← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: Anthropic Buys Compute From Elon & Commits $200BN to Google | Cerebras IPO: The Breakdown | Ramp's $40BN Latest Valuation | Hubspot Tanks, Monday Rockets: WTF is Happening in Public Markets
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- [00:00]
Jason Lemkin
Are there really enough developers in all of the solar system to keep Anthropic on the unprecedented growth path we have this year? There are categories of software where if they don't have a reason to exist in an agentic world, they will go into a terminal state of decay. If you're not accelerating, you're going to be destroyed. Right? And at a minimum, you've got to raise guidance. I think Zoom Info's growth was stolen from it, from Clay and friends and it's a brutal case study. It's a brutal case study.
- [00:28]
Rory O'Driscoll
Give me 30% growth, give me profits, give me a story that's got some future in it and I'll get you back to five times. There you go in capitalism. Great.
- [00:36]
Harry Stebbings
This is 20 VC with me, Harry Stebbings. It is my favorite show of the week. Rory o', Driscoll, Jason Lemkin here to discuss the biggest news in tech this week. Anthropic partners with SpaceX to use their Colossus 1 data center. A mega move for both Elon and Dario. Plus they commit $200 billion to Google over 5 years. Cerebras IPO is 20x oversub and they bump the range to $150 to $160. Then ramp eyes a 40 billion dollar valuation on their new fundraise and finally app Lovin HubSpot Cloudflare post banging numbers, but the street doesn't necessarily share the optimism. What is going on? We analyze the public markets but before we dive into the show today. Are you a founder working non stop to raise your next round? Are you an investor doing all you can for your portfolio companies to help them stand out? Funding and scaling A vision is Banking should not be HSBC Innovation Banking caters to tech and healthcare founders all over the world who need a really great banking partner that matches their pace. Offering fast onboarding product packages designed for your business and capital solutions built for high growth startups and the VCs investing in them. With HSBC Innovation Banking's rapid onboarding, you can get access to your new accounts and facilities quickly so your team can stay focused on building and scaling. What's next? You'll be paired with your own dedicated team of venture eco ecosystem veterans who have the network and experience to guide companies in your specific sector at your specific stage. And behind that support is this real strength HSBC's $3 trillion balance sheet and global network that provides this stability and international reach needed to grow your operation with confidence. To see how HSBC Innovation Banking can support you whether you're on day one or day 1000. Visit Innovation Banking HSBC to learn more and connect with an Innovation Banking Special Start InnovationBanking HSBC. While HSBC manages your corporate banking needs, Deel helps you build the global team behind it Founders scale startups faster on Deal Grow Without Borders Deal handles the hard parts of global hiring so you can stay focused on growth. Set up payroll for any country in minutes, hire anyone anywhere and get visas handled fast. Deal takes care of onboarding, hr, it, EOR benefits and compliance. Everything your startup needs to scale quickly. All done fast in one place. It's why more than 40,000 fast growing companies like Airwallex, Elevenlabs and Intercom Trust Deal. To move fast and get back to building, visit deal.com 20VC that's deal D E-E-L.com 20VC Deal handles the global team and Framer handles the front door. Your marketing website sets the tone for your brand, let's face it, and it's the one touch point every single one of your customers has. So if you're struggling to make small changes and simple updates, you're for falling behind. And that's why so many companies from early stage startups to Fortune 500s are turning to Framer. Framer is an enterprise grade no code website builder that works like your team's favorite design tool and it's used by companies like Perplexity, Miro, Mixpanel to move faster. Designers and marketers can fully own the site with real time collaboration, a robust CMS built for SEO and advanced analytics that include integrated A B testing. So you're not just shipping pages but you're maximizing what works and when you're ready to ship, changes go live in seconds with one click. Publish without relying on engineering. Plus Framer is built for scale with premium hosting, enterprise grade security and 99.99% uptime SLAs. Whether you want to launch a new site, test a few landing pages or migrateyourfull.com framer has programs for startups, scale ups and large enterprises to make going from idea to live site fast. Learn how you can get more out of your.com from a framer specialist or get started building for free@framer.com 20VC for 30% off 30% off a Framer Pro annual plan. That's framer.com 20VC for 30 percent off framer.com 20VC rules and restrictions may apply.
- [04:59]
Rory O'Driscoll
You have now arrived at your destination.
- [05:02]
Harry Stebbings
We are back. I am so looking forward to this one. As always, we're Going to start with this week in Anthropic. I think. I think I'm going to be really unfair, actually, and just go off on one because Rory loves it when we go spontaneous. So Anthropic have come out in the last 12 to 18 hours and said, Nope, all sales of secondaries and SPVs need to be approved by the board. Basically brings into question the legitimacy of the transactions that we've seen and will be able to get out of moving forwards. This is a very big deal, actually, and we're seeing it impact their price in secondary markets significantly. 200 to 400 billion, reportedly. Guys, how did we analyze this as an announcement from Anthropic?
- [05:44]
Rory O'Driscoll
In one sense, not surprising. Companies like to keep control of their cap table and they'd probably lost a little bit of control and stepping back because the SPV word is a little misleading. There's a lot of different ways shares change hands. There are a lot of different ways SPVs are used. So let's distinguish them. One is sometimes an SPV is when a venture firm has a big allocation, can't take it all up, so it forms a special purpose vehicle and that company invests directly in Anthropic, maybe raises money from the venture firm's LPs and the SPV appears on the cap table. Nothing wrong, nothing to see here. But that's not what we're talking about here. What we're talking about here is secondary sales of Antropic shares. Outright sales, we'll come to that in a second. Or transfer of economic value. In other words, I own shares of Antropic, I'm an early employee. For whatever reason, I couldn't access the company structured tender offer. And I decide to do something outside of that. So the first thing I do is I try and sell directly to Jason. He's willing to buy, I'm willing to sell. Anthropic says we're not going to affect that transfer. We have rights to approve transfers. We're just not approving this. And I don't know what they've been doing in the past, but that's what they say they're going to do going forward. In other words, they have the right to say yes or no, which makes sense. It's not unusual. But the real thing that's going on, and this is where it gets interesting, is what I can also do is say to Jason, hey, Jason, I can't sell you my Entropic shares because they won't let me. But I contract with you that whatever I get for my Entropic shares. Later, I will transfer that value to you, and I will structure a document that says I owe you contractually all the money there is that ever comes from that share. So now Jason thinks he doesn't have the shares, but he kind of has the economic right to the share. So he's money Good. And there's two problems with that. The first is probably the Antropic documents say, rory, not only can you not sell your shares, you can't transfer beneficial ownership to those shares to Jason. So I may not be able to do this. So Antropic could say, hey, we don't agree to that. And that's fine, though. But the funny thing is, Jason and Rory might still have their contract because I promised Jason something. Just because Antropic says they don't agree to it doesn't mean Jason and Rory can't contract. But the tricky thing for poor Jason two years later when we go public, is he doesn't have any structure. He can't go back to Entropic and say, my shares are in the cap table. I'm good. I can just sell. All he has is a commitment from Rory. And Rory turned out to be a liar and a cheat, and he never owned those shares, or he owned them, but he sold them to someone else as well. And it's just going to get really messy at that level, as individuals start trying to enforce contracts, not against Entropic because they're not in the loop, but against other investors who sold. So there's going to be a lot of losses at that level. And I think Entropic is just trying to distance itself from that and probably also worried that if there's been a lot of transfers. I saw someone suggest that even though they say they don't allow these, you get into all sorts of equitable remedies. In other words, the court starts saying, hey, dude, you knew this was going on forever. You kind of acquiesced to it. So maybe you are involved in this mess, and they don't want to be involved in this mess. So totally makes sense. As you get ready for an ipo, you're like, I've been a little bit sloppy here. Time to tighten up. And then the real thing is, we'll see the second auto impact.
- [08:55]
Jason Lemkin
To me, listen, maybe I'm missing something. To me, this story seems like a nothing burger made up on social media. Let me tell you why. First of all, all companies have had this for a long time. Most of our portfolio companies have the same provisions in it. This has gotten More and more locked down over my investing career. Right? It used to be the lawyers wouldn't put the stuff in in default. And then maybe four or five years ago, every set of charter documents say no transfer without the board permission. Just like anthropic and opni. Okay, so nothing new. Two anthropic last year warned memo, one of its best investors and others. Enough with the SPVs. They said publicly, Enough with the damn SPVs. This isn't new. They said, Stop the SPVs. If you want to invest, you have to invest directly. Okay, they were clear on this last year. I think this is anthropic. Just saying this is still happening. They named a bunch of entities in there, which you never see. They named like five hedge funds or something. And saying these guys are bad actors. I think no one was listening to them is the problem. They banned it. They were clear that one of their lead investors, you know, greatest and one of the greatest venture investors of all time, they told them to stop sbv. And they told everybody, there's so much greed in AI, people wouldn't listen. And so they named actors. And I think the interesting thing to me is when folks don't listen, I don't think they listened to the company last year. So then you have to go public on the megaphone and make sure everyone hears, hey, these are bad actors. And don't do it because people, people were. They're so greedy, they take the risk anyway. The triple layered, quadruple layered 20, 20, 20 SPVs. This is the hottest share of the century.
