the Justin Brady Show

Stephan Paternot is the father of social networking, co-founding and is the author of A Very Public Offering. He’s also co-founder & CEO of Slated, the world’s first online film finance marketplace. was founded in 1994 and the company made history when it went public in 1998 with a one billion dollar, record-setting evaluation. Over a six-year span, the company grew to over 300 employees, and the website became one of the top thirty most trafficked sites in the world, and in 1999 Paternot won the Ernst & Young Entrepreneur of the Year Award.

National Geographic has featured Stephan Paternot in their new series, Valley of the Boom. He gives sound investing advice from his unique and discusses why going public is the last resort not a metric of success.

We also dig in deep and I ask Stephan Paternot Paternot if the SEC and measures meant to protect investors actually kill innovation, and hurt our investments in the long run and then, for good measure we discuss his film marketplace and the role it plays in the content race.


Learn More About Stephan Paternot

Learn more about National Geographic’s Valley of the Boom.

Learn more about Stephan Paternot at his website.

Buy Stephan Paternot’s book A Very Public Offering


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Transcript of Interview with Steph Paternot

Justin Brady 0:04
Stephan Paternot oh yeah that’s that’s who’s with us Steph pattern now author of a very public author excuse me a very public offering. Co founder and CEO of slated the world’s first online film finance marketplace stuff thanks for joining us I maybe you should just host the show I’m choking all over myself.

Stephan Paternot 0:34
My pleasure. Good to be here

Justin Brady 0:36
you’re you’re best known for of course co founding one of the first internet community sites the globe 1994 and you know most people are going to be familiar with that. But now you’ve been featured in this new thing the National Geographic is up to called valley of the boom What are you doing in this thing? What What is this?

Stephan Paternot 0:59
It is a series that I unwittingly became one of the subjects of which is about the birth of the internet and sort of came out of the blue the year or two ago, I actually thought it was going to be a documentary, which I’ve done many times before. And I would just be interviewed and be a talking head and some sort of dry documentary about the internet. And it actually turns out it’s a scripted series, sort of high energy a ton of fun about the rise of the Internet with it follows three companies Netscape, the globe calm, and his third company pixel on and they basically use those as examples of, you know, Netscape was the pre Google company. The Globe was the pre Facebook company and pixel on was the pre YouTube company. And it’s a crazy narrative that was created by Matthew Carnahan and this guy’s a creative genius. I would I just participated as an interviewee and discovered later that it was this scripted series and that they were casting people named Marc Andreessen and stuff pattern. Oh, and I was a little bit horrifying at first, but ultimately, I’m, you know, pretty flattered and humbled that they’ve selected our company to portray the the rise of the Internet as well as bubble burst, because our company was pretty iconic at the time for the rise and fall of that era.

Justin Brady 2:27
So the globe, the globe. com went public in 1998. And at the time you had this just massive record setting IPO, and what was the company valuation at that point?

Stephan Paternot 2:42
Well, it was on the day, the IPO went to a, like one $1.1 billion,

which was insane only because the day before it was a company price that look, call it 150 million dollars. And we became best known for Unfortunately, it was that first day IPO run up of 1,000%, which didn’t happen because of anything magical. My partner and I did when we were doing our roadshow, it it was like a confluence of events, the market turning around a huge amount of pent up interest by investors and getting into dot coms. And maybe a little bit because this whole notion of creating the this virtual community is social network got it piqued people’s interest. So everybody bought into our stock like crazy, the stock price ran up like this insane thousand percent. And I think we were just as bewildered about what was happening. And at the end of that first day, my partner and I, you know, we were just to 24 year old kids, what seemed like a reasonable business we’ve been building for four years before suddenly felt like this massive amount of pressure on us and huge expectations by the world. And that was sort of the beginning of IPO mania, followed by the followed by the gradual deflation and the bubble bursting, two years later. So

Justin Brady 4:08
now over the six year span, the globe grew to over 300 employees. And the website was one of the top 30 not I did not know this, by the way, but it was one of the top 30 most traffic sites in the world. And you ended up getting the Ernst and Young Entrepreneur of the Year award. I mean, was this I think a lot of people kind of look to Facebook as the beginning of those social media sites. But that’s not that’s kind of what the global was. Right.

