20VC: Anthropic vs The Pentagon: Who Wins | OpenAI's $110BN Mega Round | Cursor Hits $2BN in ARR | Block's 40% Headcount Reduction: AI or Overhiring

AGENDA: 04:13 Anthropic vs The Pentagon: Who Wins 13:54 Was Sam Altman Wrong to Take the Deal 24:28 OpenAI's $110BN Mega Round: The Breakdown 28:22 Who Has a Bigger Valuation Premium: Sam Altman or Elon Musk 34:38 Why We Got the SaaS Apocalypse Wrong? 43:24 Why Salesforce Could be the Best Buy in Public Markets 47:46 Block Lays Off 40% of Team: AI or Overhiring 01:00:16 Cursor Hits $2BN in ARR… so not Dead? 01:18:15 How to Pick Winners in AI?

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

• 0:00Speaker 00

  Whatever it is that's in the water at Anthropic, it's working and it has created unity. The state is more powerful than Anthropic. You've got to believe that the next round for this Anthropic and SpaceX are all public offerings. Tesla trades at a trillion today. I think if Elon died tomorrow, they'd trade at 200 billion. OpenAI trades at 800 billion today. I think if Sam Altman died tomorrow morning, we'd trade at 600 billion.

• 0:21Speaker 01

  I think we got the SaaSpocalypse all wrong. Every single CEO I talk to doesn't think they need 40% of their team.

• 0:28Speaker 00

  The lesson is never underestimate big markets and momentum. The knife fight doesn't start until the TAM is like 60, 70% saturated. The prize for winning is to reinvent the company from scratch and the product from scratch every six to nine months. Congratulations, it's a fun game.

• 0:45Harry Stebbings?

  This is 20 VC with me, Harry Stebbings. Now, it is time for my favorite show of the week. Rory O'Driscoll, Jason Lemkin, analyzing the biggest news in tech this week. Anthropic goes to war with the Pentagon. Do morals help Ario or do they hurt him? OpenAI closes that $110 billion round, four times the size of the largest IPO ever. And then finally, Block lays off 40% of the workforce. Jason Lemkin predicted it in real time. This is my favorite show of the week. It's time to dig in. But before we dive into the show today, I run 20 VC Fund and I get this question from founders all the time. Harry, I can't find a good dot com. Do you have a hookup? Let me tell you now, the answer is always going to be no. I don't have a guy or gal for that. I do have a recommendation, though.

• 1:30Harry Stebbings?

  If you're building a tech startup, get a .tech domain. Tech startup, .tech domain. It couldn't be more simple or obvious. As an investor, I appreciate founders who put thought into their branding. When I see .tech in your name, it tells me right away that tech is at the core of your build. It'll say that to your customers, too. A clean and sharp domain like .tech pays off in the long run. Look at the companies using .tech. Nothing.tech, 1x.tech, Aurora.tech, CES.tech, Ultra.tech, Alice.tech, Neon.tech, Blaze.tech, Pi.tech. Great tech companies. They all use the .tech domain. These are my two cents. If you're building a tech startup, don't overthink it. Secure your dot tech domain from any registrar of your choice. While dot tech gives modern companies a home online,

• 2:15Harry Stebbings?

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• 3:00Harry Stebbings?

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• 3:45Harry Stebbings?

  Take the Charlotte Hornets NBA team. 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&L, go to invisibletech.ai/twosyr vc.

• 4:11Speaker 00

  You have now arrived at your destination.

• 4:14Harry Stebbings?

  We are back. Rory, last week, this man predicted one of the biggest layoff announcements in history before it came. He is that good at predicting the future. So this week's going to be even better. We're going to start this week in Anthropic with the Anthropic going to war but being banned, that issue with the Pentagon. Rory, do you want to provide some context for everyone? What's actually happening with the battle between the Pentagon and Anthropic before we dive in?

• 4:43Speaker 00

  Okay, yeah. Reminder of context. What happened is that Anthropic actually has a $200 million contract with the Department of War. In a negotiation about that contract that culminated in a rupture last week, Anthropic was seeking to impose a couple of conditions on the use of their model that the Department of War was not willing to sign up for. And specifically, the two issues, as I understand them. And again, I want to preface all this by saying, unless you're in the room, you should assume that everyone who was in the room is spinning a version of this that makes them look good. So with that caveat, the two issues appear to be Anthropic wanting to specify two things. One, that you could

• 5:24Speaker 00

  not use their models for "mass surveillance", and secondly, you could not use their software for autonomous weapons. Those were two restrictions they wanted to put on the use of their models. And the Pentagon's counter was, we want to be able to do anything that is "legal". That was the bid-ask spread, and it didn't converge. And on Friday afternoon, the Pentagon broke off the discussions and effectively threatened, though as yet I understand it hasn't been done, to, at a minimum, cancel the Anthropic deal, but also, pass away straight, declare them a supply chain threat such that other vendors selling to the Pentagon or even to the US government couldn't use them. So depending on how that threat is interpreted,

• 6:08Speaker 00

  it's either a mild loss of a contract or something approaching thermonuclear. And it's not yet clear how that happened, or if it happened, what it means. So that's kind of the facts, simply put.

• 6:19Harry Stebbings?

  Was it the right decision by Dario to have these principles and to stand by By his beliefs in this way, because Sam has since swept in and done a deal. And we can get to that repercussions on the consumer side. But Sam has done a deal in replacement.

• 6:35Speaker 01

  I think he got swept up in a tough position, which is his team, his employees. Dario clearly, since the day he was lead safety researcher at OpenAI, has felt profoundly important about safety. In fact, they refused to release Claude before ChatGPT because he didn't think it was safe. They only released Claude under duress. Finally, he goes to his team and says a while back and says, listen, at least we can make weapons safer. It's going to happen one way or another. There will be AI in weapons. This is my understanding. And he convinced the team that what we will do is we will make them safer. And that was the justification. And to a lot of folks in AI, it's even Elon said a little while ago, I wish AI hadn't happened. But since it is, I'm all in on XAI, right? So if these AIs are going to be out there in the military, we'll make the safe one.

• 7:20Speaker 01

  And I think it just got pushed to the point where I don't. I think he has his personal beliefs, but I don't think he'd go to his team and say it was true anymore. It was just pushed too far to say at least we'll make it safer than our competitors were. At least this will be safer than XAI or ChatGPT or some tortured open source thing, because at least the good guys will be in there and we'll make sure we don't do the wrong source of mass surveillance. And that when we do target folks, which we've been doing with some form of AI for years, at least we'll minimize the collateral damage. I don't think he could say it with a straight face. So he said, I've got to step out on this one. Like this is, not only do I not believe in it, but I'll lose my team.

• 7:56Speaker 00

  If that's the framing, then I can answer the question concretely. I think you're right, Jason, which means he was wrong. I totally agree. One of the organizing principles on Tropic has been this almost messianic belief in AI, the threat of AI, as yet the willingness to develop AI because they're the only people who can be trusted with AI. I find that weird, but I'd be an idiot not to recognize that this has been an extremely successful unifying principle of this company, right? Which is why they still have the seven founders, when the other guys across the street have lost almost all but one or two of the founders, right? Whatever it is that's in the water at Anthropic, it's working and it has created unity. And he would be a fool To blow that unity, and the man is clearly not a fool. So I get it, Jason, you're right.

• 8:38Speaker 00

  He had this believer on AI safety. That is not just a lightly held belief in his company. It's a core organizing principle and arguably the engine that has driven the enthusiasm to build that company. Given that, I think it was naive to try and sell to government at all, a department of defense at all. They too, unlike a lot of us who are just ordinary people, have an organizing principle, which in the case of Department of Defense or Department of Wars, defending the United States of America. And they believe correctly that that's their task that they've been charged with. And the idea that someone's going to waltz in and say, I want a $200 million contract, but I'm going to tell you the safe way to use this is absurd. And I think the deal of the pants was absolutely right to say, we are not signing up

• 9:22Speaker 00

  for some bunch of guys in California to tell us what to do. We are the Department of Defense empowered by the president and the Constitution to defend this country. Go away, little boy. So I think they were entirely right. If you wanted to not sacrifice your principles, and if you believe that that you have really nuanced opinions on how AI should be used in war, then you probably shouldn't sell to the Department of Defense, because they really don't correctly, don't give a damn about your principles. And I know, again, I feel weird saying this because I actually think I love Dario's writing and his speaking. He's some of the clearest, best writing I've seen on almost anything. And I happen to know because he writes a big believer in Richard Rhodes, the making of the atomic bomb as a book they share.

• 10:05Speaker 00

  And when you read that book, the first conclusion you should come to is General Goze didn't give a rat's ass about the scientists. He humored them, he gave them what they needed, he let them not wear uniforms because it made them happy. But when it come to the crunch, they weren't even in the room when they decide to use the bomb. And thinking that you're going to have the luxury of getting to be part of the decision is unrealistic, naive, and actually constitutionally wrong. I may not love the current administration, but they were elected by 80 million people. And Harry will remember, Tony Benn, the English politician, used to say a cabinet minister, a very left-wing socialist, whom I don't like in any dimension, but he had a great phrase for the civil servants. He turned to them and say, And who voted for you? And who voted for you, guys at Anthropic? Because eighty million people voted for us.

• 10:50Speaker 00

  And the Constitution says we're here to defend the country. So I think drifting into this situation, given that that's the co-organizing principle, is probably a mistake. It might work from a business and a marketing perspective because you've got a huge bunch of outside lift. And on that basis, it's been great. But this is the big but. You're now a little bit at the mercy of how the administration wants to handle this. Right? And the thing that's in your favor is they often have a short attention span and they move on. And the thing that's against you is they're quite hard-nosed sometimes about grinding you down. And if they want to grind you down, they can. I don't think they should. I think they would be wrong. I think they should say to Anthropic, you don't want to do business with us, that's fine. We'll keep our two hundred million, but we won't grind you down.

• 11:35Speaker 00

  We won't declare your supply chain risk. We won't try and destroy your business. But you've drifted into a situation where it's at least plausible they can. I don't think that's a good idea.

