20VC: OpenAI Cuts Valuation to $1.25TRN | Public Market Meltdown: GOOG Loses $500BN in 12 Hours | DoorDash Buys Instacart for $17BN | Kalshi Raises $1BN and Cognition Eyes $80BN Valuation

AGENDA: 04:00 OpenAI Cuts Valuation to $1.25 Trillion as Fundraise Shrinks 08:00 Google Loses $500 Billion as AI Stocks Sell Off 10:00 Anthropic's Growth Slows as AI Price War Intensifies 27:00 DoorDash Buys Instacart for $17 Billion 33:00 Kalshi Raises $1 Billion at $40 Billion Despite Legal Threats 41:00 Cognition Eyes $80 Billion as Baseten Hits $30 Billion and Serval $3 Billion 51:00 AI Law Firm Crosby Bids for Collapsed Legal Giant Weil 57:00 Physical Intelligence Targets $20 Billion Valuation 01:00:00 Hugging Face Deal Faces Scrutiny as Salesforce Buys Cresta for $2.7 Billion

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Agents are an existential risk to DoorDash because their number three competitor is nobody. All these app platforms have a risk of slight disruption from agents.

• 0:08Speaker 01

  Kalshi is a money deal. If you want revenue velocity right now, nothing gives you revenue velocity like inference. Physical Intelligence, company with relatively little revenue is worth 20 billion. Dropbox, company with billions of revenue ain't worth a lot. There. It just shows revenue muscles don't get you anywhere.

• 0:23Harry Stebbings?

  This is 20 VC with me, Harry Stebbings. It's the best show of the week. It's Rory O'Driscoll, it's Jason Lemkin, coming together to discuss the biggest news in tech. Today, we have OpenAI's big fundraise. 1.25 trillion dollar price, down from 1.4, apparently only 11 billion dollars committed. Sad face. Then we have the AI trade hitting a wall. Alphabet, whoa, 500 billion dollars off the market cap overnight. Intel falling 29%. Then we have DoorDash buying Instacart for 17 billion. Base10's new round. We have Physical Intelligence's new round. We have Serval's new round. God, the show just keeps on coming in terms of these venture financings. This and so much more in the show today.

• 1:07Harry Stebbings?

  But before we dive into the show today, Base44 is one of those products I used, and I just thought straight away, man, I wish I'd had this when I started 20 VC with 50 dollars and no contacts in venture. I wanted to see what it could do, so I built a guest research hub for the show. Upcoming guests, company notes, previous interviews, sponsor contacts, follow-ups, all in one amazing location. I described it in plain English. A few minutes later, I had the product open in front of me. Database, login, backend and hosting already handled, and just all in one. It made it so easy. And that's what I loved. I didn't write a long spec. I didn't stitch five different tools together. I built the thing and I started using it. For any founder listening, that's the point. The faster you turn an idea into something real, the faster you launch.

• 1:51Harry Stebbings?

  Apps, dashboards, internal systems, AI agents, whatever you need to build, Base44 gets you there. Go to base44.com/20vc. That's base44.com/20vc. While Base44 helps you build, AlphaSense helps you find answers really, really fast. Quick one for anyone doing diligence in venture right now. AlphaSense just launched SuperAnalyst, and it's one of the more genuinely useful AI products that I've seen come out of this space. It's an always-on agent that works like a power user inside AlphaSense, but on your behalf. So check this out. It pulls from over 500 million premium sources, covering both public and private companies. That's filings, earning calls, broker research, expert transcripts.

• 2:36Harry Stebbings?

  And it doesn't stop when you close your laptop, point it at a sector, a company, a thesis you're tracking, and it keeps working in the background. And here's the part that I really care about. It remembers your process. It learns your templates, your firm's logic, and it applies that to every new task. So it compounds. It gets better the more you use it. Isn't that the value? And every single output links back to its source. So there's no black box, there's no trust me, and you can see exactly where something came from, so you have complete traceability. Pick the deal memo or the market map you've been putting off and hand it over to SuperAnalyst instead. Start your free trial at alpha-sense.com/20vc. That's alpha-sense.com/20vc.

• 3:19Harry Stebbings?

  While AlphaSense finds insights, Intercom helps you serve customers. As AI agents become more common in customer experience, teams often end up juggling multiple siloed tools for every job. Well, Finn was built to change that. It's a single unified agent that works across your entire customer experience, from service to sales to success and beyond. Finn is the agent making perfect customer experiences possible for thousands of customers. It's powered by custom models, trained on years of real customer interactions, so it understands the nuance and complexity of customer service better than any other agent. That means faster resolutions, more consistent support, and just better experiences for every customer.

• 4:00Harry Stebbings?

  It's also designed to be fully self-managable, so you can easily improve and adapt it as your business evolves. No third parties required. Leading companies like Gamma, Asana, DoorDash, and Crypto.com already use and love Finn to deliver better customer experiences. So for a limited time, you can get 500 dollars a month in Finn credits for your first three months. Learn more at fin.ai/20vc.

• 4:25Speaker 03

  You have now arrived at your destination.

• 4:28Harry Stebbings?

  Boys, we are back. Luckily, there has been a huge amount happening in the last seven days. So let's start with OpenAI. Its valuation got cut from 1.4 trillion to 1.25 trillion, and the round reduced from 30 billion to 20 billion, with only about 11 billion committed. As a result, everyone is going, oh no. This is further examples of the AI wave cracking. How do we think about that?

• 4:55Speaker 01

  I would dispense with the whole AI wave cracking narrative. I think people are trying to extrapolate their desires, wishes, whatever, prejudice and biases on the story. It's as simple as the other company is bigger, growing faster, profitable and about to go public, so you can buy it liquid at 1.5 to 2 trillion. What would you pay for the smaller company, growing less quickly, still losing money, that's illiquid? Answer, less than 1.5 trillion. How much less? Well, that's what they're figuring out. So it's utterly not surprising. It is as simple as that. No projection about AI, positively or negatively, just as two securities are going to be sold in the next two months, and which one do you want to buy?

• 5:32Harry Stebbings?

  But Jason told me last week that it was the most underappreciated.

• 5:35Speaker 00

  I think it is. It just may, maybe it needs to drop a little more. Well, don't forget, listen, there's gonna be bumps, right? And, you know, broadly, what we call AI stocks fell 5 trillion last week, right? Now, maybe this AI round was the week or two before that. There's obviously a temporal gap. But when we're seeing this level of volatility, and listen, I'm surprised that folks didn't talk more about it. I mean, Anthropic had a down quarter from net new revenue. It was down in this last quarter in terms of net new bookings over Q2. There should be some nervousness. Maybe it would fill up at a trillion. Maybe I'm glad we didn't put in our bid until the end, Harry. The second tranche will be lower than the first. It makes sense there should be a little bit of wobbling at the moment.

• 6:14Speaker 00

  The stock market's down. We could argue, maybe Rory will challenge me, we can argue that Anthropic's last quarter wasn't, wasn't quite as crazy as some folks might thought. There should be wobbliness, and maybe it doesn't matter. It matters where it'll be in 12 to 18 months. But it did make sense there's wobbliness. There's wobbliness in the debt markets. CoreWeave debt is paying 15%. That's wobbliness. There's Broadcom having, I know Rory didn't, kind of took me to task on this last week, but Broadcom having to guarantee Anthropic's debt is a little wobbly. It's just, it's just wobbly. And IPOs are always thin and wobbly. Like they, no matter how many times we say they, they get oversubscribed 20x, so many of them are just a little wobbly going into it.

• 6:50Speaker 01

  Yeah, again, I didn't take it as, I think all those things are true. I think it is. The way I think of it, there's a lot of kind of pushing, shoving. There's a lot of price discovery, risk discovery going on, on the supply side of the AI trade. You know, what price do you need to be paid to lend money to CoreWeave? What price do you need to pay to buy OpenAI in the private markets when you get in the public markets, right? All that, I agree, all that stuff is going on. And I think, you know, when you go from assumed euphoria regardless to tempered euphoria, there's this kind of price discovery process on the way. And I think, so I think it's fair, Jason. Those things are all true. As I say, well, my point is merely, if the other side of the equation, the demand side holds up, all these things will be, you know, forgotten in six months.

• 7:32Speaker 01

  And if there's a problem on the demand side, on the growth side, then all these things will be, you know, straws in the wind of a very significant change. That's my point. So when you zoom out to what matters, if the demand for AI is anything like some of the bulls would say, then let's, let's talk about the CoreWeave bonds, because everyone's like, oh my God, the bonds are going to go up. If the demand for AI is as strong as people think, then everyone's going to need every damn computer, GPU, and data center they want, and those bonds will be money good, because someone will buy the damn company, right? There's just no risk of that, right? If the demand is not there, then the first person who's going to suffer when the demand is not there is not going to be Google or Amazon, who have a big ass balance sheet. It's going to be the guys like CoreWeave, and that's where the problem will come, and that's why there's some risk in it. So that's all that's going on.

• 8:16Harry Stebbings?

  You mentioned price discovery. It was a tough week for Alphabet or Google, falling about 12%. Most significant drop in a decade. Google Cloud doubled to an insane number. It doubled to like 130 billion, growing 103%. But search did slow to 12%. Free cash flow was negative, unusual when looking at Google. Is this just another element of price discovery?

