20VC: Cognition vs Factory: Vinod Khosla Creates a Storm | OpenAI Nears $70B Run Rate: Anthropic Under Threat | ElevenLabs Doubles Its Valuation to $22B & Salesforce Buys Listen Labs for $2B

Joinin the trio today we have Dev Ittycheria, CEO @ MongoDB. AGENDA: 04:00 OpenAI Nears $70B Run Rate—Anthropic's Lead Under Threat 12:00 Factory vs Cognition: Silicon Valley's Talent War Turns Ugly 23:00 Vinod Khosla Blasts His Own Portfolio Company 25:00 Reflection Launches Beam: America Strikes Back in Open-Source AI 34:00 ElevenLabs Doubles Its Valuation to $22B 37:00 Salesforce Buys Listen Labs for $2B—Sequoia Cashes In 46:00 Vercel Hits $600M ARR as Agents Drive Half Its New Business 55:00 Former Groq Engineers Sue Over Nvidia's $17B Deal 01:01:00 Meta's Muse Steals the Show as OpenAI's Dots Underwhelms 01:05:00 Oura Pulls Its IPO Despite 74% Growth—A Warning for VC

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

• 0:00Speaker 00

  It will be super interesting to see where that Anthropic Q3 number comes out.

• 0:05Speaker 01

  I've never seen a CRO flip from one competitor to another.

• 0:08Speaker 02

  But I just think in the AI age, the definition of loyalty has changed.

• 0:12Speaker 01

  I think the reputational damage that you can do, you know, long term is going to come back and bite you. Basically handed every other firm a weapon when they're competing on deals, saying, is this the partner you want when things go bad?

• 0:24Speaker 02

  When agents pick you, it's a force of nature right now.

• 0:27Speaker 00

  There's a lot that's got to happen between now and the Anthropic IPO in the middle of November.

• 0:32Harry Stebbings?

  This is 20 VC with me, Harry Stebbings, Jason Lemkin, Rory O'Driscoll, the biggest news in tech. And we have a special guest joining us this week, Dave, the returned CEO of MongoDB. And today we discuss OpenAI, they are closing the gap on Anthropic, nearing a $70 billion run rate. Then we have the factory in the cognition debacle, Salesforce then buys Listen Labs for $2 billion. Reflection, could they be the US's best hope for an open source model that can compete with China? This and so much more in today's show. But before we dive into the show today, Base44 is one of those products I used. And I just thought straight away, man, I wish I'd had this when I started 20 VC with $50 and no contacts in venture.

• 1:14Harry Stebbings?

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• 1:54Harry Stebbings?

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• 2:37Harry Stebbings?

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• 3:22Harry Stebbings?

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• 4:07Harry Stebbings?

  You have now arrived at your destination. Boys, it is so good to be back and we have a phenomenal guest joining us today. Dave, thank you so much for joining us, dude.

• 4:17Speaker 01

  Thank you, Harry. Thanks for inviting me and being part of this amazing group.

• 4:21Harry Stebbings?

  You know what, actually, I don't know if you guys know, but Dave gave me feedback that we needed to move on faster from just OpenAI and Anthropic.

• 4:29Speaker 00

  I love it.

• 4:29Harry Stebbings?

  And we really took it to heart. And so taking it to heart, I thought we'd start on OpenAI.

• 4:34Speaker 01

  Well done.

• 4:35Harry Stebbings?

  OpenAI nears a $70 billion run rate and goes for $30 billion at 1.4 trillion. But the IPO is going to wait until 2027, despite Anthropic going out in the next few weeks, it would seem. What do we think, boys?

• 4:50Speaker 02

  The crazy thing to me, when I think about the story is, I mean, OpenAI is back, right? 70 billion in revenue, but more importantly, if you look at your portfolio companies and others, Astro, Sol, Lunar are everywhere, right? Everyone's using them, everyone is using them. And when you think where we started this year, a lot of things in B2B only worked like at the end of last year. And like only Anthropic could get this stuff to work. And even coding at the start of this year only worked on Anthropic. And then we went into the summer and it kind of seemed like, you know, OpenAI in some ways was on the rope because consumer was the wrong path and they couldn't get back. It's only October or something.

• 5:25Speaker 02

  I mean, the rate of change here and the rate at which the OpenAI team got back in the game and made something that is truly epically competitive to the point where people are switching out their models for real because it's better and cheaper. It's crazy that pace at that scale and it's 70 billion, it says it all, right? So, I mean, you counted them out three or four months ago, not literally, but figuratively. And now if they launch a truly competitive set of model, LLMs, it's like instantly massively competitive. It's crazy, massive kudos, I think.

• 5:57Harry Stebbings?

  What happens if Anthropic's numbers for Q3 aren't blowout? Like every team that I speak to has at least deviated some meaningful portion from Anthropic to Codex. And everyone says how amazing it is. What happens if they're not blowout numbers, like the world really just assumes Anthropic always has now?

• 6:16Speaker 01

  The interesting thing that we should also learn from this and having sold to developers the last 12 plus years is that there's not a lot of loyalty. Developers are very quick to use, to switch from one tool to another or frankly, use multiple tools. And, and I think what we're seeing is that developers are quick to find the shiny new toy. The question is, you know, what will Claude or Anthropic come out with next? And what are the other alternatives? The other thing that's, I think, interesting also is that what OpenAI has done is shown that when you have essentially a billion people using ChatGPT a week, that's a great distribution channel. But the potentially where the mode is where the enterprise business is, you have to sign contracts, you have to train thousands of employees, you have to build workflows.

• 7:02Speaker 01

  And it may be hard to switch the DP again to the enterprise. That's kind of a little bit of reaction I had.

• 7:07Speaker 02

  Yeah, I guess in that sense, OpenAI's run rate is even more impressive, right? I mean, maybe they are already embedded, maybe they're already through procurement, but that's pretty fast change in the enterprise too.

• 7:15Speaker 01

  Yeah.

• 7:16Speaker 02

  Can I ask you a follow up question? From your seat, do you think that is a blocker for more progress in open weights models in the enterprise? Just the literally the ability to get through procurement, get, get approved or do you not? Where do you, I mean, obviously the explosion this year is crazy, but, but it is, it is a hurdle to get over. What are you seeing from the MongoDB and Sequoia side?

• 7:34Speaker 01

  Well, actually, from a MongoDB side, I was just talking to our CIO and we're talking about token costs and token budgets, right? So cost is a big factor that I think every enterprise has to consider. No one has unlimited budgets. The second thing is IP rights, you know, how we train these models, who gets the data, how proprietaries the data. And I think those two things are also pretty important points when it comes to what models you choose and who you work with.

• 8:01Speaker 00

  As you often do, how you put a lot out there. And I think you're right, forget the valuation stuff, which we haven't even discussed it, just the raw number, the 70% Q on Q for OpenAI in Q3. And I tweeted at the end of Q2, when the OpenAI numbers came out for Q1 and Q2, and the gap revenue growth from Q1 to Q2 was 18% quarter on quarter. And you did that math and it was, that implied, you know, just under 100% year on year growth rate, which was massive deceleration at a time when Anthropic was still growing 10x. So like at the end of Q2, that was the state of the race. And I don't like to make this a horse race because you need to zoom out, but there's a part of it is a horse race.

• 8:40Speaker 00

  And if you noticed really early on in Q3, all the OpenAI team started really tweeting, we're having a killer July. Do you remember Sarah Frye coming on that, we're having a killer August? It was clearly that they internalized that. Q2 was the first time Anthropic and gap revenue was larger than them. And it just felt like they were pulling away, you know, 11 billion versus 6.8 billion, growing 10x versus growing 2x. Suddenly a 70% number, no matter what, we'll talk about Anthropic in a second, but no matter what Anthropic does, at least changes that narrative back. If it really is correct, then we don't know. But if gap revenue grows 70% Q on Q or even 60% up from 18% Q1 to Q2,

• 9:20Speaker 00

  that's a massive re-acceleration and, you know, just, just starting with a huge win and the big fricking sigh of relief. Because, you know, given the OpenAI forward purchases of just about everything from compute to data centers to land in Virginia, if they didn't grow at a hyperspeed, a lot of things come unstuck. So that's the first thing, which is if true, amazing for OpenAI. And then you're right, the second thing is, did that come, and this is where the dev comment on developer loyalty is important, is that did it all come at the expense of Anthropic? In other words, you're asking a question, is this a rotating share game? They accelerated 70% and then Anthropic slowed down markedly or did they both grow pretty well? In which case the, you know, you can lean into the TAM.

