20VC: Daniel Gross and Nat Friedman: Acquired by Meta | OpenAI’s SBC Bombshell: More Stock Comp Than Revenue | Privat Equity is Back: Olo Bought for $2BN | Microsoft Lays Off 9,000 People: Is This Just the Start | Will Sequoia Part with Shaun Maguire

Summary

Summary of The Twenty Minute VC (20VC) Episode: July 10, 2025

Hosted by Harry Stebbings, this episode of The Twenty Minute VC features in-depth discussions with venture capital experts Rory and Jason. The conversation delves into significant industry movements, including high-profile acquisitions, the evolving landscape of AI talent recruitment, private equity activities, and broader economic implications impacting venture capital.

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1. Daniel Gross and Nat Friedman Joining Meta

The episode opens with a compelling discussion about Daniel Gross and Nat Friedman departing their renowned venture fund to join Meta. This strategic shift raises questions about the implications for their Limited Partners (LPs) and the broader venture community.

• Jason breaks down the financials: "You have a $1.1 billion fund, it's forex. Half of it's deployed. So $500 million times 4x, that's $2 billion... they're already up $300 million in two years." (05:44)

• Harry Stebbings elaborates on the deal's attractiveness for both the partners and LPs: "For the LPs, they're getting 2x. So if SSI goes great, hooray. If it doesn't, they at least got a 2x." (05:57)

• Rory expresses LP sentiments: "They're happy to get cash back and good economics, but there was such excitement around the partnership that they will be sad to lose the stewardship and future funds." (08:46)

This move is likened to historical ventures, drawing parallels to the Dot-Com era, but with contemporary nuances in AI-focused investments.

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2. AI Talent Wars and Stock Compensation

A significant portion of the conversation centers on the escalating costs of recruiting and retaining AI talent, particularly within B2B sectors.

• Jason warns about the unsustainable stock-based compensation (SBC) practices: "OpenAI had more SBC this year than revenue. That's 119% of its GAAP revenue." (20:20)

• Harry Stebbings provides context on SBC's impact: "It's about the dilution percentage versus cash. If your SBC exceeds your revenue at scale, it's pretty dilutive." (21:17)

• Rory highlights the broader venture implications: "Employee stock-based comp dilution is going to be so significant and so much more significant than in prior generations of venture." (29:32)

The panel discusses how companies like OpenAI and others are balancing SBC with revenue growth, emphasizing the long-term sustainability challenges posed by high SBC ratios.

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3. Private Equity Activity

The episode transitions to Private Equity (PE) maneuvers within the tech space, focusing on Olo's acquisition by Thoma Bravo and CoreWeave's strategic purchases.

• Rory discusses Olo's privatization: "Thoma Bravo bought Olo for $2 billion, a profitable business that's decent." (28:31)

• Harry Stebbings analyzes CoreWeave's acquisitions: "They took on equity to reduce fixed costs, which is a smart move to deleverage their balance sheet." (23:46)

The conversation underscores the role of PE in stabilizing and scaling profitable, vertically integrated SaaS companies, although acknowledging that such deals alone cannot rescue the multitude of struggling unicorns.

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4. Vanguard Adding PE Exposure

The panel examines Vanguard's strategic move to incorporate more PE exposure into its investment portfolios.

• Harry Stebbings remarks: "All the PE shops have been doing some version of this... another source of capital, another." (39:32)

• Jason expresses concern: "Vanguard adding PE exposure is a terrible sign." (39:32)

The discussion highlights how institutional investors like Vanguard are diversifying into PE to hunt for alpha, though it may introduce complexities for venture capital structuring and liquidity.

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5. University Budget Cuts and Endowment Taxes

The episode sheds light on the financial strains faced by prestigious universities due to budget cuts and increased endowment taxes.

• Rory mentions Stanford's layoffs: "Stanford blamed its $140 million budget cuts on federal research funding and potential increases in endowment taxes." (43:00)

• Harry Stebbings comments on the societal impact: "It's an awkward way to make public policy and punish the wrong people... cutting science and small grants." (43:00)

The panel discusses how these financial pressures are adversely affecting academic research and innovation, emphasizing the broader implications for future technological advancements and venture investments stemming from these institutions.

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6. Future of Sales Roles in Tech Companies

A critical discussion unfolds around the transformation of sales roles within major tech firms, exemplified by Microsoft's recent layoffs.

• Jason predicts significant changes: "The inability to recruit talent in AI will be the biggest issue of 2026. B2B AI is just the inability to recruit talent." (16:01)

• Harry Stebbings observes Microsoft's strategy: "They're replacing general salespeople with solution engineers who have deep product knowledge." (49:22)

• Rory shares Canva's approach: "Canva is conducting AI Discovery Weeks to reskill employees, pushing them to embrace AI or face redundancy." (50:38)

The conversation highlights the industry's pivot towards specialized roles that leverage AI capabilities, signaling a shift away from traditional sales positions towards more technically adept functions.

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7. Economic Outlook and Recession Bets

In a spirited segment, Rory and Jason engage in a quick-fire Q&A about the likelihood of a recession by the end of 2026.

• Harry Stebbings outlines the baseline probability: "The Bayesian prior is there's a 1 in 6 to 1 in 7 chance of a recession within the next year." (57:32)

• Jason takes a strong stance against an imminent recession: "There's no chance we have a recession." (59:04)

• Rory questions the impact with ongoing economic indicators: "End of the year, soft landing or high unemployment?" (57:20)

The panel debates the factors influencing economic stability, including historical precedents and current market behavior, ultimately agreeing that while minor fluctuations are expected, a major recession remains uncertain.

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8. Final Thoughts and Wrap-Up

As the episode concludes, the hosts reflect on the dynamic nature of the venture capital landscape amidst technological advancements and economic shifts.

• Harry Stebbings offers insightful reflections: "The early AI market is such that if you start to pull ahead and continue to execute, it's very hard to catch up." (05:25)

• Jason emphasizes the importance of durable differentiation: "I have to believe that [growth patterns] are just gonna keep going... you gotta dominate some segment of your market for a real enduring reason." (37:06)

• Rory underscores the necessity for venture firms to adapt: "Keep your head, keep the companies moving forward, converging on acceptable growth, acceptable profitability." (34:35)

The panelists reiterate the importance of strategic adaptability, sustainable growth, and the relentless pursuit of innovation as key drivers for success in the evolving venture capital ecosystem.

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Notable Quotes:

• "No one ever said to Winston Churchill, did you bring World War II in on budget? They just said, did you win World War II?" — Harry Stebbings (00:06)

• "AI is just the inability to recruit talent." — Jason (16:01)

• "Samuel McGuire tweeted some controversial things... will he leave Sequoia this year? Almost no chance." — Rory (54:02)

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Conclusion

This episode of The Twenty Minute VC offers a comprehensive exploration of pivotal trends shaping the venture capital and startup funding landscape. From high-stakes talent battles in AI to strategic shifts by major players like Meta and private equity firms, the discussion provides valuable insights for investors, entrepreneurs, and industry enthusiasts alike. The candid exchanges and expert analyses underscore the complexities and opportunities inherent in today's fast-paced tech ecosystem.

Transcript

[Jason]

It will be the biggest issue of 2026. I think in B2B, AI is just the inability to recruit talent.

[Harry Stebbings]

No one ever said to Winston Churchill, did you bring World War II in on budget? They just said, did you win World War II? The truth is this. When it becomes existential, you do what you have to do to win. The running in the early AA markets has been very much. Attention begets more attention begets more attention. So if you start to pull ahead, provided you continue to execute, it's very hard to catch up.

[Rory]

This is 20 VC with me, Harry Stebbings. Now it is my favorite show of the week. It's Rory. It's Jason. We are back with some incredible topics. This week we have Daniel and Nat leaving one of their legendary funds to join Meta. But at what cost? And what cost to LPs? Then we discuss Olo's going private with their $2 billion with Thoma Bravo. Then we discuss Coolweave's $9 billion acquisition and whether Circle will use their meme equity price to buy more. Also we discuss whether Sean I will be leaving Sequoia. Linda Yaccarino Leaving X so much in this episode and as always, the highlight of my week doing this show. But before we dive into the show today, let's talk about agents. Specifically Piper, the AI SDR agent brought to you by Qualified. The agentic marketing era has arrived. And if you're a B2B marketing leader looking to scale a pipeline generation, Piper, the AI SDR agent.

[Jason]

Wow.

