20VC: Canva Slashes Growth: How Much is it Really Worth | Demis Hassabis and Jeff Dean: Talent Exodus at Google | Revolut's $50BN CEO Pay Package | Elon Musk's $55BN Terrafab

AGENDA: 05:00 Canva's Growth Gets Slashed as AI Costs Explode 20:00 The Great Software Reset: Why 2026 Will Punish AI Hesitancy 29:00 Canva's Valuation Reality Check—and the LP Liquidity Trap 35:00 Google's AI Brain Drain: Jeff Dean Leaves, Demis Steps Back 43:00 Why Google Can't Afford to Cure Alzheimer's 50:00 The Data-Centre Revolt: Can AI Survive the Political Backlash? 55:00 Elon Musk's $55BN Terrafab Bet to Break Free from TSMC 57:00 Revolut's $50BN CEO Pay Package—and the Return of Founder Control 01:13 AI Shopping, Atlassian's Revival, and Airtable's Brutal Sale Reality

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

• 0:00Speaker 00

  There's going to be a lot of people paying the bill in twenty six and twenty seven for a certain amount of hesitancy in twenty three and twenty four. The only way you prove that you're not dying is by growing. It doesn't matter what you think, big guy, you're in this journey for the next twelve months. Buckle up because liquidity will only come at the end of the journey. It must be extraordinarily validating, if you're Jeff Dean, to leave as a non-CEO of a two or three trillion dollar market cap public company and have the stock go down by a couple of hundred billion dollars. Google's efforts so far are B plus, A minus, they're not A plus.

• 0:33Speaker 01

  I mean, this is such an entitled podcast. Oh, poor Anthropic engineer only made thirty five million. I mean, go out to the goddamn Panhandle, no one's making fifty grand.

• 0:41Speaker 00

  When they say it's not about the money, it's about the money.

• 0:44Speaker 01

  Any investment I've made that is not run by a founder is a zero, it's gonna be a zero in this age.

• 0:48Harry Stebbings?

  This is twenty VC with me, Harry Stebbings, and it's my favorite show of the week. Rory O'Driscoll, Jason Lemkin and me, shooting the shit on the biggest news in tech. So what happened this week that we discuss? Canva cuts twenty twenty six growth by a third? Ouch, as AI serving costs blow up. Next, Jeff Dean leaves Google after twenty seven years. It gets worse. Demis Hassabis, the OG of AI, then steps back from Google DeepMind. Also, god, poor Sundar, that is one bad day at the office. And then Elon Musk, as always, comes out with one of the most ambitious projects with TerraFab, where we unpack the jobs that come from it, the first real installment of sixteen point eight billion dollars,

• 1:31Harry Stebbings?

  and just what it would mean for him in terms of structurally not having to beg at the Tower of TSMC. But before we dive into the show today, what's one thing in business that's spreading as fast as AI? AI risk. Every new tool your team signs up for, every vendor that turns on AI features, every new integration, each one, I'm sorry to say, is an opportunity for something to go wrong. And most security programs weren't built for AI's pace of growth. Well, that's where Vanta comes in. Vanta is the number one agentic trust platform used by over sixteen thousand fast-moving companies like Ramp, Cursor, Harvey and more to ensure they're always audit-ready. And now Vanta's helping companies like yours watch for the risks that show up between audits

• 2:15Harry Stebbings?

  across your vendors, your AI tools and your whole environment. How? Well, the Vanta agent works like a twenty-four-seven GRC engineer in the background, finding issues, drafting fixes and cutting vendor agreements time by up to fifty percent. Whether you're a fast-growing startup or a global enterprise, Vanta's here to help you automate your security and your compliance and earn and prove trust. My listeners get a special offer, oh yes, a special offer, one thousand dollars off Vanta at vanta.com/20vc, that's V A N T A dot com slash two zero VC for one thousand dollars off. While Vanta keeps compliance covered, Deal helps you hire globally. Founders scale startups faster on Deal, grow without borders.

• 2:58Harry Stebbings?

  Deal handles the hard parts of global hiring, so you can stay focused on growth. Set up payroll for any country in minutes, hire anyone, anywhere and get visas handled fast. Deal takes care of onboarding, HR, IT, EOR, benefits and compliance. Everything your startup needs to scale quickly, all done fast in one place. It's why more than forty thousand fast-growing companies like Airwallex, Eleven Labs and Intercom trust Deal to move fast and get back to building. Visit deal.com/20vc, that's D E A L dot com slash two zero VC. While Deal builds the team, Framer builds the site. If your team wants a website that looks and feels handcrafted but is still fast as ship,

• 3:43Harry Stebbings?

  Framer is built for exactly that. Here's what I love. Framer is the pro AI website builder for creators, teams and businesses that care enough to get every detail right. The agents close the gap between AI-generated ideas and production-ready website work because it all happens where the site actually lives. It lands on the canvas, stays editable and can be published when the team is ready. So you can build custom code components, create and manage CMS content, optimize SEO settings and ship everything all in one place. The agents bring speed and scale, you bring taste, judgment and control. It's an enterprise-level solution too. Premium hosting, enterprise-grade security, ninety-nine point nine nine percent uptime SLAs,

• 4:26Harry Stebbings?

  which is why the world's leading brands like Perplexity and Miro build in Framer. Learn how you can get more out of your site from a Framer specialist or get started by building for free today at framer.com/20vc for thirty percent off a Framer Pro annual plan. That's framer.com/20vc for thirty percent off. Framer.com/20vc, rules and restrictions may apply. You have now arrived at your destination. Boys, it is another week, we have Jason joining us from Hawaii. What is the ha-woo, you know the like Hawaiian dance?

• 5:04Speaker 01

  The hula, the hotspot, hula means hotspot of AI. That's what, it's an acronym, hotspot of the AI, that's what, that's what it means.

• 5:13Harry Stebbings?

  Boys, we're gonna start with something other than OpenAI or Anthropic today. We're gonna start with Canva, baby. We had Cliff on the show before. Now, Canva cuts twenty twenty six growth by a third as AI serving costs blow up. So Rory, for those that maybe missed this story on Canva, what should they know that they need to know here?

• 5:33Speaker 00

  Sure, yeah, let's start with the facts and then kind of go into the question. The facts are that Canva, large privately-held company in the kind of creative suite space, discloses its revenue even though they're private. And, you know, they were at three billion in GAAP revenue last year. Going into this year, they're growing at thirty percent. And the CEO, Melanie Perkins, disclosed kind of mid-year that they're probably going to be growing twenty percent by the end of this year. So as you say, a one-third slowdown in growth rate, but still a healthy twenty percent. And then the other half of what she said was interesting, which was that they're obviously adding a ton of AI features. Those features cost real money. And part of the reason that she claimed for the slowdown in growth, it was just too expensive to effectively be subsidizing users with kind of cheap AI

• 6:18Speaker 00

  when in fact they're incurring significant costs. So there was an implication there, which I'm actually going to tease out later, I'm not sure I fully buy, which was my growth rate slowed, but if I was willing to lose more money, it mightn't have slowed by as much. So there's an implied statement on elasticity there. But the big picture, and this is kind of, I want to zoom out and ask Jason a question. The big picture on this, and there's three massive creative software companies. There's Adobe, which does twenty-three billion, growing at twelve percent, trading at like three or four times revenue. There's Figma, which is also public, doing a one point four billion, growing at forty percent the fastest. And in the middle, there's Canva, still private, around three point six billion, growing at twenty percent.

• 6:57Speaker 00

  And the big question for all three of them is, and that's why I want to put it back to Jason, who's much more, I've used him, but not as much as Jason, is, is AI going to be a feature they can incorporate? Or is it a new, new thing that makes them obsolete? And to me, that's the meta question. It's not about thirty percent growth versus twenty percent growth because of a little bit of gross margin compression. If that was the only issue, we could talk about that. That's a kind of second-order business model issue. The real question for all these companies, are you thirty on the way to twenty on the way to ten? Because there's a whole new set of companies doing this, and I know Jason, you guys are in Higgs field. Or is this something you can incorporate and kind of survive and continue to grow? So I think that's the question, and Jason, I'd love to get your thoughts.

• 7:39Speaker 01

  I don't know, man, I found it kind of depressing, the Canva stuff, because Canva seemed to me one that obviously AI was maiming. Every ChatGPT release, every Higgs field release, every else, you can do more and more of its functionality in core AI, right? This is what we fear as investors, is that you can do our investments in ChatGPT or Claude, right? That's the ultimate fear. But yet it seems somehow Canva was defying that gravity. It seemed it was, it was a non-issue despite me having churned and Amelia having churned. We churned, this is a tough one. Canva and Notion, both we churned, not because they're not great apps, we just no longer had any need for them in the agentic area, just no need. Canva and Notion did nothing wrong at all, nothing, and we didn't need them.

• 8:20Speaker 01

  But until this, it seems somehow I was wrong, like they were defying gravity. But thirty to twenty in one year, I love Rory's optimism that they're gonna bounce off and get back to thirty or forty next year when they find a few extra tokens under the, under the covers. I think it's terrifying and it's a little, I was hoping they were defying gravity, but it doesn't look like it.

• 8:40Speaker 00

  Defending myself on the optimism charge, because no one ever accused me of optimism. I actually didn't say that, what I said was that's the implication that they're saying. I don't know the answer, genuine comment here. And I'm going to advance the bull case to some extent, just articulate it more. Because again, what the CEO is saying is, look, we can't envelop it in AI because we were using frontier models and they're just casting us a shit ton. And so the first shoe that's clearly gonna drop is they're not gonna continue to spend a whole bunch of money with Anthropic or OpenAI, probably OpenAI, given its images, of course, Rory. But they now bought their own model and are building their own in-house image-focused model, which makes absolute sense. So let's assume they do that.

• 9:19Speaker 01

  Why didn't they do that last quarter?

• 9:21Speaker 00

  I agree, and agreed, let's say they were even a year or two late. Because I think I want to push back to the big question. The interesting question is, if, let's just say they get it done and in six months, their in-house model, which is ninety percent, eighty percent cheaper, is just as good as images as, you know, the frontier models. Then the question still remains, to your point, Jason, do you think they can quarter, and I hate to be vague, stuff enough AI functionality into that product that you would have retained? Or do you, as an pretty active user, say, no, I just prefer to go out at AI native day one? Because that's the big question.

• 9:54Speaker 01

  You know what's scary is something that sounds nerdy is becoming mainstream. Our agents never even suggest these products. That's the danger. And it's not just agents, it could, you know, we talk about AO and GO, what does Claude and ChatGPT say? But it's worse than that. As we become agentic, our agents, we can't choose everything ourselves. We built our own ad server and ad generating network that built our own creative and own collateral and serves it to this Astra community. It's all built on our agent. It never occurred to the agent to use Canva for this. It never once occurred to it. And so even some sort of open weight parity, at the meta level, I think what's scary is that, you know, the most exposed part of the market is the prosumer market.

• 10:33Speaker 00

  Yep.

