← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: Musk's $TRN Pay Package Broken Down | Ramp Hits $1BN ARR and Brex Hits $700M: Who Wins | OpenAI's $10BN Secondary Sale | Atlassian Buys The Browser Company for $610M | ASML Lead Roun into Mistral at $14BN Valuation
01:27:56
AGENDA: [00:05] Musk’s $1 Trillion Pay Package: The Breakdown? [00:15] Scale, Windsurf: Are Founders Just Mercenaries Chasing Cash Today? [00:21] Ramp at $1B ARR, Brex at $700M — Is AI Causing All Boats To Rise? [00:26] Sierra at $100M ARR Worth...
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- [00:00]
Rory O'Driscoll
The real truth is the buyer has cunningly eviscerated the brains and the heart of the company and left the carcass. And we're going to pretend it's real, but it's dead as the dodo. And everyone knows it. But no one's going to go on the record saying it.
- [00:13]
Jason Lemkin
If scale was for sale for 28 billion, Brett's got to be worth 56 billion.
- [00:17]
Rory O'Driscoll
I didn't leave Hollywood. Hollywood left me. This is venture capital today.
- [00:21]
Jason Lemkin
And this is the greatest wealth creation, wealth hunt, greed hunt, venture hunt ever. Venture rounds are all getting done on Saturdays. Forget about no diligence being done two years ago. Diligence isn't even being attempted. I think the best control today would be if more founders that committed fraud went to jail.
- [00:41]
Harry Stebbings
You are listening to 20 VC with me, Harry Stebbings. Now it is my favorite show of the week. Rory o', Driscoll, Jason Lemkin and Twilio's founder, Jeff Lawson join us in the hot seat for a very special guest appearance Today. We discuss everything from Elon's trillion dollar pay package. We discuss anthropic's billion and a half dollar payout to Authors OpenAI's biggest liquidity event, to their employees sale and much, much more. I want your feedback. I want these shows to be the best they can be. Let me know harry0vc.com but before we dive into the show today, let's talk about agents. Specifically Piper, the AISDR 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.
- [01:29]
Jason Lemkin
Wow.
- [01:29]
Harry Stebbings
It is here to help. Piper is the number one AI SDR agent on the market according to G2 and HU. Hundreds of companies like Box, Asana and Brex have hired Piper to autonomously grow inbound pipeline. Fucking sign me up. Anyway, qualified customers see massive business impact with Piper. 3x increase in meetings booked and 2x increase in pipeline. Wow, that is some results. Hire Piper, the 1 AI SDR agent and grow your pipeline today. Learn more at qualified.com 20VC that's qualified.com 20VC with the 20VC spelled out in letters for goodness sake. And while Piper builds your pipeline, Attio gives you the CRM power to close and grow those relationships. Attio is the next generation of CRM built for the AI era. Fast, flexible and powerful. No, it's not a sports car. It's a CRM system, baby. It is Attio and it Takes less than a minute. Sync your email, your calendar and you'll instantly get all your relationships enriched in real time with incredible data, no manual input needed. Attio also integrates with your existing tools and syncs with your product data to deliver an AI native platform that's tailored to how your team actually works. You can model your CRM around your business, automate complex tasks and surface real time insights all in a platform designed to scale with you. With Attio, AI isn't just a feature.
- [02:54]
Host/Interviewer (possibly Harry Stebbings or a co-host)
No no.
- [02:55]
Harry Stebbings
It is the foundation. It's powerful. It's AI automations. It's research agents that transform your go to market motion. It's a data driven engine. From intelligent pipeline tracking to smarter product led growth, fast growing startups like Flatfile, Replicate and Modal are experiencing what's next. So get ready to build without limits and start now. Attio.com20VC and get 15% off your first year. That's attioattio.com20VC. Okay, pipeline sorted. Woohoo. Now what about your own legal team? Enter Logora. Logora is the category defining AI platform that's fundamentally reshaping how legal work gets done. About frickin time. Empowering lawyers across tier one law firms and in house teams to achieve more more with greater precision and confidence. So Ligura does this by solving really concrete tasks such as document extraction, reviews against a firm playbook and suggesting well crafted markups directly in Microsoft Word based on your preferences. My Word, that is a topic list of conversations that will not get a second date. But anyway, the adoption of legal AI is surging across the world and Legora is at the forefront of this shift as the chosen partner to 250 industry leaders in law across more than 20 markets. The likes of Goodwin, Bird and Bird and Deloitte. Making daily use of Ligura platform to review and research with precision, draft Smarter and collaborate seamlessly. They recently also got an $80 million Series B from Iconic. They're backed by General Catalyst, Redpoint, Benchmark and yc. Also they operate out of New York, London, Stockholm. Yes, they're Swedes. Always a wonderful race. With over 100 employees from some of the world's leading global law firms and tech companies, the team is growing super rapidly. They're just freaking awesome. Just go use Legora. Honestly, I love Max, their founder. He's just a great dude. Go find out.
- [04:48]
Rory O'Driscoll
You have now arrived at your destination.
- [04:51]
Harry Stebbings
It is my favorite show of the week.
- [04:52]
Host/Interviewer (possibly Harry Stebbings or a co-host)
I'm so happy to be back with the one and only Rory o', Driscoll, Jason Lemkin and our special guest today, Jeff.
- [04:59]
Harry Stebbings
It is awesome to have you with us.
- [05:01]
Host/Interviewer (possibly Harry Stebbings or a co-host)
So Jeff, first off, thank you for agreeing to do this with us today.
- [05:04]
Jeff Lawson
Great to be here. Thanks for the invitation.
- [05:06]
Harry Stebbings
Now we're going to start with the.
- [05:08]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Most pressing or a big element of.
- [05:10]
Harry Stebbings
News which was Musk and the first trillion dollar pay package breaks all prior.
- [05:16]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Benchmarks in terms of a trillion dollar pay pa.
- [05:19]
Harry Stebbings
I'd love to hear how we thought.
- [05:20]
Host/Interviewer (possibly Harry Stebbings or a co-host)
About this and whether this is a.
- [05:21]
Harry Stebbings
New normal that we should be expecting.
- [05:23]
Host/Interviewer (possibly Harry Stebbings or a co-host)
To see for your Sam Altman's of the world or this is a one off exception. Rory, I know you love it when I go to you first.
- [05:30]
Rory O'Driscoll
Yeah, I like this question. It made me think a lot and I did a little work and I think there's a lot to unpack here. Let's start with the first thing I always say this compensation is how boards reveal their real priorities. Nothing else matters as much. So you can tell everything about what the board wants in terms of how they structure the CEO package. So there's two or three things here. One is, and I read the proxy about it, it's 322 pages. I didn't read all of it, but I got to around 150 pages. What's clear here is this. The board wants the Elon bet. That's just super clear. We feel they owe him the past and they're going to give him the future. The second thing is they really did believe that if they didn't give him the extra 12% on top of making good the stuff that was disallowed in 2018, he might walk. I mean that's in the thing every time. Rightly or wrongly. You can argue that, but that's clearly what they believe in the proxy. And then the third, I think the most interesting thing is they're really paying him to double down again. The trillion dollar headline is obviously a big headline, but some of those operational and market cap goals are huge. It's basically the board saying we're the 8th or 9th largest market cap company on the planet. We'd like to double down again and be by far and away the largest market cap company on the planet. That's the bet we as a board want to make. And Elon is the way to make it. So when you look at it, you go, I mean, you look at it, you've got the market cap metrics. I think 8 trillion is the maximum cutoff. So you got to make something with 8 trillion. You got EBITDA criteria, you got to make 400 billion in EBITDA. For context, Google, the most profitable company this year, makes 100 billion. So you got to make four times more than Google. And then I think the most interesting one was the four kind of what I always think of the most interesting metrics. Not the money metrics, the what do you got to do metrics. 20 million total cars. That's doable. They've already done 10, 10 million in FSD. That feels doable because why would you have a Tesla and not get fsd? I love my fsd. I'm a crap driver. But then the other two are, I think a million optimus robots. And I want to say, don't quote me about a million robotaxis. So when you look at those criteria, they're basically saying double the existing business, but on top of that, build a whole new business on top. This is a board doubling down on Elon. This is the bet they wanted. I mean, we can discuss whether they should want it or not, but it's actually intellectually very clear. I find it pleasing. If you wanted this bet as a board, this is exactly how you go and buy this bet from Elon. You say, I will give you a shit ton of money if you take our trillion dollar company and you double the quits at that level. It was like.
- [07:58]
Jason Lemkin
Yeah, I get it, Jeff, what was it like on the other side of Twilio with your comp? I mean, thinking back, your comp package, because you, I mean, maybe they didn't offer you a trillion. I don't remember. Did you have one of these crazy packages? Because they're becoming more common with startups now in my portfolio. I.
- [08:11]
Rory O'Driscoll
It.
- [08:11]
Jeff Lawson
No, I actually never wanted major comp. Like as a founder, I had ample equity and I always thought comp, generally speaking, just distracted. Like all the time spent on that. At least for me, one of my principles of compensation was always the more levers and knobs and things you put into a comp package, the more opportunity it is for someone to just think it's unfair. The idea was once you pass the bar of fairness. This is Daniel Pink's whole philosophy from his book Drive, that once people believe they're paid fairly, they focus on the work. The only thing you can really do with all these knobs and levers and variable comp packages is take someone who thought they were comped fairly and then suddenly make it feel unfair because, oh, we missed that metric, or that I did my part, they didn't do their part, whatever. And So I always wanted as simple as possible compensation for the team and that also went for myself. And so whatever they gave me, I just said thank you and that was that. The more complicated you make these comp packages, the more shit can go wrong.
- [09:03]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Dario Sam Altman, Mike Truel at cursor. You name any of these great founders who are very pivotal to a could look at this and go, well, this is a new benchmark. Do we see this as a turning point in how we incentivize CEOs at scale given how central they are to businesses? Or is this a one of one with Elon?
- [09:22]
Jeff Lawson
I think this is the new standard for anyone whose board consists of their brother in law and other relatives.
- [09:28]
Jason Lemkin
It's a good point. I find boards are more and more created by founders. They're more and more great job and everyone wants to get into the deal. I think everyone's got in a sense their brother in law and ex boss. On the almost all my portfolio companies, the founders control the board. Not just from a cap table perspective, but from a relationship perspective. They control it. And I, and I don't know what you guys see. I see all these deals happening. I see lots of deal. Once you've crossed the unicorn, which now is like a series A, every CEO is getting some founder, CEO is getting some massive upside package with massive goals. Instead of, instead of a top up for 2 or 3% after you've struggled for five or eight years, they're getting 7, 8% or more.
- [10:11]
Rory O'Driscoll
More.
- [10:11]
Jason Lemkin
But you've got to have a massive outcome. 10 billion, 20 billion, 100 billion. It's becoming the growth VC playbook for right or wrong.
