20VC: a16z Raises $10BN in New Funds | Mercor Raises $350M at a $10BN Valuation | OpenAI Restructuring: Who Wins and Who Loses | Why IRR is a BS Metric and Three Ways to Win in VC Today

AGENDA: 05:17 OpenAI's Restructuring: Winners and Losers 17:17 Andreessen Horowitz's Raise $10BN in New Funds 26:38 Mercor Raises $350M at a $10BN Valuation 43:08 Spray and Pray: Does it Work: Data Breakdown 47:04 The Role of Option Checks Venture Capital 48:36 The Three Ways to Win in VC Today 54:26 Why IRR is a BS Metric and What Matters More 01:08:47 Amazon's Struggles: How Do They Return to Greatness in AI

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

• 0:00Speaker 00

  I just can't think of a retail IPO that would be more popular than OpenAI. To me, going from 23 billion to 30 billion, I don't even consider it an up round. It's not enough.

• 0:10Speaker 01

  If they really have gone from 100 to 150 in less than six months, then I can make this conversation really quick. There's no way they should sell. Andreessen Horowitz is the red army of the venture industry. What you're basically saying is, worry, you can win a deal, not because I've grafted for 30 years and returned, frankly, billions of dollars to my investors, but because I'm on a fucking pod. If that sentence is true, if that sentence isn't true, then 100% Mark Andreessen was right all along.

• 0:36Speaker 00

  I think Bezos would lay off half his company in a fortnight if it was the right thing. I don't think he even cares.

• 0:41Harry Stebbings?

  Andreessen Horowitz is the red army of the venture industry. I think that has to be the quote of this series. This is my favorite show of the week. How can you not listen to that intro and just be like, I want to listen to this show? This episode was so much fun to do. We cover everything from OpenAI's structuring to Synthesia rejecting the round, to Ramp's new potential round, to many, many more. This was so much fun to do. I want to hear your feedback on the show, [email protected]. But before we dive into the show today, now, most people who get scammed never talk about it. And if it can happen to tech savvy professionals, CEOs and investors, it can happen to anyone. But the problem isn't just losing money, it's that today's scams,

• 1:27Harry Stebbings?

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• 2:10Harry Stebbings?

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• 2:55Harry Stebbings?

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• 3:37Harry Stebbings?

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• 4:20Harry Stebbings?

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• 5:00Speaker 00

  It's at least in the top two each week, isn't it? At a minimum, it's gotta be in the top two.

• 5:03Harry Stebbings?

  I would say it's a top-two show for sure.

• 5:06Speaker 00

  Always, right?

• 5:06Harry Stebbings?

  Yeah, always a top-two. Does that, does that make you feel special now? Yeah.

• 5:10Speaker 00

  They say the silver medal is the toughest one of the Olympics, but I don't know about Rory, I'm good with it here. I'm good with it. I'll take a silver.

• 5:16Harry Stebbings?

  Okay, so we were talking about where we were gonna start, Rory, before this, and you were like, I think we should start with OpenAI, given the news today. And so, learning from the feedback that we get, I would love to start with you just explaining a little bit about the news that's just come out about OpenAI and their structure, and we can start there.

• 5:33Speaker 01

  Sure. I mean, the big news today is OpenAI cut their deal. They cut their deal with Microsoft, and they cut their deal with the attorneys general, the plural of attorney general, of Delaware and California, which means they have been able to implement their restructuring, which means they can raise their capital, which means they are out of their messy, complex trap they had put themselves in all those years ago in terms of their structure, and they've gotten it done. That's the big-picture news. There's lots of information one level down about who won, who lost, who got what economics, but that's where we're at. It's still got some opposition. Elon can still litigate and say, I don't think you should do that because I gave this money to a charity, but possession is nine-tenths of the law. And once the attorneys general have allowed it

• 6:16Speaker 01

  and they've actually converted, it's a lot harder to unwind. So as of now, as of this morning, as I understand it, there is the charity, the charitable foundation, which is now one of the most well-capitalized charitable foundations on the planet. Underneath that... There is the company itself, OpenAI, which is a, it's a P V C. I can never remember the initials. Basically, a for-profit company, but also has to take into account more than just shareholder maximization. So that's the entity that's created, and that's the entity into which you can invest. There are other companies like that. I think Patagonia, for example, has the same status. This is not a crazy thing now. This is not some weird, like, the old OpenAI used to have this disclosure. You should regard this as a donation. It can all go to zero.

• 6:58Speaker 01

  This is a real honest-to-goodness American corporation, a different kind of American corporation, but they can go public with this. They've gotten out of the straitjacket, and it's big news. It means, you know, what IPO is one enormous step closer. Not saying they have to, not saying they will, but big news today.

• 7:15Speaker 00

  I'll just throw one thing that jumped out at me on the deal. The overall structure, Microsoft owning 27%, the employees owning 20-something percent, the nonprofit owning 20-something percent, those are all roughly what we all expected, right? There's, there's some nuances on how A G I worked there, a little interesting. But the craziest thing in this deal, because it's unprecedented, I think, in our lifetimes, is OpenAI said that Sam Altman will still have no shares, no shares in the combined entity. At the same time, we've got Elon Musk arguing he deserves a trillion-dollar pay package so the robots don't kill us, which I, I think he deserves, okay? I think his V C's will say he deserves it, okay? There is something unimaginable to 99, to almost any other in the world saying he should have a trillion-dollar pay package, but the scale has to be relevant to the, to the outputs, right?

• 7:59Speaker 00

  I don't believe it will ensure the robots don't kill us. It's a little crazy. But on the other hand, Elon wants a trillion, and everyone was saying, show Sam the money when he was fired as CEO over a very long weekend, right? The Night of Knives or whatever was fired, fired by this crazy nonprofit. Everyone had to revolt to bring him back. Fast forward to today, that same nonprofit's in charge still. There's been turnover, but it's still sort of charged, and he has no shares. We could hypothesize why. He's pretty transparent. I actually think it gives him, in some ways, more power as well as less power. You can't assail the man for capitalism when his other billion-dollar entities are the ones that let him finish off the McLaren collection, but we've never seen someone own nothing.

• 8:40Speaker 01

  It's crazy.

• 8:41Harry Stebbings?

  If we just drill down on winners and losers from this structure and change, who are the winners and losers?

• 8:47Speaker 01

  I think the lesson here is a lesson that every attorney knows, which is you often hear this expression with litigators, what's the case worth? In other words, they look at the filings on both sides and experienced litigators look and go, okay, we got these three points. They got those five points. In the end, we're going to win on the three, they're going to win on the five, this is the way it's going to come out. And then there's a whole lot of human drama because humans are like that and we yell and we scream and we have juries and all. And then typically things settle out for what they're worth. This settled out for where the cases were. Let me tell you what I mean by that, right? It's when you look at the thing, not only no surprise, but you know, no surprise for a long time. Microsoft had a fair amount of leverage. They used it, they got a great deal. They put in thirteen billion dollars. They got a ten X on their money as of today.

• 9:30Speaker 01

  They got a lot of AI leverage. They got some going forward AI property rights. They got a significant going forward contract for Azure business if they want us, which we can come back to. Overall, they didn't push it to the point of breaking, but they got pretty much what they were going to, and they still have some rough share, which surprised me. So they got a great deal. Microsoft corporate development and lawyers deserve a gold star from their shareholders in a way that frankly Microsoft R and D does not. And the proof of this is this morning, Microsoft's stock is up nicely. They're like, thank you for the hundred billion dollars we're up. There's three big winners. The second big winner is the charitable foundation. There are some people, again, even today griping and saying, we did this all for charity. It feels wrong that there's any capitalists involved.

• 10:14Speaker 01

  And I get that, especially if I'd given the seed money, but stepping back, somehow in the midst of this, we've ended up funding a wonderful one hundred and thirty five billion dollar charitable foundation. That's a significant contribution to whatever good they hopefully will do with that money. And they already made some announcements about AI for medicine. So there's a hundred and thirty five billion dollars out there that's not going into someone's pockets to, you know, buy yachts, boats and football teams. It's actually going to try and solve world's problems. Now, whether they can or not TBD, but yay. Because I would have laughed in two thousand and sixteen, but the people who started OpenAI saying, we want to do good for the world, have at a big picture level succeeded. They built something, what, a hundred and thirty billion dollars, which is a foundation that they can be part of. So it's a win for them.

• 10:58Speaker 01

  Obviously, the employees own a third and now it can get liquid, yay them. And then, you know, the remaining, the investors can kind of exhale, get a sigh of relief. SoftBank can put in their 22 billion. And the investors as a group, I mean, SoftBank will own about 10% and everyone else will own low, low single digits. And everyone won and everyone got roughly what the leverage would make them get. And then the final winner, I just got to say, and I notice a lot, but Brett Taylor just wins the best board chairman of the year award again, for the second time in the last five years. He totally won at this board chairman of Twitter, where he jammed that down Elon's throat for $44 billion despite his opposition. And he won here today because he unraveled the mess and set it all up for a win. So there's no losers?

• 11:43Speaker 01

  Well, the losers would be the Elon feels he didn't want any of this to happen. So his miffed. And the people who think, oh my God, it should all have stayed not for profit. They, they, they feel they're losing. There's a lot of that Twitterverse comments today. But pragmatically speaking, I mean, Microsoft put 13, 14 billion dollars in here and they've made it 10x, which is a good return, but we'll talk about returns. It's not like it's rapacious relative to the risk they took. No one else was writing OpenAI a billion dollar check in 2019. Microsoft did and they got their return.

• 12:15Speaker 00

  And the IP for a, for an extended period.

• 12:17Speaker 01

  Absolutely. No, sorry. Yeah. I don't think anyone got much more than they deserved for the risks they took and the work they did.