• 10:33Speaker 01

  Everyone is ChatGPT fluent, and if it works in ChatGPT, right, or Claude, you're just gonna use it. And if you believe these Gartner numbers, and I'm out at a big sales source event, they have all the data. It may be that less than ten percent of the enterprise has even deployed an agentic application successfully. I actually believe that, okay, despite what we're seeing in the, because all the hot enterprise AI companies are still serving early adopters and outliers to a large extent. On the prosumer side, everyone's used ChatGPT. And so there's no going back. My related concern is if you compare it to Figma, well, Figma missed the quarter in a sense. Figma traded down 20%, but they burned the tokens. Dylan was clear, our gross margins are going to be significantly impaired going forward because our

• 11:17Speaker 01

  agentic products are being used. It's not identical, but they took the hit, right? And they're public. It's more painful to take the hit when you're public than when you're private. I really don't think Blackbird and Friends are going to beat Canva up if the bottom line is missed slightly. That's an internal decision, right?

• 11:32Speaker 00

  You're right, and there's a lot buried in it. I just want to unpack it again for folks. One is, you made a distinction. Let's talk about the enterprise versus consumer distinction, because you're exactly right. Is that, you know, Figma has, is much more an enterprise product. It's kind of large groups of people building software, coordinating. So even if you automate creativity, you've still got bureaucracy and corporate processes that you make money off in terms of managing workflow. But you're exactly right. Canva is the prosumer shit. I want to generate a flyer. I want to generate a cheap website. I want to generate some kind of content. And that's exactly where AI is the most accessible, because you can just go on and type in, generate me a flyer that says this, and there it is. So you're right, they are more exposed in that sense.

• 12:16Harry Stebbings?

  It goes to the fortnitification that Jason often talks about in terms of the shrink and can, when you have a dinner invite that you can do on ChatGPT and bundle it into your consumer subscription versus an additional tool.

• 12:27Speaker 01

  The nerdier version, Amjad said about Airtable, not about Canva, but he said, his quote on the CEO of Replits quote for Airtable was, no criticism, but the era of no code is over. And no code was a bunch of tools where without developers or AI, we could build stuff. And Airtable was a no-code database disguised as a spreadsheet, right? It was a wonderful product before AI. Notion is a no-code database disguised as a word processor. And Canva was a no-code way to design stuff. It was a breathtakingly disruptive product. I didn't need a designer anymore. I didn't need to know how to do HTML or anything. But the era of no code, of things that we, humans can do without engineering resources, it's slowly winding down.

• 13:11Speaker 01

  And if it's in ChatGPT, man.

• 13:13Harry Stebbings?

  Is it a blessing or a curse that they didn't go public already then?

• 13:18Speaker 00

  It depends on who you're asking. Blessing and a curse for whom, right? Because I was thinking about this a lot, because I knew this question would come up. Because if you think about it, if you're the founders, doing this publicly is just marginally, arguably marginally more painful. So maybe you're happy to be doing this in private, right? What you're really saying is this, let me translate, because we never say this explicitly. When you say, should you have gone public early? What you're really saying is, oh, my God, if I'm the venture guy who did this thing at 100 million, like Blackbird or a couple of them, I think Felices was in early and Matrix was in super early, and then even, you know, the guys who came in at a billion, you must be like, oh, my God, if we'd accessed that 50 billion valuation in 2021, I would be so gone now. And that's really what you're talking about.

• 14:01Speaker 00

  And so, which is why, to be clear, some of the CEOs are a little unsympathetic to this line of conversation, because this is their life's work. Because really, when you say, should they have gone public early? What you're saying is, boy, I wish that the fast money had gotten out while the CEO and the management team would still be there, just in a different forum.

• 14:20Speaker 01

  Good point. The getting out early, it's a critical question for VCs, right? How the hell do I take something? We can talk about IPOs and M&A, but man, our shares are illiquid that we buy. We put them in and we pray, we face Easter, that we'll ever get any cash out. If I'm an employee at Canva or a founder, and the founders already gave away 90% of their shares, they've already given it away. They're on the mission of their life. Maybe in Sydney and Australia, it's easier to retain your talent than in the Bay Area, right? Maybe they're not going to quit and go to OpenAI the next day if you don't go public and make them, you know, a million dollars effective a year in stock. Maybe, maybe it is better to hide. You've built an iconic company that isn't going anywhere. I mean, I'm just playing the devil's advocate, but Rory's point, if I were the founder, if the three of us were the founders, I might want to run this thing like Basecamp, right?

• 15:05Speaker 01

  37 signals, guys, let's just hunker down, we'll increase profit sharing. Probably the VCs wouldn't let you get away with it, but if I hadn't raised a ton on my cap table, it might not bother me so much.

• 15:14Speaker 00

  Yes, and I think one of the totally separate threads is, public markets have to be more attractive, not just for people exiting like the VCs, but also for founders to be able to, you know, kind of reignite and reopen the window. And if, if it's rational to say, uncertain circumstances, it's easy to be private, then that just probably weighs into the calculus when you decide, as Canva could have done, should you have gone public in 2021? You know, again, to repeat, for the most important people in the company, who are the founders, who own effectively the company from a entrepreneurial perspective, regardless of the cap table, I don't know if that matters. I don't know if public versus private matters nearly as much as this is the platform shift challenge of all times.

• 15:57Speaker 00

  And, you know, assuming you do get almost free AI via your standalone model, you've got to figure out, to Jason's point, a product in the next 12 months that's as easy and as accessible to your user base, because you know the segment of the market you're addressing that. It has to be as easy to that user base as ChatGPT is to generate the products they generate with it. That's your challenge.

• 16:21Harry Stebbings?

  My point is, I don't even think it's about easy. I just think it's about the bundling of consumer, like real estate of where they spend time. I just interviewed the president of Uber. What is his single biggest fear? It's actually the disaggregation of UI or the removal of UI, where you say, I want a car, and ChatGPT automatically routes you to Lyft, Uber, or another provider based on price.

• 16:44Speaker 01

  That's what our agents already do. They just routed us around Canva.

• 16:46Harry Stebbings?

  And so my point being there, Rory, is like, ease doesn't actually matter.

• 16:50Speaker 00

  No, no, you're exactly, look, to be very clear, going back to some, if the AI models become the universal, in ChatGPT, let's say, who was more consumer-focused? If that becomes the universal interface for functionality, then you're exactly right. And all model choices are backend choices, then you never even get the chance. I don't know if it does. I could be wrong. And in fact, this is probably an area where I'm still trying to triangulate. I don't know what things that we do separately in the West, because it's interesting, China, obviously, and mobile, has a single super app for everything, and you do everything through WeChat. But just to pick on two, what I'd call high cognition tasks that are very different, actually the polar opposites. One is creativity, building something creative for consumer, and the second is doing your taxes.

• 17:35Speaker 00

  There is a credible argument in both cases that ChatGPT can suck those revenue up, which is why Intuit was down. I'm not sure I fully believe it, but it's why Intuit are down, and it's what Canva's wrestling with. So it's a super interesting time here. As yet, I'm willing to bet, I could be wrong on this, I'm willing to bet, and you guys from Higgsfield can say it, there's still a role for a company like Higgsfield, which is an aggregator across models, which goes against what you're saying, Harry. That's a company that's saying, hey, Mr. Consumer, you could do this directly on one of the video gen companies, but I'll aggregate the models, I'll give you a slightly better UI, I'll help you with billing, and maybe there is a business on top of the models.

• 18:10Harry Stebbings?

  I don't know if Jason would agree with me. I'd say they're serving two different markets. I think the ChatGPT cannibalization of Canva is me and my partner doing a dinner invite with ChatGPT that we would have done in Canva. And then Higgsfield is actually a business that uses video as a more primary method of delivering their message. And so it's a slightly more prosumer professional, I would argue. Jason, I don't know if you agree with me.

• 18:33Speaker 01

  I think it is. I think you could argue it for sure. Almost all that growth, 700 million in revenue over today, is from this video creation, complex video creation, where you're taking, you're creating functionality out of the models that alone, it's very complicated to harness, right? It's a harness that allows you to do something that's very complicated with the models. Their original model, which was just to aggregate models to make short videos, it is cash flow positive to Rory's point, but it's not an exciting business, right? They stumbled into the bigger one. The tough one, and it's that, whether that whole business, which will shortly be a billion in revenue, it, you know, a lot of it could have been Canva's. If they aggressively got into it, just like I firmly believe a big chunk of Replit and Lovable could have been Figma's if they'd done it.

• 19:14Speaker 01

  It's easy to take shots when it's so hard to run your core business, but I think we're starting to see the outcomes of it being so hard to run your core business in the age of AI. And you've added all the AI stuff. Figma's added, added great agentic features. Canva's a little slow, but they've added it. Even that's, it's just not enough, and you're seeing gravity weigh you down, and it's a tough job today, right?

• 19:36Speaker 00

  I think that's actually a super interesting meta point, Jason. You're right, because I tend to be an incrementalist, but there are times when the world opens up and there's a cravass between the before and the after. And if you make that jump, you got to make it quickly, and there comes a time when the gap is too big, right? And that's what you're saying here, right? And I do, I've come to the conclusion that this could be one of those times. And to some extent, there's going to be a lot of, we saw it at Airtable, there's going to be a lot of people paying the bill in '26 and '27 for a certain amount of hesitancy in '23 and '24.

• 20:06Harry Stebbings?

  Can you give me an example of a Figma or a Canva generation company that has gone, hell, I see this coming, I'm going to move fast, and hell with it, they've done it and done it well?

• 20:17Speaker 00

  Well, I mean, look, the boring one is obviously Inacom. We've talked about a lot, and we were investors, so I don't, but they succeeded and did it. And I think, I'm sure when, after the deal, Tor's own will be the first to say, that was a journey and a wild journey and a hard journey, and he earned every dime. Let's put it that way, you know, so I give him credit to that. But, I mean, I'm just trying to think here. It's a hard one, isn't it? Because the interesting thing is, to some extent, and we'll talk about, for example, at last in a second, one of the big questions is, how much of your business is going to change? And there are some businesses that just by virtue of the software process they automate, there's not going to be as much change. I think, for example, I think accounting, you know, we were looking, we have real interest in the next generation of accounting companies, but it's a fairly slower moving market than, say, individual prosumer creative tools.

• 21:02Speaker 00

  So to some extent, the speed at which you have to move is in part a function of the kind of business you have. You know, I'm just thinking aloud, actually, I will give you some, because they're right on the head. Some of the coding tools, I think even, I think, they didn't have a big business, but I think Windsurf and even, come on, Cursor, were doing something else right at the start, but because they were super small, they pivoted in '22 really fast. I don't have a good, to your point, I take coding as the best apps market, right? The biggest. I don't have a good example of a 2020, 2017, 2018 coding company making that pivot.

