20VC: Sam Altman vs Elon Musk: The $100BN Battle | The Implosion of Thinking Machines | Can VC Survive Public Market Pricing Today? | ClickHouse and Replit's New Rounds: Analysed

AGENDA: 03:30 Can VC Survive With Public Market Prices Today 15:20 The Implosion of Thinking Machines 21:13 Elon Musk vs. OpenAI: The Legal Battle 40:50 Can OpenAI Win Ads? 55:50 ClickHouse's $15BN Deal: Analysed 58:55 Replit's $9BN Deal: Analysed 01:08:35 There Are Only Two Types of Deals VCs Want To Do Today

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

• 0:00Speaker 00

  If Figma isn't good enough, what hope is there for the rest of us in software? I look at my portfolio. What the hell am I going to say at board meetings this week, Rory?

• 0:07Speaker 01

  It's going to be the gift that keeps on giving. If you're the kind of person who slows down at a traffic accident, in other words, if you're like 90% of humanity, you're going to be slowing down every time the depots come out. It's going to be great.

• 0:18Speaker 00

  If I just stayed at Stripe and just played Minesweeper, I could be worth 10 billion.

• 0:23Speaker 01

  Elon's in an asymmetric win-win situation and OpenAI is not.

• 0:27Speaker 00

  Advertising is not valueless to consumers when it's perfectly executed.

• 0:31Harry Stebbings?

  This is 20VC with me, Harry Stebbings, and here is my favorite show of the week. Jason Lemkin, Rory O'Driscoll, discussing the biggest news in tech. This week, my word, we have a lot to discuss. We have can venture survive when public markets price assets the way they are today? Sam Altman versus Elon Musk? The $100 billion fight that is about to ensue? The implosion of thinking machines? Replit and Clickhouse's new multi-billion dollar rounds? This and so much more. I always want your feedback. Let me know what you think of these shows. [email protected] But before we dive into the show today, I run the 20VC fund and I get this question from founders all the time.

• 1:16Harry Stebbings?

  "Oh, Harry, I can't find a good dot com. Do you have a good hookup?" Well, let me tell you now, the answer is always going to be no. I don't have a guy or a gal for that. I do have a recommendation, though. If you're building a tech startup, get a .tech domain. Tech startup, .tech domain. It could not be more obvious. As an investor, I appreciate founders who put thought into their branding. When I see .tech in your name, it tells me right away that tech is at the core of your build. It'll say that to your customers, too. A clean and sharp domain like .tech pays off in the long run. You know, nothing, .tech, 1x.tech, aurora.tech. All of these great tech companies, they all use .tech as their domain.

• 1:59Harry Stebbings?

  These are my two cents. If you're building a tech startup, don't overthink it. Get a .tech domain. After .tech establishes your digital presence, checkout powers the payments

• 2:10Harry Stebbings?

  Experience your customers see. Digital commerce is exploding, but payments are still where revenue leaks. Checkout.com launched in 2012 to fix that. They don't try and be everything to everyone. No, they just do one thing better than anyone. Digital payments. Cloud-native, sub-500-millisecond latency and 99.999% uptime. Today, that bet has paid off. With a $12 billion valuation and 65-plus merchants each processing over $1 billion annually. 65 doing over $1 billion annually is insane. Checkout powers $300 billion in e-commerce for brands like Uber, Klarna, eBay, Vinted and more.

• 2:54Harry Stebbings?

  Now they're building for Agentic Commerce, where AI agents buy on behalf of your customers in real time. Partnering with Visa, Mastercard, Google, Microsoft and OpenAI. Now, if you want payments built for what's next, talk to the team at Checkout.com. That's Checkout.com. Once Checkout gets customers through the paywall, Invisible helps you scale your operations with on-demand talent and processes. Why don't we hear more real AI success stories from big companies? The models are insanely good, but implementation's the problem. It's really, really hard. There's data all over the place, there's legacy tech and manual workarounds. It's a Ferrari engine in a shopping cart. Meet Invisible.

• 3:34Harry Stebbings?

  Invisible trains 80% of the top models and then adapts them to the messy reality of your business. Take the Charlotte Hornets NBA team. Invisible took years of game tape and analog scouting notes to go from uncertainty to a draft pick and Summer League Championship win in weeks, not seasons. Get the data in order first and suddenly AI can do almost anything for you in the enterprise. If you want AI that hits the P&L, go to invisibletech.ai/20vc. You have now arrived at your destination. Team, I am excited to be back. I'm excited to be back. We've got a lot of stuff to go through this week and I wanted to start with a really optimistic view of public markets,

• 4:18Harry Stebbings?

  which makes me question whether venture today as a model can still make money. Because when we look at Figma down to pre-IPO levels, when we look at DataDog, now 20% down, even Co-Attached, Monday Killed, we talked before about PagerDuty, consistently, we're just in the dumps with public markets. How do we analyze this? And do public market multiples today make the venture model increasingly challenging?

• 4:46Speaker 01

  No, they don't. Because the public markets, actually, it's almost the exact opposite. Those multiples, what they say is when companies go X-growth, they get much lower multiples, right? Slow-growth companies get low multiples, high-growth companies get absurdly high multiples. And you know, you could have also cited at Palantir, at 70x forward sales, for a 45% grower, every venture capitalist is going to make a trillion dollars. So what you're really seeing is the markets are just basically doing what they always do. They're sifting and they're basically saying, low growth, we're going to value them very low and perhaps too low. We can come back to that in a second. And so that's what's really going on here. So it's not a, oh, tech is doomed. What it is, is it's a sifting and a sorting. Things that look like they're going X-growth are getting thrown out, yeah, getting discarded

• 5:31Speaker 01

  at pretty low valuations, and things that are perceived as exciting and on-trend are getting very high valuations. And venture is nothing if not a trend business. So I would argue for venture, it's pretty good. It just reinforces the dynamic of this business. It's the always be in the hot stuff and you'll be fine. If you're in the trailing edge stuff, you're toast.

• 5:49Speaker 00

  Goodness. Here's how I think about it, just being more pragmatic. If Figma isn't good enough, what hope is there for the rest of us in software? I'm not saying that there aren't folks that are exploding, the ones we know, the 11 Labs and the Replits and the Lovables. But I feel like nuts of the unicorns are better than Figma, almost nuts of the prior. And if Figma isn't good enough, it is not a great IPO. It is, I'm not even sure it's a great public, it's a great product, right? I'm not even sure it's a great public company. And I look at my Portfolio. What the hell am I going to say at board meetings this week, Rory? Great job, guys, but have you seen Figma?

• 6:26Speaker 01

  But hang on, I'm just going to say something, you know.

• 6:29Speaker 00

  Great job, boys. Great job, lads.

• 6:31Speaker 01

  This is the problem with anchoring. Figma, it's a little bit down from its IPO. It's obviously, but then all the screen, it's hugely down from when all retail priced to the day after the IPO. If you look at it versus the IPO, you're right, it's still down a little, but it's not nearly as catastrophic. It's still a $12 billion market cap company. It's still growing. Yeah, it's still trading at 10x forward sales, growing at 30% plus. It's a, it's an awesomely good company. That's just the value. In other words, 10x.

• 6:57Speaker 00

  Maybe not if you invested at eight or six, though.

• 6:59Speaker 01

  Again, the message is really clear. When you pay up for high growth companies and the growth slows even a little and the belief goes out of the multiple, you're in for a long, hard haul. I would come back to this, I think, a few times before you can be valued on free cash flow. It's a long journey from the hope and the sizzle of a revenue, a forward revenue multiple and a high growth rate to the steady anchor of, you know, 12x free cash flow. It's a long and tedious journey and there's a long, flat period for the stock while that happens.

• 7:29Speaker 00

  I feel like, you know, one, one analysis, you know, it's Bill Gerling at all. There's just windows when there's lots of liquidity and high prices and then it, then it's crap 80% of the rest of the time. Another version I've always thought is, and I don't want, I don't want folks to take this the wrong way, but in some ways I feel like venture and tech is a bit of a scam. And what I mean by that is that our job is to convert very high revenue multiples into cash, almost unnaturally, through M and A, through, through public offerings, when they haven't earned it in free cash flow. Our job is to find companies worth 20, 50, 100, 200 times revenue and magically convert that to cash. And when it does, that's how we build 5X or higher funds and that's how we make money. If we have to go to an EPS world, we're dead.

• 8:14Speaker 00

  I feel like we're waiting for these moments and not, and it's even worse because when multiples are way down like today, no matter what any, no matter what the card today says, there is no liquidity.

• 8:22Speaker 01

  But, but, but you, you say that, I mean, you described the system correctly, but you kind of imply it's called a scam. I don't think it. Is a scam. One level more sophisticated analysis here says what's really happening is everyone has long since internalized the following sense. In the end, the surviving tech companies at scale are astronomically good businesses. Microsoft dominates the PC era and it's going back along. It's an astronomer. So therefore you know you want to own that. And therefore you just work your way backwards that says, okay, at the point in time when I don't know which company is Microsoft. I can't wait until it's trading at 10 times EPS to buy. So I got to take a chance. And as you say, buy a basket of things that might be Microsoft.

• 9:05Speaker 01

  And you price them long before they have EPS. So you price them on forward sales, right? And the truth is four out of five of them turn out not to be Microsoft. No one even remembers what Boll and Software does. If I put a gun against Harry's head, he couldn't tell me about Corel, Visicalc, Lotus, et cetera, et cetera. And all of those stocks traded high and then went down, but it doesn't matter a damn because in the end, the as a as a whole, the system, the venture guys, the public markets were correct, which is this is a big ass trend and the winner will be worth $4 trillion. And if the losers, if you write off half a trillion in guessing to get there, you get there. That's why it's very hard to fund an old school SaaS company today because people are just saying, look, you're great. You're going two to five. You're great. You're a profitable company.

• 9:48Speaker 01

  And again, this is the thing, I, you know, there's people who rain down a little bit of VCs who kind of project a little contempt. Oh, your little $100 million revenue thing doesn't matter. I can come across as a little callous and a fairer statement is this. Your $100 million revenue SaaS company is an awesome entrepreneurial achievement. You are to be hugely congratulated. It's magnificent. It's just not something that we can properly finance because we're just not going to make a public market venture return here. So it's.

