20VC: Scale's $14.8BN Acquisition: Is Scale a Dead Man Walking / What Did Meta Buy | Chime IPO: Are IPOs Hotter Than Ever | Ramp Hits $16BN Diluting Only 1% | Salesforce, Slack and Dropbox Falling Behind: Are Incumbents Losing Ground

Agenda: 00:00 – Meta’s $14.8B Deal for Scale: The Analysis 05:40 – Will Scale Lose Their $800M ARR? Will All Customers Leave? 13:00 – Who is the Winner from All Scale Customers Leaving? 21:30 – Who Made the Most Money From Scale? 24:00 – LPs Just Got $14B Back. Are They Reinvesting? 26:45 – Chime IPO: The Breakdown 29:20 – Ramp Hits $16B Valuation: Are We Back in 2021? 31:10 – Ramp vs Brex vs Mercury: Who’s the Real Winner? 34:00 – Gusto Going Public with $900M in ARR??? 36:40 – Dropbox vs Glean: Can the Old Guard Survive the AI Wave? 38:50 – Is Slack Dead as a Platform? Salesforce Shutdown Slack API? 41:15 – Will China Dominate AI? The Bets Are In 43:00 – S&P Prediction, iPhone Assembly in the US, and Rory's Rants Please read the offering circular and related risks at invest.modemobile.com. This is a paid advertisement for Mode Mobile’s Regulation A+ Offering. Past performance is no guarantee of future results. Investing in private company securities is not suitable for all investors because it is highly speculative and involves a high degree of risk. It should only be considered a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid, and there is no guarantee that a market will develop for such securities. DealMaker Securities LLC, a registered broker-dealer, and member of FINRA | SIPC, located at 105 Maxess Road, Suite 124, Melville, NY 11747, is the Intermediary for this offering and is not an affiliate of or connected with the Issuer. Please check our background on FINRA's BrokerCheck.

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

• 0:00Speaker 00

  There's no way that Scale can recover from losing its founders. I love you, but it's a dead man walking instantly.

• 0:06Speaker 01

  I could imagine an entire IPO cycle where, once again, neither of the two names decided, chose to go out. And we get to the end of the year.

• 0:13Speaker 00

  I'm starting to lose confidence in the old guard.

• 0:15Speaker 01

  In situations of ambiguity, the person who has the most leverage has the best chance to win. And I would argue, Microsoft has quite a lot of leverage because it's not existential for them.

• 0:25Speaker 00

  I think they have no leverage, actually, honestly. I'm not trying to be a chaos agent like our prior guest.

• 0:30Harry Stebbings?

  It's time for my favorite show of the week, where we sit down with Rory O'Driscoll and Jason Lemkin to discuss the biggest news stories from the week. This week, we were not short of topics. First, Scale acquired by Meta for 14.8 billion. Then we have the Chime IPO. Then we have Microsoft and OpenAI disagreeing again, and so much more. But before we dive in today, here are two fun facts about our newest brand sponsor, Kajabi. First, their customers just crossed a collective $8 billion in total revenue. Wow. Second, Kajabi's users keep 100% of their earnings, with the average Kajabi creator bringing in over $30,000 per year. In case you didn't know, Kajabi is the leading creator commerce platform

• 1:15Harry Stebbings?

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• 2:00Harry Stebbings?

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• 2:45Harry Stebbings?

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• 3:27Harry Stebbings?

  Mode's revenues surged an incredible 32,481% in three years, recognized by Deloitte as 2023's fastest-growing software company in North America. And here's why I'm excited. Mode's equity offerings have raised over $30 million from 20,000-plus retail investors, one of 2025's standout public raises. And you can now join me as a shareholder with as little as $1,000 at invest模度mobile.com/20vc. For a limited time, unlock up to 100% bonus shares and a free Earn Phone. Email us for the investor brief at 20vc@模度mobile.com or check out invest模度mobile.com/20vc.

• 4:12Harry Stebbings?

  You have now arrived at your destination. Guys, I'm so excited for this. It is my favorite time of the week and oh my god. What a week of news we have to go through. We're also thrilled to be joined by Garrett from Handshake. So I wanted to start with the news of Scale and the acquisition there. And so I'm gonna start with obviously Scale, 14.83 billion to Meta. I wanted to start with that. Garrett, how should we read this? You're the expert in the room. How did you take the news?

• 4:43Speaker 03

  It's pretty unprecedented to have the leading player, one of the leading players, like completely bow out. What we're seeing is many of the labs having to reallocate their spend and trying to diversify away from some of the leading players that they no longer can trust to do to do work right now.

• 5:00Speaker 00

  I have a bunch of questions I want to ask Garrett since we have them at, I mean, at a deal level, it seems pretty clear, right? It's a weird deal. They've put almost $15 billion into Scale. Rory may have the details. Most of it comes out as a dividend and the CEO leaves to go run seemingly a much broader portfolio at Meta, right? He's not just running training, right? Which this is the whole mystery is, is that Facebook does, or Meta doesn't even seem to care about the revenue, right? But if only OpenAI is committed to maintaining that as a partial presence, I assume the revenue will decline rapidly. You've already benefited from that, right? I mean, almost overnight, you've benefited from that. So, so in a way, you are, you are the mole here rather than us.

• 5:40Speaker 03

  Yeah, I mean, we have seen a huge surge in demand. Primary concern right now is hiring on our team. I mean, demand tripled in the event of the week. I'm running on an average of like three and a half hours of sleep for the last like 10 days.

• 5:52Speaker 01

  I think I'm going to zoom out even one level forward just to restate in case, I mean, we've dived right in because we're so in the details. But zooming out a million miles, yeah, Scale AI is an amazing company founded 10 years ago to help companies build great AI models. And they do that by rounding up human experts and initially just doing very simple data labeling. But increasingly over the last four or five years, as Garrett had said, as the tasks that the model builders have to attempt to solve get more complex. They've been hiring experts and at the PhD level to help with post-training reasoning questions around making the models better.

• 6:30Speaker 01

  ZoomOut company. It's an amazing business. It grew to eight, nine hundred million dollars. Think about it kind of one level below the model providers themselves. This is a company selling to those five or six amazing model provider companies, a vital service. That's probably kind of a pain in the ass if you're OpenAI or Anthropic. You don't want to spend your life rounding up literally thousands of people to answer, you know, what 10 years ago were very mundane questions like, is this a stop sign? And now, as the AI has gotten smarter, much more advanced questions, as Garrett knows better than me, right at the level of PhD knowledge. That's the business AI scale I was in, and it was doing eight hundred million dollars. And its customers were, in the main, the five or six large model providers.

• 7:12Speaker 01

  That's where we were a week ago. It was a highly valued company, just raised at fourteen billion. So that's kind of the the level set here. And then, as you say, a week ago, in the last week, you know, Facebook slash Meta announced a fascinating transaction whereby that definitely is a bit of a head scratcher, whereby they invested fourteen billion into Scale AI, took forty nine percent, non-voting control, allowed the other investors to literally take that money back out as a special dividend. So all those other investors got fourteen billion in cold hard cash. Some and some of the key executives at Scale AI move over to affect to working with Meta. So that's, those are the facts on what happened.

• 7:54Speaker 01

  And I think, you know, the open questions that we're starting to think is, why? What's the impact on Meta? What's the impact on the remaining Scale AI business? And then, as Garrett says, what's the impact on all the other providers who probably, as Garrett just hinted, Facebook, again, to state the obvious, Facebook is another contender in the AI model wars. So if you're OpenAI, if you're Anthropic, if you're any of the other guys, you now have a key supplier who's selling you a pretty important subsystem of what it takes to build your model, who is now owned, controlled, dominated, infiltrated, pick your word, by one of your direct competitors. It's got to make everyone pause.

• 8:32Harry Stebbings?

  Which is exactly what you'll see happen with Windsurf being turned off of Anthropic.

• 8:36Speaker 01

  Agreed. And then back to Garrett. What you're saying is, in the last week, the phone's been ringing off the hook.

