Are Burn Multiples BS in an AI World? & Sam Altman Needs $1TRN of Energy

1. 0:00 – 0:47

   Intro

   1. RORory O’Driscoll0:00

      There's only two ways of pricing a deal. You price a deal on hope or you price a deal on the multiple. A $15 million revenue company that's perfectly good and has reasonable growth is actually of zero value to a VC because we're in the upside option game.

   2. JLJason Lemkin0:12

      I hear too many folks that are like, "Oh, you're triple, triple, double, double or better, you're, you're golden. Don't worry, kids." And I think that's terrible advice in 2025. Terrible advice.

   3. RORory O’Driscoll0:21

      Whatever the prize is for being the best company in AI, [ding] OpenAI's gonna get that prize. Have a great day.

   4. JLJason Lemkin0:27

      Ready to go? [upbeat music]

   5. HSHarry Stebbings0:40

      Guys, I'm so excited for this. I always love this, and it's evening time here. It almost feels atmospheric. I've got my questions ready. We're

2. 0:47 – 12:57

   Understanding Burn Multiples and Capital Efficiency in an AI World

   1. HSHarry Stebbings0:47

      good to go. And Jason, I want to start with one that you just suggested, which was fantastic. And so I want you to explain it a little bit. Iconic did a report and there was a really interesting takeaway for you. Can you explain what that takeaway was and how we should think about it?

   2. JLJason Lemkin1:03

      Yeah, they, they, they did a, um, 73-page State of the Software report. We don't all have patience with over 80 charts. I wrote it up on SaaStr, uh, this week, uh, my top learnings. But the one, one that kind of hung with me, along with the trip- the triple, triple, double, double discussions we've had here that you had from Hemant or, uh, from General Catalyst, right? Um, you know, what's the point of venture in, in 2025? Rory's p- other points that, yeah, all the money's go- 70% of the money's going into less than 20 deals. But, but this one analysis that Iconic did was interesting, which is that, yes, AI native companies, the ones we're all so excited about growing so quickly, under 100 million ARR have terrible free cash flow margins, -126%. It's much worse. Uh, non-AI companies are -56%. They're still burning, right? Classic checks. Um, but because [chuckles] they're growing so quickly, actually the burn multiple's much lower. They're actually capital efficient because they're growing so goddamn quickly that even if they're burning a lot along the way, right, even if they've got afterburners on, they're getting to Mach 10 or whatever it was in Maverick so quickly that if the capital efficiency is better, this is where it's, you know, this is where a VC should put, be putting all their money, right? And so-

   3. HSHarry Stebbings2:21

      Can I interject and just ask-

   4. JLJason Lemkin2:23

      Yes

   5. HSHarry Stebbings2:23

      ... for an explanation for those that don't understand why the burn multiple's better if they're spending more. Can we explain it for those that don't understand?

   6. JLJason Lemkin2:30

      It's basically how many dollars of ARR, um, do you get out of each dollar that, that you're spending, right? What is the efficient... How much revenue are you creating for each dollar [chuckles] of venture capital you're lighting on fire? [laughs] And it's, it's a weird metric because you could, um, be seemingly efficient and run out of money, right? If you don't have enough money in the bank account, right? It doesn't mean you're profitable. And I've always been... David Sacks sort of coined it, and I think when, um, when everything was the same in SaaS and B2B in 2021, it made a lot of sense. All the companies were the same. They all kind of grew the same. Uh, a- as you have companies with lower gross margins, at first they kind of broke it, then we ha- then VCs stopped wanting to fund everything in 2022. That broke it. And then AI breaks it because the, we've never seen growth like this. But the margins are lower. A lot of them have token costs, right? We, we talked a lot. Some don't. Talked about folks like Higgs Field that are, you know, somehow are almost cash flow positive 50 million or Lovable and Replit that are burning, burning a few dollars of venture capital. But even if you throw... How much had Re- Re- Lovable raised in the last round, Harry?

   7. HSHarry Stebbings3:35

      Uh, 200.

   8. JLJason Lemkin3:36

      200. Okay. But the point is, oh my God, let's imagine you throw 200 into Lovable and they're burning $6 million a month. That would shock most CVCs, right? But if they're gonna add 300 million of ARR, [laughs] it's actually, the, the burn multiple is actually quite low. It's quite efficient from a company ARR building perspective. That, that's the thought. And, and, and then you should put even more of your money into these companies, right? Because you get the most leverage. The theory is you get the most leverage out of your venture dollar in these types of companies, right? Because you're getting the most ARR per dollar invested.

   9. RORory O’Driscoll4:09

      I think, you know, there's the old expression about m- models that's also probably true about ratios and rules of thumb, which is all models are wrong, but some models are useful, right?

   10. JLJason Lemkin4:18

       [laughs]

   11. RORory O’Driscoll4:18

       In the same way, all ratios can be wrong, but all ra- all ratios are wrong, but some ratios are at times useful. And I think the burn multiple is a very useful ratio, but as I think Jason said it really well, there's a whole bunch of implied assumptions that go into that, most of which are no longer, not ma- not all of which are true, right? So if you use it blindly... That was a brilliant insight, right? Um, when David coined it, right? And it really is helpful to compare companies, uh, you know, different companies at different stage and get a sense of capital efficiency, right? But there's about three or four different assumptions in it that if you forget them and just focus on the burn multiple, you're gonna blow up, and it's worth disaggregating that. So first of all, let's say what it is, right? Burn multiple basically says it's the ratio between the amount of ARR you add and the amount of money you spend to add it, right? So if you spend $2 in total burn for every $1 of sales and mark- sorry, for every $1 of ARR, right, your burn multiple's two, right? And if you think about it, big crude comment here, if you're getting paid 10 times ARR, right, if you're being valued at 10 times ARR, so you just spent $2, you added $1 of ARR, that's worth $10, you're up, right? You add, you put in two bucks and you got $10 million of market cap. So it is a very valid construct, right? So at that level it totally works and obviously, you know, this is one of those weird multiples where lower is better, right? Um, so one is better than two. And there's some idiosyncratic stuff like when it crosses into positive, it goes into a negative number, makes you kind of head hurt. We track it a lot internally, so we've wrestled all those things. But at a high level, it's a super good way of comparing things.You know, comparing companies at very different levels, right? In terms of companies with different growth rates and, or even just different absolute sizes, right? Super good insight, right? Embedded in it, though, is a whole bunch of assumptions, right? One is about... There's a whole, uh, boring economy, say, ceteris paribus, everything else being equal, right? The implied assumptions are the ARR is real, but we know it's often not. The implied assumption is... And it's net ARR, so you're taking out churn, but if you're growing fast, you can hide churn because you're churning 12 months ago as customers, which was maybe two million, and this year you're at 10 million, so churn is understated, so you can hide that. That's the second thing. So your... Is your ARR real? Is your churn real? There was an... It does pick up on gross margin, but again, the same thing. If you're growing hyper fast and your margins are moving, you're not picking up on it, right? And then last probably is less so for these companies, but definitely true for the AI, um, model companies, it doesn't take into account CapEx, which isn't true for the $100 million ARR companies, but it's definitely true at CapEx. And, you know, you can't ignore, even in a, in a crazy world, 10 billion of CapEx in a company. So all those things are what says the model, when you're comparing, it's not like with like. So that's one big picture comment, is there's a whole bunch of applied assumptions in there, right? Which is why even though we love those kind of metrics, and the one, Jason, you mentioned, we were chatting before that, kind of the magic number, which is what sales and marketing we actually coined back in '04, right? They're all good assumptions, but we've actually come back to saying there's a real advantage in seeing the GAAP revenue accounting also to make sure all the money is, for lack of a better word, just showing up for real, right? So that's one... So, so there's a lot of noise in that multiple, and I think when they were all SaaS recurring revenue businesses, all seat-based, all 90%, 80% gross margin with no CapEx, right? All enterprise sales with low churn, it absolutely made sense. You could compare two companies, and that's why by 2019 or '20, it almost felt like, you know, fill in the form, give me the valuation. None of those conditions are true now, right? So yeah, I, I, I agree. I think it's totally up for grabs.

   12. HSHarry Stebbings8:21

       Does it as a framework carry no weight then, given the volatility of all the different inputs, which mean the output is less reliable? Respectfully, is it even a reliable framework to look back on?

   13. RORory O’Driscoll8:32

       It's a decent framework. We still use it. It's absolutely a decent framework because, you know, I mean, 'cause you can do... There's things you can do to kinda get the same idea. You can look at, for example, you can look at delta GAAP. In other words, you can see how the GAAP revenue changed, 'cause if you were doing two million at the start of the year in ARR and 10 million at the end of the year, you know, the delta ARR is eight, right? But if you also... Another way to get to the same thing to check for, quote, "honesty," is to look at are you recognizing 2 million of GAAP run rate in January, and are you recognizing 10 million of GAAP run rate in December? And it kinda checks on that. So there's things you can do to deal with that, but, you know... And, but, but there's a lot more noise in the system, right? It, it, you know, you, you, you have to worry about... I mean, 'cause I think you have to worry about churn, and you have to... There's other issues even beyond that we can come to, but e-even just at the churn, are you picking up all the metrics? Is it forward-looking enough, especially on these trials? Is the A... How we... 'Cause there's an implied... Stepping back, there's an implied assumption. Remember going back to my simple model. I was spending $2 million, getting $1 million of ARR, being valued at 10 times, and therefore creating 10 million of value, right? If that ARR evaporates a year later, then I didn't create value. So there's an im-dep... the implied assumptions around stickiness, all of those things are up for grabs. So I, yeah, I, I think it is use- I'm sorry, that was a long-winded answer. I think to show that it is still useful, but we're far beyond the stage that we, which w-which we were in 2019, where you can just plug the numbers into the number cranker and come up with a rough and pretty accurate estimate of the valuation of a company. We are not at that stage anymore. We are not in Kansas.

   14. JLJason Lemkin10:14

       There's a meta question that I, that, um, that I think about mostly when times are good, right? And when companies aren't running out of money. But it's... Maybe it's a question to Rory and to Harry, but I mean, venture in some ways is an ARR arbitrage, going to your point, right? And so when you're north of 10X revenues, um, venture works. You put in this small amount of money, and the magic thing is we can talk about free cash flow-

   15. RORory O’Driscoll10:39

       Yeah

   16. JLJason Lemkin10:39

       [laughs] ... and profits, but the reason it's, it's a, it's a tolerable business is we really get to trade on ARR even through the IPO to some extent, right? We get to trade on this ARR, and it's... As long as it lasts, it's a great deal, and as long as the multiple's high enough, right? That's where the, the leverage is, right? That I can, that I get paid off this ARR, and so if the burn multiple's attractive, it, it just makes the whole thing, uh, uh, uh, uh, on afterburners or steroids, doesn't it?

