20VC: Who Wins the Inference Market | Has Open-Source LLM Inference Peaked? | What Happens to the Cost of Compute | The Real Limits of Post-Training and RL with Erik Bernhardsson, Modal CEO

Erik Bernhardsson is the Co-Founder and CEO of Modal, the AI infrastructure platform for training models, running inference and powering AI agents. Modal has raised over $1.2 billion, including a recent $750 million Series D led by Accel at a $15.75BN valuation. The company has surpassed $1BN in ARR, growing more than 15x year-on-year. Previously, Erik built Spotify's original music recommendation system. AGENDA: 05:30 - Why wait until your mid-30s to start a company? 06:40 - Is founding a startup really like "eating glass"? 08:00 - How to Raise $1BN with No Pitch Deck 08:45 - The danger of raising too much venture capital 09:40 - How much cash is Modal burning on GPUs? 10:30 - Do early-stage startups actually have moats? 13:30 - Who wins the inference market in the next 5 years? 15:30 - Are 90% software gross margins dead in AI? 17:45 - The "open-air drug market" for GPUs 21:30 - Will GPU hardware prices ever collapse? 22:15 - Are we about to overbuild data centers? 23:45 - Can custom silicon dethrone NVIDIA's monopoly? 24:30 - Is CUDA really the moat everyone claims it is? 25:20 - Are Neo Cloud providers partners or mortal enemies? 26:35 - Nebius vs. CoreWeave: who built the better business? 27:25 - Open-source vs. frontier models: which takes the lead? 28:20 - Can Europe ever build a competitive frontier model? 30:20 - The bull case for a $100B verticalized model company 37:15 - Modal's biggest resource allocation mistake 38:00 - Has open-source LLM inference already peaked? 41:30 - The real limits of post-training and RL 44:20 - How much does Modal spend every month on coding agents? 45:50 - The massive gold rush in selling data environments to labs 47:20 - Should enterprises own their own intelligence? 49:50 - Is model routing a defensible standalone business? 53:20 - $20M+ compensation packages for exceptional new grads 54:20 - The #1 portfolio company Erik would bet on 55:10 - What Erik changed his mind on most this year

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

• 0:00Speaker 00

  I think there is an opportunity to create a hundred billion dollar company with a lot of specialized models in inference. There's gonna be a pullback. I'm okay with that because I think the long term opportunity is so fucking big. There's just so much demand for it. It's like so large. I don't want to sell this company because I would just go and start Model 2. We've lost new grads going to, you know, some of the labs for like, like talking, you know, twenty plus million. I mean, these are exceptional people, exceptional.

• 0:25Harry Stebbings?

  This is 20 VC with me, Harry Stebbings. And do you know what I wish I knew 12 months ago that I now know? The demand for inference, it's infinite. And we're seeing some of the biggest companies in the world be built in this space. Today, I'm thrilled to welcome one of those founders to the hot seat in the form of Eric, co-founder and CEO of Modal. Now Modal just hit a billion in ARR. They just raised $750 million led by Excel and they're priced at $15.75 billion today. I actually think it's a steal, by the way. But today, we dig into the inference market, what to come, what no one sees that everyone should see, and so much more. This was a phenomenal discussion with Eric. But before we dive into the show today, Blitzy, the autonomous software development platform that's built for enterprise scale,

• 1:10Harry Stebbings?

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• 1:50Harry Stebbings?

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• 2:35Harry Stebbings?

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• 3:20Harry Stebbings?

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• 3:58Speaker 02

  You have now arrived at your destination.

• 4:01Harry Stebbings?

  Eric, listen dude, it is so great to have you on the show. You know, I was sitting downstairs with you chatting before and I was just like, you can feel when it's gonna be a good show because people are themselves. And that was an amazing conversation and we're gonna have a lot of fun. So thank you for joining me.

• 4:16Speaker 00

  It's so exciting to be here. I mean, I've listened to so many episodes. It's kind of surreal to be inside of it right now.

• 4:22Harry Stebbings?

  That's really awesome. As I said to you, you could have text me when you started the company and maybe I would have been a little bit richer.

• 4:28Speaker 00

  Yeah, but you probably didn't know about me then.

• 4:30Harry Stebbings?

  No, I didn't, but I would have welcomed investing in another Swede. I wanted to start with, I was talking to Zach Frankel last night and he said about your childhood and like early indicators of success and like exceptional ability. How did you fall in love with technology? And for me as an investor, what would have made me excited in seeing your childhood?

• 4:50Speaker 00

  I started coding 1992 or something like that. I was eight. I just loved it, you know? It's like one of those things, like I realized you can control computers. I had a Mac Plus, you know, one megabyte of RAM or whatever. And yeah, started making games and like, I mean, they were terrible, but you know, it's just, I think back at like, in a way, I'm like so grateful. I look back at like my childhood. My friends, they were like collecting hockey cards or whatever. That was like their hobby. My hobby was programming and now I make a lot of money from it. Isn't that kind of crazy? Like, you know, when you think about it, like the fact that I can make a lot of money, like doing what was my hobby since I was eight? Kind of nuts. So I'm just so grateful about, you know, the fact that I fell in love with technology and coding. And then, you know, I started doing programming competitions when I was 16, 17 and so much fun.

• 5:35Harry Stebbings?

  Modal was your first company or is your first company. Why did it take so long?

• 5:40Speaker 00

  I think the consistent pattern in my life is like I never had quite enough confidence in myself. And a lot of it was that was missing was just the confidence, a little bit the money too. But uh, so it wasn't until I was like 36, 37, I started Modal. And I think, I don't think I've ever wanted to necessarily start a company. It was like one of those things where like, I just saw this big opportunity in the market. I almost thought to myself like, why is no one else doing this? Such an obvious idea. And that led me to think like, maybe I should start a company. And then, you know, five years later, here we are, it's gone pretty well. I think in hindsight, maybe I should have started it much earlier.

• 6:14Harry Stebbings?

  Do you wish you had?

• 6:15Speaker 00

  I look at some of these like Stanford kids and they're like 21 and like, I kind of feel like they maybe have too much confidence. You know what I mean? Like they're like, you know, think they're gonna take over the world and they're 21. I think the ideal age is maybe like, I don't know, 32 or something like that. You have a little bit more experience, you know how to navigate people, you know how to hire people, you know how to fire people, like all these things. I don't know if I would have been a good founder at like in my twenties.

• 6:37Harry Stebbings?

  Before we get into the market and everything beneath that, we were chatting downstairs. We often hear that founding companies is like eating glass. It's hard, it's painful. How do you feel about those?

• 6:47Speaker 00

  Dude, I hate that stuff. It's like, I don't get it. Like you're eating glass like every day. Like, why are you doing it then? Like, I don't know. You expect some like magic reward, like some big cookie in the end? Like, I never understood that mindset. I think it's like this mindset that a lot of people have. I'm gonna suffer pain and then there's gonna be this big reward in the end. I don't know. I don't think about it that way. I enjoy it every day I go to work. Of course, there's like hard times, like there's, you know, you have to have hard conversations, maybe fire people, maybe you like do hard things. But like in the grand scheme of things, like, I mean, such is life and I enjoy life. I enjoy building a company. And I don't, I don't think of it as like, one day we're gonna flip this company and be, I, I hope to work on this for 20, 30, 40, 50 years. I'm having so much fun. I don't want to sell this company because I would just go and start Model 2.

• 7:28Harry Stebbings?

  You really wouldn't?

• 7:29Speaker 00

  Yeah, I don't. I don't think money necessarily makes you happy. I mean, a little bit, like it's good to have some money, but you know, beyond a point, like, you know. I like building stuff. I love technology. I love coding. So much fun.

• 7:39Harry Stebbings?

  You're such a Swede.

• 7:41Speaker 00

  Is that Swedish mentality? Maybe it is.

• 7:43Harry Stebbings?

  Yeah. Dude, never has an American come on before and said it's not about money.

• 7:47Speaker 00

  I mean, I do care about money a little bit, but maybe you're right. Because I do think in Swedish mentality, it's like, it's like self actualization, like doing what you enjoy is like kind of the highest form of prestige in a certain way. And it could be music, it could be like poetry, whatever, like it almost doesn't matter.

• 8:01Harry Stebbings?

  What do you do that you don't enjoy?

• 8:03Speaker 00

  Yeah, I kind of hate fundraising, honestly. I mean, it's fine. I don't know. Like I enjoy it when it's like good people, but it's like kind of challenging. You have to say no to a lot of people. I guess that's a good problem to have, but you know, in general, it's, it's.

• 8:14Harry Stebbings?

  Oh, you have to say no to a lot of people? Oh, Eric.

• 8:16Speaker 00

  I know, I know. That's a horrible thing.

• 8:18Harry Stebbings?

  Oh, Harry, you can only have 10 million or 50 million.

