20VC: Anthropic Surpasses OpenAI Revenue | OpenAI Acquisition of TBPN: Analysed | OpenAI Management Team Reboot | YC Kicks Delve Out | Mercor Hack and Why Now is the Time for Cyber | Supabase Raising at $10BN & Doug Leone Returns to Sequoia

AGENDA: 03:59 — Anthropic Surpasses OpenAI in Revenue 12:43 — OpenAI Management Reboot 18:24 — OpenAI Buys TBPN 29:00 — SpaceX Files for IPO Targeting $2 Trillion Valuation 37:21 — Doug Leone Returns to Sequoia Capital 41:14 — YC Kicks Out Delve 45:21 — The Rise of Open Router 57:59 — Supabase Targeting $10B Valuation 01:08:18 — The Mercor Hack and AI Cyber Threats Moving Forward 01:17:25 — The $1.8B Two-Person Company

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

• 0:00Speaker 00

  Their training costs are a quarter of OpenAI. It really feels like the investors in OpenAI got a much worse deal in the last round than the Anthropic ones did.

• 0:07Speaker 01

  I thought the acquisition of a TPBN was just insane. I'm gonna call bullshit, start to finish, on this whole discussion. Owning a media asset invariably takes way more time than you think for way less money than you expect. See Jeff Bezos for details.

• 0:24Speaker 00

  There's no way that deal is going to happen today. Like, it's dead because of management change. The big three, SpaceX plus OpenAI plus Anthropic, assuming they all IPO. And certainly SpaceX will in the next 12 months. Their value at IPO will exceed every other IPO for the last 20 years.

• 0:40Harry Stebbings?

  This is 20 VC with me, Harry Stebbings. It's my favorite show of the week. Rory O'Driscoll, Jason Lemkin, analyzing the biggest news in tech every week. So what do we have on the agenda this week? OpenAI reboots management team. OpenAI buys TBPN. Anthropic hits a whopping $30 billion in revenue, surpassing OpenAI. And then finally, SpaceX finally confidentially files for IPO, targeting a $2 trillion valuation. But before we dive into the show today, let me tell you about Omni. It's an AI analytics platform and it solves a problem every scaling company hits. Your team needs insights, not just data lookups, the stuff that really matters and is critical to get it right,

• 1:23Harry Stebbings?

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• 2:05Harry Stebbings?

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• 3:33Harry Stebbings?

  Invisible took years of game tape and analog scouting notes to go from uncertainty to a draft pick and Summer League Championship win in weeks, not seasons. Get the data in order first and suddenly AI can do almost anything for you in the enterprise. If you want AI that hits the P and L, go to invisibletech.ai/20vc. You have now arrived at your destination. Boys, welcome back. I've been looking forward to this one. I was doing the schedule over the weekend and last night and I was like, wow, this week we really have a lot of meat to get into. So I want to start with OpenAI and Anthropic. And the news today that Anthropic have surpassed OpenAI in terms of revenue.

• 4:16Harry Stebbings?

  So Anthropic now have 30 billion in revenue. It's all into intertwined with the subsequent things that we will discuss with OpenAI. But as Jason put in an email to us all, holy cow. Jason, holy cow indeed. What did you think?

• 4:29Speaker 00

  Even even in an era where we're getting inured and anesthetized to crazy numbers, this one I did fall out of my chair, right? Getting to 30 billion up from 9 billion at the start of the year. I mean, Salesforce is the largest software company, right? Or at least cloud one, and it it took them 25 years to get there. Anthropic got there in five, but maybe they really got there in three, depending on how you count. But it was incredible to see where they were in February. We couldn't believe it. And then essentially adding 10 million of net ARR. Let's not debate whether it's how many Rs there are and whether it's recurring. At this level of growth, it really doesn't matter. And that there's still capacity constrained and that Claude still shows us when we're in there that it can't finish chats.

• 5:11Speaker 00

  Every engineer in tech has been told to consume more tokens and move faster, right? The crazy thing is, what will it be at this rate at the end of next year, right? It grew 3.3X in four months. We need Rory's math help to figure out what Anthropic's run rate will be at the end of 27.

• 5:27Speaker 01

  The estimates that we were just looking at two months ago just look incredibly wrong at this stage.

• 5:32Speaker 00

  Yeah.

• 5:32Speaker 01

  These are amazing numbers. I think a bunch of other interesting things start to happen here. One is, you're kind of munching in some stuff. One is their announcement on OpenClaw and not allowing that to be in the base plan. I think it kind of gets back to, they're in a massively interesting situation now. Their revenue is exploding. Despite the revenue explosion, they're still compute constrained. In other words, they could sell more if they had more. And what do you do when you can sell more if you had more, but you can't make more? But you can't magically make data centers, though obviously they have that big announcement to do that. What you start doing is allocating capacity based on money. And one of the first things they've figured out is these folks using these OpenClaw-type agents

• 6:14Speaker 01

  are consuming vast amounts of tokens on the fixed-price plans. And they probably want to stop that, which is what they've done. So you're going to see them do exactly what anyone in economics would say do, which is try and find a way to maximize and extract even more revenue. Saw it even with OpenAI last week where you de-emphasize things like video, which consumes huge amounts of compute for small amounts of revenue. In Anthropic's case, obviously, they have much less of that pure slop. But you de-emphasize things like open to low access, where it consumes a lot of your compute and doesn't make you a ton of money. And I think you're just going to see a continued trend to pricing tokens, pricing closer to the value. You don't want to overcompensate because you want to get people addicted on the product.

• 6:59Speaker 01

  Because the truth is, the thing you have in your favor with any digital good is the complete certainty that prices per token go down over time. But you do at least want to start allocating it a little more sensibly while you're constrained. So that's kind of, I think, the trend here.

• 7:13Speaker 00

  The other interesting thing was The Wall Street Journal today had a bunch of leaks on the financials for Anthropic and OpenAI. And the one that jumped out at me when I contrasted with the fact that Anthropic has caught OpenAI, right, in half the time, is that their training costs are a quarter of OpenAI. Their training costs for models are a quarter of the OpenAI. Now, maybe that's because they're focused. They don't have to do video. They don't have to do images. They don't have to do a lot of consumer stuff. But if you just think about it for a moment, the compounding effects of catching OpenAI in half the time, right, at roughly the same revenue or more, 30 billion in five years, and having training costs that for now are a quarter of it, you know, that's a double code red.

• 7:52Speaker 00

  It's one thing if you have two classic startups where one has bled money and it's artificial. There's other things. But if you have a dramatic cost benefit and you're out accelerating your competitors and there's management team turmoil at your competitor, it really feels like the investors in OpenAI got a much worse deal in the last round than the Anthropic ones did. Just crazy, just having both. You usually don't have both together with your competitor. You're out accelerating your competitor and your training costs are a fraction of your competitor. Good God, that just compounds.

• 8:21Speaker 01

  That's actually a good point because you take the Uber Lyft struggle, right? Uber had the, oh, my God, we're out accelerating. Oh, but by God, we're spending every dollar we have to do it. And we show no fear. In this case, you're out accelerating the opposition while being more efficient on a bunch of interesting measures. No, you're right, Jason. That's a scary fact. Pattern. If you're, you know, if you're running the game theory and you're the other guy, it's like, hmm, that's not good. Right. They're growing faster than us. The gross margin economics are roughly the same slash slightly better. And their costs below the line and to a rounding error, costs are compute and scientists to run the compute for training are better. And that's, that's a bad fact pattern.

• 9:00Harry Stebbings?

  Have we ever seen a bigger seeming chasm between where they're at? With the greatest of respects, it seems like Anthropic is accelerating faster than ever. And OpenAI is having more challenges than ever all at once.

• 9:14Speaker 00

  I'll tell you the one I think about, the word where I didn't realize when we did this show the last, because the press is always focused on the headline stuff, right? Yeah, the OpenAI one was barely real. Andreessen's money appears to be real. It came in out front, right? The 13, 14 billion, whatever they put in, that's real, 11 billion. You know, all they have to do is get 20% carry and double that. And it's, it's, it's a nice side bet in an SPV. But that was real. The SoftBank money comes in tranches. They have to borrow money to pay it. The Amazon money is trunched in part on IPO or AGI. And the Nvidia money is almost all not money. It's almost all offsets and compute. So, you know, I thought about it, but then in context of Anthropic's growth, like, I think OpenAI would have rathered have all the cash.

• 9:57Speaker 00

  Like, it's not a sign of strength where the majority of the round is not cash upfront. Like, that's not, I don't think that's a sign of strength. That's a sign of, like, classically at least, barely getting the round done. Barely getting the round done versus getting, because why wouldn't you want all cash upfront? Why wouldn't you want 140 billion upfront?

• 10:14Speaker 01

  I don't know, bit harsh on the barely, because I thought they tacked on another, I can't believe I said this sentence. They tacked on another 10 billion. Think about that sentence sometime, that I think was called hard cash. So I, I agree, your comment is correct, Jason. The vast bulk of the dollars weren't cash. But enough money changed hands that it represented a bona fide price at the time. But yeah, you are right. And again, I mean, look, Anthropic does some of the same stuff in the sense of, given that your biggest expenses are, you know, compute and then distribution. You know, from Microsoft onward, OpenAI to all the recent Anthropic deals, there's a lot of this round. Tripping business, I'd say make two comments perhaps. In both cases, there was enough hard dollars changed hands to represent,

• 10:58Speaker 01

  both of them represent price estimates. But to your point, would, based on what you know now, given the revenue equivalents, rough revenue equivalents, we shouldn't assume until OpenAI releases their numbers. Maybe they've exploded too. But definitely Anthropic at three seventy billion feels a little more comfortable, let's just say than OpenAI at eight twenty or eight forty, or whatever the final closing was.

• 11:20Speaker 00

  Well, OpenAI did say two billion last month. I think that's why Anthropic rushed out the thirty, that they're at a two billion dollar run rate.

• 11:27Speaker 01

  And no, we have the whole gross of net thing. But the bottom line is this, when you look at those two graphs, you definitely don't say to yourself, I mean, I think what you, if this was a public stock, let me put it this way, if both of these companies were public, there would be a bunch of those New York hedge funds shorting OpenAI, longing Anthropic and saying they have the perfect AI bet. Would you short OpenAI at eight seventy and go long Anthropic at three seventy two? I'm not a risky guy, but even I would contemplate doing that. It feels like a no brainer bet. You have roughly the same revenue, a better trajectory and a management team for half the price. Hmm. And if you short the one and long the other, you're kind of, you're diversifying away the AI overall risk and you're just making a relative performance bet. That would be an interesting one.