- [10:19]
Rory O'Driscoll
And it's definitely happening. And if you go back to the first Elon Kahn package in 2018, there definitely was a wave of wannabes that copied that. In the two or three years after that to the end of 21, it wasn't everyone. To your point, Harry? Well, it was about 10. My guess is 10% or less of CEOs went for it. And the first thing is it was typically the CEO asking for it. For some CEOs, something like this becomes important and motivating and you can't ride every horse the same. And some folks are like, this is the core of who I am. And I think Elon is the Uluru example of that. Right. I don't particularly love that style, but it's like it's all about me and I am the most amazing person in the universe. Compensate me accordingly. So to some extent as a board, you're left saying, what do you do in that circumstance? Now, you could have done, to Jeff's point, you could have done the bluff game and say, I don't think you'll leave if we won't pay you. My guess is they were angsty about that. Not saying rightly or wrongly, but that's the thought process. Once you don't believe that to be once you think someone can leave. And by the way, the one person who can leave is someone who has three other gigs that are equally exciting, which is why your leverage is lower. In this particular case, once you've kind of crossed those two doors, you have the person who wants the egotistical win and he might leave without it. Then you're left with a negotiation exactly like we just saw in Elon's case. I don't think that's the norm. That will be the high water mark. Not the norm, but I definitely think, like all high water marks, it will push up other people's demands and aspirations.
- [11:47]
Jeff Lawson
Roy, have you thought about the fact that maybe this isn't about upside? You made the upside case that this is all about building a multitrillion dollar business. Now what about the downside case? The downside case being that Tesla is overvalued and that it's all the cult of personality of Elon Musk that creates that value. And if he leaves, the house of cards comes tumbling down.
- [12:07]
Rory O'Driscoll
I totally agree, because there are two risks. One is the if you were valued as a car company, you'd be valued at around 25% of where you are now. Maybe this is a car company worth 25% of our current market cap. And then Elon Special Source, which is the other 75. So as a board, you probably feel a huge amount of pressure to keep that person. You're exactly right, Jeff. And the other thing is. Yes, because the other option you could take, which they're clearly not, is to say, I mean, this is going to sound really hard. Knowles, you've built an amazing car company. We're a car company. Let's manage it like a really great car company. Let's accept that we don't want these future bets and you could get a different person to manage that company. But you're right. The problem with that negative vision is you're right. The stock will be down 75%. Next step. The individual shareholders, who, let us remind ourselves, have revoted this the prior comp plan twice when they didn't have to. They're like the people who own this company want to make this bet, I personally find it a little terrifying. It's such a risk on bet that it makes my head hurt. That's what they want to do. And you're right. The odd thing is, if that bet were canceled, if the board said, we're not going to do that bet, we're going to play it safe. Jeff's exactly right. The stock would go poof. And as a board, you would be dealing with lawsuits from here to the end of human time. So it really is a prisoner's dilemma. It's kind of a scary board to be on. I admire their courage. You get compensated well. I think they have one of the best bored comp packages on the planet. But it must be a really odd dynamic negotiating with Elon, knowing that, as you say, Jeff, if you try to demonstrate resolve and he threatens to walk, you're down 75% next morning. That would be tough.
- [13:41]
Jason Lemkin
The tough thing is, you know, we've changed so much in tech the last, like, 18 months. AI, the AI greed, which is not all bad. What Jeff said is how I felt as a founder. Our generation, it's not that long ago. I've got enough. If I'm in the double digits, like, don't get me wrong, I'd love more. I wish I hadn't taken all that dilution in the seed round. But this is about a team. I'm driving a team on a huge journey. Leave me alone, take care of my team. I've got enough, right? It'll work out. I think that's what Jeff said. That's how I felt. I don't hear that too often anymore. I think we've changed. When your cognition and you go, and this is amazing, you go from nothing to 10 billion in what, 18 months, Harry or whatever, you just. This isn't the Twilio grand grind or the Stub. I mean, Jeff was at StubHub before that. They're finally Ipoing now. This is a different world, and folks are building great teams, but they're mercenaries. I want to cash out at OpenAI for 10 million after 12 months. It's not bad. It's just. I don't hear what Jeff said much from the kids these days.
- [14:35]
Jeff Lawson
Well, can we even just talk about the idea that founder CEOs quit to go join Meta?
- [14:41]
Jason Lemkin
It's crazy, right? Or Open AI.
- [14:43]
Harry Stebbings
What's your take there, Jeff?
- [14:44]
Jeff Lawson
What's the policy of profanity on this podcast?
- [14:47]
Host/Interviewer (possibly Harry Stebbings or a co-host)
You're not saying that you want. I'm British, so, like, we swear all the time.
- [14:52]
Rory O'Driscoll
It's Good.
- [14:54]
Jeff Lawson
I am accustomed to the founder, CEO being the most committed, the most long term oriented, and the most visionary of the group. And that's what makes startups great. And so when the person, it turns out, is just a mercenary and will go anywhere for a higher paycheck and leave the rest of the company that they started and they run to flounder, I'm like, as Jason said, this is a whole different world of why people are in the startup world to begin with for I think a lot of folks. And I put myself in this bucket. It was missionary. It was like, you believe the world needs this thing and I believe that that's the best reason to start a startup. Because if you just want to make money, probability adjusted, you should just go get a job at a hyperscaler. Probability adjusted, you'll make more money. So you don't start companies to make money. You start companies because you love what you're doing and you think the world needs to have the thing you're building.
- [15:42]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Do you think an Alex Wang is wrong then? I mean, his investors made a huge amount of money. It was a great deal for them. It was a great financial deal for him. Was he wrong to do that?
- [15:51]
Jeff Lawson
I think it just shows that it's a mercenary move.
- [15:54]
Jason Lemkin
It is, but are we old?
- [15:56]
Jeff Lawson
Maybe, Maybe. What about.
- [15:58]
Jason Lemkin
I don't see it anymore, Jeff. I don't see it. Since 2022, I don't see it.
- [16:01]
Rory O'Driscoll
Okay, so first of all, yes, you are old, Jeff. I mean, that's an objective fact. I didn't think I'd be defending the mercenaries here.
- [16:09]
Jeff Lawson
No, that is literally subjective.
- [16:12]
Rory O'Driscoll
Okay, we're gonna have to put a pin in that one. Okay, you're right, Jeff.
- [16:15]
Host/Interviewer (possibly Harry Stebbings or a co-host)
You are right.
- [16:16]
Rory O'Driscoll
My age is a fact. But whether it's deemed old or subjective.
- [16:19]
Jeff Lawson
Oh, God, yeah, because from your perspective, I'm young.
- [16:23]
Rory O'Driscoll
You're totally right, by the way. That was another dig. You're two up.
- [16:26]
Jeff Lawson
And from Harry's perspective, we're all old. Let's see how this works.
- [16:29]
Rory O'Driscoll
Let the record show 20 minutes in, we decided gloves are off. Okay, I'm going to defend those two transactions. First of all, I love your framing that you should start a company because you're not doing it for a rational risk adjusted return. You're doing it because you have a mission. You want to change something. I would argue in both Scale AI's perspective and WinService flat perspective, the objective facts were the offers being made. Let's call them the attempted acquisitions. Because I think in both cases the acquirer would have just bought the company if they'd been let. The offered acquisition was well in advance of the company's work at the time and probably in my view their worth at any time in the future. So it's their highest and best exit. And to some extent they should think about taking that for themselves or their investors for as many of their employees as possible. Because I think primarily of antitrust. In both those cases they couldn't do the clean here we just own the company thing. We had to just do some kind of bullshit structure. In each case it was kind of weird. The casualties from that were you did blow the social contract for a number of the employees, I do believe, and I think the data's come out. In both cases there were residual money left to make the payout. Cause remember, the people who get left behind aren't the longest tenured engineering employees. It's typically people who joined in the last year and a half. Maybe the total ownership is some 5% of the cap table. It would have been entirely possible to take care of them as if they'd been acquired while still doing this deal. And I'm not sure if they did or not. And it's kind of in the murkiness of the underground shatter if they did, then I would argue those founders did the right thing.
- [18:09]
Host/Interviewer (possibly Harry Stebbings or a co-host)
But if you look at the people who did really well from that say your excels in scale, they have the University of your Wisconsin or Michigan, or the Cystic Fibrosis foundation, the Children's Hospital of Atlanta, or all of these amazing institutions that got back a load of money and are able to do things now for scholarships in education, for medicine that they couldn't do without that money. And a thousand people at scale who were in marketing or sales now will have to go and get another job at Cognition in the Valley.
- [18:38]
Rory O'Driscoll
I think that's fair from the VC's perspective. I think what but all the other board members that are not the CEO and founder have the pure fiduciary obligation to do the smart thing. And all those venture guys did the smart thing. And I'm sure they're glad their LPs are happy and I'm sure they're glad they're happy. Let's get real here people. I think what Jeff is saying, it's true, is it is different for the founder and even though legally you have the same duties and obligations as a board member as everyone else. I think the interesting question a lot of this kind of corporate law stuff raises this. I think for the founder it is their. And I'm thinking about this in terms of these two deals, in terms of going public, dealing with post public stuff. It is their baby. And I always feel in my head, and though you can't articulate, especially in a public company boardroom, the founder has the right to be slightly different and pursue their vision, they have a little more leeway to say, this is what I want to do, right? And I do believe in both those circumstances, if the founder had said, no, I believe we should go on here, I think the VCs would have gone on. And if the founders say, I want to fold, I think the VC's fold. So the practical reality is it is a founder decision with everyone acquiescing.
- [19:43]
Jeff Lawson
But what is this scenario? Is this a fold or go on when it's like, no, no, no, the company should go on, just not with me, because I can go make no one else can.
- [19:51]
Rory O'Driscoll
I just be very clear on that. In both of those cases, that's a pure pretense to get the government off our ass. Everyone knows both of these companies are toast because in the case of scale AI, in theory, Meta owns 50% of it. And in theory, their business is selling to everyone but Meta. And of course, no one's going to buy their shit anymore. In the case of Windsurf, the carcass was gone five days, three days later, the CEO who's selling out has to pretend, oh, this company's going to go on without me. The real truth is the buyer has cunningly eviscerated the brains and the heart of the company and left the carcass. And we're going to pretend it's real, but it's dead as the dodo and everyone knows it. But no one's going to go on the record saying it except Rory. Look, let me give you a clue. If it was my billion dollar cap game by not admitting it, I would be quiet and stumped too. I would be just following my MDA.
- [20:43]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Guys if we cross over to the private markets a little bit. Turning tact on this conversation, there were some pretty astonishing announcements this week. First ramp hits, a billion in error. Brex hits 700 million in error. Brack's growing 50% after a little bit of a rough patch, but seemingly back on now. Is everything just booming? A billion and 700. Is everything just working?
- [21:07]
Rory O'Driscoll
No. I mean, I wish they were. I'd love to say all tides are rising. You know, I'm not one of those VCs that go, everything. Our portfolio is killing it. No, all tides aren't rising. I think those two businesses are good businesses at scale. They've regrouped. In the case of Brexit, the kind of business they are, they're selling money and they get interchange revenue. It's possible to ramp those businesses very quickly. So I think they're perfectly good businesses in a good place. I don't think everything's going at 50%. I mean, you know, they're good businesses with interesting dynamics. They're not really selling software, but you know, most of the time they're selling companies a credit card, which means extending 30 day credit in return for interchange, which they share with the companies, which means your margins are much less than typical software. But if you're willing to lend money and ramp aggressively, no pun intended, grow aggressively, you can make revenue grow. They're cleaning amex's clock.
- [21:56]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Rory, should they be valued like traditional financial services businesses or should they be valued like a new technology first provider?
