Anthropic Raises $13BN & OpenAI Buys Statsig for $1.1BN All Stock

1. 0:00 – 1:03

   Intro

   1. RORory O’Driscoll0:00

      Wall Street is the madman in the backseat. In the end, the thing that bails out our incompetence is your growth rate

   2. COCliff Obrecht0:05

      And we've had a billion sitting on our balance sheet for ages, and it's-

   3. RORory O’Driscoll0:08

      That's a flex, people. "I've had a billion lying around for ages. What have you guys been doing this week?" You know, it's the Mark Twain, "Reports of my death were greatly exaggerated." Well, it turns out reports of the death of SaaS and software were greatly exaggerated, right? No one wants to say it, but if you get the direct listing totally successful, the people buying don't make any money, [laughs] right?

   4. SPSpeaker0:28

      Ready to go? [upbeat music] Guys, I am so excited for this. This, as you know, is my favorite time of the week, and we get to bring in my buddy Cliff from Canva. This is gonna be great fun. Now, I just wanna dive straight in this week, and Rory, as always, I'm diving in with a late edition because you love late editions, but we had to. Anthropic raises $13 billion.

2. 1:03 – 16:58

   Anthropic Raises $13BN: The Analysis?

   1. SPSpeaker1:04

      Started with 5, moved to 10, now 13 at 183 post. Wow. It's a lot of money. It's a high price. Rory, going to you first 'cause you prepped for this one.

   2. RORory O’Driscoll1:16

      Abs- Well, funny enough, Harry, I did 'cause it was a little bit anticipated, and I think to some extent, yeah, it's... Look, it's a h- I mean, it's a high absolute number because 173 billion, 173 billion is a lot of money, but is it a high price? And it's interesting, and we talked about this a little last time, and relying on reported numbers. If the growth trajectory is really 100 billion, uh, sorry, 100 million two years ago to a billion-dollar run rate started this year to somewhere around five now, maybe eight or nine by year-end, right? Let's just take that as kind of roughly true. Let's say one and nine, which typically means the GAAP revenue is roughly the average of the opening and closing ARR, which means GAAP revenue could be, again, subject to ab- around $4 or $5 billion this year. What are they gonna do next year? If they go from one to nine, this is... And this is the... And, and these are the facts. Up until now, all I've talked about are facts, things we know today, right? The million-dollar question is what does today's trajectory say about the next even year? You know, you throw a rock forward and it falls down, but it moves forward and falls down at the same time. How much does 9X revenue momentum this year persist into next year? Do the math here. Even if they go nine, I was doing it roughly, nine to 30, which is 3X growth down from 10X growth, then GAAP revenue average of 30 at the close, nine at the opening, it's around $20 billion. This is eight times NTM rev- and FY 26 revenues. The stunning thing with this growth rate, if it persists, big underline, is you're only buying in [laughs] at eight to nine times next year's revenues if the growth lasts. Now, will it is the billion-dollar question, but high absolute number, absolutely. Does it make sense? If you think the growth rate's there, then it's not crazy. And I did not go into that math expecting that answer. I mean, I went in saying, "Oh, aren't those guys so silly paying so much?" And you look at the numbers and you go, "Well, maybe those guys are [laughs] being quite smart."

   3. COCliff Obrecht3:15

      This round was also super oversubscribed. It was, uh, I, I know folks in the industry have been clamoring over this, and it was hard to get into. So they could have ra- raised, I think, 10X that v- 10X that multiple of funds that they put in.

   4. RORory O’Driscoll3:28

      You're exactly right, Cliff. If you were g- I mean, just thinking about it, if you're one... I mean, looking at the, the cast of characters who did it, it's like if you're a growth stage investor, you know, you had a big growth fund, it's hard to kind of imagine a world where you say, "Well, we're growth stage investors, but the two largest market cap companies in growth in the last three to five years, the two LLM models, we don't have a piece of that." So there's probably some kind of huge corporate imperative at every growth stage firm saying, "You know, we're either taking a big, bold call that this isn't gonna work, or we need to get one of those." So yeah, I, I imagine you're right, Cliff. I'd say there was huge demand.

   5. SPSpeaker4:02

      As ins- insane as on its surface, you know, Anthropic at, what, 160, Databricks at 100, Canva at 42 sounds, uh, uh, at first, if you don't... The, there is multiple compressions-

   6. COCliff Obrecht4:14

      Well, that's barely 10X for us. We sound very cheap.

   7. SPSpeaker4:16

      Yeah. That's the point.

   8. COCliff Obrecht4:16

      We sound very cheap. [laughs]

   9. SPSpeaker4:18

      It's not that high. It's, it is ch- It is... I mean, literally, if you're using, uh, for ARR multiples, these are not... Well, especially if you use forward ones, to Rory's point. Like, if you use next year's, Canva, Databricks, um, Anthropic seem reasonable, right? As long as the growth can persist. As long as... And, and k- I mean, Canva, I mean, again, I'm, I'm a super fan since the old days. I wouldn't have thought it would be this big, but the growth at scale is epic, right? That's the... It's crazy, Canva's growth, that it's not growing 8% today, right? [laughs] I mean, it's, it's growing five to six times that. Uh, I don't know if you predicted that in the old days, Cliff, but I mean, it's, it, like, breaks your rules of TAM, right? And it's not even An- uh, uh, Anthropic. My question is, we, we mentioned the oversubscribed element there. Cliff, when you literally have a 5X oversubscription, I'm sorry if I'm being naive here, but in the same way that Dario did, how do you literally choose which dollars you take?

   10. COCliff Obrecht5:13

       It's very tough. And, and for, [laughs] for us, we priced our round before Figma went out, uh, and had all those conversations and relationships.

   11. SPSpeaker5:20

       Mm.

   12. COCliff Obrecht5:20

       And so the Figma IPO kind of threw a cat amongst the pigeons, um, in regards to proving that. We, we, we will close the year very close, if not at $4 billion, growing, uh, close to 40% growth rate and re-accelerating growth. So we are, uh, compounding growth at scale, which is, which is a good place to be. Um, when it comes to investors, we really need to think long term. We have a lot of long-term partners, and you als- you wanna pay a lot of loyalty to people that have supported you along the way. But also we're thinking through what an IPO looks like. Who are gonna be the, the cornerstones of that IPO? How do we see this not as a point-in-time deal, but a relationship-building exercise through the next 18, 24-month period with these really long-holding investors? And how do we instill trust in them and, and for them to trust us as a leadership team that can take this, uh, through IPO and beyond and, and make good decisions? So we're not looking to ratchet up the price. We're not looking at kind of playing any silly games. We're really seeing this, uh, as, like, how do we build these long-term relationships that are gonna be with us a while?

   13. SPSpeaker6:24

       Do you have fidelity?

   14. COCliff Obrecht6:27

       Yep.