- [10:23]
Harry Stebbings
We're going to discuss the next big deal of the day, which is anthropic steel with Elon. We've said before about Dario's difficulty in his job in terms of forecasting capex requirements. Rory, do you want to just provide some context into the deal with Elon and what it basically means just shows,
- [10:39]
Rory O'Driscoll
you know, needs must when the devil drives, as they say. You know, I mean, let's be. Elon in the past has said, you know, horrible things. They're evil, they're woke, they're anti white, they're anti Chinese. It's been as recently as three months ago, and suddenly he wakes up one morning with excess capacity, and Dario wakes up one morning with a need for capacity, and Elon ends up in trial with OpenAI. So kind of the enemy of my enemy is my friend. And here we are. Totally sensible deal. I mean, it says a lot about both markets. It says this is a market consolidating, and even though they will deny it till the day they die. What this is is X AI SpaceX, Grok basically saying, we're not going to be right now a leading edge model contender. GROK is not growing like OpenAI and Entropic is. And we're going to effectively switch from being a net buyer of capex because we're trying to build Grok to being a net seller because we're not going to be able to build Grok. I believe the data center was 11% utilized. So this is the market consolidating. The stronger players have the capital to buy more CapEx. And in the context of this, GROK is a weaker player and they very wisely are opting to stop for now, at least the dream, and Instead take probably $4 or $5 million a year, which is a big slug of revenue. I mean, depending on the estimates, 3 to 5 billion a year of revenue, which for an asset that was losing money. And for context, the total SpaceX revenue run rate is around 20 billion. So this is like a 15% revenue list from something that a couple of months back looked like a money pit. So the combination of this and Cursor, I think they've taken X AI from a $250 billion, which is what they paid for it in SpaceX stock, which is astonishing from kind of a, huh, why are you doing this? To. Okay, I get it, it's at least notionally pro forma profitable and has some kind of existence. Right? But it's not a competitor anymore to Entropic and OpenAI and trying to pretend it is different. So it's, you've got your own little core weave. Congratulations.
- [12:39]
Jason Lemkin
You know, we talked about this a couple weeks ago and I said something, you know, I usually don't use these kind of lines, but I said something like, this wouldn't be hard to imagine because like Samsung does it with Apple. They compete and sell them components and we talked about this. No, you're ridiculous. Yeah, they just, they would sell it to each other, right? Actually, the most obvious candidate now is, is SpaceX, because they've got to have different BU's. I can't even keep track. You've got the Rocket guys, you've got the Starling guys, and now you've got X AI, which is two things mashed together. And they each have their own PNLs, BU's and responsibilities. And if I'm stressed and I'm running this X AI Twitter thing and I can get another 4 to 5 billion in terror, it doesn't just make sense for the IPO it makes sense for me. It just selfishly makes sense for me. So I don't think the deal is as surprising. It's a reminder, like, keep meeting with your competitors. This is a classic Saster post. Always meet with the CEOs of your competitors. You never know where to it's going. It's never a bad idea to have lunch once or twice a year with your competitors. It's never a bad idea because this is one of those deals. And two, the more interesting thing to me is, my God, you know, it changes so quickly. Just a couple of weeks ago it's like, well, Anthropic can't launch Mythos because it doesn't have enough capacity. And now Anthropic, I hate the 5D 8D chess metaphor. But now it's going to. It's figured out a way to have more capacity than Open AI. Like, it's pretty epic, like to just hoover up anything that's available on planet Earth and possibly orbiting soon enough. But it will hoover up everything available, right? Core, Weave, Xai, anything. Right. It'll probably buy capacity from OpenAI if SAM lets them for some reason.
- [14:10]
Rory O'Driscoll
You know, capitalism works and assets should get reallocated to the person who can create the most value from them. And you know, right now Anthropic can turn that capex into the most amount of money the quickest and Grok could not. So I agree.
- [14:22]
Jason Lemkin
The person who is in charge of making the P and L work for the data centers is sure glad to get an extra 3 to 4 billion to make his math work and not get fired by Elon Musk. Pretty happy.
- [14:32]
Rory O'Driscoll
It will be fun, by the way, to watch the SpaceX roadshow because someone's going to have to perform out. Well, this is what we owned a year ago. Then late last year we bought X AI. So bear with me. We dropped all this stuff in here. That's what it is today. And we have a whole quarter of combined revenue. Oh, and by the way, we then sold all that capacity and that should hit next quarter. So you got to performa that in. And then the quarter after that, we're going to drop in cursor, which hopefully Colossus 2 will be online then. And you got to performa that in. So basically, Mr. IPO investor, you're buying a $15 billion Runway company today, and it'll be a $23 billion Runway company in two quarters with two totally different businesses on top. That's why the bankers are going to earn a couple hundred million dollars. But it Won't just be an extend the model and grow 20% Q on Q kind of analysis here.
- [15:20]
Harry Stebbings
Another deal for Anthropic. They also did a deal committing $200 billion to Google over I believe it was a five year period. To your point Jason on Samsung and selling into partners. Ultimate sign of a circular economy. Ultimate sign of Google's superiority in their positioning owning both Gemini and then TPUs and where they sit selling now to Anthropic. Anything of note there?
- [15:42]
Jason Lemkin
To some extent at places like Google it's like okay, like obviously we want to win, we want Gemini to win, we want to beat everywhere but we're not strong everywhere. We're not. But let the best model win. Like we're going to win but we're okay with internal competition by selling capacity. Anthropic as well, like it's okay at their scale to let the best buyer of these different things, I mean they don't have infinite capacity but it's not necessarily a bad way to keep everybody on your toes to have a little bit of the competition inside of you. It's not a bad, necessarily a bad thing.
- [16:13]
Rory O'Driscoll
It is interesting though, I mean I think there's a couple of things with it. One is I think now the Anthropic rev commit is about 40% of Google's total future backlog. So it underlines quite how heavily dependent the hyperscalers are on these two privately held companies which are effectively providing more of those revenues. And you write Jason, reminder everyone, Google has Gemini, which in theory is a direct competitor of OpenAI and Entropic. And this is Google giving a separate part of Google giving Anthropic the compute they need to grow. And I think in one sense you're right. Win both ways. I'm sure at the margin you'd prefer at Google to be the winner of the model company because I think, and I could be wrong, I think, I think in the end the value will accrete mainly to the model providers and everyone down the stack that's selling to them even though they're all making out like bandits today, starting with the memory guys all the way up to the hyperscalers over time. That's not the obviously differentiated place and I could be wrong that. Maybe CapEx and the ability to invest hundreds of millions of dollars in a data center is in fact the moat itself. But over the long term if I'm Google I'm like I'm happy that I'm doing $200 million billion dollars of revenue with Anthropic. No more than Microsoft is happy they're doing $200 billion of revenue with OpenAI. But deep in your heart you should be saying to yourself, God, I really wish Gemini was so busy that they needed $200 billion of compute. And in Microsoft's case, I really wish I even had a model that was worth a damn. Which I don't because all you're doing is you're enabling with your balance sheet. The two most exciting next generation tech companies who are going to draft on your balance sheet air cover and become huge.
- [17:55]
Jason Lemkin
It's for sure. I mean there's a trade off. You're enabling your competitor. Right. It's just, it was interesting. The Wall Street Journal today published the market shares in the enterprise for OpenAI, Claude, Gemini and Grok. Grok is a rounding error going to the prior conversation.
- [18:07]
Harry Stebbings
Right.
- [18:08]
Jason Lemkin
It's not making any progress, but everything is so multimodal that it said Gemini went from 27 to 40% market share I think in the last nine months and Claude went from 21 to 48. Okay. And obviously OpenAI actually only went down a little bit. They don't sum to 100 because you're multimodal. Right. But if Gemini has gone from 27 to 40 and Cloud as we know has gone from 21 to 48. Now Google's got both pieces. It's got its own winner going to 40 and 50 and 6% of the enterprise and it's got a large share of this, this other leader, 48%. There's worse ways to, to solve to revenue growth than having both the fastest growing players, yourself and your competitor. You get a piece of each.
- [18:45]
Harry Stebbings
Jason, I was so intrigued to hear your thoughts on this Goldman piece where they essentially summarize saying agents will push tokens consumption up 24x by again. Our job is to kind of invest on the back of this and invest in companies that provide these services. When you heard that and living as you do with the company structure that you do today, do you agree with that? Do you think that is enough? Do you think it's underplaying it? Overplaying it? How do you respond to that?
- [19:12]
Jason Lemkin
Well, I wish I had the fluency in numbers that rory has, but 24x sounds, I know I highlighted this was it sounds just way too low.
- [19:19]
Rory O'Driscoll
Agreed.