• 12:24Speaker 00

  So I can tell my LPs that the little 6% stake deal I'm doing today is okay because here's look at OpenAI, I don't need to get double digits. Point, point to this one, don't, don't beat me up on the double digits.

• 12:34Speaker 01

  Totally. No, exactly. And you're, you're right, Jason, it just shows rules of thumb are made to be broken. 90% of the time, your ownership target is a really meaningful metric and it should run your business on it. And, you know, 10%, 1% of the time, who the hell cares? 1% of the biggest company on the planet is $5 billion.

• 12:52Speaker 00

  The one micro thought I just thought was all the circular financing, who, who Nvidia giving them money, AMD giving them 10% of the company, Oracle raising unprecedented amount of debt. So what I mean is I don't know how much equity OpenAI needs, but it seems to me if they're coming up on being the first trillion dollar startup and more. If they could IPO at 2 trillion, which is crazy by any historic, so is a CEO with no stock, maybe they could raise another 200 billion, right? I mean, at least in theory, that's a lot of capital to access. But my point is, this unlocks maybe four times more equity for them, potentially, if the public markets are different than the private because of the potential valuation they could IPO. They may need an extra 200 billion to go the distance.

• 13:36Speaker 01

  I think that's an excellent point, Jason. And you're exactly, it means that there's one more set of winners here. All those people who stopped popped because they have a bullshit promise from OpenAI to buy a whole bunch of their stuff in the future with money OpenAI didn't have, now at least can say they can go get that money. I mean, as you know, I'm skeptical that Oracle will collect the last dollar of that cloud contract. But at least you can now say hand on heart, the customer, OpenAI, now has a sensible corporate structure. They obviously have an amazing business. And if they need to raise another 100 billion, it's not like crazy anymore. It's just banking and math. So you're exactly right. This thing may fail for, there may be business issues around, you know, return on thing, but we're out of the stupid corporate structure getting in the way of everything.

• 14:20Speaker 00

  I just can't think of a retail IPO that would be more popular than OpenAI, right? Just bringing everyone out of the woodwork to put a little bit of their life savings to ignore the, well, even if the valuation makes no sense, this would have to be the most popular retail IPO of all time, right?

• 14:37Speaker 01

  I think, yes, you're exactly, and it's now it's doable. Yeah. I mean, people aren't going to be reading the prospectus and saying, maybe we won't make profits. They're not going to be reading the thing about 250 billion dollars of cloud commits to third parties. They're just going to be, let me get some of that OpenAI. To your point, it'd be interesting to check on the secondary valuation pop today for OpenAI trades. The weird thing right now is SoftBank is closing two separate deals right now. They're closing their roughly 300 billion pre-direct investment, and they're also doing a share buyback from some existing employees at 500 billion. So, well, I mean, literally, you have the same security trading at two different prices. And I think that's true for other investors, too. They've locked in the earlier price. Because when the other investors, I think Tribe is in this, too, when they commit

• 15:21Speaker 01

  To OpenAI a while back, they said, hey, we'll give you money at 300 billion, but you got to get your conversion done first. So now that the conversion is done, they're going to put the money in. But already, they've already had a markup before the money. Oh, my God, they've had a markup before the money's gone in. Because SoftBank is marking itself up by doing business at 500 billion in the secondary. So literally, you're going to wire money at 200 billion or 300 billion, whatever the number is. And then second, next day, you can say, hand on heart, current valuation of this is 500 billion. So there you go. You're 40% IRR on an hour.

• 15:54Harry Stebbings?

  Do you think there will be a trillion dollar company in 2026?

• 15:57Speaker 01

  On the current trajectory, maybe all I can answer is on the current trajectory and without the euphoria Jason mentioned, it's probably two years because, you know, you do get some attenuation of growth at scale. And, you know, at the current thing, I mean, at 500 billion and, you know, 12 billion, let's call them boring GAAP revenues rather than ARR. It's kind of, you know, 40 times GAAP and if it's 20 billion and 25 times ARR run rate. My guess is it would take two years in the normal course, but you, you know, you might see that euphoria moment. It's not crazy. It's not like it's never going to happen. It's it's within the trajectory. It's within the strike zone. If anything like the current growth rate continues. If it slows, I mean, as a reminder, when you're trading and we saw this in 21, if you're trading at 40 times revenues and your growth rate slows,

• 16:40Speaker 01

  it's nasty and you fall sheer. But right now they're growing, so they can get it.

• 16:45Harry Stebbings?

  I would love a two trillion dollar IPO. That sounds great.

• 16:48Speaker 01

  It'll be fun to watch the bankers beg for that. They might pretty much do it for half nothing just to be on the biggest IPO of all times. I mean, I think technically Saudi Aramco had a kind of a couple of trillion dollar market cap, but nobody really cares. Let's get real. It's an oil company in Saudi Arabia. This would be one for the ages and I think every banker on the planet will be making decks as we speak and calling on Mr. Waldman and Mr. Taylor.

• 17:12Harry Stebbings?

  Dude, you'd do it for free for the credit.

• 17:14Speaker 01

  He probably would.

• 17:15Harry Stebbings?

  Okay, we're going to talk about Andreessen's new funds. Andreessen dominates so much of the venture microphone today. $10 billion split across $6 billion in growth, $1.5 billion in AI apps, $1.5 billion in AI infra, $1 billion in defense. My word, what a big raise. I would love to understand, is this just a new normal of general catalyst and light speed and the mega platforms raising like this? Is this different? How did you analyze this news?

• 17:47Speaker 00

  Honestly, I thought they were small. And what I mean is, I didn't think it was small until I saw the breakdown of the funds. At first, when we talked about this before, like $10 billion, that's unprecedented, right? But when I look at that in the new Sequoia fund, $200 million Sequoia seed fund, that's not that big compared to 20 VC. What's the 20, 20 VCs, 150 out of 400 or something, right?

• 18:07Harry Stebbings?

  125, yeah.

• 18:08Speaker 00

  Yeah, and Rory's more A and B, but it's not, 200 million doesn't really get you out of bed at scale. And then 1.5 billion for AI apps, when you're investing in 11 labs and friends and Replit, doesn't seem to get you very far. The seed funds and the AI fund for Sequoia and Andreessen were smaller than I would have expected in today's insane world where even 50 million at a YC demo day could be a low valuation, right?

• 18:35Speaker 01

  Wasn't expecting that. Now, I thought it, look, is it the new normal? Yes, it is the business model that Andreessen and a couple of other firms have brilliantly pursued. This is the world we live in today and as investors will live in for the next four to five years, right? Somewhere down the line, you'll either have the, it works over across the cycle and then this will be the norm forever. And you could envisage a world where this is a little like, where venture becomes more like investment banking, where there's Goldman Sachs, JP Morgan and the rest of us are boutique players, right? Or the other thing that could happen is the returns from the bigger funds are slightly disappointing and kind of does a little bit of a tilt back to more mid and small cap ventures.

• 19:18Speaker 01

  But this is the dominant modality today. This is why. What top dog venture investing looks like. This kind of scale, this kind of dollars at work and there's four or five other firms doing this.

• 19:29Speaker 00

  Is there any excuse to that I can't compete with Sequoia? I mean, scale can outbid them. I think you can compete with a $200 million seed fund or a 1.5 billion AB fund. I think you can.

• 19:40Speaker 01

  Yeah, I agree. The sentence, "I can't compete at a seed with a recent cost of check size," doesn't make sense, except in one very derivative way. Because I agree, at the end of the day, someone's raised 10 million and you have 10 million, the other guy has 10 million, end of. Just one of two arguments against what you're saying, though, right? The fact that one checkbook comes 10 out of, let's just pick on Harry. One checkbook comes 10 out of a $400 million fund and one checkbook comes 10 out of a $10 billion Colossus. Right, let's just say, there's two ways in which the Colossus has an advantage. The first is, they can literally decide they're not pricing this round, they're buying an option on the next round. If Harry's trying to make his money on seed and they're simply trying to set themselves to make the money on the B,

• 20:24Speaker 01

  they can by definition pay a higher price because any option always trades higher than the intrinsic value of the asset in question by virtue of the time value. So they can pay a, quote unquote, "stupid" price, right? Because they have a different model. And then the second way they can win, and I'm really internalizing this now, is the wall of news. Right, at the end of the day, when you have a $10 billion fund, you always have shit going on. You don't talk about your bad stuff and provided you're modestly competent, and these guys are far beyond modestly competent, they're extraordinarily competent. You always have some good news in the portfolio. You always have exciting things, you're probably going to be in some winners. So the.

• 20:57Speaker 00

  I don't buy the wall of news anymore.

• 20:59Speaker 01

  What?

• 20:59Speaker 00

  I'll tell you why I don't buy a wall. I've learned this first from Dr. Harry Stebbings and now I've learned it others, okay? Look, Harry's in some great, great investments that he quietly but relentlessly reminds us of. The perplexities and the mercours. However, he says it with his British accent, how do you say mercure in British? Mercor, he like, he elongates the vowel or something like that, right? And he tells us all the great stories. What I'm saying is you can get coverage. You don't have to write $10 million checks to be the with participation fund guy. Scale could do 50 deals if you wanted with participation. From Rory from Scale, who we love from the pod. So just, the option thing's a bigger deal.

• 21:40Speaker 00

  I just wonder if a $200 million seed fund at Sequoia, how many options can you afford before your whole fund is options, right? That's the question.

• 21:48Harry Stebbings?

  The one thing I will say is the with participation thing does not work for publications. And this is very in the weeds and granular. With the with participation, you playing in rounds with smaller checks does not work unless you have an existing brand. For random tier two, tier three firm, if you were to do with participation, now that the tech crunch is the big brand.

• 22:09Speaker 00

  You want to be at the end of the fifth paragraph?

• 22:10Harry Stebbings?

  No, they honestly, they don't. They really don't listen. And so, and so, yes, we do.