• 21:37Speaker 01

  Replits an example. It was frigging in the wilderness for six years until, until it added the models, right? It was a super nerdy web IDE. I think to answer Harry's question, it's a tough question to address as investors and employees, which is, the ones that have accelerated, right? The pre-agentic ones are the ones that were in, that could catch the wave. The Datadogs, Cloudflare, Palo Alto Networks from last week, these were guys that were already, even, you know, I didn't think Twilio would benefit from this. Jeff Lawson saw it when he was on this pod, right? He's like, agents are going to need more. They're going to need more voice and more text. So Twilio, which is your, which was the hipsters, you know, API for voice and data when, when we all met Jeff, it became your granddad's tool, but it was still well positioned for the wave.

• 22:22Speaker 01

  He was holding the boogie board just right, and the wave came in, and he's flying, and frigging ChatGPT is just tumbling, poor Canva. Side over side. And I think in the enterprise, it's happening is just slow. It's just quarter by quarter, it's slowly happening.

• 22:36Speaker 00

  But I want to make a distinction here because I think the data dog example is an interesting one. I think you have to distinguish between it's easier to survive if you're well positioned and don't require a business model change versus if you're not well positioned. And I think the challenge, the toughness of the task facing the CEO of data dog versus say the CEO of Canva are very different. Because if you think about data dog, they sell observability, they sell it to infrastructure vendors. Nothing in their model has changed, except there is now an infrastructure vendor who needs to buy 100 times more data dog than anyone else has ever bought. So all they had to do is show up and sell more. And that's true for all those guys. We were lucky enough to be in J Farg, you can see that cloud flare data dog, all the infra providers. It's not like they're inventing a new thing.

• 23:21Speaker 00

  They're just saying this is the greatest infrastructure boom in history. I sell infrastructure time to make out like a banner. There's some tweaks at the margin on the products, I agree, but fundamentally, that's it.

• 23:31Speaker 01

  There is one, there is one that Captain, obviously, and just so I don't get flamed in the comments too much that did it. And I think there's, I don't know all the reasons, but I can think there's two important reasons. Obviously, Palantir did it. Palantir went from 18% growth to 98% growth, right?

• 23:44Speaker 00

  That's a good one.

• 23:45Speaker 01

  Unprecedented in our lifetimes, right? It may be the one of N or the N equals one. Maybe it was well positioned. The thing was, it really leveraged a combination of outcome based deals and pricing and true F Ds that no one else. We talk about F Ds all the time with our portfolio companies. It is fair to say they're really solution architects or S E's with an F D T shirt. Palantir had people who for a decade and a half were out there deploying business massive change in the field for their customers. So when their customers needed AI, they had the guys to do it, right? And then Alex Karp did the crazy thing, which the V C's talk about, but it's hard for all the company. He did outcome based deals. Give me $2 billion.

• 24:28Speaker 01

  I want a $2 billion contract, but I'm going to save you 8 billion or I'm going to give you six more billion of revenue on the. No one does that outcome. They talk about it, but they just they just pretend that they do it. No one puts a $2 billion deal on the line for an outcome based resolution. And they had both these things that canvas on the prosumer side, but in the enterprise, very hard to change to true outcome based pricing. And to have a suite of F Ds that can deploy AI. I really wonder if the average S A P S E is as literate in the models as they are at Palantir.

• 25:01Speaker 00

  And I think, first of all, I totally agree because we talked infra and now we moved on to apps. And in the apps, I think Palantir is an excellent and possibly unique example of someone who's. It's very interesting because their existing model wasn't that threatened, but it was growing slowly, very government centric. And if you read the book, the Palantir, the Karp biography, huge credit to them in 23, 22, 23. They saw the L L M's and they grocked it immediately. And they said, going back to the thing about making your bets in 23 that come good in 26. They basically said, we're going to put all our wood behind this. We're going to build the enterprise version of the product. I can't remember the code name for it now. We're going to make this bet.

• 25:41Speaker 00

  And you're right, and it turned out that the combination of AI knowledge and F Ds was exactly what enterprises needed. So I agree, that's an example of someone, someone like a Repli had to rethink everything and pull it off. Someone like a canvas still has to rethink evidence and has a lot of pressure on it. Palantir could have chugged along at 20% and been roughly fine with the government. Instead, they grabbed the moment. I'd give them the positive grab the moment award. You with me? It's one where I would argue, unlike a data dog or someone where all you had to do is do the same thing. That's one where you have to give the CEO and team credit. They said, if we turn the crank even slightly on our offering, it will work for a whole suite more customers than we've had. So I agree, I think that's a, that's a good example of grab the moment.

• 26:26Speaker 00

  And I think Repli is a good example of doing the even harder thing, which is shit, I gotta do something else, but if I do it, I'll win. But there's not many, there's not many.

• 26:34Harry Stebbings?

  Ding ding ding. If I, if I just do a quick fire, I don't want to take it back too much, but just a lot of LPs listen to the show and they have Canva in their books and they're going, what do I do with that? How should they think about that, given what we've just said?

• 26:48Speaker 01

  What do you think it's worth? I'd say it's probably worth 12 billion right now. 20% growth at 4 billion ARR in the current public markets and not decelerating. There's some sort of rule of 40 number that's better, but I'd say it's worth about 12 billion.

• 27:02Speaker 00

  You might be right, but I'm going to push it. What's interesting is I can find you companies like that are in 20, 25% gap revenue growth, free cash flow positive, are trading significantly above that. Because there's no existential question. I mean, one of the big things that's happening is like a data dog or I think a cloudflare, J Farg or all those guys, they're mid twenties growth, 20% plus operating margins, trading at 15 to 17 times N T M. But I think the difference is there's no existential question here, which is why maybe I'd answer the question in the following way. If it's 20% and the existential risk is there, then Jason's right, it could be, you know, it could be 12 or even less. If they can transcend that risk, you know, you're still top stop by, you know, you're going to be grounded by reality now because you're not selling Brave New World, but it's kind of 12 and up.

• 27:46Speaker 01

  Listen, I hope you're right. Again, I don't want to be negative. I want to be, I want Canva to defy gravity. But when every single person on Wall Street uses chat G P T, why do you think people won't? And I think existential risk is both reality and perception. Why do you think it won't be perceived as having existential risk? If Monday and HubSpot do, I don't see why they won't see the exact same thing for Canva.

• 28:05Speaker 00

  I'll tell you exactly why, because you're right, in the short term, they will. But if you look at, in the short term, they will, you can't control that though. You can't control what the 27 year old Wall Street thinks, but let's take the example of Atlassian. We had Mike on as well, right? They killed it last quarter. The only way you prove that you're not dying is by growing, to Jason's point, right? The thing that's pleasing about life is if you pull off the important thing, the hard thing itself, then the markets will follow. You're right, right now, it's a very tough time because you're going to, when the existential risk is posed, the only way out is to prove it. So you're right, right now, I think there would be a wide variety of perceptions on valuation that something like a prosumer company like Canva.

• 28:43Speaker 00

  And it'd be hard to peg value and hard to get liquidity at scale, by the way, which is one of the other things about at the margin, a difference between a private company and a public company is when the window shuts and private and the appetite dies, it's very hard to get anything done. So the real answer to your LP is it doesn't matter what you think, big guy, you're in this journey for the next 12 months. Buckle up because liquidity will only come at the end of the journey.

• 29:07Speaker 01

  It's also important, potentially, I mean, I don't want to over kibbitz, I'm not exactly a public company P R expert. But I do think it's important to get ahead of the narrative Rory's describing. I do think that once everyone starts saying that chat G P T is killing Canva because you can make poster size images for free with your, with your subscription. It's just like the dumbest, I think the three of us can probably agree, one of the dumbest AI memes was that everyone would vibe code their own CRM. Even though Harry's had guests that do it, this makes no sense for 99.9% of the world. Okay, you can't maintain it, you can't build the integrations, it's more complicated. Most of the folks that say that have never used a CRM. It's so visceral, the idea that everyone, and that's damn 20 V C show has, has been part of it.

• 29:50Speaker 01

  Bringing in all these guests who are trying to hide slowing growth by, by talking about how they built their own CRM. But I mean, it is taken hold, right? And, and the shorts have jumped on it and the haters have jumped on it and so be it, right? But if I were Canva, I'd be worried that this would become a meme.

• 30:07Speaker 00

  I think there's a quote, something like, the worst thing in the world to fight is a bad idea whose time has come. And you're right, everything's, yes, and you're seeing that in the SaaS apocalypse now. And the only way out is true, which is the companies that have produced revenue growth have seen upticks. And overall, world clouds up 50% since the bottom of the SaaS apocalypse. But the people who've struggled are still struggling. So you're right, you will have to prove it.

• 30:29Speaker 01

  I don't know, you know, what worry, what do you think the answer to LPs is? I guess, obviously, I think after Airtable and this Canva quarter, it's probably time to be a little extra skeptical of marks. Just, just being realistic, like these are two events that I think have quietly hit old marks. Even you should have marked them down last year. These are events that are difficult to hide, they're difficult to say, my guy's going to turn it around. Okay, after these events, I think they do kind of shake the ground a little bit.

• 30:55Speaker 00

  They definitely do. And it's funny because just taking the air table come, we all, I used to mentally say to myself, I'm sure you did, air table and notion, you had them in the bucket of being the same. And then, I mean, I don't know if the sacronomies are correct, but notion is apparently 800 million growing at, you know, 70, 80%. Gets back to the same comment is, when I think about valuation, stepping back, at a minimum, you have to look very objectively at the actual growth rates and be brutally honest as you think about valuation relative to that growth and that projected forward growth. You've got to ground yourself in those factors, step one. And then the question, the second order question is, do you grade up or down for existential versus lift? But at a minimum, yeah, it's a longer acceptable to say, once upon a time we raised at 42, therefore we're holding for 42 billion, right?

• 31:40Speaker 00

  It's, we're doing a billion, we're growing at 30%. That is this multiple, we're doing a billion, we're growing at 10, that justifies that multiple. I totally agree, Jason.

• 31:48Harry Stebbings?

  For me, I thought actually one of the tweets of the week was Dave Samuels, I think is his name from Freestyle. He mentioned that blended exit price from air table was actually 6 billion and the importance of selling along the way and being very thoughtful about selling in the good times.

• 32:02Speaker 00

  Totally. And it's always true when it goes down and it's never true when it goes up.

• 32:06Harry Stebbings?

  One of my great friends is a multi-billionaire and he told me, you know what, Harry? I never regret making millions of dollars and I say this through my G650. And actually, you know what? I've sold now stuff and yeah, I've lost on upside. But you know what? I'm happy that I locked in some wins.

• 32:24Speaker 01

  Yeah, but here's the thing. I mean, we can move on. I get all that, the freestyle argument. It sounds great on Twitter and it's mathematically true, right? But if you want to have an outlier fund, I don't know, man. That math really only works if you've got like a six or eight of them in the fund. Listen, maybe, maybe the scale, size are bigger, the math's different. But for a smaller fund, I'm lucky to have three fund returners. Okay, that's hard. And if I start taking early exits on those and I don't have a 10x fund returner, okay? And my LPs want these frigging five, six, eight, 10x funds? The math gets kind of tricky if you sell too much early. I don't, I don't care what X says. You gotta, you gotta keep doubling down. And I literally just did this analysis across my whole lifetime.