- [19:20]
Jason Lemkin
The theme of a lot of the rest of the year, it's just taking off now. The theme of a lot of the rest of the year is parallel agents. Now we don't need parallel agents in everything. We don't need 100 SDRs hitting up our 1000 potential customers every minute. Like you run out. There are definitely plenty of workflows that do not need 10, 20, 100 parallel agents. You don't need 1,000 flights going to the Bahamas for your vacation. But workflows that can benefit from parallel agents, it's just kicking off inside of these LMS, their models. And so not only is this 24x sound alike. What if we have 10 agents? That's 250x. Right. And more. And then we also forget how underpenetrated the enterprises are. It's so early outside of tech. Right. So I don't see why it's not 250x but I got to put it on a better spreadsheet. But I think we're underestimating the potential impact of parallel agents. It's still, still most of us live in a sequential world. We fire up something Claude, Claude code chatgpt, it doesn't matter. And we're kind of have a human interface where we're doing things sequentially because that's how our brains work. But it's also how, how the LMS have worked. But now that they can natively run parallel agents, we just get these superpowers we didn't have a couple months ago. Like and what these parallel agents are doing, if you haven't seen any of it in action, is they'll even better because like for things like coding, they'll go out and do 10 different versions of the same feature of the same iteration and then they'll just. Then the LM will decide which is the best of the 10. It can present you the two or three best options and you can approve it. So why build a feature once if you can build it 10 times? Have the LM decide which of the 2 to 3 expressions of the feature is the best and then you pick the best combination of the expression. And so you can see hints of it like in image generation, you know, you use some image generation times you get four images. But what if you were in real time blending the best of all of these with much more complicated workflows? So it's 24x just sounds, it sounds conservative I think at this why Anthropic's right to buy every, every TPU, GPU, every Cerebrus chip, 12 inch chip they can buy.
- [21:17]
Rory O'Driscoll
Yeah and I think the token count is always a mislit because I mean, I mean I've tried to do these numbers Jason, and it just so hard because I saw the summary of the Goldman report. I haven't read the detail, and I really want to because I was trying to think through the same stuff myself. But like, what do you know, every 18 months, the raw performance of the chip gets roughly 3x faster. Then on top of that, other optimizations, how they run LLMs, how they do all the quantization, all the other clever stuff that you can do, read about and try and understand, gets you another 3x. You're probably roughly 10xing the number of tokens per unit of money every couple of years. So you have that if you were using more tokens, ironically, the total revenue would be going way down. Because if you only needed a million tokens and it cost you, I mean, you see it in the prices, they're down 10x. If it cost you five bucks now for the same number of tokens at the same efficiency, it would be way cheaper. But then what you have on the other side of things just getting better, right? So you use more of them to get to a better result. But what you see, as Jason said, is when I looked at the token count to support a chat two or three years ago, when you're interacting with an LLM, whatever it is, it's X. It's 10X that now to do some kind of simple cowork analysis. And it's 10x that again if you're doing coding, and it's 10x that again if you're doing kind of parallel work and kind of where these agents are going. So you're just going to see token, the cost per token is going to go way down and the use of those tokens is going to weigh up. And then the question is, the interesting thing is you're dealing with two numbers, one on each side, that's moving an order of magnitude every 18 months. And trying to forecast where the net multiplicative effect of that comes out is hard. I mean, that's what you're trying to do. And I wouldn't fool myself into saying that you can be wildly accurate on that. You can get the rough direction. But it's hard to say, you know, I know exactly how this is coming out.
- [23:07]
Jason Lemkin
There is a little bit of a growing counterargument that's growing here. When you talk to some of the best CTOs and engineering leaders that we don't need as many tokens as we think. And if you talk to folks that didn't just get their team the last quarter or so to get going right on Claude 47, but have been deep in this for a while, right. There are multiple releases into their whole team being AI pilled. You know, there is a theme that like we, we actually don't need this much code. We don't need this many lines of code. It is too much. We cannot process all of it. And this is just a lot of token maxing that is just unnecessary to deliver what the end customer needs. And we're all learning, we're all excited about these tools. They work and people are running, they're running Claude code and Codex 8, 10 hours a day. But it's not necessary. Guys, you're producing too much code that's never going to be committed to production. You're wasting your energy. And there is this, there's the token, there's like the whole, from the press, the whole token Max Amazon, where people are pretending to work because they have quotas. But this is different. This is some of the smartest people saying the folks that need this, this many cloud coding, these are the mediocre webheads, web developers that don't know what they're doing. Okay, these, these are like a little bit better than Lemkin.
- [24:16]
Harry Stebbings
How do you think about that then with respect to your Mike Cannon Brooks at Atlassian saying, hey, our demand for new software, new products, new features is infinite. And so we will continuously need labor supply of great developers and we will continuously need more tokens because the demand for new technology and new products is infinite.
- [24:34]
Jason Lemkin
Yeah, but can the, the question is, can the average Atlassian engineer really effectively consume $10,000, $20,000 a month of tokens and be productive? Okay. And there is a growing micro backlash that the best, the best developers and engineers now don't need $20,000 a month necessarily. And that this is going to fade and we're not going to go back to handcrafting code. Right. But that this is, we don't need to be, to be running Claude code 10 hours a day. This is a bad way to ship enterprise grade software. This is a great way to, to ship hacks and proof of concepts and impress my boss. But do we really need this many lines of code a day? Do we really need it?
- [25:13]
Rory O'Driscoll
There's a lot to unpack. I'm a little tentative because it's more my infra colleagues doing this, but I've been talking to them about wrestling with this question. So I just want to pick this apart, Jason, because there's a lot to do. One is this whole idea of monitoring people's token consumption and what impact that has. There's an economic concept. It was actually an LSE professor Goodhart's law, which basically says whenever you monitor a variable, you actually change the causal relationship of that variable. Which is a way of saying, if you say to people, I'm going to monitor your token production and how much you use, you will in fact distort the result. And that's what Jason's hinting at. And I think we saw it for either Amazon or Meta or one of those where employees are internally just burning tokens on stupid tasks, which is easy to do just to make sure they, quote unquote, make their quota. To assess the market size for these companies at a highest level on Shopify, you do have to have some mental model of how much LLM spend for which token is a tricky but meaningful proxy. It is going to be relative to salary. That's one of those macro numbers I'm trying to figure out all the time. Does the average developer spend 2% of their salary dollars on tokens? Is it 5%? Is it 10%? It's a huge number and it's a very important number. But the odd thing is the more these big companies target their employees based on it, the more likely the employees are to distort the outcome. That's the first big picture comment and I agree. I think there's a ton of that shit going on. And to some extent, when people find that out, and I think there will, I think there is going to be a push to get more grip on cost because there has to be. Because if you think back to December when entropic was at $9 billion run rate by definition, very few of those CIOs had in their budget. Oh, by the way, you're going to spend 10x that next year and it's a big sum of money. Someone's going to have to find $50 or $60 billion of budget across US corporates. And that's real money. And what that means is there's going to start being some kind of pressure on where is this money being spent, even if they still want to AI max conceptually. So I agree with you, Jason. So on that I agree. The thing that I don't know enough about, and I'm just going to ask you because you said it is do the best engineers not need as much tokens? I hear you two questions on that and they're questions that I ask my infra guys where I don't have the answer. The first is I've heard them articulate a perspective that actually says it's the opposite. The very best engineers can in fact manage because they have the conceptual vision of what they're trying to build. They can be more productive with these tools. And the less productive you are, the more you're getting yield loss in the sense of you're using tokens that aren't turning into effective code. Right?
- [27:42]
Jason Lemkin
Yeah, but I think both are. Right. I think now they really are becoming 100x engineers. Right? Let them use whatever they want. Right. Give them all the tools in the world. The concern is that there's kind of a snarky term web devs. There's others folks one or two steps above me or the mediocre folks on your team that just aren't that good. Okay. They're web devs. They're consuming massive amount of tokens for relatively low amount of productivity gains. Right. And it's not, it's not all performative like the Amazon thing. Some of it is attempting to keep up, but they need so many tokens to contribute to so little value. Right. It's 100,000 line of code where some folks are made up on Twitter. Do you really need 100,000 lines of code to run a blog? Well, maybe you don't. Right?
- [28:24]
Rory O'Driscoll
Which is why the question I'm always asking the rest of my team and I don't know the answer to is what is the objective? How do you think about measuring this? I mean, you're right, it's not. Lines of code is a dumb measure because this stuff grinds out lines of code. You know, you need some kind of conceptual effective lines of code and I haven't found anyone. In fact, we just surveyed, I think 30 of our VP's vengeance to try and understand what's going on in terms of spend. And they all spending a lot. They all think they're going to spend more. But you're right, I didn't get clarity on the what is the heuristic for success and there has to be one over time.
- [28:54]
Jason Lemkin
Well, it's just hard to know what the ratio of like web devs and token trashers is to 10x or 100x engineers. Right. And this, it just goes to the question we asked before. Are there really enough developers and all of the solar system to keep anthropic on the unprecedented growth path we have this year. Probably. But a counterargument is these web devs and trash tokens and like we're going to, this is going to play itself out. We're not going to in a year from now. We're not going to be wasting tokens on mediocre web developers playing with stuff and we're going to clamp down on it because it's a huge waste. We're going to give the S tier guys all they want, the 100X. But that's always been true.