- [22:03]
Rory O'Driscoll
I would think that's kind of a bullshit question because in the end everything should be valued on a basis of risk adjusted free cash flows. So just start with that. But what you're really saying is what's the best in the absence of, of free cash flows, what you're really saying is what's the best rule of thumb to value those things? The truth is they have the margin profile and core dynamics of a financial services company, but they have the growth rate of a software company. You have to adjust and come somewhere in the middle with the expectation that. This is the key sentence. Once the growth rate slows, they will be valued just like if they're growing the same as Amex, they will be valued the same as amex. The growth is what's saving them.
- [22:41]
Jason Lemkin
I do think Terry's point, the AI boom is filtering further and further down the stack and wider. We're seeing Broadcom explode, Cisco. Cisco, that's where our grandpa learned to be an engineer. It is accelerating, right? Twilio's seen some acceleration from AI overall at an uber level. It's not an AI company. No need to talk about Twilio per se, but I think we are seeing it. And I do think if you're a B2B company and you're seeing nothing, you're not seeing any boost from AI. You didn't get OpenAI or anthropic as a customer, you're not seeing any benefits. Like you get an F, you get, you get an F. There's so much money flowing through this system and, and OpenAI and Anthropic Alone are spending so much of that money, right? I mean, they're, they're spending it. You got to get some guys. It's like fish food at the top. It's floating almost down to where it's dark in the ocean now. It's embarrassing if you can't get in of it.
- [23:33]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Dude, sorry, that's metaphor of the day.
- [23:38]
Rory O'Driscoll
Do you have thoughts on that?
- [23:39]
Jeff Lawson
Well, yeah. Okay, so I think we hit a bunch of things here. First question is, is the growth of say, ramp or Brex indicative of something bigger? And I don't know, but I think you're right. Right. If it's deposits, basically money getting spent, then it's not really about ramp and Brexit's about. Okay, how much venture capital has been deployed in the last 18, 24 months. And you look at. There's a fair amount of it. Well, great. It's got to go into some banks. So are they winning some market share? Probably. I know I use Ramp for my most recent ventures. And so they've got a great product out there, which is fantastic. And so. But are they. Is it all because all their customers are crushing it, or is it because there's just money out there? Are they winning market share from legacy companies that could be also part of it. And then lastly is like, if their revenue is based on this debt product, then great. Maybe companies having debt on their books is a sign of not awesome things happening. All that is to say, I think Jason's really right. There's clearly a boom that's going on because of venture capital fueling it, which just pushes the question to great, when will there be the returns that everyone's expects and on what timeframe? And that's the big open question, it seems now. But from a infrastructure provider perspective, we certainly saw this at Twilio. We had customers spending a lot of money on Twilio during the mobile boom. A lot of them didn't make it, but didn't mean they didn't pay us millions of dollars along the way. And that's just what it takes to go figure out the, you know, who the winners and losers are going to be of the boom. We saw a lot of those along the way. And that's one of the benefits of being an infrastructure provider. It's also the risk because of all those companies didn't make it. That revenue went away for the, for Twilio and so we had to replace that revenue with somebody else. So it was either going to be more durable revenue or just the next thing that grows really fast and might be the hit thing, and maybe not. We'll see what happens. But you know, in the mobile boom, there were just enough companies coming constantly that even if some of them ended up fizzling out, you had another batch that was the next one that could replace the revenue. And that's probably a decent amount of that happening today in terms of the AI boom that's going on.
- [25:37]
Host/Interviewer (possibly Harry Stebbings or a co-host)
When we look at Brex, last round was 13 billion, now 700 million, growing 50%. And then you look at a Sierra.
- [25:46]
Harry Stebbings
I love Brett Taylor.
- [25:47]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Phenomenal operator. Interviewed him before. To not compete with Brett Taylor was the takeaway I had. But valued at $10 billion at 100 million of error and Greenote's leading it. We love Neil Maitre, one of the best. Is this market going AI nuts again to our last point, or is this again an extremely rational bet given the operator and the growth trajectory that they've been on to? 100 million to me, when I looked.
- [26:11]
Jason Lemkin
At this, I'm sure there's a spreadsheet that justifies it, right? The 100X. But I think, I mean, Brett Taylor, if you buy Sierra, you get everything, right? You get the ex CTO of Salesforce and Facebook and his team. You get it just like what you would get buying one of these startups and you get a potential leader. So my thought is, look, worst case, we make 20 billion. All these other deals are happening. Worst case, I make 20 billion on the deal. If I'm. If I'm Green Oaks or whomever, right? This is a generational guy. This is one of the top 10. I mean, guys there is, right? And this sound seems like a better deal than buying the buying skateboard scale. I'll buy him if scale was for sale. For 28 billion, Brett's got to be worth 56 billion. I mean, I think it's part of the math because you might not get it if it was Harry and Jason's company with the same metrics. I think there really may be downside protection here.
- [27:00]
Rory O'Driscoll
What's interesting about the bet is if you have the mental model of all these bets, this ticks every button but every box. But the last box, which is my mental model is always. We say this internally. Is there a category that can support a big winner? Are these guys going to be one of the winners in the category? And are you getting paid for the risk? You could argue that's the kind of sequence of questions you have to ask every time you look at a deal. Is there a category here? Absolutely. Other than coding which is the infoplay. At the app level, customer support, customer success is the number one use case for AI because it's just so obvious. You have lots of people answering phone calls, answering emails. You can do 70, 80% of it with AI. It just saves a ton of money. It's a cost center. This is going to happen. It's a thing. And then are they the winner in the space or a winner in the space? They're clearly one of a small number of people. They've got a really nice position here. They're dominating the high end. And you've got a person running and who. I agree. I didn't listen to your podcast. I'd listened to the Latent Space podcast with Brett and I remember thinking, God, that guy's smart. He was talking tech and business and can move between it. So if you're an investor, you're like, tick box. One tick box too. There's so few deals that tick bought those boxes that you're just so tempted. So the only box left is, are you getting paid for the risk? There's only one question left, right? The bigger the market size, the more you can squint and say, well, at some point this company will be 20 billion, 30 billion in value, therefore I can do it. My downside is limited to a low irr in the limit. That actually can be a fatal mistake because you just over extrapolate too many things. If you were to say to yourself, I'm going to commit this quote, investing sin only one time every year. Which of course isn't how sin actually happens. Once you do it, you do it all the time. But probably at the apps level, this will be one of the ones you think about because you're like a great guy in a big market at a terrifying price. Okay, I'll close my eyes. So I see how they got there 100 times. ARR is pretty steep at that stage, but I see how they got into it.
- [29:03]
Host/Interviewer (possibly Harry Stebbings or a co-host)
The only thing I think you actually use is the opportunity cost of the capital. For Neil, you're like, okay, 350 million there. Yeah. He's probably going to be doing 275 in a $2.75 billion fund. That's like 10% of the fund going into that next check, which is the second check into the company. It's just an interesting one for me, which is like, hey, when he looks at the opportunities on his desk and where upside is, he sees this as one of the top. That's interesting. And given the percent of his fund that this will be. That's notable.
- [29:32]
Jeff Lawson
That's a very relevant way for a venture capitalist to look at their portfolio allocation.
- [29:35]
Rory O'Driscoll
Right.
- [29:36]
Jeff Lawson
And you get dangerous when you get that much concentration. I'm not a venture capitalist, I'm an entrepreneur. And so the way I've always looked at it is when I started a company, all my prior ventures, that was 100% of my capital allocation for myself, for my life, for my time, for my bank account, for everything. And so the whole idea that an investor would have a concentrated risk with 20% of the their portfolio, that's easy.
- [30:00]
Rory O'Driscoll
This is why it's great having operators on. This is your reminder that don't say you're brave when you put 10% of the fund into one deal. On the other side of the table, they're putting 100% of the fund into one deal with no way out. Nicely put, Jeff.
- [30:12]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Speaking of where to put funds, I thought one of the most interesting venture deals of the week was Kleiner Perkins investing 100 million into the $13 billion anthropic round priced at 183. It's their first investment in a model provider. Does every large fund have to have a mod investment number one? And then number two, is this actually just an indication that the best way to make money stay in the business is to do late stage AI when winners are confirmed.
- [30:38]
Jason Lemkin
How big is that fund?
- [30:40]
Host/Interviewer (possibly Harry Stebbings or a co-host)
1 5.
- [30:41]
Jason Lemkin
So it's probably a logo deal then, right? You can't walk into the partners and not have anthropic or OpenAI on the website. It's not enough. I think it's a logo deal.
- [30:49]
Rory O'Driscoll
I think at 100 million, no one just does a logo deal. Maybe we did the math last week on the buy and I eyeballed the math. I started off going, no, of course you wouldn't. And then you run the math and you go, it's not a crazy bet at all. First of all, in the abstract, as you say, if you had one. So I don't think it's just the logo deal. I think when you look at the growth again, to repeat from last week, one of two things is going to happen. Either this is going to be the fastest slowdown in history in the next two years, or if it continues anything like this trajectory, this round is going to work.
- [31:18]
Jason Lemkin
It's not that it's a bad investment, it's just not venture capital. It's a logo deal because it doesn't. You weren't there at Twilio in the seed round. You weren't Bayern Dieter in the trenches With Jeff, this is throwing in 100 million at 13 billion. I mean you. Do you even get a meeting with Dario or do you just get. You probably just get a zoom.
- [31:33]
Rory O'Driscoll
You probably just get a zoom.
- [31:34]
Jason Lemkin
You probably don't even get to get a go in the office for. Seriously, you probably don't get to go in the office.
- [31:38]
Rory O'Driscoll
You made a comment here. This isn't venture capital. I think I've quoted Gloria Swanson before. I didn't leave Hollywood, Hollywood left me. This is venture capital. Today most of the money in quote unquote venture capital is. Venture capital is 20% old school venture capital and 80% plus or minus late stage. What would have been Fidelity Growth, public investing. This is where most of the dollars are going today. So first of all, objective fact, it is where the money is going. Just because that's a fact. And then secondly, I mean Harry said something insightful. It must have been an accident. He said, is this not only the main place that's happening? Is it the shrewd place? Is there a points on the board regardless? I mean the thing about this is you have a chance to matter and be relevant. I can totally kind of doesn't need to be matter. I think the matter moon's awesome and I think they don't need anyone to matter because they have Figma. They're glorious. But I totally get the idea of sticking some money in some Ultra Late Stage X150 billion pre round just to feel you're relevant in the space. It's not crazy on multiple dimensions. It's not the business you probably sold to your LPs four or five years ago. But it's not necessarily absolutely wrong. I mean it will be pushed to the extreme where it will become wrong when all the other risks evaporate. Remember the first two risks I ranged are kind of is it category either where the only risk left is valuation. In the end valuation risk expands to fill like a vacuum. So in the end what will happen is people will over extrapolate and a bunch of these will be overpriced. Then people will go, oh yeah, that's why you don't overpay. But along the way there'll be some great companies and maybe this could well be one of them. Where even these rounds math out. You're not in the trenches with Jeff and the seed like Bessemer were or any of the deals. But maybe you putting 100 million and getting 300 million and that feels like an easier way to make a buck.
- [33:18]
Jeff Lawson
So you're saying it's kind of like going to the mall with your parents credit card as a teenager. You spend a bunch of someone else's money to feel relevant on a bad day.
- [33:26]
Rory O'Driscoll
I'm not to be harsh because if your parents were grading you on the quality of your purchases, then yes. So I mean we've chosen not to do that.
