20VC: Why "Pacing the Frontier" is BS | Instinct Raising $1BN at $10BN & Meta Launches Muse | Miro Sells for $1.35BN After a $17.5BN Valuation | Mistral Raises €3BN & Could Sam Bankman-Fried Win His Freedom?

AGENDA: 03:40 Dario Calls to "Pace the Frontier" 11:30 Why the Fed Will Raid Anthropic if Needed 21:50 Meta Launches Muse to Take On Instinct 28:30 Instinct Raising $1BN at $10BN—Would You Invest? 39:55 Miro Sells for $1.35BN After a $17.5BN Valuation 47:45 Could Sam Bankman-Fried Win His Freedom? 51:25 WordPress Power Struggle: Matt Mullenweg Ousted, Then Returns 1:01:20 Mistral Raises €3BN in Europe's Biggest-Ever Tech Round 1:05:00 Adobe's New CEO & Canva's Slowing Growth: SaaS Giants Under Pressure

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

• 0:00Harry Stebbings?

  This is 20 VC with me, Harry Stabingson. It's the best show of the week. Rory O'Driscoll, Jason Lemkin discussing the biggest news in tech. So this week, number one, pacing the frontier. We discuss what it means for infrastructure, what it means for energy, and what it means for the biggest frontier model providers. Next up, AI assistant war. We've got Town, we've got Instinct on the startup end, and we've got Zuck and Muse on the incumbent end. What happens here? Who wins? Next up, bending spoons, baby. They are on an acquisition spree, having bought Miro for $1.35 billion. And then finally, staying with Europeans punching above their weight, Mr. Owl raises 3 billion euros. Europe's largest ever tech funding round.

• 0:45Harry Stebbings?

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• 1:30Harry Stebbings?

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• 2:14Harry Stebbings?

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• 2:55Harry Stebbings?

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• 3:39Harry Stebbings?

  Rules and restrictions may apply.

• 3:41Speaker 01

  You have now arrived at your destination.

• 3:43Harry Stebbings?

  Boys, we are back. Now, I was thinking about where we should start, and in all honesty, I just thought it'd be egregious to not start with the most important thing, I thought, which was Dario coming out and saying that we need to pace the frontier, to which Sam Altman then agreed with him, and then Elon too agreed that it is important now to put in place some form of external regulatory body to slow down, regulate the capabilities moving forward of model providers. How did we think about this?

• 4:14Speaker 01

  It's been fairly universally panned. I tend to be on the side of the people who are saying that the hostile reception is deserved. What is the problem you're trying to solve? Dario, if you read the note, Dario's definition of the problem was fairly well-defined. It was cyber attacks, it was economics, and then it was we lose control of the AI. So even though that sounds like a lot, it's fairly controlled. The guy who quit and started this crazy thing as a coxswain or whatever his name is, and then the employee within Anthropic kind of chiming in saying, I think there's a 10% chance of, you know, human extinction in 10 years. That's a very different thing. So let's deal with that first of all, because I'm just going to call such bullshit. And to be fair, and this is why I'm saying it's complex, because every time Dario makes

• 4:59Speaker 01

  a comment, you know, a lot of the tweets back are, hey, if you're going to blow up the world, you should stop. And they're right. The truth is, he didn't actually say they were, to be fair. He didn't talk about P doom. But I'm going to do the same thing as everyone else. I'm just going to throw some rocks first. If the feds really thought that there was someone in downtown San Francisco building a technology that was going to blow up the fucking world, had a 10% chance of blowing up the world in the next 10 years, they would move in with a SWAT team, kill everyone in the place, and close it down. Replace the word AI with, we're building a nuclear reactor. It's totally safe right now, but there's a 10% chance it goes wrong in the next five years and blows up the world. Issuing that statement, how many seconds after that before the entire weight of the

• 5:43Speaker 01

  US military is shutting you down? What it says is, is this, these kind of 10% P doom people, the truth is, either the US government is asleep, which I doubt, or B, it's looking at this going, this is a bunch of excited teenagers, we'll step in later if it gets crazy. My first point is the, to be fair to Dario, not Dario, but the, oh my God, the world's going to end, we're going to destroy the world, but we're going to keep doing it, people. I cling to the hope that the US government, if it was a real issue, we'd do something. Right? So I think all that's overwrought bullshit, which is different than saying what Dario said is overwrought bullshit. It's just not realistic. Dario's stuff, on the other hand, it's hard not to disagree that the cyber risk is real. Of the three risks he raised, the cyber risk, real, the economic risk, I will all be unemployed,

• 6:27Speaker 01

  I think it's a little bit bullshit, and then the third one, we lose control of the agents hard to assess. So, okay, that's the problem he's trying to solve. And then the solutions range from the unlikely to the impossible. You know, the unlikely is, yeah, we're going to install third-party monitoring agents voluntarily, but then the ask is that it be made a requirement. That's the first thing. Then the second thing is all the democratic governments have to agree, and that'll be easy because we get on so well with Canada and Europe right now. And then the third thing is we have to agree with the Chinese, and that's going to go super great, though it might go greater than the Canadians because we like the Chinese more than the Canadians. We should put in the Russians, we get on great with them. So stepping back from the bullshit side two and side three, right? Just proposal one, which is we're going to introduce these kind of third-party monitors.

• 7:12Speaker 01

  And if it's voluntary, knock yourself out. You do whatever you want, Dario, right? If the government decides that they should do something, which is different than Dario thinking they should do something, then it's not going to be your friends regulating. You're not going to get to choose that. It's going to be a law, and there's going to be regulators, stuff like bank regulators. And I'm not sure that's a great idea. I'm not sure it'll work really well for innovation. But if it does happen, I mean, a lot of the comments were either this is silly, we don't need it, or if we do need it, well, who the fuck are you to tell us what we need? We're a government. I'm kind of sympathetic to Bodat's responses. Sorry, that was a vent, but I just think it's so overwrought. Sorry, Jason, I just launched.

• 7:49Speaker 02

  No, no, no. My very tactical view, and then I'll give you, my very tactical view was this was just a risk factor in an S1 done live. My tactical view is Anthropic's going public. He is just, you know, in part because of the employee that worked there four weeks or eight weeks that said there's a 10% risk of destroying humanity, which many agreed with, but he's just getting ahead of a risk factor so that when the $2 trillion IPO happens, it's a non-issue. I honestly think he's enunciating a risk factor. We're ahead of it, we're going to debate it as a society, and so when we go on the road through to New York and everywhere else, no one cares. It's not even cynical. I think it's your job as CEO. That was less discussed.

• 8:26Speaker 01

  I'm sorry. You can't say, I mean, words have meaning. If you, and again, I'm going to be fair to Dario, he didn't say 10% chance of blowing up the world.

• 8:34Speaker 02

  He responded to it.

• 8:35Speaker 01

  Yes, you're right, he responded to it. I feel like if government was doing its job, we convene a congressional committee, we subpoena Dario and say, you're head of safety, not the guy who quit, Jason, this is an important point, not the guy who quit, but your head of safety said, me and many of my people, there's a 10% think there's a 10% chance of blowing up the world. Get a fucking congressional committee, subpoena the guy and say, Mr. Dario, as the head of this organization, do you believe that your safety commissioner is correct and there's a 10% chance that you're going to blow up the world in the next five years? Yes or no?

• 9:06Speaker 02

  Right, but it's going to happen. This just started. You're acting like the feds aren't going to raid Anthropic. I don't think it's literally going to happen. The feds are going to raid Anthropic, conception speaking. This just happened last, how many texts did you guys get from folks outside of tech asking if AI is going to kill ourselves in the last week? I got texts from people, relatives I haven't heard from in years. Are we, is AI going to kill us, Jason? There will be congressional committee and hearing after ad nauseam for the next 24 months. We have just awoken the sleeping giant here that AI isn't about a bunch of folks in SF becoming, you know, sent to millionaires. The public is going to believe it's going to kill us, and I think that's why Trump, I don't want to go too much, I think that's why Trump cut it off so quickly. I actually think he said it's not issue, we're going full bore.

• 9:51Speaker 02

  I don't think that was out of nowhere. I think this is because there's going to be two years of, this is all they're going to talk about.

• 9:57Speaker 01

  To be clear, I think you are right. It's that, so maybe I should have said the future tense. We've kicked off a boulder cascade here now whereby, you're right, if I'm, if I'm an ambitious politician, I would do this, right? And maybe you are right, there's two risk factors in the S1, what you're saying, Jason, really good point. The first risk factor is, by the way, there's a 10% chance we're going to blow up the world. We can discuss that one, that's a fun one. But the other risk factor is because I employ people who believe we have a 10% chance of blowing up the world, and I do this because they're actually very motivated to build great AI, and for whatever reason that motivates them, we can talk about that with our therapists. Because I'm running this company where these people say these crazy shit, as Jason's just pointed out, I'm probably going to spend the next two years being investigated, and there's a series of bad things could happen for that, up until including the government

• 10:42Speaker 01

  shutting me down. You're right, Jason, that's the risk factor. I agree with you, yes. It's going to be the weirdest risk factor ever. We say dumb shit, so we may get shut down.

