah. And every dollar you don't allocate or you allocate to someone else is a dollar away from someone who's been a true believer from the beginning. And so I think you know we had to figure out like what is the rubric for any new capital that we're going to squeeze into the cap table in this round. And the you know we were suffice it to say kind of traditional venture capital at this stage knew that did not know us and had not really spent time with the company, was going to be bringing less new value than, than investors that are looking at Oxide now as the company that we want to go build and eventually become which is where you know we are still in the early stages and in the limit we anticipate being a public company.
Steve Tuck:And and you know investors that invest in private but also invest at public, at IPO and invest through and into the public markets. So that they kind of designated as crossover investors and then strategic investors.
Bryan Cantrill:Right. And when you were... We were looking at those crossover street... Crossover investors, we were looking at buy, hold, buy kind of investors, which is not everybody. And we...
Bryan Cantrill:I think, it didn't, Pierre Pierre Labonde, the
Steve Tuck:Oh, god. Yeah. He he So great.
Bryan Cantrill:He had some great words of wisdom for you on this one. Didn't he? In terms of, like,
Steve Tuck:think Yeah. We're meeting with crossover investors, and, and and I think getting in in in our minds, like, oh, these are the investors that, you know, buy at IPO and then they're they're big buyers in the public markets. And I had the privilege of having lunch with Pierre and, was kind of sharing our enthusiasm for, oh, the crossovers, you know, versus, you know, the the the classical, you know, new entrants that would show up and and be in the in the more classical VC stage. And I mean, so so typical of Pierre. He's like, Steve, do you know what crossover investors are good at?
Steve Tuck:And I'm like, uh-oh. Oh, yeah.
Bryan Cantrill:Right. It's not good. Apparently Are you... And and those are you... I mean, obviously, there's no good answer to this question.
Bryan Cantrill:I mean, you really just wanna be like, I... You don't wanna... It's like, okay. Clearly, rhetorical question.
Steve Tuck:100%. So for
Bryan Cantrill:a joke. Right?
Steve Tuck:Yeah. Yeah. So so let him continue. And he's like, they're good at telling you what you want to hear. I'm like, oh.
Bryan Cantrill:Oh. Okay. They're they're good at that, actually.
Steve Tuck:And then he said, you know, an investor, any investor, will sell when they believe the price is the highest it will ever be. And, again, you know, and I I tried to kind of rebut that a little bit of like, yeah, but, and I think there is nuance there for sure. But it was I think there is but I think It was entertaining.
Bryan Cantrill:I think we also... I mean, Adam, some of these some of these crossover investors are very clearly at a high trophic level in the capitalist food chain. I mean, this... You you just feel like prey Yeah. More than with others.
Bryan Cantrill:You can see
Steve Tuck:the dorsal fin pointing out of the back of the suit.
Bryan Cantrill:It's... Oh, whoops. That that thing... That that's supposed be off camera. That dorsal fin that you're not supposed be able to see that.
Bryan Cantrill:Is it... I think what was our... I mean, a part of our rubric was how well do you know the company? Because we... Just using that as kind of a rubric for how much you believe in the vision.
Bryan Cantrill:Like if you view us purely as financial return... Because when the financial returns are good, of course everyone's interested in investing because the financial returns are good. So you want you want someone who's gonna have a deeper sense of conviction than just the financial returns. Who's gonna see that the financial returns is coming out of having made the right strategic bets and technological bets and so on.
Steve Tuck:That's right. Get... Wants to get in the details. Is is curious about the details. And, and fortunately, over the last couple of years, we had met in a few investors that met that criteria.
Steve Tuck:And one of them that we met years ago was, Atreides.
Bryan Cantrill:Atreides. Yeah.
Steve Tuck:And we really, really liked them. We met them a couple years ago.
Bryan Cantrill:Actually, when we say we met them, I think we're we're not actually giving someone their due. We were introduced to them by Alex Bienaek. Alex. We love Alex.
Steve Tuck:Love Alex.
Bryan Cantrill:And Alex is a great kind of... Alex, if you're out there, you know we love you. Alex is a great example. And Adam, you know Alex. Mean, we've had...
Bryan Cantrill:Yeah, yeah, yeah. Alex is great. Alex is a classic example of an investor who have been passed on us in our seed. But the reason you kind of keep these folks close and excited is you just never know who they're gonna introduce you to. And at one point, Alex is like, You know, you guys should really meet the attorneys folks and, introduced us to them, which is great.
Bryan Cantrill:So, I did see... Shot us a note over the weekend. He's like, oh,
Steve Tuck:Yeah.
Bryan Cantrill:I guess that was a good intro. I guess I was like, so my finder's fee, you're gonna find to be extremely reasonable given the situation. Might wanna check your mail box. That's right. But very grateful for that intro.
Steve Tuck:Very grateful.
Bryan Cantrill:And again, a good reason to always take the meeting and always... You will wanna... Even when people pass on you, that's not the end of the relationship.
Steve Tuck:And again, but this was a firm that we got to know over years. And, you know, it doesn't necessarily take years to get fully warmed up on Oxide and get to fully appreciate what we're building and why, but, it it was it was helpful for us also to get to know that team.
Bryan Cantrill:Well, and have them come to the office since I know it's all... So when those guys were... I mean, I think they had an unfair advantage. For sure. Because we like them and they like us.
Steve Tuck:We met with, like, every crossover investor. Most of the of the the the the prominent crossover investors. There were
Bryan Cantrill:so many of these crossovers. I could have mentioned it casually to someone. They're like, oh, oh, oh, be careful. Be very careful. Be very careful with them.
Bryan Cantrill:You're like, okay. Okay. We will be careful. Not with the tradies, with these other folks. So Yes.
Bryan Cantrill:There's there's some sharks out there. The the... There's some sharks in the waters for sure. But we landed on a tradies as a big new investor. I feel like we should at least mention a new strategic investor in terms of AMD.
Steve Tuck:Yeah. Well, I mean, this was the other part of the consideration, which was and or a strategic investor that is going to be extremely helpful either technically product or from a customer perspective and it should be said at tradies actually kind of fits both. Yes. They are a crossover investor and they also are really strategic. Yes.
Steve Tuck:But, but AMD?
Bryan Cantrill:AMD, always a bridesmaid, never a bride with us. So we... AMD had been, I don't think it's revealing any great confidence to say that they had been... That there had been some leaving at the altar several times. They were almost an Oxide investor.
Bryan Cantrill:Almost an Oxide investor many times over. So when they really wanted to become an Oxide investor, it's great. But I was also like, okay. But they were very, very serious about it. You were about to be headed, you were headed off the grid.
Steve Tuck:That's
Bryan Cantrill:right. And you were taking your family and headed up into the hills and you were gonna be unavailable. You and I both felt like, I don't think it's gonna be an issue because there's just no way they can move fast enough to get across the line while I'm gone.
Steve Tuck:Would have been like a couple business days.
Bryan Cantrill:And, you know, you traditionally call me from, it's Mama Mia's, is that the
Steve Tuck:Mia's.
Bryan Cantrill:Mia's. Mia's. Mia's. The... If you're going up Sonora Pass, the kind of the last place
Steve Tuck:Just past Cold Springs.
Bryan Cantrill:Yeah. The the last place you have cell reception. You you give me your kind of last will and testament before you head off the grid. And I swear it was moments after that that that AMD came inbound and they were just moving very quickly and they've got... They wanna invest more than they originally wanted to invest.
Bryan Cantrill:And a bunch of things were just like, yeesh, normally I would be consulting with Steve. But anyway, all worked out great. Worked out great. Really happy to have AMD on the cap table. So it was...
Bryan Cantrill:And round then to being a bit bigger than we wanted, but only a bit. And really terrific set of investors. Now we have the issue of, so when is this thing announced? Any comment? Feels like a trap.
Steve Tuck:Now over to you. Well, so there is a kind of a well worn conveyor belt in startup land and investor land that, one raises money and then they involve, a team of... A video production company. Yeah, there you go. A video production company and stars and I mean, of these things.
Steve Tuck:Big ad budget.
