← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: Tiger Global Saved by OpenAI | Coatue's New Fund: Hype or Substance | Why SBF is the Greatest Investor of the Last 5 Years | Why Big Funds are Investing in Perplexity
01:14:37
Items Mentioned in Today’s Episode: 04:11 Owner’s New $120M Round at $1BN 06:05 Why Series A is F****** Today 14:55 Could Tiger Global Be Saved by OpenAI and Scale 22:43 Why SBF is the Greatest Investor of the Last Decade 31:34 Why No Individuals...
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- [00:00]
Rory O'Driscoll
The fact that Sam invested early in Entropic and Curse is astonishing.
- [00:04]
Jason Calacanis
I think the weirdest thing in this is that for OpenAI you have a CEO and now another CEO that are both not technical. I just think it's really weird. Microsoft laid off 3% of their company today. It's not enough. I'm not sure I need 80% of my team today so I would armor up if I were Clay. I would hire everybody, I would raise another hundred million and I would just scorch earth everyone in the space.
- [00:25]
Rory O'Driscoll
What perplexity is selling from an investor perspective is an at bat a credible 1 in 3 not equally weighted. To be clear, OpenAI is clearly going to win, but maybe you can be third and that's worth a damn side if the prize is a trillion bucks, that's what they're selling.
- [00:41]
Harry Stebbings
This is 20 VC with me, Harry Stebbings. This show was just the funnest to record. These are always the highlights of my week to record. In the show Today we discuss OpenAI's new CEO, CO2's new fund structure, we discuss Perplexity's new potential round where SBF might be the greatest investor of the last few years and so much more. You can find it on YouTube by searching for 20VC. I really hope you enjoy it as much as we did recording it.
- [01:06]
Unknown
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- [01:16]
Jason Calacanis
Wow.
- [01:17]
Unknown
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- [04:07]
Rory O'Driscoll
You have now arrived at your destination.
- [04:11]
Harry Stebbings
Guys, it is so good to do this. I always say this. This is my favorite show to do.
- [04:15]
Rory O'Driscoll
But you say that to all the girls. Howie, you know what?
- [04:18]
Harry Stebbings
Clearly you don't listen to the show.
- [04:20]
Unknown
My friend, because I don't.
- [04:21]
Harry Stebbings
I actually just thank them cordially and pretend, you know, that I'm thrilled.
- [04:25]
Unknown
But I would love to start with.
- [04:27]
Harry Stebbings
Some big news, which is owner's new round. Jason, you led the seed here.
- [04:32]
Unknown
90 million at 900 million I think it is.
- [04:35]
Jason Calacanis
You know, I don't even read the document. Honestly, I don't read the doc. I just found out it's 120 million. When I read it today, I didn't even know. I didn't even read the document. All I care about my ownership, I don't really. The, the other numbers, you know, they don't really. I, I'm, I'm being a little facetious. I actually didn't know. 120 million. Yeah. 120 million.
- [04:49]
Harry Stebbings
At a billion.
- [04:50]
Jason Calacanis
Yeah. At a billion. Yeah. Yeah.
- [04:51]
Harry Stebbings
Wow.
- [04:52]
Jason Calacanis
The learning is, look, yeah, they're at 40 million, growing 10% a month, but the, the trailing is there, right? So they have done a lot in sort of AI infused marketing, but in some ways it's also a pre AI. I mean, it's really good software. We could talk about that. But. Well, the interesting thing was that the, the narrative is, right, this is just my learning with those metrics, right? With the growth. And the thing is, Adam did a great job doing what you're supposed to do, getting to know all the VCs over time, right. Socializing it. But then the classic thing, which actually I get some hives around, which is open the data room on Monday, get two term sheets that afternoon, and get all of the term sheets by Wednesday. That process still makes me nervous to this day for a variety of reasons. But the meta lesson is going to our conversation. Look, triple, triple, double, double. Still good enough, right? And so owner is growing faster than that. Okay. Objectively. But if you are, then it feels like there's unlimited. This is learning. There's like friggin unlimited capital. Even just from the insiders could have filled out 150 million in this round. Wherever this zone is today, this is the endless struggle for me of this is my learning from this. If you're in the zone, and I think it's harder than ever, but if you're in it, there is just unlimited effing capital. Right? But you got to be in that box. So that's my learning the box, right.
- [06:02]
Harry Stebbings
Rory, what do you do in those cases? I have this now with the team where they say, harry, great founder, great founder, we need to decide by Wednesday and it's Monday. And I go, I can't write a $15 million check by Wednesday. When it's Monday, I just can't.
- [06:17]
Rory O'Driscoll
Well, the freeing of the question says why it's wrong. If it's Monday and you're hearing it for the first time and you got it right, Wednesday, you're just way behind. Because even if you crank and write the term sheet, you're also gonna be up against someone who's met them before in the last round. And is ready to write another term sheet now and has done some work the prior Monday to Friday. And for them, Monday is just confirmatory. And then you've got two days. So, yeah, look, it's. I mean, the speed at which things are moving make it really hard. But there's no use crying and saying, shit, I WISH it was 2010. You just got to, as you say, play the game in the field. It's really hard to go from zero to the side in two days. Maybe you can assimilate the data. Maybe you can, but it's very hard to assimilate the person. In other words, it's very hard to know enough about that person in two interactions spaced one day apart or two days apart to pull the trigger here. So that's the hard part. So, you know, we have internalized, you know, you've just got to be tracking them. You've got to put a lot of effort into seeing the ones that you want to see in advance to know in advance what you want and the consequences of that means. The second order problem is, what it means is you can't be looking at everything equally because you can't. You can woo 10 people, you can't woo 200 people. So upfront, picking your shots on where you want to do the wooing becomes part of the struggle. My rule of thumb is if I don't have a list in our salesforce of 10 to 20 names that I know I want to see, that I could imagine investing in in the next 12 months, I'm probably not doing my job. And, you know, we talk about it internally, everyone has their hot list, and if you can't name those companies, you know, and you're just wandering around hoping shit's going to turn up on Monday, that will make you money on Wednesday, it's not going to be successful.
- [07:58]
Harry Stebbings
The question that I'm finding series investors and our Series A team asking is like, how quickly after the seed can we preempt? Because it's so, so fricking competitive that they're like, the seed was done a month ago. Can we just bid it up now? Because when we don't Lightspeed gc, Sequoia do.
- [08:14]
Jason Calacanis
Well, look, if you bid it, I mean, as silly as these things sometimes see when they're bid up in two or three months, right? Sounds silly at first, right? But going to Rory's point, let's say you met them and you really like the deal, it didn't work out for whatever reason. You get two more investor updates and the company's grown 50% two months and you've already done the diligence. You already met the founder, right? I mean, why wouldn't you do that deal? I mean, if, if, if you believe the price made sense, right, because you already got you, you get a second chance. Isn't. Sequoia seems to be really good at these second and third and fourth chances, right? Sequoia did this round at seed in the this round, and then it does clay at 1.5 billion. To me it seems chaotic, but I don't think it's chaotic. Right. It's win when you can win, isn't it?
- [08:53]
Rory O'Driscoll
Rory, I do struggle with this. Should we do it three months later? Because, you know, there's a little party that says, oh my God, that just feels wrong. Admit my biases are that way.
- [09:03]
Harry Stebbings
But I think, and you know, they don't need it, like, you know, that this is solving for your problem, not for theirs. Fundamentally, yes.
- [09:12]
Rory O'Driscoll
And if they don't need it, well, they're big boys. It's up to them to say they don't want it. I don't have to solve everyone else's problems. It's hard enough to solve my own. So I do agree that's an issue. But the bigger issue is there's a couple of things. Can you stomach pain, you know, twice as much as someone three months ago? We've never done that. I struggle with that. But then, as you know, as a theme with me, I always think, am I getting that right? I mean, for example, there's no doubt some of the best companies in these high growth markets have the highest velocity of raising at some zoom out level. It's Adam Smith giving a signal to everyone. These guys have found a place to put capital. Give them more capital, you fools. I mean, OpenAI being the classic example. We put in 100 million, the model got smart shit, let's do a billion got Smarter, let's do 10. I mean, you know, you're gonna double down until it doesn't work. That's the signal that says we need to get money into this thing. So I'm wrestling with exactly that. How soon after that should you do it? You don't wanna be paying twice the price of someone else for the same risk. That feels like an idiot, which is why we haven't done it. But at the same time, as Jason said, six, nine months later, probably, if it's a good deal, that's when you should be engaging.
- [10:18]
Unknown
On the flip side of this, we've.
- [10:20]
Harry Stebbings
Just seen, literally just before this and sorry, Rory, then we'll get to bits that you have prep for because I promise I won't throw in everything. Carter just announced Series A's are down 81%.
- [10:29]
Unknown
Yes, I agree with this.
- [10:31]
Harry Stebbings
Our Series A team is scratching their head going, what the has happened to the Series A market? Are you guys seeing the same thing? How did you reflect think about this 81% drop in series A's.