• 8:22Speaker 00

  Yeah.

• 8:22Harry Stebbings?

  Oh, you've never done a deck, have you?

• 8:25Speaker 00

  I've never made a pitch deck, yeah. Every round we've done so far, it's, I like to get to know people well in advance of raising money. So every round we've done, I mean, most recently, we announced the D round yesterday with Excel. I've been speaking to Rich and Gonzalo at Excel for I think at least a year. And at some point, you know, we're like, actually, you know what? We could take some money. Like, what are the terms? Like, let's discuss terms. And then it happened very quickly because we already had that relationship.

• 8:51Harry Stebbings?

  How do you think about price optimization? Is it a game of getting the highest price?

• 8:55Speaker 00

  No, I don't think so. I, I think maybe in later stages, it becomes a little bit more of a commodity, like the money itself. But I think in the early days, like, I mean, for several reasons, like one is that there's a misaligned incentive. Like VCs always want to put in way more money than a company needs. And that, you know, you just take on a lot of dilution. It's not good as a shareholder. But the other thing is like, you actually want to hold back, I think. And it's often better to raise a lot less money at a lower valuation and then keep the VCs hungry for the next round.

• 9:21Harry Stebbings?

  Is this not the generation though where actually capital is the moat and you need so much more money than you think? You said that VCs want to give you more money than the company needs. I thought AI was finally the output exhaust for venture dollars that was needed.

• 9:34Speaker 00

  I think there are times in the market where you are capital constrained. We have not been capital constrained for most of the time of the company. We've been extremely capital efficient. We burn only a few million a month. I mean, only like, you know, it's a lot of money. I respect for the money.

• 9:47Harry Stebbings?

  You burn a few million a month?

• 9:48Speaker 00

  No, I mean, up until like last year. Now we have to spend a lot of money on capacity.

• 9:52Harry Stebbings?

  How much do you burn a month now?

• 9:53Speaker 00

  A lot. I mean, we actually are profitable on a P and L basis, but like cash flow is quite negative because we have to spend a lot of money on, on getting GPUs and building out capacity. And so that is a different period in, you know, in the company and how we think about capital. Capital is, I don't want to call it a moat because, you know, I feel like people throw around that word like to mean like things that, you know, moat to me has like a very strict definition, but it, you know, certainly helps. Capital helps at this point.

• 10:17Harry Stebbings?

  What's the moat definition for you?

• 10:19Speaker 00

  I mean, moat to me is like you go read like Seven Powers or like one of those things.

• 10:23Harry Stebbings?

  I love Seven Powers.

• 10:23Speaker 00

  It's a good book, but I think, you know, then people read that and they get delusional, like, and you know, they're like, yeah, we're starting this company, it has all these moats. You never had moats in the early days, like, you know, like.

• 10:33Harry Stebbings?

  Google could do anything they wanted to.

• 10:35Speaker 00

  Google could do, yeah, but it's also like, you know, like what are the seven, I don't even remember. It's like cornering resources, like market power, like whatever. It's like, none of those things happen until you're like 10 years in, you know? There's an old blog post that I always come back to by Ben Thompson. It talks about Snap and the like, the gingerbread man strategy. Do you know this thing? And it's like, the whole point is like Snap doesn't have a moat, they just run faster, like they're the gingerbread man. And I actually always come back to it. I think that's so true, like for almost every startup these days. It's like, you just have to like move faster than everyone else.

• 11:04Harry Stebbings?

  I actually think like the three things that matter today when I invest is like, one, team, are they a top 100% team?

• 11:09Speaker 00

  Yeah.

• 11:10Harry Stebbings?

  Two, speed of product decision making, very specifically. You look at like instinct today. The speed of feature shipping is really very impressive and they're very. And then three is brand.

• 11:20Speaker 00

  Yeah.

• 11:20Harry Stebbings?

  And I think those are the three determinants to me of defensibility mote, but it's a kind of package.

• 11:25Speaker 00

  Yeah, I mean, again, I don't know if I would, but I kind of agree with your point. Like, I think brand, I don't want to call it a mote, but it's actually, I think, the value of brand has gone up a lot.

• 11:34Harry Stebbings?

  Can I be a dick?

• 11:35Speaker 00

  Yeah, please.

• 11:36Harry Stebbings?

  Do you think Modal have done well with brand?

• 11:38Speaker 00

  I think pretty well. I think we have, it's coupled with the developer experience and the product and the website and the visual identity and all these things. We just did an event in San Francisco and I thought a lot about that, sort of how we package it, the event and the visual look and feel.

• 11:52Harry Stebbings?

  But like, do you think you have a bigger brand than Base Ten and Fireworks?

• 11:55Speaker 00

  I think we have that. I think we have like really, really good vibes. Like, I'm terminally online, like people tweet like way more about Modal. I think there's like a little bit more of a community. I think there's like much better vibes around us, like, but like, I am paranoid about those companies. Like, I am paranoid about competition. Of course, I track it. Like, of course, like, I, I see everything that gets tweeted and about our competitors and this is important. Like, everyone wants to be a part of the community, everyone. You know what I think is like, people misunderstand is I love typesafe with Jev.

• 12:22Harry Stebbings?

  Yeah.

• 12:22Speaker 00

  Cause like, everyone wants to clone Jev. No one wants to get up on stage and wear a fucking pink fur coat and just like talk about the Jevolution in an unhinged way. That is what brand to me is. Like, it's like, that guy is like, he's playing the game on a whole different level. And I think it's just like, so like, true about like companies today. Like, you have to think about that.

• 12:40Harry Stebbings?

  What, so can you sum up why? Cause he's authentic and different?

• 12:43Speaker 00

  I think so. I think you just have to create a personality. You kind of have to like, figure out like, what is the personality of your company and just be consistent and create like, almost like a sense of movement, a sense of like community. Like, this is something cool and people want to use you because you're one of the cool products out there. They're like, have you tried Modal? It's pretty cool.

• 13:00Harry Stebbings?

  What has Modal done then that Base Ten and Fireworks haven't to build that?

• 13:04Speaker 00

  I think we started with the developer experience. So that was, and we had a very clear sort of PLG, product market fit, product led growth in the sense that people came bottoms up, they just sign up on a product. Like, I think the consumer background of coming from Spotify is very important in how I thought about building what's now a B two B company, selling tech effectively. You know, it's like a very boring category, but I think, you know, like, having personality and having, you know, a little bit of an edge is a big part of how you create that sort of movement and that sort of like sense of excitement and the feeling that you're different. And I wanted to start the moment you go to our website and the moment you try the product and you just feel that it's different, like magic moment.

• 13:42Harry Stebbings?

  Can I ask you, we've spoken about the three different providers there. Inference as a market has many different speculators commenting on it. When you look at the next five years, how does the inference market play out?

• 13:55Speaker 00

  First of all, I think inference is going to be an enormously large market. It's like the new cloud, basically. And, but I don't think inference in itself is maybe like the only thing you need. One of the things that I feel very strongly about is like, it has to come with like a lot of other products. It has to come with post-training, sandboxes, agentic stuff, all kinds of, you know, other types of inference, like low latency inference, batch inference. So building that platform, by the way, we've been working on this for the last five years. I think that to me is, you know, not a mote, but it's a very hard product to build, that infrastructure.

• 14:24Harry Stebbings?

  Why do you need to have the breadth of that product set? Otherwise, you're just in a compression layer.

• 14:30Speaker 00

  Yeah, cause otherwise you're just selling commodity product. And like, if you're just selling like tokens for dollars, there's no switching cost, you know? People can just switch to different provider. It's just a race to the bottom. But if you couple it with all these other things around it, sandboxes and post-training and, and reinforcement learning and all these things, like you can actually create a, a whole set of tools. Like, no one wants to build a, you know, buy a single trick pony. People want to buy a portfolio of different things. Like, they want to buy, you know, a whole suite of tools that basically lets them build amazing AI applications on top of it, right? And the, and the infrastructure underneath is a lot of differentiation, a lot of, you know, staying power in the markets. It's very hard to copy like the infrastructure required to build all of these products.

• 15:09Harry Stebbings?

  What does no one see about the inference market? Or you don't see commented on much that is very obvious to you?

• 15:15Speaker 00

  One thing that people don't see about the inference market is, I actually think in the long term, there is so much gross margin opportunity in this space because you can build all these things around it. All the sandboxes, all the agentic stuff, workflows, post-training, reinforcement learning. If you do all those things, there's actually so much opportunity to make money.

• 15:32Harry Stebbings?

  Is it a market that has software margins? Cause we're looking at margins now in the 25 to 40% range. That's kind of traditional players. I don't know if that's yours, but that's kind of what inference providers are generally. Do they go to 70 as you own more and more of the stuff?