• 12:09Harry Stebbings?

  What would you say to an OpenAI employee who is now looking at their incredible stock price appreciation with tens of millions of dollars in equity that they now have at the eight twenty price? Sell it all at eight twenty the minute a tender comes? What would you say to them?

• 12:26Speaker 01

  I have some things in OpenAI I want to pile on this time. And if you recollect, in the last couple of weeks, I've tried to avoid the pylon when someone's down. I think you always want to be more tempered. But I always say to everyone in any private company, I say, when the liquidity window opens, take it seriously because it mightn't open again for a while. So yeah, when the liquidity window opens at point eight trillion dollars, the alert reader should say, you know, if you're planning to buy that house in San Francisco, you might need an extra few million just based on what I'm seeing in the market now in terms of house prices. So take advantage of this thing because all your brethren have. The company's still doing a lot of great stuff. You got a lot of turmoil, we got a lot of drama at the top, we'll talk about that. But take advantage of liquidity just because you should always take some advantage of liquidity.

• 13:10Harry Stebbings?

  Let's knock it on the head. Let's talk about the drama at the top. I mean, talk about a management team turnover. You have Brad, the COO, who's been moved to special projects. Never a good sign being moved to special.

• 13:21Speaker 00

  I'm going to be the SVP of Special Projects for 20VC in my next phase of life.

• 13:26Harry Stebbings?

  Jason, I would love you to be the SVP of Special Projects.

• 13:28Speaker 00

  Special Projects, yes.

• 13:31Harry Stebbings?

  We have the CMO stepping down due to health reasons. We have the CRO out. We have Fidji, who was head of apps, taking a short leave of absence with health problems. How do we read this very significant multitude of changes at the management layer?

• 13:47Speaker 00

  If we step back a minute, it ties to Anthropic passing them. You don't just sit there and make no changes on the team when your competitor over the last six months has radically changed the competitive posture. So, look, I don't think any of us like the amount of change in any management team, right? It feels almost a wholesale change at some level. And it's risky, but calling code red three months ago didn't magically change the trajectory here. So, it ties. You got, you got, you got to try to mix things up in some fashion. Hopefully you can do it with the team you have, but in the context of Anthropic now out accelerating OpenAI, it just makes sense to reboot the team.

• 14:24Harry Stebbings?

  Yeah, there's some rebooting, some, to use your phrase, who's been hired, what's the additive reboot?

• 14:31Speaker 00

  Well, the dramatic one, which is always risky for like any startup, is you take Denise Dresser, who was CEO of Slack, who came from Salesforce just a couple of months ago, and you put her in charge of basically everything go to market and related, right? That's a good bet on a seasoned executive, but that's the type of change that we've all seen as investors is like super risky, right? You bring in the one, the person with the perfect LinkedIn, right? And the perfect background that's still getting to know the product. They're still on a get to know you tour. They haven't quite been to the, to the New York office yet. They're getting to know the product and all of a sudden you give them this massive portfolio because they're proven executive. In my experience, I don't know what you guys think, in my experience, that has about a 30% chance of success.

• 15:11Speaker 00

  Just, just roughly that bringing in the big, the perfect LinkedIn, giving them a massive portfolio and either attaching them to, and attaching to something in tumult. If it's executing to perfection, it always seems to work. Bringing in Mr. Mr. LinkedIn is like, but when you're in tumult, there's not a lot of time to learn everything, right? There's not a lot of time for the get to know you tour. So it's just risky, but it's it's a but it's a play.

• 15:37Harry Stebbings?

  I get where you're going there, Rory, which is like for the replacements to be additive, there needs to be great talent added. And there seems to be a lack of people coming on the field when they're coming on.

• 15:47Speaker 01

  Agreed. And you know, I'm all, as I say, I have a couple of comments. One of them, always a load to comment on the illness related days. You just don't know what's going on in people's lives. And that's tough and people have challenges and you know, you wish people all the best, especially in these kind of chronic diseases and hope they can get back to full health. Let's just start with that because that sucks, right? You know, at the same time, you know, you have a lot going on here. I'm tempted to make that, you know, the famous Oscar Wilde quote in the importance of being earnest, you know, to lose one parent might be an accident. When he was talking to this woman was talking to the orphan, but to lose both parents smacks of carelessness, right? Well, you know, you are getting to the stage of carelessness here, but I actually don't think that's the real issue. It's fun to say, I think two, I'll tell you, we haven't mentioned the two most surprising things in the last week on OpenAI.

• 16:32Speaker 01

  One is, I'm just going to say it. I thought the acquisition of a TPBN was just insane. In the particular, it doesn't matter, but you don't launch an E code red edict and a focus edict. And you know, no more side project edict. And then within the space of a week, do something that's so obviously a side project. We can discuss whether it's stupid on its face and whether, you know, buying media assets is the way to go. And I acknowledge the Andreessen articulated thesis that, you know, you have to control the media story, though doesn't seem to be, Entropic has any need to do that. But stepping back one level, you're running a $25 billion company, the most exciting company on the planet, and you just told your entire internal team that you need to focus.

• 17:15Speaker 01

  There's nothing that's more of a vanity project than buying a media company.

• 17:19Speaker 00

  Just one thing, we could talk about it more or less. The one thing just to add, when you look at the press, that deal, the outreach was in January. That's a lot of time in OpenAI and AI time. Vijay was new. Thought this would be a great thing to elevate OpenAI in January. Now it's April and maybe the deal seems a lot different. But in January, it was a different world, right? It didn't happen last week is my only point. It happened in January, it took some time to close, right? And I will say one thing, I'm 90% sure it wouldn't happen today, to your point. Priorities change, right? It probably wouldn't happen today.

• 17:51Speaker 01

  If you only noticed in the last week that you need to focus, then yes, I'll give you that, right? But you didn't just notice in the last week you need to focus. And if you did, maybe you need to focus. See, Pyrocamp is coming, right? If you haven't realized you're in code red for the last two or three months, and if you haven't realized this is the kind of thing you don't do when you're in code red, then you're just not paying attention. So I challenge that. I think it's a vanity project and absurd. And then the other kind of weird.

• 18:16Harry Stebbings?

  Can we just pause on that?

• 18:18Speaker 01

  And I know you want to, because you want, like, where's your 200 million, Harry? But yeah, let's pause on your lack of 200.

• 18:22Harry Stebbings?

  No, I just want to actually articulate a bull and a bear case, rationally for an audience, for how this acquisition could be ceded from both sides, because it is very confusing. So if we were to start with a bull case, Rory, and Jason, please chime in too, because you're the master of media and venture as well. What is the bull case?

• 18:42Speaker 00

  I'll give you the bull case. The strategic one's more interesting, but let me hit the tactical one, because Rory made a good point. Look, this is not going to make or break the company, right? There are certain acquisitions that can, but there are some things you acquire where they run almost on autopilot. They are not massive distractions. And if the price is small relative to what you hope to get out of it, that does factor into the equation. If you have to rebuild your whole team, it's a total distraction. You're going to rip out your guts. That's a big deal. Once in a while, it's pretty rare you can acquire something that isn't massively distracting to some management team level. So even if it's not the perfect acquisition, I don't think it's a huge, it's not going to require a huge amount of senior executive time.

• 19:26Speaker 00

  So it's just important, general to the calculation. The one point I'll make, and I wrote a post that every profitable public company should do a deal like this, of which OpenAI has neither, right? It's clearly not profitable, it is clearly not public. But other than that. Let me tell you why, Rory, and you might end up agreeing with me on this. Because, and this is why the Barstool deal almost worked but failed, right? If you are a profitable B2B company especially, you are under insane pressure to get more profitable. Like, I actually can't overstate how intense the pressure is. Like, they're looking at every headcount, every sales efficiency, everything. Now, it is brutal, and your cash is trapped on your balance sheet. And so it is very difficult to increase marketing spend.

• 20:10Speaker 00

  It is very difficult to spend another 100 million this year on marketing. But, at least in the short term, if you can buy a marketing asset that is at scale, that is at scale, you can turn your balance sheet into marketing. It's hard to do. I think maybe TBN is not the most successful way to get OpenAI's brand out there. We could debate that. But it is a way to turn a balance sheet into a marketing asset.

• 20:35Speaker 01

  I'm gonna call bullshit, start to finish, on this whole discussion. OpenAI is the most known company on the planet, perhaps, other than Apple, right? Within the last two years, the CEO of OpenAI has been able to meet every world leader he wants, right? He's gone on world tours. He's met Macron, he's met the president, he's met every single Prime Minister of India, whatever, right? They get constant attention, constants. The AI story has been the entire Zeitgeist for the last three years, and they're the leader of the AI story. So in terms of media minutes, there's nothing left to get. Now, if what you're saying is, "I don't like what they're saying about me, ooh, they were mean to me",

• 21:17Speaker 01

  then, yeah, maybe you can pay these guys to say nicer things about you than on average. But you don't need more, it's not like you're making fucking widgets in the heartland here, right? You are the most exciting tech story on the planet. You don't need a little bit of help to just get out and get covered. I mean, literally, everything Sam does gets covered. So I hear you, Jason, most of the time, but not for these guys. If you were to pick the one company who doesn't need media attention and does need to focus, it would be OpenAI, and this is non-focused and getting media attention. So I'm like...

• 21:50Harry Stebbings?

  We're a hundred percent aligned. The only thing I would come back to you with saying is they have consistently shown an inability with how to respond on social to negative moments. Whether it's lemonade stand, whether it's anthropic adverts, they've consistently messed up crisis PR and crisis communications and made themselves not look great. The only way I could justify this is by saying they are vibe maintenance for those shit times to make us better, cooler, better responders to bad things. Because they have no editorial control. Like, this is the most important thing. And Jason, you're right, the importance of owning media.

• 22:27Harry Stebbings?

  But they have no ability to own the content, to influence it, to impact it in any way. It is editorially completely impartial. So they have zero benefits. This is the only reason this does not make any sense. If they had the ability to own the media properly, it would make sense. But they have zero impact on it.

