← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: Why Fund Returners Are Not Enough Anymore | Why Sequoia Had the Best Strategy at the Worst Time | What it Takes to Be Good at Series A and B Today | Benchmark Leads Manus Round: Should US Funds Invest in Chinese AI
01:24:57
In Today’s Episode We Discuss: 03:56 Why The Risk Lever Has Been Turned Higher than Ever in VC 06:04 Why IRR is the Hardest Thing to Control 09:36 Is Lack of Liquidity Short Term Temporary or Long Term Structural 12:17 Why Fund Returners Are Not...
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- [00:00]
Jason Lemkin
One X is not good enough for me anymore. At this point in life. It's not worth it. I want 3x the fund.
- [00:05]
Rory O'Driscoll
The problem with Series B is if you get it wrong, you end up effectively paying Series B prices for Series A risk. And it's exactly correct. Now at the A you're paying Series A prices for seed risk. But the whole point of having to be good at this job is being able to figure out which is which.
- [00:20]
Harry Stebbings
This is 20 VC with me, Harry Stebbings now. I am so excited for this discussion today. I actually cried laughing while recording it. It's back with Jason lemkin and Rory O'Driscoll. This is the week we unpack the biggest tech news, financings M&As and we have Fabrice Grinder, one of the best early stage venture investors joining us in the hot seat today where we, as I said, go through all the biggest news. This was so much fun. I want your feedback. Let me know on Twitter. Harry Stebbings but before we dive in today, here are two fun facts about our newest brand sponsor, Kajabi. First, their customers just crossed a collective $8 billion in total revenue.
- [01:00]
Fabrice Grinder
Wow.
- [01:01]
Harry Stebbings
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- [03:54]
Unnamed Speaker
You have now arrived at your destination.
- [03:57]
Fabrice Grinder
Guys, I am so excited for this. First, thank you so much all for joining me today. There's three of you, so like I'm just gonna dive straight in.
- [04:04]
Rory O'Driscoll
I want to start.
- [04:05]
Fabrice Grinder
We have more LPs, listen, than I quite realize because I get pinged by all of them and I wanted to start with like, what the fuck are we seeing in Vantra right now? What your 1 takeaway is from the last week. Fabrice, you're our new joiner. When you think about like what you've seen in the last week in Venture, that has struck you. What is it?
- [04:24]
Unnamed Speaker
I'd say what struck me in Venture, we're still in the middle of an AI bubble. If you look at like the amount of money that's going into AI versus every other category in terms of valuations raised, the number of companies getting funded, and I thought we were at the peak a year ago, and then Venture, you know, they won 100 billion investments in the category and so doubled from Q1 to Q4. And the other categories are not seeing much love. And I think venture as an asset class has been somewhat in the doldrums because LPs have felt overexposed. They haven't had distributions in 22, 23, 24, and frankly, 25. We were hoping the markets were going to reopen, but so far IPO windows not reopened and the spigot of M and A has not reopened. And so I'd say it's become an unloved asset class. I think it's the best time to invest. But in a way, investing in venture right now is contrarian. And I think you should be investing in funds that are not going after the lovingy, all AI, all the time category.
- [05:19]
Rory O'Driscoll
Yeah, agree on the time frame. The big common stepping back is nobody cares. I always thought no one cares about our problems. We're VCs. One thing I've learned is when you start bitching and moaning and then you realize, you step back and you talk to anyone else on the planet, they're like, let me get this straight. You have this wonderfully interesting job, you have a reasonably good current comp, you get to pay the percentage of the upside, you have visibility over three years in your computer. Nobody cares about our problems. And then when you start explaining that our number one problem is that valuations are too high, then they go, let me get this straight. Your number one problem is that you have to pay me, the entrepreneur, more money for my company. I like your problems. I'm glad you have problems. I want you to have more problems. So let's start with that. That said, I do think it's a weirdly tough time right now because it's simultaneously a hard time to put out new money because things are expensive and a hard time to get money back because exits aren't there. And if you think of the two by two quadrant, normally one of those things is hard and one of those things is easy, and it's good, like 21. Easy to make money, Easy to get money back. Hard to put money out. It was expensive. Right now we have the low, low quadrant. It's very expensive to do these new great deals and at the same time, exits are tight. So it's a tough time. But again, after I say that, I go back to first principles. Nobody cares about my problem.
- [06:37]
Fabrice Grinder
Just had a conversation with one of the largest endowment funds in the world, and they said the lack of liquidity, the big question that we have around that is is it a temporary adjustment in the venture ecosystem and public markets or is it a permanent structural shift in company building and maturation stages and liquidity cycles? If it is the latter, we cannot be in this asset class any longer to the extent that we have been. If it's the former, we will be patient.
- [07:00]
Rory O'Driscoll
The sentence has the answer. The only time it will change is when they get out of the asset class is what we said two weeks ago. While they keep putting money into the asset class, it will remain a stay private for longer asset class. And once the capital in the asset class reduces, then we'll go back to going public earlier. So economics is about seeking equilibria and kind of things push things back into balance. So the very statement sets up the solution.
- [07:25]
Jason Lemkin
I would just say two things Harry, I think you asked what's changed in the last week or something. What was the question? Some version of that? I'll tell you my micro learning. I think even in VC and lpland we live in this new news cycle. So like I had a company close a unicorn round On I think April 7, there was actually a downturn in venture because of the nasdaq, right? We had these Trump, Trump drama. I think the stock market fell 15% didn't it? Nasdaq or something. And then everyone was freaking out in growth stage VCs for at least three days. For at least three days. And already this company that did a unicorn round has an offer to do an a top up round at an even higher valuation. So like we for like, you know, it used to be when there was a downturn or something it would have shocks for the system for at least a few months. Right now the shock, the shock doesn't even last until the next 20 VC comes out, right? So it's just I hear all this stuff but all I see is a gold rush. All I see is gold rush in the SF Bay Area. All I see OpenAI says they're going to grow a thousand percent by 2029. Everyone's just looking to make an insane amount of money and they don't care about the nickels and dimes and the casualties and they will deploy every dollar they can. I think we can talk about liquidity and all this, but I honestly think that today is a much bigger gold rush than 2021 or other times. We get like I've never seen such a goal because this gold rush goes all the way down to high school kids. Like this gold rush is up and down the stack of, of tech and it's both fun and a little cynical and a little crazy. But it's, this is, you know, in the 2020 gold rush, you had to be a crusty old B2B guy, right, that had been doing this for years or have something interesting consumer. Now every 17 year old kid is dropping out. I mean, Harry, you know what this is like. But they're dropping out and they're in the Gold Rush. And it's, it's, it's glorious and weird and risky and full of baloney. But I've never seen anything like this Gold Rush. Never. Never. Right. And yet we need that. But, and so, and again, we talked about this before. I honestly think almost every GP in market will deploy every dollar during a Gold Rush. This is the way booms work, right? You will deploy every nickel possible in the, in the boom. And then we pull back. For those three days there was a pullback in growth. April 7th through 10th and back to the Gold Rush.
- [09:31]
Fabrice Grinder
Fabrice, are you not concerned that given that Gold Rush realization and the speed of revenue strategies being what they are today, I have new AI companies like Macaw and Lovable in my portfolio who are scaling in just the most insane race. And then I am in ERP systems for concrete businesses which are going from 1 to 4 million. And I'm going Lovable does that in about a day. Do you not worry that you're going to miss out on the Gold rush?
- [09:58]
Unnamed Speaker
So look, 9% of our investors remain in AI. It's just that I try to be disciplined and I try to invest in the companies where I feel that they have differentiated data sets, that they have valid business models and where I'm seeing less competition. What worries me of the Gold Rush is there's too many companies doing the exact same thing, going after the exact category and it feels it's unclear who's going to win. And historically I've waited until there was an emergent winner before investing. So I was happy to pay up. And frankly, you don't necessarily even pay up because the prices kind of adjust with traction over time. Like the traction evaluation metrics start aligning as you get A, series, B, C, D, et cetera. What worries me about the Lovable type examples is yeah, they can go from 0 to 18 million in AR in three months. But I think they could go back in the other direction. I don't know if people remember that AI company where everyone one for a month basically changed their profile photo using AI and their ARR or their MRR went from 250k a month to 30 million and 99% churn a month later and they were back to 500k and they raised like at that moment in time. And so these things are riskier than people think they are. Do I think that GitHub or, well, maybe GitHub is not the best example, can launch coding tools to compete with the likes of lovable and curse of et cetera? Yeah, absolutely. So I don't mind missing the bubbly elements of the bubble. And I worry that people are underestimating the orthogonal risk of disruption from either OpenAI extending their stack. Right. I build my own AI for fun. I built Fabrice AI and I started using LangChain and pinecone, et cetera. And then OpenAI released 4.0 and became so much better. I just ripped out my entire back stack and moved to OpenAI. Same thing. I was using a different stack for text to voice and I use whisper. I feel people are underestimating the risk of zeros. Even though something can go from 0 to 100 million ARR very quickly and usually they're priced accordingly. What do you need to underwrite so you can still get your 30% IRR and I think the risk of zeros is too high.
- [12:10]
Fabrice Grinder
I'm interested. This is for the whole group, but Josh Koppelman tweeted this week something that really struck me and I respect the.
- [12:16]
Harry Stebbings
Shit out of Josh.
- [12:17]
Fabrice Grinder
He said, speed matters in venture. How fast you win matters as much as how much you win. Being able to return in 10 years versus 17 years is a huge difference to the performance of your investors. 3x in 10 versus 3x in 17. Obviously enormous. And people just talk about 3x funds. I wanted to hear your thoughts and lessons on the importance of speed of returns, how big that is.
