The Twenty Minute VCCursor Acquired for $60BN | Anthropic Hits $1TRN in Secondary Markets & Figma, Adobe, Canva Dead?
EVERY SPOKEN WORD
115 min read · 23,497 words- 0:00 – 0:59
Intro
- JLJason Lemkin
I'm not sure they're buying them for $60 billion. There's a lot of stuff going on between these companies
- HSHarry Stebbings
Now, this week on the agenda, breaking news, Cursor acquired by xAI or SpaceX for $60 billion with a $10 billion break clause. Tim Cook announces he's stepping down from Apple. Anthropic turns down $800 billion funding offers and crosses the trillion-dollar mark on secondary markets. And then Anthropic launches Claude Design as if it wasn't eating everyone else's lunch. Now it's going after Figma, Adobe, Canva. This is an epic one
- RORory O’Driscoll
If your stock is valued at 100 times revenues, you can buy things that are trading at 10 or 15 times revenue all fucking day long.
- JLJason Lemkin
I think there'll be a $100 billion deal in the next 12 months
- RORory O’Driscoll
I think this will stand as the high-water mark of private M&A for a decade.
- HSHarry Stebbings
Ready to go? [upbeat music]
- 0:59 – 6:41
Cursor Acquired for $60B?! Breaking down the mind-blowing deal with xAI/SpaceX
- HSHarry Stebbings
Boys, we recorded yesterday, and last night some very big news happened. Um, I messaged this morning saying I, I think we should actually do a little segment this morning and discuss this because it is so notable. And so last night it was announced that Cursor was ... Rory, you're gonna correct me whatever I say, so I'm just gonna do it and you can correct me. Cursor is being acquired by xAI, SpaceX in other words, for $60 billion with a break clause of $10 billion by the end of the year. Rory, please correct me on-
- RORory O’Driscoll
It, it's, it's too early, Eric. We shouldn't overthink. I mean, basically what it is, is they have an option to acquire Cursor, and if they don't, they pay $10 billion for the work, but it amounts to the same thing, right? And yeah.
- JLJason Lemkin
Well, we'll see. We don't ... Listen, it's very interesting because first of all, this is an epic deal, right? If it happens, $60 billion in about three years from seed funding. I mean, we thought Wiz was big, guys. We thought [laughs] ... I mean, we s- when we started the show, we were talking about Windsurfer. That was two and a half billion. Now it's 60. I mean, these are numbers that we have not seen in three billion from founding. Now, having said that, look, we haven't read whatever the deal is, right? Um, to me, it looks a little, it looks ... I'm not sure they're buying them for $60 billion. Um, there's a lot of stuff going on between these companies. Senior engineers have already quit and gone to xAI. Um, it appear, like, it appears that Cursor may be, at least notionally, the largest customer for Groq for coding, okay? They have, their market share has fallen, and they've already committed to using a lot of the, the, the, the, the million GPUs that SpaceX, whatever [laughs] we're calling it, is in Colossus. So there's a lot of stuff going on here, and what this call and option is and how much it's tied to Cursor having enough of a state-of-the-art model that they're worth buying because an ID isn't enough, there, there's a lot up in the air, and it's probably why the deal is structured like this, beyond the fact that SpaceX is going public [laughs] which adds to the complexity. There's just, there are a lot of moving pieces here, so I wouldn't be surprised if it doesn't close because I think there are mi- a big milestone that needs to be hit, that Cursor needs to make progress, and maybe I'm wrong. May- maybe I'm wrong.
- RORory O’Driscoll
Wow. Such a lot to unpack, but I've, a- and i- in no partic- I want to actually cover all this, but first of all, y- you're right. The first sentence is this is the, this is the biggest private acquisition ever in Venture. It used to be, um, Wiz at 32. Before that, it used to be WhatsApp at 16. I mean, i- individual private check before going public. Now it's a $60 billion outcome in three years. You're right. So start with ... If this deal closes in three months, this is the biggest ever privately held venture acquisition, period, full stop, end of story, an amazing result. So you're right, Jason. We, befor- before you get into the noise, that, that, that's the venture takeaway.
- JLJason Lemkin
Jesus. [laughs]
- RORory O’Driscoll
And w- I know. And wow. And we'll come back to who's making money-
- JLJason Lemkin
And it didn't even take 20 years like most of our funds take. This was thr- this'll be three and a half.