• 22:14Speaker 00

  But Rory has a following now after this pod. He's got a pretty big following. Rory now would be.

• 22:19Speaker 01

  Even if I did, even if I did, which I would.

• 22:21Speaker 00

  I'm not kidding.

• 22:22Speaker 01

  It makes me cringe, but even if I did, actually you'd be proving my point, which is it's not because, I mean, what you're basically saying is Rory, you can win a deal, not because I've grafted for 30 years and returned, you know, frankly, billions of dollars to my investors, but because I'm on a fucking pod. If that sentence is true, if that sentence isn't true, then a hundred percent Mark Andreessen was right all along. And he said, it's not, I don't think in the end investing is a media business, but I do believe that, and I'm going to give them enormous credit. I admire people who pull off strategy, articulate a strategy and pull it off. They tilted the table with their media strategy. And, you know, here I am on this podcast in my little tiny humble way, trying to say, okay, this is the new game. So I do disagree with you, Jason.

• 23:04Speaker 01

  I think the wall, and I think the wall of sound is a combination of the 10 billion and the media presence they generate and all things. I think at the margin, the bigger funds are harder to beat. And you just have to say that it's not by any means impossible, but I'm, what I'm saying is Andreessen, I think this $10 billion raise, and I think by the way, the structure of it actually also makes sense, the three different individual funds and then the growth fund. And it makes sense, I think, both for structural investing reasons and probably also for human capital management reasons. You can give your chief lieutenants each a little fiefdom where they can feel in charge, which is a good way to keep them. I think this strategy works. And as I said, provided the long-term returns are there in terms of tilting the field of

• 23:49Speaker 01

  play in their favor, I think it's been successful.

• 23:51Harry Stebbings?

  I would argue actually that there is massive advantages to them. I get you, Jason. We've got $275 million for a Series A fund versus their one and a half. That is a lot more money for management fees to pay great people. That is a lot more carry. That is a lot nicer offices, which founders do get wowed by. Like it or not, they get wowed by it. That is a lot more events to host where you can have serendipity. There are a lot more things, I think, that scale and AUM buys that do increase.

• 24:19Speaker 01

  One of my favorite expressions is from the Russian Red Army, which is quantity has a quality all its own. In other words, when you want to take Berlin, at some point, what you do is you just get 2 million people willing to die and you march them forward, right? And, you know, Andreessen Hertz is the Red Army of the venture industry. Now they got the 10 billion and they're going to march it forward.

• 24:40Speaker 00

  But it's not, of course, it's 10 billion. It's 10 billion of 30% carry and 10 billion of 2% fees and 10 billion of all this. But when you break apart the funds, I really don't think Sequoia having 200 million is that different than what Harry has. And I don't think a one and a half billion for their AI app funds, I think it's only twice as scale. So I just don't think like Air Cover, it's an excuse. You have to work twice as hard as they do. That sounds right. You should have to work about twice as hard. But it's not as, it's not really 10 million in a billion, right? From when you break the funds up.

• 25:12Speaker 01

  I agree with that. You do have to work twice as hard. As a comment, the definition of a good strategy is if you have a strategy that doesn't allow you to have to work that hard. Right? And therefore, by definition, having 10 billion is a good strategy. I mean, I think the interesting thing, and we said this before, but my bigger heart is this. The only people for whom this might be a net negative is the LP investors. And we don't know that yet. Maybe it'll be a wildly successful strategy, in which case it will run the table. Or maybe it'll be modestly successful, in which case in five or seven years, the LPs will start going, hey, you know that late-stage fund? It gives me a good return, but it's 12, 13%, and maybe I can get that in the markets now that there's more IPOs. Maybe we should just trot back our allocation. We love the early-stage stuff, some version of that.

• 25:56Speaker 01

  But until something like that happens, for every other player in the market, having 10 billion is better than not having 10 billion. So that's what the game is.

• 26:04Harry Stebbings?

  I do also think for everyone listening, they don't often understand the stapling that is required to be in these funds, which is if you're an LP and you want to be in the early stage fund, you will often, very often with top tier brands, have to put in two times that into another fund to get that one dollar in the other. And you don't get your pick of which fund. Very often you have to be across all of them.

• 26:24Speaker 01

  Yes. And when you see that, you realize that intuitively, leaders of venture firms understand the concept of bundling at their core, right? Bundling and rent extraction is fully understood.

• 26:36Harry Stebbings?

  Jason, you said about this company, uh, McCour, I think it was. I think it might be a 20 VC company, to be fair.

• 26:43Speaker 01

  Yes.

• 26:43Harry Stebbings?

  But they announced yesterday they've raised $350 million at a $10 billion valuation, led by the person who led their last round at $2 billion only eight months ago, which is Felices. Now, this company has gone to 500 million in revenue faster than anyone else, I believe, in history. I think it was 17 months. Also, again, this is not bias. I hate fricking bias shows. I sometimes listen to them. A lot of people say it's not real revenue, it's GMV. I wanted to hear, how did you guys feel about this round? The speed of revenue acceleration, if it's real revenue, I want your thoughts.

• 27:20Speaker 01

  I mean, it is quote unquote real revenue. They ship things, they get paid. Gap requires you to book it as revenue. Maybe step back and give people some context. What they do is they provide humans with specialist knowledge and their customers are the large foundation model companies. And what they do is they bring this human talent to bear to help the foundation model companies train the models by providing human feedback. People would have heard RLHF, reinforcement learning through human feedback. These are the humans that do that. So if I'm OpenAI and I want to quote, "teach my latest model how to do advanced math", what I need is a whole bunch of doctorates and PhDs who understand math

• 28:04Speaker 01

  that are available to post questions to the model, judge model questions, give feedback on which answer is correct, which answer is not. So by giving this human feedback, I think of it as you pound. The model into submission where it eventually says, okay, I've learned this shit by adjusting the weights. That's what's going on here, right? We think of this all as happening in Nvidia GPU chips. There's an astonishing amount of human training that is required to make these models work. So that's kind of the market these guys are playing into, right? Scale AI, which was acquired by, partially acquired by Meta, is in the same board market. These guys have done, Merck has done an amazing job. Cause five years ago, as Jason said, I love the expression, five years ago, we were labeling cats.

• 28:44Speaker 01

  Right? And you know, you had people often overseas charged with labeling cats and not getting a lot of money. I think Merck realized that the market today is not labeling cats. It's in fact answering complex physics questions, math questions, bio questions. Cause the models know how to label cats now. And what they need to do is the outer edges of human knowledge. So it's a very different set of humans that you need. And Merck did an amazing job of assembling all these kind of high end folks. And making that product available to the model companies to do it. That's kind of what they do. And in that context, the growth quote isn't surprising. Cause if you think about it, these model companies have grown faster than any company in human history. They're spending three, four hundred billion dollars on compute.

• 29:27Speaker 01

  They're probably spending three, four billion dollars on RLHF. And they were spending zero five years ago. It's an explosive growth market. So, you know, it didn't happen in a vacuum. This happened because our customers want their stuff.

• 29:39Harry Stebbings?

  I actually obviously spent quite a lot of time in the market, which will surprise you already to hear that I've been thinking about markets more deeply, but it all started with like talent acquisition. If you got the talent and could provide it, fantastic, we'll pay you. That's pillar one. Pillar two is get the talent number one. Now we want data acquisition, which is you provide it to us, not we extract it, you provide to us. And then you measure the quality of it too. That's the second pillar. And now we're adding the third pillar, which is the implementation layer, which is we now expect you to not only do those first two, but we expect you to implement it efficiently and make sure our models get off the ground more effectively. And with that, you also see increased pricing and the willingness to spend much, much more from the model providers. The other thing I will say is

• 30:24Harry Stebbings?

  You have concentration of buyer unlike any other industry. Two buyers are 50% plus of every one of these labeling providers revenue. So there is real revenue concentration there. It's it's high quality customers, but you do have that dynamic as well.

• 30:39Speaker 01

  Agreed. And that was well put because it makes it an interesting question from an investing perspective. On the one hand, there's nothing better than a customer who's well funded. We just agreed they're well funded. Who's got an urgent and compelling need to get a bunch of stuff done that you can help them with. And wants you to grow with them. And what you're saying is you're exactly right. Open AI and all these people. Five years ago, they had simple requests. The more the complexity goes up, the more you meet that complexity as a vendor and Mercor has done that in spades. The more revenue they're going to give you. So they're going to be shoveling money because you're solving their problems. They got other shit to be solving. They don't need to be thinking about this. Mr. Mercor, if you can make this go away and get me, you know, 500 doctors and this data and this answer and integrate it to our system, I will pay you money because money I have in spades, Tom, I don't got.

• 31:24Speaker 00

  For sure, but I've got to imagine you you guys and especially Harry would know better than me. I don't think it's stress. It may not be stress free. I have a portfolio company that was doing a vaguely similar attached to a to a large AI business model where the contract was growing to eight figures. That renewal was stressful AF. Once you get to eight figures, okay, I know, I know these guys have more money and time than engineers, but there's a point where you turn around and you say, maybe we should do a little, you know, OpenAI is building its own chips. I'm not saying this happened at Mercor or Scale. I'm just saying Harry's point of having to radically go up the value chain is both revenue but more stress because I don't, I don't think anyone's just shoveling money at Data Dog and Mercor without even thinking about the the margins.

• 32:08Speaker 01

  Jason, I totally agree. And that's what makes your venture fund and challenging is that you look at the checklist and you have one enormous positive. Great big honking market growing like a weed. You're exploding. And then you got two negatives. The first is your margin profile is not amazing because the gross revenue is 500 million, but you give 70% of it to the doctors and the mathematicians who are doing all or whatever it is, some percentage. I'm not going to speculate. And then the second fact you have against you is massive. Customer concentration and at some point they're going to say, oh, given you 200 billion, which means you're making 30% of that 60 million. Hell, maybe you do it for 40. You know, you prefer to be open AI and have 800 million customers than to be Mercor and have two. That when you look at those positives and negatives, what you say to yourself is this is fundamentally

• 32:51Speaker 01

  a bet that the AI capex train will keep running for two or three or four more years. If the air capex train slows down and like.