- [10:43]
Rory O'Driscoll
I saw the data. The seed and the pre seed are the believe in the team round and the A is the show me the traction round. And you know, belief is easy to manufacture and traction is hard. So once you get to the traction line, you either, you know, it's either you have it or you don't. Right. And if you don't, I think the smart thing people are doing is not trying to raise, they're just trying to figure. And we'll talk about a company in a minute that did an amazing job of that. Not calling, never. You know, it's kind of like the law, like a barrister. Never call a question unless you know the answer. Don't go out and try and raise money unless you're pretty certain you got what it takes.
- [11:16]
Jason Calacanis
Series A conversions are down. Who cares? Your start like go make your startup S tier. The whole point of venture is to invest in S tier startups. And if you built a B tier startup and it's hard, or you built an A tier startup that could get funded in 2021 and it can't today, cry me a river. I was there with owner years. It couldn't get funded, I couldn't get funded. Multiple. I went through sequential years as a founder. Easy to get funded, impossible. Easy to get funded, impossible, right? Crying about it because it's hard to raise a Series A is. It's a B tier way to look at it. Be the best of breed, you'll get five term sheets. You really will.
- [11:47]
Rory O'Driscoll
This is a totally weird analogy, Jason, but I get what you're saying. It's like years ago I actually had stunningly bad cancer. And you get the numbers and you get the statistical survival rates and they're miserable. And what we internalized at one point, my wife and I, is that the statistics are actually interesting to the doctors because they have lots of patients and they want to keep a rough eye on things, right? To the person, to the patient, it's 0 or 1. You either make it or you don't. And it's the same thing here for the startup, you're exactly right. Either you have something that's Worth funding in which yay, you and the statistics don't matter or you don't at the margin. It's interesting that it's slightly easier to get money, but fundamentally I think you are right is that you want to get money because you have a good thing. And the having a good thing is the hard part. Venture is pretty much on tap if you have the kind of metrics that you guys got at owner. Look, I was telling Harry before we started here, you know, whenever there's a good deal announced, I go to our salesforce, I look at the chatter notes and I look at why we passed on that round four or five years ago and what idiots we are. And you know, that's just the nature of the thing at time. It didn't look obvious. You guys hung in there, you made it work and all power to you.
- [12:52]
Jason Calacanis
The cancer you talked about.
- [12:53]
Rory O'Driscoll
Yeah.
- [12:54]
Jason Calacanis
Why did you come back to Venture? Why didn't you throw in the fucking towel and say I've had enough of chasing these deals. Seriously, I. You do. We are. We've talked about how folks are leaving Venture. Right. Some are certainly not elective. But we've also seen a lot of folks that made a lot of money that stepped out of Venture the last couple. Like, why did you come back?
- [13:11]
Rory O'Driscoll
So I did not make this mean to make this a personal thing. It was just kind of came in my head. But I have no problem talking about it because I internalized at the time. I was just on the 40 and I got stage four colon cancer and my bigger heart going through it when I was doing chemo for about a year and a half and you know, is that I kept on working and you know, some people say I had this thing, I had this near death experience. I want to, you know, travel around the world, live in a yurt, I don't know, climb the Mount Everest. And what I realized is I like my work and I just like to keep doing it and you just do it until you can't. I've kind of processed through the whole existential what are you doing thing and come straight out to, it's a good job, we get pretty well paid and it's quite interesting. I have no desire to do anything else. And I. That definitely brought it home for me. It's like, you know, if you're not going to change, I mean, sometimes it irks my nearest and dearest when she'll say, you know, really, you couldn't even change. And I'm like, yeah, that's what you got.
- [14:00]
Harry Stebbings
Jason, do you know, I love so much.
- [14:02]
Jason Calacanis
What's that?
- [14:03]
Harry Stebbings
How cancer changed Rory. I just want to find another enterprise storage company. Give me another. Like, I don't want to see Everest. I just want another data storage company with high nrr.
- [14:16]
Rory O'Driscoll
Hey, you know, there's a lot to be said.
- [14:17]
Jason Calacanis
They're in the hospital.
- [14:19]
Rory O'Driscoll
Just give them a. I actually used to take call when I was on the chemo. I used to lie on the floor. Cause it hurt. But I don't mean to make this a personal thing, you know, actually, as a random comment on the Yay venture, I was one of the first people to get Avastin, which is the Genentech drug, which was funded by venture capital way back in the day. Kleiner funded Genentech and, you know, before that, you'd have been toast. And after that, you know, literally it was a week after it was FDA approved. At the risk of getting political just for a second, I don't know what my health healthcare provider paid for that drug, but I'm damn glad they did.
- [14:52]
Harry Stebbings
So you said. Yay, Vantia there. One of the villains, or criminals of Vantia, so to speak, of the last few years has been Tiger. People criticise, obviously, deal, volume, deal, count dollars out the door. It's definitely been seen with some skepticism, for sure. But positions with OpenAI and scale is proving to make some of their fun performance not look so bad. And if we project out forward, this.
- [15:18]
Unknown
Could really save them.
- [15:19]
Harry Stebbings
How do we think about this, chaps?
- [15:21]
Rory O'Driscoll
First of all, it's not a morality play, so there's no right or wrong. Look, they had a very aggressive Strategy. They did 300 odd deals in 2021. Obviously, in retrospect, total mistake, you know, time diversification, if they had enough. Time diversification, I think is in tiger 15, or pfp, whatever they called it, 15 to get some OpenAI in and they had the guts to do a lot of it, then. Yeah. Can you pull it back? Totally. I think. I don't know. But at the very least, you can kind of salvage something from what looked like a very tough fund. So it's entirely plausible that one deal has a significant impact now, given the size of the fund. 12 billion. Given that 350 as in 2021. This gets to something we've talked about earlier. The only way it works is bet sizing. In other words, if they did 1,350th in OpenAI, it's not going to bail them out. Even if it's a 10x or 20x or 30x. If on the Other hand, they had the guts and the foresight and the courage to put 10 or 15% of the fund in something that could 7 or 8x. Then, yeah, maybe they've snatched victory from the jaws of the feet and more power to them. I don't know the amount they put in, but that's the key fact.
- [16:29]
Jason Calacanis
Wait, let's go back in time. Help me, Rory, because you're so good at this. They did 350 Series A's basically in a year.
- [16:34]
Rory O'Driscoll
I don't know about A's deals.
- [16:35]
Jason Calacanis
I think so help me just think. But 2021 was good times, especially in B2B, because everything was working right. What would it have to work out in B2B for that fund to do 3X? Like how many? Help me think through the math.
- [16:48]
Rory O'Driscoll
I think you shouldn't conflate the two, because the truth, any 21 exit is a 2018 late stage deal. Right. Which is why, by the way, if you look at it, a lot of the late stage funds are going to have a very excellent 2018 vintage, where, interestingly, the earlier guys won't, because they won't have had it all the way through the system by the time the window shut. The later stage funds are going to post a very nice 18 fund. Tiger as the definitive late stage firm. Probably has a great 18 fund. I haven't checked with PfP 14 or whatever it is. Right. Because if you were buying stuff at 2 billion in 2018, you were probably selling stuff at 6 billion in 2021, right?
- [17:24]
Jason Calacanis
Yeah, they were. The gems at 2 billion.
- [17:26]
Rory O'Driscoll
That was beautiful. And then, of course, everybody does the same thing. You start thinking you're smart because you're making money, and then you do 315 more deals in 2021. The math of those, Jason, I mean, it's a 12 billion fund, so you got to return. Let's just do 24 billion to get a 2x. My assumption is, look, you're not going to have the hit rate. The calculation you're asking isn't worth doing because this isn't going to work because 20% or 30% of the 315 deals become solid deals. There's not going to be enough deals. It's going to work, if it works at all, because they put 20% in OpenAI and 10% in scale, and then they get a couple of dribs and drabs and that's a couple of decent 21 deals that become okay, but not much. It's just hard to dig out of a 12 billion doll. Billion hole in $100 million increments.
- [18:13]
Harry Stebbings
I have to say I think they are unfairly criticized. I completely agree that the deal volume was off the charts. I don't think the strategy was that wise. All of this. That said, if I was an LP in those funds, if they hold on to OpenAI scale and I'm actually in some of the back catalog with them, and the good and the bad, the bad. They will 1x.
- [18:32]
Unknown
There's lick press.
- [18:33]
Harry Stebbings
They haven't raised crazy amounts. They will 1x. They won't lose money on them.
- [18:36]
Unknown
And there's actually quite a few that.
- [18:38]
Harry Stebbings
Are really fucking good.
- [18:40]
Rory O'Driscoll
Totally. I think that's fair. People have strategies. They either work or they don't. The facts come in. The great thing about this business is in the end, we don't have to say what we think of each other. The numbers tell. If they were able to put a lot in those two big deals, they win. And they should win, because that's a very shrewd move. When you're in trouble, you have a lot of trouble deals in 21. And you say to yourself, objectively speaking, what's the only strategy that can save this fund? The correct answer is shove the remaining 40% of the fund in one of the only two or threes that can go to the moon. It's a total morphing of the strategy. There's an implicit statement in there that the strategy was wrong because otherwise you wouldn't be in the hole. But at the same time, getting out of the hole counts for points too. It's a little like Bush in Iraq. It was a mistake to go in, but at least in 2006, he surged his way out. This could be the tiger surge. Made a big hole. Then fix it.
