Canva Slahes Growth | Talent Exodus at Google | Revolut's $50B CEO Package | Musk's $55B Terrafab

1. 0:00 – 1:25

   Intro

   1. RORory O’Driscoll0:00

      There's going to be a lot of people paying the bill in '26 and '27 for a certain amount of hesitancy in '23 and '24. The only way you prove that you're not dying is by growing.

   2. HSHarry Stebbings0:10

      So what happened this week that we discussed? Canva cuts 2026 growth by a third. Ouch. As AI serving costs blow up. Next, Jeff Dean leaves Google after 27 years. Demis Hassabis, the OG of AI, then steps back from Google DeepMind also. God, poor Sundar, that is one bad day at the office. And then Elon Musk, as always, comes out with one of the most ambitious projects with Terrafab, where we unpack the jobs that come from it, the first real installment of $16.8 billion, and just what it would mean for him in terms of structurally not having to beg at the tower of TSMC.

   3. JLJason Lemkin0:47

      I mean, this is such an entitled podcast. Oh, poor Anthropic engineer only made 35 million. I mean, go out to the goddamn Panhandle, no one's making 50 grand.

   4. RORory O’Driscoll0:55

      It must be extraordinarily validating if you're Jeff Dean to leave as a non-CEO of a $2 or $3 trillion market cap public company and have the stock go down by a couple of hundred billion dollars. Google's efforts so far are B+, A-, they're not A+.

   5. JLJason Lemkin1:09

      Any investment I've made that is not run by a founder, it's gonna be a zero in this age. Ready to go? [upbeat music]

2. 1:25 – 8:26

   Canva Cuts 2026 Growth by a Third — Is the No-Code Era Over?

   1. HSHarry Stebbings1:25

      Okay, boys, we're gonna start with something other than OpenAI or Anthropic today. We're gonna start with Canva, baby. We had Cliff on the show before. Now, Canva cuts 2026 growth by a third as AI serving costs blow up. So, Ro- for those that maybe missed this story on Canva, what should they know that they need to know here?

   2. RORory O’Driscoll1:46

      Sure, yeah. Let's start with the facts and then kind of come to the question. The facts are that Canva, you know, large privately held company in the kind of creative suite space, discloses its revenue even though they're private, and, you know, they, they were at 3 billion in GAAP revenue last year. Going into this year, they're growing at 30%, and the CEO, Melanie Perkins, disclosed kind of mid-year that they're probably gonna be growing 20% by the end of this year. So as you say, a one-third slowdown in growth rate, but still a healthy 20%. And then the other half of what she said was interesting, which was that they're obviously adding a ton of AI features. Those features cost real money, and part of the reason that she claimed for the slowdown in growth, it was just too expensive to effectively be subsidizing, um, users with kind of cheap AI when in fact they're incurring significant costs. So there was an implication there, which I'm actually gonna tease out later, I'm not sure I fully buy, which was, "My growth rate slowed, but if I was willing to lose more money, it mightn't have slowed by as much." So there's an implied statement on elasticity there. But the big picture, and this kind of, I want to zoom out and ask Jason a question, the big picture on, on this, and all three of-- there's three create- massive creative software companies. There's Adobe, which does 23 billion, growing at 12%, trading at, like, three or four times revenue. There's Figma, which is also public, doing a 1.4 billion, uh, growing at 40% the fastest. And in the middle, there's Canva, still private, around 3.6 billion, growing at 20%, right? And the big question for all three of them is, and this is why I want to put it back to Jason, who's much more of the, "I've used them," but not as much as Jason, is, is AI going to be a feature they can incorporate, or is it a new, new thing that makes them obsolete? And to me, that's the meta question. It's not about 30% growth versus 20% growth because of a little bit of gross margin compression. If that was the only issue, we could talk about that. That's a kind of second order business model issue. The real question for all of these companies, are you 30 on the way to 20 on the way to 10? Because there's a whole new set of companies doing this, and I know, Jason, you guys are in Higgs Field. Um, or is this something you can incorporate and kind of survive and continue to grow? So I think that's the question, and Jason, I'd love to get your thoughts.

   3. JLJason Lemkin4:01

      I don't know, man. I found it kind of depressing, the Canva stuff, because, um, Canva seemed to me one that obviously AI was maiming. Um, e- every, every ChatGPT release, every Higgs Field release, every ELs, you can do more and more of its functionality in core AI, right? This is what we fear as investors, is that you can do our investments in ChatGPT or Claude, right? That's the ultimate fear. Um, but yet it seems somehow Cl- Canva was defying that gravity. Like, it, it, it seemed it was a, was a non-issue despite my, m- me having churned and Emilia having churned. We churned. Um, just not because it... This is a tough one. Canva and Notion, both we churned, not because they're not great apps, we just no longer had any need for them in the agentic area. Just no need. Canva and Notion did nothing wrong at all. Nothing. And we didn't need them. But until this, it, it seems somehow I w- I was wrong. Like, they were defying gravity. But 30 to 20 in one year, I know I love Rory's optimism that they're gonna bounce off and get back to 30 or 40 next year when they find a few extra tokens under the, under the covers. I think it's a ter- terrifying and it's a little... I was hoping they were defying gravity, but it doesn't look like it. It, it doesn't look like it.

   4. RORory O’Driscoll5:11

      De- de- defending myself on the optimism charge, because no one ever accused me of optimism, I actually didn't say that. I s- what I said was, that's the implication that they're saying. I don't know the answer. Genuine comment here, right? And look, and I'm gonna advance the bull case to some extent, just articulate it more, because again, what the CEO is saying is, "Look, we can't envelop it in AI because we were using frontier models and they're just costing us a shit ton." And ex- and so the first shoe that's clearly gonna drop is they're not gonna continue to spend a whole bunch of money with Anthropic or OpenAI, probably OpenAI, given its images, of course, Rory. But, um, they now bought their own, um, model and are building their own in-house image-focused model, which makes absolute sense.

   5. JLJason Lemkin5:53

      Yeah.

   6. RORory O’Driscoll5:53

      So let's assume they do that.

   7. JLJason Lemkin5:54

      But why didn't they do that last quarter?

   8. RORory O’Driscoll5:55

      Agreed. Agreed. And, and agreed. Let's say they're even a year or two late, because I think I want to push back to the big question.

   9. JLJason Lemkin6:00

      Late is tough.

   10. RORory O’Driscoll6:01

       Yeah. The interesting question is if-- Let's just say they get it done, and in six months their in-house model, which is 90%, 80% cheaper, is just as good as images-

   11. JLJason Lemkin6:11

       Yeah

   12. RORory O’Driscoll6:11

       ... at, as, um, you know, the frontier models. Then the question still remains, to your point, Jason, do you think they can quarter, and I hate being vague, stuff enough AI functionality into that product that you would have retained? Or do you as a pretty active user say, "No, I just prefer to go at it native, AI native day one?" 'Cause that's the big question.

   13. JLJason Lemkin6:32

       You know what's scary i, is something that sounds nerdy is becoming mainstream. Our, our a-agents never even suggest these products. That's the danger. And it's not just agents, it could... You know, we talk about AO and GO, what does Claude and, and ChatGPT say, but it's worse than that. As we become agentic, our agents, we can't choose everything ourselves, and we generate, we have our own, we built our own ad server and ad-generating network that builds our own creative and own collateral, and serves it to the SaaStr community. It's all built on our agent. The agent never, it never occurred to the agent to use Canva for this. It never, it never once occurred to it. And so, um, even, even some sort of open-weight parity, I, I think it-- Listen, I, at a meta level, I think what's scary is that, you know, the, the most exposed part of the market is the prosumer market. Everyone is ChatGPT fluent, and if it works in ChatGPT, right, or Claude, you're just gonna use it. And, you know, if you believe these Gartner numbers, and I'm out at a big sales source event, they have all the data, it may be that less than 10% of the enterprise has even deployed an agentic application successfully. I bel- actually believe that, okay? Despite what we're seeing in the... Because all the hot enterprise AI companies are still serving early adopters and outliers to a large extent. On the prosumer side, everyone's used ChatGPT, and so there's, there's no going back. Um, and then my related concern is if you compare it to Figma, well, Figma missed the quarter in a sense. Figma traded down 20%, but they, they, they, they, they burned the co- the, the tokens. They, they-- Dylan was clear, "Our gross margins are gonna be significantly impaired going forward because our agentic products are being used." It's, it's not identical, um, but, um, but they took the hit, right? And they're public. It's, it's more painful to take the hit when you're public than when you're private. Um, I really don't think Blackbird and friends are gonna beat Canva up if the bottom line is missed slightly. That's an internal decision, right?

3. 8:26 – 14:12

   Figma vs Canva — Who Is More Exposed to AI?

   1. RORory O’Driscoll8:26

      I think you're right, and there's a lot buried in it. I just wanna unpack it again for folks. One is you made a distinction. Let's talk about the enterprise versus prosumer distinction, 'cause you're exactly right, is that, you know, Figma has, is much more an enterprise product. It's kind of large groups of people building software, coordinating. So even if you automate creativity, you still got bureaucracy and corporate processes that you make money off in terms of managing workflow. But you're exactly right. Canva is the prosumer, "Shit, I want to generate a flyer. I want to generate a cheap website. I want to generate some kind of content." And that's w- exactly where AI is the most accessible, 'cause you can just go on and type in, "Generate me a flyer that says this," and there it is. So you're right. They are more exposed in that sense. That's one. So I think you're, you're-

   2. JLJason Lemkin9:13

      I guess the Fortnite-ification that Jason often talks about in terms of the-

   3. RORory O’Driscoll9:16

      Yes

   4. JLJason Lemkin9:16

      ... shrink and can when you have a dinner invite that you can do on ChatGPT and bundle it into a consumer subscription versus an additional tool. Yeah. Another, another ver- the nerdier version Amjad said about Airtable, not about Canva, but he said to his quote on, uh, the CEO of Replit's quote for Airtable was, "No criticism, but the era of no-code is over." And no-code was a bunch of tools where without developers or AI, we could build stuff. And Airtable was a no-code, uh, uh, database disguised as a spreadsheet, right? It was a wonderful product before AI. Notion is a no-code, uh, database dis- um, disguised as a word processor, and Canva was a no-code way to design stuff. It was a, it was a, a, a breathtakingly disruptive product. I didn't need a designer anymore. I didn't need to know what, how to, how to do HTML or anything. It-- But the era of no-code, of things that we, that we can, humans can do without engineering resources, it's, it's slowly winding down. And if it's in ChatGPT, man, I'm, I'm just worried. I'm just worried.

   5. HSHarry Stebbings10:22

      Is it a bl- is it a blessing or a curse that they didn't go public already, then?

   6. RORory O’Driscoll10:28

      It depends on who you're asking. A b- blessing and a curse for whom, right? 'Cause I was thinking about this a lot 'cause I knew this question would come up. 'Cause if you think about it, if you're the founders, right, doing this publicly is just marginally, arguably marginally more painful, right? So maybe you're happy to be doing this in private, right? What you're really saying is this. Let me trans- 'cause we, we never say this explicitly. When you say, is it a bl- should you have gone public early, what you're really saying is, "Oh my God, if I'm the venture guy who did this thing at 100 million like Blackbird or a couple of them, I think Felicis was in early and Matrix was in super early," and then even, you know, the guys who came in at a billion. You must be like, "Oh my God, if we'd accessed that $50B valuation in 2021, I would be so gone now," right? And that's really what you're talking about. And so which is why, to be clear, some of the CEOs are a little unsympathetic to this line of conversation, 'cause this is their life's work. 'Cause really when you say, should they have gone public early, what you're saying is, "Boy, I wish that the fast money had gotten out while the CEO and the s- the, the, the management team would still be there, just in a different forum." Does that make sense?

