20VC: OpenAI's Multi $BN Deal with AMD | Polymarket, Vercel and Supabase Raise Mega Rounds | Does King Making Really Work in Venture Capital: Harvey vs Legora | Chamath is Back: The SPAC is Back

AGENDA: 03:29 OpenAI and AMD's Major Partnership 07:35 Microsoft Have F***** Up the OpenAI Partnership 17:08 OpenAI's Developer Day Announcements 20:45 Why VC is the Most Forgiving Asset Class on Price and Valuation 29:10 What Does it Take to IPO in 2025: Why Snyk Will Not IPO 42:30 Four Strategies Companies Need to Take to Own Their Own Destiny 49:31 Vercel Raises $300M at $9BN: Suicide Round or Strategic 55:39 Does King Making Really Work in Venture Capital: Legora vs Harvey 01:08:11 Chamath Raises Latest SPAC: SPACs are Back 01:10:56 Polymarket Raises $2BN at a $9BN Valuation 01:14:53 Quick Fire Questions and Wrap-Up

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

• 0:00Speaker 00

  Paul Graham was right. Sam Altman understands power. He has more power than AMD, so he took 10% of the company for the privilege of selling stuff to him. The interesting thing is the leverage that OpenAI has, even though they're losing a shit ton of money, precisely because they have the users.

• 0:17Speaker 01

  Nvidia is making so much money, it's almost incomprehensible. So I think Jensen knows he's got to give up some of it.

• 0:23Speaker 00

  The more you do this, the more you just say to yourself, you just need to do big, exciting deals in trends that are absolutely obvious. And every time you try and make it harder than that, you just, you lose money.

• 0:37Harry Stebbings?

  This is 20VC with me, Harry Stebbings. It is my favorite show of the week. Now, what a show we have in store for you. So many great bits of content. We have OpenAI's partnership with AMD and their ability to buy 10% of AMD. We have their Dev Day announcements analyzed and broken down. We have SuperBases new round, Vercel's new round, Chamath's new SPAC is back. SPACs are back, baby. It is an incredibly fun show. I cannot wait to hear your thoughts. Let me know what you think. I want this to be the best show of the week for you. Harry at 20vc.com. Let me know your feedback. I want to make it better for you. But before we dive into the show today, now, most people who get scammed never talk about it.

• 1:20Harry Stebbings?

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• 2:05Harry Stebbings?

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• 2:10Harry Stebbings?

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• 2:55Harry Stebbings?

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• 3:40Harry Stebbings?

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• 4:25Harry Stebbings?

  Start creating for free at framer.com/ design and use the code 20VC for a free month of Framer Pro. That's framer.com/ design and use the promo code 20VC. Framer.com/ design promo code 20VC. Rules and restrictions may apply. You have now arrived at your destination. Guys, I am so looking forward to this. We have a lot of news to cover this week. We're gonna start with, I did laugh when I was putting this together with Jason's brilliant suggestions, thinking, you know, this could also just be called this week in OpenAI. That could be a relevant name, but obviously we had Dev Day yesterday. I want to start though on the AMD deal. Setting the scene, OpenAI announced a major chip supply partnership with AMD.

• 5:10Harry Stebbings?

  OpenAI will buy AMD's upcoming Instinct chips, up to six gigawatts. As part of the deal, they get warrants to purchase up to 10% in AMD. Big news. If we start there, what the fuck does this mean? A week after Nvidia invest a hundred billion in them?

• 5:28Speaker 00

  It means a lot. There's a ton in this and it means first of all, the odd thing is whoever does corp dev in OpenAI gets a bonus this year. Whoever does corp dev in AMD and Nvidia all get bonuses this year. Cause so far this has been oddly enough, and I'll come back to that, a win-win. I maybe start right down in the weeds with the AMD deal, right? Cause contrasting with Nvidia, because Nvidia is strong, when they get to get equity in OpenAI in return for giving OpenAI chips. And OpenAI uses that money to buy those chips. AMD, because it's weaker, has to give their own equity to OpenAI for the privilege of having OpenAI buy their chips. It speaks to OpenAI clearly, and this is why Paul Graham was right. Sam Altman understands power.

• 6:12Speaker 00

  He has more power than AMD, so he took 10% of the company for the privilege of selling stuff to him. And he has probably less power than Nvidia, so he let them get equity for the privilege of selling him chips. There's dominance clearly been established. That's the first thing out of the gate.

• 6:28Harry Stebbings?

  Well, I just want to understand, he got warrants to purchase.

• 6:31Speaker 00

  Yes.

• 6:32Harry Stebbings?

  That is different to him purchasing.

• 6:34Speaker 00

  It is and it isn't. If you look one level down, what did he get? OpenAI got warrants to purchase 10% of AMD and a penny. So in other words, they're free warrants, right? We'll come to the accounting on that in a second. But only if they buy the chips and the AMD stock price goes up. So I can imagine the discussion. The discussion was OpenAI come in and say, "Hey AMD, we're going to buy some shit from you, and that's going to be so good for your stock price that we want warrants to do this deal." And the old AMD guys say, "No way, we're selling you chips, we're getting money. What the hell do you mean you're going to get warrants as well?" And OpenAI said, "I bet you your stock will go up just because you're doing business with us, because you're kind of a no-hoper and now we're saving you, and we want to get some of that upside." So therefore, did I repeat? We want the warrants.

• 7:19Speaker 00

  AMD eventually says, "Here's the warrants." And the interesting thing is, and remember, OpenAI has got to buy the chips, step one. And step two, the stock price has got to be high. The interesting thing is that we'll see if that lasts when those chips get shipped. But as of right now, the stock price went up 30 something percent. So if they were shipping the chips today, they'd be getting the warrants today. So OpenAI was correct when they looked AMD in the eye and said, "Dude, we're going to get 10% of this company. I think that's worth 30 or 40 billion, because it's a 300 billion company, and your stock price went up 60 billion, so you're up."

• 7:50Speaker 01

  My initial sense, which I think may be wrong now, you said Rory, my initial sense was AMD is getting the better end of the stick here, right? We need to diversify away from Nvidia, OpenAI does, but we're going to do much more for them in the short term than they do for us. And then you're going to turn around and monetize it with our competition. You're going to sell them all to Elon. That's how I read it. So we don't want egg on our face. It reminded me at first of Shopify and Stripe. And Toby was so angry in his mind that he put Stripe on the board that then he went to Klavio and said, "Listen, I'm going to do the same thing for email that I did with payments on Shopify, but you got to give me 10% of your company." It felt like not getting egg on your face, maybe they just want the money.

• 8:28Speaker 00

  Yeah, I mean, it's all together. They came with a kingmaker package and they, you know, made them an offer they couldn't refuse. As I say, as of today, it would work, but remember, they don't get those penny warrants until They ship the chips and until OpenAI buys them. Because remember, because whenever you do these vendor deals, you're worried, are they really going to buy the shit? Two years from now, OpenAI still has to need whatever vast sum of chips that they set. But if you zoom out a level, go a little historical here, what you're seeing here is uncanny. What you're seeing here is the Windows Intel game beginning again, right? If you zoom back thirty years, Microsoft was the software company that took control of the PC monopoly. Their adjacent partner was Intel.

• 9:08Speaker 00

  IBM was the old school company that set them up by doing that famous DOS licensing deal. And AMD was the little player that got dealt into a ten percent market share because IBM said, dude, we're not going to just rely on Intel anymore. We need a second supplier. That's thirty years ago, and the way it unfolded is Intel did well, Microsoft did better. And, you know, AMD got a little bit of money and IBM faded away. Fast forward to today, the company that's dominating everything is OpenAI. They're the Microsoft of today. They have the consumers, they have the eyeballs. They're building this new monopoly and the equivalent of Intel is now Nvidia. In other words, the only other company that OpenAI needs to make all this shit happen is the chip guys.

• 9:53Speaker 00

  If you've got chips and you've got these guys, you're golden and obviously capital. So Nvidia occupies the role of, you know, the dominant other part of the dual virat. You know, the two armed people running the thing. In other words, you've got OpenAI and Nvidia. But bizarrely enough, you still need the second source. In this case, OpenAI is driving that agenda, but up comes AMD again, thirty years later, with exactly the same shtick. We're not as good as Intel, we're not as good as Nvidia, but we're here with a second source, give us some money. And history repeats itself. And then, you know, just to say it, the role of IBM has been played by Microsoft. They set this viper in motion and they've allowed it to exist. And in one sense, for a while, it looked like Microsoft got a good deal because they got access to

• 10:39Speaker 00

  OpenAI's technology early on and they got a little bit of buzz. Brutal comment here, just like IBM got a buzz when they shipped the first PC because they got a product out the door. But they let this competitor emerge in their midst. And I think OpenAI, going back to the developer day, it's uncanny how similar it is. And if you're sitting there and now and you're Microsoft, did we just create a monster?

• 11:03Harry Stebbings?

  Did IBM own a large chunk of the monster they created?

• 11:06Speaker 00

  No, and no, look, exactly. History, as someone wisely said, history doesn't repeat, it rhymes. IBM did not, does not own, it's a good point, does not own a big slug of OpenAI. But as we've discussed, you don't get points for venture capital when you're a dominant monopoly. You gotta just stay a monopoly. So, yes, better to own 10 to 30% of it than nothing. So, great, as I said, what we said, great corporate development deal for Microsoft. Far better corporate development deal for Microsoft than IBM did 30 years ago, when it didn't take any ownership. So, as we said, the corp dev guy at Microsoft, he also gets a bonus this year. But from a business perspective, I mean, we're going to talk in a second about developer day. What you saw is OpenAI basically saying, here's the place in which you should run your other apps. Now, I'm not sure that vision sticks, but if you're Microsoft, you're like, what?

• 11:52Speaker 00

  WTF, we're the place where you should run your other apps. That's what we do. Who the hell are you? So, you might have, it's not a complete parallel, but there's a lot going on here that feels uncannily similar. And you kind of got, think about it.

• 12:05Harry Stebbings?

