Anthropic’s $10B Raise | a16z’s $15B Fund: Is the Middle Dead in VC? | How OpenAI Could Go to Zero?

1. 0:00 – 1:16

   Intro

   1. RORory O’Driscoll0:00

      In the early stage, you're taking uncorrelated business risk, and in the late stage, you're taking 100% correlated valuation risk. If the growth is there for one more year, it looks cheap.

   2. HSHarry Stebbings0:11

      Now, this week we have a lot to cover. Anthropic's $10 Billion Fundraise, xAI raised $20 Billion, Andreessen Horowitz raising $15 Billion.

   3. RORory O’Driscoll0:21

      I would be nervous if I was a $27 billion pre-cursor investor, but they've created something amazing.

   4. HSHarry Stebbings0:26

      If you're OpenAI, are you not slightly nervous? You're being eaten away by Anthropic, and then on the consumer side, you've got Gemini outperforming.

   5. JLJason Lemkin0:34

      Well, luckily, you're a non-profit, so whoever wins is great for the global economy, right? You don't have to worry about it as a non-profit. It's all for the greater good. Where we have ascribed the odds of a downturn to less than zero. I think OpenAI has existential risk. It is a bet that the best of times lasts at least a decade. It's pretty interesting that Andreessen not only raised the most capital, but on a two-by-two, I think has the strongest founder brand.

   6. RORory O’Driscoll0:55

      You can be promiscuous at the A if you have enough late-stage stuff to cover it up.

   7. JLJason Lemkin1:01

      Ready to go?

   8. HSHarry Stebbings1:03

      [rock music] Boys, we have a big, big lineup

2. 1:16 – 8:59

   Anthropic's $10 Billion Fundraise

   1. HSHarry Stebbings1:16

      today. Uh, we're gonna start with two monster rounds. It seems the only thing anyone's talking about right now is Anthropic. Anthropic raising $10 billion at a $350 billion price. I would love to hear your thoughts on this. Is this the last round before they go public? How do we feel about the price? Over to you.

   2. RORory O’Driscoll1:35

      Probably yes on the first question, because they've stated they want to, and it feels like they can. And if someone says they want to do something and it feels like... and that thing is doable, then logically it should get done. Um, so yeah, I think it probably will be the last round before the IPO. And, you know, how do you feel about the price? Look, when, when they raised at $160, I mean, I remember internalizing. We talked about it, and frankly, we talked about it in our partnership. You kind of go, big number, wow, that's the second or third-largest private cap valuation ever. And then you look at the market traction and the revenue traction, and you go, on a revenue multiple basis, it's cheaper than some of the stuff we're doing at 200 and 100 pre, 'cause this is a company that's gone from... It's easy to remember the numbers for Anthropic because they very kindly did them in round, you know, units of 10. They went from $100 million in '23, uh, at the end of '23 run rate, to a billion at the end of '24 run rate, to allegedly about between 9 and 10 billion at the end of '25. So let's assume those numbers are roughly correct. They 10X'd two years in a row. I don't know, next year do they... Let's just say they only, quote, "only 3X," so they go to $30 billion, right? Now, a rule of thumb is, I'm gonna go now from ARR and run rate at the end to GAAP revenue for the year. A rule of thumb says, take the opening ARR, the closing ARR, and calculate the average. Uh, $10 billion, $30 billion, average is $20 billion. That says they do actual GAAP revenue of $20 billion next year. So it's, you know, 17 times NTM revenue. It's a much lower revenue multiple than Palantir. It's kind of comparable with Cloudflare, for God's sake, in the public markets. So you do that math. If the growth is there for one more year, it looks cheap. It's the old rule. It turns out you really, really can pay up for anything that goes 10X year on year. So that's the bet, and the guys who did it at $170 three months ago are feeling pretty smart now. They're at 2X in four months. Calculate that IRR, Harry.

   3. JLJason Lemkin3:29

      Only raising $10 billion, it, it's actually a sign that, that the, the unit economics are probably healthy. Um, it's not that mu- it's not that much dilution, right? Um, so I think Anthropic's been clear that they believe that their, their, uh, their unit economics are strong. Um, they own o- they own not just enterprise, but they, they own code creation, they own application creation, right? They own building everything we have spent our lives working on. Um, and if you're building with these tools, I know it's the trite VC thing to say, but it, it's hard not to believe we're in the first inning and just getting going. It's literally hard not to believe it. So how that works out on a spreadsheet to, uh, how many tokens, [laughs] how many trillions of revenue is complicated, but, uh, subject- qualitatively and subjectively, it feels like first inning.

   4. HSHarry Stebbings4:22

      Jason, do you think they have the enterprise market at this point?

   5. JLJason Lemkin4:25

      Everything that I see at, at the, at, at the API level, I mean, Claude has won it, um, and nothing is perfectly stable in AI. [laughs] We should not feel that anything's perfectly stable, but the reality is so far nothing's dented that. And it's birthed Cursor and Lovable and Replit and Harvey and Lago- I mean, the- these all... I mean, even Cursor, Cursor is just a, a derivative of it, of it. I mean, there's other models as well, but it's, it's tough to, it's tough to stop this train.

   6. RORory O’Driscoll4:52

      Yeah, I, I agree, and I think you should break the market up into, I would've said two, and as of yesterday, I'm gonna say three, and I'll tell you what I mean in a second. The enterprise market. There's the enterprise API market, which is basically selling your product to other ISVs who are building on top of it or enterprise building on top of it, and they've been the premium product there for the enterprise for a long time. Because you're ju- quote, unquote, "just an API," there's always a risk that as, you know, an ISV is building on top of your product, they might try and use cheaper open source models for some of the more commodified stuff. But to the extent that you need the high-end part of the product, that's been the business that Anthropic/Claude has been able to get. So first of all... And that's where they started, obviously, at the API level. Now, the second thing that obviously... And, and, you know, one of the biggest customers for that was the coding companies, like, um, Cursor and that. So then the second thing they've done, yeah, within the last year is they've said... I mean, I don't, don't think they said it as malevolently as this will soundBut they're like, "Hey, coding is probably the single largest use case for what we make. Let's build a coding product." So they have Claude Code, and that's allowed them to, quote-unquote, win at the... I'm taking your win at the enterprise comment. Now they're winning not just by being the API, but being the app for coders. And it's not 100% win. They're kind of competing with Cursor, they're competing with GitHub, but, you know, you're grabbing more money instead of maybe being 50% of the revenue of a coder 'cause you've got gross, with a gross margin of 50, you're getting 100% of the revenue 'cause you're selling the product. So that's the second category in which they're clearly, quote-unquote, the winner. I mean, I, my sense is their enterprise share of coding revenue is plus or minus comparable to, uh, Cursor and GitHub, maybe a little lower, but growing nicely. And then the third thing is they announced a product yesterday, and caveat, I haven't had to use, been able to use it yet 'cause I'm actually here at an offsite, but it's early in the morning. My coffee hasn't kicked in. It's, uh, the product is, bas- it's Claude for non-coders. It's the ability, it's kind of a ability... Claude Workspaces, I think it's called. Don't quote, I could be wrong on that. But basically, the idea is if you're doing other knowledge work other than coding, can you do it within Claude? And this is the idea that, you know, the world, I think, has been going in this direction. We talked a little bit about Manus last week, you know, um, companies like that. Um, there's a number of others. We have one, Obviously.ai, that has kind of launched a product and that's based, it's just starting now. But, you know, Claude Workspace, obviously the dominant one, the idea is, is that if you're building PowerPoint, if you're manipulating data, if you're doing all the other knowledge work that those of us who aren't coders do, instead of bringing the AI to the Excel spreadsheet, which is what Copilot tried to do at Microsoft, you bring all these tools into the Claude space, into the workspace, and maybe it would be more efficient. Now, I've read some preliminary reviews. Yeah, some, some are like, "Yes, this is amazing." The people who've used it more said, "Yeah, it's amazing, but it's a bit janky." But the idea is there, and clearly the reason I mention all this is the idea is the direction of travel is, hey, don't just be, you know, don't just be, quote, the chatbot for enterprise, the chat interface for enterprise, like ChatGPT for research. Be the place where you do knowledge work for the other knowledge workers who aren't coders, right? At a high level, and this is a zoom-out comment, but it's a scary one if you're Microsoft, it's like every single knowledge worker uses the Office Suite. You get PowerPoint, you get Excel, you get Word, right? What is the AI version of the Office Suite? And 'cause that's a great pro- It's a kickass product for Microsoft 'cause every knowledge worker buys it. Can you imagine turning up for work and someone saying, "We're not gonna give you a spreadsheet, a word processor, or a PowerPoint product"? You're like, "What the fuck?" Right? The idea that for every knowledge worker, there can be some product like this, some bundle like this, is a huge-ass idea, right? And I don't think this is it yet, but the idea is clearly to the extent that you are doing knowledge work using AI, you probably will need some space to be in, and that's the game they're just joining now. Sorry, long-winded answer, but the idea is, so they're going for another slab of revenue.

3. 8:59 – 16:08

   Has Claude Code Beaten Cursor Already

   1. RORory O’Driscoll8:59

      Sorry, Harry.

   2. HSHarry Stebbings8:59

      My job is to ask pro- my job is to ask provocative questions. Um, when we look at case two there, you mentioned kind of Cursor and the potential impact that Claude Code has on it. I speak to many CPOs as part of 20 Products, and I ask them about tool usage internally. Everyone that I speak to instantly states Claude Code, and the portion of people that said Cursor has gone down dramatically in the last three months. Would you feel nervous if you were Cursor and a Cursor investor?