• 32:59Speaker 00

  Is that, is that enough? Is two to three years enough?

• 33:01Speaker 01

  Well, whatever, at least you're right, Jason, at least three to three to five years. In other words, that it's a permanent new thing at growth because OpenAI is not going to focus on getting efficient until it's dealt with hyper growth. So as long as it's not getting efficient, you probably can lean in. If it slows down, then the positives, which is the growth rate goes away and then all the negatives come back to bite you. So if you were to say to a public or a hedge fund guy, find me a bet that had the maximum exposure to hyper AI capex growth. This would be, you know, right up there with Nvidia as a, yeah, I like this risk, man.

• 33:34Harry Stebbings?

  If you're doing this at 10 billion, what are you underwriting it to? What does that math look like?

• 33:39Speaker 01

  I mean, as we're going to discuss later, you shouldn't be writing anything to a 3X. So you got to be 30 billion to make it work you wild. I'm just doing the math in my head. Even at 5X revenues, my God, that's 6 billion. You know, you're underwriting a lot of training data. You know, that's, that's the sobering thing.

• 33:55Speaker 00

  In the short term, though, in the short term, if they're at 500 million at 10 billion, growing at an unprecedented rate, we're all ignoring gross margins in 2025, 2026. It's only 20 times revenue. It doesn't seem, this is where actually we're seeing revenue compression, right? Which we talked about with Cliff and others. He doesn't like the revenue compression at Canva, right? Where this 20X ARR, was your last deal lower than that, Harry and Rory? Higher or lower than 20X ARR, the last deal you did?

• 34:21Speaker 01

  It was higher and I'll admit, and Jason, you're exactly right. I actually said something else that was really insightful. Your comment is there's two modes of thinking about an investment. And I think it's really insightful, Jason. There's one more that says pencil me out the next five years. How do I think end state? What market do I have? And therefore, what return are you underwriting? And I think if you assume five times revenue and you want to be at 3X, you're Billion, which means six billion in training revenue, which makes a man pause. On the other hand, you can say it's growing five X. And if the multiple just stays context and it grows five X for another year, I'll be five X up. And in fact, that's just what happened on the last round. It was at two billion, I don't know, at a hundred million, and now it's at ten billion at five hundred million.

• 35:05Speaker 01

  So the near in revenue traction is saying to everyone, as long as this keeps happening, you can grow it quickly, because what? You look back now, I mean, because, you know, we're talking about is it worth ten billion? But go back, give them credit. You now look at the two billion that somebody paid six, seven months ago? And you're like, oh, my God, that seems cheap. Because you're like five hundred million already. So when when high growth happens, it's tempting and it often pays to lean into that growth. And yeah, you very quickly, just like I think the entropic round at sixty seven billion earlier this year, now looks dirt cheap. If the hyper growth comes at the size of growth we're dealing with now, which is not, to your point, Jason, trouble, trouble, double, double, it's, I can't, I don't know what the word is, but fipple, fipple, deckle, deckle. You know, I don't know, right?

• 35:49Speaker 01

  If you grow five or seven X, you can grow into almost anything. So this whole thing, top to bottom, is one big ass bet on AI capex hypergrowth. And as long as it keeps happening, you know, I don't want to quote Chuck Prince, but we all know the quote.

• 36:04Harry Stebbings?

  No, we don't.

• 36:05Speaker 01

  Oh, you're young then, Harry. Chuck Prince famously said in two thousand and seven at Citigroup, as some some version of, as long as the band keeps playing, you got to stay on the floor and keep dancing. And it turns out he should have sat down and not danced anymore, obviously, given the way two thousand and eight happened. But in other words, it's the quote of when things are working, everyone just tends to lean in.

• 36:25Harry Stebbings?

  Well, when things are working, everyone just tends to lean in, baby. Ramp is a fundraising machine. They raise every few months. Reports that they're raising a new round at a thirty billion dollar valuation reportedly. What are they doing with all the money? Do they need it? Is this a game of customer acquisition and brand? Do we just do rounds now to continuously stay relevant to Jason's point?

• 36:49Speaker 01

  We talked about this a few weeks ago on the last raise and I have nothing to say that I feel like I just had these comments. It does appear to be a combination of insane demand for the stock, an ability to use that to create this aura of inevitability. And, you know, to some extent, as I remind you, this is more than most companies. This is one where constant growth requires lots of capital because you're in a capital advancing business. So you probably have every dollar you add of revenue takes five dollars of capital because you've got to finance purchases because you're effectively recreating Amex. So it may well be, I haven't seen the numbers, that there's a larger demand for capital here than the average deal. I'm sure they can leverage some of that, but if you're going to a billion dollars,

• 37:32Speaker 01

  you have probably have a $5 billion balance sheet. I remember doing the math at one point in time. So if someone's lending you $4 billion of that, they're probably going to want a $1 billion equity cushion.

• 37:42Speaker 00

  To me, going from 23 billion to 30 billion, I don't even consider it an up round. It's not enough. Let's say I was a seed investor. I've probably had a token of dilution, okay? So let's imagine I'm down to 2%, which would be great. I have a $400 million position at the last round, right?

• 37:57Speaker 01

  Yeah.

• 37:57Speaker 00

  Now it's worth 480 million with dilution after this next round. I mean, it's a lot, but like it's not doubling my position like a classic round is. These little rounds, 22, 25, 30, and then maybe not at Ramp, but with a lot of AI companies, a lot of dilution or a lot of others, right? You could see 10% annual dilution in these companies or more. You might go from 22 to 30 and have the same price per share. It's possible, right? I just don't really care about these micro step ups that look great. You're like 30 billion. Well, if the last round was at 10, impressive, right? If the last round's at three, like Mercor, very impressive. Here I'm like meh.

• 38:35Speaker 01

  That's cute, but I'm pushing back just another spin on what you're saying is with the exception of the new AI companies, that probably is the kind of IRR you should expect to get in a mature growth private company. One of my insights over the last, I mean, sometimes I just realize the obvious is that there's really early and late stage venture. And then there's venture for companies that already could comfortably be public. And I think we need a different word for that. It's not even late stage. It's private as public. Ramp could just as easily be a mid-cap stock at this point in time, public, right? And you don't expect mid-cap stocks to gap up 3X in a year. You expect the overall market will go up by 11. The best companies grow 30, 40% year on year. So I look at this and I go.

• 39:19Speaker 01

  There's no reason to assume that the return to the stock should be different just because it's held in a different corporate structure. The company is the company independent of its public or private. So I think, and the reason I mention such pedantic land, is I think, as you think about these late, super late growth fund things, the return they will realistically get, absent the AI lift, is some version of what was the small cap, high growth, public market return. So for those guys, because you're going in, Jason, correctly, with your venture rule of thumb. And even on a late, let's call it a late-stage company, company doing 50 million, going 100 million, it should be that 2, 3X step up, financing event to financing event.

• 40:01Speaker 01

  When you're doing a billion dollars, you're near profitable, you should be public, you're going to see this kind of step, these much smaller percentage step-ups, because you really are a different asset class, you're public stocks hiding in private. Which is why, you know, the stripes most recent change was from 91 to 110. It's the same kind of thing.

• 40:19Speaker 00

  But you just said we were still underwriting, Harry asked you what we're underwriting to, you said at least 3X. So if I'm going to run to 3X and I did the last ramp, round at ramp at 23, meh. Like, it's not really getting me to my 3X.

• 40:30Speaker 01

  No, listen, you are, dare I say it, confusing on your pronouns. You said we're underwriting, you're underwriting to a 3, I'm trying to underwrite to a 3X. If you're running money, doing companies at 30 billion pre, you're probably not underwriting to an overall 3X on your fund. Now, you might get the most iconic company of its generation, OpenAI will give you a 10X, but I don't think you are underwriting to a 3X when you're doing ultra-late-stage, billion-dollar revenue runway, 30 billion-dollar valuations. And you're definitely not underwriting to a 30% IRR. So this is what you get. Again, go back to, there's no reason to assume that just because the companies are still private versus public, that you should get more return than you would have gotten if they're public.

• 41:15Speaker 00

  I'm with you. My only meta point is, and Harry's made this, Harry's made this in the early days, like the massive dilution at Anthropic and others, right?

• 41:21Speaker 01

  Totally.

• 41:22Speaker 00

  I'm just less excited, I've found that things that move the needle for my little portfolio, some of these headline Don't always do it like it's not always that simple, right? It could be years have gone by, there could be a massive increases to the round, massive dilution. You might have forgotten that the last round was was pretty high too, back in 2021. Like you might even be flat or down, it looks great, but like I just, they're not always as sexy for the IRR or the markup as you might expect, that's all.

• 41:50Speaker 01

  I totally agree. That's because you're busy trying to turn, you know, 10 million into 100 million or 200 million. But there's someone else out there who is very happy to turn a billion into 2 billion. Very happy indeed, and it's going to make more money than you, just to make it even sadder, dude, right?

• 42:05Speaker 00

  More money and keeping your IR, trying to keep your IR above 40% is not easy. Later in life of the fund, it gets really hard, right?

• 42:12Speaker 01

  Agreed. And for those guys, a different game. So yeah. The aha is the two biggest changes of the last three to five years have been the advent of what's happening in AI and the transformation of the late stage and IPO marketplace to this ultra, ultra late stage where companies are way beyond the IPO threshold and still private. Those are the biggest two changes in the game.

• 42:36Harry Stebbings?