• 33:06Speaker 01

  Of all the things I've been involved with, personal, angel, venture, who should have sold? And who should have, who should have sold earlier, taken the secondary? And for me, it broke roughly 50/50.

• 33:16Speaker 00

  It's surprising. I would have guessed it would, I mean, statistics would say it probably breaks 70%. You should have sold, I mean, I can tell you what the facts are. 70% plus, you should have sold 30% or less, you should have held. But the next sentence is the key. The holders compound forever and the ones you sell don't compound at all from then on. And so it's the, I'm going to pronounce this name on the guy from Arizona State, the bookbinder researched that sub 1% of all the companies ever give 90% of the cap gains in the public markets. It's the same in the private. It's just, it's the nature of power laws. Most of the time you won't regret trimming, but on the few that you regret trimming, it turns out to be most of the value.

• 33:55Harry Stebbings?

  I'll never forget having Jake Saperon from Emergent, who I like a lot. I like Emergent a lot, brilliant firm. But like, you know, they sold Salesforce reasonably early in the arc of the Salesforce value accumulation journey. And I mean, if everything else didn't matter and there was just a hold on that decision, it would dwarf all the other outcomes. We can choose to continue in this vein and discuss Atlassian and HubSpot? Or should we talk about Jeff Dean, Google talent changes?

• 34:22Speaker 01

  I mean, I'm not an expert on the Jeff Dean talent change, but it clearly, this is the time to go off and build, man. Let me leave the comfy coop where I'm making nine figures a year to just talk about AI in a comfortable conference room with a mug and go out and do it, man.

• 34:36Harry Stebbings?

  So let me provide some context. Google had some talent loss. Jeff Dean, one of the godfathers of much of AI, has left after 27 years, taking three legends with him. I'm going to pronounce their names wrong, so I'm going to leave it there. And then Demis also is like stepping back or whatever elegant marketing message we want to put around it is like moving into chairman role, power centralizing back really to Silicon Valley as well with that. That was the big news from Google and obviously shares tanked as a result.

• 35:11Speaker 00

  I actually think Jason made the best point, right? So first of all, in passing, it must be extraordinarily validating, if you're Jeff Dean, to leave as a non-CEO of a $2 or $3 trillion market cap public company and have the stock go down by a couple of hundred billion dollars. If you want to increase your sense of self-importance and self-worth, that was a good moment. That was what the therapist called validation at a high level. So let's move on from that. I actually think Jason, genuine comment here, Jason's take is the correct one. We can analyze what it means for Google, but think about it. If you're Jeff Dean, you've done 27 years at Google, you've made gazillions of dollars. The mission at Google, two around the, like it or not, is allocate a lot of the compute

• 35:53Speaker 00

  to Google Cloud business to just be a hyperscaler, boring as shit to you. Allocate more of that, the remaining compute, to build a competitive frontier model, mainly focused on the big things of consumer, because that's what they care about, and coding, because that's what they care about. At this point, after 27 years, fairly boring to you. And get some time to do a little bit of medical discovery and scientific discovery that's really exciting to you. But because of the relative size of those businesses, that's always going to be in third place. That's option A. Option B, you can go raise all the money you want. I mean, it was really sweet that they even built a PowerPoint. I doubt they needed to, right? I think, hi Jeff Dean, I'm raising money would have sufficed. And go away and do exactly what he says, which is use AI to quote, investigate advanced

• 36:38Speaker 00

  scientific questions. What are you going to do with your late 50s in life? It's totally natural.

• 36:44Harry Stebbings?

  Yeah, I don't buy that. I'm not being rude, sorry. If you look at the resources he had available to him at Google, with the data that he had available to him at Google, he could go into Sergey and Larry's office and say, hey, I want X. And they would say, Jeff, you have whatever you want.

• 36:59Speaker 00

  I don't think that's what's happening. With all due respect, I don't think that's what's happening, right? I think what's happening is every piece of compute that you give to Google Cloud turns into 30% operating margins in a day, right? Because they can sell it to Anthropic. Every bit of compute that you give to building Gemini might turn into a decent coding model if they get their shit together and maybe you can get some Anthropic-like revenues or some ChatGPT-like consumer revenues, right? Every bit of compute that you give to drug discovery, our materials discovery, our physics discovery, turns into a long shot, five or seven-year moonshot that maybe will indulge at the 10% level, but it's not going to be the core thing they do. So if you're a senior executive in those companies, you're probably expected to do

• 37:43Speaker 00

  your J job, what was the old thing, 20% kind of fun time? 80% of the time you're meant to, you know, deal with boring shit. So I think at some level, there's a desire to focus full-time on that. I think people, it's hard for you to understand when you're younger. As you get older, you start saying to yourself, you know, is this it? I optimized ads, this is all I want in life. Maybe I want to be my own boss. Maybe I want to just focus on scientific discovery.

• 38:07Speaker 01

  If Rory's right, it makes sense to me, I just don't know. If, if in a sense, they have access to all the resources, but the team's somewhat deprioritized, right? Because of where the cash flow is. I can just tell you, not to go back in time, but when I was an SVP at Adobe at the number three business unit, it, it sucked. It sucked. I mean, you know, you'd go, I'd be with the other 50 VPs and we wouldn't even get to talk about what we were working on. We were only doing 800 million at the time, but it didn't, like the number three BU is invisible, right? It was just, and so if that's the vibe today, and for, maybe for the first time ever, I could take my team, my whole team, and get all the capital I really need to do what I want to do, I would leave if I was the number three. Listen, I'm not quite smart enough, but if Rory's right, that may completely explain it.

• 38:50Speaker 01

  If you're, if you're the number one priority at Google, you're going to stay, right? Because it's easy and it's a pretty bucolic environment there, right? Or at least it used to be before. I mean, I used to sell to Google all the time. I was there every three or four weeks, the most bucolic campus ever. But maybe today it's a little more stressful. But if you're number, if you're, if you've been deprioritized, as important as you are, right? Your team has, and you can get, you can raise a billion or so, I'd check out, man. I'd go do it, right? And the VCs aren't going to put the traditional annoying pressure on you the first 24 months.

• 39:18Speaker 00

  That's actually another interesting point. It's what's saying is that the appetite from venture to finance moonshot type AI will solve science bets has never been higher. I mean, the proof is not yet in, as a reminder, and there's a lot has to happen to make these bets work. But if you're a scientist at your core, and if you're a believer in knowledge and discovery, this is a once in a lifetime chance to make that unhedged bet with no corporate BS to deal with. Even two or three years ago, you would not have got that kind of money to make that, right? It's just, these kind of science-based neolabs are really a phenomenon of the last two years.

• 39:56Speaker 01

  And maybe just two small things, but when I think Vinod's leading the round, right? Or co-leading the round or something. So he's just redoing, he already, he already, granted OpenAI hasn't gone public, but he's, he's already had a little bit of a win here, right? That guy Vinod, right? So he's just doing the playbook again. And then two, going back to, to Harry's question at LPs, you know, I think this week, it's, it's a little murky. I'm trying to read the news from Hawaii. I'm not quite in the SFB. But if Anthropic really is going to IPO for now, for real in the next 60 days, it's just going to tangibilize all of this once again, right? Hopefully, hopefully for the better, and maybe slightly for the worst, but it will make these bets seem more and more like the present, right? And the canvass and friends more and more like a distant, a distant memory, a distant memory of a bygone era of software.

• 40:38Harry Stebbings?

  Two, two questions for you. How significant is it losing this many high caliber people this quickly? We haven't mentioned Demis. Obviously, Demis, founder of DeepMind, led London AI efforts, visionary genius, been fortunate to interview him. How significant is it honestly to Google?

• 40:54Speaker 00

  On one hand, obviously, look, early on, this business had been very individual centric. So losing these two talented people in terms of full-time thing and the three people who left with Dean is obviously really significant. On the other hand, just to put it out there, whatever was Google was doing wasn't quite working. And we've gone through the Google is dead phase 12 months ago. Then we went through the Google is amazing phase six months ago. And now we're kind of going to the, in the middle, which is Google's doing a good job in cloud, selling compute to Anthropic. They're doing a good job selling the picks and shovels of TPUs to Anthropic. They've kind of got a model out there, but they haven't made any impact whatsoever in coding, which is the mother load that's feeding the Anthropic beast right now.

• 41:37Speaker 00

  So you could look at it and say, Google's efforts so far are B plus, A minus. They're not A plus. So I don't think anyone wanted anyone to leave, to be really clear, but it's probably been unsatisfactory to go, because you can imagine it, you're the CEO, you're coming in saying, you're saying to your two most talented human beings, one of whom has a Nobel Prize for medicine, just to remind you, why aren't we building a better coding model? And they're sitting there thinking, why haven't we cured Alzheimer's? You know, at the end of the day, that's a really boring E-staff meeting because we're just talking. Past each other. In a perfect world, I mean, this is oddly what they got rid of two years ago. In a perfect world, if everyone had been self-actualized, they'd have put someone like the guy who's running it, a tactical executive in charge of grinding out this and maybe giving these guys more running room more early to do fun things.

• 42:21Speaker 00

  Because I think that's been the dynamic all along. If you read the Malki book about the DeepMind acquisition, all along, it's been, how much corporate shit do I have to do? Because what I really want to do is get a Nobel Prize. And who am I to argue? We'll remember the Nobel Prize long after we forget the Google Q2 earnings, right? So he's entirely right to want to do it. But unfortunately, Google has to make Q2 earnings. And if you're the CEO there, you need an executive who's willing to drive, drive what it takes to get a comparable chat model out there to compete with ChatGPT and a comparable coding model out there to compete with Anthropic, neither of which you've done now. So if someone comes in and says, I've launched this initiative, and I think in five years' time, we'll bring out a simply amazing drug, and it will, you know, cure cancer, cure Alzheimer's, whatever.

• 43:07Speaker 00

  Your brutal comment is, the correct response is, if we do that at the expense of a coding model and a chat competitor, that's a mistake and our stock will go down by 50%. Because the largest drug company in the world is valued at a trillion and Google's valued at three. So the corporate imperative is to get someone who wants to do those things, not someone who wants to save the world.

• 43:27Speaker 01

  It's super difficult today. The best AI engineers, the best AI researchers really want to work on what they want to work on. And they don't want to work on stupid things and they don't want to work on obvious things. They just, they really only want to work on stuff at the absolute cutting edge that is extremely intellectually interesting to them. They don't want to work on anything else. They just don't want to do it and they don't have to. They don't have to anymore.

• 43:47Speaker 00

  Which is why you've got to admire the brilliance of the team at Anthropic, that they have simultaneously managed to not convince themselves, because that sounds judgy. They feel they're on this mission, you know, public benefit corporation, a mission to bring AGI to the world, all that good stuff, while simultaneously making every single correct rational financial move over the last two years, including, to your point, going public first, which I think they will as soon as possible, because they'd be insane not to. And the one thing we can stipulate is those guys are not insane. They are right on it. They will go public because this is peak brass ring moment. And, you know, you could argue the trends in 27 are tougher. You've pulled ahead of ChatGPT. So just put a nail in the Anthropic pit, right?