• 8:42Speaker 03

  Absolutely. And I think as you talk about the shift from generalist to experts, like we haven't even talked about like the future too, like future is going to involve more audio, the future is going to involve more tool use, the future is going to involve more trajectories as some of these agentic systems and step by step problem solving is trying to be improved by all the frontier labs in their pursuit of AGI. Right? So really what that means is that like you need experts in domain, mostly right now where we're focused is on core science skills and also skills that you'd imagine like finance, law, medicine, like the large markets that these that these frontier labs are chasing after.

• 9:21Speaker 01

  One key question for you, Garrett, as you're having these conversations post the announcement, right? If I was running procurement or then for one of the other AI company, and I've had this happen to me once, how do you think it will impact how they contract with people like you, companies like you? And how much of the like, how much of the process will they let you have visibility into? Cause one could argue that scale, the asset that Meta may think it's bored is that scale AI has a lot of knowledge just by virtue of the questions that are being asked and the kind of expertise that people are seeking from them has a lot of knowledge about where the most advanced LLM companies are going.

• 10:01Speaker 01

  And if I was procuring handshake after that experience, I might have some different perspectives in what I can let you see or not see. Or is there anything you can comment on that?

• 10:10Speaker 03

  When we're talking to our customers, we are talking about the absolute frontier of what's happening. Our customers really care about three things that are always in balance. They care about quality first and foremost, you have to have high quality training data. You have to have high quality evaluation set, like you, you have to have high quality. Then they care about volume, you know, it's really hard to get to scale on volumes if you don't have an audience. Like I would say the only durable moat in the entire human data business is access to an audience. And then they care about speed, how fast can you turn them around? If you're another company in the space, like, you know, or one of our advantages, I would say is the ability to activate volume and quality quickly. And we don't have to run. One month-long advertising campaigns to make that happen.

• 10:54Harry Stebbings?

  In a year, Garrett, over or under, one word, does scale have over a hundred million or under a hundred million of revenue?

• 11:02Speaker 03

  Over a hundred million.

• 11:03Speaker 01

  That's a great call, Garrett. And the reason it's a great call is such a savvy thing because you're probably correct because it takes a long time to go from eight hundred to one hundred. So you didn't diss anyone and you also gave probably a factually correct answer. If Harry had asked a different question, which I'm now going to ask, do you think the revenue goes down? Do you think customers will reallocate significant spend away from scale AI to other providers of data in the light of this acquisition? How would you answer that question?

• 11:32Speaker 03

  What we're seeing right now in the market is that there are hundreds and hundreds of millions of dollars of spend that is trying to be reallocated to leading providers. The primary constraint is the ability to deliver volume and scale.

• 11:45Speaker 01

  What you're saying basically is, yes, there's a massive spend reallocation away, which gets, you know, which gets to the interesting question about the deal. What did they get for their 14 billion? I know what the venture, I know what the investors got for their 14 billion. They got 14 billion and it's just interesting to speculate.

• 12:01Harry Stebbings?

  I didn't think this, I think everyone's really confused by this in a way that they shouldn't be. Zuck was behind with Lama. He needed to show the public markets that they were still a front runner with an AI slant. Bluntly, that was the play. The price is less than 1% of the market cap. Honors, he doesn't give a shit and he gets good talent with some people that he likes. Roll the dice.

• 12:22Speaker 01

  I agree. That is the analysis. So I was asking the question, but you're right, Harry. Implicitly, what you're saying when you make that answer, and I, to be clear, I a hundred percent agree with it. What you're saying is there's no internal DCF that says why this is a good idea. There's just a, I want to be relevant. It's less than 1% of market cap. I'm doing it. Somebody paper the file. If you piece it up logically, you're right. You gave a company 14 billion for half of the company. The 14 billion has moved out of the company, so that's now gone. It didn't move out as a repurchase of shares. So you still only own 49% of the company. The cash is gone and therefore you now have. Half ownership in a business that obviously doesn't have that 14 billion and just has whatever revenue it's had.

• 13:07Speaker 01

  And we just agreed that's declining. The value of that asset, it's not nothing, but it's nowhere near 28 billion post. We now have an 800 million declining revenue business with so, so gross margins. The amazing thing you've got is you're exactly right. The talent of those people that you've brought across.

• 13:22Harry Stebbings?

  The talent and the messaging for a company that is the size of.

• 13:24Speaker 01

  And the messaging and the knowledge.

• 13:26Speaker 00

  Well, I'll tell you, if I had to simplify it, I think the question is, is Alexander Wang as good or better than Brett Taylor? Because look, here's my view. Salesforce spent $750 million to buy Quip in 2016, a word processor that barely worked for one dude, right? One of the greatest of all time, you know, CTO of Facebook, right? And then almost CEO of Salesforce, except he bailed, right? Rory's really good at this math. What is 750 million in 26? Were great exits where IPOs were lucky to be a billion compared to 2026, 10 years later? It might be the same as scale, like the multi, it might be 20x bigger. So 20x times 750 is almost exactly the deal size.

• 14:05Harry Stebbings?

  I don't think, he's not saying, I think you're placing emphasis on, but the talent acquisition.

• 14:10Speaker 00

  Yeah.

• 14:11Harry Stebbings?

  I think 27 billion of the 28 billion is on messaging. It is about showing the public markets in the world, he is still a front runner.

• 14:18Speaker 01

  Important in fairness to say it's only 14 billion, not 28.

• 14:22Speaker 00

  Yeah, 14. So I think the math to Quip is actually pretty good. Rory, you're better at math than me. 750 in 2016, 14 today for one dude. Basically, I mean, who used to, raise your hand. Garrett, help me. How often do you use Quip for your word processing? Pretty, pretty often, every day?

• 14:36Harry Stebbings?

  Don't be mean.

• 14:38Speaker 00

  No, what I'm saying is it seemed crazy, right? It's, it's gotta be, but if it's the same deal or Google buying Bebop to get Diane Green for 400 million, right? That was the generation before Quip. What's it, everything's bigger.

• 14:52Speaker 01

  Everything is bigger now. There are seven companies who can write stunning checks and only customer quarters cash, literally one quarter of free cash flow. And therefore, if you're in the path of the corporate imperative for one of the top seven companies, you can just get huge amounts of money and you're thinking, oh my God, this is the most. Amazing thing of all time and they're literally thinking tick that's Q2 done what am I doing in Q3 Harry broadly speaking we're all saying the same thing Facebook's market cap is 1.7 trillion and their free cash flow for a quarter is 15 billion even if it's a total write-off he literally goes away Mr Zuckerberg goes away and in 90 days come back and said whoops that was an error but we earned it back keep moving here people

• 15:33Harry Stebbings?

  Garrett I'm gonna with that Microsoft put down an offer tomorrow for $4 billion to acquire handshake would you say yes

• 15:41Speaker 03

  What absolutely not

• 15:45Speaker 03

  I love it The broad opportunity for us is like you know leveraging all of this trust we built with the million

• 15:51Harry Stebbings?

  Jaffa GGV is just calling me he says fucking sell at 4 billion

• 15:55Speaker 03

  I think it's an opportunity

• 15:56Speaker 00

  I tell all founders to sell now by the way

• 15:59Harry Stebbings?

  No

• 15:59Speaker 00

  Only as a challenge I'm not saying you shouldn't take this fake offer this is what I my life lesson I tell you to take it and then if you come back the next day and say what you just said which is F no it's the right answer but I want to as I said I want to be the one as crazy as it sounds I want to be the one guy to tell you to sell as a challenge

• 16:17Speaker 01

  My observation is no one's opinion on what they would do at a hypothetical offer is worth a damn and what people actually do when the money comes into view tends to be very different on both sides

• 16:28Harry Stebbings?