• 10:05Speaker 00

  And you're right, if the OpenAI growth rate was the key missing card, you know, the missing data point, now that you've allegedly seen that card, and again, we're assuming the 70% is correct. You're exactly right, the next shoe to drop is, okay, OpenAI, you paid your 70% card. Now we're going to play our still its 10x growth card or is it going to be the 5x growth? Or is it going to be, hey, we've slowed down a lot? It will be super interesting to see where that Anthropic Q3 number comes out. And I won't say it's no accident, but it's worth noting that the timing of the IPO now is such that that number will be in the prospectus. But it will be known at the time they go public.

• 10:42Harry Stebbings?

  If we disentangle the revenue from the price and the round, then Rory, as you quite rightly illustrated I should have done, poor Harry. 1.4 trillion, the largest private round, $30 billion more. I mean, I thought we'd dried up all private capital. Clearly, there's more. How do we think about this, Rory?

• 11:01Speaker 00

  This would be the first ever venture round above a trillion dollars. That's pleasing. The first ever private trillion dollar. I remember in the mid 90s, I remember the first above a billion dollar round and we were like, whoa, that's kind of crazy. Yeah, moving right along with three orders of magnitude.

• 11:18Harry Stebbings?

  Rory, congratulations for becoming the new head of Calpus Pension Fund and you are now in charge of Directs. And you have the chance to open AI at 1.4 or Anthropic as they go public at 2. What would you like to do?

• 11:31Speaker 00

  Oh, I think you lean to liquidity. It's a lot better to have liquidity than not have liquidity. You separately have to value the two companies, which has worked more, but then separate from that, you really asked a question liquidity versus illiquidity. I would much prefer to be in the liquid stock when the amount of information is as unknown as it is. You either want the liquid stock or you accept that you're holding for three or four years because that's what the risk of being private is. Yeah, you think it can go public next year and it should be, it's damn it, it's big enough, but you never know of the world. So I probably would lean to liquidity at the margin. Sorry, boring answer.

• 12:03Harry Stebbings?

  We can go to Anthropic's IPO or we can go to the slightly salacious one, which is Factory and Cognition. I think we should go there. I'm going to just throw my hat in the ring there. So I'm going to provide some context. Chris Degnan, sales leader, legendary from Snowflake for many years, was a all observer at Factory. Spoke to Mattan every day, according to the founder, and was very close to him. And whilst he was very close to him, was interviewing for a role at Cognition, according to the founder, Mattan this is. And then took the role at Cognition as CRO. And that is when Mattan came out and said, you're barred, this is wrong and how bad of you. Let's start on that before we discuss Vinod. How did we analyze this?

• 12:48Speaker 01

  Yeah, so I just want to be clear. I know Mattan personally. I'm an angel investor, Sequoia's investor in Factory as well. And MongoDB is a partner with Cognition. But the fact that an advisor has access to a founder's confidential plans, they should be clarity on, you know, with the founder that they're thinking about going in a different direction, especially if that's a potentially competitive situation. But if I was the CEO, I'd be pretty annoyed to see someone who had access to my plans go to a competitor. Again, I don't know if that had happened. That would be quite upsetting to me if it did.

• 13:22Speaker 02

  On the other side, like as a CEO, it's going to be profoundly frustrating, right? Your advisor goes off and joins a competitor, right? It's happened to us all at some level. I would think 95% of the CROs we would talk to would say, this is fine, man. This is the way it works. Like CRO is a risky job. There's a lot of turnover. Jobs come in fast and a lot of CROs, if it's a hot job, they move very quickly. And so I just think that a lot of CEOs would be frustrated. I think 95% of CROs is saying, this is how I found my last job.

• 13:51Speaker 01

  Jason, I'm going to respectfully disagree because remember that CROs also hired other people to work for them. Selling them on the company, selling them on the vision, selling them on how they're going to make money and how it's going to be transformative for their family. If that person were to leave, they'd basically burn their reputation with everyone they recruited as well. So I've never seen a CRO flip from one competitor to another. I've seen a CRO go from one company to another company in a different space because they think that's a better opportunity. But I've never seen a CRO, at least that I can remember, that's ever flipped from, you know, one company to a direct competitor of another.

• 14:24Speaker 02

  No, I just don't think most CROs, if they were just an advisor, not, not, he's not a full-time employee, he's an advisor, he's not even on the board. A board observer, and that's important, right? But there is a distinction between a board observer for a little while and a board member. A CRO, not a CTO, not a founder, not a CEO, gets, maybe somewhat retired, as far as I understand it. You know, made a lot of money at Snowflake and that's fine. Nothing wrong for many for retiring. Gets what seems to be the greatest job offer. It's going to happen. And then says to the other CEO, I got this offer, I'm going to take it. It'd be nice if there was a little more temporal separation, but I just think most CROs that find the job of a lifetime that are just an advisor to another.

• 15:06Speaker 02

  They wouldn't even see a conflict. The way, the way we think about conflicts as founders, I think a lot of CROs think of it as a game. Like competitors are often really friends with each other, CROs. They see it all, my job's to beat Mongo, my job at Mongo is to beat whomever, right? And so, anyhow, I just thought founder is shocking, but I don't know if the CRO is an advisor, this is seen as crossing some sort of line.

• 15:24Speaker 01

  So again, not knowing all the facts, what I will tell you is that different advisors have different roles. So you can call an advisor for a particular part of the business or a particular function and saying, hey, I want your advice on, hey, I'm looking to hire someone in Europe. Can you vet this person or give me some ideas of who I should talk to? That's very different than someone who's inside the tent, looking at your product plans, your board plans, your financial plans. And has real visibility in terms of where you're taking the business. I think if it's the former, then yes, there's no issue. Hey, this person was talking to you, you was kind of a, you know, a light relationship. And they decided to move on to a competitor. Okay, it happens. You're not thrilled about it, but it happens. But if someone had real insight into the business, real insight in terms of what the product roadmap was like.

• 16:06Speaker 01

  Real insight on how they're competing and winning and losing against their competition. And then they suddenly jump to a competitor, that would be very, very different to me.

• 16:14Speaker 00

  The interesting thing is, if you think about the employee relationship first and then the advisor relationship. At the employee level, you know, if I'm, if I have a CRO working for me, right? At any point in time, it's entirely possible that he can, he or she can get a compelling offer from a direct competitor. And go over there and literally know, know everything about what I was doing up until the minute he gave his notice. And Dev, you might think, oh, that sucks. That was a pretty shitty thing to do because you were all in for team A. And now you didn't go to another sport. You went to team B in the, in the same damn league. It's really shitty, but it happens. And the Factory CEO would, you know, voiced anger, but it's worth pointing out, if I was a full-time employee. There's no way for me to tell CEO A, hey, I'm thinking of leaving until I got the job and then I have to give my notice.

• 16:59Speaker 00

  There's no halfway measure. So to some extent, this is going to happen. If you have employees, they're going to know a lot about what you're doing. And at any point in time, they can go and do the same thing for a competitor. And at that point in time, it's going to suck. And right up until the minute before they sign that offer from your competitor, they had know all your plans. So in other words, something, shit like this can happen and if.

• 17:19Harry Stebbings?

  Or you could forward communicate. You could say, Mattan, I've been approached by Scott and I would like to actually pursue it. And so I wanted to let you know and be upfront about that because I'm aware I have a position of sensitivity.

• 17:32Speaker 00

  But okay, first of all, I'm dividing a full-time employee and then we'll talk about advisor. Because I think one thing Dev is correct, there was implicit, this is where you get explicit and implicit understanding. There was, there was probably some implicit understanding about the advisor that wasn't fully fleshed out on either side. And that's where I think Dev is actually correct. But going back to the full-time employer, I don't think you can, Harry. If your number two said to you, come in and said, hey, I got an offer from Excel, I'm thinking about it. I may go, I may not. If I, if not, I still want you to love me as if I'd never kind of thought about leaving, but I may go. And I've done that, but it's generally in an operating role, it can, it can at least be difficult, at least half the time.

• 18:12Harry Stebbings?

  I'm with you, but that's not the case here, Rory. You're doing that hypothetical.

• 18:15Speaker 00

  I know. What my point is merely, people are saying, hey, you had a part-time advisor who left and brought all this information. My point is you can lose a full-time direct report reply who brings exactly the same information and even more. So it can happen. It happens quite a lot in business. It's not like it's unusual. The thing that's unfortunate here is if the person's just doing kind of part-time advising, you kind of ended up in an odd situation where you're disclosing everything, that person's not on the board, so has no fiduciary obligations, is not employed by the company. They're probably to Dev's point with some implied statement that said, hey, you shouldn't do this, but it was never made concrete. Harry, you're shaking your head.

• 18:53Harry Stebbings?

  I think you're absolutely wrong. I think as an employee, you have very siloed information and you don't have a lot of privileges that a board member would do with the oversight on strategic discussion across the whole company, across all the different functions. So it's completely different.