  I completely agree. And on the second, I go back to actually Jason's point on the modest size of the Andreessen funds. Because when you take the $6 billion growth fund, minus fees, you're at 4.8. You've got 2200 million dollar checks. It's not that much. It actually feels very reasonable in terms of size.

• 42:53Speaker 00

  To their credit in that chart that went around, they did do a good job of recycling. They did, they did an excellent job of recycling.

• 43:00Speaker 01

  And recycling is good.

• 43:01Speaker 00

  So we can assume they get the full six out, but fair point. It's not a lot of checks.

• 43:05Harry Stebbings?

  David, David George is very, very good. I'm always impressed by him. I want to move to spray and pray. There's different models of venture. You can be concentrated or you can be spray and pray. Spray and pray for those that don't know is obviously having a broadly diversified portfolio, investing in lots of different companies rather than few with more money. There's always a question of does spray and pray work? There was some data released by Carter. What did the data say? And how do we think about spray and pray today?

• 43:32Speaker 01

  I disagree. I read the data. I also read, Jason, your blog, the blog post on Saster. I think your characterization of the, your characterization of spray and pay is wrong, to be very direct. I think the data was awesome. Let's stop back with the comment. The data was awesome and very pleasing. Stepping up here, what it told people for listeners is, they looked at all 547 2018 Series B investments, and then they did a histogram of where they come out in less than a 1X, you know, 1 to a 2X.

• 44:01Speaker 00

  Oh, that was Series B.

• 44:02Speaker 01

  So 547, and then, you know, 18% of them greater than a 5X, about 10% of them greater than a 10X, and one deal, FIGMAT, returned 100X. That's a pretty sizable chunk of information. What's it telling you? I find it really interesting because, in fact, you know, we typically do As and Bs, and I was very happy at you, by the way. It was exactly what the distribution for our fund model, we think, has to be, which is 30%, they were actually 35, we would have said 30, less than a 1X. We do wider buckets. 1 to 5X, 50%. They broke that into two buckets, and greater than a 5X, 20%. So the distributions on 547 deals match pretty much what we're saying, right? So the interesting thing is, if you hit those three buckets correctly,

• 44:44Speaker 01

  the blended return, I know it from our fund model, is 3.7X growth, 3X net to the LP, right? So if you look at that business, if you look at all those things, and you get enough slots in the buckets, right, in each of the buckets, the good buckets, the 5X bucket and the 10X bucket, you end up with a 3X net to the LP. The first piece of good news is, if you do it right, the return was available to you. The interesting thing is, to your point, is the right strategy, spray and pay? That's why I was jumping back on it. I don't think that's what it said. I mean, I think it says, you got to pick very carefully, because obviously, if you do a lot of deals, but, I mean, looking at the same data, Jason picked on the negative, which is 2/3 of all deals are less than a 2X, which means they just don't help. Correct, Jason? That was, that was the point you made in the blog?

• 45:29Speaker 00

  Yes.

• 45:30Speaker 01

  And, and what it says is, picking is so important.

• 45:33Speaker 00

  But did, did it say that?

• 45:35Speaker 01

  I, no, your blog didn't say that, but I'm saying, I think the data says that.

• 45:38Speaker 00

  But here's the thing. First of all, you're right. I mean, to me, the data was shocking to some of you. That is a concentrated investor because this is scary risk for me. But it did blend out to three X net plenty good, right? So, so you're right, but at at series B, everyone thinks they're a great picker, don't they? This isn't pre seed, everyone's a great picker at series B, right? Does everyone have the same logarithmic distribution across the across these deals or?

• 46:02Speaker 01

  No, they probably don't. I'd say three things. Everyone thinks they're a great picker. Not everyone is a great picker. But the third sentence is you have to be a great picker to win. There's two strategies you can face with this opportunity set of 547 series Bs in one year. Right, that's the it's a very clear data point, right? If you're not a good picker, you will end up with more. Remember to Jason's Jason's did a different set of buckets, but his buckets are more scary. He said two thirds of all these deals are less than two X. And that's on average. If you skew instead of 66%, if you skew 75, 80% in that less than two X bucket, your math doesn't work and it's not that hard to be that bad. Because on average, it's 66% is my point.

• 46:45Speaker 01

  It requires a fair amount of discipline and picking to pull this off. I don't think the spray and pay strategy would work here. It might work at seed. I'm not as familiar with seed, but here the cost of spraying just gets too high. The only way it does, and I can see Harry doing his, I don't agree phrase is, I think there's actually three approaches. There's picking, there's spraying. And then the third one, which is someone big like Andreessen can do, which is optioning. You can spray if you're just doing options. But if you spray and that's the only way you make your money, the probability of being wrong is just too high.

• 47:18Harry Stebbings?

  So that's exactly what I was going to say, which is actually in reference to an amazing graph that was released a month or so ago about seed bets by multi-stage firms. And Andreessen did 72 seed bets compared to score in number two at 27. And exactly to your point there, Rory, you said you can't win without being a great picker. I'm not saying Andreessen are not great pickers. I'm not saying anything against them, but you can if you have 72 option bets.

• 47:41Speaker 01

  I agree. There are three strategies, there's spraying, picking and optioning. And because because the beauty about when you can option, you can afford to spray more. Optioning allows you to spray more, right? That you're exactly. Right. No, I I think it's super clear at every stage. And again, it goes back to structurally. I mean, once upon a time, you thought seed was all about option value and anything beyond that wasn't. Because we're dealing with gargantuan sums of money. It is now plausible that for some people, A's and B's are partially options. And really, if you're going to deploy 200 million in the growth round, you don't want to be totally slipshod at the A and the B, but you can think of it as more option value, right? And that and that's absolutely a a superpower that a wall of money gives you.

• 48:23Speaker 01

  I can't afford to do that because most of my money goes in on my initial round. At most, fifty, sixty percent comes in follow-ons. I can't afford to be wrong on two-thirds of my money to be right on one-third. That's not going to make me a dollar.

• 48:36Harry Stebbings?

  Does the ever-expanding outcome scenarios that we're seeing today, you know, before thirty billion dollars was insane valuation for a company. Now we're kind of like meh with Ramp, meh ten billion with McColl. And we're not blown away by it. The outcome sizes are getting so much bigger. Does that not favor a spray strategy? Because all that you need to do, if you're early, is just get into the winners. Who cares? Not who cares, but 500K or 2 million, it doesn't matter. Spray the 500Ks because the only thing that matters is McColl and Ramp and everyone are in yours.

• 49:11Speaker 01

  No, because what you're doing is you're taking a plausible theory and extrapolate and you know, and extrapolate it to the point where it no longer holds true. You can spray as much as your bankroll will allow you. The more bankroll you have to build up option value. I mean, well, step back. You could be talking about two things, Harry, and you got to break them apart. Are you saying simply spray because I'm not going to make my money on follow-ons? But it's the seed argument. I have to be in the very best deal and I have to cover wide versus concentrated to do that. Right? And that's one thread. And then the separate thread would be, how much easier is the is the spray constraint if I also have option value at the back end? And that's easier. There's no doubt. Let's agree to following. The more option value you have at the back end, because you have a 10 trillion dollar fund,

• 49:55Speaker 01

  the easier it is to spray because you can amortize the cost of the losses over the one winner. Provided you get to stick 500 billion in the winner, the rest is noise.

• 50:03Harry Stebbings?

  But if you're a seed fund and you're David Tish today, who, and he won't mind me calling him out, he explicitly does respectfully spray and pray. He does 50-plus companies plus plus in a portfolio with low ownership. But my word, he is in some of the biggest companies, including Ramp, consistently.

• 50:23Speaker 01

  Again, but going back to the Carter data, what I like about Carter is it's actual data, not words. There were 547 Series Bs in 2018. I'm going to guess graduation rate probably, but that implies 800 As, that probably implies 1,600 seeds. So even what you are pejoratively calling quote unquote spray and pray is doing 50 deals out of 1,600. There's still a huge element of picking involved in that. The only people on the planet who have a structured business where they can de-emphasize picking because they can write checks, option checks at scale as Y combinator because they have a structured advantage in terms of their economics. They are the only people who've built a mass production seed business.

• 51:07Speaker 01

  But for everyone else, if you're trying to pick even 50 and there's 1,600 places. I mean, and we know that at the B, only 500 of them get to the B. There are 1,100 places to put that money that doesn't work out. You can always say, it'll always be true that if you pick the single largest outlier in any vintage, like if one of those deals was Figma, where the B made 100, so probably the A made, I can tell about 200 and the seed probably 400, 500, I don't know, right, of that order, the numbers are available, 300, right? Even if it's 300, if you did an index and did every deal, you know, you made a 300x and you did all 1,600 deals equally, it's only a point two return. Do you understand me? You know, if you put a dollar into everything,

• 51:50Speaker 01

  your Figma check doesn't quote unquote return the fund if you did the whole industry. Now, maybe an OpenAI would, maybe there is one deal so big that it would literally return the vintage such that if you just bought the entire vintage, you're good. That probably happens maybe once every decade or two. Most of the time, even at the seed stage, you can't just say it's spraying, is my point. There's an element of picking up and down the stack.

• 52:16Harry Stebbings?

  I get that.

• 52:16Speaker 01

  I mean, it's funny, I was more, the Jason headline, only one in three deals double investors' money per Carter data. That's it. It's so sobering. It's like. It makes you remember how much of this business is disappointment. You you remember your deals, you remember your 10 Xs and your 15 Xs and your 20 Xs. And you just forget, you just, and I think actually the best investors and.

• 52:38Harry Stebbings?

  You become numb to it, Rory.

• 52:40Speaker 01

  I don't, I get all sad. I'm a bit lame.

• 52:43Harry Stebbings?

  I had a shit outcome this morning and I'm really like upset by it.

• 52:47Speaker 01

  Yeah, you get vested.