- [33:35]
Jeff Lawson
Harry is literally hiding behind his microphone.
- [33:37]
Host/Interviewer (possibly Harry Stebbings or a co-host)
I just love Mamoon. I just don't want Mamoon to hurt me.
- [33:41]
Jeff Lawson
Well, bring him up.
- [33:44]
Jason Lemkin
He's one of the best of all time. But the 100 million can't 3x the fund on its own, can it?
- [33:49]
Host/Interviewer (possibly Harry Stebbings or a co-host)
I would argue that you should.
- [33:51]
Rory O'Driscoll
Yeah, I agree. So in other words, you're basically on my side, but I'm saying it's not crazy. Jeff is being, I don't say this being a little pejorative about it and you're saying not only am I right, but I actually am being a wimp, not doing it myself. Yeah, which is another way of saying so. Therefore, to say it more directly to Jeff, you're disagreeing with Jeff. You don't think it's just kids buying with their parents credit cards. You think it's a rational strategy in 2020 for venture funds to put a big slug of the money in ultra late stage investments because risk adjusted the return might be the most attractive.
- [34:21]
Jason Lemkin
But you know what, there is another thing in all seriousness. The Moon's one of the best there ever was and figma is. I mean that was his first deal at Kleiner. That's multiple billions back. But here's the weird thing today. Here's the weird thing. Figma's $25 billion company, it feels small, it feels niche in this weird world. It feels small compared to Canva when we had Cliff on last week. And it feels very small when we're talking about DataBricks just crossing 50% growth at 4 billion. It feels small compared to Anthropic and OpenAI. It feels small. And as great as Figma is when the 19 year old founders walk in and all you've got is well, where's your AI one? I mean figma is great. My old team used to use it. But that's just a little niche SaaS application at 2035 billion. I know it sounds facetious, but listen to this. I mean the numbers are so big today. And this is the greatest wealth creation, wealth hunt, greed hunt, venture hunt ever. I mean these are orders of magnitude larger. A little $10 billion company is not enough today. Look at Brett Taylor. He's just getting Going with his a staying on.
- [35:23]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Something very notable around the space is OpenAI and the secondary that they did which is $10 billion, it's expanded more and more. How does this change surrounding areas? And it can be anything from San Francisco's real estate market to the retention of those employees to the amount of angel investors. The Valley is about to get a lot a lot of millionaires that it didn't have before. What changes?
- [35:49]
Jeff Lawson
I was going to say I just remember feeling that way before Twitter's IPO back in like 20 was it 14, 15. I just remember because I actually was looking for our first house I think around that time. And it was like I just remember thinking like oh my God, I got to get if I'm going to buy a house, I got to do it before the Twitter IPO because everything's going to go nuts. And you know, and the question is, did it like yes, it did. Is that because of that particular batch of people that finally got some liquidity? I don't know. But I hope that San Francisco and I know some of the leaders now in the Bay Area are focused on abundance and growth mindset in terms of housing and in terms of building capability to absorb new wealth and also not have the displace other folks. And I think that that is the mindset of folks in office and I think it's a good time for it flip side which is it'll create more entrepreneurship and so you probably get more founders now spinning out of OpenAI once they get liquidity because they're afforded the ability to take that risk. It's another upside.
- [36:44]
Rory O'Driscoll
I agree, because you made a comment that's not correct. You made it's unprecedented. A private secondary of 10 billion is unprecedented. I agree. But if this company were public and were worth half a trillion dollars like reminder Apple was only worth 800 billion in 2018. It was the largest market cap company. Half a billion dollar company, 20% held by management at 100 billion. The headline could be portrayed as people who are very wealthy choose to sell 10% of their total holdings to slightly diversify as an entirely rational move, much less dramatic. I'm willing to bet when Apple was worth half a trillion dollars, this kind of money flow was taking place every year. Because people would be crazy not to to diversify some of their holdings. It's only anomalous because it's private. A company with the same market cap in the public wouldn't be as obvious what's going on and we digest it. Just like as Jeff said, they digested Twitter, you digested meta, they digested Google. It's not as anomalous as it seems. It only is weird because it's private and it's relatively early in its life.
- [37:45]
Jeff Lawson
I don't even think it's not even that early.
- [37:47]
Rory O'Driscoll
True, you're right. They are 2016. Good point. I mean, yeah, I mean, must feel early. If you only joined two years ago and you're getting 10 million bucks, you feel pretty good. But yeah. And of course the other thing, the fun thing, Jeff, is that if you think Nvidia, the guys who peeled off of Nvidia at half a trillion dollars four or five years ago are probably like, ooh, I took 10 million off the table. It could have been 60. Bummer. So if you believe in the journey, and Sam Altman clearly is articulating that journey, you might be leaving money on the table. Just saying, Liz.
- [38:13]
Jason Lemkin
Maybe Harry, you want to move on. I think the biggest difference from the Twilio time that Jeff was talking about was, oh my God, there's so much liquidity. Or other times is the impact on recruiting so much bigger in this generation. It's so big. And if you're running a boring B2B company, only going triple, triple, double, double, that's all you're doing, even just 36 months ago, you would have been S tier right today, how you're not going to get a lot of people in engineering talent. And you know, we've asked a lot of folks on the show, we haven't gotten great answers from CEOs on this question, how do you compete? And the answer has to be, we don't. You know, we don't, we don't compete or we're not trying to hire those folks or we're not building an LLM. It's tough to get AI talent. It's just tough when everyone's making eight figures like handed out like candy.
- [38:57]
Jeff Lawson
You know, you should do, you should have like, have like Jim Farley from Ford on the show. Ask him how did you recruit developers during the teens when they could have gone and worked at Twitter and Facebook. And it's the same problem, right?
- [39:08]
Jason Lemkin
Yeah. Or the nsa. I wonder too.
- [39:10]
Jeff Lawson
They do get in that era against, you know, Silicon Valley.
- [39:14]
Jason Lemkin
Well, Tesla's the only one that can really do what it does.
- [39:17]
Jeff Lawson
Amazingly. Actually, I point to Domino's Pizza.
- [39:20]
Rory O'Driscoll
Yes. Best stock, 10 year killer stock.
- [39:22]
Jeff Lawson
He's built a great tech operation in Ann Arbor, Michigan. So maybe the key is get out of Silicon Valley.
- [39:27]
Rory O'Driscoll
Interesting you said that, Jeff, because the other thing that Turned out. Or maybe it's correlated. It probably is correlated. They also have been a stunning 10 year stock.
- [39:34]
Jeff Lawson
Oh yeah. The best return, better return than Google.
- [39:36]
Rory O'Driscoll
Over that time, which I just love. And I did not know that they built it because I did not know they had a great tech operator. Interesting. Yeah, but you're exactly right. You probably shouldn't be competing for the same people in Mountain View. But there's lots of people who don't want to be in Mountain View. Can't imagine why, as you say, go down Arbor, Michigan.
- [39:51]
Jeff Lawson
Well, and I struggle to think of a single kind of, let's say legacy company who said, hey, we got to get in on the software thing and opened up their Silicon Valley office and.
- [39:59]
Rory O'Driscoll
Actually made it work. Yeah, interesting. Yeah, because Walmart did it for a while. I think they closed it. GE did it with that whole weird thing that totally blew up. Yeah, no, you're probably right. Interesting.
- [40:10]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Going from employee payouts to one we.
- [40:13]
Harry Stebbings
Didn'T expect author payouts.
- [40:15]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Anthropic had paid out $1.5 billion to authors. Is this a one off prayer for forgiveness? Is this a continuation or a new business model? How did we analyze this?
- [40:26]
Rory O'Driscoll
Easy and super clear. If you read the judgment, it's really interesting. The judge said the if you bought the damn book once and you used it to train your model and provided you paid the 15 bucks per book, that's totally legal. If, however, you downloaded this corpus of books, didn't pay anything, used it to train a model, I'm going to fine you $3,000 per book. Which is how the fine was. It was 500,000 books at $3,000 a book. So it's actually a fair amount of clarity here. What it says is if you want to train on 400,000 thousand books to build your LLM, what you actually have to do is buy the book, slice it off, OCR the whole damn book and you can legally use that. But if you don't do that and you just don't pay the 15 bucks per book, you get fined three grand. So I thought it was actually a fairly coherent legal opinion that said this is the cutoff between fair use and non fair use. And I think Anthropic just made the mistake way back when of not doing that and got caught for it. But cheap at the cost, probably like, yeah, we should have done it. It's not like it's not a crime. It's like we shouldn't have done this. We're going to pay our three grand per book. Wish we paid 15 bucks a book. Life goes on.
- [41:34]
Jeff Lawson
So the future is you're going to go to the bookstore and you're going to buy a book and it's got like a steel bar through the COVID but the version without that costs $3,000.
- [41:44]
Rory O'Driscoll
It's cute. That's fun. I assume that there will be a much more efficient way than that of doing it. You're exactly. But I'm sure, for example, that there will be a corpus available of a purchased copy of every. You know, I'm sure that some one of these label guys that says we have bought for you and just for you, 500,000 books scanned them just for you. So we have a legally compliant book set that you can use for training.
- [42:07]
Jason Lemkin
But yeah, having said all that, like, this is pretty bad. I think begging for forgiveness, right? The classic startup thing, it is interesting, but they downloaded this from pilot pirate websites.
- [42:16]
Jeff Lawson
Yes.
- [42:16]
Jason Lemkin
Okay. This wasn't cutting a little bit of a corner.
- [42:19]
Rory O'Driscoll
Okay.
- [42:19]
Jason Lemkin
This wasn't claiming something that wasn't quite open source was. This is literally, guys, we got to get this rocket ship going. I need a trillion books. I'm going to the two places where I can download them. Pure piracy. Pure. This isn't even stealing YouTube videos like OpenAI did. This is as bad as it gets. You can't defend it. You can't defend Pirate Bay for books.
- [42:41]
Rory O'Driscoll
No, you can't defend it. But to be fair, they just paid a 2,000. You know the concept of triple damages. Triple damages would have been 45 bucks. They just paid 200 damages.
- [42:51]
Jeff Lawson
Yeah.
- [42:51]
Jason Lemkin
They may end up paying more. They may end up. It's not over. They may end up paying more. I'm not saying it's bad, but this is as bad as begging for. This isn't just pretending. I'm not using someone's API.
- [43:01]
Rory O'Driscoll
Which is why, again, why I admire the coherence of the judicial ruling. And again, these guys think unlike some of the other branches. Yeah. They just said, look, if you'd done this, this is what it would have cost. You didn't, and we're going to charge you 200 times as much per. And you're right, it's a big fault and no one's going to make that mistake again. Now, you're right. You could have got to pick a number. You could have said you're injuncted from not using it. But that wouldn't make sense in the context of you have a damages claim because your loss of earnings, because they said, because you're not directly reproducing the book, it's fair use. So you only damage this claim as 15 bucks. Now, the interesting case is where some of these artists are saying, it's not a question that you're just using my art to train a generic model. When I go onto the model, I get effectively my art and my sentences back. At that point, you go from 15 bucks a book to a much bigger damage. So I think there's still litigation to be had and decisions to be made in terms of how fair use manifests itself in the kind of AI age. But I thought this was kind of okay, clear. That's one piece of the puzzle established.