   15. HSHarry Stebbings6:28

       Yeah. It was super interesting. We had Brian Halligan on from HubSpot, and he was talking about the central role that fidelity play, and I actually wasn't quite as aware, as I'm sure Jason and Rory were, as how important and strategic that was in terms of aligning them for when you are public

   16. COCliff Obrecht6:43

       Yeah. I'm not, I'm not sure how much I could-

   17. RORory O’Driscoll6:45

       Yes

   18. COCliff Obrecht6:46

       ... But, uh, yeah, they're, they're, they're, they're the anchor of the round. They're the largest check in this, this round. Um, I mean-

   19. HSHarry Stebbings6:51

       I thought, I thought you promised that to me though, Cliff.

   20. COCliff Obrecht6:53

       [laughs] I said I can shake some trees. Let's say, so the problem now, so this is all secondary. We've got over a billion dollars cash in the bank. We don't need to raise money, primary funds. Um, we've been a profitable company for eight years. Um, so when we go out and do this employee secondary, and also we have some investors that wanna sell, then they see Figma go out, a lot of that sell-side demand dried up. [laughs] So we, we do have, even though we're already oversubscribed, we've got this supply and demand imbalance at the moment that, um, yeah, it's, it's an interesting dynamic to work with. [laughs] It's a high-class problem to have, but you don't wanna disappoint people.

   21. RORory O’Driscoll7:27

       How do you coach employees on that? Do you stay out of it? Um, because it's, it's, it's, uh, you know, especially when you see Figma go out in the multiple, right? Uh, it- it's tough for employees to p- process the decision, isn't it?

   22. COCliff Obrecht7:39

       Yeah. I, I like to be very transparent, and I think Figma are the absolutely incredible company. Uh, they don't have a massive float. There's dynamics to any float that, that, that can make things go higher or lower. Uh, what we do, we show them, uh, a spread of public companies. We show them their growth rates. We show them how we really think. So if you compare us to some companies, we're undervalued. If you compare us to some, we're sort of on par. Uh, and we give them that spectrum so they're not just taking one single point and, and referencing all their kinda marks to that. And also just talking through the long game nature of this. I mean, we have been through trials and tribulations ourselves. We, in 2021, were worth $40 billion, uh, at, which was a, I think it was a 50X multiple on our revenue at the time. Uh, 2022, everything came crashing down. The market came, came crashing down. Uh, and that took us down to 26, and so that was, that was, uh, s- a tough pill to swallow, um, when we thought we were riding high. Um, and we've slowly just compounded that growth. I mean, and the company hasn't stopped growing. We're still profitable. All, all of the, the, the, the foundations were right, and that's what, I guess, what we really focus on and educate the team on. We can... The markets will do what they're gonna do, but as a company, we can compound growth, we can compound margins and increase margins, and we can deliver value to our customers first and foremost.

   23. RORory O’Driscoll9:02

       A- a- and you're exactly right. I mean, it's just, it's kinda just talking about that, 'cause even the little example you gave, two things are clear. Look, very smart people with MBAs swore blind you were worth 50X ARR in '21 and 20X ARR in '22, and now you're worth 10X ARR. So I always-

   24. COCliff Obrecht9:19

       And do you know, do you know, Van, funny, funny point.

   25. RORory O’Driscoll9:21

       Yeah.

   26. COCliff Obrecht9:21

       It took discipline to take the 50X. 'Cause we... I won't name names, but we had people coming in at higher multiples, and even we were like, "This is, this is batshit crazy." [laughs]

   27. RORory O’Driscoll9:29

       Jolly. And it is always worth... I mean, I did a post years ago, beware of the madman in the backseat, which is Wall Street is the madman in the backseat. It change... I mean, finance, we all do. You, you change your mind so drastically and so quickly, right? That, as you said, all you can say to the team is, "They're gonna do what they're gonna do. They're gonna 50X, they're gonna 20X, they're gonna 10X." What you can do, and it's very impressive, is we can... Finance can be wrong literally by 5X. We were from 50 to 10, and you've been able to recover that valuation by just working hard and growing for five years. In the end, the thing that bails out our incompetence is your growth rate. And g- and that's the, that's the dirty little secret deposit. If you get in these companies which can compound for five or six years, they can cover a multitude of sins.

   28. COCliff Obrecht10:15

       That, that's what worries me about some of the AI companies now because there is, uh... I've seen this time and time again with people trying to copy Canva or be Canva for this or Canva for that.

   29. RORory O’Driscoll10:25

       Yeah.

   30. COCliff Obrecht10:25

       There is an early adopter syndrome that pulls forward a lot of revenue and, like, I think one thing we've done well with Canva is cross the chasm to the mainstream. Middle America, people all through Europe, not the Twittersphere or the X sphere, whatever you call it these days, um, that are always using the latest and greatest products and paying that 'cause they're happy and-
3. 16:58 – 25:37

   Is Zuck’s $14BN Scale bet the biggest blunder in AI?

   1. COCliff Obrecht16:58

      offers.

   2. HSHarry Stebbings16:58

      Dude, I, I will always put you on the spot and ask questions like that. Rory knows that well. The, the tough one is, uh, poor old Zuck. Zuck is getting a battering. You know what I love is the transience of Zuck, where it's like, you know, Zuck’s a hero, and then Zuck, what a fool for buying Scale. And I mean, the, the wheels seem to be coming off the Scale acquisition in terms of the talent that's leaving and the satisfaction with the quality of Scale's output. Everyone wanting to use Surge. Edwin, great guy. Liked him a lot, actually. Uh, and Macau, portfolio company. Go Macau. Um, [laughs] Rory. Um, and they're just very upset with the output of Scale not being good enough. Is this the wheels coming off the Scale and the Meta train, or is this media over-hyping and coming back on Zuck in a way that's just unfair?

   3. COCliff Obrecht17:52

      I just feel poor... sorry for poor Zuck. Imagine poor Zuck opening the, the newspaper or his phone every morning looking at the news. Is that... It mustn't be a, a... It's gotta be a challenging, uh, life being the CEO of Meta. Um.

   4. HSHarry Stebbings18:05

      Dude, y- you get stuff written about you in AFR. Does it upset you when you read it?

   5. COCliff Obrecht18:10

      [laughs] It doesn't, but it's not at the same scale as, uh, as, as, as th- them.

   6. SPSpeaker18:16

      My sense is his, his, his skin has been thick since the movie.

   7. COCliff Obrecht18:20

      Yeah.

   8. SPSpeaker18:21

      It really... I think if you remember back in the day, he was pretty upset when the movie came out. I think since then, his thin, his thick skin is about five inches thick. [laughs]

   9. COCliff Obrecht18:29

      You do stop caring, actually. That is, that is... I mean, we're, we're at such a smaller scale than them, but you do, you do learn to not care.

   10. HSHarry Stebbings18:35

       Rory?