  Can we just stay on the deal itself before we move to the developer day? If you're Nvidia, are you not thinking, hang on a minute? I thought we had this trusted relationship, this wonderful partnership. We just gave you a ton of money. We just invested, what a strategic relationship. And now you're turning and biting the hand that feeds you. How do Nvidia feel?

• 12:24Speaker 01

  Sam is, again, we've said it many times, I learn a lot watching what he says because he is thoughtful and direct. He was very careful to be complimentary to Nvidia and be clear that they were his number one vendor, right? Here's my view, I don't know what you guys think. I mean, Roy's made the point, the only person making any money in AI is Nvidia. Even Oracle isn't making any money, OpenAI certainly isn't making any money. Nvidia is making so much money, it's almost incomprehensible. So, I think Jensen knows he's got to give up some of it. And I think there's this elaborate dance of chipping away, he's got to give a little market share. He's got to be a little polite in these deals as long as the end. He knows he's gonna have 90% market share. They're all playing it very carefully so that he can minimize his price erosion,

• 13:05Speaker 01

  which he has to deal with and maximize his market share without creating a huge conflagration. But I think it was very carefully orchestrated. You can't, this may end up being very little, right? If AMD isn't fully competitive, no one may end up using these chips except that the minimum they need to maintain competitive, right? So I thought it was very thoughtful about everybody. I thought it was sequenced in the right order. AMD didn't come before Nvidia, did it? Certainly wasn't announced first and everyone showed up to pay homage to Jensen and he referenced it when he did the AMD deal. So I think it was as, what we can see from Elon is being impolite has consequences in this space. I mean, that Elon guy, he hates Sam, doesn't he? I don't know if XAI would exist if it wasn't for his bone to pick with Sam Altman. He might not have bothered, he might have just gone to Mars faster.

• 13:50Speaker 00

  Staying with the dynamics of the deal and what it reveals. On the chip side, it reveals, you know, they're a wildly powerful company. They can shed a little, you know, they're gonna have a lot of other issues eroding them. Just people are gonna, no one's gonna see a $4.5 trillion market cap, 200 billion revenue, 50% operating margin company and do anything other than say, get me some of that. So, you know, he's brilliant and playing out his hand. I mean, the interesting thing is not the perception of leverage that Nvidia has, because the leverage is real and obvious, they allocate the chips. The interesting thing is the leverage that OpenAI has, even though they're losing a shit ton of money, precisely because they have the users. When you have the users, even if you're burning cash,

• 14:32Speaker 00

  there's no place you could, Nvidia can put chips other than to a customer who themselves has enough users to use all those damn chips. And therefore, the stunning thing here is the asset is you can be sitting there losing money like hand over fist and still you get credit for committing hundreds of billions of dollars you don't have. You can bestow market cap on your vendors, for God's sake, just because you're willing to buy from them, simply because the whole world right now believes, rightly or wrongly, that that 12 billion revenue line is gonna get to 200 billion. It's going to take a hundred billion a year in chips to do it and therefore selling shit to OpenAI is a business so good that you're willing to give up 10% of your company for free for the privilege.

• 15:17Speaker 01

  Well, here's the weird thing because I have actually, in my first startup, I sold components. Nvidia is selling components and in the day, it's a crappy place to be on the stack. You know what everyone does when you sell on components? Everyone's nice to you because they need you and they bring you into the conference room and they bring you coffee. And you know what they all say? Harry cost plus 20%. Now, you can laugh about that, but when you look at Nvidia with 50% margins, okay? And you're buying from them, you can't help but feel that's the number one place I'd like to attack if I could. I'm fine if Nvidia makes 20 cents on a dollar, 15 cents, right? But 50 cents, I mean, F me. And there used to be competition in the GPU market, there just isn't today, right? So it is this weird dynamic where normally you'd be beating up on your vendor.

• 16:00Speaker 01

  Your vendor would have lower margins than the software provider. Here it's highly inverted.

• 16:04Speaker 00

  To play it out, because I thought I was going to disagree with you, but in the end, I'm in sync. Because what you're saying is this, normally, components businesses are hard because everyone understands the cost structure. You typically only have a few customers. It's like selling telco equipment to the telcos. There's only 20 big telcos. They know they have you over a barrel and therefore those businesses become pretty tough, right? Because you're right, they just calculate costs and work back in. But two comments. One is, the only thing that defeats that is an architectural lock-in where you have a monopoly. And what you're seeing is this is a monopoly competing against an oligopoly and the monopoly provider being Nvidia. And as long as there are monopoly, you know, the buyer from OpenAI can sit, or Microsoft can sit there and go,

• 16:47Speaker 00

  you bastards, you're only paying, you know, $50 a chip to TSMC and you're charging me 300. I hate you, I'd like to do it for less. And Nvidia sits there and go, well, we won't. And you've got no other choices.

• 16:58Speaker 01

  We will, but we're sold out, Rory, we're sold out.

• 17:00Speaker 00

  Yeah, I mean.

• 17:02Speaker 01

  Maybe in 2031, we could provide you with some of those chips.

• 17:05Speaker 00

  I mean, the fun thing about this semi business is, you know, about, I mean, it was about 20 years ago. Venture effectively walked away with one or two exceptions from semiconductors. And they were probably correct because from a start. A perspective, it got really hard around two thousand and three, two thousand and four ish. There's been a few since then. Yeah, we, we actually, one of my colleagues did the deal, not me, but we had one of the last monolithic power, which was a success about two thousand and seven and eight. Since then, been almost no venture exits in venture land. At the same time, in public land, it's been wildly profitable. You've got Nvidia, you've got Broadcom, Avago, you've got a bunch of others. They've basically consolidated, to your point, Jason, so that the remaining providers have significant leverage.

• 17:48Speaker 00

  If you're going to only have six or eight customers, you better be sure you only have none or one competitor. Like, for example, memory, for example, which is a chip market where there's three or four competitors, that tends to be wildly cyclical and prices go to shit in the downturn. If the GPU market ever turned into the memory market, which I'm not saying it will because of the complexity, then that business looks very sad and just, you just take a look at how Samsung and Micron trade versus how Nvidia trades. Everyone left him alone for thirty years and they built Monopoly and now he's, you know, picking up the check from it.

• 18:22Harry Stebbings?

  So if we progress this forward then to Dev Day, which we touched on slightly there, and why don't we start on kind of, one of the major announcements was the opening up of apps into ChatGPT. So you can essentially use your Figma's, your Canvas, your Spotify's easily and natively within ChatGPT. I'd love to understand from your perspective, Jason, why don't we start with you? We touched on it a little bit beforehand, but you left me with a cliffhanger and we'll save it for the show. Jason, were you impressed by this?

• 18:48Speaker 01

  I was underwhelmed because, first of all, let me step back. We had Mark Benioff on the show a few weeks back and I, and I told him this is what I wanted. I wanted to talk to my apps, remember? And Mark at the time was, I mean, we love Mark, right? He was like, you don't want to, that doesn't make sense and you don't want to do vibe coding. Now they're doing vibe coding at Dreamforce. The world changes in the four weeks since he's been on the show. I'm like, I want this. I don't want to log into Salesforce, okay? I want to go to ChatGPT or Claude and say, tell me how Harry and Rory are doing this month. I've literally been a Salesforce customer for twenty years and haven't logged in in a decade, okay? I want my Salesforce in ChatGPT. But I had two thoughts watching this. One, this, Canvas, Spotify, I didn't see an aha moment. I didn't see magic. I didn't see something that was so

• 19:28Speaker 01

  Great. My jaw dropped and I would copy it. The second thing I thought as B2B guys is um, this is like Slack 2.0. Slack was our ChatGPT until 2024 months ago. This is why Marc Benioff bought it for 27 billion. It was our OS, right? We didn't know how to communicate. We didn't know how to work async and everyone's in Slack all day long. Even today, we still use it. It's just not like it was. ChatGPT took a lot of that mind share and we would be, we'd be sharing in Slack and, and every app has a Slack integration. It's actually now that I'm, I don't know, Harry, I don't know if you know, I've been vibe coding lately. And I will tell you of all the things that, that are easy. Some stuff is hard to do. Some stuff is easy to do. OpenAI is really easy. Zapier is really easy, but Slack is super easy. It is still the easiest software to like push updates and do,

• 20:12Speaker 01

  and work bidirectionally. But where are all the apps in Slack? The connectors are there. How often in Slack are you creating a Spotify playlist or creating a Canva image? Or even pulling up a CRM record, which you can do. How often do you do it? I bet never. Do you, do you track deals in Slack? You probably could. So I thought this is great. It's like Slack, but what do we do in Slack? So I was hoping this aha moment where Sam would show one or two use cases where my jaw dropped. I'm like, holy crap. This is integrating my memory, my data, my learnings. It's combining apps in ways you can't without an API or without a Zap. Like I just didn't see the great use case, right? And I'm, I'm hoping it comes because someone's going to figure it out and build a huge business out of it.

• 20:55Speaker 01

  But I don't know if there'll be a thousand. I'm also not sure we need another app marketplace for the other side of the announcement. I'm not sure we need the 10th app marketplace. Maybe we do. We'll find out. I didn't fall out of my seat for a magic moment and maybe that's because they built it in eight weeks.

• 21:08Harry Stebbings?

  My question was especially around Agent Kit, which you mentioned, which is, you know, the ability for people to build pretty good quality agents very, very quickly. They did it in eight minutes in a demo. Does that kill a litany of companies like your N8Ns who promised the same in terms of customer delivery?

• 21:25Speaker 00

  That's a harder one to assess. I don't know. I can envisage the kind of agency going to be building for enterprises probably are going to require a lot of orchestration, a lot of management. There's a lot of product surface area that a software company just focus on that has to do. If it's a trivial problem and it's easily integrated with OpenAI, maybe they do kill some of these companies. But my guess is there's more complexity involved and, you know, over the next two years, will OpenAI spend the time on that because they got bigger fish to fry? Will they just make it easy to connect and move on?

• 21:59Harry Stebbings?

  I think the thing that worries me, I do want to make sure we move away just from OpenAI, because the thing that worries me is I saw these crazy rounds and two that stood out to me. Naveen Rao, who was VP of AI at Databricks, raising a billion at five billion pre. Does this just break venture, though? A billion at five billion. For me to get a 10x, it needs to be a hundred billion dollar company with dilution.

