20VC: Sam Altman Offers Trump 5% of OpenAI: Fool or Genius? | Alex Karp Sounds the Alarm: Enterprises Fear Frontier Models & Questionable ROI of AI | The Rise of Chinese Open Source: Deepseek Building Own Chips

AGENDA: 05:00 Washington Just Put Frontier AI on a Leash 06:30 Sam Altman's Wild 5% Government Stake Idea 19:00 The AI Funding Bubble: Why Founders No Longer Fear Dilution 28:00 Alex Karp's Brutal Warning: Enterprises Don't Trust Frontier AI 33:00 Meta's Shock Pivot: Has Zuck Accidentally Built the Next CoreWeave? 41:00 Nvidia's Dangerous New Game: "Compute Now, Pay Later" 45:00 Anthropic & DeepSeek Go After Nvidia's Crown 48:00 Kling vs Sora: Did China Just Win AI Video? 52:00 Is China Secretly Winning the Open Source AI War? 01:02:00 Microsoft & Amazon's $6B Bet: AI Still Needs Humans 01:11:00 Ashton Kutcher Walks Away From Sound Ventures 01:16:00 The New Startup Talent War: No Liquidity, No Chance 01:20:00 Final Thoughts: Who Wins the AI Endgame?

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

• 0:00Speaker 00

  It's like rewriting Atlas Shrugged, where John Galt goes to Washington and says, why don't you regulate me more? Why don't you take more? Why don't you take us, Mr. Mooch? Grab some of my stuff? What the fuck are these people thinking volunteering for this stuff? Madness.

• 0:15Speaker 01

  No one's worried about making their last round high-priced investors money anymore. Literally, no one is.

• 0:20Speaker 00

  Every technology company either goes bust or lives long enough to become next generation's IBM.

• 0:26Speaker 01

  As an employee today, why would you join something that you don't believe will have secondary options?

• 0:31Harry Stebbings?

  This is 20 VC with me, Harry Stebbings. Now, it's my favorite show of the week. Rory O'Driscoll, Jason Lemkin analyzing the biggest news in tech this week. So what are we discussing? Number one, Washington lifts the fable five ban. What does this mean moving forward? Second, OpenAI floats giving the US government a 5% stake. Whoa, Sam, baby, hold up. Number three, DeepSeek is developing its own chip. My word. And then number four, Meta Compute launches cloud business, which caused the stock price to jump 10%? Thank God we've needed it, Zuck. This and so much more in the show today. But before we dive into the show today, you have the idea, but with most AI tools, you hit a wall. The setup, the config, the gap between what you pictured and what you actually ship.

• 1:16Harry Stebbings?

  Well, Base44 is where that wall disappears. You describe it? Yeah, Base44 builds it. Apps, websites, AI agents, real working products, built in minutes, using nothing but plain language. And it's all batteries included, the backend, the database, the authentication, the hosting, the heavy lifting is handled. So you just really stay in the flow. This doesn't just take the busy work off your plate, but it gives you an advantage and pushes you past what you thought you could build alone. So in this market, fast is the baseline. To win, you just have to be first. Base44 is that edge, the move that skips the troubleshooting and gets you straight to the breakthrough. Build your next thing at base44.com. That's base44.com.

• 1:58Harry Stebbings?

  While Base44 turns ideas into apps, Ploud turns conversations into insights. Founders and operators spend way too much time every week jumping between meetings, investor calls, brainstorms, customer conversations, and then trying to piece everything back together afterwards. And that's why I've been using Ploud. Ploud instantly captures conversations, voice notes, meetings, random ideas with one press, and then turns them into clean summaries, action items, mind maps, and searchable notes that you can actually come back to later. Honestly, it feels less like a recorder and more like an AI-powered, like, brain memory system. And the crazy part is the hardware itself. The Ploud Note Pro is literally as small and thin as a credit card. So it's just always with you when something important comes up.

• 2:41Harry Stebbings?

  There are already more than 2 million founders, operators, investors, consultants, and professionals using Ploud to stay organized. So think more clearly and stop losing great ideas and important details. Go to plaud.ai/20vc and use the code 20vc for 10% off. That's P L A U D dot A I slash 2 0 V C and use the code 2 0 V C for 10% off. While Ploud captures the conversation, Finn helps continue it. As AI agents become more common in customer experience, teams often end up juggling multiple siloed tools for every job. Well, Finn was built to change that. It's a single unified agent that works across your entire customer experience,

• 3:24Harry Stebbings?

  from service to sales to success and beyond. Finn is the agent making perfect customer experiences possible for thousands of customers. It's powered by custom models, trained on years of real customer interactions, so it understands the nuance and complexity of customer service better than any other agent. That means faster resolutions, more consistent support, and just better experiences for every customer. It's also designed to be fully self-managable, so you can easily improve and adapt it as your business evolves. No third parties required. Leading companies like Gamma, Asana, DoorDash, and Crypto.com already use and love Finn to deliver better customer experiences. So for a limited time, you can get $500 a month in Finn credits for your first three months.

• 4:08Harry Stebbings?

  Learn more at finn.ai/20vc. You have now arrived at your destination. We are back, boys. I am no longer at the beach in the UK. There was one comment in the YouTube which goes, Harry is so burnt. And then it goes, he looks like a panda. And I was like, gosh, this, this whole holiday vibes thing isn't working.

• 4:29Speaker 00

  You did look like a panda. I mean, you had those great big eyes. You look dumb, but that's okay. Sorry.

• 4:35Speaker 00

  I mean, it's a look.

• 4:36Harry Stebbings?

  Took us about 45 seconds, Jason, but we're good.

• 4:40Speaker 00

  Pale skin bread goes to beach. It's a common thing.

• 4:43Harry Stebbings?

  Listen, we're going to start with the news of the day or one of the most pressing topics, which is Washington lifts the 19-day fable five ban. How did we analyze Washington lifting the ban and what it means moving forward for both OpenAI and Anthropic in terms of the permissions they have to get?

• 5:01Speaker 00

  Well, it's a quagmire in the sense that you've now been entrapped in some kind of pre-approval process. And the fact they're talking about some kind of structured pre-approval process, but that hasn't been finalized yet. But the zoom out comment is, you know, six months ago, you could ship software like a free man. And now you have to get permission from Washington before you do it. It's a big change. How does it pan out? Who the hell knows? There are some arguments in part in the cybersecurity for some process, but it's definitely a big step. And all other things being equal, you'd prefer not to have to get permission from any administration before you can pursue your business. I think part of the reason the US is such a dynamic economy is because we don't have a ton of that.

• 5:44Speaker 00

  Europe does. And now we do. We sneered at GDPR and here we are.

• 5:48Speaker 01

  Whether more regulation is better, people have been talking about safety in AI for a long time, which is not the same issue, but a related issue for a long time. This is the grown-up state of LLMs and AI. It's just going to have this level of oversight, whether we like it or not. At the end of the day, this particular issue seems minor only because Fable's going to sort of a variable pricing, per token pricing in a week or two anyway. So most of us aren't even going to use it because it's too expensive. It's going to be a niche model, at least until it, until it percolates into the standard OPUS and Sonnet over the coming months. So the world impact will be minor. The world's changed. To me, Sam Altman offering 5% of his company to the US government was much more interesting in some ways

• 6:31Speaker 01

  than whether some suboptimal but inevitable oversight is coming to, to the LMs.

• 6:37Harry Stebbings?

  I totally agree. And that was going to be my next point, which is like, if you take that one step further in terms of government intrusion or government opinion, Sam saying, hey, take 5%. How did we think about that?

• 6:50Speaker 00

  Well, if you own 100% of it, now you're only on 95. You're kind of a little bit pissed.

• 6:55Harry Stebbings?

  Or if you own none of it, you're not very pissed because you're not getting diluted at all.

• 6:59Speaker 00

  Yeah, exactly. I will happily give you away some of them. I'm not, again, stepping back. What problem is he trying to solve? I mean, I think it's absurd, to be clear, but let's try and go from first principles. What problem is he trying to solve? By definition, it's not any of the security issues we just talked about, which at least are vaguely credible, right? It's not cyber. It's some kind of macro, AI is going to destroy everyone's jobs, so we got to give back, right? And they produced a nine-point plan, OpenAI did, I think about a month ago, that, you know, some kind of, we've got to rethink everything because of the economics of AI. And they're talking about maybe we need to, I mean, let's put it out there, the grandiosity. We're talking about restructuring the taxation system of America to tax more and cap gains and less on income

• 7:40Speaker 00

  because so many people are going to be put out of work because of AI that we want to lower the tax burden on labor and increase it on capital. And this is all part of that. And the whole thing is so delusional and so far from where we are now that I just stopped listening. You've got a really great growing company, no discernible impact on employment yet. You've got a bunch of issues you got to sort out because you have been lapped by your direct competitor. And your focus is, A, on telling Congress that they should, you know, remember, for context, if they give 5% of Anthropic, it's $50 billion. Your focus is telling Congress that raises plus or minus $5 trillion a year. So you're 1% of it for one year. Your whole donation gets rid of 1% of a raise for one year, that they should restructure their entire taxation system.

• 8:25Speaker 00

  Sure, we'll get right on to that. The House Ways and Means Committee, we'll call a committee. Every lobbyist, it's like kicking off a process that you won't be able to control. And I predict, I mean, it does go back to the, the kind of comment on pre-approval. You start with pre-approval, suddenly you end up with an ownership interest, then you end up with a board member. And what the are these people doing? It's like rewriting Atlas Shrugged, where John Galt goes to Washington and says, why don't you regulate me more? Why don't you take more? Why don't you take us, Mr. Mooch? Grab some of my stuff? What the fuck are these people thinking volunteering for this stuff? Madness.

• 9:01Speaker 01

  I completely agree with you at first, right? 100%. I'm like, this is the weirdest kissing the ring in a weird corrupt administration where our president made $2 billion off Crypto and Friends last year in profits. And that's cool now. It's cool for a president to actively trade any stock, his own meme coin, and make $2 billion in one year? I mean, the guy's 80. What does he need it for, right? So at first I was with Rory, but then I step back for a minute and I'm like, listen, Sam Altman, beyond being the CEO of OpenAI, is one of the most successful investors of our gener- of ever, of all time, right? And he, and he knows everything about how startups and scale-ups are run, and he's seen it all. And I think in some ways he runs OpenAI with that playbook in a way the others don't, okay?