- [19:31]
Harry Stebbings
I have said. I think the thing that's fascinating is actually when you look at ftx, their positions in anthropic precursor actually would have saved them if they had the time to prove that out and they hadn't done the commingling that would have saved their financial performance with those two investments alone.
- [19:45]
Jason Calacanis
Well, that's why I tell founders, just only do like a little fraud. Like you got to know where the line is of too much fraud. Right. And that was too much. That was the problem. You poke the bear too much.
- [19:56]
Harry Stebbings
You poke the bear.
- [19:57]
Jason Calacanis
Yeah, he just. He just. You just. Yeah, I mean, you know, a little commingling, you know, using. Using the funds to buy a compound in Baha in the Bahamas, that's okay. But like, you know, I feel the.
- [20:10]
Rory O'Driscoll
Need to state for the record, that Jason, once again, is merely being ironical. And we will not be leading the promotion for this show with a picture of Jason and me with someone saying, only a little fraud is fine. Okay.
- [20:22]
Jason Calacanis
But I think all of crypto is a little fraud. He just took it too far. Don't be stupid.
- [20:26]
Harry Stebbings
We couldn't fit that much on a thumbnail. We'd just have only a little fraud.
- [20:30]
Rory O'Driscoll
Exactly. No mitigation. Okay, got it. There's a lot in that, for what it's worth. First of it, just to observe. Yeah. The fact that Sam invested early in Entropic and Cursor is astonishing. What a talent. What a willingness to look at new stuff in 21 before the ChatGPT moment when it was just crazy stuff that people were saying this might work. Who knows? It might have been early 22. I wouldn't swear by it, but astonishing to pick two of the most important companies in the post. 21. Crash and nail it. You're clearly a very smart man. That's. Yay. Second thing is your comment on that could have quote unquote, has saved him. It's worth pointing out the core business he also had was a pretty impressive and good business. I mean, the core exchange worked fine too. It was all the weird shit on top. It was all the commingling. So, yeah, he had an excellent business, blew it with fraud, and did some great venture. That's quite a polymath.
- [21:24]
Jason Calacanis
Do you think he deserves another startup if he gets out on time, if he gets pardoned, do you think he deserves it? Like Theranos got another one, right, The SYNAPSE guy. Do you think. Do you think a top fund will give him a couple hundred million to get his next venture going?
- [21:37]
Harry Stebbings
That's a good question. Would you fund him?
- [21:40]
Jason Calacanis
Would I fund him? I don't think Rory or I would. I'll defer to Rory, but I think someone will fund him. He showed the upside as well as the downside. I don't know. There's a lot of morality in the business. I think someone will give him just like 100 to start. This isn't like an open AI spin out, just a little 100 at a billion post to hire a team and just kind of get things going and see where it goes. It's not a lot out of the new $5 billion fund, is it? It's 2%.
- [22:02]
Rory O'Driscoll
Yeah, it's all cute. And look, there's lots of.
- [22:04]
Jason Calacanis
I mean it, though.
- [22:06]
Rory O'Driscoll
What?
- [22:06]
Jason Calacanis
Even someone will fund them.
- [22:07]
Rory O'Driscoll
I don't know if I agree. In the sense of, at the risk of sounding like a stick in the mud, I think there's a big point spread between dodgy, aggressive performance, acute failure. Wework being the most obvious example of, you know, major failure, hubris, grandiosity, you know, implosion of money on a large scale, but no convicted crime. And on the other hand, being convicted of a whole bunch of fraudulent related offenses, I just think that's a bigger lift in terms of attracting capital. So no, my gut. Once you pass the convicted criminal stage, the bar goes way up.
- [22:41]
Harry Stebbings
You said yay Vantia. Saving Vantia. I think it really stood out to me was the CO2's marketing of the new fund as being open to anyone with 50K. You know, Philippe Lafont went on all in and really showed this kind of democratization in access to venture and a new model where you could redeem. There was kind of liquidity built in. How do we think about this?
- [23:02]
Jason Calacanis
Well, you know, I want to hear what Rory thinks, but I, I watch a lot of YouTube and they have, and they have movies and boy, the room came up. It was the story. Vin Diesel. It's just a story. Let's just rip off the retail investor.
- [23:14]
Rory O'Driscoll
You really are the cynic here.
- [23:16]
Jason Calacanis
I, I'm the most positive. I'm not a cynic. I just think people are, are, are cynical. I'm not a cynic. I think this is cynical. Ripping people off for 50 grand that don't know what they're getting themselves into.
- [23:26]
Rory O'Driscoll
And bringing a couple of things together. One in. And in defense of the thing, a lot of the big private equity firms are making the same move. They're trying to tap additional sources of wealth. I mean, we've just discussed it. A lot of the endowments are under pressure for capital. You just gotta get money where you can. And it's one more vehicle. I think if you look at people like Blackstone and people like that, a significant and expanding portion of their capital is coming from high net worth individuals. I don't know if the bar is as low as 50k, but there's no doubt that all the wealth managers have these PE type products. Products where they've constructed some element of liquidity similar to what Cortu is doing. So it's not like it's out there, way out there in the blue. The other comment I'd make is going back to, I think here we are. I mean, this is the complete round trip. Everything used to go public early and then they stopped going public early and they stayed private for longer. And all the institutions could do it. And now we've recreated this vehicle to allow public investors to invest in these companies. And in fairness to CO2 as well, I want to say at better economic terms than the traditional 2 and 20, but when you zoom out a million miles here, this is all madness. These companies should be public and then Fidelity Growth Fund could do them at 70, 50bps instead of Coattu doing them. So the core problem here is that all these companies want to remain private for longer. And you gotta ask yourselves why is it such a shitty experience being in the public markets? Because it clearly is. This is a workaround for a problem that would be better solved some other way.
- [25:01]
Harry Stebbings
Is it a workaround that others adopt? Is it a workaround that lightspeed GC others go, hey, this is something that we should be doing as well. Or is it unique to CO2, do you think?
- [25:12]
Rory O'Driscoll
I think anything that works in finance gets copied immediately. It's just one of those life rules.
- [25:17]
Harry Stebbings
Do you think it will work respectfully? He's on all in because he wants people to invest and he's marketing a product.
- [25:23]
Rory O'Driscoll
I think that they're very smart people. One thing I didn't understand by the way, is the concept of was a Dell and Bezos as anchor tenants. I don't know if you saw that part of the announcement where they said I think it was Michael Dell. I didn't understand that because I would have assumed that they can get all the liquid ari liquidity, they can get whatever asset they want. They pass the 50k threshold, let's put it that way. Jeff Bezos and Michael dell make the 50k sophisticated investor threshold. So I didn't understand that. But do I think it'll work and raise capital? Probably it will because the facts are there. The other PE vehicles have worked and then let's get real at the end it'll be packaged as some version of this is the only way you can get access to OpenAI and Tropic and all the hot new startups that are changing AI sign here and people will sign because it's true. It is the only way you can get access to those assets. So yeah, I think it'll sell.
- [26:13]
Jason Calacanis
Listen, I'm not a real retail guy but that based on my limited experience I always write if you tell folks they can get access to these hot names, they won't even understand what the carrier economics are. They won't even process what it is right. In fact, I think the way they're doing, whatever the carry is 12.5% and 1.6842% fees. It's almost too insider baseball a right. I don't think the average retail investor even knows what that means. It's actually arguably very high, although it's low compared to traditional venture. Right. Depends how you whether it look led at a crossover. You know, is this Fidelity or is this vc? But I.
- [26:44]
Rory O'Driscoll
That's an interesting point. Jason. You're right. I didn't take into account 50% of the assets are public. You're exactly right. That's probably how they got it. Half of my assets are public stocks which should be 50bps and half of my assets are venture which should be 2 and 20. So you blend. You're exactly right. Good point. That's not cheap, it's market.
- [27:00]
Jason Calacanis
You know, there just is a line where this could rip retail investors off and I just hope it doesn't cross it.
- [27:05]
Rory O'Driscoll
There's really only two things that go wrong. Either you have the wrong manager or it's just the wrong asset class. Or maybe the third is the wrong structure. So let's take it apart. You're getting an excellent manager. Code 2 is a top tier public private manager. So if you look at the three things that go wrong when a retail investor puts his money in dumb stuff, mistake one's not going to happen. You've got a top tier manager.
- [27:26]
Harry Stebbings
Are they a top tier private manager?