• 15:46Speaker 00

  I think basically almost no company today has software margins anymore. Like, what you used to see in like Silicon Valley in the, you know, 10 years ago with this like 90% margins plus, I think that's basically gone. And the reason is actually almost like topological. It's like, you have this like stack of vendors, right? Like, today you have applications, you have models, you have infrastructure, you have cloud, you have Nvidia. And so when a customer pays a dollar at the top of the stack, it has to flow through a lot of different layers. And at every layer, there's going to be, you know, 20%, 30% gross margins. So I think there's a lot of margin opportunity and there's a lot of opportunity to make a lot of money. I mean, the space is so big, but you're also splitting it across a lot of layers in the stack. So, I mean, you know, like the 90% software margin businesses are gone.

• 16:28Speaker 00

  I, I think Modal has an opportunity long-term to get to 40, 50, 60% margins, but we're never going to get to softer margins.

• 16:35Harry Stebbings?

  What's a wild prediction you have on the future of the inference market that you think many people would disagree with?

• 16:41Speaker 00

  I think one prediction about the inference market is going to split into a lot of different things, because the market got so big in the last, I don't think anyone expected, me included, I don't think anyone expected it to be, you know, so big. It's like 10x or 100x bigger than I ever thought. And that to me means there's going to be so much room for specialization, low latency, high latency, like various types of fine tuning and post-training. I think there's going to be some wacky new technologies that let you do it with way less resources, new hardware, like all kinds of different things.

• 17:06Harry Stebbings?

  I'm really sorry, does that not go against what you just said though about the need to own it all and have that breadth of product? If it's so much larger that you need real specialization.

• 17:15Speaker 00

  Specialization by product. I think it's going to fragment into a lot of different products. Now, we can build a lot of those products and host it all under Modal. And that to me is very exciting, because, because a lot of different, you know, there's going to be a lot of different products that companies are going to need. For one product, they're going to need low latency inference. For one product, they're going to need batch inference. For one product, they're going to need sandboxes, which we have. For one product, they're going to do pre-training their own models, you know, maybe it's a, you know, certain specialized, you know, audio models or whatever. Like, we do a lot of stuff besides LM inference. And, and so that to me, that creates a lot of opportunity to basically kind of rethink what a cloud looks like in the era of AI and kind of deconstruct the cloud and rebuild it for this new era of software.

• 17:55Harry Stebbings?

  Earlier you said about building capacity with GPUs.

• 17:58Speaker 00

  Yeah.

• 17:58Harry Stebbings?

  What's it like doing that today? Is it as crazy as reports suggest?

• 18:03Speaker 00

  So it is pretty crazy. I spent some time in March at GTC Nvidia's big conference in San Jose. I would describe that as like an open air drug market, but GPUs instead of drugs. You're running around, you know, talking to 500 different cloud vendors. You're like, do you have GPUs? Like, please get, and like, you know, in the end you come out, like you do a lot of deals and, and that's something we've had to develop the muscle. I think part of the value prop of Modal is like, our customers don't have to think about that. We do the dirty work of doing all the GPU deals under the hood. We work with 25 different Neo clouds. Or, you know, right now we control like, you know, 0.1% or whatever, I don't even know the number of like the world's compute. But like, my like crazy, like, you know, how I think about the long-term goal is like, as we control more and more of the world's compute, you can aggregate that capacity

• 18:47Speaker 00

  and aggregate demand on the other side and manage that capacity and demand extremely efficiently. So that to me is like something we're actually think we can do, we can fill a big gap.

• 18:55Harry Stebbings?

  What does that allow you to do, being that aggregation layer?

• 18:58Speaker 00

  Well, so we built a lot of our infrastructure ourselves. Like, we, we don't use Kubernetes and Docker and things like that. We built our own file system, we built our own container runtime, we built our own scheduler, we built our own, basically how we manage the, the capacity. And that, that enables us to, to basically treat like all of the world's compute as one big pool of capacity. And so if you think about the fact that there's, we already have many thousand paying customers and over time it just grows and grows. Each of those customers have like very sort of variable requirements or like their, their workflows kind of vary over the day and they have maybe bursts and each individually, they're like very sort of unpredictable. But if you pull all of those customers together, you end up with a very sort of smooth overall demand and that is something we can manage extremely efficiently. And so one of the valid props of Modal, besides like, we can scale up with you, is also, you

• 19:43Speaker 00

  don't even have to do capacity planning. Just come to us, we'll give you 100 GPUs. I think it's so amazing going back to typesafe, for instance, like they, we had talked to them, I think a long time ago before they launched, but they launched overnight on Modal and we, we weren't even aware of it. They just like scale up and we gave them a ton of GPUs and it just happened automatically. So, so that magic, I think, is, is something that is, people really value with Modal. It's like, we can give them a lot of GPUs on very short notice and we can handle that sort of variable, like if you go to us, you don't have to lock up, you know, like a rectangular block of GPUs over three years and you have to know the exact number. Just pay as you go, you scale up and down, you pay per GPU second.

• 20:19Harry Stebbings?

  How do you do GPU buying in terms of forecasting then? Cause you don't want to have an insane excess of supply just sitting on your books.

• 20:27Speaker 00

  Totally. The GPU lead times right now is about three to four months. So we basically do a straight line or exponential line extrapolation and we look at and aggregate across all our customers. We have a very diversified set of customers. You can actually look at the demand and aggregate pretty well and predict based on monthly growth rates, which have been about 30, 40% month to month for the last 12 months. And you just project that, you know, three to four months into the future, you end up with like two to three X. You go out and, you know, buy that capacity and make sure to ramp up and, and sometimes.

• 20:54Harry Stebbings?

  Can you just buy that capacity?

• 20:56Speaker 00

  You can, yeah. I mean, I think there's a little bit of like a misconception that like we're out of capacity. I mean, Nvidia is like shipping like an insane amount of GPUs like every month. I don't know how many hundred thousand Blackwolves are getting installed. Prices are up for sure. You have to pay more to get the same amount of GPUs. And I don't want to say it's like an efficient market, but if you're willing to pay more than other people, you can get a lot of GPUs.

• 21:15Harry Stebbings?

  Is there a price at which it doesn't make sense for you? Of course there is, but at what point?

• 21:20Speaker 00

  I don't think so. I think in fact, like, we're actually more long than we're short GPUs, because, you know, we, we can charge a higher price to our customers. Like, there's effectively a market price and it's like different dynamics, because we lock up longer term reservations and rent them out on slightly shorter duration. But, you know, if, if the underlying price goes up, people are also willing to pay more.

• 21:36Harry Stebbings?

  What happens to the price over time? Your H100s were meant to depreciate and go down.

• 21:41Speaker 00

  I have no idea. Yeah. I mean, and like, I mean, actually like, it's funny.

• 21:44Harry Stebbings?

  Well dude, if you have no idea, what am I meant to have?

• 21:48Speaker 00

  Did you see Jensen yesterday? He was in London, actually. Someone asked him this question. He's like, well, obviously like supply is going to catch up with demand eventually. And then we'll see what happens with pricing. It might happen in a year. It might happen within five years. He said exactly the same thing I always tell people like hardware prices, like it's like gravity. Hardware prices always go down in the very long run. Right now, we're in a very, you know, there's a supply shortage and you know, that means that the prices have gone up. They may continue to go up for another year, two years, five years. I don't know. But eventually it will come down.

• 22:15Harry Stebbings?

  How early are we? Because like, you know, I run Instinct for everything. I have over 100 automations on Instinct, doing things that are just absolutely wild, from buying concert tickets to planning shows to helping with like medication for my mother. The amount of compute I am using is Jevon's paradox times 100.

• 22:33Speaker 00

  Yeah.

• 22:33Harry Stebbings?

  If that is equivalent for actually many people in society.

• 22:37Speaker 00

  Yeah.

• 22:37Harry Stebbings?

  Because it's accessible within WhatsApp and what. How early are we?

• 22:41Speaker 00

  I think we're very early. I think you're saying the same thing. I mean, yeah, Jevon's power, whatever. Like, I think there's just so much latent demand for these things. And, you know, I think, you know, eventually we're gonna start to run up against these capital constraints, right? Like, there's interest rates are going up, like, we just can't build data centers fast enough. Maybe that's good. I don't know. Like, I think in a way, like, you know, it's a guarantee against like overbuild, which, but I also don't know if we can overbuild these things. There's just so much demand for it.

• 23:06Harry Stebbings?

  I don't think you can overbuild in the next five years.

• 23:08Speaker 00

  Probably not, no. I think what could happen is like, people realize, you know, Instinct is a good example, like allegedly, they don't, you know, charge or they don't make revenue yet. So I think it's a good example, but like clearly Instinct can make a ton of money in the future. But so, you know, that's a dynamic in the market. There's a lot of companies that are not yet making money yet, and they're using a lot of GPUs. They just have to eventually start to make money. But like, that lag could take a while, right? And that, we might run up against that.