[Rory]

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[Jason]

Great success. It's a big week. Things just keep accelerating. Harry.

[Rory]

Dude, things keep accelerating and I'm going to start with one that you tweeted brilliantly. Well, Jason, by the way, you said about Daniel and Nat joining Meta and you said the wild story of NFDG2 Silicon Valley legends built a $1.1 billion fund 4x did in two years and then abandoned it all for matter this week. Bluntly, what we saw with them moving. Why don't we start with you, Jason. How did you analyze this? Because it's pretty big and shocking news.

[Jason]

Well, listen, I want to. I want to have Rory help me with the math here because they're also there for x on a $1.1 billion fund. The Wall Street Journal said it's about 50% deployed and they're already closing another fund. Two partners and a few other guys for 99% of the venture world. This is beyond a dream outcome. There's a lot to the story. Obviously it's a moment in time that including the Axio of GitHub. Right? Not founder, right. Who's had a run to want to go work for a dude. See, here's the problem. Like one, I get it, right? The excitement when I just flew back into Palo Alto today. The Bay area was in SoCal for a week. I already feel the vibe like I want to do the same. But I also worry this is going to be like the Trump administration. Like everyone's going to quit too. Like they're not going to last. Like the Elon's and the Davids and all the techies aren't going to be there for four years. Do I really want to go work for Meta for four years? That's the only weird part in it. But I get it of the moment, right? I don't want to be friggin meeting Founders and writing checks. This is a once in every 20 year moment in time. This is like 1999, except it's not going to implode on us in 12 months.

[Harry Stebbings]

And it was a lot riskier, Dan, because there wasn't a whole bunch of large incumbents willing to take your quitting and monetize it for 100 million bucks. So in many respects it's more zany by far than what's going on, what went on in 95 to 99 when I actually was around in the business. This is something we've never seen before because there's never been incumbents just willing to plop down this kind of cash to hire people, for God's sake. Right. Just to go do something. And it gets back to what we've discussed a couple of times, which is that small number of high priests of AI who are deemed to have the answer just have huge market value. This is the market working. True.

[Jason]

I don't mean to interrupt, Harry, but let's just do the math for a moment for folks that might read or watch. So you have a $1.1 billion fund, it's forex. Okay, let's be generous on the math, but true. Right. Half of it's deployed. So 500 million times 4x, that's to 2 billion. That's 1 1/2 billion profit. On paper, which we can talk through, that's 300 million in gains.

[Harry Stebbings]

Already.

[Jason]

We're ignoring some subtleties. Right. We're already 300 up the three of us.

[Harry Stebbings]

Correct.

[Jason]

The two of them plus a few guys that probably have 2% carry. They're already up 300 million in two years. They're up 300 million in two years.

[Harry Stebbings]

This is why the offer is so good. Because you know what you're getting is you had a billion dollar fund, you put out a half a billion, your forex up one and a half billion gain. You're not, it's worth pointing out you're not getting that money now, at least to my knowledge as a GP. It's the LPs they're basically, and I'll give them huge credit, they're taking care of their LPs. They're saying you can take half your money off the table, which is effectively means even if the whole thing goes to shit, you got a 2x. So the LPs are getting the money off the table. What they're giving up, and there is a real give up here, they're giving up as investors the right to use the other 500 million and the other billion that they were clearly going to raise in two weeks flat because they're those guys. So basically you should think about the offers being kind of in three components. Mr. Nat and Daniel, we will a take care of your existing LPs in a way that will make you feel good because you're a reputable person. Secondly, you're walking away from 1.5 billion doll of investable capital and the worth of that depends on what you think you could turn it into. Let's just say you could do another 4x, which means 3x of gains, which means 4.5 billion, 20% profit. There's a credible argument that's 800 million of value to you, Mr. Nat and Mr. Daniel, and obviously whatever other offer they got for that had to be better than that.

[Jason]

Plus they had premium carry in the fund. So let's call it an even billion. They gave up 800 million to a billion in theory, to join Meta.

[Harry Stebbings]

I personally think not having to put that money out in today's frenzied market and instead getting kind of, if they got anything like a comparable equivalent in terms of capital return, that's a pretty damn good deal. It's also an excellent deal for the LPs. They are losing the stewardship of those two guys on their investments, which is why there's no new investments, but on their existing money in the ground. So if they put in $1, they're getting $2 back and they still own the other $2. So if you SSI goes great, hooray. If it doesn't go great, they at least got a 2x. So for the LPs, it's an interesting one and subtle nuance. I believe the terms are that overall Meta will buy 49% of the fund, but each individual LP can put in to sell as much as little as they like, and then it just aggregates. So there's a lot of LPs going, do I take my 49, do I hold tough and sell nothing? Or do I ask, hey, I'd take it all if it's available. Yeah. This is a chance for liquidity in a stellar fund early. It's an interesting question we could talk about.

[Jason]

I remember a couple months ago I was having lunch with one of my LPs that I share with Harry. And after lunch, the LP was going to meet with them for that, for this fund, for fun, to. To put it all. And I'm like, you're doing what? He's like, he's like, jason, it's not even like the same game you're playing. He's like, don't worry about those guys. They're like, we're not. You're not in the same box. You're not in the same bucket.

[Rory]

I do not think LPs are happy about this outcome, by the way. Don't get me wrong, they're happy to get cash back and good economics back, but I think there was such excitement and fervor around them as a partnership and what they were building, that they will be sad to lose the stewardship and the future funds, personally, is how I read the LP sentiment from.

[Harry Stebbings]

And I think at that level that's probably true, but there's a lot of people. Look, getting jilted is one thing, but getting jilted with a 2x is a lot less painful. When funds end, most of the time it ends in weirdness. It ends in pain. In the butt for the LPs, I'm giving Daniel and that very great credit. This is a very clean ending. They can look everyone in the eye and say, yes, Simply put, you, Mr. LP, would like us to do venture capital for the next four or five years. It would appear in a market system that we all live in, our highest and best use is building AI for meta. So the market has spoken and that's what we're going to do. And I'm not genuinely not surprised. And I can say that with some credibility because I competed for a deal with those guys back and yeah, we lost to them. It all worked out in the end, Rory.

[Rory]

They beat every single person in the market.

[Harry Stebbings]

And I ended up getting to work with Ellen. I think wonderfully talented guys. But I remember saying to the CEO, they won't be doing this in four years because it was obvious to me why that's interesting venture, it's fun. Look, it's a perfectly good gig, but they have so much more talent. If I was someone, when you meet two people, one of whom's been the talented entrepreneur, early on we looked at that round at Xamarin, been the CEO of GitHub, built the most, first, most compelling product, and then his colleague has been involved in that kind of early AI stuff, capable of being a founder at SSI. Your highest and best use is not being the 50 adventure guy. Even if you're the best venture guy, there's other things you can do. No, I'm totally not.

[Rory]

I've never felt so unspecial. Jason, you should.

[Jason]

I felt this way going into venture myself. I felt like I was walking into quicksand of A world with fungible sources of capital, where clearly some gps are better than others. Like, in terms of adding value. No question some funds are modestly better than others. But are you really, like, the only value I think you can add in venture in the world really is if you discover talent that would otherwise not get funded. Like, that's the mitzvah in it, isn't it? Like, you find. You find the young Rory. No one would fund him. And he builds cursor. You've done a good thing for the world no one else has, really. Adding significant value to the world adventure, dude.

[Rory]

That's why I did Project Europe. We just funded this kid in Athens with Project Europe who's doing humanoid robotics from his grandmother's garage. Never ever would he have been found. If I'm an investor in SSI and I've just put in a big check and Daniel led that fundraise. I am a bit pissed off now.

[Harry Stebbings]

No, interesting, because that was. It's going to sound zany, but why are you pissed off this week rather than a couple of weeks back when he stepped away from ssi? All right.

[Rory]

No, I'm saying it because he led the round as an operator and he was in charge of the fundraising, committed to it as an operator. And I think that is a responsibility there that you don't piss off a couple of weeks later.

[Jason]

I think it's interesting, Harry, when I remember, I. When I wrote it up, the other thing I said, it was an interesting parallel to Gary Tan, because Gary Tan left Initialize to run YC two years ago. I instantly got it right. I don't know Gary very well, but I have a chance to watch him a little bit over the years. And people. We have a lot of LPs in common and people thought it was crazy, but their fund, too, is going to be a 10x fund, I think, with Flock Safety, Rippling and others. So he left them with a 10x fund. Right. A great position. A lot of them are involved in YC today as LPs and otherwise. But there was. Some people were upset. They're like, we love Gary and we wanted to go another couple of rounds. The LPs we had in common, they were. Don't get me wrong, they're all happy for him, but they were upset briefly because they thought he was going to do this for another 20 years. Right? And I'm like, this guy's a builder, right?