   11. RORory O’Driscoll18:36

       Yeah, look, I mean, I don't think it's profitable for me to speculate on how he feels. I don't know, and frankly, don't much care, and it, it's not my problem, right? And if he's n- and if he's not feeling great, he can cry into his $200 billion and get over it on his own, right? Take it up with his therapist. The actual more substantive question is, you know, d- does this new information make you feel better or worse, just as a-You know, objectively seeing how the deal's going, right? It was what-- is there actual real fact-based takeaway, right? Here, there's information, it's not wildly surprising. I mean, when, when the deal was announced, you kind of go, "That feels an odd way to solve this problem. Maybe it'll work, but it'll be messy along the way." And this just feels to me like there's two different shoes dropping here, and they both feel like exactly the shoes you expected. The first shoe to drop is people, right? It's hard to give people $100 million and then give someone else a billion dollars, and then give someone else $10 million, and then have them all work together. There's gonna be some fallout, even if they're all amazingly talented people who wanna work together. People have egos, people are human. It's just gonna be messy. So the fact that some people are leaving, whatever. I don't know. I don't know about the retentive package, but it's just not surprising. And some of it could be directed. Remember, we talked only last week, back to your comment on we're kind of up and down on this, that they seem to be organizing the thing in at least a structured fashion. You're in, you're out, you're in, you're out. So there's, there's kind of human fallout that was predictable. And then the second thing is kind of, and I'll talk about it, the second thing is just the a- the asset itself, right? It seems that the, I mean, the, the comments about how the Meta team aren't as excited about the Scale data labeling stuff makes sense to me. I mean, from what you read, the requirements of data labeling have evolved a lot from very simplistic, this is a dog, this is a cat, to, you know, answering much more complex, kind of the training data that it takes to, you know, pass advanced bio, to pass advanced math. And it's a different thing, and I'm sure that Scale aren't dummies, they're trying to do it. But there's other firms, and you mentioned two, one of them is your portfolio company, 'cause that's what you do, promote the product. There's a bunch of others touring and all that. There's a bunch of folks out there. I'm in none of them, just to be clear, so no agenda. And, you know, there's a lot of competition, and if you're sitting there as Meta and your ass is on the line to deliver, right, then you're not going to say, "Oh, I'm going to buy from what is now our biggest investment, which is in Scale, just 'cause Zach told me to do it." You're gonna buy from the best. So there's probably gonna be some of that, "Oh, we didn't get what we want." Which raises a third... If you remember the structure of this weird deal, they put $14 billion into Scale as if it was worth $14 billion. And to your point, Harry, it's kind of a one, it was 1X to the last round, and then the VCs promptly took out that $14 billion, leaving Scale as an empty shell because all the money's gone, and then there's this remaining asset that we agreed wouldn't last a year, but we had to pretend was like a company. And now Scale, um, Meta on its balance sheet has a $14 billion investment in a company that probably isn't worth $14 billion anymore. There ain't any cash, and there ain't a great business. At some point, the auditors are gonna say, "Hmm, you've got a $14 billion venture investment there. Do you really think the empty husk of Scale without all the team that's g- moved over to Meta, all the team that's left is worth $14 billion? We'd like you to take a write-down." And that's gonna be the entertainment factor back end of this year, early next year. So yeah, it, it was a quirky deal. It has a bunch of problems. It's just been a step on the journey to fucking up a $14 billion acquisition.

   12. SPSpeaker22:05

       Rory, do you have confidence Zuck's master plan will play off? Or does this leave you less confident than you were before?

   13. RORory O’Driscoll22:12

       His master plan, I just simply observe the facts. He has a master plan. He's won already. He's worth $200 billion, and he's got one of the most 10, seven most influential companies on the planet. He's won already. All you can say, again, I try and confine myself to fact. All you can say is you've had some big bets that have worked amazingly, like WhatsApp. You've had some small bets that worked brilliantly, like Instagram, best acquisition of the last, of, uh, the prior decade. And you've had some big bets that have flopped, like Meta. That's, like, you know, whole Metaverse thing. My gut is this is more like the latter than the former. I could be wrong.

   14. SPSpeaker22:47

       Culturally, I think just the simple fact is he's, he's assembled, uh, a pack of mercenaries. He's gone out and hired all the best mercenaries out there, some- forced them to report to each other, a weird structure, power struggles, fiefdoms, but he's put them all together in a matter of weeks, right? Maybe months. And when, when I, when I s- when I was a B2B founder trying to be driven but, but touchy-feely, I was sort of anti-mercenary. If you're not on my journey, I don't want you, right? Uh, this is a long path. Canva's been doing this for, I don't know, 20 years, right? Something like that. Like, but as time has gone by, I'm more nuanced. Sometimes you, you know, maybe you need mercenaries, and sometimes there's cultures where it's okay, and sometimes there's a tool for the job. But I just think this is, we can pick at this, and I think the criticism... But it's just, I think Zuck knows this is a bunch of mercenaries. Some of them are gonna fall in battle, some of them are gonna quit. [chuckles] And he's given $20, $30 billion to a pack of mercenaries. Um, I don't know. I mean, Cliff, Canva seems anti-mercenary from the outside, right? But maybe there are times when you've had to hire a pack of them to go into, [chuckles] go into battle.

   15. RORory O’Driscoll23:55

       We're trying to, as we look at kind of big classical SaaS companies, we're trying to figure, and, you know, trying to figure out their role in the AI world. How much of your re-acceleration would you attribute to the stuff you did in AI versus just, you know, getting through 2022 and kind of finding your sea legs again and just executing?

   16. SPSpeaker24:14

       I mean, [clears throat] COVID for us, we were growing faster than ever. So, so you gotta decouple valuation and company growth.

   17. RORory O’Driscoll24:21

       Yeah, I agree. And decoupling valuation from just-

   18. SPSpeaker24:23

       Yeah, COVID was a mass discovery event. Everyone was sitting on their ass on their computer all day. It was great for Canva. Um, uh, but, um, so what was the question? It was, um-

   19. RORory O’Driscoll24:32

       If you look at, so, so and I didn't, post, I me- I wasn't clear, but post, like '22, '23, you de-accelerated, right? And now you are, leave valuation out of it entirely. Just talk revenue. And now you're obviously re-accelerating at huge scale, right? And you, you're doing what every SaaS company pre the AI companies wants to do, right? And that's the only way they're gonna, you know, be back to being relevant, being exciting. And obviously, every one of us owns lots of them, and we're trying to figure this out. So for you, do you think that

   20. HSHarry Stebbings25:00

       AI was the reigniter of, of growth in '24, '25? Do you think it was just execution? How much of it do you attribute to the AI initiatives you guys took in the last year and a half?

   21. COCliff Obrecht25:11

       I would probably say 20%. I think one thing you need to buck the trend of as you become a larger company is insular thinking and treating your user base like a wet tea towel that you need to, to wring out.

   22. HSHarry Stebbings25:25

       Nice.

   23. COCliff Obrecht25:25

       And 90% of our user acquisition is organic, and so we just needed to re-accelerate all our core flywheels, and AI enhanced that. Going really heavy on international enhanced that.

4. 25:37 – 35:53

   Lovable Raising at $4BN and Vercel at $9BN: Justified or Madness?

   1. HSHarry Stebbings25:37

      We spoke about paying up for the team. There's companies that are being paid up for. Rory, I'm not shilling, so before you get me for shilling, I'm not shilling. But one of them is Lovable, and it's in the FT, and it's like, hey, new $4 billion round. By the way, Cliff, notice what I'm about to do here. I'm about to neutralize my argument. Vercel, another company in the similar space, has got a $9 billion round apparently in the works. Question being, do these markups very rapidly, literally within a month or two, really make sense, or is it excess capital supply that is exuberant, desperately trying to find a home in an AI company?