• 23:33Harry Stebbings?

  You mentioned that the specialization that comes within the inference market, and we spoke about Nvidia there, we're seeing more and more specialization within the chip market. Is Nvidia's business today stronger than ever, or actually weaker than ever, as you see the fragmentation of the market into very specialized players from Cerebras to Etch to Olex to Fractal that weren't there before?

• 23:55Speaker 00

  I think you're trying to phrase it as like one versus the other. My view is like, I think Eric Fisher was actually, it's funny, like, the same thing, like, all of these things are gonna grow. Like, I think Nvidia is gonna keep growing, they're gonna keep shipping amazing chips. I think there's also gonna be like Cerebras and all these Etched and all these other ones, like shipping specialized chips, and they're also gonna grow. So I think there's gonna be markets for all of it.

• 24:16Harry Stebbings?

  So why is Cerebras down 30%?

• 24:17Speaker 00

  I don't know. I don't follow really the stock market.

• 24:20Harry Stebbings?

  You don't follow the stock market?

• 24:21Speaker 00

  No. I'm in like a very passive, you know, buy the index, mostly because of my own time. Like, I don't feel like I have the energy to follow the stock market.

• 24:28Harry Stebbings?

  To what extent is CUDA the moat that everyone says it is for Nvidia?

• 24:31Speaker 00

  I actually, I think it's a little overstated. I don't think CUDA itself is the moat. CUDA is actually kind of annoying to work with. It's like a pretty annoying programming model. But I do think all the Nvidia, the ecosystem is. Like, I think, you know, all the kernel optimizations and all this stuff that, you know, every, like Torch always supports Nvidia much better than anything else. And, and the open source engines like VLM and SGLang, because of that, they always supported much better. So like, everything is Nvidia first today. And that's probably gonna continue. It's like funny, for the last like 15 years, I've been saying, you know, like, next year is the, you know, it's the year of non Nvidia accelerators. It never keeps happening. I'm always wrong. Nvidia has just, you know, shown to be incredibly good at having that staying power and just dominating the market. We'll

• 25:13Speaker 00

  see. I mean, there's like Tranium, there's TPUs, there's AMD, there's a lot of other stuff that does look quite good. And they're catching up. But, you know, I still think they're quite behind.

• 25:22Harry Stebbings?

  To what extent are the Neo clouds a friend? Because they're partnered with you in a lot of cases, I'm sure, as you mentioned, I think 25, you said, or a foe? You know, I had the founder of Nabya on, and he was like, we're coming for the inference market. Like, we need to own full stack. And I don't mean that against him, I totally understand it. But are they friends or are they foes?

• 25:42Speaker 00

  I feel like everyone in startup land is like a friend and a foe at the same time. They have this like weird sort of, you know, relationship with everyone. I think some of the top Neo clouds, Nabya's included, they are trying to move up the stack. I'm personally somewhat skeptical. I think it's like very hard to be good at like your core business and also trying to move into different market at the same time.

• 26:00Harry Stebbings?

  Why would it be hard for them? Like, what's the bare case on them being able to move into the inference layer efficiently?

• 26:05Speaker 00

  I mean, I'm biased, but like, we spent the last five years building, you know, an incredibly complex infrastructure stack. I think it's very, very hard to replicate what we built.

• 26:12Harry Stebbings?

  What's the hardest thing?

• 26:13Speaker 00

  All the code and, you know, everything around the file system, the container runtime, the scheduler, like, building the system that can, you know, place like millions of sandboxes every minute, you know, scale up and down many, many thousands of GPUs, you know, power hundreds of thousands of tasks running concurrently. These are, these are very hard engineering problems. I mean, I'm an infra geek, like, I love that shit. It's so much fun to work on it. But like, these are hard problems.

• 26:37Harry Stebbings?

  Is Nabya a better business than Corevive?

• 26:39Speaker 00

  I actually don't know. Like, I don't know. I think they're both. Like, they're executed extremely well, both of them. I have a tremendous respect for what we've done. I think at the, at the end of the day, like, the thing that I have the most respect for is actually more on the financial engineering side. They're very good at that kind of stuff.

• 26:52Harry Stebbings?

  Why do you say that?

• 26:53Speaker 00

  Because I think a lot of the constraint for building a Neo cloud very quickly is on the financial side. You need to be very good at, you go lock in like a long-term customer contract, then you go raise a bunch of money against it, then you go buy the chips, then you deliver the chips, and then you pay off the debt, like, over the next few years. Doing that sort of dance with the financials, like, is kind of an interesting game. And Corevive has done it exceptionally well. It's a capital game. It's a financial game.

• 27:18Harry Stebbings?

  When you move a layer beneath them, we spoke about Jev, who obviously worked with Modal, we see incredible movement from the open source community, which has been exciting.

• 27:27Speaker 00

  Yeah.

• 27:28Harry Stebbings?

  But then you also see Haiku and Anthropic's newest models being incredibly performant and incredibly cheap. What's the benefit of open models if frontier models are almost as cheap and as efficient?

• 27:41Speaker 00

  I think open source is always gonna be, there's always gonna be great models coming out. Let's also remember, like, the open source, the open source models, they're all moving into licensing models. So like, they're getting better at capturing the value of those models. And I think that means they're gonna have more funding to train better models. And I really hope there's gonna be European and US models, because I don't think it's a good situation that we have so many Chinese models. I mean, they're, obviously, I have tremendous respect for all the Chinese labs, they're extremely good at what they're doing. But I think it's good for the world if there's, you know, more power spread out. But anyway, going back to the question, I do think that open source, there's always gonna be people who wanna fine tune, wanna have more control over their models and sort of tweak the parameters, like go low latency, high throughput, like whatever it is. And open sources kind of play a big role in that. It's like Windows versus Linux.

• 28:24Harry Stebbings?

  With, I am, sorry, with the greatest of respects, do you think Europe will produce a competitive open source model?

• 28:30Speaker 00

  Yeah. I mean, I'm, I love Europe. I grew up in Europe. I grew up in Sweden. But, you know, I do think that like Europe does struggle with, you know, accumulating large amounts of capital. I think both of those things are things that Europe struggles with. And that is something that China's done really well. They've accumulated massive amounts of human capital. And US obviously has very, you know, very good at like raising enormous amounts of money and like training very large models. I don't know if Europe has either of those.

• 28:56Harry Stebbings?

  Does it matter if Nvidia owns the open source model layer in the US with first poolside and now reflection?

• 29:04Speaker 00

  I think Nvidia is very smart to focus on the ecosystem, building up an ecosystem. And I think that includes like propping up a lot of open source models. And I think they probably saw an opportunity to pick up open source models. These companies are very resource intensive, right? Very CapEx intensive. And I think it's smart of Nvidia to like buy some of those and sponsor them effectively, in order to create like American-built models. By the way, I want to take back like one thing I said. Europe does have an insane amount of human capital. I do think what Europe is very bad at is like aggregating them and putting all of them at the same company. That is something I think US is very good at.

• 29:41Harry Stebbings?

  And I think inspiring a mindset of ambition.

• 29:43Speaker 00

  Yes.

• 29:44Harry Stebbings?

  And huge, huge scale. I think to the point that you said earlier, which is like, oh, I didn't have the belief in myself. I respectfully think if you're in the US, you might have been surrounded by influences that told you to start a company earlier.

• 29:55Speaker 00

  Yeah, yeah. I mean, it's almost like too much on the other side to that point.

• 29:58Harry Stebbings?

  Oh, when you're four, you're encouraged to start. Leave school, drop out. Kindergarten wasn't worth it.

• 30:03Speaker 00

  Exactly, yeah.

• 30:03Harry Stebbings?

  I totally agree with you. I do want to talk about, you know, we said about models and Jev in particular. Are we seeing like the unbundling of models on a like per function basis, where Jev is obviously very good for its certain tasks?

• 30:15Speaker 00

  I think so. And I think that's a function of what I talked about earlier, where like the market for inference is so large. And that, you know, when a market is like, you know, billion dollars, like, you're not gonna have too many sub-markets. But when a market is starting to get 10 billion, 100 billion, whatever, right? Like, you're gonna have a lot of different sub-markets. And, and Jev does classification and things like that, regression type things, very, very well. And there's a large enough market for that.

• 30:35Harry Stebbings?

  Okay, welcome. It's your first day as a partner at 20 VC Fund, and we're in the Investment Committee. And very kindly, we have the opportunity to invest Jev. We're all in on Jev's new run.

• 30:45Speaker 00

  All in.

• 30:46Harry Stebbings?

  What's, what's the bull case for Jev being worth 100 billion?

• 30:49Speaker 00

  I told you before, but like, I think the brand and the community and the movement around, you know, this, just to sort of, everything they're doing is so incredible. And that, to me, is like a massive, massive asset in this new age.