   3. RORory O’Driscoll9:28

      Depends on the price I got in at. I mean, I wouldn't feel nervous if I got in at, you know, the pr- the round at 200 million pre, because it's not going away. I mean, again, th- there's an element of a horse race drama here. We like to get caught in the, you call it provocative, I might call it getting lost in the details. Um, there's no doubt that Cursor has got two large competitors, both of whom can bundle with adjacencies, A, Claude Code, where they have a strategic dependency as well, and B, GitHub. So yeah, I would be nervous if I was a 27 billion pre, um, Cursor investor, but they've created something amazing. And what I always say to my CEOs is, the best way you know you've graduated from one league is when you start competing with people one league up. It's like, you know, you're in Division 1 of the English Premier Le- English Premier League, and suddenly you graduate to, you know, the top division, wh- it's Champions... What, what is it now, Harry? Premier Division, right? Yeah. I'm so old, I reme- I'm so old, I remember when that was Division 1. But anyway, um, you know, you just get to g- you get to g- play against different competitors. I mean, Cursor is now up against, um, Microsoft. It's up against their own supplier, Claude. So yeah, they're playing in the big boys leagues. But are you a little scared? Yeah, but you're damn glad to be playing there, 'cause the other 10 coding agents ain't even gonna get to play.

   4. JLJason Lemkin10:43

      For sure. I'd be a little... I would ... Listen, if I were, if I were an investor, uh, first of all, I've given up, in the age of AI, I've given up on this nerv- nervo- nervousosity-

   5. RORory O’Driscoll10:50

      Yeah

   6. JLJason Lemkin10:51

      ... of competition-

   7. RORory O’Driscoll10:51

      We're all nervous

   8. JLJason Lemkin10:52

      ... and disruption.

   9. RORory O’Driscoll10:52

      I love it.

   10. JLJason Lemkin10:53

       Because what can you, what can you do? The w- I mean, these products didn't, I mean, none of these products even worked a year ago. How nervous can you be, uh, uh, holding a large position in a product that didn't work a year ago? You can only be so nervous or quit the game. Um, but even little things like, like Anthropic cutting off xI- xAI's access to Anthropic this week, it is easy for me to imagine the business model switches. Right now, it's great for Anthropic to get an extra billion or so a year from Cursor. It's a great deal. It's, it's free money. They, they, they repackage the product. They don't, I don't believe they have to sell it at any discount whatsoever, and they get another distribution channel. Should that change as, as Anthropic crosses a couple trillion and $10 trillion in revenue, uh, it's easy to imagine, one, they could cut off access. Like, that sounds aggressive, right? Or they're, they just might limit access to the top modelsThey just might limit access. They just might degrade it. We've al- And, and so, um, there's no reason to believe that, what's the expression, that the scorpion might not sting the, uh... Who, who, who's the scorpion taking across the river? [laughs]

   11. RORory O’Driscoll11:57

       The frog and the scorpion. It's in his nature.

   12. JLJason Lemkin11:59

       Yeah, there's no reason that the c- that Anthropic just might sting Cursor just before it gets to the other [laughs] side of the river. I don't-- I think it would be naive to as- assume otherwise, right? And there's many ways that the scorpion could sting the frog. It could be, it could be the, the, the simplest way is to limit access to models. They've already done it on a limited scale with xAI and others. Uh, they could simply copy the product. I mean, how hard is it to build, uh, an IDE that's just the same as Cursor? Uh, it's really not that hard. They can build Replit and Lovable too. These are not the, the greatest challenges of mankind. So all of them are at risk of the scorpion stinging the frog, but I would still invest.

   13. RORory O’Driscoll12:35

       It is worth pointing out that, uh, when the scorpion stings the frog, uh, the scorpion dies too, in the meta- in the old Aesop's fable and in The Crying Game, if you remember the movie. But yeah, I d- I, I love-

   14. JLJason Lemkin12:45

       It, it does die too. [laughs]

   15. RORory O’Driscoll12:46

       Yeah. I love it, Jason, 'cause you... The first thing you said, I think, is just really so true. It's very helpful for me 'cause the comment on being scared, if, if, if you're gonna be uncomfortable being scared, you need to just go home. I'm scared all the time 'cause these things change so much. I mean, I think we said this before, you know, in SaaS land you could compound for seven or eight years. Now, there's existential risk every six months, and if you can't live with that, you probably need to find a different job. So I, I, I think you're spot on there.

   16. HSHarry Stebbings13:11

       If we've got to be comfortable being scared, to what extent is Google choosing Gemini for Siri over the prior relationship with OpenAI a massive deal versus a temporary moment in time where Gemini is proving to outperform?

   17. RORory O’Driscoll13:26

       The big deal comments are this. One, Google and Apple obviously have a long-standing relationship where the money moves from Google to Apple for placement of search, because search monetizes with advertising, so therefore it's valuable to get real estate, right? So they have a long-standing relation. So it kind of makes sense that you'd go with your default relationship to make it happen, right? The odd thing is, for this relationship, the money may-- I'm not clear on the money movement, but it, it kind of... Because there's no advertising model, maybe the odd thing is Apple might be paying Google for Gemini, I don't know, while at the same time getting paid a lot more by Google for, um, placement on search, which is why the two products are slightly different. That could flip. If OpenAI had a model, for example, that had ads in the thing, then maybe, you know, the dynamics of the money move can flip. But yeah, if you're in the distribution business, you wanna be on a billion phones. I mean, the proof that it's worth something is Gemini... I mean, app- Google pays, I, I used to know the number, I don't, $10 billion a year. Some, some absurd sum of money just to show up on the phones 'cause it's the best distribution on the planet. So yeah, at the margin, you're sad. Un- unless the economics were stupid. It's not like... Actually, even cancel that comment, 'cause it's not like OpenAI blinks at bad economics. I mean, those guys have, you know, an economic indifference curve that would make your head hurt. So yeah, I think it's, at the margin, you'd be bummed not to be on it.

   18. JLJason Lemkin14:47

       Certainly today, Google feels like a far more stable partner than OpenAI. It's just a reality. It's not the-- OpenAI is not the only game in town anymore for Apple. Um, the only thing I would add, I, which, you know, sometimes when I've spent time with the folks, senior folks at Google Cloud and other parts, I realize we underestimate how mission-critical privacy is in the deep enterprise. We, we don't talk about privacy enough. We don't talk about... And so the fact that Apple made clear that they felt this was the best solution for user privacy and that they can maintain the most data within their clouds and their systems, we can jo- We, we don't care about that with most of our startups. Yeah, we care about privacy. Hopefully it doesn't leak. Hopefully the agent doesn't expose your data, uh, publicly. But this is, like, even, like, a lot of enterprises think, they worry about whether Salesforce is secure enough. They wanna run their CRM on their own private clouds, on their own data. Google Cloud, it's not as big as AI, but they have a massive business running Salesforce on their own private clouds for customers who somehow worry Salesforce isn't secure enough. So when Apple says privacy is part of it, it's, it's just a reminder to me there's, there's a, there's another level here in the big enterprise that a lot of folks can't touch. We actually don't have those levels of security and privacy. We're not gonna earn those deals because we're not that secure. We're not, we're not more secure than Salesforce. It's a high standard.

4. 16:08 – 25:58

   OpenAI Could Still Go to Zero

   1. HSHarry Stebbings16:08

      If you're OpenAI, are you not slightly nervous? You're being eaten away by Anthropic, who have had wins behind them seemingly like they haven't had before, and incredible model performance. And then on the consumer side, you've got Gemini outperforming, you've got, you know, NanoBanana being incredible, and the tailwind of Google and the machine behind Google. It feels like you're being eaten at every angle, combined with very high SBC and high churn, and it feels precarious.

   2. JLJason Lemkin16:40

      Well, luckily you're a nonprofit, so whoever wins is great for the, uh, for the global economy, right? You don't have to worry about it as a nonprofit. It's all for the greater good.

   3. RORory O’Driscoll16:48

      You're not a nonprofit anymore.

   4. HSHarry Stebbings16:49

      I'm, I'm being serious.

   5. RORory O’Driscoll16:50

      Stop. No, hang on. Stop. First of all, when-

   6. JLJason Lemkin16:51

      Whoops. Whoops.

   7. RORory O’Driscoll16:52

      No, no. Hang on, hang on. Uh, that's, it's confusing when Harry says... First of all, just to be precise, you're not a nonprofit anymore. Your largest shareholder is a nonprofit. So to just make it even more hard, if, if your economic value goes down, the biggest single loser is this wonderful nonprofit called OpenAI Nonprofit, which has, uh, actually has already made some interesting donations as kind of... Which was very clever, by the way. Once you got that deal done, start dispensing some money as a charity to show it's a charity to, to separate the two. So, you know, if OpenAI's value goes down, the largest loser is the charity, the second-largest loser is Microsoft will survive, and as you pointed out, the third-largest loser is Masa. So it is a problem. But the core question is, precarious is a little strong one. You feel angsty and driven. I mean, that's why they're at code red. But A, to Jason's point, anyone who's not feeling nervous doesn't understand the game. So of course they're feeling nervous 'cause, you know, you gotta play the game. But look-I saw some... I mean, actually, I saw it in The New York Times this morning, I could be wrong. Simon- Sebastian Maltby, who I think wrote the book on venture at one time, was kind of, "Oh, I think Google goes, uh, sorry, OpenAI goes to zero," and I think that's absurd. There's huge value here. Like, I still, you know, we all default... They have 800 million users. They'll find a model. I mean, I think that there is a model there. They have subscriptions, they have a business. It's not going to zero. The way I keep score is not, oh, does it go to, like... The way I keep score is the relative value of Anthropic to OpenAI is kind of the ratio of, let's call it management success from over the last three years. And the truth is, it's gone from, you know, 10 or 8 to, you know, 10 plus to one, to much more convergent. It's now only two to one. So if you were in a race, the objective, yeah, the objective measure of success over the last three years is something like, uh, you were in the lead 10 to one over the other guy. You're still in the lead, but he's now only 50% behind you and coming on fast. So are you nervous? Yeah. Are you bummed? Yeah. You're still in the lead. Don't blow it. And I think, you know, you've got a differentiated business. I still, you know, like, for all the Gemini talk, I still enjoy the ChatGPT experience more for the kind of research I do, for example, to go on this pod. So they got something amazing and compelling there. They just need to, frankly, focus, knuckle down, focus, and make it work and make it, you know, realize its potential. A lot of the make it work. That's a stupid statement, Rory, 'cause it has made it work, it-

   8. JLJason Lemkin19:16

      There is, there is a very... I think there is a very simple bear case for OpenAI, though. There is a s- a very simple bear case that it goes almost to zero, um, which is that shelf life of an LLM is less than 100 days. Half-life is very short, and something happens. There is a macro disruption, and OpenAI can't raise the capital it needs. All of its competitors, we just talked about how Anthropic has much superior margins, Gemini, massive cash flow, and, um, xAI, crazy, but, you know, it, it, it'll get a trillion of Trump contracts. OpenAI is vulnerable to, you know, we know we joke about macro disrupt- every portfolio company that didn't hit, uh, the, its Q4 numbers blamed macro disruptions. But it easily could ha- like, this cap- the, we've never seen this amount of capital availability ever, and it is not hard to imagine something... We've had systemic shocks in our lifetimes. If this was '07, '08, or whenever, OpenAI could almo- like, it could die in the sense that it could not evolve when its competition could.