• 22:24Speaker 00

  No, I mean fifty billion. Well, with dilution, okay. I was worried you were unclear on 10x math, Harry. That was a bad moment, so.

• 22:29Harry Stebbings?

  No, no, no, no, no. I was accounting for dilution, thinking 50%, given the stage and the company's style, be 50%. Does this just break venture math?

• 22:38Speaker 00

  These deals are unusual. I mean, if you think about what kind of deals get this, and it's most early-stage startups, definitely consumer, definitely, I believe, in apps in particular, are a little bit voyages of discovery. You don't know if the market's there. You're trying to get product-market fit. Even if the executive, the CEO, is really good, you don't get that automatic right to win. Where you do get it is in these hard infrastructure markets, the number of people who can credibly say, I can solve this level of technical problem that we're now facing is much smaller. So you do have that kind of star effect in raising. I mean, you're seeing it in thinking machines, you saw on safe superintelligence, and you're seeing the same kind of thing there. The number of proven people who have the magic in this space is low.

• 23:21Speaker 00

  And we should add that Naveen has successfully built two companies. One of them broadly, interestingly, from my recollection, a hardware company back in the day. I was sold to Intel. And then the second one obviously was sold to Databricks, another clever infrastructure company around LLMs. So this is someone who has twice built a successful deep tech company in precisely the hottest space on the planet today, knows everyone, has a proven record of success. I can totally see why, you know, he gets that money. What you can do is you can stipulate he'll probably pick the right problem and he'll probably get the answer right. So really you've kind of compressed a bunch of the venture questions. And then you're right, you're only left with the third one, which is, does it make economic sense?

• 24:04Speaker 00

  In other words, if he picks the right problem, if he solves that problem, is the market big enough to justify, as you say, at least a 50 billion outcome from your, what is it, 5 billion, whatever it was, pre-money? And the answer is clearly right now, people believe these infrastructure markets are having those kind of outcomes. We'll see if there's room for everyone. I, at the margin, maybe skeptical, but I can totally see each step of the logic train that gets you there. Proven person, hard problem, hard problems are getting rewarded. Would I prefer to back him versus two comm sci graduates out of a really good school who might figure it out? A priori, hell, yes, I'd prefer to back him. Now, once the two comm sci graduates actually get the work done, you can go, oh, that might be a far more attractive bet. And that's most of

• 24:46Speaker 00

  what we would do. But I can totally see, you know, the proven person saying you can deploy capital at scale with me, remember, especially for these bigger funds, I'll probably solve the problem, I'll probably pick the right problem, you'll be in a good deal. So I can totally see how it happens. I can totally see why, especially folks who've backed them before, where they know they have the relationship. I think Lux give them credit. I think it backed them twice. If you'd backed someone twice in a row to build complex technical problems and one took a long time and you showed grit, and then the second one took a short time and you made them a ton of money. When he comes into your office the third time, believe me, he gets a nice coffee and a nice seat and you're like, what do you need? Quick decisions in all those partner meetings.

• 25:24Speaker 01

  You know, I think some of it, I had two thoughts. One is, it is a confidence game. Venture has changed, to Harry's point, was the question, right? One, if you're Naveen, you're at Databricks, you've seen 100 billion dollars and more going up, right? So five to 100 seems plausible. I'm not as great a founder as any of these guys are. But back in the day, when I met Rory, it was really hard to see north of a billion dollar outcome for a lot of these startups. It was just hard to see. And so my whole life and the reason I sold was I was probability. It's like, wow, man, I own 30%, but if I get to IPO a bill, like it's just, I can't even make more money. Like, like you couldn't see it, right? And then quickly you could see 10 billion. And now it's very easy if you, if you are a Databricks alum to see 100 billion or more because you were just there last week. And that round wasn't hard to close, was it? I mean, everyone in there and their uncle and aunt wanted to get in at 100 billion.

• 26:09Speaker 01

  So it's all become venture's always been a game, but for founders, man, it's a super game today, right? It is nothing but we walk out of Y C demo day and as an investor, you feel gamed. So if, if the game is 100 billion and you've already played it once, going to Roy's point, like, like when you start off as a VC, it really helps if you have a few hits in your first few deals because then you have the confidence. I wouldn't have the confidence to raise it 5 billion on my seed round, but if I was the CTO of Databricks, I probably would, right?

• 26:36Harry Stebbings?

  I just interviewed Mike Cannon-Brooks from Alasian and he said, listen, the trouble is there'll be a load of shit that will lose money, but there will still be some Amazons in this AI wave. Yes, but Amazon was priced as Amazon was, and that generated Amazon level returns. These are not priced in any universe of Amazon level returns. And so actually, even if you have Amazon level plus, plus, plus outcomes, they're still not venture star returns.

• 27:03Speaker 01

  Well, it might, the IRR could be tolerable if you put enough money to work, right? Put a half billion into the round.

• 27:08Harry Stebbings?

  If your time to value is much quicker than sure.

• 27:11Speaker 01

  Yeah.

• 27:12Speaker 00

  Yes. I mean, let's state the banal, a lot more has to go right. What's, what's this, you can laugh. A lot more. 5 billion trade and an eight post, right? Did I really say that? I think I'm going to get value from that. But yeah, no, totally. Look, it's, you know, I can give a bunch of examples. I mean, you look at what the Stripe seed round that Aladdin others did was dirt cheap. The Airbnb round that Sequoia did was compellingly cheap, you know? I look back and we have very successful 09 and 2013, 14 funds. And you can see it when I'm talking to the younger partners, the thing in their eyes is dude, you were able to buy so cheap. Even a moron like you could make money, right? You should try making money today, big guy, right? And entry price has an impact. It's not the only thing. The wonderful thing about venture. Is there's a positive comment.

• 27:57Speaker 00

  It is the most forgiving equity business of getting the price wrong. PE, if you get the price wrong, there are low variance assets. If you overpay by fifty percent, you're toast. Because there are three X assets and they're not going to ever be seven X, right? Your degrees of freedom as well. Same thing in the public markets. The great thing about venture, it has maximum variance, which means that it is the most forgiving of getting the price wrong. Because you can get, because you have exponential growth on your side. Now, I think we all rely on that and then sometimes we rely on it too much. And we find that just because you're maximally forgiving on overpaying, doesn't mean you're entirely forgiving on overpaying. And to your point, Harry, you you can push a theory to destruction. And you know, what you're saying is if you pay for everything,

• 28:40Speaker 00

  where you've got a five X return if you do something wildly amazing, and only one in three of the companies or one in five of the companies does something wildly amazing, because that's just the way wildly amazing runs in this world. You don't have much of a return. And that that's a fair comment.

• 28:53Harry Stebbings?

  I think it's another clear example, though, of the Alex Wang changing venture mindsets on entry price acceptance. Because we all go, well, if Alex is worth fourteen point eight, Jesus, Ilya is worth thirty and Mira. And it justifies these prices.

• 29:10Speaker 00

  And you're right. And by the way, that's why whenever anyone uses comps to discuss what we should pay for a deal, I want to bludgeon them to death. Because the problem with comps is they tell you what an ass, what company A is worth relative to what company B and C is worth today. In the public markets and the private, you're exactly right. If Scale AI is worth fourteen and then you're like that, you're worth fifteen, so you can pay fifteen. And it's a logical way for a banker to relatively rank things today. But it turns out as investors, we're trying to answer a slightly different question is, which is what are they going to be worth in seven years? And the problem with comps is if you use the comps, you would buy in two thousand and twenty one, a whole bunch of assets that were only priced at fifty times revenue, because the other ship was priced at eighty and you're getting a good deal.

• 29:55Speaker 00

  And that turns out to be a very bad way to invest. You can't rely on nearest neighbor comps type analysis to do investing. And we all do to some extent, because it's easy to be a comparison shopper. But you're exactly right, Harry, is that you have to have a view that says not only a scale AI worth 14 today to take your example, but that you believe on a sustaining basis that companies worth doing five, six, 700 million in this kind of business can trade at 20 times revenues over an extended period of time that includes the next decade. That's a lot harder story to believe.

• 30:24Speaker 01

  Slight variant question on here is, um, let's assume you can, your LPs will support you, like you can do these deals, right? Like this deal. There's only, you've got to deploy the capital. Let's assume you have access to a lot of capital like Andreessen or others, right? How fast people are trying to deploy these funds? 18 months or something like that, right? How many candidates are there like, like these? How many of these generational founders, even if you have to hold your nose when you make the investment, even if you have to hope and pray, even if you see Rory's math, it's like 80% of these have to work out for the math to work. There always is pressure for 90% of ECs, there's pressure to deploy it, right?

• 30:59Harry Stebbings?

  Let's actually take that drill down because I think that's really important, which is that, you know, let's look at Andreessen's new fund. You know, six billion now expanded to seven and a half reportedly, seven and a half billion. Say you're putting in 300 million, 400 million of this billion raise. Gosh, you've got to find 15 of these in, let's say, a two-year period.

• 31:18Speaker 00

  20, but that's okay. Depending, yeah, 300 times 20 is 6 billion. Keep, keep rolling.

• 31:22Speaker 01

  You've got to find, you've got to find them, right?

• 31:24Harry Stebbings?

  You've got fees, my friend.

• 31:26Speaker 00

  And reserves. Okay, I agree.

• 31:29Speaker 01

  How many are there, right? Not to interrupt, keep going here. How many of these candidates are there out there?

• 31:33Harry Stebbings?

  Is there 80 year? Because that's kind of the seven and a half a year. If I'm being really precise, Rory, we can cut Naveen in half. And then you have seven and a half.

• 31:41Speaker 00

  Yes, but you've also got to say, I mean, look, we're all Pavlovian. We do the things that feel good. Once they start feeling good, you keep doing them until something hurts, right? And, you know, based on, I saw the nuke of the leaked Andreessen numbers, you've got to say they're excellent. They've earned the right to throw 7 billion on the table. And, you know, the truth is we're, we're human. We'll just keep doing this until Mr. Market delivers a sad lesson that says you've overreached. And so far, that hasn't happened.