Bryan Cantrill:Do you watch any of these? Adam, have you been watching these? Like the, I mean, these are these great videos.
Adam Leventhal:I literally don't watch it.
Bryan Cantrill:No. No. No. No. No.
Adam Leventhal:Of course, I haven't watched those.
Bryan Cantrill:Oh, well, I... No. They're not walking. It's all very... They're very well produced.
Steve Tuck:Yeah. There is one in particular I can think of where there is some walking with a lot of production going on around, but yeah, they're very, very, very produced.
Adam Leventhal:Wait, people do like highly produced fundraising announcement videos.
Steve Tuck:Highly produced. Are you... God. You don't wanna dip into this genre. Are you...
Steve Tuck:No. Are you...
Adam Leventhal:Is is this like gender reveals have gotten out of control?
Bryan Cantrill:Yes. Yes. In fact, I think we are so close to a fundraising announcement causing a wildfire. Yes. Like Makes sense.
Bryan Cantrill:The fire... I think that is, almost... I mean, I know it's too early to make predictions, but... No. Absolutely.
Bryan Cantrill:The the... We... This is taking that gender reveal arc of like, wow, this got really, really, really out of hand. And I think it's out of hand right now.
Steve Tuck:It's out of hand. So we previously, on the record, have talked about, one of the trappings of going down the traditional media and PR route is that it takes a long time and it's kind of a dating process and you go and you meet a bunch of reporters and you're trying to like match make to who is gonna get the exclusive and write the article and, but oftentimes you can find yourself just saying, we should have just gone direct and, and and dropped the news and and gone through the normal channels of...
Bryan Cantrill:Done a walk and talk
Steve Tuck:regardless of who's plugged in or section Twitter, etcetera, etcetera. So, in this case, we we had talked to a reporter that was interested in writing and, it it made sense to accommodate going through the timeline that would be involved. For those of you...
Bryan Cantrill:That's very that's very political. I... Know, you're...
Steve Tuck:You internet sleuths out there will see that we closed in, like, July.
Bryan Cantrill:You're very generous in spirit.
Steve Tuck:Our form d was filed in August. You might wonder, well, the form d was filed in August, why was this announced in October?
Bryan Cantrill:Well, here we are. The point is that we're here now. So...
Steve Tuck:That's right.
Bryan Cantrill:We we And then also, if you're wondering That's
Scott Orn:that's the
Adam Leventhal:reason I came to this podcast. Like, that was the question I had. You... We're just not gonna answer
Steve Tuck:it yet. It's enough.
Bryan Cantrill:Oh, no. It's a You and many others. It's a reasonable question. Oh, were you also gonna answer the... Ask the question of, like, which is the question that the Axios reporter called what they called us, like, who we've got a great relationship with.
Bryan Cantrill:But he was like, hey, guys. Is it... It's Friday.
Steve Tuck:Dropping the news on Friday is an interesting take.
Bryan Cantrill:But you could actually see him do the calculus, like, is kind of like actually.
Steve Tuck:No, it doesn't.
Bryan Cantrill:No, it doesn't. So it's like it is like a workday. So I am kind of covering it. So Yeah. Maybe it's kind of genius.
Bryan Cantrill:No, no, it's not genius.
Adam Leventhal:It's Like, yes, we are very clever.
Steve Tuck:It's exactly what we thought.
Bryan Cantrill:Yeah. No. So, yeah, if you're wondering why the news dropped the way it did. But there it is. But the news is
Steve Tuck:out there.
Bryan Cantrill:News is out there. We had Well received. Well received. And then, well, actually you always get a little bit worse. I'm like, we just had done, you know, we did the Series C.
Bryan Cantrill:We rely on Hacker News for our content generation. You know, are we gonna get a different... I'm kind of relying on Hacker News. Hacker News, I want you to bring out your weird a little bit. I want you to get off the rails in delightful ways.
Bryan Cantrill:And I was a little worried that it wouldn't. As it turns out,
Steve Tuck:I I Need some content.
Bryan Cantrill:I I... We I need to... I literally need some content. And I did... We didn't need to worry much.
Bryan Cantrill:And Adam, I don't know how much you were you were following those hacker news threads early in the day. It is funny whenever Oxide's in the news, some new aspect of the company just gets in people's craw and they just go like a nonlinear over it.
Steve Tuck:Well, and so for the record, the... What we talked about was we raised around. Series D, 445 raise.
Bryan Cantrill:Yes. We did we had a big piece of news we were dropping.
Steve Tuck:Yeah. And and we did talk about the fact that we had hit profitability. Yeah. Paid taxes. And and that was
Bryan Cantrill:Can I actually say, by the way, huge shout out to Seth, Seth Winteroth Yeah? From Eclipse. Because we were talking about how to structure the announcement and, like, what we wanted to announce. And because you you and I are both very mindful of privacy in terms of talking about customers or talking... We're just like, we are transparent in many aspects of the company.
Bryan Cantrill:But other aspects of the company, we wanna be very respectful of everyone's privacy. So I didn't really... It was great to hear Seth being like, you guys should talk about the fact that you're profitable. Yeah. That's what you should talk about.
Bryan Cantrill:And I don't know that I that I don't know that you and I would have had that disposition otherwise, honestly.
Steve Tuck:Yeah. It was the right it was the right angle. I mean, he... I think the... Because again, what one normally is riffing on is like, can we share, updates on all the progress commercially?
Steve Tuck:Yeah. Can we, you know, should we... Can we talk about, how we're scaling manufacturing? What all that looks like? And again, to your point, we've been sort of hesitant on, not even hesitant, we just don't really share things that we feel like are gonna be around the edges of like customer related or sort of revenue related.
Steve Tuck:It was great for him to key in on. He's like, yeah, mean profitability.
Bryan Cantrill:Talk about that. Did take a photo of us paying taxes. Right. And that ended up being the hook, which- It's a
Steve Tuck:great hook.
Bryan Cantrill:Which is great. So we... So we... And Anyway, we announced that, announced the profitability. I did...
Bryan Cantrill:Adam, I was... I used a little AI... That was an AI modified image of us paying taxes. Not on the taxes. And Scott, I'm not even sure if you're aware of this, but I did...
Bryan Cantrill:Scott had a a lovely large photo of his daughter on the other monitors, like a screensaver. I'm like, I don't think we need to put that on the internet. So let's get, how can we, Scott, don't know if you noticed that, that your monitors AI adjusted.
Scott Orn:I appreciate that. Did appreciate it. And by the way, I got a bunch of messages from my dorky finance and tax friends about, woah, they use tax. They're talking about paying taxes in their release. And I very proudly said, hey, that's my desk by the way.
Scott Orn:Had lot of laughs. I was very My desk made the release.
Bryan Cantrill:I think your desk got the release. Exactly. The... It did... Your desk get out as a a very slightly AI modified desk.
Bryan Cantrill:The... We didn't... We we we we didn't... We could've turned off the lights, I guess, with AI too, but the
Steve Tuck:Next time.
Bryan Cantrill:The undercarriage lights. So we... And actually, maybe... So this is a good segue, Adam, in terms of what... Because I mean, I...
Bryan Cantrill:And, you know, Steve and I both come back to your your rubric. I guess it's the ancient rubric of the... It's the Passover tradition, right? Of the wise child Yes. Wicked child, simple child, and child that doesn't know what questions to ask.
Adam Leventhal:Am I getting that right? That's exactly right. That's true. And I always feel like these are mostly for the child who does not know how to ask, but certainly everybody on Hacker News knows how to ask something regardless of whether they're wicked wise or simple.
Bryan Cantrill:And I just... Like, I... Again, like my intro... My introductions and and they... Someone's dropped the the four sons link into the Discord, but this is really great.
Bryan Cantrill:Have to say this this is a this is this is a great rubric for many things in life. And I and I think we've talked about this in the past that it would be great if Hacker News could feature a badge next to a comment. So you could you could vote it as wise, wicked, simple, or does not know how to ask. Yeah. But I thought we got...
Bryan Cantrill:We we got some good ones kinda off the jump. I would say the one that like the the the October surprise, if you will, of the comment section, people going absolutely rector over the nine hours of conversations. I mean, just unhooked on the end. Do you find that surprising at all?