• 44:30Speaker 00

  You've pulled ahead of ChatGPT comfortably, OpenAI, to a point where it's embarrassing. It's never going to be better. There's just been a trillion dollar IPO that all in all went okay. It's back to its offering price. You should go. You should go now. You should go fast. You should be done.

• 44:45Harry Stebbings?

  If I'm the founder of a company, an early-stage company, do I just accept that I'm going to have B-tier or C-tier AI talent? And I don't mean that denigratively or rudely or horribly, but they're at Anthropic and OpenAI. I mean, Google can't fricking keep them.

• 44:59Speaker 00

  I, I think it's the wrong framing. Because if you think about it, when you were building a software company in the age of the PC, you had fourth-tier chip talent because you weren't building a chip, right? The point is, if you're an AI company and you feel the need to build a frontier model, then yes, you've put yourself in direct competition with someone. And if you don't have the good people, you're toast. So what you got to do is make the model a complement and have A-tier talent at UI, A-tier talent at AI implementation, A-tier talent at the things that you have your competitive advantage in. Even the very best companies that are taking open weight models and fine-tuning them, they should be experts at fine-tuning. They should be expert on their data domain. But they're probably not going to be as good at kind of building an LLM from scratch as the guys have been doing it for the last two years.

• 45:44Speaker 00

  But that's okay.

• 45:45Speaker 01

  One tough thing, though, that is happening, that for sure, is that I think when we started this show, there started to be sort of two tracks on compensation, which is I have to have, I have to break my salary bands for my AI guys because they're worth so much to Anthropic and OpenAI. Now we're seeing three bands of compensation. We're seeing the regular human beings, then we're seeing the AI guys, and then we're seeing the one to five superstars that we're talking about, right? That I have to find a seven-figure package for as an early-stage startup because they're going to get it, right? And, and we have to provide them everything, the outsized equity, the outsized cash. And there are, especially when you talk for folks that are mature, the 100 million and up, AR guys, 200 million and up, they all have this, this god tier now of compensation.

• 46:30Speaker 01

  And it's, and if you have the revenue, it's sort of fine, right? You can afford, if you're doing 200 million in revenue, you can have four god-tier employees. It's not going to break your, your, your model, but it does, it is something that folks have had to accept. There's a bunch of CEOs I work with informally that I'm not an investor with, that I work with at that scale, and they've all created god tiers. They're like, I got four guys. They are the core of my next-generation product, okay? They're all making seven figures. They all have, like, they all have equity stakes 10 times what an employee at this late stage would have. And the best investment I've made, like this god tier. But it's tough on the rest of the team, right? Because it's not the way we used to do this kumbaya style when you've got this god tier. It's tough. But you're not going to pull off a Palantir or an Intercom without a god tier. You need a Skunkworks and you need a god tier, or it ain't going to work.

• 47:15Speaker 01

  It's just the siren, the siren call of the Anthropic comp is too high. OpenAI just did a secondary of 7 billion, didn't it, this week? Something like that? That sounds pretty good to me, guys.

• 47:24Speaker 00

  Markets and prices are all about incentives and signaling, right? It just, it's a way of sending real information. And there's no doubt that, you know, I saw the analysis that someone who got a million in stock in Anthropic in 23, it's worth 51 million now. That's a signal that just ripples through the hiring environment across the entire ecosystem. Now, I would remind everyone that that's what's known as a one-in-a-lifetime change. I don't think the person today will be getting 50 times their return. But whatever, it does have an impact of just distorting what everyone thinks is possible. And, you know, we are naturally attracted to narrative around the outliers. That's not the norm, but yes, that is the California Gold Rush part of the story. And you're going to see it even more written when the pricing happens.

• 48:10Speaker 01

  The only other thing I would just add, if you're not, how do you compete with them, right? How do you compete with that? I do think you might have to have a god mode compensation package. The only thing is, a lot of those, the jobs that you're offered for those job dropping, they, they do, going to Roy's earlier point, they do kind of suck. They're not all Jeff Dean and buddies sitting around in a whiteboard designing the future of Fable, the 7.2. A lot of these jobs are, for folks that aren't quite at that tier, are not that great. And so that's always been the job of a founder, is to find those pirates and romantics at the edge that could get it. You know, back, back when I was a founder, our test was always, did you get an offer at Google? If someone got an offer at Google back in the day, you knew that they were top 10%, top 5%. You could do the same test today. Did you get an offer at Anthropic or OpenAI? And what was the offer?

• 48:53Speaker 01

  Well, that flashing thing in Claude they want me to work on, the, the, or I'm a colorblind, the red or orange thing, I'm going to make a million dollars a year, make, getting that pulse just right, or I got to work on watermarking my first 18 months. And, and so you can find the folks that say, yeah, accounting software would be more fun than that. I'd like to do LLMs for accounting. If you, you got to interview everyone on planet Earth and you will find someone that doesn't want that, that job, right? That's the job. But you might have to pay them a lot more than you had to 24 months ago.

• 49:19Harry Stebbings?

  Talent is one bottleneck. Another bottleneck that I, I did think was a really interesting news story that came out this week was the backlash going federal when it comes to new data center creation. Rep. Rohana said he will introduce a data center bill of rights that will give local communities the right to say no to AI data centers. Yes, you go, Rep. Rohana. That's exactly what Xi Jinping is going to say.

• 49:43Speaker 01

  The hero of Silicon Valley.

• 49:44Harry Stebbings?

  Xi Jinping is going to say, stop you deep-seaking moonshot. We don't want that in this rural community. What a fricking joke, eh?

• 49:53Speaker 01

  I have talked with some folks who truly are experts at this, right? Most folks think that, like, this is, this is pretty lame. This is pretty dumb, this NIMBYism, right? It's bad for, it's, it's even crazy that Texas is in on it, right? Is in on the NIMBYism. And I think Elon pointed out that, that the tariff app's already created 3,000 jobs, but it's only, it's only 10% capacity. It could be 30,000 to kind of get folks to see the other side of it. But I think folks that are close to it think that it, it, there will be enough counties and jurisdictions that want these data centers that as we push through this and as government gets on the other side, it, it will ultimately going to work itself out. Like, this will not be one of the great issues of our time, even though it seems ridiculous today that, that you don't want these. But they are, you know, there's only so many people working at these data centers.

• 50:36Speaker 01

  But it may, if this one may work itself out, at least that's what folks I've talked to that know it more closely than me.

• 50:41Harry Stebbings?

  Do you not think this will be a material blocker in our speed of deployment?

• 50:46Speaker 01

  Well, we have 50 states and I don't know how many counties we have. It's a lot of counties. Like, there will be some with water and power that want this business is, is the meta point. And that also this backlash isn't going to last, right? These are not, these are not all destroying our water tables. These are real jobs. 300, 3,000 jobs for a lot of poor communities. Let's not mock it when the aver, I mean, I mean, this is such an entitled podcast. Oh, a poor Anthropic engineer only made 35 million. I mean, go out to the goddamn Panhandle, no one's making 50 grand, right? So these are, these are not enough jobs, right, to make up for. But these are real jobs with real money and they're going to last years and years and years. And they bring a limited amount of economic, real economic benefit. But it, it is a bummer for places where we should be building these data centers, for sure.

• 51:29Speaker 01

  It's not a net positive. It's just a question of will it work itself out in, in the US where we do have competition? One, we do have a nice set of competition here, regulatory competition between states and counties.

• 51:39Speaker 00

  Yeah, the irony of Rukana, you know, the Silicon Valley congressman turning into the, you know, the Marxist wolf in sheep's clothing is pleasing to me, as I would not tend to be on that side of the voting aisle. Just watching all the Dems get suckered into thinking he's a moderate has been worth the price of admission as he starts advocating the billionaire's tax. So there you go. But who am I to judge?

• 52:02Speaker 01

  You mean millionaire's tax, where I think you missed it.

• 52:04Speaker 00

  Yeah, that's exactly right. So that's funny in and of itself. But you know, once you're elected congressman, your next step is up. And the truth is, the way to electoral success probably lies to a fair amount of populism for the next period of time. So on the data sense, I think, you know, I saw a good piece, I think in the Atlantic or something, really, just talking to people, you know, in the areas wrestling with these issues. And it was a very interesting point. It was much less even AI is awful and much more, I don't know what I'm getting here. It's all very opaque. What's the deal? And I think if tech wants to get this stuff done, and there's two risks here, and they're almost opposite each other, because it's, if you want to get local support, you got to figure out what's the package that moves it for them. And it definitely isn't, oh, by the way, you're going to get a 25% increase in electricity costs. And you're seeing that

• 52:49Speaker 00

  now. People are, and I think the smart people are saying, at a bare minimum, if you want to get a data center in here, you got to find a way of making sure people aren't going to pay for electricity, and there's probably going to be some kind of dividend. If you tell people that, you know, you're going to get this job, business, there's not going to be an increase in electricity, and there's going to be, you know, a five, 10 grand distribution per people in the township, you probably go, yeah, we should look at this. The other thing is, do some of these statewide laws just make that impossible to do? Because the truth is, at the moment, there is a fair amount of we hate tech bros out there. And as we said a million times, it turns out if you spend three years saying, AI is going to kill you all, you shouldn't be surprised to be hit it. So I think there are, there is some wood to chop technically. But I do agree, Jason, it's a great point. One of the best things we have over here, unlike, dare I say, at the UK, which is one

• 53:34Speaker 00

  of the most centralized states in Europe, in terms of central authority, and Andy Burnham was trying to change that. But we got 50 states. If North Dakota hates this shit, but South Dakota likes it, then South Dakota can put something in place and it can happen. Dude, the UK is like the size of South Dakota. Yes. My point is that we've got diversity here in terms of, so hopefully it won't be a huge block. I mean, right now, the practical point is, it's actually the availability of power, rather than just pure data center blocks. But there's definitely a whole series of things slowing things down between power availability, compute availability, and then political willingness to turn the stuff on.

• 54:13Harry Stebbings?

  Now, the main man himself, always lacking in ambition, Mr. Elon Musk, unveiling terra fab, which we touched on there, $16.8 billion. I think it's going to be the most expensive build out of like a real estate project, I think I read. As we said, in terms of jobs, extraordinary in terms of how many jobs will be delivered, different numbers, but between 2 to 3,000. Really, it's him saying that he wants to sidestep TSMC's queue and obviously build out his own fab capabilities. How did we think about this news, both in terms of the strategic decision and the scale of it?