• 11:43Harry Stebbings?

  If you were an Anthropic shareholder today, would you feel more or less confident today? You mentioned the lift. For context, they are now number one in the App Store, ahead of ChatGPT for the first time. They have a consumer brand which actually consumers care about, really at mass for the first time. And Dario has presented himself to be a very thoughtful and progressive leader that cares about safety. As a shareholder, would you be more or less happy?

• 12:10Speaker 00

  Same expected return, wider variance. By definition, the risk increased. Therefore, you should be unhappy. Despite the lift, you were doing really well a week ago. You were clearly the dominant company. You made entire stock indices move at your will. You write a blog post and every legal tech company goes down twenty percent. You had a good thing going, as they say in that meme. And now you've drifted into the situation where you've got this ongoing fight with the government, who has way more power, as you're suddenly discovering, than you do. I don't think you're happy about the increased risk in your deal.

• 12:45Speaker 01

  I think we're entering an era, we've entered an area where no one really cares as long as the numbers are there. No one cares. There's fewer ethical concerns, there's fewer anything. Concerns. If I just got my March 1 investor update at Anthropic and we just crossed 16 billion, my email back would probably be great job with three exclamation points and maybe an emoji or two if they're on my phone, right? I mean, this is the world we live in. So we don't, we don't have the rights. We don't have, almost none of the money in Anthropic has any rights whatsoever. I would say with most startups, it doesn't, no longer matters what I think as an investor. It literally doesn't matter. Only the struggling ones doesn't matter what I think.

• 13:21Speaker 00

  And then you don't want to care.

• 13:22Speaker 01

  Yeah, then I have my board partner.

• 13:26Speaker 00

  You cynic. To be fair, I think the question is not, do they care about your opinion? The question is, how would you feel? And I think you're right. If the, if numbers go up, you're fine. But I think you just have to accept the fact that in return for a significant boost in popularity, good, you have a mild existential risk that probably you can beat in the courts. But nonetheless, if the people on the other side of the table decide they want to be vindictive, can make things very hard for you.

• 13:54Speaker 01

  Just one thing that I was thinking about to highlight, if we get to block later, right? If we talk about the, the power of labor versus management, and I know we don't like these terms, they sound very Smithian and stuff, but it's true. At Anthropic and OpenAI, we're at the extreme end of power of labor. I mean, people are leaving eight figures of vesting stock at OpenAI because they, they want to work somewhere else after 13 months or six months. I mean, this is unprecedented. Even at the hottest startups, people used to stay. Okay? On the other hand, for non-AI folks, for the blocks, we have the least power versus management ever. Like you are, you're less than fungible. You're not even wanted, right? And so there's a subset of folks, and listen, Anthropic's probably at 15 billion. This is

• 14:36Speaker 01

  an important subset, right? There's a subset of folks, it's very weird where labor has all the power and, and Anthropic has done the best job of anybody. A lot of the ex-AI founders are gone too, right? This is like 2021 all over again. You've got to do whatever it takes to retain the team, like everything. If they want you to take on the Fox News dude, Pete Hegeth, you do it. If they want you to tap dance on the roof of the company, you do it to keep those, to keep the researchers, right? What Maggie told us, I didn't even know this, when we were in London with Harry, at OpenAI, don't even let the salespeople talk to the engineers, the researchers. They're not even allowed, their cards don't work at the building of engineers because they don't want to be bothered by the go-to-market team. They're not even allowed to attend meetings in, in the, in the good building. They've got to go to the building next door.

• 15:20Speaker 01

  That's protecting your talent at all costs, right? So that's why I think Dario had no choice. I don't think the team would tolerate anything else.

• 15:27Speaker 00

  First of all, I love the labor-capital distinction. It's really more Marxian than anything else, and I'm gonna go with it. You know, capital versus labor. And I think you're right. It's super interesting to see in a situation like Anthropic, capital is weak and labor is strong, because those are the most talented people on the planet who have the skill that you need the most. And you're right, in many other organizations, it's weak. But I'm gonna remind you, if we're gonna do political economy, right? Not politics, but political economy, as classically defined, there is a third actor. It's called the state. And I think what you're seeing very clearly, and I just wanna say it very clearly, is the state is more powerful than Anthropic. And I think that's the lesson you gotta learn. And it's interesting, if you listen to some of the folks talking about AI even two or three years ago, were hinting at this, were like, will the state intervene?

• 16:11Speaker 00

  And I think the state has extraordinary powers, because it's the state. It has, as Weber points out, the monopoly on violence within a geographical area, right? And I think that in terms of appeasing your employment base, you gotta do what you gotta do, but drifting into getting into a conflict with the Department of War on something where I think logically you're in the wrong, because you're trying to interpose yourself over and above the people who are charged with doing this, is just a bad place to be, and I would wanna tiptoe back out of there. And if it all it costs you with a $200 million contract, in the context of a $14 billion business, you should declare a win and move on. For all this talk about AI being so scary, let me tell you what we learned in the last week. AI might be scary in the theoretical aspect, oh, it could be used for this, it could be used for that.

• 16:56Speaker 00

  The state is scary in the real sense of, we have laws, we have men with guns to enforce those laws, and we can take your company if we want to. And I bet you, even though you look at those laws like the defense production act, you looked at those laws like being declared, what was it, a supply chain risk, and you kinda go, I think I could win that one in court. It's still a sobering moment when you realize, hmm, the person in charge of the most powerful military on the planet thinks that you are a supply chain risk, wants to invoke powers granted to him by Congress to do that, and you've picked on them. Hmm, I would have preferred...

• 17:29Speaker 01

  To skip that. And you've got David and the rest coming straight for you, nonstop, right? It doesn't help.

• 17:35Harry Stebbings?

  But when you're talking about the power that labor holds, what you're suggesting with that, given Sam sweeping in and taking it, is that he does not face the same pressure from his employee base.

• 17:47Speaker 01

  No, he did. His team hated that he did it, right? He had to immediately say he's going to unilaterally change the terms of the contract the next day. I mean, he's a very smart guy. He signed a few contracts in his day. That was numbnuts thing to say. I know he believes it, but we're just going to change the clauses ourselves on ChatGPT so that they say what we want them to say. I mean, good God.

• 18:08Speaker 00

  I agree with Jason there, Harry. I think what the last four days have shown is the power of labor at OpenAI too. And it's ironic, because the first time we saw the power of labor at OpenAI was the power of labor to insist that Sam comes back, you know, back in 2023, when you had that magic moment, when everyone, when labor basically said, we want to pick our boss, and the owner says, you're right, you should pick your boss.

• 18:31Harry Stebbings?

  So was Sam wrong to then do that deal in your mind? You said it was naive of Dario to maybe enter it. Do you think Sam should have not entered it also?

• 18:39Speaker 00

  It's the most entertaining of all possible outcomes. He's probably right on the merits, as often happens in life with a certain kind of person. It's only when you're absolutely right on the merits. I mean, when you actually believe what you're saying, and I read what he's saying about in a democracy, the final arbiter should be the government, not individual people. I actually think he was right on the merits on that, which of course means pleasingly, it's the one thing that's going to bite him on the ass. Ironically, the one time I think he was like entirely correct in terms of how companies should interact with the Department of Defense, and I think actually signing the contract on the merits wasn't awful. But you're right, his labor doesn't want him to do that. So I think in terms of opening Pandora's box in his company, he was wrong.

• 19:21Speaker 01

  I mean, he wasn't even approved at the Department of Defense for this application, right? Only XAI was. And they had lost. They had lost because Palantir picked Anthropic. They'd already lost last summer. They'd already lost this, this, this war. And he saw all of a sudden there was a break, which happens to every founder, right? Moments in time when your competitor goes down for a week or screws up a key deal. And he did what most of us in B2B would do. He pounced on the deal. He immediately shot the email to the CEO. You know, Rory Coe was down all weekend. I can have you up on our infrastructure on Monday.

• 19:55Speaker 00

  I'm actually going to argue something that's going to sound naive. I actually think it wasn't just a pounce while the other guy is weak. It actually was a roughly trying to do the right thing. And actually, as I say, I think the odd thing is I think he was right on the merits. Right? We should be willing to sign deals like this because the government should decide, but his labor is not going to consent to that. And I can tell both of you are looking confused. It's like.

• 20:15Speaker 01

  Listen, I think it's just, everything is accelerating in the capabilities of these models. Everything has accelerated since December. Right? Everything's gotten better. So it's just very hard to predict for a military application, what these models will be able to do in 12 months. It could literally could be beyond what we could conceive these LLMs could do. And I'm not saying that that is a bad thing because there's bad actors in the world, but even understanding where it's all going to go, it's hard to predict.

• 20:41Speaker 00

  Curious, just to ask a political economy question, who should make those decisions on how to use this technology? A privately held company or someone elected pursuant to the Constitution of the United States of America with 80 million votes in a Congress? Who should make those decisions if they are quote unquote.

• 20:57Speaker 01

  Well, it's tough. I mean, I don't want to spend all our time. It's tough because there's no good answer. We know the last thing we want is Ro Khanna or whoever the version is on the right, making a hyper political decision. We don't want that. We don't want to politicize, right?

• 21:10Speaker 00

  No, I disagree. We don't want political. How do you think we make any fucking decisions? It's called the Constitution for a reason. We elect.

• 21:15Speaker 01

  I don't think we can. I don't think most of our political leaders even understand how AI works. I don't. I don't think most of, most of the folks in general, even on X, understand how it works. They don't. They don't understand.

• 21:25Harry Stebbings?

  Well, guys, there's, there's logic and there's rationality. You're logically right, Rory, but Jason is rationally correct.

• 21:32Speaker 00

  No, I disagree.

• 21:34Harry Stebbings?

  Well, no, the majority of governments around the world are not sufficiently versed in artificial intelligence and deployment and evolution of it to make sound decisions. I think we would all agree on that.