   17. RORory O’Driscoll11:04

       High is bad, low is good, negative is better. I think the real... But the, let's not obsess on the ratio. The real comment I think you're saying is when all you have to... When all you're graded on is growth, it's not easy 'cause growth is really hard, but at least it's a one-dimensional scorecard, especially on ARR, right? When you're graded on growth plus profitability, which happens to us all at some point in time, it gets a lot harder. Because you're right, there's often, especially in enterprise software companies, an ability at the margin to push really hard on the sales and marketing pedal or the free user pedal, and you get some revenue, but just not commensurate with the marginal spend. And as long as you're just being rewarded for growth, you can do that. But once you have to deliver profitable growth, it, it, it all gets harder, right? So th-that's pro... That's not the shoe that's dropped yet, but it will. And, and, and, and I just wanna make one other point on that. It's just so important. People talk about burn multiple, and they're like, "Oh, my burn mult was good," but they sometimes just forget that there's also absolute burn and then not having money. You know?

   18. JLJason Lemkin12:06

       They do forget. [laughs]

   19. RORory O’Driscoll12:06

       'Cause, 'cause the implied assumption, again, I, I remember thinkingWhen David Sacks published, it's a very clever comment, is if you have a good burn multiple, you should in theory be fundable, right? So no matter how... You know, if you're adding a lot of ARR and, and you're spending a lot of money to add that ARR, then in theory you are fundable 'cause you are venture value accretive. But that's a theoretical construct, and cash in the bank is a actual material construct, and sometimes I see people tell me their burn multiple and not tell me their cash balance, and I'm like, "So yippee, you could have a great burn multiple and you still could be out of cash on Friday. I, I need to know more." So, e- to, to your point, Jason, you can't lose sight... You can't let the ratios lose sight of just having money versus not having money. And you see that behavior sometimes where you're like, "I don't care about your burn multiple. I care about the fact that you've less than six months cash. You know, what

3. 12:57 – 20:59

   What Metrics Founders Need to Focus on in a World of AI

   1. RORory O’Driscoll12:57

      are we gonna do about that?"

   2. HSHarry Stebbings12:58

      Guys, I have many companies with good burn multiples, and they are going out to fundraise now, and they are not getting love. They are not getting attention, and they are going, "Harry, I don't get it. I've been brought up to understand burn multiples, to understand growth ra- like, what is going on?" And I'm just seeing a very stark binary world of haves and have-nots. Are you seeing the same? And if you are, what would you advise this generation of founders who have good companies and good numbers and are feeling very confused by a re- rejected VC community?

   3. RORory O’Driscoll13:33

      Wow. It almost sounds like therapy, doesn't it there? I'm confused. I'm rejected. But on a serious note, it's, it's, it's a super interesting subject 'cause, 'cause there's an embedded, a set of assumptions in there, which is at some high level, does no one give a shit about anything that was founded before 2022? That's really what you're saying, right? Um, is all these old things, how you... how uninteresting are they? But I think the high-level comment is it's not that simple. There's... You know, it's not going to be just, um, no one cares. It's like, 'cause look, look at the recent IPOs. Many of them were non-AI native by definition. Most of... The average IPO just went public, was plus or minus 10 years old, 10 years old. By definition, it's pre-ChatGPT. So, um, they've built perfectly good businesses, capable of going public, maybe getting some lift from AI, but they're a thing, right? So I don't think it's all gonna just, quote, "go away," right? But I think what you are wrestling with is that we're in, for lack of a better word, yeah, we're, we're in an AI-first world in terms of mental models. So when VCs look at any deal, there's only two ways of pricing a deal. You price a deal on hope, or you price a deal on the multiple, on, on the multiples. When you price a deal on hope and growth, you can lean in on anything, right? And you can get prices that, quote-unquote, "make no sense" 'cause the growth ultimately comes and it all pays off. Once you start valuing things on, quote-unquote, "the fundamentals" today, right, then you can value a public company because at 400 million it's not nothing. But to your... what we were talking about before we got on, a $15 million revenue company that's perfectly good and p- and has reasonable growth is actually of zero value to a VC 'cause we're in the upside option game, right? It's a perfectly good company. Someone should lend them some money. They should get profitable, right? But at, at s- at super sub-scale, right? The mental model of the VC is saying, "A lot of the time you can't get from here to big IPO, and that's the business I'm in, so therefore I don't have any embedded option value. So therefore I can only value on fundamentals." And if you're doing 400 million, I could multiply 400 by four and tell you you're worth 1.6 billion. You mightn't like it, but I'll give you the money. But if you're worth- instead of, y- you know, if you're worth f- 4 million, you have no value because 4 million is never gonna be an IPO, therefore I'm just not gonna do it. So yeah, there's a lot of companies that are gonna have to build a much more capital-efficient model, and again, maybe can make great outcomes, but it's kind of... it's, it's the zeitgeist, it's the group thinking that's not in your favor. I don't know, Jason, does that kind of resonate? I saw you-

   4. JLJason Lemkin16:07

      I think that's right. I see something that's worse, to Harry's point. I think Harry's point on, on X was, listen, I've got a couple companies that are growing better than triple-triple, double-double, right? And they have an... they're... they have an AI element, and they're interesting, and they're struggling to get funded because they're not ultra breakout, right? That's a slightly different point.

   5. RORory O’Driscoll16:25

      It is a different point.

   6. JLJason Lemkin16:27

      And, and not only is that true, I'm seeing something more problematic that's at the edge of toxic, which is that, uh, boards and investor syndicates that I'm a part of aren't aligned on this. They're not seeing it. I am seeing many VCs that have been around for a while, especially one that are doing just fine, right, um, maybe that aren't going to every, um, every AI hangout in San Francisco or everything, who when they hear numbers like this, there's no concern. There's no concern, right? I had a portfolio company kind of like this. My advice to these guys is just take it. If it's decent, just take it because you're... Some of these VCs are still living in the past. They're still living in the past, and I think they give hor- terrible, borderline t- inadvertently toxic advice. They're still giving 2022, 2021 advice from the corner office, and I think it's dangerous for founders.

   7. RORory O’Driscoll17:16

      Can you clarify that? What you-

   8. JLJason Lemkin17:18

      Yeah.

   9. RORory O’Driscoll17:18

      Are you saying... I'm, I'm... Genuine comment here, which by the way speaks to the complete lack of certainty on what, on what the, about this issue. Are you saying the bad advice is to need money, to raise money, or not to? I mean, are you saying it's a dumb thing-

   10. JLJason Lemkin17:30

       Here's the bad advice.

   11. RORory O’Driscoll17:31

       Yeah.

   12. JLJason Lemkin17:31

       Harry, I'm at... We're at, uh... I mean, um, Rory, Harry and my company, we're at 15 million ARR. We're growing 100%.

   13. RORory O’Driscoll17:38

       Yeah.

   14. JLJason Lemkin17:38

       Okay? Our burn is, is... our burn ratio-

   15. RORory O’Driscoll17:40

       Manageable

   16. JLJason Lemkin17:40

       ... is good.

   17. RORory O’Driscoll17:40

       Yeah.

   18. JLJason Lemkin17:41

       Uh, we're in, we're in a AI-enhanced mug-making company, okay? It's good-

   19. RORory O’Driscoll17:45

       Great

   20. JLJason Lemkin17:45

       ... but the TAM is not enormous. But the numbers are there, right? But it's not... People aren't... Uh, and, and I see VCs saying, "Don't worry, you'll get the round done. Take our time. Let's optimize around price. Let's see how it goes. There's no rush." And then, and then I hear, "Hey, you know, Scale wants to put in money at 250 on that deal." And my advice today is ins- like we're... Rory's a pretty good guy, but even if he isn't, take that deal now. And I hear too many folks leaning in there like, "Oh, you're, you're trip- triple-triple, double-double or better. You're, you're golden. Don't worry, kids." And I think that's terrible, terrible advice in 2025. Terrible advice.

   21. RORory O’Driscoll18:21

       I, I, I agree. I think that those are perfectly good... They're, in fact, they're great numbers, right? And with an upside story you could fund them. But I agree, a totally non-AI story, if you're doubling at some ma- and you're still so far below 400, 300, 400 million exit value, that you're, you're many years away from it, right? It's-And you can get a deal done, you should take it. You shouldn't be optimizing. What you're saying, which is good advice, is if you're one of those companies, you should be getting your funding done and being damn glad to get it done, right? And it may well be that four years, five years from now, you'll have the last laugh, and you'll be sitting there going, "I told you, you idiots, this is great," and you can email all the guys who turned you down and laugh, right? But right now, there was a lot less money for that deal, and it makes, what is it, sense. It's, it's... Again, it's the comment of, if you had 200 million, I can tell a story. 'Cause again, I'm gonna repeat myself, of the 15 IPOs year to date, 10 of them have almost no AI story, right? So it's not like you can't make money not doing, uh, outside AI. That's absolute bullshit. But to start today at 10 million, and to believe in, what, seven, eight years of compounding to get you to an IPO eight years from now, that's a much harder undertaking in a world where everyone feels that the AI is the story. So those companies, Jason, you're right, is that... And in fact, we have one in our portfolio I'm thinking of specifically. You should just get the deal done, raise at a reasonable price, continue to grow, but be capital efficient. Don't get lost in your just your burn multiple. Focus on your cash. You know, if you're right about your business, you'll be right in the end, and I think a key part of being an entrepreneur is being willing to prove everyone right even when they all think you're wrong. But you should operate for the next couple of years as if cash is pretty damn tight and scarce.

   22. JLJason Lemkin20:07

       But I think-

   23. RORory O’Driscoll20:07

       Agree.

   24. JLJason Lemkin20:07

       And I wanna hear Harry's anecdotes. I- just one thing I want, it's one that I think that's changing. I don't think there are any non-AI deals anymore.