Stephan Paternot 4:36

I mean, there’s, you know, as they say, the the road to success is littered with the dead corpses of the pioneers along the way, right, where we’re one of those guys. Yeah, it’s, you know, I think the only people who are going to remember the globe story are really, 1.0,

here are the people who lived in it. And we’re building stuff back then. Right? So for most people, today, there’s 2 billion plus people using the internet, they don’t remember what the what it was, like, on the internet for the first hundred million users. When we started the globe, there were only five to 10 million internet users. And, and even at our peak in 2000, 2001, there were maybe 200 million internet users, 20 million of them were hitting our servers every month. Yeah, that seems it seems like a lot for us back then. But today, that’s a drop in the bucket, right? Compared to Facebook, or compared to people who use iPhones or Android devices. It’s, it’s nothing. So you know, this is sort of like a fun walk down memory lane, quite frankly. And

yeah, we were inadvertently, we didn’t know what we were creating back then would be a the first social network, we were calling a virtual community. And it was this idea that you could now live online, quote, unquote, and get to join clubs and communities and interact with people around topics of interest, right. So we were creating things, chat rooms, and forums, and what we called free homepages, homepage hosting, and we gave people publishing tools so they could create their own little space and have their own little news feed and photo albums and all these different things. Which, of course, 10 years later became like a your Facebook wall,

Justin Brady 6:11
right. Right now,

Stephan Paternot 6:12
we’re used to right now.

Justin Brady 6:15
It’s just baked into almost every website nowadays. That whole model

Stephan Paternot 6:19
Yeah, social networking, which really became woven into the fabric of the internet two point O or web two point O is now the norm. We’re all used to that, right? We’re now starting to look at web 3.0, the evolution of blockchain. And by the way, that is a really a completely new beginning of reinvention of how the internet works, which is part of the reason why this this TV series that came out on nowhere valley of the boom, the timing couldn’t be better, because it’s a 25 year look back at the beginning of the Internet, and how did we get here, and it’s become highly relevant again, because of what’s gone on with the internet. The internet is sort of become distant, boarded and worked from the original utopian vision. Everyone here is now addicted to social media and, and people’s personal information that they’re pouring online is now being weaponized against them in subtle ways. And everyone’s starting to think there’s something really dark and distorted about the internet. And it needs a course correction. But to be able to do that, you need to be able to look back and I think everybody that was racing along, like we were back in the day, you know, you just had this pure vision, it was back in the days before money, corrupted the whole thing. And, you know, it was all about, let’s live online, and make the world a global village and make it easy to shop and make it easy to connect with people and all these great, wonderful things. And, of course, there’s a flip side to all of those things that I just described. So Oh, go ahead. Well, I was gonna say, so for people to really take a lesson away from all this, you need to be able to look back, right? Otherwise, you’re destined to keep repeating, right? Same patterns, right, so now we’re at this inflection point, blockchains coming along with a whole new young generation of entrepreneurs. It’s not people like me who are reinventing the internet. It’s the next generation of young kids who have grown up with the internet from day one. They’re the ones who didn’t know about the globe, probably never heard of Netscape. And they’re the ones who seem to be most interested actually, in this TV series, or, or my book, or whatever it is, that’s helping them go back and live through how we got here in the first place.

Justin Brady 8:27
I mean, looking back, you know, talking about history, we see we see companies in the news now that are I mean, Lyft and Uber going to be there IPOs been in the news all the time. And that’s a really hot topic right now. I mean, if you could share with them information, or coach them right now? Is, is the IPO the magical it? Is it is this the metric the pinnacle of success, or is it not?

Stephan Paternot 8:53
Well, I unfortunately, it’s still represents a mile milestone that people want to achieve. And I say, unfortunately, because we lived through it, and I got to see firsthand how corrupting how the the system the whole IPO process of going public, as well as what the SEC then requires you to do as a public company. Sure, negatively negatively game defied the system, it was intended to help protect small, unsuspecting and experienced investors, right, transparency, quarterly reporting, making sure that companies operate at the highest of standards, once they’re public, right, it’s certainly done is massively rewarded short term bumps and your stock interest. And it’s it’s the very thing that happened in 2008 with the market collapse where we slowly started questioning capitalism, you know, in its in its entirety, which is, wait a second, if everyone is being rewarded for sure, term gains. And of course, you know, day traders and shareholders they’re all in it, right? They want they want to map they want as much to make as much profit selling stocks as fast as they possibly can, right truly in it for the revolution of the company.