• 21:44Speaker 00

  I wouldn't. Look, by definition, if you're running the government on any. Individual thing, experts know more. Your job is not to be the expert. Your job is to be able to manage the experts. Right. And I think it's the same mistake, frankly, that folks made in COVID where they defer to science. No, it's listen to science and make informed judgments. Now, you might argue that the people making those judgments at various times have been mediocre or even bad at judgments. But the way to solve that is to elect different people to make judgments. You can say, I don't trust the US government, so I don't want to deal with them. That's a totally rational thing to do up until the moment when they invoked the Defense Production Act. Right. Totally rational. But what you cannot do is say, I'd like my $200 million, but I'd like to tell you what to do as well.

• 22:28Speaker 01

  Just one interesting thing on the deal, just structurally putting aside and then we can move on. Like it was being negotiated before it was being signed, right? By the nature of any big deal. So it was signed last summer. That means Anthropic was probably closer to a billion dollar run rate and still trying to break it. Because it was a billion dollars in January of 2025. So signing a $200 million deal plus 200 million from Palantir pull through. Okay. Plus blocking your competitor from Palantir and others. That was probably a pretty big deal at the time. That was probably one where like he was honest that he swallowed some of his principles, like raising money from sovereign wealth countries. But it was so important to winning in the enterprise and building this cloud. It probably actually made more sense to take the risk at a billion ish, right?

• 23:13Speaker 01

  Than at 15 billion where you're like, oh, you know, everyone's gonna be like you throw away the 400 with Palantir. Okay, 200, 200 tougher decision at a billion run rate. Like most of our portfolio companies, if they came in and said, we can grow an extra 40% this year. If we sign a contract, we'd kind of rather not sign, but it's totally legal. And Rory, instead of growing 60% this year and having no exit, we can grow 110%. I think most investors are going to say, take, take the deal, swallow your pride. Right. And so it was a bigger deal at the time than it is today, I think. Right?

• 23:45Speaker 00

  Agreed. But I actually genuinely now having been harsh, I'm going to compliment. I don't think this happened because they needed the money then and they don't need the money now. I think like often happens in life, people drifted into a situation that nobody fully thought through. And then you end up at At this point, even though he didn't plan to be there, I'm sure I think actually the relationship happened initially by Palantir. So they were selling to Palantir as one would. A great customer to sell to, Palantir sells to the government, you get dragged in. And you probably sit there thinking, well, that'll be reasonable. We'll go and talk to them about how we operate. I mean, the Wall Street Journal covered it today. Part of this, as is always the case, is personality clashes. You're like, oh, this is the way I look at the world. And this guy at the other side of the table looks at the world totally different.

• 24:28Harry Stebbings?

  Final thing on OpenAI Anthropic, and then we will move off them. The ultimate dealmaker that is Sam Altman closes a $110 billion round for exercise of the largest IPO ever. I mean, Jesus, you've got to give the man credit. I mean, what an absolute machine. Anything other than plaudits? Is there any money left in the world to fund these businesses? The $200 million in revenue seems relatively paltry compared to the $110 billion he just raised.

• 24:58Speaker 01

  Yeah, I mean, there's some meta, I mean, obviously, they're not public. And obviously, the benefits are nearing to a relatively modest amount of shareholders, right? All of that stuff. But it does make you wonder if we should even be talking about the IPO window or any of this crap. It doesn't even matter when OpenAI can raise 110 billion. Oh, we're all worried some B2B company can't IPO at 400 million, growing 40% at 3 billion. What difference does it? Like, it's so miniscule. I mean, it matters to the humans that work there, but it's not even relevant to the economy when OpenAI does 110. And they're going to do another one before they IPO, probably before they IPO if they can, right? Maybe not. It'll either be an IPO or another round like this, but it's a force of nature, right?

• 25:40Speaker 00

  First of all, it's clearly a fortunate, and it is astonishing. Any way you cut it, it's like, you know, when you add up venture dollars raised, invested year to date, you know, you kind of go 30 on Anthropic, 110 if you call it VC, is 140. You know, it's more than US venture for all of last year. So these are astonishing numbers, right? I do wonder, it's a very odd circumstance to have a private round be for exercise of the largest IPO ever, right? And it does make you wonder how that IPO gets done. And it's interesting, there's little Nuances here. Amazon's, I think, forty or fifty billion. Some of it's upfront, some of it's commensurate on either an IPO or AGI, which is just one of those weird things, that some of their money only has to go in once the company either achieves AGI or goes public.

• 26:25Speaker 00

  Which, to me, and Jason, you mentioned a while back, exudes a little bit of the IPO support coming in. In other words, is this really fifteen million now and thirty-five million as kind of a placeholder for the book on the IPO or something?

• 26:38Harry Stebbings?

  There are always a precedence of Nvidia investing a hundred billion and then the kind of walk back of up to a hundred billion. Is it that again? I'm genuinely confused.

• 26:47Speaker 00

  No, it's not quite that, because Nvidia talked about investing a hundred billion. Remember, I printed out the press release, and then they ultimately invested thirty billion. So they folded back slightly. Amazon came in for fifty, but of that fifty, it's not like it's a press release, it's actually a real commitment, but it's commitment on closing conditions that are either an IPO or AGI. So it's not money now, right? If you needed to pay your workers next week with that thirty-five billion, it wouldn't be there.

• 27:13Harry Stebbings?

  When does this go public?

• 27:15Speaker 00

  You've got to believe that the next round for this, Anthropic and SpaceX are all public offerings. Articulate who writes the next check privately and what the investment thesis is. I don't think there's more capital there. It's hard to imagine another round after this, so you just, therefore, by a process of elimination, at some point you got to go public, and the next round probably is a public round.

• 27:34Speaker 01

  An important point on an asterisk that we have a double asterisk to. So it's a hundred and ten billion round, but fifty billion from Amazon, of which only fifteen billion is upfront, right? The rest is AGI or IPO. But Amazon's own free cash flow has fallen to eleven billion a year, because it's spending so much. OpenAI had to go to Amazon, and they had to go to everybody on planet, Nvidia and they're exhausting all, like, Amazon doesn't even, it has the resources, but it does not have the free cash flow to fund its commit. Could Amazon do a hundred and fifty billion, three hundred billion? I mean, there's a limit here where the folks that did this round literally cannot do anymore, right? And this is probably why Jensen walked the hundred billion back, was there's a theoretical idea where it makes sense, but the world has changed, and that's a lot of free cash flow, even for Nvidia.

• 28:19Speaker 01

  Hundred billion, right? So we're reaching their limits.

• 28:22Harry Stebbings?

  I know this is an absolutely stupid probably suggestion. You can both fire me for it. Is there a Sam Altman premium? We've spoken about the Elon premium before. If Sam were to say, I don't want to do this anymore. Is there a Sam Altman premium?

• 28:35Speaker 00

  I don't think in the same way. His genius has been deal doing and the oomph and the chutzpah to raise 200 billion plus privately held. But Elon's genius at the margin has been the ability to pull off amazingly complex engineering projects sequentially. So I don't think there was the same premium there. And you could even, to make it a little more pointed, as it were, against Elon, just for a second. OpenAI trades at 700 billion pre this round, but that's because it's hyper growing at, you know, I can't remember the growth from 12 billion last year, from three or four billion in GAAP revenue to 12 billion, 20 billion ARR run rate. It's 30 or 40 times revenues for hyper growth. Astonishingly, I continue to point out Tesla continues to trade at 10, 12, 13 times revenue for declining revenue.

• 29:20Speaker 00

  The Elon premium is way higher, you know, relative to the performance of the underlying asset. You asked, who's got the better premium? Elon or Sam? And actually, the easiest way to ask that question is to say to yourself, remove the person with the premium. Tesla trades at a trillion today. I think if Elon died tomorrow, it'd trade at 200 billion. OpenAI trades at 800 billion today. I think if Sam Altman died tomorrow morning, we'd trade at 600 billion. They'd go, we better get someone else to run the thing. Brett Taylor would be in charge, right? And Brett Taylor would be great and he'd figure it all out and they'd build a company and go public. If Elon goes, who's going to make the robots? And who's going to make the robot taxi? And if you don't make one of those two things, you've got a car company with a declining car product line, flat revenue growth in a tough market for electronic vehicles.

• 30:04Speaker 00

  You'd be down 800 billion bucks.

• 30:06Speaker 01

  If Sam left, you buy Sierra for 80 billion, 10% of the value. You buy out the shareholder, you know, whatever the math works, whoever gets what, you just do it overnight for 80 billion and your problem is solved and possibly the company's stronger afterwards, other than the fundraising. It might be better.

• 30:21Speaker 00

  Yeah, agreed.

• 30:22Speaker 01

  And if you have one of the greatest technical CEOs of our lifetimes in charge of it, instead of a very brilliant, but ultimately non-technical Founder. I mean, it's tough to be it's tough to be Brett Taylor's background. It's and he's already on the board, right?

• 30:35Speaker 00

  But fundamentally, Jason, you are right. Fundamentally, you'd be like, oh, we're just going to build a company now. We're going to build chat GPT. We're not going to have distractions. We're just going to be fine. I'm going to push you both before we move on. When does it go out and what price does it go out at? Open AI? I think there is now a subtle, unspoken rush to the money that is taking place between those three mega cap companies. Everyone else is kind of too rounding out on the sideline until these deals get done. I personally would say the sooner the better for everyone. So I'd love to go public as quick as can and get it over with. The question is not when they want to go public because I think if they could if they could all wave a magic wand by the end of this year, I think that all all three of those companies would wave the wand and say, let's be public. It'll be it'll be safer. I'm going to say October and I'm going to say it's going to go out at 1.5 trillion.

• 31:19Speaker 00

  I think you can trade that in polymer on some of these kind of tokenized bets. I mean, you know, which probably should be something we should do.

• 31:26Speaker 01

  I think it's a logical bet. They might they might actually seek initially a lower price to not stretch it for an IPO and then see what happens. The SpaceX IPO price that Elon is making up 1.75 trillion. It's a crazy number, but it's not 2X the last round, right? So it may make sense to have a modest step up, but that's really just aesthetics. You know, the market will settle. It would. I do think there's risk that they've exhausted some pools of capital from the round trippers, the soft banks, the Nvidia's and now Amazon. Like the fact that so much of the money of Amazon isn't in the bank today, to me, it doesn't count. Like, maybe it sets the IPO up to Rory's point. Like, that's great to set up to have 35 billion of your IPO pre sold. Like, that does make the IPO easier. Let's be clear that like it's a gift walking in and have half your book sold.