• 32:06Harry Stebbings?

  But I don't think it will. I don't think it will happen. They're about to get the payday of paydays in venture land with a minimum of 40 billion back from Databricks.

• 32:15Speaker 00

  Totally. Look, at some point, what it takes to change is externally driven.

• 32:20Harry Stebbings?

  We're jumping around here, but the people that determine whether it's allowed to continue or not are the LPs, the people who put us in business. Yeah, I thought it was a really interesting one, Jason, that you highlighted was Brown and Northwestern selling VC stakes. We saw Yale and Harvard sell VC states earlier this year. Will this be the new normal? Is this a new wave of LP liquidity that we just will continue to see more and more of?

• 32:43Speaker 00

  We can talk about illiquid assets and whether they're getting an adequate premium of a liquid assets. That's one discussion. And then, and that's a good discussion. And then on top of that, you have the extra phenomenon of university endowments under particular pressure because of the political pressure and the push on universities, a whole bunch of changes that means they feel the need to be more liquid. I think for those guys, it's not going to be the new normal in the sense of you're not going to be doing this because it's not going to persist for a long time because by definition, if you're selling a lot of venture assets, you're probably not going to buy a whole load more. So it will tail off. I mean, I think it's a readjustment. What you're probably seeing is some reassessment of the Yale endowment model and exactly how much liquidity do you want to have in your portfolio?

• 33:28Speaker 01

  I just went through, like first and hopefully the last time I had an LP sell position is the first time. I mean, I only have so many LPs. I don't have as much money as either of you do. It was interesting to watch it and Ever, this firm Evercore manage it. But even though the process was handled very poorly and frictionfully, what I thought at the end of it was there should be a lot more of this because what I didn't know, I'd never read, I'd never read the LP pack. My LPs have no rights to sell at all, like literally nothing. There's no exceptions for if you're struggling or if you're, it's just, it's just, I'm shocked because a lot of this stuff is LP friendly. This one is absolute. You have no rights to sell. And so I thought in today's world where it could be 20 years until even good funds wind down, when, when founders want to go longer and longer and longer, some LPs don't care, right? Some LPs literally, but if the Harvards of

• 34:13Speaker 01

  the world care and everyone, everyone that says to me, It would be nice if there was more LP liquidity in a way that wasn't bad for GPs. It would, I think it would be a positive outcome. What I saw is it's a, a pretty broken, frictionful, weird corner of the market, right? Cause they need my permission, so they're trying to manipulate me. And then these guys claimed they had the rights to do it, but they were lying because they didn't want to, they didn't have the balls to ask for my consent. It was very interesting from like a games and I'm, I try, believe it or not, I tried to be a nice guy. I'm like, well, if you have the rights, do whatever you want. And then we didn't mean to say we have the rights. What we mean to say is we have the moral authority to, to, to sell your position. I'm like, what?

• 34:50Speaker 00

  I mean, you might be oversharing here, dude, but.

• 34:53Speaker 01

  I'll keep sharing. I'll share everything except the name of the LP. I'm happy to share.

• 34:57Speaker 00

  But I do think, yeah, stepping back, you're right. Better liquidity is of advantage to both sides, right? Especially as these funds drag on. So yes, we've been supportive of some of our very good LPs who've continued to be up in new funds. Say, you know, after 10 or 12 years, if you've got a tail end residual, one company left, does it make sense for them to clean up their books and sell to a secondary? So there's going to be a lot of this kind of process happening because it just makes sense. It's just like the company staying private longer. The consequence of that is that, you know, you end up having to facilitate secondary shares for employees. You know, when your time period of private is longer than your, you know, half your working life, you probably want to get some equity money. In the same way, for any of these companies, even if they have a long-term perspective,

• 35:41Speaker 00

  which obviously LPs should, if you're entering venture, given the thing. Sometimes you thought long-term was eight years and it turns out to be 12 years. I think it's just healthy to be able to conduct those sales. And even if they were efficient, and it sounds like you weren't, the truth is that no matter how efficient they are, there's still a drag to it. There's still a price discount and therefore it's not going to be the new norm in the sense that people aren't going to run into it saying, I love to do this, but either because you need capital or you want to close out an all fund. It's just, it's just going to be a part of the world. It's, I mean, there's already a substantial secondary business. You're with big players, there's always going to be secondary and it's probably going to increase over time. Quick summary.

• 36:16Speaker 01

  We're acting like there's infinite liquidity. It appears there is for OpenAI and the secondaries. But this is a world of scarce liquidity outside of a few names, right? And so my learning from this process is everything would be better if there was more liquidity down the stack. No matter what, who cares? The market can decide the discount. Everything would be better in an age where companies are longer to exits. It would be better for more liquidity for all players.

• 36:40Speaker 00

  Agreed. And that's also true, I think implicitly you're saying for companies, which of course is why they should go public. Because you're exactly right. I always say to people, when people say there'll always be liquidity because there's lots of money. I'm just going to say it so I can remember it in a year or two when it happens. Liquidity doesn't evaporate because people run out of money. Liquidity evaporates because people get scared and want to keep their money. And at some point when that happens, you'll go, oh, that's what the public markets were for. So you have a little more opportunity than this.

• 37:06Harry Stebbings?

  People should just IPO, right, Roy? Yeah?

• 37:09Speaker 00

  They probably should.

• 37:10Harry Stebbings?

  And then you've got a company like SNEAK, which has slowed down growth to now 26%. I think it's about 300 million in AR. It's down from 150% in 2022. So big growth here.

• 37:23Speaker 00

  First of all, I would actually go with the more conventional English has slowed down rather than has slowing down. I just, you're sticking with the

• 37:29Speaker 01

  We'd be slowing down.

• 37:30Speaker 00

  It's slowing down, I think. But that was just me being mean, Harry. Sorry. You know, I have to do it once per show. Yeah.

• 37:36Harry Stebbings?

  Dude, you corrected me on every fucking sentence.

• 37:40Speaker 01

  Hold on, Harry may have this weird accent, but he's one of the most well spoken people I know.

• 37:45Speaker 00

  Yeah.

• 37:46Harry Stebbings?

  Every

• 37:47Speaker 01

  It's pretty good. Harry's pretty precise.

• 37:49Speaker 00

  Okay.

• 37:50Speaker 01

  I'm full of malpropism in every paragraph and Harry just nails it in every question. I don't know how he does it.

• 37:56Speaker 00

  I was just being snark.

• 37:58Harry Stebbings?

  I think he's why he's beating me up.

• 38:02Speaker 00

  I will admit, you can truncate almost, you can calibrate everything by coffee consumption before a show. And this is a three coffee day, so it's just going to be tough. I'm sorry about that. Normally a one coffee day, it's easy, but I got a lot going on, so sorry about that. So what do you say about SNEAK? Just go back to the task at hand at 26%.

• 38:20Harry Stebbings?

  What I'm saying about SNEAK is like, hey, has growth slowed down to the extent that they are now no longer able to IPO? Because there are rumors now, growth down to 26%, revenues at 300, PE buyers circling and PE is the option. Are they at a stage now where they're looking for a PE buyer and IPO is off the table?

• 38:38Speaker 00

  I mean, the interesting thing is three hundred and A R and twenty six percent is about the low bar. We were just looking at this now. There's been fifteen IPOs year to date. And the median IPO this year was a stunning, get ready for this, nine hundred and thirty one million dollar revenue run rate. Nine hundred and thirty one. So the median blew me away, right? And the cutoff, there was a couple of two or three hundred, right, growing at around thirty percent. The first comment, just to put it out there, is it's not like they're miles away from it. It those are in fact the numbers. But yeah, if it's just below that line, then yes, you've only you've got to do. There's three routes and we discussed one of them last time. You either you have P E, you have, if you're lucky, a strategic buyer. But if you're not in the A I world, I don't think people are buying strategic stuff at this point.

• 39:23Speaker 00

  Or you have to consolidate like D B T and five trans to get to scale.

• 39:26Harry Stebbings?

  What price does that go for? They raised at seven point two last time.

• 39:31Speaker 00

  I mean, that's the tough thing because P E buyers are six to eight, you know, plus or minus. So you multiply three hundred by eight and you just end up with a different number.

• 39:41Speaker 01

  I'd say in the twos, based on, I'm using NetScope as a rough comp, right? NetScope's at eight, it was at seven hundred million, growing thirty three percent at IPO. So this is three hundred million, growing twenty five percent. I I'm just, I'm using the roughest V C math, but if that's worth eight, this is worth in the mid twos. Two something if it IPOs, if there's appetite for an iconic company, right? Just not a whiz, right, an iconic company. I'm using a security comp. It's not, I know it's not the same application. It's the last security IPO, NetScope, which is asked here, but it's not quite rubric. And then the problem is we we start to see this triage, right? And Sneaker, Sync or whatever, it's it's great, but it's not NetScope, which isn't rubric. And so you can just look at the, I don't have your skills, Rory, but I can just pull up the the valuations and the numbers

• 40:24Speaker 01

  and spitball it at two, two something billion would be its IPO valuation, right?

• 40:28Speaker 00

  So the question to play it out is, there's two, one is, does that fall just below or just above the line? Can you get a public deal done at that size? And if you can't, are you in private land? And then obviously, instead of all the preferred converting to common and cleaning up the cap table, the whole preferred stack. And then the next question is how much have you raised? And what does that mean for all? So you got all that drama to do now.

• 40:51Speaker 01

  And do you even if you can't let's say you can IPO because you're it's at the edge, right? It's at the low edge. Do you want to? Do you want to deal with that crap and be ignored by Wall Street? If you're if you're a rung and a half below NetScope, is it worth it to be one of these invisible public companies?

• 41:06Speaker 00

  I'm just going to put it out there because I feel I really don't like the all these companies are no good because they're not worth seven billion. I mean, stepping back one because the other alternative you have is compound for a couple more years of 30%. But if you've got the stomach for the holding period, try and do some acquisitions, you know, build a thing up, get, you know, because at 400 million or 30%. It's a little more compelling. You're well above the threshold line. So that is one option. And then you got to assess, obviously, do you have obsolescence in your future? The point I'm making is this, every single one of our quote successful companies, other than the most successful are dealing with this reality. I can think of plus or minus eight or nine companies in our much smaller portfolio, where we're all at this kind of stage and having these dynamics, right?