Adam Leventhal:A little bit. So, I mean, and just for context, mean, I know not our favorite thing, but just for a little bit. I think like half of the comments, at least a third, were about the Oxide hiring process, which I think your blog post had nothing to do with that whatsoever.
Bryan Cantrill:Nothing to do with it. It's not... Yes.
Adam Leventhal:It's just just spin the spin the wheel and
Bryan Cantrill:see which way it goes. Spin the wheel. Absolutely spin the wheel.
Adam Leventhal:And we have this very writing intensive process and people talk to
Bryan Cantrill:us about That we don't care about apparently. All of the work that we need to do for that is like, no, no, that's not what is upsetting people today.
Adam Leventhal:Yeah. And then when people are like, oh, yeah. And they'll talk to you for like nine hours of live conversations. People did lose their minds over that. Had the same reaction.
Adam Leventhal:How do other people hire? First of all, if I'm a candidate and I have nine hours of opportunity to meet my future colleagues, give me that.
Bryan Cantrill:I got
Adam Leventhal:offered a job at Slack years ago now, right before coming to Oxide, in fact. And I I was like, but I've only talked to like at this point, I talked to Stuart and a couple other folks and I was like, I want to talk to more people. They're like, really? What? They're kind of like, what's wrong with you?
Adam Leventhal:And then and then What
Steve Tuck:what is going... Are we on a... Are we from a different planet?
Adam Leventhal:Certainly a different time.
Steve Tuck:I just feel...
Bryan Cantrill:Is it a different time?
Adam Leventhal:Maybe.
Bryan Cantrill:I just feel that, like, we... I mean, when I first interviewed at Sun... And not just Sun, but everywhere. I would have a whole interview flight. And it's not like nine people asking me riddles or whatever, but like you do want that cross section.
Bryan Cantrill:I thought it was very... Surprisingly, people were so indignant about like, how dare you? First of all, it's like, what?
Adam Leventhal:There is something to it. Like, there there are some, like, really good hard to hard to reduce studies that are like diminishing returns after the fourth or fifth interview, which is fine. But I think that understates the utility of the interview, which is bidirectional. Right? Like, it's for the candidate as much as it is for the the interview panels.
Bryan Cantrill:It's for the candidate. And I would say that... So because this is the other... You know, people were just like, again, very over index on this. And they're like, why nine?
Bryan Cantrill:Like, why not six? Why not 12? It's like, well, we we actually have experimented with 12. And sorry to those candidates. That's a bit much.
Bryan Cantrill:But the... And six is like when you when you start getting down there, you are... There is signal that you get in conversation seven, eight, nine. And I think for both the candidate and the company, I mean, Adam, certainly we have seen things where one person sees something across nine interviews. And it is actually like, oftentimes it's like, oh, no, no, wait, this was seen by two other people.
Bryan Cantrill:And that becomes like a lot of signal. And if you chop off those two other conversations, then you get the like, well, one person saw it at a six. And it's like, I don't know, maybe it's nothing. So that that was a weird one for me. But that's interesting to know that Slack thought it was bizarre that you wanted.
Bryan Cantrill:I think for any senior role, I wanna talk to as many people as I possibly can.
Adam Leventhal:Yeah. That was weird. Back way back in the day when I entered at Microsoft, they they had a very robust thing where, like, I would move from room to room. And then when I get to a new interview, like, the email would bing, like, ten minutes in, and it was, like, a chain of, like feedback following me from interviewer to interviewer. So like not only were they just waiting they weren't waiting till the end to discuss it they were you know whatever pros and cons they saw along the way they were passing off to the next person to either, you know, poke at or or not worry about or whatever.
Bryan Cantrill:Which I think is also like a good thing. Yeah. I mean, we we have used that a lot at Oxide where you've got... If you're in conversations, I know, the Internet... Wait.
Bryan Cantrill:You think the... This is other thing I'm like, the Internet is upset about nine hours of conversations. I'm like, let me give you many more things to be upset about by the way. Like, this is like, if you're upset about this, you're gonna be much more upset.
Adam Leventhal:First of all,
Bryan Cantrill:You're gonna be absolutely outraged when you look at our materials process or across those conversations, I think it is very useful when someone's... And we've used this a lot where it's like, hey, I think I saw that. Or we even like, I think I saw this thing. I actually need this kind of person to talk to them. Let's add to the interview schedule to go.
Bryan Cantrill:Because you're trying to make the best possible... Everyone is trying to make the best possible decision, both candidate and company, I think. And it feels like more signal is better there. I also feel like we're gonna be, we're kind of committing to a long term relationship together. Like, are we...
Bryan Cantrill:How dare West go out on nine dates before a proposal?
Adam Leventhal:We... You didn't wanna drop this into the comments, but there... I mean, there are people who spend ten, twenty, thirty hours on their written materials. That'll just Oh, many
Bryan Cantrill:of more.
Adam Leventhal:Then nine hours, nine hours basically of discussion of the things you wrote, like more or less, know, that doesn't feel disproportionate.
Bryan Cantrill:It doesn't feel... Yeah, it doesn't... Anyway, so that was... I did not think... I did not see that one coming.
Bryan Cantrill:So we had our... So we... I'm not even... I guess we we need... Actually, we've got five wise...
Bryan Cantrill:We've got five sons because we've got spin the wheel. We've got, like, the joker in the deck, and I felt like that was the joker in
Scott Orn:the deck.
Adam Leventhal:Yeah. I don't know. It's like... I mean, it's a classic bike shed. Right?
Adam Leventhal:It's like... I mean, people abstractly, I think, very positive about, about Oxide and technology. And, you know, there'll be comments like, oh, it's all open source, which is like, you know, that, I mean, that is true and that's great and all, but it's not like you could just download it and get it onto your Dell box and suddenly your Oxide. But under like hiring and our, compensation policy, like, those are very easy to understand. So therefore very easy to have an opinion about.
Bryan Cantrill:So, hey, notable for its absence. Comp did not come up.
Adam Leventhal:It came up, but
Bryan Cantrill:it Oh, did it?
Adam Leventhal:People didn't get their hooks in.
Bryan Cantrill:They didn't get their hooks in. Okay. They didn't. But I think... I wonder if they've kind of...
Bryan Cantrill:I shouldn't even say this. I'm tempting the gods. I think the hacker just may have exhausted itself on that one. Mitch is like, alright. We're just like, we've we've given up.
Bryan Cantrill:Yeah. Alright. Alright. So what's our lineup? Because I I felt like we had some some good examples of wicked for sure.
Bryan Cantrill:Some good wise ones too.
Adam Leventhal:Oh, I I did have one. So there there was... I I think there was both a... I don't know if the kind child... Maybe that's to spin the wheel, but love the photo caption, paying taxes.
Adam Leventhal:Oxide are so good at comps, which I thought was just a lovely, you know, cheerful comment.
Bryan Cantrill:And did you see that's from? From a a... From a front of the pod?
Adam Leventhal:Oh, copied and pasted, but I don't know who it was. Was Simon? Oh, there you go.
Bryan Cantrill:Simon, who Adam, deep blue Simon is making deep blue go supernova.
Adam Leventhal:Good. Good. As well as well, he should and all of you, like, militia folks should
Bryan Cantrill:should do this. Right?
Adam Leventhal:But there was a funny reply, though, which was maybe not great at finance. Why are they paying taxes if they have a huge order backlog and
Bryan Cantrill:so forth? Right. So... Okay. So I feel like...
Bryan Cantrill:And I... We... I think we can say this this is wicked. Is it not?
Adam Leventhal:Yeah. No. I think that's fully fully wicked.
Steve Tuck:It's gotta be.
Bryan Cantrill:Fully wicked. Okay. So, Scott, what gives? Why... I...
Bryan Cantrill:How how dare how dare we pay taxes?
Steve Tuck:What kind of rubes... What kind
Bryan Cantrill:of morons are actually paying taxes on?