   9. RORory O’Driscoll20:19

      One caveat, I understand your comment, which is why the old Bill Gates rule and, you know, uh, was always have two years of cash on the balance sheet, like OPEX cash, right? 'Cause you're right. I, 'cause I don't... If that's the case, then you ca- Like, the way you could only get into a really tough situation is if the world went to shit just when you needed to raise more money. So they're smart people. If I was... Yeah, if you're running the CFO of that company, your mental rule of thumb should be raise like crazy, you've got the world's best fundraiser, and never have mo- less than two years cash. 'Cause with two years cash, even if the world, you know, world's changed, you can tweak the thing enough to converge more quickly. You just dial down your ambition and dial up your cash flow focus, and in two years-

   10. JLJason Lemkin21:01

       But how do you do that if Gemini and Anthropic can keep going? How do you do that if your competitors can keep going through that? That's the thing. It's, this isn't work, Workday spending a little bit less on, uh, on making sure that the, the, the Windows 98 integration works properly. You die if you don't have the capital.

   11. RORory O’Driscoll21:16

       But I'm go-

   12. JLJason Lemkin21:17

       You die.

   13. RORory O’Driscoll21:17

       Uh, but, but I suppose I... You're right, Jason, but I, I rejected your first comment, which I don't believe this is the kind of user base that churns at, you know, 100 days notice. I think that there is a large degree of, an increasingly large degree of consumer behavior and stickiness. So yeah, can you paint a scenario like-

   14. JLJason Lemkin21:33

       No, no, wait, hold on just one second. Just, just imagine, okay, OpenAI needs $100 billion in the next two to three years. That is more than it has spent to date, okay? Its spend is accelerating. Um, would you... Let's imagine it, it can't raise that, and it's frozen in time. Uh, uh, ChatGPT is essentially frozen in time today. Would you use ChatGPT from a year ago? Would you use Claude from a year ago? NFW you would use these products from a year ago. There's no way you would use them in, in Cursor or for coding. There's no way, there's not a one in a million chance any developer would use a year-old model today. They were so terrible. This company would deteriorate so... It would be like Detroit, like it would still exist, right? Or it'd be like AOL and dial-up. You'd still hear the sh- the shrieking because some people don't... Grandma doesn't know, uh, Grandma's fine with ChatGPT from a year ago because it helps her with recipes in the kitchen, but the rest of the world's moved on to broadband.

   15. RORory O’Driscoll22:23

       Two, two, two comments. One is, yes, it is, by the way, it is astonishing that someone just traded AOL and it still has cash flow. That was the funnest fact of the year. Like, uh, like, literally last year, someone thought, "Wow, that thing's worth a billion bucks still, 20 years on." Um-

   16. JLJason Lemkin22:36

       Harry, get me on the internet.

   17. RORory O’Driscoll22:38

       Yeah. [scoffs] But I, I, I don't agree with what you're saying. I, I understand the point, but what you're saying, in other pa- it's... There's, imagine a two by two, which is, you know, macro condition's good, macro condition's bad, and then, um, the other side of the two by two is scaling law's still working, so improvement is vital, versus scaling law's slowed down. You're right. In a world where scaling laws are still massively working, so the next model is infinitely better than the last model, and where macro is shit, so they can't access the capital, then in that corner case scenario, then you're right. You can paint that scenario, 'cause you can always paint a bad scenario. That's what you learned. I think it's just the lower likelihood of-

   18. JLJason Lemkin23:15

       Yeah, but let me just, let me just add one more point, and I don't want to take too much time, Harry.

   19. RORory O’Driscoll23:18

       Yeah.

   20. JLJason Lemkin23:18

       You're the boss. I think we have returned to a moment in time, it, it feels like late 2020, 2021, or maybe, or, or you can pick some other times in our careers, where we have ascribed the odds of a downturn to less than zero, in venture, in everything. We are deploy- we are raising funds, we are deploying capital. We are doing up rounds weeks after the last one, and underlying that bet essentially is a 0% chance of things notUh, and, and, and look, the w- uh, we, we see it in data center use, we see it in power use and water use and RAM, but we are-- And that's fine. That's-- We're not paid to, to, to mitigate downside in venture startups, but, uh, I, I think OpenAI has existential risk. It is a bet that, that, that the best of times lasts at least a decade, and I think you can tell me the history of, of downturns. They're usually shorter than we think, but, but we don't... 10-year cycle would be a long one historically, right? 10-year with no downturn.

   21. RORory O’Driscoll24:12

       I, I do also have to say, I do think on the consumer retention element, I, I think you're wrong, Rory. I think people are a lot more promiscuous than we give credit for-

   22. JLJason Lemkin24:19

       Speak for yourself

   23. RORory O’Driscoll24:20

       ... and I think since-- Uh, excuse me.

   24. JLJason Lemkin24:22

       So there's, uh-

   25. RORory O’Driscoll24:23

       Since the latest Gemini models, I, I d- I definitely am. I'm a total slut for a new model.

   26. JLJason Lemkin24:27

       Yeah.

   27. RORory O’Driscoll24:27

       But since the new Gemini models came out, you've had-

   28. JLJason Lemkin24:29

       Okay

   29. RORory O’Driscoll24:29

       ... a 22% drop in ChatGPT usage.

   30. JLJason Lemkin24:32

       My son dropped it.
5. 25:58 – 46:33

   Andreessen Horowitz's $15 Billion Fundraise

   1. JLJason Lemkin25:58

      I mean, speaking of moderating ambitions, there's one firm that is not moderating their ambition, our dear friends at Andreessen Horowitz, $15 billion for the new funds. I believe it was 22% of all of the dollars raised from venture in 2025 going to them with this fundraise. It's enormous. How did we react to it? And a subsequent really underlying question, do you have to go mega big platform or tiny boutique to play the game in 2026? Listen, on, on the one hand, so what? We've been talking about this since this pod started, right? We've been talking about massive funds and, and it, it's, it's just all you have to do is just look at the Databricks and Anthropic rounds, and it's pretty easy to see why you'd wanna do that playbook. I would say what Andreessen... It's pretty interesting that Andreessen not only raised the most capital, but on a two-by-two, I think has the strongest founder brand. That's hard to do both. It's hard to do both, and it is evolved. And Andreessen, I mean, I've been around long enough to remember vaguely when it started, and it was cool from day one. It was cool from... Now, it wasn't what it was today, right? But I remember I had a, I had a, I had a subtenant. Marc Andreessen came into our office to meet with them, to fund them, and it, you know, it was a God moment. "Oh, my God. M- Marc Andreess- Is that Marc Andreessen in the office? I mean, sure looks like Marc Andreessen." And they have invested in that on many levels on the brand, and I don't know how they've done it in some ways, but it has, um... And, and, and it's gone a little bit up and down. I remember I had one founder that was pretty hot who was bummed that, uh, you know, he, he, he, he, he got a term sheet from Andreessen and not Sequoia, but that don't happen today. That was a brief... That was the '08, '09 version of, uh, of, of Andreessen. That was a brief moment. And you have returns. The, uh, the returns were published. The returns are top decile. So you have the biggest fund, the top decile returns or quartile, whatever, top tier, which used to be a knock, and founders love this brand. You know, whoever was talking about fund versus firm or platform, that's... It's hard to do all of those at scale. [chuckles] Founders love it. They love it. It's, uh, it's, it's defensible. So you might as well Hoover up 51% of the capital and then just shut down your competitors.