- [44:03]
Host/Interviewer (possibly Harry Stebbings or a co-host)
We've discussed OpenAI. We've discussed anthropic. Mistral announced last few days that ASML have become their largest shareholder at a $14 billion price. Everyone is slightly scratching their heads at this. If we're being honest going, did every other venture investor turn them down? Why is ASML funding this? $14 billion is a huge amount of money. How did you guys analyze this? Help me understand what is going on here.
- [44:30]
Rory O'Driscoll
I don't know if I can. But just so everyone, in case everyone doesn't know as they listen. ASML is a semiconductor capital equipment company, Holland. It's one of the two or three most important capital equipment companies on the planet. The machines they make and sell to TSMC make pretty much every semiconductor possible. It's one of the most strategically important companies out there and I think it's one of the largest market cap companies in Europe. So it's far removed from AI software. It's at the top end of the vat. If you think Nvidia is complex, one level below Nvidia is tsmc, but one level below TSMC is asml. So it's in the AI value chain, to use Jason's metaphor earlier, but much further upstream. So that's kind of just the context of what it is. As to why it's doing this, I have no clue. Other than some kind of European. Maybe the biggest tech company in Europe should support because it is the biggest. The most successful tech company in Europe should support the biggest tech AI LLM company in Europe in some kind of Euro conglomerate kind of basis. I don't know.
- [45:34]
Jeff Lawson
So they have less of a right to do this than Mamoon, in your opinion?
- [45:36]
Rory O'Driscoll
Almost everyone has less of a right to do things than Mamoon. He's done so well.
- [45:39]
Jason Lemkin
But yeah, one thing and I don't know how European FASB works. Jeff may have some thoughts here from Twilio. When big companies with A lot of cash make corporate investments. It's weird because if you're generating massive amounts of cash, it's orphaned on your balance sheet. You can't just go hire a thousand engineers. It hurts your eps, right? But if you can swap it one asset, asset for another, and that asset is not impaired or it's impaired many years down the road, it can basically be free. There has to be some synergy here, don't get me wrong, but it doesn't have to be a VC synergy, right? If the asset isn't going to decline, if they're looking at all the AI revenue that TSMC and others have and they think they're not going to lose money on this. I mean, I remember, you know, a few years ago, someone that used to be high up at Salesforce Ventures said it to me and it resonated with me is like my. And you know, we just had Mark. Our job is to make money at Salesforce Ventures, but it's more important we do. We don't lose money because if we lose money, we may have to take an EPS hit or an impairment charge. But as long as our investment doesn't go down, it's pretty much okay. And so just the motivations here, they have to make business sense. But not just not losing money might be okay because cash is, is locked, it's hard to get do anything with it. You can, we can repurchase your shares, that helps. You could invest and that's about it.
- [46:51]
Jeff Lawson
But it's kind of like having the entity in China which is like, okay, well it may go make a bunch of money, but is it your money? No. And so all you can do is then reinvest it in the next thing in China and the next. And you will basically never have that money back. That's kind of what the VC thing is for companies, which is, you're right. If you've got this money burning a hole in your balance sheet now, your investors might say, well give it to us and let us make those investments. That's the argument. But if not that, then you're right, they can feel free to go make this and the income they make from that will be discounted, but not 100%. Well, I'll get something credit for it. But again, now that you just made your problem bigger, you got more cash in the balance sheet, you go like you need to do the next investment in the next. So you know, it's kind of a wash. But so the really the thing I would say if I'm say Salesforce or a corporate investor like this is, is it giving my core business some sort of fundamental advantage in the Salesforce world? The answer I would say definitely is yes. Obviously it cemented their role in the center of an ecosystem. They ended up making acquisitions. They have more information to make their product decisions on. Like all sorts of benefits accrued to Salesforce. And I don't know if you could say the same of asmr.
- [47:55]
Rory O'Driscoll
I think you're right. I love the common Akash because just as a reminder, if you think software business is hard, the semiconductor business is way more cyclical than the software business. And you have to be tough as nails to run a semiconductor business.
- [48:08]
Jeff Lawson
Who thinks the software business is hard?
- [48:10]
Rory O'Driscoll
Hold that thought.
- [48:12]
Jason Lemkin
Just hard to stay on top. Just hard to stay on top.
- [48:14]
Rory O'Driscoll
Okay, we can come back to that. But if you think the semiconductor business is hard, the most cyclical business on the planet almost is a semiconductor capital equipment cycle because it's kind of a leverage versus a semiconductor cycle. So to your point, Jim, Jeff, I doubt it because I. But there may come a day when you need that one and a half billion and sometimes you just need cash. So you know, I'd always be wary of tying up capital. So you do wonder about that. And you're right, the strategic value isn't obvious to me. I mean, I don't know if you need to own the models to sell the capital equipment. I don't know if anyone's ever seen the picture. This is the most complicated machine on the fricking planet. I joke you not. They are huge. They are enormous. They take months to assemble. They make a Boeing jet seem trivial in terms of their precision. So these guys are not dummies. They perform the single most complex engineering feat on the planet and they make a lot of money doing it. But I agree, I just go, maybe it'll work. Maybe you'll make a 3X. I don't know. But I think a lot of it could well be just knowing Europe because it has been interesting to see this whole dynamic of non US regions, a non Chinese region now feeling the need for some kind of local championship. Because the combination of the hubristic talk about AI coupled with the hubristic nationalism behavior of the US and China means if AI is terrifying and these other countries are very aggressive about enforcing their stuff, maybe you do need a national champion. And maybe some element of this is that behind the scenes stuff, just like in the Middle east. You're seeing that. I'm not saying I agree with that even slightly, but it's what's happening.
- [49:45]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Can I ask you, Rory, when has sovereignty ever been the sole driver for a company's success? In the past, the British East India.
- [49:52]
Rory O'Driscoll
Company did pretty good. They just went over and took everything. But I agree, I'm not a believer in the tech space. Look, I said I don't believe in it. But I'll give you an example. If there is a free market in trade, then the national champion of any tech makes no sense. You should have a couple of companies competing on a global scale. But let me give you an industry where there absolutely are national champions. That's high tech defense. When people are afraid that other people won't sell them guns or weapons, they make their own weapons. And what's been interesting is this perception, rightly or wrongly, and I think wrongly, that AI is quote like that. You start having this perception national champion. Not because it's the best solution, because it's a suboptimal solution based on concerns. And I think that is true. The Europeans make a whole load of defense equipment that they have no business making from an economies and scale perspective. They simply do it because they're like they don't want to rely on the Americans. And this is the AI version of that. End of.
- [50:46]
Host/Interviewer (possibly Harry Stebbings or a co-host)
I agree. The ironic thing is if you go anywhere in London right now, Rory, the only thing you see is Andrew.
- [50:51]
Jeff Lawson
Or billboards everywhere.
- [50:53]
Rory O'Driscoll
They've done a great job of seeming European in Europe. I actually thought that was one of the slickest things they've done. Establishing the local subsidiaries, talking the talk in a way that some of the other vendors haven't been able to do where there's been talk about disabling advanced features. And a lot of Europeans are holding off behind. I'm not for sure it's the F16 or the F35, but yes, Andor has done a good job, but they've had to do it.
- [51:15]
Host/Interviewer (possibly Harry Stebbings or a co-host)
And they made a super strategic acquisition in Australia, which also made them a lot more Australian to the Australian government. People on the ground, an Australian company incorporated, made a lot of sense in terms of going back to kind of the corporates investing and the benefits that come. You mentioned Salesforce there and how it put them at the center of the ecosystem.
- [51:32]
Harry Stebbings
Jeff Atlassian's M and A team is.
- [51:35]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Just popping corks these days. I mean these guys are going on a tear.
- [51:39]
Harry Stebbings
They acquired one of my companies cycle.
- [51:42]
Host/Interviewer (possibly Harry Stebbings or a co-host)
It was a small acquisition, like $21 million in cash. Great, thank you. As a seed investor, the browser company, $610 million in cash. Josh is amazing. Fantastic product team. $610 million in cash is a lot of money. How did you guys analyze that? And were you as shocked as I was?
- [52:01]
Jeff Lawson
I read the thesis behind it. Mike's always been a real forward thinker, but I would say the thesis didn't really resonate with me in terms of we need a different browser for work. I could imagine some upsides. Is enough upsides to actually change behaviors? I don't think so. But did that thesis make sense to other folks?
- [52:21]
Jason Lemkin
I think we're at a moment in time where everyone feels like they got to make a play, right? And maybe, Jeff, you've lived it. Maybe you don't really have to make a play when you feel like you. You have to make a play. But I think everyone's itchy in the seat, right? Whether it's ASML and Mistral and Atlassian is one of the greatest of all time, but it hasn't seen the AI boot.
- [52:37]
Jeff Lawson
Would this be the play?
- [52:38]
Jason Lemkin
I don't know. But sometimes when we're itchy, and it's true for investing too, sometimes when you're itchy, it's not that you make the wrong investment, but you might not make the ideal investment if you're not itchy. Like if you've already gotten three deals done by September, you might just phone it in for the rest of the year. But if you haven't gotten a deal done by this point, you just might throw in 100 million into the last round because it's the best idea you have.
- [52:59]
Jeff Lawson
We can call Mike and ask him.
- [53:00]
Rory O'Driscoll
I'm sure as a public company CEO, there's nothing he'd enjoy more than an unscripted with this group of idiots about one of his products.
- [53:09]
Jason Lemkin
Well, but when Jeff puts it that way, I mean, look, that's. If that's the bet that. Listen, Atlassian has a massive footprint in the knowledge worker, both enterprise and developers, right? We're going to push this browser and it's going to give us an AI play. I mean there's, there's worse bets. I watch Jeff as an M doing his M and A and I watch Michael. Mike. It seems like with lasting they do what Michael thinks works. So loom trello. These made a lot of sense, but maybe they weren't impactful to Atlassian at the other end. Jeff, when I watched him, I'm like, this guy isn't wasting time. He's like, I'm gonna buy segment, I'm gonna buy zip whip. Like this was a man on a mission. He Wasn't gonna wait for these new things. Think this is my view as an outsider. He wasn't going to wait for little things to germinate eight years later. He was going to put points on I loved your M and a strategy, even if it had risks. Right. Because you weren't waiting, were you?
- [53:54]
Jeff Lawson
No. I mean, here's the thing. We were never under the misconception that SMS would be the most dominant way of communicating 25 years from now. We knew that at some point SMS, it was already legacy tech when we started the company, but we breathed new life into it. But at some point that will no longer be. So we have to parlay our success in that world, in the amazing customer base, the amazing revenue base we have, and parlay it into the next era. And so the question is, we don't know how long that timeframe is, so we better get busy doing it. Is basically was our philosophy and obviously the messaging business is a great business for us, but it was always seen as a bridge to an even bigger play that at some point in the hopefully distant future we'll be glad we did. And I always likened it to Intel. Going from memory to CPUs or one of those in the fullness of time will be seen as. People say, oh, remember Twilio started doing SMS messages and you'd ask grandpa, what's an SMS message? Well, let me tell you. And so that's how we kind of thought about it and that kind of urgency. And the thing I would say though, about any company in SaaS today and Atlassian is a prime example of this, is they are primed for disruption right now because AI is going to decimate their seat base for their products. It'll decimate the roles people are playing. AI will do the jobs that people are sitting there in Atlassian products doing today. And so the question is, what are they doing? And I look at the browser company, I'm like, I'm not sure that's the answer to what's going to potentially replace a whole lot of revenue. If AI is taking over these jobs that humans are doing in Atlassian products today, I would skate directly there and say, great, what is the job that humans are doing in Atlassian products? And here's the AI version of that today is what I would be doing.