Scott Orn:Yeah. Well, before we get into it, I want to give a shout out to my Kellogg professor, Mitchell Peterson. My favorite class at Kellogg was tax strategy. So believe me, I've thought a lot about this. But Steve has we were talking before and Steve had a good idea, which is the table stakes here is that we are investing super heavily in our technology and our team, like we are pouring money into that.
Scott Orn:And so the profitability that we're seeing here in 2026 is in excess of all that. And I think the first rule of tax optimization is don't waste money trying to optimize your taxes. Right? Don't make bad decisions you're scared of paying the government a little bit. Right?
Scott Orn:So that's rule number one here.
Bryan Cantrill:That's actually... Sorry, just not to fix it. That's a pretty wise statement there. Golden rule. Yeah.
Bryan Cantrill:Is that a Mitchell Peterson ism? Mean, I think that's Yeah.
Scott Orn:That's Ornism, Bryan.
Bryan Cantrill:That's a Scott Ornism. Excuse me. Excuse me.
Scott Orn:No, no, no. But you just... You see people do crazy stuff with the idea that they're avoiding taxes, but it's just not smart. And also I think one of the things that Duck can do is just make the company less disciplined. One of the things I love about Oxide is that one of our core values is thrifty, thriftiness.
Scott Orn:And so we think about things before we spend money. We're not just throwing things around and worrying about it later. So that's the most important thing is continue to be true to your values, invest everywhere you possibly can, right? And I think we're doing that. If you look like our headcount has grown quite a bit, we're investing in test facilities.
Scott Orn:There's just a lot of things going on here, which are all really, really good. And so if you're thinking about tax optimization, that's the first battle. Steve, I've never like on demo Friday, maybe like two months ago, some of the team members did all this really cool three d printing stuff that was gonna... That's actually gonna save us like a material amount of money in the future, but it's gonna cost a little bit. And then I think it might cost a couple $100,000.
Scott Orn:Right? This is a very simple example, but that's the kind of stuff you wanna be doing that... Those operating expense investments
Adam Leventhal:Yeah. They did
Bryan Cantrill:they did the they did the opposite of three d printing, just to be clear. They they had a part... We had we had a part that was three d printed that we made injection molded.
Scott Orn:That's what it was. Yeah.
Steve Tuck:And the molds were not cheap, but it turns out like incredible savings opportunity.
Bryan Cantrill:Yeah. I mean, it's just the COGS savings is enormous because they've got... And these are things like they are like the blanks that we have when we have a cubby that does not have a sled in it. That's a three d printed blank. And that's a super involved thing or what and is now injection molded.
Bryan Cantrill:And we've got other kind of aspects on that we are... When we don't, we've got a drive that's absent. It's important that we have a blank for that drive and having that And
Adam Leventhal:that's for airflow purposes, is that right?
Bryan Cantrill:Yes. Yeah. Airflow purposes, I think aesthetic purposes too. It's like, you kinda wanna have the glass eye, you know what I mean? In terms of just...
Adam Leventhal:Yeah. That's fair.
Bryan Cantrill:It's it's just, you know, I have to have old... Have a kinda empty eye socket staring at you. It's a little bit garish. But I think that's also for all purposes, I'm sure. But But, yeah, sorry, Scott.
Bryan Cantrill:I mean, that's an
Scott Orn:example Thank you for clarifying that. Yeah. And that's OpEx, right? That's operating expenses. That's deductible right away.
Scott Orn:That's reduces your taxes, right? And the cool thing about the team presenting that demo Friday is if he gets more ideas around how do we invest in lower costs, right? So that was, I just remember that. And I'm sorry, misspoke, but that was a really cool moment. Like I remember watching that at my desk and being like, oh my gosh, this team is so cool.
Scott Orn:It's so awesome. And then the other thing you wanna do is you wanna do CapEx investments, right? If you're investing is the max, right? But the thing that people sometimes don't quite understand is that when you make capital investments like buying, test equipment or things like that, you have to depreciate it over time. You don't get to take like the full deduction against your taxes that year.
Scott Orn:There's things like accelerated depreciation schedules where you maybe get it, you get to write it off over two or three years instead of five years or seven years, But that money has gone out and you're not really getting the tax write off at least in full right away. So those are like table stakes, right? Wanna be doing anything you can to invest and you wanna be hiring. That's maybe sometimes I always think like hiring is the best way of investing to offset tax, right? Because you bring someone who's really talented in, who's gonna have orders of magnitude impact on the company, right?
Scott Orn:So those are kind of the big three. But then after that, you start getting into like the finance tax people's realm. And I think one of the major things that startups and I used to help run a tax and accounting firm. And so I saw this all the time. A lot of founders or even like CFOs don't know that you can only offset 80% of your income with NOLs, net operating losses.
Scott Orn:So Oxide's a pretty special place in the hardware world because we've only spent a $100,000,000 to get the profitability. And the way to be a little bit more precise, our NOLs are a $100,000,000. So that means that if we were... Say we were crazy profitable this year, we could only use those $100,000,000 to offset 80% of our income. So just to do some real quick math for people, say we made $20,000,000 after all those investments we talked about.
Scott Orn:We can only use $16,000,000 of our NOLs, right? 80% of $20,000,000
Bryan Cantrill:Yeah, interesting.
Scott Orn:And so you're left with $4,000,000 And this is just, by the way, I think I'm hopeful that we'll even do better than that. But I'm just using these big numbers to make all the math really easy for folks. So then you're left with $4,000,000 in taxable income after you use your NOLs. And by the way, you can use your NOLs year after year. There's some technicalities around that.
Scott Orn:But for the most part, can use almost all your NOLs year after year. The next thing you want to look at is tax credits. How do we get down that remaining 20% of operating income, right? How do we knock that down? And that's something that Oxide has historically done and done well, and we're continuing that here.
Scott Orn:So we actually just went back. We did a 2025 R and D tax credit, and we went back into 2024 and are doing one in 2024 because if you kind of go back in the time machine, early twenty twenty five, I don't think any of us thought Oxide was going to be profitable in 2026. To be totally candid, right? So True. And furthermore, if I
Bryan Cantrill:get really Steve is trying to furrow his brow. Steve is trying to do the how dare you, but he Yeah, can't sure can.
Scott Orn:I'm sorry. I'm sorry. But in the other thing that you can use your R and D tax credits against your payroll taxes in the early years of the company for the first five years. But Oxide was founded in 2019, so had kind of run its course on the payroll tax offset part of R and D tax credit. So we could only use our RD tax credits against true profits.
Scott Orn:But Steve, you might even remember my interview. Probably talked about those with Adam and Bryan too if you guys... We went there. But I was like, oh yeah, we should if it looks like we're gonna be profitable, go back into 2024, reopen that up and do an R and D tax credit for 2024. So we've actually done that.
Scott Orn:So we've got, I think it's like $22,000,002,300,000 dollars of tax credits that we are going to use against our profits this 2026. And so if you continue kind of my math, remember we had $4,000,000 of profits after we took our NOLs out, you minus another 2,200,000 now you're down to $1,800,000 of taxable income, right? And that's when you start paying taxes. So Oxide, we're gonna pay depending on how well we do and depending on how many racks we can actually ship this year, we're gonna pay some amount of taxes. It's not gonna be a huge number, but it's meaningful.
Bryan Cantrill:It's definitely meaningful. When we were doing that, there was also like someone on hacker news was like, well, that's not an image of them actually paying the taxes. That's just an image. Like they're just doing their taxes or there's something else. Was like, no, no, no, no, that's us like literally clicking.
Bryan Cantrill:Signing. Yeah. It was like a, I think that was the actual like wire transfer to the IRS avoid a penalty. And it is definitely like buy money, okay money. It was significant as far as I'm concerned.
Bryan Cantrill:Was. That's why I felt like we were... I felt, you and I both had that kind of line mouth expression, Steve, of like, I know this is great, but we're also like, well, goodbye money. But I'm glad that we... Actually, Scott, I'm glad that I think it was your...
Bryan Cantrill:Whoever's idea, I think it was your idea. Someone's idea to take a photo of it. Anyway, I'm glad we did that.