   7. JLJason Lemkin11:34

      No, I think it's a good point. The, the, the getting out early, it's a critical question for VCs, right? How the hell do I take something-- We can talk about IPOs and M&A, but man, our shares are illiquid that we buy. We put them in and we, we hope, we pray, we face east that, that we'll ever get any cash out. If I'm an employee at Canva or a founder, and the founders already gave away 90% of their shares, right? They've already given it away. They're, they're on the mission of their life. Maybe in Sydney, in Australia, it's easier to retain your talent than in the Bay Area, right? Maybe they're not gonna quit and go to OpenAI the next day if you don't go public and make them, uh, you know, a million dollars effective a year in stock. Maybe, maybe it is better to hide. You've, you've built an iconic company that isn't going anywhere, right? It's, it's, it, I mean, I'm just playing the devil's advocate, but Rory's point, if I were the found- if the three of us were the founders- I might want to run this thing like Basecamp, right? Uh, 37signals. Guys, let's just hunker down. We'll increase profit sharing, right? And, um, I mean, probably the VCs wouldn't let you get away with it, but if I, if I hadn't raised a ton on my cap table, I... it might not bother me so much.

   8. RORory O’Driscoll12:36

      Yes. A- and I think one of this totally separate threads is public markets have to be more attractive, not just for people exiting like the VCs, but also for founders to be able to, you know, kind of reignite and reopen the window. And if, if it's rational to say on certain circumstances it's easy to be private, then that just probably weighs into the calculus when you decide, you know, as f- Canva could have done, should you have gone public in 2021, right? You know, again, to repeat, for the most important people in the company, who are the founders, who own effectively the company from a entrepreneurial oomph perspective, regardless of the cap table, I don't know if that matters. I don't know if public versus private matters nearly as much as this is the platform shift challenge of all times. And, you know, assuming you do get almost free AI via your standalone model, you've got to figure out, to Jason's point, a product in the next 12 months that's as easy and as accessible to your user base, 'cause you h- you know the, the, the, the segment of the market you're addressing.

   9. JLJason Lemkin13:40

      Yeah.

   10. RORory O’Driscoll13:41

       That it has to be as easy to that user base as ChatGPT is to generate the products they generate with it. That's your challenge, and it's a product challenge.

   11. HSHarry Stebbings13:49

       My point is, I don't even think it's about easy. I just think it's about the bundling of consumer, like, real estate of where they spend time. I just interviewed the president of Uber. What is his single biggest fear? It's actually the disaggregation of UI or the removal of u- UI, where you say, "I want a car," and ChatGPT automatically routes you to Lyft, Uber, or another provider based on price.

4. 14:12 – 17:26

   The Fortnite-ification of Software: ChatGPT Bundling Kills Standalone Tools

   1. JLJason Lemkin14:12

      That's what our agents already do. They just routed us around Canva.

   2. HSHarry Stebbings14:15

      And so my point being there, Rory, is, like, ease doesn't actually matter.

   3. RORory O’Driscoll14:19

      No, no, you're exactly... Look, to be very clear, going back to something Jason said, if the AI models become the universal, and, and ChatGPT, let's say, who is more consumer focused, if that becomes the universal int- interface for functionality, then you're exactly right, and all model choices are back-end choices, then you never even get the chance. I don't know if it does. I could be wrong. I don't know, and in fact, this is probably an area where I'm still trying to triangulate. Um, I don't know what things that we do separately in the West, 'cause it's interesting, China, obviously, in mobile, has a single super app for everything, and you do everything through WeChat, right? But just to pick on two, what I'd call high-cognition tasks that are very different. Actually, they're polar opposites. One is creativity, cr- building something creative for a consumer, and the second is doing your taxes. There is a credible argument in both cases that ChatGPT can suck those revenue up, which is why Intuit was down. I'm not sure I fully believe it, but it's why Intuit are down, and it's what Canva's wrestling with. So it's a super interesting time here, right? As yet, I'm willing to bet... I could be wrong on this. I'm willing to bet, and you guys from Higgs Field can say it, there's still a role for a company like Higgs Field, which is an aggregator across models, which goes against what you're saying, Harry. That's a company that's saying, "Hey, Mr. Consumer, you could do this directly on one of the, uh, video gen companies, but I'll aggregate the models. I'll give you a slightly better UI. I'll help you with billing," and maybe there is a business on top of the models.

   4. HSHarry Stebbings15:46

      I, I don't know if Jason would agree with me. I'd say they're serving two different markets. I think the ChatGPT cannibalization of Canva is me and my partner doing a dinner invite with ChatGPT-

   5. RORory O’Driscoll15:55

      True

   6. HSHarry Stebbings15:55

      ... that would've been done in Canva, and then Higgs Field is actually a business that uses video as a more primary method of delivering their message. And so it's a slightly more prosumer professional, I would argue. Jason, I don't know if you agree with me. But both equal-

   7. JLJason Lemkin16:09

      I think it is. I think you could argue it for sure. And, and the- almost all that growth, 700 million in revenue over today, is from this, the, the, the, uh, video creation, complex video creation, where you're taking... You're, you're, you're ex- you're, you're creating functionality out of the models that alone, uh, is very complicated to harness, right? Um, it's a harness that allows you to do something that's very complicated with the models. Their original model, which was just to aggregate models to make short videos, it, it is cash flow positive, to Rory's point, but it's not an exciting business, right? Um, they, they stumbled into the bigger one. The, the tough one, and it, it's the, is that, you know, that whole b- whether... That whole business, which will shortly be a billion in revenue, it, you know, a lot of it could've been Canvas if, if, if, if they'd aggressively got into it, just like I, I firmly believe a big chunk of Replit and Lovable could have been Figma's if they'd done it. It's a, these are... It's easy to, to, to take shots when it's so hard to run your core business. But the... We're, I think we're starting to see the, the outcomes of it being so hard to run your core business in the age of AI, and you've added all the AI stuff. Figma's added, added great agentic features. Canva's a little slow, but they've added it. Even that's, it's just not enough, and you're seeing gravity weigh you down, and it's, it's, um, it's a tough job today, right? It's a, it's a tough job.

5. 17:26 – 20:50

   Companies That Hesitated in 2023–24 Will Pay the Bill in 2026–27

   1. RORory O’Driscoll17:26

      Yeah. I, I think that's actually a super interesting meta point, Jason. You're, you're right, 'cause, you know, I tend to be an incrementalist, but there are times when the, you know, the kind of just the world opens up, and there's a crevice between the before and the after, and if you make that jump, you gotta make it quickly, and there comes a time when the gap is too big, right? And that's what you're saying here, right? I do... I've come to the conclusion that this could be one of those times, and to some extent, there's going to be a lot of pe- we saw it AirTab. There's going to be a lot of people paying the bill in '26 and '27 for a certain amount of hesitancy in '23 and '24.

   2. HSHarry Stebbings18:00

      Can you give me an example of a Figma or a Canva generation company that has gone, "Hell, I see this coming. I'm gonna move fast," and to hell with it, they've done it and done it well?

   3. RORory O’Driscoll18:11

      I mean, look, uh, the boring one is obviously Intercom. We've talked about a lot, and we were investors, so I don't know. But they, they succeeded and did it, and I think, I'm sure when, after the deal closes, Eoghan will be the first to say that was a journey and a wild journey and a hard journey, and he's [laughs] you know, he earned every dime. Let's put it that way. You know, so I give him credit to that. But the, it- I mean, I'm just trying to think here.

   4. JLJason Lemkin18:31

      It's a hard one, isn't it?

   5. RORory O’Driscoll18:32

      Um, I mean, the thing is-- 'cause the interesting thing is, to some extent, and we'll talk about, for example, Atlassian in a second, one of the big questions is how much of your business is going to change? And there are some businesses that just by virtue of the software process they automate, there's not going to be as much change. I think for examp-- I think accounting, you know, we, we're looking, we have real interest in the next generation of accounting companies, but it's a f-fairly slower moving market than, say, creative, individual prosumer creative tools. So to some extent, the speed at which you have to move is in part a function of the kind of business you have, right? And the abi-- you know, what AI's impact will be. And, you know, I'm just thinking aloud. There-- actually, I will give you some, because they're right on the head. Some of the coding tools, I think even... They didn't have a big business, but I think Windsurf and even, um, come on, Cursor, were doing something else right at the start, but because they were super small, they pivoted in '22 really fast. I don't have a good... To your point, I'd take coding as the best apps market, right? The biggest. I don't have a good example of a 2020, 2017, 2018 coding company making that pivot.

   6. JLJason Lemkin19:41

      Well, I have the example, but, but I think Replit's an example. It was freaking in the wilderness for six years until, until it added the models, right? It was a super nerdy web IDE. I think to answer Harry's question, it's just a tou- it's a, it's a tough question to address as investors and employees, which is the ones that co- the ones that, that have accelerated, right, the pre-agentic ones, are the ones that were in, i-in, in the-- could catch the wave. The Datadogs, Cloudflare, Palo Alto Networks from last week, these were guys that were already e- even... You know, I didn't think Twilio would benefit from this. Jeff Lawson saw it when he was on this pod, right? He's like, "Agents are gonna need more. They're gonna need more voice and more text." So Twilio, which is your gr-- which w- which was, you know, the hipsters', uh, uh, uh, you know, API for, for voice and, and data when, when we all met Jeff, it, it became your granddad's tool, but it was still well-positioned for the wave. He ha- he was holding the boogie board just right, and the wave came in, and he's flying, and freaking ChatGPT is just tumbling poor Canva s-side over side. And, and I think in the enterprise it's happening, it's just slow. It's just, it's just quarter by quarter, it's slowly

6. 20:50 – 34:03

   Which Pre-AI Companies Have Successfully Caught the Wave?

   1. JLJason Lemkin20:50

      happening.

   2. RORory O’Driscoll20:51

      But I, I w- I wanna make a distinction here 'cause, you know, uh, I think the Datadog example is an interesting one. I think you have to distinguish between it's easier to survive if you're well-positioned and don't require a business model change versus if you're not well-positioned. And I think the challenge, the, the comp-- the, the toughness of the task facing the CEO of Datadog versus, say, the CEO of Canva, do- are very different. 'Cause if you think about Datadog, they sell observability, they sell it to infrastructure vendors. Nothing in their model has changed except there is now an infrastructure vendor who needs to buy 100 times more Datadog than anyone else has ever bought, right? So all they had to do was show up and sell more, and that's true for all those guys. You know, we were lucky enough to be in JFrog. You can see that Cloudflare, Datadog, all the infra providers, it's not like they're inventing a new thing. They're just saying, "This is the greatest infrastructure boom in history. I sell infrastructure. Time to make out like a bandit." There's some tweaks at the margin on the products, I agree, but fundamentally, that's it.