• 22:47Speaker 01

  History is riddled with people who buy media assets to try and change outcomes. Generally, my observation is owning a media asset invariably takes way more time than you think for way less money than you expect. See Jeff Bezos for details. Yeah, it just is a sinkhole. If you can't control the story, then hire a better storyteller, you know, hire a better comms person, hire a better marketing person, think before you speak. And before you hit on your bitch about lemonade stands. And look, in turn, it's in the noise. And Jason, you are right. They're not going to spend a lot of time managing, in this case, at least in the short term. My comment is more, it's just really silly when you say, we've really got to focus.

• 23:27Speaker 01

  Nothing else matters but these two or three big things. Oh, but by the way, here's one last plaything project.

• 23:33Speaker 00

  At a meta level, just to founders, especially who've listened to this, honestly, this is why you should default yes to a good deal. I'm pretty sure this is, this deal, I just read the press, this, things, things at OpenAI, there was stress in January, but it's not like today. Fidji comes in, she has an idea, this is not the biggest bet the company's going to make, but they have a team meeting and she's like, I love TBN, what if we brought them in for a little bit of good promotion? And everyone around the corner is like, whatever, yeah. Let's go talk about buying some. Or something, but, but, but they say, fine. And things are good and they kind of shake hands on a deal. It takes a little while to happen and it closes last week. There's no way that deal is going to happen today. Like it's dead because of management change. And I can't tell you how many times I've seen this for portfolio companies.

• 24:15Speaker 00

  And even it's happened to me twice where it's not just time is the enemy of deals. It's management turnover, right? Priority turnover. So the meta lesson is I just don't think this deal would have happened today. It has nothing to do with, with the team at TBN. It just, when you say no to a, to an attractive deal, just be sure you're okay if it's no never. Because the odds that VP that wants to do the deal is there in 12 months and that their priorities have not changed. Approaches single digits.

• 24:42Speaker 01

  It's back to the liquidity window comment. You're exactly right.

• 24:44Speaker 00

  Yeah. But my God, I think it's worse for M and A because so many times in M and A, that guy just isn't there next year.

• 24:50Speaker 01

  But I'll tell you, one of the things about being the big boss is that even when you're a long way down, if you don't think it suits what you're doing now, you should stop it. I remember a fun story. 25 years ago, we were selling a company to GE. I'm not going to name the company, right? And it was a mediocre company and we were darn lucky to get the bid. And it was going all the way through and it went every level at GE. And then it came to the CEO and you know, he's not perfect, Jack Welsh, but he's willing to take a tough decision. We were a long way down. Everyone was about to sign and be all happy, happy. He looked at the numbers and said, no. And I remember thinking, damn, I thought we'd get away with it, but he's right. I should have, you know, right? And at some point, and I remember thinking, whoa, it's impressive. All these people were in, it was a long way down with the process. And he just said, I'm thinking, no.

• 25:33Speaker 01

  This is one where you say, I'm thinking, no.

• 25:36Harry Stebbings?

  I'm going to give you a hard one before we move to SpaceX. You have the chance to buy Anthropic at 850 or OpenAI at 380. Which would you rather buy?

• 25:46Speaker 00

  You may have that opportunity in the secondary market as we speak.

• 25:51Speaker 00

  I wouldn't be surprised.

• 25:53Speaker 01

  I think I'd buy, I mean, having said I'd do Anthropic last time, I mean, six months ago at the 300 and something thing, I think I'd go the other way this time because again, I'll tell you this for certain, if you, if the choices were Anthropic at, at the last OpenAI price of 850 posts or whatever it is, 20 something posts, or OpenAI at the last Anthropic price of 370 posts or 380 posts, I would argue that you would buy OpenAI on one proviso. You could sit down with the board and say, what are you going to do about this? Because it doesn't take a lot to fix this thing, right? To just stop screwing around and focus.

• 26:26Harry Stebbings?

  Oh, no, no, no, no, because you've got to stop then a machine that is Anthropic, that is now picking up more and more pace with every day that goes by and picking up more.

• 26:35Speaker 01

  First of all, you still have the consumer asset where you are by far the dominant thing. Again, this goes back to what we said last week. You have to do two things. You have to figure out a consumer monetization model and you just have to get a Codex, the Codex competitor to Claude out there. It's pretty, mission clarity is pretty simple. You do have one big advantage we didn't talk about, though it's changing a little bit. And give Sam a question. He was more aggressive on compute purchases. And I'll admit, I was someone thinking from the peanut gallery, hmm, is that a bit aggressive? But now it looks like compute constraint is a real thing in 26 and early 27. You have that asset. Maybe you figure out how to deploy that aggressively with Codex. So there's buttons you can press, there's things you can do if you focus and do them.

• 27:14Harry Stebbings?

  Jason, you've got that same choice.

• 27:16Speaker 00

  I'd say buy both if you could invert the valuations. That's what all the, the growth VCs are doing if they can get away with it anyway. So let's invert both.

• 27:23Harry Stebbings?

  That's amazing, but you can only buy one.

• 27:25Speaker 00

  Yeah, but conflicts aren't important in our firm anymore. We, they don't matter at, at pre-seed and they don't matter at growth.

• 27:31Harry Stebbings?

  Jason, you only have one check left.

• 27:33Speaker 00

  Well, look, I mean, I've said the same thing on the show. I'm just not into the tumult at OpenAI. I'm not into the drama. I'm not into a non-deeply technical founder leadership. It's just not my vibe. Like, I wouldn't invest in anything like OpenAI at a high price. It doesn't matter what it is because it's just, I just find it so risky that the turnover and not being led by a deeply technical CEO, that's just, in my life at investing, I ain't doing those risks anymore, right? And maybe I'll miss a lot of opportunities. It's just, you know, I want someone Dario or smarter technically running these companies or I just, it's just too, it's too much change. You get too lost on the, on the pen and the, and the TBPNs. Although I don't think Sam had anything to do with TPN, in all fairness. I think he said fine in a meeting and moved on.

• 28:19Speaker 00

  No, because and related to that, just for folks, I don't know how M and A works at OpenAI. It's not that sophisticated. Okay. But I will tell you, when I was at Adobe a long time ago for M and A, basically every senior executive got a big chip and a small chip. The big chip was a big deal. Back then, it was maybe a billion dollar deal. Okay, that would move the needle. If it doesn't work, you get fired. It's that simple, right? And everyone got a small chip, what could could be like 50 to 200 million deal. And you had to justify it and you didn't get five. As a forcing function, you got one. But you really weren't challenged that much to do the smaller chip. You picked one year and you didn't get fired if it didn't work out. There was, there was, there was an idea that maybe 20% of them would work out. And so I bet he spent five, this was a small chip deal and he spent five minutes on it.

• 29:03Speaker 00

  This is the one, is this the one that you really want to do this year, Vijit? Then just do it. Let's move on. We got bigger fish to fry. That's why I don't think it's that big of a deal. It was a small chip deal and no one loses their job in Adobe over the small chip deal. Otherwise it would never happen. No one would take any risk in buying an emerging company, right? They just wouldn't do it.

• 29:20Harry Stebbings?

  We've got to move on. SpaceX finally, finally confidentially files for IPO targeting a $2 trillion valuation. It would be the largest IPO in history, surpassing Saudi Aramco. They could raise up to $75 billion. This obviously includes XAI, otherwise known as Twitter, which obviously incorporated earlier this year. 2025 revenue, 15 to 16 billion, 8 billion of EBIT. At 2 trillion, it's 125 X revenue. So coming in punchy, to say the least. Feels like a series A these days, Rory. How do we feel when we hear this?

• 29:59Speaker 00

  Well, I'll just tell you one, one, one insight. I think to say that at least venture is different or remade is an understatement. The big three SpaceX plus OpenAI plus Anthropic, assuming they all IPO. I mean, certainly SpaceX will in the next 12 months. Their value at IPO will exceed every other IPO for the last 20 years combined. All of them, all of the last 25 years, these, the big three. Every other little deal. I mean, Rory's had some great IPOs. There's been tons of them out there, but this exceeds all of them combined, right? So, so I, I found it almost depressing in a way when I thought about this way. Because it was like, what's the guy we had earlier in the show from Slow Ventures? Who kind of bothered me a little bit?

• 30:38Harry Stebbings?

  Sam Lessin.

• 30:39Speaker 00

  Yeah, and he kept saying box doesn't matter. And then he said, OpenAI doesn't even matter. It's not that important. And he was very triggering. I tried not to get triggered directly. But he kind of rattled in my head. I was like, maybe the guy's right. Maybe nothing we're doing matters because the big three dwarf the last 25 years combined. Like, what are we doing, guys? What are we, what are we doing here?

• 30:59Speaker 01

  First of all, I think that is a real phenomenon. And what you're simply seeing is, especially in SpaceX's case, the longer the holding period, the more dispersion, which Seth's saying, which is more the big become bigger and the little ones fade out. And, you know, and you're exactly right. At the tail end of a power law, it does mess with your head because the combined value of the top three privacy health companies are larger than everything else in much as the same way. It's even more concentrated than the public markets, which are more concentrated than they've ever been, where the market cap of the top four or five, Nvidia, Apple, Microsoft, Alphabet, and what, and I think Meta, is approximately 30% of the total S and P, right? Which is everything for the last, you know, X hundred years.

• 31:42Speaker 01

  Psychologically, the thing about a power law they don't tell you is you can have the third best outcome in venture history and be only one tenth as large as the largest outcome in venture history. And if you're going to let that in your head, it's going to be, it's just going to be very tough business psychologically for you because you can have a life changing event that's down in the noise of 10 or 20 billion dollar outcomes, which can be enormously great for you and your family and for your co-investors and forever involved. And if you're going to let it in your head that it's not $2 trillion, then you're doomed. Then you're just going to need therapy. I wrestle with these things all the time. I mean, it is the thing that your mama told you, right? It's like, you just have to not let other people define you. I mean, you said it really, it is a psychologically weird thing.

• 32:26Speaker 01

  You're going to have these three deals go public. They're going to be worth literally everything else that's happened in the last 20 years if they trade anything like their current prices.

• 32:34Harry Stebbings?

  Will SpaceX rip and hit the $2 trillion when it does go out?