• 54:48Speaker 00

  Look, this is someone with boundless ambition, plus success at delivering on this boundless ambition, plus access to capital at an unprecedented rate. So he's probably going to try and do all these things. It feels wildly ambitious to, you know, you have to build the gas turbines, to build the fab, to build the robots, to build, you know, it's like vertically integrated on every level. But he has a piece of vertical integration that's been superb, which is satellite launching integrated into Starlink has been superb vertically integrated, right? You can join the dots in the past and say it all makes sense. I continue to think the scale of ambition, if there's any slowdown

• 55:28Speaker 00

  in the AI spend, then the all in bet is the one that slows down the most, the fastest. And this is the all in bet. So, you know, watch your space. But right now, he's got the capital and he wants to do it.

• 55:40Speaker 01

  I think that's right. I just think at the end of the day, he's beyond all that. He's just saying, listen, there's a decade of supply chain limitations that's going to damage my ambitions. I got to do it, right? I have to do it. It's just, this is also unprecedented, right? It's not just the investment that is unprecedented. It is, you can't get RAM, you can't get chip, you can't get what you want, right? We've had limited issues in the past, but I don't think we've ever looked forward and said, for a decade, I'm not going to be able to get what I need on a cost effective basis. I can't even get, I can't even get TSMC on the phone because Jensen's out there all the time. I could be wrong, but in my career, I have a limited amount of experience here in the old days. I don't think it's ever been like this, where it's, you could, it almost feels like infinite time before I can get the capacity I need at any tolerable price.

• 56:21Speaker 00

  Yes, which is why it's super interesting to tie in something. Intel is part of the terra fab consortium in such way. And I just saw today, I did not know this, Intel completed an equity round, which I read somewhere, I haven't verified it, it was the first time they raised equity since like they went public in 79. In other words, they've been profitable from cash flow and returning capital like a real company is meant to for the 80s, the 90s, the 2000s, the 2010s, right? And now the AI capex boom, plus obviously their deteriorating performance has said, it's time to access the capital markets again.

• 56:53Harry Stebbings?

  While we're on Elon Musk, Elon Musk did have a very unusual incentive package, where his obviously expanded with the expansion of company valuation. Revolut announced an incentive package to the CEO, or it was leaked, whereby it basically ratcheted up with different prices of company. He'd get another, I think, 5% to 7% at 200 billion, and then he ultimately at 500 billion would have circa 39 to 40%. Is this the new norm? And should every CEO be asking for rated incentive packages alongside valuation bumps?

• 57:27Speaker 00

  It's not going to be the new norm. And if it is, logically, stock prices should go down by 10 or 15%. Because what you're basically saying, I mean, I read what's available about the package. And the first question is, multi-year packages and, you know, with incentives around market cap, and, you know, in other words, significantly beyond the normal CEO comp. That's been a thing. It obviously worked for Elon in the first, the 2018 Tesla package. And obviously, after a lot of twoing and fouring, he got another package just recently finally approved after they moved to Texas. So they're not quote the norm, but they are put in place for reasons we'll come back to, for a small number, typically of founders who fully vested in all their shares and who feel, who want to be incented

• 58:10Speaker 00

  again by boards who feel that they have to be incented again. By definition, that's not quote the norm. 90% of public companies aren't run by the founder. And frankly, the number of people willing to run a public company for 10 or 20 million dollars a year turns out to be remarkably high, right? So no, they're not the norm, Harry. Are they the norm for founders? We're seeing some of them. Most of the time, I think, especially if they're badly designed and focused on market stock price only, they typically, they often fail. We saw a whole bunch of them in 21 that got unwound in 23, 24, because they weren't based on operating performance. They were based just on, hey, if the stock is at 200 bucks, we'll give you more shares. And then what happens is the CEO executes brilliantly, but the market is down. So he doesn't get his shares. And he comes back

• 58:55Speaker 00

  and he says, look, I've done my job, right? Forgetting that he would not have made the same argument on the other side, he or she, right? So the record is fairly mixed. But at the same time, I'm going to acknowledge something. For that special thoroughbred CEO who thrives on challenge, you can put them in place if the incentives are right. And maybe you do get extraordinary performance in return for extraordinary comp. So it's not utterly crazy. They're a very high cost focused instrument. And I think boards have to be fairly careful when doing, I'm not, for example, a fan of the purely stock price based ones. And to be fair to Elon's 25 package, we went over this before, it was a great package because it had, you have to do Mars, you have to do Optimus, you have to do lots of cars. At that point, give them the damn money, people. Now, interesting comment. So

• 59:39Speaker 00

  I think in the Journal today, there is a clause that says, if there's an M and A above a certain value, you get a lot, you might see some acceleration of that package. I haven't read the detail, but it will be interesting if SpaceX and Tesla merge, does he hit the big ka-ching on Tesla as well?

• 59:54Speaker 01

  That's what it implied, is that he might hit it just merging the companies, right?

• 59:58Speaker 00

  Totally.

• 59:58Speaker 01

  Before the details, worry, just one question to you or to you and Harry. I don't mean to interrupt, but this, when I read this, I thought it was more about control than just money. I also just read a story that the CEO of Revolut just tried to get out of pain, a $20 million broker fee on a $400 million yacht he bought. So clearly, he enjoys the good life, right? As well as working hard, right? This is not, this is not a CEO that does not care about money. But to me, and I think that Elon was very clear on this, I need to control these companies or I'm walking, is what he said when the first one failed, right? So if Nick owns 40% of Revolut, he controls, especially with, I'm sure, a super majority board and all that, it's his company. That's what he wants. The money, I'm sure, is part of it. But this is not going from 2% to 6%. This is going to 40% ownership. That's a lot.

• 1:00:41Speaker 00

  If he made that argument, to me, it's about control. And I was the chair of the comp committee, I'd say, you're exactly right, Nick. So I'll tell you what, we'll give you three votes on each of your existing shares. Now you don't need control and you don't need any more shares. And he would come back an hour later and say, I also want the money, right? Having had these-

• 1:00:57Speaker 01

  No, you're right. But I will say, I think we've all learned that there are limits to super majority shares. We all have learned that there are other sources of pressure, whether they're VCs, shareholder activists, other issues, that there are levels here of control. And you can control 99 out of 100 board seats, but if you own 6%, you may get pushed out of your company. It is entirely possible unless you'll go to the mat on it.

• 1:01:18Speaker 00

  I could talk for hours on that, but you know, I do think Zuckerberg will be an example of someone who who's controlled. You can write Ironclad control as a public company if you want to.

• 1:01:27Speaker 01

  No, but you can be pushed so hard that you walk with 40% goodbye, guys. Like, I would just end the end the Zoom with Wall Street if they didn't like what I was doing at Revolut. I would just push the button and say, goodbye, guys. Go short me. I'll see you later.

• 1:01:40Speaker 00

  You say that, but actually it turns out your problem, yeah, you can ignore people, but you can also, they can choose alternate to buy your stock. But super interesting thing happened today on the control thing. This goes sound unrelated, but humor me. Zuckerberg's philosophy on AI, right? If you read it, one of the things, remember, this is a person who controls his board absolutely. You are just literally, you know, you can show up, you can tell me what you think, but in the end I control, right? It was super interesting and he's pretty much had that sole control. He said, as part of kind of how they think about governance, he didn't want personal control over the decision to release new models. It should be a board level decision. I will admit, I'm like, hmm. And that to me was an example of, yes, Jason, you can have control over everything, but then you own everything.

• 1:02:24Speaker 00

  And at some point, even if you, if you say you want 20% of your company, but you have 10x voting control. You can't make them buy the other 80%, so you can't keep your stock up and you own every problem. And this might be a very smart man saying, I'm not sure I want to be the sole person releasing these shit. So it was super interesting. It was the first piece of on control that Zuckerberg's done in 20 years. So I did note that in passing, right? Cause control is interesting, because even when you have it, and I actually have changed my opinion. Because going public is so shitty because of all the problems going public. I've actually come to the conclusion that giving founders more control over their life's work, which is what it is, is an acceptable price to pay to incent them to go public, right? So I've actually changed my opinion on that.

• 1:03:08Speaker 00

  I actually think, even though some of these controlled things are weird, and I do think they probably shouldn't be in passive indexes as much. There should be some discount for that. I've come to the conclusion that weird control terms are an acceptable part. Cause otherwise everyone just does what the Collisons do in states private are like, I don't need your shit. But let's go back to the money, because in the words of, I think Senator Dale Bumpers in the Clinton impeachment trial, when they say it's not about the money, it's about the money.

• 1:03:34Speaker 01

  I think it's about the incentive. I don't think it's about the money. I think your point was so good, Rory. I don't think I've heard it expressed enough that way. Going public sucks so badly. They look at, look at the public company CEOs we've had on this show, or Harry has. It sucks to be public today. Okay. Yeah, it was fun during lockdown when, you know, you could grow 90% without a new feature. It's not fun. And I can't imagine being, having been a founder twice, I can't imagine a helpless feeling as a public company. See, I'd want to quit. I would just hate it, right? Having control and equity has to somewhat tie to it, or it's a partial fiction, would make it worth it. I just would, I might leave the keys on the table if I had no control of the company I founded. I'd already made plenty of money. I was deluded to nothing. I had a board that didn't understand my product, telling me how I run my company. I might just sort of leave the keys for you guys.

• 1:04:19Speaker 00

  Agreed. And I say that not because I like it, to be clear. I say that because I'm just looking at people staying private. I mean, I think the real solution will be when the private capital markets evaporate, deteriorate, and then they will go public because they have to. But that's by the by. So I agree with Jason on that. But on the other hand, let me take the other side of it now. On these kind of deals, the thing you look at is the participation rate, which is how much of the total creation and value is going to the CEO. Right? In other words, the way this deal was announced, and to be clear, it's not been put in the Revolut deal, going back to that. It's not been put in place yet. It was something like, you know, for his existing thing, he gets it to 200 and he gets to 30%. And then if he gets from 200 to 500 in value, which is 300 million in delta cap,

• 1:05:02Speaker 00

  he gets an extra 10% of the company, which would be 50 billion, which would mean that for 300 million in value creation, he's getting 16% of that, which would be abnormally high, to be clear, right?

• 1:05:14Speaker 01

  16%?

• 1:05:15Speaker 00

  16% and abnormally high, right?

• 1:05:18Speaker 01

  That's less than our carry checks. Those are 20. This sounds low.

• 1:05:22Speaker 00

  But I can tell, yes, but if you're, if you're getting it on.

• 1:05:24Speaker 01

  You think I deserve 20% of what my portfolio does after a certain point? Nick's only get, poor Nick's only getting 16%.

• 1:05:30Speaker 00

  I disagree. I think that the market, I mean.

• 1:05:32Speaker 01

  You think you're working harder for your portfolio than Nick is working for Revolut?

• 1:05:36Speaker 00

  No, I don't think it's about working harder. I think the nurses in fucking emergency room are working harder than both of us, Jason, right?

• 1:05:42Speaker 01

  I could not agree with you more. I could not agree with you more.

• 1:05:45Speaker 00

  Okay, let's go for it, right? The question is, two and a half X, taking something from 200 to 500 billion gives you $50 billion, right? Do you think you could get a Jamie Dimon level CEO for 10 billion? I mean, he's only made a billion taking.