• 19:08Speaker 00

  How would you say, okay, CFO, CRO?

• 19:11Harry Stebbings?

  If you're the CFO who moves on, you have no real insight into the maybe product roadmap and function.

• 19:16Speaker 00

  So do you think that an advisor, okay, so you would say, okay.

• 19:19Speaker 02

  But listen, I mean, how is it so different? Half of the, of the Frontier Labs folks are rotating back and forth, right? They go in and out. They're taking tons of intellectual property and knowledge from each other. Dev can challenge me here and I wish this were not true, but I just think in the AI age, the definition of loyalty has changed. I think it's changed permanently. I think culturally it's changed. I see it with some of the top executives I've learned, with just one prong. I mean, people move more quickly. The compensation's very different and I think you just have to expect people will move from competitors. They will go from OpenAI to Anthropic to wherever. It's just that we've changed culturally and it can bother you, but you, the world changed. We got it. We got to accept it.

• 20:01Speaker 01

  Yeah, so what I would say is the following, like, it's very rare for me to see people go to a direct competitor. It has happened. And Jason, you're right, in this age, there seems to be more of that happening than not. But it's still quite rare. And I think you also have to understand that these people have reputations. And if they're in a leadership position, they've recruited people who work for them, who believe in them, who believe the story. And then for this to get up and leave, and obviously, I dealt with this last week, it kind of leaves a bad taste in people's mouth in terms of how really committed were you to this? And did you sell me a bill of goods? In the situation where a CRO or senior executive is leaving, the question I'd ask is like, okay, I understand there's lots of opportunities out there, but

• 20:44Speaker 01

  do you have to go to a direct competitor? There's no other company who wanted you? There's no other company that values your skills as much as this company. I think the reputational damage that you can do in a long term is going to come back and bite you.

• 20:58Speaker 02

  Do we even remember next week anymore in the age of AI?

• 21:01Speaker 01

  I think you do. Actually, Jason, I would say the more things change, in many ways, a lot of it stays the same around people, around relationships, how you work with them. People too often use the AI era as like, oh, everything's changed. I disagree. I think how you manage people, how you recruit them, how you develop them, how you hold them accountable. In fact, a lot of these young AI founders struggle with this all the time, because some of them have never hired a go-to-market person, they've never hired a finance person. And so they're always asking for advice on what do I look for? And how do I evaluate someone with skills very different than mine? And they're all the same issues I had when I started my first company in 1998. Like, it's the same thing all over again. It's just obviously happening, maybe more visibly than it ever happened before.

• 21:42Speaker 02

  Until recently, my experience was there was always, when you went somewhere else to another company, there was always the rule of two, kind of like the Sith, but different, right? Wasn't the Sith like the rule of two? I don't know. You could take two people with you. So when you left Mongo to go do your own company, you could bring one, and Dev would get kind of pissed, okay? And you'd talk about it. And then you'd ask permission for the second, and there'd be a lot of friction. But if you crossed two, the relationship was broken, right? Now I'm seeing folks take like eight or 10 with them the first week. And like, it's not a cultural issue anymore, through people that I respect and think are high ethics, right? And some of that, I think, is the pressure to move so quickly in the age of AI. But I do think it's, I think it's related to this. I think it's a symptom of change, that the rule of two seems to have died. Was that your rule with your team over the years? Did you formally enforce the rule of two?

• 22:27Speaker 01

  People who left and then carpet bombed the rest of the organization, trying to follow them. And obviously, that wasn't a great feeling, and, you know, and stern words.

• 22:35Speaker 00

  Let me ask an interesting question. Would you prefer someone to a senior executive to leave and go to a direct competitor, but recruit no one? Or someone to leave and go to a totally different business, broadly endeavoured developer tools, but say, and recruit four or five of his top execs? Which would you prefer to defend, the talent or the knowledge?

• 22:55Speaker 01

  It's a tough one. I think it depends on who that competitor was. And it was like my mortal enemy. I'd be more upset about the former. If it was another company and a four or five people left, it is what it is, and I'd move on.

• 23:08Harry Stebbings?

  I would just love to maybe slightly move the conversation along, because we mentioned the word loyalty. And, you know, when we hear the word loyalty, I just think of Vinod Koestler, who led Factory Series C, led their most recent round, and then goes on Twitter, the wording was like, struggling second-tier competitor. Absolute demolition job of Matan. I don't know what to say. Was he asleep in the partnership decision? Like, was he aware that he led the last round? I'm genuinely not saying that stupidly. I don't know if he was.

• 23:42Speaker 01

  Candidly, I was shocked when I saw that. I was just totally flummoxed by that tweet, because it basically handed a weapon to every other firm competing with Koestler Ventures. And Koestler's got a great team with Keith and a bunch of other people there. And basically handed every other firm a weapon when they're competing on a deal, saying, is this the partner you want when things go bad? I was just totally flummoxed on why he would do that publicly.

• 24:07Speaker 00

  Yeah. Some days, you just make, it was a mistake. He will probably look back and say, gosh, I wish I hadn't done that. It's weapon in the hands of everyone who competes with them. Wish it hadn't happened. A lot of what's going on here is what are the legal obligations versus what are the implied rules? And what are the consequences of breaking the implied rules? And what are the non-legal, but nonetheless implied rules? It is really hard for venture firms when they do two directly competitive deals. And the only way you get around it is you make all this argument about you love your children equally, you don't say anything in public about one, about the other. And then you have something like this that crashes through every wall. And, you know, it just shows that those situations of, you know, two directly competitive investments are very fraught, especially if you're actively involved in the companies. It was very unhelpful, it was very unhelpful for Koestler, very

• 24:52Speaker 00

  unhelpful for both companies. It's like, ick. It was not venture's finest hour. Let's move on.

• 24:58Speaker 02

  Maybe being the Pollyanna, he meant it positively as tough love. Struggling second, you know, there's a theory, like, be harsh on the struggling, the most struggling founders. He thought struggling second-tier competitor would be motivating.

• 25:09Speaker 00

  I yield, obviously, to Dev and the CEO as man-manager side here, but I do vaguely remember something about praise in public and chastise in private.

• 25:19Speaker 02

  It seems backwards.

• 25:20Speaker 00

  I think that was the mission here.

• 25:22Speaker 02

  You never know. It seems baffling.

• 25:24Harry Stebbings?

  We've been talking a lot about open models over the last few weeks. We saw Reflection ship Beam. I thought that was a really interesting story. We also discussed, Rory, one of yours before Intercom, obviously selling to Salesforce. We had Salesforce buying Listen Labs 2 for $2 billion. Of those two, where would you rather go?

• 25:43Speaker 00

  I think both are worth some time. I mean, I'd love to hear your thoughts on Reflection, because, look, they've been frankly talking about shipping for a long time. And from what we said earlier, it seems to me that being an open-weight, US-sourced model is a super interesting strategic position right now. So if someone can ship something that's near, near frontier quality, even if it's six, 12 months off, just from the dynamics of the market, that's a nice place. So what are you guys' thoughts, David?

• 26:10Speaker 01

  Yeah, I actually tweeted out this morning, I actually thought that enterprises kind of can have their cake and eat it too. One, you get a US open-source model that's near frontier intelligence, that's three to four times more cost-effective, i.e. cheaper. And that's music to the ears of any enterprise, because there's obviously going to be some hesitation by using Chinese open-source models, especially if you're in a regulated industry or industry that deals a lot of sensitive information. To me, this was a very noteworthy announcement. Again, I do want to disclose a Sequoia's investor reflection, but I think it's great for the enterprise.

• 26:45Speaker 02

  I was at Dreamforce this year, right? And got to actually have the surprisingly large number of conversations with execs. Notwithstanding, you know, the incredible force of nature of Chinese-based open-weight models, when I, nobody I talked to really wanted to use a Chinese source model, right or wrong, fair or not, everybody that was, they felt like it was under duress for cost, but no one really wanted to use one. Again, right or wrong. So, you know, if they nail this right, it could be a torrent of demand.

• 27:10Speaker 01

  I agree. And I think that this also reinforces the point that you don't need, you know, the frontier-level intelligence for every workload. If it's close to the frontier, as Rory said, you know, within six months of the latest models, and addresses 90% of your use cases, like, especially around, you know, reasoning use cases like coding and agentic workloads, I don't see why enterprises would not kind of want to talk to them immediately.