- [55:33]
Rory O'Driscoll
I think it won't be the sound bite of the show, because I know Harry, but that should be. You're exactly right, Jeff. I thought it was a super insightful set of comments from you two. Jason and Jeff. Yeah, to some extent you were like, this is a good business but we have to add on top of it. It's a lot tougher now when you're like my existing business could go away, I better do something. You got to call those shots. Maybe this shot didn't resonate, but it's like you're probably sitting there as a SaaS CEO, as a company's said, you don't have the option of just letting the existing thing compound because it's not going to asymptot out in cash flow. It could start declining. And that's why again, to Jason's point, I love the description you do get trigger happy to some extent. What you're really saying is this mightn't be the best deal ever, but it's the best deal of the three deals on my plate right now and I need to do something because I feel the imperative to act. It's probably a very honest in aggregate reflection of the dynamic right now. If you're a CEO and frankly also if you're an investor, if you're not in, you can't win. But oh my God, it's hard to know.
- [56:32]
Jason Lemkin
Well, you can't buy Sierra, you can't.
- [56:34]
Rory O'Driscoll
Buy the things that are great. It's a weird world. Turns out making money is hard.
- [56:38]
Jason Lemkin
I don't know how Jeff thought about Twilio, but when you listen to folks like Benioff and others, they want them all to work but actually they have a loss ratio calculation just like VCs. Right? There's a loss ratio and so of course what is 600 million or whatever. But if there's even a 40 or 30% chance it's truly impactful to the customer base, that's probably good enough.
- [56:57]
Jeff Lawson
Well, I'll tell you the other thing that I think is conventional wisdom, especially at companies that do a lot of M and A like Salesforce, you don't worry about the deals that didn't work out, but the thing you regret is the ones you should have done that you didn't. And so the whole mantra generally becomes it's worse to miss a deal you should have done than to do a deal that doesn't end up working out.
- [57:15]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Can I ask you, Jeff, what deal did you miss that you feel you should have done?
- [57:19]
Jeff Lawson
Probably can't talk about it.
- [57:20]
Rory O'Driscoll
We didn't warn you that he does.
- [57:21]
Jason Lemkin
This, Jeff, but was there one? Is there one you still think about or it's behind you?
- [57:24]
Jeff Lawson
There is one.
- [57:25]
Rory O'Driscoll
You can see the love in his eyes. You can see the desire. He ain't going to cough it up, guys. He ain't going to cough it up, but you can see it's still there.
- [57:33]
Host/Interviewer (possibly Harry Stebbings or a co-host)
When you look at Mike on the offensive today, whether we get the thesis or not, and when you look at a couple of the other players in this realm of market cap, do you wish you were a public CEO on the offensive with a big ass budget to be aggressive and buy some of these assets or are you happy not being there?
- [57:53]
Jeff Lawson
No, absolutely. I thought this was going to be a really exciting time, I thought for public companies to navigate this. And like I said, one of the other things is we were in a different boat than most any SaaS company because A, we weren't SaaS, we were infrastructure. So we weren't selling CPU, so we had no innovators dilemma as it related to AI. Everyone who's selling seats has this massive innovator's dilemma and we didn't. And the way I looked at it is we were always trying to crack into SaaS, right? We built a contact center product, a marketing automation product and it was hard to do, it was hard to crack into the SaaS market because that's just not how people thought about us. And so that was frustrating. And when I saw this, all the AI coming, I looked at it and I was like, holy shit, this is going to replace SaaS. All the incumbents here are going to have innovators dilemma. They're going to go add a feature here and there that's oh, we're going to make your human beings doing the job 10% more efficient because of the AI copilot thing. When reality is they're going to want a product that is like, no, no, no, I don't need 75% of these people anymore, give me that product. And anybody selling you seats is like, they're not going to sell you that product. And so the amazing opportunity is to come in with that next generation. And that's what you see with all the AI startups are going 0 to 100 million overnight. That's exactly what's happening. And so as Twilio I looked at it and I said, hey, we finally.
- [59:11]
Jason Lemkin
Got our break here.
- [59:11]
Jeff Lawson
We don't have to become a SaaS company in order to build more value. We actually have a new way in that we are unconflicted on and everyone else is beautiful. So that's how I thought about it. It's harder if you're a SaaS company because you gotta disrupt yourself right now.
- [59:25]
Harry Stebbings
So would you like to be in.
- [59:26]
Host/Interviewer (possibly Harry Stebbings or a co-host)
The CEO seat of a public SaaS company, going on the offensive, having the ability to buy companies like the browser company.
- [59:33]
Jeff Lawson
I think it'll be a fun job. Do I literally want to do it? No. A, I've got a new venture, but B, I've never wanted to be like a hired CEO. To me, being a founder is the thing I love. So that's my point of view. But for a whole lot of folks out there, do I think this will be a great time to be at the helm of a company and navigating this transition? Hell yeah. Because you got a customer base, you've got a lot to work with there. But you also have the innovator's dilemma to work with, which makes it both hard and also super interesting.
- [60:02]
Rory O'Driscoll
How much harder do you think it is to make a bold move when you're public at a time like this than being private?
- [60:07]
Jeff Lawson
You have capital to work with and you've got shareholders who want a great AI story. And so the question is, I think all like, for us it was, we got hit with headwinds for growth and that becomes the thing you gotta fix. And so the question is, are you fixing that or are you paying for the longer term? And it becomes hard to do both at the same time. And so if you've got the growth rate right now and you're a SaaS company, absolutely, you should be swinging for the fences.
- [60:33]
Rory O'Driscoll
That's helpful.
- [60:34]
Jeff Lawson
And the hard part is if you're lacking for growth right now, it's hard to do both at the same time. And that's the position that sucks to be in.
- [60:41]
Rory O'Driscoll
That actually makes sense to me and I'm going to put an adder to it. So if you're doing 30% plus, you can be aggressive and you should be aggressive and buy shit as a public SaaS company. What you're saying is if you're doing 10%, you can't be aggressive because you got to fix the growth story. And this is the thing I want to add. Even though you probably should be aggressive at least slightly, because just fixing the growth story, getting it from 10 to 14 or 15 on its own without getting on board the AI train probably is not enough.
- [61:08]
Jason Lemkin
It is an interesting though, but obvious point that if you're selling at the infrastructure level, if you're selling it is easier to get on the bandwagon. You have to have the right product, but you're not cannibalizing your seats. If you're selling messaging, if you're selling email, right, it's easier. Then you're not just necessarily disrupting yourself.
- [61:23]
Jeff Lawson
Let's say you're Brett at Salesforce selling, you contact center automation and they've got service cloud, which is from memory a third of their revenue or whatever.
- [61:31]
Rory O'Driscoll
Right.
- [61:31]
Jeff Lawson
Like you're going to cannibalize a third of the company's revenue. That's hard to do as a public company. Whereas if you're a pure play and just saying selling the automation, your job is to go steal a third of Salesforce's revenue and replace it with a smaller revenue number. But it's all yours. And that's the whole point of being, you know, the disruptor in those markets. So.
- [61:50]
Rory O'Driscoll
And interestingly, if you eat the labor, it might even be a smaller number.
- [61:54]
Jeff Lawson
Oh, yeah, it probably will be. But you don't need it to be as big a number as Salesforce has to build a grand slam company.
- [62:00]
Rory O'Driscoll
It might even be bigger if you can actually. I mean, you know, some of these contracts you're seeing, you're getting more in the end.
- [62:05]
Jeff Lawson
Yeah, I don't know. I doubt it. I doubt it because I think the economic argument will be like, you save money.
- [62:10]
Rory O'Driscoll
Yes, actually. But the argument people are making is you saving not just software money, but labor money and some part. Can you command some part of that?
- [62:19]
Jeff Lawson
I see the software plus labor is a bigger market than the software loan. Yeah, that's fair. That's fair. Yeah.
- [62:24]
Rory O'Driscoll
If it's a 1 for 1 replacement or even worse, as you suggest, a 0.7 for 1 replacement, then a whole bunch of venture money is about to get flushed down the toilet. The only way the math works for The Sierra at 10 billion is if you don't just get India. Maybe not upfront, but over time. You don't just get the service cloud revenue, you get the service cloud revenue plus some slug of the labor.
- [62:44]
Jeff Lawson
I'm not sure I agree with that, but I think the upside is getting a slug of the labor too. But I'm not sure I agree with. Even if it was just 0.7%, 70% of the revenue, you would still build huge companies that could eat the SaaS companies alive.
- [62:58]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Jeff, I'm sure you have consistently over the years spent time with a generation of public company CEOs and founders. From your Atlassians to your Zooms to your Mongos to your Octas to your.
- [63:08]
Harry Stebbings
Boxes to your Dropboxes to your all.
- [63:10]
Host/Interviewer (possibly Harry Stebbings or a co-host)
In the same kind of generation. When you look today at that crop of companies, which founder CEO do you think will be most aggressive and strategic in the acquisitions that they make?
- [63:24]
Jeff Lawson
So I think Mike will be one of the more aggressive on the acquisitions front because they've always been. And so I think it's in the DNA of Atlassian. So I do think we are looking at one of those, even if I am not fully on board with the most recent. I think Drew has a interesting vision for where Dropbox can go with AI. The question is, will they have a right to play there? Because I think Dropbox has struggled to expand out of core sync and sharing market because they've tried a lot of things over the years. Will AI provide an opening for them to provide a new market for their customer base? We'll see. I think he's got an interesting vision there, but it's hard. It's hard to break out of the jail you might find yourself in in those scenarios.
- [64:02]
Rory O'Driscoll
When you're at the Dropbox stage in terms of growth, it's just when you need acquisitions the most. But you find it hardest to do as a public company because you're still in the low growth penalty box, and that must be a frustrating place.
- [64:14]
Jeff Lawson
Here's the thing I would say about both Dropbox and Box, both Aaron and Drew, these guys are cockroaches in the public market, right? Like, they've been through hell and back in the 10 or so years that they've both been public companies and they've managed to survive. And I know Drew's got good, good protections. I think Aaron does too. I don't remember, but they've managed to figure out how to compete brutally and manage to continue the path as public companies continue to invest a reasonable amount in R and D and advance the stories of their companies. And so I would bet on those two to continue to do that. Now, I wish they were both doing it faster, and I wish they were both able to do it more at scale. Neither of them have relied on any kind of big M and A really. And that's probably a function of, of their presence as public companies. But I also think that their history of being able to plow forward and make it happen will help them here. And hopefully what it takes, though, is some kind of breakthrough. Like, they'll need some little bit of luck. They'll push through some opportunity that breaks for them, and then it could be amazing. I think both of them have a shot at it, but it probably won't be through big M and A. It'll be through product smarts. Knowing both, you know, Aaron and Drew, they've both been looking for that opening kind of like I was as a CEO looking for that opening that's going to let you break out of your jail and, you know, kind of expand your product portfolio in a new direction and earn the right to play in a new area. And AI is certainly one of those opportunities.
- [65:34]
Host/Interviewer (possibly Harry Stebbings or a co-host)
In what way did you most want to break out of your jail that you were not able to do?