  Listen Garrett you're gonna get a term sheet from Rory at a $4 billion price on the back of that so congratulations this was a very well

• 16:34Speaker 00

  I'll put in 100k Harry I know that I believe in Garrett I'll put in 100k that's good especially if I get like a 10% off Harry before just if we have time just because a meta question for founders out there and VCs struggling with all this demand that you have now are you an AI company is this a two-product company like in a way listen you've worked so hard right but you also have a little bit of luck this has bounced for you right you've become an AI company that I when did you found the company

• 17:00Speaker 03

  Nine years ago

• 17:01Speaker 00

  Okay so you weren't AI first

• 17:04Speaker 00

  When you were a network, when you were sort of the network for jobs to university students, how do you think about it yourself? How do you think about taking advantage of these opportunities? Like, what's the meta lesson? Harry, you're the boss. I just think it's very interesting because so many founders are trying to become AI startup companies, right? But they're not quite, they're not quite hitting it, right? They're launching features and products, but the growth isn't there.

• 17:25Speaker 03

  Yeah, I mean, I think this just accelerates our, our mission of like democratizing access to opportunity and becoming the number one job platform on the internet.

• 17:32Harry Stebbings?

  No, that's not the takeaway, Garrett. Sorry. No, no. The takeaway is stay in the fucking game long enough. Don't burn too much cash and bluntly get out of business too soon. I've been in a business that could have, sorry, that was aggregating, and they just spent the money badly and they bluntly didn't survive. The business is about being ready to play when you're called on the pitch. Garrett, we're gonna let you go, my man.

• 17:56Speaker 01

  Great to meet Garrett and congrats.

• 17:57Speaker 00

  Rock on, man. Great job.

• 17:59Speaker 01

  There's a man who's going straight back to the phone to start returning customer calls.

• 18:03Harry Stebbings?

  Now, the thing that I do want to discuss on the back of that, guys, is $14.8 billion back to LPs as well is a lot of money. Do we see a resurgence in LP activity reinvesting that money, given what has been a period of illiquidity and people struggling with liquidity? Do we see now LPs return to the game at speed with Chime, with Circle, with Scale coming back?

• 18:27Speaker 01

  I mean, it's got to help. There's no doubt that liquidity this year is going to be way up on the last couple of years. It's got to help. I mean, I think, you know, when you're dealing with a couple of trillion of NAV, terrifyingly, 14 billion, let's call it 20 billion, round up, it's 1%. It's a good start. But, you know, that's the terrifying thing about big numbers. They're big.

• 18:48Speaker 00

  LPs, at least the LPs I interact with, don't get ahead of the distributions. What I mean is, yeah, Scale, as near as I can tell, Scale's already distributed cash as a dividend, right? It's out and folks are going to be, may have already wired the money out to their LPs, right? Have some fun, right? The Chimes, the Circles, the rest, the six or six or seven great IPOs, a lot of the top VCs are going to be managing those distributions out over 36 months following a lockup. Right? So my LPs don't, they're looking at dollars out now, this quarter, before they get excited about putting money, even though they should get excited because they can see it, right? You know, the money's coming back over 36 months and you can do a model and model whether it's going to be more or less than its current price. But I haven't seen that excitement until the cash is back.

• 19:33Harry Stebbings?

  I think that's what's so unbelievable about this deal, though, is that how rare do you get cash back this quick? No delays.

• 19:39Speaker 01

  Yeah, I mean, it's actually totally weird. It's even more unusual in the sense of the deal now, it's already closed. It's such a get around on the Department of Justice. I'm sure somewhere in the DOJ, someone's head is pounding. And if, you know, we were under the prior administration, they'd be trying to do some kind of retroactive restraining order. It must make everyone's head hurt because it's such an obvious get around. If the real asset is some combination of the people you hired at Meta, or call them Meta, and or, as Harry said, some kind of market perception. It's very hard to imagine a DOJ rescission that says you can't work at Facebook anymore. This is such a weird transaction.

• 20:19Speaker 01

  It would be very hard for any kind of judicial review to unwind it, in part because it's so weird.

• 20:25Speaker 00

  It's clever if you want nothing. They're bought no revenue, no assets. They've bought, as we just discussed, I mean, if handshake has already gotten, say, 50 million AR from scale already, this is the wor- as a revenue asset, they don't even own it. It's the worst purchase ever of all time for assets, right?

• 20:42Speaker 01

  That was a very succinct summary here, I thought. That should be one of the soundbites because you nailed it exactly. The funny thing is, Scale AI is still the same amazing company it was, right? Two or three, I don't know how many talented people have left and Alex is obviously wildly smart. But you've still got, you know, hundreds of really talented folks there. But the issue, as we've said, is that the impact on your customers is so traumatic that it may be very hard to get back from it. So, yeah.

• 21:07Speaker 00

  I mean, I love you, but it's a dead man walking instantly. There's no way that Scale can recover from losing its founders. It's like, this is too dynamic a business and it, it can manage 200 of its 800 for 24 months, but it's, it's a dead company.

• 21:22Speaker 01

  And by the way, I'm First of all, I agree with your conclusion. I'm just being precise. It's not because, quote, "you've lost your founder," because, you know, a company can survive the loss of one person. It's the way it happened sends such a signal about your ability as a customer of Scale AI to continue doing business with them when forty-nine percent of the company is owned by one of your competitors in the LLM space. So I agree a hundred percent. Practically speaking, trying to say it nicer, I'm working on being nicer. Practically speaking, it's hard to imagine an independent viable business selling to the LLMs, who are the competitors to your forty-nine percent owner, where your founder and charismatic CEO is currently working.

• 22:04Speaker 00

  It'll be fun. In like three or four years, we can do an analysis, or you can help. It'll be the AI stubs. What happened to all these characters, Scales, that were sort of bought, right? We got a big one called OpenAI, which was sort of bought by Microsoft. They're trying to undo that one right now. But the rest of these little stubs, what will they look like in four years? We'll pay fourteen billion for Scale, but we'll live two hundred million in the bank. Okay, that's what they're doing. They're leaving a little pot of honey in the bank. And as folks leave, because they're all cashed out, when we're left with eighteen employees, the two hundred million can last a long time.

• 22:37Harry Stebbings?

  I think the interesting thing for me as a McCollum investor is how's the spend distributed across the other players, one? And then is there additional acquisitions that the others feel they have to make as a result of this acquisition to compete with Facebook's acquiring Scale?

• 22:50Speaker 00

  Yeah.

• 22:51Speaker 01

  I agree that that's the question, because as a good investor, Harry, you're right. The only response to any great outcome is, that's wonderful, but what does it mean for me? Rory, you know me so well at this point. Always. I think this is going to be a unique thing. I don't think they'll buy a person like this happened. You might see some of them say, "I would prefer to take some of this work in-house." "Are parts of this work in-house, because I'm giving too much information to a third party, and therefore maybe I continue to do business with Handshake with Merck, but maybe more of the process is handled by me, or maybe I buy a small one of these." But I don't think you'll see someone else do a crazy, "Let's hire the CEO, buy forty-nine percent, give Harry the money, and let Harry dividend it out and pretend it's still a company."

• 23:35Harry Stebbings?

  The one thing I just want to highlight, I always want to do this. I think it's nice. We hear enough about downtreading on people in terms of like bringing people up. Excel made $2.5 billion. Well done, Daniel Levine, amazing seed bet early. Page Craig led a pre-seed, a thousand X return.

• 23:51Speaker 00

  Awesome.

• 23:51Harry Stebbings?

  The dude is well known for passing on Airbnb, which he very humbly always talks about. Awesome news there.

• 23:57Speaker 00

  No, he humbly talks about straight it up. It's even better story for him.

• 24:00Harry Stebbings?

  In terms of CEOs moving around, as we heard with Alex at Scale there, Delian tweeted about Jason at Discord being removed potentially by Benchmark due to delayed IPO of Discord. I wanted to hear what you guys thought of that.

• 24:15Speaker 01

  If you think about, because I've always been interested in the, you know, you see the threads of X, Y, Z, everyone hating Bill Gurley for replacing Travis Kalanick. I always thought you want to very much strongly bias to backing the founder the whole way. I think that's been a really good move in venture in the last 30 years. Not because it's morally right, or maybe it is, but because it's savvy. Whenever you have to change out your founder, by definition, you're going to lose a couple of years and it's a pain in the ass. So even apart from the moral issues, it's just not good for investing. But I also feel sometimes maybe you do have to make a change.