• 10:50Speaker 02

  There's so much going on here, it's hard to track, right? I would just add two things I thought were the best things said. One, maybe a little political, one, I think, non-political. I think the best thing actually was David Sacks this week, who said, "If it's that bad, Dario, it's your effing job." "Whether it's 10% or if there's any material risk, "your company is going to exterminate even a subset of humanity. "That is your job. "Your job is to fix it. "Shut down the company if you can't, right? "And if you're unable to CEO, bring in a new CEO. "This is your... "If there's any company that had these sort of odds, "it is your job, right? "This is product liability 100001. "You can't kill... "You only kill so many people you're allowed to kill with your product."

• 11:29Speaker 01

  And Jason, it has been... First of all, you're exactly... I got a hand in today. I think it was spot on, 100%. And I think it was really odd to see Lena Khan, "who is probably the antitrust regulator, "most of the Silicon Valley hates the most, "come out on exactly the same point. "When you get David Sacks and Lena Khan, "both on the same side and both making excellent points, "it's a really fun issue. "I agree with you."

• 11:50Harry Stebbings?

  I'm sorry, I'm naive. If you build recursive self-improvement "in the way that people talk about it, "is what it becomes not relatively unknown? "Like, I could have good intentions for it, "but it could become something else "or used by malicious actors, "could be weaponized to be something else."

• 12:08Speaker 01

  And I think, okay, being really clear here, I agree. That is actually the only one of the three risks itemized "in the Dario thing that I think is interesting. "Because the other two, economics, "I think it was a foolish thing to say for a whole bunch of reasons. "You can't say, 'I'm not going to invent technology "because it puts people unemployed. "We'd still be back on all on our farms, "73% of work in the farms.' "That was a dumb point, just trying to be nice and sucky up. "The whole cyber thing is real, "but that cat's out of the barn. "The commies have the cyber, so we're done." The only thing that was a fair point... And then, on the other hand, the P Doom thing, he didn't talk about. So the only thing in his letter "that was actually simultaneously, "yeah, that's a fair point, "and I don't have the answer, is exactly that "we could, quote, 'lose control of the things, "recursive self-improvement, that kind of stuff.' "You're right.

• 12:53Speaker 01

  "Of the three issues he raised, "as I was thinking from the three responses he gave, "that was the one that you go, hmm, okay. "I can't... "Jason's point... "I think Jason and David's points were on at that point. "What you're saying is, forget the other two, "which are about, 'other people will do shit with our technology,' "we'll come back. "What you're saying is you're building something you can't control. "If you're building something that you can't control, "then maybe you should stop building it. "'Cause you're the CEO." And as Jason... I'm going to agree with Jason and David. The third part is, can keep an eye on you, "but if there's people cleverer than you "who can figure out the problem that you can't figure, "you'd have hired them years ago. "We should probably assume you're the cleverest people doing this. "So either you think this is a manageable problem, "in which case, keep building, "or you think it's not a manageable problem, "in which case, you probably should stop. "But stop wringing your hands and saying,

• 13:37Speaker 01

  "if only the rest of the world could stop me killing humanity." You're the CEO. The cacophony of anti was really good there.

• 13:44Harry Stebbings?

  But you've also taken it to a level "where you've weaponized a Chinese economy "to have an open-source ecosystem that's incredibly strong, "and now to go, 'Maya Culpa, let's put the brakes on.' "You've weaponized them enough "to be a serious cyber threat to all of our institutions, "and now you want to put the brakes on and..."

• 14:01Speaker 01

  First of all, I'm going to push back on the weaponized. You're basically saying, "Oh, they wouldn't have had these models "without us doing..." I'm not sure that's the case. I mean, you can get into how much of open weight has been distilled, "and I can't assess that. "So there's some of it. "But, you know, they got smart people, too. "I think there's too much attribution "of godlike status to individuals. "The truth is, independent of probably what Anthropic did, "there's probably going to be a bunch of LLM alternatives in China. "This technology, the cat's out of the bag. "It exists, and you're right. "So your main point is correct. "It's out of the bag, so you can't... "I mean..."

• 14:35Harry Stebbings?

  But it's out of the bag because you let it out of the fucking bag. Like, that's sorry, to be blunt.

• 14:39Speaker 01

  Well, I don't know if he just did... You're right, you were the best at it. You are, you are, yes. It's like, I hate the atom bomb metaphors "because they're like Nazi metaphors. "They're just so crude and simplistic, "and it actually, in this case, feeds the ego of all involved. "But it's a really good metaphor here, Harry, unfortunately. "Because you can say, "If these folks, all the Oppenheimers "and the US invented the bomb, "there's no doubt that the Russians had the bomb "by like four or five years later, three or four years later, "and in part because they stole our shit. "They had spies in Los Alamos from the UK, "let me remind you, Hans Fusch, "and then they stole our secrets and they built the bomb, too. "But, you know, what are you going to do? "Right? "They probably would have got there anywhere."

• 15:15Speaker 02

  Elon's been clear on that for three years. He said he wished that AI hadn't happened. He said, "But since it did, I'm going to do it anyway "because it's too late." He didn't just say this last week, "he's been saying this for three years, "that it's gotten too strong. "Before XAI even got anywhere, he was consistent. "I don't want to be doing this, "but it's already been done. "It's too late. "I don't think we should have this much progress."

• 15:34Speaker 01

  And in fairness to the CEO of Anthropic, "some of the most hyperbolic stuff he's not saying, "but you have that pacing letter "that a bunch of scientists signed. "But there's a lot of hyperbole that's not coming from him, "and he's a little more nuanced than what he is worried about, "where the only one that's really meaningful "is this kind of losing control of it, right?

• 15:56Harry Stebbings?

  But I think this is where his prior messages "come back to bite him on the ass. "Because to Jason's point previously in episodes, "where he's so dogmatic about what it's going to do "to jobs and employment, "now, when things do come out, "it's tied to him, sometimes unfairly, "just because he's had that stance because of his labeling before."

• 16:13Speaker 01

  Yes, and to Jason's point, which I think is spot on, "my God, is this unpopular in the rest of the world?" I mean, because, yeah, it turns out, I mean, you know, "we're building a technology, "it's going to definitely cause 20% to 30% wide-collar unemployment, "and my VP of Safety, whom I haven't fired, "has said on Twitter, "there's a 10% chance it blows up the world. "Hmm, I wonder why we're not popular. "Well, let me give you a few quick clues."

• 16:38Speaker 02

  Can I just say what I thought the best thing "I read on all of it was on Twitter, anywhere? "It was Jay Craps, who was the founder of Confluent, "acquired by IBM for, I don't know, 12 billion, just stepped down. "This is the best thing I thought was written on all of it. "It said a lot of people have fake and stupid takes. "It's a lot of marketing. "He said, 'Here's the captain-obvious point. "Most positive use cases for AI have a corresponding dark version. "If you're superhuman at coding, you're superhuman at hacking. "If you're superhuman at structural engineering, "you're likely superhuman at finding structural flaws "to knock buildings down. "If you're even superhuman at designing drugs, "you're superhuman at designing novel, undetectable poisons. "If you cure viruses, you can create them. "Some of these are not that bad. "They're manageable. "Others are scary. "It is a fact. "Like, if you don't get guardrails right,

• 17:22Speaker 02

  "and there are no guardrails in open weights models, "for all intents and purposes, "dark versions can be created... "Your AI will be just as good, "all things being equal, at the dark version as the light version. "It's a fact. "We need to solve these issues, but it is a fact. "And it is not even... "There's so many opinions and anthropomorphizing and 10%ers, "but the dark versions will escape into hugging face."

• 17:42Speaker 01

  I do agree with what you said, Jason. Absolutely right. When people invented books, "when Gutenberg invented printed books, "the Catholic charts were pissed "because they really liked to have a control on all knowledge, "and they just didn't like information dissemination. "Ditto the internet. "There's a reason every totalitarian regime hates it. "Every... "I think it's great framing. "Every technology has a positive side and a negative side. "We're going to do what we do every time. "We're going to roll out the positive "and find a way to manage the negatives. "But in the interim, we're not going to sell chips to China, "which, of course, produce a Jensen response like you've never... "The usual Jensen response. "So on these implementation side, not realistic."

• 18:20Harry Stebbings?

  Do we see ripple effects "across the infrastructure layer, in publics, in privates?

• 18:27Speaker 01

  There was a one-day minor hit "on kind of the semi-stocks on that first day. "Separately, pleasingly, CrowdStrike and all the cyber stocks jumped 10%. "So it's actually interesting. "I looked at Monday, and we're recording this on Tuesday. "It'll appear on Thursday, "which is a whole lifetime away in the world we live now. "But the instant response was, "slight markdown on semis and the AI capex, but not a lot. "So no discern... "I mean, maybe, which implied some level of slowdown. "Significant markup on the cyber stocks "because it looks like that's where the actual reality "of the problem exists. "And overall, I always look at WorldCloud, "which is the software index versus SOX, "which is the semiconductor index,

• 19:11Speaker 01

  "and it was a great day for WorldCloud relative to SOX. "Software up, semis slightly down, but not big. "I mean, I loved... "I saw a tweet. "Market moves 0.1% on news of 10% probability of extinction. "In other words, capitalism took on board the risk and said, 'It'll be fine.'"