• 27:33Speaker 00

  Ties back to the first topic. At one level, so far, the evidence has been that there hasn't been a massive push, because people are lazy, and the bills haven't been astronomical, and therefore, they've just kind of used the frontier model, and maybe, you know, downgraded to the Entropic or OpenAI, less expensive model levels. But I agree, I think the interesting thing now is because the numbers are getting so huge. I mean, if Open and Tropic are each making $70 billion in ARR, that's $140 billion. That's more than Microsoft taxed for the longest time across both Windows and Office. That's a chunk of US corporate profits, right? And at that point in time, if you're a CFO, you probably come into your CIO and say, I don't care that it's easier to choose to use Entropic, dude. We need to shave $3 million

• 28:17Speaker 00

  off this token bill. So start using Jev for your 20% of your decisions, and start using Reflection or something for anything that's not frontier, and figure out a way how to use Entropic for the hardship. I'd imagine, Dev, you guys will start to have those conversations, and all your customers will. That's why, again, these growth rates are so interesting right now for Entropic. Can they still maintain that unparalleled growth rate in the context of this kind of chipping away? It's like, remember the old man in the sea, the guy's bringing back the fish? And then the other fish are knowing that bits of the body, you know, they're just taking away slugs of revenue from them.

• 28:50Harry Stebbings?

  Well, and then you've got Jev, and you've got a load of the other Jev competitors also in a different way attacking them.

• 28:55Speaker 00

  Yeah. And again, the forward momentum has been such that all this is like, yeah, thanks, Rory, that's super interesting. But did I mention we 10x last year and the year before?

• 29:03Speaker 01

  The other thing I think is important to understand, and Jason, I'm curious what you saw at Dreamforce, but I think there's a big gap between where the capabilities are and where actual usage is in the enterprise. I think there's a paucity of real experienced skillsets inside the enterprise. And so I think we're going to see Jevon's paradox kind of come into play, where basically, as these costs come down, people get more and more comfortable deploying it for more and more use cases across the enterprise. As they get more conversant and skilled around these technologies, they'll start deploying it for more use cases. I see this even at MongoDB. And so I think you're going to see that, frankly, this is a massive market, and I think everyone can be successful. I mean, I won't comment on the growth rates of the Frontier Labs versus the open-source models, but I don't

• 29:48Speaker 01

  see this like, I don't see this as being a zero-sum game.

• 29:52Speaker 02

  To answer this, the captain obvious answer to what I learned at Dreamforce, everyone I talked to, everyone was just overloaded with the amount of internal demand there is for tokens. And whatever it is, it's more than they can imagine, whether it's being used properly, whether it's being burned for nothing, whatever the cap is, the demand is probably an order of magnitude more than they've figured out how to surface, right? That may lead to using suboptimal models, it may lead to a lot of waste in some ways, but everyone's got to manage it, which just, that and the fear of using China-based models, again, right or wrong, is just a huge opening if you can nail it. I'm just, the only thing I will just add, just for fun, we can move on, is, man, just personally, I'm getting more and more skeptical of eval published evals. Like, of course, you can make an eval

• 30:34Speaker 02

  look great. How fast was it? What were really the outputs? How well did it perform on a real workflow? How well did it perform on a mission-critical workflow versus telling you an item was in stock when it wasn't, which is still kind of mission-critical workflow? I found that every single eval needs like three asterisks and four daggers next to it today. So I am skeptical Beam is as great as they say it is. But I just asked while we're on, if I could get on OpenRudder and check before we end the podcast, but it's not there yet, but I would try. But it's not that I don't think these are all great, I just think all the evals are so biased and focused on chess championships that I'm slightly skeptical.

• 31:07Harry Stebbings?

  We have Nematron, we have Thinking Machines, we have Reflection. In 12 months' time, what percentage of token in open source flow will go through US versus Chinese?

• 31:20Speaker 02

  Well, look, just two things. As Dev made the point in the beginning, developers will change, and especially here. This is a lot easier than swapping out your database, right? That could be done, but having recently done it, it's some work, man. I got to tell you. It's not even with an LLM. It's, I mean, listen, this is still work. You have to qualify your prompt. You have to redo your workflows. It's not nothing, like the internet says, but I could see it being half in 12 months. 12 months is a lot of time, and I think sovereignty plus US-based is really important. I'm not saying it will happen, because I don't know that, again, I'm skeptical the parity is really there versus pretend there. But if you're even X minus three months to Dev's point, it could be half in a year. A year's a long time.

• 31:58Harry Stebbings?

  But that gives me a lot of confidence. I am an investor in Fireworks, as is Sequoia, and I think the biggest concern I would have, as a Fireworks or a Base10 or a Modal investor would do, is that actually, big enterprises are concerned about Chinese models, and that would prevent them from engaging with partners like Fireworks or Modal, and they then go to Frontier. And so the fact that you say 50% shows me that the levels or quality you think is sufficient enough that it would be that rate, that makes me excited.

• 32:25Speaker 01

  I think the other thing that enterprises are going to care a lot about above and beyond cost is safety, being able to trust these systems. And I think we are just getting focused on this. Obviously, there was that big conference last week in Washington. It's clear that there's going to be some self-regulating approach to figuring out how to address safety. The challenge is, how do you define safety, right? Because if someone knows how to define it well, I'm really curious, but it's, beauty is in the eye of the beholder. But we need some way or some mechanism for people to be able to determine, much like a benchmark, and yes, people can game a benchmark, is like, how safe are these models? The more safe these models are with whatever mechanism they've placed to prevent people from doing bad things, the more widely usable they'll become.

• 33:09Speaker 00

  Agreed. And I wouldn't guess, by the way, 50%, Harry, but I think even 10 or 20% would be extremely significant in terms of tokens, because if you think about it, the foundation models on OpenRouter, I think, get 20, 30% of tokens and get 90% of the dollars. If the US openweight models are even 50, 60% of that in terms of tokens, that's a lot of traction, because it'll be, by definition, the more enterprise-centric, safety-conscious customers doing it. I think that would be frankly a huge triumph for Reflection. And as you point out, a real de-risking for all the inference guys.

• 33:45Harry Stebbings?

  Ding, ding, ding. We got Investment Committee. Dave, welcome to the committee, by the way. We're thrilled to have you as part of the Investment Team. You are Sartre Tachussee on the new firm that is O'Driscoll-Lamkin-Stebbings. Jason, we have 11 Labs, who doubled their valuation to $22 billion. Would we do $22 billion?

• 34:06Speaker 02

  I think at $22 billion, we should consider doing up to 10% of the fund. Time is short. We're at an 18-month deployment cycle. One of our most esteemed partners is going back to run a public company, so we're losing some of the folks on the team. The way I see it, 11 Labs has done something quite, with actually a fair amount of intense competition. Its lead keeps widening. It is one of the 10 most important underpinnings of agentic applications, is their voice applications where they're going. The rate of growth, and surprisingly, the margins are very impressive. This is a company that, by the time we close the Friend and Families round, which we're hoping to do at $50 billion, right, this one could be approaching $1 billion in revenue. And that's the sort of growth rate that I think it's the deal we've

• 34:48Speaker 02

  got to do. And it's a highly differentiated, I won't say they have the highest node out there in the world, but this is no, this isn't Jev-level risk. 11 Labs has built an incredible team. They have sub-millisecond response rates for voice, which has become a key modal, and it's tough to find a better asset today. Do I wish it was at 21 or 18? For sure. But I say we go all in.

• 35:08Harry Stebbings?

  Can I ask you, Mr. Lamkin, you previously said on a show that this would be the year of substitution for voice models, and that cost would drive that decision. Have you changed your mind?

• 35:18Speaker 02

  No, because I think 11 Labs is, for the most part, it's always a risk. For the most part, it is covered. It has multiple models. It has covered the low end and the high end. And quality here is, in many ways, more important than it is in your classic openweights model. We can tolerate a little bit of laxness in the reasoning for non-critical workflows, but when that flower dealer is picking up the phone, it has to work. It has to answer that phone in seconds, and it has to be the right flowers. If it fails, if it misunderstands it, if we can't populate, this product isn't worth it. So there's a limit to price, but I'm shocked at the deal size of 11 Labs. I'm shocked at the number of folks that are relatively modest companies paying hundreds and hundreds of $1,000 a year happily, and our reference checks said they love it. They feel like they're getting a good deal. So I don't think all

• 36:02Speaker 02

  models are fungible. Despite some of the other discussions we've had at the fund, the fact that I did recommend putting maybe $500 million into Reflection and others, this is not a fungible use case today. 12 months, it's hard to predict, but I'm impressed with the team, and I don't think anybody's going to catch them here today. It matters. This is where the LLM matters.

• 36:20Harry Stebbings?

  10% of the fund goes to 11 Labs. Well.

• 36:24Speaker 02

  I just don't want to do it over two rounds, you know? I don't, I don't need to see it at 50 or 100. Dev knows what I mean, okay? I don't need to see it a second time. I just want to put all the chips in now, get the ownership I can, and move on, right? And I've got a friend of mine that's a CRO I want to put on as a board advisor. I think he'll, he'll be able to help out and give him some insight.

