← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: Anthropic's $6BN Revenue Month | OpenAI Kills Sora & Hits $100M ARR on Ads | Oura Going Public & Whoop Raises at $10BN | Manus Founders Trapped in China & The Billionaire Tax: Anyone Left in California?
01:09:36
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- [00:00]
Rory O'Driscoll
We may be at the stage where we throw the humans under the bus, not the AI anymore, which I think at some level is pretty terrifying. I think shooting in the head is even more significant.
- [00:09]
Jason Lemkin
A big part of the whole strategic direction of the company was flawed.
- [00:12]
Rory O'Driscoll
You're seeing the economists. The accountants have wandered into the room and they said, we have a scarce resource here. Let's optimize it. Let's devote this compute to the people who can pay the most for it. You haven't lived till You've seen an 85% decline in an index.
- [00:27]
Jason Lemkin
This is one where it's just back ass barkwards and there's.
- [00:30]
Rory O'Driscoll
I don't believe there's right or wrong in money. There's just money.
- [00:33]
Jason Lemkin
I just don't think raising at 5 or 8 billion when you're at 80 million or 100 million of suspect ARR is the most exciting accomplishment in the world.
- [00:40]
Rory O'Driscoll
Let me be direct. Get the fuck over it. You should conform your company around your customers and your model, not your VCs. Being mean to a billionaire is actually a feature.
- [00:48]
Harry Stebbings
This is 20 VC with me, Harry Stebbings and it's my favorite show of the week. Rory o', Driscoll, Jason Lemkin analyzing the biggest news in tech. So we start with Anthropic's monster week. We OpenAI killing sora and hitting 100 million ARR on ads. And then we finish on the man with the biggest balls in tech. Massa getting $40 billion loan to buy more OpenAI stock for SoftBank. But before we dive into the show Today, I run 20 VC fund and I get this question from founders all the time. Harry, I can't find a good dot com. Do you have a hookup? Let me tell you now, the answer is always going to be no. I don't have a guy or gal for that. I do have a recommendation though. If you're building a tech startup, get a tech domain. Tech startup, tech domain. It couldn't be more simple or obvious. As an investor, I appreciate founders who put thought into their branding. When I see tech in your name, it tells me right away that tech is at the core of your build. It'll say that to your customers too. A clean and sharp domain like tech pays off in the long run. Look at the companies using tech. Nothing Tech1x Tech, Aurora Tech, CES Tech, Ultra Tech, Alice Tech, Neon Tech, Blaze Tech, PI Tech, Great Tech companies. They all use the tech. These are my two cents. If you're building a tech startup, don't overthink it secure your tech domain from any registrar of your choice. While tech gives modern companies a home, online checkout helps that home convert by turning traffic into revenue. Over the past 15 years, Guillen Pozaz has led checkout.com through what he calls the velocity years, a period of hyper growth with relentless product building. The lesson? High growth is a gift, but it demands ruthless focus. As his mother put it, play the game you're good at. For checkout.com, that game is digital payments, progressing over data, chasing basis points and compounding learnings over time. And that discipline is paying off. 2025 checkout.com processed over $300 billion in total volume, up 64% year over year and returned to full year EBITDA profitability. They now support over 1,000 enterprise merchants globally, including 63 that process more than a billion annually with brands like ebay, Vinted, Amex, asos and Temu. Guillaume's message though, it's pretty clear they've earned the right to win anywhere. Now they're investing in innovation across marketplaces, issuing financial experiences and ajantic commerce. If you want payments built for, what's next? Talk to the team at checkout.com that's checkout.com while checkout powers the moment money changes hands, invisible powers the people behind the work. Why don't we hear more real AI success stories from big companies? The models are insanely good, but implementation's the problem. It's really, really hard. There's data all over the place. There's legacy tech and manual workarounds. It's a Ferrari engine in a shopping cart. Meet invisible. Invisible trains 80 of the top models and then adapts them to the messy reality of your business. Take the Charlotte Hornets NBA team. Invisible took years of game tape and analog scouting notes to go from uncertainty to a draft pick and summer league championship win in weeks, not seasons. Get the data in order first and suddenly AI can do almost anything for you in the enterprise. If you want AI that hits the P and L, go to InvisibleTech AI20VC.
- [04:08]
Rory O'Driscoll
You have now arrived at your destination, boys.
- [04:12]
Harry Stebbings
Welcome back. It is this week in Anthropic, otherwise known as the Sasso Geez, which has been renamed. I want to start with, you guessed it, anthropic. Unbelievable. 28 day month of February where they did 6 billion in revenue, which was more than databricks has done in their entire lifetime. Do you know what I think was the most interesting news out of Anthropic this week? It was actually the accidental leak of Claude mythos, essentially 3,000 unpublished assets leaked. It's a 10 trillion parameter model. Apparently that is this next level step change in capabilities that they're not releasing because of how powerful it is. This is by far the most interesting to me. Jason, how did you think about this news?
- [04:56]
Jason Lemkin
Well, look, obviously it's embarrassing, right? To Anthropic to leak it. I actually just think we're going to see more and more of this accelerate. The faster we vibe code, the faster we ship, the more corners we cut in general on application level security, it happens. I mean, so many folks are accidentally uploading code to insecure GitHubs, to database, to supabases that are by default open. So this is, this is accelerating our data, which is just open on the Internet and, and you could say, God, it shouldn't happen at the anthropic level and I'm sure someone will get, will get scolded. But overall this is accelerating and it's going to accelerate even more as we let our AI agents make decisions. Our agents are going to decide where to put code, they're going to decide what level of security to use. This is going to become happenstance. And people are like, oh, how could Anthropic have a new security agent and have this happen at the same time? I think it makes perfect sense. The anthropic AI security agents, which I've basically used in rep. What's very, very good. And it also makes sense as we Rush, we're going to leak source code, data, pii. Right? It was, I don't know whether it's happened. It was reported today, all of Mercur's data leaked. It's being held hostage. All of it, every single interview, every single piece of pii, every single piece of humans. And so, you know, we used to mock these. I think it's going to start happening daily and weekly in the Agentic era. And it doesn't excuse it, but it's a reality. Agents, agents are goal seeking and agents are going to make, not only going to make the same mistake as humans, they're going to work a thousand times faster. So even if they make the mistakes 10% as often, Rory, help me with the math. If they do 1,000 times more productive, they're still going to make 100 times more mistakes. But we're going to see it everywhere. We're going to see it everywhere.
- [06:40]
Rory O'Driscoll
So again, just for perspective, because there's two things going on here. Anthropic, some data leaked from Antropic about their new model Mythos. Which of itself is meant to be amazingly powerful in dealing with cybersecurity. And there was a whole consequence that we'll talk about in a second in terms of how that impacted cybersecurity stocks. But as Jason pointed out, the level of irony here is acute because it was an inadvertent. So you had the situation where a model that's meant to be amazing for cybersecurity actually leaks via cybersecurity leak. So we're toggling between the two on the cybersecurity leak. It was noteworthy, entropic, quote, unquote, blamed human error. We may be at the stage where we throw the humans under the bus, not the AI anymore, which I think at some level is pretty terrifying. And you know exactly what happened. You often see this where you're about to do a big announcement. You have your content management system, you stage all the assets, be it their Fed press release. In the uk it happens, happened on the budget, if you remember Harry, you have the press release ready to hit play the minute the budget has ended and someone inadvertently forgets and put it on the publish side in advance. It's the same thing here. So it probably was a human error. There's a whole bunch of content ready for, I don't know, pick a date. The march, the May 15th announcement of mythos. They forget to secure it correctly, and out it goes. So that's the first thing, right? So that's kind of the. That's the embarrassing part of it and then the interesting part of it. And you really do have to do this without sniggering, despite the fact that it all leaked. You also have to separately talk about the fact there's some big claims on Mythos. Right. And on Tropic, we're making again via this leaked memo reminder, no one else has seen it. And the actual model, I think it's not publicly available. Obviously, some people have seen it, but not publicly available. And even I was trying to get copies of the leaked memo. There's just a few screenshots at this stage. It's hard to track it down, but the statement is it's way more powerful. Second thing is it's gonna be way more expensive for them to serve, and therefore, it's gonna be way more expensive for customers to buy. And then the third thing is a particular focus on cybersecurity. It's meant to be, quote, unquote, extremely good at detecting cyber issues. And the result of that was a 4 or 5% decline in the average cybersecurity stock. Last Friday when this leak happened.