- [27:29]
Rory O'Driscoll
At least put it this way, I would say for the kind of later stage things they are, they're clearly very sophisticated. They're in some good deals. Are they as good series A as pick a name Benchmark or Klein or. No, but they've established a meaningful scale franchise and thoughtful and you know, compared to a lot of ill thinking people. They're thoughtful investors. They're in the flow, they have access. It's not like a billion coming in where they have no access. Because one of the things that goes wrong is when these weird outside vehicles come in and they haven't a preexisting business, you know, you just don't get the good deals. They're already in the flow. They'll be able to get good deals. I think the real question actually the other two issues, one is just a timing adventure, is that if the next five years are tough, no one can save you. And then obviously a lot of retail investors will think oh my God, that was dreadful. So I mean to me that's the bigger question. And then lastly the structure thing is interesting. The whole will people internalize that there are limits to liquidity and this is not spy Your friendly local ETF that's fully liquid at one minute's notice. There are redemption gaps, redemption blocks, gates. That's what they call redemption gates. And if you remember back a couple of years back, it's either one of the Blackstone or blackrocks. I get those two mixed up. But they had a real estate fund where they had to put up the gates of liquidity because they just couldn't meet demand. So those to me are the questions much more than will they? I don't think they'll do bad investments. They're shrewd guys. The question is, does the retail investor who thinks they want it today really want it when it's cyclical and illiquid? And then they discover that if I.
- [28:59]
Jason Calacanis
Step back, I do worry it's being oversold. But any single individual I know that wants to LP into, into venture funds, right, Anybody's, including mine, I tell them don't do it because no one understands the illiquidity. It's not worth it. It's not worth it. It's not worth it for a large amount of your income because the liquidity will stretch it out. It's not even worth it. Put a little bit of money, I'm going to put 50k into 20 VC and then it does 8x. But it's a 17 years later until I. It's just not worth it for the stress. And I don't know how all the gates will play out, but a lot of folks maybe get stressed that this investment is. And I think 99% of folks should only be in liquid investments, including people in tech. You should be as liquid as Paul. It's just too stressful for the, like VTI is the perfect product for 99% of people. It's the perfect product. You cannot beat it. One of the things that I, I just hate about venture as a founder is when I smell too much grease. Greed. Now, a little bit of greed is okay, okay, we're aligned. We're. We're on the cap table together. There's a good greed, but there's a lot of VC today and in 2021 that's like super greedy. Like, you know, there is a super greedy element to SPACs. That's why I hate them. You can tell me there's some good ones, but it's super greedy. Okay. There's types of SPVs that and opportunity funds that are super greedy. And it just, I just don't like the smell of it. I just don't like the smell of it. And then when times are good, this super greedy, maybe it's the right playbook inventor, like, grab the billions. Grab the billions. But there's a. There's. I don't know, some of it smells too greedy.
- [30:21]
Rory O'Driscoll
There's always that feeling when you go to the retail investor that you've exhausted anywhere else. I get the cynicism. The weird thing that's happening is as privates become more and more of the economy, it just makes sense that the big private houses find more and more, have to access more and more of the public capital to kind of feed the beast.
- [30:40]
Harry Stebbings
I get you, but at a 1.2 billion fund, doth butter no parsnips on that extension of private markets, you need $10 billion to be playing.
- [30:47]
Rory O'Driscoll
I think that the way you get 10 billion is you start with 1 billion. So, yeah, look, I hear you again. I would say it again. Just look at what the PE firms are doing where private is a significant portion of their total raise. My guess is if you're running one of these big firms, and I'm sure there's a PowerPoint on the desk at Andreessen, at General Catalyst and on Lightspeed on this, if you're running and you want to make sure that you're matching whatever it is that those guys, the other people are doing that you perceive as your scale peers, then you're going to do what they're going to do, and they're all copying the PE guys. So the movie's inevitable. There's no point getting all moralistic about it. They're just, you know, it's the game they're playing.
- [31:26]
Harry Stebbings
Also, credit, Jason to you for potentially the fastest bet to go south in a long time. I mean, you very confidently last week were like, you know what? I bet you 100k that AI is going to replace jobs very quickly. And then this week, Seb from Klarna, the biggest proponent of replacing people in Klarna with AI, goes, yeah, seems I.
- [31:52]
Unknown
Went a bit far.
- [31:53]
Harry Stebbings
And we're going to be hiring back a load of people to walk back a lot of that AI transition process that we made. How did we think about that?
- [32:02]
Jason Calacanis
Few things, actually. I enjoy more than being wrong. I enjoy it. Right. I'm happy to admit it. I have no ego in it. I genuinely enjoy being wrong. Believe it or not. I'm thoughtful when I speak up because I. I'm going to win this bet because for a bunch of reasons. One thing, this Klarna thing was misunderstood in the beginning, and it was misunderstood today. It's misunderstood. Look first of all, there's some drama in what the CEO is trying to do to get attention for whatever reason, right? Drama with the sale. But here's the point. This is what's happening. There's in everyone that's in AI. In B2B, there's a slider, okay? There's either literally or figuratively slider. If you go into an app like Gorgeous where I'm on the board, where there's 20,000 customers using AI for SMB support, there's literally a slider and you can dial how much support AI you want from 0 to 100. No matter what anybody says on X and LinkedIn, the average across their SMBs is 20%. Okay, folks that put the energy in, get to that 40 number that everyone talks about. That's for. But you have to invest time. And out of 20,000, they have a handful of folks that are at 100 like Klarna. Do you know how many it is out of 20,000 are at 100. What's your guess? Out of 20,000, how many went to 100?
- [33:04]
Rory O'Driscoll
Probably less than 100 people, maybe even 5 or 10.
- [33:07]
Jason Calacanis
2, 2, 1, 200. And these were folks who absolutely knew the trade offs and knew what the issues were. And this is what Klarna did. They moved the slider to 100 and they did not move it back to 100% humans. He did not say that. What he said is I'm bringing back some humans. He did what two out of 20,000 customers did at Gorgeous is he moved the whole thing all over to 100 to learn to be dramatic and it went too far and he moved the slider back. But you know what's going to happen? Every three months that slider is going to move closer to 100. 100, it's going to move closer. And I believe in most cases it will never get to 100. But what will happen as we go into next year is folks will be like, I'll deal with the downside of 100. It's only two today. But more and more folks will say, listen, like some orders are going to be wrong, some answers are going to be wrong, but I'd rather have no humans in my new cool five person, billion dollar startup. And these five person billion dollar startups are still going to move the slider to 100. So I just think it's misunderstood the fact that he bounced back so far a bit. He did not say I'm rehiring everybody. He did not say I'm rehiring the thousand people that I laid off in support. He's probably going to rehire 200, right? And 800 will still be AI'd. So I think I'm going to win the bet. But if I'm wrong, like it's cool, like it's possible. But I literally, I see all the data across 20,000 AIs and this slider and the two. Once I realized it was only two that did 100, then I had my aha moment. Right, that's too far. But they talked them through it and they told them what the downsize was, they walked through it and they did extra training and they're like, we're still going for it. And those were products that were simpler, et cetera, et cetera.
- [34:29]
Rory O'Driscoll
First of all, Jason, you're not going to win the bet because we're calling it now. You've been margin called. We're closing the book. We're punching you out now. Right, Send the money. But actually, having disagreed with you last week, I 100% agree with the way you outlined it this week because frankly, it was more rational because you're right, stylistically, you're an entrepreneur, Seb's an entrepreneur. You got to move big organizations. And one of the way you move a big organization is you create these big ass goals. You violently shift the thing one way and if you have to correct back a little, you know, you do it right. It's very Elani. And we can talk about his automation in the Tesla plant as an example of that. I think you're exactly right. I think, I don't know if the CEO of Klarna believed it and thought maybe we can do it if he didn't believe it, but he thought, we'll get to 80. The only way to get to 80 is to try for 100. But it's unfolding exactly the way I would have said last week. And I agree with what you're saying this now, which is pre LLM your customer support, B2B or B2C. You could chip away 20, 25% of the number of tickets. And unfortunately they were the easy tickets because it was, you know how to fix my password. So you actually didn't save all that much at headcount. Depending on where you are on LLMs, you can get to 50, 60, 70% without any deterioration in service. And in fact, based on some references, we did an improvement in nps. That's what's going to happen as the base case. Some people are going to try and do 100 and then probably back off a little My guess is in a year or two you're right. Maybe it won't be Klarna because they're big and they're doing money. But if you're running a small DTC company with a fairly simple product and you were just really focused on, I can see in a year or two saying we just don't do support. We answer all the questions. So the direction of travel is clear. It's going to take longer than people thought a year ago, but it's not going backwards. So I'm violent agreement today. This is just a five year trend, not a one year moment.
- [36:13]
Harry Stebbings
So I love Seb. I think he's fantastic. I've had him on the show. Friend investor in Project Europe. So this is all said with love. I'm surprised by the lack of strategic analysis around the timing of how he bluntly presented this. Public markets. I had the founder of Duolingo on the show recently very clearly said, hey, public markets take a very binary approach to AI. You're either an AI winner or you're an AI loser. Very simple. When we started we were an AI loser. You saw that in the stock price. ChatGPT is coming for language. We changed our positioning around how we use AI. Content creation is powered by AI. Now we're an AI winner reflected in pricing. Okay, I'm summarizing but really I think very well articulated there. When he was going public, he was singing the song of we're AI first AI, AI, AI. Now he's no longer going public. He is able to say actually went a bit far. I don't need to project that AI progressiveness right now and I can save that for the next day when I do want to go public. I think it's a very clear strategic message from a CEO who was about to go public needing an AI story. Very wise and quite right of him. And it's just the walk back of that.
