← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: Anthropic vs The Pentagon: Who Wins | The Ultimate Stock Picks: What to Buy | The Data Centre Arms Race: Is the Capex War Stalling | The Era of Public Company Deceleration is Dead
01:14:09
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- [00:00]
Rory O'Driscoll
And I think the consensus is in law Anthropic would probably win a good slug of this case, which is different than saying they're going to win the fight. The idea that you can just have all this shit for free is at some point going to stop because someone's going to have to cover their nut.
- [00:14]
Jason Lemkin
I think getting rid of juniors is where we get budget for these data centers.
- [00:17]
Rory O'Driscoll
In part this goes out really cold. You can have dispossessed urban poor forever and nothing happens. But if you piss off the 20 something year old middle class, the over educated elites, they tend to cause trouble. OpenAI and Anthropic have the most amount of surface area to attack of any company in the world right now.
- [00:37]
Jason Lemkin
The era of gentle deceleration has ended. It's dead.
- [00:40]
Harry Stebbings
This is 20 VC with me Harry
- [00:42]
Podcast Host/Announcer
Stebbings and it's my favorite show of the week. Rory o' Driscoll, Jason Lemkin analyzing the biggest news in tech this week. First on Anthropic sues the US Government for being labeled a supply chain risk Oracle and OpenAI end plans to expand flagship data center meta move absorb the surplus AI data center capacity then crowdstrike. They beat expectations but trade down and then finally we have our stock picks, what to buy, what to sell, Public market predictions coming up. 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 challenging. 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.
- [01:54]
Harry Stebbings
What's next?
- [01:55]
Podcast Host/Announcer
You'll be paired with your own dedicated team of venture 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 InnovationBanking HSBC to learn more and connect with an Innovation banking specialist. That's 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 Deel 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, E O R benefits and compliance. Everything your startup needs to scale quickly or all done fast in one place. And that's why 37,000 fast growing companies trust deal to move really fast and
- [03:11]
Harry Stebbings
get back to building.
- [03:12]
Podcast Host/Announcer
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- [04:51]
Rory O'Driscoll
You have now arrived at your destination.
- [04:54]
Harry Stebbings
Boys, we have a big week of news.
- [04:56]
Podcast Host/Announcer
As always, we're going to start with
- [04:58]
Harry Stebbings
this week in anthropic.
- [05:00]
Podcast Host/Announcer
So we have gone from a couple of hundred million dollars in lost contracts with the Pentagon and with the DoD
- [05:06]
Harry Stebbings
to potentially billions of dollars at risk. If we and the billions of dollars at risk, how did you analyze that and maybe Rory, the wonderful context giver, if you want to provide some context, I will.
- [05:19]
Rory O'Driscoll
I think that Antropic, in my view, correctly sued the federal government in both California and subsequently in DC Just for procedural reasons, basically saying that the government's designation of them as a supply chain risk was incorrect, badly done, and should not legally stand up. And the reason they're suing immediately versus talking is they're stating that quite a lot of revenue could be at risk for them because the Department of War and the government. I think, actually I should say that the administration has articulated a very aggressive definition of supply chain risk. If you recollect last week, I was not entirely pro the anthropic position, and I stand by that, but I think the government is now overreaching as well. So, like all good disasters, both sides are doing things wrong. But it's totally rational for the government to say, you want $200 million of revenue from us and you want to get in our shorts and tell us what to do, and we're the Department of War and we ain't going to do that, so you're not getting your 200 million. That's totally fair. But designating a supply chain risk has a series of escalating consequences. At a minimum, it implies no other company selling to the Department of War can use them for those contracts, which is one step more. But again, I see how the Department of Defense might get to that place. But then you're seeing the government articulate these really expansive definition can ask, which is throw them out entirely of every government contract, which seems an overreach and then even more overreach. And it's actually not happening because the various cloud providers have pushed back on it. There was one version that said if you use Anthropic at all, Microsoft or Amazon, then we won't use you at all in the US Government. And that's an element of, frankly, almost ludicrous overreach. So what's happening here is basically Anthropic and Department of War trying to figure out where in their spat how big is the blast radius of consequences from this $200 million contract. And my perspective yet is there should be consequences, but having it be this big a blast radius doesn't really stand up. And I think the consensus is in law, Anthropic will probably win a good slug of this case, which is different than saying they're going to win the fight.
- [07:29]
Jason Lemkin
There's something to me that's minorly interesting. And then more interesting, the minorly interesting thing is how hard the hammer came down. I mean they, they're going to lose. It's like tariffs. Even if for some reason anthropic wins their case, the DoD will just come, the Department of War will just come back with another issue. Just like tariffs, they'll find another justification to block Anthropic or even at a minimum, I think the real panic, I think maybe what they didn't realize is what a blocker it would be with their customers. This is just a classic B2B sales issue. You know, you walk into these big deals and they said it in the complaint and we're struggling. Deals are being cut in half. We're struggling to close deals because prospects are worried that just some of their business has exposure to the federal government and the Department of War. And then their competition open said we don't have these problems and they may steal the deal. Like they literally said in the complaint, this is issue and this is classic B2B stress. Like you don't the risk only has to be ambiguous in a B2B deal for you to lose and go with another leader. It's a little bit less secure or they went down for two days or the database was left open. And so there was a classic B2B panic. And the government is saying, listen, we need you for war. More than that, the government is saying, we used Palantir without anthropics knowledge to conduct a war in Venezuela and depose the government. We did that without anthropic knowledge. So it happened. But the government's going to say you're either going to agree to this or we are going to freeze you out of the U.S. economy. And it doesn't matter what a court says because they'll come up with another justification. There'll be another one, there'll be a different type of supply chain risk and it'll be endless until they bend to the will.
- [09:12]
Rory O'Driscoll
I think you may be right in terms of what the government will do. But I just, as I say having been critical last week, I want to say it's wrong to try and drive a wildly successful American tech company out of a good slog of the economy simply because they don't want to serve this one particular need. And it's interesting if you read the complaint, a lot of what Antropic is talking about is literally their first amendment rights. This is not a contract. What they're basically saying is we antropic articulated our less than love for some of the things that the Department of War might use this technology for. And you're trying to ruin our business simply because we use those words and that's our First Amendment right and that's un American. And while I think you are entirely correct, it's a really tough position for Anthropic to be in, and I don't know if they should depict this fight, I also think it's particularly unfair of the US Government to try and be this sweeping in their actions against what is one of the great American success stories. If AI really is all about the leading edge of the economy, right. It's probably a mistake to pound the crap out of one of the two leading companies in that space simply because at the margin you find them slightly sanctum, harmonious, which many people do, and you don't like their politics. You don't have to buy from them and, you know, put your $200 million in another place. Stop trying to cut them off at the knees across the entire B2B infrastructure. I think it's a little bit of an overreach, but I think you're right, Jason. Me thinking that is very different than them changing their mind. There's a style in the administration that's prone to overreach. And I'm sure Anthropic deeply regrets getting down in the mud pit wrestling with this particular opponent.
- [10:52]
Harry Stebbings
What actually happens here realistically, years time, does one cower and give up? Play out the realities for me, I
- [10:59]
Rory O'Driscoll
think on the merits of the lawsuit, Anthropic will probably prevail and may even prevail quickly on some of the. I read the lawsuit last. I think they've actually moved for immediate redress, I think, you know, to basically get it reversed. I think it might prevail on some of the things. They won't clearly get a $200 million revenue deal with the US Department of War. But in a perfect world, if they bend the knee, prevail on the law. What we've seen in multiple other situations is you end up with some kind of acquiescence to the administration in return for leave us alone to pursue the rest of our daily business, our B2B business. We're not going to say, the administration's not going to be saying to Microsoft, hey, if you use Anthropic anywhere, you don't get any government business, which is the most overreaching version of this. And in return for that, Anthropic will probably have to bend the knee and be slightly supplicant. That's my gut. They'll win the law, just like many of the other institutions have won some of the cases, but will find that they've picked the fight they regret and just want to settle it.