• 24:49Harry Stebbings?

  Rory, have you ever fired a founder?

• 24:50Speaker 01

  Yes, I believe almost all of the times, even when a founder is struggling, you do a lot better by working with them and saying, what does success look like? Can you get there? Agree on what success is? And if you're not getting there, then most of the time, people say, you know, maybe you're right. Maybe I can get someone else to do this. So if you walk in and fire a founder or any CEO and they're surprised, you have massively failed as a board member because you didn't have the guts to tell them in advance you're worried.

• 25:22Speaker 00

  Personally, I don't have the capabilities or forget about interest. I could say I have no interest, which is true. I just literally don't have the skill. Like for me, like if a founder came to me and said, I'm out, right? I don't have a guy.

• 25:35Speaker 01

  One of the deep reasons for not making that change is, oh my God, it's such a lot of work. And you're right, you rarely have the guy. And I always tell people, this is open heart surgery, even if the founding CEO wants. To make the change, this is open heart surgery and you got a one in three chance of dying. It's really brutal.

• 25:51Speaker 00

  Just one, one, a little while ago, I haven't updated, but I don't think it's going to change. I did analysis of all the B to B IPOs, okay? Of the IPOs, 90% still had the founder CEO as CEO. And as near as I can tell, all but one had an elective step down. Okay, like we're, we just don't want to do it anymore at scale. Okay, that's like the pager duty story and a few others. Let me contrast this a little bit with Discord because Discord is not a B to B company. Okay, it is, it has elements of it. If we're aiming for these great outcomes and nothing else matters today in the B to B world, then if the founder CEO is out, I'm out. There's no hope in B to B. If the founder CEO is out, I'm out.

• 26:27Speaker 01

  If the founder doesn't want to go the distance and works here to hire someone, great. It's a little riskier, but you can have amazing outcomes because that's what the facts say. The violent change is very hard. I could come up with some examples of where violent change worked, but it's just so hard. Yeah, the one canonical example, as you say, Jason in consumer is Uber, which is why it attracts such attention. It was a violent change. It was very controversial, but if a board member feels it's his fiduciary obligation, and this is where I do give Bill Curly credit. If you're on the board of a company that's raised $10 billion in money from third party investors, I don't think you can just say, I religiously don't fire founders. If you come to believe it's your fiduciary obligation to make a change. And again, we can't run an alternative history.

• 27:10Speaker 01

  You don't know what Uber would be with or without Travis Kalanick versus without Dara. But in particular, in the light of the kind of backlash he got from it afterwards, I do give credit for anyone who says, I'm in the boardroom. There are lots of people's money on the line. I'm going to be a good fiduciary and do the hard thing, not the aesthetically pleasing soft thing. I'm going to step up to my duty.

• 27:32Speaker 00

  I don't know the exact story with Discord, but if I had the choice as a seed investor, you have two choices. Jason Citron, he's clearly one of the best found. I mean, he seems like I only, I followed him since the beginning. Okay, I'm a super fan from a distance. Okay, if I was the seed investor, you said you got like the company's plateauing. Jason doesn't seem to want to go public. We're worried about him and you have two, we've done the math. The last round was at 15. We can either bring someone in and try to go for a 20 billion plus IPO or stick with Jason. We're probably gonna have a 10 billion IPO. Okay, I'd stick with Jason. In a heartbeat, I would stick with it. I would stick with the risk of the founder. Oh, okay, we're gonna have a somewhat worse outcome. I'll take my, if I invested at 20 pre, what's the multiple with dilution? I don't want to do that. I don't want to, I don't want, and I think what

• 28:17Speaker 00

  Bill Gurley's doing at Uber was doing a mental calculate. If they did it with Discord, I'm sure this is what happened. I don't, he's clearly a generational founder, but he's not the belt and he's not the guy running Starbucks from Newport Beach, whatever that guy is, right? I'm okay just making a billion dollars Rory, or a couple hundred million in carry and sticking with the founder. In all seriousness, I'll take the bet.

• 28:40Speaker 01

  And actually, I've genuinely had those conversations where I'm on the same side as you. And it's not just because I want less. It's often because it's less, but with a higher certainty. Because I go back to my comment, whenever you make a change, you've got a one in three chance that the person you hire is an empty suit and a frickin disaster. So I hate making change. But I'm gonna say it again, just because I can't stop it. I do think there are still some times when you say the combination of reasons, including for juicy reasons, you do. You just, dear God, I hope that doesn't happen a lot.

• 29:10Speaker 00

  And here's the meta question though. Sorry, Harry, I don't mean to interrupt. I think this is where you start. If I'm a founder, okay, and let's say Benchmark did push them out, right? And Sequoia used to be clear, like, we'll find the right CEO, whether it's you or not, but you're gonna make a lot of money. That used to be part of the Sequoia's pitch, right? It may not be you. It is an important factor for founders to weigh in.

• 29:28Speaker 01

  It is.

• 29:29Speaker 00

  And when you sell 3% of your company at Demo Day at 60 posts, it's still your company. It's still your company.

• 29:37Speaker 01

  I agree. It is a more and more founders do also.

• 29:40Speaker 00

  Yeah, they should.

• 29:40Speaker 01

  Agreed. I would say the comment, first of all, I totally agree with that. It's relevant. And I think actually, again, we'll talk about founders for a while. It's pretty clear that early on, part of the reason that Sequoia aren't in Facebook is residual frustration with Mike Moritz for prior, you know, prior situations where they had in fact made a CEO change, which is why I think the pendulum, which was way too far over on the, you know, always make A change has massively moved the other way. So maybe the clear statement is this, if you had to pick one default mode, it's clear and you could only have one button that you always press the same button, you would go for the never change button because it's statistically the right outcome.

• 30:19Harry Stebbings?

  We're going to move on. There are a couple of other rounds that I do just want to cover. I want your wisdom on guys. Ramp can announce today they've raised a $16 billion price. These guys just never stop fundraising. The price just goes through the roof. Amazing, and this is not criticism. It's astonishing. One, how did you think about that raising at 16 billion? And then two, guys, I don't get it. Brex is like 10, 11 and Mercury is at three and a half with 500 in revenue and owning the banking relationship, which is more valuable. How do you guys think about this?

• 30:54Speaker 00

  Just to frame it, like this is 1% dilution. Here's the thing, it's 200 million at 16 billion. Because some of these rounds, you look at them, they're great, but they're 20% dilution, 30% dilution, right? That's an expensive unicorn, right? 1%, I mean, I know it's a lot, but we're not really going to notice the dilution on our cap tables, are we?

• 31:15Speaker 01

  So you made two statements, you know, you compared it to Brex and then you and then Mercury. And you were implicitly saying, Harry, you know, why would you do that 16? I mean, my sense of it is that they have a very nice business, which has both card and software and have headed more up market. The Brex has also moved up market. And the quote unquote competitor here is a combination of the card business from Amex and the accounts payable business from the accounts payable suite of SAP and Oracle. So they have a software plus kind of transaction business, which is pretty nice. You know, they've got hyper growth. I get it in terms of just the explosive growth they're seeing in that space, though I think it's slowed down.

• 32:00Speaker 01

  I think, look, the million dollar question on all these fintech companies is how ultimately do they trade if and when the growth slows down? That's probably a question you'd be asking yourself if you were paid 16 billion for that business, for a what looks like a 7, 800 million. Revenue reasonably high growth business. It feels lofty, but as we're going to discuss if we get through our agenda, which I doubt founders fund have shown an uncanny knack for getting these things right. So I'm not going to bet against it.