• 30:59Harry Stebbings?

  That's a 100 billion dollar company.

• 31:01Speaker 00

  I think there is an opportunity to create a 100 billion dollar company with a lot of specialized models in the inference.

• 31:07Harry Stebbings?

  You would have done it, though, at 8.5 billion?

• 31:09Speaker 00

  I would have done it at 8.5 billion. I think there's a pretty big outcome here. Could be an exit, could be, you know, like a public company, who knows? But I do think there's a lot of upside here.

• 31:19Harry Stebbings?

  I'd love to see him ringing the bell on the New York Stock Exchange. Do you know what I mean?

• 31:23Speaker 00

  Yeah, fantastic guy. Love that guy.

• 31:25Harry Stebbings?

  Is he great?

• 31:26Speaker 00

  I mean, you know, his charisma, his like, you have to create like a personality like around your brand. You have to create this like visual identity. It's obviously not the visual identity I would have picked.

• 31:35Harry Stebbings?

  I hear you, but I think then you should be more loud, if I'm just honest, Eric.

• 31:39Speaker 00

  Modal?

• 31:39Harry Stebbings?

  No, well, yeah, but you.

• 31:41Speaker 00

  Yeah, I mean, that's possible, right?

• 31:43Harry Stebbings?

  Like, I don't think there's like a personality-led cult from Modal from your perspective.

• 31:47Speaker 00

  I think that's a fair point of criticism. I think I could be out there even more. I tried to tweet, I tried blogging. I've been kind of bad at that recently.

• 31:53Harry Stebbings?

  No one gives a shit about blogging.

• 31:54Speaker 00

  Yeah, maybe right. Maybe I just need to like go more unhinged on Twitter. It's like fun related marketing, basically. Like, in the early days of Modal, like, that was a big part of our growth, right? Like, me just like tweeting all the time about what we're building, and I think that's really important. I mean, every company has to find its own sort of, you know, go-to-market strategy. But in the early days, like, we spent a lot of time just talking to people on Twitter, just like hitting people up. Tried a product, what do you think? Half of them ended up angel investing, you know, they're now supporters of Modal. And, you know, you have to lean into what you're good at, and in the early days, I did a lot of shitposting.

• 32:24Harry Stebbings?

  Do you know, for every follower that followed me before 50,000, I would send them a personal, like, thank you message.

• 32:29Speaker 00

  That's amazing. You typed it out yourself?

• 32:31Harry Stebbings?

  Every night from 1 till 2:30 a.m.

• 32:33Speaker 00

  That's amazing.

• 32:34Harry Stebbings?

  And I'd say like, I see that you're from Sweden, I love the Grand Hotel, let me know when you're in London. And I would send like 50 to 100 a night.

• 32:41Speaker 00

  That's dedication. That's amazing.

• 32:42Harry Stebbings?

  No, but it was the customer acquisition flywheel.

• 32:44Speaker 00

  Yeah.

• 32:45Harry Stebbings?

  Like, they would go into the office and they'd say, and be like, wow, you know, this guy, he'd send me a message and like, you should listen to his show.

• 32:50Speaker 00

  Yeah, it's smart. I love what you've been doing in terms of building up this like media brand. It's fantastic.

• 32:56Harry Stebbings?

  Neil Maitre has a great thing, which is like, how can I 10x the customer experience? And actually, like, let's do it. Fuck it, let's play a game. How do I 10x the current Modal customer experience?

• 33:06Speaker 00

  I think the biggest thing we need is, we need way more products in Modal. Like, we want to create a basically comprehensive experience of anything you need to do in order to build an AI application should be a product inside Modal. The other thing we can do is hiring way more FDS and way more sales reps. I will say we've been behind on that, but we should hire like way more people that reach out to you personally and say, hey, I saw you get started in Modal. I saw you're working in the biospace. How can we help you? Here's some bio examples, you know, protein folding, whatever, like, we work with a bunch of other similar companies. You seem skeptical.

• 33:37Harry Stebbings?

  But no, I don't at all. I'm actually just thinking about like, I like the product ambition, but I go, as a European, it goes, wow.

• 33:46Speaker 00

  We're in the B2B space, so I think it's like, you know.

• 33:48Harry Stebbings?

  But do you worry about being stretched too thin?

• 33:50Speaker 00

  Yeah.

• 33:51Harry Stebbings?

  To your point on like, you know, why can't Nebius do what you do so efficiently? Because you're so good and you've spent so much time. As you expand into all the specialities, there are players in each of them who've been doing that for years, where I'm like, oof.

• 34:03Speaker 00

  I don't think that's true. I don't think they're very good, a lot of them. But, I mean, I sort of agree with your higher level premise. Like, if there's anything that's like super critical and never goes away, it's prioritization and resource allocation, right? Like, you can't boil the water and try to do everything at the same time. You need to be extremely ruthless. And having a multi-product strategy, I think is a very hard balance. Like, when do you branch out into second product or third product, right? Like, it took us four years to see success with our second product, which was Sandboxes.

• 34:28Harry Stebbings?

  Four years to see success with your second product? But you're five years to a billion in revenue.

• 34:33Speaker 00

  Yeah, so we launched Sandboxes in 2023. Didn't see a lot of success in the early days. I mean, there was like some success, you know, it wasn't horrible. But, you know, it was a relatively insignificant part of our revenue up until summer of 2025, when Models, I think, like, saw the 4.5, one of those, like, they just got really good at generating code and building whole apps. And then it just exploded. I mean, Sandboxes today is a 300 million run rate business, about a third of our revenue. And so that's been a kind of a crazy journey. And now we're thinking about, you know, what's the third and the fourth? We just launched a training product. I'm super excited about that. Working on batch products, working on reinforcement learning, we're working on all kinds of other stuff. And so that evolution into becoming a platform, it's actually there. Like, if you go back to the very early decks of Modal, you know, I put together some just for my own thinking, it was all there.

• 35:18Speaker 00

  It's like, we had this like market map and all these, you know, it ended up being very different products than we thought. But it's so important for me to create like, you know, to focus on a category and focus on a set of solutions, not just like be a single widget vendor.

• 35:30Harry Stebbings?

  What do you know about the Sandboxes market today that you wish you'd known when you started and released the first product?

• 35:36Speaker 00

  It actually is like one of those products. I think one of the benefits of being in infrastructure, but also one of the drawbacks in a weird way is like, you kind of just have to trust your gut on like, what are like important primitives? And just build like amazing billing blocks. I think we're in the space of like providing billing blocks. We try to look at like, what do engineers need? And not like listen too carefully, because like they'll ask for like all kinds of random stuff. We kind of distill it down into like, what are some of the billing blocks? And we put out a serverless function product in 2021. It saw success in 2023 with Gen AI inference. We put out a Sandbox product in 2023 because we saw a lot of people using LLMs to generate code. And then it saw success in 2025, like I said. So a lot of like how we think about building products has always been kind of like, let's just put out like good billing blocks.

• 36:20Speaker 00

  And then it exploded. But like, to answer your question, it was reinforcement learning, it was vibe coding, background agents, and maybe some other stuff too in the future. Those were things we actually didn't anticipate. So I think, I think infrastructure is often like that. Like, we didn't anticipate Stable diffusion when we started building our serverless function product. It just happened to be the killer app.

• 36:38Harry Stebbings?

  What's your takeaway from that? The only thing is that matters is you've got to stay in the game long enough for your timing to be right?

• 36:46Speaker 00

  Sometimes, I think that's right. I mean, we've definitely been extremely lucky in certain ways with timing. Like, we put out products like right before, we started the company in 2021. And then, you know, Stable diffusion and ChatGPT came out in 2022. We had really good timing with that, right? Just created so much demand and we're very well positioned. But some of it is also like with infrastructure, like, again, like, I think it's about like building products that, you know, you anticipate will be useful in the future. And from your own experience, are things that you always wanted to see. I think you have to kind of trust your gut in that.

• 37:13Harry Stebbings?

  You said that about resource allocation and that being very, very important as you think about this breadth of products. Where did you allocate resources where with the benefit of hindsight you wish you hadn't? And how do you reflect on that?

• 37:24Speaker 00

  I think we should have allocated more resources towards LLM inference like earlier. I think we're a little bit on the sidelines for a while. We didn't realize how big open source inference would be. And we thought it would be kind of a race to the bottom, just a commodity space. And then DeepSea came out and we're like, fuck, like, we gotta move very fast. And so we staffed up a team immediately, you know, went from like, you know, one or two people working on this to like 30 people 12 months later. And now we're one of the top three providers.

• 37:49Harry Stebbings?