• 19:28Speaker 02

  I mean, this may be like a much faster version of the 20s. There's no regulation. Everyone just wants to get rich as F in the 20s, right? And what our version of 1929 will be for AI? You know, we don't know yet. But everyone just wants to get rich. $2 billion is just a start-around adventure today. I was literally thinking that today "when I saw S.H.I.E.L.D. raise at 20 or 30 billion, "and they had a little chart. "I'm like, wow, $2 billion's a start-around now in today's world. "It's just so much money, and AI is so much money, "that it's just too easy to take advantage of the dark version, "if that's how you make money. "It's too easy for you to be... "Because every LLM has a dark version, "it's too easy to cut that corner "if that's how you can raise at a billion after Demo Day. "It's too easy."

• 20:08Speaker 01

  I don't think that's actually what I have. I actually think a different version of the same thing "is this, everyone's saying, 'Oh, my God, "this is evil and bad and could be dangerous.' "And as it were, they're purging their conscience by worrying. "But Jason, you're exactly right. "No one's saying, 'I'm going to push away from the table.' "And I don't think the people running somebody's company, "especially Anthropic, and nobody... "Oddly enough, I mean, you've got to defend them a little. "They're not profit maximizers. "If they were profit maximizers, "they would own more than 2% in the case of Dario "and 0% in the case of Sam."

• 20:36Speaker 02

  It's the other folks that we should be worried about, "not the three of them. "We actually have half-decent stewards at the top. "Sam, Dario, and Elon are about as good as... "They may be better in theory, "but in practice, we can't get three better stewards. "They have the right reasons to do what they're doing." The problem is that 10 or 15% of founders are sociopaths. They genuinely are. In fact, especially the successful ones. It lets you drive, will something out of nothing into existence. The ability to manipulate people, the ability to have that look and do it. That's where the bad people using AI will come from, the sociopaths. You really don't think 10% of the founders you've ever invested in are sociopaths? Of course they are.

• 21:11Harry Stebbings?

  We're going to move on, but fantastic. Next, we have the AI assistant race that we touched on last week, but I was really annoyed because we actually missed Matter releasing Muse, which is Matter's product that is an AI assistant in many ways.

• 21:27Speaker 01

  What did you say, Harry? We didn't miss it.

• 21:29Harry Stebbings?

  Well, it came out after we recorded the show.

• 21:31Speaker 01

  Correct. I mean, I'm actually going to give us an A. I'm going to give us an A. We recorded on Tuesday. Could you use that clip of me? On Tuesday, I was like, somewhere there were 20 Meta engineers locked in a room, being told to ship something. We set that on Tuesday. On Wednesday, Muse shipped. And on Thursday, the pod shipped. So I think we nailed it, man.

• 21:49Speaker 02

  You just didn't know it was 500, not 20. That's the only slight thing that was missed. It's 500. You didn't realize that the minute OpenClaw took off, Zuck took a huge chunk of his AI team and said, we're building OpenClaw for consumers. And from that night on, they people worked days and nights. I mean, I was logging bugs over the Muse weekend on Twitter for fun. The engineering team was responding in real time, Saturday night, Saturday morning, Sunday morning. I mean, they're working 996 on this thing. This is not 20 people. This is a top priority since OpenClaw launched, right? That's, it's interesting. It came out, you know, seemingly oddly after some of the other agents. But this has been a P1 since OpenClaw, right? Because, you know, people were like lining the streets with their Mac minis, trying to get, figure out how to run an agent. Now I can do it on Facebook.

• 22:32Harry Stebbings?

  Well, let's actually just start with this, Rory. And I think you'll be as interested in I am by Jason's analysis.

• 22:37Speaker 02

  Yes.

• 22:38Harry Stebbings?

  I'm not able to use it, being in the UK, so would love your thoughts. Jason.

• 22:41Speaker 02

  I'll get you a VPN.

• 22:42Harry Stebbings?

  Yeah, thanks, dude. What did you think? How good is it? How good a response is it to Instincts? What do we think?

• 22:49Speaker 02

  Well, first of all, as software, it's very, very, very good. It instantly works. This is the definition of great software. Like, you just can't believe how well it works. Because all the hard work was done that you can't see. Most of the things you wanted to do, create a reservation, send an email to. I asked Muse to send us a bunch of stories for this show. It sent it to me and Harry and I forwarded to Rory. I did it at the right time. It sent it to us, right? I had it rebuild the entire sastra.com website for me. Log into WordPress, redo it. It did a pretty good job of it. A lot of the things you wanted to do, it just works. I'll add one more thought and then the meta question. The really interesting thing is, you know, we didn't talk about, but it is something I know a little about. It's not cheap, okay? You're giving everybody, up to a certain point, a free VM,

• 23:33Speaker 02

  which I think two CPUs, two GPUs, 8GB around, 100GB of storage or something. I do know that like the Replits, Lovables, Versells and others, it costs about three to four bucks per person to deliver that. And Muse is at the edge of it. It gives you more than they do, okay? And those guys are working on it every week because it's such a huge part of their cogs, right? Because every time you spool up a website, not a free one, but a paid one, they've got a $3 to $4 nut, you know. Wix before Base44 has a $2 nut to serve that website. Now it's three to four. So they're very incented every day to work that down, right? Meta is lucky. Not only does it already have the infrastructure, right? So we could argue whether it's free, but it has tons of infrastructure. This is running on its own LLM, Muse LLM.

• 24:15Speaker 02

  So it has a massive infrastructure and L L benefit that no one else has. That's why it's fast. That's why it works well. That's why you get more VPU's, more GPUs, more everything. So I think from an infrastructure perspective, it's almost no one can compete. You get all the VM, all the infrastructure, all the storage, and they have their own LLM, Muse. And my learning is for these lay usages, like what we're talking about, not frontier drug discovery. Muse LLM is really good for this. But the question is, does it matter?

• 24:43Harry Stebbings?

  What do you mean, does it matter? Sorry.

• 24:45Speaker 02

  Yeah. What's the killer app? Another reservation at a Cheesecake Factory or TGI Fridays? We need to see the Visicalc of Muse. We need to see what is the killer app. Every horizontal platform needs a, you know, traditionally needs some sort of killer app, right? I'm just skeptical. I'm just wondering, right? I don't think on this whole thing, I don't think there was a killer app for OpenClaw. And I don't know if there is a killer app for Muse because, or Instinct, because there wasn't one for OpenClaw.

• 25:12Harry Stebbings?

  Is it, is it not being your discovery mechanism to shopping? Like a WeChat, a super app? You know, Zuck has spoken about taking portions of transactions as being the business model as well.

• 25:25Speaker 02

  The model's good, but what are his examples? Scheduling his daughter's carpool? Is that really what a trillionaire needs to do with a general? He can't even come up with a good use case of Muse for himself. He's making up consumery things. I had to schedule ballet lessons for my daughter. I mean, great, but you need to run this thing eight hours a day. I think like Claude Code or Codex to really matter. And so if we're in it eight hours a day, like a super app, it's cool. If it's a random task, I'm just waiting to see what the killer app is. And I've run, and Muse is really fun. Like, it's so beautiful. The beauty is it gives you all the ideas. It has an idea tab. And it tells you all the things to do. I've done most of them and they're great. I just don't know if it's killer.

• 26:04Harry Stebbings?

  I don't know if it needs to be. And I know that sounds stupid. No, but I use Instinct in a similar power use way. I think latency is a real problem with Instinct, by the way, which might not be with Matter. I wait minutes.

• 26:14Speaker 02

  That is faster.

• 26:15Harry Stebbings?

  For responses, minutes. It's like the first days of ChatGPT. It's a real problem. But I don't know if it needs to be. It does all of my bookings, travel, restaurants. It does all of my shopping. It's very good. Does all of my calendar invites. I know there's no killer app, but it's just incrementally better than everything else. I don't know, but is lots of little bits not good enough?

• 26:36Speaker 01

  I have a feeling it might be. I think, well, I'm skeptical of the category on a standalone basis. But, you know, I always have my three venture questions. Is this a category? Who's the winner? And are we getting paid for the risk? And is this a category question? Is, is there a role for AI in a kind of personal assistant messenger type thing? And I will say, having used both Instinct and Muse, I can see it. I don't know if I love the word killer app because a single thing that does everything, that just ignites a platform like Visicalc. Let's leave, let's leave the killer app concept out there, right? At the margin, you kind of go, yeah, I'd use this. You do have the example from long ago of WeChat, you know, Chinese messaging systems having very much all a super app. Facebook tried to do that with the Messenger. It didn't take off.

• 27:19Speaker 01

  Because the truth is, the UI pre-AI, the UI of trying to book things on a chat bot is a pain in the butt. It's actually a lot easier just to go to the United website and see all the flights at the same time and book it. It is possible that with intelligence at the back end, as this thing from, you know, non-intelligence, you actually have an interaction on a mobile device where enough of the intelligence is in the cloud that it can do a lot more for you. It knows a lot more about you and it just becomes an easy place to get shit done. And therefore, to your point, Harry, at the margin, you can imagine people using this. You know, if you're a Facebook user, you get Muse, you're a happy little camper, you chug along. Do I think there's more that's going to happen? Yes. The real, to me, the interesting question is, the second one is,

• 28:01Speaker 01

  do you think it's a standalone company that wins here? Or do you think it's going to be Facebook with Muse and OpenAI with whatever product they come up with? Do you think that the instincts of this world can build a standalone business here? Giving that, to put it out there, having raised at something like 50 pre, less than five months ago, then 400 pre, then a couple of billion pre, but now rumor has it raising it north of 10 billion.