   2. RORory O’Driscoll28:06

      A- a- agreed. I, I've, uh, I've thought about this a lot in terms of the question you asked, and I have a lot to cover on this, just heads up, right? And, um, I, I, I, think... I'll give you the summary. They've won, and they've won really well, and the only thing that might impact them at this point is misexecution internally. But now let's unpick this, because the first question in your little notes you said is, you know, can they make a 3X or a 5X on 15, um, $15 billion, right? And, um, so that's the question you asked, right? Um, and everyone always starts with that question. "Oh, there's just not enough exits to justify that," is what they say, and it's the wrong way to think about it, 'cause I think you have to break it apart and say to yourself, first of all, can the industry... Is the industry at a stage now whereby that amount of capital can earn a return in total? In other words, the total capital going in. 'Cause remember, if the total capital going in can overall earn a decent return, then it, it, it doesn't matter from the industry's perspective if that $100 billion of invested capital goes all to one firm and they invest it all, or it all goes to 100 different firms and each invest $1 billion, right? As... The first, the macro question is, is the overall market in equilibrium such that you can get a decent return here, right? And then the second question is, given that, you know, like, again, going back to if, if it is in equilibrium, can these guys... How much of that total money can they take and profitably deploy? In other words, are there diseconomies or economies of scale, and can they execute it well? And, you know, kind of fast-forward to my two comments on this is, A, I think the industry is roughly in equilibrium, so they can do it, and in fact, the numbers are moving in their favor. And then second comment is, so for the argument on employing it at scale, I think it can make it, right? So let's do the first.Yeah. They raised-- The question, they raised $15 billion, but they do 20% of the total, so it means the industry as a whole raised $75 billion, right? And everyone goes, "Oh, there's not enough exits for that," right? Well, rough and tough, 3X, the value of exits this year, which wasn't an amazing year for exits, including healthcare, by the way, was around $300 billion. So not perfect. That's not all owned by venture, but you're kinda roughly there. And the other interesting f- and, you know, presumably next year, you know, with the caliber of com... I mean, you know, if it's $300 billion this year and then Tropic alone goes public, next year is $500 billion of exits. So the industry raised under $100 billion this... Seven... I mean, if, if they really raised 15 and they really are 20% of the total, that implies $75 billion of venture raised, right? It seems to me that's a kinda number that can be digested and yield a 3X return overall. So it's not, it's not like it's stupid the amount of money. And it's actually getting better, 'cause in the last couple of years, venture has deployed a couple of hundred billion a year and only raised about six, $70 to $80 billion a year. Now, some of that is because some of that capital being deployed is non-traditional venture, but it's getting harder for newer funds to raise money. So if you think about it from... If you move on to the second question, can they grab, can they deploy 20% of venture successfully? The, the macro trends are moving in their favor because they're raising more money at a point in time when other people are raising less. So they're getting in a relative... Th-they're in a nice position, provided they can deploy it. So I think overall the industry is getting into equilibrium. Then the second question is, how can they put it out? And they raised 20% of the money last year, right? But you gotta think of over two years. That's roughly, if they raise every second year, though interestingly they raised in '24 and then '25, but let's just say every two years. That implies it's 10% of the money on a sustaining basis. Agreed? It's like you're putting out 10% of the capital. So basically, they've gotta get 10% of the exits, they gotta get 10% of the Series As, et cetera, et cetera. Now, interestingly, that work that we talked about way back last year that the partner from DST did showed, like, over the last decade, Andreessen did roughly 10% of all Series As that became $5 billion outcomes. So it's kinda their market share, right? They gotta get 10% of everything. Gotta get 10% of the great Series As, they gotta get 10% of the great Series Bs, and provided they could execute that all the way up the stack, they make it happen, right? And-

   3. JLJason Lemkin32:25

      That's a good way to summarize it.

   4. RORory O’Driscoll32:26

      Yeah. And, and, and what I realized when I did that, Chase, it was like, I just literally did it this morning, 'cause I'm getting ready for our offsite, so I'm looking at kinda exit data. It's... I mean, there are two risks, and we'll talk about them in a second. But you look at it and you go, "It's not crazy if..." And then as you say, it's, it's in part because, I mean, you said it, is that they've done in the makeup. A-a-and I read the Packy McCormick article and all that. I think, you know, we all... A lot of us come into this business as investors, you know. And I, I, I think they came into it as engineers and as company builders, and they did a great job of solving the system, right? And, you know, there's a lot of leakage along the way. I mean, one of the things that was interesting in that article is you, you, you make some mistake. You deal with a lot of negative knocks along the way, but it doesn't matter, provided the model works overall. And again, I repeat, they gotta get 10% of everything, right? Now, maybe two or three things could go wrong, right? Um, maybe three. The first is, you know, you just... When you get bigger, if you have to do 10% of all Series As, it just becomes a lot of deals, which means a lot of people, which means is the marginal investor any good? Can you stay good when you have 20 people writing checks versus 10? It's just hard, right? You know, I think you have to... That's a management problem with the good managers. The second thing is, the funny thing is you say you gotta get 10% of all exits, right? And the total exits, the total value of all private companies right now is about $3.6 trillion. Which pleasingly, by the way, if you say 3X on invested capital, that's $1.2 trillion over 10 years. That kinda says it's got, got $100 billion a year creating $300 billion a year of value. If you chop off just the top three deals, you're down well north of a trillion bucks. You go down to $2.6 trillion. So the bigger the firm, the more capital you raise, the math all works, but it's very top dependent. And it's, again, it's... I thought the article Packy McCormick wrote was very good. If you miss even... Like, I can make my math work and not get any top 10 exits. You simply can't make this kind of math work without getting those top exits. And they... And you don't have to get in at the A, but, you know, you don't have to do the A of SpaceX, but you better show up on the cap table before they hit total, because that's a trillion dollars of value that you gotta get. So that's the mission for them. And, you know, they're doing it. And that's why they have the best-

   5. JLJason Lemkin34:41

      That part, to me, seems the easiest part to, Rory. I did... The, you simpl- you simplified it in a great way, which is they need to do 10% of Series As that matter each year, okay? That's doable if you have a top two brand, I think, and you have the right team.

   6. RORory O’Driscoll34:55

      Yes, and they did it.

   7. JLJason Lemkin34:55

      You just meet with every-

   8. RORory O’Driscoll34:56

      Yes.

   9. JLJason Lemkin34:56

      The job is to meet... I don't think you can do, I don't think you can do 10% of every pre-seed deal. I think even YC can't... Like, that's a different question, right? It's doable. And then if you have an a- one of the top three brands and you have a large enough team, their job is... I mean, even at Insight, I learned this from Teddy back in the day. Like, you get fired if we don't see every deal. It's a different question of whether we win it. We get fired if we don't see every deal. If Insight can do that and Vista can do that, why can't Andreessen see every single... Like, 'cause they, they should... They have relationships with every seed manager that matters. They're out everywhere. They're close to Gary Tan and the rest of the world. Uh, why shouldn't you see every... I mean, there'll be some from left field, right? The, the, of course. But why shouldn't you see... If your brand's strong enough, you should still see them. And, and then the interesting question is, why can't... This, this was the, the question years, a couple years ago that, um, I remember Andrew Bilecki from Klaviyo said, is like, "Well, why not 90% market share? Why can't Andreessen have 40, 50%? Why not?" I mean, there's conflicts, of course. Let's put conflicts aside, though. Why can't your math scale to 50%?If conflicts weren't an issue, why can't it scale to 50%?

   10. RORory O’Driscoll36:06

       It's actually an interesting question, Jason, because, you know, if you think about where I started, you're right. You start... Look, Sequoia have... I mean, one of the examples of why I went to Sequoia, you can tell deep in their heart they believe even if one other company, one other venture firm has a billion dollars, you're like, "Why are we letting them have that?" Right? We'd really just prefer it to be all us, right? And if every year the technology industry entrepreneurs gives the money, the venture guys, the chance to turn 100 billion into 300 billion, the entrepreneurs at some macro level don't care if that's done by one firm doing all of it or half of it versus 100 different firms doing it all. Like, there's no obvious-

   11. JLJason Lemkin36:43

       Yeah

   12. RORory O’Driscoll36:43

       ... economic reason. So I think the interesting thing-

   13. JLJason Lemkin36:46

       Especially if there's no downside to Andreessen. If there's, if all I get is upside, I don't get any drama if I sell my company, I don't get, I don't get thrown under the bus, they do my pro ratas. The worst case is I'm treated well and I get to go to these cool events. That's the worst case. Why would I not take their money?

   14. RORory O’Driscoll37:00

       So, so you're right, and e- e- exactly right. So, uh, 'cause it's an interesting question. If they can do 10%, why can't they do 20, right? And as yet-

   15. JLJason Lemkin37:09

       50

   16. RORory O’Driscoll37:09

       ... so, so why can't... And yeah, exactly.

   17. JLJason Lemkin37:11

       50.

   18. RORory O’Driscoll37:11

       So I, I think there's really three things that could go wrong, and it's an interesting spec. One is that I think you should assume that when you have that com- you see all the good deals at the Series A, but remember, you also see all the bad deals. So the more pickers you have to have to do more of the deal, the, the harder it gets to have all those pickers be good. You just... Y- your mistake rate goes up. But you can cover for that if you do enough of the A, right? The real thing... So that's the first thing. Then the second thing is, as you get later, you just have to concentrate in the winners, right? You can be diversified a shit at the A, but going back to the comment is, if it's $3.6 trillion of total private value and the top four companies now... If, if SpaceX really was worth a trillion, you could argue the top three companies are now 1.8, right? You just gotta make sure you concentrate down on those, and if you slip on missing, you know, uh, it just gets harder to execute. Like, you can... So that's, that's the second big risk. You don't concentrate on the right thing.

   19. JLJason Lemkin38:06

       But you have to fund every two years or every year. You can... They don't have... Like, you... I think your job is to get good at concentrate. Like, you own fif- I think Andreessen should target... Ben and Mark actually did not WhatsApp me on this, but I think your math, Rory, is so powerful to me. 10% of Series A's. Combine that with Andrew Bilecki own eight- 80% of your market or you're a failure as a founder from CEO of Klaviyo. Own 51% of venture. I believe conflicts are a super solvable problem for founders. Like, law firms figure it out. Like, you just isolate it. We have, we have t- three teams, and Andreessen becomes known as the gold standard. There are no conflicts. Like, you can have direct competitors, Andreessen, and they have solved this. Like, there is no leakage. They have solved this problem. And so I... This is a traditional VC. Even Sequoia has the issue. We, we don't do conflicts, right? I, I remember in the early days when we met, we referred some stuff and you guys were like, "No, HubSpot's our winner. We can't have any conflicts." But I think it's a solvable issue. Then you get 51% market share. Then you own... And then Sequoia and those General Catalyst guys get the scraps. If you wanna build a firm and not a fund, this is what I challenge my friends to do, 51%. 'Cause your math just... I, uh, w- I think you can sol- I think you can solve all the other issues. I genuinely think you can solve them. And, and Andreessen hasn't had a fund below four, 4X gross... Or gross. Hasn't had a fund below 3X.

   20. RORory O’Driscoll39:24

       Yeah. What I like about doing this with you, Jason, is how incredibly... I can go in expecting to have to make one co- set of comments and end up on the total opposite side. 'Cause I was expecting to have the, "Oh, they can't make the math work at 10%," and clearly I convinced you they can, so now you're like, "Fuck it. If you can do 10, why not do 50?" So what causes... Well, I think that the human factor-

   21. JLJason Lemkin39:44

       You're, you're willing not to try it if you can access the capital.