  Jason Lamkin, dear friend of mine who I do a show with every Thursday, he always says that now we've reached peak open source LLM inference usage. We're going to see frontier providers bluntly provide incredibly cheap products that they are now. U.S. enterprises don't want to use Chinese models, that will continue. And so actually, with those two core prevailing wins, frontier will actually research and we will see a reduction slash plateauing of the OS LLM inference market.

• 38:17Speaker 00

  I think that's a little bit of a fixed pie size mentality. Like, I think, you know, with all due respect, I do think both spaces will grow 5x, 10x, 20x over the next 12 months and beyond. Like, and so like, it's hard to argue like, you know, which one's going to be bigger than the other. But I think both will grow like in, you know, orders of magnitude over the next few years.

• 38:34Harry Stebbings?

  5x, 10x, 20x over the next 12 months?

• 38:37Speaker 00

  Yeah, for sure.

• 38:38Harry Stebbings?

  You just hit a billion in revenue.

• 38:39Speaker 00

  Yeah.

• 38:40Harry Stebbings?

  Well done.

• 38:40Speaker 00

  Yeah.

• 38:41Harry Stebbings?

  Does that feel pretty cool?

• 38:42Speaker 00

  It feels pretty cool. It's, you know, like, I don't know, like, I'm just like, you know, Swedish guy that, you know, grew up in a random. For me, it's like, these numbers are absurd, but like, yeah, like, it feels great.

• 38:53Speaker 00

  It's so much money.

• 38:54Harry Stebbings?

  Eric, you're so, do you know, I wasn't expecting you to be so like likeable and cool.

• 38:59Speaker 00

  I don't know, like, it's like a lot of zeros. Like, how many zeros are in a billion?

• 39:02Harry Stebbings?

  It's a lot. Your wealth manager will tell you. When you look at that, where will you be in 12 months?

• 39:09Speaker 00

  I don't know. What I can say is we've been growing, we grew 15x in the last 12 months. So you can extrapolate that. I mean, I don't know, like, at some point we start, you know, like, markets just get very big and they start to slow down a little bit. But with the growth rate right now, like, the growth rates are not slowing down. Like, we're growing 30, 40% every month.

• 39:25Harry Stebbings?

  4 billion?

• 39:26Speaker 00

  I hope to be way beyond that.

• 39:28Harry Stebbings?

  With the greatest of respects, 15 billion then feels like quite a cheap price. Like, I'm an investor, so this is now my ballpark. If you think you're going to be at 4 billion, say, dropping, I don't know, a billion two to the bottom line, then they actually only paid, what, 14x end of year, next year, bottom line, 3x top line?

• 39:47Speaker 00

  Yeah, it's kind of cheap.

• 39:48Harry Stebbings?

  That feels pretty cheap.

• 39:49Speaker 00

  I think it's cheap. I mean, like, I wouldn't do this if I didn't think we could grow and become like a generational company. I think there's so much upside. I think this is one of the largest markets opportunities that's ever existed. I think that the demand for compute, the demand for AI applications, it's just, it's going to be enormous. And they're all going to need a place to run, and I hope a lot of them are going to run on Modal.

• 40:07Harry Stebbings?

  What revenue line do you not have today, or is tiny, that you think will be very significant in three years' time, five years' time?

• 40:15Speaker 00

  That is a good question. I think training is something we just launched. I think that could be very large. I hope that could get to 100 million run rate in the next six to 12 months. Post-training, similarly, I work in a batch jobs. I'm very excited also about a lot of like sort of traditional, like data warehousing stuff, databases, workflow orchestration, feature stores, like vector database, and there's just so many parts of this. And they all kind of fit together very nicely, and that, to me, is like what I'm so excited about. It's like, once you start building in this space, there's so many natural adjacencies. Like, this is like a problem with me. It's like, I get excited about, so I have like no lack of ideas. Like, at Modal, like, we have so many ideas of things we want to go. I would love to get into continuous integration. That's like a very interesting space. Agent harnesses, maybe we should train models, maybe, you know, this is 5,000 directions, you know?

• 40:59Speaker 00

  And that's like my ADD brain, like, wants to run in all of those directions. You have to be obviously ruthless with prioritization and only take on like one or two things at the right time. But, but there's so many different directions we can go in.

• 41:09Harry Stebbings?

  It's amazing that your wife calls you for decisions. She must get a very incoherent answer.

• 41:15Speaker 00

  I know, I know.

• 41:17Harry Stebbings?

  I just wanted some curtains, darling.

• 41:18Speaker 00

  Yeah, you know, with the curtains, I just like, you pick one of them. We've seen Simpsons and like Rainy Wolf Castle becomes the president, and they're like, which one do you want to pick? You know, one to seven. He's like, I was born to lead, not to read. Number four.

• 41:33Harry Stebbings?

  Yeah, can I ask, we've seen this real shift, I think, in emphasis, but also in resource allocation from pre-training to post-training. How do you feel about that? And do you think that is the new normal?

• 41:45Speaker 00

  I don't know. I think post-training works because there is a lot of tasks that people do in real life that have fairly finite sort of feedback mechanisms. So coding is like a great example, right? Like, you can do coding with reinforcement learning pretty well, because, you know, you can run code in sandboxes. And a lot of labs are running modal sandboxes for that exact purpose. Start to look at cybersecurity is another area. Math, obviously, with Lean, I mean, we've seen some fantastic projects. I think it's kind of incredible, all these, like, OpenAI proofs the other day. So law, maybe to some extent, you can, you know, do like eval. So I think post-training right now, like, there's like such incredible focus on it, because you have all these tasks that traditionally only humans can do, but are actually well within reach for agents and for LMs. But

• 42:28Speaker 00

  like, I don't know if it extends beyond that. Like, I don't know. Like, there's a lot of tasks out there that are like, have way longer feedback loops, that I don't know if, like, post-training quite yet is within reach. A lot of people ask me, like, what's going to happen with software engineers in the long term? And I think, you know, we're probably going to automate everything that an agent can do within 24 hours or a week or something like that. But I kind of feel like, you know, engineers, like, they work on a longer time scale, and they have feedback loops that are longer. So I have a feeling, like, reinforcement learning, we're going to start to run into some limitations around that. But I've been wrong for so long, so maybe I'll be wrong, and this keeps going. And eventually, we can do reinforcement learning on things that take six months for a human. I don't know.

• 43:04Harry Stebbings?

  What does the day look like in three years for an engineer?

• 43:07Speaker 00

  I mean, I'm extremely bullish on software engineering. I've been coding for 30 years, and I've seen so many different changes with, like, programming languages, and the cloud, and, you know, so many different frameworks. And every single time we make programmers more efficient, it just increases demand for software. There's so many parts of the world that desperately need software. And so I'm very, very bullish on software, and the need for software engineering. And I think one of the biggest misconceptions from the outside is that developer is about, like, translating from English to code. Like, that has never been in, you know, the job of software engineers. It's like to understand the requirements in the first place, and be kind of an interface between the humans, you're building for humans at the end of the day, and like, trying to figure out, like, what does that even mean in terms of processes and workflows? And that continuously moves up in the stack,

• 43:49Speaker 00

  you know? Back in the 60s, we used to write assembly and punch cards, and then we moved to COBOL, and then to C++ and then to Python, and now we're using agents. And that's just like one, like, it's definitely like the biggest thing that I've seen in the last 30 years. But I do think we have many, many analogs and many parallels throughout the history of software and computers. To me, that makes me feel like, you know, software engineers are going to be fine for the next 10, 20 years.

• 44:11Harry Stebbings?

  How much money do you spend on coding agents a month at Modal?

• 44:15Speaker 00

  I think a half a million or something like that.

• 44:17Harry Stebbings?

  How many engineers do you have?

• 44:18Speaker 00

  150.

• 44:19Harry Stebbings?

  Dude, that's so worrying, you know?

• 44:21Speaker 00

  You want to, should be token maxing more?

• 44:23Harry Stebbings?

  There should be 10x that.

• 44:25Speaker 00

  Yeah, maybe. I don't know.

• 44:26Harry Stebbings?

  Brandon McCaw, that they spend 3x their human salaries on inference.

• 44:32Speaker 00

  Yeah, we're not quite there yet. But I will say, like, our software engineers are extremely agent pills, including myself. I mean, I write code with agents, like, all the time.

• 44:38Harry Stebbings?

  But I think, like, the big question, if you're looking at, like, an anthropic IPO, and don't worry, I'm not doing a Bloomberg and, like, pulling you into, like, what do you think of the anthropic IPO? I hate those ones.

• 44:46Speaker 00

  Great. I think it's great.

• 44:48Harry Stebbings?

  Yeah, it's great. It's, no one in AI is like, oh, not a fan. Everyone is against it. Go. But I do think a big, the mother load, so to speak, is Claude Code. It's $60 billion of revenue. It largely kind of dictates the $2 trillion price. And you look at Marc Benioff, who says that they spend 5% of engineers' salaries, $300 million, on Claude Code today. Now, if that comes way down, as efficiencies improve, you name it, that's a challenge. Or will that go up as it just eats more and more of engineers' workflows?