• 8:40Speaker 01

  Again, it's on the search side, it's been true for two or three years that there's probably going to be some element of cannibalization of search. And, you know, it still grew pretty nicely. I think it grew 12% or so on search. But I think it was a combination of search angst and general angst, right, and capex angst. So nothing more than that, but. It's been so funny to watch the last two or three years. You know, we've gone from Google is dumb as rocks and Satya is a genius. Then you fast forward, oh my God, Google is the most amazing company ever. Poor dumb Satya, he missed the boat. And now this is a switch back to, oh, maybe, you know, maybe the things that we'll worry about are, about Google are still true, which is, you know, search cannibalization and exactly. But, you know, to be fair, to your point, their growth, again, going back, the growth is there. These guys are saying they can, they can sell compute as fast as they can make it.

• 9:25Speaker 01

  And that's the number one thing. And that's where the growth's coming from.

• 9:27Speaker 00

  I just think we're in it. Listen, I think we are understandably in, just in a nervous period. Yeah. I mean, it's, I think it's at a 120 billion dollar run rate, growing 100%, right? That's about as good as it gets for the folks in the cloud. The cloud group should feel pretty proud of themselves. I just think when any metric comes up short, I mean, Shopify just fell 15% as we're discussing this, right? Because they came up a smid short, even though they raised guidance for the next quarter. Just everyone's just nervous AF. They're just nervous AF, and I think it's appropriate. I actually think the Anthropic IPO is going to suffer for it. Think there's evidence of substantial pricing pressure. There's evidence that, you know, as dominant as they are, it might be not quite as dominant as there is. And I just think it's, it's okay.

• 10:08Speaker 00

  There's going to be these squiggles going here as most things still hopefully go up and to the right until we can distribute out to our LPs.

• 10:16Harry Stebbings?

  What do you think Anthropic is going to suffer for? You mean the, the consumer excitement won't be there? You think that they won't have the pop that they could have? What does that mean?

• 10:23Speaker 00

  I think folks are just going to be nervous about a deceleration in quarter over quarter growth. And I think they're going to be nervous over pricing pressure. Like, it's hard to process everything out of a, out of the S1A, the quarterly amendment. But it, it sure appear, I mean, OpenAI is basically running around selling somewhat equivalent products for 30% off. We can discuss how much CISOs want China-based open weight models there, but they're putting pricing pressure. Jev's putting pricing pressure and, and the latest models are effectively cheaper. It's just, it's just, it's just, you have to have so much momentum to overcome a certain amount of pricing pressure and deflation. I just think the numbers suggest some, some nervousness in it, right? That quarter over quarter growth is slowing. And what does that mean? And how much nervousness does it create?

• 11:06Speaker 01

  And it's worth pointing out the numbers in very precise terms. Cause the funny thing is even after we point them out, people can still disagree, right? What it means, but at least let's get, I mean, rough and tough in Q1. And I'm using GAAP numbers here, not run rate, because GAAP numbers, as I say, are audited and the CFO will go to prison if they're wrong. So I always assume they're correct. Roughly $5 billion in Q1, roughly $11 billion in Q2, roughly $17 billion in Q3. Those are the numbers, objective fact. What it means from Q1 to Q2, you know, you can look at it as an absolute number. They went up $6 billion and they went up probably a little under that, about $5 billion Q2 to Q3. So on an absolute number basis, you know, that's one perspective. Let, look, you can also look at it as a percentage. They were at, you know, what is it?

• 11:50Speaker 01

  Five or six billion in Q1, they went to 11. They went up, they, they doubled Q1. So their Q1Q growth rate was, you know, 100%, which is an astronomical year on year growth rate. Then they added exactly the same number Q, in Q3, but by definition, because they're starting at 11. Now you're adding the same absolute number of, you know, ARR, but on double the revenue size. So the growth rate naturally, the Q1Q growth rate has quote unquote plummeted to a roughly 50% Q1Q growth rate. Cause you started at 11, you add roughly six. I'm just using rough numbers. It's roughly growing 50% Q1Q, which is still 5X year on year if you compound it. So if you buy into percentage based growth, you could say, hey, they grew a hun, I mean, they grew 100% in Q1, Q1Q. They grew 50% Q2, Q2 to Q3, right?

• 12:35Speaker 01

  If they stick at 50%, that's still 5X year on year growth rate. That's the positive spin. The negative spin is, oh, they were, were growing at 100% and only a quarter later, they're growing at 50%. Those are equally true statements of the same facts. And as Jason said, another way to think of it is just really at the margin, they added a little high fives, early sixes. I can't remember which, Q1 to Q2. And the absolute number that they added Q2 to Q3 was slightly less than that on a GAAP basis. So the most negative interpretation is, which I'm not saying I agree with by the way, is that you're adding roughly $20 billion a quarter of revenue. In which case you, you know, you're slowing out pretty quickly. And as I said, you can throw out those numbers and I'm sorry, that was a wall of numbers.

• 13:17Speaker 01

  But you know, you can squint one way and say, you know, they're still going at 50% Q1Q, which is 5X year on year. That's fricking amazing. You can squint another way and say, oh my God, it's de-accelerating from 100% Q1Q to 50% Q1Q. Does it go to 25 next quarter? And all the money is in that bet. That's the only discussion.

• 13:33Speaker 00

  Listen, Anthropic obviously isn't a startup at this point, right? It's not even a scale up. But I, as a startup, saw someone that did, instead of $6 billion, $6 million last quarter and only did 5.4 billion this quarter. I would not invest.

• 13:46Speaker 01

  But hang on, let's be clear, I, I understand. I'm just going to put out, I'm going to be very clear. It's not that they did $6 million and left out, that they added new ARR. I mean.

• 13:53Speaker 00

  But they, their bookings, maybe bookings decelerated.

• 13:56Speaker 01

  Yes, the rate of bookings growth, the decelerated, the absolute number of bookings went up. I mean, they sold more shit in Q3 than Q2 by about $5 billion.

• 14:04Harry Stebbings?

  But what's actually interesting though is given the bookings decelerated, one thing is that, oh, reaching TAM levels in enterprise. They're 0.1% of Fortune 500 spend. And so actually there is so much more budget for them to consume and the booking is still decelerated.

• 14:20Speaker 00

  Yeah, that's why I think the only, listen, I mean, I, there's not enough data in here for, or maybe I'm not smart enough to parse it. That's why to me, the answer is simply pricing pressure. It's that simple. The demand is there, the market, if you look at Open Router and others, the demand does not appear to have declined. I don't see any metrics that say penetration of the Fortune 500 has reached 100%. But you've just got, you've just got a lot of pricing pressure everywhere. So whether it's a combination of folks buying from other vendors because it's cheaper or implicit discounts that they've added in Haiku 5.5 and others. Maybe we've reached the point where Anthropic ability to command a price premium has hit a local maximum. That's one potential thesis. It is open, I mean, I'm sure if we saw OpenAI's numbers, they'd look much worse if they're literally offering a 30% discount on Astra

• 15:05Speaker 00

  with essentially what appears to be a higher cost basis. And they're offering a 30% discount. So lucky they're not, they're going public second, right? But it appears to be working. It appears to be working. 30% off is a big deal. It approaches the 40% that we target for open weight models. And this is, this is my thesis is that pricing pressure hit them in Q3. It's just, I just think that's the, the only thing I can point to, because everything else is going pretty darn up and to the right.

• 15:29Speaker 01

  I mean, probably true. You're, you're right. I mean, it's got to be something like that, Jason. I mean, it is just worth stepping back and reminding ourselves again, on a GAAP basis, $4.5 billion in GAAP revenue last year, full year. Excluding a run rate of $9 billion. And they're probably going to do $56 billion in GAAP revenue this year. So year on year, their growth rate is 12X, right? That's just an objective fact at this point. But then the interesting thing to your point is you look at the same kind of growth rates and you come up with roughly $120 billion of GAAP revenue next year. So they're probably going to go from 12X growth rate to 2X growth rate in a year, right? So to your point, pretty sustained slowdown to still magnificent numbers. It really is glass half full, glass half empty.

• 16:09Speaker 01

  You squint one way and you say, oh my God, this is a company doing $56 billion in revenues that can still roughly double next year. That's fricking amazing. And you squint the other way and you go, oh my God, it went from 12X growth to 2X growth. Is it going to go to 50% growth or 5, 10% growth in the following year?

• 16:23Harry Stebbings?

  Do you remember when we had Stuart Butterfield in Slack and zero to 10 in 18 months was like the gold standard, like the gold standard?

• 16:30Speaker 00

  You know, it's just a little bit interesting. I know it's just an anecdote and people will make fun of me, but I'm trying to launch this app, Saster Connect. Hopefully it goes out in the last, next couple of weeks, but I've been working on it for a while, this AI matching recruiting app. And when I switched it myself to Haiku 5.5 and Jev, total cost went down about 70%, 72%. Now there's some costs that are going to keep going up. We're all going to run five agents a day, 10 agents a day. We're going to run them on multiple platforms. I just upgraded to Muse paid yesterday, right? So there are, there are trends going the other way, right? As we see in the Anthropic quarter. But again, 70% for, if a lot of mature applications can see that kind of deflation from improved quality of tokens and pricing pressure. That's a lot, you know?