• 1:05:59Speaker 01

  It's too, I think it's too hard. Let me tie it back to a different point and you can challenge me on this all you want. Harry asked, what should LPs do looking at this, right? I'll tell you what I'm doing. Any investment I've made that is not run by a founder is a zero. It's going to be a zero in this age. It's going to be a zero. I look across, now you, we have different portfolios, but the ones I have that are not run by founders, whether they're at 20 million or 200 million, they're all going to be zeros. And so if the price of me not having a zero is getting Nick to 40% in my best, I wish I was a shareholder. If I'm Balderton, whoever, this is my best name, and that's the price, I'm going to pay it in a heartbeat. Because I do not believe Jamie Dimon's lieutenant with his starch shirt and his blue and white collars and his cuff links can run Revolut. It's not that mature. The space is not that stable. I don't buy it.

• 1:06:44Speaker 01

  And I'm not, I'm not a banking expert, but I don't buy it's possible. I believe he will run that company into the ground, just like every non-founder has run my portfolio companies into the ground.

• 1:06:53Harry Stebbings?

  I'm going to get killed if I don't say one thing here, which is our former guest, Nick Ash.

• 1:06:58Speaker 01

  Yeah, but when did he join? Two years ago? I just know my portfolio will be zeros without the, without the founders. I'm not saying there aren't examples out there you can find. I just know for me to the LPs, there's zero, they're all going to be zeros. No matter how much ARR's they have, they're going to be zeros.

• 1:07:12Speaker 00

  And this is the question is, and that's totally true at 1 million, 10 million, 100 million, maybe a billion. The question is, I think Revolut's doing 5, I used to know it, 5 billion in revenue and a billion or two in profit, right? It's an extraordinarily big and very impressive company. At some point it becomes not true. Or maybe the better statement is this, and this is the interesting one, because, and I know this sounds really negative, but remember, going back to interest, it's a corporate governance question. And I, having just come out in favor of founder control, all the things I said earlier, and I stand by them. You still need a dynamic to protect the other shareholders. Because if you take the logic to, I saw Nick at Revolut made a comment. It's a very interesting comment that I think is bullshit. He said, and it doesn't sound bullshit, but it is when you think about it.

• 1:07:56Speaker 00

  He said, quote, "I deserve more because the investors, after they give capital, they do nothing else." And that statement is, the first, the second half of that statement is true. After investors give you capital, they do nothing else. That's the world of capital. But just because that's true, doesn't mean the founder can, I mean, what's the limit then? Or to put it another way, fast forward 30 years, what's the limit?

• 1:08:18Speaker 01

  I think, I think the world has changed. I don't think most founders care anymore. And so I think you got to adjust. I think, I think Nick, Nick is what is saying. I think half the class at most accelerators agrees. I'm just going to raise it 50 and if it doesn't work, I'll just, I'll just do whatever.

• 1:08:32Speaker 00

  But you're not addressing the issue that said, what you're saying there is the cost to run a company from 200 billion to 500 billion is 10% dilution. Is the cost from 500 billion to a trillion another 10%? Is the cost from a trillion to 2 trillion another? I'm just trying to get a sense of it, because if it is, then two things are true. One is you should pay less for that stock because you're going to get way more dilution.

• 1:08:55Speaker 01

  Pitchbook had an article this week saying how, how much massively returns are being compressed on outcomes north of 500 million to a billion. That outcomes are being massively compressed by unprecedented dilution and high entry prices. So this is just the world we have to live in. Like as a seed investor, I've only been doing this so long, but I've been doing it for a while. When I started, my model was, I'm actually paying twice my entry price. That's how I model. Now it's 4X. I'm going to suffer 75% dilution. And it's not, and that really means my entry price is 4X what it looks like on that 50, 50 post you want. It's really effectively 200 if we, if we hit it, right? I could complain about it, just like the Nick thing, but Nick gonna do it. Like, like the, the baby Elons are going to get these packages.

• 1:09:39Speaker 01

  And it don't really matter what I think or any of us think, because enough investors are going to go along with it, that they're going to get these packages. But the more important point you made is, is how elite will this be reserved for? We could debate whether Nick deserves this, but this is a generational company, right? The question is, do subgenerational companies get these packages and how does it impact things? But yeah, with our dilution, I think all, Pitchbook said this week, all of our dilution's under modeled.

• 1:10:04Speaker 00

  Yes. And look, as I, I hate the role I've adopted in the last 10 minutes, because I'm generally, I always tell people, I'm generally the softie in the comp committee. I love writing big comp checks for successful equity packages. But at some, you do have to have some kind of linkage and someone has to sit there and say, okay, what are we getting for this? And you're right, you know, for what it's worth on this particular one, I'd probably do it, but I'd insist on non-market comp, non-market stock performance metrics. If you build the biggest bank in Europe operationally, not just on stock price value, then I would totally say you're worth the $50 billion. That's why I'm saying a lot of it's in, it's really boring, but a lot of it's in the details. So you could, if you're going to pay, let me be very clear here. If you're going to give someone $50 billion, 50 fucking billion dollars,

• 1:10:50Speaker 00

  you ought yourself to spend more time thinking about what you're getting for your $50 billion than, hey, I'll give you 50 billion if it's valued at 500 billion in a few years. You probably need to think about it a little more carefully.

• 1:11:01Speaker 01

  I think that's what you should do. In my limited experience with my portfolio, these mini, these mini Elon packages, they're basically all focused on 10x what the last guy paid. That's what all the late stage investors do. Whatever I paid, $20, $20, and I just want $200 for you to get it. I don't care whether there's a little do like that. I want to make 10x post dilution and then you get your piece, right? So it's what you ate, but I think it's what a lot of late stage investors want.

• 1:11:27Speaker 00

  I actually think you're right, in which case, given the last round's at 100 or 200, like, that's my comment here is that 10x that would be a trillion. In other words, the participation rate is just a little high. These are fine packages. This one looked, if the numbers rooted about are real, it's probably, ooh, that's a lot for, maybe you could pay a little less and get a little more, but it's a thing.

• 1:11:46Harry Stebbings?

  The one thing I will say is I've interviewed 1,000 founders, Sam Altman, Demis included. I've never interviewed anyone like Nick.

• 1:11:53Speaker 00

  Look, remember last week you asked which stock I like, Revolut? I think it's an amazing stock and amazing potential and market cap. And I just want to be sure I got an operational performance before I ponied up the 50 bill.

• 1:12:05Speaker 01

  I know it's Captain Obvious, but Revolut's, Revolut's all, all green, right? Everything, at least externally, I'm sure there's stuff under the surface that's struggling. You do these packages too late, it's too late.

• 1:12:14Speaker 00

  I think that's right.

• 1:12:15Speaker 01

  And that also means you have to overpay and pay up because you have to do these packages at the right time, right? You try to do this when the company's growing 4%, sure, but I mean, it's, you know, you've missed your window there.

• 1:12:26Speaker 00

  Yeah, I actually think that this is the second package that that particular CEO got, but yes, I agree.

• 1:12:32Harry Stebbings?

  Team, where do we want to go from here? We have Whatnot, which obviously raised a very large round, 545 million at 20 billion. We've got DeepSeek raising an 8 billion at reported 74 billion dollars. ByteDance, BANS, Distillation of U.S. Models, which I thought was interesting.

• 1:12:50Speaker 00

  I think we should talk about Whatnot if for no other reason that it's such a relief that there's more to life than AI, though shopping.

• 1:12:58Harry Stebbings?

  There's more to life than AI shopping, right?

• 1:13:01Speaker 00

  Yeah, I think it's a great story. Background for people, Whatnot raised about half a billion at 20 billion in valuation. And it's a live shopping company and, you know, in the, in the internet equivalent of QVC. The minute I heard that story, my response is that'll work. You know why? I mean, if you look at QVC, if you look at the Home Shopping Network, these were the equivalent in pre internet days on TV, you know, live sales, right? People enjoy that shit. And someone explained to me what not did a couple of years back and I'm, oh my God, it's a great idea. Not my space, not what I do, but that's gonna work. You're gonna have people live selling shit. It's gonna be a little bit of retail, a little bit of commerce. It's gonna work. I mean, if you think about it, the, the, the big three of this space have been QVC.

• 1:13:41Speaker 00

  Interestingly enough, by the way, that's now bankrupt, probably because all those people died and now they're replaced by Whatnot people, right? And then eBay, you know, we forget it, but eBay is the other quirky way to sell shit from the 1990s. And that's, you know, got a 40 or 50 billion dollar market cap. So what's interesting here is something where you look at and go, that's gonna work. And fast forward two years and it's 20 billion now. You know, it's growing 2X year on year, 8 billion. I mean, you measured GMV, which is about 8 billion last year, going to 16 billion this year. And then they get a 12% take. It's a great business, that's all. So I'm just like, yeah, go team.

• 1:14:15Speaker 01

  It is useful. Listen, if I'm not an expert on, on Whatnot, I could speak more to Shopify, which blew out its quarter too, right? It's roughly related. But I do think it's worth, I do think everyone should at least study what isn't being destroyed by AI, right? What's gonna happen with online shopping, online commerce? What's gonna happen with restaurants? What's gonna happen with cars? And, and, and it's just, it's, there will be many good opportunities in spaces that aren't going to be destroyed by folks creating a poster in ChatGPT for free. And we should just study it more. There's gold in the things that aren't going to be destroyed by AI as, as well as the things that are being decimated by AI. That, to me, that's the only interesting part, right?

• 1:14:52Speaker 00

  I totally agree, Jason, because look, Revolut's another example. I agree, there are two compelling, large businesses catering for real, you know, universal human needs, finance, shopping that, you know, are building huge outcomes. I agree, AI is most of what's going on, but not all.

• 1:15:07Speaker 01

  But if, you know, it's an AI story, it could be worth like 50X GMV. That's the only miss. Like, let's say they could pretend that GMV was, was Rev. So what would, what's 50X times 16 billion, Rory? Help me with the math. Whatnot LLM would be the next trillion dollar AI startup.

• 1:15:22Speaker 00

  Pleasedly enough, 50X times 16 billion is roughly Anthropic's market cap today.

• 1:15:26Speaker 01

  Yeah, that's what I'm saying. We need another trillion dollar. This one's a bargain at the iconic investment committee. We're getting this for 20? I do think there's plenty of that out there. I think whether it's literally GMV or not, I think there are plenty of folks getting benefits of revenue that make no sense. It's not, it's not even just lying or cynical. I think there's a lot of, I think investors to some extent don't care as long as the growth's there.

• 1:15:44Harry Stebbings?

  Final one, if I wanna shepherd us. Shopify, we mentioned blowing out the quarter. Atlassian blowing out the quarter, but biggest jump since 2015 for Atlassian, crushed it. Any takeaways from some of the big results that came out?