• 32:38Speaker 01

  I try and not spend time talking down an amazing company. Not least because I'm going to be a buyer of SpaceX 15 days from the IP. I surprised you because 15 Fifteen days from the IPO, it's coming in QQQ. I have a big QQ holding, right? If you're an index fund, you're getting this thing in 15 days. And if, I don't know when it'll be for the S and P, but it'll be fairly soon thereafter. So we're all going to be buyers of this thing. So in terms of the valuation, you do any kind of meaningful analysis of some of the parts and you come up with a lot lower number. And then, as we've discussed this before, and then the gap between what you think the assets are worth on any kind of normal basis and $2 trillion is huge and it's all Elon premium.

• 33:19Speaker 01

  And what you're really asking therefore is how big is the Elon premium sometime in June? And I don't know, you're definitely seeing the Elon premium come off on Tesla, which has been worth pointing out. It's down significantly year to date and there's definite, and you know, I was interested to see JP Morgan put an actual sell on Tesla with a prediction of a 60% price decline. So really what you're asking me, Harry, is what is the Elon premium in June? And I, hell, I don't know.

• 33:45Harry Stebbings?

  Well, I'm asking actually, do you think it will materialize in public markets and they hit that $2 trillion?

• 33:50Speaker 00

  Well, right, here's what your thought, well, obviously I don't think either of us have worked on an IPO quite of the scale, right? But, but-

• 33:57Speaker 01

  Well, by definition, no one has in the fucking universe because it's the first time it's ever happened.

• 34:00Speaker 00

  Right. So the process is going to be different, but here's my point. At some level, there is a tough negotiation sometimes between the company and the underwriters on valuation. And oftentimes some CEOs are like whatever the, whatever the Lord brings and some are extremely aggressive on the number they want, right? And depending on the situation, sometimes the CEO wins those debates, gets out with the valuation the underwriters are very uncomfortable with. And sometimes it works and sometimes they stumble because of it. I think what Elon said publicly on X, it ain't going to be $2 trillion. Now, maybe he'll change his mind. He said $2 trillion was too high. So whatever his number is, I think he's going to get it on IPO day. He's going to will it into existence. The underwriters are not going to be able to argue with him for more than five minutes. And there'll be enough demand between retail, 30% of the IPO, it's a lot, right?

• 34:43Speaker 00

  There'll be enough whipped up demand, I think, to support it for one day. He will will it into existence, whether that evaluation is there in 30 days or possibly even in one day, I don't know. But I do think the sheer force of will, the lack of power of underwriters and the 30% retail- Will will his 1.75 into existence for one day, at least one day.

• 35:03Speaker 01

  I think that's quite correct. At what point, I think, less than 12 months ago, there was a meaningful transaction SpaceX at 400 billion. Then there was this much smaller, I don't have even happened in the end, secondary at 800 billion. Then, in conjunction with the merger with X slash, yeah, X slash slash Twitter, it was SpaceX was valued at a billion to value the other asset with its negative 12 billion in cash flow at 250 billion. So they added that in to get to 1.25. And now, you know, you're at, you're talking about 1.7, 1.8. And it's all been walked up in a very interesting way. It is worth remembering that the last time the useful asset was valued on a standalone basis, it was worth 400 billion dollars.

• 35:44Speaker 01

  So if the deal went public at 1.5, 1.6, less than the whisper number, I still think they'd have done a magnificent job of walking the value of the asset up. Because it's not clear to me that the X AI asset has a positive NPV in anything like the near term. We just had a long conversation on Entropic versus OpenAI, and they're kind of number one and two in this space. And Gemini, Google is almost certainly number three. So X.ai is number four in the kind of model LLM space at best, burning 12 billion dollars a year. So I don't know what that's worth. But I would argue that they won't be talking about that in page one, two, or three of the slide deck at the IPO.

• 36:26Speaker 01

  They'll be talking about SpaceX, which means the entire addition of that probably was net negative. So I go back to my comment. I think you're right, Jason. They'll will something amazing into existence for a short period of time because this has all the leverage and the drive. And I think, you know, only in the long term are markets weighing machines. In the short term, they're voting machines. And we'll see over time how it settles as, you know, people just look at the dynamics of a 20 billion plus or minus business. EBITDA positive, capex not clear, excluding X.ai. And then add an X.ai and see how that trade, it'll settle into a long-term value over time. What happens on the day, I think you're right. It'll be much more a function of the will. And it's a small float, so, and people will push.

• 37:08Harry Stebbings?

  I'm switching it up here. We're going to go to private markets. We had big news from Sequoia this week for context, always like to context set. Doug Leoni had taken a step back from the firm, back from day to day, back from investing. Pat and Alfred had recently taken over the leadership from Roloff and now Doug is back in an investing capacity, not in a leadership capacity. That's still very much with Pat and with Alfred, but Doug's back in the firm investing, which is very big news given he is one of the OGs. How do we read Doug back and back in the trenches?

• 37:41Speaker 00

  From a distance, it feels like something to calm the LPs. I mean, everyone is raising so much capital, so much change there. I mean, you guys have even more experience than I do. LPs are uncomfortable with change. LPs say that they're looking at the new generation and the vanguard, but they are comfortable when the old leadership is still actively involved in the fund. It does make LPs more comfortable, whether they're writing, investing half the fund or a few deals. So it struck me as that simple is you, you, you bring back someone that makes the LPs comfortable and you get through this crazy amount of fundraising everybody's doing. But I don't think it's just to get somebody on your slack and get a little wisdom. You, you don't need to bring them back to just to, to get an hour or two of, of insights on, on deals. That you already have.

• 38:25Speaker 01

  I think it was a sensible move. I don't think it's an earth shaking move. I mean, they've made the changes they've made already as a firm and they all made sense. I think at the margin, you're right. It helps on a bunch of different things. It just provides some continuity, which is important, I think, for LPs, for the firm even, for entrepreneurs. Also, let's not lose sight of the fact, he's a damn good investor. I mean, one of the check questions we always ask when we're hiring someone and thinking about it, and in this case, you are effectively hiring someone, is do you think the next check that they'll write will be better than a check that one of us will write? And I think Doug Leoni's proven that he can write pretty good checks. So I think even at the margin, from a check writing perspective, kind of makes sense. And having made one transition to Roloff and having had to make another transition abruptly means the first transition

• 39:08Speaker 01

  wasn't that successful. I'm sure there's an element of scratching the itch for Doug. You want to come back and make it work. You know, they've put a lot of his life into this firm. They've done an amazing job and it just felt A little janky late last year when that transition happened. So if a couple more years can help manage that transition and send a continuity message, why not do it?

• 39:27Harry Stebbings?

  With the greatest, I spend a lot of time with LPs. The insatiable appetite from LPs for Sequoia has never been more prominent still. And so I respectfully, I don't think it's LPs. I think it's actually just like in the face of increasing competition from a founders fund who've got an Anduril and a SpaceX at their tailwinds for founder brand. And Andreessen, which are more attractive than ever for founders. You ask the question, how can we be more competitive? And Doug is the ultimate winner of deals.

• 39:55Speaker 00

  You telling me the kids at Y C have heard of Doug Leone or even know how to spell his last name? I doubt it.

• 39:59Harry Stebbings?

  I'm telling you, when Doug Leone goes to that meeting with them, whether it's Christian Hecker at Trade Republic in Germany, or whether it's the team at Wiz, he fucking closes the deal.

• 40:10Speaker 01

  Yeah, because maybe not the Y C founder who's 24, but you're right. Across, look, let's be real here, across the venture and tech ecosystem. This is someone who's had wild success and even in a meeting can bring knowledge to bear that would move the needle on a close. I agree. I mean,

• 40:27Speaker 00

  Well, let's call it gravitas, whether it's the founders or the LPs, it is adding gravitas back into Sequoia in a time of a lot of change, right? And it says they needed more gravitas. That's just what we need a little more gravitas, guys. Who can we bring in?

• 40:41Speaker 01

  Yeah. Yeah. One of the things I admire about Sequoia, to be fair, I've always said this is like literally, even if they're winning on every round but one, they'd be like, well, how do we win on that round as well? And as you say, Harry, it's never been more competitive. There are wildly talented, similar sized firms. Even if you have 10 great players, why not get an 11th?

• 40:59Harry Stebbings?

  Jason, you mentioned the youngest founders from Y C, some very young founders from Y C, obviously founded Delve, a SOC 2 compliance business. Sorry, Rory, don't look pissed at me, but it is.

• 41:10Speaker 01

  Not pissed, no.

• 41:11Harry Stebbings?

  Okay, good. Very young, 21 year olds. And as everyone knows, Delve has been in the news for not providing a product in the SOC 2 compliance space. They said they were a lot of problems around that. Y C have since kicked them out of the Y C community, which was. Announced this week or leaked this week from Bookface, Y C's internal product, which obviously wasn't meant to be leaked. Is this the ultimate sign of their guilt? Inside invested thirty two million bucks into the company within the last year. Should there have been more diligence from an investor perspective? How do we think about this?

• 41:46Speaker 00

  My guess is, you know, they, they, listen, obviously, a lot of things went wrong, right? One was making up a lot of audits with A I. We're going to find more, more portfolio companies did that. The second one was stealing from a fellow company, stealing I P, forking a fellow company. And I think, listen, I don't know how you manage it with Y C with thousands of companies, but there's a limit where you cross the bro code or the girl code or the founder code with other folks at recent portfolio companies. And there's a line you just can't cross. And whether they see it as open code theft or what happened, whether you're manipulating, you can't allow that within the core portfolio. And I think they were ejected for the combination. And it wasn't just some young kids misusing A I. I think it was the second. I think it was breaking the code.

• 42:31Speaker 00

  And that's why they were just, there was no need to comment more. You broke the code, you're out, you're out, you're out of the team.