• 41:47Speaker 00

  I think I said it like there's just a whole bunch of cutting and wood to chop to figure out what these companies become over the next two to three years. And how do you get liquidity? Is it private to private? So there's just a ton here. So that's what I'm saying is we're we're quote unquote picking on snake, but it's a high class company. 300 million is the high end of great. 30 is the high end of pre IPO critical mass. I mean, we see lots of companies that won 50 going 10 or 15, right?

• 42:13Harry Stebbings?

  It's a crime, not just a crime of price, which is overly, overly exuberant capital markets, I think, cash down a company.

• 42:19Speaker 01

  I think it's worse than that, though. I'd be worried. I'm curious to see what you see of your portfolio, but I only I have three companies I would say are different ARRs, but are in the same bucket that you're talking about. Okay. What I'm worried about is zero have had PE offers, zero of these three. Now, if this was 2021, your phone would be ringing off the hook even into late, even into early 2023, pre AI, your phone. Now, the valuations might have gone down into early 23, but these deals were none of these I can think of, you know, one basically at sneak scale, one, one about a third and one about a 10th, but they all should have gotten PE offers, right? They all have the the right rule of 40 numbers, the right this, the NRRs, right? Why not buy them? They're not going to. IPO, but they're good companies. Crickets, crickets from the P E's.

• 43:02Speaker 01

  Crickets. Are you, is your phone ringing off the hook from these P firms? Are they out there? Can I, can I see them over there? Are they banging the door to get in this morning? You gotta get off the podcast to, to sell a few portfolio companies at eight X?

• 43:14Speaker 00

  I think you're spot on, Jason, which is why if I was sitting on that board, as I always say to people in a, when you're private, the liquidity window opens only rarely. Whenever it opens, you should pay attention. You can decide no, but you should pay attention. And you're exactly right. I would say the same. You're not seeing infinite demand. It's not like P E is dying to do this. They've got lots of capital, but they're not in any rush to buy scub scale assets that aren't defendable market niches. The number one thing I'd say to these companies, including ours, is you gotta take control of your destiny. What does that mean? It means a couple of things, probably three things, maybe four. One, and probably the most important thing is you gotta make sure the management and founding team is excited

• 43:57Speaker 00

  and have something to play for. If the team doesn't think that they can build value here, then you know what to do, right? And you should incent them to build value. And you know, we've done a fair number of these for these kind of companies. I call them E F G's, Equity for Growth, right? You say to someone, you're fully vested, you've long since been fully vested, but you're the founder, you own seven or eight percent. You know, conventional wisdom says that's it. Let's just all keep working. But he's like, I'm not getting any more for more time. And I've done, you know, significant equity grants that are linked to delivering growth. So they have something to fight for again, because these, these guys are fighters. And that's what you want them to do. I want the founder to say, I thought I was on a eight year journey. I'm on a 15 year journey, but fuck it. I've got another seven years of equity ahead of me. And so I take three or four percent dilution.

• 44:42Speaker 00

  But the guy who's in the trenches is incented and so is his team. That's the first thing. Make sure the team are excited to keep going. The second thing is make sure you have control of your destiny by being profitable. And then probably the third thing is figure out a second act. Typically, it should be a second product or typically something that links to the A I trend. And we're saying this to our companies, you should link to the zeitgeist, right? If at all possible, you know, if you're in somewhere like financial services or fintech, it's not really that relevant. You'll use it for the Back office, but it's not going to change your product. But a lot of these software companies, you have to assume you need a second act. You have to assume it gives you seven more years of growth. It's almost certainly going to be related to what's going on in AI and how workflows become agents. So I think if you do those things, then then play out the being in the company.

• 45:26Speaker 00

  If you have those things in hand, then as a board member, you feel a lot more secure because, you know, I have a plan. I have a plan that doesn't rely on the kindness of Tom or Brava, or the kindness of anyone, right? I'm building my independent company here and everyone's aligned. So that to me is the job of the board right now, and we've done that, you know, a couple of companies. So that was a lot, again, too much.

• 45:47Speaker 01

  It's good. And what's the first one you called it, a FAF? What's the?

• 45:49Speaker 00

  E F G, Equity for Growth.

• 45:51Speaker 01

  Yeah, no, you inspired me. I just proactively did one of these for that for that reason. You you learn a lot from the process, but you got to do it. It's not enough, but you got to do it, right? You got to do it, right? Especially because a lot of folks won't ask. It's one of the some founders are very aggressive in asking, where's my where's my next 10% Rory? But a lot of folks just won't ask. It's good to be, I think I learned it's good to be proactive.

• 46:09Speaker 00

  And in return, it's the only time you get the right to say, in return for this, you've got to dream big again. But, you know, if we're going to be at 20, going to 15, going to 10, then with dilution, you you way below my cost of capital. Let's admit that and let's go for a sale and then you get what you get and you don't make a fuss. But if you think you can keep it at 20 and walk it up to 25 or 30 and keep going for three more years. Hey, that's value creating at a very different level.

• 46:34Harry Stebbings?

  The astonishing thing for me about your Aaron Laves or your Drew Houston's or your Mike Cannon Brooks is the longevity. You know, we mentioned sneak there, but how few actually really do the 15 year journey?

• 46:47Speaker 00

  Because it's hard, you know, and look, I've I am.

• 46:50Harry Stebbings?

  Can I ask you, both of you, you've seen more than me. When the founder leaves and there's a CEO brought in, what percent of the time does growth reaccelerate to positive outcomes come?

• 47:04Speaker 00

  Break it up into two categories. If you have product market fit and you have a CEO who's very entrepreneurial, but just not a great manager, then it can work because they've done the entrepreneurial act. But they now, but they're not great at the management and maybe they're so bad at the management that a competent manager stepping into a post-product market fit company can give it a lift. It's not ideal. I'd much prefer to err on the side of making that founder work by surrounding them with good people, but it's not crazy. If on the other hand, you don't have product market fit, the founder's not working out and you think you're going to hire someone to get the product market fit, you're deluding yourself because it's just too hard and too unlikely. You are what's called wrong and you should sell for what

• 47:45Speaker 00

  you get and move on. That's not an act that a professional manager does because if they were capable of doing that, they'd be founders. The answer is zero in that case.

• 47:54Speaker 01

  I think it's bad in all cases, but the first one, I just think back when Andreessen wrote these handcrafted blog posts themselves, but their point was we always bet on the founder. Sometimes the founder doesn't stay and we have good outcomes there, but the best outcomes are when they stay. So we do everything we can to surround the founders with other executives to help them, but, but if they don't, if they can't finish the journey, we'll support them either way. That's my answer, right? I never want the CEO ever to leave. Good God, right? But if they, if they raise their hand and, and you've given them the FAF thing or whatever you call it, the re-up and you've had the conversations and you've begged them to stay and they're still just don't want to do it. There's no point, right? Most humans should take the millions and relax, right? They may be dissatisfied.

• 48:37Harry Stebbings?

  Which is why the most useless question VCs ask founders is Rory, Rory, if you were offered 500 million for the business today, would you take it? And then when they go, mm, VC's like, mm, I told you, he's not here for the long term or she's not here for the long term. Ridiculous.

• 48:54Speaker 00

  So I gotta say, I, I, to be clear, I never asked that question. I think it's a stupid question on its face on, on multiple dimensions. Let me give you just two ways in which it's a stupid question. The first thing is, and I said this before, people's opinion on what they'll do if they're offered 500 million dollars at a point in time when they haven't been worth offered 500 million dollars is meaningless because it's a purely theoretical discussion. I've seen people go both ways. I've seen hell, I'll never sell people when they're offered the money, shit, I'm out of here. And I've seen people where I thought they were merciful like. We can keep going. So I literally don't ask that question because there was zero information content to it. And the idea that you wouldn't back a quote really good founder just because you're afraid they might sell in a good outcome that doesn't become great.

• 49:38Speaker 00

  That's just so low down the list of things that you're worried about when you're doing a deal. You want to know is the market good? Is the founder want to build a big company? If they start on the journey to doing that and someone will get intercepted, it's a high class problem. There's a couple who I look back and go, I wish we'd run that longer. But in the list of things that will reduce the return of my venture career versus backing B level people who don't even make it happen. I it's a concern, but it's also to make it actionable.

• 50:03Harry Stebbings?

  I also think that you can tell your best and your worst within the first 60 days. The messy middle, you don't know. There's a TBD, but the ones where you're like, shit, we regret that one. You tell pretty quickly and same with the God, they're on it. That first update, the first board meeting, yeah.

• 50:19Speaker 00

  I do agree that at the 70% level. On all my best deals, there's been a moment somewhere in the first year where I remember sitting around the board table going, oh, worry you clever boy. You're going to make money here and all I have to do now is cheer them on and not have to do a lot because this is just humming. You're exactly right. That's always a good feeling.

• 50:37Harry Stebbings?

  Speaking of those moments where you go, wow, you know, well done. I'm in a great company. There are a couple of like standout raises that I wanted to talk about. One is Vercel raising 300 million at 9.3 billion dollars. Jason again highlighted this announced pretty quickly after the post from Guillermo, the founder, which we're not getting into because we don't do politics, but the timing is interesting to bring up. One, I want to hear your thoughts on the timing. And then two, I've heard these described before as suicide rounds, but just because it's like a super high price with actually not such a huge amount going in 300 million. And so it sets a huge expectation with not massive capital injection.

• 51:20Harry Stebbings?

  How do we feel about those two, the timing and the suicide round status?

• 51:23Speaker 01

  The suicide one is an interesting one. The Vercel thing, I don't claim to be a total expert, but I am 200 hours into my vibe coding journey. I think Vercel and Supabase are actually tied in a sense, which is that these are. Not the most profound bets that the world of software development has completely changed. That everyone that's going to build a web app going forward is going to build on Supabase. It is the default choice to how to host and manage Postgres in this world. And when folks want to host apps live, right, they're going to use Vercel. It's super easy to use. People do love Vercel. And you've got to, you've got to host this app and you need a database. Like, these are two structural components. And that the number of apps is also exploding, which it is.