• 45:22Speaker 00

  Yeah, it's just going to eat more. I mean, like, again, like, we've seen this so many times. Like, you make something more efficient, you make something more powerful, it just unlocks, like, five new use cases, and then demand just goes up in the end. Like, that's just the history of, like, the last 50 years of computers and software. But like, I wouldn't be here if I wasn't such an optimist. That's why I started a company. You know, like, I'm just like the biggest, like, optimist that there is in the world about software and computers. And like, I just love this shit. And I think it's just going to keep growing.

• 45:46Harry Stebbings?

  The data market is an interesting one. We have so many players that have scaled so fast.

• 45:53Speaker 00

  Yeah, it's incredible. If I was 20, and I just wanted to make a lot of money, I would go out and start an environment company and just sell data to Frontier Labs. There is so much money to be made in that space. It's kind of incredible.

• 46:03Harry Stebbings?

  Let's go a layer deeper. What would you do next? You specialize on a specific market?

• 46:07Speaker 00

  I mean, the coding space is where you see the most demand right now. Like, if you can sell, like, code environments to the labs, like, you can make a lot of money. There's a big space in that.

• 46:15Harry Stebbings?

  Still?

• 46:15Speaker 00

  Still, yeah. Yeah, I meet startups all the time. I angel invested in a bunch of that. I mean, they're incredible businesses. What I will say, like, my one piece of advice is, like, you make a lot of money today, but like, is this a venture fund? Like, do you want to get on the venture treadmill? I'm not sure. Like, I think these are companies that are going to make a lot of money today. I don't know if they're going to make a lot of money in the very long run, but like, who cares? Like, you know, take the money. It's like, great money. Like, it's a fantastic business today, and that's all that matters.

• 46:38Harry Stebbings?

  I think there's data marketplaces, and then there's data and services. And when you look at the leading providers, they started as the data acquirers, and then just sell you the data. And that's kind of it. And I think they've really gone full lifecycle now to deployment, implementation, evaluation, monitoring, with a real enterprise hand-holding ability, similar to the FDEs, where they will really be that partner to ensure full implementation. That's how you expand margin and have some form of business in the long term.

• 47:07Speaker 00

  For sure. Yeah. And I think it's going to be a tough business in the very long run. But like, today, you can have extremely good cash flow selling these data sets.

• 47:13Harry Stebbings?

  Can I say, when we think about that kind of implementation, working with partners so closely, you've said, and Lynn has said too, from Fireworks, about the importance of owning your own intelligence. Can you unpack how this looks? Because specialized models for companies in this way, kind of jury's still out. You know, we have Harvey, who says that it's fantastic, and it's been amazing. And then you have Legora, who say, ridiculous, the underlying models move so fast, it's the wrong strategy.

• 47:41Speaker 00

  Yeah, for some stuff, it's good to own your own intelligence. For other stuff, it's not, like, I don't think it matters. Like, we have a lot of customers who run proprietary models on Model 2, like, and their customers, you know, they use a proprietary model. Like, I don't think it makes sense for everyone to own their own intelligence.

• 47:54Harry Stebbings?

  Why does it make sense for you two versus not?

• 47:56Speaker 00

  I think for certain use cases, you can take an open source model, and you can fine-tune it, and you can get really good performance. And the nice thing is, you know what the fine-tune model is based on. It's not going to change. Like, they're not going to take away the model from you. It's nice to have that consistency and the ability to, like, continuously, like, tweak it without, you know, the underlying model changing, which has happened in some cases with the Frontier Labs. That's like, you know, that's nice. Like, you know, I support that. But like, I, you know, I think there's many other things that matter to people. You know, owning your intelligence is like, just one thing out of many. Like, I think latency matters. I think cost matter, performance. I think, you know, hackability. I think, you know, being, you know, having a platform of a lot of adjacent services, like, these things matter too. So owning your own intelligence, like, yeah, I'm supportive, but, you know, there's many other things.

• 48:38Harry Stebbings?

  Isn't that kind of going against your business?

• 48:40Speaker 00

  No, I don't think so. I, we-

• 48:42Harry Stebbings?

  I mean, I love the honesty, but like, dude, it would be in your favor to say, yes, every company's going to need it, and we're the partner to help you. I kind of fucking teed you up there, and you-

• 48:53Speaker 00

  Well, I mean, not really. Like, I mean, if you think about TypeSafe with Jav, right? Like, you know, it's a highly proprietary model. Like, I want people to use Jav. I mean, it runs on Modal. Like, so we have many customers, like, that themselves are proprietary model, like, that are hosting on Modal, that are serving their customers. And I'm very, very in favor of that, too. I think the beauty of Model is always that it's like a general purpose platform, and we support so many different things. That, to me, is like, you know, the beauty is, like, you know, we can, if you want to use open source models, like, that's great. Like, we'll help you. And there's many customers that build incredible AI applications on top of open source models, fine-tuning them, reinforcement learning, have a bunch of, you know, adjacent sandbox use cases or training, whatever. But there's a lot of companies that have built highly successful businesses, you know, Suno, Runway,

• 49:35Speaker 00

  TypeSafe, and many others, like, running their own proprietary model on Modal, like, and their customers don't care. And that, I think, is like, you know, puts us in a really good spot.

• 49:44Harry Stebbings?

  I want to ask two more questions before I do a quick fire.

• 49:46Speaker 00

  Okay.

• 49:47Harry Stebbings?

  Model routing, as the dear Americans say, is that a defensible business?

• 49:51Speaker 00

  What do you say in the UK? Routing?

• 49:52Harry Stebbings?

  Routing.

• 49:52Speaker 00

  I love that.

• 49:53Harry Stebbings?

  Well, I mean, we are actually, the original language, America just took ours and bastardized it. But yes, my question to you, is that a defensible segment of this value chain? Or is that a commoditized product that everyone just builds themselves?

• 50:07Speaker 00

  I think it's possible to build a successful business in model routing. I think you can do that today as a standalone product. I wonder if, long term, it has to be part of a more comprehensive platform. At the end of the day, I think what these companies want, they want evals, they want, you know, ways to fine-tune, they want, you know, more control over performance, like latency, throughput, like, all these things. And I think it's like one of those things that kind of makes sense today. Like, these are very good businesses. I invested in OpenRouter personally, and it had a great outcome. I actually think they could have done even better on a standalone basis. But I think in the very long term, it feels like one of those categories, like, you know, but that's my view on everything in AI. It should really be a part of, you know, a larger, more comprehensive set of tools.

• 50:50Harry Stebbings?

  Congratulations, you're on the OpenRouter board, and the acquisition offer comes in. Please make the case for why they would have done that.

• 50:56Speaker 00

  Reject, yeah.

• 50:57Harry Stebbings?

  Yeah, please make the case for why-

• 50:58Speaker 00

  I think OpenRouter, like, the growth rate and the revenue, like, this is, and the brand, frankly, like, they have a really strong brand. I mean, there's a lot of, like, there's 500 other competitors, but the space is growing so fast, and there's so much revenue, I would have told them to keep going.

• 51:12Harry Stebbings?

  Final one. I think a really telling question is, what do you believe that does not go in the favor of your business? And so, for example, I think that seed investing today is kind of dead and bullshit. This idea of, like, two on 10, or slowly build for 18 months.

• 51:29Speaker 00

  Well, it's kind of bad, like, it's kind of bad if you want to make money, right? But it's great if you want to develop a relationship with engineers, or, I mean, with founders.

• 51:35Harry Stebbings?

  Sure. But that goes against what I do. I'm traditionally-

• 51:38Speaker 00

  You're against a relationship with founders?

• 51:41Harry Stebbings?

  No, no, no, no. I'm saying, like, I think the death of seed investing, the two on 10 and build for 18 months, is dead.

• 51:46Speaker 00

  Yeah, I understand what you're saying.

• 51:48Harry Stebbings?

  So what would yours be?

• 51:49Speaker 00

  I don't know. I mean, I think, like, one thought I have is, like, obviously, at some point, this AI stuff is growing so fast, and we're here, and we're going to go to here, and then there's going to be pullback, you know, 20%, 30% in the stock market. Everyone's going to freak out, and like, people are going to say it's the end of the world. I'm almost certain it's going to happen, but like, I'm so bullish, because then we're going to keep going. And like, you know, like, so that would be like one thing that I'm like, you know, there's going to be a pullback. I'm okay with that, because I think the long-term opportunity is so fucking big. It's like so large.

• 52:18Harry Stebbings?

  Do you take secondaries?

• 52:19Speaker 00

  Very little.

• 52:20Harry Stebbings?

  Why?