• 36:41Harry Stebbings?

  Okay, moving from one Sequoia company to another Sequoia company, sorry, Dave, it's not intentional. Rory once said a quote, which is like, what was the quote? Like, whatever game you're playing, just be Sequoia. Remember the one I'm talking about?

• 36:52Speaker 00

  There's so many quotes. I mean, you know, I've been doing this 30 years, and when I came in, Sequoia were top, and give them huge credit. 30 years later, they're still there, you know? So, yes, I gave the Gary Lineker football quote, if you recollect.

• 37:06Harry Stebbings?

  So with great surprise, Sequoia made hundreds and hundreds of million dollars with Salesforce buying Listen Labs for $2 billion. Now, apparently, they had offers at $1.5 billion. A major win for Brian Schreier at Sequoia. About $850 million back to investors on 96 invested. Sequoia did the best. They led the seed, they led the A, making about a 25x. Ribbit led the B, which 4x in eight months, so well done, Mickey. What did we think of this, guys?

• 37:35Speaker 00

  I think it was a great outcome for a very clear category, in a sense of, it's pretty obvious that, stepping back, listen, market research is a very large, fragmented, almost pre-technical industry. There's a bunch of consulting-type companies, and then there's three last-generation companies, Qualtrics, Medallia, and what was Survey Monkey, all that got to kind of high, single-digit, low-double-digit billions of dollars in terms of market cap outcome. So it's a really good category. It's an existing category with a big-ass spend, and LLMs just do it so much better, because what are you doing in market research? You're kind of asking questions of people and aggregating and assimilating the answers. And the two things LLMs do well, we just talked about voice. Voice as a modality is a solved LLM

• 38:20Speaker 00

  problem, and then asking questions and knowing how to, and not just kind of these canned, stupid, last-generation surveys, where no matter what you say, the survey just asks the next dumb question, you know? It's like, did you like your stay? No, I didn't even check in. And then the next question is, was the bed comfy? That's the last generation. Whereas now with LLMs, you can adjust the questions based on what the respondent is saying. All that means, market research can be done so much better with LLMs, and I think Listen Labs was one of the early contenders that did it well and executed brilliantly and, you know, got to real revenue. Great outcome. I mean, it's kind of one of those, the list of use cases for AI and LLMs at the app layer, that comes out like a top five, top 10 use case, and

• 39:05Speaker 00

  there it is.

• 39:06Speaker 02

  But you know what? I would love to get Dev's thoughts on this. I'm pretty much a fan of a lot of Salesforce's acquisitions, and I've been champions of anyone. This one I don't really get. It's not that I think it's a bad idea, but I mean, Salesforce is coming up on $60 billion, their target's $60 billion, you know, they're almost at 50. I just don't, I don't know how $20 million of revenue of next-generation AI survey moves the needle. And I'm not saying it doesn't. I mean, Mongo scale, you got to move, it has to tuck in or move the needle, right? Maybe you think about it differently, but to move the needle, it's got to be big, and Salesforce even, so this is the one I'm, I get the theoretical appeal, but I wonder if this one will just be kind of forgotten in a couple of years.

• 39:43Speaker 01

  What I will say is that I think we're going to probably see more of these deals, right? Because I think there's starting to be a difference between, are you building a feature that's masking as a company or a franchise, right? And I think a lot of AI application companies will sell, because a clever product on top of someone else's platform is frankly a feature, and if they can use the distribution of that larger company, they have the cash and distribution, they're going to take advantage of it. I think the companies that are more durable are the ones that, you know, essentially are creating a data loop, where, you know, the usage creates data that no one else has, the data makes the product better, the product attracts more usage, and you kind of create that virtuous cycle. And so if someone tries to copy you, they can copy the features, but they don't have

• 40:26Speaker 01

  all the interactions that you have. And so I think the difference here is, when you look at these kind of standalone AI app companies, is are they really a feature masking as a company, or are they really building a franchise? And I think the founders of Listen Lab decided that this was an offer that made sense for them.

• 40:42Harry Stebbings?

  I mean, you'd be pretty pissed off if you're Intercom, wouldn't you? Sorry. You're just like, you've gone through like 15 years of shit and struggle and building this business, and then, you know, Abba's answer to Justin Bieber comes along, and three years later sells for a comparable number, and you're like, fuck.

• 41:02Harry Stebbings?

  Sorry. So I know, I know they all made money, but you're just like, oh, bug it. That was an easier route, wasn't it?

• 41:08Speaker 02

  Of course you think that as a founder. I mean, I don't mean, there's always someone that had the easier route and you do think about it. Of course you think, even at Mongo, I bet Dev thinks about, once in a while, God, those, I mean, we've done great at Mongo, but those guys, they had an easier, oh, easier way with it.

• 41:24Speaker 01

  The lesson I tell my boys is comparison is the thief of joy. You start comparing to everyone else and you're going to be very miserable for the rest of your life.

• 41:32Harry Stebbings?

  Yeah, Rory. Yeah.

• 41:33Speaker 00

  Hey, I, I, I didn't do it, how you, you know.

• 41:35Harry Stebbings?

  Rory, yeah, comparison is the thief of joy. Okay.

• 41:38Speaker 00

  Good, good, good to know, Harry, but that's where you were wrong to mention that because in the end, I think both companies made money and to Dave's point, you'll step back and say both of them will go, yeah, I feel good about what I did. Now, you're right. It's a lot easier to do it in three years than 10 or 15. Duh, we get that, but life ain't fair and venture outcomes are very random. And more than anything, what it says is timing and the cycle is just so interesting because look, you know, we put some money in Intercom recently. Intercom achieved that valuation. It could have happened for Intercom had they sold in 2018, 19 and the SaaS boom. And to Dave's point, maybe we will look back in five years from now, maybe 10% of these apps companies will have sold early. They'll have got their 30x revenue

• 42:20Speaker 00

  and the rest of them will be grinding it out for six times revenue at 300 million with, you know, 3,000 employees on their head exploding, right? But you just, to some extent, you can't control the outcomes. You just got to like the process, right? And if you end up doing well, then yeah, both of them have done just fine.

• 42:36Speaker 02

  I will say one thing from the, how old was Listen Labs? When was it founded?

• 42:38Speaker 00

  Three years old.

• 42:39Speaker 02

  I will say as a founder, having been through the different lengths of journeys, the earliest days are always the hardest, right? They're sort of fun because, you know, it's just you and you're creative. It's very creative, like in the way, but it's, you know, unless, unless you're the lucky kids these days, you almost always run out of money. You don't have enough customers. It's brutal, right? But I will say, if you can exit for a good price in three to four years, I'm not saying you should financially, but man, it's easier. It's so much easier to exit, no matter what struggles you go through as a team, though, because it's, I find it's five-year chunks and they take it out of you, right? I'm not saying it's a reason to sell, man, but if you can sell for $2 billion in the first five years, I have my, I'll tell them to take it. Because it's not that we don't all want to build a Mongo. We, we do intellectually, but man, it's just, do

• 43:24Speaker 02

  it in the first, in the first wave. It's so much easier.

• 43:26Speaker 00

  I don't think anyone is sitting on the call screaming, I can't believe you sold, damn it, guys. Why would you only take $2 billion?

• 43:34Speaker 02

  No, no, that's not true. We've all, we've all had VC meetings where companies like this, and, and no one around the table says you should sell on a deal like this, right? I had one this year at about this price and, and every single VC said, don't sell, right? In that first wave. And it's because there's a lot of momentum in the business, da, da, da. But man, getting out for that first, I know you can call it the first exit, but you really can do another. You know, the, the thing is, you have to decide if it's generational. Are you building a Mongo or better? Then of course you say no, right? If you can get out for $2 billion in the first five years and you're not building Mongo or better, um, I don't know, man. I would take it and enjoy my life at Salesforce.

• 44:10Speaker 00

  It's such an old story now, but for some reason it surfaced on Twitter, the whole Zuckerberg turning down a billion from, was it Yahoo or Google? I can't remember right early on without even thinking about it twice. But it is, I think the real point, Jason, it comes to your thing is you have to be kind of cold-blooded. What's the likely trajectory from here? And then how do you feel about running the tape and how likely are you to get not just three times this amount, but 10x this amount and more? And how do you assess that? Plus the personal side.

• 44:37Speaker 02

  I think you have to be honest if you're trying to build a generational company. I don't think that's a catchphrase. I think it's really important because otherwise you have it, you have a terminal value, a terminal state. And if the offer is reasonable, you'll never beat the net present value of these deals. This generational stuff isn't easy. I mean, Dev's back in the seat again. It ain't easy, the stuff ain't easy, this generational company.