• 32:11Speaker 01

  But if they've exhausted the money, then yeah, they should go public in October. But I think it's right.

• 32:16Speaker 00

  Just a comment on the valuation. I mean, I'm not in the oh, it'll be fine at 1.5. I think those are such huge numbers that they're very much predicated on the overall market continuing extremely strong. I mean, you know, S and P, despite all the noise within the system and all the SaaS apocalypse, S and P is plus or minus 2% from an all time high and trading at a 20 year high in terms of any kind of trailing. A P E basis. So this is selling securities at a time when people are hot to trot and buy securities. So getting it done in today's market, who the hell knows how it gets done? It could easily get done at an incredible price. But it is worth pausing and just looking at the vast distance between the valuation on any kind of fundamentals basis

• 32:59Speaker 00

  and the amount of leaning into the future you have to do to get to those kind of valuations. And it's kind of slightly different between them because OpenAI is a, it's growing fast, really fast. Provided it continues to grow really fast for two or three more years, it all works. So you can pay, you know, what, forty, fifty times revenues? I mean, the fact that I even said that sentence at scale is how that one happens. And if there's an appetite to pay forty or fifty times revenues at that point in time, you can do it. SpaceX is even harder because you're basically having to underwrite a fair slug of next generation technical risk. Admittedly, you're underwriting with the, with the person who in the last twenty years has proven most able to deliver that technical risk.

• 33:40Speaker 00

  But you've got the whole Starship risk and then you've got the next generation Starlink two O direct to cellular risk. And then you've got the data centers in space risk and you need all that TAM. Because the existing business is eighteen billion, growing twenty percent. So it's not obvious that it's worth a hundred times trailing revenues for twenty percent. If that was a SaaS company doing eighteen billion, growing at twenty percent with modest profitability, Jason would be sneering and saying five times.

• 34:07Speaker 01

  I wouldn't be sneering. I'd be saying five times.

• 34:08Speaker 00

  Yeah, you would be.

• 34:09Speaker 01

  Yeah, I'd be lamenting it like I'd have my head in my hands, but I would not be sneering. I'd be commiserating. I'd be like, could I just go back to December twenty twenty five, please? Could I just roll back time just a heartbeat, just till at the end of last year?

• 34:23Speaker 00

  The eternal, oh, my God, if I'd known that what I know now, I'd have sold everything. But yeah, but you're right, Jason, and it's a big gap between that and one point seven trillion.

• 34:31Harry Stebbings?

  You said if it was a public company doing, you know, eighteen at twenty percent. Jason, before we started recording, you said something and I wrote it down. You said you thought every public company would miss their numbers.

• 34:42Speaker 01

  I mean, I don't mean to be negative. I think all, almost all the public software companies are just going to do worse and worse for the rest of this. Year, I think Mongo was down what 20, the largest drop ever after a strong quarter because they said they're going to, growth will drop back to the teens, right? Even though they crushed their quarter, you know, you had Iran from Monday on the other 20 VC this week, it was great. But the, the public markets think that they're going to keep rerating growth lower and lower each quarter. I just don't see any positives for the existing group of B2Bs. And Rory's point is we just need more good ones in to raise up the median and the numbers. And maybe it's that simple, but I think we got the SaaS apocalypse all wrong. It's not vibe coding that that's killing us.

• 35:26Speaker 01

  It's just we, we, everybody has lost the way to growth. And I think because of NRR, because of revenue retention, because so many of these numbers are backwards looking. I think almost everyone is worse than it looks. You know, it's funny, I wrote it up this week, you could expand the basket very widely, but for the stocks that I follow, the most successful one is Digital Ocean. Yep. Digital Ocean's up 28% this year. Digital Ocean had all these years to, to a billion in cloud revenue, like in some ways very impressive to a billion, right? But in their hand, like it's a pretty good business to only be doing a billion, right? You're pretty, you could be critical, but you need to be radically accelerating growth and profitability at the same time. And you're looking at these public guys and you're like, who the hell is going to radically reaccelerate growth?

• 36:10Speaker 01

  Who, who the hell? And that's why when I have to come up with my four to bet on, I could only find three. Like I'm still going to do four, but I could only find three because I can make the, the case that this one's undervalued and that the markets are, don't see the, the inherent value in, but the markets are saying, you guys got to reaccelerate and they're all going to de-accelerate. And so I just think the, almost all of these public B2B companies are in worse shape than they look. And while I wish we didn't have the SaaS apocalypse, man, I just, I think it's worse than vibe coding. I think vibe coding is one of those minor threats to software companies in our lifetimes and I vibe code constantly. It's a minor threat and that's why they all have to cut half their teams to our conversation last week. That's, I sounded so oppressive, what are you going to do when for the next two quarters you keep, like you may even make the quarter,

• 36:55Speaker 01

  but you keep having to drop your earnings estimate and rate down. At some point over the course of the year, you're just gonna have to cut half your team because otherwise you can't make the math work.

• 37:04Speaker 00

  Well, I want to talk about the team, but before I just want to put one caveat out there, right? You do have to take price into account. And well, let me tell you what I mean by that. Yamango had a very strong quarter. Modest delta in terms of future guidance versus expectations dropped 25%. Why? Answer, it was trading at 40 times EBITDA, next year's EBITDA. When you're trading at a super high price, eight or nine times GAAP revenue, right? When you're trading at a super high price and you go from 30% growth to even, you know, I think it was the guidance of 23, 24. Clearly assumption would be 24, 25 would be actual result. When you're trading at 40 times EBITDA, it doesn't take a lot to knock you off your pedestal. Conversely, a whole bunch of these things are now trading at seven, eight, and nine times next year's EBITDA.

• 37:50Speaker 00

  Where even 8, 10, 12% growth can probably make it at the very least, highly unlikely to decline by 30%. And arguably more upside than downside.

• 38:00Speaker 01

  But why will they reaccelerate? I just don't believe these.

• 38:02Speaker 00

  I didn't say they reaccelerate, Jason. I think there's two separate things. And it gets to your block comment. You've got to do one of two things. I do agree you're right about, you've got to do one of two things. If you reaccelerate enough, then they'll cut you slack on profitability, provided you have some either profits or convergence on profits. If you don't reaccelerate, then you're right, all you're selling is a profitability story. And then we're going to segue straight to block. The only way to do that is to look at your cost structure and say, if my, I mean, I hate the rule of 40, but let's put it out there. If my revenue growth is 10%, I can subtract 10 from 40 and I come up with 30% free cash flow required. So you're right, you start running the math.

• 38:41Speaker 01

  It's just brutal because there's been, the amount of spend that has gone to cloud and LLMs is like nothing we've ever seen before. And if you're a public software company, you've captured none of that, it's a disaster. Like it's a Titanic. It's worse than it looks. Because you can't figure out any way to take all of that spend and turn it into an agent, an LLM that your 10,000, 50,000, 100,000 customers want to pay you more for? I mean, it is the biggest fail. An own goal in our history and it's going to get worse. It's there's so many public folks who are rolling out a beta or we've added a Claude connector this week. And it's a disaster at this point in 2026. It is, and you can see it when a lot of these public companies CEOs speak, they don't have the

• 39:25Speaker 01

  like I was on the earnings call with Mark Benioff, he's got the confidence. He believes that there will be a lift from agent force. Growth already now some of it is inorganic, growth is up and he believes he has a performing agent. He like I was there in the building, the dude believes, okay.

• 39:38Speaker 00

  No, I hear you.

• 39:39Speaker 01

  But I can smell the lack of belief in other public. I know Harry can too, when he interviews and you can just smell it out of the pores. And as a human being, I have empathy, but good God, that's why I think because of retention, it's all worse than it looks. It's all worse than it looks because you can hide under multi-year contracts and annual contracts and price increases. You had so much time, like these three kids from Stanford that figured out how to use Opus. Why couldn't you? It's out there, it's not even that expensive. Why can't you figure out how to use Opus? Why can't you put your 20 best engineers and just frigging clone Harvey or 11 labs or level? How hard is it to clone those apps, guys? You all deserve to be fired.

• 40:21Speaker 00

  Actually, I thought Owen at Intercom had a really great piece just this week on, you know, what it took to take his existing business, you know, gut it and build thin on top of it. And, and, and that's what I meant when I said, oh, Jason, it's hard. Not from a technical perspective, that's part of it, but just from a fortitude to make all those changes, to put all your bet on the new thing. There was probably a year of feeling ridiculous because you're talking about the small thing and the big thing is so much customers are saying, why aren't you focused on the big thing? And he just described very well what it took to be bloody mindedness enough to make that happen. And you're right, Jason, I do think you are correct. That's the kind of attitude that any, I mean, the opportunity is there and it's, I'm interested to hear your take on agent force either this week or next week or whenever.

• 41:05Speaker 00

  But that's the kind of bloody mindedness it's going to take to push through.

• 41:09Speaker 01

  You do need it and I just don't see it. I just don't see it across startups and I don't see it in the public companies. I don't see, and now listen, Owen had to come back as CEO, there's complexity there too, right? But he's been brutal that this is a founder market and it's hard. And yes, it was harder for them because they had an institutional base. He had to partially retain, but also partially abandon a lot of complexity. But woe is me, like his points are all were all really good. But you know what? Maybe maybe he got there a quarter or two earlier than others because it wasn't CX and support. Okay. So he could see the change earlier than everybody. It wasn't just going all in. It was that also he was in one of the two categories that changed the most quickly. Right. But what about the rest of the world? You've had time.

• 41:51Speaker 01

  You can go out there and say on Twitter, L L M's are fungible and that systems of record should benefit because because we own what matters and L L M's are commodity. I mean, give me a break. You've where's your hunt? Show me 100 million. Show me 200 million. Show me 500 million. You've had 16 months now.

• 42:09Harry Stebbings?