• 10:14Harry Stebbings?

  If I am a founder of Linear or Revenue Cat or any of this generation of companies, maybe five to 10 years old in that broad range. And I'm at 50 to 75 million of revenue and I'm not an AI first company particularly. And maybe AI helps a little bit, but I'm 50 to 75 million. I'm growing maybe 75 to 125%. What do I do?

• 10:38Speaker 01

  The truth is, if you're going seventy five to a hundred percent, you're fine. Stop. If you're going a hundred percent at fifty, you're going to be at a hundred, then your growth decays to eighty, you're going to be at a hundred and eighty, then your growth decays to forty or fifty, you're at three hundred. You're going to get to scale. You've got your funny face on for listeners who can't see it. Harry's got on his I disagree face.

• 10:57Speaker 00

  It's not that I, I'll tell you, listen, I don't want to get lost in the weeds. I only disagree with you for two reasons, Rory. They're just structural. One is, as someone with a relatively modest amount of cap, capital and a concentrated strategy, I haven't bought twenty percent of a startup in like seven years. And I haven't done around at a million in revenue growing quickly in the teens in a decade. Now, if I could buy twenty percent of these companies in the, in the high teens, pre-money, like I used to do when Harry and I met, then I would be pretty zen about today. I'd be like, whatever the Lord brings, five hundred million, two hundred million, three billion.

• 11:31Speaker 00

  If I have to own five percent at fifty million post demo day, the math works out in the aggregate, Gary's got it all proved, no criticism, but it really ratchets the pressure when the valuation's three times higher and the ownership's at twenty five percent. I think that this is where the Figma thing gets stressful. You're not quite as, you're good as Figma, I'm going to end up owning four percent, you're going to be worth four billion, if everything goes well, five billion. Guys, I don't know. Teach me about crypto.

• 11:59Harry Stebbings?

  I'm so sorry, I pushed back again. Seventy five to a hundred percent for the biggest and best funds is not enough. When you have an eleven labs, or you have a lovable, or you have an.

• 12:09Speaker 00

  Well, let me, let me answer your question specifically, though, and Rory can challenge it. I agree with you if that is all you have, and Rory will disagree. I'm very worried about you today. The question is, your job, and for some folks, you're dead in the water. For other folks, it's, it's not too late. Your job is, how are you going to attach to AI trends? So if you look at revenue cat, right, the whole vibe coding mobile thing, I think they tripled the number of developers on their platform in the last four months or three to four months of the year. So their job is to do what work OS and others did, which is directly linearly convert that to revenue. But they have the, they have the, um, a revenue cat has massive tailwinds, which it didn't even have at the start of last year. Okay. And there's a lot of folks like.

• 12:48Speaker 00

  That have that have AI tailwinds. If you have none, you sure better figure them out right now. And this is the answer. For example, I have one of my first investments. I mean, it's been around for a decade. Okay. And it's not even at 10 million yet for a decade. Okay. I'm the only investor. They're cash flow positive. I love them. It's a very specific use case with limited competition. They finally added a way to do deep AI analysis on their data and reports that for their niche was impossible until December. Blew up. They were more than double this year after a decade of of like 10% a year growth, 20% being pretty good. So it doesn't fully answer the Figma question, but this is your job right now.

• 13:29Speaker 00

  Like, sit around your company. Those Kins and Y C built an agent for your space. Why the F wasn't that you? There is no excuse for you to not have an agent as good as the as the new kids. I honestly don't think there's any excuse.

• 13:41Speaker 01

  And going back to your pushback, Harry, I mean, I think I think it's in the framing of your question. I know what I know. Let me tell you precisely why I think you're wrong. You said if you were the CEO of X, Y, or Z, and you're going at 70%, then you kind of did the throwing your hands up in the air thing. I think you're wrong for them, right? I mean, what is true is this. If you're going 50, 70, if you're at 50 million, going 50 or 70%, you may struggle to get venture capital. Because you're right, everyone's focused on correctly on the things that have the embedded upside of potentially exploding to hugeness. And you're probably at a stage now where that kind of mega growth is not going to reaccelerate from there. So the probability of a mid-state SaaS company exploding into something amazing is rounding error zero.

• 14:23Speaker 01

  So as an investor, that's not attractive. As a person who owns that asset, maybe you own 20% of it, right? You can't just say, oh, I wish I'd done something different with my life. And now I wish there's an account. You got to play to hand your debt. And Jason's exactly right. The first thing you do is say to yourself, I may not be able to raise much more venture capital on attractive terms, run my business accordingly. I am now, just like I thought we were going to talk about the public SaaS stocks here, like you hinted in your questions, but you took us offline. But it's the same thing. Live in the world you now find yourself, which is where capital is no longer free for your sector. If you describe that negatively, you can say it's because venture capital is all fashion change. So if you describe it in a logical way, you can say it's because the kind of extraordinary growth has vanished from SaaS and has now reappeared in AI land.

• 15:06Speaker 01

  Run your business the way you do it so you don't need capital. Then, as Jason said, look at what these next generation people are doing and find a way to attach it to your business. And if you grow at 50%, then 40, then 30, and you get to 200 million of revenue and you sell it five times, that's a billion dollars. And if you have 20% of that, you have 200 million dollars. It makes you one of the probably 10 million, I've done this math, about in the top 5,000 richest people in the world. It's okay, but it's a grind. Because it's a grind explains exactly why venture guys aren't investing, because grind is not in our MO.

• 15:40Harry Stebbings?

  We'll come back to new rounds. You mentioned the grind isn't in our MO. When the grind isn't in your MO, you move on. You ever seen the Home Alone movie cover, which is like Macaulay Culkin screaming about guys? I feel like someone needs to do that for poor Mira Marati, because I think she's the only one left in Thinking Machines after everyone else this week. We've seen the implosion of Thinking Machines with now two co-founders leaving, Barrett Zoff moving in the last week. They have raised significant amounts of money at $50 billion valuation last. How did we analyze this news and what's left of the team?

• 16:16Speaker 00

  I mean, it happens with seed rounds.

• 16:19Speaker 01

  That's a great answer.

• 16:20Speaker 00

  It's just part of the risk.

• 16:21Speaker 01

  I was going to come up with a whole bunch of other things, but Jason is exactly right. You have to remember, this is a seed round. And why can't they do this thing is that the number one cause of failure at the seed stage is founder incompatibility. And this is just seed rounds with extra commas, and they discover after a year, they don't want to be doing this, and they want to go back to the big company. Just treat it like a seed round.

• 16:43Speaker 00

  I'll tell you one niche thing I never understood about this company. On paper, I get it. Andreessen, Sequoia, put in 2 billion, you're basically taking, Mira's taking OpenAI co-founder, a whole bunch of the team, and it's just going to be Anthropic again, right? They're going to recruit some of the best, and they're going to do it. In theory, you should do that bet in 15 minutes if you have the capital, right? It's just take the best, a bunch of the best guys and go do a modern. It worked at Anthropic. Good God, it worked at Anthropic. The part I never Forgot, here's the weird part, and maybe this has nothing to do with attentions. I mean, her background is not technical. And this is the part I never got. A degree in arts from Colby College and someone engineering product manager at Tesla. I'm not saying she's not, doesn't have 50 IQ points on me. I think she does.

• 17:24Speaker 00

  But I don't know how you run a lab if you're not Ilya in the early days of OpenAI or Greg at least. I don't know how you get, get the respect of the team if you're not on their level as a researcher. And it's a challenge for a lot of other B2B companies. How do you recruit this S tier AI talent? If your team isn't at that level, who the hell would want to go work there? Comp aside, right? The best, why do folks leave OpenAI like after a year and leave five or 10 million? They're just so smart, they just want to work on smart problems. This one I felt was unstable. People loved her, I think. But I'm super skeptical of technical companies where the CEO isn't one of the greatest technical visionaries in the industry. I'm just, I'll never do that investment again. I'll never do an investment again where, where it's not like Databricks are better as CEO.

• 18:09Speaker 00

  I just won't do it.

• 18:10Harry Stebbings?

  What happens in this situation?

• 18:12Speaker 01

  There will be some version of the following clause that says, if more than X team members leave, then you have the ability to call for redemption and just basically wind the company down and say, you spent 20% of the money. If you can't get an M and A outcome where you get a 1X, then you can wind the company up. You give them 2 billion, they spend 200 million. You take another 200 million to bribe everyone to go along with it. And you get 1.6 billion back and you say to yourself, that was a risk that didn't work. I only lost 20 cents on the dollar. I can recycle that money into the next OpenAI round. Everything's fine. That would be a far better outcome than we're going to commence the long and bloody march, trying to fix this thing, trying to hire new people. Because Jason's right, it's, I mean, it's such an insight, Jason. It's a seed deal that went wrong.

• 18:55Speaker 01

  What do you do when the core premise you invested in turns out not to be true? And you spent 10% of the total money? If you're smart and you don't have another compelling idea, you give the money back. You incur the respect, everyone respects, okay, I got it. You moved on, you, you call bullshit. From the investor, investor perspective, I wonder if they're sitting there going, it would be totally fine to, you know, take a 20 cent haircut and be done.

• 19:18Harry Stebbings?

  Do you think they'll do that?

• 19:19Speaker 00

  It probably felt safer when they made the investment that worst case Meta wanted to buy them. Worst case, we exit for five or six or 10 billion to acquire the team. We don't quite make as much as you might think on paper because of how the deal is structured with employees and retention. But worst case, we make we make some return on this deal. So it's not that was probably thinking it's not as crazy as we might think from the outside because with the quality of the team, high chance we get our 2 billion back. Seems lower odds today.

• 19:45Speaker 01

  Yeah, the way I described it, if I was on the board, I'd say this, we're not going to get our 2X from the M and A outcome. But if we get our 0.8X, two rounding error, it doesn't matter, especially if you can quickly recycle the capital. Because this happened so quickly, that's all in the current fund cycle. Just so listeners know, if you if you're in the investment period for a venture fund, you wire a billion dollars into investment A. Instead of waiting 10 years and getting 0.8 back, if you get 0.8 back in 12 months, you can reinvest that 0.8 and very quickly just move on. It's almost like it didn't happen.