   25. RORory O’Driscoll20:15

       I, I agree, but-

   26. JLJason Lemkin20:16

       Um, I... What I mean is, listen, there's, there's sec- there's, there's cybersecurity, there's fintech, okay? And then there's, then there's B2B and B2C. I think that's all that there is in our world, okay? I don't think, even if you're not an AI company, you are. I mean, another, other thing that's said in the Iconic report, this, this, that just came out, their September report, 94% of public software companies call themselves AI companies, and the majority mention their AI agents, okay? A- Adobe has 5 billion of AI-influenced revenue. So I, my point is I, I, I think we're, we're, we're leaving the day where there are two types of companies. Now, there may be AI... We can debate what an AI native is and an A... But, but, like, I just don't think most VCs are gonna pick up the, the email or the phone any- like, they're just gonna assume everything has an agent,

4. 20:59 – 33:50

   The Role of Kingmakers in Venture Capital: Harvey, Abridge, Profound

   1. JLJason Lemkin20:59

      like it has to.

   2. HSHarry Stebbings21:00

      One thing that has really shocked me is the mimetic, and this sounds obvious given the sheep-like analogies applied to venture, but it's how concerned investors are by going against a kingmaker. Whether it's Harvey or Abridge or any of the king-made companies, we have a couple of companies which are the second or the third, and going against the kingmaker in the Valley is the most unpopular thing in the world. You cannot get funding, and that's obviously very binary, and of course you can. I'm being deliberately binary. But wow, investors are not willing to fund anything if it touches a kingmaker or is in close proximity. In other words, founders listening, when you raise, raising to deter others from raising is a really working strategy right now.

   3. RORory O’Driscoll21:50

      It's definitely a strategy, right? And we'll see if... And a ti- and it does have an impact. The closer your customer base is to also being Valley companies, the more relevant, the more it, it might act as a deterrence, 'cause your customers might also feel that you're the king. But I wouldn't over exa- I do see the effect. I mean, maybe there's two separate things. Do I believe that that thinking exists in venture? Yes, I do. I don't fully share it, but I acknowledge that, you know, you have to factor it into your decision-making and your risk analysis. The question is, is it a binary no, or is it a you factor it in and then look at the fact? We're, we're the latter. We have done deals where the leader's been funded by one of the top firms, and we've also done deals where, you know, you look at funded by the top firms, oh, and by the way, they're doing really well, maybe you're not gonna get there, right? So it definitely is a factor. Then the second question is, provided that second company can access capital, do the customers give a shit? And the answer is they do in some markets where it's very Valley-centric. If your first customers are also VC customers or VC-backed companies, then you get this do-loop. And look, the reality is you've raised mon- someone's raised money from Sequoia, they have a big portfolio, they're known to be aggressive. You're like, "Hmm, do I wanna do that?" You know, if you compete against that. If you're selling to oil and gas companies, they barely can tell the Sequoias from their KPs, you know what I mean? Right? So i- i- i- i- it's TBD. It, it's, it's a, it's a thing. I totally agree with the thing. It, it's important, but not dispositive, I would say.

   4. JLJason Lemkin23:22

      So what's different now, going to Harry's point, right? I mean, it's always been har- VCs have always been less excited in investing in number two and number three outside of a 2021 bubble, okay? Um, I remember when Sequoia called it the... Sorry, who did Uber buy? Postmates? I remember when they called it the Postmates effect. In 2021, there was so much money to be made that Sequoia decided they were okay investing in number two and number three, because if you could make billions off Postmates, you didn't have to be in number one. They called it the Postmates effect. But people also understand there's different number ones in segments. If you're really verticalized and, you know, you did not... There are different number ones. Um, and Revolut and Chime are not the same company, right? And we can come up with a million ex- examples. Um, what is a little different in AI is that, um, there are, in many cases, there's not an established brand, and there's so much change and so much new budget and so much confusion that so many buyers w- are under pressure and have a desire to make a purchase. They wanna buy a Harvey, uh, in legal, or they wanna do something like Clay, which is powerful, but they may not even know what it does. But they know they're under the gun in GTM, and being number one is so powerful when people know they wanna do something in le- they've gotta do a, an LLM for legal. They've gotta do this AI research for their clients. And tell me who the hell to buy, Harry.And that will calm down in a couple years because the leaders will, will settle down, right? And that's why Lovable and Replit are in a death match, and it's very powerful. They're both at nine figures in revenue. They won't kill each other, right? Um, but them and, and, and, and, and other folks, like, you wanna be that brand that nervous folks don't know to buy. And I was just talking with someone at Bolt that closed a massive deal against Lovable the other day, right? And they'd heard of both of them, but no one at Lovable called them back. N- so, like, you gotta buy... And so Bolt became trusted, so they bought Bolt because they were kind of equal on the discovery, but who do I trust? Do I trust the ones where the humans are in the deal and helping me? Or do I trust the one where it's 90 days to get an appointment, right? And so we don't- we're not gonna wait a year. Like when I was at, at Adobe, we waited five years to implement Salesforce. It's just not happening with AI, right?

   5. RORory O’Driscoll25:27

      Two comments on that. One is y- if we're actually gonna be responsive to Harry's question, you have to separate being number one-

   6. JLJason Lemkin25:34

      Yeah

   7. RORory O’Driscoll25:35

      ... which I agree with you. You only wanna... In the end, when the money is made, the number one makes in a, in a business market 67% of the market, the number two makes 20, 30, the number three makes 10, and anything after that doesn't even matter, right? And in a consumer market, it's even more skewed. So I agree. In the end, when the total is wr- when the total is written, you wanna be in the number one in a segment, and you'd be better off in a sub-segment and being number one than being number four in a bigger segment. I totally agree with that.

   8. JLJason Lemkin26:01

      Look, if nothing else, if you're not number one, don't spend like you're number one.

   9. RORory O’Driscoll26:04

      That's true.

   10. JLJason Lemkin26:05

       Even if you're growing pretty quickly, like Harry said, if you're number, if you're the clear number two or number three and 80% of VCs are gonna drive by, if you burn 100K a month, like, you actually may have the best exit, like, for founders, dilution and time adjusted. But don't, don't be burning two million bucks a month.

   11. RORory O’Driscoll26:19

       Which actually triggered something else that I should have actually said, 'cause I, I, I glossed over this and I think Harry hinted at it, but just to call it out. You know, if, if, if two companies have $20 million, one from, you know, great VC, one from n- less well-known VC, it helps at the margin. But what I didn't say, and Harry mentioned, I wanna go back to it, is the thing we're seeing now is because that first company got 20 million from awesome VC, like three months later, they get another 60 million from a bunch of people who wanna follow awesome VC. Now it's not a lot of fair fight anymore because now they got 80 million. So we're definitely seeing some of that where it's not so much the money itself that's creating the momentum, it's the fact that the money sucks in more money, right? And as... And now, in the end, you know, SoftBank proved to everyone's complete satisfaction, right, that money alone cannot make winners, right? And which is very kind of them to run that economic experiment and, you know, prove the negative. But, um, so it's not in the end dispositive, but there's no doubt in my mind, and I think that's what you're referring to, Harry, you are seeing some cases where you go, "Wow, not only are... You know, they got a great firm, they got Sequoia, they got Kleiner, they got whatever, but oh my God, they raised another 80 million bucks on top of that from other people." Now you gotta say not just, you know, do I do this, put this 20 million in this other company, but do I think this other company is nuanced enough and clever enough and has a differentiated enough strategy to beat the wall of money, right? And if they've not, then it does cause a pause. So this is one of those examples, Harry, where, and I do this a bit, during the course of the conversation, I end up going, "Hmm, I get that point. I should... You know, I would nuance what I'm saying a little bit." It ain't as easy. The wall of money makes my, me trying to be pure in saying it's just about the company perhaps a little unrealistic in today's market.

   12. HSHarry Stebbings28:01

       Do you think we are near peak madness, guys? Or do you think we'll look back and laugh at ourselves for having this conversation given the might and the size of the markets that we're entering?

   13. RORory O’Driscoll28:10

       You mean that it'll be so much... But you mean, it's like, um, what's his name? Alan Greenspan talked about irrational exuberance, and everyone remembers that, but they don't m- but you know, worth pointing out the markets kept going for three more years and never went back to '96 levels. So is that what you're saying, is that is it gonna keep going or do you think we'll be laughing 'cause it's gone backwards?

   14. HSHarry Stebbings28:27

       I'm saying are we just so fucking peak that we've got 25 millionaire companies being valued at 5 billion, 10 billion, Ilia's being valued at 30 billion, Mi- Mira is being valued at 10 billion with nothing. Um, and that said, are we gonna actually look back and go, "What morons. We're about to see the biggest transition in spend from software to human labor budgets," and actually how small thinking we are?

   15. RORory O’Driscoll28:51

       Well, one of those two things has to be true because that's actually the interesting insight back. If that massive transfer of labor doesn't happen, then all these valuations are wrong by an order of magnitude. One of two things is gonna happen in the next five or seven years, right? Either A, you know, you, you, you are gonna see pretty profound productivity changes. You're gonna see companies like OpenAI literally being $200 to $300 billion in revenue super quickly. That's option A. Uh, option B, you know, AI's still gonna be wonderful, but you're gonna have a readjustment period that make, gonna make your head hurt and you're gonna go, "What were we thinking?" Without speculating yet, though we can in a minute, on which of them it'll be, one of them is gonna happen soon.

   16. JLJason Lemkin29:34

       We're just getting started on what we're gonna do in AI in B2B. It, it's just getting... It's just, it's so early. It is so early. So much like, you know, so many of these other waves, the direction's correct. We're early. I, I, I, I feel it. I live it to ours Vibe Code, and I live it that we've replaced 11 people on our team with AI agents. I can see the future pretty, I think pretty clearly. We're just starting. Um, for venture and for investment though, not only am I worried about... I mean, we've never had $20 billion pre-revenue seed rounds before, right? This has n- never happened, right? So beyond that, what I r- uh, but, but what I'm even more worried about that than now, you know, you c- we're back to the era where if you have a billion dollar round, you can't even get in TechCrunch, okay? You can't, you certainly can't get on 20VC. There's no way Harry's gonna slot you just because you're the 14th company this week to raise at a billion dollars for your AI vertical SaaS company. You're not getting on 20VC. Um, but when I met Harry, y- of course you'd get on the next week, right? I mean, if you raised a 200 million, you'd get on, uh, on the, one of the first 50 episodes. So my, my point and what I wonder is, are our loss ratios correct?If as venture m- v- uh, VC firms, especially with larger funds, but actually I'm just as worried about C funds because they're paying such high prices for such low valuations. As long as we get it, as long as we're cool if 80% of our unicorns implode or blow up or make no mon- m- more importantly just don't make money for venture, as long as we've got it all right, even if those are at 100 or 2X ARR and we modeled it properly, but I'm pretty sure we didn't model it right in 2020, 2021, those unicorns. The B2B unicorns, we did not model them correctly, um, in terms of our loss ratio and expectations. As long as we have them cool at the party, it, it, it feels almost risk-free again like it did in 2021. It feels risk-free.