• 9:46Speaker 01

  It's like a super startup, how he funds it, how he thinks about it, the relationships, the scaling. And to me, when I step back, after I had the exact same view as Rory, like, this is crazy kissing the ring, crazy stuff. This is not Intel dying. It's like, you know, you give 5% of your company. Company to Shopify like Klaviyo did so that they don't destroy you. We see this all the time in our portfolio. Like, you don't want to give 40% of your company to your partner. And 5% is not immaterial. What I've learned from my portfolio, and I think you guys will agree, is it creates an unexpectedly large amount of alignment. You sell 5% of your company to $100 billion partner. It don't matter to Rory's point. It just don't matter if they own 5% of your startup. It doesn't matter if you how almost how big you are.

• 10:27Speaker 01

  It is immaterial, but I'm constantly shocked how much that brings you into the boardroom, how it brings you. So my only point is, and I could be wrong, giving 5% of your company to placate the federal government so that you're the good guy now. You're you get you're like Stargate 2.0 when Sam was up there, right? With Larry and everybody, he was the good guy for a little while. I think as an investor, I take the dilution.

• 10:48Speaker 00

  No, no, no, no, no. I mean, I understand what you're saying, and I'm going to paraphrase. Ownership stake, which much larger entities align the large entity with the smaller entity, and that's what this is, and it's a good thing.

• 10:59Speaker 01

  Well, more than I would have expected as a founder.

• 11:01Speaker 00

  More than you would have expected. So let's have two examples.

• 11:03Speaker 01

  Because it shouldn't, because it's immaterial to the federal government, and it's immaterial to Nvidia taking stakes in most companies. It's immaterial to the economics, right?

• 11:10Speaker 00

  There's two arguments I'll make against that. The first is a business one, and then the second is a government one, right? Business one, Microsoft owns 30% of OpenAI. If ownership stake resulted in besties, they'd be besties. They're not besties. They're in a stale marriage, looking for a divorce, but can't quite pay the tax. It hasn't worked. And that's with 30% alignment with a profit maximizing entity like Microsoft, who is rational. Now, apply that to the US government. The idea that because they own some of you, they'll align with you is just that's just not the way politics works. Go back, look at the TARP. And now admittedly, that was when the banks had screwed up. So, you know, they come in, they own a little bit, they don't have voting control, but they tell you who you can pay and who you can't pay.

• 11:54Speaker 00

  And the weak banks deserve that, but JP Morgan was like, why am I getting that? That's the TARP. If you think in this case, because not only have you said, give me 5%, but you've also produced a document that says, the things that we're doing are so catastrophically impacted on the economy of this country, Mr. Congressman, that you govern, that you need to redo your entire taxation system. It's about an hour before Bernie Sanders says, you know, you're right. This is really impactful. Maybe we should go for 50. Because if you really are impacting a $30 trillion economy, if that's your, in my view, absurd statement, but you've made it, and Dario's made it, so you're entitled to own it. If you really are destroying labor in a $30 trillion economy, do you think the monster, the political monster is going to say, I'll settle for five? That's grand. Call it 50 billion.

• 12:37Speaker 00

  You've destroyed 15 trillion of labor value, but we'll settle for 50 billion. Bernie's already said he wants 50, and you deserve whatever happens to you, right? You deserve being regulated by the government. You deserve, you know, having to be intrusive. I mean, maybe you get something small and tactical, but it's such a mistake.

• 12:55Harry Stebbings?

  Why do they do it then? These are not dumb people. You're breathtaking.

• 13:00Speaker 00

  They're really smart people.

• 13:01Harry Stebbings?

  Yeah.

• 13:01Speaker 00

  And because they believe, rightly or wrongly, that the impact of this technology is so important that all these things need to be on the table. And to be fair, that belief is what gave them the self motivation and the confidence to raise billions of dollars. And that narrative is what it took. Because if you walked in and said, hey, I need $10 billion to build some stuff, and it's going to have a minor impact on some parts of compute, I don't think you got your 10 billion. You needed to tell a story like every great CEO. This is the world's greatest fundraising CEOs, telling the biggest story. And they told the biggest story, and that's what allowed them to get the now $160 billion. But once you've told that story, and genuinely, once you believe it, and in the case of Anthropic in particular, once all your employees believe it.

• 13:44Speaker 00

  If you believe this thing is dangerous from a cyber perspective, from a jobs perspective, you just suddenly end up down this road, right? All these things become next level logical if, in fact, the basic premise is correct. And if, on the other hand, you believe it's for what your little old me does, and I'm not them, I didn't invent this shit, but it's like, it's a really important technology, but it's not going to put 50% of the US labor market unemployed. Then you believe these kind of preemptive changes and conversations are a wild overreaction and wildly early, and we'll find out which it is. I mean, look, in five years' time, if Dario is correct, and 50% of white collar jobs have been replaced by AI, which I don't believe for a second, then you're damn right there's going to be political controversy. And if you think 5% is going to feed that beast, you're delusional.

• 14:28Speaker 00

  If half those nice middle class people in the middle class jobs all across this country lose their jobs to AI, it's going to take a lot more than, I think it works out to what, $140 per head, which is what the 5% of Anthropic would be worth, to keep the wolf from the door. So if you believe these things are going to happen, that's why they do it. I just don't, so I'm like, whatever, this is a mistake.

• 14:49Harry Stebbings?

  Is this purely a marketing exercise?

• 14:50Speaker 00

  What's who are you marketing to?

• 14:52Harry Stebbings?

  Congress, senators, that you're willing to align yourself, you're willing to play ball, you're open, you're not this wolf stealing jobs, and you're partisan.

• 15:03Speaker 00

  You're not the wolf that you said you were. I mean, again, it's like, hi, I'm a wolf, but I'm a good wolf, right? I mean, is it trying to clean up the mess you created to some extent? Yes. You spent three years saying everyone's going to be unemployed because of this thing, and it's wildly dangerous. And now you're like trying to walk that back while at the same time sucking up.

• 15:20Harry Stebbings?

  And if I'm going to ask you to regulate, or as you said, Rory, last week, I think quite wisely, maybe tax Chinese or open source models, maybe it'd be helpful if we had alignment beforehand, if I'm about to have a big ask.

• 15:31Speaker 01

  I think Sam is a very thoughtful communicator, and he puts stuff out there early to socialize it. And they seem like little comments, and they seem like exposition, but I think they're all very carefully thought through. And I think the issue is less about, and Rory just hit this with Bernie Sanders. The issue is less about whether it's a good idea to give 5%. I say do it like the Klaviyo Shopify thing, if you think it's going to work. It's more so it's not 50 or 20. Sam is just anchoring this idea that, hey, 5% will align us with the American people, with the federal government, with the administration, without getting into politics. And he's anchoring this at five rather than 50, because not only does he need the alignment, he's sensing the political winds. So I think it's, you know, these things seem to come out of nowhere, but I think he's

• 16:15Speaker 01

  a very interesting communicator. He's a very good anchor in a way that isn't triggering, generally speaking, the way he does this, maybe other things are triggering. And he does a pretty good job of telegraphing where we might end up before it happens, right? So I think it's just anchoring. Maybe it really doesn't matter what we think, because it's already happened. The decision essentially has already been made that the federal government will be acquiring a stake in OpenAI. And Sam is just anchoring it as the smallest possible stake to get ahead of this discussion.

• 16:42Speaker 00

  That hasn't happened yet, to be clear. I mean, that decision hasn't been made. Now, you are, I mean, the US government, for the first time in a long time, and definitely absent a bailout, has already taken stakes in a bunch of tech companies like Intel. So who knows, maybe it'll happen again. And decision hasn't been, quote unquote, taken. I don't think this administration has a decision making process. But you're right, it's definitely, quote unquote, on the table, just being clear.

• 17:06Harry Stebbings?

  Does this change anything for Dario?

• 17:08Speaker 00

  I mean, to be clear, the proposal from OpenAI, just to be grounded in fact, wasn't we give, OpenAI gets 5%. It was like, companies should. So the implied statement is everyone should, including Anthropic. It's like a, hey, we should, everyone should give away 5% for the US government. So to some extent, you know, he's volunteering other people's capital. I mean, it just all gets to the same, and we started with Fable. It all gets to the same thing. The US government is going to get enmeshed in AI in a whole load of different, probably contradictory ways, right? It can range from, you know, as I say, cyber danger, to wider regulatory danger, to economics, to Chinese open source threats. You're just going to be enmeshed in politics. And it's funny, because, you know, when you watch the internet take off, the whole emphasis was cut us free.

• 17:53Speaker 00

  And then if you look at two of the biggest deals at the start of the internet, maybe three big, I'm going to give you three really interesting 1990s regulatory issues that were amazing, amazing for the internet, and the exact opposite of today. One, you had the Telecom Deregulation Act that said, AT&T, you got to be broken up, and everyone's got to give independent access, which allowed broadband to take off. You had section, I think, 230, the one that said, websites are not liable for third party comments on their website, which effectively is what Google, Facebook, and everyone has relied on. So it was a huge amount of free speech. And then the third one was, for a long time, no sales tax, which you could argue the justice of. But all those things were basically Silicon Valley managed to have 20 year run with the

• 18:35Speaker 00

  internet where the message to Washington was, leave us alone, and we did great. It's just super, and now many of those have been revisited. It's just super interesting, we're going with the exact opposite approach now, which is, hey, don't miss us, regulate us, you know, putting our hand up and saying, pick us, we'd like to be regulated too. I mean, oil and gas must be looking at this going, wow, these people are crazy. Like, no one doubt in Exxon is saying, you know, oil and gas is really important. Why don't we give Washington 5% and check in advance before we do drilling, you know?

• 19:03Speaker 01

  You know, there's a difference, since just because this is 20 VC, not that I disagree with any of that, but maybe this is too micro of a point. But I think in the age of AI, massive dilution has been sort of institutionalized. Founders don't care anymore. Not all founders, not all founders. But even even two years ago, before all of this, before these massive rounds, I would say most folks were fairly dilution says it. Certainly VCs always have been to an extent. Now I find founders, you'll look at really hot startups in the news, and if you peel the layers back, and you look at the stub rounds, and the up rounds, and the half rounds, they've done 16, 17, 20 venture rounds often, right? Even if each one is 5% dilution, 20 rounds at 5% dilution, Rory, help me with the math, it's a lot of dilution.

• 19:45Speaker 01

  And so, and look at, look at Anthropic, you've got Dario at 1. something percent equity, right? Sam's at nominally zero. So, I mean, Anthropic is the most successful startup of our lifetimes, but the founder owns 1. something percent. It's just an example, but I see it across. Tons, not all, right? But so 5%, it's like nothing, man. It's like I just, that's like the stub round I did last week. I did around a 10 and then 14 and then 18 and 22 and 29. And TechCrunch runs it up each time. But those 5% and 6% add up. They really add up, right? Every ramp press release, it's so exciting. But I hope they're not too dilutive because there's just so many of them.