• 42:36Speaker 01

  I totally agree, Jason. I mean, look, these things are going to happen. I mean, I was just running the math in my head, you know, Y C, two hundred companies a quarter. So that's eight, nine hundred a year. Step back, United States, we have three hundred million people here. We have approximately three million people incarcerated at any one point in time. So we run rough one percent, you know, between felons and misdemeanors, right? Across the whole population. So if you just index to that, that means out of the eight hundred Y C founders a year, statistically, if they're just no better or no worse than the rest of the country, there's eight, eight of them that are, you know, will in the course of their life commit some kind of crime. It's going to happen. You're going to have fraud. And, you know, at the end of it, you know, when you have a portfolio of thirty companies or forty companies as we do,

• 43:21Speaker 01

  then most V C's avoid it and every once in a while, one V C gets unlucky. If you have two hundred companies a year, it's going to happen to you a lot. So first of all, no drama there, no, I mean, I saw all this, oh, Y C is bad because this guy is a fraud. Dude, when you have this number of companies, statistically, it's just going to happen. So that's the first comment. And then the second comment, Jason, I love what you said. You're exactly right. What do you do if you're running Y C? You can't stop this shit up front. And especially when a lot of your value add to entrepreneurs is

• 43:51Speaker 00

  The community.

• 43:52Speaker 01

  The community, right? That is what you're selling and you get you do business with each other. Anyone who did business with these guys was at the very least discombobulated and embarrassed because you rely on this for SOC two compliance. And then it wasn't true. And then on top of that, you stole from another Y C bro. You're exactly right. It's like in the old West when there wasn't, you know, much law, you know, you have to take the law into your own hands and hang the cattle thieves. This is the same thing, right, dude? You broke the code of the West, you're out. And I think from a enforcement perspective, I can totally see why they did it, you know? Now you can talk about should other people have known? Should you really buy compliance software from 21 year olds? That's an interesting comment, but fundamentally, I, I, I think you're exactly right, Jason.

• 44:34Speaker 01

  You're going to have this thing and the only way you can deal with is not a priori policing, but especially when you break the bro and whatever the non-sex loaded term of bro is, when you break that code, you just gotta be pretty ruthless about it.

• 44:50Speaker 00

  Yeah, I really think it was the part two that did it. I, you know, there was a

• 44:53Speaker 01

  Yeah.

• 44:53Speaker 00

  You know, taking a customer, Sim Studio, that is also a Y C company, maybe even a batchmate. Taking their open source software, not attributing it back and claiming it's your own software to like your own batchmate or your own customer. That's, you know, we, we've all thrown a few things in the clod and pretended we did the work, like all three of us have done that, but this one breaks the code. You took the open source code from your batchmate and said it was your own software. I mean, and they were your customer. That's, you can't hand wave that one away.

• 45:20Harry Stebbings?

  Okay, moving on. OpenRouter, very well known company. For those that don't know, a marketplace for L L M, so to speak. At 1.3 billion price at 50 million of error, up from 10 million in October. So obviously 10 to 50 and whatever that's been six to seven months feels quite cheap for an A I leader. Jason, I'm intrigued to hear your thoughts specifically on this one.

• 45:42Speaker 00

  I love OpenRouter. I mean, I use it and it's just very interesting. You know, it's a very simple way to dynamically pick which LLM to use, right? And going to our conversation from last week, sometimes it doesn't matter if you're not price sensitive for certain workloads. Sometimes not only does it matter, but it's incredibly helpful to not have to do all this work yourself. Oh my God, which model should I pick? How should I do it? And OpenRouter lets you do it dynamically, or you can pick different LLMs for different use cases. And it just makes it elegant. And what I love about it, and it's also really cheap. It's quite cheap. I suspect the cheapness is why it's not worth 10 billion, right? When you have such a low take rate from such high GMV, you do naturally get a little nervous about the address, the true TAM,

• 46:26Speaker 00

  even though we've given up on TAM, that would be my guess. They've become the market leader in this space. It's cheap and it works and adds a lot of value. You gotta love it, right? It's just when the flip side is, you know, one of the reasons Anthropic, I mean, got 20 billion, right? Is a really good Anthropic call at the API level is a buck. Okay, here's my simplification. You can do so much on your $20 a month Claude subscription or $200 a month. But I can tell you on all the apps I've built, the complex stuff, it's a dollar. So that scales massively. If you're taking 1 to 5% of a subset of that, you know, there is in theory a ceiling if you don't expand it. What I like is if you get market leadership in this kind of thing and you're not that expensive, there's no reason to switch. It's not worth switching for a tiny amount more basis points. It ain't worth it, right?

• 47:11Speaker 01

  And just for listeners context, what the company does is access, if you're building an application, this product, OpenRouter, acts as an interface between you, the builder of whatever software product you're building, and 50 to 60 different LLMs such that it can dynamically pick in real time, which LLM is the right one for whichever call you're making. And it charges around 5%, 5.5% of the money you pay the ultimate model provider. So if you're building this app and you're spending, you know, $100,000 a year on LLM calls, using these guys, you pay 5% to them. But in return, instead of having to access each LLM separately, you get access To the mall in one kind of API call. And so it kind of just totally makes sense to me.

• 47:57Speaker 01

  It's kind of in that Stripe Twilio business model of an interface. Twilio was an interface between an app builder and all the complexities of telco. And these guys are an interface between an app builder and all the complexities of L L Ms. And you know, Twilio's gross margins, because they account for everything gross, were twenty, thirty, forty percent plus. They were pretty darn good, whereas in this case, they're only booking the net revenue at five percent. So maybe there is actually room for margin expansion there over time. So it's an interesting business, kind of the world needs it. The other thing that's interesting about it, which gets to the wider question is a number of folks have backed into figuring out what are the most common models? And you see a lot of the Chinese open source models now. So I always think I'd love to spend time thinking about it, and I just haven't.

• 48:39Speaker 01

  They must have, open router must have a pretty good sense of what things do you need state of the art models? And what things can you do easily on, you know, much cheaper open source models?

• 48:50Speaker 00

  Well, they can even turn it on for you. That's one of the reasons I think open router is so clever. If you want, they will just decide which model to use for a workflow. You don't even have to figure it out.

• 48:57Speaker 01

  Yeah, at some point, the people spending thirty billion dollars a year on Anthropic and corporate I T is going to wake up and say, do I have to spend all this money on Anthropic? Or can I pass some of these calls to a cheaper model? Just given the size of spend that OpenAI and Anthropic are getting, there is at least the opportunity for corporate purchasing to think about, is any of this doable on a cheaper model?

• 49:20Speaker 00

  Like, I'm a super fan, right? Like, great software, super easy to deploy, everything, it's like eleven labs, just like super easy to use, super easy to deploy. I give it a ten out of ten. What I've learned from another investment we can chat about is, okay, so they're at fifty million A R, they said. And the nominal take rates five percent, but some folks probably pay less, right? And in some cases, you don't have to pay anything. So they might be needing to manage two billion in inference just to get to fifty million in revenue. So easy to see how you get to a couple hundred million in revenue, right? In today's world, what I worry about companies like Open Router is how do you get to a billion in revenue, right? And do you just wave your hands and say, these are great founders? They're at the heart of A I, or do you say?

• 50:02Speaker 00

  Oh my God, like even if Anthropic keeps growing and some folks won't use it because they'll get big enough, they'll do their own things. How the hell does this get 20x bigger when it's already managing 2 billion of inference?

• 50:12Speaker 01

  I'm going to give you the argument, which I'm not sure I believe, but look, you just look at the OpenAI and Anthropic projections, which cumulatively add up to in 2029 on the Coto estimates, $400 billion plus. Let's call it $500 billion in API across both companies, right? As you take out ChatGPT consumer business, maybe 3-400 billion of enterprise API calls across OpenAI and Anthropic. I don't know, if 10% or 20% of that went open source, that's 40 to 80 billion. And 40 billion to 5% is pleasingly 2 billion. If you could, and now that's 100% of the market, so you're right.

• 50:47Speaker 00

  100% of the market, right?

• 50:48Speaker 01

  That's fair, that's fair. You got to get 100%. Maybe there's 40 to 80 billion of kind of value going to open source LLMs. And maybe you can get 5% of that. Now, the other question to your point, Jason, is right now amazingly, all these open source models are primarily Chinese open source models. And until, if Meta reintroduces an up-to-date open source model or someone like Reflection ships one, there'll be a US equivalent. But right now, the low, ironically, the Chinese Communist Party is effectively subsidizing the American small independent software vendor by providing cheap open source models, God bless them. Because if you look at the kind of winner list on OpenRouter, it's all Quen, Kimi and all the other open source products.

• 51:31Speaker 00

  What I think about OpenRouter, just for investing, right? One of the news is, I do really think about small takes of large Tams is intellectually confusing. So Harry and I are both investors in a company called Revenue Cat. I was the first investor and they have about 50% market share in managing mobile subscriptions. If you have a mobile app that is paid, 50% chance they have Revenue Cat deployed, okay? It is, it's competitive and their net take rate is like half a percent up to 1%, right? Even with all of that, they're only so much bigger than OpenRouter. Now, they grew 40% last month because of AI, like it's great, but like, and I love the company, I love it. They have a clear path to a billion in revenue now, but my Learning from that is sometimes it's hard to do the math intuitively.

• 52:15Speaker 00

  If your, if your product is very cheap in a largeish market, but you don't get all of it. Open Rudder could be one of the greatest 200 million ARR companies, right? It's just a risk that I think about more than I used to.

• 52:28Speaker 01

  That, that's fair, but I will give you the counterpoint, which is the two best financial businesses on the planet are Visa and Mastercard. I sit literally 30 yards away from the Visa headquarters. They don't even get two and a half percent because most of that goes to the banks. They get, you know, 15, 20 bips, but on every dollar of every human spends on the planet. It turns out to be a remarkable business.

• 52:49Speaker 00

  I guess my personal intellectual limitation is that the notional bips math doesn't always translate to the real world bips math. Right? That's the thing that the Revolut and Visa's sound great, but niche, sometimes products that seem mass scale are more niche in practice. And if your product is $200,000 a year or $100,000 a year, who cares, right? You'll figure it out later. If your product is dirt cheap, you really, really gotta like own everything. Own everything when it's dirt cheap. And I think we're, we're all making a lot of AI mistakes here and we're, our investments are being flattered by high ACVs right now. Like the ones that will have high ACVs all seem to be doing great because they're 50 to 100K per check.

• 53:29Speaker 00

  Getting to where 11 labs got from the early days is much harder than a lot of, a lot of Lagoras and Harvey's are. Just because the large ACV flatters, flatters the, the, the inputs and the outputs to achieve that scale.