- [37:23]
Jason Calacanis
You're probably right. You would know. You would know best. I think in general though, when I see a lot of these statements from public company CEOs, they're really also telling their team it's time to change now. Yeah, enough. And honestly, a lot of big company CEOs I talked to, they're honestly like I'm not sure I need 80% of my team today. They're just the wrong people. It's not 3%. Microsoft laid off 3, 3, 3% of their company today. It's not enough. Enough. It's not enough. The people running the 2018 playbooks are going to become Almost useless going forward. So you always see These comments about CEOs, like public saying, we got to go harder, guys. I'm not sure who listens to those statements. Pushing the dial to 100. People are going to listen, right? They're going to roll. But I think that's what it is because, you know, the Fiverr guys like, my job is at risk. And it looked dramatic, but I think he's right. So CEOs are trying to give folks shock therapy and I don't know that there anyone's listening, but hey, at least, least, at least he said it ahead of time. Your job is at risk. The Fiverr said everyone's job at the company's at risk, including mine with AI Toby at Shopify kind of implied that too, that everyone's job is at risk. And I believe it with my bet. I don't think it's five years to Rory said, I think it's, I think by the middle of next year in tech, almost every single person's job will have changed by the middle of next year. It doesn't mean there'll be mass unemployment, but their job will have. It's not going to change in five years. It's going to change by next year. CEOs are at least trying to tell people before you get fired, you got to step it up.
- [38:42]
Rory O'Driscoll
And maybe an interesting distinction here just internalizing, Jason, is this is if you're in charge of driving change. In other words, if you're the CEO of a large organization, you have to take these hyperbolic statements because otherwise it's just so hard to move 10,000 people. Right? You have to put stakes on the ground. It's a management technique. Look, I'm sitting back, frankly, as you know, a small vc, an analyst type person, I'm saying, I'm trying to be very precise what percentage will be automated in the next 12 months so I can build my five year kind of expectations on revenue growth. Growth. It's a very different thing. I'm trying to find the right answer. The CEO is trying to find the right answer for his organization to make progress. And by definition that's a much more oomphy, lifty kind of statement. And I'm looking at my best CEOs as they're driving change here and they're doing stuff like this. I mean, I'm thinking of one in particular. I got the missive at the start of the year. By God, we're going to drive this. And I was like, wow, that's what it takes to get true to people. And I think that's what's going on here. So I don't think it's some mysterious. I'm in. And maybe there's some public market messaging in the cloud thing, I don't know. But I think it's just a CEO of a big organization trying to drive change and the only way you can drive change is just push, push until something breaks and then throttle back a little.
- [39:55]
Jason Calacanis
Literally, a CEO of a company just crossed 100 million. Asked me, not that I'm any savant, how do I create more urgency in this AI age? I don't even think it's about. I think it's out. As a CEO, how the hell. We've had this level of urgency for years. I need to double our level of urgency because everything else is urgent today. Agreed. How the hell do I do that with 10,000 people people? How the hell do I create even 5% more urgency?
- [40:16]
Harry Stebbings
What did you say?
- [40:17]
Jason Calacanis
The only advice I gave to this particular CEO is immediate. Like he was hybrid. So I said to force 100 of people return to office in 30 days and let everyone go except your S tier engineers. Letting them all go because you don't need them if you're there from 6 in the morning, like 20 VC till midnight, like Harry is. Harry posted on Twitter last night. My whole team's here. I get that the BST and the PST confused, but there's multiple messages in that tweet that Harry sent out. He's like, don't work for me if you don't want to be here at night. Right. Or whatever the hell.
- [40:47]
Harry Stebbings
And we work late. And we believe that the harder you work, the lucky you get 100%.
- [40:52]
Jason Calacanis
This is my only half decent idea to create urgency, force everyone to come into the office. And to be honest, we have a beautiful office in Palo Alto. I only go two days a week, so I represent acknowledge it's hypocritical. I'm not willing to go back, but it's the only idea I. Yeah, speaking.
- [41:06]
Harry Stebbings
Of driving change, I mean the single biggest change in 20 VC and how we do what we do is simply chatgpt across everything. This week, couple of big bits of news. New CEO of apps Fiji. Sumo. I love Fiji. I had her on the show when she was at Instacart. Fantastic operator. How did we evaluate this kind of layered CEO beneath Sam, now CEO of Apps for OpenAI. What did we think?
- [41:30]
Rory O'Driscoll
They weren't going to start being normal now? Dude, dude, we are 10 years into the least normal startup in the planet. Why stop now?
- [41:38]
Jason Calacanis
I think the weirdest thing in this is that for OpenAI you have a CEO and now another CEO that are both not technical. I just think it's really weird. I think it's really weird. And listen, Sam is obviously off the charts genius level. Even though he's lost a lot of people he can recruit like no one on planet Earth. And maybe that's all that matters. As a CEO, my life experiences non technical CEOs now we have two of them. Them they can't win at companies like OpenAI. Yet they are winning. But my experience is they almost all fail.
- [42:05]
Harry Stebbings
Fiji built our naps ecosystem at Facebook unlike any other. Why? Why does it need to be technical? I'm naive. Help me understand.
- [42:12]
Jason Calacanis
Because the rate of change is so fast that I find non technical CEOs just can't understand it that now they're really great at sales and marketing and they're really great at knobs and dials and spreadsheets and price increases. Honestly, Harry, no matter how many times you talk to me about rag and vectorizing my content, I'm never going to understand how it works. I could spend 100 hours with the smartest people in the world. I will never understand how, how, how open AI works. Never. Now she's smarter than me. But my point is all the non technical CEOs that I've seen especially take over my investments as outside CEOs they never understand the product. They never. And Sam is S tier for like I mean S S tier, right. And she's S tier. But it's still weird to me that one of the greatest technological innovations of our lifetimes is now run by two non technical people. I just still think it's weird. Right.
- [42:59]
Harry Stebbings
Rory, does it impact how you think about their expansion into the app ecosystem? You mentioned before, very wisely, I think chat, coding and customer support, does it impact how you think about that?
- [43:11]
Rory O'Driscoll
A little. Not a ton. Going back to that comment I made, actually one of the things you told me, Harry, is that doing this would make me up my own game on thinking. And you've been very right by the way. I decided after that that comment wrong. I think they will do. Obviously they've done coding, they've done the app. I don't know if they'll do customer success because it's so idiosyncratic. So I think the apps that they'll do will be very broadly horizontal in a way that coding is and the way obviously that chat is. And you can envisage a huge amount More on the consumer side as they shopping in particular. Absolutely, totally. It's a thing. I mean. Yeah. So I do agree. It is astonishing that the most compelling technical product in the last 10 or 15 years has been created with the CEO of the head, who's not technical. And it just speaks to some shrewdness by him and empowering that technical team and feeding them money and providing them leadership. It's a stunning achievement. We'll look back and go, wow. But I think it is going to work. I mean, at the margin, it doesn't matter, I suppose, is what I'm saying. They have won. They have just huge. And there's just so much more to do on the coding and on the consumer side. And you, you're right. ChatGPT is going to suck in all your brain. It's going to suck in all your phone calls. It's going to know everything about you. And you know, it's going to be like, remember what once, way back when, you thought Evernote would know everything about you? You ain't seen nothing yet. It's just going to take it all in and you're just going to be able to defer to it. Web traffic and shopping is just going to be a huge thing. So, yeah, I think there's a ton to be done there. It takes someone who's not focused on the pure technical stuff and not focus on raising $500 billion and it looks like this is that person.
- [44:47]
Harry Stebbings
Should we just all chuck in our funds into OpenAI? At this point? It seems like the easiest way to get a 3X, you know, the shortened window to liquidity. I am so sure that OpenAI is going to be a one and a half to two trillion dollar company, right.
- [45:02]
Jason Calacanis
I think you should put. Listen, I don't. I remember, I might have this a little bit wrong, but I remember I was around when David raised Kraft Ventures one, right? And I think the next week he put a third of the fund into SpaceX. And I had just a little bit of overlap with lp and they're like, they're like, David's crazy. I'm like, listen, I only know David is a founder. We were founders together. I don't know him as investor. This is one of the smartest guys I know. If he wants to put a third of his fund into SpaceX, I think it's going to work, right? I think he did it like the first. I think he just called up Elon any extra share. I don't know what the story was, but. And I might have This a little wrong, but I think it's mostly correct. And it obviously worked a third of the fund. Fund one. And it seemed like a, you know, a nutty move, but it was highly concentrated. Can't look.