[Harry Stebbings]

Totally. People with those talents are going to be drawn to the thing that can most allow them to instantiate those talents. You shouldn't make decisions based on someone else, quote, unquote, doing the right thing. All you can do is evaluate their incentives and motivations, are they aligned with you and if they are, most of the time it'll be fine. But even then, I mean, kind of back to what you said last week, Jason. We're seeing a lot of founders tap out, walking away from something, or in this case walking towards something. It's just going to happen in this market. And yeah, you can be pissed for a day. But I go back to what I said. If getting screwed over is getting 2x in cash and a ticket to ride on the other half in two years, we should all be so lucky.

[Rory]

I'll just end it with two savings. One, I really don't think this is about money. Both of them worth half a billion before another half billion. I don't think they give a shit about that. The final thing I'll leave on is like, do we think this talent accumulation machine that Zuck is building is going to work?

[Jason]

I think it will work. I think it already worked at X. I think they're running a little bit of the Elon X playbook of just being insane. Cracked. Creating this mega mecca for talent. I think you almost have to do this playbook. You have to create a mega mecca for talent somehow, right? I think it will probably work. The best want to work for the best. It's always been true our whole careers and the very best only want to work for the very best. They won't tolerate anything else. That's why so many struggling unicorns are in an existential death spiral, because they can't attract anyone great. Not a single great person is going to join, you know, unless the founders are great. Some folks don't care that the growth has fallen to 10%, but they want to work for the prominent best in many cases. And so this is in the two by two, the best and super prominent. I'm gonna go 80% of people wanna go there. The best people wanna go there. And you need soldiers, not just captains and generals. Right. So you gotta attract them.

[Harry Stebbings]

Broadly agree with that. And I think one of the things, it's funny, I'm just reading one of the many open books about OpenAI. I think it's called empires or something. And they talk a little bit about how they deliberately and ostentatiously wanted to raise their profile for exactly that reason, Jason. To be able to hire the very best people. So this dynamic has been there. Lily, one of the first emails, I think it was earlier sent to Elon was basically some version of if you would lend your name to this project, it would be cool because we would hire more engineers quicker because you're cool. End of an email right back in 2015 or 16. So I totally agree with that. So at that level, I think, Harry, the answer to the question is yes, it will work. These wildly smart people, they are members of, as I say, the mythic, the inner circle of people who know the magic spell. They will make the product. I think the interesting question as a business decision will being the shorter fifth broadly capable LLM be a compelling business for Meta? To me that's a much more interesting and difficult unclear question. But I don't think they're agonizing about that now. They just feel the existential need to play.

[Rory]

I was with a founder this morning of a multi billion dollar company. It's a very good company and they said my single biggest challenge today is Cursor. Cursor's just paying insane amounts of money for everyone. And no disrespect to Cursor, but the question for me was just like wow, if this is a tidal wave then of just incredibly well funded AI companies just paying through the nose and not just meta, but suddenly 10 others have to compete. Where does this end?

[Harry Stebbings]

With people losing money?

[Jason]

I mean obviously though, talent war, it's under discussed. How the hell if you're not at a top vibe coding company or how are you going to compete for talent? You better find somewhere where being very good is enough because you cannot take these teams head on. There is just no way. And you, and you also can't pay them $800,000 a year plus RSUs, plus guarantees, you just, just can't do it right. It will be the biggest issue of 2026. I think in B2B AI is just the inability to recruit talent. I don't think firing up lovable or replit is is going to solve this problem. I love both tools, don't get me wrong. And I see too many startups saying I'm going to hire an AI guy or I'm going to hire my worst one. Like if a startup says I want to hire a VP of AI, I'd like to sell all my shares on any secondary market that exists. If you think your answer is to go hire a VP of AI that wears a tie and is studying things like just shut the startup down, sell it for anything. Sell it. Go sell it to Grammarly if you can while there's time.

[Harry Stebbings]

God, you're just piling On, I mean, look, and I think that's true. I mean, obviously at the application level, if you're a user of the models, you don't need to have the same caliber people as it takes to build the models, provided you have people who can deploy them, who can use. So I see Jason making his I disagree face.

[Jason]

It's true. But the problem is a lot of these categories, sure, you have exposure to the same models, but your ability to do more with them requires an S tier team. Otherwise you're just lost in the sea of the sameness.

[Rory]

Yeah.

[Harry Stebbings]

And that's the point I'm trying to make. Jason, you're exactly right. Is that look. Yeah. They're not doing it by paying $800,000, $1 million in cold hard cash to the 50 people in Silicon Valley can do that. You build a center of excellence somewhere else. You have to be very, very good. But you don't have to be quite as on it as if you're building cursor.

[Jason]

I was actually talking this last week with the CEO of A. It's adjacent, but it's a really good B2B company. Coming up on 200 million in ARR. Doing well.

[Harry Stebbings]

Okay.

[Jason]

And he's like, yeah, I basically have to give half a percent or percent of my company to each AI engineer now.

[Rory]

Wow.

[Jason]

To get who I need. You can't do that for 50 engineers, can you? How does that math work out at like the series D delusion stuff?

[Harry Stebbings]

Pretty badly for the.

[Jason]

Pretty rough on everybody. He's forgetting about the cash. He's like, I got to do like half a percent or more to get the people I need today. And he's like, I got no choice. Right. Coming up on 200 million. That's the time when engineers start to get like 0.0001% of the company.

[Rory]

That's bluntly why this wave I think will be highly damaging to Venture returns. Because the employee stock based comp dilution is going to be so significant and so much more significant than in prior generations of venture. If you're anthropic or OpenAI, you're just continuously having to top people up every year.

[Jason]

Well, information said OpenAI has more SBC this year than revenue. They came out with a piece this year more SBC than revenue.

[Harry Stebbings]

And intellectually you're correct. And I'm not going to lead the sbc. Doesn't matter. Comment because it's more than revenue. It might matter, but it's more than revenue only. Can I make a comment?

[Jason]

Yeah.

[Harry Stebbings]

You know, revenue only. Because there's this spurious way of accounting for it that's your cash based, which is quite misleading. It's more clear to think about it as a dilution percentage versus cash. And I understand there's an element of both when you're sitting there allocating the money. The more it's freely tradable stock, the more you should think of it as cash and a direct replacement for cold hard cash. In which case if it was 100% replacement for cold hard cash, you could argue their loss is approximately double what it's stated to be. If you end up building a big ass company and you look back and you go, this is Horrific, you had 20, 30% more dilution than you'd expected, you still got a pretty good big company. I'm not advocating mass dilution, but the truth is it's not going to be the fatal error not getting errors. The fatal error. It's like a line I often use. No one ever said to Winston Churchill, did you bring World War II in on budget? They just said, did you win World War II when it really matters. The truth is this, when it becomes existential, you do what you have to do to win. And this is where again, we said it before, you give, you know, face met a huge credit. I don't know if they're right in making the assumption that this is existential, but once you've decided it's existential, you just do what you have to do.

[Jason]

Listen to this statistic. It's pretty funny. Last year, according to the information, OpenAI had 4.4 billion in stock compensation. That was 119% of its GAAP revenue. Okay, yeah, now that's a lot. But it projected it would fall to 45% this year. It's not going to happen now. It's going to still be in the triple digits. That's to Harry's point. I would assume if your SBC exceeds your revenue at scale, it's pretty dilutive, right? But the fact that it's 119 instead of 45, that's a lot of dilution, isn't it?

[Harry Stebbings]

Oddly, it mightn't be. I'm not trying to really get down in the weeds here. I'd like to know the percentage dilution because one of the weird things on SBC comp is it's priced and when you issue and it's an accounting entry based on the 409A valuation of the stock, which has been motoring up enormously, so they may well be recording a large, very large Quote unquote GAAP SBC number. But the dilution, while still big, may not be nearly as catastrophic.

[Jason]

For sure, I'm being too simplistic. If they're worth 300 billion, right, and they're issuing 10 billion of stock, it's 3%, right?