- RORory O’Driscoll
Big picture here, guys, it actually makes sense. I mean, I was actually thinking last night of doing, like, a little cute tweet before I got your note, Harry. It's like, you know, you got these guys called Cursor walking down the street saying, "Hey, good news, we got a exploding business, couple billion dollars in ARR, but bad news, we have shitty gross margins because we need our own model, and we need compute." And Elon goes, "Hmm, hold that thought." This is a guy walking around with a whole bunch of compute, a, a reasonably good model and literally no revenue. It's like a marriage made in heaven. You guys ... I mean, because look, let's get real here. There's not a whole ton ... Like, it, it, it's one of those deals that makes sense for both sides, which is why I think it'll close, right? Which is different than saying it makes full financial sense. I'll come back to that. But if you think about it, from s- from SpaceX's perspective, all the narrative has been, you know, SpaceX is amazing. Starlink is amazing. WTF with this x.AI? Why did they stick in Twitter and x.AI? I know Elon loves AI, but it makes my head hurt, right? Because the truth is they'd spent 20 billion plus or minus on the most amazing data center, the Colossus data center, with literally hundreds of thousands of GPUs, but they're not doing a very good job of selling them, so they have relatively little business, right? Which, you know, all other things is a bad place to be. Now, you know, capacity is scarce, so I'm sure they could have found kind of, you know, white label work selling to, you know, one of the hyperscalers. But instead they found this company that's in the motherlode, the mother of all AI markets, which is coding, that has customers, has revenue, but has shitty gross margins because it doesn't have yet a full standalone model and massively needs compute. So they put this on top of their thing, and the vertically integrated thing just looks a lot more attractive. You h- literally have a company that's spending, that's making 3 billion in revenue and spending 3 billion on gross margin, and you have another company that's burning 18 billion. You put them together, and the 3 billion gets canceled, and at least they have some revenue. It's still not enough to cover the x.AI nut in terms of op- unless they can grow this thing, but at least looks like a business now. At le- and I think what's really clever from-SpaceX's perspective is they couldn't do it before the IPO 'cause you can't close that deal, it delays everything. It's actually a very clever structure. So they're basically gonna be able to say to the public, "You know, you love Starlink and you love our space business, and you didn't like this other thing, but we got a plan to fix it. Once we close for $2 trillion, we'll exercise our option, we'll buy this thing, and suddenly we'll be a $4 or $5 billion revenue AI frontier lab, which my Claude code equivalent is called Cursor, and I actually have the rest of the stack. And there, I told you I'd make a good business out of this."
- 6:41 – 9:02
Why Cursor and Elon Musk actually make perfect sense
- HSHarry Stebbings
Wh- which is, which is an important note just for people to understand that this is not a transaction closing today. This is in six months post going public, and it's a very strategic way for them to do it because they can't do it now just before going public.
- RORory O’Driscoll
And that's why it's ca- that's why I think of it as an option. You, and you're right, Jason, there's been some commentary that said maybe this option is in part Elon doing a try before you buy. Let's see if the model works on our stuff and vice versa, and if it doesn't, we'll just pay you 10 and walk away. I don't know, I'm not gonna guess, and there's probably some of that. But fundamentally it, it's costing you nothing today because you're not writing the check today. And what you're basic- what Elon's basically saying is, "If my IPO happens, and it probably should, and I wanna buy this thing, I will 'cause I can. And if it doesn't, I'm promising $10 million that I don't plan to have to give unless, God forbid, the IPO doesn't happen." So, and it, it kind of mentally says, "I haven't fixed this, this story today, but I have a plan to fix it. You can see the plan to fix it, so stop bugging me in the roadshow about xAI. Let's talk about rockets in space."
- JLJason Lemkin
Yeah, I mean, look, you're right. It's, it's, it, uh, I, I think, uh, listen, Elon walked away from the Twitter acquisition, so he'll walk away from a bad deal, don't get me wrong, if things change. But you don't, you don't promote it the way SpaceX did all over X, uh, if you're not basically saying this deal is gonna close, right? This isn't a change. Otherwise, if it's just vendor financing with an option to buy, you bury it. You bury it because it's roundtrip revenue so that someone will use c- someone will use our, our Colossus for a, for a, for a, for model training, right? You'd hide it if it was just a vendor deal, right?