- [65:39]
Jeff Lawson
Well, the thing that frustrated me so our most successful product was our messaging product. And so as a messaging API, the crux of that product was an API with three primary features, if you will, like from to body. That's a text message. Who's it coming from, who's it going to, and what does it say? That's a text message. And so we had millions of developers who integrated Twilio into their code and specified in their code A2A from and a body. Now, in that world, how do you add more value to the customer over time? They specifically said, I want you to send a text message from this to this that says this. What do you do to add value? You're kind of in a box. And so if you look at the last, say, 10 years of Twilio was all about how do we create a product that allows us the expressiveness to go add value? Because the customer hasn't explicitly stated exactly what they want us to do. And therefore any deviation from that exact thing is called failure by the customer. And so that's a lot of what we were always trying to do, is to create a surface area that allowed us more expression as a product team and as a company. You know, think about, if you're a file storage company, success is, I stored your file and I didn't lose it. And failure is, oops, I lost your file, sorry. And so you have to break out of the world of like, no, no, no. And customers want you to add value beyond just, no, my file was there, thank you very much. That's the challenge. And so certain product arenas and the nature of how customers use the product and the nature of the product's promise give you more ability to expand. I always admired the product surface area that Cloudflare had, because they sit at this super strategic intersection of, of the world. And then your website, and then you can ask the. And it's a dashboard. So once you're inserted into the DNS and you're proxying all the traffic now, without writing another line of code, they could add another feature to that dashboard that says, oh, flip a toggle to do this and do that and do that and do that, and all you gotta do is flip a switch and it's beautiful. That's a great position to sit in because you're at the point in the product where you can just add that feature and make it a toggle switch. That's beautiful.
- [67:34]
Rory O'Driscoll
Super. To your point about it. It's funny that actually was inside, because I always thought years ago, there was only two API companies, you guys, that abstracted the complexity of messaging, and Stripe that abstracted the complexity of money. Both of them, you were the interface for developers and a whole bunch of complex shit behind the curtain. And I think what I hadn't realized and you made clear to me now is you probably had more degrees of freedom as Stripe because there's more things you can do with money than you can do with two from. And you were trying to find the unlock on top of that is my takeaway from that.
- [68:07]
Jeff Lawson
Yes and no. Right. So I don't know Stripe's financials, but given the fact that they've fiercely stayed private all this time, I wouldn't be surprised if they struggle with a similar thing and they've been looking for a better answer. I have heard whispers that a lot of their product portfolio is not really contributing to the business. It really is the core business, which is pretty common. I'd say probably the same of, you know, the same of Twilio too. Right. It's a. It's. There's a main product and there's a bunch of other stuff that you hope will break through, but it's always hard to do that. You know, if you want. If we want, we can take a detour and I can tell you my. My theory of all developer APIs.
- [68:42]
Rory O'Driscoll
Yes.
- [68:42]
Jeff Lawson
Or we can talk about the CEO of IRL who was arrested for fraud.
- [68:46]
Rory O'Driscoll
Oh, when you. When you put it like that, big guy.
- [68:49]
Jason Lemkin
I'm passionate about the fraud topic, but I am. I mean, Jeff has been. I mean, what's. What was the billboard on 280 Astronomy Developer. Right. Since inception. But I feel like, Jeff, I'm kind of bummed you're not in the game because I'm. I'm on replit two hours a day.
- [69:03]
Rory O'Driscoll
Okay.
- [69:03]
Jason Lemkin
I'm. I couldn't be a developer before replit. There is a renaissance of the developer. Like, everyone's becoming a developer. Right. It's not just. I mean, literally, I integrated the SendGrid API in 60 seconds. I couldn't have done that six months ago. I. I mean, I'm not stupid, but I just couldn't have done it. Now me and Rly just did it right so I'm just. I am curious. I wanted to do. Want to talk about IRL and nobody out of time. But I do want to hear your theory of all of it, because I feel like it's just become. It's a new world for developers.
- [69:29]
Jeff Lawson
I'll tell you my theory of developers. Let's say pre AI, and then maybe we can talk about how it evolves. So my theory on pre AI developers stuff. And I tell this to every entrepreneur who would listen, who would think about it, which was. It was kind of one of our guiding philosophies as well. I thought that we're, you know, in 2017, 2018, we kind of were at this critical junction in Twilio where we were saying, okay, do we just go more horizontally in terms of services for developers, or do we go more vertically in terms of communication? And we chose to go more vertically in terms of communication. And part of the rationale was I analyzed every developer thing that was out there, and I decided there were three categories of developer companies that actually got breakaway revenue. And there were a lot of folks that were stuck with 10, 20 million, whatever, but there were only three that actually could break away into hundreds of millions or billions in revenue. And those three categories are, number one, business development as a service. I like that. Rory's taking notes.
- [70:21]
Rory O'Driscoll
I wrote down business development as a service. Question mark. Okay.
- [70:25]
Jeff Lawson
Business development as a service. So if I'm a software developer at some company, I am not allowed to go open a bank account on behalf of that company. I am not allowed to go strike a business development deal with AT&T on behalf of my company. I am not allowed to go stand up a new data center on behalf of my company. These are things I'm not allowed to do. But with Twilio, with Stripe, with aws, you can now engage in these business relationships on behalf of the company that you weren't able to do previously. And this empowers you now to go build the thing you need to go build. And it turns out that when you just backdoor in that way, the developer has a lot of power because the thing everybody wants in the organization is a working product. And when the developer says, here's our working product, it just turns out that in order to have it leaders of the company, you got to go pay the bill to Twilio or to Stripe or to. To aws, it turns out people are willing to do that, right? So business development as a service. Second, Capex. You got your pen right? Capex as a service. So it's similar and more relevant to the AWS story, which is a developer's not empowered to go spend $10 million to build a data center, but can they put it on a credit card? Yes. So there you get your capex. Now as a service that developers again, they're spending money of the company that they previously weren't allowed to spend. But this is a Capex play. So that's all of AWS and Google and everything else. All right. The third, and this is exceedingly rare, the third is algorithm as a service.
- [71:44]
Rory O'Driscoll
Yes.
- [71:45]
Jeff Lawson
And this has got to be an algorithm that is so complicated, so obviously beyond the reach of most developers that you are willing to pay someone else to do it for you as opposed to do it yourself. And the reason why it has to be so complicated and a lot of folks I think, think that their thing is going to fit this bill. They're like, well, we're not business development and we're not capex, but we're a thing that's really cool. And the problem is that developers a take your really cool thing that you're trying to charge them for as a challenge.
- [72:10]
Rory O'Driscoll
Yes.
- [72:10]
Jeff Lawson
Can I go make that myself? It's like a challenge, like you challenging me. You're saying I'm a developer who can't build the thing you built. Screw you, I can do that. Especially true when it gets to actually meaningful revenue. Because even if you do get your foot in the door and you get into a product and some of that company's paying you 5 million a year, now, the developers in that company are like, hey, I know I can go save the company 5 million bucks and be a hero. I just need to go recreate this thing. And that's what happens. And so when you're Capex as a service or biz dev as a service, you have backstopped that instinct with, well, you could go build your own Twilio messaging layer, but you still have to go integrate with hundreds of carriers around the world. That didn't solve any problems really. But the algorithm one has to be so hard that the developers say, you know, I'm just, frankly, I'm not smart enough to go figure that one out. And in that category, I used to only put DynamoDB, like the infinite scaling database is like, that is such a hard problem to solve. Even if you have an open source project, operating yourself is so hard, you just pay Amazon, they take care of it for you and you call it a day. And now I'd put inference in that category, except that pretty quickly inference became Open source and people are running it themselves too, so it's not even necessarily in that category anymore.
- [73:19]
Rory O'Driscoll
But you would put accessing the core Entropic and OpenAI that is their business, the enterprise.
- [73:26]
Jeff Lawson
Well, except for the fact that you've got open source models, right? You've got Llama, so you can run Llama yourself and do inference yourself. Right? I'm not saying that it is necessarily the right thing for folks to do, but people can do it. And so that argument of no, I can do it myself actually is valid. They can.
- [73:41]
Rory O'Driscoll
I remember. Look, Honestly, back in 2016, 17, we looked at a bunch of these NLP APIs that were mid level, trivial, hard, they got some developers, and you're exactly right, they got taken out and you know, give KV credit, they did a bunch of those that only did okay, but then they very wisely did the one that did amazingly well. That is OpenAI. And maybe what you're saying is it may well be that the secret sauce is if you just continue to spend an order of magnitude more money every year making the algorithm better, then no one can catch up to you. And that obviously is the openaianthropic play now because, because yes, you can get deal.
- [74:18]
Jeff Lawson
Obviously you're not selling inference, you're selling the model, you're selling the model itself on a drip basis.
- [74:23]
Rory O'Driscoll
That's why I was trying to pick up early on when you say inference, you're selling having trained the model and doing the inference, you're selling two things together.
- [74:31]
Jeff Lawson
Yeah, and if the model, let's say we hit a plateau and all the model is basically the same, including Llama is open source, then you just have a question of okay, is inference a product that I will pay someone else to execute for me, or is is it more cost effective for me to stand up my own. And it's really a question more about tunings and things like that than it is about actually running inference yourself. But I believe inference itself is not such a hard algorithmic solve that you need to pay someone else to do it for you. But clearly training a model is, yes.
- [75:00]
Rory O'Driscoll
You have this secret recipe that cost you $5 billion. And what you're saying is if people had the recipe actually doing the inference, even though it's a lot of the revenue quote you're generating in that hardware just amortizing your model. Interesting, that was super helpful. You know, we've talked a lot about these, we've looked at a lot of these developer business over the years. That's actually a very helpful framework I.
- [75:18]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Was going to share it, too, actually, Rory, that was my. Me and Jeff were chatting before the show about it, and I kind of gave it to him, but I didn't, you know, I wanted to give the founder the chance. You know.
- [75:31]
Jeff Lawson
Everything I know about developers, I learned from Harry.
- [75:35]
Rory O'Driscoll
Okay. We're the comedy section of the event.
- [75:37]
Host/Interviewer (possibly Harry Stebbings or a co-host)
You have to understand, Jeff, my team is going to clip that. Okay?
- [75:41]
Rory O'Driscoll
Everything.
- [75:42]
Jeff Lawson
And everything Harry learned about awesome hair, he learned from me.
- [75:46]
Rory O'Driscoll
Nice. And both those statements are equally true. Okay.
- [75:53]
Host/Interviewer (possibly Harry Stebbings or a co-host)
All right.
- [75:54]
Harry Stebbings
We're going to do a quick fire.
- [75:55]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Okay, so what price will Figma be at in 365 days? It's at 52 today, which is a $25 billion market cap. Give me some numbers to.
- [76:06]
Rory O'Driscoll
I'm going to give you a number that's going to say it's about mid-40s, and I'll tell you why I give it. It'll prove all these silly people wrong. I'm going to give credit to the bankers. They priced it at 35. They get a roughly 10%, 15% pop and one year's compounding. The price that it should be, if the bankers were roughly correct, would be around the mid-40s. So I'm just going to assume that they're more correct than all the idiots who priced it at 110 and moved around and talked about it. So I hope it ends up at that price, and it'll allow the bankers to say, you told you we got it right. It just looked wrong for a while, but that would be a pleasing outcome.