   17. RORory O’Driscoll31:22

       Valuation and loss ratios both matter, but maybe just distinguishing them just a little bit more, right? 'Cause the la- I think of the loss ratio as the time you just picked wrong, right? And remember, it, yeah, it's worth pointing out that the... So the number of times you picked wrong versus picked right. There was a product that got product market fit versus it didn't, right? And if you get that wrong, there's nothing you can help. Your valuations don't matter. It's just, you know, you, you, you, you wipe out, right? And that would be true if all your positive deals were pleasantly priced and if all your positive deals were, were highly priced, right? Valuation's separate, which is, okay, you got the picking right, but you can also make a second mistake. You paid up so much that you didn't make a return on those deals, um, en- enough in itself or enough to cover your loss. So you, you gotta a- break it down. You can imagine people failing 'cause their picking ratio was bad and they just, you know, put too much of the money in bad companies, right? Or you can also imagine people failing where all their companies were great, uh, or were good companies, but the prices were so bad that they only made a subpar return even though they only had a 30% loss ratio, right? So yeah, both, I mean both things can ha- I mean, the sad thing about venture is you actually have to get both things right to make money, 'cause again, it turns out to be a hard thing to do to make money, right? And the question today, I mean it's funny 'cause Jason said the loss ratios. I think the question Harry was leading with was the valuations. Just, you know, you know, even if all these companies are amazing, will you make money in all these companies, a billion dollars? That's one question, and I think that's, th- the jury's out 'cause there's a implied assumption there. If on top of that your loss ratio starts going up, then you have a tough fund because you have both things going on at the same time.

   18. HSHarry Stebbings33:07

       I also think, by the way, that Alex Wang's acquisition created this very dangerous precedent in v- in venture investors' minds where they're like, "Well, if Alex is worth 14, Brett Taylor's worth 30, and then Iliad's worth 30, and then Mira's worth 10 or 15 or 20 or whatever it is." And it creates this kind of tidal wave of justifications for why we should pay entry prices where they are, rather than accepting that Alex Wang is just an anomalous event that may be seen in isolation.

   19. RORory O’Driscoll33:32

       Irving Fisher, the, uh, big American economist at the time, famously said in summer 1929, stocks have entered, quote, "A permanently higher plateau." Well, it turns out he was wrong by 90%, so I, whenever I hear the word permanent, I'm like, "Mm, no, no." Permanent... Has, have valuations permanently changed?

5. 33:50 – 42:35

   Klarna, Figma, Stubhub, all Down: Are Public Markets Turning?

   1. RORory O’Driscoll33:50

      No.

   2. HSHarry Stebbings33:50

      While talking about permanency of value creation or sustainability-

   3. RORory O’Driscoll33:54

      Yeah

   4. HSHarry Stebbings33:54

      ... Figma is down 63% since IPO day at peak, now $53 a share. There's VCs who are still locked up. Maybe times haven't changed that much.

   5. RORory O’Driscoll34:06

      No surprises here. It turns out stocks that open 250% above their, a- above their IPO pricing probably will go down from there.

   6. JLJason Lemkin34:14

      Look, there's... You can't be critical about anything about Figma, right? It's, it's, it's close to as good as it gets, but it's still trading at-

   7. RORory O’Driscoll34:21

      Well-

   8. JLJason Lemkin34:21

      ... 26 times revenue.

   9. RORory O’Driscoll34:23

      Yeah. Agreed.

   10. JLJason Lemkin34:24

       Right? Actually, the, the, the bigger issue is I think actually you could argue that the, the markets, uh, are too generous today, right? The bar is... Like the top, the top group of public B2B companies, it trades at 20 times ARR, only averaging 30% growth rate. Like the bar's actually... We're lucky. We're, [laughs] we're... Like on the one hand, we have this AI boom. On the other hand, the mar- b- may- perha- you could argue because of its profitability or whatever, the markets are fairly generous today in ascribing relatively generous multiples to growth that seems fairly modest based on, uh, our, on our historical standards. It's, uh, the bar is not that high on ARR growth to have a d- a d- a decent public multiple. If Figma was trading at 8X revenues, I'd be like, "Let's all quit. Let's just, let's just go golf and live off the fees like 20, like 2,000, okay? Let's not invest at all because the world's been destroyed." But Figma is, it's still at 26 times revenues.

   11. RORory O’Driscoll35:17

       And better than what Jason said is th- there's a meta worry here, which is this. Like, 'cause whenever you're pricing a deal, you're like, you, you always going... This is the way I think of it. You always saying to yourself, "How much extra do you pay for how much extra growth," right? And, you know, you, you then say, "If, if it's doubling, can you pay 20 times? If, you know, right, if it's troubling, can you..." Whatever, right? I'm just, you know, throwing out the numbers here, right? And you're doing that, and you mentally have a benchmark, and j- I always think, like the 10-year Treasury is the benchmark for, you know, the financial interest rate world. In my mental model of SaaS for the last 20 years, kind of the public company median was the equivalent of the 10-year Treasury, and the public com- as Jason said, up until about 2019 was 30% growth, roughly six or seven times revenues, right? NTM revenues, right? And then, and then you said that, okay, if that's worth 30%, then maybe 60% growth is worth, you know, twice that in multiple, and you can kind of build your little valuation ladder in your head from there. And you're right, Jason. Today, that t- 30% growth stock in the public markets is trading at 20 times or 15 times, twice the long-term average. And therefore you say, uh, one of two things is true. Either it is different, and because it's more cash flow positive now or there's some good reason, or even the core bedrock price is wrong, and when that goes down, everything drifts down with it, right? And, you know, and that's the, that... If I was to pick a... You know, it's just like when the 10-year Treasury trades, everything that's linked to the 10-year Treasury [laughs] goes up and down with it, right? If the bedrock t- if top-tier SaaS 30% growth reverts to eight, seven or eight times, which was where they were happily for a decade and a half, and everything else goes down accordingly, it's gonna beA tough day. So go team. That gnaws at me every once in a while.

   12. HSHarry Stebbings37:08

       We have seen Klarna as well be hit, dips below IPO price. The StubHub was hit massively.

   13. RORory O’Driscoll37:14

       Hard.

   14. HSHarry Stebbings37:15

       Absolutely bombed. Do you think there's gonna be an impact here in terms of people being less willing to go public with the more recent IPOs facing a harsher pricing environment?

   15. RORory O’Driscoll37:26

       Somewhere Bill Gurley is lighting a candle and saying, "I told you so," right? In many respects, this is good actually. Actually, kinda-- from the banker's perspective, actually cancel that, not even Bill. It's like the banker's perspective, they're like-- 'Cause their argument is always you gotta pay them on the upside 'cause sometimes they go wrong, and this is what going wrong looks like. If you bought some of these at the IPO, you're a hurting puppy, right? If you bought StubHub, I think you've been down pretty consistently a lot, right? Klarna traded up and then is down. So what it says is, what, what's the rational buyer of IPO stocks gonna do? He's gonna say, um, I actually want a little more kinda give in the valuation to make sure I can get this done. I'm probably gonna want a wider spread. 'Cause they all price off the public comps, and they say, "Look, I can already buy any one of 10 names at 10 times NTM revenues that are already public. If you're gonna make me buy some new shit that I haven't seen before, that hasn't traded before, I'm gonna pay you eight times so I can make a pop," right? And that's the pop, and sometimes it goes wrong, and they get a huge pop, but that's the, that's the thinking, right? You gotta give me a discount to buy the new thing, right? Now they might say, "Hmm, I've been thinking. There's more risk here than I thought." Seven, right? And you're gonna see that. So I agree, you're gonna see a, some reflection in the capital availability. I mean, it will impact pricing at the margin. I don't think it's the end of the world. I think the, the trend is open given the markets. But there's definitely gonna be a little more wariness and a little more focus on price from the buyers. And then the question, to your point, is what happens on the seller side? Do people say, "I'm not gonna go out 'cause I'm not gonna get my price"?

   16. HSHarry Stebbings38:58

       Speaking of, like, what happens on the seller side, EA going tape private at a $55 billion, largest tape private of this kind. Jared Kushner behind it. I'm just like, wow, that's impressive, Jared. [laughs] Like, really well done for being the broker behind this. How did you analyze that? It's, it's a momentous deal.

   17. RORory O’Driscoll39:19

       It is. It's the largest LBO in history. It's 18 billion of leverage, which feels like a lot for a venture-backed deal. But, you know, if this was an industrial manufacturing company, those dudes leverage those things kinda six times EBITDA, right? So it's a lot of l- it's not a lot of leverage if you're a recurring revenue, you know, boring business, but it's a lot of leverage for a hits-driven games business. So interesting at that level, right? Um, so yeah, biggest deal ever. But, you know, I gotta say, Silver Lake are part of this, and they've been astonishingly smart at the decisions they've made. You know, from Airbnb to, I think, the real killer is the Dell EMC acquisition, where they-- The D- the Dell take private was a work of genius and has made Michael Dell one of the richest men in the world. So I look at it and I go, "Pretty smart money at the helm." Um, but yeah, quite a, quite a big-ass deal. Yeah. I'm not a gamer, Jason. Are you a gamer?

   18. JLJason Lemkin40:18

       You know, all my gaming energy's gone into vibe coding.

   19. RORory O’Driscoll40:21

       Ah, wow.

   20. JLJason Lemkin40:22

       It's the same dopamine hit really, so, uh-

   21. RORory O’Driscoll40:24

       Interesting. The attention economy has gone elsewhere for Jason, yeah. Okay.

   22. JLJason Lemkin40:27

       It's gone elsewhere. Um, yeah.

   23. RORory O’Driscoll40:29

       Harry, are you a gamer?