• 28:29Harry Stebbings?

  They are raising 1 billion at 10 billion. And the most popular segment of the show that we got was Jason's IC. So Jason, we have a billion dollar round for Instinct. Welcome to the partnership meeting.

• 28:43Speaker 02

  Thank you.

• 28:43Harry Stebbings?

  And it's a $10 billion valuation. Will we be putting in $200 million into this billion dollar round at 10 billion?

• 28:52Speaker 02

  Well, we will. And I will, I'll be honest to the team. It's, this is a risky one. I am impressed with what Muse has done. And if we had to compete head on with Meta, and that was the only thing, we'd be in trouble. I would not recommend this investment because we can't compete with their balance. We can't compete with their servers. We can't compete with the GM. They can't compete with the LLM. However, after having done several reference calls and over a dozen synthetic ones on Claude, I've learned a couple of things. First of all, Meta cannot go cross-platform. It cannot go in, it does own WhatsApp, which is a real threat. It won't be work with all carriers. It won't work across all services. It won't work across, it's highly focused on its own, on its own platforms. And so that is only a subset of how we communicate.

• 29:34Speaker 02

  How many folks between the ages of 18 and 55 are on Facebook all day? Very few, right? It's really your grandmother's application. Now WhatsApp is popular and Instagram, but the fact that it is not going to be interoperable across all these different services means it's got a fairly limited reach. Two, how long will Meta maintain the energy here, right? When this produces essentially trivial to no revenue. Anyone remember Workplace? Workplace in its own way was probably better than Slack for folks that lived in Facebook. It was probably better. It had a lot of neat use cases. It worked well. It was architected. And it was actually the highest NPS of any product in the entire Facebook Meta platform. But they couldn't maintain the energy. My reference checks say, when Alex leaves scale, this product will fall apart.

• 30:18Speaker 02

  If this was the only thing that Meta had to do, I wouldn't bet against them. But we're just not going to see the commitment to do the kind of things the Instinct team is going to do. And let me tell you, this is one of the greatest teams I've seen in my history of investing. They're great. These kids come and they play World of Warcraft in real time during the, during the pitch. They're top 10, each, all, they're both top 15 on League. I recommend leading the round, but being cautious with reserves because the next round valuation may hit into realistic IPO limits.

• 30:46Harry Stebbings?

  So you would do this round?

• 30:48Speaker 02

  I wouldn't. You asked me to do it. There's no effing way I would do this round.

• 30:51Speaker 01

  Okay, good. Okay.

• 30:53Speaker 02

  No other way.

• 30:53Speaker 01

  Use that whole clip.

• 30:54Speaker 02

  Here's why I wouldn't do the round, okay? And you can call me a fuddy duddy for it, okay? I believe most of that, okay, for the pitch. I just believe the infra costs here are so high and the incumbents. This is like if, we've been talking since this show started. What if Claude, what if Anthropic and OpenAI actually built apps? Okay. And in the higher history of this show, they've only built, outside of Codex and Claude Code, they've really only built half an app, Claude Design, which isn't even really a fully an app, okay? Here's Meta building the app. They have the LLM, they have the cost advantages, they have the speed advantages. They have, they have more available compute and GPU and all of it than anybody else in the world. And they're building the app. This is the threat that every VC worried about.

• 31:37Speaker 02

  And we all got a hall pass since the start of AI because the LLMs didn't build any apps. This is the one that they're building. I just don't want to compete against this because I do think for the next 24 months, it's a big priority. And it's just, Harry already said instinct is slow. That's a sign. That's a sign of compute costs of other, that's why they have to raise a billion. And can they subsidize with venture capital $5 to $10 per user per month? Sure, but if they have to over monetize it, what if they become poolside? They could become the next poolside, like it's great. But literally, I've got 10 million users at 10 bucks a month. Now I've got a $1.2 billion nut a year to pay off. I'm struggling to raise the next round. I'm not data brick. So it's just, I worry when the incumbent has infinite, all the capabilities here and wants to build the app.

• 32:22Speaker 02

  That's why I would say, no, but I might be wrong, right? I might, I might be wrong. I wouldn't bang my fist on the table at the, at the meeting.

• 32:27Speaker 01

  I'm trying to remember, was it Socrates or who was it? One of the ancient Greek philosophers where you could literally say, take one side of the argument and then halfway through you could say, now take the other side of the argument. And Jason clearly can do that here, right? That was a perfect, this is why you should write.

• 32:43Speaker 02

  Harry, put me on the spot. I don't want to do this deal.

• 32:45Speaker 01

  Put you on the spot, but I'm just impressed with the mental facility which, which you can do both sides. It's terrifying. It's like a human LLM. You can be convincing on whatever you want me to. Putting them both together, I actually think, and I want to take the post out of that. It's what you basically said is this is core to Meta and it feels like something that they would want to do. And despite your comments on cross-platform, today Muse is a standalone app, so it's not a cross-platform issue. But to the extent that they folded into, I've just got to assume they're going to make it accessible in Messenger, make it accessible on iMessage, et cetera. But it seems to me if there was one thing that Meta should do within the world of AI, it would be this. It's hard to imagine spending, you know, 100 billion plus on AI,

• 33:30Speaker 01

  saying that we're going to build the personal AI and then not putting all your effort on this. So I agree with you, Jason. I think this has to be an all-in Meta bet in a way that frankly, I reject the comparison with Slack. The Facebook for Work product was like a toy. It was not a core issue to them. This is a core issue. So I think you're right. They go for it hook, line and sinker. Now, the interesting thing about the poolside analogy in Instinct is you could have the same outcome here, which is poolside said, we ran out of capital to keep playing, but we had an excellent outcome because there was a company with an even bigger market cap who wanted the assets that poolside has assembled. Nvidia wanted access to the model, access to the talent. I mean, let's put it out here. The same thing could happen here, which is that Instinct executes,

• 34:14Speaker 01

  build a huge user base and an OpenAI steps up and says, and it's interesting. I think that the founder of Instinct either worked at Sierra or Brett Taylor is a big fan of. And Brett Taylor is obviously, among the many other things that man does, is the chairman of OpenAI. It may well be that Instinct builds a lot of traction, doesn't have a cash flow positive IPO potential, but has a very attractive upside exit. I don't discount that. Maybe 10 billion is a little lofty, but you've got to believe if it got meaningful differentiated attraction, that it would be interesting to someone who wants to build a business in this space.

• 34:52Harry Stebbings?

  The only thing I will say that Noah Shin, the founder of Instinct, from every single person I've spoken to, they cite him as one of the most generational talents. And in a world where generational talents in strategically attractive segments are very acquisitive to multi-trillion dollar, you can see that being a very legitimate upside scenario case for 50 to 60 billion, as crazy as it sounds.

• 35:17Speaker 02

  It's possible. Listen, we all have different experiences. The way I was raised to invest, in venture, was don't take bets that 100% require an M&A outcome to be successful, right? They're just too, they're just too unpredictable. I've been on the other side and know how capricious. You could be Clem's best friend, he brings in to meet with Jensen and then he quits the next day, right? You literally just can't predict it. You need some real something to steal to make a bet where an arbitrary, super high value outcome is the only plausible exit. I'm not saying it's not a bet, like it's definitely a bet, right? It's just, it's a big one.

• 35:50Speaker 01

  And just to come back on that, because I've been thinking about that. You're right, it's not what I do either, but I look at this and I do, you know, you always question yourself, is there anything you can learn? There is an argument, I'm not yet making it, but I'm just acknowledging that the expected value of a number of those bets could be strongly positive. Admittedly, the variance is high. In other words, it's a risky way to make money. You should ask yourself as you're building a portfolio of 30 bets, is it okay to have three of those bets in your portfolio? Probably not a 10 billion, but right. It wasn't reckless. I think Kleiner did the round at 500, my moon's overshrewed. It's not reckless to do a round at 500, even if you believe the profile, the payout profile is

• 36:32Speaker 01

  2 in 10 chance of a 20x positive multiple. And if you don't get the positive multiple, you're going to build a company that just can't cash flow and doesn't make it.

• 36:41Speaker 02

  For sure. If you've got the right portfolio and you can take the risk.

• 36:44Speaker 01

  It's not the way I run my business, but I'm in a bull market. Or as Harry said, there's a whole bunch of upside acquirers with frankly, free, you know, market caps that are fairly untethered themselves and have a massive need to move quickly. It's actually not a crazy way to make money.

• 37:01Harry Stebbings?

  And you don't even need much. You've got a billion and a half pref to reach. So like your downside is relatively capped on an incredible team that everyone acknowledges is industry leading.

• 37:11Speaker 01

  I mean, this is the classic Silicon Valley thing is that examine that risk return profile at 50 pre, which is as far ago back as April, I think. That's a wonderful profile. At 500 pre, which I think was the May or June round, that's interesting. Yeah, that's a good bet because it's a little further along. The interesting thing is in the space of two or three more months, you've had a round. It was, was the other round the 2 billion, Harry? From memory?

• 37:36Harry Stebbings?

  2.5 billion.