• 53:41Speaker 01

  Agreed. Not sure I could trace it back to Open Rudder, but I agree.

• 53:44Speaker 00

  Well, I'm just nervous. I'm personally, as an investor, and this may be one of my many flaws. It's a long list. I'm nervous about exciting AI investors that have very low ACVs right now. I think their actual TAMS may end up being smaller than they look, despite the epic numbers when we started this conversation. Despite Anthropic getting to 30 billion in five years, the little tiny crumbs we get out of this 30 billion may not be, may not make a whole loaf of bread sometimes. Like a bad analogy, but some truth to that. That's just, so rather than shoot from the hip when it's a seven million post back in the old days. If I've got to shoot from the hip at 100 million post in the pre-seed. Maybe I gotta really believe that that small ACV will scale up.

• 54:26Harry Stebbings?

  Do you think OpenRudder will be a $10 billion company?

• 54:28Speaker 01

  It's always a weird question because if I knew for certain, I'd go do the deal and not sit here, talk to you. Right. Because that's what they're paying me to do. Look, I think we're in a world right now where everyone is just doing the build out as quickly as possible. What that means is everyone on that journey can attract some capital, right, and get some revenue. Because if you're solving a problem, that's a rate limiting step in terms of getting the AR build out done. You can get revenue, you can grow quickly, and I think OpenRudder is an example of that. And you know, you can put on your intellectual MBA hat and say, in the end, when things settle out, maybe a lot of these businesses get commoditized. And you can worry about that. And a certain amount of that worry is legitimate. And there's a whole bunch of markets, like there's kind of the labeling marketplace, there's the inference marketplace, there's products like this OpenRudder where you say,

• 55:12Speaker 01

  oh, when things settle down and people start getting more efficient, then all these businesses will get scrunched a little bit. And that's true intellectually, but my advice, and I say it internally, is please don't overthink it. Because while that is true, at the same time, in the short term, this explosive lift in demand gives you a chance to be relevant. And it's your job to add products on top of that, such that when the great crunch does come, and it will come in a couple of years, you've just delivered enough value. Do I think OpenRudder will get to $10 billion in value on just what they do today? No. And if they just keep doing what they're doing today, no more than the inference guys, no more than the labeling guys, when things slow down, all these businesses will get crunched. When people are out optimized. But you have a chance to parlay.

• 55:55Speaker 01

  You're building relationships with a whole bunch of apps developers in OpenRudder's case. Your job is to find the add-on products on top of this that over the next two or three years, you know, give you value or do the adjacent acquisitions that give you value. Maybe you start doing inference, maybe you start hosting stuff on top that allows you to extract more value from those customers, such that when the thing slows down, you're the survivor.

• 56:17Speaker 00

  Yeah, I think that's the challenge with these investments. I mean, on one hand, if I'm running it, it's a dream. I'm 50 people, right? At 50 million in revenue at the center of this, like if I was a founder, I'd be, this is a dream job. But I think my learning is Rory's point. The reality is you have to go truly multi-product earlier in this type of situation. Not just a little feature, right? Not just a little enhancement, but you literally probably have to build five distinct products to get to that billion. You know, not all founders are actually up for that. They say they are, but you need a very distinctive founder to run the AI rippling playbook and say, hey, I want to break something up in some ways that's crushing it with 50 people if they have it. I mean, again, my dream job and say, we're going to do five of these and we're not going to wait two years. We're not going to like just focus, focus, focus, focus.

• 57:00Speaker 00

  And I think if they're up for it, I would hold my stock, Harry. You probably have no choice. If you see this sort of Stuart Butterfield-esque reluctance to go multi-product, which was very rational at that time and place, then I would be less excited to hold stock.

• 57:14Speaker 01

  Yeah, you've got to run these businesses right now. Like you're in this insane period of time when money is just raining down on everyone. And all the time you should be saying to yourself, at some point, the music will stop and two thirds of the people will have to go. How do I make sure I'm the one third that make it? And that's what, you know, the smart inference providers are doing. That's what the smart up and down the stack should be doing. How do I lock in? Cause look, the truth, even when the crunch comes, the foundational model companies make it because they, they're on top of the heap. They have the high intellectual property asset. They're going to make it. Everyone else one level down has got to be saying to themselves, when people sober up, they're going to say, oh my God, this is a commodity. There's a bunch of adjacencies. How do I make sure I win in that world?

• 57:55Harry Stebbings?

  Speaking of will this become a commodity in a future world? We've seen the need and the explosion of databases. We've seen some people like your lovable's and your raplets incorporate them, build it themselves. Some people outsource to Supabase. Supabase at $10 billion. Jason, you're the man for this. The man who's used more Raplet instances than anyone else is Supabase at $10 billion. A good buy?

• 58:20Speaker 00

  I think it might, I think I like it. I mean, I do think it's, it's an interesting buy. First of all, you know, huge credit to the team. I mean, this is one I call an AI tailwind to the maximum. Supabase founded, I think in 2020, right? This is pre-AI and they're like, oh, well, we'll do another fork of Postgres, which is open source and free. And we'll make it easier to use and easier to deploy. I mean, who the? Well, I mean, I know it was it was a hot Y C company, which kind of, you know, a lot of folks want to say it's the unhot ones that take off. But you know, sometimes it is the hot ones, but I don't know that that certainly wouldn't have been obvious to me in 2020 that we needed another forked version of an open source database process. I mean, everyone was having issues with Postgres at the low end and the high end folks were having to shard it. And it got complicated for big and it was reasonably difficult to deploy at the low end.

• 59:05Speaker 00

  But then that just worked with agents like they built a product that could basically self deploy a Postgres database. And it's what every agentic product needed, right? They needed to spool up a database without humans and they leaned the hell into it, right? They didn't get Replit. Replit went with Neon, which Databricks bought, but everyone else standardized on Supabase, right? They they supported them and then they let everyone lovable and emergent and all these other ones white label it a couple of months ago. And now I don't have the exact numbers, but I know more databases are being created by agents and humans. So that is the trend you're betting on. Database is a fundamental category of software. It always has been, right? Now, the number of databases we're creating is an order of magnitude more than it's been 12 months ago. So why the hell wouldn't you want to bet on the leader in that trend, right?

• 59:49Speaker 00

  Every app needs a database, like every, and what's interesting now, I'm not sure if this is true of lovable V zero, but Replit changed it a little while ago where every single app has a database, whether you use it or not. They found that enough of them are using databases, no matter what they build, right? That it's not worth adding a database later. So whether you even realize you have a database, all the millions and millions and millions of I've coded apps have a database in the background. So, and with Supabase, they get to monetize them all, like they're charging these guys for every single database. So I do like this one. This is one where the agents are so far ahead of humans now. There are categories where the agents are doing like the node and everyone's talking about what the world will be like in four years, right? Database is a world where already the agents are creating more databases than humans. We've already, we've already crossed that line.

• 1:00:34Speaker 00

  And so why wouldn't you want to invest in the leader?

• 1:00:36Speaker 01

  And I think it is Lily, an excellent example of two things we've talked about. One is that kind of thing I just mentioned, which is you start with something and you have to parlay. And then the other thing is, Jason, that you've talked about a lot is being a pre AI company that, you know, brilliantly finds your way to co attach. These guys co-attached to the trend, as you say, did the deals with many of the vibe coding things. And now their job in the next two years is before the music stops, be perceived just as MongoDB was the right database for the kind of SaaS era and for cloud. You want to be the right database for Vibe Code and Agent Apps in 2026, 27, or 28. And at some point, when when things slow down enough for the loverols and the

• 1:01:19Speaker 01

  replits and the other folks to say, hey, maybe we should just back in and do this ourselves, you want a Superbase be in a position to say, no, every developer on the planet uses us. Every agent framework supports us. Why would you do this? Your users will rebel. But the playbook is super clear. It is just like the SaaS and cloud's playbook, but on super fast speed. You know, this is all going to happen in two or three years. And make sure that, you know, before things slow down, you are a lot more than you are today in the eyes of your users.

• 1:01:49Speaker 00

  Think about how hard it classically has been to deploy a database. I mean, Oracle is still massive, right? I mean, I have never deployed Oracle, but I can only imagine how difficult it is to deploy Oracle database, right? MongoDB is work. These products, and that was disruptive. These things are work. MongoDB has a vector database product, and I deployed it for one of our apps. And it only took a few hours, but it took head scratching and headaches, and not everyone could do it. Supabase, you could do in five seconds. I mean, it's so disruptive.

• 1:02:19Speaker 01

  All these databases start being easier than the prior alternative. I mean, I don't shock Harry. I don't remember when relational started because it was in the 70s. But I remember even in the early 90s.

• 1:02:29Speaker 00

  Arthur Rock used to talk about it, though. I remember the relational database days.

• 1:02:33Speaker 01

  And then I, but I do remember when MongoDB started, and it was just the drop dead, simple, cloud-based alternative to a lot of these, to some of the other alternatives at the time. Not so much directly competitive relational databases, but for some of the newer use cases. And then they get more complex.

• 1:02:48Speaker 00

  For a DBA, for someone that could spend a month configuring it and getting it going is disruptive, right?

• 1:02:52Speaker 01

  Yeah, because it didn't take a month. It took a few hours. It was easy. It was JSON. It was whatever. And you're right, now it's five minutes.

• 1:02:59Speaker 00

  Or it actually, it's invisible. You don't even know. Here's What's interesting, you don't even know you have a database until you need it. It's lurking in the background now. You build an app without a developer and you didn't even know you needed a database because you're not a developer. And it's already there and configured and has all your data. It's pretty cool.

• 1:03:14Speaker 01

  That's true, but the odd point I was trying to make is the tragedy is that's great. But over the medium term, a white label business to five or six vibe coders won't be enough. So they're going to have to expand beyond that. And ironically, over the next five years, that will mean adding complexity, adding functionality. And in 10 years' time, someone, and it won't be me at that point, will be saying, oh, my God, those legacy Supabase products. They're almost as bad as MongoDB and there'll be a new alternative at that point. But that's just the movie and this is Supabase's time to crank. Good for them.

• 1:03:45Speaker 00

  I think it's also a reminder just that we've given up on worrying too much about intellectual durability in these investments, right? It's a winner. The growth is exciting. The MPS is high. The fact that everyone else may build their own Postgres databases or other things may change. We're not, we don't even care anymore.