- [45:40]
Rory O'Driscoll
Agreed. And we just discussed Tiger half an hour ago, where it may well be that the saving move was doing exactly that. It's not a crazy comment, it's not what my LPs are paying me to do. But in an open canvas, you say to yourself, that's a compelling company of one that does have just a huge, enormous market opportunity ahead of it. Obviously, it's got to sort out its entire messy legal structure.
- [46:04]
Harry Stebbings
Question for you, Rory. You mentioned that it's not what your LPs pay you to do. What would you do if you didn't have LPs in that respect? If they just gave you blank canvas completely?
- [46:15]
Rory O'Driscoll
I mean, look, we've discussed this a number of times. The kind of single bet variance, making one exception without making an exception across the team on everything. I don't know. Right.
- [46:23]
Harry Stebbings
But you could split the fund and put 25% into Andrew or 25% into Rippling, 25 into OpenAI and 25 into you. Name your other breakout. It's not what your LPs pay you to do, but you're like, strategically, that is how I think we will have the most value. Created a good time window.
- [46:40]
Rory O'Driscoll
I do believe we are in a world of fewer bigger winners. And that rolls up and down the entire venture ecosystem. If you thought your portfolio count had to be 30, a seed fund that had to have 30 deals, you need 45. You know, we typically our target portfolio is 20 deals in our fund. I believe at this stage we need 25 to 27, 28. Why? Because instead of exiting at 150, we're going to exit, best case at 300, which is two or three more years when one in three of these companies will fucking up. So by definition, if you want to end with three or four winners, you just have to have more at bats. The moving out of the bar has had consequences that I think ripple up and down the ecosystem. And it will be instead of us having 20 deals and having four great outcomes, we might need 27 deals, but only have three great outcomes. But they will be bigger because they will have compound. The good ones will have compounded on from 150 to 300, and the bad ones will have failed. So if you take that to extreme, you're at your point, Harry. Fewer, bigger winners all the way up the stack to one huge winner by OpenAI staying private for longer. It might get to Facebook type valuation before it ever goes public. Facebook today, not Facebook when it went public. So yes, what you're saying makes sense at some directional level. I mean, the hard thing then to assess is at the same time, you can still overpay for growth assets and be wrong by five or six years. And history is replete with examples of that. I mean, you look at the nifty 50 in 68, they didn't come back for 10 or 15 years. You look at 2000, the NASDAQ didn't come back for 14. It is possible to take a good idea and push it to such extremes that you end up wrong. And I just don't know. I haven't seen those numbers. To say look is 27 times forward revenues for something that can't look the right number is what's it they're doing four. Let's take OpenAI doing four. Last year, 12ish. This year, 360 million. What's that? What kind of revenue multiple are you looking at? What kind of compound are you embedding there? I don't know. I looked at it side by side with Google and it had tracked virtually the same to now. But if you look at their forecast for the next three or four years and in fact the leaked forecasts are showing higher growth than Google. So at some point you're over extrapolating into the future and when is that point? It's not a stupid idea, but obviously you haven't done it.
- [48:57]
Harry Stebbings
If you were just about making as much money in the most efficient way possible, would you do it the way you're doing it?
- [49:05]
Rory O'Driscoll
I think the question is, can you? I think the problem with in private markets, you put all your effort into being able to do one thing well and the cost of that is you don't focus, you're not equipped to do something else. So it's not been something I focused on. So I don't think starting from here, I don't know if it'd be easy to be successful at it. For starters, let's start with the basic comment, because let's push on. This very basic comment is that OpenAI said in the last round you either show up with 250 million or don't show up at all. Right. Remember that? Yeah. That's an example of to play in that space, you have to be equipped to play and how you have to set out to make that be your objective. And you have to equip yourself as a fund with the ability to write four $250 million checks. Otherwise you're going to get to see the deals. So I just think sitting here with my $30 million check sign, I mean, I can make a phone call, but I don't think they'll get back to me. You know, leave a voicemail. Jason's AI will like at 100% will just look at my customer support ticket and say, not worth replying to.
- [50:04]
Jason Calacanis
It always replies, but you're right.
- [50:06]
Rory O'Driscoll
Dear Mr. O' Driscoll, you do not meet the accredited investor at 250 million bucks.
- [50:11]
Harry Stebbings
Moving this on because I could pass here for a while.
- [50:13]
Rory O'Driscoll
You really are dick, Howie.
- [50:15]
Harry Stebbings
No, I'm not a dick. I'm not. The question that we brought up there was the nonprofit versus the for profit. And this was a big point. Now that's gone back. That's still a not for profit. I thought the whole point was they were moving for a for profit. Jason.
- [50:29]
Jason Calacanis
I mean, it is interesting. The most interesting thing of all of it for me is that, you know, when Microsoft did this deal, it seemed like a crazy weird get around M and a antitrust game and Microsoft was just going to lose billions subsidizing a backup bet. Now it looks like Microsoft got a great deal. I mean, that's the way venture works. But getting everything they get plus 10% of all revenue until there's 8 AGI plus the returns. I see why Sacha was sitting pretty and wasn't really concerned about all this. He got. Not only could he afford to lose it, but in the end, what looked like a weird backdoor license and M and A is like an epic investment, right? Not that I think Microsoft cares about it as an, as a financial investment. It can't care. That's the irony. But I guess they have to work it out is the answer. It's like us and China, like at some point, like it's going to be messy, but they just, they just got to work. They just got to work it out.
- [51:18]
Rory O'Driscoll
Sometimes things don't work out, but kind of staying with this one and leaving.
- [51:22]
Harry Stebbings
The U.S. that was a murky intrusion sometimes.
- [51:28]
Rory O'Driscoll
Stay with this. I think, Jason, you are. I think it's funny. There's a bunch of great reasons for doing it at the time. Both the original not for profit and then the Microsoft structure around that. But now you're left with this interesting conundrum. It's clear they're not, I mean, to be fair, they're not going back. I think you said, Harry, to a not for profit. They're not doing that. That's not what's happening. What's happening is they're not going to just convert the underlying company to a classic for profit. They're going to convert it. Oh, it's a public benefit corporation, people like Patagonia, where basically it's just like every other company, but you have in your articles of incorporation a specific obligation to look out for interests other than the shareholders. So the good thing about that, that actually strikes me as a decent solution at that level. Because what it says is, is we're going to be trying to make money, but at the same time, we don't have this binding obligation just to maximize shareholder value. So when you're public, you won't get pounded by the Delaware lawyers and told, you can't do this, you can't do that because it's not in the shareholders interest. It's a useful legal structure. As I say Patagonia use it. So it's a thing. It's not something they pull out of thin air. So the idea is you drop the assets into that thing and then at the holding company level, you have the not for profit, which happens. A significant. The foundation. I think it's the foundation, not the profit. You have a significant board control and you have a significant economic stake. That structure makes sense. And maybe it'll be a little less contentious in one sense than the pure, the subsidiary of being a for profit. But to your point, the hard part is everyone has a veto. To Jason's point, the Microsoft deal, it's so weird and so quote, clever that unwinding it. I mean, you're basically told, how do you value what percentage of a company? Imagine if Jason did a deal in one of these companies and said, you've got to give me all your profits until I get my 20 million investment back. Then I got to get a rev share, then I got to get something else with a cap, and now you got to convert that to a percentage ownership and a simple deal. I don't know. That's an interesting one because you do get into this, two people have to agree. I'm not sure where the leverage is and I think Microsoft ledgers might be pretty strong because the current deal is pretty interesting and attractive for them. So I think you're unwinding something that was a little, maybe made sense at the time. It feels a little clever now. And they have a block and then separately you have the whole risk of litigation from Elon. Even under this structure, is it still not. Not for profit enough to do It So there's a lot of wood to chop yet and a lot of Delaware lawyers and California lawyers and New York lawyers who are going to put their kids through college on the litigation.
- [54:09]
Jason Calacanis
A lot of kids going to get put through college on this. A lot of kids, legion of children are going to go into college on this one. The legal bills are probably 20 million a month or 10 million. They could be 10 million a month. 20 million sounds like it could be 10 million a month though, the legal bills. Right.
- [54:20]
Rory O'Driscoll
In the end that kind of the public PPC structure is actually what Antropic did from day one. They got it right. It's interesting, but OpenAI is basically saying we're going to go for something like what the structure of Anthropic already has. It's obvious that that's the end point, that just about work, you know, somehow they get there, but God knows how.
- [54:37]
Harry Stebbings
We'Re going to speed through a couple of companies where there were notable announcements, slash news and then Jason's got Sasta.
- [54:45]
Jason Calacanis
Big week, Rory.
- [54:45]
Harry Stebbings
For Jason. Go Sasta.
- [54:47]
Rory O'Driscoll
Honored he even came. That's.
- [54:49]
Harry Stebbings
I mean honoured honestly. What a fricking hero. Perplexity. $500 million rumored round at a $14 billion price rumored to be led by Excel. Any thoughts?
- [55:00]
Jason Calacanis
I just think it's interesting. I do like Perplexity. Perplexity of the of the leaders is the closest to like Google on steroids, right? I mean they announced they were at 100 million ARR recently, right? So let's say they're at 200 today, which is still generous growth, right? Does it justify this or is this a distant number three getting a massive premium. I don't even know if the anthropic valuation is. They may be getting too much of a valuation premium compared to Open A and I just don't know if it deserves it in a world where we.