- [11:59]
Harry Stebbings
Does this impact they're going public later this year. Polymarkets predicts Anthropic no longer does.
- [12:05]
Jason Lemkin
They are tied. Right. The only thing I would say, I do think we overstate IPO risks in general. Rory has been through this, right? And listen, it totally makes sense that people would react. Oh my God. Anthropic has to work to perfection to pull off the IPO they want, given the amount of capital they want and the valuation of a trillion. And being a supply chain risk would be risk factor number one and freak out the public markets. I think we've all seen every startup we've ever worked with IPO with several, several things that had to be highlighted in their prospectus and it never seems to be the end of the world. IPOs are very binary, right? Either folks get super greedy and they're genuinely massively oversubscribed or they barely get done at all. So I, I just think that is overstated by the media that there's existential IPO until, until it shows up in the numbers. I don't think fear overcomes greed and
- [12:52]
Harry Stebbings
so we didn't actually get to that, which I'm going to push you on. Does it show up in the numbers, yes or no?
- [12:58]
Jason Lemkin
At the level of growth we're seeing, it can't show up in the numbers. Yet. The beauty to numbers, and this is why I think 80% of public B2B companies are in much worse shape than they look, is they're backwards looking. Every set of financial statements is backwards looking. And it's even worse, unless you do a SPAC or something, you can only project so much, so you're stuck in backwards looking land. As closer you get to the ipo, the less you can say about the future and the more you have the benefit of hiding in last quarter.
- [13:24]
Rory O'Driscoll
I don't think it shows up in the numbers, provided what appears to be the consensus legal outcome happens relatively quickly, which is first of all the process of designating the supply chain risk has more steps than if you read the actual legislation than just deciding at five minutes notice. Like all government actions, there's a review process, there's a common, all those kind of steps. And then the second thing is, like I mentioned earlier, the interpretation from the hyperscalers who remember, do a huge amount of distribution for these guys and developers who are clearly flocking to the app right now clearly is I can use this definitely non Department of War and possibly non government use cases without any supply chain risk whatsoever to a rounding error. If that version of the world, which appears to be the correct legal entrenchment, prevails, then yes, if they went to court and they started to lose those cases, then they would be on the back foot and then they would have to probably settle pretty quickly. But the consensus appears to be that from a legal perspective in this case, the administration is overreaching. So right now, no, it's not showing up. Because yes, you're clearly down 200 million in license revenue. And if you're the sales rep for the Pentagon at Antropic, it's going to be a slow week. Right. Conversely, if you're the sales rep or the guy running, you know, PLG growth for the Entropic Claude app or for the Anthropic and developer products, you're exploding Jason Dwight against that wall of growth. There's nothing showing up if those numbers are correct. 200 million, let's do the math here. 200 million, let's call it 17 million a month. So they're doing 1.5 billion. 17 billion a month is 1%. So this is a company that's 10xing, so it's going to drop 1%. It's lost in the noise. I mean, I'm sure they deeply regret ever taking on that $200 million contract because it's in the noise compared to the business and now it's produced this contingent risk.
- [15:12]
Jason Lemkin
One of the things I reflected on this a little bit was on the one hand, it can seem very localized to Anthropic, right. Its principles and a De Dodow Department of War deal. But I think a lot of us are going to have to wrestle with these issues. I'll give you a very small example. I basically worked with a ton of next generation CRM products, okay. That everyone's building. We talked about dad, vc, right? Everyone's building. And the approaches to next generation CRM are very different. Some are very agentic focused. Some are redoing the classic core lead context opportunities. Some are building together with existing folks. Lot of approaches. But there's one thing that all of them seem to have in common. Every single thing a human does is fully tracked and logged everything. Now if we go back in time when things like GONG blew up, at first we had a pause. We're like, oh my God, my business is tracking not just a random call, but every single call. And then every like we had to pause for a moment. Is that okay? Right. And this became the way we worked right gong gong at all then you know, even during this pod we kind of granola. Is that okay? You know, is granola and people in meetings okay? Now every app is this is becoming necessary core CRM functionality to record and manage every keystroke, every interaction, everything you type, everything you do. Because otherwise you can't automate a CRM like the next generation CRM just does not work if you have any privacy in the workplace at all. And so it's just an example of you wouldn't think that a next generation serum would have to deal with the same issues as anthropic and part of war. But I think many of us are going to have these issues. Are we going to lower change our morals? Are we going to say a 40%, a 50% layoff is no big deal at block because it's part. And I think as we chase these faster and faster growth companies, I think we're going to discard more and more of our previous moral standards. And maybe it's that's the AI life. But I have a little bit of anxiety here. Just a little bit.
- [17:08]
Rory O'Driscoll
A technology that's so important that it's consuming 50% of the capital investment of the entire United States probably should have a significant number of pretty significant societal changes.
- [17:20]
Harry Stebbings
Two signs that like maybe we're facing or entering an age of more realism. One is Oracle and OpenAI end their plans to expand their flagship data center. So Stargate's Texas data center expansion to 2 gigawatts potentially being axed capping in at 1.2 gigawatts. Is this early signs of the end of the capex cycle and hype cycle or not?
- [17:43]
Rory O'Driscoll
More no than yes. I think we are over investing and I think at some point there's going to be a reckoning and a bunch of companies are going to realize they've massively overinvested. But I don't want to be that kind of guy who's trying to call the turn three years before it hits because I think the proof that how
- [18:01]
Harry Stebbings
can we be over investing when Jason tells us that this is the year of inference and we'll have inference running
- [18:06]
Rory O'Driscoll
24 hours a day. Can we come back to that? But let's answer the question you can ask. I mean the point is this. On the question you've asked no, because instantly Meta said no. If you guys don't want this data center because you're having some issues, we'll take it. So I think if you just look at all the comments from the hyperscalers. If you look at Jensen's comments right now, at least to Jason's point, demand is insatiable. If demand is insatiable, then you can't use this kind of one off set of dynamics around Oracle as a sign of oh, it's the capex cycle's turning. I think that would be over extrapolation.
- [18:39]
Jason Lemkin
Meta is playing a game, Google's playing some of it, Amazon's playing some of it that it's hard for Oracle and anybody else to play. Meta's the only one that I've known that's explicit is they're betting on a world where your AI is 247 persistent and infinite. Right now most of us are using a little bit of chatgpt, a little bit of Claude, maybe we're using a couple hours of coding compute, which is quite expensive if it's not bundled, and that's it. I mean we made fun earlier in this days of the OpenAI pen with Jony.
- [19:11]
Rory O'Driscoll
I've.
- [19:11]
Jason Lemkin
Right, we made fun of it, but I think we missed the point. And at least I did. I missed the point when we talked about it, which is I didn't fully understand what the world would look like when our AI agents run 24. 7 and the amount of compute that we will need to do that is obviously orders of magnitude. Then take multiple agents running in parallel, which is everything Cursor is about. Everything Claude code is about is multiple agents running in parallel. Replit V4, it's all about running 5, 10, 20, 50 agents in parallel 24 hours a day. I mean, I'm not even smart enough to do the math, but we're talking about multiple orders of magnitude of compute that we need today. Does it get more efficient? Maybe on the RAM side it's not. We've already run out. It may be because MET is so consumer and also in some ways so far behind, but I do think they're making this bet of 24,7 persistent AI in your life at a consumer. And so they will buy all the compute that is available that they can afford to make this dream happen because they're well positioned for it. Unless Plod, which is playing its own end game or ChatGPT can figure out its social side. They're pretty well positioned to be the AI that lives with you 24 7. Them, them and TikTok, they're pretty well prohibited. And so the world's going to be so different. Right?
- [20:23]
Rory O'Driscoll
Can I just. Genuine question, Jason. What is that thing that they're shipping that you're Talking about what I don't understand what is my AI? This 247 that I can get on Facebook or Instagram.