• 52:05Speaker 01

  So if this is the future of hosting, management, database, and it's exploding, you got, these are good bets to make. These are the leaders. These are two leaders. You could debate the valuation, whether it's a suicide round. But I think in terms of valuation aside, these are actually captain obvious bets. I think they're both captain obvious bets because this is where developers are going. Like, that's how you make money. I mean, Michael Cannon-Brooks would probably iterate that from a few years back. Like, follow where the developers are going. If you become the leader, bet there, you're going to make money because those markets are pretty, pretty damn large if they're growing. Beyond the suicide round, I think these are, these are good bets. Just Vercel is at nine billion. It's still a lot of money. Hopefully you have more than one of those bets at nine billion to Rory's point.

• 52:44Speaker 00

  First of all, I agree, Jason, what you're saying. It's, I was talking to one of my partners yesterday. We're just talking about it. And we're just saying, you know, the more you do this, the more you just say to yourself, you just need to do big, exciting deals in trends that are absolutely obvious. And every time you try and make it harder than that, you just, you lose money, right? And both of these things are exactly right. They are on trend, captain obvious for the, there's a new wave of people building apps. And these are two parts of the infrastructure that people will use to build those apps. Both of these companies have done a brilliant job. Who were pre, just as a reminder, Vercel and Supabase were our infrastructure

• 53:25Speaker 00

  components that existed pre-open AI, pre-D AI trend, pre-vibe coding, but just have inserted themselves into relevance as kind of components to build these next generation of apps and are just riding the train. Because of that, they just have momentum. They have growth on their side. And yes, the price might have doubled in. Six or so months, it may also be the company doubled in six months. So the revenue multiple is the same, which is actually a super interesting discussion. What you're effectively saying is normally you figure you start with high revenue multiples because by definition your revenue multiple is infinity on the seed round. And your multiple is six X when you get a 30% growth and your ideas, your revenue multiple is coming down as the rounds go up.

• 54:08Speaker 00

  But what you're seeing in some of these AI companies is people are effectively saying, you know, when they were doing a hundred million, I paid 20 times or 50 times. When they're doing a billion, I'm going to pay 20 or 50 times because the growth is still the same. Right. And it's logically correct. I mean, there was a market size question jumping at the end of it. But from a growth rate perspective, I'm willing to bet that you look at those two rounds and they're not wildly different in terms of.

• 54:31Harry Stebbings?

  Is that logical? Because actually it depends where you intersect with it on the growth curve.

• 54:35Speaker 00

  It does.

• 54:36Harry Stebbings?

  You can have the same growth rate, but actually you only believe they've got 20% left of the market to go.

• 54:42Speaker 00

  Totally agree. That's why I said, actually, you just, you said it correctly, Harry, and you're agreeing with me exactly. And, you know, it applies even though in Tropic, the growth rates remaining the same. And normally you expect growth rates to decline. So you can have this mental model and we talked about growth persistence. But they're not declining here. So when you do these rounds at the same multiple, but with an order of magnitude more in the valuation, the thing that can go wrong is you hit a market size wall or some kind of wall and they decelerate rapidly. And then you're wildly wrong at scale. Right. That's the risk. If the Vercel market or super base market is finite and can support a 10 or 20 billion dollar valuation,

• 55:22Speaker 00

  even if you have 100% share of vibe coding, then you could see very abrupt valuation changes. So, and I'm not discounting that. I'm simply saying, I know how they get to doing these quick rounds because the underlying growth so quick. We've been looking at some markets where we've seen two and maybe even three rounds within the year. And part of me goes, that's crazy. And part of me then goes, hmm, the B was at the same multiple as the A. Maybe wherever you need to update your priors to the world as we see it now and accept that if you're getting the growth rate and these growth rates are, and I really, Jason, you called. Discussion a while back, it well beyond, you know, a triple, triple, double, double, double. Maybe you can lean in and maybe it does make sense to have these rounds. But I definitely wouldn't call them suicide rounds, Harry, because the group might justify.

• 56:07Speaker 00

  And B, the other part of what you said is, are they raising enough? Yeah, they are. Because if you think about it, take Supabase, what they did two rounds. Someone, smart dudes at Excel, looked at a two billion and said, you need whatever, three hundred million dollars. And then six months later, they pick up another hundred. They still have the three hundred. So it's only a suicide round if two things happen. One, you de-accelerate quickly. And two, you start losing money such that you're forced back into the market in the next period of time, where you would have to take a down round. So I don't think it's wildly outrageously stupidly risky. I mean, if you want to talk about risk, there's a lot of riskier things going on in infrastructure land than Bercel raising it three hundred million at nine hundred billion. I don't think that will be the problem that brings the whole thing to its knees.

• 56:52Harry Stebbings?

  I totally get you. I think an interesting thing for me is like, this is like, one lesson for me is king making, which is like when you obviously have very quick rounds and a lot of money going into categories, does absolutely exist in this space.

• 57:03Speaker 00

  Yes, it does.

• 57:04Harry Stebbings?

  But it doesn't enlarge enough categories is what I'm seeing. And what I mean by that is, in law, for example, there are many who have got a lot of funding and a lot of traction. Same in healthcare, same in customer service, same in coding. But then as you go smaller markets, king making really becomes more prevalent. And the smaller the TAM, the more prominent the king maker ability is.

• 57:28Speaker 00

  I'm not sure I buy that at all. It's obviously easier to be a king maker in a small market because it takes less money and more people have small money than big money. It's the Julius Caesar quote, I'd rather be first in a village than second in Rome, which indicated he was a psychopath, by the way, but we can come back to that. But I disagree because I think king making is going on in the biggest markets. I think to some extent, everything OpenAI done has been both brilliant technically and financial king making. I think in many of the markets.

• 57:56Harry Stebbings?

  Paul, just pause on that. What do you mean by that? They have not been like king made, so to speak. They have many competitors. It's by no means a monopoly.

• 58:06Speaker 00

  I think it's a duopoly. I think their capital strategy has been to the point where it's going to be very hard for anyone else to attract that kind of capital. I mean, you know, if you take someone like X, I mean, if they really do need a hundred billion and they've locked it up, I can't remember how much X is already owned, but there's a lot more to be raised to do that. So I think that is a king making strategy.

• 58:25Harry Stebbings?

  You don't think that Anthropic could and Grok couldn't?

• 58:28Speaker 00

  I think it falls away very quickly. I don't think it's a monopoly, but I think it's definitely an oligopoly. So I think that, yes, the number two, Anthropic clearly can. It's a differentiated number two with an overlapping strategy, but not, you know, one is winning in consumer, one is winning in business. Do I think all of the other recent very high profile startups are going to be able to attract the kind of capital it takes? No, I don't because there's not that much capital out there. So that's an example, I would say, of the largest market king making.

• 58:55Speaker 01

  There is so much more capital in venture, but it's so stratified, right into 20, however we define it, 20 companies, 50, 100, we could go down a lot. You know, it was one thing back in the day when you would king make with a $20 million round or a $50 million round, right? Or king make very late stage. But now, even though there's more venture than imaginable, you, you really can exhaust the capital in a category, the nine figures or more, how many of these categories can support 200, 300, 400 million dollar rounds? And then you, if it is capital intensive, it's tough to compete. I mean, it's crazy. I mean, if Base44 has 10% of the vibe coding market, right, as part of a Wix, if that's accurate, it's crazy. But where would they have afforded those tokens? I mean, if Replant and Loveable are, are losing some money, where would this poor guy in Israel with eight

• 59:39Speaker 01

  developers get 50 million of tokens? Like, I don't know. I mean, there is king making happening here, right?

• 59:44Speaker 00

  I've been thinking about it too, and I'm actually gonna change some of what I said, Jason, actually listening to what you said. I think, I don't like the word king making, I've decided, because I think what's, because it, it imputes way too much value to venture, right? Like as if we're making the difference. And I think there's often mild versions of that. You see something where, oh my God, Sequoia led this round, maybe people back off the other competitors. But in general, the entrepreneur is the king and the entrepreneur makes the good company. And then with so much capital available, they can get into this virtuous circle of getting the prestige names, prestige amount and significant amounts of capital that help build barriers to entry and deter invaders. So the fundamental

• 1:00:27Speaker 00

  act of creation that allows that to happen is the entrepreneur and the revenue success.

• 1:00:31Harry Stebbings?

  But that's just not true. I'm sorry. I mean it in the nicest way. Like A, the cash enables that execution. And execution wouldn't happen without cash. And then two, what you've seen is King making pre-revenue, which is companies that are at three, four, five million dollars in revenue, which is great, but bluntly, not a huge scale, getting fifty to two hundred million dollar successive rounds on the back of a tier one with an iconic or you name your multi-stage fund coming in very quickly afterwards. And at that point, it actually is the venture investor.

• 1:01:03Speaker 00

  First of all, I agree what you're describing as a phenomenon. You know, we've seen it in a bunch of markets. We've looked at those markets. We've struggled to find a way to compete in those markets and figure out what to do, to be ready to do it, right?

• 1:01:15Harry Stebbings?

  But this is my point. And everyone knows them and goes, oh, fuck, we don't want to go in after, you know, Sequoia and Iconic into a company that competes with a realist of the world.

• 1:01:25Speaker 00

  That's exactly. But I think that going back to King making, I think in every one of those cases, I just, and we may just be arguing semantics, but it's an important comment. You start with the company doing an excellent job. You're right, they get to two or three million dollars in revenue. In other words, the moment of gestation is the company doing a really great job and having a small early lead. And then you're right, the wall of money allows you to build on that lead and defend it. The brand name firm allows you to raise a follow-on round very quickly. Arguably, the growth allows you to do it. So there is this self-reinforcing thing going on. I think we're describing the same phenomenon.

• 1:02:01Harry Stebbings?

  I'm just saying it's earlier and earlier because I don't even, you know, in some cases, literally Rory, it is pre-execution. Its founder has unique insight on GTM, on a product insight, on you name it, and that is enough to catalyze the fire.