- [29:30]
Harry Stebbings
Probably there is. And then Also Anthropic released 10 financial agent templates killing a load of YC companies in the process doing them. In a couple of weeks they are scheduled to come out with a legal product which will challenge Harvey and Negora apparently in a very meaningful way. And so there probably isn't enough developers to satisfy the insatiable market cap increase. But there is when they take legal and there is them when they move into financial analysis, financial modeling and everything in between.
- [30:02]
Jason Lemkin
I don't want to go too far. I just. We're still trying to see. We talked on the show about cloud design, whether it was a killer, right? It isn't a killer yet. I just don't. It's hard to predict some of the stuff. Listen, there have been many YC and other startups that have been destroyed by a cloud feature, right? I've invested in one or two. Being able to innovate faster than. Than Anthropic is tough. Okay. It's pretty effing. This is not classic slow company, slow pace, right? Having said that, boy, if I'm a lawyer billing $2,000 an hour and doing this, I. I don't want to take a risk. It's not that I'm not going to ask Anthropic and chatgpt my questions. I'm going to ask questions too. In addition to Harvey Lagora or other tools. Right. But man, I don't know. I don't want to take any risk that this is not have the level of domain investment in anything that is close to regulated or has other. I mean we people already got the memo, the Wall Street Journal. You can't submit briefs to a court with hallucinations in it. Everyone gets. That's a problem.
- [30:57]
Rory O'Driscoll
Now the question of are these guys going to take away everyone's vertical business? And I don't know. I think it's what Jason said is that I think the model companies have a lot to do. Building their models, building broad horizontal harnesses, building products like Cowork. It's not clear to me that they'll be able to have the time and the focus to do all these specific verticals now should they?
- [31:17]
Harry Stebbings
I agree but I think there are some very core verticals like customer support, like legal, like financial modeling and accounting where they are mega and very clearly winnable.
- [31:28]
Jason Lemkin
I don't think there's any chance that Anthropic is going to do applications in cx. And actually, and I could be wrong, I will bet you a lot of money they're not going to go all the way in legal at the app. That's why design was interesting. It was an application. Okay, now what does Harvey cost on average? $150,000 a year per law firm. I don't want to roll that into my $200 a month. I'm paying for Claude if there's any risk. It's just not worth it. Right? It is just not worth it. I need a solution. I need it to do everything. I needed to integrate with DocuSign. I needed to prepare the brief properly. I needed to review it a different way. It's just not worth. This is not a career where saving a few pennies is worth it. Outside of the low end of the market, you the low end. Maybe the ambulance chasers do use Claude. Right, that's fine. So I may be wrong next week, but I'm not confident that, that these verticals are going to put the resources to build an application. That's the thing. They're not going to build a CX application. They're not going to rebuild decagon or Sierra or Finn or Gorgeous or any of these other. It's not that they won't build chunks of it. It's not that like, like OpenAI hasn't taken away pieces of 11 labs or other pieces of other folks, but we haven't seen them commit to building applications. That's different. If the LLM can express what an application does, that's where the YC companies get killed. Because all of a sudden you don't need an application. It just works in the prompt. That will kill a thousand star. It already has. It's killed one or two of mine that are on. One is on its third version because it was super innovative a year ago and then it is built into cloud today.
- [32:56]
Rory O'Driscoll
Step back here. This is not the first time you face this question. If you look at every single platform there is a dominant compute level provider. And the million dollar question is how much of the app layer they take over. Let's just do two obvious ones. Microsoft in the 90s they were the operating system. So they dominated broad horizontal application software for the consumer and the individual knowledge worker. The Office suite, I think co worker could be like the Office suite and they dominated networking at the infrastructure layer, just connecting things. But there was hundreds of application software companies on Top of that Siebel, Vantiv, Scopus, Clarify, Bon SAP. That said, we run on top of Microsoft. We build specifically for this vertical or this horizontal use case and Microsoft tried, they bought great planes. They never really made it happen. Fast forward a decade later. Hang on Amazon. Same kind of question does AWS eat everything? And I know lots of brilliant investors who passed on Snowflake, which is not even an app, it was an infrastructure level player because they said oh my God, Amazon Redshift is just going to eat their lunch. It's not going to be a thing. And it turns out it was a $50 billion thing. My point is you have to have some approach to thinking about this but you have to face this question every compute revolution and this is just the latest turn of the crank and to me the default is the Microsoft outcome which is the equivalent of broad horizontal compute is now broad horizontal intelligence and that's going to be provided maybe not by the monopoly like Microsoft, but the oligopoly of entropic, OpenAI and maybe Gemini, probably the kind of knowledge tool Microsoft will regret to their dying day why they slipped on this and let Claude cowork be there take their lunch. But that's their problem, not mine. But at the app layer I'm kind of with Jason. I think all these individual apps especially, and this is a key point especially to take legal, if all you're going to do is mark up a document for an individual user I think there is an argument that an individual user might get a skill from Claude and they'll be fine. But most of these companies are selling coordinated workflows across an enterprise and I think once you get to that point, I'm with Jason. I think Lagora, the Harvey rep, if you're selling to amlo gcai, which is ours, if you sell into corporates, you're going to want both the relationship, you're going to want the ability to customize it to what you want. There's just going to be a whole bunch of work that's just better done by a focused firm. I mean I think history is on our side. That's the way it shapes out.
- [35:18]
Jason Lemkin
Well, I would just, I just offer two thoughts maybe one, this is more OpenAI than anthropic. Sam did hire Fiji to be the CEO of applications and there no longer is the CEO of applications. Now she's CEO of AGI. So that, that is really walking back now you could say it's a little bit different but just think about hiring a CEO of application and Say, you know, that's not a business we want to be in Anthropic. Not seeming to invest 100, 500 people in design. Right. Which they could. And so that could change next week. But right now neither of them seem to see applications. Now paradigms do shift. They're also going to Rory's point of the low end redlining or whatever that could get more powerful. I'll give you a different example. It's not the same, but I don't think in a year we're going to need any traditional marketing automation software. It's too dated. It doesn't work for agents. There are categories of software where if they don't have a reason to exist in an agentic world, they will go into a terminal state of decay. Okay. Agents do not need HubSpot or Marketo or Salesforce or any of these marketing automation tools because they have no need to hand compose an email in a third party template. And so I'm not saying that would happen in legal, but you could see if they don't keep up ahead of it and the paradigm changes, you can become obsolete over time.
- [36:34]
Rory O'Driscoll
There's two separate dynamics. One is the does new software get eaten by new models? In other words, Harvey lagore eaten by anthropic. You're referencing something different, which is does old software get eaten by agents? Either clawed agents or new agents, but
- [36:48]
Jason Lemkin
new software can get old too?
- [36:49]
Rory O'Driscoll
Yeah, well, yeah, so you're conflating the two, but yes, agreed, it can, but I just think they're different questions. Right. And I'm just trying to.
- [36:55]
Jason Lemkin
I just think the rate of decay might accelerate in the agentic era. That's the connection I didn't make. It used to take a decade. Now it could be 18 months. And if you talk to folks, senior folks at lovable and repl.it you will hear they're well aware of this. They do not want to be clotted out of existence. They think about it every day. That they have to stay ahead of it because they're closer to the core. Right. I just think stuff gets old much faster than it is.
- [37:17]
Rory O'Driscoll
That's fair. The evolutionary pressure from a model that's underneath you, an intelligent model that's underneath you, a company building that intelligent model to not answer both is, you write Jason, more powerful than the pressure of an operating system or a compute system like aws. So I do agree with you. Every day you wake up as lovable a replet. If you could be behind by a year competing with Redshift, you can't be behind by a week competing with these guys.
- [37:43]
Harry Stebbings
Jason, you said HubSpot. We had some public market activity. We had HubSpot crash 20% despite decent and consistent growth. We had App lovin at a 7 billion run rate. Stock crashed and then Cloudflare beats and then lays off 20% of its base. What one do you want to pick on first there, guys?
- [38:05]
Jason Lemkin
Maybe it's not as exciting as the anthropic wars. I just thought that the, the slight contrast that was interesting was Monday versus HubSpot. So they're both decelerating. They come out with a quarter and Monday trades up after being maybe the most beaten down stock out there, right? Trades up I think 20% and HubSpot down 18% and what's the difference? They're actually not much further than each other on their agent journey, which is early Mondays in production and HubSpot sort of in. But I mean they're pretty early. All Monday did that, I can tell, was for the next quarter. They're still decelerating, but at least they raised the guidance. For real. HubSpot couldn't do it. HubSpot lowered their guidance. So if you're not accelerating, you're going to be destroyed, right? And at a minimum you've got to raise guidance, right? Even if you're not accelerating like Monday, you've got to at least raise your guidance to get, get to get some breath. Because at least it says, I think it says sincere when Monday says, hey, we're raising our guidance next quarter, at least it says we're not going to zero, right? We're not being destroyed by AI if you're raising your guidance. But I think even though the SAS apocalypse is behind us, I think for many there is still a worry the terminal value is 0. I don't think that fear has gone away if you keep decelerating while budget is accelerating everywhere around you. It's not that everyone's decelerating. The budget is accelerating and you are decelerating. It's not a. Those aren't too good lines to cross. They're not crossing over each other. But at least it's nice. We see some bounces off the hard deck.