• 20:21Speaker 00

  It's an interesting point. And I think fundamentally, I don't think either of those CEOs are primarily money motivated. But you are, I just, great point, Jason. You are right. It is very different. Normally, the two winners in a space, you know, like if you look at Microsoft, Bill and Paul Allen own, you know, good slug each. And even Bama owned enough to buy a basketball team at the end of it. And it's the richest man in the world, one of the richest men in the world. And you're right, it is really odd where one, one of the two CEOs own 1.7% and the other own zero. You're right, it totally takes the edge off the dilution conversation because it's someone else's money.

• 20:52Speaker 01

  It's not that I say, as a seed investor, I sort of hate it because

• 20:56Speaker 00

  Yeah, you should.

• 20:56Speaker 01

  I've watched myself be diluted to levels I never even thought whatever happened, right? When I started investing, like, like literally. So as an investor, you have to internalize and realize it's basic. For me, it's doubling again my entry price, right? As a seed investor, I used to think my real entry price was twice what it looked because of dilution. Now I'm thinking it's four times. So Harry just talked about doing a seed deal at 60, right? I think you're really doing it at 240, Harry, is the honest math today, right? And founders, not all founders, look, there is absolutely a vibe of, I'm gonna go through YC. I'm gonna raise six at 60 and never raise again. Amen, right? But so many founders today, after that first round, are not dilution sensitive. And maybe it makes sense if it's a huge outcome. It's just different, it's just different.

• 21:37Speaker 00

  The only fact-based comment I'll make is you're right. Though the data from Carter, which is always excellent, says that dilution per round is going down. So maybe in part founders are willing to raise more because the dilution per dollar is lower. So maybe not the founders of Entropic or OpenAI, but in general, if the pricing goes up, you know, you can do more rounds and end up with the same dilution. I think that's happening in a lot of cases as well.

• 21:59Speaker 01

  Yeah, but I think what I'm personally seeing, and I think Dario is an example, I'm seeing both. I'm seeing smaller rounds, but so many rounds.

• 22:06Speaker 00

  Yeah.

• 22:07Speaker 01

  So many rounds that each round, you kind of don't mind as an investor or a board member. Great, wow, that's a great deal at 6% dilution. Five, that's not double digits. And then four months later, you do another one and four months later and it's, it sounds like I'm complaining, I'm just learning. But if I'm doing that 5% to hold off any regulatory issues, man, that, just do it.

• 22:27Speaker 00

  You are right, I like the learning comment because you're right. Look, I will admit that one of the areas where I think I may have been too rigid is, you know, you do think about, you know, you don't have hard ownership targets, but you want to have between 5 and 10% of investment to matter. And you know, you're seeing now, you know, Spark's gonna do amazing and very deservedly, they're gonna own 1% plus or minus. SpaceX, I think founder, who did the original check when the rockets were still blowing up, for God's sake, right? Ballziest check out there, you know, they're sub 5%, a 3 or 4% of SpaceX, right? So you're right, Jason, I think for these huge outcomes, the mental math and the mental model you had gets really turned on its head, which makes sense if you have three orders of magnitude larger exit, you can get away with just about anything on the dilution side.

• 23:12Speaker 01

  I mean, Ram's done 12 announced rounds, according to Claude.

• 23:15Speaker 00

  Wow.

• 23:15Speaker 01

  So I'm gonna guess it's more like with stub rounds, like 24 rounds typically, right? I think it's done 24 rounds of funding, right?

• 23:21Speaker 00

  And data breaks us down in the second half of the alphabet.

• 23:24Harry Stebbings?

  It was like a series M there. I love the way they actually named it, not just like another late series, they really, it's series M.

• 23:31Speaker 01

  These are honest founders, these are actually old school founders living in the AI age, data bricks, they're honest, right? It's not performative at data bricks.

• 23:37Harry Stebbings?

  You know who I love though? And then we'll get back to normal scheduling, Carry at Linear. The dude is so disciplined and so focused. He's raised two rounds of funding. He never wants to meet VCs, he really like refuses all VC intros, never meets.

• 23:52Speaker 01

  Are you sure it's, that's the right outcome?

• 23:54Harry Stebbings?

  Yes, it will return my fund one multiple times over and I'm incredibly grateful to him and the team for doing so.

• 23:59Speaker 01

  No, listen, I'm not being critical. It's a beloved product, right? With real traction and it'll return your fund one, that's great. To use Rory's term, everyone's talking their game a little bit, right? And so when I, sometimes I see him say that, I agree with him as a founder, right? I'm, I love it, but sometimes, you know, I hear a little bit of Brian Armstrong in that, you know, it's, it's a, because like, listen, maybe I could have done even better, as great as Linear is, maybe I could have done even better, but I chose to be capital efficient. And sometimes I feel like, but was that the right choice in 2026 when the prize is so large? If the exit's a couple billion, five billion, it's good. If the exit's 100 billion, then you just, I'm not, I'm not literally, I just sometimes wonder when I see it. And I'm not saying that I'm right, I'm not remotely saying I'm right.

• 24:39Speaker 00

  I think what you're weighing off to try and kind of step back, what you're weighing off is optionality versus upside. There's no doubt if the, if the prize is a trillion dollars, which it has been in at least three cases, it looks like, it really doesn't matter what it takes to get there, you just have to get there. And if skimping on it reduces the probability of getting there, even 10%, it's a huge mistake. If on the other hand, the prize is, as you say, a billion or five billion, then raising too much eliminates the optionality of taking that billion dollar exit, right? And you know, to be fair to a founder, 20% of a billion dollar exit is life-changing, life-changing, especially with QFBS for now. I think the truth is it's different by opportunity. Not every opportunity is an entropic opportunity.

• 25:22Speaker 00

  And there's going to be, I mean, Linear is a hard one to place in that because you squint one way and you go very bounded, very well executed, will be a great outcome no matter what. You do, to your point, Jason, you can see another world where do you have to become something bigger to even matter?

• 25:36Speaker 01

  Yep. I think there's a related point just for founders today that's changed this. In some cases, insensitivity to dilution is different, it's just different, right? Because if the outcome's massive, it doesn't matter. And the other one that has changed to Rory's point, and I think this is a positive, because it certainly terrified me as a founder, but it's not all positive, is no one's worried about making their last round high-priced investors money anymore, literally no one is. Because I believe investors have learned to accept 1X when it doesn't work out, without drama, without blocking, without threats. I'm not saying weird PE firms and non-standard investors, they play games all the time. I see, I see, I'm watching a threat through my portfolio from a non-standard VC right now that is blocking round after round after round. But the scales of the world and every, you're not blocking exits.

• 26:20Speaker 01

  And so I think founders, oh, I raised it 4 billion, but maybe I exit at 800 and I get an 80 million carve out. They're just not worried. I was terrified as a founder out of, for every round I would get blocked by the douchebags, okay? I just don't see any of that fear exist in founders anymore.

• 26:34Speaker 00

  That's true, and you're right. And it never made sense to do it because the minute the founder wants to sell yourself, but you're right, I do, I, across cycles, I have seen the hedge fund that you led into the last round, suddenly just refused to sign the docs, even though it's totally, you know, they're getting a 1X. And it's appropriate because if you think about the late-stage business, you're only taking one risk, which is valuation, which means your downside is, is the 1X, you should be prepared to take that and move on.

• 26:58Speaker 01

  Yeah, without drama, right? It's just changed all, I think this is the age of growth investing. And the fact there's no downside because your investors won't block that billion dollar round adds velocity on, not on the investor side, but on the founder's side. Like, I would, I would have taken another round as a founder for sure if I, if I thought I wasn't gonna get blocked. I would have done it in a heartbeat.

• 27:17Speaker 00

  I didn't get it at first, Jason, but now I'm getting it. And you're saying, and that's the argument that says if the high-priced later round is relatively low blocking rates, relatively low dilution, and it gives you upside optionality and doesn't preclude downside optionality, which is my point, then you're saying I would, to be, I would be wrong. And in fact, there are cases where if you as a founder are running a company, you're doing 100 million, there's some chance it can be a billion dollar revenue company. Take the late-stage round, it might work if it's a 50% chance it works. And if it doesn't, yeah, you'll have the preference that, don't waste the money and you'll still be able to, you know, get out with the exit you would have had otherwise. I don't know if I buy it, but that's the argument.

• 27:56Speaker 01

  I think it's a big, but I can't think of a founder I've invested in doing the big round that is worried about the return on that high-priced round.

• 28:02Speaker 00

  I agree.

• 28:03Speaker 01

  In my generation of founders, we were terrified of it. We were terrified of the expectations.

• 28:07Speaker 00

  I remember those terms where you have the block unless it's a 2X sale and all that bullshit. So you were really stuck with that late-stage money. But I agree, that's actually a fair point, it's freed up the risk.

• 28:17Harry Stebbings?

  Okay, back to schedule program. One, one video that was going incredibly viral was Alex Kopp on CNBC, where he really said two things that I think were standout comments. One is there's never been more skepticism from large enterprises towards frontier model providers, specifically Anthropic and OpenAI. And then second, that there is real questionability from those enterprises on the ROI of AI within their organizations. Anything to add, any commentary on that?

• 28:45Speaker 00

  Yeah, I actually watched it because all the whiny people were saying he looked deranged and I watched it and really enjoyed it. But I actually thought he wasn't deranged, I mean.

• 28:52Harry Stebbings?

  I thought he was more stable than he normally does.

• 28:55Speaker 00

  Yeah, it's so funny because some of the examples, it's clear there's a whole lot of personal dynamics there and his examples about his college and his example, all that. That's just his baggage to bring to the table. I read a biography recently, super interesting dude, obviously, with a lot of angst. So I think there's a lot of noise in the system from that. And then, you know, it was cute, he called Dario a world historical figure, which is the Hegel concept, you know, the German philosopher. And Alex Kopp is of course a doctor of German philosophy. So now we're dealing with Big Brain, making Big Brain references on CNN, which perhaps isn't the right place for it. But when you strip away all that, I think you're right, Harry, the two comments he made were spot on. Copa America is saying, I'm spending all this money, am I getting anything? Which is the ROI comment.

• 29:37Speaker 00

  And then the other comment, which I hadn't heard as much, and it's obviously a little right, but he said, and Copa America is saying, am I giving them all this information? Are they training them? Are they learning my business and are they going to be selling my business to everyone else? What's my IP? And obviously it was a self-serving comment because then they were like, well, Palantir will solve these problems for you, Mr. Copa America. And worth pointing out, people can bitch and moan, but the stock went up 9% on the day, right? So. I didn't realize that. I kind of checked it just before I came in. So I didn't think it was crazy at all. I think it was, yeah, I mean, stylistically, you kind of go, wow, that's a crazy style. But oh, my God, the points were spot on. I don't know, Jason, what, did you see it?