[Harry Stebbings]

That's exactly right. Because I couldn't articulate it because I'm a bit jet lagged, but that's exactly it. You see this a lot where you have a company that has an enormously high mark from the VCs off in the public market, they issue stock and then you see this a lot in the public market. Two years later the stock has returned to a much lower level. But the SBC still rolls through the books as if it was all priced against the 300 billion value. And you have those absurd public company where oh my God, The SBC is 3x the revenue. And it's all about this nominal accounting charge which is meaningless. Now in this case it is interesting because to the extent that the 300 billion is a money good valuation, then if you deliver, if you give someone 3% of the company, they are in fact getting 9 or 10 billion in cash in value. If they can realize it via a series of tenders, then good on them. If the market cap of that company stays at 300 billion or greater for the next four years, the people who got $10 billion today will have $10 billion of cash cop. Good for them.

[Rory]

Speaking of kind of capitalizing on appreciation of stock price and using it strategically, there was one that I thought was really interesting was Corweave who bought core scientific for $9 billion. This is after they bought weights and biases for $1 billion. I'm intrigued. Is this just incredibly strategic use of an appreciating stock price? How did you think about this?

[Harry Stebbings]

I thought it was a great deal, quick and simple because I remember early on the hosting business in 98, 99 and I looked at Exodus way back in the dawn and couldn't get people there like a tiny number. It goes public. It's basically offering the first ever hosting facilities, goes public, has a huge valuation and then in the dot com bust it went bust, absolutely bankrupt because it had leases and debt and it killed it. These guys have a currency they bought, is it Co Scientific? Apparently they lease a lot of data center from them. It effectively deleverages them somewhat. It uses equity to take out rent expense and it means that over the next five or six years, if the demand for, I mean shock hara for this next sentence, if the Demand for data centers doesn't continue to grow to the sky, and they have to have a more robust balance sheet, they will look back on this and say, great move. We took a bunch of fixed costs out of our P and L in return for a small amount of dilution.

[Rory]

I'm sorry, who would take the bet that the demand for data centers would go down?

[Harry Stebbings]

I might consider it. Howie. I can see it in your face. I can see it. I would put that bet at least on the table as being plausible at some point in time in the next three or four years that people find they're ahead of their investment schedules and just want to slow down. And I can see the pained look in your face, but if I was the CFO of a company like coreweave, where effectively what they did was they took themselves from 100% leveraged on the upside of infinite data center demand to 80% leveraged on the upside of infinite data center demand. That's a smart slight de risking.

[Rory]

Wow.

[Harry Stebbings]

It's not like they're shorting Nvidia stock here, dude. Which is the bet you'd take if you really believe. I mean, there's a whole series of bets you can take depending on how much you think the hyperscalers are going to spend to build these models in the next four or five years. It can all the way from I'm so leveraged to the upside that I'm going to buy Nvidia out of the money calls. That's if you really believe. And you can just go in a descending order of risk reduction from there. These guys are very leaning in on data center demand. They're not walking away from that, but what they're doing is replacing. I mean, because it's effectively a financing company, Core Weave, they're replacing fixed charges of, you know, debt and leases with equity. It's a good move.

[Jason]

Yeah. It would help us all if there were, like, 10 core weaves. There's like, if you have a public company trading at a crazy high, high multiple, right. 20x revenues, that has existential losses. You got to use your stock as your currency asap. You got to buy everything you can that can address the bottom line or other challenges you have. Right. And these are, like, fun times. If you're a target, you get bought in an hour because they're going to. The Core Weave Corp. Dev team is going to be looking for 20 assets that they can buy that can fix some of the structural challenges in their models. And we haven't had an IPO like this in A while. Like we haven't had someone searching with a high priced equity. And it's, it's a great deal for everyone to turn high priced equity into cash.

[Harry Stebbings]

And I don't know if you even say the challenges in the model as much. I mean, you are. It's not the negative in the market, it's just the nature of the model. I mean the nature of the business is, you know, you buy these, fix that. They have long term contracts against them. So they're a lot less exposed than some of these guys that are doing short term contracts. But it's just a fixed cost business. You own this great big fricking data center, all these machines, and as long as there's money coming in the top, it's fine. But if not, it's brutal. It makes sense.

[Rory]

All I was thinking was, well, Jesus, look at the other meme stock being Circle. Why are they not leveraging their stock appreciation to do the same?

[Harry Stebbings]

Probably because they're still not out of the first, the first 90 day period when it's a pain in the ass to do it, believe me, because Core Weave member has been out there a good. I can't remember a couple months longer at least. You know, generally there's a period of time where you want to put your first. I remember asking this actually when I was on public board. You probably want to put one or two, at least one earnings release on the board as the asset that you would sold to your investors before you start doing crazy deals. I am sure that stock is burning a hole in their pockets too.

[Jason]

Yeah, they'll do something. But one, you know, circle had net income of 156 million last year. So Core Weave, they both have inflated stocks. They both should use it to enhance their business models and they will. But it is different if you have net positive when you're profitable. You think about these deals differently, right? If you're burning cash, no one sweats the dilution from an existential deal. You just do it. It's like, let's get going guys. Right? When you're profitable, it just, it confuses a lot of things, right? It impacts your earnings, it impacts. Do you care more about dilution? There's a lot of things going on when you're profitable.

[Harry Stebbings]

I think if Circle does something, it will be about buying distribution because obviously their biggest cost is the money. They have coinbase. So finding other ways to get their coin in the hands of users will be their thing. Whereas obviously for Cor Weave, it's just addressing their cost structure over Time.

[Jason]

It's a weird thing. It's like sbc. If you're losing money as a public company for real, you don't care so much about dilution. It's just more dilution to achieve your goal. You only really start to care when you cross the curve to purchase profitability. Right?

[Harry Stebbings]

You're exactly right. And I would just wonder. It's not that you don't care, it's the Maslov hierarchy of caring. Right? If you don't make profits, then it doesn't matter because you're screwed. So you are. And that's why early on VCs are right to keep an eye on dilution but not get all antsy about the economics of it. Just keep an eye on dilution. Because the way I think of it is we're all in this together. If we create something of value, everyone gets a share. Once you've created something of value, then a decision to allocate some of that is a much more meaningful economic term. I could not agree more. The way to think about SBC as a venture firm or a pre profit company and when think about any kind of dilution, it's just very different than when you have a cash flow positive asset. It's a different thing.

[Rory]

Speaking of kind of different things, a different kind of asset, but one that I found very encouraging was actually Thoma Bravo going shopping with Olo 320 million of Arrow Gap. Profitable business that's decent. And it's bought for $2 billion by Thoma Bravo. Is this PE coming in to save the day as we've heard time and time again. Remember, it was public as well. So they're taking it private.

[Jason]

I have talked about how personally I've been concerned. I haven't seen the PE deals I'd hoped. Right. With these funds raised, it's a good sign, right? It's a vertical SaaS player. If you want to compare it to toast. I know a tough comp, but it's 2 billion versus 25 billion. But you could see the upside. Like there's positives and negatives in that. Right? Defensible. It is defensible. Right. Sticky. If you squint, maybe there'll be more of these vertical SaaS deals. 6Xrr though for us as investors, this doesn't buy the biggest house in Atherton. This is not going to buy a fourth house. Right. This is like at Yellowstone Club where we're just going to get a condo. We're not even get something on the hill at the, you know, at 6x are you right?

[Harry Stebbings]

It's a meat and potatoes deal. That was my aha. It's a 20% grower, profitable, 6 1/2 x, all's right with the world, sensible kind of deal. It's exactly the kind of deal issue. I think it went for 10 bucks a share. I think the damn thing went public for 25. So just as a reminder, what's happened here went public in 21. Hopefully the VCs made money. I can't remember who did the deal. Trades back way down and obviously it gets to a point where after three years, four years, people are willing to transact and the buyer's willing to pay six and a half times. So total solid meat and potatoes deal. And if you've got any more 21% growers that are profitable, that have, as Jason said, good defendable vertical niches, I'm sure they'd be glad to give you six and a half tons for that too. It's a start. But it's not going to save 500 to 700 unicorns single handedly.

[Jason]

I think that 20% number, we talk about it a lot in venture at scale. Right, but it's an example of how important it is. Right. You got to be above that number to be of interest, right? Probably. Right.

[Rory]

I'm profitable.

[Jason]

Yeah. Profitable, right, yeah. It's still probably rule of 25, we should look it up. Right. But you got to be above 20 and profitable. And there's too many unicorns that are profitable but not above 20 or 25. That's your 6x outcome.