   2. COCliff Obrecht26:19

      I'd say it's a bit of both, but definitely the, the latter is the- there's the FOMO of missing out and, uh, that, that, that's real and people throwing cash and, and realizing that we're on a curve here with this AI boom. And, I mean, most people are thinking we're not at the top of the curve. It's not gonna fall off. We're, we're a lot closer to the top than we probably were maybe a year, 18 months ago, but it still feels like there's money to be made. And, um, Rory, I heard you the last time saying you're still investing. This gravy train doesn't, isn't probably gonna end immediately. It will sort of start cooling off at some point, and I think investors are just realizing they need a good chunk of their portfolio in this category. I do worry, as I mentioned before, about some of these companies crossing to, crossing the chasm to the mainstream and turning that 100 million in revenue to billions in revenue. But companies like Lovable, they're, they're definitely well-positioned to do that if they keep executing at the rate they are. And they're also, they're creating a new category.

   3. SPSpeaker27:17

      The, the multiples can't make any sense because, um, we knew this when we did the round. I mean, Anthropic's revenue has tripled in four months, right? And no question, there was some risk it wouldn't make the plan. Of course, there's some risk. But it wasn't that high. Like, we didn't de-risk. We're, we're all investing on forward multiples. Anthropic-- Lovable worth $1.8 billion 60 days ago, $4 billion today. I know the ARR growth has been, uh, tremendous, but it's probably exactly as predicted. I mean, it-- listen, if it's, if either of these out-accelerated their plans, it'd be one thing, but, uh, tripling at this rate... What's that?

   4. HSHarry Stebbings27:57

      This is where I'm gonna get in super trouble, but fuck it, it's late at night and I'm in London and fuck it. Uh, they're out-accelerating plan. Like, they are at 125 to 130 now, give or take. They plan to end the year at 175. They'll be above that, I think, at 185 to 200. If you're at 185 to 200 and you end next year at, say, what, say they do a two X to two and a half X, say they're at 450, 500. Is it that nuts to be paying-

   5. SPSpeaker28:20

      I'm not saying it's nuts, Harry. What I'm... And y- your data is more valid than mine. What I am saying is most VCs should have had that in the model 47 days ago. I'm not saying that they didn't achieve the progress. It's just, you know, in the public markets, you're Monday, you miss by 1% and you get your head cut off, right? You're down 30, 40%, even though the range of variation's [laughs] quite, quite tiny, right? Um, these, we're always valuing future growth and, uh, I just, it's not that I'm not saying... If, if Lovable really in 30 days blew out the highest plan any VC had, then, then I'm with you. But I don't believe Anthropic did. I believe Anthropic set a crazy number, as did OpenAI, right? These numbers blew our minds when they put them out there, and they hit them or exceeded them. The, the VCs couldn't put that in their spreadsheet?

   6. HSHarry Stebbings29:06

      I, I'm gonna come in 'cause, 'cause actually I think you... The com- the Monday comment, put a pin on that, actually I think actually proves the opposite point. So stepping back, 'cause I think this is a really interesting subject, the, the d- the, the, the second round two months after the first. I've been thinking about it a lot, right? And I'm gonna do big buckets and then go down each. There's only three reasons largely this happens. One is it was priced right two months ago. New information has occurred or something has changed such that the new price is worth more, and that's kinda what we're talking about now, right? Is that happening? If that's not happening, that's option one. If that's not happening, then the second thing is somebody underpriced the first round and now someone else is figuring [laughs] that out. You know, like, there's, there's been some kind of mispriced. Either the second price... If there's not net new information, either the second round is too high or the first round's too low, right? And the third and the most zany one, but I think is a non-trivial thing, is there's this validation concept which is, oh my god, Sequoia were willing to do $2 billion. I would never have offered $2 billion or $2.2 billion before, but now I wanna get in and so they're gonna offer $4 billion. So you get this kind of, you know, the last round provides the validation for the next round, and those are three different things, and I think they're all going on to some extent.

   7. COCliff Obrecht30:20

      There's another, there's another point as well. It's like if this company is gonna be a 20, 40, $50 billion company, who gives a shit whether it's two or four, right? So if they're, if you can write the thesis that this company's gonna compound some level of growth over the next five years, it's gonna be one of the major players in a new category, then who gives a shit, right?

   8. HSHarry Stebbings30:40

      You're right, C- Cliff, but largely I'm just gonna be that painful person. If that's correct, then the people who did the first round underpaid, and the company... If the company, let's just say if a company says, b- just being logical, if the company's did exactly what it said it'd do and they raised money at $2 billion two months ago and can raise money at $6 billion now, they should have raised money at $5.5 billion two months ago.

   9. RORory O’Driscoll31:03

      Right? They underpriced the first round. If, I mean, you know, it's, it's a little like... By the way, it's why it's quite like that whole IPO weirdness discussion. Oh my God, you priced your IPO at 38 bucks and the stock opened at 76, you left money on the table. It's actually the private version of the same thing, right?

   10. COCliff Obrecht31:18

       I think it's the Harry, I think it's the Harry effect. I haven't, I haven't listened to a Harry podcast where he hasn't drummed the-

   11. RORory O’Driscoll31:23

       He can talk up the stock

   12. COCliff Obrecht31:24

       ... Lovable beat. I think, I think you've added 2 billion of market cap to this company single-handedly. [laughs]

   13. RORory O’Driscoll31:29

       Clear.

   14. COCliff Obrecht31:30

       You should, you should get more shares.

   15. RORory O’Driscoll31:31

       Tell me, but let's go back to the first one, 'cause I think the first one's interesting 'cause it's actually a fact-based comment. Is there net new information? Are they worth more? 'Cause you'd like to think the whole world lives in the first area, and if it doesn't, 'cause then you're into weirder shit. The second thing is mispricing, and then the third thing is just kind of psychological, you know, dog hierarchy, high school hierarchy phenomenon of, "I can invest if A doesn't." So go back to the first. Jason, your point, you said the Monday thing about you missed by 2% and the stock goes down by 30, right? And you... But my comment is that's actually proof why you can in fact see these step-ups. A s- like if you're underwriting 30% in the next two years, sorry, in the next two months, and you get 35, by the same logic that if you miss by five you go down by 30%, if you achieve, out-achieve by five, you can justify a higher price. And I think Anthropic will put-

   16. SPSpeaker32:25

       Yeah, I mean, the beta's off the charts, right?

   17. RORory O’Driscoll32:27

       Yeah. I mean-

   18. SPSpeaker32:28

       For, for, for their AI leaders, it's off the charts

   19. RORory O’Driscoll32:28

       ... Anthropic, some of the Anthropic thing could go down as that first example is, you know, the performance this year, I think they reacc- And I'm willing to bet... It's actually, it gets to Cliff's point. I'm willing to bet, no matter how hard you tried, no one had... They went from 100 to a billion last year, they're going to re-accelerate in Q1 or Q2 of this year, right? And they, but they did. And it's obviously with the cursor, um, Claude code, et cetera. So there pro- there is new data, I would argue. That's an example of where you have a 3X step-up from the early round, I think with light speed earlier this year to today. And at least some of that is justified based on new information, which is they have re-accelerated at a scale that probably no one imagined they could do it at, right? So I think some- so sometimes that follow-on round two or three months later might be based on new information. I don't think it's m- majority of them, but some of them.