   24. HSHarry Stebbings40:31

       I, I honestly think people who have time to game need to get on with other more important things.

   25. RORory O’Driscoll40:37

       Oh, Harry.

   26. HSHarry Stebbings40:38

       Uh, no, I'm really sorry, Rory. Like, come on, dude.

   27. RORory O’Driscoll40:40

       I liked Doom when I was younger. It's like running around shooting at people.

   28. HSHarry Stebbings40:42

       Go, go, go to the gym, get outside, spend time with friends. Come on, you're gonna level up a character that dies when you could level up yourself? Like, come on. Really? Spend hours on Grand Theft. What was it, Rory? Something, it's like, you know, go play Grand Theft and hijack cars. Like, no.

   29. RORory O’Driscoll40:59

       I used to like the one where you go, go around and shoot. I remember first-person shooters. They were great in the early '90s. It was big, big invention then, man. First Doom, it was like, wow. But yeah-

   30. JLJason Lemkin41:08

       Yeah
6. 42:35 – 1:00:44

   How Can We Fund the $1TRN Sam Altman Needs for Energy

   1. HSHarry Stebbings42:35

      speaking of size that blows you away, I mean, as we said, largest deal there. One of the things that blew me away this week is the sheer size of data center requirements and energy capacity that Sam Altman needs with OpenAI. It, uh, very candidly, he would need more energy supply than India's capacity today in eight years. OpenAI are planning to 125X energy capacity in eight years. Is this sustainable? Is this within his, "I need hundreds of billions of dollars more to make what I plan to do"?How do you analyze this unwaveringly infinite insatiable demand for energy?

   2. RORory O’Driscoll43:14

      You're right. The energy demand is a outgrowth of the compute demand, and the compute demand is an outgrowth of their ambition. And as long as the revenue keeps growing like it is, and the capital keeps coming like it has, they're gonna be allowed to make that bet. Right? And as we said last week, it's pretty clear that he and the other five or six people making that bet, and it is only five or six people, um, are all gonna make it until some unequivocal feedback comes back to say, "Dude, this ain't working, and you have to stop." Right? That hasn't happened today. Will it stop on the road between a hun- what's it? Roughly a $12 billion run rate now and a $200 billion run rate in 2030? I mean, my gut is somewhere along the line it will, but, you know, uh, the way life works is if someone's rolled the dice and won six, seven times in a row, he gets to keep rolling. And that's all you can say, really. I've really internalized this whole debate of, like, you know, you, you can sit and stare back in wonder, and I actually find myself saying, "What actually do, do you do with this discussion?" I mean, do you, uh... Like, in the end, you know, it's fun to talk about, and each week, I mean, as we talk about it, you know, you do what a good little forecaster does. You update your priors based on new information. And that's what I'm doing literally every week because we have some version of this discussion every week. And the weird thing is, every week there's, you know, some hints that say, "Oh my God, this thing can work forever." It's typically... And this is my construct. It's typically in the, in the technology. New things like the-- I'm sure, um, Jason saw it. You know, Claude can now code busily for thirty hours with no human intervention. It's, like, amazing shit on the technical side.

   3. JLJason Lemkin44:50

      I did three hours myself. Yeah, keep going. It's a big change.

   4. RORory O’Driscoll44:53

      So it's huge. And so the technology keeps moving forward, right? So if you look at it, my bigger thought is if you look through a science lens, this is all doable and possible. I think if you look through a finance and economics lens, at some point in the next two, three years, the scale of the ambitions becomes too hard to fund, and you can find evidence of that, right? And then you pays your money and you takes your choice, and in the end, you, you manifest that bet by deciding do you want to buy your puts or calls in Nvidia.

   5. JLJason Lemkin45:22

      You ask about power for data centers. Here's just the weird thing I'm thinking about for what it's... I'm not an expert, right? I believe that Sam's gonna solve this problem, okay? But I believe, like a lot of things, it's hard for us to appreciate the scale of the problem. So just the little hundred billion that he's doing with Nvidia, just the, the one they just announced, right, needs more power than all of New York City. So it will only be a couple years where the cities of the future don't even have humans in them. The c- the next New York will all be GPUs and, like, twenty people managing an entire city, a New York City of data of GPUs. They will pro- be producing... It's not just that it's a data center. It's the output of AI. Like, an entire New York will have twenty people in it. We will be in this weird future where how many major cities do we have in the US? Twenty or something like that? The, the... Half of them now will be just AI cities full of GPUs because just this hundred, this, just this ten gigawatts is more than New York. That's the weird thing. I'm, like, what are, what are they even gonna look like? Our country will be dotted with these stargates that are larger than New York City, with hund- only hundreds of people working in them and the equivalent of billions of digital minds. Like, I, that's why I don't think we can even fully appreciate the slope of the curve. I think Sam will figure out fusion and the, the, the trivial things on the way to get there. Um, but Jesus Christ, the, uh, half our cities in the United States may all be these, just these massive stargates with no humans.

   6. RORory O’Driscoll46:52

      I'm gonna zoom back out to the kind of wider concept and the thing I said earlier about kinda the si- the technology says it's gonna be exponential. I think the economics will, will grab hold of it. I think the, what Jason said was a microcosm of what will happen, you know? I don't think the level of growth-- I think the growth rate will slow more quickly. I think all the practical realities required to make that much power, to roll out that much data, to sell that much software, to get enterprise to adopt that quickly, I personally think that the rate of adoption forecast over the next four or five that's implicit in all these data center assumptions will, in retrospect, prove to be too optimistic. So there. I've crept out on the limb and said it. I think we'll be revising those forecasts down over the next five years.

   7. HSHarry Stebbings47:39

      I, I feel, I feel very stupid, honestly, because I look at a trillion dollars required to fund data centers for OpenAI alone, and I'm just like, I don't know where that money comes from. I know we said, oh, there's five X the demand for Anthropic's round. That's cute. That's, like, fifty billion.

   8. RORory O’Driscoll47:55

      Yeah. You know-

   9. HSHarry Stebbings47:55

      This is a trillion dollars for data centers alone for OpenAI alone. Like, where is the money? Sovereigns don't have that.

   10. RORory O’Driscoll48:02

       Um, well, actually, funnily enough, they do. I mean, it's worth-

   11. HSHarry Stebbings48:05

       No, no, Rory. They'd have to put it all in.

   12. RORory O’Driscoll48:07

       Yeah, agreed. That's, well, I was just being precise, right? You know, yeah. Maybe the better point, Harry, is you're dealing with numbers at that scale. A trillion dollars is a lot of money. I mean, the, the joke used to be Everett Dixon, the quote was, "A billion here, a billion there, and pretty soon you're talking real money." Now that feels laughable because the real truth is in, in OpenAI land, a billion here, a billion there, pretty soon you're not talking about that much. We're talking about a trillion. But a trillion, you're talking about real money.

   13. JLJason Lemkin48:33

       The trillion. Here's... I think, again, I've said it many times, I, I have more and more respect with the way Sam communicates, right? Simple things said a little bit ahead of time, said more clearly than we realize, right? Including the beginning of Stargate, which I didn't understand, and why the hell Larry Ellison was there with Donald Trump. I didn't get any of it. I think he is willing the trillion into existence. I don't think the answer's clear, right? I don't think he can get every sovereign wealth dollar. But whatever it is, I think is sufficient.Here's my view as someone just that lives in the, in, in AI today. Twelve agents vibe coding two hours a day. If I had to stop, if I had to only use GPT-5 and Claude 4.5 and I couldn't get any more GPUs and I couldn't run any longer context with it, I couldn't do anything else, and I had to live in... Like, it'd be okay. Like, it would be a bummer. And what I mean is it wouldn't have to stop, but let's say it had to slow down because there wasn't a trillion. So I think Sam is just willing as much of this into existence as possible because of the future, and if we come up short, if it's 400 billion or 600, like, we don't have to buy all the GPUs. Like, it, it, the world-- It would be okay if they had to last six years instead of three years or whatever the depreciation schedule is. So I think he's willing it into existence without it being a certainty because we can stop, we can stop at 700 billion.

   14. RORory O’Driscoll49:51

       I think that's actually right and quite insightful, and it allows us to make a really important distinction, right? And you see this a lot with the very best entrepreneurs, right? You know, the, the sheer act of willing something into existence like this has been, is just amazing. And the broad direction they took in 2016 on has been entirely vindicated, and it's entirely probable that the same broad direction is, is correct for the next eight years. And what that means is, as long as OpenAI stays ahead of that train and on top of that train, they're gonna be the winner. Whatever the prize is for being the best company in AI, OpenAI's gonna get that prize, right? And, and, and that's his job, and he's doing it better than any other CEO of this decade. That's true. It is also equally true as any CFO who's had an ambitious CEO knows is, just 'cause the CEO says we're gonna treble next year doesn't mean we should buy real estate and hire people as if we're gonna treble. Maybe we should plan for a double and be ready to hire more if it starts to happen, right? The problem is not big visions from a big vi- the most visionary CEO of our decade. The interesting thing is if you start valuing Nvidia like as if all that's gonna happen and more, if you start valuing Oracle as if all that debt's gonna be paid off and more. We'll, like, maybe we'll look back and say we saw this visionary person leading us to the promised land with big metaphors like trillion, and we foolishly thought it wasn't a metaphor, we thought it was a PO, right? And we literally borrowed money against the PO, right? And you know, I think five years from now that's where you could be. We said, "Ooh, I get it. OpenAI is still the best company on the planet for AI. Its growth rate has slowed to a shockingly small 50, 60%. It's freaking amazing. It's still in 30 million, billion dollars growing at 50%. It's astonishing. But maybe they don't need a trillion dollars of CapEx this week." And that would, and then the, the ripple effects of that will be where the fun starts. And to me, that's at least as likely a scenario as we achieve the full kind of thing, which gets to the... It, and it, it, actually as I think about it, the metaphor of the CEO and the CFO of the ambi-- We've, we've all been on those boards where you have the wildly aggressive CEO, and you don't want to trammel them. You don't want to say, "Don't be aggressive," 'cause their aggression is what made you all this money, right? But you do want to say, "Please get an experienced CFO who quietly will make sure that we don't run out of cash, that we don't actually spend that until we see the revenue coming in." And you know, that's obviously what the economy as a whole perhaps should be doing here. Maybe we shouldn't be borrowing every dime on the assumption it's all gonna happen. Every time I do this, I say to myself, "How much should I have in the S&P this year?" But it's been up.