They’re not really in it to see if they can change the world over a 1020 year horizon, they want to make a quick buck in the market rewards that and so that’s what led to the 2008 2009 collapse where your Dodd Frank had to come in, and there was this whole notion of like, let’s create clawbacks so that when short term gains lead to long term pain, we can try to grab those profits back from the people who benefited and try to course correct Well, that’s what IPOs are still today. And they’re necessary because once you get really big and some of your shareholders want to sell their positions or company wants to raise even more money, there is no alternative you can only raise so many billions privately before you have to go public. Sure. So that’s, you know, I commiserate with with a lot of people about the public markets being broken because they need to be fixed, it would be great if you didn’t need to go public in order to keep creating your company and making it successful and being able to let some of your shareholders out who want to sell their their gains, but it hasn’t changed yet. And so I’m you know, I talked about this when Mark Zuckerberg was taking Facebook public, I posted publicly on his Facebook wall a letter to mark saying, you know, beware of going public here.

The benefits of course, we all know of the cash infusion and the credibility it adds to your company. And it’s it’s a sexy trophy to have if you like, but but the downside will be that you’ll have 10s of thousands of more shareholders yelling and screaming at every dip in your stock, you’ll have hundreds or thousands of more journalists yelling and screaming from from the bleachers telling you how you should run your business. And you’re going to have to build a really thick skin to here past all that noise. And by the way, once your public you really, truly lose the ability to make big, bold, risky bets, right? Because you got to manage your business. Sure, yeah, very carefully and becomes a business of incremental optimization instead of big bets. And of course, now I watched Zuckerberg and what’s going on and he’s going through all of this

Justin Brady 12:20
right Absolutely. Well, and then it also reminds me of a Ilan musk tweeting, you know, something that I would have never imagined would get anybody in trouble. Just I, you know, you is, it was, um, at least knowing Ilan Well, not knowing him. But watching the guy, it seems like the way when he tweeted, I’m just going to buy all this stock, it was very genuine. And he was probably actually going to do it. And then that’s, that ended up getting him in in trouble. He almost lost his entire company, I mean, got kicked out. So you know, that that right there, I think is a perfect picture of what you’re talking about. Once you go public, you lose even what I would call common sense control things, you should be able to tweet whatever you want. But because he’s the CEO and founder, he can’t.

Stephan Paternot 13:07
That’s correct. And Elon Musk is a great example of a brilliant risk taking entrepreneur, right? It’s his, it’s his brilliance, his perseverance is crazy vision that allowed him to create the world’s first electric car company at scale, right. And it’s him, it’s his, again, crazy vision and ability to take massive financial risks for years on end that allowed him to finally make his fourth rocket launch successful and then usher in this new era with SpaceX. Right. And he’s doing the same thing with Solar City and battery technology. And by the way, there was another entrepreneur 20 plus years ago that I admired was the Elon Musk of the time that was Richard Branson. Yeah. And he famously took virgin public and then only ended up within yours truly regretting it and successfully taking virgin private again And ever since ever since he successfully took it private, he’s been able to keep innovating and doing all the types of things with airlines and aerospace and whatever other ambitions he’s had and keep innovating and inspiring generations of entrepreneurs so the big point is is going public is actually something that mostly your shareholders want who’ve been along for the ride and want to cash out right it’s not something that the person who has to keep running the business necessarily wants in fact it’ll it’ll generally start to work against them the longer they’re running their company publicly

Justin Brady 14:31
is the SEC kind of I don’t know like the stoic just say no I don’t want to get off my butt boss is that kind of the role like for anybody working in corporate America is that kind of the role they play the you know no I don’t want to deal with it kind of crotchety old guy,

Stephan Paternot 14:49
I don’t know, the SEC there. They there The intent is a good one right, is to protect, create standards, protect the unsuspecting and try to set up rules that help everybody because you know, you you know what to aim for. It’s just that those rules haven’t evolved fast enough in the internet age. And they don’t truly I feel like they don’t really take into account the research that shows the impact of innovation risk taking, right that occurs or the loss that occurs of that once companies have gone public. So it just, it just seems like they need to evolve and course correct and prevent, again, the types of market meltdowns that occurred in 2008, 2009,

Justin Brady 15:40
right. I mean, it just kind of kind of seemed like when its IPO time innovations done, and now it’s just going to be this general boring company

Stephan Paternot 15:48

Justin Brady 15:48
and maybe that’s an unfair categorization.