• 52:49Harry Stebbings?

  I had the worst, which is a company gets bought by another company and you get stock at some insanely high price. I mean, it's just the worst.

• 52:59Speaker 01

  That's not the worst. No, the worst, let me, dude, the worst is you're on the board. You try and sell the company, it doesn't close, you're on the hook for shutdown costs and you have to wire 300 or 400 grand just to pay severance costs, which you should do as a board member and you're probably legally obliged to do. And then write that money off straight away because you waited too long. That's the worst.

• 53:19Harry Stebbings?

  Wow, I thought my day was bad. That's that's perspective for you, kids.

• 53:22Speaker 00

  That's why I just do everything on a safe. I have no rights, no visibility, no financial statements, no understanding of anything. But if it goes south, I could just ghost them.

• 53:34Harry Stebbings?

  Are you serious though, Jason?

• 53:36Speaker 00

  What? No.

• 53:37Harry Stebbings?

  About just doing everything on a safe?

• 53:39Speaker 00

  No, but um, but the safe does have some comforts. I I do like the post-money cap as a seed investor. I don't have to worry about the pool or other things. And I like the fact that it's a medium commitment. I don't always love being the only guy on the cap table, the only director. The safe is like, listen, I'm only sort of committing, guys. Good luck to you. If it goes great, I'll invest some more. If it doesn't, I'll I'll write cheery responses to your monthly updates. But you didn't ask me to get married and commit, so I'm not committed. You think I'm joking, but the stuff Rory talks about is awful, right? This this end of life stuff or a decade of a struggling company where you're on the board. I I I'll take the safe over that because the commitment is low back.

• 54:22Speaker 00

  If you're going to raise on in Saturday on a safe, you can't expect too much.

• 54:26Harry Stebbings?

  Speaking of commitment and marriage, I'm really intrigued to hear your thoughts on this one, Jason. Because you've said like, oh, I encourage founders to sell. I encourage founders to sell when the offer comes in.

• 54:36Speaker 00

  So there's no regrets. So there's no regrets.

• 54:37Harry Stebbings?

  Synthesia, one of the hottest, fastest growing AI companies, you know, at 150 million in ARR, reportedly turned down a $3 billion offer from Adobe to be acquired. And they're going to be raising a new round at well north of $3 billion following this. Jason, if you were on the board, would you have told them sell for 3 billion?

• 54:58Speaker 00

  Yeah, I would have told them to sell. Yes. And I'm not saying it's the right decision, but one, he's been at it for a while. Like Synthasia is one of these stories like Replit and Vercel that like blew up with AI, but it's a journey, right? And there's competition and it's a while and I would tell him to take it unless you're 100% sure you're going to build a $20 billion public company, $10 billion public company. And if you are, do it. But I like to stress the test, right? So I'm not saying that's the right thing to do, but I want to be the guy that gives that advice.

• 55:28Harry Stebbings?

  10 or 20, because that's two different outcomes.

• 55:31Speaker 00

  Even 10 is not really worth it for a founder. It is worth it for the VCs. Excel gets another play, right? Here's the issue, right? 3 to 10 for Excel, huge difference, right? So let's say they own 15% out of a what? 450 million dollar fund? Who knows? Let's make it up, right? So instead of a 1X fund returner, it could be a 2 or 3X. You make that bet as a VC all day long, right? For the founder, let's say he owns 10%, what the hell is the difference? There's no difference. We've had billionaires on ours. You've had billionaires, Harry. I don't think Jeff Lawson would be living the better life with half the money or twice the money. It's the same dude. So like, there is a weird disconnect between 3 and 10 here for VCs versus founders. Because 1X your fund and 3X, that's a lot more carry.

• 56:09Harry Stebbings?

  So I would say with an Excel and index, you're absolutely right. They'll absolutely take the risk for another turn because they have the luxury of doing so. They don't need to return cash to LPs in the same way that maybe other managers do. If you are not a tier one GP though, you will want to provide DPI to your investors.

• 56:23Speaker 00

  I don't believe that. I don't believe that. I don't see it. I've asked my LPs, I've asked a few others. If you're a strong manager, okay? If you have a track record and their goal is not a 3X seed fund, but if they really want 5X or north out of you, they get the game is you got to keep playing another card. No matter what they say, I've asked my LP, and I guess it's a small set. Do you want more money back, right? Even ask my most conservative LP, like a university endowment that is small, right? That has stress. I asked, well, would you want your money back? I mean, with the game, they're like, no, we're just telling you, we're really worried about it. Like, we really want DPI, but we don't want it. We want you to play another card. So I think if you tell them, I seeded into Synthasia and we've got a chance to 3X it, they're going to... Tell you to go for it, that we're going to trust the fund manager's discretion here.

• 57:08Speaker 00

  I just don't know that there's this massive DPI pressure if you have a hot, if you have a hot hand. I think there's DPI pressure if you have a mediocre hand, in which case, so what? Because it's not enough DPI. What the hell's the, this is the other thing on X. What's the hell's the point of returning point two percent of, 20% of your fund? Hooray, I got an exit today. I returned 21% of my fund. Like, that ain't the full job, friends.

• 57:29Speaker 01

  So the first question really should be, it's actually what Jason said is, Victor, you know, I admire Syntesia enormously as a company. We tried to contact them. They didn't get back to me. They got the deal done. I'm so disappointed. We have another investment in the space. I love the space. I admire Syntesia a ton. And the first question is, how do you feel about the business? And you threw out a statistic there. They said they were at 100 million in ARR when they took the Adobe money in April. If they really have gone from 100 to 150 in less than six months, then I can make this conversation really quick. There's no way they should sell because that thing's exploding.

• 58:02Speaker 00

  It's a good point, and it probably is. That probably, that sounds, I don't think that's Sony baloney. That sounds right to me.

• 58:07Speaker 01

  Even if not, even if they got, you know, doubling kind of growth, it just feels like a good category. That's the reason we made another investment in the space. We like the category. We like, you know, I think there's runway there for that kind of human interface to compute. I always tell the CEO, now would be a really good time for you, A, to look into your own heart and see how you feel. And if there's something about the business that's really worrying you and you haven't told us, now would be a good time to share. And sometimes stuff comes out, right?

• 58:35Speaker 00

  The other reason I tell CEOs this, one, I would tell Victor to sell at 3 billion. And it's okay if he says no. I would do it because I wanted to be the guy. Even if it wasn't in my direct interest as a gambler, I want to be the guy that has that conversation with them. There's another thing that's under discussed, and I've had this conversation twice with founders in the last 12 to 18 months in similar situations. Is, are you really an IPO guy? There was one where I love everything about this company. I love the founders. I love everything. There's nothing negative. And I told them to take the offer, even though I didn't want them to as an investor. I told them to take the offer because they said, are you sure? You're such a great set of founders, but I don't know if today, I see you living the, what these public companies see you life. Like, I just don't. See it, the, the way you have to do it, the constraints, the stress, I just don't think that's what you want to do.

• 59:19Speaker 00

  So I think you should take the deal because I don't know if, if it's Synthesia or Synthesia Prime, you're going to get another offer like this before the IPO. That's the thing. You have to assume it's IPO or bust. Then you're going to bring in an outside CEO or you're going to, it's just a mess. So that's the question I have. Do you, can you really run up, do you really want to run a public company for real?

• 59:38Speaker 01

  That's an excellent question, Jason. Genuine. That is really an excellent question. Cause you're right, at three billion, there's not going to be a ton of people coming into view offering five. You either got to become cash or positive and settle down and just become the Collison brothers and compound private forever to the universal befundement. Or you gotta go public. And the fact, by the way, that it is perceived by so many CEOs as a pain in the butt is in my view, the thing about being public that has to change. Cause what you're doing is you're allowing this thing to get in the way of people entrepreneurial ambitions. I think you're right that it's a pain and I think it's a shame that it's a pain and I hope it changes.

• 1:00:14Speaker 00

  I mean, I was at this Dreamforce Benioff dinner. It was great. And I saw maybe 10 public company B2B CEOs that we know that have all been on Harry's show and Rory's invested in some of them. And it was great and it was fun. I got some hugs. Believe it or not, I'm a hug. I don't give the hugs. I like to get them. But um, man, the stress on those guys, I think you could just smell it out of the pores, you know, the stress. And the weight of being a public, it's so heavy today. We could see it when we'd had Jeff Lawson on and Cliff didn't have any of it at Canva. He didn't have any of the weight. It's crushing.

• 1:00:44Harry Stebbings?

  I have Mike Cannon-Brits on the show from Lassian.

• 1:00:47Speaker 00

  Yeah, some crushing weight there too. I saw it. Some crushing weight I saw on that one, right? You saw it, right?

• 1:00:52Harry Stebbings?

  The weight of being the unreasonable man. Yeah. His co-founder calls him the unreasonable man. The guy who wills things into existence and, and the weight of that you could see on his face.

• 1:01:01Speaker 00

  And when I look at the ramp and the Mercor and the stripes, like these are epic companies, right? But I don't see that weight yet. I'm not saying it's not, it's the hardest job in the world. Don't get me wrong, right? But I don't see the, the deep crow's feet and, and like, you know, Aaron Levy going from, from going gray at 28 or whatever. I just don't see that level of, of Anvil level wily coyote weight on their, on their head.

• 1:01:25Harry Stebbings?

  That will go to something about Android and capital efficiency. Rory, I just have to ask you, you said there about like, hey, we tried to get in contact with Synthesia, they didn't get in touch. I've learned over time, if you want to be in Android, the best thing is just to pay the higher price for Android, not to try and be in the next one. You said you've got another play in the space. Why not just be in Synthesia? And do you not think this market takes the way most markets do in terms of composition and the winner accrues the most value?