• 1:04:03Speaker 01

  I mean, I'd say differently, by the way, just to be clear. It's not that we don't care. It's that you just don't have the luxury. There are very few things where you can say, oh, this is something that is highly different. It has that level of defensibility. Arguably, LLMs themselves did because there was only a small number of people who knew how to make the magic. But you're right. Most of the time right now, I mean, I can regret the fact that there's not a lot of barriers to entry. Or I can just accept that that's just the reality that exists today. And the barrier to entry is, as Brian from Andreessen said, is speed. And if you execute well, you create these barriers to entry over time. But you're right, Jason. Right now, most of the deals you look at is in the short term, the barriers to entry are low. And what that means is if you stumble, you lose, right?

• 1:04:46Speaker 01

  Because if there's five of you going out of the gates, one of them won't stumble and they'll win. And over time, by winning, they'll be able to create. I believe downstream, there will be barriers and modes created, second order modes. But out of the gate, you're exactly right. It's a race. And I don't know who the Superbase competitor was, but they didn't get the two or three key white label deals and there you are.

• 1:05:05Speaker 00

  I think also this is why I view a lot of VCs today as enablers. It really bothers me because Rory's point is accurate. If you stumble today, you may lose forever, right? And the classic VC thing is, guys, keep pushing. You've got time, keep at it. You know, a bad quarter or two, falling behind the competition. Like, everyone, it's not that I don't think you should be supportive of your portfolio companies. Of course, you have to be, right? And what choice do you have? I just see too many VCs running a pre-AI enabler playbook, where when folks do fall behind a tick or two, you see kumbaya activity instead of code red activity. For example, I'm an investor in a company that's crossed nine figures in revenue, but it is hitting massive AI competition and issues. Okay, it happens.

• 1:05:48Speaker 00

  And they have a new investor on the board that doesn't really know the space that well and doesn't really want to learn and frankly, isn't as close to some of the AI changes as we are. And every email and conversation is, great job, guys, keep at it. You're like, you know, don't you understand the disruption in this space? Don't you understand the issues? And he's become an enabler, an inadvertent enabler by being a cheerleader, right? I just worry about it because so many folks are still hiding. And I don't think having enablers around the table, even if it feels good on a given month, is helpful today. I think enablers can enable a death spiral that you feel good about as you approach the event horizon and your startup implodes.

• 1:06:26Speaker 01

  I was thinking about what you said and, you know, frankly, just checking myself. Have I at times? I mean, because, you know, one man's description of enabler can be another person's description of being supportive, right? And at times when things are tough, you want to be supportive. So I was thinking, actually, Jason, because I actually think it's a very important comment. What makes a difference is this. You have to be very clear-eyed with your companies and where the competition is and understand exactly, you know, what the old guys are doing and therefore, how well and how far behind you stack up, right? And that takes it away from enabling, it's kind of a judgmental term. Is am I being, you know, because also being a jerk is also a judgmental term, right? I think what you're saying to this correct is, you're not a useful board member unless, A, you understand what the company does and how it compares to the direct competitors,

• 1:07:11Speaker 01

  ideally with hands-on experience of the products. And then, B, you find a way, without being a jerk, to keep the company honest about where they are relative to the competition. You know, what are they saying? What do our competitors' products do? What do the adjacent products do? How do we think about that? Not in a kind of defeatist kind of way, but you know, how do you distinguish between, oh, these guys leapfrogged us for a month? And we need to get our act together versus we are a year, year and a half behind in a market. We may never catch up. We should sell while we can. And I think that's kind of threading the needle between you don't want to be an enabler, but you don't want to be a debit. You want to be supportive. It's kind of a slogan we have internally. It's not so much founder friendly, it's founder honest. But also I think actually, as I think about it, it has to be found a fact based.

• 1:07:55Speaker 01

  The number one thing, and I'm even thinking of a couple of my deals where I have to do some work this week. Do you really understand where your two direct competitors are and the strengths and weaknesses of your product? And what the last three win losses say about how you're really doing in the field? Because if you don't, you're just coast playing a board member.

• 1:08:11Speaker 00

  And are you being honest about what has to change?

• 1:08:14Speaker 01

  Yeah, agreed.

• 1:08:15Harry Stebbings?

  Champs, there are many other topics that we can discuss. I often get chastised for my selection, so I'm gonna.

• 1:08:21Speaker 01

  No, I won't make the selection. You make the selection, Harry. I'm too tired to decide.

• 1:08:25Harry Stebbings?

  Okay, I think we will have to at some point address McCor. I think someone in a comment put like, oh, Harry, you often shill them. And so you can't not talk about them when there's trouble. I don't like to do that. So for context, McCor, obviously a data provider to some of the largest companies in the world, most notably Matter, who they have since reportedly lost part or all of them being a customer of their data. It was also unfortunately, at the same time that Forbes released their billionaires list of young billionaires, where the founders of McCor are on that list. Very unfortunate timing there for them. Jason, I'm sure you've got an opinion on this in terms of bluntly the McCor hack and then losing Facebook as a customer.

• 1:09:09Speaker 00

  Well, just two thoughts. One, not that long ago, I was with part of the management team of one of the leading hyperscalers or what he said. And I was with him when there was a minor security issue with the third party vendor, relatively minor, not like this, not like all of the private data of all of McCur being exposed. What he said was, there's not much higher on our list with partners than when this happens. There's not much higher, like we have no tolerance. It's not. Worth it. There is no tolerance. And in this case, they got a pass because it was a relatively minor issue with a vendor that was honest and they fixed it and it did not lead to actually any internal data issues. It was just an external issue. But it was crystal clear. It is not worth it for us. So that is troubling. And the other thing, and I'm not an expert in the data labeling or more curse based. What I don't know is how fungible the products are at some level.

• 1:09:54Speaker 00

  The more fungible it is, right? The more freedom you have to route that to what's left at scale, or whatever the guys at handshake want to do, or whatever they want to do. If it's, if it's not fungible, you can bang your chest, but you're still, you're still stuck using them. But, but that moment like that.

• 1:10:10Harry Stebbings?

  I can tell you the number one criticism of the space is that all the largest customers are customers of all of them. And so they are generally heavily fungible.

• 1:10:18Speaker 00

  So I would be very worried because this comment was chilling from this executive. It's like, this is the highest thing on our list with third party partners is security. We're exposing our applications to folks we'd rather not expose it to because of our ecosystems. We'd rather have no partners because there's so much confidential stuff flowing through what we do at all levels. So we have no, we just have no tolerance for anything that's material. And I just don't see how you would come back from this if you've crossed. There's just no, unless you have to. I think it's, it's potentially death. And the reason I bring it up is in the old days, like through 2023, in our lifetimes, you always got to pass once as a vendor, even for the worst breaches, the worst issues, unless your, your app was down for weeks.

• 1:10:59Speaker 00

  You'd get called into the CISO's office, you'd get yelled at. It was brutal, but you always got at least one because it was just the reality of working with emerging vendors. But man, I just, I don't know that you get a second one here. I just don't know.

• 1:11:13Speaker 01

  I mean, I think a lot of the margin depends on how you handle it. I don't know at this point, do we have any sense of, you know, was it a state actor? Was it a malicious employee? Was it just a stupid configuration breach? So I don't have any sense of the forensic here.

• 1:11:26Harry Stebbings?

  It was, it was, it was an organization, I think they're called Latipus, which basically hold you, hold it for ransom and you have to pay for it back. It's a commercial activity.

• 1:11:36Speaker 01

  Gotcha. It's a commercial act. Decent, decent, honest criminals. Right, got it.

• 1:11:40Harry Stebbings?

  You have very successful. I asked the team if we could invest in them. It seems this is one of many very successful.

• 1:11:46Speaker 01

  Actually, you'll find, Harry, they don't.

• 1:11:47Speaker 00

  No, they're very good. They're very good, right?

• 1:11:49Speaker 01

  They don't need much outside capital. Right, that in one sense sucks. On the other hand, the good news is at least they're going to be rational and you can buy them off. Is it fatal? Hopefully not. I think in these things, you generally pay a pretty significant penalty. How you handle it is a key part of it. Were you straightforward and honest with your suppliers and with your customers and let them know what's happened? Was it your fault entirely? Were you crassly stupid? Was it bad luck? Was it, you know, where in that continuum it was? You know, so you can manage through it. I think it is hard when you have four or five vendors that are roughly the same thing. On the other hand, I don't mean to cynically, but there also appears to be right now an insatiable demand for labeling data. So it may be, I think, because I think the meta statement didn't say they've, I said they've paused,

• 1:12:34Speaker 01

  which makes sense. Everyone's going to pause. And my guess, my guess is the likely outcome is you lose a fair amount of revenue, you lose a fair amount of time, you're going to have to spend a ton of money to bolster your defenses. But if you do the right thing, you'll be able to earn your way back slowly and over time. That's the likely outcome here. Hopefully not fatal, but my guess is that.

• 1:12:54Speaker 00

  I do think, and I think Sam Altman, maybe to tie it back to the start, I think Sam Altman said something this week that massive cybersecurity attacks will become from AI, right, are coming. I genuinely think that most B two B companies are going to get hit worse than Mercor. This light L L M was, was one of the weaknesses that they had, like tons of B two B folks have. How state of the art and strong are their security teams? They're, they're not. They're relying on a hotchpotch of open source and other products that are barely monitored in many cases. They're busy, they're under pressure for profitability, they're managing their teams. And maybe Mercor, I mean, it's probably a small company, they probably don't have a huge team. But my point is, it's going to be really tough on a lot of startups and scale ups because they just don't have the teams to deal with the levels of threats that are coming from AI. This is a start.

• 1:13:39Speaker 00

  This is, it's going to get worse, this light L L M incident. It's going to happen to everybody. And as soon as you figure out you can hold all these B two B companies and others hostage, they and their network of thousands of. Affiliates are going to do it. I don't know that the average, pretty good to mediocre to actually don't even really have a security team. How the hell are they going to keep up when I don't even have a team? Remember when Gainsight was offline for a month, Drift permanently was destroyed? And this was pre all this craziness, like there was an old saying my CTO told me back in the day. The only reason we've been hacked is no one cares about us. And that has resonated in my ears for years.

• 1:14:12Speaker 01

  You haven't been hacked.