  But I think like Toby at Shopify is one of the most brilliant CEOs and technical minds. Gustav at Spotify is too. I'm genuinely naive here. Are you telling me they've missed a beat as CEOs?

• 42:22Speaker 01

  No, Toby is dragging his company mercilessly into the agentic era, rolling out their agentic commerce. I don't know how successful it will be, but it'll it'll be front and center of Shopify. Right? It's becoming front of center. So but he feels to me roughly at the pace of Salesforce, he probably should be faster. Right? Because it's a more agile organization. But they're they're dragging their companies with real product into the future. And I think everyone else, they're already starting to fall into the the event horizon, into a state of terminal decline, that their teams don't want to do the work and that they don't have the ideas. They don't have the ideas. Oh, Jason, I rolled out A I S D Rs. Great, but you're a software company. Where's your agent? Where's your agent that goes out and does all the work for your customer base?

• 43:07Speaker 01

  Right? They're just headed in the event horizon and they're trying to put on the jets, but it's it's getting tougher each day to recover. Yeah.

• 43:16Harry Stebbings?

  Well, we're going to do a Christmas party, the three of us, and Jason's our bringer upper. Yeah, he's the mood.

• 43:22Speaker 01

  Yeah, he's gonna be, he's gonna be fluff her upper. I listen, if you're really in the game, no, seriously, if you are in the game. I will be your biggest interrupter. I will use your product. I will support your product. I will say it's great. That's why, honestly, for a long time, no benefit for it. That's why I was so supportive of Agent Force, because we started using it and it works. So I'm like, I'm going to take this example, and it is not perfect. Like, I can tell you all about it, more than almost eight. I don't think there's that many people that use twenty eight, five different, ten different GTM agents, including Agent Force. We might be N of one, and I can tell you the flaws and the issues and the challenges, but at least they're in the game. Armies of FDEs, armies of folks deploying custom agents, and it will get better. And I will tell you, it is still changing.

• 44:04Speaker 01

  Agent Force is constantly changing. It is not static. But like a real AI company, it gets better every month or two. It keeps getting better and better and better, like our AI tools are, rather than be sticking to beta. So I'm not saying Salesforce is going to turn into fifty percent growth next year, but I want to see this or better from any, anyone, anyone in software. You've got to be doing as good or better than Salesforce. I think you're hopeless. You're hopeless. Oh, our industry doesn't really like AI. Oh, you know, our, well, good luck to you. Good luck, good luck to you. I will bring the holiday cheer.

• 44:35Speaker 00

  I mean, I just want to reiterate my position in the boring middle here, which is, I think the straw man of these public company CEOs are ignoring it totally. It isn't really true or fair. I do believe that most of these SaaS companies, I don't think they evaporate or go away. I think it's, I think, provided they get with the program, depending on the industry and market, you know, there's a market where you've got plenty of time where AI is not going to be wildly disruptive from a top line perspective. I'll talk about OpEx next, all the way to where it's obviously disruptive. I think it's well within the capabilities of highly compensated executives who have their ass on the line to figure this out.

• 45:13Speaker 00

  Most of the companies that already have scale should not be vanished from this, which is a different statement than saying they will ever regain their, you know, twenty, thirty X EBITDA multiples, still less, God forgive us, twenty X revenue multiples, which they got in two thousand and twenty one.

• 45:27Speaker 01

  Here's the thing that I don't understand about the SaaS apocalypse, but this is what I think makes these companies terminal. Okay? What happened through December twenty twenty five is basically the public markets said, listen, we're actually going to Give you a growth premium for ever lower growth. Like the top tier in 2025 was if you grew 30% or higher, you were, I think on average, valued at 25 times revenues. Okay. And this held even each year through 2024, our growth slowed. And the markets were like, for whatever reason, the markets would say, listen, it's cool. We will ratchet down what we expect from public software companies. We'll ratchet. And then at some point in January, the market said, no longer, no longer will we ascribe high growth premiums. And it came out of a shot in the blue.

• 46:11Speaker 01

  And this is why everyone is still stunned now because it worked. This like this deceleration, but multiples staying strong. If you were in the top quartile, it worked for three years.

• 46:22Speaker 00

  Agreed on the facts, not the stunt because you're right. Zooming out 20 years.

• 46:26Speaker 01

  I see them stunned. I think Harry sees them stunned too.

• 46:29Speaker 00

  Yeah, but then they just didn't look at the chart, right? If you look at the chart, it's really simple.

• 46:33Speaker 01

  No, it's your stock price fell.

• 46:36Speaker 00

  No, hang on, stop. First of all, I agree with you on the conclusion. Where you were at, right, is there was 15 or 16 years of the bucket growing at an average of 30%, valued at an average of six times revenues. Then there was two years of COVID bucket growing 40% average of 20 times revenues. And then you're exactly right. What happened is we de-accelerated not just back to 30%, but down to 15. And then the market said something stupid like, well, we're back to six times revenues. It's okay, like it used to be. And you're right, Jason, it was wrong. It was six times. Once upon a time, you were six times revenues and growing at 30%. Now you're at six times revenues going at 15 and you sat there for two years. And it's why when you do a chart that just shows revenue multiples over time,

• 47:20Speaker 00

  it's a stupid chart because it looked like it had gone back to normal. But you're right, Jason, the growth had gone out of the bottom. And then all that happened last year is people's eyes were opened and they were like, it's not a temporary growth decline because of X, Y, or Z. It's now permanent because of AI. Oh my God, what are we thinking? You should be at four times. That's the movie.

• 47:41Harry Stebbings?

  It's now permanent because of AI. That's a really interesting statement. We obviously saw following Jason's statement. I don't know if Was listening, I'd like to think that he is, and took Jason's guidance as instructions and announced, obviously, laying off forty percent. It's kind of all under the hood of AI efficiency improvement. Is it truly that? Or is it a very bloated organisation that needed resizing? Jack's continuously overstaffed his companies and it was just a resizing with a mask of AI.

• 48:13Speaker 00

  Jason, you should go first because you called this last week. Didn't name the company, but you called the catastrophe.

• 48:18Speaker 01

  Well, look, I think people missed on Block in particular. I know that their profitability was way up, but I think their top line is only growing like three percent, something like that, right? So this story misses, everyone missed this. Everyone got suckered in by the press release that said profit per share gross profit was up twenty seven percent. Okay, that's true, but you only lead with that when you're not growing, right? When you're growing, you lead with revenue growth, right? So what are you going to do? I think this story is simpler than it looks. Jack, they're growing three percent and he's completely given up on returning to growth, which I think most public software companies will get to during the course of this year. They will give up, the CEOs will give up. This is my point, they will give up on returning to growth, they will give up. And he gave up and what's your next play? You've got to get more profitable, right?

• 49:01Speaker 01

  There's a limit where it's not worth, like more than fifty percent operating margins isn't worth it unless you're an IP licensing shop, right? But it's the get it done because I got to get to my next state, which is hyper profitable. And so my only point is people reacted to this like this was a high growth tech company. It has been many years or at least years since it's been a high growth tech company. Three percent is pretty, I mean, a SaaS company at least can raise prices four percent. At least, at least we have that in SaaS. We just go out to our customers. Due to the incredible features we've added this year, including changing the colours of our buttons, we're raising prices six percent this year.

• 49:35Speaker 00

  I think there's a lot in that. Big picture, agree, a mid twenties billion dollar revenue company, ten percent growth a year ago, down to almost no growth last year. So you've given up on the revenue growth, so there's only one button to press. You're exactly right, if you want to make the stock go up. So a couple of common stuff, one is on employee count. You are, it had ballooned up, there'd been a couple of years where it'd gone fifty percent. And you've got to calibrate that because interestingly, if you look at revenue. Per employee or gross margin per employee compared to SaaS companies, it actually wasn't that far off. But of course, it's not a SaaS company. It's a financial services company. And when you look at it on that basis, where obviously revenue, you know, you have all these interchange and pass through costs. You are relative to best in class financial services companies.

• 50:18Speaker 00

  There was clearly fat to cut there and that's what and Jason, you're exactly right. That's why they did it. But talking about AI, you ever use the AI word and there's two separate uses of the word AI. Are you talking about AI on your top line or just AI on your OpEx? And it's worth pointing out here, this is not an AI top line story. Salesforce is an AI top line story. AI is either going to increase your top line if you deliver agent force. Or it's going to reduce your top line if someone else delivers agent force and you don't. It's an AI top line story. This is not an AI top line story. I'm not going to use more at the margin, maybe a little. I'm not going to say no, but because Jason will correct me like he did entirely correctly on YouTube. But Cash App at the margin or be a buy now, pay later or Square.

• 51:02Speaker 00

  AI is not going to fundamentally change the top line offering here. So this is not an AI positive or negative transformation story. All they're saying when they use the word AI is they're saying, dude, we don't make or sell AI to our customers. But maybe we can use AI to cut some OpEx. Is that true or not? I doubt it's true at the 40% level. So when you look at it at that basis, it's not a growth story. It's not an AI growth story. It's a, we need to make the profits go up and therefore cut all these expenses and plan slash hope that some combination of people working harder and AI can allow me to service the customers at a much lower headcount and get the stock up 20%.

• 51:42Speaker 00

  The other thing, Jason, you're right, is it is implicitly an abandonment of revenue growth as the plan out of here, at least in the short term.

• 51:49Speaker 01

  Yeah, I'm not saying that this doesn't give folks cover to make similar cuts. And I, and I, and I'm also not saying AI is exaggerated as the root cause, but this isn't quite the play people think it is. When growth is decelerated to 10 to three, I mean, it's, you're in a tough spot. And I just think where it may inform other CEOs is folks in the, in the mid to low teens may, may adopt this. They may throw in the towel, not at 3% growth, but at 12 or 13% growth. If by the end of this year, they're like, you know what? This AI is such a force of nature, but I haven't found a path to acceleration by the end of this year. You may see people copy it just for that reason, because they're out of, they're out of ideas.