- [12:41]
Rory O'Driscoll
Yeah, I saw the tweet and obviously it's true because we're being evaluated versus other use of the money and the common denominator of capital allocation is going to be some kind of rate of return per unit time. The tweet is definitely true. So yay. I think the interesting thing is it's actually the hardest of the three things to control. So let me tell you how I mentally think about it. There's really three things that determine your return within a fun level. There's picking, picking out. If we do 20 deals, four of them have to be great deals. That's 100% in your control. If you can't get that right, you should lose your job then. The second thing is valuation on the way in and valuation on the way out, that's controllable a little, but not as much. See the conversation on valuations going in now and then on valuations on the way out. We have an excellent 2014 fund that exited in 2021. And we always tell LPs one entire turn of that fund we don't deserve it was multiple expansion. The other turns we do right from our picking. But sometimes you get lucky on the upside on return, and sometimes you get unlucky on the downside. So valuation coming in, evaluation coming out, a little bit of control. The hardest thing to control is irr because the timing of those exits. Everyone now is suffering IRR degradation. They're going to get the same return in 2026 that they thought they were going to get in 2024. It's just very outside your control. So, I mean, it's a very unsatisfactory answer. But the nature of our business is we are judged on irr. It's very hard to impact it directly. You got to get the other parts right. And then to some extent, if you do your picking really well, if you have reasonable control of valuations, then delayed exits simply mean more compounding and perhaps good irr. See, for example, the Founders Fund example. Last time they compounded for a decade and a half at 20%. Sadly, a lot of the time pushed out IRRs, pushed out exits just means lower IRRS sucks. But to some extent, it's the hardest element to control.
- [14:39]
Jason Lemkin
I was thinking about this a lot, Harry. It's interesting that Josh wrote that. I was literally thinking about it this week, and I wanted to hear Rory's thoughts. I thought it was very interesting that Fabrice led with IRR to describe his seed, his fund. I do think it's impressive, but I was literally looking when Joshua that I was looking at my 2017 fund. And it is at. Here's the question to. Maybe especially to Rory, my virtual mentor, here it's at 4.31x with a 32.56 IRR. Okay? And I was doing some modeling. I'm not that good at math, okay? That's why I do late seed. But I was doing modeling of. Okay, If. If the winners do a certain amount of different scenario planning. And honestly, unless I was delusional. Unless I was delusional, the IR would never go up the third. It's at 32.56. It will 5x fund, 6x fund, even an 8x fund. This is kind of. Josh, I'm like, okay, let's. What if this fund does 8x like, it would require a lot of things. I'm not, I'm not a chest beater. Require a lot of things to go well, okay? But the IRS still wouldn't beat 32. So I'm like, what's. And I did ask my LPs if they cared. And here's the thing, they didn't care. Okay. But I think maybe that that was a too simplistic answer. I think the answer is for early stage managers. We're just looking at multiple, right? But I've never understood this since I started investing. Because I'm looking at this, I'm like, I can't do better. Like, I cannot do better than 30 and even 32.56. Like, it is great, but that's all the way to get to 4.3 versus the NASDAQ. Like it's. It's still like, this is a tough one. The IRR thing, right?
- [16:03]
Unnamed Speaker
That I want to say. That cheat code I use for IR, why silk can get 30% IR today is the virtue of being diversified. Means I own two 1 to 3% of any of the companies. And so what I've been doing is getting secondaries on the way up. So I've been doing the anti VC strategy of selling my winners. When a company I feel gets overvalued and it can no longer underwrite a 10x, I'm underwriting at 3x in the future and a round is happening and whatever Sequoia and Dries and Greylock are all competing to get in and the founder doesn't want dilution of 15% a pop. And so it'll take like 30% primary, 15% secondary. I've been doing secondaries. And now that you have things like shares, post and forge and secondary marketplaces, and so the vast majority of my exits in the last three years have come from secondaries.
- [16:48]
Jason Lemkin
Yeah, that's how you get it. You have to get the secondaries to get that IRR doing what you're doing.
- [16:52]
Fabrice Grinder
Right?
- [16:53]
Jason Lemkin
Nothing wrong with it. There's another tweet, Harry, and it was talking about. I forget who it was. One of these talking about tax efficiency at the GP versus the LP level. Right now, for me, I'm not selfish. QSPs is good, don't get me wrong. But for me, I have some personal liquidity. I rather go long. Right. It's so much more valuable to me. Selfishly, I don't care about IRR as a gp, right? If I can get another X as a gp, tax deferred or tax free. Whoa. I Can't beat that. Right?
- [17:21]
Rory O'Driscoll
And everyone wants that. So I'm coming back to you. So to be very clear, I don't think the algorithm is maximized irr. I think logically subject. And I'm such a geek, subject to some caveats. The real algorithm is maximize multiple, subject to a constraint on irr. No one wants you to maximize your multiple by holding at 7%. But if you're at 32 and the cost of funds or the target for your sector, risk adjusted is 20, and you can hold another year and get 20% for that extra year, which brings down your overall IRR, you should do it.
- [17:53]
Jason Lemkin
Well, explain that to me. My IQ isn't that low, but I don't get it. Why should I do it if that only matches their cost of capital versus NASDAQ?
- [18:02]
Rory O'Driscoll
21. You're right.
- [18:03]
Jason Lemkin
21, right. No, no, I'm not challenging you. I'm just trying. I'm honestly just trying to learn at.
- [18:06]
Rory O'Driscoll
Or above the target return. Right. Because it's extraordinarily hard to find other places to compound money at 20% plus. So I don't think the algorithm is pick the fund with the most IRR, the highest IRR, because you often see the interstitial one year, 100%, but it's not sustainable. I think a smart LP and they are on aggregate smart is they're looking for 7, 800 basis points above small cap, pretty consistent. So 20% plus, you're probably crossing the cost of capital. And therefore to your point, Jason, shortchanging the multiple for the sake of optimizing irr, it's a mistake. And for you and for the investors, because the truth is this what you end up doing. And I want to come back to Fabrice's thing in a second about when you should take secondary, what you end up doing. It always amazes me when I end up selling the company that I know really well where I've been on the board. I have a pretty good sense of what it's doing, and I'm six years in to reinvest at a slightly higher revenue multiple than a company I know nothing about. Right. It's such a risk escalation. If you have good share, hold onto it now for reasons why. There's a couple of reasons that you don't. The first is the institutional imperative. Either if you or your LPs need capital back, then give them capital back to show you have a pulse. And then the other thing is if people offer you, and this is where it is tricky, and I'd love to get Fabrice or how are your thoughts on it when people offer you quote a crazy price, where you kind of go, I believe in this company. I love it. But I'm getting, I don't know, two years forward credit for revenue. At what point do you say, hey, even though I'm a believer, it's a smart thing to take some money off the table? I think sometimes it can be.
- [19:43]
Unnamed Speaker
By the way, these are the only companies I can sell. No one's buying your dogs, right? Like, the only companies you can sell are the ones that everyone knows is a winner and things is amazing and they end. Look, I sold so many companies at 100x ARR in 2021. I love the founder, I love the company. I love the traction. I love the. I love everything. But the price is too insane. Like, what I need to believe to underwrite this valuation is like every star in the multiverse aligning. And I just don't see that happening. And that's even to just justify the valuation, let alone get a 3x or a 10x from here. And by the way, I disagree with you on, on when I see that a company is only a two or three extra more, it is because on average, we've been shooting for the 10X's earlier. I'm very happy to recycle that problem.
- [20:26]
Jason Lemkin
With the selling in the secondary. But because you have so many names, right, there's not pressure on every number to return the fund. Okay. I feel like for me, I want every winner to return three times the fund, not one X. Because if I just return the fund, let's say that's my first distribution, I don't make any money. 1x is not good enough for me anymore at this point in life. Honestly, it's not. Because, listen, maybe it makes someone on Twitter hat happy, but that, that doesn't even put me into real carry Mode, does it? 1x the fund, right? It's not worth it. I want 3x the fund. It's just not worth it. I don't care about 1x. It's even. 2x is nothing, right?
- [21:02]
Fabrice Grinder
What I love about you is am always learning. But you said last week, if I know I can 5x a check, I will do it. And then you're also saying, this week, 1x the fund isn't enough. I need to 3 exit. Those, to me, seem paradoxical.
- [21:18]
Jason Lemkin
I think they're. They're paradoxical and they're both true. Imagine you're. You're in carry mode, right? Then you'll be Like, God, if I'd only put 5 million in lovable, and it went from 1 to 5 billion, that's another 20. That's another 5 million bucks in my pocket. I mean, that doesn't go far in London, but I could take some good holidays. I can't buy a good flat, but I can live good in Monaco or wherever for five. That's five million. See, that's the weird. I'm still trying to learn, which is you want your winners to be huge, but the ones that you aren't, winners that are like the ones in that next bracket below, just making money on them is terrific, right? And the other weird learning I'm still learning is like, you know, in that 2017 fund we talked about, I got an extra deal in, I got an extra deal in. Four years later, that's almost a fund returner, an extra deal. So think about this extra deal in that outlying year of the fund. Like, I just think the extra money is where you make. Is where you can make money too, right? It's not always in having the one huge winner, the extra money, literally, you can buy at least a decent flat in London for 5 million, right? Especially if you're like Fabrice and you pay no taxes. Then it goes. Your 5 million goes further.
- [22:25]
Rory O'Driscoll
When Marie Antoinette took this attitude, she ended up with her head chopped off. So just. This is why no one cries for us, Jason. So Julie noted that 5 million bucks won't carry you far enough. I'm still willing to get out of bed for a million bucks. I just want to be clear on.
- [22:40]
Jason Lemkin
That that with or without, I'm having some fun. But it's also, I also venture isn't about little numbers, is it?
- [22:47]
Rory O'Driscoll
That is the part that is not about little numbers. You're exactly right. And that is the part that I kind of agreed with you more at the margin than for me, is that it's so hard to get a winner that if you do think it can run, the compounding in the out years is the only way in which the venture thing really, really works commensurate with other equity businesses. We're not playing with big dollars like the PE guys. Most of our stuff doesn't work. Unlike the PE guys, the only thing that's good about this business is occasionally you can make really great companies, and ending up holding onto lots of them is the way forward. That's one of those almost always true rules. And there's times, however, to Paris's point, where it's not like 2021 was one of Those periods where that's not a good rule because everything is so overvalued that you really that they're never going to return to those valuations. Most of the time you're compounding on your winners covers up for your mistakes. So buy us long. It's why Sequoia did the Evergreen fund thing, which was a brilliant idea, unfortunately, in the only year in the last 20s where was the wrong timing. But fundamentally across 20, 30 years, it's the correct insight. And they've had it from way back when when they did Cisco and you distributed that 200 million pre when it went public. And anyone who's still holding the stock feels pretty good.