• 37:37Speaker 01

  2.5 billion. Now you're getting into the, hmm, it's a Forex if you get out of the billion. And now you're raising a 10. Now you really need that 50 or, you know, you need a reminder. The largest M&A outcome ever was Cursor. Doing 4 billion got 60 billion. I don't know if you get a $40 billion outcome without a shit ton of revenue. My point is the risk return profile was wildly attractive in April and increasingly unattractive fairly quickly by the time you come to September. So that is the problem with those kind of bets.

• 38:10Harry Stebbings?

  You know, one interesting thing that is just like the consumer product market of this product is so wild. I did an Instagram reel on it. I had over 1,000 DMs asking for invite codes. I've never had 1,000 DMs on the back of a reel. That's pretty wild.

• 38:24Speaker 02

  It's awesome. No. Can I just add one interesting thing?

• 38:27Speaker 01

  Yeah.

• 38:28Speaker 02

  Just on your, on your thing, you know, Alex Kerlin just left to go to Menlo Ventures, right?

• 38:33Speaker 01

  Yeah.

• 38:34Speaker 02

  He was on the board of owner with me, known him since the very beginning, OG Saster when he started the industry. And he wrote a little presentation about how Menlo thought about this. And not that this is so profound, but he said kind of that they're targeting 25 billion plus tech, tech exits. They're, they're targeting 100 of them. That's how Menlo's modeling the world. And that's what he went to join to find, you know, some of these 100, not all 100. They don't have to be in all 100 of the $25 billion plus exits, right? That's the model. We can say, wow, Cursor was at 60, but cognition just raised at 48. So if this is your world model that there are a total of 81, 25 billion tech companies now, but that's up from 23, 10 years ago, and that that trend is going to continue in the age of AI. You know, I wrote that the new Decacorn's 25 billion. These instant rounds make sense.

• 39:19Speaker 02

  Like if, if the good exits are all north of 25 billion, then at least I can make three acts on Instinct, right? It was just interesting to see that's their model, right? Is that we're targeting $25 billion plus exits in any investment that we do. And we see there to be another 100 of these. Now, how that all math works out with GDP and the market caps of trillion dollar companies, I need to defer to Dr. Rory O'Driscoll next to me because I can't make it work in my head without an LLM. But I assume there was some thought behind the Menlo math there of 125 billion dollar exits.

• 39:47Harry Stebbings?

  We're going to go a layer up and just a little excursion out of like deliberate AI, which is Miro, one of the hailed names from 2021 that raised at 17 and a half billion dollars. Interactive whiteboards for teams for people that don't know. Sold to Bending Spoons, the Italian juggernaut that buys everything for $1.3 billion. As I said, it's a long way down from the 17 and a half. We did, well, Paul, my partner, who is very intelligent, did an analysis of it. Excel made money, founders and employees made money. Latest investors, not really. How do we see this exit, guys, for a darling of this SaaS ecosystem?

• 40:26Speaker 01

  Inevitable and not bad, right? Inevitable because I have a little report on our sales force that literally lists every unicorn. And I can do it a bunch of different ways. One of them being literally by post-money. I just eyeball down and you see what's going on, you know, and you just rank them. And it jumped out of you like a sore thumb. The last round was in 21 at 17 billion. And when you eyeball, you know, you, you, you start to see the legume, you start to see. The level, you start to see all the cognitions just above them and just below them, you know, new rounds at 10, 20 billion dollars. You see, we track headcount growth at the same time. Oh, my God, headcount's exploding. And then you have the thing stuck at 17 billion. And it was really the largest utterly stale valuation from that period. So you look and you go, ah,

• 41:10Speaker 01

  almost inevitably, you're high and dry because you're a productivity tool in a world that just doesn't work that way. And it's obviously way ahead on valuation, I mean, of where its actual market size or traction can be. So this is just an inevitable, it was inevitable that at some point it would get done. I mean, Andrew Reid from Sequoia had a really cute tweet. It's like a little graphic of, you know, that picture of the death with the sickle knocking on every door, and it knocks on the Evernote door, and then it knocks on the Airtable door. And then, in this case, it's knocking on the mirror door, and instead of a sickle, it has a bending spoon. Death comes for us all in Sassland, right? And it was exactly right. It was just an inevitable

• 41:52Speaker 01

  cleanup operation, because it was just so far wrong in terms of pricing. And it was a good outcome for everyone. And you kind of snidely said something about the late-stage guys. But I'm going to say something. The great thing about the late-stage business is this. If your losers give you a 1X, then you'll die rich. So iconic, I think. Iconic had a ton of money in that deal. So that's a bad deal. A bad deal is when they get a 1X. You know, if you're playing the venture game, and because you're playing late, and your preference gives you 1X on everything, on the worst-case outcome, by definition, I mean, just using simple math, the overall distribution is net positive. So it's a good outcome for everybody. It needed to happen. It's now part of a liquid asset. I think interesting, I didn't know this until today, so I'm winging it

• 42:35Speaker 01

  a little. I did see some portion of the consideration rolled. In other words, some people said, I'll take, I'll take stock in Bending Spoons for that, which is interesting choice.

• 42:45Speaker 02

  Yeah, I don't know whether it was required, or whether it was a way to juice the outcome, right, by rolling it over. You could see it being either way, right? Bending Spoons needed the, they don't have an unlimited balance sheet. There's only so many Miro's they can do, right? But it could have also been, it could have been a rollover into

• 42:59Speaker 01

  The cynic in me says, it's interesting if you do roll. It's like basically saying, we couldn't do what it takes to turn this company into a cash flow positive machine. So I'm selling it at 2.7x to guys who are trading at 14x because they are tough enough to do what it takes. Because that's really what's happening. And to some extent, even though that sounds bullshit, it's true. Venture syndicates, I've been in boards where the company just flattens out, and it needs to get ruthlessly efficient. Venture, it's just not our DNA. It's not how we roll. It's a syndicate of five different people. Oftentimes, these assets are better owned by a single owner who says, look, this is the way it's going to be. This is what we're going to do. I mean, I don't know if you saw the CEO of Bending Spoons, he made a wonderfully

• 43:41Speaker 01

  controversial take, where he said something to the tune of, you know, we don't basically get all excited about the title founder. We don't want to know what you did. His basic comment is, we don't want you to know what you did 10 years ago when you founded this. We want to know what you're doing now. And what it's basically saying is, we can't do what it takes to fix this thing at 3X revenues. So we'll sell it to you, take your stock at 12x revenue, because you'll be hard-nosed enough to cut extraneous costs, raise prices, accept a fair amount of churn, and ploutro. Just interesting, but also not great. It's kind of an interesting comment on how institutions can determine outcomes. It's not all rational economics, and it probably makes sense. Bending Spoons will probably do a better job than a venture syndicate at making that thing cash flow positive. And if

• 44:23Speaker 01

  you're a customer of any of these companies, just be ready for the 40% price increase.

• 44:28Harry Stebbings?

  Yeah, the churn on their acquisitions is brutal. When you actually study the graphs on usage, the churn is absolutely brutal. They are not revitalizing these. They're increasing prices and cutting costs to the extreme.

• 44:39Speaker 01

  What they're really finding out is the marginal propensity to pay versus how much, the VC, we probably almost certainly, as an industry, over-invested in sales and marketing, and sold people who had to be sold into the product. What they're saying is, I don't want the customers who had to be sold into the product. I want a customers who hate us so much for doubling our prices, but still need this product and won't go away. It's a different worldview, actually. Because, yeah, you're going to get initial churn when they put through those price increases. But the perspective is, the people who stay really need the product. This is like what happens when you have to pay full

• 45:13Speaker 02

  Yeah, you triple the prices, and you have 30% to 40% churn, and the math's pretty straightforward, right? I'll tell you, my thought on the Miro one, it was, I almost want to move on. What's the game Duck Duck Goose with kids? And don't you take out a chair each time you go around?

• 45:26Speaker 01

  Yeah, yeah, yeah.

• 45:27Speaker 02

  I felt like there's only like one or two chairs left from the pre-AI era. And Miro took, Bending Spoons looks, they said in one of the interviews this week, they do 1,000, they look at 1,000 targets seriously and do five to 10 a year. And even they do not have an unlimited balance sheet. P is sitting out. Tomo Bravo is mostly sitting out. I feel like there's one or two seats left for 1,000 unicorns. And we can talk about why the, why iconic got 1X back. And like, like, if there were like a lot of options, I felt like it's different. There's like two chairs left at the end of Duck Duck Go. Miro grabbed one. Just like Airtable, they only got one offer. When you sell for 2 point something X, you know for sure there was, there was no other offer, because anyone can pay 2.4X or 2.5X. It's not much more for Salesforce, or Tomo Bravo,

• 46:12Speaker 02

  or Francisco Partners Albit. So you have two, and like, I almost want to move on, because I can tell you personally, I've, I've ended the game for me of Duck Duck Goose. I'm not running around the chairs anymore. Whatever, it's fine.

• 46:24Harry Stebbings?

  Who's next, then?