[Rory]

What are they underwriting this to? Is this like a 3x?

[Harry Stebbings]

I think that business is inherently a 2 to 5x kind of business most of the time. So I'm sure that Tomobab, they're looking at this going, you know, the five other pieces of technology you can bolt on here, sell to the same customers, do the kind of thing that frankly PE does well to some extent, I would say better than us, which is just figure out what your top customers want, go buy the other little things, bundle it all through, get more share of wallet from top 500 restaurant chains and just build a business here.

[Rory]

Jason, does this make you more or less excited to be an owner seeing this happen?

[Jason]

Neutral owner is even smaller than toast. Right. So it's core customer today. There's a lot of overlap. Right. But it's smaller. So it just reinforces the non obvious thing that when you're selling to end consumers, the long tail is sometimes where the biggest dollars are not. I've Been on too many boards with SAS VCs who are always like, go more enterprise. Why aren't you going more enterprise? When they don't understand certain end vertical markets, right? And sometimes service tighten. It is very enterprise, right? It's not obvious. Like service titan is not a bunch of plumbers paying 20 bucks out of their own pocket, but more of this B2B2C that hits consumers the long tails where the money is. Even today, Shopify is very enterprise. Only 25% of their revenue is is an enterprise. So going to Rory's point, I don'. I'm sure the game is one way or another to combine those two with two or three players and build something that's three times the size. So I assume that's the playbook.

[Rory]

Guys, when I listen to this and I'm a founder, okay, I hear crazy payments being made for venture funds. I hear P coming in, I hear massive meme stock price rises. And then I look at Carter's data. VC deals at 8 year low and it's hard to raise money for a lot of founders. What world are we living in? And how do you think about these two kind of paradoxical statements of everything we've discussed combined with VC deals at 8 year low?

[Harry Stebbings]

I think they go together and it's tough. I think what's happened is there's a whole bunch of things all pushing. Some of these are really nice. A flight to consensus or a flight to quality. The truth is there's a small number of things that are working really well and everything else looks dull in comparison. And it's struggling to get attention. It's become a very consensus bet and there's a whole bunch of reasons for that. You know, we've talked about this before. The whole staying private for longer means a much smaller number of companies are going to get all the way and they tend to get all the attention. Second, entirely separate comment. I think the early AI market, the running in the early AI markets has been very much attention begets more attention begets more attention. So if you start to pull ahead, provided you continue to execute, it's very hard to catch up. I mean coding, for example, you know, I mean, just cursor, pull the head, it is better. But there was 20 people trying to do it. You get that early lead and it builds on itself. And then the other people just left in the dust. And it doesn't matter that they're nearly as good because the sad truth is no one wants nearly as good. So it's a very steep fall away. From the small number of things that everyone wants to a much wider number of things that might just be okay, but they're not amazing. Frankly, it's a very hard time as an investor if you're not in one of the amazings. You kind of have your sad face on, you're working hard, you're doing your job, but nothing's exploding. That's when you got to keep your head, keep the companies moving forward, converging on, you know, acceptable growth, acceptable profitability. But it's a weird time because you're reading about all this amazing stuff and then you're going back to your day to day job, which most of the time is a grind.

[Rory]

Is it really a sad face though? Because before I've said it's the end of triple, triple, double, double, and you, I remember said to me, oh, I'd take triple, triple, double, double all day long, but triple, triple, double, double bluntly is boring today. That's not zero to 100 million in a year. That's not lovable, Ratplet and McCool, any of them.

[Jason]

But you know what it is? It was funny this weekend I was talking with an entrepreneur that was on the triple, triple, double, double path in a space I know. All part of GTM that I know well. And the deal size was right. If this was even early 2023, I would have done this deal probably. But today it's just, there's so much competition. The differentiation is less clear. Great founder, but is he generational? I hate this term. I mean, I put Hayden quotes, Harry use it a lot. It's a fair criticism. But are they really a generational founder? I hate this term. I just, I said to the founder, there's no, I got nothing to criticize. You have the numbers, you have a great approach. You have. It's interesting in 2025, my brain, I just, this isn't. I only have so many shots on goal. I don't want to take this shot today. I think it ties to the Carta data, right? People want to swing more for the fences. Either it's there, it's off to the races, or they got to believe it. And it's just, it's just, people just got to swing harder. Nothing negative to say about this. Triple, triple, double, double, dude, nothing.

[Harry Stebbings]

Nobody stays down on the farm when you can play in the gold rush. The attraction of that kind of upside. The truth is it draws everyone's head if there's two games and one of them has that embedded 10% chance of amazing 20 billion a cursor outcome and one of them just doesn't. It's actually a very interesting math question to say how much cheaper does that other non cursor embedded upside deal have to be to cover for the fact that it doesn't have that kind of outsized tail outcome on it? And I fear the answer is either it has to be a lot cheaper or even worse, there's no price at which you'll do it.

[Rory]

But like the triple, triple, double, double less AI centric are not realizing that they will have a discounted price because they are not this new wave of company. And it's hard and I'm sorry for them, but it's just the truth.

[Harry Stebbings]

Agreed. There's a price at which you can make your target return. I remember looking at a deal that was strong founder, good economics, good growth, mid sized market. No, amazing. There's a price at which you'd say that has, you know, you want your base case return to work there. Right. But it's quite a big disconnect.

[Rory]

It's interesting though, Rory, if me and you were partners at Scale, and I hope I'm not overstepping here, but I would be like 1000%. Let's stick with triple, triple, double double because we have a much higher certainty of winning there versus going for the AI halo moonshots competing against Thrive and Founders and Andreessen where the scale enterprise brand doesn't carry the same weight that their glossy brands do and you have tiny chance of winning versus massive chance of winning in the triple, triple, double double where most people have left.

[Harry Stebbings]

I mean, and I will absolutely look at deals where you have that profile, but it has to have that profile, that valuation, it has to have that upside and that pricing such that you can pencil out the return. One of the problems with the private for longer dynamic is you can do those deals when they're already at scale if they're at 50 or 60 million and they're on that trajectory. Right. The problem is when you go super early and you predicate it on follow on rounds, some of your destiny is outside your control. And if people aren't willing to fund it, you have to have existing small S scale or you have to have sufficient traction that does, you know, I have to have confident profitability because it's not just enough that you have to like it enough people have to like it along the way to be able to raise the money and get there.

[Jason]

I'm more intimidated by the deceleration at scale of folks I did not expect to decelerate So I want to know earlier that you are clearly differentiated in a way that can win, which we gave up on in 2020, 2021, 2022. We didn't care what the difference was between a lot of B2B players. I'll do the triple, triple, double, double. But it's gotta be durable for real. Like I have to believe that that is just gonna keep going. You gotta dominate some segment of your market for real reason that is enduring.

[Harry Stebbings]

Everyone who's been in the business five or seven years did a whole bunch of deals that were growing like crazy, man. In 17, 18, 19, 2021, they've all decelerated at scale and they now have a bunch of deals at 100 to $200 million with 10 to 20 to 30% growth rate. And most of their waking hours is spent figuring out what the frick should they do with those deals. It's human nature. The one thing you don't say to yourself is, this is so much fun. Let me add to that collection. The other comment I'll make is this. The industry as a whole is probably making the same mistake with AI deals that it made in 2021 with a range of other SaaS deals, which is the extrapolation of the current growth rate to the sky. And you have to have some theory of the case and how it all shapes out now, you know, across the lovables, across the. And that's why, you know, I deliberately mentioned data center spend slowing down. You at least have to contemplate that and say to yourself, in the 20% chance where that happens, am I done?

[Jason]

The scar tissue from those 20, 2021 deals may be a small part of this car to slow down.

[Rory]

Speaking of riding momentum, we saw Vanguard adding PE exposure to a Jason point here.

[Jason]

Is this the top. I think it's a terrible sign.

[Harry Stebbings]

I mean it always. Look, it's definitely a sign. I mean, look, we discussed this. The industry keeps looking for new sources of capital in part because some of their standard sources of capital have issues to deal with. Most obviously endowments. So that's probably not as true for pe, they're just bigger. But pension funds. So yeah, people continue to look at other stuff. It's high fee bearing, which, you know, breaks your heart as a, you know, Vanguard ETF and mutual fund investor.

[Rory]

What does it actually mean for Venture, for me, sitting in my venture seat, Vanguard adding PE exposure. How much more money is going to come into the industry?