- [24:10]
Unnamed Speaker
I think it's different based on portfolio construction. You guys have concentrated funds, I don't. So in my case, 2% of my deals follow the power law. Return the fund 1x. So even 100 extra doesn't return my funds because I have 500 deals per funds. So 2% of the funders return me 1x. And these are the 46x average, 8% of the fund return another 1x. And these, I think were 8x average. And then I have the remaining 90%. I actually make money in 40 of the a bit slightly less than half of those deals return another 1x. So for me it's 111. And that's how I end up with 3x and the 30% IR because I DPI early because of the secondaries on the way up. And that's been true for the last 28 years. And I haven't seen it change despite the last bad three years. So it's just a different way of playing the game. But so far it works and it keeps working.
- [25:02]
Fabrice Grinder
I think the right question to ask if I'm an LP actually is are the IRRs actually reliable? I'm an LP in several funds and I look at the underlying assets and I go, I know that company, I know that company. I know that these are not where they are priced. And actually, do not hang your hat on the IRRs of the managers because they're not even reliable.
- [25:21]
Rory O'Driscoll
You're asking the very basic question, are the numbers on the page correct? It's hard to know. I mean, and I say that not being glib, you know, we're in this weird period where we appear to be all, quote, unquote, creating value. You know, we're getting unicorns, we're getting markups, everything's working. These companies appear to be doing really well. But as a very astute friend of mine in the late Stage Business said, because there's no IPO, relatively no IPOs and MAs, there's no feedback loop. Like we're grading each other's exams and we're all saying we're getting as, but teacher hasn't graded the test yet and teacher appears to be on strike right now and prohibited from doing anything or caught up in antitrust. And until teacher grades the test, we're all just saying, yeah, I'm great. Because Jason said I'm great and Fabrice said I'm great. At some point, all these companies are going to have to have that horrible moment. I've lived through it in some companies. Is that where you file the S1 and you have that moment where you've got it on file cold and no one's seen it and then, you know, tomorrow morning you're going to unveil the numbers and it's like you're going to take your clothes off and everyone's going to see what you really got. And that's when we'll find out what things are worth, you know, until then, it's an ungraded test where everyone's getting as.
- [26:30]
Fabrice Grinder
Rory, do you agree with the girly statement that you should go public earlier? It's great to be public for discipline. Everyone should go public as soon as possible.
- [26:40]
Rory O'Driscoll
That theory Bill's in an odd quadrant pro going public early, which I agree with. But anti IPOs, I think companies stay private because they can. And as long as they can, they will. And at some point I think we'd all be better off if they could go public earlier. Right? That will happen. As I said, not when people don't do what they should. People do what they must. When they can't get cheap private capital, they'll all go public. And yeah, being public, it has some good strengths. Yes, it does. Force discipline earlier. It's not perfect because you also have to deal with activists. There are some good reasons why people stay private. Lots of being public is a bit of a pain in the ass. But I do think, I think IPOs will come back and come back earlier once capital gets withdrawn from the private ecosystem, which I think it will.
- [27:26]
Unnamed Speaker
You know, when I was a kid, because I was crazy, I was like, my dream was to be a public tech CEO. Then I built three large venture backed companies and two of which ended up being public. And I was like, the last thing I would ever want is to be public ever again. Like, in fact, that took all the fun out of being a founder for me. It was like all of a Sudden, like having to create the annual budget, the quarterly budget, the update of the quarterly budget. Like, literally, if I could never go public as a tech founder, I would do that. It is so painful and so expensive of time. All your information's out there. It's bureaucratic. It slows everything down within the company. It's like, I would rather not go public.
- [28:07]
Rory O'Driscoll
There are significant negatives around being public that I think we have to fix as a country if we're going to have a more successful, dynamic ecosystem. But I also think the cost of that capital is so much lower in most times than what you can get private. Not for the last couple of years, but across two or three cycles. I think it just logically makes sense that liquid money should have a lower cost of capital than illiquid money. When I say it like that, it's pretty obvious. It is absurd to think that one person is getting capital where you can trade it every day and the other company is getting capital where you're locked up for five years. How in God's green earth if the companies are the same, does the first company not have a lower cost of capital? But right now it doesn't. It's a point in time absurdity. And it will change.
- [28:54]
Jason Lemkin
Everyone that I know, directly or indirectly, that had a. That has a subscale IPO that tried to IPO in the 100 million 200 million range, that's growing 20 or 30% today or wherever they are. They're all miserable. They're miserable. They have to be profitable. They're not enjoying great. You have a 6 or $700 million market cap. It's sort of illiquid as founder anyway, right? You could sell a little bit, right? But again, it doesn't go that far in London, right? You could sell your 10B5. You're selling a couple million bucks of stock a year, right? It's not fun to be a 600, $800 million market cap with no analyst coverage, no liquidity 3x multiple, right? With no one to buy you and miserable employees that now exactly know what their equity is worth to the, to the, to the. To the nano cent, right? Like, like so sure, if you can go public at a. Like, what was HubSpot? I mean, where are you guys invested? HubSpot. I mean, that was a rocket ship at IPO at 100 million, but I think it was growing 60% at 100 million or something like that, right? Those deals no one wants to do today. 60% growth at 100 million, right?
- [29:56]
Rory O'Driscoll
There's a shift between those two examples. To be clear, a company at 100, 150 million with 50, 67% growth should be able to go public, is my belief. In other words, 500 is too high. You're exactly right. However, 200 million growing at 30%. The math's starting to not work depending on the multiples. Right?
- [30:13]
Jason Lemkin
And your life's miserable as a CEO, your life is miserable, I think. Right.
- [30:17]
Rory O'Driscoll
The bar should come down from today where it's effectively zero. The year of the great.com explosion, it was literally 350 IPOs, median trailing revenue 18 million. And that was clearly too early. Coming back. Interesting comment. Coming back to IRRS, that was the exit environment where a bunch of 1996 funds posted 6x net 100% plus IRR funds. It was the best of times, as Mr. Dickens would say.
- [30:43]
Fabrice Grinder
People are starting to realize that we saw the CEO of Discord, we saw the CEO of Ironclad, both leave this week. Is the realization is the penny dropping that shit? Being a public company CEO sucks. I don't want to do it.
- [30:57]
Jason Lemkin
90% of B2B companies at IPO have a founder CEO at the top. 90%. Will that go down with 20 year life now that it takes so much longer to get there? So that's my number. What I've learned is you really do have to reinvent yourself as a CEO every five years and sign up for another tour of duty. And so if you squint, a lot of these turnovers happen in these sort of four to five year cycles. Right? Think coming to the Discord point is, is Jason Citron or coming to Jesus and saying, listen, I don't want to be CEO post ipo. If you're a founder and you like big teams and you like scaling, but you don't want to do the IPO, leaving 12 months before the IPO is the right time. Right. The market's not going to be shocked. And you like scaling, you like people, you just don't want to deal with Wall Street. That's the perfect time to leave like Discord. Right? That's. And hand it to the professional guy, right? When I look at the other ones, they go into terminal decay is my concern. But that's a different issue. I just think they go into terminal decay.
- [31:50]
Rory O'Driscoll
They definitely do the hardest thing to do as a CEO change when the founder CEO doesn't want to do it. But for whatever reason you think they have, you should make that change. And for me, that's an extraordinarily high bar because a founder CEO with some managerial limitations usually performs a lot better than a reasonably good manager with no founding DNA. I'm not one of these grandiose people who says, oh, we'll never change a founder. I think statements that use the word never just don't tend to work as well. When you take longer to get to the same place, you're just going to have more change. 1999, as I said, it was a sprint. Found the company go public in three years. Most people could do a sprint. Then it was 10 years. A fair number of people could do the 10,000. Now we've converted this into a marathon. Oh, and by the way, at the end, you have to run a few more sprints at the end just for fun. It's not surprising that when it's a 10 or 15 year journey, lots more people tap out. Life takes care of a lot of this. People get older, people have other things going on. So the longer this private holding company period lasts, the more these kind of dynamics you're going to have to wrestle with.
- [32:54]
Fabrice Grinder
I find it easier to pick founders with that realization than with the shorter term horizon very specifically because you have to be a fucking psychopath. I am deranged. I run two marathons a week. I, you know, I'm an addict in every way. Like I have more energy for 20 VC than I've ever done before. 11 years in, I've done three. Like there is nothing normal about me and I look for nothing normal.
- [33:18]
Jason Lemkin
You can't make money at normal people, unfortunately, no.
- [33:20]
Fabrice Grinder
And so, but you can if it's five year windows or seven year windows where you can kind of scrape it by the 15 year. You have to be so deranged and obsessed by a problem. It's your unwavering life's work. I find it easier almost to pick.
- [33:36]
Jason Lemkin
You know, it's funny, when Harry, when you and I were in London this last summer at the Sasta Europa, There was a CEO speaking and he told me that he's in a WhatsApp group of and they're at scale, they're at nine figures in revenue. He said they're, they're a 20 percenter club. They're all telling each other how 20 growth is more is great today. I get it from as a human, but like you can't invest in these people that they're in the 20% club. They've all convinced themselves as for group therapy, that 20% growth at nine figures in revenue is as good as it gets, right? You need people who won't join, who Log out of that WhatsApp group.
- [34:09]
Fabrice Grinder
I think there's a really interesting question which is like are we going to see the acceleration of terminal decay? And what I mean by that is if you look at companies like Pinecone, they went up and they went down very, very quickly with changes in technology cycles, Squarespace, wix, any of the website builders, I'm not picking on them or being horrible, but your lovables and your bolts are absolutely killing them on the consumer. Are we going to see the acceleration in that terminal decay rate?