• 20:15Speaker 00

  So much better.

• 20:16Speaker 01

  So much better.

• 20:17Speaker 00

  So forget about IRR, you can put that money to work. You can put that money right out the door.

• 20:21Speaker 01

  Literally, I mean, ask yourself.

• 20:22Speaker 00

  The loss is a bummer, but if you're trying to get 10X outcomes, you almost don't care. Just give me the money back and let me invest it tomorrow.

• 20:28Speaker 01

  Because watch this, if you got that, if you put out, if you got the 0.8 back six months ago, and you put it in the last round at Anthropic, that 0.8 is now a 1.6. So on your initial billion, you're actually ahead 60% despite having lost 20. This is why at heart, venture is a capital allocation business. You are trying to stuff your money into the place where it will grow the fastest. Once they start going down, venture guides, it's brutal. But the rational thing to do is reallocate to success and away from failure.

• 20:56Speaker 00

  I think we underestimate the challenges and the wars for AI talent. And we talk about it being compensation based and brands, but.

• 21:03Speaker 01

  It's mission based.

• 21:04Speaker 00

  Yeah, well, it's even more. It's like the best researchers in AI, the best, the ones you need to win, they only want to work what they want to work on.

• 21:12Speaker 01

  Yes.

• 21:13Speaker 00

  And they will leave a lot of money behind. That's why we've all moved to no vesting anymore at OpenAI. Because we want the folks who like, you know what, I just don't love my job at Thinking Machines. Come to OpenAI, you will lose nothing. The smartest folks in AI, in applied math and others, they only want to work on the intellectual. Actual challenges they they want to work on. And if you can't deliver that and the right boss, there's so much portability that they will just leave. And that is an environment almost impossible for 99% of software companies to create. And maybe thinking machines does, I don't know. Maybe it doesn't have that environment anymore. Maybe it just can't provide that environment any longer.

• 21:47Harry Stebbings?

  We've spoken about the breakup of teams. We touched on OpenAI a couple of times there with Mira. I have to jump to the the ultimate breakup of breakups being Sam versus Elon going to trial. How do we see this playing out? Who wins? What do they actually win consequentially? What does this look like?

• 22:03Speaker 01

  Look, it's going to be the gift that keeps on giving. If you're the kind of person who slows down at a traffic accident, in other words, if you're like 90% of humanity, you're going to be slowing down every time the depots come out. It's going to be great. So first start with it. So now I'm going to start with an utterly different idealistic comment. As we get into this whole mess, and we will for a few minutes, it's worth pointing out, when I reread a lot of the stuff, and they did all start by making a charitable donation for something they passionately believed in where they weren't trying to make money. Elon chipped in 30 million plus, Sam Altman chipped in 10, Reid Hoffman clipped in. They genuinely believed, actually, and we'll come back to that statement because some might say it's a lie, but it appears that everyone genuinely believed at the start that they were doing something for the

• 22:45Speaker 01

  good of the world, they were doing something for charity, and they were trying to understand what AI could do and head off existential dangers at the pass. So, as is so often the case in life, I think everyone's intent was pure when they forked over real money to try and do something. So I want to start with that. You know, thank you, everyone, for trying really hard to save humanity. And then the old rule applies, no good deed goes unpunished, right? So the whole thing is now a mess because just to give the kind of the zoom out comments here, it was a not-for-profit. At some point, it became obvious to the management team around 2017 that the costs to build what OpenAI was to become was such that you couldn't keep going as a nonprofit. You have to become a for-profit entity. During the period when that started to happen,

• 23:29Speaker 01

  Elon had his demands on how he wanted that to happen. Sam and Greg Brockman had their perspective on how they wanted it to happen. They ended up, as it were, breaking up. Elon resigned from the Fast forward past the drama of twenty two, in late twenty five, the conversion to a for-profit took place finally, and it was approved by California and Delaware. And now OpenAI is a for-profit corporation with a largest individual shareholder is the foundation. And the argument Sam and Greg would make is, hey, you invested money in a charity, and that charity now owns thirty percent plus of one of the most profitable, one of the largest companies on the planet. So you kind of got what you paid for. That's the argument they're making, and therefore you're entitled to nothing.

• 24:12Speaker 01

  You made a thirty million dollar donation, you created a three hundred, well, probably a hundred and fifty billion foundation. Congratulations, you've helped humanity, you got what you paid for. And Elon's comment, which is going to be tricky to prove, but it's going to be messy, is all along you guys were planning to cheat me and planning to make it a for-profit company. Because his ask is not just, hey, I want my thirty million back. That's some change in the back of his couch. He's saying, hey, you guys planned this all along, and therefore my damages claim is not just giving my thirty million back. And it's not stopped the conversion to a for-profit, because that's already happened now. That can't be stopped. It's like, you guys took my thirty million on the false pretenses.

• 24:54Speaker 01

  Therefore, I'm owed roughly what thirty million would own out of that company now, which is a hundred billion dollars of value. He's basically saying, if we're going to go for profit here, guys, and you guys were lying to me all along, then I want my share of that now. So you're all going to have to take delusion, such that I get my hundred million. The damages claim is seventy to a hundred and thirty billion dollars, which would come in the form of extra shares of OpenAI to Elon, and everyone else would have to take the delusion. That's the ask. That's what's going on here. It's an, in the end, it's an economic argument on the basis of fraudulent intent from day one.

• 25:26Harry Stebbings?

  Is Elon doing this to slow them down? Is he doing this for the, I don't think he's doing this for the seventy to a hundred billion dollars.

• 25:32Speaker 01

  In the great words, yeah, I think he's doing it because he can and it's fun. Billionaire's going to billionaire, and near trillionaire is going to near trillionaire. I mean, it's a win-win. He feels shafted, and you're right, it's good for Grok if it slows it down. And you might win a hundred billion. And there's not a ton of downside other than a bunch of legal fees because, you know, they got no claim on you. It's a asymmetric win-win situation for him. Provided you have the couple hundred million dollars of legal fees, it's going to consume here, right? Because we are litigating over a hundred billion dollars. And then the other thing that happens is, and he's lived through this on the Twitter litigation, deposition and discovery is a sucky process because you write down stuff

• 26:16Speaker 01

  in your email, in your diary, and then it suddenly comes out and it's always embarrassing, right? The truth is that if I spewed out your last 10 years of emails, I'd find some embarrassing stuff. It happened to Elon in the Twitter litigation. I mean, some of those texts just look juvenile. You just, oh, wow, you're the richest man in the world, you sound like an idiot, that sucks. In this case, they were able to, I mean, if you look at already what they've got on the record, they've got poor Greg Brockman who kept a diary in 2017, you know, writes in his diary, as one does, what does it take for me to get to a billion dollars? And now that's come out and now they're going some version of, you were cheating me all along, you wanted to do a for-profit. I mean, can you imagine having to get your diary from eight years ago? And then you had Ilya who had to do a 10-hour depot, and this comes back to the whole mirror thing, right?

• 27:01Speaker 01

  He had to do a 10-hour depot on the 2022 CEO, it was 23, CEO drama, which is not really relevant to this because the quote-unquote alleged fraud happened in 2017 or 18. But again, it's just a fun chance to get all the mess out there. So they depotted Ilya for 10 hours and we finally got to hear what he thought about the great fiasco. And it's kind of embarrassing for everyone. Everyone looks like an idiot. In 2023, the board looked stupid. Ilya looks a bit naive because he relied on mirror. She looks a little naive because she was, it just looks like amateur hour everywhere. So if you're Elon, you're like, I can torture these folks who look stupid. If there's any kind of credible case, and remember, a judge was asked, because, what do you call it? OpenAI did go for summary dismissal, which is what you do.

• 27:44Speaker 01

  You say, hey, there's no case to answer here, just dismiss the charges. And the case, I should say, they're not charges. And the judge said, no, there is a case to answer here. I'm not saying it's right, I'm not saying it's wrong, but there's a credible discussion here. So now they got to go to a trial. And I don't know how that impacts. Fundraising, but for the next one, two years, there's the potential of every financing of OpenAI now has, you might have to take 10, 15, 20% dilution if they lose a jury trial. Now, for what it's worth, I think the intent of the other founders, Sam and Greg Altman, wasn't day one to court. I think Elon's case is built on a slender conspiracy thread. But it'll sound compelling to a jury when you also have all this dirt about, you know.

• 28:25Harry Stebbings?

  Roy, what happens? And Jason, what happens?

• 28:28Speaker 01

  It drags on a long time and it gets in the way.

• 28:31Harry Stebbings?

  And who wins?

• 28:32Speaker 00

  Elon wins no matter what.

• 28:34Speaker 01

  Yes, that's the right answer.

• 28:35Speaker 00

  This is a jury trial. A jury trial is unpredictable and there are bad facts on both sides. Like, this is the social network, the movie The Social Network. I know they're making another sequel at Meta. This should be the next Social Network.

• 28:47Speaker 01

  You're so right.

• 28:47Speaker 00

  There are bad facts on both sides. And if Elon was not the richest man in the world, he would settle for 30 billion or five, whatever that Winkleville I got. He would do the same deal. Give me 5%. They would settle on the eve of trial for 5% to Elon. They would say, we're just doing it to move beyond. They'd give him 5% or 4%. And if it was about money, he'd move on, just like the Winkleville I got their 4% or 5% of Meta, Facebook. That's what would happen if it was about money. The fun thing about the sequel to The Social Network is they ain't going to settle for that. And he's going to go to trial and he's going to win. And Elon has bad facts, but this man has already been bad facted the last couple of years in public. His worst fact, forget about that it's in Oakland. Oakland is very liberal. Elon's worst fact was that Trump hated him for about six months. He fixed that issue.