• 30:12Speaker 01

  I only saw the clips that, as Harry knows, it's all we watch is clips now, right? We create long form content to create clips. That's life. I think, listen, anybody on the application side is going to be sensitive to token model costs and all of that, right? It's a team that's real and is blown up. He's talking his game and his dependency. The one that, um, that maybe he got slightly wrong, but is the most interesting because it's still a real issue, right? Is whether, whether OpenAI and Anthropic are really training and slurping up all of our data, right? That seems to be slightly exaggerated based on their terms of use and everything today. But, I mean, this was the same week that HubSpot had to walk back that it was going to share all your prospecting data with other customers. And I want to tie them together. Okay, HubSpot's an older school B two B company.

• 30:55Speaker 01

  But HubSpot said a week ago, hey, we have a prospecting tool. Prospecting is really important. It's actually become much more important in the agentic world because all these hot AI GTM products are automating prospecting, right? So we're going to do what everyone's tried to do for about a decade and a half is we're going to pool all your data. We're going to take all of Harry's verified contacts, all of Rory's and Jason's, we'll pool them. So that when you do outbound, you'll have a truly validated set of contacts. And the, their customers erupted that you're sharing my contacts. They had to roll it back within a week. And it'd be fun to talk about in general, but I think it teases to the question that I think vendors overall are going to push the limits here. They're going to push the limits on training on your data. OpenAI and Anthropic kind of lied about the books and they, and they definitely lied about training on YouTube. And they're going to push the envelope here to make their LLMs better.

• 31:40Speaker 01

  And HubSpot did it and Salesforce is going to be tempted to do it. Every vendor that is seeing massive competition or slowing growth is going to be tempted more and more to cut corners on training, privacy. And HubSpot got caught. At least they walked it back, right? But I think we should all be worried if we care about our data for real. And sometimes we over worry about this, right? It, we're not, we're not all anarchists or whatever, but people are going to be tempted to do more and more with our data. I think it's a very valid worry. And if you're Palantir selling to the government and, and highly regulated industries, I think it's a great, it's a great play. It's a great play. You can't really trust these guys not to share your data.

• 32:16Speaker 00

  Yeah, and I think the ROI comment was clean and that comment on data wasn't as, you're right, Jason, it wasn't as obvious that they're doing that. But of course, the other thing that Carp mentioned correctly was is that Anthropic in particular had quote unquote opinions about how their AI should be used by the DOD. And he was making the point when people are giving you millions of dollars, they don't want your fricking opinions, they want your technology. And I think he did a very good job of positioning himself on that side of the table. Good for him.

• 32:42Harry Stebbings?

  I always heard the statement when I was younger, those that can do, those that can't teach. I always like to remind my teachers of this, which is probably why I was so unpopular at school.

• 32:51Speaker 00

  Yeah, you would be, Harry.

• 32:52Harry Stebbings?

  And then you kind of look at the ecosystem one day and you say, those that can do, those that can't open a cloud business to sell excess compute. We saw this week Meta launches cloud business to sell excess AI compute and Crater's Neo Clouds. Meta Compute, a cloud business to sell access to its AI infrastructure, either as hosted or raw GPU, rented by the hour like CoreWeave or Nebius. Market reacted well, 10% jump, biggest single day gain in five months on this announcement. How did we think about this one?

• 33:25Speaker 01

  My only thought was why not earlier? Why not? If you've got the capacity, why not lease it? Didn't bother SpaceX, didn't bother Amazon 20 some odd year, Harry can do the history for us. Didn't bother Amazon opening up AWS back in the day when it had excess e-commerce capacity. Um, why not, man? Why not? They, they, it's, it's one thing if, if Meta was still had massive cash flow it didn't need, right? But it's been such a, I'm not sure exactly what their net cash is from their infrastructure spend. Maybe it's zero. It just makes sense, right? At this point, it just makes sense. Why not?

• 33:56Speaker 00

  It's been interesting. Two companies have done the same thing, which is buy a load of compute to build proprietary assets, fail to build those assets and then decide instead to sell that compute to others. And both of them have had a very positive market reception from that. And one of them is SpaceX, obviously. And then the other, obviously now is Meta. You ask yourself what's going on long term? What is the market actually thinking? Are they thinking, there's a Goldilocks scenario, which is we, the market believes that Meta in the short term has excess compute and therefore we're glad they're selling it. And in the long term, we believe they have a wonderful use for this compute that we can't quite figure out yet. And therefore, long term will be this AI centric play and it'll all be wonderful. That's one view of the world.

• 34:40Speaker 00

  And, you know, you have the same kind of view like that of SpaceX, which is, oh, short term, they had to rent this compute. They got an extraordinarily high price for it, for which all congratulations. But does the market really believe over the medium term, you're going to be an AI model provider using cursor, being, you know, top to bottom, you know, state of the art model, right? That's one view of the world. Or is the market simply saying, both of you have failed at your long term goal, but being a cloud provider is a great business and go team. And the thing about the latter is you kind of find yourself saying, hmm, two more entrants into a pretty crowded market. It totally made sense for the Neo Clouds to go down 10%. Because it's like, all other things being equal, would you prefer to have two competitors or four?

• 35:22Speaker 00

  You'd prefer two, you know, so at the margin, the entrance of SpaceX and Meta into the Neo Cloud business, you know, was worth exactly that 10 to 15% decline for Nebius and CoreWeave. The interesting question was, what does it mean over the longer term? I think there's two positive scenarios. One positive scenario is they build these standalone models, they take that compute back in and they use it all. That's great. And the other positive scenario is being a hyperscale cloud provider turns out to be a great long term business. That's great, too. Obviously, the bad scenario is if a whole load more companies go through the same journey Meta did, which is, oh, we think we need all this compute, but we don't, we can't build something useful enough for it.

• 36:03Speaker 00

  And then you're only left with a few buyers of compute, OpenAI and Anthropic can clearly use it, and a whole lot of sellers of compute, maybe it won't be such a good business to you as of now. And that's the risk is that it turns out that right now, the assumption that Zuckerberg said it is, hey, we should invest because if we can't use it, we can always sell it. And that, and this is what you're seeing right now. Everything there is true up until the moment that compute demand isn't there at the margin. That's not happening now, to be clear. It's never been tighter. But if that changes, then all these assumptions go out the window. Then, then the market will say, no, I'm not glad that you bought this shit and are now selling it to other people. I wish you hadn't bought it at all. Take the hit. But that's not where we are today. A compute demand still appears to be pretty strong. Right now it's working.

• 36:45Speaker 00

  But it is odd to be able to get away with having a plan A, reverse it, go with plan B and getting a 10% lift.

• 36:51Harry Stebbings?

  Do you think Zuck will execute on the strategy well? Elon did a masterful stroke with it. We've discussed it before. He got a great price for it, single customer, amazing job. It's not easy to do. Do you think Zuck will be able to pull it off?

• 37:05Speaker 00

  I think you're phrasing the question wrong with all due respect. You're basically saying, oh, is it Zuck or Elon? They're both wildly talented. Let's use the Carp word, world historical figures, right? Which I think is true, actually. I think the real question is, is there another five gigs of demand out there that wants to be satiated? Does Anthropic have an open to buy? If, the truth is this, if a customer wants to buy something, as every salesman knows, it doesn't take a fricking genius to sell it if you have it. But if Meta has a gig of compute lying around and Anthropic, you know, five miles down, 20 miles up the road wants to buy that compute, I predict that sale will happen. If Anthropic or OpenAI doesn't want to buy that compute, then all bets are off. So that's the only thing it boils down to.

• 37:43Speaker 01

  Listen, maybe I'm not that bright, but, um, on this, but Zuck also just paid essentially $900 million to hire a head for WhatsApp, right? By investing $900 million into cred, right? So it seems to me, I might be wrong, not trying to trigger anybody.

• 37:57Harry Stebbings?

  And just to provide context, if Meta invested $900 million into cred, an Indian company with a CEO called Kunal Shah, I believe. And Kunal is now head of WhatsApp with that $900 million investment in cred, I believe is the context.

• 38:09Speaker 01

  Probably more, right? Really? Because that was an $900 million investment. Let's, they just paid well over a billion dollars to get someone to run WhatsApp.

• 38:15Speaker 00

  Yeah, he's probably getting paid something too, I agree, Jason. It was wildly interesting.

• 38:17Speaker 01

  So what's happening there? Well, clearly, and you can see the numbers, the core Meta apps are working well. WhatsApp, Facebook, Instagram, this is the engine that keeps going. And so in a way, Zuck's treading water while he figures it out, right? Did he overpay for scale and Alex went, maybe, I mean, probably, right? But he's treading water and, and listen, a lot of our founders are in this boat. The main engine's working, right? Something's working. I don't have all the answers today in the age of AI, right? My core business is still doing well and I can either kind of hide from it or I can go maybe too all in without having the answers, but at least I'm in the game. And, you know, did Llama really work out? Did Scale work out? I don't know, but when the core is so successful, you stay in the game. And then you rent out the compute, it's okay, right?

• 39:01Speaker 01

  So I give the same advice to founders that are doing reasonably well. Stay in the game, man.

• 39:06Speaker 00

  I think you're totally right, Jason. The core business is doing amazingly well. Now, one minor nuance, they say that part of the reason it's doing well is the AI is improving their targeting. And I believe that, but I don't believe it justifies the 70 billion or so they're spending. But you're right, the core business is doing well, which means that there's no fundamental fatal error risk in continuing to invest in this new marketplace in AI. So if you were a Meta board member, not that the Meta board members have any power whatsoever because Mark controls all the votes. But I always think as a board member, one of the big picture jobs you have, and you have very few jobs. But one of them is if the company is doing something that could have fatal error risk, that is when you at least record a no vote and you say, I wouldn't do this. If the CEO came in to me and said, I'm doing this, I'd have to say, you, you've earned the right.

• 39:51Speaker 00

  You've got a $100 billion cash flow business. Don't understand where you think the 70 billion of investment is going to get, but you've earned the right to continue to play. So even if there was a meaningful board at Facebook with actual votes, if I was a board member, I'd be saying, I might get it, but you've earned, Jason's exactly right. You've earned the right to play, you've hedged, and worst case, we spend 70 billion and we're wrong, just like VR. So yeah, I agree. One of my big ahas is people talk a lot about the fact that all the hyperscalers are spending almost all their capex and even starting to tap the debt markets to invest in compute. My big aha is this spending isn't going to stop because the supply side says stop. Facebook aren't going to say stop. Google isn't going to say stop. Microsoft isn't going to say stop. Really, it boils down to the man's side.