• 1:02:18Speaker 00

  Yes. And but in most cases, I think you'd agree, you described more correctly. It's a couple million dollars in run rate revenue with prestige customers, a strong founder growing quickly, has done one seed, raises a good A from a top-tier firm, gets a B six weeks later. Now you got perceived momentum. And yeah, we struggle with those. And frankly, both struggle to know, should we compete? And then secondly, struggle to compete because once you have The top tier firm, you get a whole bunch of people willing to pay up.

• 1:02:45Harry Stebbings?

  And I'm meeting a lot of founders who are going, my God, I did not realize quite how powerful kingmaking is. Because I'm like, everyone is just saying, whoa, we don't want to compete against that.

• 1:02:55Speaker 00

  Well, I always remind people, it's a long way from here to 300 million in ARR and a public offering. I don't know if it's the right attitude to say, I just can't compete. I mean, you've just got to say it here. Harvey looked like they'd been kingmade, if that indeed is the past tense of it, right? And then Lagorik came in from Sweden, for God's sake, and killed it. They did really well. They shipped that product. They took what looked like a monopoly and took it into a do up. Those two companies playing aggressively in the legal space. So there's an example of, they were second to the market. Harvey had established a lot of mindshare plus capital. They had Sequoia, they had Convictio, they had really strong people. And give Legora a credit. They shipped a good product, a very good product. They got Benchmark in.

• 1:03:37Speaker 00

  They've just done a third follow on round with, I want to say Bessemer after taking Redpoint. So there was room for a second person to be kingmaker. And by definition, if you have two people being kings, it can't be a king.

• 1:03:47Harry Stebbings?

  Which goes to my original statement of the size of the market does impact the ability to kingmake. Law, health, difficult to kingmake, smaller markets, absolutely more plausible to kingmake. Validating my original statement, Mr. O'Driscoll. Thank you.

• 1:04:03Speaker 00

  I'm not sure I agree, but you said that so confidently. I'm just going to give it to you. The question is, would you do a third in that market in the law software for corporate law firms? I think it's hard. I think there's other markets in law equally interesting that we'd like to play in. But you're right, at some point, it gets kind of cooked.

• 1:04:22Speaker 01

  I remember when Michael Cannon-Brooks came to Saster, which was a long time ago, Saster Annual. And we had the CEO of Trello interview him right after they got acquired. It was interesting. It was like a board meeting kind of at Saster Annual. And he asked him, could you do it last season today? It's like, no way I could do it last season the same way today because I had five years to be left alone.

• 1:04:38Speaker 00

  Correct.

• 1:04:38Speaker 01

  That's the way why bootstrapping worked is because everything was so slow the first five years. The flip side today, I think, is if a lot of the AI startups we're seeing start off very, very low capital demanding, right? Two, three folks. Some free tokens, some free Google Cloud, it costs nothing, but then they consume a lot of capital. And if the question is, if you could be a new entrant to the market in number three, number four, and choose to be capital light, that's great. But if the space requires capital to win, or the founders believe it, then king making becomes a prophecy because you just bow out. If I believe I need 100 million to scale base 44 to compete with Repl and Lovable, then I'm going to bow out and sell the Wix because there's no option.

• 1:05:20Speaker 01

  That's what's a little bit different than classic 80% gross margin software is if you were lucky, there was a third path. And if you were lucky, someone out of left field, you didn't hear, they got to 100 million? Yeah, well, it took five years longer in the early days, but they caught up. They would, we used to catch up around 10 or 20 million ARR. And actually, in some cases in SaaS, you would lose your capital advantage around 20 million ARR because you would catch up, right? Like in the last year in our Qualtrics. I'm not sure that's true in the age of AI. I'm not sure that you lose the capital. I think it's often is inverted where that capital is more helpful, right? In the age of AI, that's what makes it harder to invest on number three or number four. And you might be like, listen, yeah, but those guys only need 10 million and we'll see how it goes. If they're going to need 200 million, it's not as fun to invest on the number three or the number four player, is it?

• 1:06:05Speaker 00

  I agree with that. I think what you're saying is exactly right, which is that you could do Atlassian and bootstrap it for five years because no one was going at it and you had an uninterrupted run. Today, I think the direction is obvious and you know, the capital is available. And therefore, even if you don't want to do it, someone else will do it. So therefore you have to do it. It's like, you know, Nuke in the Cities. You know, I didn't want to do it, but I knew they were going to do it. So I had to do it. And pretty soon everyone's launched $50 million series H checks at each other. That's what's happening because, and you're right, that money can either go for, I mean, it can either go because you need it to build a product or deliver the product at scale if you have a token cost. It can go because you need distribution, or it can go just because the other side have it and you feel the need for credibility. I know in some

• 1:06:50Speaker 00

  of these wars, having looked at some of these deals and kind of the ERP space and some of the other spaces where you're dealing with enterprise customers, the balance sheet becomes a criteria for qualification. There's a whole bunch of reasons. Say this is the way the game's been played now and I'll admit I've taken a while to process and internalize that.

• 1:07:07Harry Stebbings?

  Rory, Jason, you're in a portfolio company. You get one of the big funds who is trying to kingmate with one of your companies. Do you say, take the money, fantastic. When the money's on the table, take it at a high price. Or do you go, this is a good company, that's a lot of money that could distract them and defocus plan.

• 1:07:25Speaker 00

  Pragmatically in this market, I think if you have something that's working and even if you don't know where you're going to put the money, if it's on attractive terms, you probably err on the side of taking it. Because if you're in a reasonably big market, you're going to have to grow and you're going, it's going to take capital. So I think you err on the side of aggression precisely because you have to play the, you have to do the game theory. It's not just what do you think, but what are they going to do, where they is your competitor. And you can say you're going to be careful and slow and rational, but if they're not careful, slow and rational, then you just end up outclassed. And as I say, I resisted the kingmaker word, but I think where you are correct, Harry, is that capital has a consequence. It has a consequence to customers, it has a consequence for hiring.

• 1:08:08Speaker 00

  I think one of the biggest drivers of when you take capital and don't is unfortunately, you have to look at the competitive dynamic, which I don't love because you want to, you want to steer your own ship, but if you're in a competitive market, it's hard to.

• 1:08:19Harry Stebbings?

  Take the money, Jason.

• 1:08:20Speaker 01

  I think what I've learned that has changed over the years, there's so much more information, there's so many more founders, there's so many more quickly growing companies. Founders have already made their own decision now. I haven't had these conversations in a while, Harry. I think two of my best current portfolio companies, one will consume an infinite amount of capital, the other has 60 years of runway. It is DNA. I could argue one is overspending and I could argue the other is underspending. That'd be a very easy argument to make, right? Don't matter what I think. Their DNA is different, their customer is different, the market is different, all of it. But especially their DNA is different. Some folks want it and they understand the downside, or they don't, but they, but they get it. They get that there's some risk, but they're effing going for it, or it's what their friends are doing. It is one of many topics that it no longer matters what I think. I can't influence it.

• 1:09:04Speaker 01

  So the best I can be is if someone asks me, I can tell them at the last minute and the first minute, and I can try and influence it, but I can't change how they're going for it.

• 1:09:12Harry Stebbings?

  Chaps, any other topics before we do a quick fire that you would like to cover or think we should cover? Oh.

• 1:09:19Speaker 00

  Okay, I'm just gonna say it here, Trumath's terms are almost legit. There you go. It's like the new SPAC, I mean, I will say the new SPAC terms, SPACs, which were an alternative mechanism for going public in 2021, they've been around for a long time, but exploded in 2021. The subsequent return of those investments was miserable. It became obvious that one of, not the only, but one of the primary reasons for that was the incentives between the person sponsoring the SPAC and the investors in the SPAC were misaligned. And the sponsor made money simply by getting a deal done. It's like a venture capitalist getting paid your 20% just for investing money in the ground. And turns out that if you do that, money gets invested.

• 1:10:03Speaker 00

  And now the terms are still not cheap, but you only make it if the stock, if you make it, there's a 50% uptick on your stock. So it is a more rational structure. I still think there's issues with it around incentives, uncertainty. I still am skeptical it'll be an amazing replacement to IPOs, but it definitely is less egregious and less misaligned than the last time.

• 1:10:27Harry Stebbings?

  Does it prevent Trumath from having the ability to pump and dump like he is accused of doing?

• 1:10:32Speaker 00

  That's nothing to do with that. It doesn't, you used the wrong word, prevent, prevent. There's two words used, pump and then dump. Pump is an interesting, in the context of SPACs, the whole thing about SPACs is entirely separately. The SEC has really tight laws about what you can say about an IPO. Really, really tight, and you can't make any future leading statements at all. But bizarrely enough, SPACs are exempt from that. So you're allowed, because it's a merger from a legal perspective, so you're allowed to articulate any future leading story you like. So anyone, and that's not picking on Trumath, anyone can pump all they want. Because you could, I mean, it's such a weird difference. You've one company going public in an S1 and you can say nothing about the future. And then you have the other one going public in a SPAC where you can say,

• 1:11:15Speaker 00

  it's going to be fricking amazing, the next 10 years are going to be enormous, I'm tweeting like crazy. So the pumping takes place because of the regulatory thing. But you're right, the dumping, here now, you can still dump, but at least you have to get the stock up before you can dump it. Before, literally, you Had the odd circumstances, the investor could come in at 10, the stock could go to five, but the sponsor got their stocks at a penny. So even at five, they could dump. And the investors lost half their money and the sponsors made money. That's not a thing anymore. Now the investor comes in at 10, until the stock gets to 15, the sponsor gets nothing. But once it gets to 15, they get a 30% promote. So it's not cheap, but it's a little better than before. This probably makes back a marginally more attractive competitor to the IPO,

• 1:11:58Speaker 00

  but I still think a well-run IPO beats it by a head.