- [20:34]
Jason Lemkin
It watches, listens, it actually can see. It can see everything you do.
- [20:38]
Rory O'Driscoll
Can I be with the direct. What tense are you using? Are you using the present tense or the future tense?
- [20:44]
Jason Lemkin
What should happen today? What. What is entirely possible today? It's just, we don't. We can't afford it. As soon as this call ends, this. This Zoom ends, my AI talks to me. Hey, Jason, that was something pretty dumb you just said with Rory on the call. Let me explain where you got it wrong and let me explain how this ties together. I don't even do anything. My AI is already ahead of me the second this. This riverside ends. That could be true today in everything you do in life. Every partner meeting, every pitch you make. It's just, we cannot afford, for the moment, the level of compute it takes to have that right.
- [21:19]
Rory O'Driscoll
I'm willing to stipulate, partly in humor, that the amount of compute it would take to correct all the stupidities that I say, you say, and Harry say might well require data centers and space. So you might well be right, but I'm not sure we can afford that.
- [21:35]
Jason Lemkin
I mean, what about your AI? Every minute of your. At least put it at your personal life, your work life, helping you be better on every single thing you've said or thought, every single decision you. How many micro decisions do you make all day long? Not even the big ones of $100 million check. How many checks do you make every day, every week? And if your AI has full context, full history, has every deal that's ever been done at scale, every deal in the last year, every deal any VC has done, every article, every interview. Is it hard to imagine that that AI immediately after every conversation you have won't enrich your work life? Like. Of course it will. It will be instantly better. Right? And so that's. But I don't know that the problem is in the short term. I don't. Oracle doesn't have the cash to keep up going to Harry's point, it just doesn't have the cash. But Meta does.
- [22:18]
Rory O'Driscoll
One of my bigger has on this whole is it all going to go wrong question is the zoom out comment is the people who say it's not talk technology and the people say it is talk economics, and we kind of just don't quite overlap. And that's the core of the challenge in this discussion. There's a million things you could envisage doing with, quote, unquote AI. The question is, are they worth doing? At what price? I mean, I was just doing the math in my head. There's $600 billion being spent on capex. There's 150 million people working in the United States of America. 150 million. That's 600 billion. That's roughly four grand per head. I don't know if an employer wants to spend four grand per head on automating with AI. I mean, if you run through all the people, there's a bunch of people serving coffee, they probably don't need four grands worth of AI. You start doing that math and you say to yourself, is the return there? So I stand by my comment. I think we probably are over investing and at some point those chickens come home to roost. And I don't think it's a controversial statement, Harry pushing back because Zuckerberg, who I think is wildly smart, has even said it. This is probably going to go wrong, but I'd prefer to ante up and be in the game and have a chance of winning, then not ante up like Apple and know I'm going to lose. Right? By definition, if six or seven people articulate that that's the game they're playing and only six or seven people matter in this discussion, then it is almost tautological to say we're going to over invest because that's what game theory says. Until such time as someone realizes, oh, I'm in the poker game but I don't have the right hand, I got a fold. Until that happens, we're going to overinvest. And I don't think it's happening in 2026. The only person that's even struggling slightly to cover their nut is Oracle, because they had the weakest balance sheet and the least compelling use case. Which is why at some point they're going to throw 20 or 30,000 people over the side to make the P and L work. Meta can borrow. Google actually has a business and Microsoft is quietly stepping back from the table. So this game goes on for another year or two. But I do stand by my comment. There's a level of overinvestment going on.
- [24:24]
Harry Stebbings
I thought it was interesting. It was rumored and this is rumors, so Rory does not like rumors, but that Alex Wang is being sidelined and that his position is no longer as superior as it once was with the creation of a new lab and him not being in charge of it, that lab director reporting directly to Boz and it appearing like the scale acquisition was bluntly hastily Done. And a mistake. To your point, Jason, on Meta being behind that is the kind of consensus that's being shared.
- [24:50]
Rory O'Driscoll
That would be over investment. I paid $15 billion for an asset that 12 months later I put on the bench. That is the very definition of overinvestment. So I actually think you made my case for me. Right. And the fact that the response of meta would be, oh, well, we'll do something else shows that we're not yet at the over investment being terrifying stage. We're simply at the I got a win, Try something. If it doesn't work, try something else.
- [25:15]
Jason Lemkin
I just want to bring up one thing that happened this week, which I think people misunderstood and is so important to my point of we're not even like the amount of AI we want to use when we're running 24. We're, we're, we need massively more compute than we have, which is Anthropic launched a true cloud code review. Okay, great, hooray. To find bugs, to find issues. And they said it's 15 to $25. And the Internet blew up. Oh my God, this is so expensive. Like, I only spend $200 a month for Max, I spent $20. And now you want 20 bucks to a code review to check for bugs and issues. But the response back from the head of cloud code, or at least whoever built the feature, was, my God, we're spooling up 10 plus agents in parallel to run for 20 minutes to find every single bug in your product. Like, you could do this manually, and I've been doing it manually in replit for months, but to do this in one click, it's profoundly like humans can't even do this. Find every single bug in 20 minutes. And so the amount of compute now they need 20. Even Claude. Claude code needs an extra 20 bucks of compute to do this. And you know what you'd really like to do? Run this after every commit. Not episodically, not when not getting up your nerve to spend $20 worth of tokens, which is a lot because this isn't subsidized. Right. This is anthropics. You'd love to run this 10 times a day after every commit you make. This is, that is orders of magnitude more compute being used for this code review than we used before. And so we're just between that everything running 24. Seven, we've just scratched the code. Because if you've, if you've built anything in cloud code or replit or lovable or whatever, what you realize is it's just the beginning. Like who's doing all the qa? Who's doing all the code review? Like, we've only scratched the surface. We do need data centers in space so that I can keep coding. But I think the point is interesting from the news. I think people miss this point of this code review thinking is $20 a lot to review your entire code base and find all your top bugs is that a lot of money is 20 bucks.
- [27:18]
Rory O'Driscoll
And of course it's not. You know, we're happy investors in Code Rabbit. Standalone company doing it across multiple tools. And yes, now we have exciting and interesting competition from Glaude. That's bad. On the other hand, validates the space and says you need to do this. I think your description of the product, of the need, is exactly right. If you're generating infinite amounts of code, right, using all these agents, the idea that you're not going to kind of do code review is absurd. So you're going to have automated code review. You're exactly right. You're coming about. Spinning up all those agents was exactly the tech. You illustrated my point. From a technology perspective, there's infinite need for large amounts of agents to do large amount of code review. From an economics perspective, you have people complaining about the fact that, that they've been asked to pay 20 bucks. And you're exactly right, Jess. The correct answer, which Claude was too nice to give because we know they're nice people, despite what Pete Hegson thinks was, for Jesus sake, I'm giving you. You're automating an entire developer. We're letting you generate infinite code for 200 bucks a month and you won't even pay 20 bucks to check it before you put into production. For God's sake, man, pony up. That's the correct response. That's what technology is meaning economics. The idea that you can just have all this shit for free is at some point going to stop because someone's going to have to cover their nut. And then we'll discover. The really interesting question is how many of those users are prepared to pay 20 bucks per code review or 200 bucks per big code review or whatever, Right? So I do agree with you. The demand is infinite. The number of things you can do is just fricking amazing. The question is, what are the things that people are prepared to pay full boat for? And it was just, it was interesting, by the way, and kind of validated a little something. We're thinking, I would love to be the pricing person for Claude. And you've done pricing Jason, how do you decide what things do you kind of. Because they've got some really interesting things going on. The API is expensive and metered. On the other hand, Claude called the subscription, as you point out, you can get a whole ton more than you should be at 200 bucks. So they're kind of not metering that. And then they decided, and in my view, wisely, hey, maybe code review is something that kind of feels managerial and maybe there is budget for that. And you know, you and I both did deals where they were, you know, low end saslan, which are PLG for individual users and people were like, oh, how are you ever going to make money on small low end signatures? But the more you go to management of signatures in the enterprise, the more there is a propensity to pay. And I think this is the beginning of the same thing. You, Mr. Hacker, you could have all the free cogen you like for 200 bucks. But if you're going to be rolling this out into bank of America Systems, you're going to want the deluxe, not the $25 code review. You're going to want the $250 security proofed code review. And you're going to see that kind of push to make money here. But I think that's the whole dynamic. There's the whole shit ton of stuff you can do and then at some point someone's going to have to pay for those data centers. Yep. And it ain't going to be Pete at the department of.