• 40:33Speaker 00

  As long as enterprise customers, as long as that revenue growth rate, even though it's one seventh the size of your capex bill, as long as the revenue growth rate is two Xing and three Xing, which is what we've seen from OpenAI and Anthropic, even at today's run rate, the spend is going to come. The demand side is going to be what shuts off the spigot, not the supply side. And I think Zuckerberg is just the best example of that. He is going to keep playing as long as there's some hints on the demand side and it's not a fatal error. And neither of them have been triggered.

• 41:01Harry Stebbings?

  The supply of money and keeping that money machine rolling. Nvidia starts financing its own demand with compute now, pay later, essentially letting providers access their GPUs through revenue sharing and credit support instead of paying upfront.

• 41:17Speaker 01

  I love it. Now that round trip revenue is like totally cool and not something you go to jail for, like, let's do it every single place we can find it, right? Let's just, let's just do it. And I'm not saying there's anything literally wrong with it, but go for it, right? And capture them early. I'm just shocked with how many folks have screwed this up over our investment histories. How many folks don't just go ultra all in on startups? And if you want to pick Y C, because it's the simplest way to go all in, just do it, right? It is such a talent magnet. But why everybody? And folks have woken up to it to some extent. But every leader should be showering startups with infinite love their first 24 months. It's the best long-term investment you can get. If there's any lock-in or anything at all, shower them with love.

• 42:01Speaker 00

  And let's talk about what's going on here, because what Nvidia has said is, and the details matter, is that for, you know, next generation Neo clouds, and one, I think, Sharon AI, which is one of the examples, they did two deals recently. In early July, they actually did some kind of explanation of what they're doing. They're basically, quote, "selling you the chips upfront." So they are going to recognize that hardware revenue upfront. And then they're giving you, as the buyer, the Neo cloud, a backstop, that if you can't use that compute, you get kind of putback rights on it, right? So it's basically hedging the risk. It wasn't clear for me in what I read when the money actually changes hands. But what was clear is they are taking the revenue upfront. So it's as legal as church

• 42:43Speaker 00

  on Sunday. It's a six or six. They're separating the revenue upfront from the guarantee over time. So it's accounting legit. But it is pretty aggressive. I mean, what it's basically saying is their push has been to diversify away from the hyperscalers, and they've achieved that. Even though they, obviously, the bulk of their revenue comes from a small number of hyperscalers, they are starting to expand the number of significant customers. And the top three customers, I think, don't quote me on this, in the data center business have gone from the 80s to the 50s, or something like that. So they're trying to make all these guys, these new Neo clouds, work. And they're leaning in backwards, or effectively. But there's a lot of contingent liability they're taking on. And Jason's right, you do that, it goes back to the same sentence over and over again. As long as the raw demand

• 43:26Speaker 00

  for compute and intelligence keeps going up and to the right, these deals will look wildly smart, because they'll work. And if that slows down, and there's excess capacity, these deals will look horrible, because you're not just not be, if you're Nvidia, you'll not just be not growing quickly, you'll be de-booking prior revenue, you'll be kind of taking, you know, you'd be taking money back because your customer will have gone bust. The whole thing is a derivative bet on keeping this thing going. Not crazy, but that's what it lies on.

• 43:56Speaker 01

  I don't think, in this point, when we record this, anyone's managing for downside in.

• 44:02Speaker 00

  You're right.

• 44:03Speaker 01

  I don't think, I think we're so far deep into a bull run like we've never seen before, a bubble or not. I don't, I, you know, you're managing for downside. I think I'll check out of that board meeting. Thank you. Here's my junior associate.

• 44:15Speaker 00

  You're right. And it's funny, I remember thinking a year ago, when I realized Nvidia were talking about stock buybacks. I remember saying, actually, I think I said on the pod, I said, "I wouldn't do that. I wouldn't do buybacks now, because buybacks are a conservative." I actually think if you're going to be stupidly aggressive with your cash, this is actually a better way, because it keeps the thing going. Now, I do think the time to manage for the downside is when no one is managing for the downside. So there's a little part of me that just goes, "Oh, we're at that stage of the cycle, and, you know, we remember that stage of the cycle in 99, 2000." And, you know, I want to say again, history doesn't repeat. It does rhyme, but it doesn't repeat. These are different companies, different times. But it is interesting. We've reached a point where the number of good customers who can pay cash and have a big balance sheet is tapping out. So you got to find more customers

• 44:59Speaker 00

  to keep the growth going. And to do that, you got to subsidize them.

• 45:02Harry Stebbings?

  Speaking of like, dependence on customers, customers having the money, well, one of the biggest customers for Nvidia is Anthropic. And Anthropic opens talks with Samsung to build its own AI chip. That was on Thursday last week. And then today, DeepSeek have announced that they are starting to build their own chips. Is this the natural progression of an ever-maturating industry? Will everyone build their own chips? How do we think about this?

• 45:27Speaker 00

  I, last week, said I thought it was mad. And I actually saw the comment from Anjay Mehta, who I think is just super smart. He responded to your trend, and his comment was, "There's two arguments in favor of it, that I didn't internalize last week, when I said, 'I think it's crazy for OpenAI to be building their chips.'" And the two arguments were, one, Anjay's comment, which was, some version of, "You got to own the compute. If you don't own the compute, you're screwed." A little like the crypto, if you don't own the keys, you don't own the crypto asset. So he was very much viscerally, "You got to extend the whole way down." And I just think he's been so smart about Anthropic in 21, he's been so smart about the need for compute. Now, that made me pause and think, "Am I wrong?" And then the second thing, kind of more technical, is if you really own silicon, you can optimize

• 46:10Speaker 00

  the silicon for your model, and probably get significantly more efficient than you might do buying a general-purpose computing platform from Nvidia and adopting it to your specific model. So there are two arguments that I didn't have in my head, literally a week ago, in favor of this thing. But I will admit, I still find myself going, "If you're at the app layer, and that's where your value is, and then you have the model, and then you have the hosting provider, and then you have the chip, just needing to do that amount of vertical integration just feels weird. I don't get it, but I could, may not be understanding the big picture," is my more tempered approach than last week.

• 46:46Speaker 01

  The only thing that makes zero sense to me is the argument that, "Hey, OpenAI, we need to build our own, our own chips, because we have very specialized needs that Nvidia can't meet." I have a little bit of experience in the semiconductor industry. If you're driving that much volume to them, and you need a special version of a chip, they'll build it for you. Like, this is not true. Like, okay, fry me in the comments or whatever. I mean, my, my experience is a little dated. For this amount of dollars, in my limited experience in the semiconductor industry, they'll do your own tape-out, they'll build your own. It's so much money. 80%, 50%, whatever the revenue. If OpenAI needs a different chip, and it's really that simple, you're going to get it. This is just responding to believing that the margins are so high in Nvidia to survive, we have to recapture

• 47:30Speaker 01

  that margin. I just think the idea that it's customized for us is just soft language, because everyone's kind of dancing around being Zuck-esque aggro here, right? Everyone on either side is maintaining relationships. But it makes no sense, in my experience. It just makes no sense.

• 47:43Harry Stebbings?

  Kling raises $2.8 billion at an $18 billion valuation. It's the biggest AI video business in the world. It's doing $500 million in Q1 ARR-wise. It's clearly going to go public on the Hong Kong Stock Exchange soon. Interesting in the context of OpenAI shutting down Sora.

• 48:01Speaker 01

  I think there's two interesting things, right? One is, if Kling can pull this off, why the hell couldn't Sora pull it off, right? Why couldn't you build the more costly? I've used all these models, right, inside of Higgs Field, right? We could talk about it. The second thing is, it's just more interesting that I wondered. So, Kling, you said 18 billion? That's what they're doing it at? At 500 million? Now, Higgs Field, where Harry and I are both investors, I was one of the first 10 users or customers. Higgs Field just announced, they're at 500 million in revenue, actually doing 2 million a day now, just in credit card billions outside of the enterprise, okay? So however we define ARR, in today's world, 600, 700, whatever, 500, 600 million revenue. Kling is just one of the models they use, but it is important to their product. And they're allegedly raising it 5 billion. So

• 48:41Speaker 01

  one question that asked, I sort of thought is, is there a Chinese valuation bubble potentially in AI? Like, there have been in prior rounds. It's a different market, right? And that just creates different dynamics for capital raising, right, for startup foundation evaluations, AI valuations are, and I don't know this to be true, are going to be meaningfully higher in China than US. By its very nature, it changes how the game is played, evaluations are higher, right? Because you've got one at 500 million doing AI video models, 18 billion, one, a partial layer on top of it, that's, that's cash flow positive at 5 billion. Is that a 3X arbitrage? I don't know.

• 49:17Harry Stebbings?

  Jason, with the greatest of respects, you've got DeepSeek raising at 50 billion, a gross discount compared to any Western alternatives, and you've got ByteDance.

• 49:25Speaker 01

  It's a counterargument.

• 49:26Harry Stebbings?

  ByteDance at 500.

• 49:27Speaker 01

  I didn't get the 18 billion. It's a question more than a banging my fist on the table, right? The meta-learning, I just didn't know that video would be this big, this type of generation, right? You know that it's big on the consumption side. We just sit doom scrolling all day, right? All of us, right? But I, it wasn't clear to me when, a year and a half ago, when these, when the outputs were pretty crappy, just like a lot of, it wasn't clear to me that the demand would be so insane. But now that people are actually beginning to build films on these, on these platforms, the amount of video you can consume, it's, it's, it's, the amount of video you can consume is infinite, right? So maybe Sora should have figured it out, because it was pretty good. When I would run all four together, Kling, Sora, Vio, and I forget the other one, the other big Chinese one, because you

• 50:12Speaker 01

  can run them all on Higgs Field, you can just run them all on videos, it's pretty, Sora, I mean, it's kind of a, I think everyone thought it was kind of a bummer they shut it down, right? They just couldn't make it cost-effective. You know, a slightly inferior product, maybe, maybe that's what the market wanted, right? Kling is still pretty cool.

• 50:27Speaker 00

  Yes, I also think there's much less freebies on Kling. They're very quick to charge. I mean, I think that, from recollection, it's so funny, how quick do we forget? I can't remember how much Sora gave for free, but look.

• 50:37Speaker 01

  Too much, probably, right?