Stephan Paternot 15:52
but it’s it’s not that unfair, because  what happens with those companies become big, that instead of truly innovating, which is what got them to be huge in the first place, they start optimizing and what you do and start optimizing yet, you still have to keep increasing your revenues at the fastest pace possible to excite shareholders. Well, your only choice then, is to go by companies that are innovating, right, so big companies end up buying lots of private companies that are making the big bold bets. And what happens is, is that you keep buying those companies it keeps goosing are your top line it keeps helping your bottom line. But you have to keep meeting the next year’s goal. So you then keep buying and buying and buying. And what happens inevitably, is that you get big and bloated, unfocused. And by the way, that’s a lesson for all entrepreneurs, big and small, right? Which is that the less focused you are, the more diluted you become. And that’s where you eventually go off the rails, you need to stay focused and to stay focused. It means turning away all these other great amazing shiny ideas and objects and companies that you might want to copy or buy. So big going public, again, it it works against you in these initially very subtle ways. And that eventually, in bigger and bigger ways until all you’re doing is managing your stock you’re no longer managing innovation and changing the world

Justin Brady 17:16
so I mean, what does it look like them too, and I want to get onto slated eventually as well. Want to talk more about that as well. But I mean, generally speaking,  given how quickly things move, giving how quickly business evolves in the environment today, what does it actually mean to be a leader in this rapidly changing business environment these days? Does it does it mean something different than it did 20, 30 years ago?

Stephan Paternot 17:43
Yes, I think leadership and the what it means the definition of it, the practice of it, the best practices of it have evolved dramatically. I think 20 plus years ago, that wasn’t a real field of study, certainly not. And so Valley, it was all about just innovate, innovate, innovate, move as fast as you can. But I think leadership now has become something you can measure. And you can look at particular leaders and see what makes them great, and also what makes them knots over eight. And, you know, in the era of me to movements, that’s a whole there’s a whole other angle, a whole other lens to look through at the topic of leadership. And I think it’s something it’s, it’s a topic that I care about deeply because I felt that I was not a great leader. When I was running the globe. I mean, I was straight. I was in college, I was a 20 year old kid, I didn’t know anything about leadership. And over the next four years, we grew our company to 300 employees. And I, you know, I was learning on the fly, but resting taught and I did my partner and I did at the time as we were hiring senior leadership that was much older and wiser than we were so that they could help us manage it. I mean, very much like Zuckerberg got.

I’m totally blanking right now. Sheryl Sandberg. We needed our Sheryl Sandberg. At the time now, after Gosh, has been 20 years, almost nearly 20 years  since the globe since left the globe… it’s become a topic that I’m really fascinated by. And I constantly aspire to improve myself to become the leader I’d always imagined. Yeah, and that means really just maturing right, with age and time. And I’ve been I sat on both sides of the table where I’ve been an entrepreneur and I’ve been an active angel investor, I’ve now invested in 50 plus companies over the last 10 years and gotten to learn you know, what, what is it I look for, as an investor in leadership and teams that I invest in what makes a great team what ultimately makes a great business and by the way, no great surprise it’s all about the team. It doesn’t matter what their idea is, how crazy it is, or how seemingly boring an idea is. There’s a there’s a great team you just can write your check you can sit back and relax because great team will iterate until they succeed and a poor team No matter how much advice you try to give Won’t they won’t succeed ultimately so you need to just learn to recognize great talent and get out of their way

Justin Brady 20:13
they, sorry… go ahead and finish that thought.