- [08:46]
Jason Lemkin
Yeah, just two, maybe just two other things on the leak. Just this trade off. You know, I'm dating myself but when I was at Adobe and we were acquired, we were an early customer of GitHub and so we were putting source code in the cloud and that was banned at Adobe at the time. It was banned because the source code was their crown jewelry. It was pretty easy to make a crappy PDF reader or a crappy image generator, but to do what Photoshop or Adobe Acrobat did, all the exceptions, all the corner, the thousands of thousands of corner cases was the crown jewel. Right. Of the company. And so everything. We got the first exemption to be able to use source code in the cloud and pros and cons. But when they use this on prem source codes management tool, it took a month to do a release. A month. Okay. Now we're doing 60 releases a day, right? Or even Anthropic, fastest growing enterprise company of all time is still doing massive releases every month or two and dropping features every day. Right. So we went to something that took 30 days at a tech leader to something that takes hours. There's trade offs there and I'll take them, but we're going to see it explode. In terms of like the stuff that was published today, going back a few threads on show number 50 to Rory, one of the things that I thought was pretty cool in Kairos was two things always on background assistant that works constantly. Our AI is working with us 247 and agents that can sleep, wake and self resume without any prompt. The autonomous agents which I've been talking about, how this is going to consume orders of magnitude more tokens and change our life. I'm excited to see more is coming. And you know, Open Claw was just this brief thing that woke us up to what Anthropic appears to be all in on, right? Truly Autonomous agents running 24 7. Hopefully safely, hopefully not leaking all of our source code. But it's coming soon, right? Not these, you know, this whole idea that we've been doing. When we started this podcast you went on to ChatGPT or Claude. No one had heard of Claude when we started this. I was a quirky guy using Claude. And you talk to it and go back the next day, the next release, it's going to be on all the time debating Harry's latest investment. Was it big enough? Is he too concentrated in the fund? Where should he go? What was Rory thinking on that deal? Right.
- [10:55]
Harry Stebbings
Why was Rory abusing Harry by email again? For the Second time in a day.
- [10:59]
Jason Lemkin
But this is the future. I'm excited to see it coming sooner when our agents are 24 7, like they're literally around us and we give up all of our personal freedoms and autonomy as part of it.
- [11:10]
Harry Stebbings
I hear you on the embarrassment of it being leaked and you know, the human era element. But while Anthropic has mythos, which is supposedly as powerful as it is, you're juxtaposing that with OpenAI fucking around with killing Sora kind of ads not really working and people being unhappy with it. And it's seeming like this massive chasm of the progression of force that is Daario and Anthropic continuing faster and harder than ever with a faltering, confused and dazed OpenAI wandering around the product desert trying to find some water.
- [11:45]
Rory O'Driscoll
You're just being mean. I mean, again, as I said last week, and I'm sorry to repeat, is that not fair? Yeah, again, narrative is over done on both sides. I think some parts of it are true. Obviously you're true in a bunch of different things. The decision to shoot Sora in the head, almost certainly a good decision. Look, it's obviously embarrassing to say something is going to be amazing less than four or five months ago and then shoot it in the head, but if it's a mistake, give him credit for at least saying it's a mistake. Move on. And yeah, that relationship with Disney, again, I think it wasn't me. I was sneering at it on real time when it happened. I think someone else in this podcast said it's really significant. Just saying.
- [12:19]
Jason Lemkin
I do. I think it's massively significant.
- [12:21]
Rory O'Driscoll
I think shooting in the head is even more significant.
- [12:24]
Jason Lemkin
I think it's saying that the. A big part of the whole strategic direction of the company was flawed.
- [12:29]
Rory O'Driscoll
Agreed.
- [12:30]
Jason Lemkin
The whole that we are going all in on consumer, from what I read, sort of made single digit millions of revenue. Right. And was consuming a million a week. Which actually sounds way too low. Right. It must have consumed billions and made single digit millions. It makes no sense as a product either in the short term or long term. But if you want to own the whole consumer experience with AI, you've got. They decided we have to own image and video and Anthropic never even attempted to do it. Right. So it's a massive retreat. It's probably the right decision to your point, in fact, almost certainly is. But man, that's. Our strategy was wrong. Like this is a huge own goal. Our strategy was wrong.
- [13:05]
Rory O'Driscoll
And I agree that. But I still think As I say, I still think Harry's kind of overriding it a little bit because, look, you made a comment about ads that I think is effectively implying that the ad strategy hasn't worked. That's a bit of a bigger leap. I mean, so it hasn't worked. They've killed it. I think I'm with Jason. I think that's smart because I think one of the things you're seeing right now is in a world of scarce compute, and astonishingly, despite all the investments that we've seen in terms of actual available compute for people to sell AI on, we're in a scarcity mode. You don't devote compute to things that are highly compute intensive and low revenue intensive. And SORA was almost the definition of that. Video generation is extraordinarily compute intensive, relatively speaking, and the revenue is almost minuscule. Conversely, cogen, while it is compute intensive, is orders of magnitude less compute intensive and there's real dollars attached to it. What's happening right now, I actually think at a higher level, it's actually very healthy. You're seeing the economists, the accountants have wandered into the room and they said, we have a scarce resource here. Let's optimize it. Let's devote this compute to the people who can pay the most for it. So that's the SORA comment on the ads comment, Harry. It's early days for ChatGPT ads, but again, I cite that quote that Brian Kim that I thought was really good. Of course they're going to run damn ads because there's no other way to build a mass consumer business. And they've no choice because, you know, their consumer conversion rates run roughly 5%. It gets them to a, I think a roughly 10, $15 billion consumer business, you know, out of their 500 million uniques or whatever it is. So one of two things has to happen in the consumer business. Again, I'm going to leave the enterprise business out on a consumer business. Either A, they take that conversion rate to a number we've never seen before from a typical consumer business. I think that's unlikely. I don't think most consumers are going to pay 20 bucks a month for this. Or option B is you make an ad business work, they got no choice to make it work. And by working, I don't mean $100 million. People are kind of ragging on the 100 million. It's in the noise at scale. Big picture here. Facebook and Google each do 200 billion plus or minus a year in digital ads. If these guys aren't doing 20 billion within a couple of years. They're not even in the game. And to get to the market cap of. I mean, remember Facebook has a 1.7, whatever it is, trillion market cap doing 200 billion. Alphabet. Google has a 3 trillion market cap doing 260 billion plus thing. If they're going to grow into their market cap on the consumer side, 20 billion is not enough. They have to do 50 billion, 70 billion of ads. So unlike Sora, this is not going to be a try the ads and then fold. This is a. There's only two existential bets for this company. One of them is ads to make the consumer business work. And then the other is, oh my God, we should have done coding all along. Let's get a competitive coding and enterprise model out there and compete with Anthropic on that side. Those are the only two things they're doing and they're the only two things they should be doing. Straightforward. I mean, I actually see this as good news. Like, at least they've, like we've gone from the let's wander around the woods feeling cool, building shit to there's only two things to do. Let's get them done. And that it's a positive. Better late than never, man. Did you.
- [16:07]
Jason Lemkin
They had the Wall Street Journal this week. They had a story of why Dario left OpenAI. Did you read the story?
- [16:12]
Rory O'Driscoll
Yes, I did.
- [16:13]
Jason Lemkin
The amount of tension at OpenAI, the fact that Greg Brockman recruited them and no one would work for him. He and his sister would not work for Greg. Bachmann would not talk to him. They would not allow him to be part of the LLM or GTP groups. Then Sam had to constantly tell each of them that they were in charge. Told Dario he was the boss, then told Ilya and Greg they could fire him at any time if they wanted to fire Sam. Then begging Dario to come back. Then Dario saying he would stay only if he directly reported to the board and nobody else. I mean, and then firing Sam and then bringing him back and then Sora and D. Sora and we're not doing coding. It's just. I mean, I'm exhausted. I. Maybe I'm wrong. I have to think at least someone like me would feel much more comfortable and anthropic, where it appears there's a much more consistent process in leadership. Same founders, same thing, same goals. I have to think a company organized like that's just going to out execute someone with that level of drama. I almost can't take it.
- [17:16]
Harry Stebbings
You're going to kill me. For this, Rory, it's the best thing for OpenAI not to buy Sierra, incorporate that as its customer support product and have Brett Taylor come in as the day to day CEO. And Sam can be fundraiser, Sam can be master of.