• 52:21Speaker 00

  I mean, I personally don't need a lot of money. I'm pretty happy with life and I have enough. So personally, I actually support it for my employees, though. It's quite important, actually, as a founder, that you make the equity worth as much as possible. And one of the ways to do that and to tell future candidates that, no, this isn't just paper money. This is real money, is to have a precedent of doing employee secondaries. Now, you can point to last round, we let employees sell this much or whatever and, you know, up to 10%. Like, I think you have to have guardrails. Like, you don't want employees to sell too much. You want them to still be very, you know, have a lot of skin in the game and be very incentivized to make the company successful. But I think it's a way to, like, you know, like, create a very liquid, hard currency out of the equity.

• 53:05Harry Stebbings?

  I totally agree. And as you think about a talent marketplace that's ever more competitive, it's very-

• 53:09Speaker 00

  It's extremely competitive out there.

• 53:11Harry Stebbings?

  Is it nuts?

• 53:12Speaker 00

  It's nuts. It's nuts. I mean, you know, like, the offers we see for, we've lost new grads going to, you know, some of the labs for like, like, talking, you know, 20-plus million. I mean, these are exceptional people, exceptional.

• 53:25Harry Stebbings?

  What makes an exceptional, exceptional new grad?

• 53:28Speaker 00

  You know, like, just fucking sharp people, you know? These are like, I know it when I see it. Like, they're just, you know, they're just extremely hungry, hardworking.

• 53:38Harry Stebbings?

  And where do they go?

• 53:39Speaker 00

  They know everything about technology. I mean, they go to some of the big labs.

• 53:41Harry Stebbings?

  Is that it? They go to OpenAI and Anthropic?

• 53:42Speaker 00

  Yeah, the big labs, yeah. They pay a lot.

• 53:44Harry Stebbings?

  But is that it? Is that where the talent comes?

• 53:46Speaker 00

  There's like a few other ones, but, but, I mean, mainly those people are known for paying very, a lot of money.

• 53:51Harry Stebbings?

  And you won't pay that much?

• 53:53Speaker 00

  We pay a lot. We can go very aggressive. We want to be out there paying 95th percentile for, in the market. And there's like a few companies that I know, like, they're probably going to pay a little bit more. I think we have way more upside in the equity. And going back to what I said about secondaries, I think it's important that, for that reason, also like to create like a real tangible value and the currency in the equity that makes us, you know, our offers seem very, very strong. Plus the fact that we have a lot of upside. I mean, you said it, right? Like, our stock seems cheap. Like, I kind of agree, there's a lot of upside in our stock. So that enables us to not necessarily have to match with the labs, but I think, you know, create a compelling sales pitch for why our comp package is like basically better than the labs. And we're willing to go very far to get the best talent.

• 54:33Harry Stebbings?

  Okay, we're gonna do a quick fire round, because otherwise I could talk to you all day. You have a great angel portfolio. Open Rudder, you mentioned Lovable before. You can put all of your money into only one.

• 54:44Speaker 00

  I love TurboPuffer. I know Simon really well, he's a Danish guy. So you have the Scandinavian connection. Just a fantastic entrepreneur. I just love the business.

• 54:52Harry Stebbings?

  How big can that business be?

• 54:54Speaker 00

  That's a good question. I mean, it is like somewhat specialized. They're doing vector databases. I think it could be a very large category. If I ran that company, I would have 500 different ideas of how to expand into many adjacent things around databases, data warehouses, other types of query, querying system, like, there's, it could be a large category.

• 55:10Harry Stebbings?

  What have you changed your mind on most in the last 12 months?

• 55:13Speaker 00

  Probably the magnitude of the sandbox space. I think it's kind of insane. Like, I look at the revenue and it just keeps going up. And I'm like, well, clearly it has to stop right now. And I think I'm like doing some sort of reverse psychology on the revenue, because it just keeps going up. I'm like, what is going on? It just keeps growing and growing. And like, I've been wrong so many times, like, you know, in a good way, like, you know? And so it's incredible how large that space has gotten.

• 55:33Harry Stebbings?

  What do you think is the most overheated category within AI today?

• 55:38Speaker 00

  Oh, boy. I don't know. I don't think anything is overheated. I will say, like, one of the things that I'm a little nervous about is companies that are dependent on continual infusion of equity capital. I would not invest in them. And there's a lot of them that I, I would be nervous about anything where like, if there's a venture capital pullback, they will struggle to raise more money. I think it's important you raise the, every round as if it's your last round. And there's like a real path towards commercialization and revenue.

• 56:07Harry Stebbings?

  You've got two kids.

• 56:08Speaker 00

  Two kids.

• 56:09Harry Stebbings?

  Biggest lesson on being a good dad and being a good CEO?

• 56:12Speaker 00

  I mean, sometimes I feel like it's kind of similar. Like, you mean like in terms of like how to balance it? Or do you mean in terms of just like being a good dad?

• 56:18Harry Stebbings?

  And what does it take to be a good dad?

• 56:20Speaker 00

  Setting them up for success in life. And I always like think about like the right amount to push the kids. I'm not a tiger dad, but like, I think a little bit, you need to push the kids a little bit to like get them exposure. I don't want to create, you know, in the future, a situation where my kids come back to me and say, "Hey, dad, I wish you'd made me do X," or "I wish you'd made me do Y." But I also don't want to create a situation where my, my kids come back to me when they're 20 and they say, "Hey, dad, why did you make us do X?" Or "Why did you make us do Y?" So a little bit of pushing. I make them play piano. I don't know why. But like, I think it's like good way to like learn something that I hope, you know, when they're 20, 30, they will actually appreciate. They don't like it that much. But I think stuff like that, you gotta push them a little bit, but not too much. My, my parents are very lax and, you know, I discovered math and, and programming.

• 57:03Speaker 00

  And they were like, "Eric, why are you doing so much math? Like, you should go out and play like the other kids." So in a way, I actually wish they would have pushed me even harder, but I pushed myself so hard anyway, so it doesn't matter. So that like right amount of pushing.

• 57:15Harry Stebbings?

  Why did you push yourself so hard? You're, sorry, you're actually from a nation where you are told that it's like bad to stand out. I'm forgetting that word, but I had a Swedish girlfriend.

• 57:26Speaker 00

  Ynta, Ynta law.

• 57:28Harry Stebbings?

  Yeah, where it's like, it's bad to stand out.

• 57:30Speaker 00

  Yeah, don't think you're special.

• 57:31Harry Stebbings?

  Yeah, why?

• 57:32Speaker 00

  But I don't know if that's true. Like, I think there's a lot of misconceptions to Scandinavian culture. I do think there's a lot of like respect for people who follow their dream and like do things. And like, whether, like I said, you know, it's music or writing books or, you know, making furniture or art, like, or being an entrepreneur. Like, I actually think there's a lot of respect for, I think this like, you know, self-actualization and following your dreams is like kind of highly regarded. And I think, you know, like, that's the flip side of having a very lax culture. It's like, you kind of pursue people to follow their dreams. And I don't know, my dream was like doing math and programming. I love that shit, so I did that.

• 58:03Harry Stebbings?

  Unless you're from Norway, where a tax structure exists that basically makes it impossible to start a company.

• 58:07Speaker 00

  Yeah, I mean, Norway has some issues.

• 58:11Speaker 00

  They also barely work.

• 58:12Harry Stebbings?

  Yeah, this is very true. But we do have a sovereign wealth fund.

• 58:15Speaker 00

  Yeah, they are rich.

• 58:16Harry Stebbings?

  Thank God for that.

• 58:17Speaker 00

  Maybe it's like the first post-economic society. I don't know.

• 58:19Harry Stebbings?

  Literally almost-

• 58:20Speaker 00

  In certain, in multiple meanings of the word.

• 58:22Harry Stebbings?

  Final one for you. What are you most excited for? It can be anything. Like, I look at drug discovery for kind of chronic conditions. My mom's got-

• 58:29Speaker 00

  Actually, drug discovery is like one of the applications I think is so incredibly cool. Like, I can't wait to take AI-generated drugs. You know, I'm like old and my skin is getting bad and like, I don't know, like, you know, every time I drink a beer, I feel like horrible the day after. Like, I don't know, give me all the AI-generated drugs I can take. Like, I want to live long. I want to live a healthy life, you know? And I think-

• 58:48Harry Stebbings?

  Do you think that is actually a realistic future?

• 58:50Speaker 00

  I think so. But, but I think with the FDA and other things, it's gonna take a while. But I think there's just so much incredible progress today in like, in AI-aided drug design. I think there's so many cool stuff, so many things.

• 59:00Harry Stebbings?

  Dude, I've so enjoyed this show in a way that I, I honestly wasn't expecting you to be this fun, open, charismatic. You've been amazing, so thank you so much.

• 59:10Speaker 00

  Thank you so much for having me. This is a lot of fun.

• 59:14Harry Stebbings?

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