   3. JLJason Lemkin21:49

      There is one, there is one that, uh, Captain Obvious, and just so I don't get flamed in the comments too much, that did it. And I think there's... I don't know all the reasons, but I can think there's two important reasons. Obviously, Palantir did it. Palantir went from 18% growth to 98% growth, right? Unprecedented in our lifetimes, right? It, it may be the w- the any- the one of N or the N equals one. Um, maybe it was well-positioned, um, but what it re-- the, the thing was, it really leveraged a combination of outcome-based deals and pricing and a-a true FDs that no one else... We talk about FDs all the time with our portfolio companies. It is fair to say they're really solution architects or SEs with an FD t-shirt. Palantir had people who for a decade and a half were out there deploying business-- massive change in the field for their customers. So when their customers needed AI, they had the guys to do it, right? And then Alex Karp did the crazy thing, which we-- which the VCs talk about, but it's hard for all the company. He did outcome-based deals. "Give me two billion. I want a $2 billion contract, but I'm gonna save you eight billion," or, "I'm gonna give you six more billion of revenue on the commer-" No, no one does that outcome ba... They, they talk about it, but they just tip-- they just pretend that they do it. No one puts a $2 billion deal on the line for an outcome-based resolution. And they, they w- they had both these things that... Canva's on the prosumer side, but in the enterprise, it's very hard to change to true outcome-based pricing and to have a suite of FDs that can deploy AI. I, I really wonder if the average SAP SE is as literate in, uh, in, in the models as they are at Palantir.

   4. RORory O’Driscoll23:25

      Well, they're not. And I think, again, y- I-- first of all, I totally agree, 'cause we-- remember we talked infra, and now we moved on to apps. And in the apps, I think Palantir is an excellent and possibly unique example of someone who's... It's, uh, very interesting 'cause their existing model wasn't that threatened, but it was growing slowly, very government-centric. And if you read the book, the b- the Palantir, the Karp biography, huge credit to them. In '23, '22, '23, they saw the LLMs, and they grokked it immediately. And they said... You know, and it-- going back to the thing about making your bets in '23 that come good in '26, they basically said, "We're gonna put all our wood behind this. We're gonna build the enterprise version of the product." I can't remember the code name for it now. "But we're gonna make this bet." And you're right, and it turned out that the combination of, you know, AI knowledge and FDEs was exactly what enterprises needed. So I agree. That's an example of someone who... I wouldn't say they had to... I mean, if I think of it, someone like a Replit had to rethink everything and pull it off. Someone like a Canva still has to rethink every- and, and has a lot of pressure on it. Palantir could have chugged along at 20% and been roughly fine with the gov- but instead, they grabbed the moment. I'd give them the positive Grab the Moment award. You with me? They-- And it's one where I would argue, unlike a Datadog or someone where all you had to do was do the same thing, that's one where you have to give the CEO and team credit. They said, "If we turn the crank even slightly on our offering, it will work for a whole suite more customers than we've had." So I agree. I think that's a, that's a good example of grab the moment, and I think Revolut's a good example of doing the even harder thing, which is, "Shit, I gotta do something else, but if I do it, I'll win." But there's not many.

   5. HSHarry Stebbings25:09

      Ding, ding, ding. If I, if I just do a quick fire, I don't wanna take it back too much, but just, um, a lot of LPs listen to the show, and they have Canva in their books, and they're going, "What do I do with that?" How should they think about that given what we've just said?

   6. JLJason Lemkin25:27

      Well, what do you think it's worth? Uh, I'd say it's probably worth $12 billion right now. 20% growth at $4 billion ARR in the current public markets and not accel- decelerating. There's some sort of rule of 40 number that's better, but I, I'd say it's worth about $12 billion.

   7. RORory O’Driscoll25:42

      The odd thing-

   8. JLJason Lemkin25:42

      Oh, I held at 50.

   9. RORory O’Driscoll25:44

      I, I understand. I'm just gonna... You might be right, but I'm gonna push. What's interesting is I can find you companies like, that are in 20, 25% GAAP revenue growth, free cash flow positive, trading significantly above that because they're getting the, um, th- because there's no existential question. I mean, one of the big things that's happening is, like, a Datadog or, I think a Cloudflare or JFrog or all those guys, they're mid-20s growth, 20%-plus operating margins, trading at 15 to 17 times NTM, right? But I think the difference is there's no existential question here, right? Which is why maybe I'd answer the question in the following way. If the existen- if the e- if it's 20% and the existential risk is there, then Jason's right. It could be, you know, it could be 12 or even less. If they can, if they can transcend that risk, then you probably-- You know, you're still top stop buy. You know, you're gonna be grounded by reality now 'cause you're not selling Brave New World, but it's kinda 12 and up, right? And a good mid up.

   10. JLJason Lemkin26:41

       But just, uh, listen, I hope you're right. Again, I don't wanna be negative. I wanna be, I want Canva to defy gravity. But why do you th- when, when every single person on Wall Street uses ChatGPT, why do you think people won't-- And I think existential risk is both reality and perception. Why do you think it won't be perceived as having existential risk? If, if Monday and HubSpot do, I don't see why they won't see the exact same thing for Canva.

   11. RORory O’Driscoll27:03

       I'll tell you exactly why.

   12. JLJason Lemkin27:04

       Yeah.

   13. RORory O’Driscoll27:04

       Because you're right. In the short term, they will. But if you look at-- In the short term, they will lose. But you can control that thought. You can control what the 27-year-old on Wall Street thinks. But let's take the example of Atlassian. We had Mike on as well, right? They killed it last quarter. The only way you prove that you're not dying is by growing, to Jason's point, right? The thing that's pleasing about life is if you pull off the important thing, the hard thing itself, then the markets will follow. You're right. Right now it's a very tough time 'cause you're gonna, for, to... When the existential risk is posed, the only way out is to prove it, right? So you-- Like, right now I think there would be a wide variety of perceptions on valuation that something like a prosumer company like Canva, and it, it'd be hard to peg value and hard to get liquidity at scale, by the way. Right? Which is one of the other things about, at the margin, a difference between a private company and a public company is when the window shuts in private and the appetite dies, it's very hard to get anything done. So [chuckles] the real answer to you, LP, is it doesn't matter what you think, big guy. You're in this journey for the next 12 months. Buckle up, [chuckles] right? Because liquidity will only come at the end of the journey.

   14. JLJason Lemkin28:10

       It's also important, potentially, I mean, I don't wanna over kibbutz. I'm not exactly a, a, a, a public company PR expert, but I do think it's important to get ahead of, of the narrative Rory's describing. I do think that once everyone starts saying that ChatGPT is killing, uh, Canva because you can make poster-sized images for free in, with your, with your subscription, every... It's just like the dumbest-- I think the three of us can probably agree one of the dumbest AI memes was that everyone would vibe code their own CRM. Even though Harry's had guests that do it, this makes no sense for 99.9% of the world, okay? You can't maintain it. You can't build the integrations. It's more complicated. Most of the folks that say that have never used a CRM. Um, but it, but it, but it, it's so visceral, the idea that everyone... And, and that's damn 20VC show has, uh, has been part of it, bringing in all these guests who are trying to hide slowing growth by, by talking about how they built their own CRM. But I mean, it, it has taken hold, right? And, and the shorts have jumped on it, and the haters have jumped on it, and so be it, right? But, uh, if I were Canva, I'd be worried that this would become a meme.

   15. RORory O’Driscoll29:15

       I think there was a quote, something like, "The worst thing in the world to fight is a bad idea whose time has come." [chuckles] Right? And you're right. Everything's-- Yes, and we're seeing that in the SaaSpocalypse now, and the only way out is true. Right? Which is the companies that have produced the revenue growth have seen, um, you know, upticks. And overall, world cloud's up 50% since the bottom of the SaaSpocalypse. But the people who've struggled are still struggling. So you're right. You will have to prove it.

   16. JLJason Lemkin29:40

       What do you think the answer to LPs is? Obviously, I think after Airtable and this Canva quarter, it's probably time to be a little extra skeptical of marks, just, just being realistic. Like, we've had some, we've had... These are two events that I think have quietly hit old marks. Uh, even you should have marked them down last year. But I mean, these are, these are events that are difficult to hide. They're difficult to say, "My guy's gonna turn it around," okay? After these, these, these events, I think they do kinda shake the ground a little bit.

   17. RORory O’Driscoll30:08

       They definitely do. And it's funny 'cause just taking the Airtable comment, we all s-- I used to mentally say to myself, I'm sure you did, Airtable and Notion, you had them in the bucket of being the same. And then it tu- I mean, I don't know if the sacra numbers are correct, but Notion is apparently $800 million growing at, you know, 70, 80%, right? It gets back to the same comment is, when I think about valuation, stepping back, at a minimum, you have to look very objectively at the actual growth rates and be brutally honest as you think about valuation relative to that growth and that projected forward growth. If you, you gotta ground yourself in those facts as step one, and then the question, the second-order question is, do you grade up or down for existential versus lift, right? But at a minimum- Y- y- yeah, it's no longer acceptable to say, "Once upon a time, we raised at 42, therefore we're holding for 42 billion." Right? It's, "We're doing a billion, we're growing at 30%, that is this multiple. We're doing a billion, we're growing at 10, that justifies that multiple." I, I totally agree, Jason.

   18. HSHarry Stebbings31:05

       For me, I thought actually one of the tweets of the week was Dave Samuels, I think is his name, from Freestyle-

   19. RORory O’Driscoll31:09

       Yes

   20. HSHarry Stebbings31:10

       ... who mentioned that, that, that blended exit price from Airtable was actually six billion, and the importance of selling along the way and being very thoughtful about selling in the good times.

   21. RORory O’Driscoll31:20

       Totally.

   22. HSHarry Stebbings31:20

       I thought it-

   23. RORory O’Driscoll31:21

       It's al- and it's always true when it goes down, and it's never true when it goes up.

   24. HSHarry Stebbings31:24

       One of my great friends is a multibillionaire, and he told me, "You know what, Harry? I never regret making millions of dollars."

   25. RORory O’Driscoll31:31

       Totally.

   26. HSHarry Stebbings31:31

       And I say this through my G650. And actually, you know what? I've sold now stuff-

   27. RORory O’Driscoll31:36

       Yeah

   28. HSHarry Stebbings31:37

       ... and yeah, I've lost on upside, but you know what? I'm happy-

   29. RORory O’Driscoll31:41

       Totally

   30. HSHarry Stebbings31:41

       ... that I locked in some wins.
7. 34:03 – 44:19

   Jeff Dean & Demis Hassabis Leave Google

   1. HSHarry Stebbings34:03

      so, so that, that-

   2. JLJason Lemkin34:03

      I mean, Jesus, let me, let me leave the comfy coop where I'm making nine figures a year to just talk about AI in a comfortable conference room with a mug and go out and do it, man. [laughs]

   3. HSHarry Stebbings34:12

      So, so let me provide some context. Uh, Google had some talent loss. Uh, Jeff Dean, you know, one of the, you know, godfathers of much of AI, um, has left after 27 years, taking three legends with him. Um, I'm gonna pronounce their names wrong, so I'm gonna leave it there. Um, and then, [laughs] and then Demis, um, also is, like, stepping back or whatever elegant, uh, marketing message we wanna put around it. He's, like, moving into chairman role. Um, power centralizing back really to Silicon Valley as well with that. That was the big news from Google, and obviously shares tanked as a result.