• 52:29Speaker 00

  I want to ask a question to you, Jason, and I'm going to deliberately do it in a way to separate two things, AI on the top line and AI on OpEx. Let's assume there's no AI impact on the top line. It's some financial services business that just has no AI revenue lift. And let's assume they're efficient beforehand, which I think Block wasn't, right? You could definitely argue there was some. What's your mental model of, if I have 100 people doing X, whatever, revenue this year, how many per year do you think a well-run company should be trimming based on AI? Do you have a mental model for that? Because I doubt it's 40 in one year. What's your mental model?

• 53:03Speaker 01

  Well, look, just one thing first, then I'll answer the question directly. I do think that even if you don't think that a company like Block is threatened by AI, I'm not saying it's like YouTube, but here's the thing I know even just from my own portfolio, folks are building agentic applications that do what Block and others do, and therefore are displacing them because that's where the energy is. There's a lot of products at Block, right? There's a lot of products. But if you go back to some of the more simplistic products like Square, right? As agentic products process point of sale and other transactions and add more value, you can lose, even if you say the atomic version of my product doesn't really need AI. It doesn't, but when these agents are doing everything in your industry.

• 53:47Speaker 01

  So I think the agents are capturing so much value that there is just limited budget in every space, and they're going to take budget away from you. So I don't think, even folks that are immune, I don't think are immune because The new entrances will find ways to tap into that budget and add more value. In terms of cutting the team, honestly, Rory, I think everyone thinks forty percent of their team they don't need today. Every single CEO I talked to doesn't think they need forty percent of their team. And so I think that the block number will become the default. I don't need forty percent. It's a gift.

• 54:18Harry Stebbings?

  I got in a bit of trouble, but I tweeted over the weekend, I spoke to three CEOs between five hundred and a thousand people. And all three said to me that they were cutting by a minimum of twenty percent. And I think this does create more acceptability around layoffs.

• 54:32Speaker 00

  It's the Overton window argument. I was stunned to learn that in recent memory, this was the largest percentage headcount cut. Like, I mean, I saw a bunch of data on that where, you know, there's a few fifteen or twenty percent cuts that were bigger. Because when someone like Amazon cuts fifteen or twenty percent, it can be thirty or forty thousand people. And this was, I think, from fourteen to ten thousand, I think.

• 54:53Harry Stebbings?

  No, it was ten thousand to six thousand.

• 54:54Speaker 00

  Ten thousand to six thousand, you exactly. I've been looking at the before and after headcount numbers. Because obviously, look, in venture-backed deals, there are occasional horrible moments when you cut by fifty or sixty percent. But that's typically when you have forty people and you lose product market fit. You know, this is the biggest percentage change for a publicly held tech company in the last twenty years, which is just an astonishing statistic. So I think, Jason, to your point, it definitely expands the Overton window of what's doable if it works.

• 55:23Speaker 01

  Well, let me give you just a simple example for fun. So I was helping a very hot AI company think about growing their GTM team. We get called into this stuff all the time now, right? And they're going from ten folks in sales last year to two hundred and fifty this year. Okay? Let me just ask you, how many of them you think are going to be great?

• 55:39Harry Stebbings?

  Twenty.

• 55:40Speaker 01

  Twenty out of the two fifty? Yeah, maybe, maybe a few more. So, look, a few years down the road, if you have to cut, this is going to be so easy. I mean, I know the human impacts are horrible, but I can't think of any company I've ever worked with north of five hundred people where eighty percent of the people were great. It's just managers of managers. It doesn't matter in the age of AI. Now, what's changing is companies are going to be permanently smaller to start. That is utterly changing. And that's why in some ways Blockta is a window to the past. It's like looking Out to the galaxies out in the sky because I don't think we'll build for the most part companies like Block the same way today. We may stumble into them in times of plenty. This got them going from 10 to 250 in sales in one year.

• 56:22Speaker 01

  But when you get that bloated, I know we all want to say we don't lower the bar. But managers of managers always lower the bar. First time managers always lower the bar. It always becomes headcount driven and hegemony driven and 40% of these people, we just have no, even in AI companies have no idea what they're doing. They don't even know my team, 500, 800 people. What are the 28 people doing in marketing again? They don't know.

• 56:45Speaker 00

  Yeah, it's funny because whenever you are like this, I always want to argue with you because you're so extreme on it. But you know, sometimes I find myself realizing that you're correct, right? I mean, because I was just reflecting on this, like going back to capital versus labor. Yeah, in the 1950s, 1960s, the biggest companies were, you know, 300, 400,000 employees like General Motors, like Walmart had a billion at one point in time. The amazing thing now is, you know, Apple has 160,000, Google has 190,000. The trend says you're right because even before AI, the valuable companies have been the high IP, low headcount people. And you look at the trend today, you look at the revenue per employee at someone like a cursor. You know, it's about the same already as Apple, maybe even a little higher than Apple.

• 57:30Speaker 00

  Apple's about 2.6 million revenue per employee, you know, Google is 2.1. So these guys are already at that level at a much smaller scale. So I don't know if it's as extreme as you say, but the trend is definitely proven you're right. More and more valuable companies with less and less people. I don't think it trends to one. I don't think it trends to the billion dollar, single person company. But the direction of travel is on your side of the table.

• 57:53Harry Stebbings?

  I do think we'll see an acceleration of layoffs, so with founders appreciating this kind of acceptability of doing large layoffs in the wake of this.

• 58:01Speaker 00

  I always hate the word acceptability. I think the more common, the harsher comment is necessity. You know, in other words, acceptability sounds like it's a social thing. I wouldn't like to get rid of people's career just because it suddenly quote became acceptable. If you are subscale, growing sub 10 and kicking off 10%.

• 58:19Speaker 00

  If you don't take the actions and someone, remember priceless all markets as I repeat myself over and over again, if you're only doing 10%, less than 10% revenue growth and 10% free cash flow, you'll be trading at four or five times and three or four times perhaps, and someone will know how to come in and buy you and make those changes. And then a month later, they'll be worth eight times.

• 58:39Speaker 01

  But for what it's worth, I think you do have a choice. I think Harry's point's an important one. And I don't even think it even matters that some of it's the past, but I think the block thing frees CEOs to make what they believe is the right decision for the company without over analyzing the horrific human impacts. They are now freed to sit in the board meeting next week, probably. These meetings will probably all happen in March, and they'll be like, guys, let's just talk about block calmly. I'm not saying we should do this, but what is, given that we missed the quarter again for the fourth quarter in a row, guys, we missed, you said we were coming back and I get, but we're at 110 million in revenue, we missed or whatever, 400, we missed the fourth quarter in a row. What could we do like block? It's at least going to be a conversation, right?

• 59:21Harry Stebbings?

  I think also the extent allows them to cut deeper. The 40% is a big number, and I think it allows them to go from

• 59:27Speaker 01

  Also, these companies are in the past. I think the future companies are just not going to hire this way. And the weird thing to think about, there's a chance we look back at 20 years of brute forcing revenue growth with sales, human-led sales and marketing as an anomaly in the era of software. In the old days of software, when I was a kid, software was wildly profitable, right? And then for two decades, B2B software grew like nobody knew until AI, but it was never really profitable. And we may look back and it's just jaw dropping in the efficiency of AI leaders, and we may just not go back to that old era. We may not, we may not go back. And we may also say, listen, those double or triple sales quotas for traditional software companies and just let the chips fall where

• 1:00:10Speaker 01

  they may. Just let them fall where they may. Like, I'm not going to do the 400K quotas anymore that you wanted the 500K. I'm done.

• 1:00:16Harry Stebbings?

  Why do we talk about one of the future companies that we mentioned on the revenue headcount? Because I'm confused, chaps. I speak to everyone about their product teams and their engineering teams, and everyone has moved off cursor and moved to core code. I tweeted about This the other day and thousands of people comment this and everyone is in universal. Cursor's dead, Claude Code rules all. Then Cursor announces their movement from a billion to 2 billion in revenue in three months. Rumors of secondary round being done at 50 billion. Maybe in my favorite saying that Rory often said about Benchmark, reports of my death have been greatly exaggerated. And I thought of that here.

• 1:00:58Speaker 01

  This is, this is one of those situations clearly where VCs judging the world based on their portfolio versus the real world are out of sync. Literally right before this all came out and blew up, I had two board meetings of my fastest growing portfolio companies. And they all joked about how folks weren't using Cursor. And one said, um, mostly it's only grandpas at the company that still use it. And the CTO stood up, who's pretty young and said, grandpa over here, I still enjoy it. And he's like, there's a couple of us that still use Cursor. And then I was with another company that has blown up. And you know, there were two people that used Cursor. So you heard these stories all the time. And you just assumed that everyone had mainly moved to Claude Code directly, right? And product team said too, you just assumed that's the way the rest of the world works.

• 1:01:41Speaker 01

  And that's why Cursor was smart to slip this, uh, news release to Bloomberg that they'd happened to double in the last 90 days. So our portfolios are not representative. I think the answer, listen, this is much as I know, other than we all made the same jump to the conclusion based on our 40 portfolio companies. But if six, you know, they said 60% of our revenue is enterprise. And probably the answer is right there, right? Is that this is a, this is a trusted tool with a lot of things, including guardrails that can manage agentic swarms and others. They're pointing out how banks use them and other conservative enterprises and are just rolling them out. And I don't know this to be true, but if Cursor is the more conservative choice, that's not the worst place in the world to be, especially if you can pick your model.

• 1:02:23Speaker 01

  Maybe that's the answer, but it's not, it's not my five fastest growing investments. That's not where they're crushing it today versus six months ago. But it's so funny, we got it wrong. Like numbers don't lie.

• 1:02:33Harry Stebbings?

  The feedback that I got from the tweet was, was very simple from insiders. It was two of them. It was one that you have. Enterprise crushing it, exactly as you said, and then two actually just annual subscriptions, their cycles not being complete yet. And so there will be a wave of unsubscriptions and that churn will be real on the consumer side.

• 1:02:52Speaker 01

  But that can't, Rory's the expert here, but that, even if that's true, and it's a really interesting topic in general, you don't go from one to two billion in 90 days. If you're having massive like deferred churn at the end of the contract, that's a different issue that's going to come down the road. I mean, that is, that is growth that is just massive market pull, like epic market pull to grow that quickly. Just to sign the deals takes so much energy.