   20. SPSpeaker33:23

       I'll tell you one, one just, just on this point, one m- um, that to me shows the ineff- inefficiencies in this, right, or the shoot-from-the-hipness, which is that-

   21. RORory O’Driscoll33:32

       Yeah

   22. SPSpeaker33:32

       ... Lovable closes, Harry's favorite company, closes at 1.8 billion, uh, in July 17th, 20- 2005.

   23. RORory O’Driscoll33:40

       Yeah.

   24. SPSpeaker33:40

       13 days later, the exact same company called Replit, that's the one I use, uh, same company closes at 3 billion. Basically the same ARR, basically the same company. Yeah, I can tell you my views of security and rogue AI agents, but come on. I mean, most people can't tell the difference. And then the revenue's basically the same, 100-ish, right? One's worth 3 billion because it's marked up by Andreessen. One's two, 2 billion because Accel wants the deal. I don't think either of those deals were perfectly efficient.

   25. HSHarry Stebbings34:08

       Is this fundamentally bad for companies, Rory? If these companies are getting hundreds of millions of dollars foie gras'd down their throats a month or 45 days after they've just taken a couple of hundred million dollars more, do you believe that is fundamentally bad for the company?

   26. SPSpeaker34:23

       Did it change your values, Cliff, having an extra billion on the balance sheet, or did it not really change the company?

   27. COCliff Obrecht34:27

       I mean, we've had a billion sitting on our balance sheet for ages, and it's-

   28. SPSpeaker34:30

       Yeah

   29. COCliff Obrecht34:30

       ... it's about rounding-

   30. RORory O’Driscoll34:30

       That's a flex, people. That's just-
5. 35:53 – 48:38

   Quarterly Results for Snowflake, Mongo, Okta, Zoom Skyrocket: Is B2B SaaS back from the dead?

   1. HSHarry Stebbings35:53

      Guys, I want to cross the chasm, so to speak, and move from the world of privates to the world of publics. Um, so this will be a fun one 'cause we had a, quite a big week in publics. Crushed for B2B. Jason, baby, B2B publics is back. Snowflake, Mongo, Box, Elastic, Okta, Zoom. I mean Zoom, beep. I mean, that's like Madonna coming back from the dead. I mean, that is like oof.

   2. SPSpeaker36:21

      That was cruel, man.

   3. HSHarry Stebbings36:22

      [laughs] Sorry, Rory. Don't worry, I said it, not you. Um, Jason, i- is this just like the return of the good old days for SaaS, baby? How did you analyze uniform great results from everyone?

   4. SPSpeaker36:36

      I mean, I don't know if it was, it was quite uniform, but it is interesting that, um, some folks, m- I mean, let's, let's spitball it as half of the public B2B leaders are finally getting an AI tailwind, right? Or, or they finally are getting one. And not everybody, you know... I mean, we love Salesforce, we had Mark on. They haven't seen it yet. They, they have the demand, but it hasn't, it hasn't hit yet. Um, but, uh, but Box, Zoom... Mongo should be crushing it because, I mean, uh, every time I spin up a new Vibe app, I need like two or three databases, right? I mean, that's just one corner of the world. But Mongo should be crushing it. Um, and so it's exciting to see. It's not even, I mean, the Atlassians from down under, the Dropboxes aren't, all the Asanas aren't seeing it yet. But, um, it should ha- I mean, like, like Cliff said, we, you just got to be smart. You're not, we're not building our own LLMs.Like w- like, if you have a billion-dollar install base, you have a distribution channel, to Cliff's point, right? It's kind of sinful if you haven't re-accelerated by the end of 2025. You kind of sc- you kind of failed as a founder because, yeah, you may miss some of the cool kids, right? They may not, they may be using... But, but you have a billion plus of distribution. You have no excuse. You had 18 months. So thank God we're seeing it, right? Because it would be almost catastrophic if none of the leaders were getting an AI tailwind, uh, boost, and, uh, it, it's good. But, but it's not a dead cat, cat bounce, but we're not... O- outside of Mongo and Snowflake, we're seeing modest [laughs] mo- modest re-acceleration. Um, but it's great to see them have it, otherwise we have to give up on all the public guys and bet on the Canvas and Databricks and the, uh, [laughs] and Tropics and give up on the last generation. [laughs]

   5. RORory O’Driscoll38:18

      A- a- and again, yeah, and it-- taking Mongo, 'cause that was the one that jumped 40, 45% of the stock price.

   6. SPSpeaker38:24

      Crazy.

   7. RORory O’Driscoll38:24

      And it's back to the, back to the point Jason made earlier, which is, you know, the year-on-year GAAP growth rate is back up to 24%. I think it's higher Q on Q, so I think they guided a little more forward aggressively. But they were at that rate kinda two years ago, right? So it's not like they're, you know, they're 10X-ing or something like that. I think what happened here is everyone got into the, "Oh my God," you know, "S- SaaS is dead. Everyone's sad," you know, "None of these guys are gonna make it." And even small, and this is back to the Monday comment. Because these markets are trying to get... You know, it's not just about fundamentals, but it's about how you perform relative to expectations. If your expectations are low and you just do moderately well, you can have a 45% jump in the stock price in a week, right? It's back to... You know, and if you look at the, the, the absolute stock price, if you look at the revenue multiple, it's just back to where it was two years ago. It's a great core company. It's like, you know, it's the Mark Twain, "Reports of my death were greatly exaggerated." Well, it turns out reports of the death of SaaS and software were greatly exaggerated, right? If you are a good CEO, and Dev is an extraordinarily good CEO. Just like the Cliff story there, 'cause he did-- I mean, I noticed, Cliff, you didn't say, "Oh, it was all just AI." You know, "We got our shit together. We did a whole bunch of things. We raised our expectations. We said, 'Hey, we're the leader in a big market. Let's make stuff happen.'" And, you know, and if at that point you're valued at seven times and then you beat plan even by a little bit, you get that kind of bounce. That's, that's what happened here.

   8. HSHarry Stebbings39:51

      Cliff, when you see this and Monday getting hit for being, you know, a couple of percentage points off, again, I would never ask on timing or anything quite that ludicrous, but do you go like, "Yeah, that's a, that's an arena I wanna be in," or do you sit and watch Cheeky Pint with the Collisons and go-

   9. RORory O’Driscoll40:10

      [laughs]

   10. HSHarry Stebbings40:11

       ... [laughs] "That's the fucking arena I wanna be in. Sitting, drinking a non-alcoholic beer with the founder of Cognition, doing a handstand with Vlad, enjoying the wonderful splendor of the private market."