   4. RORory O’Driscoll34:54

      I actually think Jason made the best point, right? So first, first of all, in passing, it must be extraordinarily validating if you're Jeff Dean to leave as a non-CEO of a $2 or $3 trillion market cap public company and have the stock go down by a couple of hundred billion dollars. If you want to increase your sense of self-importance and self-worth, that, that was a good moment. That was, that was what the therapists call validation at a high level, right? So let's move on from that. I actually think Jason, genuine comment here, Jason's take is the correct one. Don't... Like, we can analyze what it means for Google, but think about it. If you're Jeff Dean, you've done 27 years at Google, you've made gazillions of dollars, right? The mission at Google, to a rounding out, like it or not, is allocate a lot of the compute to the Google Cloud business to just be a hyperscaler, boring as shit to you. Allocate more of that, the remaining compute, to build a competitive frontier model, mainly focused on the big things of consumer, 'cause that's what they care about, and coding, 'cause that's what they care about. At this point, after 27 years, fairly boring to you, and get some time to do a little bit of medical discovery and scientific discovery that's really exciting to you. But because of the, the relative size of those businesses, that's always gonna be in third place. That's option A. Option B, you can go raise all the money you want. I mean, it was really sweet that they even built a PowerPoint. I doubt they needed to, right? I think, "Hi, Jeff Dean, I'm raising money," would have sufficed. And go away and do exactly what he says, which is, you know, use AI to, quote, you know, "Investigate advanced scientific questions." Right? What are you gonna do with your late fi- 50s in life? It's, it's a, it's, it's totally natural.

   5. HSHarry Stebbings36:36

      I don't buy that. I'm not being rude. Sorry. If you look at the resources he had available to him at Google with the data that he had available to him at Google, he could go into Sergey and Larry's office and say, "Hey, I want X." And they would say, "Jeff, you have whatever you want."

   6. RORory O’Driscoll36:51

      No, but I don't think that's what's happening. With all due respect, I don't think that's what's happening. Right? I think what's happening is, you know- Every dollar of-- every piece of compute that you give to, um, Google Cloud turns into thirty percent operating margins in a day because they can sell it to Anthropic. Every bit of c-compute that you give to building Gemini might turn into a decent coding model if they get their shit together, and maybe you can get some Anthropic-like revenues or some ChatGPT-like consumer revenues, right? Every bit of compute that you give to drug discovery or materials discovery or physics discovery turns into a long shot, five or seven-year moonshot that maybe will indulge at the ten percent level, but it's not gonna be the core thing they do. So if you're a senior executive in those companies, you're probably expected to do your J job. What was the old thing? Twenty percent kind of fun time. You know, eighty percent of the time you're meant to, you know, deal with boring shit, right? So I think at some level there's a desire to focus full-time on that. I think people... It's hard for you to understand when you're younger. As you get older, you start saying to yourself, you know, "Is this it? I optimized ads. This is all I want in life. Maybe I wanna be my own boss. Maybe I wanna just focus on scientific discovery."

   7. JLJason Lemkin38:06

      If Rory's right and it makes sense to me, I just don't know. I-if it, if it makes sense, th-they're, they have all... They have access to all the resources, but, but the team's somewhat deprioritized, right? Because of where the cash flow is. I can just tell you, not to go back in time, but when I was an SVP at Adobe at the number three business unit, it, it, it sucked. It sucked. I mean, you know, you go... I'd be with the other fifty VPs, and we wouldn't even get to talk about what we were working on. It, when, you know, we're, we're, we're only doing eight hundred million at the time, but it didn't... Like, the number three BU is invisible, right? It was just... And so if that's the vibe today, and for, maybe for the first time ever, I could take my team, my whole team, and get all the capital I really need to do what I wanna do, I, I, I would leave if I was number three. Listen, I'm not quite smart enough to know, but if, if Rory's right, that may completely explain it. If you're, if you're the number one priority at Google, you're gonna stay, right? Because it's easy, and it's a pretty bucolic environment there, right? Or at least it used to be before. I mean, I used to sell to Google all the time. I was there ev-every three or four weeks, the most bucolic campus ever. Uh, but it, uh, maybe today it's a little more stressful. But, um, but if your number... If you're, if you've been deprioritized, as important as you are, right, your team is, y-you, and you can get, you can raise a billion or so, I'd check out, man. I'd go do it, right? And the VCs aren't gonna put the traditional annoying pressure on you the first twenty-four months.

   8. RORory O’Driscoll39:26

      No. The, I, I, I... That's actually an, another interesting point. It's worth saying is that the appetite from venture to finance moonshot-stype, type AI will solve science bets has never been higher. I mean, the proof is not yet in, as a reminder, and there's a lot has to happen to make these bets work. But if you're a scientist at your core, and if you're a believer in knowledge and discovery, the chance... This is a once in a lifetime chance to make that on-unhedged bet with no corporate BS to deal with, and it's a once... I mean, even two or three years ago, you would not have got that kind of money to make that, right? It's just these kind of science-based neo labs are really a phenomenon of the last two years.

   9. JLJason Lemkin40:11

      And maybe just two small things, we can move on, but one, I think Vinod's leading the round, right? Or co-leading the round or something. So he's just redoing... He already, he already... Granted, OpenAI hasn't gone public, but he's, he's already had a w- a little bit of a win here, right? That guy Vinod, right? So he's just doing their playbook again. Um, and then two, going back to G- to Harry's question on LPs, you know, I think this week it's, it's a little murky. I'm, I'm trying to read the news from Hawaii. I'm not quite in the SF Bay. But if Anthropic really is gonna IPO for, for now for real in the next sixty days, it's just gonna tangibilize all of this once again, right? Hopefully, hopefully for the better, um, and maybe slightly for the worst, but, um, it, it, it will, it will, it will make these bets seem more and more like the present, right? And the Canvases and friends more and more like a distant, a distant memory, a distant memory of a bygone era of software.

   10. HSHarry Stebbings40:59

       Two, two questions for you. How significant is it losing this many high caliber people this quickly? We haven't mentioned Demis. Obviously, Demis, founder of DeepMind, led London AI efforts, uh, visionary genius. Been fortunate to interview him. How significant is it, honestly, to Google?

   11. RORory O’Driscoll41:16

       On one sense, obviously, look, the, early on, this business had been very individual-centric, so losing these two talented people in terms of full-time thing and the three people who left with Dean is obviously really significant, right? On the other hand, just to put it out there, whatever was Google was doing wasn't quite working, and we've gone through the Google is dead phase t-twelve months ago. Then we went through the Google is amazing phase six months ago, and now we're kind of going to the in the middle, which is Google's doing a good job in cloud selling compute to Anthropic. They're doing a good job selling, yeah, the picks and shovels of TPUs to Anthropic. They've kind of got a model out there, but they haven't made any impact whatsoever in coding, which is the motherlode that's feeding the Anthropic beast right now. So you could look at it and say Google's efforts so far are B plus, A minus. They're not A plus, right? So I don't think anyone wanted anyone to leave, to be really clear, but it's probably been unsatisfactory to go... Because you can imagine you're the CEO, you're coming in saying, you're saying to your two most talented human beings, one of whom has a Nobel Prize for medicine, just to remind you, "Why aren't we building a better coding model?" And they're sitting there thinking, "Why haven't we cured Alzheimer's?" You know, at the end of the day, that's a really boring E-staff meeting because we're just talking past each other, right? I actually, in a perfect world, a year... I mean, this is oddly what they got rid of two years ago. In a perfect world, if everyone had been self-actualized, they'd have put someone like the guy who's running it, a, a, a tactical executive in charge of grinding out this and maybe given these guys more running room more early to do fun things. 'Cause I think that's been the dynamic all along. If you read the Maltby book about the DeepMind acquisition, all along it's been, "How much corporate shit do I have to do? Because what I really wanna do is Get a Nobel Prize. And who am I to argue? We'll remember the Nobel Prize long after we forget the Google Q2 earnings, right? So [laughs] he's entirely right to want to do it. Um, but unfortunately, Google has to make Q2 earnings, and if you're the CEO there, you need an executive who's willing to drive, drive what it takes to get a comparable chat model out there to compete with ChatGPT, and a comparable coding model out there to pe- compete with Anthropic, neither of which you've done now. So if someone comes in and says, "I've launched this initiative, and I think in five years' time we'll bring out a simply amazing drug, and it will, you know, cure cancer, cure Alzheimer's," whatever, your brutal comment is, the correct response is, "If we do that at the expense of a coding model and a chat competitor, that's a mistake, and our stock will go down by 50%." 'Cause the largest drug company in the world is valued at a trillion, and Google's valued at three. So the corporate imperative is to get someone who wants to do those things, not someone who wants to save the world.

   12. JLJason Lemkin43:59

       It's super difficult today.

   13. RORory O’Driscoll44:01

       Totally.

   14. JLJason Lemkin44:01

       The best, the best, the best AI engineers, the best AI researchers really wanna work on what they wanna work on. Nothing stu- and they don't wanna work on stupid things, and they don't wanna work on non-obvi- on obvious things. They ju- they really only wanna work on ex- stuff at the absolute cutting edge that, that is extremely

8. 44:19 – 46:59

   Why Anthropic Kept Its Best AI Talent While Google Couldn't

   1. JLJason Lemkin44:19

      intellectually interesting to them. They don't wanna work on anything else. They just don't want to, and they don't have to. They don't have to anymore.

   2. RORory O’Driscoll44:24

      Which is why you've got to admire the brilliance of the, the team at Anthropic, that they have simultaneously managed to not convince themselves, 'cause that sounds judgy. They feel they're on this mission, [laughs] you know, public benefit corporation, a mission to bring AGI to the world, all that good stuff, while simultaneously making every single correct rational financial move over the last two years, including, to your point, going public first, which I think they will as soon as possible, 'cause they'd be insane not to. And the one thing we can stipulate is those guys are not insane. They are right on it. They will go public because this is peak brass ring moment, and, you know, you could argue the trends in '27 are tougher. You've pulled ahead of ChatGPT. So just put a nail in the Anthropic head, right? You've pulled ahead of ChatGPT comfortably, OpenAI, to a point where it's embarrassing. It's never gonna be better. There's just been a trillion-dollar IPO that all in all went okay. It's back to its offering price. You should go, you should go now, you should go fast, you should be done, right?

   3. HSHarry Stebbings45:28

      If I'm the founder of a company, an early-stage company, do I just accept that I'm gonna have B-tier or C-tier AI talent? And I don't mean that deneg- denigratively or rudely or horribly, but they're at Anthropic and OpenAI. I mean, Google can't freaking keep-

   4. RORory O’Driscoll45:43

      I think it's the wrong, um, framing, 'cause if you think about it... I mean, look, when I was, you know... When you were building a software company in the age of the PC, you had fourth-tier chip talent because you weren't building a chip, right? [laughs] The point is, if you're an AI company and you feel the need to build a frontier model, then yes, you've put yourself in direct competition with someone, and if you don't have the good people, you're toast. So what you gotta do is make the model a complement and have A-tier talent at UI, A-tier talent at, you know, AI implementation, A-tier talent at the things that you have your competitive advantage in, right? But yeah, you're probably not going to... Even the very best companies that are taking open source model, open weight models and fine-tuning them, right? They should be experts at fine-tuning, they should be expert on their data domain, but they're probably not gonna be as good at kind of building an LLM from scratch as the guys who've been doing it for the last two years, but that's okay.

   5. JLJason Lemkin46:40

      One tough thing, though, that is happening, that for sure, um, is that I think when we started this show, there started to be sort of two tracks on compensation, right? Which is, I have to have, I have to break my salary bands for my AI guys because they're, they're worth so much to Anthropic and OpenAI.

   6. RORory O’Driscoll46:56

      That's true.

   7. JLJason Lemkin46:56

      Now we're seeing three bands of compensation.