• 1:16:00Speaker 00

  Yeah, as I said, if you produce, you'll get rewarded, right? I was, I was delighted because, you know, when you pinned me to the wall a few months back and said, name, names. My first bet, you know, what stocks would you buy? And my first answer was the best one, which is just buy WorldCloud and sub 50%. But then you kind of pushed me and I named some names. And one of them I named was Atlassian. And honestly, two months ago, I felt like an idiot. It was still not, I thought he'd pull it up, but it wasn't there. And then obviously they nailed it, they got the growth and the stock jumped. If you look at overall, it was kind of, because, you know, some people like Datadog were down a little. And you kind of lumped them together on the agenda, but those are different stories. I mean, Datadog's story was just, everything's amazing, but our biggest customer, and everybody knows it's OpenAI and no one says it, right? Is suddenly realized they maybe don't need to spend 150 million dollars and are spending less.

• 1:16:45Speaker 00

  So growth was down a little, but that's because, you know, Datadog was trading at 18 times forward revenues and now it's 15. That's one phenomenon of the AI adjacent winners, which is very different than what Atlassian was going through, which was existential shit. And we're trading at three times and suddenly, you know, we nailed the quarter and it's an easy pop to five times, something like that. Those are different, you know, those are different movies at the same time. What the Atlassian story says is the sales forces, the Hubspots, and your canvas if it was public is, if you get it back on track in the, with the fundamentals, the stock will follow. But if you don't, and some of the others that you mentioned didn't, then, you know, you're stuck in two and three X land forevermore. Until you get, as Jason said last week, until you get bent spooned.

• 1:17:27Speaker 01

  Yeah, I still think these are hard companies to run, to your earlier point. I mean, yes, Atlassian, but Atlassian also did something, which Canva did too, which I always find a bad sign, a sign of stress. Not a bad, not, Mike's great, but they got rid of most of the free Loom seats. And this is what you do in times of stress. Like the other thing that Canva did, because the revenue's down, is they pushed all, a lot of features into the higher paid additions, okay? It's not the end of the world, Loom is not the breakout success of Atlassian, right? It is not. But getting rid of collaborative free seats, which is how we all grew up using Zoom, right? We could share and work on these together. That's a sign of just how hard, even if you beat the quarter, guys, like Shopify or Atlassian, man, they're leaving nothing on the table. These are not easy beats.

• 1:18:09Speaker 01

  This is not Anton, a lovable, turning around and he added 100 million last week without realizing why. Even the beats are hard, man. So the Loom one, it sounds minor, but whenever I see the base getting overly monetized or harvested, if nothing else, it's a sign of stress in the organization. Because no one really, no founder wants to do that.

• 1:18:26Speaker 00

  You've said that, and I've totally come to the conclusion, you're right. And, you know, when you talk to people one level in at some of these big software companies and, you know, they're doing a seven or eight percent quarter. And then you talk to a director of sales that you know, you suddenly discover it's, we're jamming them on price, we're jamming them on overages. And you realize it's just not sustainable. So I do hear you on that one. I mean, overall, I thought it was a great quarter, but yeah, sorry to lose your free Loom seat.

• 1:18:52Speaker 01

  I still just worry if agents need all these products, but I hope so. Just like, I don't want to be negative on Atlassian, I'm a super fan of Mike, we all are, I wanted to win. But I also worry a little bit, it's a Canva story coming, that it seems to be defined some trends. Now, you can say Atlassian's very enterprise, right? Let's not look at the developer side of things. Let's not look at how, how we used to use Jira and other tools, but our, our agents really don't need these seats. And a lot of their revenue is still developer focused, which, where I think the seat is under assault, a permanent assault, the seat is.

• 1:19:22Harry Stebbings?

  I've got a provocative question for you. HubSpot today is sitting at 10 billion dollars. How long will it be until HubSpot is bought by Bending Spoons?

• 1:19:29Speaker 00

  I'm not gonna dunk on HubSpot. Series C investment in HubSpot, it was at, we did it at 47 million pre, so we're still up.

• 1:19:37Harry Stebbings?

  A Series C at 47 million pre?

• 1:19:40Speaker 00

  Wrong, it was 70, I'm wrong, it was 70, I was taking a box, box was, but yeah.

• 1:19:44Speaker 01

  It's probably hard to get done, too.

• 1:19:45Speaker 00

  Yeah, it was hard to get done. I mean, I'm sure Brian, if he could have got one of the glamour people who turned him down and then did him later, he'd have taken them over us. Well, I wouldn't go that far, but. Oh, I would.

• 1:19:55Harry Stebbings?

  You're a podcaster, Rory, you stand up for yourself.

• 1:19:57Speaker 01

  I'll tell you why I don't think they're gonna get bending spoons for what it's, I don't know, right? I think there's so many things in the airtable story that are scarier than they sounded. But I think one of them is that they only got one offer. And bending spoons is, is gonna look at everything and it's gotta be perfect. And maybe they will buy them. I, first of all, it's a lot, that would be a lot for bending spoons to bite off, but they could do it, right? I guess, I guess you can always line up the financing. Like HubSpot, assuming they would sell, let's just assume they would even sell, right? And there's a lot of fiduciary questions here. There, there should be offers at 12, if it's at 10 today, there should be, but I don't believe there are. I don't believe there's many. I will tell you at a meta level, if we want to break on it, there is an issue here. And it's, it's a structural issue in the world today, in the AI world.

• 1:20:39Speaker 01

  Just like if you're Canva, the prosumer folks are threatened by chat. If it can be done in ChatGPT, even accidentally, you're hyper threatened. The SMBs, the Hubspots and Mondays and others, they're not really threatened by doing it yourself. Okay, that is, that is, that is a short myth. What they are threatened by is the fact that low end competitors in SMB are really good. The low end CRM competitors are exploding. The revenue growth from Monaco, Lightfield, Oracel and others, they are like nothing we've seen before. You know, my first venture investment was PipeDrive. It would have taken 40 years to get competitive with Salesforce, right? It's just slow. And that was the number one, like, simple to use CRM, exited for a billion and something, my first investment.

• 1:21:20Speaker 01

  The problem across my portfolio is, you used to walk into a board meeting and the competition would be the guys bigger than you, right? Here's what the big guys are doing. Now, if you walk into a board meeting and it's SMB, they're all guys that weren't on the slide 24 months ago. And they're really good and their agents are good and their LLMs are good. And so the tough hand HubSpot has is it spent the last five years beating Salesforce at the low end, right? It's a CRM company now, it's not a marketing automation company. When now the low end is so good. And the amount of founders that want to compete even in niche categories, they didn't used to want to. And so this is the bare case on everyone at this SMB space, because it's just, there's too many good competitors.

• 1:21:58Speaker 00

  I actually think you're exactly right, genuine, exactly right on that. It is very well articulated. I remember that the years of, we're doing CRM, we're competing on Salesforce. Because you can build really excellent software really quickly with a different twist using AI. It's why I, I tell, I was telling this to someone who runs a big PE shop in tech. If I owned one of these companies as a PE owner, if I was, I would just be at every Y Combinator demo day. I would be like, you need to infuse some of that DNA quickly while you still have breath and figure out what you can build.

• 1:22:26Harry Stebbings?

  You fucking kidding me? With the loyalty that they have today, you think they're gonna stick? Let's get a load of young people from YC, a big chunk of money and say, hey, come work at this shit heap. And they're gonna be like, yeah, chime.

• 1:22:39Speaker 00

  Obviously, if you think it's a shit heap, no.

• 1:22:41Harry Stebbings?

  But all the PE companies respectfully are shit heaps.

• 1:22:44Speaker 01

  You know why actually the strategy won't work? You know, you want to know the serious reason why it won't work? Rory's right, Harry, you know why it won't work? Because all the hot startups have this model, they're all picking off everybody. I, I, I mean, I think one of my investments owner, I, I think they've acquihired like 20 companies. And they, they get to go work for a, for a reasonably hot company, right? And so how are you gonna compete with that when, when Rippling has hoovered up 30 and Owners hoovered up 20 and Revolut's hoovered up 10? You just, that strategy worked three years ago, like, it's too late. Everyone is just sitting there hitting refresh, hoping these smart YC companies fail so they can hoover them up in an acquihire. I'm not, I'm not kidding. It is a core strategy of many, of many leaders.

• 1:23:20Harry Stebbings?

  Boys, thank you so much, that was awesome, I loved that.

• 1:23:25Harry Stebbings?

  But before we leave you today, what's one thing in business that's spreading as fast as AI? AI risk. Every new tool your team signs up for, every vendor that turns on AI features, every new integration, each one, I'm sorry to say, is an opportunity for something to go wrong. And most security programs weren't built for AI's pace of growth. Well, that's where Vanta comes in. Vanta is the number one agentic trust platform used by over 16,000 fast-moving companies like Ramp, Cursor, Harvey, and more to ensure they're always audit-ready. And now Vanta's helping companies like yours. Watch for the risks that show up between audits across your vendors, your AI tools, and your whole environment. How? Well, the Vanta agent works like a 24/7 GRC engineer in the background, finding issues,

• 1:24:09Harry Stebbings?

  drafting fixes, and cutting vendor agreements time by up to 50%. Whether you're a fast-growing startup or a global enterprise, Vanta's here to help you automate your security and your compliance and earn and prove trust. My listeners get a special offer, oh yes, a special offer, $1,000 off Vanta at vanta.com/20vc. That's V-A-N-T-A dot com slash two zero VC for $1,000 off. While Vanta keeps compliance covered, Deal helps you hire globally. Founders scale startups faster on Deal. Grow without borders. Deal handles the hard parts of global hiring, so you can stay focused on growth. Set up payroll for any country in minutes.

• 1:24:51Harry Stebbings?

  Hire anyone, anywhere, and get visas handled fast. Deal takes care of onboarding, HR, IT, EOR, benefits, and compliance. Everything your startup needs to scale quickly, all done fast in one place. It's why more than 40,000 fast-growing companies like Airwallex, 11 Labs, and Intercom trust Deal to move fast and get back to building. Visit deal.com/20vc. That's D-E-L-D-E-E-L dot com slash two zero VC. While Deal builds the team, Framer builds the site. If your team wants a website that looks and feels handcrafted but is still fast to ship, Framer is built for exactly that. Here's what I love.

• 1:25:33Harry Stebbings?

  Framer is the pro AI website builder for creators, teams, and businesses that care enough to get every detail right. The agents close the gap between AI-generated ideas and production-ready website work, because it all happens where the site actually lives. It lands on the canvas, stays editable, and can be published when the team is ready. So you can build custom code components, create and manage CMS content, optimize SEO settings, and ship everything all in one place. The agents bring speed and scale. You bring taste, judgment, and control. It's an enterprise-level solution, too. Premium hosting, enterprise-grade security, 99.99% uptime SLAs, which is why the world's leading brands like Perplexity and Miro build in Framer.

• 1:26:17Harry Stebbings?

  Learn how you can get more out of your site from a Framer specialist, or get started by building for free today at framer.com/20vc for 30% off a Framer Pro annual plan. That's framer.com/20vc for 30% off. Framer.com/20vc. Rules and restrictions may apply.