• 44:55Speaker 01

  So, and I will tell you, the best companies always got offers to sell, right? So I'll use my example, and I wouldn't say likely Logic was a massive outlier, but like every stage of our growth, we had people who wanted to buy us. I remember sitting, you know, I guess I can share this now. I was in John Chambers' office. We were literally sitting face to face where he wanted to buy the company. And then for some reason, it just didn't work out. Then they came back again. I had EMC at the table and you just go and go and ultimately you sold a year after we went public. And I think to Jason's point, ultimately the founder has to decide, do I feel good about continuing to build or should I just hit the exit button? And I felt good about our decision to sell to BMC, but we came really close a number of times to sell the business earlier and we, and looking back

• 45:40Speaker 01

  was the right decision.

• 45:41Harry Stebbings?

  How much did you sell for to BMC?

• 45:43Speaker 01

  We sold for about 900 million, which, which at that time was the highest acquisition paid in 2008.

• 45:49Speaker 00

  It was a killer deal. I, I had a small company that competed with him. He cleaned our clock. Blade Logic was the winner in that category. Actually, and the number two was a ref who is now at Bain Capital. He was running CenterView, CenterPoint.

• 46:04Speaker 01

  Center on, yeah.

• 46:05Speaker 00

  Center, Center. And you walked all over us, damn you.

• 46:07Harry Stebbings?

  What revenue were you doing when you sold?

• 46:09Speaker 01

  We're doing about 100, but 9x, which by the way, was right on the heels of the GFC. So the market was getting quite skittish in 2008.

• 46:18Harry Stebbings?

  One that I am interested by is actually one that Jason suggested, which is Versale at 600 million in ARR, with agents being 50% of the new business, up from 3% at the start of the year. Jason, I always find you quite mind-expanding for me when you talk about these topics. How do you think about this? How much budget we should give to agents for 2027? What's the takeaway for us from Versale now getting 50% of new business from agents up from 3%?

• 46:46Speaker 02

  Well, look, I would say maybe two different things. One, I, I think that there's a bunch of companies like Versale that had the right infrastructure, the right product before AI and agents, right? So Versale founded in 2020, right? I mean, Guillermo did not know that, that in 2026, the majority of his business would be from agents, right? Spinning up applications on their own, right? No, nobody saw that. Some of the most amazing stories, even 11 Labs is a little bit of that. Certainly Replit founded in 2016 is like a big case study where you just, you just, you latch on to that and it just works. And they do have the tiger by the tail. There is a lot of competitors, a lot of really strong competitors, but agents pick Versale. It's very strong. And, you know, it was interesting, I think,

• 47:27Speaker 02

  what did they say? They're growing 170% at 600 million from 20% increase in, in customers or something? I mean, the, the expansion revenue is astronomical. And it's just, the thing is, when agents pick you, and I'm sure Dev's thinking a lot about this, right? On the database side, when agents pick you, it's a force of nature right now. And agents, what I've learned from, well, you have 21 agents, we're building all day. Between me and Emile, I'm literally building eight to 10 hours a day. And man, my agents have opinions and they're really hard to argue with. And if they want to use a vendor, it's a lot of energy. I know I'm antipromortizing it, but it's powerful when an agent decides something. And Versale is a major beneficiary of this. Even, even last year, it looked great, but it never seemed it would be as important as it is today. Oh, that's just, that's just

• 48:09Speaker 02

  where I'm going to stick my code, right? Important, but back office infrastructure. But man, this is where so many agents and apps are running. And I would only want, I would, I would take this one to the IC too.

• 48:19Speaker 01

  I think this is really interesting about the point that Jason made is that agents are picking, are making decisions, right? But for the last 25 years, every marketing person, every company has optimized how you show up on page one of Google, right? You educate human buyers. Now you have to make sure that agents can find you, understand what you sell, have current accurate information about you across the sources they read. And if you're missing from an AI-generated answer, it's like being invisible on Google. You know, full disclosure, Sequoia has a company called Profound that helps companies with those, helping them. But I will tell you, this is a massive problem. And it's not just in tech. If you're an e-commerce site or you're a retail company trying to sell through e-commerce and agents are now making the buying decisions, you got to figure out how

• 49:03Speaker 01

  to educate those agents. Otherwise your business is going to zero.

• 49:06Harry Stebbings?

  You know, when I look at this market, we too have a company, Dave Peak, and everyone's like, well, this is like a next generation of Semrush. Is it just a next generation of kind of SEO analytics providers with your Profounds and your Peaks? Or is this actually a much larger category?

• 49:23Speaker 01

  I think the opportunity is more than just analytics, but telling you where you're missing and all that. I think the opportunity for these companies does not just tell you what you're missing, but to help shape the content and create the content to help you solve that problem. If they can close the loop, that becomes a very compelling solution versus just telling you, you're here, you're not here. This is what the other guys are doing.

• 49:44Speaker 02

  I'm just looking today, for example, it's, it's smaller, but look at resend. So for example, the first agentic purchase we made was resend for email. Okay. When I was trying to set up a bunch of agents last year, I kept getting recommended SendGrid, but, but because they need this, the CEO to go, but founders to go back, I just couldn't get the damn SendGrid thing to work. They'd kind of deprecated free. I couldn't figure out the key. It kept breaking. It was, and so I asked my agent what I should use. It said, use resend. resend April 106,000 MCP calls to September 3, 3 million. That's agents saying to use products. And I'm not saying Profound isn't doing that. They may well be. My limited experience is this is different.

• 50:19Speaker 00

  I want to kind of disaggregate all this. How did your agent decide? Because I assume some part of it is the general how I show up initially in the ants, in the answer engines, you know, how I show up on OpenAI. And then what else does the, what else does your agent look at? Is it just the?

• 50:34Speaker 02

  It looks at your infrastructure. It looks at the application you're building. It looks what's trusted. It looks what it thinks the right match is. And once in a while, it'll make wacky choices that are very specific to your use case, but you got to be that one. You got to, and it's not, a chat GPT is going to give you a generic answer based on a number of fact. I'm not saying it, they're using the same LLMs, right? So some of that is being into it. But an agent knows your whole stack. It knows every, it knows your application. It knows what you've built on top of, on top of the system. So it will make a very specific recommendation what to use.

• 51:04Speaker 01

  And this problem is even more profound, no pun intended, for early-stage companies because there's so much corpus of data for your incumbent who's been around for 10, 15 years. And if you're trying to discern some incumbent, the agent's going to see all this data about the incumbent and very little about you. So when it makes a decision, it can very easy just basically pick the incumbent solution. So it's actually incumbent upon the startup to figure out how they basically educate agents on what they do, the documentation, the APIs and all the infrastructure and the wrapper so that they can then show that they are truly a first-class experience for an agent to make a decision on.

• 51:41Speaker 02

  For what it's worth, here's what I tell my portfolio companies I've invested or work with. I say, find 10 folks you know that have agents in production, doing different things, 10 folks you trust. And ask them every two weeks, what would you recommend in this category? What would you recommend and see what the agents recommend? This product doesn't exist today. I think the four of us should fund it. It's not the same as Profound, which is guessing what LLMs do. These are live agents in the field and different applications, asking the agent what should be used, right?

• 52:09Speaker 00

  And just let me understand, where is that agent who will answer the question? I mean, that agent presumably is doing some other job and you'll just go on and say-

• 52:16Speaker 02

  The agent could be at any, any tech company, any startup is gonna have agents running today that's, that's worth their salt.

• 52:20Speaker 00

  Yes, and you will allow your agents spew out what they're using internally?

• 52:25Speaker 02

  Yeah, like, for example, I, I, literally, I'm on the phone right now. I'm asking one of my, an app I'm building, it's agent, what should I use for hosting? It said, first, use Render. Actually, honestly, I barely know Render, okay? It says, use Render, my pick. The agent said, my pick. Number two, Railway, we know Railway, they're doing pretty well. Number three, Fly.io, number four, ADOs, number five, Vercel, not suitable for this. Ah, interesting, I would have picked Vercel, you know, for, for this. I don't, you guys may know Render, I never heard of it, and you know what? Probably, I would probably use Render. And it literally says, my pick. So Render just got a lead. It just got a pretty good lead from this agent. You gotta win that war. Can we get into the last round in Render? Can we get the Sequoia price at Render? What was the Sequoia price in Render?

• 53:08Harry Stebbings?

  I did, but I don't know, I don't think it's actually the same market as Profound and Peak.

• 53:12Speaker 00

  I, I, I actually do, I think it is, because I, I, I think both Profound, I know both companies, actually, wrote a term sheet on the Profound A, which we got it. And I think naturally, both those companies, when they're finished figuring out how you show up on ChatGPT for humans, are gonna quickly evolve to, how do I, if, if, if agents are who I need to show up for, then by God, I need to tell my customers how to show up for agents. So I think it's a natural next product extension. Don't get kinda caught up in the minutia of, oh, we only do it for humans. Zooming out, as Jason has convinced us, everyone, humans and agents will make purchasing decisions using LLMs and using information they get online. And you're gonna have to make sure as a vendor that you show up correctly.