- [34:35]
Rory O'Driscoll
Short answer of course, I mean that's almost a given. I mean look one, all technology companies have obsolescence written into them from day one. It's sad, but it's true. I mean anything before Microsoft and Apple at this stage isn't here. And Coca Cola has been cranking for 100 years, right? So obsolescence is inevitable in general. On top of that, periods of acute technical disruption are going to increase the amount of technical obsolescence that companies face and then overlay that. As we've been discussing longer holding periods. I mean I think I said this last week, but my number one fear is that the technology life cycle to obsolescence is now shorter than the holding period of privately held software companies. Which means every company at least one time before it gets to go public will have an existential reinvented sell second product crisis.
- [35:23]
Jason Lemkin
It's a huge issue. All of them today, they're all too old. All of them today, all these ones that scale are too old, aren't they?
- [35:30]
Rory O'Driscoll
I talk about VCs, are you, are you picking?
- [35:32]
Jason Lemkin
Well I thought you were talking about the portfolio companies, the poor. If it takes you 15 years to IPO, you're so far architected before the AI age, no matter what you agent, you add on top of it, you're having an existential crisis. Right?
- [35:44]
Rory O'Driscoll
Quick snide windy argument response back would be SpaceX, but I would be intellectually honest enough to admit that would be a snide answer, right? For things like hot, this is one of the brilliance of those kind of companies for really hard technical problems you'll probably get a 20 or 30 year run. But you're exactly right Jason, for kind of core first generation, what we refer to as plain vanilla SaaS, it's highly likely that 10, 15 years in, if you haven't exited, you have some degree of technical obsolescence. Now it's not fatal, but there's often a reinvention act required which actually circles back to the founder comment. The ability to Take that company and drive it to a new architecture like Zuckerberg did with mobile or add a second product is in my view what will separate the companies who kind of peter off at 100 million at 20% going to 15, going to 10 versus the companies that have a year or two bumping at 20. Get that another product out the door re accelerate to 40 and make it. I mean I have some of both in my portfolio honestly I have one in particular I'm thinking that latter credit. I'm just so impressed with the CEO. So we hit a 20% year, year and a half, we did some acquisitions, we really cranked in engineering. We didn't cut engineering in the downturn, we doubled and now it's back up to 40% plus. But it's going to be existentially tough and it gets back to you guys that's going to take winner, winner, CEOs wherever they come from. Founder are hired by the way.
- [37:09]
Unnamed Speaker
I think that's true in B2B SaaS. I don't think that's necessarily true in other categories. If I look at what my bread and butter which has been and marketplaces with B2B and consumer facing the AI disruption is actually benefiting startup incumbents because they have the data moats and so it doesn't benefit ebay because they're slow and big, but it benefits an incumbent startup that has already liquidity, that is the most efficient to operate, that is at scale. And then now they're adding an AI layer and they have all the data to make the better decisions, improve the funnels, et cetera. And so I don't think in these cases they need to be. They're not at risk of disruption actually they just improve.
- [37:46]
Rory O'Driscoll
I totally agree from it. That's proof once again that a diversified portfolio has that advantage. No, you're exactly right.
- [37:52]
Fabrice Grinder
Are ebay not advantaged because of their touch points to end consumers and the sheer distribution the remaining brand that they have? I would just argue that they just have shit internal policies, slow decision making and poor teams compared to startups.
- [38:06]
Unnamed Speaker
No, I don't think that's the issue. I think the issue is actually simpler. It's their horizontal and multi category and even though they have all the information, all the categories like their tech stack is not built such that you're best in class in every single vertical. Right. Like so the collectibles, the Pokemon marketplace is going to do better than ebay and that's true of every single category you can think of. And so we're in a Handbag marketplace called Rebag and they have this AI where you take a photo and Puma tells you the model, whether it's fake or not, the quality, the price, everything's done. And even though ebay has the data, their tech stock is not that flexible that they could do best in class transactions in every vertical. So it may just be a vertical horizontal play where the verticals just do better, but ebay will buy a lot of these, so it's more tech stack, I think. And the new team is amazing for what it's worth. They're going back to the basics, they're going back to collectibles used and not trying to be an Amazon clone.
- [38:56]
Rory O'Driscoll
That's a super interesting and nuanced point by the way, Fabrice. It's equivalent to what you're hearing in enterprise software, which is with AI, the deep verticals will do better than a broadly horizontal, which because what you don't need is just a horizontal transaction management platform, you need to full solve the problem. And it's incredibly hard to solve the problem in insurance and solve the problem in retail and solve the problem for manufacturing.
- [39:23]
Unnamed Speaker
Maybe. Here's the interesting point is I think that's true at the application level, but at the fundamental LLM level, I think the horizontal GPT may just win most categories the same way that Google won Search reasonably red large, except maybe Kayak for Travel. I think OpenAI and ChatGPT win most of the LLM type categories. Like I used to use Mid Journey but like Dall e is so good and it's part of my subscription. Like I just don't use Mid Journey anymore. And that's true for many things now. It doesn't end up being true in every category like cursor or lovable. I'm not so sure. These are maybe still verticals that work, but the application layer, yeah, I think the hyper vertical where you solve the problem end to end wins over the horizontal.
- [40:03]
Fabrice Grinder
I think all of us are idiots. By the way, I spoke to a friend of mine who is doing a quarter of a billion dollar SPV into OpenAI at 300 billion and you're looking at that going, christ, there is a non zero chance you're going to 3 to 4x that SPV on a quarter of a billion with a 20% carry. It's not a bad deal, I'd do it.
- [40:23]
Jason Lemkin
It's not a bad deal.
- [40:24]
Fabrice Grinder
Not a bad deal.
- [40:25]
Jason Lemkin
Especially because it's an spv. You don't have to go into Rory's prior point, you don't have to talk about it if it doesn't work out. There's no downside to the perfectly constructed spv. Especially if there's no GP commit. You just don't talk about it.
- [40:36]
Fabrice Grinder
A quarter of billion is quite hard to hide. I think I do want to also we mentioned, like incumbents reinvent want in your.
- [40:41]
Jason Lemkin
In your g, in your LP report your core LPs just get the main funds and only the SPV guys get a separate distribution that I do over on Carta. And I got some of the email addresses wrong. And I don't.
- [40:54]
Rory O'Driscoll
I don't know how to break it to you, Jason. When you get a little bigger, you'll hire a gc. And this would be the moment in the podcast where your GC has a heart attack. But it's okay for now. Keep it clean, keep it tight.
- [41:04]
Jason Lemkin
Jason, why do the LPs that aren't in the SPV need to know the data and performance of the spv? They don't, do they?
- [41:10]
Fabrice Grinder
Rory, just get your inhaler. Okay. It's okay.
- [41:12]
Rory O'Driscoll
Breathe, okay?
- [41:13]
Fabrice Grinder
The GC is behind you. Just breathe.
- [41:15]
Jason Lemkin
I'm the most transparent person you'll see. I just forget about the big gc. I see a lot of stuff swept under the rug, a lot of investment space doing your point? I see it even from my little vantage. Right.
- [41:24]
Rory O'Driscoll
Some people wear their heart on their sleeve. Jason wears his cynicism on his sleeve. That's why I like it.
- [41:30]
Fabrice Grinder
Oh, dear. I totally agree with that. But we mentioned the reinvention of like income. Their ServiceNow popping 24%. Growing 20%. Well, almost 20% at 12 billion in ARR. What do we make of that? Bill McDermott coming out with another masterstroke. How did we evaluate this?
- [41:49]
Jason Lemkin
First of all, at a meta level, we're all trying to wonder and everyone in Enterprise exaggerates how much AI has had an influence in their business. Right. I mean, Mark Benioff's great, but he said they've had 500,000 transactions on Agent Force. We've had over 100,000 on Sastry. I don't think 500,000. If you. It sounds great at first blush, but if you think through it, it's early. And he's acknowledges that. It's not a criticism. He acknowledges it's early. Right. So I think all the talk about servicenow of all these agentic automations, I still think it's early. Right. So on the other hand, we're all kind of wondering, listen, do these guys all win the most? You can put A really, really good AI on top of almost any system of record. Really good. You can make Zendesk better. And so servicenow up 24%. Palantir, even though you know it's kooky up. I mean SAP that was founded in the 1800s I think Rory, it's up 14% growth at 32 billion in revenue. Right. That's the meta question is will they really benefit from AI? Right. And the data doesn't totally support it. What I actually think. But Harry, you hinted at it with Squarespace and wix. I think AI helps the enterprises on balance and hurts the SMB players. On balance, the SMB players just don't have as deep. They have a lot of data but it's not as deep. You can disrupt them faster. The sales cycles are quicker. I don't know this, we'll see this in, in 12 or 24 months, but we might, we might see the enterprise overall get stronger with AI and the SMB leaders get weaker and weaker because they're disrupted faster.
- [43:08]
Rory O'Driscoll
Yeah, no, funny. I went and looked at the actual numbers on service now and yeah, it clearly beat expectations, but plus or minus, it's been a little over 20% grow for five or six years. It's just a really well run market dominant company. So I don't have an insight on the minor question of the jump based on Q1 versus actuals. I don't know what they were thinking or what they were worried about and why it popped 24% on what was pretty much the prior logical estimate for revenue growth. But zooming out to the Jason point, I think that the bigger question is there's two big questions. One is what happens to these two or three ultra large SaaS companies? Does AI help or hurt? And my mental model has always been that at any point in time there's actually three different players. There's the pre AI behemoth which is ServiceNow. There's the AI teenager which is typically accompanied pre LLMs that had been building something in AI from about 2018 on. And then there is the post LLM YC next generation company. And in all these spaces that's roughly true. You can name the ServiceNow, you can name the mid tier players, you can name a bunch of new ones. And what interests me about ServiceNow is they made a shrewd move. They bought one of the teenagers, they bought Moveworks just now and they said hey, we had an AI story before. We bought a small company, clearly gave them some traction but clearly not enough. And they decided let's take 3 billion. What's that 1% of your market cap and buy Moveworks and get really relevant in AI. So I thought it was kind of a shrewd move. I think the market's saying, I don't think there's anything more profound in it than saying this is a company that looks like it's going to be a winner in the post AI world that still has scale, that still has profits, probably worth something.