• 29:32Speaker 00

  Now he's back in the inner circle. Get a couple MAGA folks, Republicans on the jury. We don't know. Sam Altman fired by OpenAI board for reasons not fully disclosed. Greg Brockman, and you know what I think really happened with Greg that I think maybe people missed? This is my theory. The guy really partially regretted leaving Stripe as the CTO on the fourth employee. He leaves, Sam recruits him from Stripe when it's worth 3 billion and says, don't worry. We'll make it up for you at our nonprofit. Come do this thing. We're going to change the world to Greg. And it's very exciting and Greg really doesn't want to work on the Stripe API anymore. He's already gotten. Payments to work. It's kind of boring and he leaves it just he leaves it in 2015 Rory when

• 30:15Speaker 00

  the world seemed very flat and simple, right? And he left and he turns around and he's like, my God, I left billions behind. How would you feel as a human being that didn't make the money Sam had already made? Sam's already become, he wasn't a billionaire then, but he's on the path, right? He's raised hundreds of millions at his own venture fund to invest in Y C startups. He personally owns 2% of Stripe. How would 99% of humans feel when you're like, if I just stayed at Stripe and just played Minesweeper, I could be worth 10 billion. It's, and I think that haunted him. And I think that's where these journal entries come from. It's not him being douchey and saying, man, I wanna, it's him haunted by Sam getting him to leave Stripe at 3 billion haunted by it. We've all, I've been haunted by some mistakes I've made too. I think he's haunted by it. And,

• 30:57Speaker 00

  um, and I think that creates, gonna create a whole bunch of bad facts. The deeper we deal that Greg was haunted by leaving the money at Stripe.

• 31:04Speaker 01

  First of all, I'd be haunted too.

• 31:08Speaker 00

  I'm not going to speculate. Even Harry would be haunted if he left a couple billion behind.

• 31:12Speaker 01

  Yeah, yeah. No, I mean, one of the things that that's also sucky about this when you're in litigation is suddenly everyone, including Rory or Driscoll, who I think has never put eyes on you, has a fucking opinion about you. That's the really sucky thing. And the great, I think, I'm not sure I agree with you on Elon in terms of the jury. I want to come back to that in a second. But I do agree on one thing is he is post pain when it comes to public shame and obliquity. We are, there's nothing left to do for him, man, right? So basically, everyone else is going to have to get down in the muck. And he is already so far on the muck that, you know, on various different parts of the last three years, 40% of the country have hated him and it's been a different 40% each time. There's nothing left for him to do, which actually gets to the, how do you think, you asked, how do you think it ends? I think, Jason, you're right. If it was normal people, they'd settle. If

• 31:57Speaker 01

  it goes to jury, I think two, two comments that we'll make. From a facts perspective, I think in the end, Elon has to prove his case and it's a high bar to prove. You got to prove that all, it's a very hard, you got to prove right when they were raising the money charitably, they were all along intending to swipe it and, you know, build a for profit. And I think that's very hard to do because Altman's Money went in as a for profit, a not for profit too. So I think it's fundamentally, I think Elon's wrong on the core assertion. I don't think this was a cunning device to cheat everyone. Because if they wanted to do that, they could have just done a, what Antropic did, which is the totally sensible interim stage of a public benefit corporation and saved all this frickin' drama. So I think stripping aside all the bad facts,

• 32:40Speaker 01

  I think the core assertion Elon is making, which is they misled me into giving them 30 million for this thing, which was never going to be a charity. And therefore I get my money back. I think that's wrong. But to your point, you still got to prove it to a jury. Now, the other comment is, remember, he has to prevail. So as long as there's one person on the jury who hates him more than he hates Sam, he ain't gonna win. It's going to be hard. First of all, it's going to be a very unattractive cast of characters. An Oakland courtroom, you get Sam to come in and say, you know, hey, talk about how you said this is going to make everyone unemployed. Then you get Elon to come in. They're gonna hate the whole being on the stand thing, which everyone's gonna have to go on, right? I think the jury will get, if they get into that room, they're gonna go,

• 33:23Speaker 01

  wow, I don't like any of these people. Why should, you know, right? But the problem is this, for Elon to win, he has to get them to all vote for him. And a kind of hung jury is fine for the prevailing wisdom. Unless Elon prevails, he doesn't get it. So I think way down the line, two, three years from now, at the end of a long and bloody trial, the probability is he doesn't win the case. But Jason, you're right, he's already won the case. If what he wants to do is get kind of psychic revenge, this is gonna be the best two. This is like Peter Thiel's spend on Gawker. Sometimes a billionaire just wants to spend a couple of hundred million bucks in this case to grind the other guy and make him sorry.

• 34:00Speaker 00

  I think he wants every bad fact about Sam to come out. Every bad fact in this trial. We haven't even heard why the board fired him, right?

• 34:07Speaker 01

  If someone sequestered, deported my diary for the last 10 years, and if you keep notes on days when you're feeling like shit, you know, you're like, hmm, that's not great. That's the problem with litigation. That's the problem with consolidated structures. You end up in litigation. That's why keeping it simple was step one. And once, you didn't keep it simple, trying to get, keep everyone in the tent. When you don't do that. That you end up being sued by the richest person on the planet who's angry and mad at you. It's a tough place to be.

• 34:34Harry Stebbings?

  If you're Sam, do you not go, hey, I'd rather have the dilution, not go through three years of distractions? And actually get him off my case, bring the enemy inside. I don't have a stock anyway.

• 34:47Speaker 01

  Don't settle at five, settle at a hundred. Yeah.

• 34:50Harry Stebbings?

  I don't have stock anyway.

• 34:52Speaker 01

  This is true.

• 34:53Speaker 00

  Well, sort of. I think that was dishonest.

• 34:56Speaker 01

  But you're right. Actually, you're right in the big question. It's like, if this is getting in the way of the next financing, and it's been seen as a credible risk, then would you be better off, even if it's extortion, to cough up? Which again, is why, again, Elon's in an asymmetric win-win situation and OpenAI is not. The only way it doesn't matter is if every, and I don't know, if every investor looks at this and says, I'm not worried about the risk. In the end, Elon will lose, so therefore we can ignore it.

• 35:23Speaker 00

  Well, isn't that what they said? They said our exposure is capped at Elon's donation of thirty some odd million. That was the public announcement, right? Or sort of public leaked, right?

• 35:33Speaker 01

  And that's why his aggressive claim is on the facts very contestable. I mean, it's a real reach. The claim is a reach to say it's not just my thirty million back. Basically, what Elon is saying is, it was a for-profit all along. You guys just didn't tell me. And if it's a for-profit all along, and I put in, if I was the thirty million seed in what was a for-profit company, then I want what a thirty million seed would get. It's a stretchy claim. You're right, Jason. And OpenAI are going to say, there's simply no way, from a point of law perspective, we're going to concede that. And even if we lose a jury trial, we'll go in on appeal. And they're just going to say they're going to litigate it the whole way down. But you're right. That's fine. And this actually ties, funnily enough, to the ads come and everything else. What I don't, the key question that I don't know is, how will the investors look at it?

• 36:19Speaker 01

  If you're writing a check right now, do you think, if I'm paying six hundred, if I'm paying six hundred billion per year, or eight hundred billion per year, do I need to say it could be a trillion? Because it could be twenty percent dilution. I don't know. Or do you say?

• 36:31Speaker 00

  You said last week there was no existential risk to OpenAI. I said there might be some structural economic risk. You said it could be.

• 36:36Speaker 01

  But this isn't existential to Harry's point. In the end, you can fold and give the man what he wants.

• 36:41Speaker 00

  If you can't, if it's hard, I don't think this will make it any harder for them to raise capital because greed trumps fear. But if it did, it could create some risk, right? If it made it harder to raise capital.

• 36:50Harry Stebbings?

  I think you have to fold because the winner in this case, I know, I know it's ridiculous to say, but the winner in this case and the guy laughing with popcorn is Daria. Yes. Going great.

• 37:01Speaker 00

  But you can't fold. I don't think he'll let them fold. I could be wrong, but there's no chance that there wasn't some lawyer discussion talking about what would it take to resolve this, right? In a quiet room off the, you know, there's just no way that OpenAI has a fiduciary obligation to find out what it would take to settle it, right? Arguably, they have to. So Elon has no, didn't want to take it. He just, he wants his day in court.

• 37:24Harry Stebbings?

  That's why you have to settle if you're Sam, because the worst thing.

• 37:27Speaker 00

  You can't settle if the business doesn't want to settle.

• 37:29Speaker 01

  No, I mean, to be fair, you don't have to. I mean, because I, as I think about as an investor, what would you say? You'd say here, let's just say this is around at 700 million pre. There is a probability of an additional 15% dilution, but it's not 100%. Maybe it's only 10%. So really risk adjusted, you are kind of a, you add a 1.5, but so you don't assume, you're assigning a probability to a capped, large and uncertain event. Right. Which is there is some chance that I take 15 or 20% extra dilution, but it's not 100%. So it doesn't drag the financing down to zero. It merely means there's an asterisk risk on it. And to be fair, anyone who's financed OpenAI today, if you look, the funny thing about OpenAI is it has, even though this looks very risky.

• 38:14Speaker 01

  OpenAI from a structured perspective, it's less risky now than it's ever been. If you look at all the risks, the first money went in, it was, hey, it's for profit and not for profit. And, and then you had that disclosure, hey, we're never going to make money. So what can you do? And then in the last year, they've been able to convert to a for-profit company. So a huge step took place last October, November of 25. When OpenAI, the real danger would have been if they hadn't been able to convert to the for-profit company. Because at that point, the whole thing was at risk. When they got that done, they took a big step function decrement down in risk. So even though this feels very risky, it is less risky than the risk under which they were able to raise, you know, $200 billion plus or minus.

• 38:59Speaker 01

  So it'll be fine. It's just a risk. It's going to be a monstrous pain and it's going to be popcorn time for everyone else.

• 39:06Harry Stebbings?

  I I think you're being way too nice. Like, at a time for OpenAI, where you have Gemini killing you on consumer, Anthropic killing you on enterprise.

• 39:16Speaker 01

  But you you you you're just lumping everything in together, you know.

• 39:20Harry Stebbings?

  Because you have to.

• 39:21Speaker 01

  Yeah, but, I mean, look, the litigation.

• 39:23Harry Stebbings?

  I can't isolate things.