• 17:11Speaker 00

  Even though everyone's going to be coding at 72 hours a day with 20 agents, a 72% decrease in effective price is not, is material. And it's faster. It's faster and 72% cheaper and, and better. So that, that hadn't happened yet, at least in my personal agentic experience since the beginning of 2015. On an, on an as used basis, nothing got cheaper. No matter what anybody said on evals and token price, nothing got cheaper until Haiku 5.5 plus Jev. Then I saw 72% decline for B2B workflow running constantly.

• 17:42Speaker 01

  For same task?

• 17:43Speaker 00

  Yeah, for the same task and higher quality. So like, it's just one and people can make fun of me, but it is interesting for me. It is interesting for that actually to happen in the real world for the first time.

• 17:53Speaker 01

  Agreed.

• 17:53Speaker 00

  It just makes us hard to predict for me. It just makes it hard to predict how it's all going to, I mean, 12 months ago, none of these models barely worked. Today they're epic. In Black October, they've become weapons to destroy Binance and everybody else. It's hard to know in 12 months how these, how these sub-metrics are going to play out. I think it's almost unpredictable.

• 18:11Harry Stebbings?

  But I think that exact statement, Jason, is why we have the unpredictability or the binary nature in venture markets. It's why we have the volatility in public markets, which I think is just like a lack of certainty around what the five year looks like. I think the whole world does not know what five years out looks like in a way that we generally have done for the last 13, 14 years.

• 18:31Speaker 00

  I'll tell you, not to share too many other personal stories, but just comparing the show. This morning I finally churned off Canva after 12 years, took 12 years, don't need it. And I just think at the start of this year, Canva was still accelerating, you know? There were a report, there were some rough reports this week about its current growth, right? They kind of varied. I don't know what's true. One of them said growth was zero, others said they're preparing layoffs, who knows what it was. They, it at least seems to have decelerated 20%. It's just that predictability, right? It's just, you just don't need it. The agents don't need it. So it's, it's hard to predict one year out, let alone five, so.

• 19:02Harry Stebbings?

  Jason, what happens to Canva? Does it go out?

• 19:05Speaker 00

  I don't want to be a Debbie Downer, right? The Debbie Downer case is obvious, they missed their window.

• 19:09Harry Stebbings?

  And then, but then what? They missed their window and they're just like a private company that grows, is that it?

• 19:14Speaker 00

  I don't know. I mean, it seems to be working for Automattic outside of a few CEO turnovers and, and temper tantrums.

• 19:20Speaker 01

  I want to be clear, was that humor?

• 19:22Speaker 00

  I don't think it's humor. What I mean is I think Automattic will stay private forever. I don't think it will, it was raised its billion, right? As 40% of the web. I don't think Automattic will become an agentic company. And I think Matt is fine with it. And I think it will stay private. I genuinely think it'll stay private forever. I don't know what the, the VCs do with it, right? But I don't think it'll ever go public and I don't think it'll ever get acquired, Automattic.

• 19:42Speaker 01

  The only comment I'll make is software companies in particular, they're not moving forward. You know, it's like the shark, you're moving, you're, you're going down, right? And over an extent, I mean, it might take an extended period of time, but you know, you're, and I remember, I remember these three mainframe companies in the nineties and early 2000s that were still, you know, living off their 20 year old contracts. But the asset just becomes very terminal valued. So yes, you can stay private and continually cut costs and live off your installed base or, you know, do your own little bending spoons on your own. But it's just, it's a tough place to be and it's hard to get value from it as an investor. It will be interesting to see what many of these companies decide to do. You know, can you clamber aboard, even if it's a little late, the AI train and get enough traction to maybe not be the winner, but grow 5, 10, 20%? I don't know.

• 20:27Speaker 01

  But I think if you don't do that, if you decide to just not play that game, I think over the medium term, you're just heading to quiet obsolescence.

• 20:36Harry Stebbings?

  I'm so picking a fight here because Cliff, Cliff always messages me, Cliff loves the show and he always messages me like, you guys, you guys are harsh on me. And I'm like, you know, Rory and Jason, I never say anything. I'm just-

• 20:48Speaker 01

  I didn't say anything harsh.

• 20:49Speaker 00

  You know what the surprising thing from all, where I've gotten surprised guys going to this point? Listen, obviously, if you're doing what we're doing, you have 21 agents running and they're running agentyically and they're using Higgs field and Opus and the other things. It makes sense you'd churn off Canva, right? Because your agents don't log into it, right? And it, it's really not useful for our agents. The surprising thing from all of this is that the real world isn't buying much of this crap anymore, right? If I would have thought that a Canva, a Squarespace, which just launched 20% layoffs, a Wix, which is going to be bailed out by Base44, others, I would have thought like Shopify, they'd be doing fine because most of the world isn't running 21 agents and Higgs field and musifying and everything. We're not all tech nerds, but it isn't really playing out that way. And obviously, some of this is because, you know, ChatGPT is

• 21:33Speaker 00

  so good for images, right? There are, there are things that are so good. Grok is great for images, but I'm just, I'm surprised that a lot of these core businesses are being so severely impacted. Maybe it's a limit of my knowledge and it worries me.

• 21:46Harry Stebbings?

  Instinct's amazing for images.

• 21:48Speaker 00

  Instinct's great, but in your news, you know, Elon just had to cut back Grok bot use because it's too expensive. He can't afford it. I think I underestimated what the costs of Instinct were because I didn't understand how persistent the VMs can be. Yeah, I think Instinct could cost as much as 20 bucks a month per user to service Instinct the way it's supposed to work today.

• 22:04Harry Stebbings?

  Way more.

• 22:05Speaker 00

  More than 20?

• 22:07Harry Stebbings?

  Yeah.

• 22:07Speaker 00

  Then it's, it's a moronic business model at 40 or $50 per user per month. I got it wrong because the lovable Replet thing, right, which is a highly tuned on off VM is about four to five bucks a month. Okay. They have large teams tuning that so that you can have a little bit of AI, you can have a little, but the VMs spool up and down very carefully. They've gotten it down to four to five bucks a month. So I assumed that Muse and Friends were like, Muse could even be cheaper, I assumed, right? And Instinct might be twice that because they don't have the resources, but it's much higher. It's much higher to have these persistent agents running. It's much, you think it's more than 20 bucks a month? I know you wanted to do it at 30, Harry, but how does this math pencil out at 30 or $40 a month per user? All these tickets we're going to buy?

• 22:46Harry Stebbings?

  Well, I admit that that seems relatively paradoxical to believe that it's more than 20 bucks a month and to want to do it. It's a very good argument from you there. But I think for the power users, it's very significant. And I think for people that use it once or twice a day with limited automations, it's very, very cheap. And so I think your blended is probably much cheaper. But like for me, I will be terrible as an economic profile for them. I mean, the worst.

• 23:07Speaker 01

  Look, I think real, the real truth is, just like every digital product, it always takes off at a point in time when the economics don't quite work. I remember when Facebook was ramping early on and people were like, oh my God, the server bill, it was, you know, using SCADs of servers and it was maybe going to have capex of $100 million and people were like, that's the end of the world. And the bet you take over and over again is digital goods get reduced in price 50, 60% year on year. If people like the shit and they get hooked on it, over two or three years, the math gets better, right? And that's really what's going on here.

• 23:39Harry Stebbings?

  YouTube, one of the best businesses in the world.

• 23:41Speaker 00

  Or maybe we're going to see these waves where for all but a handful of folks, the subsidies just can't last. We've also seen this in AI. The subsidies just can't last. It's too expensive, right? And I don't know whether Instinct is on that side or not, right? I mean, Cursor barely pulled it out. The Cursor V2 would have died, right? Reselling Anthropic tokens, right?

• 24:00Speaker 01

  If you, if you're going to regard Cursor as a failure, then yeah, you can win the argument. I mean, I'd take the 60 billion and call it a win myself.

• 24:06Speaker 00

  I said the V2 version of Cursor would have died. Just selling Anthropic tokens at a loss perpetually. If that's all they were able to do, they would have died. Great teams figure it out. I get the venture thing. I wouldn't mind being Saragawad and investing in Instinct at 50 or 100. Like I wouldn't bother me to, I wouldn't be too bent out of shape about the business model if I invested at 50 posts. Don't get me wrong. Okay. Wouldn't bother me a lick. But I just don't know which side, I mean, Amjad from Replet said yesterday, like the era of these free subsidies for the agents are coming to an end. If Elon can afford it, Muse can afford it for now, but what's the scale of the Muse subsidy, right? This is the second fastest growing product that they've ever had. If they're, if, if it's 10 or 15 bucks a month for them, who knows? Maybe Amjad's right. Maybe it will come before they can raise that 6 billion at 30.

• 24:51Speaker 01

  Just for context here, if it's 10 bucks a month for Muse and they're subsidizing, that's, call it 100 bucks a year, right? For every million users, that's 100 million bucks. This is a guy who's spending $70 billion on capex. He ain't going to blink because, you know, the compute bill goes up by a couple of billion dollars, right? And so I-

• 25:08Speaker 00

  Yes, Meta can afford it. Meta can afford it, right?