- [39:27]
Rory O'Driscoll
I agree. I think it was a super interesting quarter. Lots of different people reported, did different things. Some of them cut expenses, some of them had decent quarters. And the stocks, we had all sorts of weird movements. I mean Cloudflare had a really good quarter, mid-30s good. I meant. Yes, laid off a bunch of its base stock went down. You write HubSpot Decent quarter for the record here. Yeah, decent growth. Stock went down. You write Monday early on, a little bit better. Bill.com won, where I used to be on the board of, you know, unfortunately also had to lay off a bunch of people. Stock bounced up and partly because of a buyback. So, you know, you kind of look at all this and go, what's going on? And I think there's really two things, and Jason's done a really good job of articulating the important one, which is, where are you, where's your business structurally? Are you getting better or worse in your business? Is AI messing with your head? Is AI, are you accelerating? Are you on that? As Jason said, the thing about Monday and HubSpot, are you on the agentic journey? Right. I think one of the things that happened, interestingly enough to definitely Cloudflare and possibly the HubSpot is a little bit of the, oh my God, you're cutting 20% of your costs, which had been perceived as a net positive. Now there's a little bit of a ha. Cloudflare, you're a good company. Wtf? Oh yeah, what's going on? Right? A little bit of uncertainty. But if the first big bucket is that whole kind of what's going on in your business, then separately it's going to sound really Captain Obvious. As Jason would say, the second half of this is you just got to look at price. In other words, if you have a muddled quarter and your stock's already at the bottom, you might get a bounce. If you have a tricky story and your stock is like Cloudflare or App Loving, I think App loving was, and two of those were among the two highest valued companies. You're going 30, 40%, 30% in the case of Cloudflare. But you have a story that's even a little bit messy. People are like, I might be okay with this at four times, I ain't okay with this at 15 times. And sometimes you forget that there's both the strategic journey and then there's the how is price dealing with that? What you saw in the case of App Loving and Cloudflare is it turns out high priced stocks at the start of a paradigm shift, no matter how amazing the quarter is, are just vulnerable to disruption. Whereas when you're trading like Monday, poor Monday was at under two times revenues with a bunch of cash, you're like pretty much anything you do other than burn the fucking company down, the stock goes up.
- [41:44]
Harry Stebbings
It was basically priced at nothing because at one point it was basically like almost one and A half X cash.
- [41:51]
Rory O'Driscoll
And that's basically just saying just any positive momentum you will get rewarded. As I say, it is very much Captain Obvious. But price is the vector and we forget about this often in the private sector. Private side, because you're not really dealing with price on a day to day basis. But on the public side, that's how it works.
- [42:05]
Jason Lemkin
I think the most brutal one, and I love Henry, but the most brutal one that was under discussed was ZoomInfo. Right. And the reason I bring it up is ZoomInfo also tanked when you know they're growing 1% now. And I think they guided to some negative revenue growth going forward. Is the reason it's just a Tough one is ZoomInfo just won the pre AI game of sales intelligence data on your customers. Even just basic stuff, email, else, phone numbers, it just, it just won that stuff. And then like really Clay and others, in some ways they're pre four or five, right? They're not, they're not epic products in some ways, right? We use clay, we love it. But I wouldn't say it's epic, I would just say it's, it's LLM infused, it's AI infused, but that's just a one to one loss of dollars. Okay, whatever. What's Clay doing? 200 million, 300 million, right? Something like that. I mean it's hard to say. So Zoom. Zoom Info is doing a billion something, right? That's AI taking all of Zoom Info's growth away from it. I only bring it up as a tough case study of how even if you're treading ground, you can turn around and these, these, they're not all Harvey. And the gore is just these kids can just take all your growth from you. I think Zoom Info's growth was stolen from it, from Clay and friends. And it's a brutal case study. It's a brutal case study.
- [43:16]
Rory O'Driscoll
Agreed. And for the record, I mean I think the Clay story is amazing and it's much less to me a kind of AI first story. I mean it's even simpler than that. They built a waterfall product that allowed them to optimize among multiple different data providers and allowed revops to kind of waterfall a bunch of different data providers and pick the best. And what that means is instead of being ZoomInfo being the only game in town, you can compare and contrast five or six data providers. Data then becomes a commodity. And you're right, your business is commodified. Then on top of that they have done a much better job than any because they're really to some extent a pre LLM company. Much better job of building clay agents and having an AI story. The funny thing is it's a pre AI company at its core. Initial value proposition that's morphed brilliantly. And you're right, it sucked all the value out of the data providers. So yeah, those guys need to figure out how to become relevant in an agent first world pretty damn quick.
- [44:07]
Harry Stebbings
What happens to a zoom info growing at 1% a year?
- [44:10]
Rory O'Driscoll
Nothing stays growing at 1% a year in the public markets for a long period of time.
- [44:15]
Harry Stebbings
So then it gets bought by pe.
- [44:16]
Rory O'Driscoll
It does it take private bought by pe. I resist that thing because it's such a lazy man's approach because the implicit assumption is no matter what happens, you can get bought by pe. And that mightn't be true going forward though. Again contradicting myself. A friend of mine used to say price clears all markets. There's a price at which PE will buy something like that and say we'll do the hard things for two years to fix. It just might be a particularly compelling price. I don't know what it's trading at.
- [44:42]
Jason Lemkin
It's trading at one times revenue with 35% adjusted operating income.
- [44:46]
Rory O'Driscoll
Income. At that point you will get pa. Yes, yes.
- [44:48]
Jason Lemkin
Cancel one times revenue with 35% adjusted. That, that is a classic take private. If you can put the. I mean you have a hard time finding someone I think better than Henry. But that, that's the counterargument. Right? But if you. On paper, that's the classic take private. Right? Trading at 1 times revenue, 30% adjusted operating income. Right. Reasonably stable. Not adding customers, but reasonably. You know, it's net. Net neutral on customer growth or even.
- [45:13]
Rory O'Driscoll
We just said it 2 minutes ago vis a vis Monday. Get your. I mean it's your point. Get your act together for two quarters, get a small amount of kind of AI enabled growth and you won't ever go back to 30 times or whatever absurd number you were trading at in 21. But it doesn't take a lot to get you to two times and that doubles your stock. Just ate the banal. I mean the big picture comment is this. The market is not asking these old school 500 to $1 billion revenue SaaS companies to become the next anthropic and double treble and 10x every quarter there's give me 30% growth, give me profits, give me a story that's got some future in it and I'll get you back to five times. I'll never give you 20 times again. I won't fall for that one this time but I'll give you a five or six times run rate. Right. Provided you have the growth, provided you have the rule of and the profits, that's what you can do.
- [45:58]
Harry Stebbings
Now, when this goes live, Cerebras will be going public. This is one of the most hotly anticipated IPOs of the year in terms of oversubscription. 20x oversubscribed. They've bumped the range of from a starting of 115 to 125. It's now 150 to 160. Offering will raise 4.8 billion valuing the company at 48 billion fully diluted. How do we think this IPO is going to go? We've spoken before about Andrew being fantastic.
- [46:27]
Rory O'Driscoll
How's this going to play out? Guys, look, it's going to go great. The fact that they've raised the range, which you only do when you're highly confident, especially that much, that you've got a killer IPO on your hands. There's no more new information. It's going to go out and it's going to trade amazing. Amazingly now, entirely separate question. How's it going to do two years from now? That's a business question. But the technicals. Look, I'm not a banker but when
- [46:48]
Harry Stebbings
you say it's going to go out, it's going to trade amazingly comparably to a figma which had incredible power.
- [46:54]
Rory O'Driscoll
Let's put it this way. I think what the bankers would say in the boardroom when the pricing committee starts giving them shit. Are we leaving money on the table? What they'll say is something like this. We believe at this price we'll have that nice 20% pop. Everyone will be happy. I know we should hate the pop. Thank you, Bill. But they're probably trying to get that perfect ipo. Can it run away from them? Totally. Can you have a Figma phenomenon where retail piles in? Entirely possible. Nothing excites the mind like some of this AI stuff. It fires the public imagination. There's a dirt of opportunities to play. It's entirely possible that you have a whole host of retail demand that you can't forecast and in the short term it runs away from you. But reminder, when Figma popped to 100 when it priced at 35, I think I said I think it's worth 35, 40 and now it's actually significantly below that. So you can't control the weirdness of retail. And as we've discussed it's impossible to try. And frankly, it's also impossible to let it drive the narrative. I think I really feel for Figma that their narrative is this. Oh, you're at 100 now, you're down 80%. No, you're not. You were priced at 35 and now you're at 20. It still sucks, but it's not 80%. Same thing here. Who the hell knows? Will it do the normal pop or will it do something crazy? But fundamentally it's going to go out price well, trade to the upside, because otherwise these bankers would have been manifestly incompetent to do that raise. And they're not manifestly incompetent, they're smart dudes.