Stephan Paternot 20:17
well so now as having put back on my CEO hat with slated I’ve had a chance now to put into practice all the things I learned that of what makes a good leader and I had been a reluctance CEO. Ever since the globe. I had no intent of running another company. I was very happy and comfortable just writing checks from the sidelines and investing in second generation of entrepreneurs rebuilding the internet. But eventually, I found myself with a passion project that I thought was addressing a massive industry that needed fixing, which was the film industry and ended up co founding a company called slated, which is now the world’s first film finance marketplace. But I didn’t initially come into it as a CEO. I did everything I could to not be CEO and family.

Justin Brady 21:07
No, I don’t want that again. Ha ha

Stephan Paternot 21:09
Yeah, no, I mean, what, what do you get burned, and you have all this emotional baggage, you know, right? You, you change your trajectory in your life to avoid burning yourself again, there. But what I discovered along the way, when, when the company had launched and was was growing, but growing modestly, was that I may need to actually roll my sleeves up and dive in again. And to help the company out. And also, I realized, wait a second, I’ve learned so much. And he’s last 20 years, maybe I am ready to be a CEO again. And over these last four or five years that I’ve been co slated, I discovered amazingly, that it fit me like a glove again. And this time, the glove fit really well in a way that it didn’t fit 20 years ago.

Justin Brady 21:54

And I was all those all those mistakes, you remember. And you’re picking up on them.

Stephan Paternot 21:58
Yeah, it’s the think about making mistakes. And then with time, looking back and recognizing them in their totality, and in their fullness. So now you don’t feel threatened by now. You don’t feel embarrassed about your mistakes. Now, you actually enjoy the mistakes you made and find new ways to tackle them.

Justin Brady 22:14
Yeah, the terror is not there anymore. Just the lesson learned so for people see, I wasn’t familiar with slated at all until we connected. So what if you said it’s the world’s first online film finance marketplace? Is this a, like a kind of an investor type of model? How does it all work?

Stephan Paternot 22:33
Well, the the 10 second version of this is if you’re if you’re familiar with Silicon Valley, and all the different players is where we’re Angel list for the film industry.

So every time every tech entrepreneur has ever used Angel list, we will have them some context years like oh, same thing for the film industry Yes, we we basically help filmmakers assemble, you know, find a great project listed on there, assemble a team assemble financing as symbol sales and distribution is very much focused on the film industry. So different terminology. But let me give you a little more context about why I decided to dive into this thing called slated. Yeah, please do. I, I have a passion for film. I’ve watched movies since I was a kid. I don’t know anyone in the world who hasn’t. It’s one of the most widely consumed pieces of content you’ll ever experienced that and TV. And it endlessly fascinated me. And most people in the world consume film and TV and are fascinated by it, but have no idea what goes on behind the scenes, how these things get created, where they come from, you know, and I always wanted to peek behind the curtain and see how this stuff gets made. Who makes these decisions to pick a project and tell a story and what’s you know, how does one thing end up costing, you know, 10 million to make. And another one cost 200 million to make and what makes one succeed and what makes one fail. And all that was always in the back of my mind has been as I was building the globe. And ever since then I had this I had to scratch. And eventually I co founded a film production company partner mine was running it from from Los Angeles, it was called palm star, and is called palm starts still still around and succeeding. But I learned very quickly that this is a massive industry. It’s a $300 billion a year industry, it keeps growing steadily. And in fact, it’s accelerating and growth. as China’s building more theaters, India’s building more theaters into streaming streaming is come on likes, it’s not just about the article. It’s just about that just demand for content, it is exploding. As long as the population of Earth keeps climbing, and all these different, all these different cultures, and everyone wants more and more content made just for them, then you have this this supply and demand issue where more and more content needs to be made. And it’s getting harder and harder to find the winners in that content.

Justin Brady 24:54
Now, are you seeing a lot of are you seeing this incredible demand of content? Because organism like Netflix, like Amazon, like Hulu, are all trying to buy up and provide exclusive content for their networks? Is that is that partially contributing to this crazy growth increase?

Stephan Paternot 25:13
Uh, yes. And no. I mean, the growth has always been there.