- [44:50]
Jason Lemkin
You know the one, Rory, I'd be curious what you thought that I think about in the middle, right. The SMB to Enterprises box. You were an early investor in Box, what scale was. Right.
- [44:57]
Rory O'Driscoll
Yeah.
- [44:58]
Jason Lemkin
And like, Aaron's all over AI and I've been in the document management space. There's fewer spaces that you could disrupt more with a good. With good AI than documents. Because all our goals since the early days of Documents was how do we take this, these unstructured documents? Sure, we can OCR it, we can extract a little, but we couldn't do much with these documents. Right. And this is why Aaron's in love with AI. The question is, will it be enough for Box? I don't have an. I'm just watching as a student. Right. But I think it's in the middle. Like, we don't know, will this re. Accelerate Box because Box is a more valuable app or. Or not. But there's no question we have a CEO that's all over it. Right? An S tier CEO that's all over how to make AI, how to make a 2005 company with AI better.
- [45:38]
Unnamed Speaker
Right.
- [45:38]
Jason Lemkin
I'm watching as a case study.
- [45:40]
Rory O'Driscoll
And, and yeah, my comment would be first, not only do I like Aaron personally a whole ton, but more importantly, he's one of the CEOs I most respect. And going back to the comment earlier on, gritty and hard and sticking with it, that's a team that's been there now probably for 20 plus years doing the same job, never blinking when it got tough, never blinking when the activists showed up. So there's no one I want to win more. I do think. And again, back to the thing. If what it takes to make it as kind of that teenager plus company. If MoveWorx is a teenager, Box is clearly a young adult. Right. And if what it takes to add AI at that stage is great focus from the CEO and the team and just driving change, I think Aaron will deliver it.
- [46:24]
Jason Lemkin
Right.
- [46:25]
Rory O'Driscoll
So I'm a big fan. I'm still a stockholder. Glad to be a stockholder. And another day could riff long and hard about the negative parts of being public. I learned a lot from Aaron and I've changed my thinking on how best to ensure founders CEOs can be successful and the in the public ways. He's done an amazing job.
- [46:42]
Fabrice Grinder
I'm sorry I'm naive, guys. You're right. Aaron's all over AI. And you're right. And you're right, Jason. The document management space is the most perfect space for it. Why is that not reflected in the excitement around their market cap? Their market cap has always been pretty depressing as a multiple. Sorry, Rory. And you can just recuse yourself.
- [46:59]
Jason Lemkin
Well, I think Rory would know more. I just think it's a question of what will like AI. It may not lead to breakout growth for some of these players. Right. It's like how has ServiceNow? Bill says it has for ServiceNow. I'm a little skeptical. I think it just think it's early. Right. If it was as simple as having an incredible AI on top of all the data you need, Box should win. Box should re. Accelerate to 20 or 30%. I'm talking about a big public company like a VC. It should re. Accelerate. It has. It has all the AI and it has the data. It has, it has, it has trill. You know, Box has trillions of documents, right. That you can't even find. Now I can talk to my document documents. It should. If we're, if we're shooting from the hip as investors, it should re. Accelerate. But if it doesn't, then I'm trying to learn how I will change it. Right. Because Box is going to be in 12 months, an order of magnitude better application than it was 24 months ago. In 12 months, it will be an order, not a little bit better. It will be in order. And will that be reflected in growth? That's the meta question, Right?
- [47:56]
Fabrice Grinder
Well, the question does that, does that actually come out in value extraction? Sorry to interrupt you, Rory, but like can canvas a better product, but actually they've just got margin degradation because they actually are paying more without charging more for a price.
- [48:08]
Rory O'Driscoll
I think in the end if you deliver value, you'll get value. And you know, contrary to F. Scott Fitzgerald, I do believe there are second acts in American life. I genuinely do believe that AI could provide a strong boost to the bot's value proposition, which needed it. Because the reason you give me grief on the stock price, but it's a compelling achievement to have done what they've done. But the reason the stock price is always hard is we're competing against Microsoft and Google, who give it away for free. The fact that they've built this profitable, wildly cash flow positive business competing against the two largest companies on the planet who give the damn thing away for free, just hats off to them, smarty pants. But now the question is, can they re accelerate? And I think the interesting thing, there are examples in the past, like for example Adobe way back in the late 90s. One of my partners used to work there. She said they were stuck at a billion in revenue for like three or four years and then they got the unlock and they re accelerated. I can't tell you what's going to happen. I'm not on the board, but that's obviously just as Bill McDermott is looking to grab onto AI, I think Aaron is wisely grabbing onto AI and I'd prefer to be playing that hand than the guy doing a billion, billion and a half in revenue saying AI won't impact my business because he'll be gone in next month.
- [49:18]
Fabrice Grinder
Roy, you said if you create value, you'll be able to extract value. I'm worried because you see people like Windsurf and Cursor who are creating the most insane amount of value now doing like a billion lines of code a day, charging now Windsurf price slash. I don't know what the prices are, but they were like $30 before. I think now they're 15 or $20. Are we moving into a world where there is this dislocation between value creation and value extraction?
- [49:43]
Rory O'Driscoll
My guess is probably not. First of all, given the background noise, I don't think we need to worry about Windsurf's ability to quote, unquote extract value. They appear to have found a higher source of value to extract than capital market size. So I think they'll be doing fine if they get 3 billion bucks. But I think on pricing I thought it was a clever move. I think that you're going to see this. I mean, yes, they lower their lower price down, but they have tiered pricing. It's the conjoined question you were asking about value pricing, which is very hard to do for a product like this. But having tiers of pricing where you get lots of people using the base product and then escalating steps of value as you deliver more value, probably is the simplified version of quote unquote value pricing. In much the Same way as OpenAI has 0, 20, 200 and 2000, they're going to keep giving stuff away in the lower tiers, get you hooked and upsell. I don't think it's A charitable act or an act of madness. I think it's probably a pretty shrewd pricing strategy.
- [50:40]
Jason Lemkin
Well listen, I think what they're doing is vaguely similar to what HubSpot has done, which is they're going more and more low end like HubSpot 2 years ago didn't even have this Essentials additionally edition which is like 45% of the new customers and more enterprise. So if you look at Windsurf to get going, it's simpler and cheaper than it was. Right. But the average enterprise customer pays like 60 or $80 per seat and they have 200, 300 people in their enterprise go to market Market motion. Right. So they've got a barbell where everyone can get on this platform. They have incredible marketing from it. Right. I mean in three months everyone says this is better than Cursor. We can all have our own opinions. Incredible marketing benefits even from HubSpot from this long tail. And then they've got 200, 300, 400 sellers selling six and seven figure deals at 60 to 100 bucks a month per seat. That's a quietly better model than it looks. Right. And it probably can scale and absorb some significant costs from OpenAI and Anthropic.
- [51:35]
Unnamed Speaker
Right.
- [51:35]
Jason Lemkin
At that, at that level it probably can.
- [51:37]
Unnamed Speaker
I worry that these things are going to be more competed and competitive than people think. Right. Why isn't GitHub Hub competing with Cursor?
- [51:44]
Jason Lemkin
Right, yeah, but it's Copilot versus Cursor and Windserve is number friggin one on there on their got a kill list for Microsoft number one.
- [51:53]
Unnamed Speaker
So it's all over.
- [51:54]
Jason Lemkin
It is, it is existential for that, for GitHub to do.
- [51:56]
Unnamed Speaker
Exactly. I, I worry and again, again it's the reason I've been avoiding these AI deals that it's kind of like 21 where in every category you were, you were going, you were going after. There was like eight great teams, well funded and the very fact that there were that many actually killed the economics of the category until eventually a winner emerges. But the problem is if you invest at very high valuation in a company in a category where there were eight people going after it and overspending a customer acquisition or offering too low prices, it ultimately didn't lead, I think to great outcomes for investors. And I worry the same thing is going to happen here year and so while I do think eventually a winner to emerge and they'll have the proper pricing power and I do think in the long run you're able to extract value when you create value. There may be a lot of investor value destruction on the way up because people are competing on customer acquisition, on price. If this ends up winner takes most, you're willing to do whatever it takes to win. And as a result you're willing to give up a lot of value on the way there. And it's going to take a lot of capital. And that's what worries me about these models writ large. And that's why I've been been staying on the sidelines, especially considering the valuations they've been raising at. I'd rather pay up when one of them seems to be the dominant winner. And I suspect that then price and traction will be more aligned.
- [53:17]
Fabrice Grinder
I think I've said this before, but one of my friends led around in one of the model companies at 4 billion and now it's at 60 billion and their multiple is 3.1x. And it's because they're shedding 9% a year in employees.com and they've raised billions and billions and billions is not really a venture fundable asset in that respect. That's a bad sigh. Rory, don't hit me. Come on.
- [53:41]
Rory O'Driscoll
No, no, I hear you. Look, it mightn't be the best venture return, but I just think on these broad trends, not showing up, just walking away from the trend entirely is just too hard. I mean, I think you have to. I think they're still up 3x. I think they have upside from there. So I think in retrospect they're probably still glad they did it. They might be nervous about the burn. I think we're probably saying some version of the same thing. The best of all worlds would be a wonderful tech trend and low capital availability, which means only two companies get funded, they slug it out and they both make money. That welcome to 2010 or even 1994 because I was in the business, it was awesome. I'd still prefer a really strong tech trend and five or six competitors to no strong tech trend. I do love where we are from a tech perspective right now. This is some of the most amazing technology we've seen in 20 or 30 years. I mean we get so used to it. You sent me your questions, Howie. I just loaded them up the chatgpt and oh my God, I'm an expert on everything on the podcast. 10 minutes later. It's just a wonderful world here. So there's a huge amount of value happening, right? But I do agree it's incredibly tricky given figuring out how to play with just the capital. The capital is definitely massively Eroding the returns. You find yourself as an investor trying to find a way to play the trends. I mean, we're gnawing at this every day. It's so hard. Do you go a little earlier and try and catch it just before when you know the bad news is you don't know who the winner is and there's eight. Do you pay up for the winner at 5 or 600 when there's only a million? Is that enough traction? It's damn hard. I'm not saying it's the only game in town per Febreze, but it is the biggest game in town and pushing away the table entirely is a bit much.