- [30:11]
Jason Lemkin
Well, I think related to that, the thing that there's certain things we've talked about in the past that are true, but we're also willing into existence. The enterprise is willing, willing its desire for AI to replace humans. So it's going to accelerate because they want it to accelerate. I mean, my God, the one that is being accelerated is hire no junior developers, hire no juniors. This is being willed into existence. No one wants to train anybody. It ties to this code review because listen, if you're going to hire no juniors, of course you can spend 200 bucks or an extra $500 a month to do code review for your senior developers. They're already insanely productive. Right. And I think the death of the junior, it worries me. And, and I had dinner last night with my son who's off the charts smart, but he's at Penn State, which is not a top 10 Ivy League school. And he said there are, there are just zero jobs for anyone in CS or math. There's just zero. There's no one even Coming by to hire them for C tier. For C tier. There's just. He has job offers because he's, like, publishing things on Jensen Feinstring theory that I don't understand. So great. Six people in his class at a large state college have tech offers. But it has become, not only in our world, but in his world, that has become. We just don't want juniors. We don't want to train them for three months or six months. They don't know the tools cold. They don't know it. And that's where the budget comes from when you hire no juniors. When we're just a world of the middle of the bell curve in terms of experience. We don't. We don't want folks that don't want to pick up the tools, and we don't want folks that are experts. And this is my big worry for 2027 is it happens. It. It's going to be true in sales. It's already true in support. Like, you want humans in support, but you don't want juniors. My God, I don't want to. Like, I. I want a human that knows code rabbit cold, that can handle the escalations. I don't need junior marketers. I don't need junior nothings. And Harry, not to get us off track, but I ti. I think getting rid of juniors is where we get budget for these data centers. In part, we're just going to. They're just dying faster than we ever thought. It's happening in front of us. The death of the junior.
- [32:14]
Harry Stebbings
I think it ties to two fundraisers that we saw. Rory, you may disagree. As an investor in one of them, I would agree. As an investor in another. But we saw Intercom raising $250 million, and we saw Lagora raising $500 million. And I think both tie to your point there of the replacement of juniors and lower rankings.
- [32:32]
Jason Lemkin
Death of the juniors. Why would I want. Why would. I mean, I know I'm not a Lagora or Harvey expert, but I do know this. The dated space. I mean, who the hell wants to wait for an associate to scale up for two years? Like that was the classic legal hiring. You hire someone real, from a top school, ideally, that was top 10% of their class. They have the IQ and you basically subsidize them for two years until they cross the line and become senior enough that they can work with a top client or take a case. Who. God, who wants to do those two years now? Unless you have to? Unless you have to.
- [33:04]
Rory O'Driscoll
This has been one of our long running discussions. And it's good that I'm evolving my position. J As I said this, I've kind of come more to your perspective that there clearly is something going on here. And even though I don't believe in the catastrophic mass unemployment scenario, I think you're exactly right for a couple of very targeted demographics, one of which is entry level ComSci type jobs. Other would be actual customer support jobs, actual legal associate jobs. There is a meaningful impact on unemployment right now. So I just want to acknowledge you right at him. It is interesting because. And I think that's true. On the other hand. Yeah. Part of you says typically when there's new technology, the best adopters are young people because they come in with less priors. And there's a part of me that says, are these schools doing their job? Especially now that it's what, 2026. If you're graduating COMSC who aren't AI first and totally awash in using these tools, you're just not doing your job. And I think there's an element of
- [34:01]
Harry Stebbings
not Rory, you're unable to alter curriculum fast enough to update Sinclaud curriculums take time to change.
- [34:09]
Rory O'Driscoll
They need to change that. Because if you're looking at Investing, you know, 100 grand a year for four years at a four year college education to get a computer science degree that turns into unemployment and a barista job, you should be pissed. But I'm with you.
- [34:22]
Harry Stebbings
But when you look at Andrej Karpathy's journey in six months time from bluntly using it for 20% to 80%, and this is Andrej Karpathy, that I think it's unreasonable to expect an educational institution like a university to alter the entire curriculum on Claude's ability to progress throughout the kind of skill journey.
- [34:40]
Jason Lemkin
It certainly doesn't appear to be happening. Whether Rory's point, should we be expecting it from these institutions? Yeah, they're becoming just babysitting for expensive babysitting for four years and they shouldn't be.
- [34:53]
Rory O'Driscoll
And give him Credit. I think 15 years ago Peter Thiel articulated the perspective that the ROI on higher education, and at the time it was still high. And it's worth pointing out even to this day, unemployment among college graduates is lower than unemployment among high school graduates, which is lower than unemployment among high school dropouts. So you're still quote, unquote, better off going to college in terms of. But the point is now you take into account the net present value of that 400 grand, you're not getting your money back on Anything other than the best degrees. These are not the most deserving people on the planet. They still have a lower 3 point something percent versus 4.4 average. But there definitely is a trend here that would be troubling if you're a recent graduate. So I'm kind of with you on
- [35:36]
Harry Stebbings
the trend when you say you don't see the mass unemployment case where you don't quite think that or think it's an overreach. When you look at legal, computer science, customer support, bookkeeping, those alone, if it had no impact anywhere else would be mass unemployment.
- [35:51]
Rory O'Driscoll
I don't know if it would be. Again, look at the numbers. I actually was looking at it today. Entire tech industry excluding tech people employed in non Tech companies, technology NAIC classification 51 tech companies 3.1 3.2 million people in the United States of whom roughly 800,000 are software developers. If you go down by half, that's 400,000 software developers. Right. It's a lot of people, but it's 0.2% unemployment.
- [36:19]
Harry Stebbings
How many are in customer support?
- [36:20]
Rory O'Driscoll
Much bigger number. Right, you're exactly right. But also way more fungible in the sense of a lot of the low end customer support. There's lots of other service type jobs folks can do. I'm just a believer, Harry, that over the again I want to be over the medium term the technology takes longer to diffuse than we in Silicon Valley allow and people are more adaptable. So over the medium term I don't see any kind of 10% plus tech driven unemployment which is, and I know you're going to disagree and the point is we don't have to argue about this because in the end we'll know. Right? I just think I have 200 years of facts on my side and you have shit. But maybe you're right. That said, I do believe you are right in the short term in isolated pockets of very vocal people are really struggling. And look, I have three recent college graduates too over the last five or six years. So I'm totally aware of how hard it is to get a job as a college graduate. And I think it's a real issue and we better get on top of it because one of the other things the French Revolution teaches you is gonna sound really cold. You can have dispossessed urban poor forever and nothing happens. But if you piss off the 20 something year old middle class, the over educated elites, they tend to cause trouble. And I actually think the continued production of masses of college graduates are fuse with their sociology and English degrees facing in Comp science degrees where they've done played it by the rules for 20 years and then giving them mass unemployment for that cohort is going to be problematic. I want to be clear, just because I think the macro trend is not there doesn't mean I don't think the micro trend is a real issue. And I predict in 26 it's going to be a political issue. I mean it's so funny to watch the NPS survey AI polls really negative and as someone tweeted, you've been telling us you're going to blow up the world and make us all unemployment and you're surprised to discover we don't like you.