- [17:31]
Rory O'Driscoll
Look, I'm not in the boardroom so you know, I hear, look, at the end of the day, at the end
- [17:36]
Harry Stebbings
of the day, I think you're right, Harry and I would favor that as a board member. But I'm not going to say that publicly because I don't want Sam to break my balls.
- [17:44]
Rory O'Driscoll
I am too unimportant for Sam to even give a shit about. Right? So I don't worry about that at all. So let me say this delicately. That amount of board level and senior team level turnover over an extended period of time is probably the highest warning signal that you could have as a board member about how your CEOs doing. Let's put it this if there's any other founder led company and this level of drama was going on, you'd probably sitting down with the CEO and asking how's it going at least and what are you thinking of doing about this? I don't think you turn on people just when things go to shit, but you probably want to cut down the drama from here, build a team and try and call a shot and play it for more than six months at a time.
- [18:25]
Jason Lemkin
When you've worked at or observed startups where the CEO is spending so much of their time load balancing talent that can't work together versus when you've worked at one or with one where the talent's rowing in the same direction, to say that it's night and day would be an understatement. Right? It's like the, the backside of Pluto on the front side of Mercury. And I think Sam, we could criticize him, actually. When I read the everything I've seen and then when I read the Wall Street Journal guard, it's like, my God, this guy has spent so much time load balancing the drama of these extremely brilliant personalities that just, oh my God. That can consume most of your time as CEO.
- [18:59]
Rory O'Driscoll
You're exactly right. It is the drama of. We're not dealing with a bunch of people just trying to crank out some B2B software and make a paycheck. We're dealing with people who are angsting about whether this is going to change the world, who have fears about the technology, who have desires to be seen as credited for the technology despite their fears about it. This is a, I mean, as is often the case, extraordinarily talented people. Come on. An extraordinarily high bandwidth with demand on attention and care and feeding. It's been a real slog, I'd say.
- [19:26]
Harry Stebbings
Okay. The man with the most balls in Investing Massa Sun SoftBank gets $40 billion bridge loan to buy OpenAI stock. How deep can Masa go?
- [19:38]
Rory O'Driscoll
He'll go as deep as they let him. I mean, that's the one thing we know. If they give him another 20, he'll borrow that too. I mean, I checked the SoftBank. You've got SoftBank holdings. Have to be careful. There's the Telco Group, which is reasonably levered at the Japan level. And then softbank group, it's 2x levered, 1 1/2 to 2x levered in terms of equity. What that means is a 30, 40% decline wipes them out. It's a very aggressive stance. It would be like me taking our $800 million venture, $900 million venture fund, borrowing 1.8 billion and investing it all. And if it works, I really juice my return. But if it goes wrong by 30%, I'm done, right? And it's super aggressive. I mean, I suppose his lesson is Masa survived 2002 when I remind everyone the NASD went down 85%. You haven't lived till you've seen an 85% decline in an index. And obviously, if that happened or anything like it, you'd just be way underwater. It's a fairly high amount of leverage for an investment fund, to say the least.
- [20:40]
Jason Lemkin
Yeah. I mean, for sure, it's dramatic. Having said that, real estate investment funds get the maximum leverage they can by design, right? That is how they work. I would imagine if Venture had access to more debt, we'd all load up on it. If we all could do the growth rounds in your hottest company, maybe we would. And we could get all the carry from it. And the worst thing is we leave the keys to Fund seven on the table. We might load up too. I'm not sure, but certainly real estate funds load up as much as they
- [21:05]
Rory O'Driscoll
can, but just pushing back again. Because real estate funds load up because the cash flows are predictable.
- [21:10]
Jason Lemkin
But they can. Because the cash flows are predictable, they can load up.
- [21:13]
Rory O'Driscoll
Agreed.
- [21:14]
Jason Lemkin
Right. It's just harder for my little fund to go to Silicon Valley bank and borrow 200 million against it.
- [21:20]
Rory O'Driscoll
In the continuum of risk, I would argue the stock softbank portfolio, not the telecom company at the subsidiary level. But I would argue the softbank portfolio is more like Jason's fund than it is a Real estate fund. So I think it's a high level of risk.
- [21:31]
Jason Lemkin
Well, Plessy, what did he lose on WeWork? 12 billion. He knows what it's like.
- [21:35]
Rory O'Driscoll
Look, the two big assets from memory are obviously the OpenAI position and I think the ARM position, which I still think is in the holding company. Amazing companies, world class companies, easily imaginable at border that would decline 30%. It's a hell of a way to live.
- [21:51]
Harry Stebbings
Speaking of declining 30% and being in the hole, we touched on it earlier but obviously Mythos leak hammered cyber stocks, CrowdStrike, Palo Alto, Zscaler all down 6%. Octane Netscope down 7%. Taneml down 9%. Was this a justified dip or is this an unjust reaction to anthropic news?
- [22:12]
Rory O'Driscoll
I'm going to say it's not a justified dip. And I was listening to the names and there's different aspects of security and some of them I can say yeah, maybe that oval and then someone and I go, that's just a different thing. And when you listen to all the names being thrown out, you say that's just baby with the bathwater. Because step back. How does anthropic make security better? At the code development stage they can look at code and find security flaws. So there are companies that upfront do something like that and application security companies and you could argue that this is a different way of doing that. Maybe some of those guys will be impacted. What they're not doing, for example, is real time perimeter defense. They're not in a real time basis blocking people like a firewall, firewall, nor are they doing what for example Okta does, right, which is single sign on and authentication. That's simply not what they do. It's a different thing. And the fact that those kind of stocks sold off says it's just a kind of knee jerk reaction rather than anything thought through, it will have an impact. If you were doing application security or security code review, you're probably going to have to either incorporate how this works in your analysis or you'll be redundant. Just as GitHub had to roll incomplete models and figure out how to adapt adopters, right? So for some of them this is really going to matter. And then for others it's just a different thing. Stepping back, I think we're in the panicky stage, right? I think we're in the stage of because these companies are doing so well, because they're private, no one sees the numbers because AI is so sexy and so potentially amazing. We're at the stage now where everything, anything can cause a panic.
- [23:42]
Harry Stebbings
Robinhood was down like 10% because Elon didn't potentially give them the tender and was going straight through E trades and that alone was like a massive hit for them.
- [23:53]
Jason Lemkin
Obviously there's a panic in the market and the question is, is the panic justified? Right. The panic is that this revenue is not durable. Right? That's the panic. The cybersecurity one's really interesting in my experience and opinion. This is one where it's just back ass backwards if you're in the agentic world. This is the golden age of security. The number of security threats and issues is going up orders of magnitude. Claude leaking its source code. It doesn't matter. The number of apps exploded. Like, there's so many mobile apps, that App Store is like it's like a month to get your app reviewed versus a week. It is. Everything is exploding. These apps are being built by agents. They're being built in unpredictable ways. Folks aren't looking at the code, the pace of features being shipped, products being shipped, corners being cut. This is a golden age of taking any mature category and acknowledging good news for us. There's more threats. I don't care whether it's application level perimeter. The good news is threats are exploding. The whole shtick in my whole lifetime has been you've got to constantly buy new products because new threats keep emerging. Like this is. There's been a golden goose of cybersecurity that has allowed new entrants to come into a conservative category. Someone like Wiz will show up and say, guys, we know how to do this on the web. And people are so terrified of new threats they'll take the meeting, right? This should be the golden age for new and existing investors because the threats are terrifying and you can't stop the rogue engineers that vibe coded something that accessed your data. This should benefit everybody. Like everyone should be a rocket ship. Like everybody Monetizing GPUs is a rocket ship. And the fact that the market doesn't see it shows we're, in my opinion, we're in a true panic, which is hard to predict. A bottom. It's hard, but I don't get it. Everyone should be benefiting. When you see an explosion in application production and a change in the paradigm, the change in the paradigm is good for everybody. Except, you know, Windows Defender from 1996. Like, it probably doesn't help that product or whatever the hell they have, but anyone, everyone with engineers should benefit.