- [55:21]
Fabrice Grinder
Rory, if I was on your team, I would be saying to you, play the trans dude. We're pre seed seed and a our game is backing generational defining founders. We don't play trends. We just try and find the best founders in this business. How would you respond to me if that was what I said to you?
- [55:38]
Rory O'Driscoll
I'd say to you at the precedent seed that's probably true. And by the way, I liked your tweet. Just to turn it right back on you, all you have is three things you said. I'll give you the three things you have per your tweet and I'll contrast it to where we are slightly different. You said there's only three things things I've got awesome fricking founders, roughly directionally correct market and economics that make sense. And you're exactly right, those are the three things. But you did add the second one is there. You do need to have some semblance of directionally correct market. We're probably playing around and a half by the time you get to an in revenue a which is where we play early revenue a product market fit. You have to have product market fit. That's why we use the word right. And the thing is, if you pay up for a company that has product market fit and then you lose it and have to reacquire it, by definition you've overpaid. So by the time we invest, I want to at least say I believe that this is the right solution that has some element of product market fit. We're not going to tear it up and start again on something else. That happens. And as we discussed last week, it happens more in AI than anything else. But I can't afford the luxury of just saying these are meat eating founders and they're going to figure it out. Who the fuck care? Excuse me? Who the hell cares what they do? I want to at least know they've locked into something that can hunt. And then the economics, like you have to make sense.
- [56:59]
Fabrice Grinder
But I don't think you can find that number two with number three today really at all.
- [57:05]
Harry Stebbings
Because I see these deals every day.
- [57:06]
Fabrice Grinder
In SF, Rory, and they're 400k an ARR. That's not product market.
- [57:11]
Rory O'Driscoll
Okay, you caught me. That's the big problem, dude. Okay, you nailed it. That is absolutely. The issue we're wrestling with is by the time you have our first criteria, criteria of product market fit and a good founder. The third criteria. Value. No, that is why venture capital is hard. No, you're exactly right. Is the solution to try and do what you do and go pre seed? I don't know.
- [57:31]
Fabrice Grinder
I think you have to. I think you also have to, given the fact that pre seed funds are now $400 million like mine. I can do the seed in the A. Good luck trying to take my best pre seed because I'm going to cling onto it as hard as I can. And I think that's why you're seeing Neil Mason lead the seed for Windsurf. Because there's a realization that there's no freaking way you can get in unless you are there.
- [57:55]
Jason Lemkin
But even there, that one. I mean, this is. It's a good question. When both Windsurf and Cursor Anysphere were radically different companies when they were funded, they were not even the same company. Okay. They were nothing. And then. I don't. I think I have the chronology right. When Green Oaks doubled down on Windsurf, it was Codium, which essentially the company abandoned three months ago. Ago. Every engineer was repurposed to build a better version of Cursor called Windsurf. So this is like betting in. In an S tier founder, which varun is. But those bets don't work out a lot. I don't think those bets work out. Most of the time, the S tier founders, right. And the classic B2B investor is at 40k Mrr, to your point, and is attached to a trend like the world is changing the world. It's AI, it's. It's WebRTC, it's mobile. And they've attached to an early trend that even you couldn't see. See, like in the old days, right? There is early product market fit at 400k.
- [58:44]
Fabrice Grinder
ARR.
- [58:45]
Unnamed Speaker
Right.
- [58:45]
Jason Lemkin
It's just we used to be able to invest in those companies in the teens.
- [58:49]
Fabrice Grinder
I'm sorry, NSF is there. Really early product market fit. You're a YC company. You've got all your YC mates around you. You've left a firm or you've left square or you've left whatever and you say, hey, come on, sign up for a 20k contract. You get 20.20k contracts. That's not early product market fit. It's having good friends.
- [59:06]
Jason Lemkin
I think 10, 10 folks that weren't in your batch might be though.
- [59:10]
Rory O'Driscoll
Totally. And more importantly, I mean, Harry, what you. Turns out it's hard to make money. Right. Tough shit, you know. Right. Yes. We're paid to figure out which product market fit is bullshit and which product market fit is not. I remember back when the round that we now do, which is they used to be the. I remember venture wisdom when the A used to be seedless.
- [59:27]
Jason Lemkin
Yeah.
- [59:27]
Rory O'Driscoll
The problem with Series B is if you get it wrong, you end up effectively paying Series B prices for Series A risk. And it's exactly correct. Now at the A, you're paying Series A prices for seed risk. But the whole point of having to be good at this job is being able to figure out which is which. There's an element of the job that is picking and turns out that's what they're paying the commas and the salary for. And you got to get it right. And if you don't, you are going to lose money because you are in a more forgiving capital environment. Your margin for error would be much higher. And that's the really hard thing about today. You don't have enough room in the price to bury a lot of errors. So you got to get your picking much better and your win rate much better. Better. So, yeah, it's harder to make money when there's 20 VC competitors than those three. Yeah. What are you going to do?
- [60:12]
Fabrice Grinder
I love it. Fabrice. I basically get a schooling every week from Rory. Last week I was a hypocrite, so this week is a definite improvement on that.
- [60:20]
Jason Lemkin
I want to.
- [60:20]
Rory O'Driscoll
I thought hypocrite was wrong. I just should have said you're just incorrect.
- [60:23]
Fabrice Grinder
No, no, Rory, I have a thoroughly inflated ego and so it doesn't really harm me. You also mentioned something in 1994. I was born in 96 and so I wouldn't have actually remembered that, but thank you.
- [60:35]
Jason Lemkin
Maybe if you read. Yeah, maybe if you read anything that was on social media, you might.
- [60:40]
Rory O'Driscoll
Generation doesn't read. We know that.
- [60:44]
Fabrice Grinder
If it's not a tweet, I'm out.
- [60:46]
Jason Lemkin
It was a real.
- [60:47]
Fabrice Grinder
Guys, I want to just run through a couple of fundraising elements that I just have to hear your thoughts on and Then we'll wrap. Manus raised 75 million for its last valuation, led by Benchmark. It's a Chinese company. I love the Benchmark guys and, like, they're friends. So this is no shade, but should we be funding Chinese AI companies?
- [61:07]
Jason Lemkin
The first one I thought, when I saw it was Rory's point before was we're all taking more risk. So there's a political element here, Right? Which is it? Which I'll. I'll briefly and other folks can talk about. But when I saw that, Rory just. Just rung in my ear. It's like, would Benchmark. Would anyone ordinarily want it today, in today's world, want to do a China based AI company? No, but it's disrupted AI, at least for now. So you're taking more risk. You're taking more risk, you won't get liquidity. You're taking more risk, the government will take away your shares. You're taking more risk. You can't repatriate any earnings. I don't even know all the risks, but so many folks have walked back from China that they walked in. I just thought, it's taking more risk to get the massive outcome. The second thing I thought when I saw this wasn't really Benchmark. I just think in general, nobody cares. Nobody cares if you're selling weapons. No one cares. Like, people love defense tech, that it's off killing people. Now, we could argue either side of it, but I haven't talked to a VC that thinks there's anything wrong with that. I'm sure there are. Everyone's like, I'm Mr. American Dynamism now. I'm all American Dynamism. And maybe that's okay, but it was just a couple months ago we were talking about that AI might kill us all and that we needed safety and control. And I haven't heard a peep out of that since Anthropic was formed. No one cares. Right? So. But this Risk thing. Rory rang in my ear on Risk.
- [62:19]
Rory O'Driscoll
Yeah. And so much to unpack in what you said and then what Jason said. Silence on some parts does not indicate consent. So let's now go back to it and say on the decision, I think you led with the should. I want to avoid kind of the should they, shouldn't. They playing geopolitical guru? Because I'm not. My comment was, as a fund investor, you say to your. The way I think of it is this on an individual deal level, quite a lot of risk, but they're probably massively getting paid for the risk. And it's an idiosyncratic risk risk. So probably from a pure portfolio management perspective, adding one of 20 deals that have this very weird risk where you're probably getting a lower price but have some exogenous political risk, you could say from a pure finance perspective might be a good idea. I wouldn't do it because there's two other criteria. The second criteria is are you taking individual deal risk or are you taking firm risk where the blowback from doing the deal slops over, not just from the individual 1 out of 20 deals into some impact on the firm? I can't assess it. And to be clear, I'm not yet making a moral distinction, but I'm just saying, hmm, with so many people and so much congressional pressure around that I wouldn't have had the courage to maybe bet the firm or at the very least bet that I'm going to spend some portion of 2026 in front of Congress. Explaining this in a way that I. We saw very intelligent investors, Sequoia people like that get out of billions of dollars of value because they just wouldn't want to be there. Having got out of something like that, I wouldn't want to go back. So I think institutionally as a firm, I probably wouldn't have done it. The last one is some vague moral, like trying to articulate the moral stuff. And I'm deliberately punting on that. Which is not to say, how'd you.
- [64:07]
Fabrice Grinder
Put this, Rory, Your wife just said you couldn't say anything in that regard.
- [64:10]
Rory O'Driscoll
So, yeah, I get a list of banned topics beside of everybody and that's one of them. But I think there's very different risks from doing a US based defense contractor like Anduril versus getting involved geopolitically with China not commenting on the specifics of the company. I probably would be happy to skip that risk. Let's just put it that way. I don't have a developed opinion on the whole OpenAI closed AI. OpenAI open source AI. I don't know enough about geopolitical politics in China to bloviate on it. And that product is available elsewhere from VCs, so I don't need to fill that market gap. But I just go, that would be a tough one for me.