• 39:26Speaker 01

  You you you but you actually, funny enough, you have to, in the sense of, whenever you have that kind of litigation, I've been to companies occasionally have it. What you have to do is to say, the really dangerous thing about litigation is if it kind of subsumes the whole company, because the thing about litigation, it gets your blood up, and you start trying to win, and you just get emotionally vested in it. If they're smart, they'll have a great G C who says, other than depositions, none of you talk about this ever again. We will deal with it, and our hundred million dollars will are lawyers, right? Because you can't let that get in the way. So let's assume you do that. Now, you're still running a wildly successful business with a whole bunch of competition. And you're right, you've got to deal with Gemini. You've got to do Anthropic, you've got to get ads out the door. You've got to start having a convergence plan on profitability, which is, I think, why the ads are coming out. Yeah, you've still got lots to do.

• 40:10Speaker 01

  With the exception of the litigation from the world's richest man, nothing's changed from two weeks ago.

• 40:15Harry Stebbings?

  Is ads coming at just the wrong time? As Gemini is killing you on consumer and producing better and better models, and the Googler really feel feeling tailwinds to come out with something that does deprecate the product, even in a small way, is it coming at just the wrong time?

• 40:28Speaker 01

  But I think you do. I mean, I think it actually speaks to something. It, why do you introduce ads? There's three big ad, the two biggest ad businesses was Google and Facebook. And both of them agonized for about a year before introducing ads. Google in two thousand and two, two thousand and one, two thousand and two-ish, and Facebook in oh, five oh six. And then everyone goes to the following logic. There's no other way to monetize. There's simply no other way to monetize. The cost to serve a free Chat G P T customer is higher than either Facebook or Google. And the conversion rate to paid, because Facebook and Google, so you, so what are you going to do for business model? Facebook and Google didn't have a paid tier. So one argument could have been

• 41:12Speaker 01

  a certain percentage of the free people will just convert to paid, and that will. Be enough to make the business work. And but the truth is, consumer conversion tends to run well under five, yeah, 10%, probably 5% or less. You just don't get enough conversions to serve the free tier. You've got no choice. Once you recognize you got no choice in the end. Facebook hated ads. Google hated ads. You can hate ads till you're blue in the face, but America wants free shit. And the only way consumers get free stuff is if you run ads. So there's no choice. So I think it's kind of a, it's inevitable. So rip the bandage off, especially if capital is going to get more expensive. You just got to go do it.

• 41:49Speaker 00

  I think the ads will be great.

• 41:51Speaker 01

  Yeah.

• 41:51Speaker 00

  I genuinely think they'll be, they'll add value to Chat GPT. Because I don't have the numbers on it. I know for myself, I do my vendor discovery using L L Ms. I do my vendor discovery on Claude and a little bit on Google. That's when I want to find a new tool or a new product. That's where I start. I start with L L Ms. Especially if I'm the free product. If I get my, my rich response of which, which Oath product to use in Founder'scape. And at the end, there's a little ad from Work OS. And I choose to click on Work OS instead of the one I chose. And that was a great option, too. That's a win win.

• 42:26Speaker 01

  Agreed.

• 42:27Speaker 00

  And I think, actually think they're gonna, I don't, so one, I think it's a win win for free people. Two, I suspect in the beginning, unlike the, we wanted to blow our minds out with Google because it was 11,000 pages of blue links before the one natural thing. And then like, it's just, it's so polluted with ads. We can't even figure out what's an ad. If open, if the ratio is, say, 10 to one, like a lengthy analysis of what's best for you and a little ad in a different color. I think it's a win win for everybody. It makes, it makes the product more profitable, better margins, and we get some value. Advertising is not valueless to consumers when it's perfectly executed. It's not valueless.

• 43:01Speaker 01

  I, I think that's a great point, Jason. I really do. And there was a period of time, Jason, to your point, when the Google ads were awesome. You know, early on, when there was only a few, you know, paid links, you remember on the side. It was like, okay, that was, you were talking about, that was marginally additive, right? Now, obviously, they've swamped it and you can barely find out what's going on. And, you know, all these things tend to, that wonderful word, and shitification at scale. But you're right, this could be the period where. One or two ads at the bottom of that are additive in terms of information, especially when you The beauty about the auction process for the ad placement is that because they run this kind of Because Google has run, Facebook runs these very efficient auctions, you actually end up selling

• 43:43Speaker 01

  the ad to the person who values that real estate the most, which usually is someone who's got something very precise to sell you. So to your example, Jason, you're exactly right. If you write this long query on some kind of OOT, at least the ad you're going to see is someone who says, it's worth spending 20 bucks to get in front of Jason and say, dude, you should buy my OOT instead of that one. There's net information added here, right? Which won't be true when they have 40 of them, but that's 10 years from now.

• 44:09Speaker 00

  Plus, I think we're underestimating how much better LLMs are for discovery of what to buy. I mean, I find Google unusable for discovery, unusable today. It is all random ad. I can't, it's great to see vendors, I can't figure out which product to use or buy. Google's useless. Amazon is frankly more valuable, but it only works for the goods Amazon is selling. It's still exhausting, right? And LLMs are a gift if you use properly for discovery. I think, we tried to, listen, Instagram's full of ads, TikTok's full of ads, but it's pretty mediocre for discovery. It's just well targeted. This is brilliant, I think, and bring it on, bring it on.

• 44:49Harry Stebbings?

  Do you think it will be an unbelievable, massively significant needle mover in terms of revenue very quickly?

• 44:56Speaker 00

  I think, listen, first of all, there's a lot of products we've talked about, like OpenAI's web browser, we've never discussed again, we may never discuss even Claude coworker again, I don't know. Things, they try stuff, okay? I think we are way under discussing the power of discovery in LLMs. I think this is the way we will buy everything in the future as we are embedded in LLMs. Well, I don't know why I would use anything else other than the best of ChatGPT or Claude or Gemini to find a product to buy. Why would I use anything else? It's so powerful. And so the ads will be great.

• 45:24Harry Stebbings?

  And you think in a quarter, this will be a billion dollar plus revenue business?

• 45:29Speaker 00

  I'm not, I haven't run, you'd have to give me a moment to run the math, but it's, why can't a billion dollars go to it? If there's any ROI, it only has to be like 1% of ad spend going to TikTok and Instagram to move over there. Like marketers will just have to try it. Like the first billion may not be impressive, because you gotta try it. You gotta try it.

• 45:49Speaker 01

  Agreed, and a couple of comments on that. There's just a ton in this. So first of all, yeah, it's hard not to imagine it's a billion dollars very quickly. And Jason's right. Remember, it's only 5%. They're doing around 20 billion in revenue. It's only, did I really, it's only 5%. It won't be a needle mover. I mean, what are the differences between this? When Google and Facebook added ads, each of them at the appropriate time for them, 2002-ish and 2005-ish, they had significant but manageable cost structures, no other revenue source, and very quickly they became profitable, right? Or, you know, profitable in capex. Even a billion dollars is a drop in the bucket compared to the spend here. So it better do a billion dollars pretty damn quick. Because if they don't do a billion dollars pretty damn quick, it's not going to do 20 billion dollars, you know, reasonably quickly. My gut is it is

• 46:33Speaker 01

  because they're just going to find a way to make it work. And I think Jason's right. It is prime real estate. And it's worth pointing out on that, Jason's comment is that, you know, we've all been in this, you know, everyone kind of went through that Google is doomed a year ago. And then Google executed company and a bunch of things. And now we've all gone to, oh, Google's amazing. And Kotu was so stupid for leaving Google out of their amazing AI companies. And I think they are amazing in terms of their AI. But Jason's comment is really significant. He doesn't go to Google anymore for search. And that's the mother load. So the

• 47:05Speaker 00

  For discovery, for what to buy?

• 47:07Speaker 01

  For discovery. You're exactly right. For discovery.

• 47:08Speaker 00

  For search, I do not for discovery.

• 47:10Speaker 01

  Which is the best search real estate, right? So even though Google's doing amazing, it is worth pointing out that their cash cow, which kicks off 240 odd billion a year of revenue, which is the ads business, isn't the best product on the market anymore. And some of those dollars will go to OpenAI, and because it's better real estate. It's not all one dimensionally good for Google today, just like it wasn't all one dimensionally bad for Google 12 months ago, right? They've done an amazing job of getting relevant in all the spaces and winning some of the product wars. But they're still faced a core problem, which is, search is not the best place for discovery anymore, like Jason said.

• 47:43Speaker 00

  Just for fun, I asked Gemini, so that we're not biased in here. For OpenAI to do 25 billion in search revenue, which is really Roy's point, like to open the floodgates, at a $50 CPM, which I think is possible because it's about discovery, they just need 0.22 ads Per prompt. They don't need 11 million blue links where you can't find it. Point two two ads paid per prompt to do 25 billion at their scale. Does that sound implausible?

• 48:07Speaker 01

  Every one in five chat GPT's interactions has to be a discovery ad monetized. No, it does not sound.

• 48:14Speaker 00

  At a $50 CPM, so it has to work. This can't be garbage ads, but I think it's very plausible and going to, we may be upside surprises. May turn into Facebook or Google back in the day, like within a year, our jaws might drop.

• 48:27Harry Stebbings?

  This clip will be used, I think, in three years' time when they are at $100 billion in revenue and you'll look back and go, wow, we underestimated the size.

• 48:35Speaker 01

  No, I I I'd push back and say, I don't underestimate it, right? I actually think that this is the core, this is the money. Intent, with the exception, Facebook isn't about intent because it's about consumer knowledge, right? But Google was about intent. Amazon ads, which has exploded from, you know, we don't talk about it because it's buried in the bigger business, but all the gross margin now comes from ads. The retail business is just an excuse to sell ads that makes all the margin, right? On the, on the retail side, to be clear, not the cloud side. And that's exploded. I can't remember the numbers and I should have it, you know, tens of billions of dollars, it's sub 100, but tens of billions of dollars because they have intent. And you're right, Jason, at least one time, I mean, I'm just looking at my search, not my, my chat history. At least one time in five, I'm going, I, I bought a TV. I hate buying a TV.