• 25:10Speaker 01

  I want to go back to your comment because this is interesting. Because it was, look, I tend to be the boring guy who says that the numbers have to work in the end. And yeah, gross margin Cursor, blah, blah, blah. But when things are moving so quickly, you can't wait until the economics work perfectly to launch a product because someone else armed with venture dollars will launch that product 12 months earlier when the economics don't quite work, grab all the mind share, and then they'll basically lean into the cost curve and, and hope that the improvement economics bails them out. And that's the bet you're taking. And to take the Cursor example, I mean, they're doing some version of, hey, look, if you don't get a big acquisition for 60 billion, well, if what you said earlier, if I can get my own model and my costs come down, I make out like a bandit. If I'm still stuck on Anthropic in 2027, I'll probably get fucked over. But it's still a better

• 25:55Speaker 01

  bet than waiting until 2027 and saying, oh, now that there are lots of open source alternatives for state of the art coding models, I should launch a coding company because it doesn't matter. It's done, right? The truth is, the capital markets and the venture markets are just so aggressive that waiting until everything makes sense is not an option. So what that means is kind of by the reciprocal property, almost everything that's new and digital will look crazy for a while in terms of economics. And the only question is, can the economics get better before the money runs out?

• 26:24Speaker 00

  Look, no question. And we can move on, but it's, it's interesting that Elon had to cap it.

• 26:29Speaker 01

  It is.

• 26:29Speaker 00

  They have resources. They had a pretty good IPO. He has, he's going long. He has bet his company on AI and subsidizing this thing. He subsidizes everything, round trip, right? And even with his personal fortune, he subsidizes everything. This is a man that would not want to cap Grok bot if he did not have to.

• 26:45Speaker 01

  He's also the man who's getting so many dollars per unit of compute from Anthropic that he's like, yeah, I could do some free Grok bots and these people could make cute cartoons and send pictures of sexy anime girls to each other. On the other hand, I could get like 50 bucks an hour from Anthropic. Screw it, I'll do that.

• 27:01Speaker 00

  Well, they're not doing that. They're building applications. They're building code. Grok bot is fairly technical, unlike the Instinct and Muse's, right?

• 27:07Harry Stebbings?

  Okay, boys. We had another pretty big transaction which went down that in a normal world would have dominated news. In today's news, it kind of lasts for a couple of hours, but DoorDash buys Instacart for $17 billion. Under half its 2021 private price. D1 still owns 9.7%. Sequoia owns 8.1%. Before we talk about agents, which was a disclosure, anything of note here? An inevitable ending to a clear second place provider to DoorDash?

• 27:37Speaker 01

  I mean, inevitable is a bit strong, but yes, they clearly tried to do it before. It clearly makes sense. There's also probably an element of do it now while you can, if you're DoorDash. All makes sense.

• 27:45Speaker 00

  Listen, some of this is not my strength, but the fact that the Postmates acquisition worked was a surprise for me, right? I assume you buy, when Uber Eats bought Postmate, I assume you get a little bit of a brand and a list and you basically shut the thing down and that I didn't really believe these deals would be accretive, right? But they appear to be, right? So if Instacart's got 20% of the market and DoorDash has 60 of the delivery market and you can get through antitrust, which you probably shouldn't if you think about the numbers that I just said.

• 28:11Speaker 01

  Of course.

• 28:11Speaker 00

  And you can get to 80% market share. This is how you dominate networks, right? You dominate every part of it by having 80% market share. And I'm surprised that you can combine these networks and they don't end, one plus one doesn't end up equalling 1.1 a couple of years later. Like that's, that's my experience, but it doesn't appear to be true. Does, these deals, if well architected, appear to work. And so it should be accretive. It should make sense. And I think also, like, you noted it's half, it's 21 private price or whatever, right? I think like the Braze deal at Salesforce, you may say, what's the similarity? A lot of times, folks have been circling each other for years. Tony said they'd been talking for years, right? With the, so there are deals that are, that don't make sense, even if they're cheaper. And then there are deals where like Salesforce brought Braze, Salesforce was losing to Braze in marketing for years. And that when it got super cheap, when it

• 28:56Speaker 00

  got to 3X AR, now they had to play a, pay a big premium, they just buy the assets they want when they become cheap. And it may be that simple. And so if they're accretive, buy them. But this, this may be just the simple things that the corp dev's supposed to do.

• 29:09Harry Stebbings?

  One that I found fascinating was actually relating to a conversation we've had before. And it was agentic usage of these platforms and DoorDash saying that AI agents have sent only several hundred orders against 3 million deliveries a day. Were you shocked by how surprisingly low that was? Or do you think it's symbolic of the fact that people will always want to choose food and have that discovery process?

• 29:34Speaker 00

  I think in a sense, it was a dumb comment for what it's worth. It reminds me a little bit when Brian Chesky like a year and a half ago said there's no need for AI for rentals and housing, or when Parker Conrad, another generational CEO, said there's no need for AI in B2B 18 months ago. Yet today, today, only several hundred orders, but these platforms like, like all these app platforms have a risk of slight disruption from agents. They all have a risk of slight disruption.

• 29:58Harry Stebbings?

  Which is why I think it's so self-serving. I would be pushing this. Whether you're Uber, and when I had a Mac, the president of Uber on, he very clearly was most worried about agentic usage of these platforms because it would disintermediate Uber. And you could get a free now, you could get a lift, you get price optimized, time optimized, and who gives a shit about the platform provider? You have it for Vinted, you have it for Uber, you have it for DoorDash. I think it's like very specifically well done because it made headlines and news in a way that actually he wants. No, humans are here and we will continue to be here.

• 30:29Speaker 01

  Maybe the better way to say it is, let's assume they're telling the truth. That's the objective fact about what's going on now. And the million dollar question is, do you see- That behavior happen more and more and then how does DoorDash respond to it? You know, they're all doing versions of the same thing, which I mean, I could totally see for some of your standard food orders, just it's not that much easier for the record. I mean, telling your your agent to order your dinner, it's just as easy as to just go click on the DoorDash app, but.

• 30:52Speaker 00

  Well, but there's a thing DoorDash has two competitors, big competitors. It has Uber Eats, right? And it has the restaurant. The restaurants don't want to use DoorDash or Uber. So most restaurants have self pickup. At least they have to go pick up or they can avoid most of the fees, right? Or self delivery and agent can figure that out for you. Hey, Harry, did you know that Lemkin's Curry down the street? Actually, it will deliver for $2 and you don't need to go through DoorDash, whatever they have in London. I did not know. Thank you, Muse. Thank you, Instinct. I'll take that. That'll save me $14 on my order. What's the pub right behind your office that I really like, Harry?

• 31:24Speaker 01

  The grazing goat.

• 31:25Speaker 00

  Love that place. Five out of five. Okay. And maybe they could just drop it off at the next time we do the pod for free. I don't have to pay 20% and plus tip, plus this plus. You think I'm kidding? I think agents are an existential risk to DoorDash because their number three competitor is is nobody.

• 31:40Harry Stebbings?

  Can I put out a cultural difference between us? You guys pay 15 bucks a burger and it gets delivered at 50. And there's like federal charge, state charge, delivery charge, service charge. It's ridiculous. In London, it's kind of like 15 quid is 15 quid. It's fascinating to see the difference in like what you pay and what you get.

• 31:57Speaker 01

  Yes, and that's why these businesses are wildly profitable. They figured out exactly how to extract every dollar of rent from the person who wants to sit on their couch, press a button and get the meal an hour later. It works.

• 32:07Speaker 00

  It's been a brutal business since the old Grubhub days. It's just evolved with the internet and agents will evolve it again. It's been brutal. It's been brutal. The ideas take as much margin out of the customers of the restaurants as humanly possible.

• 32:17Harry Stebbings?

  I'm with Bill Ackman. I think Uber is a banger of a buy right now, though. I mean, it's so cheap.

• 32:22Speaker 01

  I broadly agree, and I haven't spent a lot of time on this, but the two worries you have are way more disruption and agentic disruption. And what you're implicitly saying is both are fine.

• 32:30Harry Stebbings?

  Yeah, agentic disruption is bizarre and taxi hailing. You're going to go to your WhatsApp and say, I would like to get an.

• 32:36Speaker 01

  I agree. I don't think that's.

• 32:38Harry Stebbings?

  It's a worse user experience. I would like to get an Uber. I am at this position on the map.

• 32:43Speaker 01

  Agreed.

• 32:44Harry Stebbings?

  And then the other issue is people love food. They love looking at it. They love pictures. They love scrolling. They love discovery. The only thing that makes sense for us is automation and scheduling, like every day, drop it off at Scale's office in San Francisco. That's it. Okay, boys, we have two big rounds in Kalshi and Co here. Kalshi, a billion and 40 billion, one of Jason's favorites, a low dilution round there with a two and a half percent dilution, but still raising a billion dollars and a 40 billion price. A day after Utah charges founders of Kalshi. And then we have Co here. I think it's the largest private raise for a Canadian company at this point, with actually the Canadian government, I believe, or Canada itself, investing up to 1.14 billion. Which one's more interesting?