9. 46:59 – 56:13

   The God Tier Compensation Problem: Three Pay Bands Now Exist in Tech

   1. JLJason Lemkin46:59

      We're seeing the regular human beings, then we're seeing the AI guys, and then we're seeing the one, the, the one to five superstars that we're talking about, right? That I have to, uh, that I have to find a seven-figure package for as an early-stage startup because they're gonna get it, right? And, and they, and we have to provide them everything, the outsize equity, the outsize cash. And there are, uh, especially when you talk for folks that are mature, the 100 million and up, ARR guys, 200 million and up, they all have this, this god tier now of compensation. And it's, and if you have the revenue, it's sort of fine, right? You can afford... If you're doing th- $200 million in revenue, you, you can have four god-tier employees. It's not gonna break your, your, your model. Um, but it does, it, it is a big, it is something that folks have had to accept. Um, I, I, there's a bunch of CEOs I work with informally that I'm not an investor with, that I work with at that scale, and they've all created god tiers. They're like, "I got four guys. I, they are the core of my next generation product, okay? They're all making seven figures. They all have, like, they all have equity stakes 10 times what an employee at this late stage would have, and the, the, the best investment I've made, like this god tier." And, um, I, it's just... But it's tough on the rest of the team, right? Because it's not the way we used to do this kumbaya style when, uh, when you've got this god tier, it's tough. But if you, you're not gonna pull off, you're not gonna pull off a Palantir, an Intercom without a god tier. You need a skunkworks and you need a god tier. It is, or it ain't gonna work. It's just the siren, the siren call of the Anthropic comp is too high. OpenAI just did a secondary of seven billion, didn't it this week? Something like that.

   2. RORory O’Driscoll48:32

      Yeah. Yeah.

   3. JLJason Lemkin48:33

      I mean, that sounds pretty good to me, guys.

   4. RORory O’Driscoll48:36

      Markets and prices are all about incentives and signaling, right? It just, it's a way of sending real information. And there's no doubt that, you know, I saw the analysis that someone who got a million in stock in Anthropic in '23, it's worth $51 million now, right? That's a signal that just ripples through the hiring environment You know, across the entire ecosystem. Now, I would remind everyone that that's what's known as a one in a lifetime change. I don't think the person today will be getting 50 times their return. But whatever, it does have an impact of just distorting what everyone thinks is possible. And, you know, we are naturally attracted to narrative around the outliers. That's not the norm. But yes, that is the, that is the California gold rush part of the story. And you're going to see it even more written when the pricing happens.

   5. JLJason Lemkin49:25

      The only other thing I would just add, um, for if you're not-- how do you compete with them, right? How do you compete with that? There is-- You-- I do think you might have to have a God mode compensation package. Um, the only thing is if a lot of those jo-the jobs that you're offered for those job, job-- they, they do go into Rory's earlier point, they do kind of suck. They're not all, they're not all Jeff Dean and buddies sitting around in a whiteboard designing the future of, uh, of a, of a, of Fable, the seven dot two. A lot of these jobs are, uh, for folks that aren't quite at that tier are not that great. And so that's what, that's always been the job of a founder, is to find those pirates and romantics at the edge that could get it. You know, back, back when I was a founder, uh, you know, our test was always w-what-- did you get an offer at Google? If someone got an offer at Google back in the day, you knew that they were top ten percent, top five percent, right? You could do the same test today. Did you get an offer at Anthropic or OpenAI? And what was the offer? Well, you know that, that flashing thing in, in Claude, they want me to work on the, the-- or I'm colorblind, the red or orange thing. I'm going to make a million dollars a year make-- getting that pulse just right, or I got to work on watermarking my first 18 months. And, and so you can find the folks that say, "Yeah, accounting software would be more fun than that. I, I'd like to do LLMs for accounting." So there-- If you, you got to interview everyone on planet Earth, and you will find someone that doesn't want that, that, that job, right? That's the job. But you might have to pay him a lot more than you had to twenty-four months ago.

   6. HSHarry Stebbings50:47

      Talent is one bottleneck. Um, another bottleneck that I, I did think was a really interesting news story that came out this week was the, the backlash, um, going federal when it comes to new data center creation. Um, Rep Ro Khanna said he will introduce a data center bill of rights that will give local communities the right to say no to AI data centers. Yes, you go Rep Ro Khanna. That's exactly what Xi Jinping is gonna say.

   7. JLJason Lemkin51:11

      Hero Silicon Valley. [laughs]

   8. HSHarry Stebbings51:13

      Yeah. Xi Jinping is gonna say, "Stop you deep-seeking moonshot. We don't want that in this rural community." What a freaking joke, eh?

   9. JLJason Lemkin51:23

      But I have talked with some folks who truly are experts at this, right? In-including very recently. Mo-most folks think that, oh, like this is, this is pretty lame. This is pretty dumb, this NIMBYism, right? It's bad for the-- It's, it's even crazy that Texas is in on it, right? Is in on the NIMBYism. Um, and I think Elon pointed out that, that the Terrafab, it's already created three, three thousand jobs, but it's only, it's only ten percent capacity. It could be thirty thousand to kind of get folks to see the other side of it. But I think folks that are close to it think that it, it-- there will be enough counties and jurisdictions that want these data centers, that as we push through this and as government gets on the other side, it, it will ultimately gonna work itself out. Like, this will not be one of the great issues of our time, even though it seems ridiculous today that, that you don't want these. But they are, you know, there's only so many people working at these data centers. Um, but it may-- this one may work itself out. At least that's what folks I've talked to that know it more closely than me.

   10. HSHarry Stebbings52:18

       Uh, do you not think this will, do you not think this will be a material blocker in our speed of deployment?

   11. JLJason Lemkin52:24

       Well, we have 50 states, and I don't know how many counties we have. It's a lot of counties. Like, um, I'm pretty-- There, there will be some with water and power that want, that want this business, is, is the meta point, and that also th-this backlash isn't gonna last, right? These are not, these are not all destroying our water tables. These are real jobs. Three hundred and three thousand jobs for a lot of poor communities. Let's not mock it when the aver-- I mean, I mean, this is such an entitled podcast. Oh, a poor Anthropic engineer only made thirty-five million. I mean, go out to the goddamn panhandle. No one's making 50 grand, right? So these are, these are not enough jobs, right, to make up for the [laughs] ... But these are real jobs with real money, and they're gonna last years and years and years, and they bring a limited amount of econo-real economic benefit. Um, you know, there's enough. But it's, it, it is a bummer for, for places where we should be building these data centers, for sure. It's not a net positive. It's just a question of will it work itself out in, in, in, in the US, where we, we do have competit-one th- We do have a nice set of competition here, regulatory competition between states and counties.

   12. RORory O’Driscoll53:25

       Yeah. I mean, I think, you know, the irony of Ro Khanna, you know, the Silicon Valley congressman turning into the, you know, the Marxist wolf in sheep's clothing is, is pleasing to me, as I would not tend to be on that side of the voting aisle. Just watching all the Dems get suckered into thinking he's a moderate has been worth the price of admission as he starts advocating the billionaire's tax. So there you go. But who am I to judge?

   13. JLJason Lemkin53:50

       You mean, you mean millionaire's tax, Rory. I think you missed that.

   14. RORory O’Driscoll53:52

       Yeah, yeah, that's exactly right. So that's kind of funny in and of itself. But you know, once you're elected congressman, your next step is up, and the truth is, the way to pop-- the way to electoral success probably lies through a fair amount of populism for the next period of time. So o-on the data centers, I think, you know, I saw a good piece, I think in The Atlantic or something, really just talking to people, uh, you know, in the areas wrestling with these issues. And it was a very interesting point. It was much less, much less even AI is awful and much more, "I don't know what I'm getting here. It's all very opaque. What's the deal?" And I think if tech wants to get this stuff done, there's, there's two risks here. Um, you know, th- and they're almost opposite each other because it's, you know, if you want to get local support, you got to figure out what's the package that moves it for them. And it definitely isn't, "Oh, by the way, you're going to get a twenty-five percent increase in your electricity costs." And you're seeing that now. People are wi- And I think the smart people are saying, at a bare minimum, if you want to get a data center in here, you got to find a way of making sure people aren't going to pay for the electricity, and there's probably going to be some kind of dividend. If you tell people that, you know, you're going to get this job business, there's not going to be an increase in electricity, and there's going to be, you know, a five, ten grand distribution per people in the township, you probably go, "Yeah, we should look at this," right? Um, the other thing is, do some of these statewide laws just make that impossible to do? Because the truth is, at the moment, there is a fair amount of we hate tech bros out there. And as we said a million times, it turns out if you spend three years saying AI is going to kill you all- You shouldn't be surprised we hit it. So I, I think there are-- there is some wood to chop technically. But I do agree, Jason, it's a great point. One of the best things we have over here, unlike, you know, I say, at the UK, which is one of the most centralized states in Europe in terms of central authority, and Andy Burnham's trying to change that, but we got 50 states. If, if North Dakota hates this shit, but South Dakota likes it, then South Dakota can put something in place and it can happen, right? It is-

   15. HSHarry Stebbings55:46

       Dude, the UK is, like, the size of South Dakota [laughing] .

   16. RORory O’Driscoll55:50

       But yeah. So my, my point is, is that we've got diversity here in terms of... So hope- hopefully it won't be a huge block. I mean, right now the practical point is, it's actually the availability of power rather than pure data center blocks. But there's definitely a whole series of things slowing things down, between power availability, s- compute availability, and then political availa- willingness to turn this stuff on.

10. 56:13 – 1:04:25

    Elon Musk's $55BN Terrafab Bet to Break Free from TSMC

    1. HSHarry Stebbings56:13

       Now, the, the main man himself, always lacking in ambition, Mr. Elon Musk, unveiling Terrafab, which we touched on there, $16.8 billion. Um, I think it's gonna be the most expensive build-out of, like, a real estate project, I think I read. Um, it's, as we said, in terms of jobs, extraordinary in terms of how many jobs will be delivered, different numbers, but between 2 to 3,000. Um, really it's him saying that he wants to sidestep TSMC's queue and obviously build out his own fab capabilities. How do we think about this news, both in terms of the strategic decision and the scale of it?

    2. RORory O’Driscoll56:52

       This is someone with boundless ambition, plus success at delivering on this boundless ambition, plus access to capital at an unprecedented rate. So he's probably gonna try and do all these things. It feels wildly ambitious to... You know, you have to build the gas turbines, to build the fab, to build the robots, to build... You know, like, the-- it's, like, vertically integrated on every level, but he has a piece of vertical integration that's been superb, which is satellite launching integrated into Starlink has been superb vertically integrated, right? Um, so you can join the dots in the past and say it all makes sense. I continue to think the scale of ambition, if there's any slowdown in the AI spend, then the all-in bet is the one that slows down the most the fastest, and this is the all-in bet. So, you know, watch this space. But right now he's got the capital and he wants to do it.

    3. JLJason Lemkin57:49

       I just think at the end of the day, the, it, he's-- beyond all that, he's just saying, "Listen, there's a decade of supply chain limitations that's gonna damage my, my ambitions. I, I gotta do it, right? I have to do it." It's just, it's... This is, this is also unprecedented, right? It's not just the investment that is unprecedented, it is this, you can't get RAM, you can't get chip, you can't get what you want, right? It-- we've had limited issues in the past, but I don't think we've ever looked forward and said, "For a decade, I'm not gonna be able to get what I need or on a cost-effective basis. I can't even get, I can't even get TSMC on the phone because Jensen's out there all the time." Um, I just don't... I could be wrong, but in my career, I have, I, you know, I have a limited amount of experience here in the old days. I don't think it- it's ever been like this, where it's, uh, you could for, uh, it almost feels like infinite time before I can get the capacity I need at any tolerable price.