• 49:19Speaker 01

  I just did chat GPT, five or six queries, what's the best TV? Why is it the best TV? How should I paint it on the wall? How big should it be? Here's my room size. I got a name. I remember the name. I went into Best Buy and I said, do you have this thing? And they said, yes, and I bought it. You know, if they'd given me a click, I'd have probably said, can you deliver it? And I'd have paid the extra money. It's prime real estate because it is the best way to interact for complex purchases. And it's not because it's inventing anything, it's just synthesizing the shitty internet into the actual answer. Now, sometimes the answer is wrong, which is a little bit terrifying, but most, it was right on the TV. I think this is a great business for them and I think you're right, they're gonna go out at Jason's success. By the way, Jason, I gotta give you a little pusher. It is why the, the deals that you hate, you know, Harry and I kind of like this market.

• 50:03Speaker 01

  He's got a play in it with Peak. I don't because lost on one of the deals with profound. All my sadness, but answer engine optimization is going to be a vitally important business. All those companies are going to matter.

• 50:14Speaker 00

  I agree with you that someone is going to build a massive business making connecting these ads to the LM's. I'm not convinced it's from the snake oil that I have seen in the G O products that I've used today. I believe there's snake oil. They're telling you, they're telling you to do very basic things that that that maybe work. Or I tell you what we should do. Let's all this is, and this is risky. Let's all put a bunch of money into Apple and in the trade desk right now. That's what we should do. I don't know whether they will, listen, I'm not a total ad ticket. I don't know if they will be fully open to open A I. But if they are, if they are open for ads, if you can run your ads across these platforms, especially the trade desk, maybe you make a lot of money.

• 50:53Speaker 01

  I got it. You talk about.

• 50:54Speaker 00

  The trade desk have beaten down.

• 50:55Speaker 01

  I I I don't know if I buy that, just to be clear. Because I think.

• 50:59Harry Stebbings?

  You're saying, you're saying they have access to open A I, so they're able to do effective routing across open A I.

• 51:04Speaker 00

  If they're allowed to, I need to, I need to think about it for the next week.

• 51:07Speaker 01

  No, you're wrong.

• 51:08Speaker 00

  That's a bet you might be able to like who, if you step back and maybe I'm wrong, maybe we're always right. Who can, if the, if the open A I platform ends up being somewhat open for ads, okay? And it does twenty five billion or a hundred billion. Who could we bet on today that ideally is public because we're all traders? Where we make money on it because they're beaten down by the start of the show by by the SASS, the SASS.

• 51:29Speaker 01

  I can tell you, I can tell you that the bet just vanished and Adobe did something smart. Because so zooming out.

• 51:34Speaker 00

  Maybe we do Adobe.

• 51:35Speaker 01

  Hang on, there's two ways to make money when you're selling software to people doing ads, right? And it's the same as Google. There is helping them show up in the free part, which is about optimizing how you appear, which is what the A E O guys do. And then there's helping buy the paid part, which is what app loving and trade desk do. And I'm going to say something, I don't think you'll need app loving to help buy ads on chat G P T. Just as you don't need app loving for Google or Facebook, you need app loving and all that for everything else mainly, right? I think maybe not app love, but trade desk in particular. Chat G P T, open A I will make it very easy to buy ads on open A I because everyone knows exactly how that's done. You have this auction process. And you auction against Jason's intent.

• 52:20Speaker 01

  And if Jason is online talking about, oh, art, you run an auction process, a real time auction process. And whoever wants, oh, art the most is going to advertise against you. So I think for the paid ads, all the, all the, all the value that's going to be captured is going to be captured by OpenAI. And there's not going to be a optimization engine. And then you have the, the free content. In other words, how do you make sure that the L L M say nice things about you? And I think that is an interesting business. And as I say, I, I think the, in the U S, the Profounds, the A R Ops, the Evertunes. All those guys are super interesting. Harry's got Peak in Europe. I think, but to your point on the trade, the, the, we missed the great trade because Adobe took it up. S, Semrush, which is the king of search engine optimization for Google, got acquired recently by Adobe.

• 53:04Speaker 01

  And I think that acquisition only makes sense if their plan is as quickly as is humanly possible to introduce an answer engine optimization product. Cause they bought that thing for four times.

• 53:13Speaker 00

  That's why they bought it.

• 53:15Speaker 01

  And that's why.

• 53:15Speaker 00

  It's not what they bought it.

• 53:16Speaker 01

  It should be what they bought it. And I will, I will admit when I was looking.

• 53:20Harry Stebbings?

  Why is that a better decision than genuinely buying a peak with a much smaller, more concentrated team? That's much more focused and better for a new A I world that you could buy it.

• 53:31Speaker 00

  Why would Adobe buy S M Rush over Peak? I can tell you why.

• 53:34Speaker 01

  Yeah.

• 53:35Harry Stebbings?

  Why?

• 53:35Speaker 00

  Well, I've, I've worked, it's a long time ago, but I worked there because, listen, when you have a conservative company like Adobe, getting, getting 15 or 20 million, whatever S M Rush they had, they said of G O revenue at a four X revenue overall is the kind of accretive deal that makes people comfortable. They could buy a peak for 20, 50 million or 40 million or 80 million. But I don't know if that returns your fund, Harry. They're not going to spend that kind of, like, Adobe's done very few deals where they're spending billions of dollars on something with a token amount of revenue for technology in the future. It's just not the D N A, right? Other folks might do it. It's just not going to be Adobe.

• 54:09Harry Stebbings?

  Cause the funny thing. Saying Sam Rush are not best positioned to win G E.

• 54:13Speaker 01

  They're not, best position is an interesting word. I, I agree with Jason. This is an odd come, odd in that you have two guests on your show, Harry, both of whom have sold something to Adobe. Jason, as a C E O, I mean, as, because I was on the board of Omniture back in the day, which was the first. First cloud company that Adobe ever bought, they were all about on desktop graphic tools. And they didn't even have a marketing cloud and they effectively bought on mature as that. And I think when people were like, why are they doing it? I thought at a very zoom out level. When you want to make a big move, like as a big company, if you buy something small, you'll just smother it. You'll stomp on it, right? You want to buy something with enough critical mass and heft that it can go do its thing and not get swallowed by the machine.

• 54:53Speaker 01

  If I was Adobe buying SEMrush, provided SEMrush had some story around what they're doing in AEO. It's more likely to be successful than buying Harry's little startup company. And hoping that somehow it gets rolled out in the system because Jason knows so much better than me. If you don't have the customers already and the distribution, it'll just get lost in the big company.

• 55:14Speaker 00

  Yeah, it's great. They just walk it around to their CMOs, Adobe does, and say, we have this, we bought SEMrush. It's now been rebranded Adobe Marketing G E O S C M Cloud. We know this is one of your top issues. They drop, they drop by, we have a solution. It's, it's $20,000 a month and it just works and it delivers a report every day. That is then forwarded to their team. That is insanely valuable for 99% of the world. Versus buying some crazy Lemkin guy startup that could blow up on you. Like there's just, it's just not, it's so much risk for a non-founder led company. Toby could buy a company like that. You need somebody like Toby. Or maybe even, I mean, Asacha or something like that, that can take some crazy bets. But most, most companies don't want to take that bet.

• 55:53Harry Stebbings?

  Jason, I'm waiting for the day when Rory goes, you know, I remember being on the board of the East India Company.

• 56:00Speaker 00

  Well, there's a lot of earnings. We need to study it more.

• 56:02Speaker 01

  It isn't that long ago.

• 56:04Harry Stebbings?

  It's not the pen space, but it's pretty good. This East India Company.

• 56:08Speaker 01

  Okay, this East India Company. They, they had a great 50, 100 year run, dude.

• 56:12Harry Stebbings?

  They did, they, they did. They, they really built a monopoly. You're right. There's a couple of big rounds that went down that I do want to hear your thoughts on. There's ClickHouse at 15 billion, there's Rapplet raising at 9 billion, and there's Cerebrus raising at 22 billion. Which one do we want to focus on?

• 56:28Speaker 00

  I wish I was a total ClickHouse expert, but I tell you what is kind of interesting about it. It's an extreme example of how do folks take advantage of AI tailwinds. ClickHouse is basically an in-house, open source product built at Yandex, which is now Nebius, built in Russia, just like everyone has an open source product, right? That has gotten scale, LinkedIn and others. And it's a very clever way to mine massive amounts of data and make conclusions from it. And they built their own for their own, I mean, Yandex was, you know, whatever, the Yahoo or Google of Russia. They built their own and it sort of works. And then timing's perfect. They spin this thing out in 2021, right? They take an open source product, they turn it into essentially a proprietary cloud product.

• 57:11Speaker 00

  And then boom, AI blows up and folks are already using it. Tesla already figures out this works because they're early in AI. Everyone's already figured out this is best of breed, but they nail the conversion from free open source to closed source hosting and then fast forward to Anthropic and everybody needs it. But this is not a product that was born at the start of this year. I'm not a total expert, but man, just go find your ClickHouse. I mean, it's easier said than done, but this is not a brand new product. Replit's 10 years old too. These are old products that found their AI tailwinds and blew up. I think it was only doing 50 million a year ago, right? ClickHouse or something like that or less.

• 57:48Harry Stebbings?

  Jason, when you're doing ClickHouse at 15, it does feel pretty expansive when you compare it to a snowflake or even a Databricks. What are you underwriting it to?

• 57:57Speaker 00

  I don't know, but I guess Databricks is your comp, right? Which is, I guess, is a large assumption that it's even better because everyone, everyone in AI is going to use ClickHouse. You're assuming one way or another, you're going to get like 100%, almost 100% market share. And some will be directly competitive with the Databricks or even Elastic where the, I think the CEO was and others. Others will be quite complimentary. It's not, but you're just assuming, I think that bet is, I don't know. I didn't see the deal at 15 billion, maybe, maybe Rory did. I think you're just assuming everyone uses it, which maybe is a rational bet. Once in a while, these products come into market where just every single person uses the product. And, and open source, it's actually common. It's just hard as heck to monetize it the way ClickHouse does. That's the clever part, right? Is that, and I'm not even an open source expert, but it's brutal if everyone just goes around and hosts it yourself

• 58:42Speaker 00

  and builds their own version and flared it, right? They nailed this, they nailed it.