   22. RORory O’Driscoll39:46

       Well, that's actually an interesting caveat. So I think that... Look, I think there's two or three risks, right? One is if you're doing Series A's, the more you do, the more people you have to have, and at some point it becomes un- 'Cause it's... The more capital you're deploying, you only have one or two moves. You either do more small deals or fewer big deals. If you're doing, I mean, instead of f- 20 Series A's a year, you're doing 60 Series A's a year, you need X number of GPs. I, I, think quality goes down at scale. Let, let me give you proof on that. Andreessen's market share is higher than benchmarks in terms of... That, that worked, and I wish Rotman, the guy from DST did. It's higher in terms of the great Series A's, right, as a percent market share, but the hit rate is much lower. So as you get bigger, you, you, you get more done, but the quality rate goes down. And at some point, you know, you, not only did your hit rate go down, you probably... Therefore you have a lot more fails, right? So it's hard to scale. So if you scale from 5% market share to 10%, your hit rate goes down by a couple of points. If you go from 10 to 20, now you have the next 10% being written by less good investors. You, the pressure to do deals goes up. My guess is your hit rate goes down over time. So that's the way it happens at, at, at the Series A side. So I don't... I think there is a natural limit to this, 'cause I mean, if you look at public investing, index investing is a scale business. Stock picking is not, right? Now, we can talk about is, in the public markets, is indexing the right answer, which is why all the big money managers in the public markets are indexes. But stock picking in general, it gets hard to be smart in a room with more than five or seven people in it. So I think there are inherent limits.

   23. HSHarry Stebbings41:23

       If you are indexing Sequoia, Index, Index reduced the fund size that they went out and raised, a billion and a half circa. Sequoia actually have quite contra- constrained fund sizes. I think the, you know, seed fund is two, around 200 million, and they don't have billions and billions per vehicle. Do they have to embrace scale and say, "Fuck it, Andreessen have set a precedent. This is a money wall game"?

   24. RORory O’Driscoll41:45

       There's no doubt that you can pursue a really great seed and Series A strategy with plus or minus 500 million, plus or minus five, you know, maybe 500 to a billion. There's no doubt about it, right? Index can do it, Sequoia can do it, everyone can do it. The math is clear. You can have five partners doing deals. So maybe another way you ask, to ask the question another way isTo be successful in the Series A, do you also have to add this adjunct product called a shit ton of money for your growth stage, right? Where you use that money to do two things. One is to help you win Series A deals, because you can say to people, "Not only will I do your Series A, but I have a wall of money for later," right? That's the implied thing. And the other advantage it gives you is just you seem bigger, so you get more of everything, right? That's the question. Yeah, Benchmark have proven you don't, right? And, and Andreessen have proven that it can be great. And I think the real truth is, you know, th-th-there's multiple ways to play that Series A game, and one of the ways that wasn't true at all 15, 20 years ago, but now is clearly true, is co-attaching a big late stage fund to your Series A firm fund, provided you execute on both of them well, is a way to increase your profile, it's increase your value to founders, it increases your personal net worth enormously [chuckles] and provided you don't shank the late stage part of the business, i-i-i-it's one way to play it, but it's not the only way.

   25. JLJason Lemkin43:06

       I don't believe, no matter what VCs tell founders in their spiels and pitches, I don't believe founders highly value the fact that VCs can fund you through every stage. Every, every big fund tells you that. Every Index, every Redpoint, everyone comes in and says, "The good news is, if we deem you worth it, um, we can shovel cash into you if we believe you're one of our best companies." I don't think founders go skipping down the street, uh, from South Park, uh, or Sand Hill when they hear that, that... They just... Th-that's not my problem, right? Um, getting help now and giving me the capital on the amount and terms. So I just don't think that is as defensible as winning all the As. That is just an output of a combination of pro ratas and, and, and winning, winning, winning the right to do beyond your pro rata.

   26. RORory O’Driscoll43:53

       Put me down for a no on that, 'cause I think there's two ways it helps, Jason. Now here, I don't think it's dispositive for the founder, but I think it helps at the margin because it'll... For a couple of reasons. One, it helps you tell the founder a story. "Oh, look at the last two years." Like Lightspeed do a really good job of that. "Look at," what is it? "Navan or, uh... Oh, look how much we owned at the exit, 'cause we were there the whole way through." Um, Andreessen tell that good story with Databricks. "Oh, look, we're there the whole way through." And I think at the margin that helps, right? More money's better than less. I think-

   27. JLJason Lemkin44:20

       I don't think an average Series A founder is picking you because, um, you, you diluted the founders of Navan to 5%. I don't think that's the most compelling story I've heard at a founder pitch.

   28. RORory O’Driscoll44:29

       Oh, that's harsh.

   29. JLJason Lemkin44:30

       They're picking me because I believe Mark, Mark and Ben and team are gonna help me build $100 trillion company.

   30. RORory O’Driscoll44:35

       The second argument, 'cause I think the third argument's the impor-... I'll give you this. The second argument is, one, you can use all the growth stage fees to fund all the platform stuff, and you can decide how much or how little you believe on that. I think the third, the third argument is the really compelling one. Watch this. It's when I have a late stage fund, I can afford to do more... I can decide I'm not clever enough to be like Benchmark and pick just the good ones. Fuck it, I'll just do more of them, and some of them will be great, and even if I make errors at the A, I will be able to get so much money in my winners that I can cover for my mistakes. And I'm not saying that's what any of these firms are doing, but it's clear on the bat, the more scale you do, the more errors you make, right? And therefore, the only way you can make more errors is if you have a way to come back from it. And the easiest way to come back from it is just to know, if I, to get one good Series A, I'm willing to get three or four of them wrong, because in that good Series A, I'll do the B, C, D, and E, and the other stuff gets lost in the noise. That's actually the real power of the late stage fund. It's, it's, it's clean up on aisle five. Yeah, we made some whoopsies, we made some misses, but we'll just clean it up, right? We'll go... Y- the other three Series As that went bust, cost of doing business. You're down $60 million, 20 on each. You have $20 million in the good one. You put a billion in and you just 2X it and you've covered your nut. That's the real strength. You, you, you can be promiscuous at the A if you have enough late stage stuff to cover it up. That's the argument. And it, it gets back to the core thing, I think it was inside out. I think if you approach your business as an investor, and I think Benchmark's are superb at, like, you just... I'm trying to pick the best, and I, I naturally gravitate to that. Let me try and be smart and pick the best. I think when you approach it as an engineer, I think those guys said, "How do you engineer an overall system such that it works?" And you say, "Hmm, I can take a little, I can take a little loss rate here, provided the overall system can cover for it," and it's just

6. 46:33 – 53:27

   The Middle is Dead: Boutique vs. Large Platforms in Venture

   1. RORory O’Driscoll46:33

      an approach.

   2. HSHarry Stebbings46:33

      For me, the truth is the ballooning of your growth assets means you have ever-increasing price elasticity on your early assets. And so-

   3. RORory O’Driscoll46:39

      Yes, exactly

   4. HSHarry Stebbings46:40

      ... for us, playing the early game, they can just come in and bid 300 when we're bidding 150. Doesn't freaking matter, 'cause David George is gonna put in a $300 million check at 3 or 4 billion. And so the more you have here, the more elasticity you have here, and that's the real alpha that you get from this. And that was my point, which, uh, Alex Rampell said on the show that we released on Monday. Very simply, the middle is dead. Like every other asset class that matures, you see a boutique specialist and you see a very large platform play, and the middle hollows out. I mean this in the nicest and most loving way, Rory, 'cause I think you're utterly brilliant. Are you not the middle, and how would you respond to that?

   5. RORory O’Driscoll47:23

      I think, first of all, uh, yeah, in that context, you are the middle. But I think, uh, i-if you're gonna do crudely on, um, AUM. But I don't... And I do think that, uh, it'd be a fool... I do think there is pressure when you have firms that can raise $15 billion. And until such... A-a-and that definitely creates additional pressure, and you'd be a fool not to say it. I think you have to focus, 'cause I think the word boutique doesn't just mean small. Given the stage we invest at, we can only do 20 to 30 deals per fund. We can only focus on enterprise software. We don't do consumer. We don't do crypto. You have to be good at something. At the stage we invest at-We couldn't be a $250 million quote-unquote "boutique" because you're a Series A and a Series B, you're gonna have to be writing $20 to $30 million checks with 50% reserves. So what you have to do at a minimum is focus on a specific set of areas and be the best at that. Let's just examine what Andreessen does, right? Enterprise, consumer, f- fintech, crypto, defense, blah. If we were trying to cover all those grounds, we'd be doomed. And it's interesting today, Alex Opertka, he says that. But on the other hand, it's very noticeable that they've split the fund up into four funds roughly our size, to put right at you. American Dynamism, roughly over a billion. Fintech and AI... and apps is about a billion and a half. Infra, a billion and a half. 'Cause implicitly... By the way, I think it was a brilliant strategy. Very Alfred Sloan, if you read the founding of GM. What they're doing is saying, we... They're recognizing you couldn't run this as a single thing, because I think you see deterioration of investment quality. And what they've done is they've given Martine his sandbox. They've given David Ulevitch his sandbox. They've given Alex his sandbox. And each of those funds is a fricking boutique fund at a billion dollars, just like us. So no, I don't buy that, right? A focused billion dollars fund. What they do have with the $15 billion that you don't have as a $900 million fund in the same market as their $1.5 billion AI apps fund is they have the air cover of the brand, and they have the cleanup of the $5 billion, uh, late stage fund to cover for their misses. But, so yeah, I mean, you are compe- So, so that's the advantage they have. But I think to just simplistically say everyone else goes away is not just... It's, it's, it's interesting as, as a comment, but it's belied by the way they've structured their business. I think, but you have to be damn good, because you have to get up every morning and say, you're competing against someone who will see almost everything, who can really lean into what they want, 'cause they have it, and they have this, the brand and the late-stage money. So you have to be... You have to get there earlier. If you wait till it's consensus or anything close to consensus, you're probably gonna lose. I mean, it's the Peter Thiel question, 'cause I always think if, if you look at the two biggest entrants in the last 30 years that are, you know, really since Benchmark in '95, you know, Andreessen Horowitz signed f- figured it out as founders who were engineers, and they systematized it. And I think Founders Fund, even though the name is Founders, figured it out as founders who were incredible investors and figured it out from an investor perspective. So the lens is think- They thought it through, whereas Andreessen Horowitz engineered and managed it through. And they both are obviously the two successful scale entrants. And I think the comment, the Peter Thiel comment is, what do you know that no one else knows? If you're doing as a quote-unquote "boutique" or a focused firm, you have to know something and have an area that, that more general funds don't have, otherwise you're toast. Exactly. You have to see things earlier. It's hard. It turns out to be hard to make money.