• 1:01:52Speaker 01

  I do. I think we're, it's a broad way. We have a very different product. It's kind of real time interactivity versus asynchronous avatar. So there's a big difference in terms of the interaction. It's a company called Tavis. So basically, instead of pre-recording an avatar, saying something or having an hour of runtime, you actually have real time interactivity with the avatar. At high level, it's the same conceptual trend, but I agree. We looked at Synthesia wannabe at the time. I'm not going to mention the name and we decided Synthesia is one. You're not in the business of doing modest number twos. Agreed. So you're playing the broad trend in a related but different market. I agree. You never want to do the number one wouldn't have me, I couldn't get into them, or they just raised a round. You either pay up for the later round. I made that mistake in

• 1:02:35Speaker 01

  2013. I won't mention the two companies, but we had missed the rounds that were the typical scale round for company A. We actually had a chance with a lot of networking and to do a very late stage round in company A, or we could do a more normal scale round in company B in exactly the same market, the two most head to head companies I've ever done. We did B, we got a 2X, we didn't do A, we left a 15X on the table. Literally, every time we discuss this in the off site, one of my partners, I love them dearly, the canonical example has become that decision. And I'm like, am I going to hear about this till I die, people? Right? I know I got that one wrong, but they're right. They're right to mention it. That was a, you thunk through, exactly. You never

• 1:03:19Speaker 01

  want to do the way behind exact same category number two, if they're way behind. This is too hard. I remember the week I got that learning. I can tell you where, exactly where I was when I took those two phone calls.

• 1:03:30Harry Stebbings?

  Okay, we can do Android capital efficiency, we can do Amazon. Amazon layoffs, we can do Amazon cloud wars or Oracle debt, you choose.

• 1:03:39Speaker 00

  I feel bad for Roomba, but you choose.

• 1:03:41Harry Stebbings?

  You want to do Roomba?

• 1:03:42Speaker 00

  Kind of it because this whole talk is about how everything's up and to the right. Poor Roomba gets an offer from Amazon to buy them for 1.7 billion. Blocked by antitrust, they raised 200 billion, million of debt to finance the gap. And now it's all spent and they're probably going to go bankrupt. This is why maybe, maybe, maybe take the Synthasia offer. Owning maybe a half dozen Roombas over the years, it's a tough, it's a tough end to a founder journey, isn't it?

• 1:04:07Harry Stebbings?

  Do you sue the government in that case?

• 1:04:10Speaker 01

  No, I think in the UK it's called Crown Immunity. It's, it's hard. In the UK, you have Crown immunity where literally governments are protected from incredibly dumb acts because of the government. I think over here we have more rights, but still, and I'm winging it here now. I can't remember that they actually, if the DOJ blocked something on antitrust, you can, you can take them to court. And those DOJ decisions have been overturned. I can't remember in this case, did they take it to court or did they just decide to fold? And if you decided to fold, then you probably can sue because you had a statutory remedy and you chose not to take it. Again, zooming out for people, the story here is I Rumba had a deal to be sold to Amazon. And the FTC led by Lina Khan chose to block that deal.

• 1:04:53Speaker 01

  Because I think Benedict Evans said on his, because of an insipid monopoly in the house vacuum cleaner marketplace. Very tongue in cheek, right? It was an absurd decision at the time and only got more absurd since. Because unfortunately, the poor company, which was a consumer hardware business with all the gross margin profile that that requires. Struggle on a standalone basis and you right now faces the risk of going bust. It's a horrible and unfair outcome for which the government and Lina Khan and the FTC is entirely responsible. Based on an outdated, stupid and foolish paper and a foolish belief about how things work.

• 1:05:29Speaker 00

  It's, it's also another, I mean, there's those whole how the antitrust killed the company. It's the edge of no politics rule, right? But not past it. It's also a reminder that like, when you go into the, the M and A offer, the Synthasia, sometimes you'll get like the choir will pay a multiple. That only sort of kind of makes sense, a revenue multiple that makes sense for them. But you couldn't get, and so, you know, when you get one of these deals, it's tragic, it died, but you've got to take it.

• 1:05:53Harry Stebbings?

  I don't know if you're a synthetizer, you're looking at Dylan and Figma going, God, do I want to put myself in that potential 18 month waiting period? By which time I'll be 400 million in revenue being acquired for 3 billion. No.

• 1:06:06Speaker 01

  Exactly. How you said it, it's, you think you're getting this great multiple of, oh, they're paying me 30 times revenue. But the damn thing's going to close in 18 months, by which time you might be down to 10 times and it's just not going to feel that much. Like, I don't think Wiz has closed yet. I could be wrong. I think it was early 20s.

• 1:06:22Speaker 00

  That's the crazy one that hasn't closed. It's crazy, right?

• 1:06:24Speaker 01

  If you think about it, everyone's like, yeah, you got a two and a half X in six months. No, you didn't. You got a two and a half X in two years, right? And this prolonged antitrust process really is kind of sand in the gears for a lot of these M and A decisions. And at the margin, probably pushes people to push out either A, push on, or B, in the case of the crazy deals, when the acquirer only wants the people, then they do the, you know, the Silicon Valley aqua high routine. But, you know, when you're buying the vacuum cleaner company, you want the fricking vacuums.

• 1:06:53Harry Stebbings?

  That duration period though is also why I think it's our responsibility as early stage managers to be much more proactive in secondary markets. Cause we get cash back way sooner and the age old thing of a four X fund over 17 years is the same as a 2.5 X fund over 10. And duration matters and time matters and IRR is king.

• 1:07:11Speaker 01

  It's not the only king, because look, in this very show, Jason was going, oh, it's only a 30% IRR ramp from the 22 billion to 30 billion. From an IRR perspective, that looks amazing. So I don't think IRR matters. I actually think for the record, I think the correct formulation of the optimization function is the maximization of multiples subject to a constraint on a minimum IRR. Just to be a total geek here. Basically, you should know what your target IRR is. And let's just say it's 25%. Let's just say, right? You want to maximize the multiple, provided you don't dip below 25. But that's actually what you're trying to do, right? So for example, a 30% IRR in one year isn't as good as a 25% IRR for four years.

• 1:07:54Speaker 01

  But if you hold on too long and that 25 starts dipping to 19, 18, 17, then you've gone to a different place. That is the rule. Cause in the end, you want the maximum amount of capital to invest, because you are held accountable at the investor level at the IRR basis, because at some point they're looking at you, they're looking at the public markets and they're saying, risk adjusted, I need me my 20%. So it is the constraint because it's what prevents money from coming down the spigot to you. But you're actually trying to maximize your multiple.

• 1:08:22Harry Stebbings?

  So this shit is hitting the fan at Amazon before we do agree or disagree. 10% largest layoffs in history, 10% of white collar, that is. Falling behind in cloud wars from 50% of cloud revenues in 2018 to 38% today. Raymond James sees Amazon's AI cloud share falling to 7%. Then we had the outage, billions of damage. This was a bad fortnight.

• 1:08:47Speaker 00

  You know what? Maybe it's not fair, but what I was thinking is contrast this with Sergey Brin coming back to Google, everything else happening. Maybe, maybe it was a tough time for your founder to leave and go to Miami. Maybe it seemed like a very stable time to do a transition, right? I mean, Jeff Bezos, longtime as CEO, but maybe stepping down just before AI hit was suboptimal for Amazon.

• 1:09:09Speaker 01

  Yes, or maybe it was brilliant for Jeff, because maybe.

• 1:09:13Speaker 00

  He's off the hook.

• 1:09:14Speaker 01

  Because you're implying in that had he stayed, all these bad things wouldn't have happened. And it's plausible, just given his, you know, world top two or three entrepreneurial achievement of the last three decades. But it's just worth pointing out what the two big problems they have are. The first problem is in their retail business, they over invested for COVID. And now they're trying to replace people with robotics because the technology is there. And that's just something that had to be done. That's just more of the same. And in cloud, it's less that their core AWS business has folded up. It's like all the new compute, which is 10x and 20x larger in terms of demand for these customers, is AI related compute.

• 1:09:56Speaker 01

  And you, you've neither built something compelling standalone, nor have you partnered, except to be fair, a little bit went on topic. You didn't make a meaningful partnership and you haven't found a way to get some of that compute.

• 1:10:07Speaker 00

  But he had four years. Andrew Jassy took over in July 5th, 2021. Bezos checked out right at the peak of the last era, when, when products were frozen in time for a decade, when AWS was the same product for a year. So are most of the companies we invested in, all three of us in 2021. They were the same products as 2015. It was the great time to go to Miami because nothing was changing in the world. It was just go, just stock prices were going up in revenue. But the products were the same. So why wouldn't you retire? This is not going to be any change.

• 1:10:36Speaker 01

  Punch out at the top. No, it gets gets an A++ for market timing.

• 1:10:39Speaker 00

  No, I think he gets an F.

• 1:10:41Speaker 01

  Oh, God.

• 1:10:42Speaker 00

  If he sold his company, you get an A+.

• 1:10:44Speaker 01

  That's true.

• 1:10:45Speaker 00

  Yeah, like my last deal, Salesloft, December 2021, you know, two and a half billion. That was the last deal of the era. You know, Kyle and team get an A+ for timing. This is not the same.

• 1:10:56Speaker 01

  I want to congratulate Carl. Exactly. This is not.

• 1:10:58Speaker 00

  This is not the same. This is punching out at 2021 and not punching back in like Sergey.

• 1:11:02Speaker 01

  Cynical comment here. You're right. But when you've got a couple of hundred billion dollars, my guess is you're not maximizing money. You're maxing psychic pain and joy. My guess is his psychic joy in the last three or four years doing what he's been doing has been significantly higher than the psychic pain that would have been involved in realizing you've never done a big acquisition in your life. You've got to do a huge corporate deal in AI to matter. And B, all those people you hired in 21, trying to do the right thing for COVID and expand, you all got to lay them off.