    4. RORory O’Driscoll58:32

       Which is why it's super interesting to tie in something. Intel has come into the consort... Intel is part of the Terrafab consortium in such way, and I just saw it today. I did not know this. Intel completed an equity round, which I read somewhere, and I haven't verified it, it was the first time they raised equity since, like, they went public in '79. In other words, they've been profitable from cash flow and returning capital like a real company is meant to for the '80s, the '90s, the 2000s, the 2010s, right? And now the AI CapEx boom, plus obviously their deteriorating performance has said it's time to access the capital markets again.

    5. HSHarry Stebbings59:06

       While we're on Elon Musk, Elon Musk did have a very unusual incentive package where his obviously expanded with the expansion of-

    6. RORory O’Driscoll59:15

       Yeah

    7. HSHarry Stebbings59:15

       ... company valuation. Revolut announced an incentive package to the CEO, or it was leaked, um, whereby it, it basically ratcheted up with different, um, prices of the company. Um, he'd get another, I think, five to seven percent at $200 billion, and then he ultimately at $500 billion would have circa thirty-nine to forty percent. Is this the new norm, and should every CEO be asking for rated incentive packages alongside valuation bumps?

    8. RORory O’Driscoll59:45

       It's not going to be the new norm, and if it is, logically stock prices should go down by ten or fifteen percent. Because, I mean, what you're basically saying... I mean, I, I read the pa- I saw the, I read what's available about the package and, you know, the first question is multi-year packages and, you know, with, with incentives around market cap and, you know, in other words, significantly beyond the normal, um, CEO comp. That's been a thing. It obviously worked for Elon in the first, the 2018 Tesla package, and obviously after a lot of toing and froing, he got another package just recently finally approved after they moved to Texas. So they're not, quote, the norm, but they do ha-- they are put in place for reasons we'll come back to for a small number, typically of founders who've fully vested in all their shares and who feel, who want to be incented again by boards who feel that they have to be incented again, right? By definition, that's not, quote, the norm, right? Ninety percent of public companies aren't run by the s- founder, and frankly, the number of people willing to run a public company for $10 or $20 million a year turns out to be remarkably high, right? So no, they're not the norm, Harry, right? Are they the norm for founders? We're s- we're seeing some of them. I mean, common-- most of the time I think, especially if they're badly designed and focused on market stock price only, they typically, they often fail. We saw a whole bunch of them in '21 that got unwound in '23, '24, 'cause they weren't based on operating performance, they were based just on, "Hey, if the stock is at two hundred bucks, we'll give you more shares." And then what happens is the CEO executes brilliantly, but the market is down, so he doesn't get his shares, and he comes back and he says, "Look, I've done my job," right? Forgetting that he would not have made the same argument on the other side, he or she, right? So the mi-- the record is fairly mixed. But at the same time, I'm gonna acknowledge something. For that special thoroughbred CEO who thrives on challenge- You can put them in place if the incentives are right, and maybe you do get extraordinary performance in return for extraordinary comp. So it's not utterly crazy. They're, they're a very, not blunt, they're a very high-cost-focused instrument, and I think boards have to be fairly careful when doing-- I'm not, for example, a fan of the purely stock price-based ones. And to be fair to Elon's 25 package, we went over this before. It was a great package because it had, you have to do Mars, you have to do Optimus, you have to do lots of cars. At that point, give him the damn money, people. Right? So, uh, it, so th-there can be way to-- Now, interesting comment I saw, I think, in the Journal today. There is a clause that says if there's an M&A above a certain value, you do get a lot. You might see some acceleration of that package. I haven't read the detail. But it would be interesting if SpaceX and Tesla merge. Does he hit the big ka-ching on Tesla as well?

    9. JLJason Lemkin1:02:31

       That's what it, that's what it implied, is that he might hit it just merging the companies, right?

    10. RORory O’Driscoll1:02:35

        Totally.

    11. JLJason Lemkin1:02:35

        Before the details, Rory, just one question to you or, or to you and Harry. I don't mean to interrupt, but-

    12. RORory O’Driscoll1:02:39

        No, go on

    13. JLJason Lemkin1:02:39

        ... th-this, when I read this, I thought it was more about control than just money. I also just read a story that the CEO of Revolut just tried to get out of paying a twenty million dollar broker fee on a four hundred million dollar yacht he bought, so clearly he enjoys the good life, right? As well as working hard, right? This is not, this is not a CEO that does not care about money. But to me, and I think that Elon was very clear on this, "I need to control these companies or I'm walking," is what he said when the first one failed, right? So if Nick owns forty percent of Revolut, he controls it, especially with, I'm sure, a super majority board and all that. It's his company. That's what he wants. He wants. I'm, the, the money, I'm sure, is part of it, but this is not going from two, four, two percent to six percent. This is going to forty percent ownership. That's a lot.

    14. RORory O’Driscoll1:03:21

        If he made that argument to me, it's about control, and I was a chair of the comp committee, I'd say, "You're exactly right, Nick. So I'll tell you what. We'll give you three votes on each of your existing shares. Now you don't need control and you don't need any more shares." And he would come back an hour later and say, "I also want the money." Right? Having had these-

    15. JLJason Lemkin1:03:36

        No, you're right. But I will say I think we both all learned that, um-

    16. RORory O’Driscoll1:03:41

        Yeah

    17. JLJason Lemkin1:03:41

        ... we've all learned that there are limits to super majority shares. We all have learned that there are other sources of pressure, whether they're VCs, shareholder activists, other issues, that there are levels here of control. And you can control a hu- ninety-nine out of a hundred board seats, but if you own six percent, you, you may get pushed out of your company. It is entirely possible unless you'll go to the mat on it.

    18. RORory O’Driscoll1:04:03

        I could talk for hours on that but, you know, I do think Zuckerberg would be an example of someone who, whose control is... You can ride ironclad control as a public company if you want to, and as I've said before-

    19. JLJason Lemkin1:04:11

        No, but you can be pushed so hard.

    20. RORory O’Driscoll1:04:13

        Yeah, but you get pushed-

    21. JLJason Lemkin1:04:14

        Push, block. With forty percent, you know, goodbye, guys. Like, the, I, I would just end the, end the Zoom with Wall Street if they didn't like what I was doing at W- Revolut. I would just push the button and say, "Goodbye, guys. Go short

11. 1:04:25 – 1:09:29

    Revolut's $50BN CEO Pay Package

    1. JLJason Lemkin1:04:25

       me. I'll see you later." [laughs]

    2. RORory O’Driscoll1:04:26

       You, you, you say that, but actually it turns out your problem, yeah, you can ignore people, but you can also, they can choose also not to buy your stock. It was interest- super interesting thing happened today on the control thing, right? Un- this is gonna sound unrelated, but humor me. Zuckerberg's philosophy on AI, right, if you read it. One of the things, remember, this is a person who controls his board absolutely. You are just literally, you, you know, you can show up, you can tell me what you think, but in the end, I control, right? It was super interesting, and he's pretty much had that sole control. He said as part of kinda AI, f- kinda how they think about governance, he didn't want personal control over the decision to release new models. It should be a board-level decision. I will admit, I'm like, "Hmm." And that, to me, was an example of, yes, Jason, you can have control over everything, but then you own everything. And at some point, even if you, if, say you own twenty percent of your company, but you have 10X voting control. You can't make them buy the other eighty percent, so you can't keep your stock up, and you own every problem. And this might be a very smart man saying, "I'm not sure I want to be the sole person releasing these things." So it was super interesting. It was the first piece of uncontrol that Zuckerberg's done in twenty years. So I did note that in passing, right? 'Cause control is interesting, 'cause even when you have it, you know. And I actually have changed my opinion. Because going public is so shitty because of all the problems going public, I've actually come to the conclusion that giving founders more control over their life's work, which is what it is, is an acceptable price to pay to incent them to go public, right? So I've actually changed my opinion on that. I actually think even though some of these control things are weird, and I do think they probably shouldn't be in passive indexes as much. There should be some discount for that. I've come to the conclusion that weird control terms are an acceptable part, 'cause otherwise everyone just does what the Collisons do and stays private and like, "I don't need your shit." In the words of, I think, Senator Dale Bumpers in the, in Clinton impeachment trial, when they say it's not about the money, it's about the money.

    3. JLJason Lemkin1:06:29

       I think it's about the incentive. I don't think it's about the money. I think your point was so good, Rory. I don't think, I don't think I've heard it expressed enough that way. Going public sucks so bad today. Look at, look at the public company CEOs we've had on this show or Harry has. It sucks to be public today, okay? Yeah, it was fun during lockdown when, uh, you, you know, you could grow ninety percent without a new feature. It's not fun. And, and I can't imagine being, having been a founder twice, I can't imagine a helpless feeling as a public company CEO. I'd wanna quit. I, I would just hate it, right? Um, having control and, and equity has to somewhat tie to it or it's, it's a partial fiction, would, would make it worth it, right? I, I just would, I, I might leave the keys on the table if I had no control of the company I founded. I'd already made plenty of money. I was diluted to nothing. I had a board, uh, that didn't understand my product telling me how I run my company. I might just sort of leave the keys for you guys, you know? You, you take them.

    4. RORory O’Driscoll1:07:22

       Agreed. And I say that not 'cause I like it, to be clear. I say that because I'm just looking at people staying private. I mean, I think the real solution will be when the private capital markets evaporate, [chuckles] deteriorate, and then they will go public because they have to, but that's by the by. But, uh, so I agree with you, Jason, on that. But on the other hand, let me take the other side of it now. On these kind of deals, the thing you look at is the participation rate, which is how much of the total creation and value is going to the CEO, right? In other words, and the way this deal was announced, and to be clear, it's not been put in, the Revolut deal, going back to that, it's not been put in place yet. It was something like, you know, for his existing thing, he gets it to 200 and he gets to 30%. And then if he gets from 200 to 500 in value, which is $300 million in delta cap, he gets an extra 10% of the company, which would be $50 million. Billion, right? Which would mean that for $300 million in value creation, he's getting 16% of that, right? Which would be abnormally high, to be clear. Right? I think 16%, abnormally high, right?

    5. JLJason Lemkin1:08:27

       That's less than our carry checks. Those are 20. This sounds low.

    6. RORory O’Driscoll1:08:32

       But I can tell you, yes, but if you're, if you're getting it on value-

    7. JLJason Lemkin1:08:35

       Do you think I deserve 20% of what my portfolio does after a certain point? Nick's only get- poor Nick's only getting 16%.

    8. RORory O’Driscoll1:08:40

       I disagree. I think that the mark... I mean, I, [sighs] I, I just-

    9. JLJason Lemkin1:08:45

       You think you're working harder for your portfolio than Nick is working for Revolut?

    10. RORory O’Driscoll1:08:50

        No. I don't think it's about working harder. I think the nurses in the fucking emergency room are working harder than both of us, Jason. Right?

    11. JLJason Lemkin1:08:56

        I, I, I could not agree with you more. I could not agree with you more.

    12. RORory O’Driscoll1:08:59

        Okay, let's go for it, right? The question is, two and a half X, taking something from 200 to 500 billion gives you $50 billion. Right?

    13. JLJason Lemkin1:09:07

        Yeah.

    14. RORory O’Driscoll1:09:08

        Do you think you could get a Jamie Dimon level CEO for $10 billion? I mean, he's only made a billion taking-

    15. JLJason Lemkin1:09:13

        It's too high. It's too, I think it's too high. I, I, I will, let me tie it back to a different point, and you can challenge me on this all you want, right?

    16. RORory O’Driscoll1:09:19

        Yeah.