Scott Orn:I loved it too because it took like kind of this... You know, it's not the most exciting thing in my day, but it was a cool moment. I'm glad we just kind of took a second, you know, that was the... Also like, I don't know, you know, Bryan and Steve have been at this for seven years. Adam, I don't know.
Scott Orn:I think you might be six years in or six and a half years in. Like there's a lot of people who've worked here for a long time to make this happen. And I'm new to the party, but I just think that's a really cool moment for everyone like And even for me, to be the CFO of a profitable venture capital backed company, right? Yeah, we're gonna go to a conference this week, an investor conference, and I bet you there'll be five out of 200 companies there that are profitable at the max, right? Like I've worked with thousands of startups and we are very, very unique.
Scott Orn:And so to me, I'm actually really proud of it. I'm I'm excited. We're going do it and yes, next year, we'll be thinking about how to mitigate our tax, you know, tax exposure and things like that but like it is it is an incredible.
Steve Tuck:Yeah, don't worry. I word is in that Micron has got a about that. They're gonna they're gonna help us with that. That's right. Profitability thing.
Scott Orn:Yeah. It's Right. Exactly. So anyways, I hope that helps.
Bryan Cantrill:Yeah. That's great. I mean, I think... So, take that wicked child. Hopefully, wicked child is buried under an avalanche of tax related thinking, Adam, in terms of...
Bryan Cantrill:But I think it's also there's this kind of idea that you can turn arbitrary accounting knobs and make just things like taxes go away. That's actually just not the case.
Adam Leventhal:Yeah, think I mean, like everyone or the I think the thing that's in the water is like Amazon doesn't pay taxes. I'm sure that's not that wholly true.
Bryan Cantrill:Well, I think Amazon also was not profitable for the first many years of operation, but also... And I think that that was this person who was kind of holding that up. Also like Amazon wasn't... I mean, we are shipping a product. So it's like they were operating a service.
Bryan Cantrill:And I think also probably just didn't have the growth level, was just not as explosive. I think there were a bunch of other reasons. I also kind of reminded, know, there's those services that are like, always like, oh, we'll clean up your credit or whatever. You realize that like, oh no, no, it's like, we're just gonna go contest everything that you actually have done. We're just gonna lie about all that stuff.
Bryan Cantrill:I think that some people are just like, some of this tax avoidance stuff is kind of shady. Not that Amazon's engaged to that stuff. Anyway, we are aware of these things. Scott, I love your kind of first rule, which is just like, you don't wanna do anything.
Steve Tuck:Don't over optimize.
Bryan Cantrill:Don't over optimize for taxes. And I think that's very good advice. We... I feel like there was... Do you feel, Adam, some of these debt versus equity questions kind of dipped into the wicked, but maybe, I don't know, maybe they were simple.
Adam Leventhal:I felt like they were the Dunning Kruger child.
Bryan Cantrill:The Dunning Kruger child.
Adam Leventhal:Yeah. I mean, are a bunch of folks saying, Oh, why did you take venture capital rather than debt? And why not raise a bond or take a loan? Or a lot of what about ism from folks that seemed fairly just uninformed. But sure, what about for those simple, wicked children?
Bryan Cantrill:I just think it was... That one was a little bit surprising. Oh, well, that's also one of these discussions where, like, people are arguing with one another and it's like, actually, you're all kind of wrong. Like...
Adam Leventhal:Yeah.
Steve Tuck:But I do love the certainty of like... Yeah.
Bryan Cantrill:Yeah. No.
Steve Tuck:Why would... Like, what are you doing? This is what you raised debt for.
Bryan Cantrill:This is what you raised debt for. Right. And so one, we are very much aware of debt, and debt is a very, very useful tool. I will say that actually, it mean our eyes were being opened to venture debt. One of the catalysts for our use of venture debt, as it's been in several things, Steve, is a parenting activity that one or the other of us is on.
Bryan Cantrill:In this case, it was a scout hike that I was on with a parent who was like... He's like, no. You guys should really seriously get through venture debt. It kind of like made the case for venture debt. I'm like, and he's like, and I got the guy you should talk to.
Bryan Cantrill:Who's the guy we engaged with too? So sometimes when you think you're on the sidelines supporting your kids, you never know when when you're making that connection you might need to to raise venture debt as the case may be. So... But we'd done venture debt for a long time, but now, of course, we're into kind of a different waters. Steven, have you ever heard of debt?
Bryan Cantrill:What...
Steve Tuck:Yeah. I mean, you know, we definitely had dabbled in it back in the day. We're wary of it because it turns out, when you borrow money, you have to pay it back.
Bryan Cantrill:You have to pay it
Steve Tuck:back. And I think companies can easily start to look at their bank account which can include millions of dollars of debt one has drawn down. Yes. And then be thinking about runway in the in in based on that that bank account and that's... That could be very dangerous.
Steve Tuck:Yeah. So, you know, if you wind back four years, we we were leveraging venture debt. Less less venture debt these days and much more just debt.
Bryan Cantrill:Just debt debt. Yeah. Yeah. We're we're... I think we're kinda out of the venture debt.
Steve Tuck:Well, I just mean in the, like, industry wise. Like, I think there's there's far less of the
Bryan Cantrill:Is that right?
Steve Tuck:Kind of classical venture debt that you saw.
Bryan Cantrill:I understand.
Steve Tuck:Yeah. I mean, it depends on your your definition because if you if you weighed into somewhat like the neo the neo fill in the blanks, maybe maybe that is actually explosive venture debt. But... So I think we always were pretty cautious around how we treated debt. You know, as your business matures, one of the things that you really wanna do is you want to, get your cash conversion cycle as, as tight as possible.
Steve Tuck:Dell, you know, famously and and forgive me because, you know, this is something a drum I've beaten like the entirety of my career since leaving Dell, Dell brilliantly had a negative cash flow conversion cycle. And so they would, and Costco very much the same way where they would basically be paying for the things they had sold after they had collected cash on it. Many other businesses are paying for things long in advance and then it takes a long time to build it and sell it and then collect cash. And so they have this big gap between when they buy the materials to when they actually collect from their customers the finished products. And one of the ways that that debt plays, an important role is you wanna borrow money to be able to buy materials that you are gonna build into a finished product and then sell that and then collect payment from your customer.
Steve Tuck:And they they kind of help offset that middle period so you are not having to outlay the fullness of capital in that in that period of time. And so as we began to grow his business and have more commercial contracts and these are contracts with very creditworthy end customers importantly because you cannot borrow against obligations that are with customers that are not creditworthy. We started incorporating more on the debt side and as our business has grown we have looked at growing those the debt side of the business. But it turns out like you have to have money to borrow money.
Bryan Cantrill:Right. Yeah exactly. This is like the And so you really get... Can get much better debt deals with a stronger balance sheet.
Steve Tuck:That's
Bryan Cantrill:right. And this is like not a a... So I mean, a lot of this equity raise was to put us in a better position with respect to debt. And Scott, know that this is, I mean, as an old H and Q banker, shout out to Hambrick and Quest, do you wanna talk about kind of our perspective debt?
Scott Orn:Yeah, totally. And I was a partner at Lighthouse Capital for, worked there for nine years. It's a debt fund. Like I have lived debt, done tons of deals. And one of the things you have to remember is right now, when you don't have a lot of debt or no debt, it's really at the board level, it's your venture capitalists and the founders slash management team.
Scott Orn:There's two parties that need to stay aligned. And if you sit inside of an Oxide board meeting, it's kind of amazing. I mean, you gave a shout out to Seth earlier. Seth and Gatana, Gatana from USIT, are really, really strong board members. And I tell you guys this all the time, there's very little politics.
Scott Orn:I've sat in just horrible board meetings time and time again. So we have this amazing thing happening where there's really good alignment between our investors and the management team. And when you take debt on, you're adding a third party to that dynamic. And whenever there's three, there can be two against one, right? And so you have to just kind of walk into these debt relationships knowing that if things are good, there's gonna be no problem.
Scott Orn:Debt, the lenders are gonna be very kind of passive and collegial and things are easy and you got a lower cost of capital. But the second your company starts getting into trouble, and the second that debt becomes fearful that they might not get paid back because I think Steve made the point earlier, you have to pay debt back. It's a truism, right? Then you've got this third party who's way less invested in your company than you the management and the VCs are. And all they care about is getting their money back.