• 46:25Speaker 02

  Look, of course, there will be more deals. But I think we've entered the era of capitulation. And if there is a seat left in Duck Duck Goose, grab it, grab it. But otherwise, the game's just ended. And these companies are going to go into 0%er mode. They're going to go into 0% to 5% growth mode, and no one, no one may buy them. Because if this is the best Miro and Airtable can do, what if you're not Miro? These are not bad companies. Miro's 600 million in the era are still growing high single digits and cash flow positive. Like, it's a pretty good asset, right? So anyone worse than Miro or Airtable is not going to get one of the last one or two chairs. Just no one wants to buy these things. And I don't mean to be grouchy. I just mean, I just give it, like, kids, go, go do whatever you want. Here's the keys to the house. I've moved to

• 47:08Speaker 02

  another city. Have parties, you know, crash the cars, do whatever you want, because

• 47:14Harry Stebbings?

  Boys, moving swiftly on, what would we like to do next? Jeff Dean's company hitting $50 billion after just raising it 10. We've got Citrini selling his company to Dylan Patel and Sammy Analysis for 100. We've got OpenAI pausing Pro signups.

• 47:32Speaker 02

  Is SBF getting out?

• 47:34Harry Stebbings?

  Well, I mean, he's got to accept his Midas list, doesn't he?

• 47:36Speaker 02

  He might have even been on the under 30, under 30 or something when he got it too, when he did the Anthropic deal. I think it was under 30.

• 47:42Speaker 01

  I'm going to be the voice of humanity. I mean, yeah, he is doing significant time, which really sucks, and that's a life wasted. So I'm not going to pile on the guy yet.

• 47:51Speaker 02

  I think the Supreme Court's going to take the case and overturn it narrowly. Because I watched his lawyer on YouTube, he was pretty good, who's done 50 cases through court. He's like a badass, like, Supreme Court lawyer. Basically, his, and listen, I'm not the, I'm not the target. His point was, this is an Eighth Amendment issue. You can't find somebody $12 billion, this is unconstitutional, that can't repay it, when at least according to the terms of the bankruptcy court, everyone was repaid in whole with interest. We could argue whether they would have made much more money, right? But there are some constitutionality issues. I think he's going to get his, I think the Supreme Court's going to take it. They don't have to take any case. And I think he's going to get it. And, you know, whatever he's in jail for, 30 years and 11 billion, I think it's, I think, you know, Sam may be freed eventually. This, the Supreme

• 48:33Speaker 02

  Court hearing the case is a far cry from being freed, but I think he may have a day in court.

• 48:37Harry Stebbings?

  Jason, do you think he should be freed?

• 48:38Speaker 02

  I mean, he seemed like the biggest scammer of all mankind, when, what was this, all way back in 2023? It is weird he didn't enrich himself as far as we know materially, right? It is weird that, this is very arguably, very arguably, it's of course terrible that he's, he moved assets between Alameda Research and, it's terrible. But the argument that was allowed by Terms of Use is an interesting argument. It is an interesting argument. He did not self-enrich. The reality is, if you use a generous version of made whole, folks were made whole. Should he go to jail for most of the rest of his life and have to pay 11 billion when he get out? It seems like a lot in the era of sentient AI that could kill us all. It does seem like a lot today. But at the time, you know, Silicon Valley Bank failed, I lost 10 million over

• 49:21Speaker 02

  the weekend. I don't know about you guys. It seemed like it was just desserts at the time, right?

• 49:26Speaker 01

  For what, one, I hadn't prepped on this because it wasn't on the list. And I don't like, my wife, who is a lawyer, gets mad when I practice law without a license. But I will say, it was so low down, Harry, I didn't think we'd get to it. You never do.

• 49:38Harry Stebbings?

  Oh, that we get.

• 49:39Speaker 02

  Well, Harry asked.

• 49:40Speaker 01

  Genuine comment, genuine comment here. Separating the fine, which, the issue doesn't matter, but there was misallocation of funds. It was white-collar crime. It should be punished. I actually think 30 years was probably disproportionate with, I mean, I think, what was it? I'm trying to remember the ex Goldman Sachs guy who misallocated in brokerage funds, in MG brokerage, about 10 or 15 years ago. I think he walked entirely. I can't remember anything. I think white-collar crime should be punished. And it's a shitty world where someone steals 20 bucks, and they go to prison, and someone else steals $10 billion, and they don't because they're white and upper-middle-class. But I'm also not sure 30 years is the command for a thing. Now, the interesting thing is, that's not the issue at hand in the Supreme Court. I don't think they're

• 50:22Speaker 01

  appealing the sentencing, on the sentencing guidelines issue, they're appealing the facts and circumstances of the case. So we'll see. Yeah, and I don't think it matters that, the fact that he took the money and was a brilliant investor doesn't excuse him for taking the money. Because by definition, if it worked, then anyone could take money, provided it worked. Hey, I stole your money, Harry, but I bought, put call options, and the stock went up, so we made money. Here's your money back. You shouldn't mind. Well, of course, you're going to frickin' mind. Because when you took the money from you, you didn't know what the outcome would be. The 50% chance would go down. So you're going to want that guy punished because you're going to want that behavior stopped because you're not going to want the next guy to think they can do it. So it doesn't matter that he was the most brilliant, genuine, it's the most brilliant equity investor of our generation between Entropic and Cursor. It just matters if he took money and if that was against the rules.

• 51:07Speaker 01

  And I haven't heard the terms of service argument, Jason. That will be interesting. If he took money, it was against the rules, then he should be punished. If he took money, it wasn't against the rules, then he probably should walk. And the process will take place. Not my problem.

• 51:20Speaker 02

  What happened to Matt Mullenweg? He was, he was out for a day and back. What happened to poor Matt? Did someone not read the bylaws, Rory? What happened? Did someone forget to pull the certificate of our corporation from Delaware?

• 51:29Harry Stebbings?

  So, so Matt Mullenweg is the founder and CEO of WordPress. And he was ousted by the board and then he came back and overrode them, it would seem. And now he is back as the CEO and the power to the founder has reigned true here. And he is back as CEO.

• 51:44Speaker 01

  Correct. And this is a company, Automatt, that has been the steward of the open source project WordPress, which is, you know, one of the most commonly used blogging and website platforms out there. Very successful product. Matt's the CEO of the company that manages the product. I think it's fair to say that the stewardship in the last few years have been troubled. He's been in a big argument with WP Engines about, the argument is WP Engine is a hosting company that is hosting WordPress sites. And I think Automattic wants some of that revenue, so they've been pushing WP Engines. But the way in which he's behaved has been unhelpful to the open source project

• 52:26Speaker 01

  because it's kind of like, I will use the leverage of my company to try and frankly, prevent other people from benefiting from the open source ecosystem, which seems to be unethical to the idea of it. So I think it's been a troubled situation for a while. I think the truth is, the real issue is, the world is passing that product. It's kind of a sad little thing because the world is passing that product by. And Jason will be able to tell you that, you know, you can build most of what you have in WordPress with Loveable or Repllet or any one of 10 things. And increasingly, they are, as I've quoted before, the Henry Kissinger thing about academic arguments. The fights are so vicious because the prize is so small. The truth is, Automattic doesn't matter a damn anymore.

• 53:07Speaker 01

  It should try and build something new, but it's, it's kind of on the tail end of, I mean, to Jason's point about, it's on the tail end of the tech trends. They should be doing things totally differently to try and survive in the brave new world. Instead, they're arguing internally. So that's kind of the zoom out comment. Within that context, that's kind of their big picture. And the funny thing is, like all litigations, when you get caught up in the detail of the day to day, you forget the big picture. The big picture is, this company needs to point WordPress in a forward direction to think about how you take advantage of what's going on in AI and become a relevant player in the next five years. Otherwise, you won't be. That's the corporate imperative. Instead, the corporate imperative has turned into a pissing match between the board and the CEO, when now it looks like the CEO has won. Congratulations, you've won the poison chalice.

• 53:52Speaker 01

  You get to keep your diminishing empire. And it's worth pointing out, this is not a board full of evil VCs. And I've been on boards as an evil VC where you've had to replace the founder. It sucks to the end. This is actually a board of, I think Salesforce is an investor. They have some really good independent board members. They don't need this grief. I'm well about what happened, like now down in the tactical weeds. I think Jason probably nailed it. You probably have a board, they probably have a majority. They probably said to the CEO, we're a majority of the board, we're independent directors. We think you should replace you. And my guess is, the founder CEO went deep into the bylaws and says, you are the board and you can vote to replace me, but I can actually also vote to replace the board. I'm hereby voting, I've seen this once, I'm hereby voting to replace the board. You're all off the board.

• 54:36Speaker 01

  Oh, look, the new board is me, my pet dog and my ventriloquist dummy. And after due consideration, we've decided I would be a great CEO. There you go. And all the independent board members at that point promptly resigned because there's no point wasting your life and getting into a whole bunch of litigation about an ever, this is, remember Jason, your island, was it the Fortnite island? That's continually getting smaller. You are fighting to maintain control of an island that's getting smaller and smaller. So congratulations, Matt, you're in charge. I feel like going, if you are in charge, well, how about you turn this thing around? So yeah, that's my takeaway of this. It's kind of sad in a way, these things happen. People behave how they're going to behave. I think a lot of other people were involved in that company and put a lot of effort in. You know, one of the guys with Tony, who was at True Ventures, did a lot in it early on.

• 55:21Speaker 01

  It's kind of a situation. Yeah, it's been pending for a long time and you kind of just go, gosh, I wish, there surely should be more of a win-win here.