   15. JLJason Lemkin52:29

       No cash.

   16. RORory O’Driscoll52:30

       Uh, no cash.

   17. HSHarry Stebbings52:31

       I'm thinking, I'm thinking less and less right now. I'm, I'm looking at it thinking, "I can't be this good. This has to be a peak. This has to be a peak, baby." We said there about, like, Sam, you know, you earn the right to do the next thing, and he continuously does.

   18. RORory O’Driscoll52:44

       Yes.

   19. HSHarry Stebbings52:45

       And then you also said about revisiting your prize. I always thought that Zuck earned the right to do the next thing, he earned the right to do the next thing. And I have to say, my faith in Meta's AI strategy has just dwindled and dwindled and dwindled, and I hold that in stark contrast to them being my largest public position, being very open. And, uh, I, I-

   20. RORory O’Driscoll53:07

       I, I, I sympathize. You just-

   21. HSHarry Stebbings53:09

       Yeah. Ne-never bet against Zuck, but I'm looking at it, I'm looking at Alex Wang, I'm looking at the treatment of Yann LeCun, I'm looking at how they structure teams, and I'm going, "This is not, this is not well run." OpenAI, Anthropic are coming for you. Microsoft and Satya are fucking great. You know, Sundar's got Google. You know, am I wrong to have such unwavering allegiance?

   22. RORory O’Driscoll53:33

       Well, it doesn't sound like you do. [laughs] It doesn't sound like you do. You're voicing disloyalty here. If the-

   23. JLJason Lemkin53:40

       Yes. Well, one thing's clear. Listen, uh, I, we, I'm not a total... He is not the communicator that Sam Altman is. Getting up there with the thick glasses, and I'm gonna buy him. Like, I, I didn't line up on two. I have a lot of the meta... And, and, and saying things that just, if I don't understand where the hell he's going and Harry doesn't understand it, I'm not saying he's not getting there, but good God, we don't under- n- if we don't understand, he's not one of the great communicators at the moment, Mark Zuckerberg. He might be a great connector with technology because this, this Facebook engine is unkillable. But man, he's a crappy communicator, right? Because none of us... I'm not saying his AI strategy isn't S-tier, but I don't think any of us understand it. [laughs] Not for the life of us where the hell it's going.

   24. HSHarry Stebbings54:20

       I think you can say it isn't S-tier, bluntly. It's a desperate-

   25. JLJason Lemkin54:23

       What's that?

   26. HSHarry Stebbings54:24

       -attempt to bring... I think you can say it isn't S-tier. It's a desperate attempt to throw money at a problem and bring in dream talent and try and throw it together in a way that hasn't worked very clearly, very quickly.

   27. JLJason Lemkin54:36

       Yeah, but he was clear just this week he'd rather burn the $20 billion in operating income and fail than become irrelevant. That, that, like, that was Altman level of clarity, but maybe not in the way I wanted to hear it. But it makes total sense. Like, he'll burn every d- bill, $20 billion of operating income to be in play rather than not be at the game, right? Um, I just, I don't know what the game is, unfortunately. I, I, I just don't get it.

   28. RORory O’Driscoll54:59

       Agreed. I mean, I, and I think there's a lot to unpack in that. You're right, that statement is the most important statement. The man who owns, with untrammeled power, the $200 billion revenue, whatever it is, $70 billion free cash flow business, is totally willing to spend the money to make the bet. So his, so the bet's gonna happen. You exactly... And, and, you know, I mean, the bet's gonna happen because that's his evaluation of the risk-return. And then to the pointYou, you'd echoed back for me, when you're successful, you earn the right to roll again, right? Which-- And I said that, and I stand by that statement, but there's two different statements. You earn the right to roll again, which doesn't mean you were right. If there was a Kalshi bet, and maybe I should check at that, you know, some version of this AI strategy will not produce meaningful revenue despite a twenty billion dollar burn and will look more like Meta VR and less like Instagram and WhatsApp, two of the most brilliant acquisitions of the last two decades, I'd take that bet. And, you know, [laughs] and I'd also be glad to have backed a leader who got two... Remember, you get two right, you get two wrong, the two right more than swamp the two wrong. If, if this guy w- if he was just building a venture portfolio, he'd have a fifty percent hit rate, and he'd have a wild DPI. I don't get it for this deal, but there you go.

   29. HSHarry Stebbings56:10

       You do, but it doesn't mean that you rate the quality of their decisions in the way that you used to.

   30. RORory O’Driscoll56:16

       Well, you could also say it's just a harder bet. You're right. It's a harder bet. People are obviously vitally important, especially CEOs around charm or power. But to some extent, the wider comment is the bet for the last fifteen years was riding this brilliant invention that you had in two thousand and three and just optimizing it. And that's hard, but it's a lot easier than now you gotta invent a whole new thing a second time, right? And, you know, with the exception of Mr. Jobs, very few people have ever built a whole new thing differently, right? 'Cause Jason's right. The zoom out comment here on risk on AI is not, oh, uh, like that bullshit statement in pa- the AI's gonna help us target ads better. That's in the noise. The big picture comment is if you spend two hours a day on ChatGPT, that's two hours a day that you are not spending on Facebook, and we live and die on our attention. So we're just gonna make shit until somehow we get people to come back and play with us. We're gonna have characters whisper sweet nothings in their ear, [laughs] whatever it takes, right? And you are-
7. 1:00:44 – 1:09:04

   FiveTran and DBT: Is the Wave of Consolidation About to Begin?

   1. RORory O’Driscoll1:00:44

      that nut.

   2. HSHarry Stebbings1:00:44

      I do wanna discuss one very, uh, I think important one, which is Fivetran in talks to buy DBT. Both were super hot companies. DBT was really super hot. Um, Fivetran reported last time four hundred million of ARR. Uh, DBT said before it was a hundred million. Taking them together, given growth rates, that'd be over five hundred million if they were to combine. How did you guys analyze Fivetran buying DBT and this kind of combination coming together?

   3. RORory O’Driscoll1:01:11

      Smart, and I'll tell you why, because the, the products seem to overlap in the sense that they have-- not overlap. They seem to be adjacent, so they make kinda better. You, you probably have a better together story. There's always puts and takes one level down, you know, um, you know, how well y- the customers overlap and that kind of stuff. But at a zoom out level, this is the kind of thing that simply has to happen over and over again in everyone's venture portfolio.Because we have six, seven hundred unicorns. We've processed five fifteen out the f- out the IPO gate year to date, so 20 for the year. That implies we've got 30 years of this stuff to get through. What they've done, if, uh, you know, and every time two companies combine, we have the unicorn list, right? And, you know, it takes two mid-sized companies, I mean, Four Hundred was nearly there. It makes a bigger c- this is part of the job venture's gonna have to do to whip their portfolios into shape to be IPO-able, right? And it'll be noisy, it'll be hassle. I'm sure all the drama of private to private, right? But-

   4. HSHarry Stebbings1:02:14

      Do the DBT investors do okay in this transaction? I know it all depends, but, uh, how do you expect this to play out?

   5. JLJason Lemkin1:02:21

      I thought saw it, right? 'Cause I tried to do one of these myself recently, but I'm not, uh, at Andreessen Horowitz. The fact that Andreessen is the leader close to it in both deals makes it much simpler on many levels. Not only does it make it easier to get people together in the conference room, right? Not only does it mean you already know each other, but just on paper, if I, if, if Andreessen owns 20% of, of FiveTran and 20% of DBT and you combine them, it does kind of suck when you, when you own 20% of a portfolio company, combine it with another leader, totally makes sense on the spreadsheet, right? Great outcome, and now I own 8% after the deal. I go from 20 to 8 because I combined them and there's dilution and all this. It just is, it may make sense, uh, in, in the real world, but, but if I own 20 and 20 and I got 20 together, these deals, there's a million reasons you should mash your own portfolio together, right? It just makes it easier.

   6. RORory O’Driscoll1:03:08

      It does make it easier, but I understand what you're saying. And just to be clear, what you're saying is, if it was my, if, if, if I had ownership in one company but not the other, right? I have 20% ownership, so I have 20% of upside, and now you merge, it's a 50/50 deal, there's some dilution, now you're down to 8%. And that is fundamentally the reason why these deals are hard. The, the preference stack is, makes it even harder. But even on an ownership basis, there's a little part of you thinks, "I have this little at bat, and if this company takes off, I'll get 20% of the upside." And now what you gotta say to yourself, and, and when you do this deal, you're saying, "If this combined company takes off, I'll only get 8% of the upside." So your leverage of your bet has diminished markedly. So I get, and I remember thinking that when we'd look at some of these deals. But what you've, what I've got to internalize, and I think these guys have done a really good job internalizing it, is, yeah, 20% of something that's not going public is not nearly as interesting as 20, as 8% of something that is going public, right? And if you believe that it's not a continuum of value, you know, a sliding scale of value, but rather it's a, it's like electron states, there's just a gap, and then you gotta go to the next state. If you're above critical mass and you can get public, you get the trees. If you're below critical mass, then your only option is, you know, Thoma Bravo and whatever pain that that involves. So I think that's why when you look... And, you know, we've had these discussions in some of our companies. Maybe, you know, would I prefer to have 20% of my bet? Yeah. But I'd prefer to have a bet that's worth something, right? And I don't mean worth it in the sense that a $100 million company's not worth it. But if you wanna get to the IPO and the IPO window's four, three, $400 million, you gotta do what you gotta do. So-

   7. JLJason Lemkin1:04:47

      Of course. Of course.

   8. RORory O’Driscoll1:04:48

      Like, look, it, it's hard. It's damn hard

   9. JLJason Lemkin1:04:48

      If you believe, if you believe the upside is not bounded per se, right?

   10. RORory O’Driscoll1:04:52

       Yes.

   11. JLJason Lemkin1:04:52

       If you're optimistic. It's so much better to combine two portfolio companies and own 20% together. I, I understand you're in... You can't argue the intellectual argument, but it's tough. VC firms are a collection of GPs, and it's a collection of interest, and if my one winner goes from 20 to 8, that's tough enough as it is, right? B- but and also, but owning 20% of something that is accretive, that's a g- like, it's hard to argue against that intellectually or emotionally, isn't it?

   12. RORory O’Driscoll1:05:18

       Emotionally, yes, but intellectually, no. You're right.