- [25:48]
Rory O'Driscoll
I broadly agree with Jason. I mean, there are More than Windows Defender 2006 that might be impacted. As I say, some of the application security code review stuff could be, but big picture, Jason's white. Instead of having people trying to get into your firewall, everyone is now downloading an agent, giving it full root access to their computer and telling it have a go. And as Jason just pointed out, work overnight. It's funny, my colleague Aaron, who does a lot in the security side, we've been looking at a lot of these companies. No one yet knows the exact approach that we're going to have to take to defend against agents running within the organization. But everyone 100% understands that this is a emerging mega threat because of the velocity adoption times, the power of the solution. So I agree with Jason. It mightn't be the old guard that takes advantage of it. I mean, one of the things I admire about the security companies is the crowdstrikes, the Palo Alto networks of this world is they know damn fine that when a new threat emerges and a new solution emerges for that threat, when an earlier winner comes out, you better spend your 300 million bucks, your 500 million bucks and just swoop up the winner and add it to your product. So I think there'll be a ton of fast acquisitions as agent security solutions emerge and people would be doing if they're smart. And I think those two companies are extraordinarily smart. They'll be doing acquisitions long before it's, quote, certain because you're going to have CIOs come and talking to you. One thing worth mentioning on that is it was interesting again and some of the leaked information from Anthropic, they're masters at selling fear. One of the things they're doing is they're releasing the Mythos model first to CISO within companies. It's kind of like, oh, it's so scary. We're going to give you this model and give you time to figure out how to use it. Of course, part of that time will involve giving a million bucks to Anthropic. So it's just great marketing. So they're actually leaning into that and saying to the CISOs, you're going to have to figure this out. This is the new terrifying weapon we've invented. Please give us a million dollars and we'll let you defend yourself with it. Also great marketing, but it speaks to how correctly afraid every security CISO should be given the pace of agentic AI adoption of the enterprise, the golden age
- [27:57]
Jason Lemkin
of cyber it should be. How hard is it to get a meeting, whoever you are, if you have any established brand. We've got a new agentic product. We're going to help protect you from this. You're going to get a meeting that afternoon.
- [28:07]
Harry Stebbings
Wish I bought them over figma. That's a depressing chart that I'm looking at.
- [28:11]
Rory O'Driscoll
You need to let go, Howie. You need to let go.
- [28:14]
Harry Stebbings
Down 30% in a month, Rory. It's hard to let go after 30% in a month.
- [28:18]
Rory O'Driscoll
Okay, no crying in the casino. Move on.
- [28:21]
Harry Stebbings
I do want to discuss revenue kind of questionability. We've got anthropic recognizing revenue in a very different way to open AI. And then you also have questionability around Emergent Labs. And is it okay if ARR is kind of questionable in sorts of how it's accounted for? How do we think about that? You can choose which one you want to take.
- [28:39]
Jason Lemkin
Let me just. Can I just. Maybe Rory can dig into it. But I'll tell you, there's one startup I invested in that's over 100 million arrangements I own just enough to get the investor updates. It's not. I'm not on the board and I get three numbers every month. Three revenue numbers. I don't know what the hell they are. Over 100 million. But the smallest one is ARR. Now I invested in seed. I don't really care. I'm in the money. I don't have a choice. But I can't understand. This company's doing great. But I can't understand for the life of me. I cannot understand these three numbers. And there's asterisks and daggers and there's charts that go every. But they keep going up and to the right. Which I think was on this Emergent thing. We could talk about our next. I think that's what some of the investors said. Who cares? But I can't tell the hell the difference. What a. What an ARR is 20, 26.
- [29:22]
Harry Stebbings
What I always get is like pipe, which is complete bullshit. The contracted and then there's live.
- [29:28]
Rory O'Driscoll
Yeah. So first of all, stepping back to be fair to Both Entropic and OpenAI, they have a very clear and sensible way they define ARR. What they say is they take the last. The average of the last four weeks to smooth out times 13. Because there are 13 four week periods in a year which is more sensible than monthly because you have these varying months. So they're basically. What they're saying is. Is realized revenue for the last four weeks averaged the average of that four weeks times 30. Obviously if it's the average, it's times 52 but basically it's actual GAAP revenue. What did we bill for the last. For the average calculator across the last four weeks to take into account how this. That's their run rate. So it's actually pretty. It's not committed to be fair to them, it's not committed to any of the bullshit kind of higher level stuff. It's actual money flowing through the system. Antropic is roughly at 19 billion according based on that kind of trailing four week metric and OpenAI is around 25. But now let's talk about your thing. There was this kind of whole meme of OpenAI reports net on their partner revenue and Entropic reports gross. And what they're saying there is if OpenAI sells through Microsoft and Microsoft takes some money off the top, OpenAI only reports the net amount. If Antropic sells through AWS and they sell $100 worth of revenue, they report the gross amount and then they give $20 back to Amazon as a cost of sale. So there's two different methods for what look like the same revenue kind of mix, same revenue approach.
- [30:58]
Jason Lemkin
I thought you were going to extend that. I thought part of where you're going was to Michael Cannon Brooks point on the show was that a lot of this revenue is getting double or triple counted because of how it's being recognized. And not only does this happen, then cursor's selling it again and recognizing the revenue. Right. The same token people keep reselling these tokens again and again and recognizing them as their own. ARR. How many times do we get to resell these, these poor little tokens?
- [31:19]
Rory O'Driscoll
I think that's actually a great point, Jason. I hadn't got to, but you're exactly right. No, it's like the. Everyone's got amazing revenue growth because it's the same little token going. I just can picture this little token.
- [31:29]
Jason Lemkin
I mean if we all agree to have essentially 0% gross margins, an infinite number of us can keep reselling tokens tokens to each other, can't we? This is our new 20 VC scale saster demo day. We all resell a million tokens to each other on the first week. So everyone in batch 001 has a million ARR its first week because we just resold our tokens to each other. The VCs don't mind.
- [31:49]
Rory O'Driscoll
You're exactly right. And the sentence that you added in passing is the key one. Until we all have to get profitable, all this, you know, can continue. And then at some point, that's why I said I think you're starting to see it. Someone's going to have to say, assuming we want to have a net present value and a cash flow, what's going on here? And then all this becomes more clear. I didn't comment on the Emergent labs fastest to 100 million, Jason.
- [32:11]
Harry Stebbings
You actually tried it, didn't you? You thought it was good.
- [32:14]
Jason Lemkin
I did, I thought. I mean, listen, it's hard for me to know the criticism, right? You know, some folks in the press in the India B2B environment tried to make this some sort of scandal, right? Because and in a sense, fair enough if you go to Emergent Labs and Emergent Labs is sort of an Indian computer competitor, replit and lovable, which I'll show you what I learned in a minute, right? And if you go right now to the homepage, they say 0 to 100 million, I think in eight months. It's right there. It's the biggest banner. So in all fairness, if you're going to put yourself out there, not, not just as a tweet, but if it's going to be right there on your website, one would expect 70 to 80% accuracy in that number. Ideally higher. Right. So if it's lower than that, I think it's fair that some daggers came out. But I don't actually know what happened. Is it triple counting to I. I can tell you one thing that I learned which I don't love. And a lot of AI startups do this. So this is not unique to Emergent. Instead of getting used a free version, they try to get you to immediately do a free trial instantly that says it's $0 and $20 a month thereafter. Now so many folks do this, it is not unique to them. It's probably best practice and most accelerators, but I'm pretty sure that means they recognize $240 in ARR that first month when you're paying zero and they trick you because you don't even. Yeah, you do have to click on the stripe link, but you almost think you're just using Product. So is that if I do a zero dollar a month product that's discounted as a marketing cost and I churn after 30 days, does that count as $240 of ARR? I think for a lot of startups it does. So that's a fair criticism. I'm not saying this is what emerges it but a lot of startups will instantly recognize that as $240 in ARR, which is how they rock it. Otherwise you can't get There that quickly. Right? So they clearly did that. I will say what was interesting is, overall, I think the criticism is probably unfound because I thought the product was pretty good. Much better than make, like an order of magnitude better than the disaster of make, because I do a five part test, a six part test. The first part is awareness test. So I ask it to redo the Saster AI homepage. Actually, of all the platforms that did the best job, it beat all of them, all of the leaders. Because I redid this recently. I redid it and they're all good at it. Repit, lovable, v0, they're all good at. They all pass the test, but it actually was probably the best and it passed a bunch of the other tests, so. So I'm not going to switch to Emergent Labs, but I would say it's in the top 10% of vibe coding apps. That's pretty good. So that tells me it's a legit business. Like they did. They did the work. The truth is, if you play with a lot of these, even from leaders, makes not the only one that's crappy. Okay. Because they're basically relying on the fact that Claude code does 90% of the work for you. Right. They're just putting the simplest wrap around this. And so they did a good job. But I really didn't like the way they do the billing. But we'd probably have to shoot half our portfolio companies that do PLG AI because I think it's a sus practice. I just don't like tricking you with the $0 for the first month when you think you're using a free trial. That's the SUS part. I don't love that kind of gray art, but the product's pretty good.