- [64:50]
Unnamed Speaker
Look, I used to invest a lot in China and Russia back in the 2000s and early 2010s, and I was an early investor in Alibaba and financial, et cetera. The thing is, there was a path possible where both of these countries would actually be US allies. Deng Xiaoping really saw the two countries. And Deng Xiaoping is probably one of the greatest statesman of the frankly ever and got a billion people out of poverty. And the path he was going on was pretty profoundly different from the one Xi Jinping is on. And so Xi Jinping having this nationalistic, conflictual, great power issues. Once Jack Ma was disappeared, I pulled out of China completely and my remaining olding is and financial which should have been a massive home run. And that Xi Jinping just personally decided, you know what, I don't like what Jack said to the regulators leaders. I'm shutting down the ipo. And I did the same thing in Russia. Russia was an amazing market for us. And then in 2014 Putin decided to invade Crimea. When that happened, several of our unicorns were funded by Tiger and Basar, et cetera. All the capital pulled out. The only people to fund them were local, well connected oligarchs that were like, okay, I'm out. And so would I take that geopolitical risk today? No, absolutely not. Do I think, think actually backing people that are contrary to our interests is a good idea? Absolutely not. From a just moral perspective now do I think that at some point this may change and they may become again more aligned and we can get away from this, you know, great power war, great game type world that we're back in currently? Yes, I hope that that's true. And I'm actually hoping that in the long run, as China becomes wealthier, the masses will not want taxation without representation and turns into a democracy. But the problem with dictatorships is people can see dictators a very long time, even if they don't do right by their people like the Castros or what's going on in Venezuela. So for now I would completely avoid these geographies, frankly. I even moved away from Turkey, which remains a democracy and a US ally. But Erdogan is to me going against all the principles of Ataturk and the revolution, the positive revolution that happened there. And so, so I stick to my personal moral principles. And by the way, speaking of defense tech, I'm investing a lot actually in Ukrainian defense startups. My vision is that Ukraine could become the manufacturing hub for defense in Jural. And look, I'm an investor in Jury. The problem is their cost is extraordinarily high. And so the way you measure this is cost per kill. And they're not battle tested. You want to minimize cost per kill, basically. And so these startups in Ukraine that are using super low. Yes, I know that sounds horrible.
- [67:42]
Jason Lemkin
I want to see a few investor decks with cpk, cost per kill, I want to see it declining over time and I want to make sure it crosses over by the Series C that your cost per kill declines.
- [67:52]
Unnamed Speaker
Look, if you're backing defense tech, this is at the end, it's roi, right? People want to make you be efficient and if you're a country with less resources, you need to be more efficient. And what Ukraine is doing is building an extraordinary stack that if we are ever in a great power war with China or Russia, we're going to need access to it because our costs are too high right now. We don't have the manufacturing capacity. We would lose a war with China right now. And I think the only way out of that is backing things where you can build scalable, cheap mass manufacturing. The reason we won World War II is we out manufactured the Axis and that was the us. Today we don't manufacture cac.
- [68:31]
Jason Lemkin
CLTV and CPK are the metrics I really run the fund based on. To be clear, sometimes, sometimes a high CPK can be disguised in a low CL tv and that's the problem with the lower margin American dynamism. Investment is your CLTV can seem high, but your CPK is high as well. You've got to get the cross. What is, what is the magic number here? The ratio of CLT:1? Is that how it works? Yeah. Maybe David Sachs can help us with the ratio, like a burn ratio.
- [69:08]
Unnamed Speaker
But I think that this is existential. It's existential for Ukraine, I think it's existential for the West. I think we need to be in a capacity to be strong enough to defend ourselves, otherwise we're going to be bullied and otherwise we're to lose and it's good. And if we are perceived to be weak, there will be, I think our perceived weakness is more likely to lead a war and like invasion of Taiwan or whatever then than if we are perceived to be strong. And so it's distasteful. And look, I would much rather we all live in harmony to be clear and I would rather we don't have the leaders we have on both sides. But it's existential and essential and we need to do this.
- [69:44]
Jason Lemkin
Can I just add one question? I know we're over, but to Fabrice, since I haven't done any, any defense technique. Do all these new seed investors and folks that are excited about, do they have any idea what they're doing or are they just chasing trends? Do all these folks and dog patch investing in hot startups, do they know what the hell they're talking about when they do, when they pop down to El Segundo for the day, or are they just flushing their money down the drain?
- [70:06]
Unnamed Speaker
I think no, they're doing what Rory said people should be doing, which is investing in mega trends. And is defense tech a megatrend? Absolutely. And they're, they're trying to latch on. And what are. And by the way, they're very good funds in this, like, shield in the defense. They're amazing. They know exactly what they're doing. Do most people that are latching on this are lemmings. And look, I'm an investor in Enduro, but I think most people are like, this is the emerging winner. We need to pile up the truck here and invest. Or how thoughtful are they? And have they really looked at the cost per kill, et cetera? I think the answer is no, but probably they still do.
- [70:38]
Rory O'Driscoll
Well, to be clear, they're probably just as thoughtful as the dude who piled in 250 million on the SPV at OpenAI. Exactly. Don't conflate, overthink. Momentum investors may actually be impacted negatively by overthinking. I think it's actually one of my faults is that if you just want to pile on the dominant winners and the mega trends, please stop thinking because that sentence is all you need. And the last just comment on that. I mean, listening to all this, I remember 15 years ago, investors asking us why we don't do China investing. And we didn't then and we have never done. And yet my perspective as an immigrant coming here is the US is 25% of the world's GDP, 50% of the world's software and enterprise technology market. If I can't make money on 50% with the rule of law, adding another 10% with no rules whatsoever isn't going to help me. So I'm so glad I haven't had to do that to make a buck. And good luck to the benchmark boys. It feels like a hard road to hoe.
- [71:36]
Unnamed Speaker
Look, every founder, especially I'm European, right? I'm an immigrant as well. All my French founders are like, where should I build startups today? Does it matter? No. Come to the US you have like 300 million rich people that are early adopters that are dying to buy your product. You're playing the game of life on easy mode and. Or very easy. I mean, yes, it's harder to get visas, but whatever, like, you can figure it out. There is no doubt. And by the way, if you're at 100 million revenues, it's easier to go from 100, 200 in the US than 0 to 100 anywhere else. And that's true at a billion. It's true. Probably maybe forever just by the Europeans.
- [72:08]
Rory O'Driscoll
You've just kicked off Harry.
- [72:10]
Fabrice Grinder
And heavy pushback. Classic glib statement from America. And American in Turks and Caicos. I add lovingly for Breece. Lower salaries in Europe, higher retention. Fantastically like to have both. Okay. Easy access to cash. There's a lot of money in Europe, actually. I completely agree. And you can sell actively into the US from Europe. Pigment have showed that and scaled to a really meaningful revenue size from Europe. You have to get on a play more often. But it's absolutely possible. You can leverage cheaper engineering teams, hire great sales teams in the us Very possible.
- [72:48]
Jason Lemkin
What's the question? Is there an arbitrage here?
- [72:51]
Fabrice Grinder
Point being, you don't have to arguing.
- [72:54]
Rory O'Driscoll
We can set this out. Jason.
- [72:56]
Jason Lemkin
No, no, no. When I started investing in European startups accidentally pipedrive and Algolia and Talk Desk. It's not a great insight. I'm always shocked how much cheaper engineering talent is in Europe. SDK talent in Paris. The best engineers. It's half the price. And people stay past their cliff.
- [73:13]
Unnamed Speaker
Yeah.
- [73:14]
Jason Lemkin
Everyone, even at OpenAI, they leave at their cliff. So. And why that arbitrage doesn't work even better is the odd question. It's less understood that it exists, which is frigging true. I'll tell you just one thing, Harry. Just on this, when I've asked a lot of the European founders that I still work with on this, right? And they're all relentless. They're like, we're. They're just not driven. Our European folks are just not driven enough. I don't care. Care about the cost. They're just not driven like sf. Everyone says this to me, the ones I've invested in, gorgeous Nicholas from Algolia when I saw him at YC Demo day, everyone. I mean Nicholas is like everyone in every French startups. They've got to come now. He's like, I didn't think this three years ago. And maybe he's talking the YC thing as a general partner, but everyone I've worked with, they're like, we don't care about cost or retention. It's just the pace. We cannot get our team in Nice or Barcelona to work at the pace of the US and we don't care.
- [74:04]
Fabrice Grinder
Do you want me to lose Project Europe disagrees.
- [74:07]
Jason Lemkin
I'm. I'm not. I don't have the database.
- [74:09]
Fabrice Grinder
I'm going to lose a Load of friends in one sentence. None of those are generational defining founders go to Revolut's HQ and Revolut's awesome.
- [74:16]
Jason Lemkin
No, no, I'm not saying. I'm just saying.
- [74:18]
Fabrice Grinder
No, no, you know, you're right and I agree. But the founder sets the cadence and if you.
- [74:23]
Jason Lemkin
I think the ultra outliers will be everywhere outside of Antarctica. Right. You will have the Revoluts. Right. But when you have to hire hundreds of people, that's where, that's where it gets hard. Right. I just think then you're stuck with the average. No matter what anybody says, there aren't 500s tier engineers that want to work anywhere. But cursor. They're just, they just don't exist. Right. They're going to work at your boring B2B company. You're lucky to have four S tier engineers at your concrete B2B company with an AI co pilot. If you get four, you're like, if you have one person that would work at OpenAI that will join your. It's a serious issue. We're lucky if you have one. But maybe if you're an SF you could get two.
- [75:01]
Fabrice Grinder
Rory looks frustrated. Are you okay, Rory?