- RORory O’Driscoll
And, I mean, even though I don't think the whole ... I'm gonna say something weird. Even though I don't think the whole business effort here makes sense by trying to enter this market, you know, trying to be the third or fourth foundation model player, you know, as xAI/ um, SpaceX, I don't think it made any sense sense. But once you've decided to do that, this deal makes sense at the margin because you've incurred all the negative parts of being a subscale hyperscaler with $20 billion in burn, and now at least you have a business. So I'm with you, Jason. I think they're, I think they're pushing this because they're like, "Oh, this makes sense and actually solves a problem for us." And obviously solves a problem for Cursor in the sense that it, you know, makes the P&L of their business look very different, and therefore it's a win both sides and it closes. I mean, we can talk about the
- 9:02 – 11:25
Who Won the Deal?
- RORory O’Driscoll
how of it all.
- HSHarry Stebbings
If I, if I, if I push you, who is getting a better deal? They're expected to finish the year at $6 billion, so this, this is only 10X end-of-year revenue.
- JLJason Lemkin
Seriously? We just talked on this pod before about Figma $20 billion and about, [chuckles] um, uh, sorry, Groq to Nvi- you just said Groq to, to, for, to Nvidia for $20 billion and getting to be, not have to be a public company CEO is the second-best gift to Salesloft selling for $2 billion. This is a gift. They don't have to do the hard work. They've only been doing this for three years. They've only been doing this for three years. I was watching some images of, like, what's the, what's, what's Michael's last name, the CEO?
- RORory O’Driscoll
Tru.
- JLJason Lemkin
Okay, I was watching something on Twitter with him and Gary Tan a year ago, okay? Gary Tan's got a big job, right? Gary Tan looks like he's aged eight years since the video. Michael looks the same. [laughs] This is the time to sell because you don't ... Listen, I, this is, maybe this is a little meta, but what I've learned as a founder is you don't get, it doesn't hit you until around year fi- four to five. This is just the way humans are, okay? A- and, and, and he's young, but s- look at founders you've invested or met with. Around year four to five, the weight's there, okay? You can see it in the bags under their eyes, whether they're 21 or 61, and, and you gotta double down. At four to five years old, you gotta sit around and say, "Do I wanna sign up for another tour of duty?" These guys don't even have to do a second tour of duty. They're out at $80 billion. This is a pretty good deal, Harry. If you're 10 or 15 years in, you know what to do. Three years in, you go, you gotta go home.
- RORory O’Driscoll
There's no ... Guys-
- JLJason Lemkin
You've gotta go home after [chuckles] three years for $60 billion. Three years. Three years after $60 billion. [laughs]
- RORory O’Driscoll
Can I help you on this? It's weird. Uh, you're thinking about ... You asked which of the two is getting a great deal, and the answer is they're both getting a great deal.
- HSHarry Stebbings
That's not the answer.
- RORory O’Driscoll
For two reasons, right? What?
- HSHarry Stebbings
Uh, you gotta give one name.
- RORory O’Driscoll
Uh, no, l- I'll tell you who's losing. Uh, g- hear me out. There's two reasons they're doing it. There, there's two reasons they're getting a great deal. Everyone's getting a great deal. The first is it actually industrially makes sense. The two things go together well, right? So there's, like, some business logic. Whether or not the SpaceX Elon team can manage these kind of researchers over time, you know, that's TBD given how, you know, the X stuff has unfolded so far. But it makes industrial sense for these two companies to come together, right? Why are they both getting a great deal? Answer, you're, you're missing the point because there's a third player in the game here that you're not mentioning.
- 11:25 – 13:34
Venture Payday: What this means for the investors and the "lock-up" reality for the founders
- RORory O’Driscoll
The future SpaceX public shareholders are valuing a $20 million revenue company at $2 trillion, which is 100 times revenues. If your stock is valued at 100 times revenues, you can buy things that are trading at 10 or 15 times revenue all fucking day long, right? As long as SpaceX is worth $2 trillion, then if Elon wants to scratch an itch to clean up a biz- a subsidiary of SpaceX that isn't quite working out and he can chuck $6 billion on the table, it's ... For context here, it's 3% of SpaceX m- alleged market cap in return for 15 to maybe 10, 20% of their total revenues.
- JLJason Lemkin
Yeah, I mean, it's such an important point. Like, it's not, it's not even material.