• 1:14:13Speaker 00

  With AI, you can hack anybody you want.

• 1:14:15Speaker 01

  I think Jason, you're exactly right because I think in general, you know, new stuff gets deployed. People should think about security upfront. They tend not to. They deploy, bad stuff happens and then they panic and think about security. That's the way it's always been in every cycle. And I think we're just about to hit that stage of it now. And I think there's kind of two separate vectors. So first of all, the AI apps themselves have security needs that are different than pre AI apps. You know, get the whole prompt injection kind of issues. But I think the bigger issue is Jason's point, which is using AI, the bad guys can just automate attacks, automate phishing, you know, automate, you know, duplication of voice, all that kind of stuff.

• 1:14:55Speaker 01

  I think Anthropic referenced this and it's the Red Army quote that I often use that quantity has a quality all its own. And with AI, you can make quantity of fake people, you can make quantity of attacks, you can do this thing. So I think it's not so much going to be you getting attacked because of your AI apps. It's much more going to be AI apps are going to attack you. A lot of the AI doomerism I kind of discard, but this is a legitimate and big issue, I think, right? The ability of AI to escalate the velocity and ferocity of attacks. So, which is why, by the way, I think the response of security stocks going down to the Anthropic announcement was absurd. I think anyone who's cutting back on the security budget in 2026 is missing the point.

• 1:15:39Speaker 01

  The second statement is really Captain Obvious, but it's worth saying, these stuff get more important every year because more and more of our stuff's online. You know, the percentage of things that we do that are done online just continues to escalate. It's like stupid stuff. It's like all the stuff in your house, all the stuff in your financial life. There's nothing that matters that isn't done online at this. Point, which means that attacks there can attack more and more what cats. But so I think you should be seeing a real acceleration of investment in a different class of security to cope with a different class of threat. Because look, it's a fatal error if you don't. There's only really two things that can destroy one of these companies. The app goes down for a long period of time or the app gets hacked grievously. Those are the two kind of red card fatal errors. And that's where you're going to have to put the money.

• 1:16:25Speaker 00

  There's a wave of the second tier that's coming. It's just massive, right? Even to tie it, I know we got to end rapid, even super base, which I'm a super fan of. Right? A lot of times folks turn off the default security, right? And we've seen these issues and, and, and in the old days, no one would find it because they didn't care about our little Rory and Harry and Jason's app. Now AI will find it in, in seconds, right? On the internet and it will use every possible way to penetrate that, to steal the data, to create malicious acts, everything that is possible on the face of the earth that can be delivered with software. Maybe there's nothing we can do, but I think we've all under invested in the attacks to come.

• 1:16:59Speaker 01

  It, it used to be hacker farms of people in fill in the blanks, the Philippines, Russia. Now it's going to be hacker farms of AI agents cranking 24/7. It's going to be miserable.

• 1:17:09Harry Stebbings?

  Guys, you can choose one more. Jason, Rory doesn't feel like choosing, so he's delegated it to you.

• 1:17:15Speaker 01

  Absolutely.

• 1:17:15Harry Stebbings?

  There's the GLP one two bit, two company. Again, for people who use this as their like news on tech, a two person company who uses AI intelligently scaled to 1.8 billion in revenue selling GLP ones. Interesting lot to unpack there. Wix buying back 31.6% of its shares, given its low stock price. Oracle getting rid of 20 to 30,000 employees via a 6am email. Jason, any that stand out, baby?

• 1:17:44Speaker 00

  Obviously at some level, people are so excited about the one or two person billion dollar company. Facts were glossed over, points were missed and all that, right? Oversimplified and they use deep fakes. They made representations about doctors they shouldn't. They did all the wrong things. They did all the crappy affiliate marketing stuff people have been doing for 20 years. And they did it at scale with AI and built a big business on it. Right? But what is interesting about it is if you, let's not over glamorize this company. That maybe is at the edge of fraud in many ways and its marketing tactics. The fact that they could use AI to scale this with two people and maybe some consultants and stuff on the side. We are seeing the future and AI is completely changing marketing. Marketing has not gone away. To Rory's point, Dario and Sam are everywhere because marketing matters as much now as ever.

• 1:18:29Speaker 00

  This is a different version of how marketing is changing and if you don't adapt, right? Maybe buying TBM is a bad idea, but you've got to adapt to the new world of marketing when. And, and you know, there's a number of startups that have tried to automate all this marketing at scale with AI. Most of them are terrible, right? They don't quite work. They create boring assets. They look like an awful art. They look, they look kind of like make. They're that bad, a lot of the assets. They don't have context. They use too much stock art, but no reason in a year. Everyone shouldn't have the AI power to blanket the entire internet with the best hyper personalized marketing in the world. Like we, hopefully in a year, we will all have the power to do some of what Medvee have done. And I think it's, I think it's a, I think if we step back, it's a chance to see 12 months into the future. That when we will, all of us will have more of this power.

• 1:19:13Speaker 01

  In other words, just because they're illegally selling weight loss reduction drugs that are off label to people without the appropriate FDA safeguards, doesn't mean they're not great marketers.

• 1:19:24Speaker 00

  I just, I talked to so many CMOs who are still struggling to run the 2023 playbook and falling further and further behind. You have to adapt and crappy automation doesn't work anymore, right? But these guys that were able to do it at mass scale and target everybody, this is the future that we all should, should know. And I guess the code is marketing appears to be more powerful than ever in the age of AI. And humans have to control it, but if you don't leverage how marketing is being done in the future, you're, you're going to be stuck in the past. You're going to, and you're, you're going to be killed. You're going to be killed by folks running the old playbook. So, but yes, I mean, anyone that achieves some sort of scale through marketing, as dodgy as some of these consumer guys are, there's something to learn, right?

• 1:20:08Speaker 00

  Whether it's multi variant testing, whether it's AI, whether it's personalization at scale. It's a waste as a marketer if you don't learn from it, right? And this is what I think is going to happen. We are just like it is inexcusable to send a Dated sales oft outreach cadence from 2021 today. The way we're doing advertising and marketing will seem incredibly dated in two years. Like only, only the creakiest companies will be doing marketing and advertising the way they do it today in two years. It makes no sense. I should be getting the GLP one ad specifically targeted to you. Jason, you don't technically need it, but I noticed your jawline on 20 VC could be a little bit tighter. What if we just microdosed you today? And so you could get some of that T-shirt look that Harry has like I'd click on that in 60 seconds, two seconds.

• 1:20:50Speaker 00

  I shouldn't get that and versus stock art of some grandpa running with his golden retriever on a beach. Right? So I'm both, I both think this is fraud and, and a over headlined and, and the future. We're watching the future.

• 1:21:03Speaker 01

  Yeah, I think you're right. I mean, I would argue that a huge percentage of it is on the fraud side, but none of the fraud side, but the hairy edge of regulation side. But I actually agree upon reflection, what you're saying is correct. It's funny, it's a little like the last comment. What we're basically saying is the most entrepreneurial people on the planet out there right now are the hackers and the kind of dodgy marketers that are on the front line of pushing things. But the tactics that they're using and the way they're leveraging AI, everyone's going to be doing within a year or two, it are going to be left behind. I could, I could go along with that.

• 1:21:35Speaker 00

  Yeah, there was, there was an era in the old days when the best affiliate marketers knew things nobody else did and built billion dollar companies out of it. Right? Then there was an era, which is now faded, when some of the best companies used SEO in a way nobody had used before. Millions of pages, right? You know, even things you could, you know, it's maybe it's only worth 10 billion. Digital Ocean was built entirely on SEO farm. So was Zapier and others. And there was a group of folks that knew how to do this and it worked. The next group of folks will know how to do this mass personalization at scale that really works to millions and millions of people. And they will win like the prior affiliate market and they will crush folks. And the rest of the world just won't get it. They'll think it's dark arts and they need to become agentic marketing experts.

• 1:22:15Harry Stebbings?

  But in the same way that great affiliate marketers largely originated from porn and Viagra.

• 1:22:21Speaker 01

  Good.

• 1:22:21Harry Stebbings?

  And here I think probably some of the best next gen AI marketers will spawn from GLP ones or anything at the border. Borderlines of next generation e-commerce in some ways.

• 1:22:32Speaker 01

  Yeah, but I think that Jason's insight, I agree with that, by the way. Yeah, I mean, there's no doubt that many of these new technologies are adopted by crime or by porn or dodgy marketers. But I think Jason's insights is a profound one, which is marketing tactics that are used by and look very kind of dark arty. Over the next 10 years tend to be adopted by everyone. And now, as you say, everyone in any corporate America is an SEO expert. Whereas 20 years ago, it was a dark art. And I think you're right, Jason, in the next two or three years. If you're not adopting agentic marketing as a digital marketer, you're just going to be left way behind. And personalized marketing and leveraging the technology, I think. I mean, I knew it already intellectually, but actually, I will say you kind of crystallized it in my mind.

• 1:23:14Speaker 01

  Cause I've lived the last year, I remember when SEO marketing was literally something that only the lead gen companies did. And there was two or three year period where they had, you know, hyper growth, hundred million dollar businesses kicking off 30% cash. And then those businesses went away as normies adopted the technology. And the correct play was to be the software provider, helping the normies tool up. And I think the same is true here in agentic marketing. So that's my stolen insight from you for the day, Jason, as I go look for those companies.

• 1:23:42Speaker 00

  It's just interesting, all MedVee has to do to make 400 bucks is drive a GLP lead to someone that buys a product that, just like tokens, the world can't consume enough of. And most of these folks are selling the exact same product and they're fungible, right? There's a moment in time where it's a great marketing arbitrage if you're excellent at this. You get three to 400 bucks for delivering a customer that already wants to buy your product, right? It's a moment, that's, that's how the math, it kind of ties back to our open route or another conversation. If you only made 10 bucks, this wouldn't be such an exciting business. But they are so profitable, but also so competitive. When you get 400 bucks for just delivering a customer from a Facebook ad, man, you want to run this.

• 1:24:18Speaker 01

  You do what it takes.

• 1:24:19Harry Stebbings?

  Boys, a lot to discuss this week. Thank you for being so good. It's so good to see.

• 1:24:23Speaker 00

  Rock on. 51.

• 1:24:25Harry Stebbings?

  51, baby.

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