• 33:28Speaker 01

  Kalshi is a money deal. Let's be really clear here. The thing is working. It's growing like a weed. Deep in their heart, everyone knows that we started off thinking we were doing prediction markets, which had some social utility. And we've long since converted into sports gambling markets to feed people's addiction for gambling. Right? So we're all over the doing good. We're all over the higher purpose. You know, we're pushing through a whole bunch of local regulation, which is why Utah is suing them because sports betting is regulated on a state by state basis. And these guys are applying to on a national basis. So there's nothing to see in this other than VCs will put a lot of money into shit that's working. That's the takeaway, right? And you know, if it's at 40 billion, it's had momentum. It raised like three or four months ago at 22 billion. So this is one of those classic momentum plays, right?

• 34:12Speaker 01

  I mean, contrast that clearly very different. I mean, it's almost not a momentum play. It's a, we need our sovereign AI play in Canada because you are nasty people and you've threatened to invade us multiple times. And we've got this product and it's, you know, one of the original four or five LLMs, to be fair. I mean, back in 2023, you had Co here, obviously OpenAI, Anthropic, and then all the other ones like the one that Microsoft bought, Adept and Amazon bought, all the others folded. So give, I mean, give Co here a huge credit. They are one of the survivors of that first group of LLMs before Neo Labs was even a thing. And now they didn't release revenue numbers, but you can see how you can make a sovereign AI store. It's almost the exact opposite. In the case of Kalshi, the government is saying, I want to stop you now and put you in prison.

• 34:54Speaker 01

  In the case of Co here, the government's saying, I'm going to make this work no matter what, even if the economics don't work. So they're almost like the ying and yang of investments in terms of their relationship with the government.

• 35:02Harry Stebbings?

  Does that work? Can the government just do that?

• 35:05Speaker 00

  Do what?

• 35:06Harry Stebbings?

  Well, hey, we want to make you work and so we're going to inject you with 1.14 billion.

• 35:12Speaker 00

  Isn't that what our governments do all the time? They subsidize everything.

• 35:15Harry Stebbings?

  Yeah, you can do it once, you can do it twice, but ultimately if enterprise adoption isn't there, it doesn't work.

• 35:20Speaker 00

  Sometimes it's worth just being in the game. It's like, it's like putting a few chips into Anthropic in the D round. Sometimes it's worth just being in the game and sometimes it bounces, bounces your way and you've always got the lick pref.

• 35:30Harry Stebbings?

  Jason, the D round was 16 billion, so I'd take the D round. Yeah.

• 35:34Speaker 00

  In all seriousness, I don't know how like Canadian, like national governments work. When you talk to folks that run at the top companies with large corp dev portfolios, public companies, really, they just want it not to go down in the aggregate. They love the gains, right? But you only get so many credits as a public company for the, for the gains from your portfolio and the losses really suck, right? Because they swing your EPS in really weird ways and you, you know, you have to put asterisks and daggers next to it. So as long as they don't lose too much money on, on the investment, I don't know that they, I don't know that they care.

• 36:02Speaker 01

  I mean, but I think there's two separate things. You're right. The motivation for anyone doing this isn't purely financial gain if you're the government, right? Agreed. But Harry asked a separate question is can it work? And I think the answer there is you can keep it, governments can make things happen for a fair while, but what they can't do is make the private sector use the product. So, you know, you see it with Mistral too. To the extent that there's a willingness to spend Canadian government tax dollars on a Canadian government AI solution. Or maybe if Canada goes on with its kind of affiliating with the EU, these guys in Mistral may be the you're not America LLM options. And there probably is some spending that, but do you think it'll be a compelling business that will go public at 3X this round? Not as obvious to me at all.

• 36:44Speaker 00

  Well, in today's world, today's day and age, Co here not disclosing revenue is hardly a flex.

• 36:48Speaker 01

  No.

• 36:50Speaker 00

  It's a pretty bad sign.

• 36:53Harry Stebbings?

  I love it. It's like ARR grew more than 165%. You're like.

• 36:56Speaker 00

  Since inception?

• 36:57Harry Stebbings?

  Yeah, no.

• 36:58Speaker 00

  You know, one thing I was thinking on the Kalshi thing before we leave. So Sequoia led the last round, right? At a billion, they put in a billion right after felony charges were against the founders, right? And I get that it's just a state and then we have Binance, right? 6.6 billion taken by apparently North Korea in a matter of hours. I had to wonder between Sequoia and Binance, if the ball had bounced just a little differently, would, would FTX still be around today? And would it still be a winner? Same VC, same risks. FTX got, listen, you, you obviously can't take money from one sister company and put it in another. But I think Binance barely survived this 6.6 billion. They don't have a transparent balance sheet. We don't know how much money they had. What if it was 13 billion? Where would they have repaid it? I think they were one step away from an FTX type situation.

• 37:44Speaker 00

  Luckily, he got pardoned, CZ, right? But I just wondered if, it made me think if, since you have the same investor and the felony, we've just all changed the way we take risks because it's game on, right? It just made me, made me think about apparel universe where FTX was a, was a shining portfolio company today.

• 37:59Harry Stebbings?

  Do you want, I mean, the fascinating thing is FTX's $500 million position from Anthropic would.

• 38:04Speaker 00

  Well, that we know, yeah.

• 38:05Harry Stebbings?

  Would be worth 39 billion at the one and a half trillion. So timing is important is the takeaway, kids.

• 38:11Speaker 01

  The most compelling fact about the Binance thing was, was that they could pony up $6 billion to replace the money that was taken. Like what a good business. I mean, assuming that you're not doing an FTX and swiping it from someone else. As I understand it, and I did not spend a lot of time on this one, Binance were able to make good the crypto loss, which implicitly means Binance makes enough money to be able to make good the crypto loss, which means it's an amazing fricking business.

• 38:33Speaker 00

  I think so. I just think, and again, I'm not a crypto guy, but when CZ said they could cover it, but it would be tough, suggested to me they didn't have 13 billion. And what I really thought was ridiculous is how many folks said, said that their balance sheet was all the crypto they hold for, as a trustee, as a custodian. That's not true. That's what, that's why Sam's in jail and CZ is out, right? I don't think they had 13 billion. I think they got out in black October.

• 38:58Speaker 01

  Yeah, you can't take my crypto dollars and give them to Harry and say, sorry, your stuff was stolen. Agreed.

• 39:02Speaker 00

  Yeah, their balance sheet. I mean, just think how much still happened in black October, right? And then we have this, the one that I think is craziest, I don't mean to get off track, is this, I know it sounds minor, but it's not this Artex thing that, that breached WorkOS and a bunch of others. This is just since we did the last one. This one is insane, this Artex thing.

• 39:18Harry Stebbings?

  I saw that Michael Grinnick posted about this 16 hours ago, but tell everyone what this is.

• 39:23Speaker 00

  Artex we should be scary about. Artex is a, is initially well regarded. It's only like a couple of months old, a Chinese open source pen test solution to penetrate test applications. We all need pen testing. We always needed it before. We certainly need it in an agentic area where everyone from Binance to the rest of the world is being breached, right? We're all being breached. All the refrigerators in Europe are going down because they've been breached. It's, this is, black October was much blacker than we made it look. And so some really smart developers, just a couple of months ago in China, built an open source thing, great. So it's free and you could hook it up to your deep seek and your other LLMs and it will just try to hack you. And this is what you're supposed to do. You're supposed to hack yourself, but it became very easy to turn it around and just attack other folks with agents. It became, it was flipped around and has become one of the greatest threat.

• 40:08Speaker 00

  And a lot of folks are saying, well, you could always, you could always do this, but now you can do it with LLMs at scale. You can just tune it against anybody you want.

• 40:14Speaker 01

  So the originally built as defensive, yes, Evan said, oh my God, this is a pen testing tool. Yeah, it makes total sense is that it'd be basically, yeah, it's like the guns don't kill people, bad people with guns kill people. You built a gun and you hope it was in good people's hands and now it's in bad people's hands and they're killing people.

• 40:29Speaker 00

  People, it worked, seemed to work great at first, right? Until you turned the gun around.

• 40:33Speaker 01

  It's probably hard to overstate, you know, the cyber dynamics of the next 12 months. I mean, you're right, it's one of those stories, you never cover it on a daily basis. But you're right, at some point, something really weird is going to happen, and you're going to go, come on, guys, we should have seen that. You know, the entire US Fed wire goes down for a day, and we're like, we can't move money.

• 40:51Harry Stebbings?

  Yeah, and we joked about the refrigerators in Europe, which, for people that don't know, there was a hack, which basically meant someone could turn up the the temperature on refrigerators, and they did, to 50 degrees. Now, it was luckily rectified, and the frozen peas were saved, which is of great relief to everyone in Europe. But you could see this being much more mission-critical things, like traffic lights, or like heating facilities, or you name it. So it is, it is quite alarming. Ding ding ding, Mr. Lemkin, we had quite a few rounds, and it's your turn to bring something to the IC this week.

• 41:22Speaker 00

  Goodness, can I take a break for the rest of the year? We've been busy, we've deployed so much, we've gone back for three funds this year.

• 41:29Harry Stebbings?

  No, no, no, we're Andreessen, we just raised a big ass fund, and so we've got plenty more for you to go through. Jason, we're a deployment machine. Which company are you going to take to IC this week? Serval, Cognition, Base10?