- [38:05]
Jason Lemkin
Yeah, but at the same time, if you look, I'm sure intercom data says this. Everyone's data that works in a heterogeneous human AI age environment. The CSAT is always top 10% for the agents. It's never number one. They never say that the number one most popular person is always a human, but the agents always in the top. That is more telling than most people realize because it's early but it's accelerating is we just rather work with agents. We'd rather hire agents. We'd rather buy an agent. We don't want to. I mean, Harry's got 3,000 applicants for his EA position because he needs a human. But I tell you, he'd rather have an agent if it works. He don't want to interview 3,000 people. If he could have an agent, he'd pick an agent. And we're all going through that. It doesn't even matter if it's cost effective. We just would rather have an agent. I've been thinking a lot, but my God, why, why do some of the AI B2B startups grow so quickly? The simple answer is product market fit, product led growth, agent led growth. But as you dig deeper and as the year goes on and as we roll into late 26 and 27, people just want to buy an agent. They don't want a human. And if you can deliver perceived massive roi, that is so appealing. It is not layoffs, it is not this. It is, oh my God, I could get customers, I could run campaigns, I could do support without humans. My God, I want that. And when I look at so many of the mediocre products the public B2B companies have launched, they do not service that demand. I don't want humans at Atlassian or HubSpot or other folks with. I don't want them. I don't want to make my humans 8% more efficient with your AI. I don't want these humans. I want an agent to do this work. And when you do that, whether the Lagora, Harvey, whatever, a million on the show, whether they fully can realize that potential, that people will line up at your door when you can give them an AI instead of a human, an agent, they watch what they want. These are the companies we want to
- [40:05]
Rory O'Driscoll
build and run, as is so often the case. I agree with the broad direction and might disagree with the. Not so much as sequencing as the narrative. I think a lot of the B2B adoption to date, with the exception of customer support and in the last year, with the exception of coding, I think folks like Harvey, Lagore and gcai, they're all about. They're not actually about human replacement except very much at the margin at some vague level. Maybe I don't need the 17th associate at Linklater. So I. Because so far it hasn't been agentic. So far it's been primarily, let me help you, Mr. Lawyer, be smarter, work more efficiently. Yeah. At some level, not ask an intern to do something. But it hasn't been a wholesale replacement story. I think you're right. It's been at the task level. I've been able to increase the number of tasks that I can do and therefore decrease the number of tasks I have to pull in an associate to do. I think you're right, Jason. Now with agents, and I think we've seen it first in software, it's stunning what's happened in the last six, nine months in terms of the ability of these things to genuinely just code start to finish. And therefore, this is where I think you are right, we might be at the start of some of this identification. And the next 12 months will be B2B companies saying, now I finally can automate this task entirely. And then we'll find out what I
- [41:20]
Harry Stebbings
like to think through a frame of what will my children look at me and how I used to live and go, God, I can't believe you used to do that. And I think one of the things they will say that too is, I can't believe you spent years training people and then they left. All those years wasted and then they left.
- [41:38]
Podcast Host/Announcer
That's so nuts.
- [41:40]
Harry Stebbings
I think that will seem incredibly archaic. An agentic world which compounds education and learning and they never leave you, Jason,
- [41:48]
Rory O'Driscoll
Would I prefer it? Yes.
- [41:50]
Jason Lemkin
Yeah, that's. I just think if you're founders in B2B, this is what you should be building is something where folks will line up the Door because they'd rather work with your agent than a human. And most of the public companies are not even thinking this way. But the ones, the startups that do blow up, what they line out the door.
- [42:08]
Rory O'Driscoll
Give me an example of the agentic ones, please, as distinct from the automated task ones. Give me a. What level of agent are you talking about?
- [42:17]
Jason Lemkin
There's a bunch, but I've done so much in these GTM agents. These go to market agents. Okay, so this last one that we deployed, this Monaco one that Sam Blonde did, I mean, they closed seven figures in their first five days, and they have 60 days of people lined up. And look, I'm not hyping it, they're all good. But why are they lined up out the door? Okay, this is the more interesting question. Why are they lined up out the door? Whether they're fully successful on all their journey or not, it's worked for us as a tool. It talks to the prospect, it texts them, it. It pitches your product and it sets up the meeting. And the meeting is fully ready to go and close. If you can deliver that. If you can deliver that. Okay. And it's a high bar. And I don't even think it was possible 60 days ago. Okay? And all the other tools we use, people will line up out the fucking door for this stuff. And so that's what you, whatever category you're in, you want to build this agent that is sufficiently better than 90% of humans that everyone will pick it. And the budget magically comes out of nowhere. Like the TAMS for some of these products don't even make sense to us. Like they, they, they're not consistent with the past, but people will line, line out the door. If you can do this without humans. I mean, we built our own VP of marketing literally yesterday. This week was the first time it led our human staff meeting. Our AI VP of marketing led the team meeting. It led the meeting. It summarized every single metric, every single thing, every single thing the humans on our team had to do. 10K RA led the meeting. I mean, as great as Clay is for enrichment, it's great. If it could do that, I would give you $50,000 tomorrow.
- [43:46]
Harry Stebbings
You're doing the intercom deal. Are you betting that they beat Sierra?
- [43:50]
Rory O'Driscoll
I'll tell you what I am betting on. I'm betting on that they can carve out a significant space in that market for that product and that they've had explosive growth in it. And I'm betting that that team, coming from the SaaS background, but being grounded in what it takes in AI can take a significant portion of market share. They tend on average to be slightly smaller, smaller in terms of customer size at the high end of Sierra and they compete more with decagon.
- [44:12]
Jason Lemkin
But one thing that I think in a lot of these categories that have traction. But if you, if you want to say, and I'm only a partial expert, but if you want to say Intercom versus Decagon versus Sierra versus others. Right. Zendesk Salesforce. One thing that people miss a little bit in terms of the winner, which you kind of asked rory, right. IS FD's forward deployed engineers for the moment are a limiting factor. And let me explain what I mean, what it means is no one has enough fully trained FDs that can get a customer up and running fast enough. No one has enough of these resources. Okay. And what it means is that almost every vendor has to pick lanes. They have to. You can't do as much as you'd like to do it if it was all software. You've got to pick where you're strong. Right. And if you're best at digital transformation for enterprises, maybe that's what Brett Taylor is. You got to pick that. Right. And you got. And so not that these folks I know at the sales team and folks think they're direct competitors, but everyone has more demand than S tier FDS to service that. So they're all picking lanes today. And that is a frontier we haven't crossed yet. And so in that sense they're all services businesses in a sense that this VC meme is true. They're not long term services businesses. But if you need humans to train it, if you need humans to manage it, if you need humans to iterate it, you far you have the same constraints and services businesses have. This FD thing is a limiter this. It's exciting because I think the losers, a lot of the losers out there can't even get at good FDs. If you look at folks that are a lot of folks that are struggling in AI B2B if you, if you peel the layer back, sometimes their agent isn't, isn't competitive, sometimes it's too slow. Right. A lot of issues. But if you really dig down how many, how many great FDs do you have? How many folks do you have that can spool up a couple customer in 30 days? Well, I've got three. Well, you're going to lose just saying
- [45:59]
Harry Stebbings
on venture in private and just covering like the news items. So people are up to, as I said, Ligura raises 500 at 5.5 billion. Excel lead that round. Obviously Harvey are better funded at I think $11 billion. In the latest round, Decagon did a tender at 4.5 billion. Intercom raised 250 million at I don't know the price. Rory, you might know it, but they didn't announce it it Founders Fund are closing in on $6 billion of new funds. They invested the last 3.3 in 11 months in amazing businesses like SpaceX and Stripe and Anduril. I'd be very happy if I was an LP. Base 44 hit 100 million in ARR. Don't know if you have anything to say about that, Jason. Given rat plit does it save Wicks?
- [46:44]
Jason Lemkin
Well, we had on the agenda Crowdstrike crushes the quarter, trades down. Right?
- [46:48]
Harry Stebbings
Yeah, I was going to move on to that with our prediction.