- [48:22]
Jason Lemkin
Of course, I agree with Rory. When they raise this much, there's no question people are going to buy. They're going to buy into the first day. So you should get a pop. Maybe there's examples where the range is raised this high and all that, where it doesn't happen historically, but in my limited experience, you're always. I mean, it's just. It's almost built into the system. But I mean, we just have to see. Listen, it's a fun one to watch because on the one hand, demand for inference is infinite. It's great. On the one hand, they've got support from OpenAI and Amazon and everyone, which they didn't have when they tried to IPO last time, right? Timing, right partners seeming backlog commitments. But it's competitive, right? And everyone's going to buy every solution. And if Nvidia Groq is better and they can get the chips, they'll use it. So it's hard to predict when there's this much explosion and when there's also hedging happening. There's also hedging. There's hedging for capacity, there's hedging for performance, right? So I just think this one is. It's impossible to predict, but it's a great derivative. It's great to IPO before anthropic and OpenAI IPO too. It's a great time because I get into that zeitgeist. It's more interesting than core Weave, which is a data center, right? This is, this is real technology that is fueling inference, but it's so damn early to really know how it's going to go. This is not 2 years of massive 3 of US chips used in production in data centers proving a massive competitive advantage. It's early. So how the hell do we know where it's going to Be in two years. How the hell do we know? I might take my profits, I just might take my profits.
- [49:53]
Rory O'Driscoll
Hard to argue with that because when they went and go out, and even now the historical revenue is very much concentrated on a couple of customers from the uae, United Arab Emirates. What they're leaning into here going forward is the contract from OpenAI and a less kind of fully fleshed out contract from Amazon. So you're right, Jason, you are leaning into a future that's not like the past. So to that extent you got a lot of risk going on here. Yet at the same time their story, you read the CEO letter, the founder's letter, it's great. I, I mean what they're selling is speed. What they're selling is their inference can be faster than anyone else. And I love the tagline in the thing. I think it's something like how much would you have to be paid to have a slower Internet? And you just don't, once you see speed, you don't like to go back. And actually one of my companies, Tavos, was mentioned in Deep in the IPO because we use them for our inference because we have these kind of AI humans and you need real time responsiveness. And I think there is a focused market for that kind of real time, blazingly fast inference that they can maybe have that market over the medium. And that is the medium term bet
- [50:56]
Harry Stebbings
if they are the first really reasonable competitive alternative to Nvidia Solutions. And Nvidia is a 5 and a half trillion dollar company. Just roll with me. Being priced at 48 if you take a 5 to 10 year potential view, 1%.
- [51:12]
Rory O'Driscoll
Agreed.
- [51:12]
Jason Lemkin
Now that passes the Monday partner meeting test, doesn't it? Yeah.
- [51:16]
Harry Stebbings
Thank you, Jason.
- [51:17]
Jason Lemkin
I'm glad we could put 10% of the fund in. Yeah, Cathy and Arker should be into this deal. It makes perfect sense, right? You can't argue with the upside.
- [51:25]
Rory O'Driscoll
Agreed. I think that is the sound bite in a nutshell, Harry. It's like the other guys are worth 5 trillion. You are one of the only ways that you have an at bat to them. Are you worth 1% of that? If your probability of making it is 10% and you get that your expected value is positive, it's still risky way to make a buck. But I totally see how you get there.
- [51:45]
Harry Stebbings
We don't do risky ways to make a buck, Rory, so that's fine.
- [51:49]
Rory O'Driscoll
No, I hear you, that's my point. But yeah, I mean, just to say it, you know, great achievement. I mean these guys started I think 2016. It wasn't obvious then.
- [51:58]
Harry Stebbings
No, the fucking nuts achievement is the 20. What is it? Sorry, they have 20% ownership. Sorry, benchmark.
- [52:05]
Rory O'Driscoll
No they don't because you see how you just listen to Twitter. But if you go and you actually look up the S1, they have 8 or 9% ownership. Because I do these things. Because every VC reads an S1 the same way you read the front page. You figure out what it does and then you push on the index and then you go to ownership, shareholder ownership and foundation. Benchmark and Eclipse all have incredible 8 or 9% ownership to hold onto that after eight or nine years in a wildly capital intensive business that even in their own S1 said, oh my God, we were early in 2122. I just think it's an amazing achievement. Achievement. I just huge credit to Steve, to Eric, to all those guys. I mean just be fair on eric.
- [52:44]
Harry Stebbings
That's a four and a half billion dollar gain on a 500 million.
- [52:47]
Rory O'Driscoll
That's my point. You don't need 20% to do no, it's an amazing result.
- [52:50]
Jason Lemkin
It is. I got to tell you though, I mean Hurricane good to benchmark. When I looked at Service this is 20 VC the show, right? I would say for the first time in a long time I was kind of jealous of foundation because they did the hard work. Steve and the team incubated this company. You saw on Twitter, the barbecue. Okay, not only was it not obvious, this isn't even after it gets the kudos and Y combinator or foundation socializes the deal. And this is what VCs are supposed to do. But no one does this in venture. No one goes out and finds this really smart guy, plays tennis with them for a year, works the deal, seeds it, incubates it and then does it. Even in a crazy category that didn't even totally make sense in 2016. And then wherever this thing ends up, trading has a $40 billion IPO. I mean this is what, what this is actual venture capital. My job is to do what Steven team did. I'm jealous. This only I can't think of another vc. I'm jealous. And I put this in quotes. I'm not literally jealous, but this is the job of early stage investing is what foundation did. This is not using Mark Andreessen's brand to muscle into the bee, you know,
- [53:50]
Rory O'Driscoll
without showing shade on the others. I watch this, see my therapy is working. I, I, I tend to take things positively. Now you I, rather than being jealous, I'm going to say I'm impressed and good job all of Them I'm not going to dis eclipse or fund it. They all did great. It's what the industry is meant to do. It's kind of innovation. The industry should be supported. And that implies all the way up the stack to B to C. The round for Metroid is all that. It's exactly what should be happening. And I agree. Great credit to Steve. I can't play tennis, so I'm not going to be able to make.
- [54:17]
Jason Lemkin
Might not have been tennis. I think it was tennis. Maybe I'm making up the story, but it's directionally correct. It might have been another activity like that.
- [54:22]
Rory O'Driscoll
Okay, good. Something with less.
- [54:24]
Jason Lemkin
But that's real venture capital, Right. That's not leaning into a deal. Right. That's not winning A.
- [54:30]
Rory O'Driscoll
Like I said in their founder's note, that's calling a shot on AI in 2016. Saying even in the founder's letter in 2122, oh my God, we're way too early. Finding a way to survive. Then seeing the tailwind in 22 from GPT, still struggling to get orders, getting some business from the uae and all credit to the guy who said, I'm going to get on the plane, I'm going to Dubai and I'm going to sell me some chips. Whoever that sales guy is, I hope he got a big stock order and then surviving luck pulling the IPO in 2020, I can't remember which when it just wasn't ready. And then the moment has come. You get the opening eye commit, you get the Amazon commit and now you can go out on strength. It's a great story. Whatever they make, they earned it.
- [55:10]
Jason Lemkin
I put jealous in air quotes, right? I mean, I'm not. I'm only jealous in that that's what I should, should be doing. The other thought I had just at a high level. And granted I. I only met him when on Riverside, when Harry and I did a show a while back. But I mean, Andrew Feldman's just so good. I didn't meet him in 2016. Maybe in 2016 it wasn't Captain Obvious. Maybe it was right. But to me, it's also a reminder of. We all talk about going long on Twitter and social and betting on great entrepreneurs, but I so many more folks quit this week on my LinkedIn and Twitter. But he's so good. This is the kind of. And it's also a reminder that if you're not quite as good as Andrew, like you're really, really good, but you're not as good as him, you would have quit. You would have quit. So the combination, this is just my learnings. The slight, the jealousy air quotes of them and then a reminder that when it's so fun to do a startup today, you got to be so great to win. Right? And you guys got to be and so great to have these massive exits in venture. You got to be. The founders have to be so great. Not just this is the tough part of venture. Very good founders aren't going to build this type of outcome.
- [56:10]
Harry Stebbings
Okay boys, we have. We have ramp is $40 billion valuation. Parker, an alternative fintech company files Chapter 7 and Gusto passes a billion. Which one do you want to take?
- [56:23]
Rory O'Driscoll
So let's start with the company killing it. I think the distinction between the two is that Ramp is a broadly horizontal corporate business card. As we've discussed many times the actual economics on cards are good but they're not amazing. You get this interchange revenue but you have to give a lot of it back to the customer so your contribution margins are only okay. The only way to make that business better is you got to add a lot of software and a lot of functionality. And Ramp are doing a truly amazing job job of doing that. You start doing ACH payments. They just announced something super interesting yesterday in the market we like which is agents on top of their system to automate your purchasing. So you're a mid sized business now you can have the Ramp agent. Jason will be so happy to hear they've got agents go out and try and optimize your spend and reach out to your suppliers and beat the crap out of them on price. That's a market we like independently but that's a good ad for Ramps. But the zoom out comment is is Ramp was in a broadly horizontal market with a lot of running room to add and the other guys were in a very constrained market with a lot of margin pressure to some extent. Not surprising at all. I don't know. Sorry Jason, I went off there but I love those agents. You should check them out. They're like that's exactly the kind of thing you should be doing on top of your. They will pass the Jason Lemkin acceleration test.