• 50:38Speaker 00

  Exactly. Because the point is, if you're OpenAI, your highest and best, you have another use for that compute, that's enterprise-centric, where you can make real money. So you're probably at the margin cutoff, Sora. On a standalone basis, if you were charging, you're right. So that's one comment. I can see, if I have a finite number of GPUs, and I'm falling behind on coding, there's more money in coding than consumer video. Separate comment, if all I have is a consumer video business, and I can validate with a charging model that, you know, allows me to make money, then that's great. And I saw an estimate, it's what, Jason, for kind of a 30-second video generation, it's about a buck 30 to $2 in GPU generation costs. It's kind of a rough, very rough estimate. So, provided you can get some kind of money from it, there's a business there. Different business than

• 51:23Speaker 00

  enterprise coding, where those GPUs from OpenAI presumably ended up. But nonetheless, you're right, Kling has proven that there is a business here, and people will pay for it.

• 51:31Speaker 01

  But you're right. I mean, 500 million to OpenAI or Anthropic today is nothing. Not only did you lose your capacity, to Rory's point, which was the biggest issue, right? It's just not, it's, and not only was it under-automized, even if they were able to automatize it at the Kling or better level, it's, it's a distraction. It's below the materiality line, and a lot of, a lot of capacity is. But for Kling, it's not a distraction.

• 51:49Speaker 00

  Exactly. It's a wonderful business.

• 51:51Speaker 01

  This is why we get to invest in startups, because distractions can become very large businesses.

• 51:55Speaker 00

  Yeah.

• 51:56Speaker 01

  That might be a lot of great investments, right? That's just a distraction for, for us.

• 52:02Harry Stebbings?

  The most commercially successful AI video product on earth is Chinese. The top six models as of today on OpenRuder are Chinese. Do you think China is running away with the model there?

• 52:13Speaker 00

  First of all, the top social network sharing short video was obviously Chinese. It was TikTok and it got adopted here. They just, you know, competed in the same rough market as InstaReels and all the others and what? So that's kind of on the pre-gen AI video business. On the gen AI video business, you're right. Kling is the top model, Sora decided they got better things to do, right? We just had that discussion. On the big market, which is obviously, you know, LLM for compute, LLM for coding. Look, the US is clearly running away from it in terms of frontier models. And the Chinese Counter-Strike has been open source models, yeah, distilled in some part. Reasonable people might differ how much off OpenAI and Anthropic.

• 52:53Speaker 00

  But yeah, they are clearly numbers one to six in terms of the non-close source financial models. So that market, they're running away with it.

• 53:01Speaker 01

  You know, just one thought I didn't fully appreciate. I just got back from two weeks in China in Hong Kong, which I didn't appreciate being till I was on the other side of the great firewall. Is that now I think Jensen was right about about this because when you're in China, OpenAI and Claude will not, Anthropic will not serve you. It's not just a question of being blocked. You cannot access it. Now you can get around it, right? There are ways, but they try to block VPN access. So you kind of got to side by tokens or side by things. What do you expect China is going to do? The second largest economy in the world? Of course, they're going to build things that are as competitive or better than we are because you can't even use Claude in China. If for some reason we don't like what's happening in China, we created it by not allowing China. And Jensen's point was you better let the GPUs go over there, right? Or they're going to just do it themselves.

• 53:44Speaker 01

  And, you know, literally the fact that even in Hong Kong, which is much more open than China, I just couldn't use ChatGPT or Claude or the APIs. What do you expect? To Rory's point, probably videos, they're going to go with it because they have so much strength there already, so much domain expertise. But of course, they're going to build it all. You can't even use ours. And of course, they're going to be pretty good. There's some pretty damn good engineers in China. They've been working on the internet and software and AI for a while. And, you know, this is a, if we don't like what's happening in China, I, having just gotten back from two weeks there, what do you expect when you can't access the leaders, when you simply can't access them? They're going to build something as good or better if they can, and they can't. They can come close. At least we know they can come close.

• 54:23Speaker 00

  Jason, you're right, and it's well expressed. And the only nuance I'd say would be Jensen was right that this is the consequences of us not allowing access to a front, you know, kind of state of the art chips and then state of the art frontier models. Now, you can decide as a country, going back to the government thing where we started, that that's an acceptable price to pay because you believe the national security issues are significant enough that you want to do that. And I'm deliberately saying that. I'm not saying they are, and I'm not frankly equipped to assess that. But you're right, actions have consequences. And it goes back to when we talked about that famous Jensen podcast with Dorkish, where they were kind of getting, talking past each other. If you believe there's a national security concern on these models and these chips, and it's legitimate and real, and you've made that decision soberly as a government and responsibly,

• 55:07Speaker 00

  then you can choose to block access to these technologies. But you're right, you can't expect the other side to say, okay, you caught us, we give up. We won't have this stuff. We'll build our own. And there will be a commercial consequence to that. And that's what you're seeing here. You're right, Jason. They didn't say, okay, we can't have cool LLMs from Silicon Valley, we'll just give up. They said, no, we'll build our own, thank you very much. And they've done a pretty good job. And now it's interesting, Harry, you just, I haven't even seen this, so I hate talking about things I haven't seen. But Harry mentioned just as we came on the set here that there's information out from China that they're starting to say, the Chinese government is saying maybe we'll deny access to overseas users to some of the Chinese open source models, which is kind of hilarious in one respect because we're nervous about using them because we think using them is dangerous.

• 55:52Speaker 00

  And they're worried about letting us use them because they think letting us using them is dangerous, which is kind of just a zany thing because both of those things arguably can't be true at the same time. But that's where we are. And it would be very significant in terms of competition, the competitive environment, if Chinese open source models were removed as an alternative going forward. I think that would be obviously pretty excellent if you are a US frontier model. See prior conversation, Jason, you might be right. They might be getting something for their 5%. Or B, you're a US open source model provider like Reflection or Poolside. This would be best thing that could happen. We'll see.

• 56:26Harry Stebbings?

  I just see more and more moving towards open. Did you see today, the co-founder of DoorDash announced that they were moving?

• 56:32Speaker 00

  Towards open. Yeah, I mean, everyone's trying to do that because of the expense.

• 56:36Speaker 01

  If there wasn't a more cost effective, we wouldn't be building chips either. It's the same thing, right? The margins, it's just the, we're now graduated from the experimentation phase, right? And now that, you know, we have to deal with managing costs. That's what CIOs and companies do weirdly, but reasonably well, net net, right? And it's just going to, it's just going to accelerate. But it's, you know, it's funny, I'm trying to build this project right now and launch it. And it's got a sufficiently complex algorithm that I can't understand it. I'm not smart enough, right? Folks can fry me in the comments. I just don't, it's an application, I cannot fully understand how it works. And I'm using the mix of the models in Replit, which it's Sonnet plus open source. Okay, is basically what I'm using. You can use Fable and Opus, but I'm basically using it, can't quite get it right.

• 57:19Speaker 01

  So I've got, I'm passing it to Fable and Opus. And then I'm running both side by side, Claude running Fable and Opus with Replit. And my point is after spending about 10 hours in Replit, I couldn't solve this big algo problem. I solved in about 20 minutes in Fable and Opus, right? So there's going to be, even for me, there's going to be this grade of problems where I lost so much time and money using the N minus one step down model. I lost a day, endless cycles, forget about the money, 500 bucks, whatever. I lost a day, I got stuff to do. I got portfolio companies to rescue with my grand insights. I got, I got stuff to do. And by using Fable plus Opus, and I'm not sure which combination really did it. I was able to get to the heart of the problem and algorithm I could not understand. So that's why I'm just saying, I don't know how this all plays out over the coming years.

• 58:03Speaker 01

  But as the problems we solve get bigger and more complicated, I'm not sure I want to waste a day on a mediocre answer that doesn't work.

• 58:09Speaker 00

  I think you're right, Jason. And I, I see Jesse Zhang, the Decagon founder, did a nice post on that just now. It was good. Basically, he said, look, when you're trying new stuff or you don't know the problem or you can't bound the problem, you're going to use frontier models because they're smart and they'll figure out the, you know, the unknown unknowns. The more it becomes a commoditized answer where you know the answer you want to give, the more you're going to push it to open source, right? It was a good paper, totally made sense. And his comment was, we're at the explosions of usage now. So you're seeing a lot of, you know, frontier model usage. It may well be in two years' time that, you know, you didn't need to pay that tax. But right now, if, if the only way to solve the problem is with the frontier model and the problem is what's solving, you're going to pay for it. Which is why the open router, you know, all the tokens with, you know, with open source is a little misleading

• 58:53Speaker 00

  because all the tokens can be in one place, but all the dollars can be in the other place. To your point, Jason, you know, at the end of the day, you're glad you spent that $1,000 to give me the answer in Fable. I don't want to be dicking around.

• 59:03Speaker 01

  It was actually cheaper because I needed 10 minutes.

• 59:05Speaker 00

  Exactly.

• 59:06Speaker 01

  It wasn't just more expensive, it was cheaper. It's soft and hard costs. Instead of eight hours and 500 bucks, it was 20 minutes and actually zero because I get it in my $200 max account, right? So it's free. It's subsidized, but.

• 59:17Speaker 00

  It's no more than any advice business. There's a reason sometimes you go to the nurse practitioner and then sometimes you go to the heart specialist.

• 59:23Speaker 01

  And we may end up blowing it. Listen, we need help and there's, there's vendors that do this, right? That are on fire. But we, we're going to need help making sure that when we use cheaper models that we're actually, it's actually worth it. And I think even in, I'm bored of talking about the subject, but you brought up Decagon. If you really go deep on a lot of the data today and a lot of folks doing next generation AI CX, there is some plateauing. And the reason there is some plateauing is this, some of this pressure to have reasonable costs per resolution, okay? We're kind of standardizing this industry around like 50 cents per resolution, okay? In CX, right? That's sort of the, the cost, right? It's gone down from a dollar to, so how, assuming you're not just burning venture dollars. If you can charge 50 cents for resolution, what, what do your LM costs have to be? 25 cents, maybe less, right?

• 1:00:08Speaker 01

  So everyone going to, I didn't read the Decagon point, but I'm sure they're doing it. So they're all rushing to say, okay, I got to push this, right? And Fin, and Fin just got bought for $3.6 billion, right? I got to push the open source thing. I've seen a lot of data, I've seen a lot of plateauing, and that may push people back to a limited, more high end models so that you can get to the next level, so that you can get to 95% true resolution of complex problems. Instead of no matter what the internet says, 40% resolution of sort of not that hard problems to solve, right? So, so we'll see, we'll see how, whether this open source stuff over the next six, now that we've all internalized it, we may not get all the, we may not get all the benefits out of it that everyone thinks we are.