- [46:50]
Jason Lemkin
No, but it's related to the Wix thing. And then I was looking at Cloudflare which is on my, my top, top four, right? Cloudflare, 27% growth a year ago, 34% growth last quarter. I mean that's pretty good acceleration. That's pretty Damn good acceleration. 40% year over year increase in net new customers. The public markets, you know, we, we're wondering what's happened this year and, and you, you had Iran from Monday on, a week ago on, on 20 VC and he said it, we've got a, we've got a accelerate to get back credibility with the public markets. Accelerate, not manage a genteel deceleration which was 22 to late 20, 25. Not, not manage a gentle deceleration with higher net margins which everyone thought was the job at scale. Now the truth is you've got to be Cloud. It's not just Palantir, you got to be Cloudflare or better. And so I wouldn't want to be running Wix because 100 million from base 44, it's great and it shows you can cross sell, right? And it shows a lot of new things but their, their larger customer count is flat to down. So they've got the gravity of the decline of the core business. Like they've got to get back to so much growth that 100 million just, it's not enough. Rory could help trail out the math But I think base 44 and there's some cannibalization there. It's got to be doing 5,600 million to move the needle for Wix with its core growth decelerating, it's just so hard. And you know, for, and for startups you know, you got to start wondering this year when you should just give up on your portfolio. If they're not accelerating, at what point do you just give up? Because if the public markets won't tolerate gentle deceleration, how will the private markets tolerate it? The era of gentle deceleration has ended. It's dead. We didn't think it was such a great period, 22 to 25, but it was pretty nice that gentle deceleration was tolerable.
- [48:40]
Rory O'Driscoll
Again, so much to unpick. First of all, to be clear, gentle deceleration is like entropy. It is the end state of the universe because everything de accelerates to GDP growth.
- [48:50]
Jason Lemkin
Well, yeah, but the universe will be dead before some of it happens.
- [48:54]
Rory O'Driscoll
Agree. So I just want to be precise because you know me, I'm that guy. Right. What you're really saying is at 10x growth, year on year, anthropic can afford to decelerate at 40% growth like Figma had it a couple of quarters ago. Yeah, you accelerate to 30, you're going to take a little hit. But you're exactly right, Jason. What you're really saying is at 10% growth, you're now so close to GDP that you've got to reaccelerate. So that's really what it's just being precise.
- [49:18]
Jason Lemkin
I don't know if, even though if the public markets think it's okay that figma might decelerate.
- [49:21]
Harry Stebbings
Right.
- [49:21]
Rory O'Driscoll
Again, start, I got to push on that because let's take CrowdStrike, right? Slight deceleration, 27% revenue growth, guidance of 23, they'll probably beat that by 2. It's okay to grow 25% when you have scale. I mean, you know, Microsoft and Google are all going at 13, right. So you just have to be objective. When you have enough scale, 25% is enough to matter. Not everything's going to accelerate all the time, Jason.
- [49:44]
Jason Lemkin
No, but the markets have been brutal this year. And I think it's not that you're wrong analytically or empirically, but the markets have given up on folks not accelerating. They've just entirely abandoned them.
- [49:55]
Rory O'Driscoll
Well, yes, again, agree that I'm being precise. What they've done is they've said for three years I thought it was temporary and now I recognize it's permanent. And now I'm going to value based on this growth rate take a hit off you for technical obsolescence and the terminal value take another hit off you for free cash flow and I'm going to give you eight or nine times ebitda revenues. That was sweet that I said that, wasn't it? Those are the good. No, you're exactly right. So they've corrected to fundamentally what they're worth with no pixie dust. And that's just a tough place to be long term. I agree. Those guys, the negative spin is they have to reaccelerate. This positive spin is even a small amount of reacceleration. You know, we'll get you some lift from here, but you gotta do it anyway. WIX is a good example of that. It's funny. Let's try and take apart Wix. I hadn't prepared on this one, but
- [50:40]
Jason Lemkin
there are 2 billion growing 13%.
- [50:42]
Rory O'Driscoll
If that $100 million business grew at the same trajectory as Lovable or Replit, I'm gonna do some ahead and you guys know the numbers. But let's just play it out. They went from 100 to 300 plus or minus in a year, fair. And 300 to 600 plus or minus in another year. At least. If base 10, which is inside Wix at 2 billion, went from 100 to 300 this year, that would mean it's small today from 10. The problem is this. From 10 to 100 it gets lost in the noise. From 100 to 300, it's 10% lift to Wix's growth rate. So if it's 10 before now it's 20 and from 300 to say 600, it's 15% lift. So you can't just say it's not big enough because the nature of a small thing is it's small and then it exponentially compounds. So I would push back and say,
- [51:31]
Harry Stebbings
I would also just say for proportions also just to say Lovable's at 300 and IT projects it will be at a billion by the end of this year.
- [51:38]
Rory O'Driscoll
Agreed. That's where it's going to go. It's not that 0 to 100 is bad, Jason, but where you are correct is this. If you're an old school SaaS company and you have this bright shiny thing inside you that's growing from 0 to 100 in one year, right. You have to run it in such a way that it can keep up with the lovable and the replace and it has to go 100 to 300 and 300, maybe a billion, maybe 600. And what you're saying, and it is correct, is if it ends up hobbled by the wider company or the bureaucracy or the SaaS or the blah, blah, then you're not going to get the needle.
- [52:11]
Jason Lemkin
Well, the challenge is their core customer base. Their core paid customers declined 1.2% last year. So they're at a terminal state where a lot of B2B companies are. And it's not just AI, it is life where they have reached a terminal state for their core customer base. Right. And. And what they've done better than most public companies is hell with a great acquisition, they got 100 million of AI revenue on top of it. That's like better than most, but it is not enough yet. Not only your math, but the core is declining 1 to 2% a year, which doesn't sound like a lot, but man, that's rough. Right.
- [52:44]
Rory O'Driscoll
But Jason, just doing. I think we're actually ending up saying the same thing. So you're declining $20 million a year. Whoop de do.
- [52:49]
Jason Lemkin
Well, you're not adding new customers is the problem. Right?
- [52:52]
Rory O'Driscoll
Yeah, it doesn't matter. Stop. It doesn't matter. If base 44 could grow like lovable or replit, then within two years they'd be out of the woods and there'd be a 30% growth company. So you're exactly right. They made the right move. But what you're effectively saying is inside that other company, they mightn't be able to. Right. So I think as an investor, you should be saying to yourself, if we think base 44 has the same trajectory, then great, then you have a diamond in the rough here. You get the existing business for free and you get the new business. But I think implicitly you're both saying that it's not going to grow at that trajectory. It's probably going to grow 100 to 200. So it's probably going to get the growth rate back up to the mid teens, but it's not going to be enough to dramatically change. I'm not saying.
- [53:34]
Jason Lemkin
I actually think there is a time will tell. Here's what. And if we're using Wix as a case study, here's why every B2B company of scale should hope that base 44 works, which is. Look, look, I love Rep Lovable. They're great. Okay? But Wix has 6.11 million customers. I'm sure the founder who's been on Harry show will challenge me, but I know half the reason it's working. It's a good product, right? Is they have 6.11 million customers to sell it to.
- [53:58]
Rory O'Driscoll
Yeah. And that's okay.
- [53:59]
Jason Lemkin
No, it is okay. So they should be able to pull it off. It's not. 100 million ain't enough. Like all the tweets about how great it's just the scale is so intimidating. It's tough. You gotta like do what Mark did and buy an informatica too to bridge the gap.
- [54:14]
Rory O'Driscoll
If you're in a game as an existing SaaS company where what Jason's effectively saying is even when you make the right strategic moves, it's quote unquote not enough because you can't pull it off for whatever institutional reasons, then that points to a. It's a grim conclusion for most of those companies.