[Harry Stebbings]

All the PE shops have been doing some version of this. We talked about CO2 doing it in that crossover Blackstones and all those guys have been doing it. This is a category, this is a trend that's going to happen. I don't think it's going to be the same wall of money as sovereigns or pension funds. It's just another source of capital, another. Pick a number. 20% more. What the heck. And you know, I think structuring it for Venture will be harder because you have to make all these kind of partial liquidity assumptions, which will get tricky for Venture. I don't know if you saw it, but the. I can never pronounce the name. Elsie Stefanek, who continues her crusade to make Harvard's life misery, is indirectly going to make pe's life a misery because she's been saying, hey, Harvard, your accounting is incorrect because half your assets are PE and other private assets and they're not marked correctly. So that's kind of processes ongoing. So the whole process of private marks is challenging. And the less sophisticated the investor are, the less able that investor is to take the long view, the more challenging it becomes. And my guess is the retail investor is least in a position to do that.

[Jason]

Listen, here's a bad sign. They're partnering with Blackstone on this, right? And they want to offer PE access into target date funds. I mean, listen, we can talk about the pros and cons of target date funds. They, they have their place in a non tax.

[Rory]

What's the target date fund target is.

[Jason]

Harry, you don't even know anything about investing. When do you want to retire, Harry? I mean, I know, I know you're stuttered. What year would you like to retire?

[Rory]

80 years old.

[Jason]

So 2075. We have a 2075 fund for you and it will start off today at 95% equity, 5% bonds, and each year it evolves, evolves. And so when you hit 78, you'll be, I mean, Rory, you can connect me if I'm wrong, but you'll be 95% bonds and liquid and 5% equity. Right.

[Harry Stebbings]

It clearly seemed that you're not spending any time thinking about retirement, Harry, which entirely sensible at your age, but yes, Jason's exactly right. These are these structured products for the mainstream market. If it wasn't for the fees, they're a broadly good idea, which is you don't know Mr. Or Mrs. Whatever how to think about equity versus things. So we'll just make one big decision and we'll land the plane for you. The returns. Sometimes part of the issue is the fees are high relative to what you get. But it totally makes sense. But Jason, to your point, you're putting these in there and you know, one thing we know about venture is you can't target your return date. Right. If you could, it would be easier. So it's a hard asset to fit into a liquid individual portfolio. I think they'll try. I think it'll be hard to Terry's.

[Jason]

Point of Vanguard has 10 trillion. Putting 10% of that into venture would move the needle. But I just don't think ordinary investors should be doing this stuff.

[Harry Stebbings]

I mean, it's chasing return and that's always the nature of it. So.

[Rory]

But yeah, the hunt for Alpha continues.

[Harry Stebbings]

The hunt for Alpha always continues because that's what we're all paid to do.

[Rory]

You mentioned Harvard there and life being hard for them. There was the billion dollar funding gap and Stanford are doing layoffs. It wasn't huge layoffs, but layoffs still the same. How do we feel about the health of where they're at, how concerned one should be for them and how we should think about it?

[Harry Stebbings]

There's three levels of question here. If you're asking their impact on venture investing as a venture, as a source of capital, that's an easy question to answer. They're obviously going to be a lot less active next level down. Are you asking the impact on the institution? The kind of the wider societal things. But it looks tough. I mean, it's a terribly unfortunate way of making policy because a whole bunch of humanities kids yelled in the close about political issues. You're firing the poor guy who's been in his lab for 10 years trying to cure cancer. It's a very awkward way to make public policy and punish the wrong people to punish the institution. But I don't envy anyone running one of those institutions, and I hope they can figure it out because a lot of what they do is really good. Not all and not some of the most visible things. It's quite annoying. But when you look at the things that are being cut as distinct from the things where you kind of go, oh, that's a waste of money. The administrators ain't getting whacked at scale. These programs are getting whacked that are cutting science, that are cutting small grants to graduate students to do amazing fricking things just when they're most productive and useful. So I think it kind of sucks as an outcome.

[Jason]

I just thought it was interesting. I mean, not in a good way, but Stanford blamed its 140 million budget cuts on federal research funding. Right. Which is the issue that you're Talking about. But they also said a potential increase in endowment taxes. Like they had to, they had to lay off people and cut the budget due to endowment taxes. There is a cost to these endowment taxes, right? Taxing venture in a sense by taxing endowment. It isn't free. It literally did decline in investment and it's climbing humans. We did get a QSPS break in the new tax bill. I do like that.

[Harry Stebbings]

I do like that.

[Jason]

I do like that.

[Harry Stebbings]

I do want to ask that everyone got a little.

[Jason]

The deficits may ruin us. As Elon said, we all have to move to Mars. But I got my piece, I got my QSBS to 15 million and I'm excited for it. I got my piece, I got bribed in the tax deal.

[Harry Stebbings]

And what I'd really love to know and I just don't is I have this vision of this crazy sausage making machine and there's a whole bunch of agendas to pound it to the solar guys, to pound it to the universities. I mean this is an administration that has its hate list and works down through it pretty methodically and then somewhere someone crops up in a meeting. I can see it. But despite all this, guys, let's cut a deal for the QSBS guys. And whoever that person that was coming, whoever that person is, next time he's running through San Francisco, all he has to do is email me and I got him dinner. Because you know, you're sitting there and the way it works is they have a target to make in terms of money. And every time they stick it to someone and charge them money, you know, endowments, another 20 bill, getting rid of the EV subsidy, another 20 bill. And then someone had to say let's go backwards 15 bill to give it to these guys on QSPs. So whoever had the juice to push that, true. Maybe it's your Peter Thiel and the Bilderberg, you know, whatever conspiracy. I love it, I'm in.

[Jason]

Listen, we can explain it to it for folks. But I'm curious at your fun stage, when you write checks, if you had to spitball or ballpark at how much qsbs benefit do you get in the end at the GP and LP level? Like because some of it isn't going to qualify, right? Some of it's going to be.

[Harry Stebbings]

It's not as big a thing.

[Jason]

50% if that less than that for folks that don't know. And Harry, you might not even know in the, in the US. I mean my taxes in California are 50%. I know all you Brits are Complaining about taxes. I think Rory and I pay more than you, but we get one weird quirky tax break, which is if you invest in startups or small companies below. It was 50 million in assets. Now I think it's 75. You don't pay any federal taxes on the first 10 million in gains. Now it's 15. And every LP, to the extent their individual extent they're taxable. Every LP gets 15 million on their distribution too. No federal taxes. And California taxes it, which is pretty annoying. But most state, a lot of states don't tax it at all. So you could have no taxes at all on startup gains. And for whatever goofy reason, it got increased 50% in this tax bill. So we all, we all got our little taste.

[Rory]

So basically you have no cap gains on angel investing if you're not on angel investing.

[Jason]

Yeah. Up to 10 million. Now 15. And, and frankly, you can stack it with trusts. Like for me, it's probably 40 to 50 million per because I have five trusts on this. So that means for each exit I get 50 million. Has. Has no taxes. It's possible to do it to 500 million, but it's really comp. It's now 750 million, but it's complicated.

[Rory]

But he has a big condo in Yellowstone. Just.

[Harry Stebbings]

He clearly has a big combo. Yeah.

[Rory]

With his trust. Yeah. I have five Tr.

[Jason]

Only tax break. If, I mean, Rory makes the point is you'll take the nickels and you might as well pay 50% tax in California because it's the best place. But for me, this is my quiet motivator to do early stage investing. At least I, at least I can avoid, you know, 15 million of taxes per deal.

[Rory]

Okay, we're going to do a final one, which is Microsoft. Microsoft laid off 9,000. I know in the grand scheme of that workforce, it's not huge. It's still 9,000 people replacing General salespeople with solutions engineers. I was walking with a Clay founder the other day. They don't have salespeople either. They have pretty much the same. Is this the future for everyone? How did you see this?

[Jason]

This bothers a lot of generalist sales folks. We could have a longer discussion about thoughts on how much of sales will be replaced with AI. My rough sense is it's 30 to 40% of like one to two call sales reps are going to be replaced by AI. It won't. It won't be the same as with support, but it'll approach it. It'll be relatively small in the enterprise. Okay. Everyone's like oh, well, you can't go, you know, you can't go to Pepsi and AI is not going to show up. But you know what's going to happen? It's what Clay talked or forward deployed engineers or what's Microsoft's doing. We're not going to have a guy that doesn't know our product in the age of AI show up to big deals. I would rather have a solution engineer that knows this cold, that partners with somebody or is less good in sales. And so I think you better be worried if you're a generalist sales guy that thinks being a relationship guy wins today. It's. That's Microsoft's point. We don't need relationship people. Like AI has raised the bar for customer expectations. Here's the important point. It has raised the bar. Microsoft's doing what everybody wants to do. Replace folks that don't know my product with folks that do.