• 58:46Speaker 01

  Agreed. Whenever you pay up for these high growth companies, I can use three different words to say the same thing. You're effectively saying, in math terms, you're saying the most recent growth rate is going to continue for a long time. Daw, right? Because you're paying an absurd revenue multiple, but it's not an absurd revenue multiple if the growth rate continues for two or three years. So you're basically underwriting growth persistence. So next level down from that, what does that mean? What you're basically saying is, this is a category, they're the winner, and it's a big enough category to keep going for two or three more years, at least at this growth rate, and then they accelerate slowly.

• 59:17Speaker 00

  Yeah, two to three years at three to four X growth at 350, it pencils out, right?

• 59:21Speaker 01

  And again, you know, we have examples of this absolutely happening. If you look at the anthropics of this world, then we have examples in SaaS of people, you know, where you wonder why the growth rate and then suddenly that growth rate deteriorates and you're high and dry. It's just that simple. There's no what a magic is. What I always say to, I actually say to investors, and I probably said this on the show before, is that, first of all, you have technical and founder risk, then you have business go-to-market execution risk, which is typically where we invest, and then at the end, you have valuation risk, right? And valuation risk expands to fill the gap. Once the other risks are taken out of the deal, you're left with valuation risk, which is all about growth persistence and market size. And the good thing for ClickHouse is, it is a category, right? Because step one, what you don't want to do is find you the third best random database, but if you look at one level deeper, what they do, OLAP, which is, and this category has existed

• 1:00:05Speaker 01

  in prior generations too, right back to the East India Company, Harry, right? In every database, like way back in the 2000s, when you know, Oracle is the relational database king, then there was kind of some of these obscure AI-type databases even back then, that would be equivalent to say Databricks today, which is obviously a bigger category. But then you have these analytical processing databases like Teradata. And think about that, like, it's not about writing transactions to a database. It's all about, you have a million, and now maybe a billion or 10 billion data elements there, and you want to quickly scan down a column and add them all up. How many clicks? How many, you know, people traverse your website? Large amounts of typically read-only data. And if you use a standard

• 1:00:47Speaker 01

  snowflake database, it's fairly inefficient, because that's written to be able to write transactions, where you write in a transaction, like, here's my typically, you know, a debit or a credit. So Snowflake's optimized for that. And Collum databases like ClickHouse are optimized for analytics processing. It's a different category of database. And you know, data warehouses back in the 90s and 2000s, the same thing. You have your production database where you run your system, your banking system, your ERP, your pick, you know, whatever it is. And then you have this analytical place where you put off all the transactions. Because some analyst is going to wake up and say, I have a really obscure question. How many people bought this product in this district two days after they did this online on the website? I need to know how many people did that because I want to do attribution. Some weird corner case like that, right?

• 1:01:32Speaker 01

  And in AI, the number of those queries has gone to infinity. Because if you have that information in AI, you can use it to predict things. Jason's exactly right. You have this optimized special tool for very clear use case. That's kind of different enough from Snowflake and from Databricks that you have the separate category. It's become important because AI eats that shit up. So you have this explosive growth. So then the only question is, can the OLAP market support a 30, 40 billion dollar outcome? You know, you squint and you look at Snowflake at AD for transactional database, you look at Databricks, 100, 110, maybe it can. I mean, it's typically, if you look back in the prior generation, the data warehouse

• 1:02:12Speaker 01

  category was smaller, significantly smaller than the relational database, than the transaction processing part of the marketplace. Because, concrete example, you're running your airline reservation system. That's a transaction processing system. That can't go down for a single minute because you lose billions of dollars. The analysis at the back of that, American Airlines wants to run an analysis of how many premium customers flew last week on thing. That could be a little, little less performant and therefore not as big a market. So these markets have existed before. It's typically a, not a multiple of the Snowflake type marketplace, but a, what's the word for below one, a fraction of it, but a pretty appreciable fraction. So if Databricks and Snowflake are worth 100 to 200, maybe you get a 30 to 40 billion dollar outcome here, and that's the bet.

• 1:02:58Speaker 01

  Sorry, long-winded answer, but it's a category. They're the leader. Demand has gone up because of AI. You squint one way and you say two or three more years of growth, you feel like a hero. If it turns out to be a smaller market than you think, then you're high and dry. Welcome to late-stage investing.

• 1:03:12Harry Stebbings?

  Would you rather be in data bricks at 130 or Clickhouse at 15?

• 1:03:16Speaker 01

  Basically, what you're saying is, is the old app category more or less than 10% of the core? Well, data bricks isn't really related. It's much more about AI-enabled data manipulation. But when you look at it like that, you'd say it's not crazy that the subcategory is more than 10%. It might be 20 or 30. So yeah, if they were both public, you could have a fun, you know, kind of macro trade of short one, go long the other, but that's not the way the world is now.

• 1:03:43Harry Stebbings?

  Final one. Let's do a quick fire and just cram a couple in one.

• 1:03:46Speaker 01

  Oh, God.

• 1:03:48Harry Stebbings?

  Oh, it'll be fine, Rory. Don't worry. Sequoia are going big into Anthropic. They're also in OpenAI. Are we seeing the end of competitive investing? No one gives a fuck about competitive investing anymore in 2026.

• 1:04:01Speaker 00

  Well, didn't we talk about this last week when I said Andreessen should target 50% market share, not 10, to Rory's insight? I said they can get past the competitive issues.

• 1:04:09Harry Stebbings?

  So yes.

• 1:04:09Speaker 00

  Sequoia's past it. Different partners, different funds.

• 1:04:12Speaker 01

  I don't buy any of that, but I think the truth is, when you're piling in at 350 billion pre, you're not on the board. You don't have meaningful information rights. It doesn't matter. Again, going back to the first principles, this is really fidelity mid-cap growth. Well, actually, large-cap growth now, but just in the private markets, which again, I repeat, is absurd that we're in this place, but whatever. Given that fidelity growth is always going to buy, if they believe in a category, they can totally buy two or three different things with no conflict because they're not in the room when decisions are happening. And I think these late-stage investments, if you're not in the room, it doesn't matter because you don't have meaningful information rights. You're not getting the board deck. You're not there for the strategic stuff. You couldn't do the series A of OpenAI and do the series A of Anthropic. That would be stupid. I would assume one of the CEOs would stop you.

• 1:04:56Speaker 01

  But getting at 350 billion pre, where your billion dollars, it's just worth saying this, where your billion dollars gets you 0.3% of the company, which is about what you'd hire a director for at a series B. No information rights, no nothing. It doesn't matter. You know nothing. You get the two, you get one email a quarter from each of the two companies. You know where they are. And as I say, you are just a public market investor in private assets.

• 1:05:21Harry Stebbings?

  Jason, I'm intrigued for your thoughts on this one. Replit, nine billion bucks. Loveable six and a half is the last vantage point. I think they're neck and neck in terms of revenue, really.

• 1:05:31Speaker 00

  I mean, so let's, let's imagine they, they're at 300 million this year and when they did the round before they're at 100 or 100 something. You can justify the step up based on that. You could also challenge it using Rory's math. What I think people might not get, this product's like 50 times better than at the $2 billion, $2.5 billion round. It's not a little bit better. Like when I, when, when we started doing the show, I was trying to use the V1 of Replit. I could not finish an application. It almost blew up on social media. You might remember, right?

• 1:05:55Harry Stebbings?

  We do, Justin.

• 1:05:56Speaker 00

  It was unfinishable and it just wasn't there. And one of the founders of a competitor called me up and said, none of us are there in the industry. None of us are there. Over the holidays, for fun, I built an incredibly complicated game. I've never built a game in my life. I built a startup simulator that simulates everything from going through YC to IPOing, to controlling all the global power and GPUs and tokens in the world. People love this game. And what's interesting isn't that I built it, it's that it works. Nothing worked at 2 billion, 2.5 billion, whatever the round was. Nothing worked. And the joke was all over the internet. Everyone's got a project they 80% finished in Loveable or Replit. Everybody did. They couldn't finish it. And it was a joke because they thought they 80% finished it, but there was no chance to go from 800. Literally, I built this thing over

• 1:06:39Speaker 00

  the holidays and I probably put 100 hours into it because it was over the holidays, right? This was not a one-shot deal, but it's magic. And so if the revenue growth justifies it and the product is literally more than an order of magnitude better, I, I would argue, I know this is the, the math that we're going to look back of and make fun of ourselves, but I would argue this is a much less risky investment today, whatever it is, within reason, than it was at 2.5 billion where I didn't even think this was a stable product. Like I thought it was cool, but it didn't work. And by the end of this year, man, it's going to be even better, right? So we're just getting so much benefits of these improvements. Like we're, and everyone that's like, oh, you know, if you watch the Ben Affleck, Matt Damon one on Joe Rogan, pretty fun. And, and Ben's like, well, nothing's really improving

• 1:07:21Speaker 00

  anymore in LLMs. And maybe it isn't in Hollywood, although I doubt it. We've just started with agents and it's just so much better. So I, I think Replit's 100 times, I know the math, venture math doesn't work this way, but if it's 100 or 1,000 times better product, it's probably worth two to three times more if the revenue is growing at outlier rates.

• 1:07:37Harry Stebbings?

  Well, I mean, they'll be at 250 million now. And then if you assume, given their growth rates, they'll realistically be at 700 to 900 by the end of the year.

• 1:07:48Speaker 00

  Sounds like a better deal than a lot of other portfolio companies. If it hits the number, if it hits the number, it sounds like a pretty good deal, right?

• 1:07:55Speaker 01

  Yes, implicit is a huge amount of belief in growth persistence, but yes, agreed. I too replanted over the holidays, inspired by your example, honestly, right? And it was fun. And what I did find, though, is I used to use it when I was doing my Python lessons. They're very much driven now to a much higher level. It's all agent based. It's basically, you don't even need to see the code, Mr. Designer. It's all about, you know, you're interacting with the chat. I'm actually trying to get down to the developer level and understand the code base. And it's like, it's almost hard to find and it almost resists. The interesting thing about it is you have to embrace a world of you don't need to know the code, Mr. Rory. And once you do that, just describe what you want. It's a whole new skill is my, it's almost like it's not, almost different than, because it's not programming at the programming level. It's describing at the describing level.