- RORory O’Driscoll
Yeah. When you have a high-price stock, you can buy any pretty things that you want. And what happened here with Elon is like-
- JLJason Lemkin
And you should. And you should
- RORory O’Driscoll
And you should. Abs- well, yeah. And you should
- JLJason Lemkin
You should, because it may not last, right?
- RORory O’Driscoll
Yeah, exactly.
- JLJason Lemkin
This is the opposite. When we s- when we did the, the other version of this pod, we were talking about how so many public software companies, if you're now trading at $10 billion, you can't even spend a billion to buy a couple of kids, right? For Elon, this is immaterial to SpaceX's market cap, to Rory's point. And the, at the margin, at the margin, it helps that he doesn't care if he makes them billionaires.
- RORory O’Driscoll
Yeah.
- JLJason Lemkin
That, that's another ... It's a micro learning, but there are issues in making targets billionaires. It, it is, it is issue.
- RORory O’Driscoll
As long as SpaceX is worth that kind of multiple, it's revenue accretive, story accretive, you know, and is one of the ... And, you know, and the, and the reason it m- another reason it makes sense to Cursor is the number of people who can write a $60 billion check for a, a roughly break-even-
- JLJason Lemkin
[laughs]
- RORory O’Driscoll
... gross margin business can be counted on the fingers of one hand, removing at least one or two of them, [laughs] right? Of said fingers-
- JLJason Lemkin
Yeah
- RORory O’Driscoll
... right? And of those acquirers, most of them, in most situations, would be unable to do so for the DOJ. This is the only game in town, right?
- JLJason Lemkin
It helps to be founder-led, too, to write a check like this.
- RORory O’Driscoll
Yeah. Yeah. Oh, totally. Yes. This is a, a-
- JLJason Lemkin
If you're going to Google again, you're like, "I know we did Wizz at 32 billion and it's crushing it, but we wanna buy Cursor for, for, for t- twice that?" I mean, it's a tense board discussion,
- 13:34 – 20:35
SpaceX as an AI Lab
- JLJason Lemkin
right? [laughs]
- HSHarry Stebbings
If I, if I'm an investor in the business, what does it mean for me? Wh- uh, when do I get my cash? What are my LPs getting back? [laughs]
- RORory O’Driscoll
Yeah, you're getting a lot of money. I mean, look, you get, you're getting your cash if this deal closes, I think, in six months, which is, you know, back end of this year, um, assuming the IPO happens in June. You're ecstatic, it means. I mean, it's-
- HSHarry Stebbings
And you're, and I'm getting cash or I'm getting SpaceX stock?
- RORory O’Driscoll
Right. Well, you're almost certainly getting stock. I, again, I'm, I'm going to opine on that without looking, because the, the IPO is $75B, allegedly, again. We haven't s- again, we haven't seen a printed, uh, S1 yet that's been publicly unveiled, but the IPOs, it's highly unlikely that you're gonna write, raise $75 billion, write a check for s- for $60B, so almost certainly you're getting stock. So then the second order questions are, is it registered? If you're getting that stock in the, uh, restricted period, is that gonna be restricted too? 'Cause the whole, the dynamics of the SpaceX lock-up, given the size of the round, are gonna be one of the most interesting parts of the whole transaction. There's talk of, as you say, employees getting out early. There's also, to be fair, talk about some shareholders being held in for much longer, because the combination of a $2 trillion ... I mean, it's going to make a difficult problem around float management slightly more complex, 'cause a $75 billion raise on a $2 trillion valuation is a teeny, tiny float, right? And, you know, going from there to the other 97% of the company being freely tradable in six months just doesn't work. So I'm sure there's gonna be a convoluted float management thing, and then this stock will probably go into that. So I wouldn't be surprised to discover that as investors in, um, Cursor, congratulations, you are now investors in SpaceX, and, you know, you've got that fluctuation risk for six months, plus or minus, but, you know, on the other hand, you are getting $60 billion. Shut up.
- HSHarry Stebbings
And do we know if the $2 billion at $50 billion happened, that round happened last month?
- RORory O’Driscoll
I don't.
- HSHarry Stebbings
We don't?
- RORory O’Driscoll
I don't know.