Scott Orn:And I've played that role before where you've got to be a little tough and it's not fun. The lenders don't like to do that by the way either. The lenders, that's a sign that they probably made a bad decision lending to you if they're having to take that position. But you can just lose control of your own company really, really quickly. And so my philosophy is always raise whatever you think you're gonna need in equity, and then the cushion comes from debt.
Scott Orn:And debt is an amazing accelerant. If think about like, I think I can probably share this, like, was it last Friday, Steve? We were sitting there and we're like Micron basically is giving us extra allocation indirectly, but through one of their partners. And we want to hit the bid on that. So that's going to be really, really good for our company and really good for our customers.
Scott Orn:And it wasn't a huge amount of money, but knowing that we have a credit line with Western Alliance that has plenty of room on it. And by the way, Western Alliance has been a fantastic lender for Oxide over the years. But just knowing we had the extra firepower allowed us to hit the bid. That's accretive. That's like a lender, that's debt doing its job right there.
Scott Orn:Don't wanna be capitalized on a knife's edge. I think you guys showed me something where someone was like, don't they just finance all these receivables from the big customers they have? Well, we could do that, but we would have like zero margin for error. And we certainly wouldn't be able to be opportunistic like we did last week, right? It's kind of...
Steve Tuck:Well, that's the I think that's the key point across I mean, you know, the whole... This is a once in fifty year supply chain crunch across memory, storage, chips, passives, I mean, the whole thing. And you... It is it is not a question today of how much you have to pay. It is can you get enough supply Yeah.
Steve Tuck:Across all these things. And, you know, if you're talking about passives and power electronics, it's like all things kind of roll up to TSMC. So there just aren't vehicles to buy your way out of this stuff. You you need to be able to strike very very quickly and be able to make long bets long ahead of even having like guaranteed demand for some of this stuff. And, and so Scott you're like that's that's exactly right.
Steve Tuck:It's it's being able to be opportunistic and jump so that we can reliably build and ship racks in lead times that are really attractive for our customers. Yeah.
Scott Orn:Yeah. I mean, the debt becomes a competitive advantage. We can do things we wouldn't be able to do. And like Bryan, your point about how raising a nice equity cushion, lowers your cost of capital. Like we are borrowing in the mid single digits right now, interest rate wise, right?
Scott Orn:Like if we didn't have that equity cushion, we'd be borrowing at like 10, 11, 12% easily, easily. And that's just like interest, that's just money going out the door.
Adam Leventhal:And Scott, so what kinds of things does that unlock once you have that debt? Like what do you do with it?
Scott Orn:It's exactly like what we talked about. Like you're able to buy more inventory if you need to, right? You're able to...
Bryan Cantrill:Could you also talk about how, because this is something that was totally new to me, the idea of letters of credit and being able to take some of a deadline and issue that as a letter of credit to someone who's gonna act on our behalf, Scott. Because that was... Yeah. Apologies if I'm butchering that explanation.
Scott Orn:No, that's exactly it. So one of the reasons we are so capital efficient is because we use contract manufacturers, right? And we're so integrated with our contract manufacturers, it's really kind of amazing. But those folks, because of our integration, they are taking on risk, right? Think about from their perspective, they're buying inventory ahead of time on their dollar.
Scott Orn:They are building racks that are kind of half built. And that's a money sink right there. And then we coordinate the shipment of a rack to a customer, but they're still not getting paid for thirty days until after that rack has shipped out of the contract manufacturer. So those are like the three big buckets of cash investment they're making. And so if you're a contract manufacturer, that is a very competitive business.
Scott Orn:You're typically operating at very low margins. And so the last thing you can have happen to you is take a huge loss on one of your customers. Like say, part of raising all this equity is so that this never happens. But if Oxide went poof, our contract manufacturer would take a huge loss.
Bryan Cantrill:Huge hit, yeah.
Scott Orn:Huge loss, right? And again, they have thin margins so they can't take that kind of risk. It's a similar thing with lenders, right? Lenders operate on low margins. They can't take a ton of risk.
Adam Leventhal:They can't take a lot
Scott Orn:of losses. And so what you do is you turn around and give them a letter of credit to kind of make them whole. Now they are, I should take a step back and say like our contract manufacturer does give us a pretty good chunk letter of credit. So some of those cash exposures, I'm talking about buying inventory, having AR out to us, they are taking a pretty they're taking some risk for sure. And partially that collaboration between us and them, we're getting to take some of that risk.
Scott Orn:But then we're insulating them from catastrophic risk is the way to think about it with a letter of credit. And that letter of credit says basically like if Oxide doesn't pay its bills then we can draw down on that letter of credit and the letter of credit is funded by a bank.
Bryan Cantrill:Importantly, when you kind of cleave up a deadline into these letters of credit, you don't get to overbook your deadlines. You'll be like, okay, we're gonna take dollars 50,000,000 of this deadline is gonna be a letter of credit for this Centimeters. Exactly.
Scott Orn:So our line with Western Alliance has a significant letter of credit. That's kind of like, that's kind of just visualize like taking up some of the allocation on the credit line, right? On debt. So we can only use a portion. We say I wanted to draw down like $25,000,000 today, I could do it, but that goes against that plus the letter of credit, has to be below whatever the limit is.
Scott Orn:Now there's another way, which is you can cash collateralize your letter of credit. So I could take X millions of dollars, give it to the bank, they put it in a segregated account. We can never touch it, it's restricted cash. But I feel like the better way to do this is to use our deadline because you can get very, very favorable pricing on that letter of credit. If you do some of the math, I don't wanna get too into it, but if you're cash collateralizing letters of credit, you're typically not getting kind of your full kind of cash return that you could get putting in something else.
Scott Orn:So for us it makes, and this is all negotiated stuff, right? Like some companies listen, some startups, early stage startups need a letter of credit who don't have Oxide's profitability profile, cash in the bank profile, they may have to cash collateralize, right? But for us, we were able to negotiate just a straight fee arrangement and it's a nominal fee. And that way our cash continues to be a liquid and be earn kind of the full return that it should be earning. So that was something that we did, maybe nine months ago, six months ago.
Scott Orn:And so we use, but we're able to do that partially because we have this larger debt line with our bank in place. Does that make sense? If I need to explain a little bit more, happy to do it.
Bryan Cantrill:Yeah, very useful to open up. And I think one of the questions in the chat, Tom, I think it said that debt is very bad for kind of riding out a crunch in part because that debt gets called. And so getting a kind of a stronger equity, stronger balance sheet allows you to get debt with less covenants on it that allows you to have that better able to survive true rainy days.
Scott Orn:Yeah, you're totally right. Like covenants and they can be as simple as a profitability or revenue covenants, all the way down to like something really dangerous, like a material average change clause, right? Like, and for the early stage startups who are listening to this, their debt probably if they have debt would probably have a material average change clause or an investor abandonment clause, which just basically means like your investors are refusing to fund you anymore. Therefore, we as a lender can call it, right? And the moment you are in default, the bank has remedies.
Scott Orn:And to take this one step, I don't want to get all scary here, but like the bank has the right of offset against your liability. So you owe them money, that's a liability. Meanwhile, they're managing your cash, that's an asset. They can offset the liability in cash and make themselves whole. Now, if you're backed by a top tier VC in Silicon Valley, banks and lenders do not shoot first and ask questions later because they know they'll never get another deal from that VC firm, but there's only so much the VCs can do.
Scott Orn:And this is just kind of circling back. Remember how I talked about all of a sudden there's three parties who are involved in the company? Like that's all that conversation I'm talking about between the VCs and the lenders, guess who's not in that conversation?
Bryan Cantrill:The founders, right?
Scott Orn:The management team
Bryan Cantrill:is They
Scott Orn:don't care. They don't care, right? And so it would be...
Bryan Cantrill:Mean, you're claiming that you want his dominant hand, but what if we give you his non dominant hand? Give us both hands.