• 32:28Speaker 00

  You're right. Ramp, Brex probably are basically the same amount of revenue. Mercury's approaching. I don't think Mercury's bank relationships are worth anything, Harry. I think they're worth zero. I can tell you why, but putting that aside. Here's the theme that I see in the private markets, which I think is weird, which is that let's assume Ramp is the fastest growing of the three for the sake of argument because it has the highest valuation. It should be, right? It should be. I still feel like for startups, we're giving revenue valuations that don't have an adjustment for different ways their comps trade in the private markets. And if Ramp is in a space that's two to four X revenue when it's public or whatever, you could look at the comps, three to four. That's the part, you know, a lot of fintech revenue is lower, it's lower margin. We're at the public market value at lower, and that's the part I don't get.

• 33:13Speaker 00

  And even in my own portfolio, when I see valuations that value 80% gross margin products, the same as 20 or 30 or 40, and that remains a mystery to me in the private markets, right? Where everyone gets the same ARR valuations, even if the quality of revenue, even if the public comps, the public comps are different, right?

• 33:32Harry Stebbings?

  So I totally agree with you there. And I just looked at it and was like, wow. And just the speed, they are always announcing fundraisers. Like, I mean, it's every three months Ramp has a new round, which is again, great. I'm just like, wow.

• 33:43Speaker 00

  1% every six months with a little bit of tender offer thrown inside is no big deal, but I hear your point.

• 33:48Speaker 01

  And as a reminder, it is probably at the margin of cash consumptive business because it is, I mean, just like Amex, it's giving people credit cards that they pay for things and the merchant gets paid next day. And then someone has to float the card for 15 to 30 days. It's not a lending business in any long-term sense, but on a short-term basis, you are lending money and you have to fund that capital. So there probably is a capital need. Now, I don't know how much they're doing that with securitization or receivables, but fundamentally, this is not the kind of company you can run on the cheap. It's not like a software company where you can be down to your last dollar and Juggling payroll, as I'm sure Jason did many times, right? When it's starting out, you have big ass receivables.

• 34:32Speaker 01

  I remember doing the math and you kind of have to make a bunch of assumptions about, you know, if you have revenue of a billion, then, you know, if you're getting two or three percent, you can work out the gross transaction value per year. And then if you say to yourself, settled over 12 months, you probably, if you're doing a billion in revenue, you probably have roughly four billion in receivables you're financing. In other words, you're advancing money, maybe two to four, depending on the credit cycle. You're advancing money to your customers that you have to fund on the balance sheet. And that's probably where some of the money goes.

• 35:02Harry Stebbings?

  I actually think it's a really interesting way to do relevance. The most important thing today is to be relevant and to own consumer attention. And I think by having frequent fundraisers and frequent media hits, it's just a great way to continuously keep velocity and momentum ahead of someone like Brex. It's actually important, Roy, like in the nicest way, I would push back on your, you went, mm.

• 35:22Speaker 00

  Yeah, no.

• 35:24Speaker 00

  Especially because most customers, a lot of consumers don't know which one to pick. It's all brand anyway, right? And Ramp, Brex, what I don't, I don't, even I don't know.

• 35:32Harry Stebbings?

  But Ramp is always on Twitter and they've got Sasquatch or whoever this random footballer is running with Ramp on and that goes viral. They're crushing brand.

• 35:42Speaker 01

  You're right, Harry. You called me on it correct. I did make a little face, but I'm willing to say you're correct. It kind of galls me that you'd be using fundraising as momentum builder. But you're right, so much of the business in this part of the market is about momentum that, yeah, they're smart. Most of what they do is pretty damn smart and that's probably smart too.

• 35:59Speaker 00

  Plus, if you're doing it, if you're a new customer, you don't want to invest in a loser in the space. It just sucks. When the velocity comes out of the product, when they start removing features, you just, you just. The beauty to this Ramp, Brex, Mercury at all business is everyone needs it, right? They may not need these, but it's 100% attach rate, right? But I don't want to, I don't want to be trapped. I don't want to be ripped off. I want someone that's actually going to make my life easier, where the spend management actually works, right? I don't want to see the ones where the energy is seeping out of the company. I just, I won't, I won't sign up for that vendor. Intuitively, it makes no sense, right?

• 36:30Harry Stebbings?

  Listen, 16 billion at Ramp, perplexity, raising again.

• 36:35Harry Stebbings?

  First tranche fifteen, second move to eighteen because there was so much demand. Rory, is it the same as you said last time, which is just, hey, it's an infinite shot at a massive $500 billion outcome? Roll the dice.

• 36:47Speaker 01

  The two stepper price uptick thing is weird, but you're seeing some of that now where I think the first round gives you certainty. And then the people who didn't get in say, I'll just pay 10% more. I just want in. It's just a sign of deal heat. It's a sign of the market right now. Rational CEOs take advantage of it.

• 37:05Harry Stebbings?

  Listen, we have OpenAI creating more news as always. We have a 200 million defense contract from the Pentagon, which is actually very sizable. It's like the largest the Pentagon have given to a single provider. How did you guys read that? Also, OpenAI's first foray into defense in this way.

• 37:22Speaker 01

  Aggregate comment, it's probably good news. I just love the fact that the Pentagon is spending money with all these venture backed, high growth, very technically savvy, forward facing companies. I think it speaks to some level of improvement in the procurement process. Palantir started that SpaceX, and I think it's on to all and all that now. I think it's great. You look at the news right now and wars in other places and you go, I want to make damn sure that we have the best stuff. If we ever go to war and it looks like that's not being made by the old fuddy duddy companies. So big picture, good news. Go team.

• 37:55Speaker 00

  Related to what you said, Rory, I, OpenAI to achieve its mission, anyone with its market share, you have to be friends with everybody. Before 2020, there were so many principled CEOs. So we were so principled about issues, about not working with defense or the government. There are many things folks are principled in fact, many things that are very aligned with my values that folks are no longer principled on. You've got to be neutral. And I think the limited press I saw on it, Sam said, this is not, this is only 200 million. This is not material to us. This is a small deal, right? You know, he probably didn't do a customer call on this one. I mean, maybe he did. But it is immaterial. You can't be Republican or Democrat or anti this. The threat to OpenAI from being political is so high, right? You've got to be friends with everybody.

• 38:36Speaker 00

  And so you've got, I mean, other than rogue states, I think OpenAI has got to sell to everybody. They've got to own it.

• 38:41Speaker 01

  For the record, he may want to be friends with everyone. He doesn't appear to be doing a great job of staying friends with Microsoft.

• 38:47Harry Stebbings?

  What happens there with the Microsoft feud?

• 38:50Speaker 00

  Listen, I think they're lucky in that Microsoft crossed the line first. Listen, it's a weird deal because Microsoft basically bought OpenAI and they're going to end up being like a 33% shareholder of a standalone company. This is the opposite of scale in some ways. They're descaling. Before ChatGPT, this was in some ways a struggling company, right? Before, I mean, ChatGPT exploded, right? It was great, but the revenue was, in the grand scheme of things, relatively minor. So they sold 49% to Microsoft, right? Now they're going to de-sell it. But Microsoft does use multiple providers, right? It does compete with ChatGPT, with OpenAI. So even if it's allowed under the contract, they did cross the line in terms of remaking, I think, the spiritual side of the relationship.

• 39:32Speaker 01

  I don't know if just because Microsoft, quote unquote, crossed the line first, and I'm not sure they did. I'm not sure that will impact. I don't know how it ends up, but I'm not sure that it will be determined by, you know, who, quote unquote, crossed the line first. I think it's a very weird contract. It's right up there. A very different version of weird than Scale AI, but very weird. It's not just about ownership and preferred stock and common stock. It's all sorts of different rights around profit sharing, all sorts of different triggers around AGI. In situations of ambiguity, the person who has the most leverage has the best chance to win. And I would argue Microsoft has quite a lot of leverage because it's not existential for them, especially now.