• 1:11:32Speaker 00

  I think Bezos would lay off half his company in a fortnight if it was the right thing. I don't think he even care.

• 1:11:37Speaker 01

  Well, he'll have that chance.

• 1:11:38Speaker 00

  I mean, Chegg had to bring in, poor Dan Rosenwick out of retirement to rerun Chegg. After laying off 80% of the company, they had to bring him back. They got to bring Bezos back.

• 1:11:47Speaker 01

  I think, and to be fair, one thing we shouldn't do here, and you know, you saw a lot of it with Google too, is that you don't want to overcompensate. I mean, if you look at the two, if you kind of, there's a bunch of bad news in one day, and it is bad, right? But a lot going on in the last, right? But again, going back to, your position in retail is broadly good. You know, I think you've become a little schlocky in terms of shopping experience. But you have dominance because of your distribution and you're doubling down on that. You're reinvesting in robotics, you're cutting costs. And Amazon wins in their retail business because they can deliver shit faster than anyone else on the planet, pretty much anywhere. And you're doubling down on that. So that's like a win. You're right. On the compute business, on the AWS business, your problem is you just,

• 1:12:29Speaker 01

  you're not relevant in the new world. So just knuckle down and figure that out. To be fair, of the three hyperscalers in the pre-AI world, if you look at it, Google was able to be relevant because they had their own model. Microsoft. Went and rented a model from OpenAI and now now the contract's nearly up and they did it to make a lot of capital gain, but they didn't actually, in my view, really develop something compelling that they own from it. And you did nothing. So you lose. You you need to do something. They got a set of problems on the AWS side. They have to get AI relevant without frankly, doing what Arctil I fear is doing, which is taking on a whole bunch of subpar economic transactions. They do have a good slog of Anthropic, not as much as Google, who I think owns fourteen percent, but I don't.

• 1:13:10Harry Stebbings?

  Google owns fourteen percent of Anthropic.

• 1:13:13Speaker 01

  Google, yes, Google win. Yeah. I mean, again, we should be promoting all these cop dev guys. They're doing great.

• 1:13:18Harry Stebbings?

  Unbelievable. Guys, we're gonna do agree or disagree. Okay, I got three statements. Rory, you love this. Hide your excitement, Rory. It's too much.

• 1:13:26Speaker 01

  Killing shit out of your ass. I hate it.

• 1:13:28Harry Stebbings?

  No, I know on the previous hour and a half wasn't.

• 1:13:33Speaker 01

  I did. I do research, Harry. That's the difference between us.

• 1:13:36Harry Stebbings?

  Ah, dear, it's a very fair point. I can't disagree with this. Okay, first one, I would rather own Brex at thirteen than Ramp at thirty. Ramp is at a billion in revenue, Brex is at seven hundred. They're both around the break even to moving profitable phase.

• 1:13:54Speaker 01

  And you've given me all the information except the only information I need, which is what's the growth rate?

• 1:13:58Speaker 00

  Brex said fifty percent. They just said they're going fifty percent now. I don't know what Ramp is. This is where my cognitive bias, I'm gonna go for Brex because it's lower. I can't help myself. I cannot help myself. I can't help myself. I don't have that much money to invest. If you gave me a great deal at a hundred, if you gave me Ramp at a hundred million and Brex at thirty or forty, I'm still gonna do Brex probably.

• 1:14:18Speaker 01

  I could assign a homework assignment that would make this actually an interesting discussion. It's watch, we have all the data points we need. We have the relative size, the valuation and the growth rate of Brex, right, at fifty percent. The correct question is, what growth rate should Ramp have such that you're indifferent between those two prices? You know, if Ramp is at a hundred, you probably want Ramp. If Ramp is at fifty, you definitely want Brex. Actually, the fundamental question, I would argue, in all of venture is how much extra do you pay for how much extra growth? If you could buy Ramp at whatever it is, seven hundred million, fifty percent growing at thirteen, break even. And ramp one billion at thirty billion, there is an equilibrium growth rate that would

• 1:15:00Speaker 01

  make you indifferent between those two prices. And it's actually because it's actually a very fun exercise because it actually is the core problem you face over and over again in venture, which is how much extra do you pay for seventy percent growth over sixty, over fifty? You're paying almost two to two and a half times the revenue multiple. How much more growth would you want from that? This is your job on the show, Rory. You got to tell me. Yeah, no, it's hard to think and talk at the same time. Keep going.

• 1:15:21Harry Stebbings?

  You weren't relying on us for analysis, were you, Rory?

• 1:15:25Speaker 01

  Shark hour, yeah, I was. Keep going.

• 1:15:27Harry Stebbings?

  Okay, Andreessen deserves the prize for best performing mega platform of the last twelve months. Discuss.

• 1:15:37Speaker 01

  They're going to get the prize no matter what I say. It doesn't matter. They're getting the ten billion. That's prize enough for those guys. They'll be fine.

• 1:15:43Harry Stebbings?

  I've been impressed by them. I've been with them across the board. And I think one thing that people often say about Andreessen with absolute respect to them is they have so many people and that almost suggests that they can't all be good. They have so many people, so like, whatever. I have worked across the board with the different partners. They are as good as the partners at smaller firms with three to five partners, and they've been fantastic. Like, I'm a big bull on Andreessen now, where I was not before.

• 1:16:10Speaker 01

  I agree. They've been operationally excellent. I mean, what they did is my, I've been thinking about it. What they brought to the venture business from two thousand and seven, eight on is they went into it solving the problem from the founder back with operational excellence. And on that, they've delivered in spades. They've figured out what the founder wants. They've aggregated and delivered to him. The return profile of that has been excellent. I mean, I've seen the numbers. They've been excellent. And the question, that was the question, and they pulled it off. And that's why I think it's smart the way they have. I mean, obviously, they're just like, I can never pronounce the gentleman's name, Andre, but very impressive. I've heard him speak, who's going to do his own thing.

• 1:16:46Harry Stebbings?

  Andre Hitter.

• 1:16:47Speaker 01

  Yeah, I mean, super talented guy. I heard him speak. I'm very impressed. They have a constant churn. And I was thinking, even that's okay, because they have a platform that transcends. They'll find other good people. They'll have, they have the little pockets to play with. So they can, you know, they can give you your little infra world. They can give you Chris's crypto world. Everybody can have their thing. It's just like investment banks where you know you're the second co-head of North America. Everyone's got a great title and Mark and Ben sit at the top and life is good. It's a well-functioning scale machine and the take 15 years ago was venture couldn't scale. And it's TBD how far it can scale, but they've scaled it far more than anyone else would have thought 10 years ago.

• 1:17:25Harry Stebbings?

  When we sit and look at Series A, we don't sit and be frightened by Index or Excel or the big European players. We sit and be frightened of Andreessen coming into Europe. They're the ones who beat you.

• 1:17:36Speaker 00

  Okay, good to know. You want to be in the top two choices for a founder at your stage. That's when you win in venture. It'd be nice if you're in every stage and every deal, right? And I think Andreessen has elements of that today, a top two choice in so many stages from so many types of founders. Y C has that in a sliver, as do others. If you're not, man, it's just, it's just a different game than when you're a top two choice. It's just a different game. That's what you want. So I agree with you. There's only, only two people can be in the top two, right?

• 1:18:03Harry Stebbings?

  Final one, of all the could be public but are private late-stage companies. I would rather be a shareholder today in Anduril, the hottest at 50. Agree or disagree? And if disagree, which would you rather?

• 1:18:19Speaker 01

  I'd prefer to be in Anduril because I actually think the mission is great. Let's start with that. I think I give him huge credit for stepping up to defense in 2017 when a lot of people wouldn't. What they're doing is good for defense, good for the country and hopefully going to make them a lot of money. I don't know if 50 times revenue for a defense contractor is as good a bet as 20 times revenue for an Entropic or an OpenAI where you've got myriads of customers. Where in Anduril's case, you're dealing with the dysfunction of the government as the major customer. But just from a god, I, genuine comment, I think the people who did that early should be incredibly proud of what they've done. And they've moved the needle in a very, very hard market and they've pulled it off.

• 1:19:02Speaker 01

  Because maybe it's not worth 50 right now, but they've bullied their way into being a prime and they went. So that's cool.

• 1:19:09Speaker 00

  No, one, not interested in the company personally, just personally at this point in life. Want to do things I'm interested in to a fault, not interested in building weapons and stuff like that, just not my vibe. Two, I don't go to enough parties in SF because if I did, and this sounds facetious, but you know what I'm joking, I'm never really joking, fully joking is where it is. There's no better brag at a party than Andro that you did it, right? It's the ultimate founders fun brag, it's just, it's just the ultimate brag. You know, one of the psychic benefits of investing is bragging, right? At many levels, there's different types of bragging, there's bragging because I have a sense of worth in my life that I don't, I have, I'm bragging because I wrote a tiny check, but, but I'm validated in my, in my, in my soulless job, there's so many levels of validation,

• 1:19:51Speaker 00

  but I just don't go to enough of those parties since 2020. But if I did, I'd want to have that one on my chips to, to talk about at parties, but I don't care. And I'm not into bombs and weapons, so I'm, I'm out on this one.

• 1:20:03Speaker 01

  The amount of self-knowledge embodied in that last two minutes from Jason is just stunning. I mean, the therapy is clearly working, dude. But you know.

• 1:20:11Speaker 00

  It's just called being happier.

• 1:20:13Speaker 01

  It's got, that's, I think it's actually called getting older and wiser. I love it.

• 1:20:16Harry Stebbings?

  Listen, guys, on that incredibly hearty note, thank you, this has been fantastic and I've loved it.

• 1:20:22Speaker 00

  All right, rock and roll, thank you, Harry, thank you, Rory. Thank you.

• 1:20:27Harry Stebbings?

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