   6. HSHarry Stebbings50:59

      Did you hear that spoiler? That was Rory saying the next fund's gonna be a billion five-

   7. RORory O’Driscoll51:04

      It's not

   8. HSHarry Stebbings51:04

      ... coming soon.

   9. RORory O’Driscoll51:05

      Absolutely not. [laughs]

   10. JLJason Lemkin51:08

       Well, look-

   11. HSHarry Stebbings51:09

       Go on

   12. JLJason Lemkin51:09

       ... there, there's, um... I think all this, I mean, it's all true, right? Obviously, uh, Andreessen down to YC is sq- will squeeze out a lot of players. Like that, that, that's... You can't argue with that. The, the meta question is can you still find acorns? Can you still find diamonds in the rough? Are there any good startups that don't go through YC? Are there any of them? Are there any that Andreessen won't see the A? Um, An- Anthropic is on fire, but one of the co-founders said in the very first time they tried to raise money, 22 out of 23 VCs said no. Now almost instantly later, everyone put money in. Can you find that moment in time? If the markets are so efficient in venture, from the bottom end, from YC to South Park Commons to HFO, if those markets, to Project Europe, if those have become so efficient in discovery, um, that the only thing left is inception, and there are a lot of VCs that have been doing this a long time that think the only thing left is inception investing, right? Because you can't compete with YC and Project Europe and HFO and South Park Commons because they, they've all locked up the market. So inception's im- And maybe there'll be a new fund, pre-EF, that, that locks up the pre-inception market. Like we'll go to middle school or grammar school.

   13. RORory O’Driscoll52:20

       Yeah. That feels like, that feels like summation. Yeah, yeah.

   14. JLJason Lemkin52:21

       Uh, but so, so there is truth to that. And is there still just... Can, uh, can you find... Here's my way of thinking about venture. This is, 'cause this is the only thing, otherwise I would re- quit, right? I would retire. Are... Can you still find a $10 billion gem outside of the boundaries of this system or not? This is the meta question. If you cannot find a $10 billion gem, then this is all a game or fees or riding, riding the, the, the down- the downturn of industry. If it is still possible, and your fund or firm, that differentiation, Andreessen, between fund and firm, can actually still find one of those outside of the boundaries of this system, then you can make an insane amount of money. But if not, um, it's all performative. It's all little checks. It's all 25K checks into hot YC companies, and it's all a, it's all a lifestyle joke on Twitter. That's the question. Can you... And, and c- will this market, as it matures, and it has, goodness gracious, matured a lot in the last couple years, will it ruthlessly create discovery for all asset classes to pre- to inception? It's started. It's certainly all down the path to doing that, right? Here's the question to Gary Tan and friends. Can you find a great startup that won't go through YC and friends?

   15. RORory O’Driscoll53:26

       Yes.

   16. JLJason Lemkin53:26

       Can

7. 53:27 – 1:12:14

   The Future of Venture Capital

   1. JLJason Lemkin53:27

      you even find one anymore?

   2. HSHarry Stebbings53:28

      But, but I think ju- ju- just to pull it in in two ways. There's two, there's two founders. There's the ones who are young and want YC-

   3. JLJason Lemkin53:33

      Yeah

   4. HSHarry Stebbings53:34

      ... and then there's the serial entrepreneurs who want money and a good price and people who won't get in your way, which is Andreessen. Naveen Rao, DataGrail-

   5. JLJason Lemkin53:43

      Yeah. Why not go to Andreessen first?

   6. HSHarry Stebbings53:44

      Multi- multiple rounds before anything came public, all swallowed by Sequoia and Andreessen. So the question just to add your addition is can you find any founders that don't go through either YC or Sequoia and Andreessen with big money very early behind the scenes 'cause they're in those insider networks? I don't know. I got in trouble last week 'cause I tweeted the worst place to be investing is Series A. You either need to be pre-seed or pre-IPO today to make money.

   7. JLJason Lemkin54:11

      There is one segment that will always exist in venture, I think, for, for what it's worth. What-- And this, when I look back, this is where I've done a lot of investments, um, accidentally. We used to call it a second seed. You can call it whatever. When there's a glitch in the matrix, when they stumble a bit, or when no one sees the re-acceleration. It's hard, right? But there are moments in time where someone is the hottest company at YC, it has a couple great months, it reboots, and all of a sudden it re-accelerates six year- months, 12 months down, down, down the road. I just invested in one that, but because of Anthropic and friends re-accelerated two years after YC. It can happen. It, and, and that is, that is, that is a niche, but, but it's a narrow... I mean, it happens all the time, right? But it, it's a narrow one still. It's, it's a narrow one.

   8. HSHarry Stebbings54:56

      That's a, that's a hard investing ground. Like, recogni- I, I credit you and you're brilliant at it, Jason, but doing the glitch in the matrix, I see what others don't, that's tough.

   9. JLJason Lemkin55:06

      Yeah. Owner was a glitch in the matrix when Redpoint didn't see it, and I did the seed, and then they came in and put every single round since. G- there's a lot of glitches in the matrix. They happen because w- the progress is not linear in the early days, right? But if progress is linear, man, I don't think there's any hope for, for, for boutiques and buddies. [laughs]

   10. HSHarry Stebbings55:23

       It, it's not, it's not, but it almost is today, and that's kind of the weird thing. With AI companies, the progress-

   11. JLJason Lemkin55:27

       It is almost

   12. HSHarry Stebbings55:28

       ... was, was-

   13. RORory O’Driscoll55:28

       You know, and guys-

   14. HSHarry Stebbings55:29

       ... it all doesn't work

   15. RORory O’Driscoll55:30

       ... uh, c- c- comments here, right? Um, first look, a lot of that is true. Yeah, and just to, just to cite some numbers, you know, Y Combinator com- I think roughly 20 something odd percent of unicorns have gone through Y Combinator, so 80 haven't. And then is it all going to be done by, quote-unquote, the good investors? We track this by round. I mean, typically, you know, we're taking 10 names as being, you know, impressive, hard to beat, as I'd call them, right? Where you kind of go, "Hmm, if I'm up against Mark and Tristan, I might lose," right? We have a mental list of, you know, X hard to beats. And, you know, at the A, it's 40, 50% of total deals. The interesting, it climbs steadily, and by the C, it's about 80%. In other words, they, let's call it the Rory hard to beat mental list. By the time you get to the C, 80% of the time, one of-- they have one of those names in the cap table. So the market is pretty efficient, right? You know, as yet, as you pointed out, um, venture does a stunning job of missing the turn. I mean, you know, if you're taking the two actually big turns of the last two decades, I mean, Salesforce struggled to get a dime from venture and didn't. And Anthropic and OpenAI, with the amazing exception of, you know, KV Khosla, didn't get venture either. I mean, the first venture round at K- at OpenAI was $23 billion pre with Thrive, and the first venture round at Anthropic was $4 billion pre with Spark and Menlo, Spot, you know, right? So we, we pr- we're sitting here saying, "We have structurally solved all our problems. We're amazing. We got all this coverage." But in the end, look in the m- you know, turns out picking matters, and it is newsworthy and interesting how many of the dominant companies, because they were unusual, struggled to get, um, venture acceptance. So it, it, it's not a just a given that y- you know, if you cover enough ground, you get it. Right? So I mean, Coinbase, I think Andreessen did out of the B or the C. Union Square did the A very thematically in 2012, and I think Initialized and Y Combinator did the seed. So there is an element of picking here.

   16. HSHarry Stebbings57:30

       There's only an element of picking if you believe the company growth is non-linear and will continue to be. If you believe that company growth has changed to being linear and signals are clearer than they've ever been, then picking becomes less important.

   17. RORory O’Driscoll57:42

       Yes. If it's incredibly obvious to everyone, and then you rank o- th-to, to be very direct, you're right. If it's incredibly obvious to everyone, and then you rank order on, for lack of a better word, a beauty contest basis, and if you, you know, you're probably going to rank lower than some people who have $15 billion and the guy who invented the product. Oh, well. Don't... You can't... That... I- if that's the way to... And you're right, Harry. Th- there is a little bit now, it does feel a time when it's, quote-unquote, very obvious. And generally, my observation is be very nervous when you think everything's going to work, just as a comment, because that's usually when you're-

   18. HSHarry Stebbings58:18

       I, I, I just look at the, I just look at the best in Europe, which is Lovable, Eleven Labs, and Lagor, I think you'll probably say is the three kind of breakouts right now, and the growth has been en- and it's been entirely linear. There's been, y- no faltering in executional growth, and that is different to years gone by.