- [35:08]
Harry Stebbings
You know what I didn't like when it comes to confusing? I was wondering whether to go off on one in this show and then I thought, fuck it, let's go off on one. It's been a long day. I'm pissed off by these tranched rounds. I see them all the fricking time. The amount of Sequoia rounds where it's like, oh, oh. X raises money from score at 5 billion. Trust me, Sequoia got in at 1, but they just club it together and then announce the sum and then the latest valuation and it's just very misleading. The tier ones get in early. A Tier 2, Tier 3 instantly marks it up.
- [35:38]
Jason Lemkin
Same as crypto, isn't it? For years. What's the difference? We'll give the Andreessen crypto fund, you know, essentially 80% off the token. What's the same thing, isn't it? You're paying for the, paying for the signal.
- [35:49]
Rory O'Driscoll
I think if you break it down first of all, just so everyone's on the same page, because interestingly neither Claude nor GPT was on the same page and didn't know what a tranche round was and they gave the old conventional venture tranche round based on performance milestones, you know, BS from back in the day when we actually ran businesses. Right. So didn't have a clue about this. So let's be clear on the practice here. The practice here is when a company, a hot company, raises a round where there are effectively two different prices per share, let's call it a first close and a second close, even if they're at or near contemporaneous, where the first one might be at 250Pre and the second one is at a billion pre and the headline is they always at a billion pre. There's two impacts of this. First, let's do the simple one where there's just a single participant in the round. That's where if I'm the new investor, I want to pay 600, the company wants a headline of a billion and to win the deal someone says okay, let me put some money in at 250, some money in at a billion. I can do math because I'm paid to do math because I'm an investor. So I know my overall basis is 600 million. So I'm getting what I want and the company's getting what it's want, which is a headline number of a billion. It's silly, but that's all that's happening. In that case, that's the single participant tranche deal. If a company wants a headline, that's what they get. Generally those things come back to bite you because by definition if you are the company, just as the investor can do Matt, presumably you can do Matt, if you accept that combined deal, you're implicitly saying, I know I'm only worth 600 but I'd like the optics of a billion, you better be damn sure that your next round you're at $1.5 billion. Otherwise you'll have the optics of a down round. And if you're an optics believer, that's probably worse than the uptick. So that's kind of the single participant version. The much more annoying version that Harry clearly was getting on his high horse about is when you have the same structure but access to those rounds where the lead investor maybe does all of the 250 pre round and only half of the billion round. And then some new investors just get to do the billion round. So literally at the same time, the lead investor is investing at 600 billion and the follower investor, less marquee investor, is investing in the same asset at a billion. And I don't believe there's right or wrong in money. There's just money. That's where at the minimum, you have to look yourself in the mirror as the other investor and saying, wow, that's the price of being cool. That's the price of access. I'm paying 50% more because I just can't access that deal. And that feels like pretty invidious thing to. I mean, again, going back to the comment, if you think about. And again trying to avoid morality and saying, oh, because it would feel shitty. I mean, you really would feel like a loser if you did that. But let's play it out. This is a situation where the lead investor, let's say it's Sequoia, because everything good and strong should be Sequoia. They are admitting it's only worth 600 on average and they're just doing this fakie transaction. The company is admitting it's only worth 600 on average because they're taking the money at a blended cost of 600. So what you're saying doing at a billion is you're either saying either I have a lower cost of capital and I'm willing to take a lower return than everyone else, or the only positive spin you can come up with is the company thinks it's worth 600, Sequoia thinks it's worth 600. But I am smart enough, even though I don't have access, I am smart enough and clever enough to know that it's really worth a billion and I should do it at a billion, even though I can't get to 600 and I'm willing to put up with the upfront tax and foolishness. Look, because six 12 months from now it'd be obvious that I bought at a great price and maybe I'll look like a genius.
- [39:21]
Jason Lemkin
Yeah. But we've entered an era though, where so many founders are obsessed about headline prices. Obsessed. They're obsessed coming out of demo day. They are obsessed once they cross a billion, which I think should be a moment to take a pause because of the M and A options. They're obsessed about driving to 11 billion and 9 billion and one upping their competition. And they don't think through the any of the ramifications of the valuation. They're hiring, they don't care. And I'm not even saying that's bad. I mean, I think burning the bridges is a good way to have a big outcome, but it's become utterly gamified on many levels. Right. It's just become gamified. And so this 11 tranches in a round is just part of Gamify. Define it. It's been true of YC since I started investing there. There was always a cheaper price before demo day if you're reasonably hot, a higher price at demo day, and then a 20 or 30 after demo. So that version has just become institutionalized and so be it. If it's what the founders want, if they want to gamify it, so be it. Right. I just don't think raising it 5 or 8 billion when you're at 80 million or 100 million of suspect ARR is the most exciting accomplishment in the world. I'm going to send a few, few thumb emojis on the email, but that's about it.
- [40:28]
Harry Stebbings
It goes back to your point though, on Emergent Labs and the graph doing the eight months to 100 million, the gamification of like the race to 100 million. I'm not choosing Emerging Labs, but they
- [40:36]
Jason Lemkin
listen, I think they built a good product. I think. I'm sure they've been overly lambast because whether it's 100 or 80 or 60, I don't care. It's pretty damn good. Right? Whatever it is. But if you're going to do that, you deserve the daggers to come out when it's not 100% right.
- [40:50]
Harry Stebbings
I agree. One that I thought was fantastic, exciting. I always like to see a potential IPO aura to IPO shortly. I thought this was fascinating. It's been an incredible journey actually from like, you know, Scandinavia, these founders building this business. It's had a couple of CEO changes. The business is actually in incredible shape. Both actually and whoop announced today that they raised, I think it was 500 million at 10 billion. Fitness and health data. Do you know what, actually, Rory, Jason's annoyingly right again. I don't know if you remember his predictions, but he predicted, if I'm not wrong, that 2027 would be the year for like human healthcare data and longevity.
- [41:27]
Rory O'Driscoll
Yes. And it looks like it might even be 2026. And the great thing about both stories is Johnny Iverside very defendable from. And this is not an AI envy story. I mean, they use AI in what they do, but these are fundamentally standalone products with a clear consumer value proposition. They're not going to be cloud coded on Friday. I totally see it. And they clearly have had critical mass in terms of revenues. I think it's all awesome.
- [41:51]
Jason Lemkin
I think the question. Listen the interesting thing for these products, you know going back to the topic of arrrrr these are recurring revenue products, right? For the most part. Right. Fairly expensive subscriptions and they're exciting until like Peloton when they aren't Right now There's not a $2,000 cost here and I'm not being critical, I think that they're exciting. But there's also a faddishness ism. People can switch. So what multiples do these companies deserve? What it is I'm not smart enough to know but the. But the acceleration is a nature right? I'd love. I'd love to be a seed investor. Don't get me wrong.
- [42:25]
Harry Stebbings
Do you think there's a fadishness in the same way I think we.
- [42:27]
Jason Lemkin
I think you can switch from vent Harry. You're into fitness. I'm not so much But I run 360 days a year, five miles a day for 10 years. So if they're a better treadmill, a better device, a better thing, I would switch. And you know whatever you're. You're fairly fit Harry. Like if you're. If you are or and you love it but Whoop is. Is better and you care you're going to switch. So it's not. It's not service now air right? You. I mean it's not. You will. You're loyal but there's just some disruption. Like look at Peloton when Peloton blew up but actually as the world changed, even though people love Peloton right super high mps they you remember the Peloton addicts of 2020 on Zoom. They. They loved it but when the world changed they just. The simple answer to Peloton is they just switched and Whoop is different than Aura and there could be a whoop or whoop aura and maybe one is your ankle and it has your AI rock from Jony Ivan and then we'll
- [43:20]
Rory O'Driscoll
switch two comments on this one disclosure. We are lucky enough to have a small investment or through the acquisition of one of our companies. So I don't have a ton of information so I'm not going to breach any confidentialities but just an abundance of caution. I'm not going to comment on numbers at all. Great products right. But to your point Jason on it's not ARR. Like service. Now let me be direct. Get the fuck over it. Not every business on the planet has five year design. Then if you're running a bar down the street every night, I can go drink at a different bar. If you're selling Coca Cola every day, I can switch to Pepsi. If you're running Amazon consumer every day I can go search and go on Walmart. Not every business is going to have enduring kind of long term lock in and that's obviously you prefer to have lock in. But there are lots of business that have been around for 50 years where every day they have to earn the right for the consumer to go to them. There's no doubt in my mind that any kind of consumer hardware, software, combination product has some residual asset from the subscription. But then yeah, every new device has to be awesome. You're in competition with other awesome products. It turns out capitalism is hard. If you want to make 10 billion in value, you got to deliver value for your consumers. And I think for what it's worth on peloton, I actually think what really happened to them, it's a little like the Zoom story is demand. That would have been wonderful. It would have been the greatest stock ever had that demand been spread out over five or six years increasing at 20% a year. Here we'd be talking about the peloton compounding machine. Instead everyone bought the damn thing at the same time. They staffed up to kind of meet that demand. The market was wildly saturated and then the stock went down and broke the narrative. So I do agree there's nothing you can do to make a market bigger than what it is. But I think they got whiplash by virtue of the COVID demand spike followed by demand fall off.