- [57:36]
Jason Lemkin
Yeah, we're going to rebuild our financial stack after Saster annual and we will move from BREX to Ramp if it is the most agent friendly. And automating procurement is a huge bonus. Like we just take the humans out of it. Just have the agents negotiate procurement. We've all had enough of it. Just like Delve solved SOC 2. I want an instant solution to procurement without this moronic Back and forth, the games, the politics, the fake contracts that Procurement cuts back 10% to get their slice. So you have to overprice the deal. I'm waiting, I'm saying this a little. This is a problem agents at least the next generation of agents could solve. But I'm going to see, I'm on, I'm going to leave, I'm going to either stare or leave Braxton a month or two based on which has the best agents.
- [58:16]
Rory O'Driscoll
The separate issue is you just got to put it out there. It's a billion in revenue trading and it raised money at 40 billion.
- [58:22]
Jason Lemkin
That's where I get confused a little bit.
- [58:24]
Rory O'Driscoll
Yeah. And again it's back to my comment earlier which is, you know, again as I say, I apologize for saying something so obvious is you have your discussion on the strategic dynamics of the business and then separately you have price. I mean I think ramps on the strategic things they're doing is just amazing. 40x run rate revenues when the comp traded at 6 in terms of Brex even albeit on a lower growth rate is a pretty healthy valuation.
- [58:47]
Jason Lemkin
I do wonder a lot some valuations whether there is that scrutiny of revenue quality and revenue multiples. I mean we're all just addicted to growth so we all pay the same multiples almost regardless of what gross margins or anything are today. And maybe it's fine.
- [59:00]
Harry Stebbings
Would you buy ramp at 40?
- [59:02]
Rory O'Driscoll
Probably not. I mean I haven't seen the growth rate which is the only thing that matters. I just think there's a gravitational pull too. The amazing thing about these fintech businesses, the biggest thing they have is some of them can be just enormous stripe Revolut Nubank in Brazil because you're selling to consumers or SMBs and everyone does this fintech, everyone does finance, everyone has a payables division, everyone has a corporate credit card. So they're big ass businesses. But they trade like there's no magic kind of AI premium. They trade just like Amex but adjusted for growth. So I think whenever you get wildly far away from a revenue multiple, you really have to be certain. Two or three years further growth and you've grown into it. I mean if you double and double again, I mean maybe the way to think about Harry is how many years growth do you have to get before you're trading at kind of a normal multiple. So if you go 1, 2, 4, 8, I mean it takes probably two and a half years of growth until you're at the Brex multiple. That's pretty scary. That's the outer edge of Terrifying. If you're leaning in a year, you're like, yeah, whatever, it's going to double, I'm fine. If you're underwriting two and a half years of doubling to get to the Brex multiple, that's pretty scary.
- [60:12]
Harry Stebbings
I agree.
- [60:13]
Rory O'Driscoll
I mean, you have the protection of preference. And it's the same investors who did the prior round. So to some extent they're probably saying across the investment, they need the fuel, I got my return, it'll all be good. They're going to make out like bandits because the big aha was 2022. At 5 billion, that looks like a pretty damn good deal.
- [60:29]
Harry Stebbings
Now the other cool ipo, which isn't on schedule, but it's just Lime announcing that they're prepping to ipo. Do you see this? Lime bikes.
- [60:37]
Rory O'Driscoll
I did, I did. I had that feeling of, oh my God, they were live. Oh, my God.
- [60:42]
Harry Stebbings
I mean, if you come to London, they're alive and they dominate the city in large parts. But I mean, that is a hard business that's been through its turnaround of the day. Incredible journey there. Like shout out of the week for me. Lime announcing ipo. Good, healthy business, awesome to see.
- [60:58]
Rory O'Driscoll
I will be interested to see the numbers. And again, it's back to good on you entrepreneur boys.
- [61:03]
Harry Stebbings
Should we do some more? Actually, one final thing before Musk versus Altman. It's that moment of the week. Brockman says Musk wanted a for profit. We had Ilya today come out and say that he's, I think, worth $7 billion.
- [61:17]
Rory O'Driscoll
What do we need to know in
- [61:18]
Harry Stebbings
the Musk vs Altman trial of the century?
- [61:20]
Rory O'Driscoll
I mean, first of all, we're going to know a lot more than we need to know in the sense of, as is the nature of these trials, a whole bunch of stuff that's marginally extraneous will come out just because that's the nature of the beast in the end. A reminder here. It's a jury's advisory. Judge decides. You saw some really nice profiles. I was actually checking out the judge, Texas Judge Gonzalez. I can't remember first name. Yeah, seems super tough and hard she's driving here. She's making the decision. So all this noise will just fritter away. It'll be fun for the headlines. She'll make a decision on the legals. My gut continues to be that even though everyone will look crappy, that OpenAI escape with their deal intact would be my gut.
- [62:02]
Harry Stebbings
Jason, help us out. Sasta, this year, who will be the best speaker? Money on you. Do reviews on your audience, who's going to be the most popular speaker?
- [62:12]
Jason Lemkin
We barely have any speakers this year, Harry, because I think podcasting has kind of destroyed the whole need for a speaker. So we have a lot of workshops, we have people 5 coding, showing you how to build things. Why would I, why would I go see Andrew when. When he was on 20 VC and was better from Cerbert, like so we don't. We have no firesides and no speak now. I mean, it's going to be great when I have Amjad from Repla to us on 20 VC. We're going to walk through my agents and what they said and why they built and why. Why it is is right, because, you know, I'm going to have Tyrell here, who is the father, the Blade Runner father of my agents. But we're not going to, we're not talking about how, you know, because podcasts are better.
- [62:52]
Harry Stebbings
They're way better. I honestly. And also the edits make them better.
- [62:56]
Jason Lemkin
So we're going to have, we're going to have everyone showing how they built the agents. We're going to have Rubrik demoing their agents. We're going have Andrew from Klaviyo, the CEO, demoing his agents. Everyone's going to demo what they built, why they built ama. That stuff you don't get on an average podcast. So I'll have to see. But we won't do, we'll never do. Unless I'm forced to. I mean, if, you know, I do it for Sam Altman, but otherwise I'm not going to do the firesides are dead and speakers are dead. There's just no point when podcasts are better.
- [63:21]
Rory O'Driscoll
For what it's worth, that's super insightful. You always know when something's insightful when the minute someone says it, you go, yeah, I hadn't thought of that before. But you're absolutely right. The minute you said that sentence, why I'm going to go over. Obviously I'm doing a little thing. Why would you schlep over to see 10 back to back speakers say the same thing they've said on a podcast when you can listen to them when you're working out. Whereas I'd be super interested. I think I'm conflicted. I'd be super interested to hear Jason, you and, and talk about your agents and talk about agent security and all the other topics and how one of
- [63:48]
Jason Lemkin
them willed itself into existence. We didn't even try to build an agent our age, our agent Annie willed itself into like, how does that happen? That's pretty cool, right?
- [63:55]
Harry Stebbings
Rory, can I just ask you. Sorry, should I be buying Micron SK Hynix? I feel like I'm super late to the game and I don't want to rock up to the party at 11. But I'm also like, shit.
- [64:07]
Rory O'Driscoll
On the one hand, you're right. You kind of go, oh my God, it's gone up 5x last year. How can it be right? But I hate that thinking. Because the correct thinking is to say, but then you still look at it relative to earnings and they're still relatively cheap. So really what you're saying is on an earnings basis, you basically start trying to say to yourself, how long does the capex boom last? And how long before they double the number of fabs that make drams and commoditize? And do you think there's more oomph in the stock? Because once those two things happen, typically what happens is the boom starts to slow down just when the extra capacity comes online. And the combination is brutal to the downside. And you see that over and over again. I was actually just looking at the sandisks and the dram guys because we're going to discuss this in the podcast. But of course you ignore the agenda. As late as 22:23, all those guys were in the crapper because you had that post, remember Covid, everyone bought a laptop because they were working from home. And then after Covid, everyone didn't buy a laptop because they didn't need another damn laptop. And all those stocks went way down in 2223. And the last two years and one year in particular have been amazing. I don't know, it's not a good enough reason to say I won't buy them because they've already gone up 5x because you got to look at the distilled pricing. But I don't have a developed opinion on. You have to decide those two things. Duration of the capex boom relative to the speed at which they can build X more fabs. Because in the end they always do build more fabs. That's one of the things about human nature. When you start making 50, 60% net margins on a shit ton of money, the temptation to build a fab just becomes huge. So I'm sure Samsung and SK Hynix, even as we speak, are digging holes in the ground in Korea. That'll come online just as Antropic starts to cut orders in 2028. And there you go in capitalism. Great.