Scott Orn:Yeah. So anyways, there's a lot that can go wrong. It is a really useful tool and we use it at Oxide, but we do it responsibly and we do it with like, I just, again, I just come back to like debt is the cushion. Debt is for the extra thing that makes us go faster or can be accretive in some other way. It's not we're financing this company on.
Scott Orn:It's not the foundation of the company.
Bryan Cantrill:Yeah, totally. And importantly, it's not... I think that hacker news discussion, surprisingly enough, got too reductive. And it's not either or. You wanna use kind of both.
Bryan Cantrill:These are different tools and you wanna use both of them. Steve, I was definitely smiling when you're talking about the cash conversion cycle because you... I mean, we... You have been talking about that for... I mean, this is something you've always lionized about Dell.
Bryan Cantrill:And it's just great that we're actually at the point where it like matters for Oxide.
Steve Tuck:I know.
Bryan Cantrill:It was it was like, there's there's all this...
Steve Tuck:Always a fun fanciful concept.
Bryan Cantrill:Yeah. No. It was. It was all this stuff that we would talk about when initially raising in 2019, where people's eyes would just glaze over and you'd just be like, okay. Like cash conversion.
Steve Tuck:Cycle. Because the first thing you need is conversion. Right. Right. Exactly.
Steve Tuck:Not much point optimizing anything else.
Bryan Cantrill:Right. Exactly. So it's, it's fun to be at that at that juncture.
Steve Tuck:It is. And I will say, it is great. I mean, this is where some of these financial institutions really shine because we're getting to know a lot of these banks, big and small, and, they play a really important role in whole bunch of different ways when you kind of need the whole plumbing running for a business that includes physical things. You have to buy components and you then have to build a thing and then you have to ship it and you then invoice and then you collect. So not not I think Scott you've done a great job and we've we've been able to bring together just some wonderful financial services partners in also leveraging debt in how we capitalize the business.
Steve Tuck:Yeah.
Scott Orn:We're really lucky. We have really incredible venture capitalists who care about the company and care about the people. Like, again, that's that's very unique, you know? And then we've got great...
Bryan Cantrill:This is where I've always reminded Scott about like how... I mean, you've had exposure to so many startups when you... Because you were working as a services firm that was effectively providing these kind of CFO services to many startups. And so it's like you've seen such a broader range. Because I'm like, of course, we've got good investors in a good board meeting.
Bryan Cantrill:Of course, politics in a boardroom, that would be awful. It's like, oh, you've got no idea. Because I'm sure you've seen it all in terms of bad investors, bad boardrooms.
Scott Orn:Yeah, and the lighthouse days and the H and Q day, I mean, I've got stories, just so many so many stories. So we are very, very lucky. And Seth and Gatana and Will and all the people who are in that boardroom, they don't want the company to go off the rails either because of that, right? We've got Bryan, Steve and Adam, you guys have years and years and years in your career. I've got now a year of my career in this company, right?
Scott Orn:And I've invested in the company back in the day as well. But we all have this very strong incentive to do the right thing, to keep the company on the rails. And if we have problems, solve the problems. Sometimes debt is like a hiding place. People don't want to make the hard decisions and so they're just going to throw some more logs on the fire.
Scott Orn:But reality is you gotta make hard decisions when you're running these kind of companies. That's my 2ยข. But yeah, if you're listening to this and you're a startup and you have a great board, consider yourself very lucky, keep those relationships going and the same with lenders. Lenders are, like Steve was talking about, just a very important part of the ecosystem and if you have a good relationship with them, you're keeping them up to date, they're gonna bend over backwards for you and help you. How many times have I talked about the favors Western Alliance has done for us?
Scott Orn:It's really, really amazing. So there's a lot of benefit at the margin that the lenders can do for you as well.
Bryan Cantrill:Yeah, that's awesome. All right. So Adam, those are the wicked children have now like glazed over in detail. Was like, all right, God, forget it. I guess you guys know what you're doing.
Bryan Cantrill:I don't even know. The... I feel like there was some... There was either... Whether it's it's simple child or child that doesn't know how to ask.
Bryan Cantrill:I feel like we had a couple of those in the hacker news discussion as well.
Adam Leventhal:Yeah. There's definitely... I I don't know if this is where you're heading, but... And and since we we shared all of the Wicked Child listeners, we can now get into it. Yeah.
Adam Leventhal:One was... And this was from a user whose name was I don't want this. What is their product exactly? It's a server that is cheaper for some reason. And then another one says, I still don't get what Oxide's offering.
Adam Leventhal:Anyone care to give me the skinny?
Bryan Cantrill:And some others along those What I find wild about this, you're like, I mean, I guess I admire it that you wanna ask that question of hacker news and not like chat GBT or Claude or Gemini that could literally give you an authoritative answer to that question. Okay, good sourced authoritative answer. No, I'd rather not do that. I'd rather actually just, I'd rather just sit here on the office.
Adam Leventhal:Ask at the bus stop. Yeah, just like.
Bryan Cantrill:I'd ask at the bus stop. I'd rather ask at the bus stop. Exactly, who knows? This fine passenger looks like he might know a thing or two about, yeah, it's just, you know, okay. This is how you...
Bryan Cantrill:And then people kinda get in arguments about it, but like, well, I still don't understand it. It's like, okay. You know, ask chat GPT. I mean, is this... Anyway, I I I guess this is gonna this is gonna be true forever, I feel.
Bryan Cantrill:I feel like for the entire lifetime of Oxide, there'll be someone on a hacker who said be like, who... What are these guys? What do they make? I don't get it.
Steve Tuck:And can you get one in the home? I... You know, the home lab or where the home labbers show up? I didn't see much.
Bryan Cantrill:They did. They were there. They did show up.
Adam Leventhal:But that's... Those are just our stands. Those are those are the people Those
Steve Tuck:are the home labbers.
Bryan Cantrill:You love the home labbers. Yeah. We love the home labbers. And there's always like the little bit of the home labber fanfic of like anyone who does this will make a mint. Like this is
Steve Tuck:How many people are there
Adam Leventhal:to make? Like, know who you... Who's super pricey and elastic? Me. Me, the random nerd on hacker news.
Adam Leventhal:I will pay anything. It's like, will you though?
Bryan Cantrill:Yes. Okay. How about a 0 no. No.
Adam Leventhal:No. No.
Bryan Cantrill:Not a thousand dollars. Not a thousand dollars. And I also... It's like, okay. We'll we'll make it cheap.
Bryan Cantrill:And then I'm reminded of, you know, the the moment when we... Sorry, Steve, go back to this. But when we... Adam, we launched Manta at Joynt, the Office Storage Service. And the numbers were all like really up into the right.
Bryan Cantrill:It was like, oh, this is great. But if you looked at like the actual Y axis on the absolute numbers versus the femto cents per exabyte for storage. And Steve is like, We're kind of all congratulating one another. And Steve's kind of doing the math. It's like, oh, no.
Bryan Cantrill:I got... It looks like we're gonna make, wow, $7.35 this month. Like, wow. And you're saying it's like...
Adam Leventhal:Which half of the sandwich should we buy?
Bryan Cantrill:No. Absolutely. Not not both of them actually. Sorry. No.
Bryan Cantrill:No pickles. They actually charge extra pickles. Sorry. We actually can't... Maybe next month we can afford the pickles on the sandwich, but not this month.
Steve Tuck:I really wanna go back and like be in the room to see if it was quite as pejorative as it sounds at this point.
Bryan Cantrill:No. No. It... Well, so no, it wasn't that. It was you doing the number on the calculator and then showing me the calculator.
Bryan Cantrill:And it was like $7.35. You didn't even like... I think we... It mean it was even more gutting than that. And I think you realized that it was like actually just an absolute like a dagger to the heart because it was just like, oh, oh yeah, I guess this is...
Bryan Cantrill:But actually, Man, selling things in volume is really... Selling cheap stuff is really hard. You've gotta... I mean, you just gotta sell a whole lot of it. And I mean, it's like you can...
Steve Tuck:Especially if it's not profitable. You really gotta
Bryan Cantrill:get the high volume. Exactly.
Adam Leventhal:You really get the volume up.