- [45:06]
Jason Lemkin
The meta question for venture is, you know the classic Peter Thiel, 0 to 1, competitions for losers is what Dr. Teal said. Competitions for losers. Competition destroys profits. Monopolies drive innovation. You want to invest in monopolies. That's just my meta anxiety is if these are unmonopolizable markets, are they good ones for venture or not? And obviously there's two sides to it. But I would feel more comfortable investing in things that become monopolies. I mean it's a, it's a better landing place place than investing in bars.
- [45:39]
Harry Stebbings
And you can't ascribe the same durability of revenue to this as you can what day as much as I love.
- [45:44]
Rory O'Driscoll
But on the other hand you can ascribe super high growth and you can ascribe big Tam you I just look, if there were Enough monopolies to do even one good monopoly a year. I'd be in. And you know, speaking of founders are about to get the all time prize because they invested in the space monopoly and 20 years later they're going to cash in their chips. Right. Monopolies are better businesses than competitive markets. But I do think you can still build many billions of dollars of value from a high good consumer product. And there are lots of prior examples of that. And yet we all understand the dynamics of. I mean, actually, for what it's worth, I think if you look at consumer products that flame out like the GoPro, it's much less, and I'm doing this on the fly, but it's much less a competition issue. It's not like GoPro died because the competitor to GoPro emerged. Right. It's that saturation is as big a problem as anything else.
- [46:35]
Jason Lemkin
Well, DJI might disagree with you. I mean, there was a whole step function in the industry that they got, they got left behind. Right.
- [46:40]
Rory O'Driscoll
Would you prefer $2 billion in consumer hardware revenue or $2 billion worth of five year contracts like Palantir? Yeah, I'll take the contracts with the 90% gross margin of the five year lock in, please. Your starter for 10.
- [46:52]
Jason Lemkin
I think maybe the more interesting question, Rory, that you brought up because so much has changed. This is our 50th show. So much has changed. Right. When we started this show, durable public company revenue despite slowdown and the top line was the gold standard, Right. It was the best revenue out there. Fast forward to today. Do we give a crap what type of R it is? Because the durable software stuff is trading lower than the S&P 500. Maybe I'd rather have ring revenue and with a somewhat suspect customer lifetime value because the software value is so low. Maybe I don't care where my R comes from.
- [47:24]
Rory O'Driscoll
Totally.
- [47:25]
Jason Lemkin
Right? It used to matter. It used to matter, right. We were so we'd be in board meetings where you would torture companies so that they would have have more ARR and that they would have less variable revenue. I mean, that seems like archaic today.
- [47:37]
Rory O'Driscoll
Yeah, And I remember doing that and I remember telling people not to do that because I'm a big believer you should sell your product the way the customer wants to buy it. And I agree. One of the things I hated about Venture was when people would say, oh, make it all recurring revenue. And then the fun one that's actually really relevant right now is you remember everyone would say, oh, you know, it's a hardware product, but all the values in the software. So we're really like a software company. And now hilariously, everyone's going, oh, thank God I've got hardware. Because hardware is defensible, not software. Right. A big picture comment is you should conform your company around your customers and your model, not your VCs. Because I agree with you this kind of pretend it's ARR, but then next year we hate ARR. It's just a total waste of time for entrepreneurs. Things are what they are and you do best in business if you actually say what they are and just live and die by that. Most consumer production have high volatility associated with them. You better have a damn good R and D function and continue to build great products.
- [48:29]
Jason Lemkin
The one question I would have about an Aura ipo just thinking about it, we looked today, this week. They also talked about how I think allbirds was. Was it. Was it acquired for less than 30 years?
- [48:37]
Rory O'Driscoll
It was a quiet.
- [48:38]
Harry Stebbings
Yeah, I was literally about to bring this up, Jason. It was acquired by Amex for $39 million.
- [48:42]
Jason Lemkin
So my question is, if a company like Aura goes public and you see weakness in a quarter, should you dump this thing instantly like Alberta versus forgive a little bit of weakness in a salesforce or service.
- [48:54]
Rory O'Driscoll
I'm going to avoid any specifics. Genuine comment here. Right. Because it's not appropriate. But I would say something. Unlike the other two guys, I've run a textile manufacturing company. Thirty years ago, the technology required to make an All Birds or a shoe is not the same as the technology required to make a modular electronic device that sits on the human finger and measures blood. Either of these kind of consumer electronic products, they're not a monopoly in the same way Nvidia is, but it's pretty rare. Number of companies that can do that go down. Put it this way, Jason. I'll name a wearable, you'll name a wearable, and then I'll name a sneaker, and you'll name a sneaker. We'll be done with wearables long before we're done with sneakers because there's a lot of different sneaker companies. And yeah, turns out sneakers are easier to make than wearables, which are easier to make than Nvidia GPU chips.
- [49:40]
Harry Stebbings
Speaking of like, do we care? What do we actually care about? I don't know if you guys know this, but I have wonderful partners and one of my partners is. Is much more intelligent than me, which Rory, you're going to make some form of gag about, but he helps me put together some of the schedules too. And he was like, whoa, I had no idea about this. He was like, whoa. Epic games laid off 25%. I didn't even hear about that.
- [50:02]
Jason Lemkin
Yeah. And then I. Then I had had Marc Andreessen on your last pod sort of laughing about how we all over hired in 2021.
- [50:08]
Harry Stebbings
Well, Mark Andreessen was. Was very clear. He thought that we were all using AI as an excuse. Excuse. We were all overstaffed by 50 or at least 75%. But point being point, completely under the radar.
- [50:20]
Rory O'Driscoll
And to be fair to them, they didn't try and do an AI bullshit story. They basically said daily active use of their Fortnite game and their games is down. So your revenue's down, so you take your expenses down. Struck me as a no bullshit layoff announcement. It's like, we sell less stuff. We have less people. It sucks. And again, I really do try never to be cavalier about people losing their jobs. And because every one of those has to put food on the table, they're not on the kind of money we're earning. And now they got to go out and find another job in a shitty job market. It sucks. But the lesson is, and that's why I respect them, it's like we're selling less. So we got to do what we got to do to keep the company profitable.
- [50:56]
Harry Stebbings
Guys, we keep talking about these layoffs and these big numbers. I mean, it was over a thousand people laid off in this layoff. A thousand numbers are relatively meaningless. And we've had so many of these conversations. What happens to the labor markets?
- [51:11]
Jason Lemkin
Well, one thing on the Epic thing, and the Wall Street Journal did a good article on this this week on the permanent decline of Hollywood employment. It's permanently in decline. It's in decline because fewer movies and TV shows are being made. TikToks and YouTubes are doing it. And it's in permanent decline because every other country provides larger subsidies. And so there's this permanent decline in Hollywood labor. I think entertainment is sort of a shows us the future. Epic Games is entertainment too, too. And they will absorb as much AI and technology as they can to adapt. And it's just early. It's just early. They've had to adapt to YouTube. They've had to adapt to social gaming. We talk about these thousand people at last year or whatever. But I think Epic Games is just. I think it's a more interesting view of the future than block we talk about. Folks might Vibe code a B2B app, but content's already being massively disrupted.
- [52:01]
Rory O'Driscoll
And some part of that is, as you pointed out to me when I got it wrong a few episodes back, AI related in terms of recommendation engines. But I think lot of it is just a very competitive attention economy. You write Fortnite was the game everyone talked about. Now it's not. It's the nature of the gaming industry.
- [52:17]
Jason Lemkin
So yes, it's the Fortnite Circle coming for everybody at the end of the game. Coming for everybody. Even Fortnite. The Fortnite Circle has come to Fortnite itself is surrounded itself. Poor Epic games is in the middle of its. Of its end game of Fortnite. It's just it and content creators shooting it out at the very end. It's coming for all of the. The. The Fortnite circle is coming for all of us.