[Harry Stebbings]

What's interesting is it wasn't couched as a replace with AI story. It was couched as a replace with better people story. And it's hard to argue with that. I mean, it's always impressive. That's a random comment. It's always impressive to me that These companies with 40% operating margins are still willing to grind another point out of it. You know, it's just so capitalistic.

[Jason]

It's just great to see just related to it. I thought this, I could tie it back, but I thought it was super interesting. I didn't see many folks talk about it, but canva's doing an AI Discovery Week this week. Yeah, all 5,000 folks are released from their normal jobs to learn about AI because a lot of employees were saying they're too busy to learn AI. They're too busy. They're too busy at their daily work at Canva to learn AI. So there's teach ins and the CPR was very clear. Cameron, you've had free chatgpt for a year. You've had free Claude, you've had access. You can pick from a bevy of tools for a year, but you're still too busy to learn AI. So here's your week, guys. We're gonna have classes, teach ins, sit ins, we're gonna have a hackathon and it sounded great. The angst I hear from, from folks that have been around Rory for a while in B2B, the angst. And you see it on LinkedIn in person. Rory, I need to be reskilled. I'm frustrated. I need to be reskilled. I think reskilling doesn't work and I think Canva's basically saying shit or get off the can. Guys, here's your week.

[Rory]

I'm really sorry. They're twofold, I think. One, if you need a discovery week for AI, you have people who aren't curious enough to want to progress and learn in their job. No, I mean serious. It's a kind way to say I'm really sorry. I'm on the board of a public company and I got asked the other day, Harry, what do we do with employees who are not embracing it because they are fearful of it and don't want it? I said you fire them. Yeah, I'm sorry. It's super unfortunate. I do not say that happily, but if you don't want to embrace it, you are going to make this ship sink. If you need a week for rediscovery week, I promise you, you're not going to work and you're going to go and take the kids to the playground and go eat chocolate in the cinema. And you know what, you've got to be curious yourself. This is not the way to do it.

[Jason]

Well, it might be in that it is. I think a lot of leaders are trying to do gentle messaging, right. And stage it. And I think is may work for Canva or it may just be their warmer way of doing it. Right. Here's your week. It's also notice, right? It's notice to those folks too, isn't it?

[Harry Stebbings]

In many respects, you're both correct. To me, this was the performative. We're letting you all know expectations that way two months from now, to Harry's point, when you know, if you're deciding as managers that some people are surplus to Void, we're all humans. You can sit down with them in HR and say, look, you had your opportunity, you didn't take advantage of it. But we're going in, as they say, we're moving in a different direction. And here's your package, big picture, zoom in. There's lots of different ways to do it. Let's just say we're not talking about the new curse of startups where it's all people who are AI native, but all these large tech companies who have 10, 20 years of employees and you know, you gotta get on the AI journey. One of my big ahas is it doesn't matter how you do it. Don't over agonize it. Some people might just fire the people out of the gate. Some people might do a training week, some people might do a training month. We know the direction of travel Two, three, four years from now, you know, you're not going to have people who say, I'm too busy to use AI. They're going to be long since gone. You're going to have people have been automated away and then you're going to have people who are using the products and are doing the automation. How you do it, maybe how. He's just meaner than the nice people who on Canva, who seem to have done very well, by the way, by being nice. So. So let's not have any complaints about that.

[Rory]

And Cliff is amazing. He's the co founder and CEO. He's super nice, lovely dude, always been great to me. So that wasn't a shit on him, it was a shit on his.

[Harry Stebbings]

How much time do we all get to get with the program?

[Rory]

One thing that we did here at 20 BC is every Friday, everyone has an hour from 4 to 5 where they get to try new tools. Every Friday, it's much more nice to do it in a continuous way where it becomes a habit and it kind of becomes fun that you also do in the office together. And then we do a show and tell from 5 to 6 on what we've learned and what's cool. Really cool way to do it.

[Harry Stebbings]

Agree. That's nice. It doesn't matter how, as long as you just keep moving forward.

[Rory]

Okay, so we're going to do a Kalshee quick fire. As you know, this is like a speculative marketplace. There's bets. You always want me to say the exact odds, Rory. Quite rightly so. I will exactly for you this time at number one. This one's a good one. I love Sean. And so I'm going to get in the firing line here. Sean McGuire tweeted some controversial things recently again about your New York mayor thing. Sorry about that. And everyone's really quite upset about it. The question is, will Sean McGuire leave Sequoia this year? Yes. $348. No, one. $15.

[Harry Stebbings]

In other words, highly. And the market is saying highly unlikely?

[Rory]

Not exactly.

[Jason]

I'll take the bet then. That he will. I'll take this actual bet with you. Whatever the money is, I'll do the bet for real.

[Rory]

I'll 1000% do that.

[Jason]

Am I understanding this, that there's almost no chance he's going to leave based on this bet, right?

[Rory]

Pretty much, yeah.

[Jason]

I can tell you why I'll take the bet that he leaves this year. I don't know him. I don't know him. I'll take the bet.

[Rory]

Do you know his investments? Because if you knew his investments, you would never take that back.

[Jason]

I know, I know that. And it. There's different ways to leave. You could. I just don't think. Listen, we're in the age. One great thing about X is we, we see the grouchy billionaires, we see just how unhappy so many billionaires and mid centimillionaires are. The happy ones go off and leave their venture, multibillion dollar venture fund and join Meta, right? The unhappy ones just, just use this as an endless megaphone, right? And listen, I get his points and they're just so amplified, right? They're just so amplified. But you could leave as an investing partner, you could become a venture partner, you could transition. I'm giving myself credit for all of this bet, Harry, that it's. That the answer is nuanced. It's most favorable to me that. I'm not saying he's. He like is. Is like expunged from, from the website. I'm just saying if this keeps going week after week after week, I just think it's a sign his head is not in to the investing.

[Harry Stebbings]

I think a lot of his returns have come from working with Elon and Elon loves his shit. So he's actually giving, he's giving his client what he wants. He might get promoted for this. Congratulations, you pissed off 2 million people and the owner of X SpaceX and Tesla loves you, you in. So I actually think on the merits of whether or not what he said is going to result in anything, I don't see it. I'm on the no side. I mean the only argument for taking the yes, Jason, is more. Look, statistically X percentage of people seem to leave every year. So at some point the bet's not priced in.

[Jason]

That's what I'm saying. I think this is a tell. There's a higher than otherwise chance he leaves this year. That's all. I'm not saying anything more clever than that.

[Harry Stebbings]

Right.

[Jason]

I'm just looking for the tells. And as we've learned, we know a lot of folks in B2B that have quietly retired over the last year or two that it's not clear on Twitter they have. We know folks that have right state.

[Rory]

Of the economy at the end of 2025, soft landing 76% high unemployment 16% there's no actual dollars tied to this one for some reason.

[Harry Stebbings]

This is easy. Roughly one year and seven the economy is in recession. So you should say if someone asks you is it going to be recession? The default probability is about 16 to 20%. What this is saying is the economy is no more likely than not. Is it a normal probability of being in recession? And I'd say that's about priced right. I don't know what would cause it. Things in the short term. Well, so my perspective on that, it's a roughly correctly priced bet. You should wake up every day and say with no new information. The Bayesian prior is there's a 1 in 6, 1 in 7 chance that 12 months from now things will go to shit. And when you start seeing the VIX climb, and that's why you saw it when the tariffs come in, when the VIX starts to climb, that 1 in 7 chance goes to 1 in 4, 1 in 3 and then when things come down, it goes back to normal. What this bet is saying is we.

[Rory]

Think things are, quote, roughly normal now, end of 2025. Are you saying soft landing or high unemployment then?

[Harry Stebbings]

I think spot's about right. I'm actually indifferent on the bet. I would pass on putting money in that bet because I think it's priced. I don't have differential information other than maybe a better way to say it if it had.

[Rory]

Well then forget the bet. Just tell me which one you think it's going to be. Wise one.

[Harry Stebbings]

I'm not going to tell you because the whole point. Actually that's why you're asking a dumb question. Harry, all you can.