• 1:03:14Speaker 00

  The lesson is never underestimate big markets and momentum. If you come into last year with the momentum they had or the middle of last year, even if, you know, things are slowing at the margin, even if at the marginal startup, you're losing to Claude Code, you know, you've built your name, you've built your brand, every enterprise is trying to adopt coding, the adoption cycle there isn't, oh, I tried Cursor yesterday, I'm going to try Claude Code tomorrow. It's like, corporate's got to approve, purchase order's got to be raised, we got to have security review it, legals reviewed the contract, we signed a deal. You're not going to run in next day and say, we should switch to Claude now. It's like, no, we're going to use this for the year, we'll do an eval mid-year and we'll think about it next year. I mean, Jason knows better than me.

• 1:03:56Speaker 00

  So the big aha here is when you're in a great big market with a massive trend of adoption in the course of, you know, two, three years, if you've got your share of that, you're going to do just fine. I mean, you know, at the margin, are you probably losing share relative to Claude, at least in the last three months since the last set of models, probably, but it still means a big outcome. I mean, you know, we talked about this two or three months back, it's clear that they're going to be one of the two or three players at scale and scale gives you a lot here. I would add, you're right, Harry, numbers don't lie, but I haven't seen the numbers, right? And I haven't seen the revenue and I haven't seen the gross margin, but you can easily see how someone with an early lead would be able to maintain that lead, even when, you know, you've got a super credible competitor who can bundle a product into an adjacency, taking some

• 1:04:41Speaker 00

  of that space, because the market's expanding enough to cover a multitude of sins. Maybe this is the real sense, Harry. The knife fight doesn't start until the Is like sixty, seventy percent saturated, which by the way, happened to SaaS in two thousand and twenty one. And that's when the knife fight started. Suddenly you're like one in two of every new customers is a switch. Now it's time to kill the other guy. Until then, let's all grow one big happy family. We all have a win rate of sixty percent. We don't compete against each other. All those happy things that you hear in the board. When the market is so big that we're not overlapping. Once things get saturated, then it gets uglier.

• 1:05:16Speaker 01

  Yeah, there was, I think there was a tweet, I think there was a quote or something from someone, a cursor. I might be wrong. I think it fits, it's an interesting point, which is that Barclays had just rolled them out. Okay, that was the first agentic coding product that was approved at Barclays. Okay. And banks are a big deal because they have the biggest budgets, but they are conservative at the same time. It's an odd dichotomy, right? They're super aggressive and super conservative. And we might have gotten cursor wrong. I mean, cursor is more enterprise. You can run it without data retention. You have full SSO, you have role based access controls. And all these things that you just gotta build in the enterprise, the right audit logs, the right hooks. And to a, to a CISO or CIO, as long as the product works, that could be ten times more important than what someone in the other building wants. Okay.

• 1:05:58Speaker 01

  And the other thing that's happening right now, good God, is it's been in, in all of these products for a while. But in Claude four opus, these swarms of agents got really good. Okay, these swarms of autonomous agents. And Michael from cursor wrote this, not only did they leak the two billion, but he wrote a post, which, you know, tweet article, which seemed kind of weird. But talking about how the whole future of cursor is sort of safely managing these autonomous agents, not, you know, the early days were, were clicking tab to finish, to finish a line of code, which was what Codium and Windsurf got going with. And when you have swarms of autonomous agents, good God, they're not totally safe. Not much as we all love our open claws. They're not totally safe. And the more of them you have that are autonomous and the more they can touch your data, they're, they're not safe.

• 1:06:43Speaker 01

  And so if cursor can do both, if it can unlock the power of swarms of autonomous agents running in real time, running concurrently and make it safer. I would gotta think ninety five percent of CISOs want that one. And, and, and, and a lot of. Conservative organizations, the cranky CTO doesn't get to make all the decisions like at our startups. At our startups, the CTO decides, you know, what the team's going to use, right? But good God, at a bank, what if you repeatedly leak everybody's confidential data? I mean, it's exhausting to have to go through that. This is not a joke, like every agent will leak data if it's allowed to, like every single agent will. That's how goal seeking works. Being the most enterprise leader in these mature spaces, you can, you can win because 99% of the world is not like us.

• 1:07:28Speaker 00

  Jason, sold. I mean, all you have to do is look at Azure's market share in cloud, where for 20 years, the value proposition, having said in millions of board, not millions, but tens of board meetings where we've talked about, you know, we're running on AWS, should be one on Azure, our customers want to run on Azure. The value proposition of Azure for 20 years was it's not nearly as, it's not as good, but it's getting there. And Microsoft have great relationships with every CTO, so it'll be fine. You're exactly right, you know, there's a large amount of software selling that can be done on the basis of safety and integration and selling all those boring bits. What you're dealing with is a massive market where everyone's making adoption decisions in an extraordinarily short period of time.

• 1:08:11Speaker 00

  And let me repeat what I said earlier is they're both going to crank as fast as they can, they're gonna, and as people make initial decisions and more and more of that market has an initial buy decision made, you're going to start running into each other. Is that going to be later? Yeah, the competition is just going to intensify. They're not, I mean, let's just do it. If Cursor went from one to two, I think in the same period this year, I saw some Anthropic statement about, you know, we've added $2 billion in ARR year to date. So both of them are exploding. This is a huge, this is the biggest frickin' market and those are the two most viable players in it.

• 1:08:44Speaker 01

  Going back to last week, it's the Fortnite effect, like Claude will, Code will keep doing more and Cursor has to keep ahead. That's the job.

• 1:08:50Speaker 00

  Got it, exactly.

• 1:08:51Speaker 01

  Apparently 60 to 70% of Cursor model calls are still using Anthropic's API. Okay, so even of that 2 billion, a lot is flowing back through to mom and dad. This is the point Michael Cannon-Brooks made the other day. And Claude, even if they, they may not even care about Cursor as a team, but they will inherently build all these features as an enterprise play. And so the bubble will shrink and then Cursor just has to do more. But what we've learned this week is they've kept ahead. They have kept ahead of the Fortnite storm. They've kept and every CEO out there crying and saying how hard it is. And that hasn't kept ahead. They're going to be that Fortnite storm is going to shrink to a pixel and they're going to die.

• 1:09:28Speaker 00

  Jason, I think you're right. That is the soundbite. I mean, the correct response is congratulations in the great race for what looks like a $50 to $100 billion minimum coding prize. You have conquered level three, which means unlike a whole bunch of people who are stuck in a back in level two, you now get to go to level four and play again. It turns out it's hard to make $100 billion, but they deserve all the credit for being the early winner, cranking and keeping grabbing the story. I mean, it also just again, back to the swarms of agents. It's just worth stating, and again, this is obvious, but just to say it. If you look at the Cursor story, I mean, he spelled it out in that kind of post, which I thought was very good. If you're not, this is back to Jason's point. If your story is not changing significantly every six to nine months, you are probably falling behind.

• 1:10:12Speaker 00

  In fact, not probably, you are falling behind. You know, you were autocomplete, then you were an IDE. Now you're agents, now you're swarms of agents. These models are moving so quickly that the technology is moving so quickly that the prize for winning is to reinvent the company from scratch and the product from scratch every six to nine months. Congratulations, it's a fun game, but the prizes are great.

• 1:10:32Speaker 01

  You know, the one thing I'd still love to know about Cursor, and it is incredible, the growth is, and not to be very 2025 about it, but the Claude API is expensive. You know, I've measured our API calls. It's so much cheaper to run something inside of Claude. My God, so like, I mean, I'm on Claude Max. Amelia runs out of credits using Claude desktop and everything, or she runs out of time. She doesn't even run out of credits, but what I get for a hundred bucks a month. And then I track what some of our API calls cost. And for a good prompt, a good call, it can be well over a dollar. And maybe for code, it could be more like that adds up really quickly. And it is whether you think it is subsidized, whether you think Anthropic is subsidizing its own native use or not. Their margins are strong. It doesn't really matter.

• 1:11:16Speaker 01

  So that is still the more like, hooray, you hit the top. But when you're still paying probably rack, like I can't imagine Anthropic is so desperate for Cursor business, they're giving them a massive discount, right? Harry may find that out through his network, his, but if they're paying close to rack rates, which I think they are, because they also say you can bring your, your, your key with you. Like if it's cheaper, bring your own API key with you. It says there's not much of a discount. That remains, you're at Anthropic's whim because they're already subsizing their own product.

• 1:11:47Speaker 00

  Totally.

• 1:11:47Speaker 01

  We're lucky, people are not that, no matter what anybody says, we're not that price sensitive today.

• 1:11:51Speaker 00

  It was super interesting. I got to give a shout out to Tomasz, who, who we had on here a few months back. Did an interesting post just today as, you know, basically would you buy, I can't remember, it was a good metaphor, I should remember and I can't. Basically just looking at the pricing of, you know, top of the line frontier models versus six month old open source, Chinese open source models. And, you know, the 10, 15, 20 X difference in cost per token. It was a good piece. And you're right, right now people are paying full rack rate for the new stuff because the new stuff is so great. His point he was making is it's only six months from so new that it's amazing to, oh my God, you can get it open source for 120 at the price. And it just really, again, brings home pace of change and the need to be on top of it.

• 1:12:33Speaker 01

  I think OpenClaw confused things, but the power of running swarms of agents autonomously to build software, the rate of change, we think the rate of change is like, I know you didn't literally mean it, but that the way you described Tomas's thing suggested change might be slowing down, right? And we might get a benefit of these cheaper models. It just, I know you didn't suggest it, but there was a hint of it. I think it's going to radically accelerate this year because what changed in December, what, so like, listen, I've been on Replit, not to talk about forever about Replit and Lovable, but I've been on it since June. And when I started, you couldn't finish anything. You'd ask Replit or Lovable to build an app. You remember in the early days, Harry, and you'd get a lot of buttons that didn't work. Okay, nothing worked. They'd be fake buttons. Everything was fake, right? Then it got better and better.