- [75:04]
Rory O'Driscoll
I don't know if I agree with you, Jason, that gross generalization on Europe, but I actually don't think you have to because the real truth is in enterprise software as a sting from consumer where fabric is playing in enterprise software, it doesn't matter where the R and D is and it should be wherever you can get good R and D. The spend is 50% in the US, 20% maximum in Europe, 30% rest of the world and the US is the earlier adopter. So the thing that is true is for enterprise technology companies, your R and D can be anywhere your go to market will have to be in the US and you can make that statement wonderfully without typecasting your confidence or not of the entire 300 million people in Europe. And as a European, I don't want to do that because I do want to be able to go home sometime. So I think we have loads of investments where they have European engineering staff, et cetera. And they're awesome and great. But I think in the end the reason we mentally think about the American market is because you know, Willie Sutton, that's where the money is.
- [76:01]
Jason Lemkin
Yeah, but I just don't think you can win today if you're comfortable leaving work at 5.
- [76:04]
Rory O'Driscoll
I don't think I'm going to defend now I'm going to defend the Europeans now. It's working. You're pissing me off. I think there's a visible difference between the Europe of the people who get it and the Europe of the people who don't. And let's be clear. Out of the 300 million people, not all of them or even most of them get. But when you run into the people who do, you're like, yeah, you're with the program and you're right because it's not anywhere close to most. The generalization that you're making is correct, Jason. But that's looking at the whole working population. There are teams, there are critical mass areas where people do get it and they're cranking a la American. I mean look, Dublin is a great place for American tech companies and fundamentally it's because people are with the program and cranking. I think it's true.
- [76:47]
Jason Lemkin
I think pre AI. I agree with you. I've just changed my mind. In the AI world just the value of a 10x engineer is 100x now. It's 100x Jason.
- [76:55]
Rory O'Driscoll
That could be true for infrastructure.
- [76:57]
Jason Lemkin
But okay, your companies are going to go under. If they're not. If they're not dominating AI in their market in B2B, they're all going to die. If you're not number one in a B2B they're going to die. They're going to die.
- [77:06]
Rory O'Driscoll
I can't hide. Let me tell you why Harry's hiding here, let me give you the bad news for what happens and I'm going to. What happens in this program every time is we crank up stuff and then by the end Jason escalates and that's okay. But the problem is this. The social marketing team from Harry's team then picks up the most inflammatory quote that Jason made, puts it out on the Internet with your face and my face. So tomorrow morning we're gonna see a thing that says no Europeans worth a damn. It's gonna be your picture of my picture and we'll never go home again.
- [77:37]
Jason Lemkin
No, no, no. I think there's plenty of revoluts. I just don't think going home at 4:30 to have red wine and baguettes. I think you're gonna lose to today. You're just gonna lose.
- [77:47]
Rory O'Driscoll
Agree.
- [77:47]
Jason Lemkin
I can tell you from all the French founders, I know they all think it's like not them themselves, but their teams think it's. I literally talked this week if you. I know we're going over to someone that for. For an SVP of engineering role that's incredibly respected in Europe. Okay. Incred doing the cycle on all the portfolio companies. Immediately he's like, well, I just got off for a month off in Europe for my vacation and I'm. I want to spend some time really thinking about AI. He said, I really want to spend. Spend some time thinking about AI. Right. And so I took the chat and I put it in the saster AI and I said, should we hire this guy? And the AI said, whatever you do, pass on this guy. This was something that is, you know, these candidates that get passed around all the VCs because they're a hot candidate. This was a hot candidate that like the month off the baguettes and is going to dilly dally into AI and you're going to get destroyed by the kids in sf. You're going to get destroyed.
- [78:35]
Unnamed Speaker
But Jason, right now, if you're a 10x engineer with AI, you become 100x engineer. The question I have is, in the long run run, could AI actually have the opposite impact where the regular engineers become. Yeah, they become themselves. Maybe they're not 100x where they become 70x and that's good enough.
- [78:53]
Jason Lemkin
I don't know. It's already half a regular engineer today is already went from 1x to 2x. Like there's no debate, Correct?
- [78:59]
Unnamed Speaker
Right. Didn't shrink the gap.
- [79:02]
Jason Lemkin
No, no.
- [79:03]
Unnamed Speaker
But that's the question is, in the.
- [79:04]
Jason Lemkin
Long, long run, if you have a team that knows AI, your whole team has already been 2X'd in the last last five months. Your whole team is at least 50% more productive. Right. Even Salesforce commits 20% of their code through AI. So if you're good, you're 50%. And literally it's 50% across windsurf, like 50% productivity. No matter what anybody says. There's. There's no 99. Okay, it's 50. But everyone has these tools. As Harry said, it's 15 bucks a month, 100 bucks a month. Everyone's twice as productive. Right.
- [79:30]
Unnamed Speaker
But the question is, in the long run. Yeah, yeah. But in the long, long run, when AI becomes so much better.
- [79:36]
Jason Lemkin
Yes.
- [79:36]
Unnamed Speaker
Do you think that the gap will shrink between the very best engineers and the average engineer and because if that happens, that changes the game. If it doesn't, you know, then it's not. It's a question.
- [79:47]
Jason Lemkin
I'm going to make the bet. All of history, 10x engineers have become better and better. They've become better and better, and that's what we're seeing in startups today. That's why they can grow so quickly. That's why? Harry's. This is a small. It's not just that they're small teams, it's that they're. They're much better than they used to be. So. So I think we're going to see bigger and we're going to see 10x engineers even better. And I think half of these sales teams will be gone in two years. Half of these sales and customer success teams will be gone in two years because they're mediocre. They'll be gone. They're all going to be laid off. We're not going to need any mediocre to call SMB reps. We're not going to need any customer support. Folks that don't even show up to the, to the qbr. They're all going to be gone with AI and the engineers are going to be even better. And. But the arms race because the arms race between Cursor and Windsurf is so huge. Huge. And that arms race is going to lead to bigger and bigger engineering teams that are better and better and better. And I think both. I know windsurf's 100 in the office. I think Cursor is too. They're going to be these, these aggressive in the office. Six and a half day a week. Teams that don't get baguettes and red wine at 4:30. I still love Europe, don't get me wrong.
- [80:48]
Rory O'Driscoll
And I'm.
- [80:49]
Jason Lemkin
I'm a fan of Project Europe. I'll be. But. But I think we got to find the revolutes because baguette culture I think is worrisome. But. But it's crazy. It is. The rate of change is crazy. And I do think all these B2B comes companies are just going to die. If they can't change fast, they're going to die.
- [81:03]
Fabrice Grinder
I cannot thank you enough for doing this. This has been so much fun. Honestly, it's like the highlight of my week. Real and dipling.
- [81:11]
Jason Lemkin
Real and dip. What about real and dipling this week?
- [81:13]
Fabrice Grinder
You know what? We're going to pause before we lose more friends. You've pissed off a continent already, Jason, so you're cool. But guys, thank you so much. This has been amazing.
- [81:22]
Unnamed Speaker
Thank you.
- [81:23]
Jason Lemkin
Nice talking. Fabrice, thanks for the time.
- [81:25]
Unnamed Speaker
Likewise.
- [81:27]
Fabrice Grinder
I have to say I just have.
- [81:29]
Harry Stebbings
So much fun doing these episodes. They are the highlight of my week.
- [81:32]
Fabrice Grinder
Rory, just schooling me is one to remember. Jason, always a dear friend and a.
- [81:38]
Harry Stebbings
Fantastic addition to the show. I hope you enjoy it. Let me know what you think of the show. I always love to hear your feedback, but before we leave you today, here are two fun facts about our newest brand sponsor, Kajabi. First, their customers just crossed a collective 8. $8 billion in total revenue.
- [81:54]
Fabrice Grinder
Wow.
- [81:55]
Harry Stebbings
Second, Kajabi's users keep 100% of their earnings, with the average Kajabi creator bringing in over $30,000 per year. In case you didn't know, Kajabi is the leading creator commerce platform with an all in one suite of tools including websites, email marketing, digital products, payment processing and analytics for as low as $69 per month. Whether you are looking to build a private community, write a paid newsletter, letter or launch a course, Kajabi is the only platform that will enable you to build and grow your online business without taking a cut of your revenue. 20VC listeners can try Kajabi for free for 30 days by going to kajabi.com 20VC that's kajabi.com, k a J-A-B-I.com 20VC and while Kajabi helps you build and monetize your own business, Harmonic helps you find the next ones before anyone else does did you know that half of the 27 companies started last year by OpenAI alumni are still in stealth? I discovered this on Harmonic, the complete startup database used by Excel, Insight, Menlo and hundreds of other leading VCs, as well as go to market teams from the likes of Notion, Brex and Google to find the best startups and founders. Even in stealth, few things annoy me more than missing a round where we know the founder and should have led the round. But now this is a problem of the past. Harmonic maps everyone your team has ever met, emailed or connected with to the source of truth for startups. So when that company that was just a little too early suddenly gains traction, you won't be too late. Or when you find the perfect company for your thesis or product, you'll know that Sarah just happens to know their CTO. How does Sarah know everyone who knows she's a genius? Learn how VCs and GT ATM teams find the best startups six months ahead of the competition on Harmonic AI and once you've found the next great startup, you're gonna need the tools to help them scale. That's why AWS is the perfect partner for startups and why they're proud to sponsor this Week's episode of 20 VC. The AWS startups team comprises former founders and CTOs, venture capitalists, angel investors and mentors ready to help you prove what's possible. Since 2013, AWS has supported over 280,000 startups across the globe and provided $7 billion in credits through the AWS Activate program. Big Ideas Feel at home on aws, and with access to cutting edge technologies like generative AI, you can quickly turn those ideas into marketable products. Want your own AI powered assistant? Try Amazon Q Want to build your own AI products privately? Customize leading foundation models on Amazon Bedrock? Want to reduce the cost of AI workloads? AWS Trainium is the silicon you're looking for. Whatever your ambitions, you've already had the idea. Now prove it's possible on AWS. Visit aws.Amazon.com startups to get started. As always, I so appreciate your thoughts and stay tuned for an incredible episode coming on Monday with a very special guest breaking some news.