   19. RORory O’Driscoll58:36

       Which actually will segue nicely to... Remember I said there's one other risk here, right? About all these strategies, these stra- let's call it the strategies unlike, that involve excellent early-stage investing as part of your overall strategy, but then a huge number, maybe four or 5X that number of dollars going into the growth rounds. Right? The risk in that strategy is that even if, you know, if the execution is good, the pricing bet is still the remaining on, yeah, as yet unresolved question here, right? In the sense of... My comment is, when everything becomes obvious in terms of market and business opportunity, valuation expands to fill the gap, to fill the vacuum. Put it another way, when it's obvious, people pay up because the only risk left to take is valuation risk. So brutally, even though, yes, the best firms win the beauty contest, but they winners at the top price. You don't get a mega discount. You know, no one's giving a Lovab- you know, Lovable is not saying, "I'll take $6 billion when I could get $8 billion from someone else." Yeah. The best firm might win the round, but they pay the market price. So the remaining embedded risk here is, in all this sentence, is, is that all these late-stage valuations are 20 and 30 times, and the growth persists. And if I was to pick the... If you were to pay the, if you do the, what is it, the postmortem three or four years from now, what, if many of these assumptions would be wrong, right? And I'm not saying it's going to happen. I'm simply saying, what would that look like? You said yourself, all these growth rates attenuate just a little bit, and multiples come down a lot, and you're just in a different place. I'm gonna pick on, on my view, one of the best companies out there, Databricks. It's doing four and a half, $5 billion, right? It's valued at, it's got a growth rate of 40% plus.It's cash flow positive. It's a superb company. Top four... It's one of the top four companies out there. You know, what's the current value? At hu- you know, 100 billion. It's 25-ish revenues, right? If growth slowed to just 20%, across the last two decades, 20% growth companies with cash flow positive trade around six times. Six fives are 30. So they grow 20, but six sixes are 36. Yeah, that, you know, all the math here is predicated on these kind of valuations. And if the growth stays, I think the valuations stay. If the growth slows down even slightly, th- then you have a dislocation to the downside, and I think then some of those strategies could feel a little painful because you're taking this utterly correlated... What I'd say to people is, in the early stage you're taking uncorrelated business risk, and in the late stage you're taking 100% correlated valuation risk. And when it goes wrong, it's gonna go wrong for all of them, you know, right? And, a- a- and, and that's the, that's the embedded assumption that you're, you're assuming it'll just be fine now. Yes, it's clear, obvious and linear, but if it's not, because it's been so clear and obvious and linear for three years, everyone's leaned in so far that if it dislocates even slightly, the, the pain impact will be magnified. And to me, that's the-

   20. JLJason Lemkin1:01:37

       You wanna hear a small fun example? If, uh, you, you talked about the best ones in Europe are Lagora, ElevenLabs and Lovable, right? So I started using ElevenLabs for real this week. So I built, I, I vibe coded the... My favorite thing today, it's a game for founders. It's called founderscape.ai. Try it.

   21. RORory O’Driscoll1:01:52

       I love it.

   22. JLJason Lemkin1:01:52

       I put like 200 hours into this. founderscape.ai. It does everything from picking your accelerator. You can join YC. You have batch mates. You struggle. You build the team. You go public, okay? It does, it simulates everything. Fundraising. Let me know if you want 20VC and Scale in it as funds you can raise for. It simulates the whole thing. Like, a couple hundred folks have played it. It is kind of addictive. I can tell you why. Okay, so this week I wanted to go to the next level. So your CTO joins you together, and I added ElevenLabs. And your CTO talks to you the whole game, right? Like, you know, the team's struggling, get your NRR up, do this with your product. And I added ElevenLabs and it was a- it's awesome. Your CTO talks to you the whole game, okay? It's so effing good. It's a, it's a 99 out of 100 product. And I burned through $30 in credits with just a couple people in three days, okay? So imagine thousands of people are playing this game, okay? I don't, even I don't have those resources. So my point is, ElevenLabs ended last year. They, they just said it. Mati is such a great CEO on so many levels, right? So charismatic, so good. 330 million in revenue from nothing, right? But I, if, for my game, if, if I could do something a tenth the price or a 50th the price that was close to as good, I would have to switch. Like, I burned through $30 of credits on ElevenLabs in 48 hours with 20 players, 30 players. [laughs] I don't, I can't... Like how does it help? Rory's so good at math. Imagine I have 10,000 people playing this game for hours on end. Um, I need, I need a lot of fees to support that, right?

   23. HSHarry Stebbings1:03:19

       Everyone, everyone watching this, let's make Jason have a massive ElevenLabs bill.

   24. RORory O’Driscoll1:03:24

       Yes. Let's-

   25. JLJason Lemkin1:03:25

       Yeah. founderscape.ai. And, and the, and the fees do come down at scale, in all fairness, right? But my point is, it both shows why these companies are so explosive, right, and also why th- they could be fragile. Like it is, it is hard to predict, right?

   26. HSHarry Stebbings1:03:40

       Jason, would you invest in ElevenLabs at $11 billion?

   27. JLJason Lemkin1:03:43

       I would... Listen, I mean, if the... I, I wouldn't. Uh, I would not.

   28. HSHarry Stebbings1:03:47

       You would not?

   29. JLJason Lemkin1:03:48

       At $11 billion? No.

   30. HSHarry Stebbings1:03:49

       They've gone, they've gone, they've gone to 330 in two years.
8. 1:12:14 – 1:30:41

   The Impact of Wealth Taxes on the Industry

   1. HSHarry Stebbings1:12:14

      The final element I do wanna discuss, and Rory, you can bounce when you have to, 'cause I know that you've got to run to your offsite. Um, but it is all over Twitter, and I don't want us to move into politics, so I want us to stay on startups around this, so I'm gonna deliberately point this-

   2. JLJason Lemkin1:12:27

      Yeah, yeah

   3. HSHarry Stebbings1:12:27

      ... to our industry. But we've seen obviously the wealth tax being implemented. Brin joins Page in leaving California. Chamath Sather-

   4. JLJason Lemkin1:12:35

      You mean the entrepreneur's tax, not the wealth tax. The entrepreneur's tax.

   5. HSHarry Stebbings1:12:38

      Sorry, the entrepreneur's tax.

   6. JLJason Lemkin1:12:39

      Yes. Just, just-

   7. HSHarry Stebbings1:12:40

      Um-

   8. JLJason Lemkin1:12:40

      Just so we take politics out of it, the entrepreneur's tax.

   9. HSHarry Stebbings1:12:42

      We, we, we've seen, uh, Chamath say that now a trillion, I think it was, you know, reported 700 billion of 2 trillion now is gone already. Um-How does this impact very specifically our industry, and how significant is this actually?

   10. RORory O’Driscoll1:13:00

       I actually meant to read the text, and I didn't get around to it yesterday. But, um, I, I ma- I would make two comments. One is all wealth taxes underperform what the people project they'll raise because it tends to be very mobile and it's, it does, it's, it's very hard to tax that and people can move. So Norway, France, a bunch of people have introduced them. They invariably unwrap, yeah, unwind them because you get much less than you think. That's the first comment. And then the second specific comment where I've read it but I haven't read the core text is one of the weird things about this tax is they estimate your ownership based on your voting control. And what that means is because a lot of these founders have these super voting shares, and I would say that's a, uh, something I didn't agree with 10 years ago and I've changed my mind totally. I think it's good in the public markets that founders have voting control. They're getting assessed as if they own more than they do. So instead of being 5% of what they actually have, it's 5% of your voting control, and if you've got 10X voting, 10X votes, that's now 50% of your actual money. So are you gonna sit in California if you're worth $2 billion and say to yourself, "I'm gonna give a billion dollars for the privilege of living here"? I don't think so. You're gonna leave. So I think it's going to be fairly pernicious to what we're doing here. And look, I think invariably it's unsympathetic. The sight of rich people leaving a, a state just 'cause they don't wanna pay more money at a time if people, you know, feel strapped. And it's, it's, it's inherently an unsympathetic thing, right? And, you know, it's easy if you're the rank and file to say, "Screw those guys. They should pony up." But I think this is in the category of dumb ideas who, in trying to overreach, will end up getting less. And I think especially in taxation, the way you should approach it is not ideological, "Oh, we'll make them pay." It's much more, "How can I cost efficiently milk this cow?" [laughs] Right? And I think this is gonna be inefficient 'cause I think, you know, the super rich will leave.

   11. JLJason Lemkin1:15:02

       I, I think it's much m- much more mo- clever and worse than it looks. It's much worse than it looks because you have to read what's happening. Um, this is a Trojan horse. The, this is not about a one-time 5% wealth tax. The goal of the proponents of this bill, everything that has been put behind it, this coalition, which has already passed similar propositions in the past, Prop 55 and others, is that this will then transition to an annual tax. Of course it will. You cannot solve an annual healthcare gap with a one-time tax. It sounds good. So first they need to get through the issues here and pass it once. Fi- and then the goal is it's 1% or more forever. Then the goal, it has already been written, this has already been attempted to be passed three times. Then the goal is to lower it in phases to 50 million and 25 million threshold. That if you have 25 million of paper wealth based on the last round price of your startup, 50 to 25 million, you will pay a 1% wealth tax. That is the end goal. This is just sta- f- stage one of the ultimate plan. As bad as it is with paid, it's already f- going to fail. If the only goal was economic, it's not going to work, right? Because we've already had four leading billionaires leave. But the goal is this becomes an annual wealth tax on 25 to 50 million of paper net worth. And so I say this will end up being leave for the Series B. Leave before the Series B. Because if I'm the founder of GC.ai or ElevenLabs and I'm doing a Series B at 500, I'm gonna pay the wealth tax right n- as it's, as the goal it is to implement it. I'm gonna pay it. And you can say, "Well, Gavin Newsom says it won't happen," or... But, but no, like the voters in California are gonna vote the, all this stuff in. And so what I think happens, if, if you just wanna know what I think, 'cause I, I think this is n- it's much deeper than it looks. And so it's not just peop- people feel bad for billionaires, okay? Very few people actually feel bad for billionaires. The goal is to hit folks with paper wealth of 25 million, and I think if it passes and the next bill gets put up, it, it will likely pass. I think founders will begin to massively exit in 2027 before the next v- one goes up, 'cause there's gonna be a second if this passes and a third. So this is not a, this is not one and done. This is just the start. It's just the start of what the coalition behind this wants to do. It's crystal clear. They've already put a bill up three times to lower this to 50 million. One billion is a retrenchment to get it done this year because they couldn't get 50 million passed, a $50 million wealth tax. It's a disaster. If this actually happens, people will finally flee.