[Jason]

Kalshi's worth 2 billion. There are no dumb questions. There are no dumb questions on Kalshi.

[Harry Stebbings]

There's no evidence anyone can call it. Actually, I think Kalshi. By the way, this is the real insight here. Kalshi is calling it correctly and I agree with Kalshi. Kalshi is saying that the probability of. There's no more information about the probability of a recession at the end of next year than it's just the normal year. And I'm with them on that.

[Jason]

But if it is one in seven, right, the odds have to increase as you haven't been in a recession for multiple years. So how does that pack into the bet?

[Harry Stebbings]

It's a very interesting question. I'm going to answer that because what the fuck?

[Rory]

He has an interesting question and I get a stupid question.

[Harry Stebbings]

No, no, no, no. Okay, well, you said it, Howie.

[Jason]

It's like flipping coins. This is the opposite of a flipping coin. It doesn't make the higher the heads are here.

[Harry Stebbings]

But this is the opposite as an expression. Boobs don't die of old age. In other words, what you're saying is just because it's been great for six or seven years. Doesn't mean that it has to die in the eighth. Australia had this run of 17 years without a recession. Logically, my mind says it should mean that. Unless what really happens is, we said your booms can go on quite a long time. Unless people do dumb shit. Now, because we're humans, we invariably do dumb shit. But if that didn't happen, it. You know, it could go on for a while.

[Rory]

Yeah, thanks for that one, dude. That was. That was smart, dude.

[Harry Stebbings]

Oh, yeah.

[Jason]

There's no chance we have a recession.

[Harry Stebbings]

At the end of the year.

[Jason]

There's just no chance.

[Rory]

So no chance.

[Harry Stebbings]

That's a one in seven chance.

[Jason]

I'll take that. I'll take that. I'll take that. But I'll put a grand in on that.

[Rory]

He's putting bets down all day.

[Jason]

I'll tell you why I would do. Actually, I would probably do like 50 grand instead of a grand if you want to do it, Rory. Because the technical definition of a recession is pretty tough to meet.

[Harry Stebbings]

True.

[Jason]

I'll put 50 grand on this one if you want to do it. Because I think even if we are, I don't think there's any chance we'll be at a recession in the year. But I think even if we are, it's not going to be called a recession yet. Right. It's already July. Thinking maybe 75 grand. I'm going in on this bet now.

[Harry Stebbings]

I'll pass, thanks. But that's a good point. You're right.

[Rory]

It's always the highlight of my day. I have the most fun on these calls. Honestly, I love doing this with you both. Even if it's incredibly humbling. Being informed after 10 years of asking questions, I still ask shit questions.

[Jason]

I think you're pretty good.

[Harry Stebbings]

I didn't say.

[Rory]

Thanks, Jason. I love you too, dude. I miss you.

[Harry Stebbings]

Okay, what else? Come on.

[Rory]

Okay, final one. Linda Yakarino. Does she leave X this year?

[Jason]

Jason, this is a tough one, right? As an outsider, I don't see any merits in her. Right. I just. Not from day one. Right. It's hard to see. But. No, I just. I just. I just don't see it. Right. There's so many public CEOs, and the fact that on a social media platform, she's chosen not to be insightful in public, I think is a bad tell. Right. Having said that, there's just no way he wants to run this thing. Right? Especially the. The core X. She's not working on AI and Grok, right? She's managing Advertisers and the P and L. So I think if it's not broken, he's not going to make a change. So this is a, this is a murky one. But I say she, she's, she's here through the end of 2026.

[Rory]

Wow. Through the end of 2020.

[Jason]

He just fired his head of Europe. Now he's head of European sales for Tesla, too. I mean, you can't. It sounds fun to fire everybody on the team and there are moments in time when you need to, but, man, you got to keep a few pieces going on the board. It's just, even if you're on Adderall or whatever he's on, there's only 24 hours in the day. Like, I think he's going to keep this soldier in place.

[Harry Stebbings]

Yeah. I think the interesting one, obviously this week was the market response to the New Party, and correctly the Tesla response to the New Party, which was shareholder barf. And I was just reading. Is it Dan Ives straight away, you.

[Rory]

Guys both, you both said no to that, by the way, Harry.

[Harry Stebbings]

And the definition of a good kind of forecaster, and we've talked about super forecasting, I think, before in Philip Tetlock is you update your priors with new information. The fact that he went on to form just go down that route, I.

[Jason]

Think I was still right.

[Harry Stebbings]

Would update your priors on the. Would he still be CEO at the end of next year? You kind of say to yourself, increasingly, are you the right person to be running that company?

[Jason]

I don't think he formed a real political party the way the bet was. That's why not to spend too much time. I don't think he's not going to run candidates in all 50 states. He's not. This is a tactical move that is, if it happens, is at the edge of what a political party is. So as much as I love Kelsey, you got to give me a little credit for definitions here, like recession or political party. Right.

[Harry Stebbings]

But Tally was a lawyer, can't you.

[Jason]

Jesus.

[Rory]

Yeah, come on.

[Jason]

No, what he's apparently doing is cleverer than I thought. You're just going to contest a few elections where money matters, right? And that's it. If that's what he does, it's very different. But it's.

[Rory]

I want to point down, Jason, you, you've said very clearly. Yes. You think she will.

[Jason]

Yes.

[Rory]

Rory, are you quite as blunt as saying she serves no purpose?

[Harry Stebbings]

I, I, I don't know enough to comment, so I'll pass on that. As I say, I'm more willing to be opinionated on the wider CEO issue, but I'm not opinionated on that. I don't have a clue.

[Jason]

I mean, she has a tough job, but if you run a social media platform, how can you not be out there? It's just weird, isn't it? She's coming on 20 VC anytime soon. Let's get her on. Terry, I want to see you and her. Just tell her it's a friendly environment. I want this question answered.

[Rory]

Final one, it's not a bad and stupid thoughts. Does coreweaven circle sustain the super high stock prices? Does the memeification of their stock deflate?

[Harry Stebbings]

Yeah, I mean if it is a meme, yeah, then it does of course deflate. The real question is did the investors at the time of the IPO significantly underpriced the asset and have now people realized that in fact the correct price is the much higher one? When we looked at the circle numbers at the price they're trading at, it felt very lofty relative and traditionally most of these post IPO or pre lockup stocks drift down significantly if the valuations are way above any kind of near end fundamentals. So you've got to believe the downward pressure is there.

[Rory]

Right? Boys, time to wrap. This has been so much fun. I love doing this. And again, Rory, thank you for coaching me on questions. I'm getting better one day. One day.

[Harry Stebbings]

Don't be rude. I'm going to pause and say it wasn't that you guys. I actually thought Jason's is a really interesting one. Seriously. It's the. Does the probability of a recession increase every year that goes by without one? It's the classic in statistics. Are they independent on correlated events or is there some kind of buildup? There's no reason that there should be a buildup, but in fact there is, because humans. The reason there is a buildup, the reason Jason is more right than me actually, upon reflection, is because when times are good, people pile up the dumb aggressive shit to make money and the minute something goes wrong, it blows up in their face. So at the margin I would actually revise my opinion and say Jason is right. The longer it goes on, the more likely it is eventually to blow because of actually ties to your core. We've come, stocks get high, things get expensive, people take on debt, they do aggressive things. You wake up one day, the Charlie Kindleberger thing, manias, panics and crashes and you're done. Right?

[Jason]

Just to wrap Harry, the one thing I will say I don't know in all Seriousness, I don't know anyone in tech media that can cross as many domains as successfully as you can. So a lot of respect to the I mean you can get really good at a narrow thing but I don't. I mean your ability especially over the last two years to jump every I mean the type of guest the domains right. I can't think of anyone else that can go that deep and thoughtful. So kudos. Kudos to you for that one. It's easy to go deep on one or just be a student but pretty much S tier.

[Rory]

Well I super appreciate that. I leverage wise friends like you both so I appreciate you both.

[Harry Stebbings]

This was good.

[Jason]

Still a pasta.

[Rory]

My word. I was almost getting emotional hearing that from Jason. Now if you enjoyed this show today, you can check it out on YouTube by searching for 20VC. I always love to hear your thoughts. So let me know what you think by letting me know harry0vc.com but before we leave you today, let's talk about agents. Specifically Piper, the AI SDR agent brought to you by Qualified the agentic marketing era has arrived and if you're a B2B marketing leader looking to scale scale a pipeline generation. Piper the AI SDR agent.

[Jason]

Wow.

[Rory]

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