- [76:39]
Jeff Lawson
I'll take the interest rate bet and say it'll be 75.
- [76:42]
Rory O'Driscoll
All right. Lower rates. Zerp. We're zerping again, people. We're zirping.
- [76:46]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Jason.
- [76:48]
Jason Lemkin
I'll bet 60.
- [76:49]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Will Canva go out in Q4? Yes or no chance.
- [76:53]
Jason Lemkin
0%.
- [76:54]
Jeff Lawson
Have they even talked about it? I feel like they're pretty happy where they are.
- [76:57]
Jason Lemkin
Well, Cliff came on last week, and he was pretty open about it. I just don't think. I mean, Jeff's been through it.
- [77:01]
Jeff Lawson
I don't have the benefit it of. Of. Of being on last week.
- [77:03]
Jason Lemkin
It just takes time. They could fi. They could have. I mean, they. I don't think they can confidentially fire, but it's. It gets tough to get it done in Q4. It's already September 9th. I don't think Cliff would have come in last week and talked about not doing a direct listing if they were about to file. I think the lawyers would have shut.
- [77:18]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Him down, even though he's so.
- [77:19]
Jason Lemkin
I Think I. I think first half is the right question. So I'm going.
- [77:22]
Jeff Lawson
No, let me call Cliff and I'll get you.
- [77:24]
Jason Lemkin
Yeah, call him, get an answer.
- [77:26]
Jeff Lawson
What time is it in for them right now? I don't even know if I am I waking these people up.
- [77:30]
Jason Lemkin
That should have been the show Harry. Jeff calls. That just should have been the show.
- [77:33]
Jeff Lawson
Jeff.
- [77:37]
Jason Lemkin
Billionaire software executive friends and just ask them random questions about business but. But sort of uncomfortable questions out of the blue. This will be his next appearance. Jeff Gos.
- [77:47]
Jeff Lawson
That is what podcasting is just without planning.
- [77:50]
Rory O'Driscoll
Yes, there's no planning here, I assure you.
- [77:53]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Okay's on a tire against me today.
- [77:56]
Harry Stebbings
I mean he's just not.
- [77:57]
Rory O'Driscoll
I'm sorry. It really just boils down to the two coffees. I've had too much coffee. It's not your fault.
- [78:03]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Don't know. I don't take it personally. Trust me. It's okay. My final one is what Jeff mentioned.
- [78:10]
Harry Stebbings
IRL CEO arrested for fraud. What happens here?
- [78:15]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Jason, this is a topic you're passionate about. You can kick it off.
- [78:18]
Jason Lemkin
Well listen, I'm not a criminal litigator or lawyer. Rory's got one in the family but yeah, hopefully it goes to jail for stealing millions from the company. I genuinely believe our. I mean our ecosystem is. Is so turbocharged right now. Right. But with in the Bay Area, I mean venture rounds are all getting done on Saturdays. Forget about no diligence being done two years ago. Now diligence isn't even being attempted. I think the best control today would be if more founders that committed fraud went to jail. I just think if every month someone went to jail that completely lied. I know Rory disagrees. Completely lied in a round complete sent financials where they aggregated all their years revenue in one month where they pretended unpaid pilots were pilots. If a couple of these went to jail every month, I think it would have the proper chilling effect and mitigate the rampant fraud we're seeing today. I just think it would be. It would be helpful for the ecosystem if that were penalized. And I know Rory thinks it's a cost of venture, but I think it's reaching an all time high and it's a net in the end it's a net negative. If trust breaks down and invests in. If trust leaves the system, it's just so much harder. There's so much trust in this system and it's not. There's not enough time to earn it in investing. Sometimes there isn't enough time to earn it. You can't get to know someone for four months anymore, even four weeks, you might have four minutes. So I wish a few more people went to jail.
- [79:38]
Rory O'Driscoll
Okay.
- [79:39]
Jason Lemkin
There's no consequences to standing up at a top accelerator and saying we have millions of revenue and the next week the revenue isn't there. There's just no consequence. And, and maybe that's funny to some people. I don't think it's funny. I think it's like Jeff, like founders used to. Every founder, almost every founder used to have this ethical standard a few years back that I think has dissipated in today's world. And it's just rampant greed. And I like the greed because it'll make us money, but there's too much of it.
- [80:06]
Rory O'Driscoll
Disagree that it was good and now it's. I don't think it's. I think dishonesty ebbs and flows with greed. And I think you tend to see peak dishonesty at a time of peak greed. So you see more of it now. But I don't think human beings have changed. I don't think we, we're more moral than people 30 years younger than us. I think the truth is you look at 1929, you look at the boom in the 80s when there's lots of money at stake, you tend to just see more fraud and no surprise happening right now. That's the first thing I do think people who absolutely lie should suffer severe consequences up to and including prison. I think so That's a generalist concept. I will say all these cases tend to be very facts and circumstances, you know, ranging from, oh, you gave an example, we had contracts and they had opt outs. Is nar squint one way? It is, maybe it isn't all the way to forging documents, which is clearly illegal. Right. So I think what the truth is, and I'm not going to comment on specifics because I don't know, I think it'll range from you absolutely lied to, you told things in a way that's very poor. You and they should have asked the right questions and you didn't. So my comment is the legal. And you're right, I have a lawyer in the family, a criminal defense defense lawyer way back in the day, long since retired. But the average Fed conviction rate for Most crimes is 70, 80% plus. It's slightly lower I think for white collar crime only because you get lost in the details and the noise of what exactly is intent. So I don't think it's a layup. But I do believe, as you say, Jason, some actions are just so Far blatantly out on the. I just flat out lied. I forged invoices that, yeah, if you do that, you should go to prison. Because. Because there's a lot of tax. If you can't rely on that kind of stuff, there's a lot of tax you have to do. So I'm not calling for vengeance and death, but I would be careful. That felt like a bit of a law and order lurch at the end there. Come on, say something nice, Jeff.
- [81:57]
Jeff Lawson
Well, between Jason, who wants some sort of venture capital ice regime, I actually think a little bit like, if VCs are like so eager to get a deal done because they're like, I don't have time to even check any of this stuff, then it does feel like, like their greed in that scenario gets rewarded with some amount of fraud. You're like, well, that seems about right. And there's a German word for that, I'm sure. Here's the pattern that I see every time I read these. I saw this CEO of IRL abducted. I've never heard of IRL actually. And the pattern that I've seen is that whenever I read these stories about CEO, founder, committed fraud or whatever, and they've took millions of venture capitalists, the pattern I see is I've never heard of any of the companies. Maybe that's just me, like I'm an old man and I'm not keeping up with all the cool things. But there's like this sort of thing where, like, well, if I've never heard of all these things, maybe there wasn't a lot of real behind them and they just look good on paper because as a real human being operating the world, if I've never even read a story about these companies, let alone an active user of them, something seems a bit odd.
- [82:59]
Rory O'Driscoll
It's interesting comment, Jeff, to your point. The commission of the crime is on the 22 year old who lies and they pay the consequence. But there was a little bit of me saying the 40 year old running a lot of money, who's sophisticated, who's running a big firm, they kind of owe the system the duty of care to check some of this shit and not be carried away, you know? Yes, SBF went to prison, but he was, relatively speaking, a young man with a lot of hubris. And we've all been there. I know I was, when I was that age, it would be better if the people who are paid for their judgment exercised that judgment. And a few times that said, slow down here, maybe we should have an audit to people before we manage, you know, 50 billion of other people's money. The incidents may fall on the guilty, but I'm not sure the moral blame should be allocated the same way.
- [83:45]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Yeah, well Jeff, I have to say dude, you have been a fantastic guest.
- [83:49]
Harry Stebbings
Lovely. I have loved having you on.
- [83:52]
Host/Interviewer (possibly Harry Stebbings or a co-host)
I know Jason and Rory have done as well. I mean, seriously.
- [83:54]
Rory O'Driscoll
Awesome.
- [83:55]
Host/Interviewer (possibly Harry Stebbings or a co-host)
Thank you so much.
- [83:57]
Jeff Lawson
Thank you for having me on by.
- [83:58]
Rory O'Driscoll
Actually stealing the little fucking three way list.
- [84:02]
Harry Stebbings
As you can tell, we have so much fun doing that show, but I want to make it the best show for you. So let me know what we can do to make it better for you. Harry20vc.com I want to hear your feedback. 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 a pipeline generation. Piper, the AI SDR agent.
- [84:30]
Jason Lemkin
Wow.
- [84:30]
Harry Stebbings
It is here to help. Piper is the number one AI SDR agent on the market according to G2. And hundreds of companies like Box, Asana and Brex have hired Piper to autonomously grow inbound pipeline. Fucking sign me up Anyway, Qualified customers see massive business impact with Piper. 3x increase in meetings booked and 2x increase in pipeline Pipeline. Wow, that's some results. Hire Piper, the 1 AI SDR agent and grow your pipeline today. Learn more at qualified.com 20VC that's qualified.com 20VC with the 20VC spelled out in letters for goodness sake. And while Piper builds your pipeline, Attio gives you the CRM power to close and grow those relationships. Attio is the next generation of CRM built for the AI era. Fast, flexible and powerful. No, it's not a sports car. It's a CRM system, baby. It is Attio and it takes less than a minute. Sync your email, your calendar and you'll instantly get all your relationships enriched in real time with incredible data, no manual input needed. Attio also integrates with your existing tools and syncs with your product data to deliver an AI native platform that's tailored to how your team actually works. You can model yourself CRM around your business, automate complex tasks and surface real time insights all in a platform designed to scale with you. With Attio, AI isn't just a feature.
- [85:55]
Host/Interviewer (possibly Harry Stebbings or a co-host)
No, no.
- [85:56]
Harry Stebbings
It is the foundation. It's powerful. It's AI automations, it's research agents that transform your go to market motion. It's a data driven engine from intelligent pipeline tracking to smarter product led growth. Fast growing startups like Flat File, Replicate and Modal are all experiencing what's next. So get ready to build without limits and start now. Attio.com20VC and get 15% off your first year. That's attioattio.com20VC okay, pipeline sorted. Woohoo. Now what about your own legal team? Enter Logora. Logora is the category defining AI platform that's fundamentally reshaping how legal work gets done about frickin time time. Empowering lawyers across Tier one law firms and in house teams to achieve more with greater precision and confidence. So Ligura does this by solving really concrete tasks such as document extraction, reviews against a firm playbook and suggesting well crafted markups directly in Microsoft Word based on your preferences. My word, that is a topic list of conversation that will not get a second date. But anyway, the adoption of legal AI is surging across the world world and Lagora is at the forefront of this shift as the chosen partner to 250 industry leaders in law across more than 20 markets. The likes of Goodwin, Bird and Bird and Deloitte are making daily use of Ligora platform to review and research with precision, draft smarter and collaborate seamlessly. They recently also got an $80 million Series B from Iconic. They're backed by General Catalyst, Redpoint, Benchmark and yc. Also they operate out of New York, London, Stockholm. Yes, they're Swedes. Always a wonderful race. With over 100 employees from some of the world's leading global law firms and tech companies, the team is growing super rapidly. They're just freaking awesome. Just go use Legora. Honestly, I love Max, their founder. He's just a great dude. Go find out more. Lagora.com as always, I so appreciate all your support and stay tuned for an incredible 20 sales episode with the founder of Gong on the show tomorrow.