   12. RORory O’Driscoll1:17:42

       Yes, they will. And I think the voters, I'm gonna be optimistic here. I think in, I mean... I think one of two things happen. Sense prevails and it gets shot down. If that happens, it's already been an own goal 'cause we've lost people who've left California in advance of this, and that's just stupid. Uh, the second thing you write, Jason, is it gets passed, then a bunch of people do leave because then it gets real, and you start seeing other people leave. And then the voters face this other choice two, two years from now when they put up another bill to lower it a lot, which will cause even more people to leave, and they either vote for that or not. And, you know, you ca- I don't believe you can, you can't stop stupid, but I actually don't think the voters are stupid. I think the default is n- I mean, look, I don't love the California referendum system, but it's worth-

   13. JLJason Lemkin1:18:26

       We pass crazy propositions in this state

   14. RORory O’Driscoll1:18:27

       ... Hang on, hang on. We do.

   15. JLJason Lemkin1:18:29

       Crazy ones.

   16. RORory O’Driscoll1:18:29

       But it's worth pointing out most of the time they say no, 'cause I think, you know, I, I don't love... The great thing about the referendum system is it's dumb as rocks, so I actually think the default California voter goes in to say no. So my guess is in the, my guess, and maybe I'm being optimistic, my guess is in the end this loses, right? But you sit back and you go, even trying to do it has had an economic cost because if you have those kind of assets that you're subject to it, yeah, this is aThis is not an idea that a revenue-- It's not even revenue maximizing. If you were a revenue... Let's just say you hated rich people. You hated them. But at the same time, you also passionately want to fund healthcare. And those two things, and you believe both, and you're a rational human being, when you look at a wealth tax, you say to yourself, "If my goal is to fund healthcare, I don't do the wealth tax." Right? Because it's actually not the rational way to get more money. There are lots of things you can do to tax people at the point of sale, et cetera, et cetera. We could talk about it if we had more time. So you're right, Jason. The only-- This is not a rational act by people trying to maximize dollars. This, it, it, it, it, it's a lash out-y thing. I'm very optimistic the vote will defeat it, but it'll still have had a cost, and it's kinda dumb. And on that note, I gotta duck out, guys. I gotta go and actually work and figure out how my poor little boutique firm can survive in this harsh and cruel world that we live in.

   17. HSHarry Stebbings1:19:52

       [laughs]

   18. RORory O’Driscoll1:19:53

       Okay?

   19. HSHarry Stebbings1:19:54

       You, you, you, you go. Dude, I, I do just wanna stay with you on this one, just 'cause you said there a couple things I, I really wanna understand-

   20. RORory O’Driscoll1:20:00

       Yeah

   21. HSHarry Stebbings1:20:00

       ... 'cause I don't understand this. I'm sure if it happens, Jason, how likely is this to actually happen?

   22. JLJason Lemkin1:20:05

       So strange things have been passed. Strange things have passed, and the only thing that stops them from not getting passed is we're all kinda lazy and we all vote no in general. But you whip folks up into a frenzy, it doesn't matter what anyone in gov- the governor or the legislature says. It only needs 50 plus one. It is direct. California, it's, it's, it's wonderful and terrible and crazy. It has a type of direct democracy that the rest of the country doesn't have. So all you need to... You can go around to everybody, re- get people upset about billionaires, and many people should be upset about billionaires, and you just need half and, and plus one and it passes. And so that is why no matter-- It doesn't matter what people say or think. You just need half plus one.

   23. HSHarry Stebbings1:20:47

       Okay. It happens and it passes.

   24. JLJason Lemkin1:20:49

       Yes.

   25. HSHarry Stebbings1:20:49

       What happens then? Everyone-

   26. JLJason Lemkin1:20:51

       Well, this is my point. And listen, I'm not as, you know, I'm not, I'm not a billionaire and I'm not gonna get there. I, I had a chance, um, but I, I won't be a billionaire. Um, and so I don't have the same perspective as Chamath and others, but I do think everyone's m- mostly missing this point, which is that this is not a one-time thing. This is... There is a group of folks behind it. I don't wanna get political, but there's a group of folks behind it that have been working on this for many years. Of course they have. This doesn't come out of the blue, right? They've been trying to pass a version of this for five years. They finally figured out this is step one. Let's make it all about the billionaires, right? This is the easy one. It's easy to bash on the bil- the rich billionaires, um, when we have a very bifurcated time, when the wealthy are getting wealthier and jobs are also going away. So it's an easy one to win. That's why I think Rory's wrong, because everyone feels like the rich are getting, the billionaires are getting... They're all, they were all in St. Barts over the holidays, but our company's doing layoffs. Doesn't feel very good, so I'm gonna vote to tax those guys. And if it was just one tax, then as bad as it is with Larry and Sergey and Peter Thiel leaving, it was, it would at least be a bounded thing, right? It would be a bounded thing. But this is a, this is a, this is just phase one of the plan. Phase two is it happens every year. Of course it's not gonna happen once. This is how you put a bow tie on something to make it look good. It's just once. Of course it's going to happen every year. And the prior versions of this bill, and the one they wanna keep passing, has already lowered it to 50 million and then 25 million net worth. And it is on illiquid assets based on the last round in venture. So how many deals have you done, Harry, where the last round was at 250 million or more and the, the founders had material ownership? Like a lot in the age of AI, right? And so I do think if this goes as far as the folks that have backing it want, you could have a Detroit in the Silicon Valley. Like, when it becomes a meme to do YC or to do South Park Common, but then build a-- You know, get your money, build your team, and then leave, that could be the meme. Like, come to Dogpatch, do YC, stay a year, build up your team, and then leave. Like, it's ea- It's not... Is it hard to imagine that being the new SF? It's not hard to imagine. It's not that it would go away, it's just you leave after a year.

   27. HSHarry Stebbings1:23:01

       Who wins from this? In any loss, there is often a winner. Is there a state where everyone goes which wins?

   28. JLJason Lemkin1:23:09

       The answer is the ones that almost won in 2020 and 2021. It's that simple, because there wasn't enough gravity to get people to go to Miami outside of, you know, some hedge funds and others, and there wasn't enough gravity to go to Austin because it's really not that nice there. Um, but it, obviously they will win because we already saw it happen, right? It's just the yo-yo bounced back up when AI came out, right? It, it wasn't worth it to be in Miami or Austin when AI came back out, right?

   29. HSHarry Stebbings1:23:34

       Jason, would you leave?

   30. JLJason Lemkin1:23:36

       Well, here, listen. First of all, I'm not starting from scratch, right? So bear in mind. Like, I think that is an important... You know, I, it's crazy that, to me, that, um, Sergey Brin left because he's driving AI at Google based in the Bay Area, right? Larry Page I get, and Peter Thiel is, is managing money. Um, I don't know. I, you know, I've thought about it every year since 2020 when it didn't matter for two years where you were. I've thought about it. I'm on the edge. The co- I'm not a billionaire, but the cost, the financial cost to me to remain in California is super high. Like, what I pay to live here in taxes and others, it's, and it's worth it, but if I had to pay a, a, a wealth tax when it goes down to these lower thresholds every year, I w- I would leave, of course. Now, does it matter? Uh, you could argue, you could... What I f- So I've thought about it a lot. What I... It would push me over the edge because then every year I'm paying this massive tax on top of 50% tax that I pay, um, in California already, uh, or 40% on long-term capital gains. It's the highest taxes in the country already. And then there's a wealth tax on top of where every year I gotta pay 1% to 2% of everything. Like, one year it's actually not, like, who cares one year, but what if it's 10 years? Like, that compounds to a lot, right? We need Rory to do the math, but that compounds to 15% to 20% of your net worth is gonna be gone until it gets increased. So you, you gotta go to Miami or Austin at some point in your career, right? So I think, so I think I would go, but, but what I worry more aboutAnd, uh, and I wrote this and it already had 500,000 views in a day. I, I worry that the, that it just makes sense to leave after the Series B. You should just leave. And I, I don't, I ... And I think YC will get their 7% and, and, and the, the funds will still stay, but you'll just leave. You'll just leave. It's a terrible idea to leave SF in the age of AI, but I don't think it's as bad as going to Monaco or Dubai or weird s- Like, I, I, I don't think that's the best way to build a startup from Dubai or Monaco. I'm, I'm pretty sure that's suboptimal. Um, but we may go back to distributed teams. We, we, we did learn how to do it. It's suboptimal. The, the... We may not be all RTO. It-- We, we learned a lot of skills that now we're putting on the back burner, but we know how to do these things. We know how to build distributed teams. We know how to, we know how to work remotely. We know how to do these things. They're not as good, um, but if it becomes what we do, we will just adjust. We will adjust. It's not that big a deal. In tech, we, we, we are not dealing with a meta issue that wealth-- the wealth gap's just gonna spread in the age of AI. It's gonna get vaster and vaster, and the social implications and, you know, we're all, we're really, you know, we're worried about layoffs and AI taking people's jobs. But, um, people are, you know, when, when these co- You know, when you and I first met, Harry, a billion dollars was a good exit when you and I first met. It was a great exit, right? Now, 100 billion doesn't feel like that much, does it? I mean, it's crazy, but that's also 100 times more wealth for the founders. Maybe even more. Maybe even more realistically, right? And so that is just a gap that we, we're, we kinda hide from. And I, I brought it up on the pod. We didn't do it, but when every billionaire was in St. Barts competing with their yachts over the holidays, man, when, when that gets retweeted, it, it's, it's hard for not everyone to feel like they wanna tax the F out of everybody. It's gross. It's g- it's gross, right? It's tacky. It's gross.

Episode duration: 1:30:52