- HSHarry Stebbings
Uh, a- and then do we think it will be-
- JLJason Lemkin
Well, they're tied together. That's what I'll, I'll ... I, I don't know all the machinations, but I guarantee they're tied to-
- RORory O’Driscoll
I, I-
- JLJason Lemkin
They're tied in some fashion
- RORory O’Driscoll
... saw one that said ... Can I stop you there?
- JLJason Lemkin
Yeah.
- RORory O’Driscoll
I think I saw one that said it's not happening because this obviates the need for it. Because if you think about it, they probably had reasonable ... I'm just winging it here, but they probably had pretty good cash on the balance sheet, but they knew they had to spend a lot in compute. And now one of two things is gonna happen in September, Octo- six months. A, you're gonna get $60 billion and you have all the compute you'll ever need from Elon, and B, you're gonna get $10 billion in cash, in which case you can buy some compute then. So they can probably do some forward contracts. So if the, if the round hasn't closed, it probably won't close now because there's no point to it and no one would want that stock, 'cause that's just basically like buying SpaceX and you'd prefer, prefer to just wait for the IPO.
- HSHarry Stebbings
And then if I'm in the, uh, if we get stock back and it, we, where it was, you know, locked up for 12 to 18 months or whatever that is, like, how am I feeling as an investor? Am I still ecstatic? Like, again, if you're in the Figma IPO and you're locked up for 12 to 18 months, that's been brutal.
- JLJason Lemkin
But Andreessen's all in on the, on Elon anyway, right?
- RORory O’Driscoll
Yeah. If you wanted that action, you got more of it, and if you don't want that action-
- JLJason Lemkin
Yeah
- RORory O’Driscoll
... you're gonna bite your nails. Look, y- I mean, you're part of Elon. Do we-
- JLJason Lemkin
Mark wrote a blank check to Elon for the, for the take private of Twitter. Of course you're gonna go long on Elon now, right? It's, you're doubling down on the same founder. It's not even ... It, it, I don't know the cap tables, but for Andreessen it's almost like merging two portfolio companies at a meta level. Maybe not ac- that's not maybe accurate, but intellectually it's like that, right?
- RORory O’Driscoll
But a- as yet, Harry, you are right. And look, this is where the beauty of being in early at a low base is. If you're in, I mean, I looked, and if you're in at the B, which is where ... The A was Andreessen and Thrive, the B Thrive led, the C, uh, I can't remember who led, but basically the C is roughly a 5X, the B is a 20X, I can't even calculate the A, but it's huge, and then the most recent round is a 2X. If you're into SpaceX at $2 trillion and that's only a 2X, you're scared, 'cause there's a lot of volatility in that stock. So that's the thing. You could end up, I mean, I'm gonna say something heresy. You could end up breaking even. The stock could-
- HSHarry Stebbings
Yeah
- RORory O’Driscoll
... go down. IPOs do go down apparently at times. I mean, Facebook went down plus or minus, I think, 40% from their IPO price in the first six months before 10Xing subsequently, just as a reminder. So you got risk in that deal. On the other hand, if you're sitting there at 20 times, in the case of the B, or 50, 60 times in the case of the, the A, you're like, "Oh, well, so if my 80X becomes, uh, 40X, it's still a 40X. I'm fine." So you can roll that dice. Does that make sense?
- JLJason Lemkin
So I'm thinking, thinking through that. Uh, um-Or it's almost, you know, it's almost a defensive move if you're like Andreessen. You've added value to your net asset by combining these on paper, right? You're shareholders in both, right? Uh, you have an IPO, it has risk. You p- you threw this crazy asset in there that's very immature, where, where the debt is exploding, right? Your balance sheet has been blown up. How can I de-risk my IPO for a couple percent dilution, right? I could... Uh, it's just a couple percent dilution to de-risk my massive investment. Done.