- [52:37]
Harry Stebbings
The other one that kind of relatively was, I think maybe a little bit overlooked is reports of Manus founders Manus obviously for context, being bought by Meta recently. Manus founders trapped or kept in China.
- [52:49]
Rory O'Driscoll
So just again, give people context and then put out one question mark there. Manus was a company originally based in China, had some Chinese investors, then we domiciled to Singapore Benchmark invested effectively. We founded as a US Singapore company. Meta acquired it. I want to say, and I use the word past tense acquired because my understanding is the transactions closed and the money's moved. Though interestingly, neither Chachi P. No Anthropic were clear on that. But my understanding is that's what happened. But then now the latest thing is the Chinese government takes a dim view of this because they don't want Chinese talent leaching overseas and going to the US and effectively not being Chinese anymore. And they feel it as a brain drain. So they did something that was pretty coercive in the sense of two of the key founders of Manus, I think, were either in China or summoned to China. They're no longer able to leave. So those are the facts. And yeah, of course you care. I mean, I think that starting from scratch, I mean, that sucks. I wish them the best because that's not a pleasant place to be. I mean, I think you've had the Jack Ma thing of, you know, at Alibaba, of effectively going, as it were, under the radar for a few years when you kind of incurred the displeasure of the administration. You also have people who've had significantly worse consequences than that. So let's start with the basic you wish them all the best.
- [54:06]
Jason Lemkin
I don't think another deal like this would happen to you. I think this whole Singapore washing thing is over. It's over.
- [54:11]
Rory O'Driscoll
I totally agree. That's where I was going to go with that long preamble. I'll tell you who did notice. Maybe no one in America spent any time thinking about it, but every Chinese founder who was thinking about doing this is to going, going, hmm, I don't know how I feel about this. I don't know if I can do this deal. I do know if I do this deal, I am never going home again. But I'm with you, Jason. I think all these other China washing deals, they're put on pause or they're put on reevaluation or this next thing is going to sound harsh. It's a fairly coercive regime. If your family's not out of the country, do you have exposure there? It just shows. I mean, authoritarian governments can take pretty drastic steps to impact our citizenry if they want to. And I agree, Jason, it makes it really hard to imagine doing another one of these deals without being worried about this consequence. And hopefully they'll kind of go naughty. You pay 50%, like, you know, California makes it hard to leave too. But if you pay them 13%, they'll let you go to Nevada. Yeah. Hopefully it turns out to something like that. And please God it's not something more, you know, coercive. But I agree, Jason, wouldn't do another one.
- [55:09]
Jason Lemkin
In venture, you take risk, right? It's part of the job. So we've all had deals where there's some rule, some corner that was cut and we talked ourselves into it. So, okay, right. Something weird about this company, but. And we convince ourselves as, as, as talking to some mediocre lawyer or asking an LLM today that it's okay. So, like, the Singapore washing must work. They've moved to Singapore. It's got to work. And you convince yourself, you talk to a few people and you take the risk. And it bounced. It appears to have bounced the right way for benchmark and friends. Right. It appears they've gotten their money. But you don't do the next one. Right. And there's 242 millionaires in Singapore. The majority of the inflow is Chinese. You don't do the next deal, maybe other capital does the deal and that's fine, right? Capital is fungible, but you just, in venture, you just don't. You just can't do the next one like this. It's too risky.
- [55:55]
Rory O'Driscoll
What do you do?
- [55:55]
Harry Stebbings
If you're Meta, part of the asset you're acquiring is the team.
- [55:58]
Jason Lemkin
2 billion is not a lot for Meta. And they have the Product?
- [56:01]
Rory O'Driscoll
Yeah. What are you going to do, Harry? What would you recommend? Getting angry at the Chinese. That'll work well for them, right? I mean, I think it'll be yet another acquisition that looked clever, but in retrospect wasn't amazing.
- [56:14]
Jason Lemkin
Well, listen, for Meta, I'll just say one thing. I only have a tiny bit of information, but appears to me Manus is running mostly and smoothly as an application and a company now. I don't know if the founders are working at it. Certainly feel strongly when you lose your founders, you lose your heart and soul of your company. But in the short term, I don't think it's a big deal for Meta outside of the founders because it's running smoothly in the short term, it's not down, the team's functioning, they're running and. But it's crazy.
- [56:41]
Rory O'Driscoll
And at the risk of being Pollyanna, but also wanting to assume the best of people, I would hope that the Meta management team and board, to the extent they do have any influence, can help these guys come to an amicable end. And if it requires a tax settlement or whatever, you don't want to leave people you just acquired in limbo at some zoom out level. When you listen to the rhetoric on both capitals, you just have to realize that trying to tread between these two countries is pretty hard. Right now we have China hawks in the U.S. government. They obviously have a whole ton of U.S. hawks or whatever the equivalent is. There's a real perception of competition. We don't let them buy the Nvidia chips, et cetera, et cetera. You're playing with fire in that thing and sometimes it bites you.
- [57:22]
Jason Lemkin
I just think overall it's natural given the outcomes in AI and given the growth, that I think it's tied to taking the highest levels of risk. We've also taken because the payoff seemed to be there. And when this deal happened, folks, folks kind of thought this was aggressive. Benchmark's never done a deal like this. Why are they doing a deal like this? It's not even very cheap, right? It seems a little crazy. And they're like, well, we've never seen anything grow like this. And the team's incredibly talented, right? So they took a little bit of risk and they made their profit. We're all taking more and more risk, folks, that now it's a week of revenue at a demo day. I did a million dollars my first week. It's amazing. What about the second week? I don't know like it. But as long as it all works out in the Aggregate. And I think this why nobody cares. To Harry's point, I cared about, I cared about madness. I added to the, to the list. I don't think anybody cares. We're all focused on getting a million dollars our first week.
- [58:08]
Rory O'Driscoll
Just good realization that the worst thing that can happen is not just oh, you lose your money. There are worse outcomes than that.
- [58:14]
Harry Stebbings
I mean, speaking about cooling their shot and making billions of dollars, Steve Jervison, he's tied his career to Elon very smartly. So that's not in any negative way in terms of the investments that he has plowed, trebled, doubled, quadrupled, everything in between leaves. California buys most expensive home in Incline Village and these were Jason's own. Will anyone with liquidity be left in California? What if California is structurally bankrupt?
- [58:39]
Jason Lemkin
It's not a great sign when they keep leaving, is it? It's not a positive where Rory's staying.
- [58:45]
Rory O'Driscoll
Jason, I mean, look, first of all, you're exactly all credit to Steve and more power to him. I've known him intermittently for 30 years. He made a brilliant call to align with SpaceX. Been on the board of Tesla and SpaceX Tesla for a while and then came off obviously for those back in the day. But SpaceX too, yeah, he's put his money in a compounding machine and now he's clearly hit the DPI moment. The truth is this ultra high net worth people have a high degree of mobility and unfortunately if you put the hammer up too high, they can leave and choose to go across the border to Incline village and save 13% on any realized gains plus as we pointed out, 5% on all gains. If this wealth tax passes, you know, at the margin, why wouldn't you? You know, it's not like you need to be in California to be a Tesla board member or a SpaceX board member given the down in Texas, the actions of consequences.
- [59:36]
Jason Lemkin
Well, it's interesting also this week Washington state did pass their 9.9% state income tax for millionaires and the governor said, well, they just deserve to pay more. And that may well be true. It may well be true. Like I don't want to debate that. This is not political. Right. I'm more concerned about the tipping point when we kill golden geese. Washington and California and to a lesser extent New York have been the gold golden geese. It's, you know, Washington said they're going to lose money, they're not going to make money on this. It appears that most folks that are neutral or right have said California will lose money on the billionaire Tax. Everyone's left. And. And the tax itself assumed massive amounts from Larry Ellison, who's been gone a half decade. Right. So no one's. It's just I do worry they're all clean and everyone that doesn't work at Open Anthropic, you know, on this show we've done it 50. And I said in the beginning of this that you leave after the series B. And now I see that used again and again by these folks who are on the right on it. They say all the founders will leave after the series B, but it may happen by Show 100.