   11. RORory O’Driscoll40:21

       [laughs]

   12. COCliff Obrecht40:22

       I still like my beers alcoholic. I haven't, haven't followed that trend, but, um-

   13. RORory O’Driscoll40:26

       I love it

   14. COCliff Obrecht40:27

       ... I, I think it comes... I mean, yeah, yeah, there's a lot of, there's a lot less scrutiny as a private company. But as a late-stage private company with the likes of all the big cats that are playing in public markets already invested in us and continuing to do so, our reporting obligations and our expectations to beat and raise are pretty much the same. So it does get me thinking, like, what is the real difference? And then I think to your point that you've made on previous podcasts, the public markets are valuing companies a lot higher. So when the public markets were valuing companies lower than the private markets, you were kind of like, well, whatever, whenever. Uh, but now, now at a lot higher marks, it, it sort of, it is appealing. It is becoming more appealing, um, to, to turn to private.

   15. HSHarry Stebbings41:15

       In the show, we, we actually mentioned you. Uh, um, you probably heard it, sorry. Uh, where we were like, you know, Figma goes out [laughs] Jason's, where like Figma goes out, sees the pop. And if I were you, I'd be going back to the team going like, "Let's Forrest Gump this one." Like, "We should go out now. Let's run for it."

   16. COCliff Obrecht41:36

       Um, I mean, we're, we're, we're gearing up to be ready to IPO. We, we wanna be an IPO-ready company. We recently... You mentioned Zoom. We brought in Kelly, who, who led their, uh, IPO, and she's been a fantastic addition to the team. She was their CFO. Uh, so, so we- our goal is to be ready. Um, when we actually go out is another question. But yeah, we're, we're gearing up to be an IPO-ready company.

   17. SPSpeaker41:59

       Can I ask a j- a question we've talked about on this show a bit? Uh, you're, you have a billion in cash. You're profitable or cash flow positive. I don't care which one, probably both.

   18. COCliff Obrecht42:09

       Nice. Yeah.

   19. SPSpeaker42:10

       You're able to do tender offers for your employees and provide liquidity. And for whatever, whoever of your early-stage investors want out, you can probably flip their shares. Um, why IPO?

   20. COCliff Obrecht42:21

       Yeah, I'd love them, I'd love them to sell more shares because it has helped solve my problem right now of, uh, [laughs] not having enough sell-side.

   21. SPSpeaker42:27

       Yeah. So why, why, why... At a meta level, why, why IPO, right? You have... A- and, and you, and even M&A probably isn't a reason on its own, right? Unless you wanna buy something for $10 billion. Why, why would you IPO?

   22. COCliff Obrecht42:41

       Yeah, I mean, that's the question we've always asked ourselves, and, and I think there's three key points. There's availability to capital, which we, we have access to. I think it's probably liquidity, and there are restrictions, particularly around employee liquidity and what you can do in the US and whatnot around that piece. And so we do believe in... We're, we're, we're 13 years old as a company. Our employees should have liquidity. They've created all this value. How can we make it easy for them to, to access that, that wealth that's built up? Um, and it, a- and while secondaries, annual secondaries are a mechanism for that, it's pretty janky, and particularly in some jurisdictions, it's, it's downright impossible. Uh, so that's probably the biggest one. Yeah. As, uh, you also get a bit more publicity. Personally, we don't wanna be more in the public eye. We're happy just being i- in Australia working away building great products. Uh, but yeah.

   23. RORory O’Driscoll43:37

       I'm not gonna be too nice to you, Cliff, 'cause-After last week, Harry gave me grief for being too nice to our guest, Mr. Benioff, so-

   24. COCliff Obrecht43:43

       No, give it to me. I love it.

   25. RORory O’Driscoll43:44

       Yeah. But, but I'm actually gonna be nice this time 'cause I totally agree, and you mentioned the other one in passing, and I just wanna put it back on the table 'cause you said it. "Oh, and by the way, the public markets n- now are giving me cheaper capital than the private markets." 'Cause if you're, if all the numbers are as reported, you're getting roughly 10X revenues, and the fine folks at Figma are getting between 17 and 30, depending on how available you think the current price is, right?

   26. COCliff Obrecht44:08

       I think that's a byproduct of these last large crossover funds probably have 80% of their capacity allocated to public and 10 to 20 to private. And so you're chasing a smaller pool of capital, even though we're, we're in a good position. Ultimately, the, the volume of capital dictates that multiple, and there's such an immense amount of capital being deployed in public markets that just is driving up those vals.

   27. RORory O’Driscoll44:32

       In this conversation, which we have rolling all the week, I'm a huge, companies at scale like yours should be public, right? Um, if for no other reason, it is bizarre that we've evolved the system whereby to allow ordinary people to invest in you, instead of paying 50 bips to Fidelity, we have to pay 2 and 20 now, and enrich the middleman like us, and, you know, God bless it, but it doesn't seem like a mission-driven company would make that their mission, but call me cynical on that, right? It's just abs- the whole structure's absurd of, you know, these high... A- and it's exactly what you said, having to get permission from your employer to get liquidity as a secondary after 13 years, it's better than no liquidity, but it's a little bit serf-like. And you really, when you're public, you can do, make your own choices. So I'm totally with that answer in terms of companies at scale, when they're ready, should go public, and it feels like the better way to run a business at scale.

   28. COCliff Obrecht45:26

       Yeah, I mean, people deserve liquidity. Uh, and, and having our customer base, we've got 240 million monthly active users, a lot of them want to invest in Canva, a- and, and you see Figma had a huge retail demand. Um, we, we want people that have helped create our success to share in that success, and we really wanna deliver for them. So it very much works into our mental model of the world. So yeah, we're not, we're not anti-IPO.

   29. RORory O’Driscoll45:49

       I love it.

   30. HSHarry Stebbings45:50

       Are you not the perfect contender for a direct listing?
6. 48:38 – 50:01

   Is Jensen Huang right there will be $4TRN in AI gains?

   1. HSHarry Stebbings48:38

      Um, I was listening to, uh, Jensen on an earnings call. This is what's so great, Cliff, about doing these shows. I actually have to do some work and really listen to earnings calls again, okay? And he said, over the next five years, we're gonna scale into, with Blackwell and with Ruben, uh, into effectively a $3 to $4 trillion AI infrastructure opportunity. 3 to 4 trillion. Can that level of CapEx be supported by enough AI-driven revenues, guys?

   2. RORory O’Driscoll49:10

      Yeah, I mean, look at it. Four- let's do $4 billion. You want a 20% return on equity, you gotta be generating $800 billion of profit a year. That's a lot of profit when, you know, Facebook, Meta, all these guys make a couple hundred billion a year, right? So you've gotta believe, and you're gonna create another four Microsofts, another four Facebooks to justify that kind of spend. So it feels deeply lofty to me and not grounded in kind of the macro. But on the other hand, it's hard to argue against a guy who, you know-Built a comp- the most valuable company on the planet. So, you know, you, you can give him credit for the specifics. I don't see where the macro works, but whatever. If you wanna make that bet, Harry, there are Nvidia puts that I keep my eye on that you're more than welcome to plow into anytime you want. Tell me when you do, Rory. [laughs] The hell I will. [laughs] Jason?

7. 50:01 – 1:06:35

   Will AI wipe out SaaS margins with 10% GPU taxes? Or is Notion the exception?