- [55:28]
Rory O'Driscoll
Have a rational M and A strategy and it's tbd, if we will under this administration. The big picture here is this is an at bat, a one in three at bat at a trillion dollar company because Google's a trillion dollar company and this is a one in three. There's only three people that are going to be relevant here. It's OpenAI Anthropic Perplexity, right? The mere fact that you're in the arena, use a phrase, and you've got users, you've got revenue growth. You were first with the idea of web search plus LLM combined. You got that done, you got that out the door. That gives you the right to Play the game and maybe you can build a standalone thing and get public in a world where frankly, in a world where IPOs happened like they happened in 96, four search engines went public in 96. You don't remember any of them except Yahoo, but it was Lycos Excite. I can't even remember the fort proof because it was a big obvious market, it was happening fast. All of them had a chance to be big. So going back to that upside junkie comment I made last week, what perplexity is selling from an investor perspective is an at bat, a credible 1 in 3, not equally weighted. To be clear, OpenAI is clearly going to win, but maybe you can be third and that's worth a downside. If the prize is a trillion bucks, that's what they're selling.
- [56:38]
Harry Stebbings
I am actually an investor in perplexity. Good for you. I think I have to announce that otherwise my CFO will fucking kill me me. But that was exactly my thinking, which is like how many companies have a credible chance of being a trillion dollar company where it is still very small. Very, very, very small. Very small, but still a credible chance.
- [56:55]
Rory O'Driscoll
In a world where you can do M and A, which may not be today. There's also a whole bunch of big companies who need to be credible in this space too. So plan B shouldn't be awful. Now as I said, the weirdness of M and A in tech for the last five years is headbanging the depressing. But there's no doubt in my mind there's a couple of trillion dollar companies who like shit. Maybe I'd like to mess with Google's head.
- [57:16]
Harry Stebbings
I need to have this 100% agree incredible team around them to be fair. And then also one thing that no one also sees is that distribution strategy has been very very smart in terms of large partnerships. They've done quite a few in Europe with big telecoms providers which enables them kind of default access to consumers phones. That is very smart. And if you look at Google in the same way in the early days they did exactly the same. It was distribution through partnership. Very small.
- [57:40]
Jason Calacanis
I realized that investment standard investment should be updated. The first paragraph should be odds of trillion dollar outcome. You think I'm being physician but I'm using an old template. I remember the first deal I ever did was pipedrive. We talked about it years ago, Rory and I remember when I wrote up the investment memo it was the odds were getting to $100 million exit. That was the old structure. And I was forced by the traditional VC firm to fill out the numbers and I said 5% chance of $100 million exit right. It did sell for 1.25 billion, but I'm just using my 2013 first investment ever lens and I did 5% now instead of 100 million. I mean then it should have been a billion and then 10 billion. But maybe there needs to be another row which is 1 trillion. What are the odds in the IM of 1 trillion and if it's north of 2% odds for 2? We do the deal.
- [58:21]
Rory O'Driscoll
I think some version of that is true. The way I'd say the opposite is if you're looking at a deal that has all the risks of a classic private company, but doesn't have embedded upside beyond the base case, you probably shouldn't do the deal. As I said, we're all upside junk. It's the pixie fairy dust dust that lands on our portfolio every five or six years that makes the math worthwhile. So if it doesn't have that, you know, you got to ask yourself why should you do it? And this one has it in spades because it's the biggest pixie dust. It's a trillion dollar pixie dust, not the 100 billion dollar pixie dust.
- [58:49]
Harry Stebbings
Totally agree. And get both of you there in.
- [58:51]
Unknown
A similar ish elk.
- [58:53]
Jason Calacanis
So you're going to do super pro rata is the answer in this alleged accelerator. This is just what I don't know. Are you doing super pro rata pro rata or none? What are you going to do with your check?
- [59:01]
Harry Stebbings
My business is not to do $14 billion price rounds.
- [59:04]
Rory O'Driscoll
You know, so after giving me crap half an hour ago about not listening and just doing what the right thing to do is, you're saying it's not your business. I just want to note that moment. I accept it.
- [59:14]
Harry Stebbings
But Rory, before the visuals have been made, do you want to pick this fight, my friend?
- [59:18]
Jason Calacanis
No.
- [59:20]
Harry Stebbings
No, I. Very fair point, very fair point. But no. $14 billion is not my game. But I'm thrilled that Excel are rumored.
- [59:27]
Jason Calacanis
To be chicken dollar cost average. That's the thing you don't. That's as an existing investor you don't have to take the domino price too seriously. Your dollar cost, averaging it.
- [59:35]
Harry Stebbings
The interesting thing is the other one and then we'll let Jason run is actually Clay. Clay obviously did this kind of billion and a half dollar priced transaction. I think it was employees secondaries with Sequoia. My thinking there was. People are now believing that Clay is the next credible threat to Salesforce. And that is why people are getting so excited by it that actually it's much more than. And go. We're like shaking heads. How do we think about this?
- [59:58]
Jason Calacanis
Maybe the VCs are. I don't know what. Maybe that's what Sequoia says. I'll tell you just two things I see in the field, right? This is pretty close to our core audience, right? Is clay is. First of all, clay is a great success story. Like let's simplify it that right. There's a couple things that are driving clay. Certainly there's super sophisticated cutting edge teams. Right. But there's also every struggling marketer today that doesn't understand AI wants to deploy clay. Massive pull every 2021 CMO that is scared they're going to lose their job. They nothing's working. Search SEO isn't working, content isn't working, Everything's down. They're hiring clay consultants, Clay engineers. Deploying, writing checks like hopping in 2020. Okay, it's literally like hopping in 2020 but for marketers. And I think they earned it. Right? So I don't know about the salesforce. Maybe that's the vision. I'm telling you what's happening on the ground is just like people needed a digital event solution during the pandemic. Pandemic marketers need an AI solution now. They are. Their jobs and lives are at risk because they're. This is what I'm seeing. Literally. We were at a saster pre event last night and I'll tell you everything I heard about clay. That's what everyone's saying. Every. And we're gonna have a CMO summit on Thursday and I'll ask and clay is the winner.
- [61:04]
Harry Stebbings
Does that mean it's unsustainable?
- [61:05]
Jason Calacanis
I'll tell you my second question. So every CMO we're gonna have 400 CMOs on Thursday. Rory, if you come, you can sneak into the CMO summit and ask them. You can ask the question for me. How many of you are are using clay? Raise your hand.
- [61:15]
Rory O'Driscoll
How many?
- [61:15]
Jason Calacanis
Is it because you're scared of AI? I bet if it's a closed door they'll say because I'm scared. The only question I have for clay is boy, I've never seen more great founders than I met last night that have clay. The clay target, they're going for it. Everyone, everyone want. I want an easier to use clay. I want clay with better data sources. I want clay that can be self serve. I want clay for this. I want clay. And I'm not saying clay won't win, but literally this is a category that the knives are out and it doesn't mean they don't already have scale and won't win. I literally met the CO last night. He's like, hey, are you Anna Lemkin's father? I'm like, yeah, well, I just dropped out of Stanford with your daughter. I have a new competitor at Clay. We're already at 2 million.
- [61:52]
Rory O'Driscoll
Wow.
- [61:53]
Jason Calacanis
Already? He just dropped out and he's 19 or 20 with my daughter. Like what do you mean you're. He's like, well, we're just, honestly, we're just much easier to use and we have better data. So it's the story I've already told you like the third time. So that's 2 million like in a couple months. Right. So Clay is. Has won this like Q1 20, 25 vision of the marketers platform. And I'm not betting against them. It took like four years for folks to figure out why GONG was successful. Like anyone in sales adopted GONG in the early. Like I could actually listen to my reps calls, the, the dumb things they say to prospects. But it took everyone else about four years to figure out why machine learning on voice calls was disruptive. Now it's happening in like days with AI, right? Or weeks. They're figuring it out. So just competition is going to be insane in the space. Is my summary of my rambling point insane. So I would raise even more. Forget the secondary. I would keep it as primary because I'd build up my war chest.
- [62:42]
Harry Stebbings
So you raise it as primary.
- [62:43]
Jason Calacanis
I mean, I'm just saying the competition is so high. You know, we started this conversation on owner and why did owner raise 120 million? Right. You know, part of it is because it's. Even though it pulled away from some of its venture backed competitors, it's such a competitive space. I'd love it if you could win in a competitive space and be cash flow positive with 50 employees. But we have a lot of history of that playbook not winning working. So I would armor up if I were Clay. I would hire everybody, I would raise another hundred million and I would just scorch earth everyone in the space.