- RORory O’Driscoll
My, my sense is that entire s- I, I think you're correct in your analysis, though my, my comment is the entire sentence implies that Elon consulted with anyone. My sense is Elon solved Elon's problem, and everyone else is along for the ride, so they'll get the shareholder consent and the DocuSign, and they'll say, "Thank you very much so," and sign. But you're right. If I'm, if I'm, if I owned a lot of SpaceX, oddly enough, I mean, to say it succinctly, I'd have been pissed at the x.AI merger 'cause I didn't need that dilution. But having done the x.AI merger, I'd be like, "Clever deal with Cursor, dude. You had this negative thing. Now at least you've got a full-on full stack story." Um, you know, is it the best story ever? No. Would I prefer on a standalone foundation model l- lab bet, would you prefer it all on Anthropic than x.AI plus Cursor plus the Frankenstein of Twitter? Yeah, you would. But at least it's a full stack story now. So I, you know, this is a clever deal. Again, enabled by the 100X valuation you have, or at least allegedly have, but at least 50X. I mean, even at the low end, I mean, if you play it out here, even if SpaceX trades, shock horror, at a trillion, which is a 50X revenue multiple, and even if Cursor gets to $6 billion by the year-end, so it's a 10X revenue multiple, SpaceX is still buying stuff at 10X with stock that's trading at 50X. It's a great country.
- JLJason Lemkin
Those arbitrages are real. You really should do a deal or two in those moments in time because they don't la- one way or the other, they don't last, right?
- RORory O’Driscoll
At the risk of stating the obvious, there is a lot more fucking differentiation in putting rockets in the sky than there is making, um, forking an open source IDE and running it on top of Claude code. So I think the, the boys at, and the folks at SpaceX have, an, done a much harder task, so they deserve a higher revenue multiple. But nonetheless, it's why you can write the check with such gay abandon.
- JLJason Lemkin
And look, if the next deal's at $120 billion, all is good.
- 20:35 – 27:10
The AI Advantage: Why high-price stocks are the ultimate weapon for massive acquisitions
- HSHarry Stebbings
Going to your point earlier though, Rory, of comparing it to like Wiz, the, the other thing that's just an- amazing is like the scale. It's not like a little bit more, it's double Wiz, give or take. I mean, literally 32 versus 60. I mean, it's, it's double the largest before.
- RORory O’Driscoll
And again, it, it is back to the... It's like, I was thinking about this this morning. You know, for arguably a much less defensible business, and I think the truth is this, it's why venture capital is amazing. If you... The, it's the aha, it's don't play small ball. If you play in the big markets, if you lean into the risk, in, in the part of the cycle where the big guys wanna win and wanna catch up and wanna be relevant in the space, then this kind of exit can happen even if the fundamentals aren't great. And a gross margin ... I mean, you know, Sequoia, who might think are the dying of the whole industry, always say, "We hate negative gross margin businesses," right? This is a break-even gross margin business. But it worked because the overarching comment is AI is the biggest story of the last five years, and big tech wants to be a player, and Cursor's a player in the biggest markets. Don't overthink it. You know, it's like, it's the, the SAS motto, "Who dares wins." Those guys dared and they won, right? And all the other questions aside, when... Now, the minute the tide goes out, you know, we saw this in '99 too. You know, once the tide goes out and people are like scared of dot-com or scared of dot-AI, you know, all these high burn, high growth companies can get a real hit. But what you're selling now, what they were selling, is a ticket to matter, and x.AI wanted the ticket. So to your comment on all the other guys, the Factries of this world, there are 10, 20... This is where Jason's point is right. There's 10 or 20 other companies that are staring at irrelevance over the next three to five years, 'cause they're all part of the old software development life cycle. And they, you know, maybe they can't pay $60 billion, but y- they're gonna all have to buy themselves or build themselves into relevance. So I think a lot of these c- can still have decent exits. The lad's right. You should be thinking about this. But, you know, I don't even know what Computer Associates does, does now. It's part of Broadcom. But however people make software in 2021, they're making it different today. And I'd prefer to be in something like Factory leaning in than in some old school code development tool that doesn't matter anymore.
- JLJason Lemkin
Another way to flip it around, on the one hand, sure, you should sell. On the other hand, there's six leaders with market caps above 2 trillion, right? And we're adding SpaceX, so there'll be seven maybe above 2 trillion. They can all afford to pay $100 billion, 5% of their market cap, plus or split it with some cash, to not fall behind. But Jensen stressed about Tanium. He can spend $100 billion, right? He already did a small deal, a $20 billion tuck in. Nvidia, Apple, Meta, Amazon, Alphabet, Microsoft all can buy a startup for $100 billion. This might be ... And I remember back in the day at SaaStr Annual, Ryan Smith came and, um, and Qualtrics had just been acquired for 7 billion, and our jaws dropped back then. That was a lot for a software company. And I asked Ryan, "Will this ever happen again?" He's like, "I, I don't see why there won't be one for 14 billion next month." He's like, "It's just getting good." And he was right. It, it, it kept, the party kept going, to Rory's point, until it ended. I think there'll be $100 billion deal in the next 12 months. Which one it is, I don't know, but you have to. You have to do... There'll be $100 billion deal. This is gonna be the f- one of three. That's my prediction, and I may be wrong. And I may be wrong, but there's, there's seven folks that can do it, do $100 billion startup.