   13. JLJason Lemkin1:05:21

       Yeah.

   14. RORory O’Driscoll1:05:21

       I, I get it. I, I, I do the anchoring and, you know, you, someone's ma- uh, something you guys asked about last week or two weeks ago about, you know, individual portfolios. I, again, I often do this, I sleep on my answer and revise it. Individual po- portfolios should be less diversified than group portfolios, 'cause there's some value to the firm, and this is another one of the values. The firm has to be able to, we have to talk as a partnership and say, "Hey, yeah, even though you're gonna go from 20 to 8, you know, this is something we need to do as we think about liquidity." And so I, I, it's not ideal, but there's no point hanging onto a dream that's not gonna happen when you can get a reality that is. And look, ev- and the one thing, the, the fatal mistake that always scares me is not the dilution, right? The thing that scares me is you go from a decent deal that's well run, where you know everything about it, to merging with something else, and then the combined entity screws it up. That to me is the really shitty outcome, where you took your 20% bet and turned it into 8% of a disaster, right? Which is why, you know, you gotta, which is why picking the partner and having it make industrial sense is key, and that's why I think this, this deal felt to me from a distance, like I'm not the infrastructure guy at scale, but it felt to me from a distance like that's a, that's a damn smart, obvious combo. You know, that'll be a good, that, that will get critical mass. I mean, you won't be looking at the S1 going, "Why are these companies together?" You'll be going, "Oh yeah, I get it."

   15. JLJason Lemkin1:06:43

       It was funny, there was a deal superficially similar to this, right? To, to, to the, to the numbers that I tried to work on, and it was sort of there was the, there was the, there was the A investor, the seed, and the pre-seed all-

   16. RORory O’Driscoll1:06:52

       Oh, yeah

   17. JLJason Lemkin1:06:53

       ... on the chain, okay? [laughs] And the A, the A investor wanted to, to jam two of his companies together. [laughs]

   18. RORory O’Driscoll1:07:00

       Well, you were just telling him to.

   19. JLJason Lemkin1:07:02

       The, the, the pre-seed investor had another company that I thought was mid from his portfolio that he wanted to jam together, okay? Um, but I get it. It was a, it was, it was almost as big, but, but mid. And then I had this idea, I'm like, "Listen, I have a third company, a fourth company to combine. I have no shares in this other company, okay? I'm gonna go through [laughs] 50% dilution, but I know the CEO, and he's the best in the industry." And the, the AI idea and the pre-seed idea were both fine. Like, I mean... [laughs]

   20. RORory O’Driscoll1:07:31

       Yeah.

   21. JLJason Lemkin1:07:31

       But both would maintain ownership and their own thing and their own properties, and nothing's happened. Noth- nothing's happened. [laughs]

   22. RORory O’Driscoll1:07:37

       And that's w- you know, why you need to be an active investor. That's why you need to be a board member. Because you're right, it is tempting to try and take care of yourself at the same time, but you can't. You gotta do, you know, because the whole point of this, 'cause remember, the bad thing about doing that is you actually will create the situation I just talked about. 'Cause if, if the comp- if the CEO isn't saying these companies obviously belong together, then it's probably a dumb idea.Right? So-

   23. JLJason Lemkin1:08:02

       Yeah

   24. RORory O’Driscoll1:08:02

       ... backing it-

   25. JLJason Lemkin1:08:02

       When the CEO doesn't drive it, it's weird too, right?

   26. RORory O’Driscoll1:08:04

       Oh, totally. No.

   27. JLJason Lemkin1:08:06

       Yeah. Exactly.

   28. HSHarry Stebbings1:08:08

       This is what happened with Clari, though, you know?

   29. JLJason Lemkin1:08:10

       And this one's easy to be critical of, right? It's easy to be a critic, right? Uh, it's just combining a series of, of, of, of pr- some properties that Vista has underinvested in, right? With another one that has scale but isn't growing, right? Um, this is the bad... I mean, it's easy to say this is the bad version of Rory's story, Rory's saying we gotta combine 800 B2B unicorns or whatever it is, right? Um, but mashing together a bunch that are growing single digits is the suboptimal strategy, right? I- if that's the case here. I mean, Drift is probably shrinking based on just looking at how the deal happened, right? It's probably shrinking, but, and leaking all the s- Salesforce, uh, tokens for CloudFl- leaking everybody's data too because it's, it's being ignored, right?

   30. RORory O’Driscoll1:08:49

       'Cause yeah, to, to take it on the chin and push back, but agree in a way, the combination of a SalesLoft-type company and a Clari-type company makes a ton of sense. You have a sales engagement platform and then you have a forecast. It's, you know, intuitively makes

8. 1:09:04 – 1:16:52

   Does Private Equity Need to Change in a World of AI

   1. RORory O’Driscoll1:09:04

      sense.

   2. HSHarry Stebbings1:09:04

      I wonder if tech PE now question their business model a little bit more. When they see the multiples that you can get on the money that's being moved by your Kirsch and your big firms, combined by the increased loss ratio that will happen from an increasingly volatile new AI world, are you suddenly going, "Shit, I'm not getting paid for the risk that I'm taking on the multiple on the upside given the displacement on the downside"?

   3. RORory O’Driscoll1:09:30

      To be explicit, 'cause you didn't make it up, what, uh, is what you're saying, are the PE, the tech PE people looking at their business model that looked so secure for so long of buying SaaS companies and just running them, paying down the debt and optimizing, and are they saying, "This mightn't be, this might have more risk than we thought and less upside than the other game"?

   4. HSHarry Stebbings1:09:52

      100%. Buying your Pipedrives or your Coopers or your you-name-its, gosh, it's harder than ever because as we said, y- opportunity cost-wise, you can move more money with better multiples elsewhere. And then secondarily, just displacement-wise, there's more and more ways in which they're getting attacked through better and better in- you know, startups.

   5. RORory O’Driscoll1:10:13

      They might be saying that just like sometimes we say, "Oh my God, PE looks so easy, they just have these big sums of money and they do it." I think it'd be a mistake. Generally, the record of people trying to transition to a totally different sector is pretty mediocre. I remember in '99, 2000, a bunch of the PE firms like Hicks Muse piled into telco just at the wrong time, and the same thing. I do think they're probably... So that, to my view, going from what they do to making non-controlled late-stage investments just because, you know, pick a name, Thrive do that well, would be, in my view, stupid, because Thrive are really good at that and they're not. I do think they should be saying, "Any deal we underwrite today, you better have a clear understanding of the AI downside risk," to Jason's point. And if you have a lot of downside risk, maybe you shouldn't be doing this, right? I, I, 'cause I do agree with you there is that it'd be fun to speculate on how... I don't know actually, Jason. It's like how embedded would a AI, non-AI app have to be for you to say, "This thing is good for five more years of revenues"?

   6. JLJason Lemkin1:11:17

      The, the prob- the problem is, and I, you know, I think PE thinks about this maybe from a slightly different perspective, but I think this is the concern. Anyone that, like us, has been doing B2B for a while, these products didn't change from about 2008 until 2023.

   7. RORory O’Driscoll1:11:32

      Absolutely.

   8. JLJason Lemkin1:11:32

      They're the same products.

   9. RORory O’Driscoll1:11:33

      Same thing.

   10. JLJason Lemkin1:11:34

       And the be- the le- the Brian Halligans will agree-

   11. RORory O’Driscoll1:11:37

       Yep

   12. JLJason Lemkin1:11:37

       ... and, uh-

   13. RORory O’Driscoll1:11:37

       Fully. Agree

   14. JLJason Lemkin1:11:38

       ... and, uh, and, and I said this with Henry Schuck, and he's like, "Yeah, I didn't, you know, we, the, looking back on it, none of our products changed for a decade," right? And so it wasn't just that we had high NRR, um, which is, which, which was, which was the spreadsheet glue for the PE model. It was the fact, and I, you know, I was, I led the seed round in Pipedrive. It was the idea that the, and that product didn't change for f- it took them four years to launch a mobile app.

   15. RORory O’Driscoll1:11:58

       Yeah.

   16. JLJason Lemkin1:11:59

       You had four, you used to have four years to launch a mobile app. That was my first venture investment. It was a billion-dollar cash exit, billion and a half, my first investment. But at four years to, you could, could you imagine today waiting four years to launch your AI, uh, copilot? Like you're, you're dead in the water, right? And so that under- that was the part that was underappreciated, underdiscussed. Yes, 140% NRR meant we could buy Marketo and fire everybody but, but it doesn't, but, but, but, um, the products can't be static. And it's, it, and AI is the accelerant there, right? And but that's why I, I worry. I worry there aren't enough buyers for, for any of this stuff, right? Because it's, it, it's, the rate of change, it's unprecedented in business software. Unprecedented. The so- the, the software, yeah.

   17. RORory O’Driscoll1:12:42

       I, I just wanna kind of double just whatever cliche is on that. That is such a big insight, right? 'Cause and you're basically, there's two consequences of that. Like, you're right, there was 15 years where we made the same product and you didn't have to think that much about product direction at the macro level. It was, you know, roughly the same form factor. I mean, you look at Salesforce 2002 and 2022, it's the same thing, right? And, and that's now changed. You're exactly right. And that's huge, and it's huge, so there's two consequences though for both sides of the table. On the PE side, you're exactly right. You look at that and you go, "I mightn't get away with t- next 10 years making the same thing as, you know, and not changing it. And so maybe I'm entering into some kind of tech risk that I've never before internalized."

   18. JLJason Lemkin1:13:23

       Yeah.

   19. RORory O’Driscoll1:13:23

       The weird thing is-

   20. JLJason Lemkin1:13:23

       It's a new tech risk

   21. RORory O’Driscoll1:13:24

       ... a new tech risk. And the weird thing is, even on our side of the table for these new post-LLM startups, I'm finding that, I think we talked about this before, is that product market fit, when you locked into it in SaaS land, you just didn't unlock for 10 years. Whereas here you can lock in and out of product market fit as the models change, as things, approaches bec- And you look back on the product a year ago and you feel, "Oh my God, it feels totally obsolete." So there's more risk on our side of the table too, I think.

   22. JLJason Lemkin1:13:53

       Yeah. First, that's why it's good the growth is higher, 'cause the risk to, it's less stable.

   23. RORory O’Driscoll1:13:57

       Yes, you're exactly right.