Bryan Cantrill:Got got got down boy. Sorry. Got it. Feel like I'm right back there. Just feels like I'm wiping away a tear here.
Bryan Cantrill:Okay. What... Okay. We had that kind of simple chat. What else do we have, Adam, in terms of the...
Bryan Cantrill:I mean, obviously, there's a lot of very positive stuff too.
Adam Leventhal:Yeah. People fired up for the podcast. That was correct. Recognizing that both Oxide and Friends are our primary exports, which is, you know, that's fair.
Scott Orn:That's good.
Adam Leventhal:Some questions about GPUs and then some answers about GPUs. I don't if we wanna get into
Bryan Cantrill:that GPUs. Yeah. You know, I feel like the FAQ Fridays are helpful on this. Yeah. Kind of some of the stuff.
Bryan Cantrill:Because we can actually just point to like our FAQ Friday. It's not a walk and talk, but it's close.
Adam Leventhal:Yeah. Maybe you could wander around a little bit just to... Just wondering just a little
Bryan Cantrill:note for you. Yeah. Well, just as long as you're gonna watch it, you know, this is like, I, you know, I feel like I'm I'm thrusting myself in the traffic. You're not even watching it. I mean, it's just like...
Bryan Cantrill:Yeah. I don't the algorithm. Yeah. Do, but you know, do. There there you go.
Adam Leventhal:Yeah. Think, I mean
Bryan Cantrill:There was the surprising appearance from the Batesville casket company. Wasn't expecting that, that just the interview process of the Batesville casket company, big multi day interview process there. Missed that one. That's sick winner. I knew someone, a father of a friend at school worked for the Batesville Casket Company.
Bryan Cantrill:And they were very thoughtful in the way that they, they're very deliberate in the way they hired people, the way they kind of thought about death. So there you go. There you go.
Adam Leventhal:This was not
Bryan Cantrill:written That's the culture interview.
Steve Tuck:Not written by any of
Adam Leventhal:my stock profits, but someone says with the B, C and now D. Makes one wonder, this is not really a question. Will there be any shares left for the original team?
Bryan Cantrill:There sure won't be. No, sorry. Well,
Adam Leventhal:thanks everyone.
Bryan Cantrill:That's right. A good... It's kind of funny that people... Mean, kind of the way these things work, ideally when they work is that you are raising at a higher and higher valuation and you're always taking dilution. You're selling off some portion of the company to new investors.
Bryan Cantrill:And ideally that portion that you're selling off to new investors is a smaller portion over time.
Steve Tuck:That percentage is smaller than the percent gain growth.
Bryan Cantrill:But it's a larger pie. Yeah. So it's a pretty big win.
Steve Tuck:Fortunately, that's been the case.
Bryan Cantrill:That's been the case. But it's not always the case. And I mean, companies can have down rounds and so on. But I think employees are pretty happy about this one. I don't think any employees concerned to be diluted in it.
Bryan Cantrill:I mean, it is kind of amazing. You think about like the actual dilution that we are... Actually, I also, I love the fact that the share math now, Adam, because like, you create a certain number of shares and like that, then you obviously create new shares for new rounds, but there's an integral number of shares. You don't get a floating point number of shares. And as a result, there's like share math and the share math means that you're kind of like, you always end up being short of what you think you are.
Bryan Cantrill:So you think you raised $12,000,000,000 Steve, when we raised that, the $12,000,000,000 wire was... We thought it was gonna 12 and a bunch of zeros that hit the bank account. Right. And it was 11 and... 9, 99, 9, 999, 9, 9.
Bryan Cantrill:And then like a three, I think. It was like $7 short of $12,000,000. And it was very disappointing at first. And then you realize like, no, no, that's the way the share math works. But now like the share math is like, when you're raising $445,000,000 the share math is like a lot of money.
Bryan Cantrill:Yeah. In terms of like, you're actually off by like, no, no, seriously, like you can buy like a Hyundai with that. So like, where's the... It's like, no, no, no. That's like the way the math works.
Adam Leventhal:And this round was very minimally dilutive.
Bryan Cantrill:Minimally dilutive. Yep. Rave early shareholders. Yes. But whenever you raise, it's dilutive.
Bryan Cantrill:And you wanna make sure that you're increasing the value of the company more than you're diluting folks. Yeah, what else is in there? The. Asking for the new IBM.
Adam Leventhal:Yeah. It's like, no, we've never sold to the Nazis. There was another good one that was couldn't happen to a better bunch of people. I used to think Oxide's business model sucks in the face of the hyperscalers. But, you know, why would you go through the trouble in the past five years?
Adam Leventhal:They've been in constant decline towards more concentration of power, lack of care for their customers and degradation of quality. So all the best of luck to Oxide. I thought that was a really nice one.
Bryan Cantrill:That's a very nice one. That was very nice. That was very nice. And I think in general, like the tenor of the comments were really very nice.
Adam Leventhal:So Yeah. Was it was all either clearly wicked children or supporters. Right?
Bryan Cantrill:Like Yes. Trolls are supporters. And I mean, it is that human... What what is that human nature where it's just like you've got, you know, 99% of these comments are positive and you got, like, the 1% jackass and you're like, I can think about nothing else but this jackass. Like, I am just, like, locked on this jackass.
Bryan Cantrill:And I really...
Adam Leventhal:Right. I keep telling telling them that back in back in 1996, you had nine hours of interviews for Sun.
Bryan Cantrill:Oh, it got worse. Not not in that particular thread, but like I... It it it got worse. Complaints about... Because you need people who are just like, well, here's why I wouldn't wanna work there.
Bryan Cantrill:And it's very hard to not say, well, actually you're... Like you're turning down an offer from Oxide. It's very hard to get it in shop outside. Right.
Adam Leventhal:That's not something that you need to worry yourself about too.
Bryan Cantrill:Not something you need to worry yourself about. It would have been a more politic way of saying some of the things I said. So anyway, I would try not to do that, but I got down into it a little bit. I try to keep it clean, but there's only so much I can take.
Adam Leventhal:There you go.
Bryan Cantrill:And then I break. Yeah, that was good. Is there any other things you had, Adam, on your... Nope, I
Adam Leventhal:think we hit all the topics, broadly speaking.
Bryan Cantrill:But a big and exciting milestone for sure. Fun to kind of look down in the valley below, but a lot more to go do. And I would say that, I mean, Adam, I know we've said this the last couple of times, but the podcast has definitely been re upped for another couple of seasons. Yeah. It's...
Bryan Cantrill:Adam has the long stare. Like, it's a
Adam Leventhal:lot more a moral Into the abyss. Right.
Bryan Cantrill:Into the abyss. Exactly. But great stuff. Thank you.
Steve Tuck:We will not be back on this topic for quite some time.
Bryan Cantrill:For quite some time. I think we... I I... Yeah.
Steve Tuck:I've I've May have said that earlier this year, but
Bryan Cantrill:this time But this time we really made it. This time we really made it. I appreciate that. This
Adam Leventhal:time we made it.
Bryan Cantrill:Yeah, exactly. This time we made it. Yeah. Good. But we will...
Bryan Cantrill:And I do think that, and we said this before, but in terms of the... And Steve mentioned this much earlier. In terms of the objective of the company is a generational company, and that means a public one. So at some point we're going be doing, not in the foreseeable future or the immediate future, but that's kind of where we're tacking towards. And we got a whole bunch of thoughts about how to be a public company.
Bryan Cantrill:So a lot more to talk about. Awesome. Well, Steve, thanks for joining us in the litter box. Scott, thank you very much for walking us through taxes and debt and all sorts of other exciting stuff, which actually is exciting stuff. I do love this about Oxide.
Bryan Cantrill:We have just nerds on every dimension. And love that we got our tax nerds and our debt nerds here in addition to our ERP nerds. We've got nerds of all stripes here.
Scott Orn:Guilty as trust, Thank you.
Bryan Cantrill:You bet. Awesome. All right. Thank you very much everybody. And Adam, go check out that walk and talk.
Bryan Cantrill:Because you can identify Now that car that I want to zoom in on that car that nearly ran me down, see if I know the driver. Awesome. Thanks everyone. See you next time.