- [54:30]
Jason Lemkin
The case study will be base 44 is a good product. I will stipulate. I'm not going to argue where it stands on the highway hierarchy of Vibe coding. I have used it. It is a good product. It's a lean team, but it's a good product. If WIX can't frack and cross sell out to 6.1 million people, what hope is there for you? This is a rhetorical question. To many founders it's a bleak question because I can tell you anyone would rather Vibe code a website than deal with the crappy templates it comes with. So it's a great use case, right? 6.11 million it's got. If it doesn't work, Jason, see what's coming.
- [55:02]
Rory O'Driscoll
I think you're exactly right. I think it's a perfect best of a use case. If you can't cross sell the new AI product to existing customers who are trying to do the same thing just with an older technology, then the cross sell acquisition and cross sell story doesn't work. This is as good as it's going to get if you're an old school SaaS company other than managing the client. So you are. It's a total lab experiment. As you're watching Salesforce in my view, wisely buying a few next generation AI first companies, they got to do the same dance, just with an extra zero everywhere. They got to take that 40 billion behemoth and find a way to upsell another $20 billion worth of stuff.
- [55:43]
Harry Stebbings
At least they have something in this market to play with. I look at your webflows of the world in your squarespaces and I go ouch.
- [55:50]
Jason Lemkin
Yeah, it's a mystery why they're not trying. One thing that happened to me this week is I tried Figma make for real for the first time. I know Harry saw it on Twitter and for my use case it was terrible. It was much worse than base 44, much worse than any Vibe coding product I've ever used Figma Make. It was terrible. It was undesigned. And even worse, all these products have advanced. So I do this test and a lot of people make fun of me. They're like, oh, you're an idiot. You don't know how to do a prompt. I've done a few prompts, okay? My, my AI apps have been used a million times, but I also know how these tools work. So when I want to test a new Vibe coding site, I do something very simple which didn't work six months ago and works well today. Go to Saster AI and make me a better version. People make fun of you. There's not enough context. There's not enough data. Of course there is. I have massive amounts of context and data on my website. Scrape it, use your AI and come up with a better idea. And I'll tell you, replit and lovable and and even V0 can do a pretty good job of it. They come up with ideas. This is what the AIs are supposed to do. Make didn't even know it was on my way website. It didn't even try. It was the worst thing I'd ever seen. Nor did it was it designed. And so if Figma make can't do that and then I can tell you what folks, how folks criticize me, that's the wrong use case. It's not supposed to do that. But if Figma make can't even pick up the context from a website to redesign it, what hope is there for Squarespace and all the other guys? Right? They can't even. Even Figma can't do it. Worst Vibe coding experience I've had in six months is Figma Bake and I'm not a designer.
- [57:18]
Rory O'Driscoll
Okay, but I'm sure what the comments said is some version of the use case here is take a design and implement it as code.
- [57:25]
Jason Lemkin
Yeah, not that. And recipsa Loquitter is fine in 2026. Your website doesn't have to say anything coherent because it doesn't matter for design. That was the other feedback which I thought was rather dated because your comment
- [57:37]
Rory O'Driscoll
was you were criticizing the work in terms of its written content.
- [57:41]
Jason Lemkin
Well, it was all terrible. First of all, it didn't design the website. It just used dated clot artifacts from six months ago. So giving me little sparkly icons that are on every tier three demo days is not impressive for Figma that there's no design but it didn't pick up. My point is they chose not to pick up any context from the asset.
- [57:57]
Harry Stebbings
Jason, did this change your opinion on your optimism as a shareholder or potential shareholder? Of Figma moving forwards.
- [58:05]
Jason Lemkin
Yeah. It shows that the team's not. I think it's worse than base 44. It's rough. It's rough. You're not going to win today if you're doing quarterly release, best effort releases. And I would say most public software companies are also. And many struggling unicorns, I would say almost all struggling unicorns are doing best efforts quarterly releases. That's death today. That world does not exist any longer. Best efforts quarterly. Let's get around the table and decide what we're going to ship this quarter, guys. Okay. That's the way I built software. It don't work today.
- [58:34]
Rory O'Driscoll
I think what's interesting about this discussion is how generalizable it is is to the challenges that a huge amount of the portfolio faces is that this challenge of taking an existing business. Because one thing I think you can stipulate is the people at Figma are extraordinarily talented. I mean it's not a year or two ago since oh my God, these are the best people out there. They've built something enormous. And they clearly have. And they clearly did. I think this speaks to the challenge anyone faces in a larger company with an existing product architecture, finding a way to adopt the new technology, the new architecture and the new way of doing both, the way of building and then what you actually have to build in such a way as you can make a big enough impact to change the trajectory of your existing company. And we've talked about two or three examples. We've talked about Figma, we've talked about wix, we've talked about Intercom who seems to have been doing it. And it's just really damn hard. But the funny thing is there are literally one point something trillion dollars worth of public companies and another trillion dollars worth of private companies for whom this is the existential cr. And it's just really interesting here. We're seeing it across our portfolio. How do you make sure you matter and how do you cut through the internal noise and how do you staff your teams and how do you create the urgency and how do you create a sense of what's possible? The odd thing is this is precisely when you should be hiring young people who are coming in replete with the knowledge and unencumbered by priors. So maybe all those unemployed computer science, but maybe in some of these SaaS companies, genuine commentators, you do need some young talent to see what you can do and you know, do some Y Combinator aqua hires of failed teams and say, how do you turn around your R and D development, which takes, as Jason says, three, six, nine months to deliver something when the team down the road are delivering a new version every week. Because if you don't figure this out, you're going to trade at 8 times EBITDA, which at best is 2 or 3 times revenues, and it's going to be pretty fricking unsatisfactory for the people who paid 30 times.
- [60:31]
Harry Stebbings
I don't think there's a lack of desire, by the way, for young people. I think there's a lack of desire for one or two years in a role who've been indoctrinated enough to think that the world is a certain way with a certain set of tools and what you actually want is the 18 year old who's on every subreddit and knows every intro to a TikTok.
- [60:46]
Podcast Host/Announcer
Totally.
- [60:47]
Harry Stebbings
We have to make some public market bets and I wanted to save some time for this. And so we have four companies that we need to choose. Jason, would you like to start with your 4? And you can give like a minute
- [60:59]
Podcast Host/Announcer
as an explanation or you can share.
- [61:01]
Harry Stebbings
Just say them.
- [61:01]
Podcast Host/Announcer
Up to you.
- [61:02]
Jason Lemkin
Okay, hold on, I, I got a little confused here. Mine haven't really changed. Mine were Palantir cloud flare farts. What was my third one? Shopify and CrowdStrike. Okay, and the fourth one I'm not sure about. I, I, I'm sticking with my three. I'm going with the same. I'm betting on momentum is the only thing that's going to save us in the age of AI. So I'm betting on PAL overpriced Palantir Cloudflare, which is re accelerating and benefiting from AI and Shopify, which is gaining market share. I actually can't find a fourth from my cohort, but because I made up the bet, I'm going to go CrowdStrike because I don't think AI is going to hurt them. But I would almost go IGV instead of CrowdStrike. But I'm going to go CrowdStrike. But I can't, even though I want to do Atlassian because I think it's above the fold and a good one, it doesn't fit the thesis. So I got a pass after using make. I cannot do figma. I cannot do figma after make. This is not a world class product, so I got to stick with CrowdStrike.
- [61:58]
Harry Stebbings
I'm sharing you on CrowdStrike. Ooh, we have that in common. Okay, I'm adding NuBank. I think NuBank's actually dramatically underappreciated they're going to enter the U.S. they've still got David at the helm. They're growing 28% year on year. Incredibly solid. I am going for the incredibly boring Nvidia.
- [62:17]
Jason Lemkin
I think that's a good one.
- [62:18]
Harry Stebbings
I think honestly if we're going to see inference skyrocket, Nvidia will win. Acquisition of Grok moving into inference layer. I don't fucking sell Janssen. And then I'm actually going to go for an out there one of Reddit. It's down 40%. I think it's a data layer for a lot of the LLMs and given its pricing it's a good buy. Rory, what would yours be?