But Netflix and Hulu and Apple, they’ve provided a new means for that content to reach a wider audience, which in effect means, oh, they need to feed the beast, right? So now that they’ve connected writers have millions of more people who can stream stuff and couldn’t go to the theater before. Okay, well, now they need to buy up more content. And of course, what turns out is there’s not enough content to buy up. Think of them as large companies acquiring small companies, they’re buying every single film and every single TV series they can find. And also now they’re doing their own original content, right. So they’re just signing up all the talent and telling them please just make this stuff for us. So yes, it’s, it’s, it’s raising prices. And it’s making it, you know, a more exciting and more profitable time for a lot of people to be in this business. But it was always there and big and growing. And what hasn’t changed is the process of sourcing and assembling and putting together a film that you interest. So the only thing that’s truly changed is how we access that content. What hasn’t changed in 100 years, is how it’s getting made. And that’s where slated comes in, we realize we realized there was an opportunity, which was create an online marketplace where all the talent of the world can sign up. And they can automatically connect with all of the new up and coming projects that need talent. And oh, by the way, all the investors that have ever been fascinated by film and TV can now connect with them at the point where they need financing. And then ultimately, we help greenlight those projects. And then those projects are looking for distributors. And again, that’s where Netflix comes in, and Hulu and Amazon and iTunes, and all the studios. And they can basically shop right on slated for all this content, and we’re simply assembling it far more efficiently than any studio ever could have.

Justin Brady 27:07
That’s, that’s a really awesome concept. And I mean, I feel like we could talk about that for another hour. But we do need to, we have three minutes left. And I want to get to a few things. The one thing we love to ask every guest is what is a time in your life. A lot of people look at you and they think you just kind of, you know, this guy doesn’t understand failure or pain. He just kind of things worked for him. But that’s not true. A lot of innovators go through struggles, and it’s hard and there’s failure. So name a time in your life, that you had a miserable failure, how you recovered, and how you took that to be where you are today,

Stephan Paternot 27:40
a god honestly, there are so many failures that I have, which one was that which one was the most profound one,

I think it’s… Gosh, and we may need to edit this later. Just because I’m trying to think through which was the which was the most important I think it was my

it was partly contribution of youth, but my inability to understand how to manage people, it left me feeling highly insecure, and scared because I didn’t know how to manage the 300 people that I had. And I need to then spend, I needed to spend the next 20 years learning how to manage how to work, how to work with people, how to understand them better how to communicate with them in a way that inspires them more to work with you, not for you, right. So really, I would say the failure came in part in and an inevitable one, which is, if you’re too young and too mature and thrust into a massive position of leadership, you’re going to hit a lot of walls. And these are the walls that you can only get over with time and age. And so there’s a lot of lessons that I needed to learn and pour into my my new book, just so that I could teach a next generation of entrepreneurs, those who care to read the book, you know, a cheat sheet, if you will a Cliff’s notes on what are the things you’re going to hit? And how do you as a manager as a leader, so that I don’t know if that answers…

Justin Brady 29:13
That’s a great, that’s a great answer. And with our final minute, what is one tactic you turn to when when teams are stuck to help them get over their problems, help them problem solve?

Stephan Paternot 29:25
Well, I would say this, which is always apply a gentle but steady pressure to solve a problem or to achieve your dreams. Because you need to remember, at the end of the day, it’s not a sprint, you don’t need to quickly get there. Now, as long as you have the intent and the drive to solve the problem, to build your vision to execute. Just trust that pressure you’re putting on yourself and let the solution appear organically. If you try to manufacture an outcome really, really fast, you’ll simply burn out and get really frustrated. And that may make you give up so slow down and trust you’ll find the answer and and if you’re having a problem and you’re in a state of crisis, the next most important thing is to stay centered. Because when you’re in a crisis, and you only see negative problems all around you, you’re not seeing clearly and if you can’t see clearly you’re going to make a bad decision.

Justin Brady 30:17
Now that’s that’s really good advice. I like that a lot. Gentle and continuous pressure. Steph Paternot, thank you very much for joining me and everybody. Today. A very public offering is the book co founder and CEO of slated and of course valley of the boom when does that come out?

Stephan Paternot 30:33
January 13 on the National Geographic Channel

Justin Brady 30:37
outstanding. How do people reach out to you what’s your website? Or how do they learn more information about what you’re up to.

Stephan Paternot 30:42
If you go to or same thing on Twitter or Facebook or any of those.

Justin Brady 30:54
Thank you so much stuff. I really appreciate it.

Stephan Paternot 30:56
My pleasure.


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