• 40:13Speaker 00

  I think they have no leverage, actually, honestly. I'm not trying to be a chaos agent like our prior guest. Here's why, because, listen, I'm still, I'm a student, right? The reason I think they have no leverage is because I think that whatever AGI is, we're going to be there pretty soon. So Microsoft loses, what Microsoft wants out of OpenAI is a relationship where as much of it survives. I mean, obviously, it's tied to profit sharing, survives this moment in time in the relationship, right? And they can, and listen, I'm sure, though, they would argue over it, and I haven't, I don't know the details of the contract, but the profit sharing, all the rest ends at AGI, right? So part of this relationship ends at AGI.

• 40:52Speaker 01

  That's a good reminder of that term because if you recollect a few weeks ago in one of our quick questions, someone that when are we going to hit AGI? And I think my answer, which now I feel smart because Jason confirmed it is my comment is we're going to hit AGI when Microsoft and OpenAI litigate what OpenAGI is because everyone else is using that term Lucy Goosey. It could be now, it could be 2045. Who the fuck knows? Now, half a trillion dollars of value depends on that word. I can tell you, you're right, Jason. That is the only part of the contract where you go, oh, that is a bit of, because it's ambiguous. So you're right, that will be a fun vector of this discussion.

• 41:30Speaker 00

  I've talked with several of the smartest folks I know in AI. Okay. What they think about this, what they think about AGI. And they basically all say very, it's the same thing. At this point in time, it's something Sam Altman made up to simplify a lot of concepts. He's the one pushing the narrative and we, none of us really believe there's a magic point for AGI. Right? At a lay level, I think we're close to being there already. That's the risk to Microsoft. Like, so I think my only point is since they both have something to lose in this and Sam is like, he always like, the guy signals early and he's like, you know, Microsoft will end up with 33% of a new entity. And like, he's just trying to create the outline of a deal so that it lands there. Right? They own a third, he owns six or seven percent. It gets reorganized in some weird new way. Right?

• 42:15Speaker 00

  And, and Mike, what does Microsoft get out of it? They get a longer tail. They're going to get a longer tail in this agreement, but it's going to be a different one because the cash alone is not important to them per your point. Right? The IP and the relationship is more important than the cash. What are they going to do with the cash? Dividend it out by Scale AI Prime? Like, they don't actually need the cash, do they?

• 42:34Speaker 01

  I think we can agree that they don't need the cash. I agree.

• 42:37Harry Stebbings?

  Scale AI Prime coming to you soon, clearly. Listen, guys, we do have, we've talked about Chime in two separate episodes and this went out. It went public and it popped 50%. All IPOs up in 2025, except for sale point. How did you, is this a sign that IPO markets are roaring? There hasn't been a better time in years? And how did you analyze Chime specifically?

• 43:01Speaker 01

  Yes, yes, they clearly are roaring now, right? It hasn't been a better time in years. Yes, because there's been none and some is better than none. It's not a complex question. I mean, does it mean-

• 43:13Harry Stebbings?

  So you think it's pent up demand that's just latching on to available supply? Not necessarily the quality of companies coming out?

• 43:20Speaker 01

  No, I think the great company, no, I did not say that at all. No, I think, look, how do windows open? Traditionally, good companies go out at attractive prices. That's how you, if you've had the window shut, the only way you open it is with good quality assets and at prices where it's attractive. And the way it manifests is unfortunately, you get these pops where effectively the company going public has effectively bribed the buying public to like IPOs again. Because investors were all fairly Pavlovian. If you were a IPO buyer in 2022, your searing memory is, I bought them all in 21. I lost my 30%, 40% on average, 90% in some cases. I'm never doing that again. So you take a long time to come back.

• 44:04Speaker 01

  Now, in the last month, your narrative has changed. It's, oh my God, I piled into the last five IPOs. I'm up 70% on average. I'm up 250% in the case of Chime, in the case of Circle. This has been a huge boost to my fund performance. I gotta do me some more. So the pop helps the win. It's not ideal. There should be a better way, but there's clearly positive momentum now from good companies and there's going to be more of an appetite.

• 44:32Harry Stebbings?

  Will this lead to Databricks or Stripe or one of the big boys going out?

• 44:38Speaker 01

  Even if they go out, the sentence is wrong, Harry. It doesn't lead, you see, lead, you're implying that they couldn't go out and now they can. They can go whenever they want. They could have gone in 22, they could go in 23 because they're so big and so good. They can go whenever they want. That's an idiosyncratic, I'm a genuine comment. That's an idiosyncratic decision that they're going to make that I don't have a ton of visibility into.

• 44:58Harry Stebbings?

  No, no, no, no, they can go out whenever they want. But now they have data to suggest that if they were to go out at this period in time, it is highly likely that they will be priced at a premium with a huge amount of demand. They did not have that historical data beforehand. So this data is leading to a decision for them.

• 45:17Speaker 01

  I'll give you that. It's not clear to me that the only angst was on pricing. I think it's much more true. Maybe the better statement is this, Harry. I think it's much more true for the whole flotilla of companies in that 200 to 400, 500 range who have been trying to figure out where to go and can now see some kind of exit. For those folks, everyone is dusting off their plans. For the big four or five companies like Databricks and Stripes, you're right. At the margin, it's a more favorable time. Why not? I think their reasons for doing it or not doing it are more about the whole when do they want to do it? Do they really want to deal with it? So I could imagine an entire IPO cycle where, once again, neither of the two names decided chose to go out and we get to the end of the year.

• 45:57Harry Stebbings?

  Was Chime mispriced or is that pent up demand?

• 46:02Speaker 01

  Well, by definition, pent up demand. The whole point of pricing is to pick up pent up demand. So by definition, it was mispriced.

• 46:10Speaker 00

  My limited understanding from folks that have been involved in some of these recent IPOs, and it's limited, Harry, you probably have had more, but the advice was just to be conservative. It's a slow market. Well, the advice to be less conservative now after these IPOs? Probably, right? I think you're still going to tell everybody to be conservative, right? It was to be conservative. And yes, we could talk about how much money people really left on the table versus in theory, you can't sell every share at the highest possible price, right? That's the fiction in the circle math. But even if the company leaves money on the table, the investors distributing over the coming years, they may have only lost a little bit from the incremental dilution. Dilution aside, the price, the IPO price is almost irrelevant for the VCs. It's when you get out and getting out strong may be worth the incremental dilution.

• 46:55Speaker 00

  That's the one that Bill Gurley, I guess, disagrees with, right? Is that there's a trade off. Like going out strong doesn't matter, right? You'd rather go out and limp along. That's the advice. The other thing I would say on Databricks, and I don't know on Databricks, I literally know nothing, but literally the fact that this last week they had an analyst summit where they went through all their metrics, their revenue, their growth rate through an entire group of investors and analysts says to me, they will decide one data file and it will just happen. Like they're already red. Not only are they running their company like they're going to IPO. They're actually managing to Wall Street like they're already they're at the edge of managing like they're already public, right? So I wouldn't be shocked if we opened up the news tomorrow and they filed because they're already completely ready, right?

• 47:38Speaker 00

  They're already they're already they've already halfway there. So I think we'll be shocked in Databricks because we think we'll we'll we'll see these signs. But there it's like a Sam Altman narrative. The signs were already there, like they literally could file next week and no one should be shocked.

• 47:51Harry Stebbings?

  Totally agree with you on Databricks. So I actually interviewed that head of sales, Ron, who was unbelievable and spoke in detail about how they structure and run.

• 48:00Speaker 00

  Crazy. He was there since almost the beginning.

• 48:02Harry Stebbings?

  I mean, really crazy. I was so impressed with him. One of the one of the companies in the flotilla that you, I think, very wisely described, Rory, is Gusto, who announced a tender at 9.3 billion at 900 million in ARR. I was actually surprised there at 900 million in ARR. Amazing. Congrats to Tomer and Josh and the team. That's awesome. I don't know if you guys had a take, a read on on that, coming out with 909.3?