    17. JLJason Lemkin1:09:19

        Harry asked, what should LPs do looking at this, right? I'll tell you what I'm doing. Any investment I've made that is not run by a founder is a zero. It's gonna be a zero in this age. It's gonna be a

12. 1:09:29 – 1:17:10

    Non-Founder-Run Companies Are All Going to Zero in the AI Era

    1. JLJason Lemkin1:09:29

       zero. I look across, now you, we have different portfolios, but the ones I have that are not run by founders, whether they're at $20 million or $200 million, they're all gonna be zeros. And so if the price of me not having a zero is getting Nick to 40% in my be- I, I wish I was a shareholder. If I'm Balderton, whoever, this is my best name and that's the price, I'm gonna pay it in a heartbeat because all my... I do not believe Jamie Dimon's, uh, lieutenant with his starched shirt and his blue and white collars and his, and his cufflinks can run Revolut. It's not that mature. The space is not that stable. I don't buy it. And I'm not a, I'm not a banking expert, but I don't buy it's possible. I believe he will run that company into the ground just like every non-founder has run my portfolio companies into the ground.

    2. RORory O’Driscoll1:10:11

       Let me ask another hard-nosed comment.

    3. JLJason Lemkin1:10:12

       Totally.

    4. RORory O’Driscoll1:10:13

       Again-

    5. JLJason Lemkin1:10:13

       But running into the ground.

    6. RORory O’Driscoll1:10:14

       Yeah. When you're running-

    7. JLJason Lemkin1:10:15

       Zero. Zero.

    8. RORory O’Driscoll1:10:15

       Yeah. See, by the way, I'm gonna get killed if I don't say one thing here, which is our former guest, Nikesh.

    9. JLJason Lemkin1:10:22

       Yeah. Yeah, but when did he join? Two years ago? Oh, I just know my portfolio will be zeros [laughs] without the, without the founders. I'm not saying there aren't examples out there you can find. I just know for me, to the LPs, they're zero- they're all gonna be zeros no matter how much ARR they have. They're gonna be zeros.

    10. RORory O’Driscoll1:10:38

        And this is the question is, and that's totally true at one million, 10 million, 100 million-

    11. JLJason Lemkin1:10:44

        Yeah, 100

    12. RORory O’Driscoll1:10:45

        ... maybe a billion. The question is, I think Revolut's doing five bil- [sighs] I used to know it. $5 billion in revenue and a billion or two in profit, right? It's an extraordinarily big and very impressive company. At some point it becomes not true, right? Or maybe the better statement is this, and this is the interesting one, 'cause, and I know this sounds really negative, but when you're on... Remember, going back to interest, it's a corporate governance question and I, you know, a- having just come out in favor of founder control, all the things I said earlier, and I stand by them, right? You still need a dynamic to protect the other shareholders, right? Because if you take the logic to extreme, I saw Nick at, at Revolut made a comment. It's a very interesting comment that I think is bullshit. He said, and it's, it doesn't sound bullshit, but it is when you think about it. He said, quote, "I deserve more because the investors, after they give capital, they do nothing else." And that statement is, the first, the second half of that statement is true. After investors give you capital, they deserve not, they, they, they do nothing else. That's the world of capital, right? But just 'cause that's true doesn't mean the founder can... I mean, what's the limit then? Right? Or to put it another way, fast-forward 30 years-

    13. JLJason Lemkin1:11:56

        It's up to you.

    14. RORory O’Driscoll1:11:57

        What? What's the limit?

    15. JLJason Lemkin1:11:58

        I think, I think the world has changed. I don't think most founders care anymore, and so I think you gotta adjust. I think, I think Nick's, Nick is what he's saying, I think half the class at most accelerators agrees. I'm just gonna raise it 50, and if it doesn't work, I'll just, I'll just do whatever. It's whatever.

    16. RORory O’Driscoll1:12:13

        No, but, but, but you're, but you're not addressing the issue, is that what you're saying there is the cost to run a company from 200 billion to 500 billion is 10% dilution. Is the cost from 500 billion to a trillion another 10%? Is the cost from a trillion to two trillion another... I'm just trying to get a sense of it.

    17. JLJason Lemkin1:12:30

        Well, listen, here's-

    18. RORory O’Driscoll1:12:31

        'Cause if-

    19. JLJason Lemkin1:12:31

        I think your point's a really good one

    20. RORory O’Driscoll1:12:33

        ... if it is, then two things are true. One is you should pay less for that stock because you're gonna get way more dilution. Right? It, you know?

    21. JLJason Lemkin1:12:41

        Well, PitchBook had an article this week saying how, how much massively returns are being compressed on outcomes north of 500 million to a billion. That outcomes are being massively compressed by, by u- unprecedented dilution and high entry prices. So this is just the world we have to live in. Like, as a seed investor, I've only been doing this so long, but I've been doing it for a while. When I started, my model was, um, I'm actually paying twice my entry price, okay? That's how I model. Now it's four X. Now I'm play- now I'm paying, I'm gonna suffer 75% dilution, and it's not, and that really means my entry price is four X what it looks like on pa- that 50, 50 post you want, it's really effectively 200 if we, if we hit it, right? And I could complain about it just like the Nick thing, right? But Nick, Nick gonna do it. Like, like, the, the, the baby Elons are gonna get these packages, and it don't really matter what I think or any of us think because enough investors are gonna go along with it, um, that they're gonna get these packages. But to your, I think, Rory, the, the more important point you made is, is how elite will this be, will this be reserved for? We can debate whether Nick deserves this, but this is, this is a, this is a generational company, right? The question is, do sub-generational companies get these packages and how does it impact things? Um, but, uh, yeah, with it, our dilut- I think all, PitchBook said this week, all of our dilution's under-modeled. It's all under modeled, right? So-

    22. RORory O’Driscoll1:14:04

        And look, as I s- I, I might hate the role I've adopted in the last 10 minutes because [laughs] I'm gen- I tell people I'm generally the softie in the comp committee. I love writing big comp checks for successful equity packages. But at some- you do have to have some kinda linkage. And at some- someone has to sit there and say, "Okay, what are we getting for this?" And you're right. And, you know, for what it's worth on this particular one, I'd probably do it, but I'd insist on non-market comp, non-market stock performance metrics. If you build the biggest bank in Europe operationally, not just on stock price value, then I would totally say you're worth the $50 billion. That's why I'm saying a lot of it's in the, it's really boring, but a lot of it's in the details, so you can... If you're going to pay... Let me be very clear here. If you're going to give someone $50 billion, 50 fucking billion dollars, you ought to spell to self to spend more time thinking about what you're getting for your $50 billion than, "Hey, I'll give you $50 billion if it's valued at $500 billion in a few years." You probably need to think about it a little more carefully.

    23. JLJason Lemkin1:15:04

        I think you're right. For what it's worth, legal on forever, I think that's what you should do. In my limited experience with my portfolio, these mini, these mini Elon packages, they're basically all focused on 10X what the last guy paid.

    24. RORory O’Driscoll1:15:16

        Yes.

    25. JLJason Lemkin1:15:16

        That's what all the late-stage investors do. Whatever I paid, $20, $20, and I just want $200 for you to get it. I don't care whether there's a little do- like, I, it, I wanna make 10X post-dilution, and then you get your piece, right? So it's what you ate, but, uh, but I think it's what a lot of late-stage investors want.

    26. RORory O’Driscoll1:15:33

        Yes, again, go back, I actually think you're right, in which case, given the last round's at 100 or 200, like, that's my comment here is that 10X, that would be a trillion. In other words, the participation rate's just a little high. I think these are fine packages. This one looked a li- if, if the number's booted about are real, it's probably, ooh, that's a lot for maybe you could pay a little less and get a little more, but yeah, it's a thing.

    27. HSHarry Stebbings1:15:55

        The, the one thing I will say is I've interviewed 1,000 founders.

    28. RORory O’Driscoll1:15:58

        I know you love them.

    29. HSHarry Stebbings1:15:59

        Sam, Sam Altman, Demis included. I've never interviewed anyone like Nick.

    30. RORory O’Driscoll1:16:03

        Well look, remember last week I, you asked which stock I like? Well, I, I think it's an amazing stock and amazing potential in market cap, and I just wanna be sure I got an operational performance before I ponied up the 50 bill.
13. 1:17:10 – 1:22:31

    Whatnot Raises at $20B

    1. RORory O’Driscoll1:17:10

       I mean, I think we should talk about Whatnot if for no other reason that it's such a relief that there, there's more to life than AI. There's shopping.

    2. HSHarry Stebbings1:17:18

       So there's more to life than AI shopping, Rory? Wow.

    3. RORory O’Driscoll1:17:23

       Yeah, yeah, I mean, I, I think it's a great story. Background for people, Whatnot raised, uh, about half a billion at 20 billion in valuation, right? And it's a live shopping company, and, you know, in the, in the internet equivalent of QVC. The minute I heard that story, my response was, "That'll work." You know why? I mean, if you look at QVC, if you look at the Home Shopping Network, these were the equivalent in pre-internet days on TV, you know, live sales, right? People enjoy that shit, right? Uh, someone explained to me Whatnot did a couple years back, and I'm, "Oh my God, it's a great idea," right? Not my space, not what I do, but I... That's gonna work. You're gonna have people live selling shit. It's gonna be a little bit of retail, a little bit of commerce. Look, it's gonna work. I mean, if you think about it, the, the, the big three of this space have been QVC. Interesting enough, by the way, that's now bankrupt, probably 'cause [laughs] all those people died, and now they're replaced by Whatnot people, right? And then eBay, you know, we forget it, but eBay is the other quirky way to sell shit from the 1990s, and that's, you know, got a 40 or $50 billion market cap. So what's interesting here is something where you look at it and go, "That's gonna work," and fast-forward two years and it's 20 billion. Now, you know, it, it's growing 2X year on year, 8 bil- I mean, you know, you have to measure, I think it's... You would measure GMV, which is about 8 billion last year, going to 16 billion this year, and then they get a 12% take. It's a great business. That's all. I mean, so I'm just like, "Yeah, go team."

    4. JLJason Lemkin1:18:48

       It is useful. Listen, if I'm not an expert on, on Whatnot. Uh, I could speak more to Shopify, which blew out its quarter too, right? Um, it's, it's, it's roughly, roughly related.

    5. RORory O’Driscoll1:18:56

       Mr. B2B.

    6. JLJason Lemkin1:18:57

       But I do think it's worth, I do think everyone, i- should at least study what isn't being destroyed by AI, right? What's gonna happen with sh- with online shopping, online commerce? What's gonna happen with restaurants? What's gonna happen with, with, uh, cars? And, and, and it's just, it's, there are, there will be many good opportunities and spaces that aren't going to be destroyed by folks creating a poster in ChatGPT for free. Um, and we should just, uh, study it more, right? There, there's, there's gold in the things that aren't going to be destroyed by AI as, as well as the things that are being decimated by AI. That, to me, that's the only interesting part, right? Is-

    7. RORory O’Driscoll1:19:33

       I totally agree, Jason, 'cause look, Revolut's another example. It's just work, you know, just trying to grow. I agree. There are two compelling large businesses catering for real, you know, universal human needs, finance, shopping, that, you know, are building huge outcomes. I agree. You know? AI is most of what's going on, but not all.

    8. JLJason Lemkin1:19:52

       And but if, you know, as an AI story, it could be worth, like, 50X GMV. That's the only miss. Like, let's say they could pretend the GMV was, was Rev. So what would, fifth, what's 50X times 16 billion, Rory? Help me with the math. [laughs] This-- [laughs] what, what whatnot LLM would be the next trillion-dollar AI startup?

    9. RORory O’Driscoll1:20:09

       Pleasingly enough, 50X times $16 billion is roughly Anthropic's market cap today.