- [65:51]
Harry Stebbings
Are you long nebbyous?
- [65:52]
Rory O'Driscoll
No, I'm not long or short nebbyous. I mean you asked me a fact based question. Have I chosen to put. No, I have not put my money in. But that's, that's different than you can't buy every stock you talk about Howie
- [66:04]
Harry Stebbings
Fine, the important round which was very popular. Rage bait but real I upset people because MrBeast basically posted saying that the sacrifice of mental health was essentially required to have the success level that he's had in terms of commitment and the willingness to suffer for long periods of time is what separates those that are successful from those that aren't. Paraphrasing but very close. And I agreed with that and I said I 100% would not have achieved what I have without sacrificing large parts of my health and commitment. I got a lot of pushback. Do you think that is rage bait or do you think that is real? When you look at the $20 billion plus founders that we need, can you have the success without sacrificing mental health?
- [66:47]
Rory O'Driscoll
It's very hard to have the success without sacrifice. Right? And your real meaningful sacrifice, you know, time, alternative uses of your life. Sometimes in the case of brutal competition, people in fact are family life, their loved ones, marriages end up in divorce. It's really hard to do something really intensely and most of these things require real intensity. So I do think that part's probably true. However, I think at the point in time when you're getting into mental health, you probably actually owe it to yourself to try and find some way to not tilt over to the point of making bad decisions. So I think it requires sacrifice, it requires an intensity. But when I get to that point of being wholly stressed and kind of spread thin, I don't make good decisions. So you actually owe it to yourself to at that point pull back a little. You actually aren't that useful when you're until Terry. So I don't know if that makes it rage bait or not bait maybe true, but not worth rage would be probably my advice. Don't rage.
- [67:48]
Jason Lemkin
I'll give you a different learning. This was one of the first Saster posts I ever wrote right when I got out of Adobe and I it took me a while to realize this. When I when I sold my first startup, I sold it after for 50 million after 12 and a half months, which today would be more money. There's been inflation and it was great. Okay. It was so hard. My first startup I was building implantable batteries from nanomaterials that had never been done before. We had customer concentration. I had to close 6 million. My VCs, pulled my term sheet. I had to do payroll myself. I had to take a, had a full recourse loan against my house to get the round done. It was just. Everything that happened, okay, everything that could happen, I would do. I would do day trips across the globe, I would do, I would fly to any airport in the world, do a meeting in the airport and fly back. The same, I mean unsustainable stuff. But we, we bounced back after a week after we sold the company, right? It was 12 and a half months. I, I was given a two week package to stay and I was okay in a month. The second time it was five years, which is not long now. And what I realized after the next one was my brain was permanently rewired. I was no longer the same human being. The level of intensity to almost going bankrupt multiple times, to dealing with those issues, to saving the deals, to going through GFC and having to turn 100k customer into 500k so we could survive and make payroll when no one want. Everyone wanted to cut the deals in gfc. Going through all that drama, I was, I could not go back. I could not. My brain would not allow me to go back. So yeah, there's a rage bait element, but it's not. Some of it is doing the996 and working all the hours you're talking about, Harry. But, but I think what founders understand that have been doing it for more than five years, four to five years I think is the break point. And you have been Harry, is you're changed. And it's not as simple as mental health. It's not vacation, doesn't do it anymore. It's not enough. It's not enough to go for a run on the beach. It's not enough to take up to start buying watches, even to buy a yacht. It's not enough. You're like, you're a different person. And if you want to win, you have to commit to being a different person. You're not going to be that happy go lucky person. Where you got into YC and you got your 2 million and it was great and it was really fun and you told your friends and you went to the hackathons and it seemed really hard. But you know what? That first year, it's just, it's just fun and games, okay? And you have, you will be a different person. You can never go back. You often can't even talk with non founders for real anymore. Founders stick together. They're in WhatsApp groups. They're chats. You're all changed. It's not just a peer group. You're not the same people. You're not the same people. You're not the same person. When I met you, Harry. And so I think that's the meta issue. And, you know, seeing a shrink is great. I'm all for mental health. Right. But it's not going to change the fact that you're changed after five years. Four to five years. And. But I don't think it happens in a year. As hard as that first year was, man, I was back to runs and cruising and I was never going to do another startup again. I'd made a couple million. That was enough. Life was good. Check the box.
- [70:27]
Harry Stebbings
One of my favorite quotes ever on a show is Daniel Dines from UiPath, who said, A lot of people think they want to be me, but I promise you, when the lights go out at the end of the day, it's very lonely in my head.
- [70:38]
Jason Lemkin
And then ask the next one, are you the same person you even were when you started this journey? He's going to say, no, I'm not. I'm just. I've been. While your brain has been rewired, though, the brain has been rewired because I watched your applovin one with that guy. So effing intense. Right? So good. Right. But I. I could see one of the things I thought when I watched that one is his brain's been rewired. The things he's saying make total sense to me after my journey. Right. But they don't make sense to most people. That was the point of your tweet. But what he was saying, most people wouldn't get it because they haven't been. Their brains have not been rewired for the level of intensity it takes to succeed. It's not just the hours, it's the intensity that is like nothing else. It is like nothing else.
- [71:14]
Harry Stebbings
Jason, do you know what shows like that, though? And find it hard to invest in other founders? Because I'm very lucky. I interview people like that for a living.
- [71:22]
Jason Lemkin
Yeah. And every time you cut a corner, every time you invest in a founder that's really nice and really hardworking, a really good guy, you never make any real money.
- [71:29]
Harry Stebbings
That intensity. Hard question, do you see that intensity
- [71:32]
Jason Lemkin
in your portfolio, in your winners? You do. Because also any normal human will sell for 50 million after a year, or 200 million or a billion. Any normal human will sell. It is idiotic to not sell. You don't want to do service. You want to Do Grok, as we talked about. What? It just makes no sense to be Daniel Dines after 20 years. So it's all self selecting. You've got to be Daniel or crazier to do this journey. There was a brief period where you could do it 35 hours a week in late 2020 and early 2021. But it's gone now, right? The world was. Products were static.
- [72:03]
Rory O'Driscoll
What he's basically saying, I'm violently agreeing here. If it takes intensity to be successful, it's no surprise that all successful people are intense. I mean, it is to some extent. And the part of that that resonate with me, Jason, you write, is that good companies get offers along the way and if you're not intense, you'll take them.
- [72:20]
Jason Lemkin
That's why I tell all founders to take the offer. I tell all founders to take it. The opposite of VCs take it. It is an intensity test. And if they push back and say, no, a billion is not enough, great, then go for it. But if they're not sure, you may not make it anyway. You may not have that level of Harry's tweet to do it. So take the billion or the 50 million or the 200 million, as long as it's 3x or more of what you raised and go enjoy your life, man. Because Daniel's not happy and the applovin guy's not happy.
- [72:44]
Rory O'Driscoll
I just want to say one thing, though. I find myself violently with you on the kind of rewired and the intensity side. I do still think that you still have to find a way in that maelstrom to keep perspective. And I see it myself and I see it in CEOs. When you're working so hard and you don't have any way to clear your head, you actually can become ineffective and a weaker decision maker.
- [73:08]
Harry Stebbings
Adam does surfing now.
- [73:09]
Rory O'Driscoll
Yeah, I was going to say that. Yeah, actually I saw. Interesting Admiral. I'm going to pronounce his name Stravidis. I'm mispronouncing it. The guy, he was Commander in Chief, NATO. He was speaking at your Cambridge Associates event recently and someone asked him the obvious three lessons for life as a senior leader. And they were expecting some kind of hire good people, the usuals. And his first comment was, you got to stay healthy because if you're not at some level vaguely healthy and functioning in terms of sleep, in terms of thing, you just won't be able to cope with the pressure and the intensity. It was a super interesting comment from a guy who, remember, has been commander in Chief NATO. My point is merely when you disappear into your own head to the point where you're not making good decisions, you will not maximize value for yourself. I know what it's hard to articulate, but I'm sure there's times when you're just not thinking straight and just making sure that you have whatever coping mechanisms to avoid doing that. It's a little like it's about I don't drink much now, but the day after you've had a lot of alcohol, when you're slightly hungover, you make horrible decisions because you're all jittery, right? And that's one of the many reasons why I don't drink. Now.
- [74:10]
Harry Stebbings
The reason I love about rage Bait But Real is Around is two out of two. You guys have both agreed that it's real, not rage bait.
- [74:17]
Jason Lemkin
I'm like, yeah, no, I have.
- [74:19]
Rory O'Driscoll
Both times I've actually agreed it's real and it's rage bait because it's something that annoys everyone. Perhaps because there's an element of truth in it.
- [74:27]
Harry Stebbings
The Work From Home Friday brigade were pissed off with me about Work From Home Friday.
- [74:32]
Rory O'Driscoll
None of them have figured out, Harry, that you do it because you enjoy the rage. You know, that's what's the problem here, right boys?
- [74:40]
Harry Stebbings
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