• 55:29Speaker 02

  Well, Automattic would have been a great company if it hadn't raised venture capital because Matt could do what he cared about, right? Which is having a commercial arm of an open source product he created, right? Very young. Imagine it's doing 500 million a year, spinning off 200 million. It's like a bigger base camp. Those guys aren't venture backable and they don't give a rat's ass with their 22 Lamborghinis and Panganis and Villas in Italy. And they're fine growing 30% at 60 million, spinning off 30 million or 40 million in cash here. It doesn't bother them at all, does it? This is, I don't know the full funding history, but one could imagine it didn't really need to raise all this money. A version of it, and it might have done just fine. It's easy to say, but that might be the one. And that might be why Matt's frustrated. It would haunt me as well. Companies do get overfunded, boys.

• 56:12Speaker 02

  And I might be sitting here, I'm like, this could have been 37, like I could be like 37 signals. I could be running this, I didn't need this, what the hell did I need this 800 million? A bunch of people running around doing nothing all day long. I could have run WordPress and Automattic both, side by side with 80 people, like DHH, and be making 100 million a year. And, and who the fuck cares if I'm growing? If this is my mission in life? If you're making nine figures a year out of your company and your growth is 5% and you're happy and you're, and you're doing a good deal for the world, you know, screw you, VCs.

• 56:42Speaker 01

  Yeah, I mean, first of all, I do agree is that you shouldn't take VC if you're not signed up for that program. I'm also not sure that, that's one dimension, VC versus kind of lifestyle business. I do think there is another dimension here of the open source business. I mean, so on the first dimension, VC versus lifestyle business, it's pretty clear. You should do the lifestyle if you want lifestyle. There is another dimension, which is open source community project versus managing just for the quote unquote company that controls the open source product. And I'm not sure that on that dimension, the company's been an amazing steward of the project. Right? So I hear you. I, I think, and that's just an initial dynamic. But you could also say to your point, Jason, if you didn't take any venture money, if you initiated the project,

• 57:27Speaker 01

  if you have whatever open source rights you have under the copyright or whatever leverage you have in terms of the licensing and the copyright, then it's your company, do what you like. And actually, I do agree with you is that this is America. If you built a thing and you want a mismanagement, mismanage it. And you own 100% of it, you're allowed mismanagement. Go team. That's what ownership means.

• 57:47Speaker 02

  You know what's tough too? I know you want to wrap it up. I just, I'm just learning, I'm, I'm learning later in my investment career. You gotta be F-ing ruthless to do a venture backed open source company. Ruthless, you really do. Because look what Matt did. Matt did said, listen, I'm focused on the platform. This is what I'm passionate about. I'm not so into the hosting. Okay, that's a commodity business. I'm going to let WP Engine do 500, you know, 100 million, 80 million, 100 million, 300, of these other folks do. And there's like, I'm kind of into this e-commerce thing like WooCommerce, but I don't want to do what Shopify and Toby did. Like, that's too extreme. And so you, you end up not owning that much of the revenue in your ecosystem. And, and I, and I don't think he's mad about the, the WooCommerce thing not being huge from revenue. Because WooCommerce actually is, used to be massive in terms of scale versus Shopify.

• 58:30Speaker 02

  But I think he's looking at WP Engine, it's like, not only did these guys treat my community worse after the PE buyout, which I do think is objectively true, but I kind of want that 500 million now, guys. I wouldn't have minded having that extra 500 million for this crappy commodity hosting that I could do a better job. But in fact, we're on their own product. It's a great product. But my guess is it's doing a fraction of what, it has to be mathematically, right? It's like, I want that, you know? And so if you're too kind in open source, I think you lose. If you're too kind, you lose. You gotta be ruthless.

• 58:59Speaker 01

  If you think about a couple of different agenda items that we've talked about here, you know, on the one hand, trailing edge of tech trends, you have Mirror getting bought for 2.7 times. And you have a nasty little spat over a flat to declining asset in open source land in Automattic. And then on the front edge of the thing, you have companies like Instinct, you know, raising literally four weeks ago at two and a half billion, now raising at 10. You mentioned the Jeff Dean kind of spin out, raising at 10 billion, now raising at 50 billion. The big picture point, it, it really kept an obvious here, but it just shows venture, so unlike PE, is not about valuation and there's not, there's not any safe assets.

• 59:43Speaker 01

  It's just, you're either in the head of the train, in the new, new thing, everything is possible, or you're in the tail end of the train and life is shitty.

• 59:52Harry Stebbings?

  I was with one of the biggest CIOs the other day and I said, you've been doing this for 30 years. Have you ever seen a time like this? I'm cognizant that I'm on the younger spectrum. I'm not that young anymore, but I haven't seen all cycles. And he said, I've never seen a time like this. This is more nuts than it's ever been. This is unprecedented.

• 1:00:10Speaker 01

  I think that's true. I was investing only since, I love this, only since 93 or 94. So I did live through the dot com investing thing. And it was pretty crazy because you also had the whole millennial thing about, you know, Y2K and the world was going to end, just like now, we all have to have a world ending thing. And you know, let's be honest, New Year's Eve, December 99 was a pretty wild freaking party in San Francisco, right? Half the people were getting toasted drunk because they were rich. And the other half of the people were staying up, making sure that the Y2K thing didn't bring down the world, which was the actual worry at the time, bizarrely enough. But it's nothing compared to this. I think the ability of AI to just excite the imagination is just way higher. And the internet was awesome, but AI, you know, you can start talking about the AI, the software is human. You can get carried away.

• 1:00:54Speaker 01

  And then the second thing is, you know, instead of existentially worrying about the computers won't work because of Y2K, we now get to worry about the whole world ending. It's the same thing on a way more magnified scale and the money is 10x bigger.

• 1:01:06Harry Stebbings?

  Can I ask, speaking of the money being 10x bigger, I sit in, in Europe, as you know, Rory, and remind me frequently.

• 1:01:12Speaker 01

  Well, actually, Howard, you don't. You actually sit in England, which deliberately chose not to be part of Europe, but I know what you mean. It's okay. Sorry, that was mean.

• 1:01:20Harry Stebbings?

  Ah, listen, you know, I wasn't pro Brexit, but I, you're technically right. I agree.

• 1:01:24Speaker 01

  Yeah.

• 1:01:25Harry Stebbings?

  Very sad. Mr. Al raises 3 billion euros. It's Europe's largest ever tech round. They're going to hit a billion in revenue by the end of the year. For a company that's had, I think, a lot of criticism, definitely in Europe. This was a very meaningful sign of progression and hope that actually we do have a horse still, so to speak, in the race. What should we take from this round?

• 1:01:48Speaker 01

  I think it's less about being a competitive frontier lab and more about AI sovereignty. I don't think you should take the fact you have a horse into it. If you're saying Mr. Al is now competing with OpenAI and Anthropic in the frontier model race, you and I know that would be bullshit. I think what you're really saying is Europe has decided, based on the antics they see from the companies at the frontier in the US, coupled with the dynamics of the political interaction between the United States of America and Europe, that a technology as important as this has to have a sovereign European component. And, you know, even though it's obviously ludicrously inefficient from any kind of rational perspective, they've decided we just got to make this thing happen and give Mr. Al enough business to make sure that there's a viable European AI competitor.

• 1:02:31Speaker 01

  And it's clearly Mr. Al, and, you know, there's a long tradition of Europe doing. I mean, Airbus is an example of that. They said, we can't just be relying on the Americans to make planes because otherwise we're a vassal state. And they said, we're gonna make it happen. France and Germany are gonna make planes and we're just gonna do it. And it took 10 or 15 years, but they built a viable competitor. It's probably the same thing here. They're simply saying, we can't afford to have, I mean, you know, we've seen instances where, I think recently, I'm doing it for memory here, I think the US government said to Anthropic, thou shalt cut off all other countries from Fable. I think it was Fable, one of the most recent models, cut them off because it's a security risk. And we didn't say cut off, you know, Russia, but leave the United Kingdom and France and Germany. We said, cut off everybody.

• 1:03:15Speaker 01

  If you're in Europe, the day that happened, you said to yourself, we can't rely on these guys anymore. And the day that happened, you made Mr. Al a viable European competitor. Is it going to be as big as us? Nah, it's not gonna, I mean, I don't think it's gonna be as, I mean, Airbus has actually overtaken Boeing, took 30 years, right? But in the short term, it's not gonna be any near as big a market cap as OpenAI or Anthropic, but it's gonna be a winner and it's gonna be the European winner. So, thank you very much, politics. If you're a, if you're a Mr. Al shareholder, you should be very grateful for the current political tactics. It's just made you a couple billion bucks.

• 1:03:49Speaker 02

  Also, you know, just to be technical, I mean, the round's led by Samsung, right? So, they're generating, I think, 200 billion in free cash flow a year right now. So, 3 billion, like, I don't know if I take the markup. I mean, I guess I would take the markup, but you could argue it should have an asterisk and a dagger next to it because is it really real if it's led by Samsung, right?

• 1:04:08Harry Stebbings?

  Well, and the last round was led by ASML.

• 1:04:10Speaker 02

  Yeah, I don't know if those count.

• 1:04:12Speaker 01

  The money counts. I, I agree. Look, the valuation.