• 41:41Speaker 00

  Well, listen, I mean, Harry, as you know, much, much is, in many ways, the Wind Surf team lamented having to sell out to Google for just a few billion. The Cursor team's gonna, gonna lament selling to SpaceX for only 60 billion, right? Cognition at 80 billion, it seems market correct. Now, to get to a 10x with Delusion, a trillion dollar valuation, I start to get nervous with the latest, the latest round from OpenAI and Anthropic. I do get worried that fundamentally, it only owns so much of its own IP, but geez, I don't know if you saw the last Q3 of Anthropic. Like, the one thing that is working, that never stops working, is coding agents. And Cognition has a bunch of the field open to it. They made a lot of their own luck.

• 42:22Speaker 00

  I don't know if the original version of Devon, when I brought it to committee, you know, a year and a half ago, I, I don't know that that product worked. They lucked out buying the Wind Surf team, they lucked out buying IP, they lucked out from open weights. But this is something with the kind of momentum that I think we can't sit out. And we have a little bit of money left in the fund, a couple billion, and we need to deploy the next one. I say we close out the last fund with 2 billion in Cognition. We're already up 5x on paper, we can't lose. So we might as well put the last 2 billion in Cognition. And I say if we get a little recycling before the, the round closes, we toss it in too.

• 42:54Speaker 01

  Interesting. Just for the people listening, because it wasn't obvious, that was a much better question than you normally ask, Harry. Because normally you say, here's a deal, Jason, tell me why you should take it to committee. And honestly, and respectfully, I say that's kind of stupid, because all you're just saying is, give me a soundbite, right? The reason this was a good question, much more interesting, was because you have three deals in front of us. And it's worth pointing out to the listeners what they were. Three really amazing companies. You were basically asking Jason to pick between Base10 at 30 billion, up 2x from June, an inference company, Cognition at 70 to 80 billion, up from 48 billion in September, and Serval at 3 billion, up from 1 billion in December. Three different companies, very different businesses.

• 43:38Speaker 01

  One's an inference provider, one's a coding agent, and one's a very hot next-generation AI app in the ITSM space, right? So three different businesses, all of whom have had a round and are getting a second re-up within this 12-month period. So as I say, because it forces Jason to choose, that's a much more interesting question, if you know what I mean, than just tell me nice things about this company.

• 44:00Harry Stebbings?

  Philip, editors, can we please cut that segment? That's the first time that Rory's actually congratulated me on a frame.

• 44:06Speaker 01

  It's okay, because I think it happened by accident.

• 44:08Harry Stebbings?

  I'm gonna, I'm gonna play that to myself later, just to give myself more confidence.

• 44:12Speaker 01

  But actually, genuinely, it's really was a super interesting question, and I, I kind of, so would you like to do an inference provider at 30 billion, a coding agent at 80 billion, or a IT AI app in ITSM at 3 billion? I mean, good question.

• 44:28Harry Stebbings?

  No shit?

• 44:29Speaker 01

  Which would you pick?

• 44:30Harry Stebbings?

  Serval, are you kidding me?

• 44:31Speaker 01

  Okay, so you do, you think your upside in Serval at 3 billion is better than your upside at Cognition at 70 billion?

• 44:37Harry Stebbings?

  Oh my god, the tide is changing. ServiceNow is an old guard. Bill McDermott's amazing, but he's like Slutman, he's a sales-led CEO, we're in a product-led generation. Jake and Tatiana at Serval are incredible, the product's amazing, their enterprise adoption is better than I've ever seen. And the upside, just pure multiple on cash, now there's an, there's an addendum and a star, which we can go back to. Multiple way better here. The chance of getting a 10x here, I think very likely. The chance of getting a 10x for Base10 at 30 billion, god, you've got a squint. The chance to get a 10x at Cognition, to Jason's point, gosh, we're nearly hitting a trillion there. So yeah, I think the multiple is clearly much more evident there.

• 45:20Harry Stebbings?

  Now, the challenge, though, that we have with Serval, that we don't have with Cognition or Base10 is, if we're an AUM play, just putting cash out the door, they only raised 150 million. And if I'm Andreessen, I want to put 500 million, a billion out the door. And so, doth butter no parsnips, as we say in the UK. I need to do Cognition, because I need to move money. But for the multiple, it's the easiest decision you made.

• 45:44Speaker 01

  Interesting.

• 45:45Speaker 00

  You know what, the question about Serval, I don't know, I really don't know it all, the founders don't know it. It's just my question to the IC, does it expand the TAM? Am I bounded, for, for real, for real, right, not for hand-waving? Am I, in essence, bounded by a subset of ServiceNow's TAM today, right? Now, every founder will expand the markets and add concentric circles, but is this really expanding the TAM here? I, I generally don't know, but I personally am not excited about disrupting existing players if you don't expand the TAM, because I think, I think we don't get anywhere at the end of the day.

• 46:16Speaker 01

  And I think the argument they'd make would be some version of, ServiceNow just is a list of things that IT has to do, and, you know, Serval is actually a product that does those things for you, so you can command more value from it. And, you know, the way you'd validate that is looking at their ACV on a like-with-like basis. In other words, there's a mid-market company that might spend 200 grand on ServiceNow. Would that same company be willing to spend 300 or 400 grand on Serval? And that's what you'd need to see to get TAM expansion. Because, yeah, I mean, we think, I know about, one of my colleagues had talked to him in the past, it's an amazing company, amazing team, and a great market. I mean, it's always worth remembering, until recently, ServiceNow was, I think, the second-largest market-cap SaaS company. You had Salesforce and then ServiceNow.

• 47:00Speaker 01

  ITSM is a much bigger market than you think, because it kind of becomes the, the general corporate to-do list for service functions, like legal, accounting, all the back-office folks were using ServiceNow to keep track of their tasks. So it's been a way bigger business than I would have guessed when we saw it in, what was it, 2010 or so, right? So yeah, replacement for that's a big opportunity. But I hear you, Jason, it's, it's the, can you expand the TAM? And are you just, are you dealing with a 10-year grind ServiceNow-down deal, where you do it forever? Whereas, Harry, to take the other side of the argument on Cognition, I mean, the beauty of the coding agents is, especially with Cognition, they're coming into large enterprises and basically saying, we will help you effectively rewrite your entire codebase, enable your team to be agentic coding, and getting huge dollars for that.

• 47:45Speaker 01

  So in terms of money velocity on the table right now, Cognition has, you know, just an ability to command many more dollars. I think Serval probably has the compounding effect of, there's probably 10 or 15 years of grinding down ServiceNow to a bigger outcome. So I don't know, it's, it's kind of velocity but capped versus long-term great mega trends, but is it going to take a while?

• 48:06Speaker 00

  Look, and it may well resolve tickets that ServiceNow can only track. It may be an epic play, I'm not, I'm just trying to, I think Serval aside, 2027 will be a year where we find out a lot of vertical AI plays are nifty little startups, but didn't in the end expand TAM enough. They didn't expand TAM, they're, they're fighting for a slice of ServiceNow, a slice of Salesforce, a slice of Atlassian, but they're not expanding the TAM. And I just, personally, I don't want to invest in any of them, because I just view it as tiers in five years.

• 48:32Speaker 01

  I, I don't think Serval, I don't think that's the case with Serval, I think they are expanding the TAM. And I don't think, I did, I'm sure they'd push back very vigorously on the vertical description. I mean, I think it's very cross-functional and cross-vertical.

• 48:42Speaker 00

  It's an adjacent point I was trying to make, but I hear you.

• 48:44Speaker 01

  Sorry, I'm not, I'm not arguing.

• 48:45Speaker 00

  I think in vertical, we're going to see the biggest tiers, because a lot of folks are going to make investments, assuming that, especially for like an SMB or an era where you can charge three to four times the size, and we're going to find out, you know what? You can charge 1x the size, and now there's five or eight times the competitors in the market, and the leader isn't dead, right? The leader isn't, they're still, they still have a pulse, they may not be growing at the rate before. And so you're just slicing up the same old F-ing TAM 11 times. I just don't want to personally make those bets, because it's exhausting, right? It's, it's exhausting.

• 49:15Speaker 01

  And then it's been funny, we've, as I said, that's why it's such an interesting, it's really genuinely interesting question. I'm like literally thinking of it as an investor here, rather than just blathering on. We've kind of gone between the 80 billion one of Cognition and Serval, and kind of Base10 in the middle. I mean, if you want revenue velocity right now, nothing gives you revenue velocity like inference. But from your little face, Harry, are you implying the angst there is just competition? There's five or six great companies in that space, and that's a worry?

• 49:40Harry Stebbings?

  I would, I would 100% invest in Base10 too, by the way.

• 49:43Speaker 01

  But the whole point is there is no two. You got to pick.

• 49:45Harry Stebbings?

  Well, yeah, but no, I would not choose it compared to Serval or Cognition. I think Modal's product suite is unbelievably strong. Like Eric is incredible for that and Lynn and the team at Fireworks by far, I think, have the best inference product. And so I would choose Modal and Fireworks. And so it's super clear for me on Serval.

• 50:03Speaker 01

  Okay, that was a fun question.

• 50:05Harry Stebbings?

  Rory, did I change your mind?