- RORory O’Driscoll
I, I think this will stand as the high water mark of private M&A for a decade. There, I'll take the other side-
- JLJason Lemkin
This one, this clip is, it's gonna embarrass you, Rory.
- RORory O’Driscoll
I, I, I, it's okay, I'm-
- JLJason Lemkin
It's gonna embarrass you. [laughs]
- RORory O’Driscoll
I used to be embarrassable, but now, but-
- JLJason Lemkin
[laughs]
- HSHarry Stebbings
What, sorry, what, Rory?
- JLJason Lemkin
Or me. Or me. [laughs]
- RORory O’Driscoll
Because I just think it's anomalous in the sense of, yeah, it's a combination of the absolute amount and the revenue multiple. The number of-- You know, I, I just think the number of people who can write-- The number of people who can... Let's do it here. The number of people who can write a check for less than 10% of their market cap where that's greater than $60 billion is by definition people above $600 billion. There's only eight or 10 companies above a trillion, right? So you-- it's a very finite group of people who can do those kind of deals. Everyone but Elon trades at under 10 times revenues plus or minus. Yeah, it's pretty much minus. So they're not going to do a 60 times. So if you're gonna be worth... I, I, I might actually contradict myself in a second. Watch this. If you're going to-- For the-- With the exception of Elon, 'cause he can overpay, 'cause he's trading at 100 times, or at least plans to be trading at 100 times. I wanna spend a little time on that in a second. Everyone else trades sub-10. So you're not gonna buy anything greater than 10X, which means to pay $100 billion you have to buy something worth $10 billion, right? So even rounding down. As I did that, I realized, "Hmm," and, and at that point, a privately held company has to be doing, let's say, let's round down again, five to 10 billion a year to be worth 50 to 100 billion a year to kind of meet the Jason criteria of bigger than this. If JPMorgan wanted to buy Stripe, you actually would be right. So I can imagine a few circumstances-
- JLJason Lemkin
That could happen tomorrow
- RORory O’Driscoll
... where that could have-- Yeah. But-- And then you also have the, um, whatchamacallit? The DOJ stuff, which is obviously suspended for a while, but there you go. So it's, you, you, it-- you're not impossibly wrong, Jason, but I just think, I think this is such a special circumstances. It's a combi- I mean, it's, it's a combination of a couple things. One is it's a company trading at an amazing price, feeling the imperative to execute a transaction in an amazing space where there's a company willing to transact like that, right? 'Cause the other, the other thing I was thinking about is one of the, the bigger ha's on this is Elon is so risk-on. I mean, and, and you know, and at, at what point, uh, like, how do you put this? He is-- I, I, I would use the-- You know the expression in poker when you're on tilt, when you're just, you know, maybe you've-- it's not going well and your response is to double down and double down, right? If you look at the whole Twitter/X transaction, unlike, you know, SpaceX, which has been a work of genius from day one, you know, it's been, "I bought Twitter. I didn't want to do it. Shit, now I have to do it. That's $44 billion. Well, if I'm gonna do that, I-- then I'm gonna wanna do the AI thing, and I'm gonna spend $20 billion on CapEx there. Got no revenue. Let's put them together. Ooh, that's not working. Let's flip them into SpaceX for $250 billion. It feels notional, but whatever. Uh, that's not great, so let's buy, um, Cursor for another $60 billion." This is a guy, I'm-- he's basically gonna keep doubling down until he wins in AI. It's astonishing. It's terrifying if you're a shareholder, but that's the game he's playing and it's his company.
- JLJason Lemkin
Let me just tell
- 27:10 – 34:55
The $100 Billion Prediction
- JLJason Lemkin
you why you're, why you're wrong about the $100 billion deal, Rory.
- RORory O’Driscoll
Okay.