• 1:08:39Speaker 01

  And if you, and if you, once you embrace that, you get stuff done. But it's really hard to go back to first principles and say, how does it work?

• 1:08:46Speaker 00

  Yeah, you can view, but you're right, you can view the code and some folks use it that way, but it's, it's basically abstracted away. It's hidden, right?

• 1:08:51Speaker 01

  Agreed, and you can find it, but it resists.

• 1:08:54Speaker 00

  The more you do it, the better you'll get at understanding how the agent thinks and works, right? And

• 1:08:59Speaker 01

  Exactly, and this may be like a dude when spreadsheets were invented, saying, I like to add the numbers myself to know they're right. And maybe I just need to let go and say the spreadsheet's right and I, and just stop worrying, don't be an idiot. But yes, it was super interesting and extraordinarily powerful once you use it. The final just comment, because you know, you had it in the Sequoia doing Anthropic and Sequoia doing 11 Labs. You know, I just was reflecting on this, obviously, given the changes they had. Clearly, the mission of the new management in charge is we're going to execute an AI.

• 1:09:27Speaker 00

  New management of Sequoia, you mean?

• 1:09:29Speaker 01

  Yeah, I mean, you know, they had a, they had a transition. I think part of the reason was

• 1:09:32Speaker 00

  Oh, yeah. Add Excel too. Just all in. Just do all the winners.

• 1:09:35Speaker 01

  My point is that if I was a late-stage company looking to raise capital right now with a very compelling AI story, it's clear there's an open to buy there to

• 1:09:43Harry Stebbings?

  We've talked about it before, but I think the thing that people haven't discussed enough is the promiscuity of traditional early-stage firms across rounds.

• 1:09:49Speaker 01

  But I think, yeah, in general, you, you have these multi-stage firms that you make a multi-stage bet. And, you know, the whole point of the late stage is to clean up on your early-stage misses, and they're doing that. They're, I mean, I give them credit. Everyone's executing the mission that they said they'd do. You know, everything's staying private long and getting the good deals. It's best to get them in at the A. But if you have access to infinite capital, getting in at the F is okay too. Or in the case of data breaks the L, stuff the money in the good companies. I mean, it obviously, as a trend, it will only stop when it, when it reaches success because that's the nature of economic behavior. But people are gonna do this until it doesn't work.

• 1:10:22Speaker 00

  I mean, Harry, you had, you had Alex Rample from Andreessen the other day on the pod, right? And he made the point, listen, we, this is how you win at Andreessen. You do want, I mean, it's, it's captain obvious, but it's still helpful. You either own a lot early or you invest whatever you can get into if it's, if it's a guaranteed winner. It's like it's that simple as the playbook. And so if today, if in today's world, you have LPs, especially if they're in SBVs or annex funds or something, if they'll give you billions and billions for access to these things, you could argue whether you want to do that or whether you, you don't like it, but it's, it's almost free money.

• 1:10:55Harry Stebbings?

  And Rory, this is where you're gonna hate me for this and just going off on a tangent, but fuck it. At the end of the conversation, you do, this is where like the game has moved to like pre-seed and pre-IPO. Where it's like, do you know what? The dummies game, I think right now is playing the super competitive series, AB's in venture, where we're paying up super early for little signs of product market fit in intensely competitive markets, 100x ARR. I'd way rather have 15, 20% of a pitch deck and two people or be piling into air wallacks, as I did at 5 billion, and have a little bit of something that's really fucking working.

• 1:11:30Speaker 01

  But I disagree. I, I hear what you're saying. I mean,

• 1:11:33Harry Stebbings?

  Risk-adjusted, why do you think that AB, where you're getting 10, 12? Twelve percent because you're not even getting fifteen now in these competitive rounds.

• 1:11:41Speaker 01

  Firstly, anecdotally, you might be right, but in the end, over the long term, markets have to tend to rational equilibrium, which means as you take less risk, you get less return. There can't be bad stages. I've heard this for thirty, oh, X stage is really bad, Y stage is really good. It doesn't make sense, right? In the medium term, you have to assume that as you go down the risk curve, which is what stage is going down the risk curve, you know, you you slightly go down the return curve, there are interim anomalies at various points in time. You're exactly right. It's like, oh, you're anecdotally, oh, my God, serious B's are really hard now, blah, blah, blah. But you're building a firm over an extended period of time. You've got to be cognizant of where the market is at any point in time, but saying it's very hard to say,

• 1:12:23Speaker 01

  I'm doing serious A's and B's, I'm getting ten to twenty percent ownership. Oh, I'm going to wake up this morning and that whole sector is quote bad. What does that mean? It's just a weird comment.

• 1:12:32Harry Stebbings?

  It means risk adjusted. My dollars are better suited elsewhere.

• 1:12:35Speaker 01

  And if you believe that disequilibrium is going to persist longer than, you know.

• 1:12:39Harry Stebbings?

  I'm not saying that, but I'm saying play the game on the field. And right now, the field is showing you to Alex Rampal and Jason's point.

• 1:12:47Speaker 01

  If you say play the game on the field, but what happens if you thought you were playing soccer and suddenly you start playing golf? I mean, it just gets a little weird at some point in time. It is a little weird to say, I'm not going to do ultra late. I mean, so, yes, there's got to be some tacking and adjusting. But, for example, if a late-stage firm said, let's just say, if someone was doing, take the other extreme. Someone is just doing ultra late. They're putting money in ten companies at naught to fifty billion pre, because there are ten companies, naught to fifty billion pre, and that's their thing. They're basically saying it's pre-IPO last round, and that's what we underwrite. And then they came to you as an LP and said, eh, right now, those pre-IPO deals are priced wrongly, right? I'm going to do seed. You'd say to yourself, it's too far from what you're doing. You can't get there from here, right?

• 1:13:31Speaker 01

  They might come to you and say, hey, these late-stage privates are not priced right. I'm actually going to do public, cheap publics. It kind of makes sense. It's adjacent. So you can duck around in the box, but you can't do violent switches, not with most of your money.

• 1:13:45Harry Stebbings?

  Do you really think that? I'm sorry, like, you know, I think Thrive have proven that to be wildly wrong.

• 1:13:49Speaker 01

  Well, I disagree with the two. I think Thrive have proven it to be wildly wrong. I think, like, Thrive have executed that really well about, I think excellently, you're right. They probably sixty, seventy percent of their dollars at high late stage, but at the same time, excellent early stage. Yes, they've pulled that off. You're exactly right. Give them credit for that. I think some people, for example, in the AI have done really well by stuffing a bunch of money into Anthropic, you know, all the way up. And that's been a brilliant decision. Look, I do think where you're at is the new space that didn't exist before was this late and ultra late, and people have found a way to profitably fill that. And if you found a way to profitably fill that by hiring the right growth folks, that's been a good opportunity too. Because the zoom out comment is this, the public markets seeded another three to five years of growth to the private markets, which meant market expansion for venture and market contraction for small cap publics.

• 1:14:34Speaker 01

  Not the best decision in the world, but that's why everyone's allocation to private's gone up. And that's why LPs, to Jason's point, are giving money to these big mega firms to say, I can't get me that Anthropic in the public markets. Go get me some. As I say, I'm not sure why the world has decided to give even more money on a two and twenty basis when it could be giving it on a fifty bips basis, but that's the world we live in.

• 1:14:54Harry Stebbings?

  Because Mark and Ben need it, okay? Why would you?

• 1:14:57Speaker 01

  Everyone has needs, just simple, humble billionaires.

• 1:15:00Speaker 00

  All right, team. I love that. Rock and roll.

• 1:15:03Speaker 01

  Rock and roll. Okay.

• 1:15:06Harry Stebbings?

  But before we leave you today, I run the twenty VC fund and I get this question from founders all the time. Oh, Harry, I can't find a good dot com. Do you have a good hookup? Well, let me tell you now, the answer is always going to be no. I don't have a guy or a gal for that. I do have a recommendation, though. If you're building a tech startup, get a dot tech domain. Tech startup, dot tech domain. It could not be more obvious. As an investor, I appreciate founders who put thought into their branding. When I see dot tech in your name, it tells me right away that tech is at the core of your build. It'll say that to your customers, too. A clean and sharp domain like dot tech pays off in the long run.

• 1:15:46Harry Stebbings?

  You know, nothing dot tech, one X dot tech, Aurora dot tech, all of these great tech companies, they all use dot tech as their domain. These are my two cents. If you're building a tech startup, don't overthink it. Get a .tech domain. After .tech establishes your digital presence, Checkout powers the payments experience your customers see. Digital commerce is exploding, but payments are still where revenue leaks. Checkout.com launched in 2012 to fix that. They don't try and be everything to everyone. No. They just do one thing better than anyone: digital payments. Cloud-native, sub-500-millisecond latency, and 99.999% uptime.

• 1:16:29Harry Stebbings?

  Today, that bet has paid off. With a $12 billion valuation and 65-plus merchants each processing over $1 billion annually, 65 doing over $1 billion annually is insane. Checkout powers $300 billion in e-commerce for brands like Uber, Klarna, eBay, Vinted, and more. Now they're building for Agentic Commerce, where AI agents buy on behalf of your customers in real time, partnering with Visa, Mastercard, Google, Microsoft, and OpenAI. Now, if you want payments built for what's next, talk to the team at Checkout.com. That's Checkout.com. Once Checkout gets customers through the paywall, Invisible helps you scale your operations with on-demand talent and processes.

• 1:17:13Harry Stebbings?

  Why don't we hear more real AI success stories from big companies? The models are insanely good, but implementation's the problem. It's really, really hard. There's data all over the place, there's legacy tech, and manual workarounds. It's a Ferrari engine in a shopping cart. Meet Invisible. Invisible trains 80% of the top models and then adapts them to the messy reality of your business. Take the Charlotte Hornets NBA team. Invisible took years of game tape and analog scouting notes to go from uncertainty to a draft pick and Summer League Championship win in weeks, not seasons. Get the data in order first, and suddenly AI can do almost anything for you in the enterprise. If you want AI that hits the P&L, go to invisibletech.ai/20vc.