• 50:07Speaker 01

  You made me think, no, I genuinely, I genuinely comment, this is like, this made me think, right? These are three very different, interesting dynamics. I mean, it makes you think about, you know, what's your bet? Is it very horizontal inference, but lots of competition, risk of commoditization? Is it the last surviving standalone coding agent that's cracked the enterprise, but at a very hefty price? Or is it an app that I think will be the, if there is a next generation service now, the probability of it being Serval is probably eighty, seventy percent plus. And those are very different bets. And, you know, I'm actually literally thinking, they're all for the record, pretty interesting bets. The one nagging comment, and I don't know if this is correct, is the good thing about Serval is you can say, this is your point, Harry, that the old school company is worth, I can't remember by Eastern order number, forty or fifty.

• 50:52Harry Stebbings?

  It's worth a hundred and ten billion.

• 50:53Speaker 01

  So you can say, there's a thing that exists today that's thirty times the value of this, therefore I can have that money. Whereas for Base Ten and for Cognition, you have to say, there's no standalone coding agent worth eighty billion. So it's good news, it's a new market. Bad news is, what are you mentally taking over? You know what I mean? And the same is true of inference.

• 51:11Harry Stebbings?

  Now, bad news is you're fourth in the market. You've got Codex, you've got Claw Code, you've got Cursor, and then you've got them. Jeez, don't get me wrong, I'm all for independence. I'm an investor in Factory as well, and I totally buy that. But that versus like Serval versus ServiceNow, bit of an easier one.

• 51:29Speaker 01

  Okay.

• 51:29Harry Stebbings?

  So, Rory, you'll be surprised to hear that my girlfriend is still with me. I know. My mother is shocked too, but in the legal world, whoa, mega news. One of the big law firms, the prestigious OG brands, while shut down very quickly and weirdly because of partner dispute, whatever. AI law firm Crosby, who've raised eighty-five million bucks from Secoria and the like, bid to take over its assets and it's like its brand. Anything to say here? I thought that was fascinating.

• 52:03Speaker 01

  I mean, it's two separate stories. There's the Wild Gotchell crashing, which is a, you know, American law, it's not a tech story, it's an American law story. You lose a couple of key partners. These firms are, even though they don't have a lot of liabilities other than leases, it's just a bunch of connected rainmakers and sometimes the.

• 52:18Harry Stebbings?

  That's a flimsy, no offense Rory, that's a very flimsy way of looking at it. A couple of partners leave does not mean a ninety-year prestigious law firm.

• 52:26Speaker 00

  Yeah, but if you take enough of the book of business with you.

• 52:28Speaker 01

  It's a small number of rainmakers, absolutely. It's not like.

• 52:31Speaker 00

  It's worse than if you leave, if you leave a VC firm, the VC firm dies but over twenty years. If the top rainmakers leave, you know, there's nothing to pay out at the end of, at the end of the year.

• 52:39Speaker 01

  I mean, if you look through it, I mean, I've read all the accounts, I don't know as well. As I say, it's four or five key lawyers, each of whom ran a key part of the business. And it just, there seems to have been a clash on a couple of, I think the guy who ran all the PE practice, which is probably twenty, thirty percent of a company like this, left, takes his book of business. And yeah, it can go wrong pretty quickly. So, but it doesn't matter because that's not a tech business. That's just a wow, that's interesting. And then I did, I did admire Crosby for just, that's just a, hey, if there's some attention to be paid here, why don't I put in a bid for the business? That was, that was, that was a bit of a fuck you, but I was, I was impressed. I think is a relevant word there for that. That was Hutzpah.

• 53:13Harry Stebbings?

  I loved it. Ryan just like, yeah, we'll take it.

• 53:15Speaker 01

  Yeah, if you don't want this one hundred year old franchise, we'll take it here.

• 53:20Speaker 00

  I don't mean to be too negative on the Crosby thing, but ultimately, if you're providing slightly higher value services, it's gonna have the same issues. People want to keep all the, the partners, the rainmakers want to keep all the money. Now Crosby has, probably has no rainmakers, right? And it's doing transactional stuff, but I don't know that this idea that lawyers will give up a bunch of the profits they could make for shares in a company that hopefully will IPO. I don't know how sustainable the business model is.

• 53:46Speaker 01

  For the, for the record, I don't know if I fully buy the model, but I disagree with you in the sense of, I actually think, it's actually the same story. What Wild Gotchell says is, there are some parts of law where the partner that you are dealing with as the customer is so important because you value his or her personal advice, that when that partner leaves Wild and goes to someone else, you take your business with them. And that's like, I'm doing a complex PE deal, I need this guy, I'm paying him five grand an hour, some absurd sum, but he's my guy and I trust him and I'm, you know, running KK and R and that's the guy I want. And then what Crosby is saying is, there's a whole bunch of other law where you really don't care the name behind the thing, because it feels pretty standard and transactional. And that business can be done across below. Well, I actually think that they're actually a very nice counterpoint.

• 54:28Speaker 01

  If I'm doing an NDA or a series B stock purchase agreement, I don't need the five grand an hour guy. I don't need to know the name of the guy doing it. It's just, you know, do the usual stuff, check the usual thing. So I think.

• 54:40Speaker 00

  Yes, but, but even at the low end, incompetence hurts you. It damages you. Have you ever done a routine transaction where some idiot lawyer cost you a lot of money? I have, I have. I've been damaged seven figures by incompetent junior lawyers.

• 54:52Speaker 01

  But I think, I'm sorry, I'm just gonna push again because I'm grumpy. Like, that's exactly the Crosby argument, which is, it's less likely to have that kind of mistake if it's automated, if you've got AI, like for the standard stuff. So.

• 55:03Speaker 00

  Okay, well, let me flip it around. Let's imagine I go to Crosby and I make a hundred and seventy thousand dollars a year and I get point oh one percent of the company for the IPO that I'm not even sure is gonna happen. And then I can go to Wild Prime and make two fifty. And if I'm actually good, I may, every great partner now makes ten million bucks and every good. And the entry level ticket at Wild was over two hundred thousand for an associate, for a soul-crushing horrific job, bind you. Like, I get the Crosby, I just, my only point is, and I'm, I'm not being critical, I haven't talked to them. I'm not convinced this is, is as stable as a lot of VCs might hope it would be. It's too human based.

• 55:38Speaker 01

  I agree. There are issues with the kind of human plus AI delivery model and I have questions on that, but I'm just gonna push back on your comment on why would I go to Crosby? Like, that's easy, because for every lawyer who wants to be a rainmaker and work twenty-four seven and make ten million dollars, there's also lots of lawyers that's like, I want to do forty hours of good law. I don't want to be a rainmaker. I don't like that. I'm just a good lawyer and I want to go home. Maybe I'm, you know, dealing with kids, maybe I'm dealing with parents, maybe I just want to take it easy. There are lots of people for whom being a lawyer, a well-compensated, nice upper middle-class salary, working for someone like Crosby, doing forty hours a week with control of your own time, is a perfectly good product. So I don't have a, they'll be able to get lawyers, right?

• 56:17Speaker 00

  I just don't know if I can see a ten billion dollar outcome here.

• 56:19Speaker 01

  Different question. I'm sorry.

• 56:20Speaker 00

  For the, I don't think I can take this to IC. It's, it's a lot that has to happen.

• 56:24Speaker 01

  Agreed.

• 56:24Speaker 00

  For the corporate company, its corporate affiliate to be worth ten billion dollars, because it has to suck so many billions of years of profits that the lawyers could otherwise take home as partners.

• 56:33Speaker 01

  That I agree with. I think that there will be a coterie of law firms five years from now that are focused on the Crosby kind of work. Crosby will obviously be one of them. They'll do really well. We like the space. But I agree, the question is, if you look at the billings of Wild Gotchell as an example of American law, if seventy percent of the dollars come from the high rainmaker, irreplaceable by AI stuff, and all you've got left is a thirty percent, and then you have to halve the value of that to get the business, then you're right, then you're left with the low margin parts of the business. So I do agree. That's the question is, how big can it be? But whether you can build a business there, absolutely, I think you can.

• 57:08Speaker 00

  Yeah, you can build a small business for sure. It's just for RIC, ten billion is the, is the lowest possible exit where we're allowed to bring it to IC.

• 57:15Speaker 01

  Agreed. As far as I can see.

• 57:16Speaker 00

  Twenty twenty-six, boys.

• 57:17Harry Stebbings?

  Yeah. Ten billion? I thought, is ten billion the round size?

• 57:21Speaker 00

  Look, Rory and I are a little more conservative. We're okay with a ten billion dollar exit as long as the entry is appropriate. We can't make the numbers for the whole fund work, but we can make our own little slice of the fund. We can, we can hit our, our individual six X goals with those exits.

• 57:34Harry Stebbings?

  Guys, what have I missed? Creandam, I think probably the most exciting fund that Europe's produced in the last three years, raises seven fifty. Physical Intelligence in talks to raise at a twenty billion dollar valuation. They've had room at acquisition talks in the last six months as well. That's with Avenir and Lux. Dropbox cuts nine percent of staff and CTO leaves.