• 48:26Speaker 01

  Yes, you underestimated them. We had talked to them way back when and obviously should have done the deal. So I share your pain. I think, look, payroll is one of the biggest markets out there. I mean, it's very, sometimes the obvious shit is the most important shit, right? It's a huge, big market because everyone gets paid and you get five bucks a month per US worker that you're paying. You know, ADP and Paychecks are two old school companies that are, you know, work approximately 100 billion. There's a bunch of other companies at the 10 to 30 billion dollar level of public comps in the space. So it's a huge ass market with a lot of attach and it was pretty stodgy. So at one level, I'm not surprised, given the TAM. They've clearly executed really well to get to that size and scale.

• 49:08Speaker 01

  But, you know, they're they have a modern SMB focused payroll solution. There's, you know, half of the workers in the United States work in SMBs. So you're probably at 60 million people on which you can get, I'm just doing the math in my head, five to 60 bucks. Yeah, I mean, you're at you get to a huge market very quickly, 60 billion market.

• 49:26Speaker 00

  You know, and they're also lucky. I think all these guys are lucky in that they have a great comp. So Paychex, again, I think was founded in the 1870s, Rory, we could look it up. I mean, Paychex is an old one. It's trading at 10x revenue at 55 billion in market cap. So it's very easy and it's, look it up. It's at an all time. It's not just trade that. That's an all time high. It's in an all time high today. So if you're a VC, it's very easy to say, well, look, okay, Gusto is at a billion. Paychex is at five. Okay. Gusto is growing a little bit faster. It's newer. It's better. It's founder led. You can back into Gusto, all of the payroll folks, you can, with a $55 billion ancient public company trading at 10x,

• 50:08Speaker 00

  you can justify any of these deals. People don't realize Paychex, Toast, a few others, there's some great comps out there.

• 50:13Speaker 01

  Well, ADP as well. I mean, you have to put in ADP. I mean, the two big dogs in payroll are ADP and Paychex. And I'm, Paychex, I think was founded 60s, 1960s or 70s because the original founder, you know, went on to continually run for governor of New York as a republic.

• 50:27Speaker 00

  ADP is almost all time high too. They're both.

• 50:31Speaker 01

  They're two big businesses. So provided you can make the economics of replacement work, you can build a big company.

• 50:37Speaker 00

  ADP, I didn't realize ADP is trading at 15 times revenue.

• 50:40Speaker 01

  Yeah.

• 50:40Speaker 00

  Why didn't we just put the fund into ADP Rory? Forget about putting the fund into these, these newer kids. We should have put the fund into ADP and Paychex, ADP and Paychex. I mean, that's what my grandma's startup used. Like they use Paychex, right?

• 50:53Harry Stebbings?

  Rory, what was your reflection on turning down an early Gusto round? And did it change your mindset, teach you anything?

• 51:00Speaker 01

  Yeah, that I can occasionally be very stupid. You know, we talked in between rounds, so it wasn't actually an engagement. But yeah, I think I underestimated both the founder and the openness of the market. Well, two things. One, the founder, the openness of the market to switch. And I'll say something else. The willingness of investors to pay up quickly for that, such that it got outside my price range very quickly. Stuff happens. I mean, I was wrong on that decision. Being wrong sucks.

• 51:27Harry Stebbings?

  Final one before we do a quick fire. We mentioned old guard competing with new. Glean is a $7.2 billion company today, moving very fast. Dropbox is still working to get Dash out, which I'm sure is a good product, but it's separate to their core product and core business. Can the old guard compete with a very, very fast, well-funded new guard?

• 51:49Speaker 00

  I'm starting to lose confidence in the old guard. Listen, I think because the LLMs are open, anyone can use the API. Most of the work is done by third parties. Use an open source framework for your chat and then you can use an LLM. And then you can, it's pretty simple to rag a bunch of data and stick it in. And I just figured that at the software level, the big guys would catch up, right? But I'm just, in my ecosystem, they're still too slow. I just don't see it. I don't see it. I'm worried.

• 52:19Speaker 01

  First, the minor comment. I do believe the quote unquote old guard can compete if they, in certain circumstances, if the situation is right and then they have leadership to just push it through. But I don't think that's the issue here. It's a different issue. The real truth about Dropbox shipping or not shipping whatever the product is, Dash is, is it doesn't matter. Let me tell you what I mean by that. Typically, the old guard play is some version of, I'm the system of record. I'm already in there. I can add this stuff on top. That's the pitch every time. I'm ServiceNow, I can add an agent. I'm Zendesk, I can add an agent. I'm Salesforce, I can add an agent. And the new guy's pitch is, we have this agent and we can run on any system of record. So you can buy us and you don't have to change out your old guy. That's the vector of competition.

• 53:03Speaker 01

  What it means is you can only be an old system of record provider. Your right to win is predominantly in your existing customer base. And ServiceNow is a big one and Salesforce has a big one. And brutally in the enterprise, Dropbox doesn't. So even though we threw out Dropbox and Glean, they're not in the same quadrant. It's not a relevant question with all due respect, Harry. Glean is out there competing with all the people on enterprise-wide deployments for big ass companies. And they're going to have a whole bunch of competitors in that space that we could talk about. Even if Dropbox had pitched a perfect Functionally equivalent product to Glean. It would mean that for their existing business customers, which is a smallish percentage of their total business, they would win all that business.

• 53:47Speaker 01

  But then when they moved on to customers who didn't have Dropbox, they would be at ground zero competing against Glean for that. And that, I think, is the real issue, not some kind of, are they powerful? Are they good enough engineers? Are they strong enough founders? I think just situationally, starting where they are, it's just hard to get there.

• 54:04Harry Stebbings?

  Rory, the joys of me is I have very few feelings. And so you can always say it's a wrong or a moronic question. My retort to you would be, you're very wise. What would be the right question to ask with regards to the new versus the old guard then?

• 54:17Speaker 01

  Whenever you're dealing with the old guard, by definition, they're not going to bring oomph to the table. They're going to bring the asset to what they have. So the interesting questions are things like Salesforce, ServiceNow and people like that. And, you know, we had a mention there of, I will say, the whole Salesforce throttling Slack.

• 54:34Harry Stebbings?

  Yeah.

• 54:35Speaker 01

  Seems pathetically lame, irritating to customers. And I was asking someone about this and they had a good take on it. They said, it probably doesn't survive in that form, but it probably survives. Because if I'm a customer, you're telling me I can't access my Salesforce records. And when I want to, you know, run it through Glean, that's not going to, I'm sure that's not going to survive. But the question is, is there some kind of API connectivity fee? Are they going to try and monetize that? But it definitely felt a little lame. I mean, you'd really want him to say, of course, you shouldn't use Glean because our product is so much better.

• 55:05Harry Stebbings?

  Is Slack, have its best days been and it is now in a decline?

• 55:10Speaker 01

  I mean, almost by definition, your best days are as a startup. Going public and then selling for 27 times revenues? I don't think it would get 27 times revenues today. So yes, by definition, it's on the downward slope of excitement, which isn't to say if it was well run and integrated well, it couldn't be a perfectly good and successful part of the Salesforce ecosystem. And we're, you know, small, small in size, but big Salesforce users. So it's not like it's doomed, but they got to make it happen.

• 55:36Harry Stebbings?

  Do you think it will be a good and successful part of the ecosystem if it continues as it is?

• 55:42Speaker 00

  It's probably maybe doing two and a half billion in revenue today, some somewhere around that. Just as an aside, I don't think Salesforce got a terrible deal in the end. You just got to, you got to view it by where it ends it up as a revenue multiple. And Salesforce is growing single digits, so I don't think Mark would want to give up that two and a half billion today. And in fact, interestingly for Salesforce, all of their, not all of them, but the light, so many of the acquisitions, Slack, even Tableau, which I think was founded in the 50s, they're actually all growing faster than the core Salesforce. So like, we can say, oh, Slack isn't what it was, which it isn't, but growing in the teens, when the core is growing seven, eight percent, that's, and you have billions in revenue, that's material, right? It's this hard stuff to do. So I think Slack today is, is pretty successful, like LinkedIn, it's not as good, but like

• 56:27Speaker 00

  LinkedIn, it's just a different Slack. Will it be a hub for developers that, that people build their eco, those days, Slack Force as our hub, those days are, are far behind us, right? But here's the irony of it. My view is Slack got acquired, it was, it was a better, even better deal than it looked. You know why? It only had one product. My view, Stuart is a generational founder, right? Did it multiple times, did, the kind of CEO we'd all love to work for, right? But I think deep down in his heart, he didn't want to do multi-product, or they would have been multi-product. Like, it had an existential ticking time bomb, because it could only be so big as a single product company. So it had, it had to evolve. And so this is a new enterprise Slack, it is what it is, we still y'all use it, and just like Workday and LinkedIn are locked down, it gonna be locked down.