- [60:36]
Rory O'Driscoll
And I think one of the arguments I make is because, you know, the truth is this articulating the argument to the activist on the other side as being. You're being mean to the billionaires is of genuinely no interest. And being mean to a billionaire is actually a feature. But I think the real articulation is this. If you actually are losing revenue that won't be available to California, and the marginal dollar in California probably goes into payment for homelessness, payment for your kids, payment for foster homes, payment for marginal social welfare services that are easy to defund when times are tough. And by choosing to obtusely tax without any attention to ability to collect that money, you've actually reduced the revenue that's available to you. And that's the argument you have to make to someone on the other side of the table. You have literally chosen something. Instead of getting, pick a number, 50 million from the Larry and Serges and the Jervisons of this world, you went for 200 million and now you're going to get zero. And what that means in real terms is somewhere down the line, long after all these changes have been made, somewhere in Sacramento, someone will zero out a line item on the budget. And let me give you a clue, it won't be payments to the teachers, it won't be payments to finance. It'll be marginal services to marginal people that your crass stupidity and desire to make a political point has ended up costing them money. And that's the only argument that moves the needle, because it's true. And you're right, Jason, you're saying is that it will have a net negative return. Now, do you feel good, Rory?
- [62:01]
Harry Stebbings
If you were Steve, would you have left?
- [62:03]
Rory O'Driscoll
I think from my perspective, I'm just so glad to be in California. It's so wonderful. I've moved around a lot early in my life. I have my friends here. I have my life here, here at the margin. The whole point of having money is to be able to do what you want. And for 3 or 4 or 5 or even 13% of your income, do you really want to leave? Now, I will say that's why you can tax income relatively highly, because it comes all the time and you can't control timing and therefore you have to uproot your whole life for the rest of your life to avoid it. And I don't think it's worth it. So I wouldn't move to avoid income tax. Conversely, if you have this pending capital event where literally in one year you're going to sell, quote all your SpaceX stock and realize a $2 billion gain and you're going to pay an extra 13% of that in California, because $260 million, maybe you turn to your wife and say, honey, for the next two years, why don't we live in Inclined Village? 165 days, I'll pay for the plane, we'll go back every week, you won't lose contact with anyone, and we will save $260 million. And you go, hmm, that's will con.
- [63:06]
Harry Stebbings
So.
- [63:06]
Rory O'Driscoll
And that's the point about, you know, that's not the life I live. That's not the situation I'm in. But that's the argument you make. It's like, it's not crazy.
- [63:14]
Harry Stebbings
Is there any story that I haven't hit on guys that we should hit on?
- [63:17]
Jason Lemkin
I just have to bring up the Ron Conway, Matthew Prince one, because it was. I highlighted that one on Twitter. It was just the funniest thing in the world.
- [63:25]
Harry Stebbings
Do you want to provide some context?
- [63:26]
Jason Lemkin
Yeah. I don't know Ron Conway, but he's certainly viewed as one of the Silicon Valley gems. Right. Seed investor in so many leaders, always out there as an advocate everywhere. Probably could have retired years ago. Right. Very founder centric. And he wrote that he had helped Cloudflare navigate some very significant issues earlier in the day, I think on Jack Altman's podcast. Yeah. On Uncapped. And they asked Matthew Prince, CEO of Cloudflare, the question. He said, well, maybe I don't remember any of that. And it's just, it's not. And he wasn't mean. Matthew can be fairly sharp, as Harry knows these days. It wasn't meant mean. The tweet was not to meant mean. He literally just met me, couldn't remember getting any help from this beloved vc. And I, I think it just said so much to me about VCs adding value, but also VCs thinking they add value. VCs possibly adding a Modest amount of value. But founders not really thinking that modest value was consistent with the bravado of the vc. It just crystallized the whole value add idea to be in a single tweet. It wasn't mean, it's just, I don't remember any of, I don't remember Ron helping, but maybe did.
- [64:27]
Rory O'Driscoll
Yeah, you're right, Jason. I did laugh at that. And I think actually my bigger heart to your point is both to some extent are right, is that, you know, as a, we all want to have agency, we all want to feel we help and you know, want to be good people. And you look at the guy, hey, I spent some of my time helping the CEO. I feel I helped. But from the company's perspective, they're founding a company, they're doing a million things on one or two things on a 10 year journey. You helped. You remember that vividly. They're like, dude, it just fades into the background of, you know, or 100 things. And you know better than me, Jason. They have to do every day, right? One of the proofs of this interesting way to check it is I often read business biographies and business stories of great companies, venture backed companies, and how they're formed and what happened. And you know what I notice in them, Every single one of them, very few little mention of VCs. If you just read them, you eyeball them, says, oh, that's a biography. Yeah. And they crop in and come out a couple of times, right? And I think that's right, because realistically, in the journey of what's going on, the only significant things we don't. I've said this before in the podcast, we put in the money and we put in more money when they need it. We decide to hire or not hire and fire the CEO. We agree the broad strategic direction and anything after that is at best an assist. Right? And if you read the biographies of businesses, what you generally see is the only time the VCs come in is on some version of Those and it's five pages of the journey early on, interspersed across 200 pages in the first five chapters. And by the time they get to the IPO, it doesn't even rise to the level of a. I was reading the OpenAI biography, a bunch of them, and that's just the way it is. Microsoft, same thing. And the VC can feel those five minutes of impact were amazing and they feel really good about them and you feel warm and fuzzy. But the only thing founders really remember, for better or ill, is, oh my God, our backs were to the wall and no one would put in money. And they put in money. They remember that. Sometimes they even forget that. But to your point Jason, at least
- [66:17]
Jason Lemkin
half the time they forget that.
- [66:19]
Rory O'Driscoll
If they forget that, they're definitely going to forget the time you made that phone call to help them connect with xyz and that helped them do something because that's something that happens 100 times a day. No, you're right. We're not the stars in the drama. We're bit players who get well paid for our part.
- [66:32]
Harry Stebbings
Boys, as always, the most humbling 90 minutes of my week.
- [66:35]
Rory O'Driscoll
I have faith you'll get more. You'll be humble tomorrow.
- [66:40]
Harry Stebbings
But before we leave you Today, I run 20 VC fund and I get this question from founders all the time. Harry, I can't find a good dot com. Do you have a hookup? Let me tell you now, the answer is always going to be no. I don't have a guy or gal for that. I do have a recommendation though. If you're building a tech startup, get a tech domain. Tech startup, Tech domain. It couldn't be more simple or obvious. As an investor, I appreciate founders who put thought into their branding. When I see tech in your name, it tells me right away that tech is at the core of your build. It'll say that to your customers too. A clean and sharp domain like tech pays off in the long run.
- [67:15]
Rory O'Driscoll
Run.
- [67:15]
Harry Stebbings
Look at the companies using Nothing Tech 1X Tech, Aurora Tech, CES Tech, Ultra Tech, Alice Tech, Neon Tech, Blaze Tech, PI Tech Great Tech companies. They all use the tech domain. These are my two cents. If you're building a tech startup, don't overthink it. Secure your tech domain from any registrar of your choice. While tech gives modern companies a home, online checkout helps at home. Convert convert by turning traffic into revenue. Over the past 15 years, Guillaume Pozaz has led checkout.com through what he calls the velocity years, a period of hypergrowth with relentless product building. The lesson High growth is a gift, but it demands ruthless focus. As his mother put it, play the game you're good at. For checkout.com, that game is digital payments, obsessing over data, chasing basis points and compounding learnings over time. And that discipline is paying off. 2025 In 2005, checkout.com processed over $300 billion in total volume, up 64% year over year and returned to full year EBITDA profitability. They now support over 1,000 enterprise merchants globally, including 63 that process more than a billion annually with brands like ebay, Vinted Amex, asos, and Temu. Guillaume's message, though, is pretty clear. They've earned the right to win anywhere. Now they're investing in innovation across marketplaces, issuing financial expenses, experiences, and agentic commerce. If you want payments built for what's next? Talk to the team at checkout.com that's checkout.com While checkout powers the moment money changes hands, Invisible powers the people behind the work. Why don't we hear more real AI success stories from big companies? The models are insanely good, but implementation's the problem. It's really, really hard. There's data all over the place. There's legacy tech and manual workload workarounds. It's a Ferrari engine in a shopping cart. Meet invisible invisible trains 80% of the top models and then adapts them to the messy reality of your business. Take the Charlotte Hornets NBA team. Invisible took years of game tape and analog scouting notes to go from uncertainty to a draft pick and summer league championship win in weeks, not seasons. Get the data in order first. First, and suddenly AI can do almost anything for you in the enterprise. If you want AI that hits the P and L, go to InvisibleTech AI20VC.