• 1:12:01Speaker 01

  Can I just add, I know for one last, the crazy deals, like the reason it comes up is SPACs are back, right? It's, it's, it's really a sign of the times, we run out of time. Related to that, good God, the New York Stock Exchange invests $2 billion in Polymarket, which was essentially illegal, illegal last year. It was essentially illegal. And the Biden administration decided this was gambling, offshore gambling, and was gonna, as I understand it, was gonna shut down Polymarket. Trump, and listen, no politics here, okay, but it is interesting. The world changed. Trump comes in, his son joins the board and invests in the company. David Sacks, who I am a fan of as a SaaS founder, we go back, trying to remove all the regulations from crypto and all this. And now you go from something that was essentially illegal last year in the US

• 1:12:45Speaker 01

  to now something that Trump, Trump Jr. owns a significant share of, and now the New York Stock Exchange is investing $2 billion at a $9 billion valuation. I mean, if that isn't a sign, like SPACs being back, if that isn't a sign of the times, that is such a change. Forget about, I mean, AI isn't the only thing in the world. Just removing all this regulation, and now that Polymarket's on the inside and the New York Stock Exchange is investing, to me, that's quietly the craziest story. And the legitimized self-dealing in it, it's just a different world, right? I don't know if it's better or worse, no politics, but it sure, it sure is different.

• 1:13:20Speaker 00

  I think the deregulation is great, to be clear. I, I, I think the fact that the Biden administration chose that hill to die on was, I think, both probably wrong and definitely stupid, which is the low quadrant, and goes a long way to explaining their terrible polling numbers among the 20 to 30-year-old male demographic. I actually give Credit, I think the deregulation is one of the few joyous parts of the rest of coming out of current administration. I think it's great, right? Go team. Whether or not, I'm not going to comment on the, you know, what interpersonal relationship it takes to get something done and, and I don't think it impacts the deregulation, but that's a morass that I have no doubt will be unpicked at another day by someone other than us with judicial powers.

• 1:14:00Speaker 00

  I think, yeah, the interesting thing about those businesses is if you look at the volume and I, I didn't check, I think I checked Kalshi's, it's still seventy, eighty percent sports betting. But the real question is, can you build prediction markets for other things? And you're seeing that and to the extent that you can do predictions for other things like the questions we're going to be asked, like, you know, I just saw it, you know, who's going to be the next prime minister of Japan was running because the election thing. Whether or not there's a quote legitimate non-sports gambling business there that someone like, it was the NYSE, which is really Intercontinental Futures, that Atlanta company is the core owner of that. Whether or not that's a non-sporting business is TBD, but I think it's super interesting. I think those are two really interesting companies and credit to the venture investors who stuck with it. Right? During the regulatory time, I think you go, you got a really nice asset now.

• 1:14:45Harry Stebbings?

  I totally agree. The thing that I did just find like a little bit confusing, like $2 billion is a huge amount of money. Again, comparing that to the Vercels $300 million. I don't know, but there is not a computer infrastructure spend. I guess there's a right spend in a lot of cases, but $2 billion, I mean, did you?

• 1:15:02Speaker 01

  I think it's, listen, we have to see the details of this. I think there's some level of implicit exclusivity here. There's data sharing, right? You invest $2 billion for it to be in essence an affiliate of the company, right? There may be some vague similarities to the beginning with OpenAI and AMD. It's, this is a bonding investment, right? This is buying a quarter of the company or twenty some odd percent. And someone's putting something in here more than money and in return they want to own a lot, right?

• 1:15:27Speaker 00

  These guys are strategic investors. They're not doing it for a 2X return. They're doing it because they own, I can never remember if it's the NYSE or the NASDAQ. I should have checked. They own a bunch of market making companies.

• 1:15:37Speaker 01

  Yeah, I do confuse the Internet, Intercontinental Exchange owner of the New York Stock Exchange.

• 1:15:41Speaker 00

  Yes, and they are called ICE and I was going to say ICE, but of course that would be confusing to the average reader, listener, right? Yeah, Intercontinental Exchange. They bought London Financial Futures like twenty years ago. They're like, it was an exciting and interesting financial market. Where people buy and sell electronically really interesting shit, we like to own some of that. So it totally makes sense strategically. Good for them.

• 1:16:02Harry Stebbings?

  We're gonna do a quick fight. Good addition there, Jason, by the way. I totally with you. Fucking nuts deal. Nuts. Okay, so number one, this is an official Cowshy. Tim Cook leaves Apple this year. Yes, a hundred dollars turns into eight seventy-nine. No, a hundred turns into one oh seven. I mean, is he already, is he already confirmed? Those odds are terrible.

• 1:16:24Speaker 00

  Agreed. But leaves is the word, right? I mean, again, I, I, I hate these things because I'm riffing, but, and Jason can do it in real time and look things up. But wasn't there some kind of succession planning announcement? I can't remember that the VP of Engineering would in time, I, I, I should have looked it up, I didn't. So there's clearly a succession plan here, as one would expect if you're a competent board and you've got, you know, a chief executive over sixty, but leaving, I, I think the only reason, I think leaving this year is a very tight bet. So the only way that would happen if you thought things were failing. So I actually, I know why it's, it's a very modest payout because it's very unlikely. Which is different than saying, separate comment, the board is starting to think about what is the transit, what's the skills required for the next leader? I think, and again, I could be just imagining this, it's been so crazy this week, but I think it was the SVP Engineering.

• 1:17:09Speaker 00

  So it's very much a-

• 1:17:10Speaker 01

  Yeah, that was a leaked rumor that he was a successor. He's fifty and Tim Cook's turning sixty-five. So it's their job, but there's no way it's this year. Unless it's a health issue, there's no way it's gonna be this year.

• 1:17:20Speaker 00

  You're exactly right, Jason. I think both sides are adequate. It's not this year, but it's exactly, it's their job. If you were, if you're on the board of the most valuable, second or third most valuable company in the planet, your CEO is hitting sixty-five and you're not thinking about succession, then just call yourself the Disney board and give up.

• 1:17:33Harry Stebbings?

  Right, you still a holder?

• 1:17:35Speaker 00

  I'm still a holder. I trimmed a little when Warren did. I got in before him, but I'm like, I pay attention to-

• 1:17:41Harry Stebbings?

  Trimmed a little, ninety-nine percent.

• 1:17:43Speaker 00

  No, no, no, no, no, no, no, and hold a lot and continue to worry about the growth rate. And continue to worry about the AI story, but fundamentally, you need instantiated physical products to consume all this stuff. And they're the platform of choice for middle-class consumer on up worldwide. So it's still been going to bounce back nicely from where it was. I mean, there was a little low there and I'm like, oh, maybe I was wrong.

• 1:18:05Speaker 01

  I don't get these VCs to invest in the public markets, but it's good content.

• 1:18:08Speaker 00

  It's not what I do. I feel the need to find myself. I have almost no individual public stocks other than companies that I get distributed to, but I also wisely bought in 2009 and my basis is so low now that I just can't bring myself to pay the 37% tax.

• 1:18:25Speaker 01

  Yeah, don't sell it. Don't sell it until you move to Puerto Rico or whatever.

• 1:18:28Speaker 00

  No, I'm not going to move out of California, but I just can't bear to give it up. But maybe I'm just stupid.

• 1:18:33Harry Stebbings?

  Okay, next one. Raplin and Loveable, over/under 250 million ARR by end of year? They're both in the 160 range now, 160, 170.

• 1:18:42Speaker 01

  Is there a Kalshi or are you just, is this a binary question?

• 1:18:45Harry Stebbings?

  This is a binary question. This is a Harry.

• 1:18:48Speaker 01

  I'll tell you the only interesting thing. So I would say over, over 250, but barely. There was an interesting report this week. It wasn't Bloomberg. It was someone at Barclays. Barclays tracked what they believe the web traffic was to all the categories. And what was interesting was it, it looked very accurate in the sense it had Base44 hitting the numbers that tied to what Wix publicly disclosed. So we can assume that's accurate, right? And it had Replit tying to when they launched V3, which was a big boost. And then they had Bolt's numbers, which roughly tied to what I think they are. And so what it said is, look, traffic has flattened, flattened to down. Okay. And so initially you might say, oh my God, sell your, sell your, sell your stock. But I actually think it's a good thing because the looky loos aren't going to renew. The problem with these products is you have to segment churn. There's folks like

• 1:19:32Speaker 01

  me, I'll never churn off Replit. Okay, I'm 200 hours in. I've got eight apps into production. It's impossible to leave. The odds that I'm going to spend somewhere between 300 and $3,000 a month for a long, long time. Okay. But Abigail, that wanted to build her own CRM and was told you could do it in 60 seconds and it didn't work, she's going to churn, right? Or he's going to churn. So it's good to get rid of the looky loos because even though they got these guys to 100 million, they ain't going to get them to a billion. We've all had companies where this is the case, where we had a segment of customers that were very high churn and a segment that's very sticky. So I think it's okay that interest is flat because it'll be high. Higher value, but it is something to reflect on. It looked right to me that that we've seen at least a temporary plateau in interest in these platforms.

• 1:20:15Speaker 01

  And it makes sense to me because a lot of use cases, they're not viable. Like, I love repl to death, but it's a, all of this is a, is the edge of marketing misrepresentation. So rambly answer, I think they'll hit it, but um, but I do think there's deceleration in, in, it's not like chat GPT. There's going to be deceleration in lay users wanting to use these platforms.

• 1:20:33Speaker 00

  For the record, there's deceleration in chat GPT too. It goes much what I said earlier, what rate of de-acceleration gets you from 10? How much the acceleration can you do at 12 billion to make sure you still take 100 billion is my question, but we don't have time for that today, but I'm thinking about it. I don't have anything to add on lovable and repl it, I defer to Jason entirely.

• 1:20:51Speaker 01

  But I will tell you just one thing, I don't want to spend all the time, they're getting better. I'm almost 100 days into vibe coding. The platforms are so much better than 100 days ago. So it's like a lot of things in venture startups, you got to be careful how you predict. This is not SaaS of 2016, okay? The rate of improvement is so high that that's why I feel pretty good about the error numbers, even if I think the prosumers may fade.

• 1:21:12Harry Stebbings?

  Let's wrap it. Guys, thank you so much. This has been awesome.

• 1:21:15Speaker 01

  All right, rock on, Harry. Thank you for the time. Thanks for doing this for us.

• 1:21:18Speaker 00

  Totally.

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