• 1:00:46Speaker 00

  Two comments on that, though. One is yes, but I think the point that Decagon CEO was making is it's not just a pricing, it's also a latency, it's a response time. There's a bunch of reasons. But I think the meta point is this, I'm going to make on the CX space. Everything you said is correct. What I love about it is if you think about the chasm concept, this is a market that's the other side, the positive side of the chasm. Because implicit in everything you said, Jason, was a recognition that there is an ROI there and the shit works. One of the reasons I like this space is a lot of these other apps companies are wrestling with, how do I price per outcome? This market has already gotten to the point where the custom, not, it's not important to vendors, that the customer says, I get it. I can increase my resolution rate from 30% to 65.

• 1:01:29Speaker 00

  I get it, I spent three bucks an email to answer a query. So a buck or even 50 cents on customer support is well worth it. In other words, it's moving from, I mean, today, it's moving from the experimental side. You know, there's a lot of talk about 95%, whatever bullshit, you know, AI ROI is not there. This is a category where everyone can articulate the 30% where it is there. And then to your point, they can go, oh, the next 10% is going to cost more. That's a high class problem. Maybe what you're saying is you go from 30% resolution to 65% resolution at a buck a pop. And maybe from 65 to 75, it's two bucks a pop. You'll still happily pay it if you're the customer.

• 1:02:05Speaker 01

  Probably, it's just, it's just going to be another, another stage in the evolution of AI, right? Where you can either say, listen, I got 20 cents of that 50 cents to provide the best resolution I can, right? And that's, that's a great answer today. But as your competition gets smarter about this and blows by you, it's going to create an amount of competitive pressure that, it'll just be interesting because it will all have to get much better at this stuff.

• 1:02:25Harry Stebbings?

  Does it ultimately provide the value? Microsoft launches $2.5 billion and 6,000 people to embed engineers inside enterprise clients, targeting the MIT finding that 95% of enterprise AI pilots deliver no measurable P and L impact. What a positive finding that was. Amazon made the same move two days earlier. Is this a continuation of the shift from a model to a services ecosystem? How did we think about this?

• 1:02:54Speaker 01

  I think it's going to fail.

• 1:02:55Speaker 00

  Ooh, good take.

• 1:02:56Speaker 01

  I'll tell you why, because we have a lot of FDEs at SaaS, because we have so many agents, right? We have like the best FDE at Salesforce, the best FDE at all these folks, not the best, but we have some of the best at all these companies. And they're effing great, literally. The FDEs we work with at these leaders, okay, are better than anyone I've ever worked at in customer success or support, my entire crew, with maybe one or two exceptions. They are so good, the best FDEs at this company, okay? And then one leader, not Salesforce, another leader, our FDE went on paternity leave for three months and the new one told us they couldn't fix our bug for three months until the first guy got back. This was a leader. So my point is, I think this is going to fail because I don't think there is enough talent to do what we want to do in the enterprise. The idea makes sense to, on a spreadsheet, it makes sense.

• 1:03:38Speaker 01

  Sadhu is smarter than me, but today, my experience is it's going to fail with all the companies we work with because there's not enough depth to do it. Literally, this is a public company said, you're going to have to wait three weeks to fix a fact that your AI is still talking about Saster 2026, which already happened. It happened in May. It's now July. We are going to have to wait until August to fix that bug until our better FDE comes back from paternity leave. Think about, this is not someone, and this is not some of those hired last week. How the hell are you going to scale this? Wait three months to fix the fact that you're talking about an event that already occurred 60 days ago? That's an F, isn't it? I'm going to throw 10,000 people that were terrible at customer success into solving massive enterprise problems? Good luck with that one.

• 1:04:18Speaker 00

  I disagree. I think it will work in a limited but interesting sense. I mean, stepping back, I don't buy, for the record, that 95% MITs, there's a lot of kind of.

• 1:04:28Speaker 01

  You don't buy the story, I literally just told this public company leader, we were told it would take three months.

• 1:04:31Speaker 00

  I totally buy that story. I'm saying the 95%. I'm saying, I don't think 95% of these things fail, but I do buy your story, Jason, which is even a smart company like you, and you're way more technically adept than 90% of corporate America, needs assistance to make this shit work. And it's obviously very bad that they couldn't answer that in three weeks, but the solution is not, don't get that support. The solution is someone has to build a business whereby they have, shock horror, two people capable of answering your questions. And the big zoom out question, because I actually didn't see this until I thought about it, but I'm now clear on it, is who's going to meet that need? If corporate America is going to adopt all this stuff, and they're who they are, they're an oil and gas company, they're a banking company, and then on the other side of the table, you have Anthropic and OpenAI, who are product companies to their core, you're

• 1:05:15Speaker 00

  going to need something in the middle who are services companies to help them adopt. And what's interesting that's happening to Microsoft, and oh my God, every technology company either goes bust or lives long enough to become next generation's IBM. IBM was the enabler to the PC and to some extent the cloud revolution, helping corporate America. When you don't have an amazing product yourself, but you do have large enterprise trusted relations, what you do is you sell to those relations the ability to adopt new technology from other people. And to some extent, that's what IBM's been doing for the last 20, 30 years. IBM Global Services has been all about, you know, we don't build e-commerce, we don't build any of these cool things, but we'll help you adopt.

• 1:05:54Speaker 01

  Yeah, and we'll launch your product in 2030, but that doesn't work today.

• 1:05:57Speaker 00

  Jason, to be clear, I'm not saying IBM is amazing, and I'm not saying Microsoft would be amazing at this. I'm saying that, and this is a harsh comment from Microsoft wrapped in a positive one. They used to be the company with the new technology and other people built consulting services to help adopt Microsoft 30 years ago. Now, OpenAI, Anthropic are the companies with the new incredible product, and Microsoft is the more mature company with the enterprise relationships, who is going to build a large services businesses, just like HP did, just like IBM did. If you went back and read those press releases from 20 years ago, you know, HP, your trusted partner in global services, IBM, same thing, it would read exactly like this. And the summary is, Mr. Corporate America, you need to adopt this new technology.

• 1:06:42Speaker 00

  Those dudes in Silicon Valley are pretty scary. You've never met them before, and they talk about crazy shit like the end of the world. We have been selling stuff to you for 20 years. You trust us, we trust you, we're going to make this work. And to your point, Jason, you're right, they might make it work great, but it will be better than the enterprise trying to do it on its own. So summary, I think Microsoft will build a huge services business here if they want to, which also speaks to, it won't be nearly as profitable as selling operating systems.

• 1:07:07Speaker 01

  I actually think they're both right, stepping back from, I think, because literally, we work with the top one or two or three FDEs at so many vendors, and I can tell you the depth, even at the hot, some of the best companies, the depth is not there. It does not go, and these are not old companies. There is no depth to the FDE chart. So I know that these, this is going to fail, but Rory is also right, it is better than doing it yourself. And so, just like a lot of things, how this plays out when it doesn't really work, because the FDEs have no idea how to actually develop this business process change, rather than run the same goddamn Salesforce deployment playbook, it's going to lead to a lot of tears, but it doesn't mean it's still not better than trying yourself, which is often hopeless, right? But I am right that the depth today just doesn't exist.

• 1:07:51Speaker 01

  So a lot of board members and folks not close to it are going to say, let's go do this. A lot of VCs are trying to invest in AI-enabling old businesses, right? And I believe if you could attract the talent, this would be great. I just don't, there's not a couple hundred thousand people that want these jobs that are off-the-chart smart. They just, you're lucky, in some ways, we're back to the early days of B2B software, where you'd have a couple of folks that kind of understood how it all works, and no one else could solve the problems on your tool. We're back, we're back that way with a lot of these agentic products, I think.

• 1:08:21Speaker 00

  Which, what it means, by the way, is for the model companies, the rate of adoption of their technology is to some extent a little bit outside their control, which is why they are doing this services business. The biggest problem when I'm picking Exxon or Bank of America, rolling out Gen AI, is not their ability to buy from Anthropic, it's the ability to do change management and application building in the enterprise. That's going to be solved by large trusted partners who deliver the services and the expertise. And it's going to, for the record, I think, the interesting point on this, circling back to demand, is if Jason is right and the quality isn't there, that means the adoption cycle will be longer. And the biggest single question on all of this is what's the rate of diffusion of this technology? For the last three years, it's been way faster than the diffusion of any other technology in history.

• 1:09:06Speaker 00

  The rate at which, you know, OpenAI, Anthropic got to four and 12 billion respectively, or the other way around, sorry, 12 and 4 billion respectively in GAAP revenue, never before seen. If the next 10x takes three times longer because corporate America can't adopt, that's going to have consequence. And I think it's the big question, how quickly can that spend from Anthropic go from 4.5 billion to 40 billion to 80 billion?

• 1:09:28Speaker 01

  I don't know how much it'll impact the top line, but I definitely think you're right in my experience. It's just this, this type of rollout is going to be slower than folks hope, right? There's just not enough talent to do it. Whether that really stops Anthropic in the aggregate is a different, it's a different question, right?

• 1:09:41Speaker 00

  Nothing stops, slows down. You are, it's not a stop, it's a slowdown. You are, Jason, it's a slowdown. It's a question of how fast.

• 1:09:45Speaker 01

  I'll tell you what, just as an aside, one thing I learned that was really interesting, at our Saster AI Annual this year, we had a CPO panel, we had the CPO of Harvey there, who came from Mupling. You guys might know this, but I learned something, right? Every deployment they do at Harvey has an FDE and a lawyer. Every single deployment has a lawyer, right? And so, to the extent Harvey can bring in, and I'm sure they do, I want to go deeper on this, to the extent they can bring in consulting firms and Microsofts to deploy them and maintain that, that'll work if they're like a three-way team, but it just, it's just interesting, if you have a lawyer and a very experienced technical resource deploying Harvey, which has a high price point, right? You can, you can afford it, that might be what you need to have a successful deployment there. Rolling this out to generic B-tier or C-tier people today may not just be successful, but that clearly works.

• 1:10:28Speaker 01

  It's captain obvious, but I don't think most of the companies we work with deploy a deep subject matter expert and an FDE at the same time together as a team.

• 1:10:35Speaker 00

  It's a good point, and it makes sense, because if you think about it, when all you're buying from the vendor is a database, all you need is a database expert, but when you're buying from the vendor intelligent answers about your own business, and if you're, I'm going back to, if you're running Exxon, you better be damn sure that those answers are grounded in oil and gas facts. And you're right, actually, it's interesting, probably everyone will be some combo of tech expert and domain expert. And that's why these services companies will be tricky to build, to your point.

• 1:11:00Speaker 01

  Yeah, they go in, they learn about how your entire law firm's business process works, and they map it against Harvey, right? That'd be great if these services companies can do it, I just, I'm skeppy, but maybe.

• 1:11:10Speaker 00

  You're naturally skeppy.