    10. JLJason Lemkin1:20:13

        Yeah, that's what I'm saying. We need another trillion dollar. This one's a bargain at the Iconic Investment Committee. We're getting this for 20? [laughs]

    11. RORory O’Driscoll1:20:19

        Yeah.

    12. JLJason Lemkin1:20:20

        I do think there's plenty of that out there. I think whether it's literally GMV or not, I think there are plenty of folks getting benefits of revenue that make no sense. It's not, it's not even just lying or cynical. I think there's a lot of-- I think investors, to some extent, don't care as long as the growth's there.

    13. HSHarry Stebbings1:20:33

        Final one, if I wanna she-shepherd us.

    14. RORory O’Driscoll1:20:36

        Sure.

    15. HSHarry Stebbings1:20:36

        Shopify, we mentioned, blowing out the quarter. Atlassian blowing out the quarter.

    16. RORory O’Driscoll1:20:42

        Yeah.

    17. HSHarry Stebbings1:20:42

        Um, the biggest jump since 2015 for Atlassian. Crushed it. Any takeaways from some of the big results that came out?

    18. RORory O’Driscoll1:20:51

        Yeah, uh, just as I said, if you produce, you'll get rewarded, right? I was, I was delighted 'cause, um, you know, when you pinned me to the wall a few months back and said name names, my first bet-- you know, "What stocks would you buy?" And I-- the-- my first answer was the best one, which is just buy World Cloud, and it's up 50%. But then you kinda pushed me, and I named some names. And one of them I named was Atlassian, and honestly, tw-two months ago, I felt like an idiot. It was still not... I, I thought he'd pull it off, but it wasn't there. And then obviously they nailed it, they got the growth, and the stock jumped. I think if you look at overall, it was kind of-- 'cause, you know, some people like Datadog were down a little, right? But those are all-- And you kind of lumped them together in the agenda, but those are different stories. I mean, Datadog's story was just everything's amazing, but our biggest customer, and everybody knows it's OpenAI and no one, uh, says it, right, is suddenly realized they maybe don't need to spend $150 million and are spending less. So growth was down a little. But that's 'cause, you know, Datadog was trading at 18 times forward revenues, and now it's 15, right? That's one phenomenon of the A- of the AI adjacent winners, which is very different than what Atlassian was going through, which was existential shit and were trading at three times and suddenly, you know, we nail the quarter and it's an easy pop to five times, something like that, right? Those are different, you know, those are different movies at the same time. What the Atlassian story says is the Salesforces, the HubSpots, the, you know, Canvas if it was public is, you know, if you get it back on track and the fun- with the fundamentals, the stock will follow, right? But if you don't, and some of the others that you mentioned didn't, then, you know, you're stuck in two and 3X land forevermore until you get, as Jason said last week, until you get bent

14. 1:22:31 – 1:24:29

    Atlassian Kills Free Loom Seats

    1. RORory O’Driscoll1:22:31

       spooned.

    2. JLJason Lemkin1:22:31

       I still think these are hard companies to run, to your earlier point. I mean, yes, Atlassian, Atlass- but Atlassian also did something which Canva did too, which I, as-- which I always find a bad sign, um, a, a sign of stress. Not a ba- not Mike- Mike's great. But, um, they got rid of most of the free Loom seats, and this is what you do in times of stress. Like, the other thing that Canva did because they're-- because their revenue's down, is they pushed all, a lot of features into the higher paid editions, okay? And after-- and then it's just, it's not the end of the world. Loom is not the breakout success of Atlassian, right? It is not. But getting rid of collaborative free seats, which is how we all grew up using Zoom, right? We could share and work on these together. That's a sign of just how hard-- Even if you beat the quarter, guys, like Shopify or Atlassian, man, they're leaving nothing on the table. These are not easy beats. Th-th-this is not Anton of Lovable turning around and he added 100 million last week without realizing why. Um, these are h- these-- even the beats are hard. And so, uh, uh, and, um, so the Loom one, it s-sounds minor, but whenever I look at-- whenever I see, uh, the, the base getting overly monetized or harvest, if nothing else, it's a sign of stress in the organization, 'cause no one really-- no founder wants to do that.

    3. RORory O’Driscoll1:23:46

       You've, you, you've said that consis- and I've totally come to the conclusion you're right. And you know, when you talk to people one level in at some of these big software companies, and you know they're doing a 7 or 8% quarter, and then you talk to a director of sales that you know, you suddenly discover it's, "We're jamming them on price. We're jamming them on overages," and you realize it's just not sustainable. So I, I do hear you on that one. I mean, overall, I thought it was a great quarter. But yeah, maybe, yeah, it's-- sorry to lose your free Loom seat.

    4. JLJason Lemkin1:24:15

       I still, I still just worry if the agents need all these products, but I hope so. Just like, I, I, I don't wanna be negative on Atlassian. I'm a super fan of Mike. We all are. I want it to win. But I also worry a little bit it's a Canva story coming, that it seems to be defying

15. 1:24:29 – 1:24:50

    Is the Atlassian Story the Canva Story Coming?

    1. JLJason Lemkin1:24:29

       some trends. Now, you can answer, you can say Atlassian's very enterprise, right? Let's not look at the developer side of things. Let's not look at how, how, how, how we used to use Jira and other tools. But, um, our, our agents really don't need these seats, and it is in-- a, a lot of their revenue is still developer-focused, which-- where I think the seat is under assault, a permanent, permanent assault,

16. 1:24:50 – 1:29:31

    HubSpot at $10B — How Long Until It Gets Bending Spooned?

    1. JLJason Lemkin1:24:50

       the seat is.

    2. HSHarry Stebbings1:24:51

       I've got a provocative question for you. HubSpot today is sitting at $10 billion. How long will it be until HubSpot is bought by Bending Spoons?

    3. RORory O’Driscoll1:24:59

       I'm not gonna dunk on HubSpot. We were lucky enough to get to-

    4. HSHarry Stebbings1:25:02

       I'm not, I'm not...

    5. RORory O’Driscoll1:25:03

       Yeah, we did a series C investment in HubSpot. It was at four- we did it at 47 million pre, so we're still up. Um, Harry, I will admit-

    6. HSHarry Stebbings1:25:11

       A series C at 47 million pre?

    7. RORory O’Driscoll1:25:15

       I had it wrong. It was 70. I'm wrong. It was 70. I, I was thinking of Box. Box was b- yeah.

    8. JLJason Lemkin1:25:19

       It was hard to get done too.

    9. RORory O’Driscoll1:25:20

       Yeah, it was hard to get done. I mean, I'm sure Brian, if he could've got one of the glamour people who turned him down and then did him later, he'd have taken them over us.

    10. JLJason Lemkin1:25:28

        Well, I wouldn't go that far, but yeah.

    11. RORory O’Driscoll1:25:30

        Oh, I would. Um, but no-

    12. HSHarry Stebbings1:25:32

        You're, well, you're a podcaster, Rory. You stand up for yourself.

    13. JLJason Lemkin1:25:34

        I'm- I'll tell you why I don't think they're gonna get bending spooned for what it's worth. I don't know, right? There's so many things in the Airtable story that are scarier than they sounded, but I think, um, one of them is that it's-- they only got one offer, and Bending Spoons is, i- is gonna look at everything, um, and it's gotta be perfect. Um, and maybe they will buy them. I-- it-- first of all, it's a lot-- that would be a lot for Bending Spoons to bite off, but they could do it, right? I guess, I guess you can always line up the financing. Um, I, I think the tough-- Like, HubSpot i-i-- as-assuming they would sell, let's just assume they would even sell, right? And there's a lot of fiduciary questions here. There, there should be offers at 12 if it's at 10 today. There should be, but I don't believe there are. I don't believe there's many. I will tell you at a meta level, if we wanna break on it, just there is an issue here and, and it's a, it's a structural issue in the world today, in the AI world. Just like if you're Canva, the prosumer folks are threatened by chat. If it can be done in ChatGPT, even accidentally, you're hyper-threatened. Um, the SMBs, the, the, the HubSpots and Mondays and others, um, they're not really threatened by doing it yourself. Okay? That is, that is, that is a short if. What they are threatened by is the fact that low-end competitors in SMB are really good. The low-end CRM competitors are exploding. The revenue growth from Monaco, Lightfield, Orasel, and others, they're like nothing we've seen before. You know, my first venture investment was Pipedrive. It, it would've taken 40 years to get competitive with Salesforce, right? It was just slow, and that was the number one, like, simple to use CRM. Exited for a billion and something, my first investment. The l- the problem across my portfolio is you used to walk into a board meeting and the competition would be the guys bigger than you, right? Here's what the big guys are doing. Now, if you walk into a board meeting and it's SMB, they're all guys that weren't on the slide 24 months ago, and they're really good, and their agents are good, and their LMS are good. And so the fr- the tough hand HubSpot has is it's spent the last five years beating Salesforce at the low end, right? It's a CRM company now. It's not a marketing automation company when now the low end is so good. It's so, so good with AI. These low e- the, the new entrants are so good in SMB, and so... And the amount of founders that wanna compete even in niche categories. They didn't used to want to, and so this is the bear case on everyone at this SMB space, 'cause it's just, there's too many good competitors.

    14. RORory O’Driscoll1:27:57

        Exactly right on that. It, it is very well articulated. I remember the, the years of we're, we're, we're doing CRM, we're competing on Salesforce, and now you're exa- It's, it's those, there's just myriads of re... 'Cause you can build really excellent software really quickly with a different twist using AI. It's why I, I tell, I was telling this to someone who runs a big PE shop in tech. If I was, if I own one of these companies as a PE owner, if I was the... I would just be at every Y Combinator demo day. I would be like, "You need to hire, you need to buy some of these co- You need to infuse some of that DNA quickly while you still have breath," right? And figure out what you can build.

    15. HSHarry Stebbings1:28:33

        You fucking kidding me? With the loyalty that they have today, you think they're gonna stick? Let's give a load of young people from YC a big chunk of money and let them have a go.

    16. JLJason Lemkin1:28:41

        You know, I just gotta push back, Harry.

    17. HSHarry Stebbings1:28:42

        And come work at this shit heap.

    18. JLJason Lemkin1:28:44

        No, no, yeah.

    19. HSHarry Stebbings1:28:44

        And they're gonna be like, "I should go to Chime and then..."

    20. RORory O’Driscoll1:28:46

        Obviously, if you think it's a shit heap, no.

    21. HSHarry Stebbings1:28:48

        But all the PE companies respectfully are shit heaps.

    22. JLJason Lemkin1:28:51

        You wanna know the serious reason why it won't work? Rory's right, Harry. You know why it won't work? Because all the hot startups have this model. They're all picking off everybody.

    23. RORory O’Driscoll1:28:59

        Yeah, agreed.

    24. JLJason Lemkin1:29:00

        Ev- I, I, I mean, I think one of my investment's owner, I, I think they've acqui-hired, like, 20 companies. Tw- And they, they get to go work for a, for a reasonably hot company, right? And so how you gonna compete with that when it, when Rippling has hoovered up 30, and Owner's hoovered up 20, and Revolut's hoovered up 10? You just... That strategy worked, uh, three years ago. Like, it's too late. Like, everyone is just sitting there hitting refresh, hoping these smart YC companies fail so they can hoover them up in an acqui-hire. I'm not, I'm not kidding. It is a core strategy of many, of many leaders.

    25. HSHarry Stebbings1:29:28

        Boys, thank you so much. That was awesome. I loved that

Episode duration: 1:29:42