• 1:04:14Speaker 02

  Yeah, the, the money counts, but I don't know if the valuation is, is connected to any, like, we should, that it's the same as an objective valuation done by financial parties. I just, it's just not, right?

• 1:04:25Speaker 01

  But there is some intrinsic value to be, like, you know, if, I mean, let's ask what the, I mean, brutal comment, if the American winners are worth a trillion and the European GDP is roughly 70, 80% of the American GDP, I don't think that implies, to be clear, 800 billion, but you might get to 30, 40, 50. It's, it's not a crazy end state, but I agree, Jason, it feels like you're probably, I don't think they did it on the basis of market comps and composites. I think they did it on the basis of state strategically.

• 1:04:54Harry Stebbings?

  Boys, is there any others that I've missed that you think we should do?

• 1:04:58Speaker 01

  I mean, I'm just trying to find interesting private stuff. I mean, Jason, any comment on Adobe linking on, new CEO taking over? I saw the results. What, any, any thoughts? Cause you're the Adobe expert here.

• 1:05:08Speaker 02

  I, I think it's great. You take two non-founder folks slowly leading different business units into no growth and you, you pick from, you pick from the lesser of two okay leaders. I mean, you know, I, I think it's just Miro at scale, but with so much scale that it, it survives, right? It's a, you know what it is? It's a reminder that Miro didn't, in today, you know, it's funny, if when the three of us met, I told you about this 600 million dollar company in collaboration, we would think that was scale, right? In the old days, it's not scale. Adobe has scale. So, even if Adobe isn't really making the right moves in AI and it can't really afford it and it's just moving the deck chairs around for its CEO team, where the CEO said like a year ago, Shantanu said he's gonna retire and it took him a year to, to decide which of the two internal candidates to promote.

• 1:05:53Speaker 02

  I mean, it's pretty bad. I think it's a nothing burger. You know what it is, Rory? It's a sign just nothing, nothing's gonna change. It's a sign of capitulation. It's a sign that we're gonna just keep bulldozing our way through the world the same way versus really changing. Super high margin, bleed our core products, add some imaging from the AI and kind of call it a day, right?

• 1:06:13Speaker 01

  I broadly agree with you and it's interesting. They did the, you know, we're not leaning into ARR growth, we're leaning into getting free usage and that was the play they did in the 90s.

• 1:06:23Speaker 02

  That's their fake AI metric of the week.

• 1:06:25Speaker 01

  And that's where I was going. I, I think, you know, cause this is where I, the reason I asked you is, that's a playbook that might have worked two or three years ago, but to your point now, what you're basically, cause net new ARR went down significantly. In other words, the growth of new ARR didn't happen. So, they have their AI ARR metric went up, but overall ARR went down. And you know what that means is you're just channeling some into the good thing, but yes, you at least with the program that you need to win, which is a start, but you're not winning because the Jason rule, which I go back to, if it ain't growing, you ain't winning. If people ain't paying for it, you ain't winning. They have scaled, they're not going away, 25 billion in revenue, whatever. There was no news here, which is interesting because overall, it's been a pretty good few weeks for software in general.

• 1:07:07Speaker 01

  I mean, you've seen big jumps and they, I'd say huge jumps in the cyber stocks, big jumps overall in world cloud and the entire SaaS apocalypse has been unwound. But I think, Jason, to your point, what's been happening is there's been a real distillation of, oh, these kind of businesses aren't going to be winners, they should stay low and then these kind of businesses are doing super well. You know, Adobe is in the first, more in the first category than the second.

• 1:07:30Harry Stebbings?

  So, boys, their market cap today is 105 billion.

• 1:07:34Speaker 01

  Yeah, about 100 billion, 25 billion, yeah, exactly.

• 1:07:36Harry Stebbings?

  In three years' time, what is their market cap?

• 1:07:39Speaker 01

  120, 130.

• 1:07:41Speaker 02

  Same as today. It'll be the same as today.

• 1:07:42Speaker 01

  Yeah, plus a month. You know, it's not going away. Basically, again, from memory, it's a sub 10 times cash flow multiple, Harry. So, unless it, unless the ARR evaporates, not just doesn't grow, but evaporates, you know, you can get there on a cash flow multiple. If Jason's view of the world, the mental view of the world is correct, if there are 10 or 125 billion dollar plus outcomes, which by the way, I don't think, the point of your relative significance will go down. I mean, you know, I couldn't tell you HP's market cap now to save my life because it doesn't matter. And that's the same thing. You just, you'll do fine, you'll cash flow positive, maybe if you find the right leader and the right product, you'll reignite growth. You know, your trajectory is not to blow up, but your trajectory is to trade at eight or nine times cash flow.

• 1:08:24Speaker 02

  Well, that's the way it was for a decade. Adobe stock didn't move for, for a decade. It was traded on cash flow. Shantanu was amazing of that. Then cloud worked better than anyone expected and either they're gonna run that playbook for another decade or they'll have some magical AI thing that even Canva hasn't figured out. I'm not betting, I'm not betting on it today, but, you know, I was there when cloud happened. They didn't expect it. They, they could have a killer AI app that just, we're early in the AI thing, so I don't know, man.

• 1:08:49Harry Stebbings?

  Would you rather invest in Canva or Adobe today?

• 1:08:53Speaker 02

  I'll tell you why you just can't invest in, I want Canva to win very badly, right? I, I love them. You just can't be not growing. Like ServiceTitan got destroyed for lowering guidance, fell 30% last week, okay? I think Canva fell 30 or 40% this year when they had to lower guidance, right? Maybe more, right? They're just not public. But you gotta grow, but you, but at least Adobe is gonna get to this stable plane, to Rory's prior point. It's gonna get to a stable plane. It's not impressive, but it's gonna grow six or eight or nine percent a year with lots of free cash flow, right?

• 1:09:23Speaker 01

  I'm gonna give you the numbers, Canva's numbers, right? They are growing, they're growing 20%. They were growing 30%, they're growing at 20% now. And I know that because in Australia, you have to file your revenue with the watch my columns.

• 1:09:33Speaker 02

  But it's not, but that's a big deceleration.

• 1:09:36Speaker 01

  Agreed. So, they're not, it's not that they're not going, they're de-accelerating, so.

• 1:09:39Speaker 02

  So, are they entering DCF world or are they, or are they still a, a growth stock? Are they growth or value?

• 1:09:44Speaker 01

  Okay, I'm gonna agree with you now. The only reason I interrupted you, Jason, is I didn't agree, you just said they're not growing. I want to be precise. What you said now is really the insightful point. Seriously, I want to pause on this because it actually comes to a lot of different things. Going from a growth story to a value story is really tough, right? You go from a revenue multiple to an EBITDA multiple. I think it's, I hit a really good post on Twitter, where basically above 30% growth, you can use a revenue multiple, below 30% growth, you have to use an EBITDA multiple. It was a very insightful comment. It basically said, if you're growing fast, everything is forgiven and you'll be valued on a revenue multiple. If you're growing slow, nothing is forgiven and you'll be valued on an EBITDA multiple or low revenue multiple, right?

• 1:10:28Speaker 01

  It's just a different world, right? And I actually did, I remember I did a post way back that you bought as a public company, went through that transition and came out the other side, but it takes three or four years. Because when you go from six or seven times revenues to 20 times cash flow, you gotta get that cash flow to 30% just to hold the stock flat. It's brutal, it takes forever. And this is going back to the point is, I think Canva is still growing very nicely, but it is de-accelerating. And even though I like them and I want them to win, they're founder-led, whereas Adobe, as you say, is at this point exploiting me every time I buy their product, I load their licensing system so much. The hard truth is that when you're going through that transition, it's hard to get to a public offering. So, when you ask about the two stocks, Harry, what you're basically saying is, would you

• 1:11:12Speaker 01

  like to own something at eight times cash flow with 13% growth where at least you're liquid? Or would you prefer to own something at 20% growth, admittedly de-accelerating? The question is, can they get through the liquidity window, right? You know, price clears all markets and there's a relative, I mean, I think the interesting question, yeah, is how you think about relative valuation. But I just think the, having to go from the growth valuation world to the value-based world sucks and doing it while private is hard because it takes a long time to just get through that nut. And during that time, you're standing still, right? I mean, it sucks doing it as public too. It just sucks doing it in general because you get a different investor base, you have different dynamics, but it's just a hard role to hold.

• 1:11:55Speaker 01

  And, you know, it's, it's the risk of being private for a long time. You know, Stripe avoided that risk because they re-accelerate. And I really hope Canva can find a way to re-accelerate too, because I want, you know, the good, I want the founders to win, I want good guys to win. But, you know, if you look at it, if instead of Stripe, we accelerated into 40%, they'd accelerated down to 20 and 15, then they'd, you know, I mean, they still have, they have huge cash flows, so they, no matter what, they're fine. But it's just interesting, slowing growth and being valued on a cash flow basis is a profound adjustment in the valuation metric. Oddly enough, as I think about Stripe, it's the only guy who could weather that storm because apparently it kicks off so much cash.

• 1:12:30Harry Stebbings?

  Rory, we gotta go let Jason be a superstar at Dreamforce.

• 1:12:34Speaker 01

  Oh, you are, I'm sorry, Jason. You're off to be a superstar.

• 1:12:36Harry Stebbings?

  He's off to be a superstar with Mr. Mark Benioff. Yeah, he's the star attraction.

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