• 1:11:11Harry Stebbings?

  Okay, we're going out on a weird one. Ashton Kutcher, one of the most successful investors of the last few years in terms of SPVs and OpenAI, Anthropic, Sound Ventures, obviously his firm, announces he's leaving his own VC firm, and he's going to start a new VC firm with Morgan Bella, previously at Andreessen and then NFX, and now starting her firm with Ashton. It's a notable move in the world of venture, I guess. New firm, one of the biggest AI investors of the last few years. Jason, what did you think?

• 1:11:43Speaker 01

  You know the gossip, I need to know what really happened. I mean, on its surface, it's just crazy to leave your own firm, right? Like this, it's one thing, it's one thing if you're managed out, right? Or something like that. That can't be the case here, right? I mean, this is the guy from That 70s Show, I mean, we need him in the, in the fund, right? Maybe he was managed out, I find that unbelievable, right? Unbelievable, right? To leave it behind like this, it's interesting, right? It's like, in a way, it kind of reminded me of Jack Altman raising a massive amount for a solo GP fund and joining Benchmark. Like, these are counter, these are things that make sense today, but just a couple, almost even when we started this podcast, they wouldn't even make sense. Like, Jack, why, and I love Jack, but why would you raise a half billion dollars and have LPs dying to fund you and go join? Benchmark, right? Because it makes sense in 2026.

• 1:12:28Harry Stebbings?

  And Jason Sound has raised a lot of money.

• 1:12:29Speaker 01

  Yeah, billion dollars. They're in some good names, right? I'm being facetious.

• 1:12:34Speaker 00

  No, no, I mean, yes, they're in some excellent things. And, you know, frankly, we've co-invested with them in some deals they've been wonderful to deal with. I actually think it's simpler than this. I don't think there's a, and I could be wrong, and I'm usually a cynic in venture. But I actually don't think there's a deep, dark story here of bad of, you know, of course, I don't think any of that applies. I think this guy is so successful, like, why do venture firms hang together and paper over the story? Because, you know, the asset is the firm and the name. And even if you hate each other, you want to manage the process well, so you can keep the thing going. Because the firm has a brand and a reference. And therefore, you know, I know many situations where effectively partners look at each other and say, I'm mad at you. You're mad at me, but we're going to hold this thing together.

• 1:13:15Speaker 00

  None of that applies here. He's Ashton Kutcher. He doesn't need, I mean, I knew who Ashton Kutcher before I knew Sound Ventures. If he wants to do something else, it's just cleaner to say, now I'm Ashton Kutcher doing this. I'm doing, I think it's very much seed, pre-seed, deep tech. It's a new thing. I mean, I think very few people are in the position whereby the name is such that they don't have to worry about the firm brand. They just say, I'm a famous person who's, for the record, I'm sure most people, when he started investing, would have had a little sneer. And he's killed it. I've been, I'm a famous person who's now been a brilliant investor and now a famous person doing deep tech seed. So I actually get the impression from the vibe from the folks I've talked to at and near the firm that there's much less of this angst than you think, and just two people wanting to do different things.

• 1:13:57Speaker 00

  Because, look, a lot of the OpenAI and Anthropic's brilliant investments were late-stage, you know, obviously multi-billion dollar pre-moneys. It's just very different than deep tech. So I think the beauty about being a famous, rich person in America is you can pretty much do whatever you want. And if you're TV famous and movie famous, you don't have to worry about your, the firm's brand name. There are very few investors where I know the name of the investor. And it took me months later before I figured out the name of the firm. This is one of the few investors on the planet where it's the investor name. I mean, to this day, if you said to a bunch of people who's on your cap table and Stan was an investor, they'd probably say Ashton Kutcher's on my cap table. So the name doesn't matter.

• 1:14:32Speaker 01

  Yeah, but there's only like six brands in venture anyway. Let's not exaggerate how many brands there are.

• 1:14:37Speaker 00

  And it's not one. And Ashton Kutcher is more famous than all of us. So move on. I'm well to bet there are more, if you check Google Trends, he gets more searches than Sequoia without even blinking. Because 330 million people have some sense of who he is and maybe 3 million know who Sequoia is.

• 1:14:50Speaker 01

  I'm with you. Listen, we can move on. I just, even for me, and I listen, I'm a solo GP who would not deal with any of this crap today. I would, if I had a CFO that was working, if I had investor relations working, if I could stand my partner, if I liked my partners, if I liked coming to work, I would stick, even if I had to get some of them out, I would stick with my entity if I liked all the stuff around it. It's just, not that you can't rebuild everything, right? It's not that there's no, I don't think there's any equity in the brand, but if the engine is working, I'd rather just stay. I'd rather just stay.

• 1:15:20Harry Stebbings?

  Boys, you can choose one more topic. What topic should we discuss?

• 1:15:23Speaker 01

  Well, look, I think you hit a lot of good stuff. The one that maybe we've discussed before, but I still think is a, is a topic that resonates, right? Is the 11 lab, I added this one, the 11 lab secondary at 22 billion, right? I don't think, like, it's a high valuation, maybe that's interesting, but I think the growth in today's world, it's consistent with other rounds. Or I don't think the price is actually that interesting. I do think, even though it's not a new topic, the one I said is interesting. It's like, as an employee today, why would you join something that you don't believe will have secondary options? I really think this is a big issue. Like, one issue is why would I join you rather than Anthropic, right? Where I can make so much money or OpenAI. But there's plenty of reasons to not join Anthropic and OpenAI. We could talk about that, right? They're pretty big companies. Your role's going to be very narrow, right?

• 1:16:05Speaker 01

  It may not be the job you want. 11 Labs probably is more agile than Anthropic or OpenAI, right? Your job is probably a little bit more interesting in some, for some folks. But Jesus, if I was a hyper-talented employee, I would not want to go somewhere without liquidity. It just doesn't seem worth it today. It's just question, do you have to create this as founders? What do you do if you're close to this level? Because the liquidity is thin. There's only so many 11 Labs that can pull off a tender offer at 22 billion, right? They're there and then, but if you're not quite at that level, they go away.

• 1:16:33Harry Stebbings?

  You see Clay do, I know, I know it's much smaller. It's five billion, but they did a tender offer at five.

• 1:16:39Speaker 01

  Yeah, that's the minimum, like, I'm not saying, there's some line where you can pull it off. But maybe, and I'm not saying this literally with Clay, but sometimes with something like Clay, even next year, you might not be able to pull it off, right? What if it's a little bit soft, right? There's only a handful of companies that can always pull it off like Clockwork, right? There's only so many Databricks and, and OpenAIs, but that's, why would I join anything sub-Clay? Because even if the nominal valuation's three instead of five or two, if there's no regular liquidity program, why, why would I join it? Why would I join the startup? Life's too short, man.

• 1:17:08Speaker 00

  No, I disagree because it's incorrect framing, Jason. I don't, because the point is if you join something that's already doing tender offers, then you'll get an equity grant reflective of the fact that we're already doing tender offers, so it will be slower. If you join something that's never does a tender offer ever, then you, then you're lost. The whole trick for employees, just like it is for VCs, is to join something that isn't doing a tender offer today, get a healthy grant and join a company that within a year or two, when you vested 50, 60% of your thing, starts doing tender offers. So I'm just, it's a slight nuance. You said, don't join anything that isn't doing a tender offer.

• 1:17:44Speaker 01

  I missed, but I just misspoke. I meant to make the exact point you're making. Why would you join anything that you don't have high certainty, not just they're going to be unicorn because it's not good enough, that they're going to have tender offers, right, in the next 24 months?

• 1:17:56Harry Stebbings?

  How can you know, for people listening, how can you know if something's going to happen?

• 1:18:00Speaker 00

  I mean, two years is hard, but I think in the end, look, it doesn't actually change things all that much. It's the same as whenever you join a startup. You got to join startups that have the potential for big upside. 10, 20 years ago, it would be go public. Now that window takes 12 years in some cases. So you got to have something else and tender offers are the proxy for public. Anyone who joins a startup does it for two reasons, and I think you have to start with mission. Second one definitely is chance of a payday. I tell everyone, and it's funny, I say this to them, I tell everyone that I operate on the operational side, hey, you're a single-shot VC. You got to pick only one deal and get it right. And I always say to them, look, when you come to choose a couple of companies and if you want any random VC input, feel free to ring me and, you know,

• 1:18:42Speaker 00

  maybe it can give you perspective. Very few people do. It's just funny that way, right? I think actually, one of the things I often look at is how operators make decisions. And there's a lot of things that get fed into it. And maybe there are perfectly good other reasons you like the people you're working with, the market, it has a mission. But from a pure stock picking perspective, Jason is right. The mission, the job at hand is to pick a company that within one to three years will be a unicorn, will be tender-worthy. And you make out like a bandit. It's a hard thing to do. We get 20 shots and, I mean, I feel guilty almost. We get 20 shots and go and they get one.

• 1:19:16Speaker 01

  Well, if you're leaving every year, you might get 20, depending.

• 1:19:19Speaker 00

  That's true.

• 1:19:20Speaker 01

  I'm not quite sure. It's, it's just, they're sequential, employees are sequential venture capitalists, right? They're just sequential rather than parallel.

• 1:19:27Harry Stebbings?

  Down those vesting schedules, bugger.

• 1:19:29Speaker 01

  Well, now that there, now that there aren't even vesting schedules at OpenAI and Anthropic, those issues have been solved, right? A lot of startups don't have vesting schedules for top employees, right? It doesn't mean you vest into all your stock, right? Sorry, they don't have cliffs. The vesting, you don't have a cliff, right? That problem's been solved by eliminating cliffs, right?

• 1:19:44Harry Stebbings?

  Boys, this has been fantastic. I've so enjoyed this. It's so nice to be back in the studio. I was not enjoying the holiday setup. I like to be like in the studio for this, but you've been awesome. So thank you so much for joining me. And Rory, we've got to let Jason go back and deliver insight to his portfolio.

• 1:19:58Speaker 01

  Yeah, they need that profound, those profound insights on, you know.

• 1:20:02Speaker 00

  That they can't get on X.

• 1:20:03Speaker 01

  Have you looked at, have you guys looked at open source? Have you thought about managing your token spend a little bit better?

• 1:20:10Harry Stebbings?

  Can we increase sales?

• 1:20:11Speaker 00

  I've long since internalized and tell them, I see, I'm actually not here to give you insights. I'm simply here that if we're driving the thing off the cliff, I scream stop. That's probably your only value add. Other than that, you guys are going to figure it out. That's the way it works.

• 1:20:27Harry Stebbings?

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• 1:21:12Harry Stebbings?

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• 1:21:52Harry Stebbings?

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