   1. SPSpeaker50:01

      All I do know is, you know, I know it's a small percent of the economy, but when you listen to what Cliff say now, when you listen to what Mark Benioff said last week, I mean, basically Mark said w- we're, we're like 0.1% AI penetrated in the Salesforce base, right? So Salesforce is coming up on 50 billion, right? They alone are gonna have 200 billion of AI attach to their model. I'm not saying Mark's gonna get all of it, but the attach is gonna happen. Um, it's just so, it's so early, um, that, uh, it's hard not to see everything easily being 100X bigger than it is today. We've just started. We just started. It f- it feels like 100X. Now, does 100X get us to that number? I don't know. But, uh, I, I think, I think, I do think that Jensen and Sam Altman have a pretty good sense of it, so I'm not betting against it. We can ask Cliff how much, how deeply AI is penetrated there.

   2. COCliff Obrecht50:50

      Yeah, we have billions of AI usages in our product per month, and that's accelerating at, uh, clip. So it is just beginning, and the amount of calls and inference we're gonna rely on is just gonna grow exponentially as these products evolve. But yeah, when I have a-

   3. SPSpeaker51:08

      It's easy to see 100X growth, right?

   4. COCliff Obrecht51:11

      But they're all getting distilled, and they're all gonna get it run on device a lot more, so there are optimizations that are coming as well.

   5. RORory O’Driscoll51:16

      Thank you. 'Cause c- take on that, 'cause you, you'd mentioned the Notion comment of spending 10% of their revenue on, um, you know, on AI inf- uh, on, on GPUs and inference and model training, right? I mean, turning back-

   6. COCliff Obrecht51:30

      So as you say, they, they've gone from a 90% gross margin to an 80% gross margin between-

   7. RORory O’Driscoll51:34

      Yeah. In other-- Which is effectively a way of saying-

   8. COCliff Obrecht51:36

      Yeah

   9. RORory O’Driscoll51:36

      ... to, to, to deliver their AI magic, they have to part with roughly 10% of their revenue to the big, um, AI companies, just as maybe they probably did roughly the same to AWS. So turning back to Cliff, I mean, do you envisage spending 10% of $4 billion, $400 million on, you know, Nvidia chips and/or third-party models and, um, GPU acceleration? Or d- does that feel wildly too much?

   10. COCliff Obrecht52:04

       100%. Yes, 100%. Uh, so, so we do our own foundational model training, which, which requires a huge amount of compute. But then there is a lot of expenses, and I think this is where, uh, the Notions and Mondays a- and all the other companies of the world are, are, are flowing through revenue to the model companies. Um, but those costs are coming down exponentially. You wanna have the best model in your customer's hands to... Yeah, sorry, you're already gone.

   11. RORory O’Driscoll52:31

       But do you think 10%... I mean, y- you, you're spending like a qu- and do you think it could get to 10%?

   12. COCliff Obrecht52:36

       Yeah, definitely. It already is. Yeah.

   13. RORory O’Driscoll52:38

       Wow.

   14. COCliff Obrecht52:38

       Yeah.

   15. RORory O’Driscoll52:39

       That's a-

   16. COCliff Obrecht52:39

       But, but, but, the, and espec- especially in the short term, it, uh, it will be probably less than that over t- uh, so you gotta separate-

   17. RORory O’Driscoll52:49

       Yeah

   18. COCliff Obrecht52:49

       ... training your own models versus serving AI. So currently, yes. I mean, if you look at Lovable, what are they, what is their pass-through in regards to what they're paying Anthropic or whoever the, the model providers are? It will be a lot. It'll be way more than 10%. Uh, but over time, they're betting on distilling these models down, understanding user queries, and where I need the foremost frontier best model versus where I can deploy the, the model that's on device or the model that we're self-hosting and running. And you'll, you'll get a lot better. Companies will get a lot better at picking the right model for the right job and only using the expensive models connected through an API to OpenAI or Anthropic or whoever for the most premium queries where you need that answer. But 90% of it will be run on device or be self-hosted. And we know that over time we'll use the best models and that... So take image, for example. If there's the latest and greatest image model that has additional capabilities, it may cost us four cents an image, but we know we can get that cost down to 0.02 cents an image. A- and we're banking on that over a six-month period. So we view some of those upfront costs that are having a big sort of eating a chunk into our margin as more of a marketing cost than a long-term enduring cost of goods.

   19. RORory O’Driscoll54:05

       Got it. And that's a huge difference. I mean, it g- 'cause g- g- 'cause the assumption of getting 10% from every software vendor is crucial to the idea that you can expand $3 trillion. And if Cliff and all the other Cliffs optimize and that 10% becomes 5%, I mean, which is still a hefty tax to pay from your revenue-

   20. SPSpeaker54:25

       Yeah, but I d- I, I don't want to speak for Cliff, but, like, I, I, um, I imagine creating an, a, a, a static image such as it is today, you could break it down an order of magnitude. But, like, let's-- when Canva adds everything that Gamma does. I mean, Gamma's consuming a lot of tokens to build dynamic presentations for every single person at my little team on the fly. This is not an image, right?

   21. COCliff Obrecht54:45

       We're coding every presentation from scratch, right?

   22. SPSpeaker54:48

       Yeah. That's a lot of-

   23. COCliff Obrecht54:48

       Well, we've-

   24. SPSpeaker54:49

       And it's not, and it's only pretty good. Imagine when it's great and they redo every presentation three times and run it through multiple models, and then they, and then Canva does it, and Canva has a higher bar because you have 240 million users.

   25. COCliff Obrecht55:00

       Yeah, but we don't need to code it, right? So that's why we're building our own foundational model to generate a presentation that's, like, phenomenal. It doesn't need-

   26. SPSpeaker55:08

       Yeah

   27. COCliff Obrecht55:08

       ... to code every line of a presentation. So there, that's a heavy compute cost to create a, a presentation. They'll be looking at, we don't need to essentially go to Anthropic and write a whole thing, a h- a whole essentially website every time we wanna create a presentation. It's a lot, there's a lot easier ways to create presentations at a lot lower cost. So they'll be thinking about that just like we've thought about it.

   28. SPSpeaker55:30

       But if you were doing the Gamma approach, which you're not, th- you might not-- going to Rory's point, let's compare it-

   29. COCliff Obrecht55:34

       Oh, we've got the Gamma profile. We've got Canva Code-

   30. SPSpeaker55:36

       Yeah
8. 1:06:35 – 1:14:34

   The VC Regret Pathway

   1. COCliff Obrecht1:06:35

      midterm.

   2. HSHarry Stebbings1:06:35

      Before we wrap, there's, there's one interesting topic that we said about before, which is that you said, "Oh, you should invest in Riverside." And I was like, "Oh, no, I saw it at seed and I missed it." And then I've seen it every round since, and I, I didn't wanna do it. And you said it was an interesting thing about kind of the VC regret pathway and, and not engaging later on. I had it again today with Revolut when people asked me why I weren't investing in Revolut, and I was like, "Well, it's a bit embarrassing as an early-stage investor to buy Revolut off Goldman Sachs, my bank." Uh, [laughs] and that is when you really fucked up as an early-stage investor. Rory, Jason, I'm just intrigued to hear your thoughts on the ones that you've missed and the regret pathway on investing later.