- [62:42]
Rory O'Driscoll
I'll tell you, I think there's of the boring ones that have been savage on a below 10x EBITDA, I think Salesforce 8 or 9x EBITDA and even team at 9x EBITDA with decent growth is okay. I think those are good stocks. For the record, I also bought World Cloud. I put the full 250k we said we'd bet into World Cloud the day we bet and we're about up 4% so far. Nothing major but nice, right? In a month, in a week. And the interesting thing about those, those are squarely in the strike zone of could be replaced by AI, but I don't think they will be. Then the next bucket is I actually think the AI fear is overdone and they're kind of in that mid category of garp. They're not stupidly priced and they got decent growth. And I put Toast and Intuit in there because the software but with a huge slug of transactions that aren't going to be replaced by AI. And then at the very top I actually thought Jason raised the most interesting category which was the high growth companies where I think the AI is going to kill them story was totally overdone. And the best example of that was CrowdStrike and the proof that it was totally overdone was by the time we're talking about it two weeks later, it's gotten back almost all the hit it took on the day. Right. So it's been kind of one of those up and then down things. So I think with more fear because I'm more afraid of the current high price overall than I am of the SAS apocalypse. I would with fear pick CrowdStrike because you're paying at mid high teens of MTM revenue. I think the ebitda multiple is 50. The growth rate's 23%. That's scary. But it's an enduring company. And I wanted to pick two expensive ones. The kind of real exp. You know, where you're not dealing with like my first two are 8 or 9 x EBITDA boring ass value. The other two are early teens EBITDA which is roughly the same as Microsoft and Google. Pretty boring. And then you got the high price ones are at 30 and 40 times EBITDA. In other words, they're not cash flow justified. So you're still story based. And I went crowdstrike and then I get drawn to Palantir. And I never thought I'd say that because I'd be. No, but the growth rate, they're one more year of growth away from being normalized. Okay. And maybe you're a year and a half. In other words, you're forward paying two years. And I think this administration's gonna spend for two years. So I reluctantly, reluctantly put Palantir into that bucket.
- [65:01]
Jason Lemkin
Wait, was that seven or four? Who were the four?
- [65:04]
Rory O'Driscoll
Two of each too cheap. Value two GAR and two. Oh my God. I mean to your point. And that's why I thought the last category that you put all them into is the venture category. Effectively. The only category that I listed that's even vaguely venture relevant is the 30% growth plus people. And that's the crowd strikes the palantirs of this world. The astonishing thing is 95% of the assets in the public market are utterly venture irrelevant in terms of growth rate and everything like that because you just haven't had any public IPOs. By definition, the return profile from this back probably significantly below what you should be able to get in venture if you've got the right price.
- [65:41]
Jason Lemkin
Which is of course as long as you've tracked those four area, it's good by me.
- [65:44]
Rory O'Driscoll
Yeah.
- [65:45]
Harry Stebbings
Banioff's gonna be unhappy with you, Jason.
- [65:47]
Jason Lemkin
I mean. No, no, I'm. It's not that I, I would. I'll pick value stocks. I, I deep, deep believer in. In Salesforce. I guess I could swap.
- [65:54]
Harry Stebbings
You wouldn't choose one value stock today. Like I'm not asking you to actually put your money in this one, but like where you're like I'm having to reach for a gem in value. What would it be?
- [66:03]
Jason Lemkin
Well, listen, I only believe in re acceleration. This is my only thesis. Right. I have no other thesis. And so you have. I. You have to pick Atlassian because I can't find another downbeat and one that's re accelerating. It's that simple. And so my fourth one, Palantir Cloudflare, Shopify. It's just the Math. For the fourth candidate I was CrowdStrike versus Snowflake versus Atlassian. I had Atlassian, I would pick Atlassian and probably in a year I'd pick Salesforce because I think it's all going to work, don't get me wrong. But, but, but we need to see it. But the only reason I ding Snowflake is it's not founder led and it's just that's my thesis today. Like I, I, I can't pick Mongo or I killed Mongo or Snowflake just on not being founder led. That's just, that's just, just to have a bright line. But you could argue, if you look at the numbers you could argue Snowflake's a better bet than Crowdstrike.
- [66:47]
Rory O'Driscoll
Right.
- [66:47]
Jason Lemkin
But Atlassian, you know I, I don't know why it hasn't gotten any credit for re accelerating. Right. I mean obviously the answer is they don't believe it will sustain. They don't believe it will last. Right.
- [66:56]
Rory O'Driscoll
I think the argument there is which is a scary one, it is that the software development life cycle itself is changing so dramatically that you're effectively a software product that coordinates the software development life cycle and seats are going to change, workflows are going to change if you don't stay on top of it. You have a software that coordinates how engineering departments run in 2022 and the risk on team is that in 2027 it is going to run so differently that you're not the thing. Now I'm willing to bet he can figure it out but yeah, there's a legitimate risk on that one in a way I don't think. For example I think on Salesforce your destiny is a little like SAP. Your worst case if you can't re accelerate you just optimize. Right. And boring is be damned. Increase free cash flow. I mean one of the reasons I went with that was all the big pre SaaS companies that had systems of record, Oracle, PeopleSoft, which rolled up into Oracle and SAP survived and financially thrived even if they're not exciting in the age of cloud. And my guess is Salesforce does the same in a way that the mid tier point products don't in a consolidating world in cloud they can probably be mean and pick up other people. Yeah, that's on Instagram.
- [68:10]
Jason Lemkin
Well, people, I mean listen, if you wanted to bet on Salesforce I'll tell you the simple reason. It's just the numbers don't show re Acceleration yet. Right. Least the organic ones. The simple reason, and I know this being super deep on Agent Force and everything is unlike a lot of folks on this list. They have more demand than they can serve. And it's a complicated issue. Like not every customer can get Agent force to do what they want and can train it and get an fde. But what you really want to squint in bet if you want to bet on turnarounds is who has more demand AI demand than they can service. And there may be more than Salesforce, but there probably aren't too many more folks who literally are turning away customers because they can't service. And going earlier in the conversation, those are the startups I want to bet on too, right? That have that how are you going to build something where the demand for your agent is so strong you can't even service it? And Salesforce does have that.
- [69:00]
Rory O'Driscoll
One of the reminders for me on this that I have to revisit in my own head, the eternal venture question of how much for how much. In other words, how much extra on revenue or EBITDA multiple do you pay for 30% growth versus 20 versus 40? Jason, to your point, because I like your SORT algorithm and in the venture business they're the only things you invest in. But I will say sometimes in the public markets you just get a little scared at the kind of 30, 40 times EBITDA multiples, 12, 14 times revenue multiples in conjunction with the 20% growth rate. When you think back to the fact that the average SaaS company used to trade at six times with a growth rate of 30, essentially what happened at the low end was everyone woke up and said these things aren't growing at all. I'm giving you eight times ebitda. That's it. The question is what happens if at the high end people go 20 or 30% growth? It looks great relative to Salesforce, but it looks shit relative to Entropic. And maybe I shouldn't go back to my oh, six times revenues, seven times revenues and you have 50% capital risk. I mean, I'm not saying it's going to happen. I'm actually saying I'm reminding myself of how the good growth at a pricey price is always tricky. The great thing about 100% growth is it covers everything.
- [70:13]
Harry Stebbings
Growth solves all. Boys, time for a wrap. Game on.
- [70:17]
Jason Lemkin
Game on.
- [70:18]
Rory O'Driscoll
Game on. Game over.
- [70:19]
Podcast Host/Announcer
Game on.
- [70:20]
Rory O'Driscoll
Game over. Oh my God, I've been talking to you guys for two hours.
- [70:23]
Harry Stebbings
Well done. I know you really enjoy it, huh? And it's only Tuesday Rory as he
- [70:28]
Jason Lemkin
said, it's only Tuesday.
- [70:32]
Podcast Host/Announcer
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Harry Stebbings
What's next?
- [71:12]
Podcast Host/Announcer
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