   24. JLJason Lemkin1:13:58

       It's less stable, right?

   25. RORory O’Driscoll1:13:59

       Yeah. That's actually very clear.

   26. HSHarry Stebbings1:14:01

       Adding to your point, Rory, it's what makes our job harder than ever, and I'm not asking for sympathy. I know it's not easy making money, but that's what makes it hard than ever is-

   27. RORory O’Driscoll1:14:08

       I, I totally agreeThe predictability of markets in old days was easier.

   28. JLJason Lemkin1:14:13

       A lot of things Jeff Lawson said I'm still processing. It was a good show, even if people didn't, they should go watch that one if they didn't. You know, his point was that if, if he were running Twilio today, it would be probably thriving because he sold at the API level and could benefit from the AI boom, right? I've seen that with RevenueCat and others in my portfolio, and that the seat model is under risk, right? And I, I got burned out of LinkedIn people saying the seat is dead because it's obviously not true at some level, right? Um, seats are growing. But good God, now that we're running 12 AI agents, you know, we only need two seats of Salesforce.

   29. RORory O’Driscoll1:14:45

       Yeah, because you don't have the people.

   30. JLJason Lemkin1:14:47

       We just don't, and yeah, and, and if Salesforce, if Agentforce can do all 12 of those agents, then we'll, we'll actually end up paying more to Salesforce. It hasn't happened yet. But this change of not needing as many seats, it's-- We thought it was a layoff thing in 2022, 2023, oh my God, we're laying off people. Like, smaller headcount is an issue, but ultimately, if the economy grows, you get past it, right? You get past the layoffs, and the companies re-accelerate. It's a transitory thing, like a, like a global pandemic. But the, just the le- the agents taking over humans and less seats in software, my God, it makes the P model worse and our jobs harder. It just... Literally, we could get by, because now we have, like, six agents that plug into Salesforce. They're like six human equivalents. But i- you know, Salesforce may change their API pricing, but they sure don't need a seat. And so it just makes it even tougher for P to buy these seat models. It just, it's just not only the products not last a decade, but the AIs don't need as many seats [chuckles] .
9. 1:16:52 – 1:24:47

   Political Expression and Corporate Responsibility

   1. HSHarry Stebbings1:16:52

      I'm going to finish on my wild card-

   2. RORory O’Driscoll1:16:54

      Yes, go

   3. HSHarry Stebbings1:16:54

      ... which I'm not, I'm not naming names, and it is not political, but we always stick to advice for founders. And as we move into a more and more political world, do founders have a primary fiduciary role to team members, investors, shareholders to do what's best for the company over freedom of political expression?

   4. RORory O’Driscoll1:17:17

      It would trouble me to say yes, in the sense that it would trouble me to think that just because you're the CEO of a company, you're not entitled to your personal opinion separately from that, right? That's just a troubling con- it's a reflection of the times that you'd have to even say that, because you should be able to dissociate the two most of the time, right? So I underst- you know, and I have been on boards where we've wrestled with that. You have a particularly outspoken CEO, and I've come to the conclusion that, you know, if they're expressing their personal political beliefs on a personal basis, I'm inclined to let them do it, right? I- I'm not inclined, that even sounds too controlling. I, I would be actively resistant to stopping them, right?

   5. HSHarry Stebbings1:18:02

      Even if it had an impact on the company?

   6. RORory O’Driscoll1:18:04

      I think the recent trend at the company level of saying less has been smart, right? I think that the, you know, I think a lot of companies took a lot more positions three, four years ago, and it's been almost fun to watch. Just like universities, they've realized that speaking as a corporation, you probably should stick to the mission of the corporation, right? The, in the university language, the University of Chicago principles have been proven to be so much cleverer than anything else that all those other people, all those other colleges are scrambling for that safety. And I think as a company, you probably want some version of the same thing. You just want to stay out of the culture wars, especially when they're so vehement, right? So as a company, I, I, I think, you know, companies should stay out, and I think, and think long and hard before getting into anything else. I think what's hard, and I'm just struggling with a little, is, you know, when you're the CEO, you are, you know, do you really give up all personal right to have a political opinion? It's worth pointing out that, and I wanted to say no, but again, I do this when I change my opinion as I talk. It's worth pointing out that there are a lot of roles in society where the job does involve exactly what you said, Harry, not having a political opinion. It used to be, for example, people in the military were scrupulous about not declaring their political opinion, right? I mean, it's worth re- when Eisenhower was solicited for candidate for President of the United States in 1952, they didn't know if he was a Democrat or a Republican, and both sides asked him to do the job, right? So it is, I, I, I'm like, I, I wish that wasn't the case, but actually the wisdom from some of those old learnings of staying out of it is, is making me tweak my opinion a little. Do you understand what I'm saying? I want everyone to be able to have, because I enjoy, I think everyone in this country should be able to speak. It's why this country is so fricking amazing, right? And say their opinion, and we got to get a lot better at not trashing other people for it. But I do recognize, in some cases, institutions, there's been a-- there are other examples of institutions that don't. It would seem a shame that that needs to extend, but I understand the point.

   7. HSHarry Stebbings1:20:08

      Well, I'll give you a tactical answer. Um-

   8. JLJason Lemkin1:20:11

      There are, especially for folks that are active on social media, once in a while you'll say something that either you shouldn't, or maybe you should, but you went too far, or you said it the wrong way, right? I think, uh, and there's folks like Har- Harry and I have known each other for a long time. I can't think of very many times, but I think a couple of times one of us has DM'd the other and said, "Hey, here's a tweet. Maybe you didn't really mean it." And we've deleted it or modified it. It, it happens not... It ha- doesn't happen all the time, but it's happened multiple times. There's a level of trust, and I, and I, and I, and Harry and I have done this, and I've done this maybe with 10 CEOs that I know a little bit, okay? Like, I would do it with Jeff Lawson, who I barely know. I would do it with Brian Hall. I'm, I'm not saying they have, but I would do it with folks like we've had on the show, right? And I've done that multiple times. I've said, "Listen, you be like, I'm, you know, you be you. But just to let you know, this, this tweet may not have landed the way you thought, or it might bother some folks on your team, or it might bother some folks," right? And outs- I can only think of one public company executive who responded positively to that. Not that no one was negative. No, because it, no, I don't do this all the time. I'm not pre- I don't think I'm preachy. It's always a quiet thing. I try to be... But, but I only do it when it's, when I know the impact was more than they thought. But I can think of one that all three of us know well, where he was like, "Holy crap, I didn't, I did, like, you're, you're... Thank you. Sort of thank you." Like, it took a beat to be thank you. [laughs] It wasn't an instant thank you. At first it was like, "You're wrong," but it was a thank... But every other time, and not only have I... What I've been told by all the other nine are, is, "You might be right, Jason, but I don't care. I feel so strongly about this. If I alienate 40% of my customer base, if I upset some of the less, the less represented folks on my team, if I do whatever, I, I feel so strongly, I don't care. If I, if I piss off, I just don't care." And so I, I've become much more reluctant to do that. Um, and it's rare, right? I only do it the time where I think I can really be helpful, right? The moment I see a, what I think is a mistake, I do it maybe once every four or five months. But nine times... I can only think of one where it was well-received. And so what I learned from that is that, like a lot of things in venture, and this, these aren't companies I invest in, but these are public company executives I know, it doesn't really matter what I think. And I will provide some feedbacks at times, and I will provide it multiple times, and at some point, it's your company, it's your keys. And if, and, and so it, it, it's an interesting theoretical question. I think I 100% agree with Harry's point, which is this is bad for business.

   9. HSHarry Stebbings1:22:41

      How important is it to post that? There, there was no need-

   10. JLJason Lemkin1:22:44

       We agree

   11. HSHarry Stebbings1:22:44

       ... to post that.

   12. JLJason Lemkin1:22:45

       We agree, but what does it matter what you and I think? My learning is some folks who have been on your show, some folks who have very strong opinions that are very... I've talked to just a handful, and they, they just don't... They're, they're, they're cognizant of the risks. They're cognizant of the downside. It's not a mistake. Every once in a while, someone makes a mistake, right? Um, they're cognizant of what they're doing.

   13. RORory O’Driscoll1:23:04

       There's a distinction subtle between bringing politics to work and not having that, which I think has been validated as the correct strategy, and I think that's almost, I won't say fully a given now, but I think that would appear to be the consensus. Because everyone tried the other theory and tested it to destruction and failed. As a board member, I would struggle, uh, a lot to attribute some business blame to someone having a personal opinion that's clearly their personal opinion, because we have free speech in this country. It shouldn't be, right? So I, I, I, I, I struggle with... And then you kind of say to yourself, "Well, let's just..." I mean, you have to play out the other extreme. What happens if that personal opinion alienated 50% of the country such that they literally cancel all your business, right? Then you could argue at some point maybe you aren't the right person to run that company, but-

   14. HSHarry Stebbings1:23:50

       Or your team left. 10, 10 great engineers leave.

   15. JLJason Lemkin1:23:53

       But my learning is nine out of 10 of the executives are fine with that. Let them go. I think Brian Armstrong was fine with it, wasn't he? I think Brian Armstrong said... And I didn't agree with Brian, but I think he said, "Go. There's the door."

   16. HSHarry Stebbings1:24:03

       The one thing I do think is, like, the attention economy is also more fickle than ever, and just like Deel and Rippling was such a big deal-

   17. RORory O’Driscoll1:24:10

       I, I think that's a smart point.

   18. HSHarry Stebbings1:24:11

       It, it, it's not actually. Everyone forgets it.

   19. JLJason Lemkin1:24:13

       No one cares.

   20. HSHarry Stebbings1:24:14

       This story, whatever story. Do you remember that Elon and Donald Trump broke up in the most blazing of rows? No one... That was yesterday's news.

   21. RORory O’Driscoll1:24:22

       I think that's actually very insightful, Harry. Just, just keep moving forward and, you know, people move on so the rear view mirror so quickly, [laughs] you know, it vanishes so quickly.

   22. HSHarry Stebbings1:24:33

       Uh, guys, thank you so much as always. Uh, this has been wonderful. You have changed or, uh, distracted me for two hours, which has been awesome. Um, so thank you so much. You're awesome.

   23. JLJason Lemkin1:24:46

       Cool.

   24. RORory O’Driscoll1:24:46

       Rock and roll

Episode duration: 1:24:57