   3. RORory O’Driscoll1:07:16

      I think you should do it, is the short answer. And this, uh, f- for the, for the viewers, this happened before the conver- before we kind of went live. Cliff was talking about folks who'd looked at Canva early on, passed, and then really struggled later on to pony up and pay obviously much higher prices. I am the exact opposite, right? Many of my most successful deals I've passed on prior, and I've just learned, you know, if you pass on something, you know, you come to the conclusion, and then you get another data point, like a year or two later, and they've done what they say they'll do, you literally don't need any more information, right? It's like you said, you know, 'cause it's so much more telling. 'Cause with a new deal, you're starting off and all you're seeing is one data point. The difference in information content between two data points over time, both of which are positive, and one data point at, and where you have no calibration, is almost infinite, right? I can think of two or three dealsWay back in the day, I passed... I didn't get Omniture in 2003, and a year later I saw it at twice the price, and I bought all I could. Same thing on Box. I, uh, passed at the start of 2010. The round didn't even get done. And nine months later, I literally woke up and said, "What's the dumbest thing I did all year? I didn't do that deal." And I went down and did it. And I think I'm trying to discipline myself to do it even more because when you go back... Uh, let me just repeat it again. When you see the company, when they sell, they'll do A, B, and C, and you pass, you don't believe they'll do A, B, and C. And then they do A, B, and even if they do C prime, a little less than C, you have what you need to know. And then, then Cliff's comment applies, is now you're seeing a category leader. You know you can lean into their execution. You really should say to yourself... Unless you think there's a TAM problem. Unless you think there's a TAM problem, you should say to yourself, "I was wrong. How do I kind of change my weighting and lean in here?"

   4. HSHarry Stebbings1:09:06

      Rory, does that, does that, um, leaning in apply in an AI world where sustainability of revenue is a question? 'Cause a lot will say, "Oh, I'm gonna do 10 million in a year."

   5. RORory O’Driscoll1:09:19

      I think they're two separate issues because you are right about one thing. Sustainability is a lot harder in AI. We're seeing a lot of people drift in and out of product market fit. But that's gonna be true on the new deals as well, right? You know, the new deal that you see where you have no context from two years ago and it looks golden today, that can drift out of product market fit, too. So it's a separate factor. And I do think even in an AI world... So taking it one step beyond, I think the really positive sign in an AI world would be you find the founder. Whatever reason, you passed two years ago. The best of all signs is this. The product has evolved three times because that's what's happening in AI land, and the founder's been able to evolve it. And then you're like, "Oh my God, this guy has a survivor gene. Run, don't walk." Because I think that's one of the identifying characteristics of the people we see figuring it out, which is the damn thing keeps changing, but they just keep changing faster than the other guy, right? So again, I think there's always signal. 'Cause the hardest thing, the thing you can't change in this business is time. You can't compress time. You can't fast-forward. You can't rewind. So when you have two data points over time, that's just so fricking powerful, right? And I, I totally get it, 'cause I wrestle with this. You get hung up. Oh my God, I coulda done it for 10 million or 100 million or whatever. Now I gotta pay 500 million. And you just gotta look yourself in the mirror and say, "That is the tax you pay for being stupid. Pay the tax and just get off the stupid train."

   6. COCliff Obrecht1:10:44

      Does the same apply for follow-on rounds as well? Because it's amazing to me when I've seen investors have the inside lane on all the company data and the company's performing like crazy. They've got a big chunk very early, call it seed A or B. And the best investors that have done best out of Canva, like they were early-stage funds, but they realized, "Holy shit, we're onto something here," so they raised SVB, uh, SPVs or additional vehicles to move further up the, the value chain, like going later and later stage, and compounded their position or at least didn't get diluted over time. They've done the best versus a lot of early-stage investors being like, they call themselves being disciplined. "Oh, we only stuck here." But if you're on a winner, keep betting on that winner is my approach. But it's amazing to see how different investors kind of treat follow-on investors as, investments as well.

   7. RORory O’Driscoll1:11:36

      It's a great point, and I think you have two separate issues. You have the individual, uh, the s- the investment is are you making the right investment? In other words, did you really think that the third follow-on round was overpriced 'cause you thought the market was smaller? Were you wrong on the investment? So that's one factor, and we can talk about that. But then separate from that, you know, you have the institutional thing. Are you set up to do those big rounds? Do you have to raise an SPV? Are you able to raise an SPV? And I would say, Cliff, one of the things I've internalized is I think especially being scarred by the public t- three decades doesn't help sometimes. And you're right. In a company like yours, the correct response is p- pile in at every level and find some way to do it. So there's two separate things. One is do you think it's, still think it's a good deal? And to your point, one of the things we've observed is the round after the round we do, if it gets a quick outside led up round and you have positive data, it always feels expensive going back to, oh my God, it's 2X more. That's the round you should do every dime, 'cause it's roughly in the same strike zone as your sweet spot. It's not like, you know, we typically invest your plus or minus 100 million pre. The 20 billion round is hard to get your head around. But if you do the round at 100 and then, you know, at 12 months later they're at three or 400 and everything's working, that, that's a signal that we have constantly underestimated and are correct- have constantly corrected and have, and have been validated on.

   8. HSHarry Stebbings1:13:00

      Or actually, or, or not. Or actually there's been a price inflection point, but there hasn't been a company inflection, and so you're actually paying up for little company growth. I'd rather pay up for the 800 to a billion where there's real company inflection and the price inflection matches that.

   9. RORory O’Driscoll1:13:16

      If you believe your inside information pushes to the negative and you know something, then yes. But I give... Peter Thiel said it, is that the outside, the data on an outs- a good... And maybe not in this market, and I, I haven't processed that yet, but he's very quotable as saying, you know, the outside led up round, the follow-on on the outside led up round was the strongest positive signal, and they consistently underestimated the value of that. And I do believe that, to your point, Cliff, is the case. I do admit sometimes that, that, you know, if you're doing... If your business is relatively early stage, it is hard to think how do you go at 20 billion and what do you do and how much do you put into it? But there's no doubt, and we've talked about this before, that being willing to massively concentrate on a small number of deals gets you the last dollar of out- gets you the last absolute dollar of out performance. You do have to, as you say, though, the key thing is to be able to distinguish the Canva from the 10 other companies you've had that got a billion pre-evaluations in 2021 that aren't worth a billion.

   10. COCliff Obrecht1:14:13

       True, true, true.

   11. RORory O’Driscoll1:14:14

       In, in, in, in the end, you still have to be vaguely good at picking, unfortunately.

   12. HSHarry Stebbings1:14:20

       Guys, listen, I can't thank you enough for this. You've been fantastic. Cliff, I so appreciate you joining so early in the morning. It's so great of you to join, and I really appreciate it, man.

   13. COCliff Obrecht1:14:30

       Thank you so much for having us. I appreciate it. It was a great chat.

   14. RORory O’Driscoll1:14:33

       Rock and roll.

   15. HSHarry Stebbings1:14:34

       Awesome.

   16. RORory O’Driscoll1:14:34

       Thank you, Cliff

Episode duration: 1:14:45