• 57:12Speaker 00

  And the three of us can complain, but if Allstate and State Farm and those folks don't complain, it ain't gonna change. We don't matter. The small Slack and Salesforce customers, we don't, we don't matter at 30 billion ARR, we just don't matter, right? We don't matter.

• 57:27Harry Stebbings?

  Chaps, we're gonna do a Kaochi quickfire. We've got three to go through. Again, Kaochi, essentially prediction marketplace, where different people bet on different things. Will Apple announce iPhone assembly operations in the US this year? I'm sitting outside the US, I hear constantly, oh, we want to bring back manufacturing, starting with phones. Will they bring it back? Yes or no?

• 57:50Speaker 00

  Based on the news today, I don't know what the odds are. I don't have the in front of me. I'm going to say they're going to announce it. Yes, because Trump announced a Trump phone at $499 to be built in the US yesterday.

• 58:00Speaker 01

  It's gold. You guys are so classy. Your president's announcing phone packages.

• 58:06Speaker 00

  I like all gold. You haven't seen our new office. It's all gold as well.

• 58:09Speaker 01

  That's because your prime minister couldn't build one. Look at you, Rory. You've got you've got you've got a coin and a gold phone. Not nice.

• 58:17Speaker 00

  I think, listen, it's not possible, right? If it's it's close to impossible, but announcing it and beginning a process, you might have to do it. You just might have to do it. So I'm going to go.

• 58:26Speaker 01

  I'll take it. Announcing yes, Rory, announcing doing yes or no? Politically, it would be smart to announce it, even though it's impossible. I think Tim Cook is such a straight shooter that he just couldn't pull it off with a straight face. Because everyone was no, it's absolutely bullshit. But yes, in a cynical world, I would make one phone in the United States of America just to confirm. You know, we can we too can do the low margin commoditized parts of the electronics value chain and end this question. Will the S and P finish positive this year? Yes or no? The record of analysts predicting the S and P, the start of the year, they do this exercise as analysts predict the S and P at the end of the year.

• 59:08Speaker 01

  Universally wrong, the error rate's huge. There's nothing to it. Much more interesting question is, okay, now let's talk a bet. Because then you have odds and now you can actually make an economic decision because the odds here is S and P. Will it finish on the, I'm reading it as 70% likely yes, is that correct? So that's what they're saying. Given that, I would take the no. You know, I think you would make more money betting no than yes at that kind of ratio.

• 59:33Speaker 00

  I'm all in. I have no more cash, so I'm all in on this bet already. I think it's an easy bet. Rory's right about the 70%. Like I'm not, when it's my own money, I don't get the benefit of the 70%, right? I get the benefit of the 50. Personally, I'm 100% in, so I already made the bet.

• 59:46Speaker 01

  Yes, I want to build on that. I think when people ask, especially investors, their opinion on shit, the correct answer is, don't even answer that question. The real question is, where is your position? And I'm with Jason. I'm about 75% equity, mildly terrified. You know, almost nothing in bonds and then rest in short term and weird stuff.

• 1:00:03Speaker 00

  I'm back. I'm back where I was in 2008, 100% equity in my personal position, 100% back, just like 2008. It was great.

• 1:00:10Speaker 01

  Yeah, I didn't do it the right part of 2008.

• 1:00:13Speaker 00

  It was great.

• 1:00:14Harry Stebbings?

  Final one, will a Chinese AI model reach number one this year? My bet is yes, but not published, so no.

• 1:00:21Speaker 01

  Oh, great. Easy call. In other words, I'm right, but no one will ever know.

• 1:00:25Speaker 00

  I'm going to try to get back to China this year. Obviously, we've all been shocked the last, whatever, eight months by performance, right? I don't mean to date myself, but man, you know, outside of pockets of San Francisco and areas of London, I've never seen folks work remotely like they do in China. I mean, it's just insane. And maybe it's changed because I've made it back in a while, but I plan to go back this year and.

• 1:00:47Speaker 01

  I don't think I don't think they're working less.

• 1:00:49Speaker 00

  Yeah, if the government's behind you in China, there's so much energy in that culture. It's just, I don't want to take the under on this bet because I just, I feel like this is a hubris. This is a Bay Area. There's a lot of Bay Area hubris is, and this is one of them. We can't access, they can't access our internet. It's a different world out over there. But man, the power when everyone's aligned.

• 1:01:09Speaker 01

  You're right. Jason, I'm coming around to you. The bet has to be yes. There's all sorts of noise of will you know, there's all sorts of noise how it's moderated, moderated, but the idea that there's a less than one in five chance, which is what the odds are saying, that at some point this year, one of five or six really aggressive, well-run Chinese tech companies can't achieve even temporary parity with one of the things just feels to me a stupid bet. So you're exactly right. The bet at these odds has to be a yes, which is different than saying they're quote unquote going to displace OpenAI. Probably not, just like at various times when one of the other models sneaks ahead of OpenAI for, you know, a month in the various measures, you kind of go, that's interesting as a state of the art, but that's not actually how the business value is created.

• 1:01:53Speaker 01

  At that level, I come around to, I'm with Jason. The answer is yes. There's no world where we've got all the smart people and they don't. It's silly the minute you say it. So of course they will.

• 1:02:02Harry Stebbings?

  There we go. Well done, Jason. That was a very definitive answer, Rory.

• 1:02:06Speaker 01

  Yeah, Jason convinced me. He's exactly right.

• 1:02:08Harry Stebbings?

  I love it, guys.

• 1:02:09Speaker 01

  I hadn't spent a second thinking about it beforehand. It's just not, I've never been up to it in China.

• 1:02:13Harry Stebbings?

  Well, now you're a true venture investor, Rory. Okay, you should be proud. You say things with little thought, but great confidence.

• 1:02:20Speaker 01

  See, that's what I was afraid of would happen if I did this. So that. Actually, that that never have you said anything more likely to cause me to fade.

• 1:02:28Harry Stebbings?

  Don't don't worry. Did you have such a visceral reaction to Jason saying about tableau in the 50s? Because you turned that one down.

• 1:02:34Speaker 01

  No, no, I didn't. But it was, I want to say the early 2000s. 2003, 2003. Yeah, exactly. And I'm sure the poor tableaus guys screaming, you know, like, please don't say that about me. I'm I'm relevant. I got 14 billion dollars. I am somebody.

• 1:02:50Harry Stebbings?

  Oh, dear. Well, guys, listen, I always love my time with you. Thank you so much for doing this with me. And you've been fantastic.

• 1:02:56Speaker 01

  Rock and roll.

• 1:02:59Harry Stebbings?

  I mean, those shows are the highlight of my week. Jason, Rory, I so appreciate the time there. If you want to watch the episode on YouTube, you can find it by searching for 20 VC. Also, let me know what you think of the show. What can we do to make it better? Which guests can we have on? Let me know. [email protected]. But before we leave you today, here are two fun facts about our newest brand sponsor, Kajabi. First, their customers just crossed a collective $8 billion in total revenue. Wow. Second, Kajabi's users keep 100% of their earnings, with the average Kajabi creator bringing in over $30,000 per year. In case you didn't know, Kajabi is the leading creator commerce platform with an all in one suite of tools,

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• 1:04:23Harry Stebbings?

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• 1:05:51Harry Stebbings?

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• 1:06:36Harry Stebbings?

  As always, I so appreciate all your support and stay tuned for an incredible episode coming tomorrow with Gem, CPO at Duolingo.