• 1:13:14Speaker 01

  And then by December, especially with Opus 4.5, all of a sudden it could fit, it wasn't just you could have a code for hours, whatever. That doesn't really matter for a lot of use cases. It could, it could finish apps that worked, like really worked, right? And then on our team, Amelia took it over and she built. An entire AI VP of Marketing that is better than anything on the market and she finished it without any drama. Like it took work, but she just completed it. It's in production every day, doing all of our marketing, not just execution, but it has all the ideas. It's like Hal. It wakes up every morning and tells us what to do with data. It's a little freaky. And one of the many reasons was these multiple agents running in swarm and working on the software together.

• 1:13:52Speaker 01

  An architect, a security expert, a backend expert, a database expert, and Replet just did one thing early, which is, and maybe Cursor did this too. They built a framework so you could use these multiple agents together efficiently before you couldn't Claude, right? You could do it earlier. And so now that someone that's just very smart can birth an AI VPM that marketing literally works, in six months, the applications we're able to build, our jaws will just drop. Already, I don't even know what to do with Demo Day. We literally got a sponsor that just raised 50 million. Their website was all built in Lovable. We were just laughing about it, but maybe that's not funny anymore. Maybe these apps are so good.

• 1:14:32Speaker 00

  What do you mean you don't know what to do for Demo Day? I think I guess.

• 1:14:35Speaker 01

  Because if it's, what's his face from Angel List said, "Software is uninvestable." It should have been on the show. It should have been a topic.

• 1:14:41Speaker 00

  Yeah.

• 1:14:41Speaker 01

  Okay. I agree. And I'm struggling with it. And what I mean is you can show up to a Demo Day and build anything you fucking want now in any of these coding tools that's really good. That is so much better than anyone would show up to a Demo Day 24 months ago. 24 months ago, half the folks would show up, they didn't have a product, it was barely working, you could make fun of it. We went through it. And now you go and like, there's no excuse to not have something that's like, great. Hey, I could take what we built, Emilio and I could show up to YC and say, "We built this AI VP of Marketing. It's managed a million marketing transactions." It would blow your mind, like.

• 1:15:17Speaker 00

  And just to be precise, Jason, I mean, because the sentence, "Software is uninvestable." I mean, if software is uninvestable, why bother making the demo at all? Because it's not investable. So clearly saying is, "You don't invest on a demo anymore." Because a demo simply means 24 or 48 hours earlier. You kicked off a coding project and you got it done. So there's no information in the demo anymore.

• 1:15:37Speaker 01

  I don't think that, I think for most cases. I don't think there's any signal or information in a demo anymore. Yeah.

• 1:15:42Speaker 00

  Agreed. So I think at the early stages, there's not that. So that's what you mean by demo there. Cause the software is investable. Obviously, it turns out Microsoft's stock is holding up pretty well. So software is invest is uninvestable. It's one of those hyperbole statements, right?

• 1:15:55Speaker 01

  Well, what I mean is, listen, I had one of the reasons I was modestly successful when I started investing is I was a founder that turned into an investor. Okay. And one of the superpowers you get when you make that transition is you know what's better than you. You know, the CEOs that are better than you, and you also know who's better at building software. So when I would meet a founder that week for week, pound for pound, had shipped better software than I did, I knew they had a decent chance. Like if the demo blew me away and the CTO blew me away, even if they had a couple thousand of revenue, I'm like, these kids can't lose.

• 1:16:28Harry Stebbings?

  Jason, can you name one founder, one founder who is able to create, architect, maintain agents in the way that you have done? And I'm not blowing smoke up your arse, but Rory, I think this is where Jason's like, oh, it's going to accelerate so fast, so, so fast. I don't know one founder who has built an AI VP of marketing in the way that Jason has done.

• 1:16:50Speaker 01

  I do think I'm ahead of most of the, listen, there's obviously, there are folks just building agents that are so far ahead of me, I can't even, they mock me on X and I deserve it. But I would say for your average AI focused B2B founder, I am ahead of them on this stuff, right? Cause I've been doing it for, for six months longer. They'll eclipse me later in this year, but they don't get it. They're, they're most, I'm sure you're getting investor updates in March, which even talk about how they're stunned with how much more productive their team is, right? We're all getting these, like they're just, they're just stunned. Like, I know we've been talking about this, but now it's finally hap, like it's not just a few more pull requests and this and that. They're literally, their jaws are starting to drop in March because of what they built in February and late January with these tools now, because they can finish stuff.

• 1:17:32Speaker 01

  And when that 10x is this year, here's the thing, like you're, the rate at which your product has to accelerate will be like nothing we've ever seen before.

• 1:17:41Speaker 00

  That's the real version of software is not investable. The real version is there's going to be infinitely more software. So soft. Software alone will not be a competitive advantage. So there will still be extremely large demand for software. And there is as well to that will be very big software companies. But they will have to do something more than, hey, I wrote a bit of code for this particular vertical and this particular use case. That's not just going to get you there. It's going to be some other elements of competitive advantage around network, around distribution, around moat, around vertical knowledge. That's the true version of the statement.

• 1:18:13Speaker 01

  I think, yeah, I think it may, and then listen, at the later, you know, investing in 11 labs today is, it's a very coherent bet, right? It just makes this idea that you could judge, or at least if you had the right background, that you could judge early stage experience better than many and write a check very diff. And even more so, listen, I had two investments. They weren't huge investments, but they weren't tiny. Recently, they did a million or more their first week in market AI investments because the demand was so strong. It's not, one of them, literally 45 days before, 50 days before they were showing me a demo. I'm like, guys, I know all the vendors in the market. I like, I put it back in the oven for a little while. I don't think it's competitive. And, and then it, you know, you roll out and you dominate the market.

• 1:18:55Speaker 01

  There's a lot of reasons, but that, that level of pace, we just didn't see before. It's going to accelerate. So how the hell do you pick favorites? How the hell do you pick favorites unless they had, what's his name? Frankel from, um, what's his name, Harry, that did Sono?

• 1:19:09Harry Stebbings?

  David Frankel, yeah.

• 1:19:10Speaker 01

  Yeah, he was the, he said, he, he, he had his, one of his never too braggy ones. I was the only pre-seed investor in, in Sono, which is 300 million in two years. Right? And he's like, why did I invest in it? It's like, well, PhD from this, masters in that, understood the whole space. I met him, everyone said he was the smartest guy in the world. I mean, that signal still exists in 2026.

• 1:19:29Harry Stebbings?

  Do you want to hear a joke?

• 1:19:30Speaker 01

  What's the joke?

• 1:19:31Harry Stebbings?

  He tried to bring me into that round.

• 1:19:33Speaker 01

  Well, you should have done it. Should have done it.

• 1:19:36Harry Stebbings?

  Oh, no.

• 1:19:38Speaker 01

  He probably saw that, that you couldn't see quickly though. That, that's, you know, that, that level of depth, right? That you couldn't see, right?

• 1:19:44Harry Stebbings?

  Rory, are you going to have your bets ready for next week?

• 1:19:47Speaker 00

  I will have them for next week, Howie.

• 1:19:49Harry Stebbings?

  I'll give you an allowance because it's 10 o'clock in London and.

• 1:19:54Speaker 00

  No, I appreciate that though, and I will, I genuinely will. But I'm still up on my world cloud. I'm up about six, I think six or seven, I was up 6% at one point in time. I'm not sure, which is the wisdom tree index of all SaaS. I just, yes, as the idiot version of that. So worth remembering. Now, I don't, I haven't looked at today and it's been pretty grim. So who knows? But yes, I will have my act together for next week because it is late in the day there in London.

• 1:20:19Harry Stebbings?

  But before we leave you today, I run 20 VC fund and I get this question from founders all the time. "Harry, I can't find a good dot com. Do you have a hookup?" Let me tell you now, the answer is always gonna be no. I don't have a guy or gal for that. I do have a recommendation though. If you're building a tech startup, get a .tech domain. Tech startup, .tech domain. It couldn't be more simple or obvious. As an investor, I appreciate founders who put thought into their branding. When I see .tech in your name, it tells me right away that tech is at the core of your build. It'll say that to your customers, too. A clean and sharp domain like .tech pays off in the long run. Look at the companies using .tech. Nothing.tech, OneX.tech, Aurora.tech, CES.tech, Ultra.tech, Alice.tech, Neon.

• 1:21:04Harry Stebbings?

  tech, Blaze.tech, Pi.tech. Great tech companies. They all use the .tech domain. These are my two cents. If you're building a tech startup, don't overthink it. Secure your .tech domain from any registrar of your choice. While .tech gives modern companies a home online, Checkout helps that home convert by turning traffic into revenue. Over the past 15 years, Guillaume Puzaz has led Checkout.com through what he calls "the velocity years," a period of hypergrowth with relentless product building. The lesson? High growth is a gift, but it demands ruthless focus. As his mother put it, "Play the game you're good at." For Checkout.com, that game is digital payments, obsessing over data, chasing basis points, and compounding learnings over time. And

• 1:21:45Harry Stebbings?

  that discipline is paying off. 2025, Checkout.com processed over 300 billion in total volume, up 64% year-over-year, and returned to full-year EBITDA profitability. They now support over 1,000 enterprise merchants globally, including 63 that process more than a billion annually, with brands like eBay, Vinted, Amex, ASOS, and T-Moon. Guillaume's message, though, is pretty clear. They've earned the right to win anywhere. Now, they're investing in innovation across marketplaces, issuing, financial experiences, and agentic commerce. If you want payments built for what's next, talk to the team at Checkout.com. That's Checkout.com. While Checkout powers the moment money changes hands, Invisible powers the people behind the work. Why don't we hear more real AI Success stories from big companies.

• 1:22:30Harry Stebbings?

  The models are insanely good, but implementation's the problem. It's really, really hard. There's data all over the place, there's legacy tech and manual workarounds. It's a Ferrari engine in a shopping cart. Meet Invisible. Invisible trains 80% of the top models and then adapts them to the messy reality of your business. Take the Charlotte Hornets NBA team. 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.