- [63:10]
Rory O'Driscoll
A lot of agreement. I mean, it's worth pointing out the original Clay product is a Pregenai product all around, combining multiple data sources, manipulating those sources. It was a horizontal spreadsheet type functionality initially, then focused on marketing. And the problem it solved is, hey, you need to build a 10,000 name list, list of B2B CFOs between 50 and 500. Do you use zoom. Do you use people data? Do you use one or three other sources? No, you use clay. You import from all of them and they brilliantly consolidate the four or five different entities and give you a clean combined list. It's a rev ops function that was pre AI that they solved brilliantly. Let's start with that. That's what the product actually does. Now what they've added is these play agents in the last year or two that take that list and start. You know, they're going to start doing email, start doing enrichment, start doing all the agentic work after that. So they're moving down funnel from list management to enable AI sdr. So it's a totally excellent product. It hit the sweet spot of the need. It so initially was not a oh my God AI GPT story. It's something totally different. I mean, so far from Salesforce CRM that I can't even think about it right now in any useful fashion. So that's what the product actually does, which should never get in the way of a good story from a vc, obviously. And it does it really well and it fills a need. And you're right, they have the chance to run fast on top of that and do a bunch more on top. And the roadmap is pretty clear because you've got this AI lift and now you've got clarity on what the next five set of automations could be. But there's lots of people doing that. We have investments in that space. I'm sure you do too. There's a whole ton of AI automation coming to top of funnel sales and marketing. That's what's going on though.
- [64:58]
Jason Calacanis
I do think being the vendor to take advantage of AI fear is a great strategy.
- [65:03]
Harry Stebbings
The next 18 months, is that sustainable.
- [65:05]
Jason Calacanis
I don't care if it gets me to 300 million in revenue. Like the world changes like.
- [65:09]
Harry Stebbings
I disagree. Hop in was at 200 million in revenue.
- [65:12]
Jason Calacanis
Yeah. But we did come out of the pandemic. Harry.
- [65:14]
Rory O'Driscoll
I'm with Jason, Harry, because I think that you can use that fear. No, no, no. I'm thinking of some companies where genuinely, I think when you did references on them two years ago, you talk to the very few customers and they'd be like, I'm this thing because I need to do something in AI. And you fast forward to today and they would say two years ago the product's not great. You fast forward to today and the same people would say, the product's improved a lot, I'm now getting real value from it. But they sold on the fear well ahead of the product. I'm always biting my tongue to think of not named companies, but I have a couple in mind. In the professional service, relevant professional services, white collar spaces where they've gone to finance, gone to legal, gone to folks like that. And it's been very airy fairy at the start of GPT, but they got in the door, they told the big story, they sold the fear and then over the last two or three years they've built a product. It's different than hop in where the fundamental end demand died. Yeah, if you seize ground, but then the ground turns out to be waterlogged, you're toast. But if you seize the ground and it matters, then you win. I think there's an element of the AI fear story that has been real in the last year and probably for another year or so.
- [66:21]
Jason Calacanis
So I just think people that have budget will spend a lot to not lose their jobs. So if you're that one app for the CRO, the cmo, the cco, the cfo, where if they spend six figures on you, the odds that they won't lose their job, you will find budget and you not only will you not, you will find budget out of the budget cycle, you will find budget this month, you will find six figures of budget. If I buy you and I might not lose my job. And I'm just smelling this with cmos and Clay. I'm just smelling this fear I'm going to lose my job and all I have to do is write a six figure check. I'm all in my budget's 5 million, 10 million in marketing this year. All I have to do is come up with 200k for clay. Done. Send over the contract tonight.
- [66:57]
Rory O'Driscoll
In the end, you have to deliver and you've got to deliver the thing roughly that you said you're going to deliver. Not something different, but it's a totally legit tactic at this point in the cycle, provided the product gets there in the end.
- [67:08]
Jason Calacanis
I mean, seriously not. I know we got a wrap, but I can't tell you how many marketers, if they're honest when I talk to them, are looking around and they're like, I don't know what my team's going to be be doing in six months. I just don't need this writer with ChatGPT with A. I just don't need my team. And then everyone's looking for the AI wizard, the AI magician, and to the extent this person exists, they're going to work for like a super hot startup that's the other fear with the cmo. They're going to work for Windsurf. And how is your B2B company growing 19% this year at 81 million in air are how are you going to get the AI wizard even in marketing to come to your company? You know what? There's no chance. Right? Right. So you need this hail Mary to save your job. Because my infographic person that needs a week to make an infographic and then my product marketer that takes 30 days to turn around a proof for product marketing and it's terrible. You're looking at your team and you're like, I don't even know what to do with these people anymore. I don't know what to do with them. So I'm going to buy Clay.
- [68:02]
Harry Stebbings
I'll tell you the one thing that is so far off is video. Video and AI capabilities around video editing in particular for complex video video is so today.
- [68:10]
Jason Calacanis
But Higsfield is so good, man, my jaw drops with Higgs Field. Listen, I don't think you can produce 20 VC with a don't get me wrong. And that's a good thing. Right? But I don't even think there's a point in having a static marketing image after Higgs Field. I don't see a point. It's so good.
- [68:24]
Harry Stebbings
And I think within two years we'll still be at 20 VC level for my video team.
- [68:29]
Jason Calacanis
Yeah, you'll need it. Right? But I think even when I look at like Opus where I invested, like in some ways you can make fun of Opus because you'd be like, now everyone can do clips, right? I mean other folks do it, but Opus to most democratized clips, right?
- [68:39]
Harry Stebbings
We tried it. They weren't nearly good enough for us.
- [68:42]
Jason Calacanis
Well, fair enough. But I'll tell you what's interesting. I'll just give you one last thing to close on. So the and the meta problem is when everyone could use Opus and everyone used Opus. And so then the 20 VC clip gets even more valuable because it's so differentiated. Right? And it's Opus has a feature that's coming out which for you is not valuable. But for me now they will create Eclipse video and search all your video. I have a 12 years of video video. I'm gonna go off to SAS dragging in five minutes we're gonna produce 300 pieces of content. You think I can make a one hour video out of the best of all these speakers? Now for 20 VC, worthless. Okay, worthless. But for a CMO that's still struggling to get their zoom Webinar working, that's a big change.
- [69:21]
Harry Stebbings
But it does not make my content more valuable. Sadly, Jason, it actually makes it less valuable because it brings discovery as a problem, to be a massive fucking problem. Because now we have infinite supply of content and discoverability.
- [69:32]
Rory O'Driscoll
Agreed.
- [69:33]
Jason Calacanis
So sell into that. Make money out of this trend.
- [69:35]
Rory O'Driscoll
If you're investing.
- [69:36]
Jason Calacanis
Make money out of the fear. Make money out of fear.
- [69:39]
Rory O'Driscoll
The two ways to make money are. One is sell the tools so everyone can produce this content at scale. And then back to your comment, Jason. I don't do it. My people, I do believe the marketing people who know how to use this stuff not only continue to have their jobs, but become even more useful again. It's the same. You've got to be on the side of using this shit and leaning into it. If you're resisting it, you're toast.
- [70:01]
Jason Calacanis
You're right. But the honest truth, maybe to break on is it's far fewer people than you can almost even talk about in public. So few people are on top of what AI can do. They're just going to hire agencies and they're going to lose their jobs.
- [70:13]
Rory O'Driscoll
Now you're doing the Klarner thing again, dude. You're sliding the scale to 100. I think the scale advances steadily at 5 or 10% a year. And yes, you're going to need less people. You're going to get more efficient.
- [70:23]
Jason Calacanis
Maybe it's 20amonth, 5 or 10% a.
- [70:26]
Rory O'Driscoll
Month, but Harry still makes his stuff handcrafted with care in central London. So there.
- [70:30]
Harry Stebbings
Trust me, I'm with Rory on that for video. And for me, I love the balance that we have of the beautiful nuance of Rory and then the binary us bravado of Jason coming together is just wonderful. And then me just sitting in between, other than CO2, where I just undo Unleashed. Guys, this was fantastic. Jason, good luck for Sasta.
- [70:52]
Jason Calacanis
Dude, thank you.
- [70:53]
Harry Stebbings
Me and Rory are rooting for you. It's gonna be a special one.
- [70:56]
Jason Calacanis
All right, well, we'll see you at the one in December in London. Christmas in London. We'll do it first week of December together.
- [71:02]
Harry Stebbings
Thanks, guys.
- [71:03]
Jason Calacanis
All right, talk to you later. Bye.
- [71:04]
Rory O'Driscoll
Take it back.
- [71:06]
Harry Stebbings
They are just my favorite shows to record. My favorite thing is that I get stopped when I'm walking around London with my mother and everyone says, oh, my.
- [71:14]
Unknown
God, I love your show shows with.
- [71:15]
Harry Stebbings
Jason and with Rory.
- [71:17]
Unknown
And then there's this pause and then.
- [71:18]
Harry Stebbings
They go, we really love Rory. I'm not sure what to take from that, Jason. I think Rory is the fan favorite. I so appreciate your support. If you want to watch the video, you can find it on YouTube by searching for 20VC.
- [71:30]
Unknown
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- [74:31]
Harry Stebbings
As always, we so appreciate all your support and stay tuned for an incredible episode on Monday with Duolingo.