• 57:56Speaker 01

  I want to think, first of all, unlike the last group of three, these things are like literally a grab bag of shit. Physical Intelligence, company with relatively little revenue, is worth twenty billion. Dropbox, company with billions of revenue, ain't worth a lot. They are. It just shows revenue multiples don't get you anywhere, right? It's all about the future. These are just non-comparable things. I mean, look, on the physical intelligence thing, yeah, I think robotics is going through an amazing explosion. We have a small investment in, like, I think these next generation models are amazing. When you see the demos, I've done a lot in robotics over ten plus years. When you see what the new models can do, it is truly amazing. You go, wow, the level of dexterity, the old models just don't have that. And I think it's just a real breakthrough moment. So two other comments though. I think deployment of robotics is just way longer than deployment of kind of classic LLMs and people forget that.

• 58:40Speaker 01

  I saw someone, somebody's coming, they're starting to price now on an hourly API basis, which makes sense. So you pay, you know, if you're replacing, maybe you pay three bucks an hour for access to the model. And then when you, there's only three hundred thousand robots in the US. So to make the math work at kind of twenty billion, which is where PI is, you gotta have a shit ton more robots. So the technology is amazing, the business model's got a lot of developing to do, but I think the last sentence you said is the real one. I think all the big foundation models company buy one of these things. And I think the reason is, I mean, either they build one or buy one. It's gonna sound, I think I've said this before. The really simplistic reason they do it is this. I'm writing my prospectus. There are eighty-one million knowledge workers in the US. We have an LLM and we sell to them. It's a great business.

• 59:22Speaker 01

  There are eighty-seven physical workers in America, not knowledge workers, working in blue collar or kind of, you know, physical world jobs. Now we have a robotics foundation model, we can address them, I've doubled my TAM. I mean, it's a bit simplistic, but I think the lure of robotics for the foundation model companies and the desire to say, oh, we do robotics too, I think will, means that there could well be some acquisitions in the space. It's one of those markets, it goes back to something Jason said, it's one of those markets where you can kind of say to yourself, if you just try and be logical about the steps between here and deployment, you probably get caught up in the minutia, and I'm often guilty of that, where, you know, it's gonna take a long time, customers are gonna be slow.

• 1:00:00Speaker 01

  BMW is not gonna roll out a hundred humanoids in a week. But if you say to yourself, the technology capability is amazing, the teams are amazing, we love our position in journalism, and you kind of go, this is gonna change the world, somehow you'll make money out of it. And that's probably the investment thesis.

• 1:00:15Harry Stebbings?

  Jason, any final thoughts to you on those?

• 1:00:17Speaker 00

  The only small, this one's really minor. It's almost not worth bringing up, other than it's something I'm tracking. But a tiny amount of anxiety that the Hugging Face has drawn some DOJ scrutiny. I don't think there's been a formal request for information or anything. And it just, as investors, it would be a bummer for us if M&A isn't really back. Right? As we discussed, we need $10 billion deals to even bring deals to the IC. And, you know, if this $12.9 billion deal for Hugging Face isn't going to sail through antitrust, it would just, it would just be a bummer. It would be a, politics aside, it seemed like we were able to do normal M&A deals. Right? With normal tax benefits and normal this and that. If, if it doesn't turn out to be the case, then we've got to go back to doing convoluted team and IP deals or slowdown deals.

• 1:01:02Speaker 00

  It'd be a bummer. And, and, and look at the other, I mean, Salesforce is on an epic M&A roll. I mean, they hoovered up everybody this year. And I don't know that they would do that if the antitrust environment, again, no politics aside, if the antitrust environment was where it was 24 months ago. It's good for venture that they're just hoover, I mean, who did they just buy this week? A Cresta, right?

• 1:01:20Harry Stebbings?

  They just bought Cresta for 2.7 billion.

• 1:01:22Speaker 00

  Bless, bless Benioff and Friends, right? We need these deals to, they happen in every two weeks, right? And for venture to be like, at least to be de-stressful, in my opinion, we need M&A to work like clockwork. Otherwise, we're just, we're just stressed over these goddamn IPOs. So I just worry a little bit about this thing because we want, we want the saleshorses and the service nows and micro, we would just want them buying companies, you know, every, every couple of days for a billion and up. We need it. We need it to get out of our liquid air portfolio. So this one, if something happened here, I'd be bummed, but it's just something to track if it gets anywhere. Salesforce says the opposite. They don't, they're game on for M&A, man.

• 1:01:57Harry Stebbings?

  Dude, I agree.

• 1:01:58Speaker 00

  Bless the team there. It's smart, too. You gotta, he's buying his way into the future, into the present. It's, there's some point where it's too much.

• 1:02:05Harry Stebbings?

  Is he with Cresta?

• 1:02:06Speaker 00

  I think what's happening, if you just look at all the deals that have been bought, this, this, this I saw, I'm dating myself back at Adobe, but obviously there's a little bit changing in the world with AI and B2B, right? So basically, everybody's getting a punch card, right? They bought us some defense startup, I don't even know that, for a couple hundred million bucks, right? And what you do is you go around the table with all your SVPs and they get their best idea. And whoever was in service or support or whatever, Cresta was their best idea. And whoever was trying to get these sort of support and sales agents faster, Finn was their best idea, right? And you just keep, it's not that complicated. You go down to the best idea and then someone goes out and figures out if they'll actually sell, because some folks won't sell. And you just make this best idea and then people know their jobs are on the line. And so this, none of these deals are mark betting the future of the company. They're, they're SVP chips.

• 1:02:51Speaker 00

  And I've been in the room, when, when you went around the room, Rory, what's your best idea? Harry, what's your best idea? Come back next week, I want your top three ideas. And it costs you nothing, in a sense, because it's assumed some will fail, right? But basically, they're getting around the table and they're saying, we're going to spend this much of our market cap and cash to do these deals because we got to, we got to do something.

• 1:03:09Speaker 01

  And the interesting question is, do you do a Cresta, you know, a more mature company that's using AI, but probably the original stack was pre LLM and they've probably transposed their stack once the LLMs come out in the last four or five years. But in return for that, they have some scale, they have some kind of enterprise deployments. Or do you buy something new, bright and shiny, where it's all LLM first? It's two guys from YC and 24 and, you know, they've got to $10 million and they're exploding, right? That is the interesting thing.

• 1:03:37Harry Stebbings?

  Well, the interesting thing for me is that you've got a relatively similar price being paid for them versus Listen, but you're going to have a 10x increase in revenue for Cresta versus Listen. Listen were 20 million, sold for 2 billion. Cresta are well over 200 million in AR.

• 1:03:53Speaker 01

  And given that Sequoia is in boat, it's not like they missed the fact that they're getting a different revenue multiple. So yeah, on the other side of the table, you're right, the seller said, yeah, I get why I want a high revenue multiple for Listen because it's got growth and it's new. And I guess why I'm getting still good, but not as, you know, a stellar revenue multiple for Cresta, because it's a more mature company. And yeah, no, you're right, it is interesting. It's the buyer deciding which bet do I want to take? And then, thank you for mine, Listen, that's a very good example of that. Do I want the ultra-modern deal? But the problem is I'm going to have to pay a scary revenue multiple in terms of, I'm, I'm, when you're trading at 7x, to be fair, it's really hard to spend a lot of money at 40x. You can spend maybe a couple of billion, but it gets scary.

• 1:04:33Harry Stebbings?

  I think the Cresta deal is actually pretty good. You're paying 10x.

• 1:04:36Speaker 01

  I agree. No, I, I agree, exactly like, I think, the Encom deal, I think it's a smart deal for Salesforce. You get critical mass, you move the ball forward, maybe it's not as bright and shiny as the newest bright and shiny thing, but it, you know, you service cloud business as your second largest, I think, largest business now, and you have to make progress on that. I agree.

• 1:04:53Speaker 00

  What you'll find, if you talk, talk to a lot of the big, big players, what you'll find is if they want to do an M&A where they want to put their resources against it, their GTM machine, their platform, they'll all tell you this, they want at least 100 million of revenue. And they'll wait and they'll take the meetings and they'll get excited. And what's the one, Listen Labs, right? That's a tech bet. And, and most folks will tell you those are the dumbest bets, right? Either buy a small team and pay less, or buy something with nine figures. You only do a Listen Labs deal in times of stress, because they'll all tell you that's their lowest investment performance, that's what it says. But it's just, it's a reason, if, if you're confused as a founder why deals happen, a lot of them, they, they just decide if it's not 100 million, it doesn't have scale, like I can't put my guys on it, I can't put my team on it. And I, I've heard this from a lot, a lot of teams. It just is what it is, right?

• 1:05:38Speaker 00

  You know, even with Finn, like their core, their agentic business had to hit 100 million, right? The overall business was larger. It's the same story. And then all of a sudden, it's like, okay, now I can see how I can make this material in my $50 billion business.

• 1:05:51Speaker 01

  It's probably true. It's a shame, but it's probably true.

• 1:05:54Speaker 00

  I, I don't even think, you know, it is a shame, but the Borg otherwise will just, they can't even assimilate you. You're too small.

• 1:05:59Harry Stebbings?

  Oh, yeah. All right, boys, it's time to go make some money. Back to our day jobs.

• 1:06:03Speaker 01

  Well, that's what we're meant to do.

• 1:06:03Harry Stebbings?

  Let's do this.

• 1:06:04Speaker 01

  Let's do that. Okay, Harry, thank you very much.

• 1:06:08Harry Stebbings?

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• 1:06:53Harry Stebbings?

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