• 53:54Speaker 00

  And whatever that takes, the opportunity there is to sell a solution to the marketing person who's gotta solve that problem in any company. There's some dude at MongoDB who is going to be figuring out this afternoon, check how we show up on agents to make sure when Jason needs to get a database, we show up first. And if that person needs to have some way of surveying what other people are saying about them, what other agents are saying about them, that's a product that MongoDB is gonna buy. And I think that's the Profound opportunity, it's the Peak opportunity. It's a bunch of other companies in the space. I think it's a good space. And for some, I think it's gonna have more depth than the Semrush space, which ended up commodified and boring for a whole bunch of reasons.

• 54:33Harry Stebbings?

  I agree.

• 54:34Speaker 00

  I mean, reminder, we did the series, I think, C at HubSpot, and I say this over here, it was an SEO company to start out, but they just did a brilliant job of adding a whole bunch of other stuff on top. You solve the customer's immediate pain point, especially these marketing platforms. You solve the customer's immediate pain point, and then they realize they have an adjacent pain point, and you solve that, and then you solve the one after that. And I think every marketing person has a three-year list of pain that they have to solve in terms of how they show up in the new world of LLMs, and they want all the help they can get for that. If you make solutions, you can make money here. So I think it's, I think it's a super good market.

• 55:09Harry Stebbings?

  What topic have I missed, boys from the list, that I have to discuss?

• 55:13Speaker 02

  Okay, there was one I liked, but I, I liked the one, because it could change a lot of tech stuff. The engineers suing, um, which one was it? Which, which of the license deals? I didn't think about that, but now it seems like an obvious claim that, that like, I lost the benefit of my consideration by doing this. I don't know where the lawyers come out on this one, but yeah, give us the background on this one.

• 55:34Harry Stebbings?

  Groq engineers sue over Nvidia's $17 billion license and hire deal. Two former engineers sued in Delaware. A large Groq board effectively sold its core technology and top 200 staff to Nvidia through an $11 billion license plus, about $3 billion in stock, leaving common holders with a hollowed-out company.

• 55:50Speaker 00

  The news is that they perceive that there might be a course of action, because zooming out a million miles, corporate law tries to say, everybody gets treated the same, and there's 200 years of precedent, and you know exactly how it happens. All common shareholders get treated the same. Board members have a duty of care, a fiduciary duty to all shareholders. Your case law up the wazoo has to happen. And this stuff tears up all the case law. And it effectively allows the buyer to reallocate consideration in the company. Hey, you guys are coming across, and you get a lot of money. You guys again stayed behind, and you get a little money. And crucially, these two employees had already left the company. And I don't know this for sure, but my guess is when the acquirer is allocating capital,

• 56:33Speaker 00

  they don't say, oh, I also wanna take care of the ex-employees, because they're like, why would I buy them? But Delaware law says, everyone who owns a common shareholder is exactly the same. And it's one of the non-negotiable principles of this stuff, that you treat everyone in the same security in the same way. So when I read that, I'm thought, hmm, that's interesting, that's a clever little case. And it'll run a little. I wouldn't be surprised to see it settled, because there's probably only a small number of people in the class. Because my guess is everyone who came across was happy. My guess is everyone who stayed and got stock is happy. So it could be a relatively small number of people who'd left already. But it's gonna be an interesting case where they probably have some legal argument to make.

• 57:15Speaker 02

  Yeah, I'll connect dots, right? Remember, we started this discussion about people leaving and, you know, leaving very, very quickly. And here's the parallel I draw, is like, investors long ago, and actually even more recently, have learned to protect themselves in situations, they negotiate these kind of issues upfront, what happens, any kind of exit, including a weird one. Employees never thought to ask about this. So if you're a founder, you're gonna have employees saying, hold on, what happens to my equity if the company's tech and some members of the team get bought, but the company doesn't? And I think founders need to be able to answer that question, because that's a question of, you know, as people learn about this, it's gonna be coming up more and more often, especially if people, you know, switch between companies very often.

• 57:56Speaker 00

  And the idea of kinda corporate law, Delaware, or even if you go to a place like Texas, you shouldn't have to think about it as an employee, because it's like, dude, there's common law, and you'll all be taken care of the same. But once that gets eroded, as you say, that, once that, you know it's up for grabs, then it's quite insidious, and you're right, everyone has to think, when I join a company, I don't just have to think what my 1% is worth. I have to think, well, what could happen to my 1% if you sell the IP? What could happen to my 1% if you sell the IP and half the employees? And I think it probably makes everything harder to pull off. So it'd be interesting to see if this leads to some kind of pushback away from those kind of structures. I mean, they're not ideal, and the only, the only reason people are doing them is because of the FTC. And we're not gonna ever say this, because they can't, but it's because of the FTC

• 58:41Speaker 00

  and the fact that you can't get M&A through in any appreciable time, whereas you can get these deals done literally overnight, and the employees start next day. It's a workaround regulatory problem that is no surprise, creating a bunch of second-order issues and unfairness.

• 58:56Speaker 02

  I just think it's interesting, because, listen, this, this structure is fading away a little bit. And that, politics aside, in the current administration, it sure seems easier to get a quick deal done, a Finn or a Listen Lab, pretty quickly, right? So some of these issues, some of them are, are fading at the margin. But man, I don't know, some of these deals sure feel like mergers in substance to me. So I think, I think if one of these lawsuits wins, which even if one fails, another may well win, right? I think this is a mergers in substance. I think these deals will die, because they already have double taxation. They're already horrific from a double taxation perspective. Then add a whole set of risk and carve-back for the employees we're leaving behind with the keys at Windsurf, who will end up being the big winners in Cognition, right? But it looked like they got left with the keys and a year of cash to work it out.

• 59:40Speaker 02

  I think it'll end these deals if there's significant legal risk here. And, and, and it also feels to me a little like a safe note. You know, safes say, I know this sounds niche, safes say they qualify for qualified small business stock, because they're stock, but they're not. They're clearly not stock. And all these non-merger documents say they're not mergers, there's licensing. And I'm sure they say it a thousand, the more deals go by, the more clauses say it's not an acquisition. But just because you say it's not a duck, it don't mean it's not a duck. I think these are, some of these are ducks.

• 1:00:08Speaker 00

  Exactly, and that's exactly the case they're laying out, which is, it was a de facto an acquisition, and there's a whole bunch of things you have to do in an acquisition. So yeah, you're right.

• 1:00:18Speaker 02

  It's just, it's interesting in hindsight that we didn't think about this, because they may end up being like, how the hell did we think we could do these deals? And just completely work around the, not just part of the cap table, but the whole cap table.

• 1:00:28Speaker 00

  No, but it's, it's forgiveness, permission. I don't, we talked about it at the time, we don't like it, it feels unfair. But I think the pragmatic answer, that I'm willing to bet, Grok was Nvidia, wasn't it, right? I'm willing to bet, let's say they have to settle and they have to chuck in an extra 200 million bucks. The real answer is, my lawyers, my very smart lawyers came to me and said, I found a way that we can buy this company on a Sunday night, and all the employees start on Monday morning, and we have the IP, versus this other way where we put in an application to the US government and close in nine months. And Jensen said, is there some risk? And they said, yeah. He said, I can live with it, done, we did the deal. And then two years later, you go, yeah, it was a little bit of risk. It turns out it's 1% extra on the price, here's 200 million bucks.

• 1:01:10Harry Stebbings?

  Right, I think an additional that just isn't discussed enough is Muse was a phenomenal launch and has been a phenomenal reception. And I respectfully think Dots has been very unimpressive. I thought their demo was incredibly poor, very tech-centric, how do I do flights for enterprise usage for an OpenAI employee? I thought it was out of touch and I thought it was very underwhelming. Thoughts?

• 1:01:35Speaker 00

  Obviously you used Muse for a while and you are, they've killed it. And you know, as someone who thought, and that acquisition isn't working, it seems there's a whole bunch of gear grinding, I just got to give the executor's credit. Whatever he did, whatever between Zuckerberg and Alex Wang, they put their heads down and they shipped product. And as the CEO and this call, both CEOs in this call know better than me, that cures everything. They shipped the killer product, they launched it full on, they resourced it with compute, they kicked ass, you know? And it's good. I mean, I'm going to New York this week, I'm paying, it's real fun. You do instinct in Muse and you kind of check on them and see who's winning. It's kind of a bit of a geeky joy, but there you are. They're, you know, absolute, let's use the word, frontier, state of the art. This is as compelling as any fricking startup.

• 1:02:20Speaker 00

  You guys have, Muse nailed it. And you're right, conversely, I was trying to figure out Dots today. I wasn't quite sure what it is even at the end of it. I went and looked in anticipation of the program here, I went and looked at the whole online demo day thing and I'm not quite sure I got it yet. I see where Spaces is going, but yeah, it's not nearly as cool.

• 1:02:37Harry Stebbings?

  And sorry, you are a 30-year venture investor, Rory. How do we feel about America adopting this?

• 1:02:43Speaker 00

  I don't know, I'm not going to be as opinionated as that. I wouldn't, I'm not a product guru, I'd like to hear from these guys. But my point is, I wanted to celebrate the good, because in the past I'd been a little cynical of the meta thing, they nailed it. I want to celebrate the good stuff. All I can say on the OpenAI dot stuff is, I'm still trying to figure it out. So Jason, did you turn it on? Did you try?

• 1:03:04Speaker 02

  I think, listen, I don't disagree with Harry's point that like the consumer PR element was definitely underwhelming, considering the Muse buzz, which I modestly contributed to. But I think, I think it's because the initial point of Dots is that it integrates with Codex and can work as a 24-hour coding agent. And one of the annoying things, and one of the things that, you know, it's under discussed that actually a Repliter or Lovable did well in the early days is they could be on all the time, right? At least sort of, sort of. But it's pretty annoying to, you can't really keep Claude Code or Codex going 24 hours. That's why Open Claude took off and others, I'm simplifying a lot of stuff. Now everyone has a 24-hour persistent agent that can work with Codex if nothing else. So I want to give it 30 days and see what developers do for real, right?

• 1:03:47Speaker 02

  With a persistent agent optimized around Codex, before giving up on the fact that maybe they weren't as excited about, about booking my business class tickets to Palm Beach over the holidays as, as other folks were. It could end up being the bigger win and almost, in a sense, it's almost guaranteed to win in that sense, right? If it's sort of the persistent extension of, of Codex and building on the OpenAI stack, like it almost can't lose unless they stop developing on it. But maybe it's never that consumery. Maybe it's just a nerdy product and like, like Mongo, it's okay. Like you can make money in these nerdy products, can't you Dev? There's money to be made. Let's view it from the developer lens and give it 90 days and see what cool stuff gets built.

• 1:04:26Speaker 00

  It points to the thing we've said before, it's just super hard to be developer-forward, enterprise-forward and consumer-forward at the same time, you know? Interestingly ties back to the Mongo comment and where your former colleague went to run the enterprise side of meta. I think that doing one thing well is hard, doing two things well at the same time is super hard. And I think OpenAI struggles with that all the time. Even on the kind of the product surface area, there's just a lot going on.

• 1:04:53Harry Stebbings?

  Do you remember last week when you mocked me for my buying of stocks in the middle of a show? 26% up in a single week, Rory.

• 1:05:02Speaker 00

  What did you buy again?

• 1:05:03Harry Stebbings?

  I bought NewBank and I have to admit, I didn't quite know the Brazilian elections were coming and they would go in my favor. I didn't know that the Monzo deal would not happen, which would also go in NewBank's favor. But 26% in a week, I got a lot of thank yous from people who made thousands and thousands of dollars.

• 1:05:21Speaker 00

  So let me get this straight. You bought a stock and two things that you didn't expect happened and your stock went up and you're feeling good. That's, that's the takeaway here, right?

• 1:05:30Harry Stebbings?

  Well, I feel more, I feel more charitable and we made money.

• 1:05:34Speaker 00

  I just want to answer, no, but it is interesting that as a Brazilian-based company says, stock goes up when they realize they're not investing in a third world country like the UK, stock pops. Sorry, just being mean, Harry.

• 1:05:47Speaker 02

  Harry, can I do one before we lose Dev that I just would love to get his thoughts on?

• 1:05:51Harry Stebbings?

  Yeah.

• 1:05:52Speaker 02

  I added to this because I don't think we touched enough on it. I loved, on the Aura IPO, I thought this was terrible news for venture, terrible news for venture, because you could argue this one is, is overpriced, I guess, right? I mean, that's an analysis. Rory had a point that Forerunner was selling, you know, I think them selling their whole stake was a large part of the IPO, which adds some element to pricing. But I just think it's a huge bummer that a company growing 1.2 billion, growing 74% with pretty attractive recurring revenue portion of it, the IPO got pulled. Like we talk about and liquidity is easy and M&As everywhere and the 1,000th Frontier Labs can be bought for 7 billion, but this one kind of bummed, honestly, it bummed me out that this deal didn't happen. I felt it was under discussed as, as something that didn't happen.

• 1:06:37Speaker 02

  I don't know what you thought, Dev, on this one.

• 1:06:38Speaker 01

  I think, Jason, you know, it's like that old saying, Occam's razor. I think we've got to figure out what the simplest answer is. And to me, I think it was probably price. I think, again, I have no inside information, so, but I think they probably, the bankers probably told management and the board that they could get this deal done at a certain price. They quickly had an oh shit moment and rather than go through a protracted problem, and I don't think the optics of someone selling their entire position is great, for whatever that's worth, I think it came down to they couldn't get the price they wanted, they pulled the, pulled the filing. That's purely speculative on my part, I have no inside information.

• 1:07:12Speaker 02

  But you really think they, I mean, for sure, but I mean, the markets are pretty good overall and it's hard to grow much faster than 74% of the scale if you're not in LLM.

• 1:07:21Speaker 01

  But it's a function of what, what your multiple you think you have.

• 1:07:23Speaker 00

  I totally agree. And again, disclosure, just as you know, we have a small passive piece there to an M&A situation, so I was bummed too. But to your point, I think the super, and there was a good piece in the Wall Street Journal on it, right? And one, just to put it out, it is possible that they pulled it because there's an M&A pending or something like that, but let's assume that's not the case. I just put it out there to outline the range of options. I think Dev raised an interesting point. It's more interesting than just Aura because it gets to banker dynamics, right? We've all seen it, bankers are pitching a deal, they want to tell you, they want to tell you as optimistic a story as possible. This could be one of those cases where if you convince the board that you're going to get 50 bucks a share, right? When you're trying to get the business, and then when you go out to talk to the investors, you're only offering 40 bucks a share, this is the kind of dynamic that happens.

• 1:08:08Speaker 00

  And you see that happen in IPOs, right? And it feels a very subpar outcome. And you're right, Dev, I do wonder, I'd love to see what the banker books were when they pitched the IPO and what they said, you know, the price per share would be. And this is the problem, it's always a weird dynamic when bankers are pitching an IPO, because to some extent, there's always the feeling, will you just go for the person who says you're going to get the highest price? But if he's whispering bullshit in your ear and it turns out not to be true, then you end up in this far worse situation where you think you're going to get something done, you telegraph it and then it doesn't happen.

• 1:08:42Harry Stebbings?

  I would have hit the bid on price here, boys. Come on, you look at the consumer hardware companies that have gone before, from your jawbones to your palatons, to, I mean, hit the bid at 13 and take it out.

• 1:08:54Speaker 00

  Yeah, I agree. What you're saying is, the board should have said, these guys told us 30 bucks a share, whatever it is, they didn't believe it, but we didn't believe them, so our lies cancel each other out. We got offered 20 bucks a share, that's a good price, hit the bid. And yeah, they obviously chose not to and they had their reasons. But yes, I think it's very hard to go this far down. I mean, I can't remember, Dev, did you guys at Blade Logic, did you hit it the first time after you filed? Did you, did you have an extended filing or something weird like that or did you clean straight out?

• 1:09:21Speaker 01

  We got straight out. It was a little wild, the market was a little wobbly at the time, because that's when the signs of that the debt markets were maybe not as solid as people thought. We went out in July of 2007 and then the markets progressively got worse, you know, going into 2008, but we got out.

• 1:09:37Speaker 00

  Got it. So you probably would be one of the last out of that class. I remember we had Amature in, I think, oh six or early oh seven, but yeah, you had that Vonage company and a couple of others and then it got thrashed and then it was done. But yeah, Harry, to your point, I mean, playing that back, listen to what he said, is that the, the debt markets were getting a little shaky. Take a look at the Wall Street Journal now. Sometimes you're right, Harry, you should hit the bid and get it done when you get that far down, because there's a lot that's got to happen between now and the, the Anthropic IPO in the middle of November.

• 1:10:05Speaker 01

  I don't mean to be rude, but I got to go sell some software, so.

• 1:10:08Speaker 00

  That would be great.

• 1:10:10Speaker 02

  Go, go sell some software, baby. Thank you for the time.

• 1:10:14Speaker 00

  Thank you for joining. That was awesome, we're done.

• 1:10:16Harry Stebbings?

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