- JLJason Lemkin
Just, just process-wise, okay? And I think your math suggests I might be-- Like, I hadn't even thought about JPMorgan/Stripe. That literally could happen tomorrow. Like, we could open up our, our, our X accounts. It would make some sense, right? Um, so that's one I, even I missed. But here's what's happens in ti- when, when times are good but of stress, which is what's happening with all the leaders, okay? Microsoft, Google-
- RORory O’Driscoll
The leader. Yeah, yeah. Go ahead.
- JLJason Lemkin
I, I've been-- The one thing I have been that I don't think you guys have been, I know Harry has been, I've been a senior VP on the other side at a big tech company during moments of change, and what you talk about all the time is, "Who the hell can we buy to get ahead?" And so I will tell you, in all of these boardrooms, especially Zuck, you can already imagine in your head, they are saying, "I'm willing to pay up to-- I can-- I, I want to buy something that is gonna actually effing move the needle for us. I, I-- We'll do some tuck-ins. You guys can all have a chip. You can go buy a little thing for $50 million, $500 million, maybe even a billion. Like, leave me alone. The Scale, you know, uh, what's-his-name from Scale can go buy something from a billion. I don't care. But I want something that will move the needle in AI now. Bring me your candidates." And they all be debated, but if it is above the line, those deals will get done for 5% or less of your market cap. I guarantee you the discussion is ha- 'cause I was there. It happens every week. Yeah.
- RORory O’Driscoll
Uh, first of all, even though I disagree on the number, I 100% agree with you on the description. That is exactly what happens. You, you wake up as the leader of this big company. You, you've got your $2 trillion market cap to defend. There's a technical thing that could make you obsolete. If you can spend 5% and de-risk that, you do it. I, so I totally agree, and a large part of why venture makes money is every once in a while you find yourself with companies that are kind of in the to-do list for corporate America, and they just write huge checks. So I do agree with you. I was pushing back on the 100, but do I think it's kind of like the Overton window? A $10 or $20 billion acquisition from Zuck tomorrow morning, people wouldn't even blink. They'd be like, "Yeah, of course he's gonna do that." So you're right. I mean, so I do agree. C- I, I, I was just being, as you know me, annoyingly precise about $100 billion, but I agree with you. Every other CEO is looking and going, "Hmm, what do we do now in coding? What do we do now?" Yeah. I mean-
- JLJason Lemkin
And the other crazy thing that happens, I know it sounds crazy, but it is true. Um, in, on the other side, on the acquirer side, big company, right? Once certain numbers are breached, it doesn't mean you also get $60 billion. It does not... Like, you can't walk into the meeting and say, "I'm better than Cursor," but it does psychologically change the break point for what it... Because when people go into deal mode in big companies, as long as they can afford it, they want-- and if they d- if they identify the perfect target, th- like remember, it's minor, but remember when, when Benioff was willing to give his next firstborn to buy LinkedIn. He tried everything he could, every share, every piece of debt. He couldn't get $30 billion to buy LinkedIn. That's a $100 billion deal today.
- RORory O’Driscoll
You're exactly right.
- JLJason Lemkin
Benioff would-- If Benioff could get $100 billion to buy something to change the face of Salesforce, the LinkedIn of AI, he would do it tonight, I guarantee you, 'cause he already tried to do it with LinkedIn, uh, right? He would do $100 billion if he had it. All these guys have $100 billion. So it literally, you go in a meeting, and I saw it at Adobe as cloud took off. Like pri- the, the, people's views of price changed in my tenure as a VP. As soon as you see a Cursor deal-Every w- we don't give a shit. It's, it's, we're not the founders. It's not our money. It's not even our dilution. We don't care. What does it take to buy the next Cursor? 68 million? Done. Like, boys on the corp dev team, Stebbings and Lemkin on the corp dev team, close the damn deal.
- RORory O’Driscoll
When you're fighting for relevance and defending an existing business, y- to some extent, you do what you have to do. I don't think that... I, I, as you say, and even if I don't think they get to 100, the fact that someone's done something at 60 means something at 10 or 15 will seem like, yeah, that seems like a good idea. Let's get it done, right? So yeah, I think it, it's expanded the Overton window of doable in M&A. Your last thing to say is this. You know, great outcome for the VCs. Great outcome for... I mean, OpenAI, I'm just, as a reminder to everyone, Sam Bankman-Fried did the seed. Poor Sam. They s- and the liquidator did his job and sold it for a 1X that it could've been a couple hundred X. Um, OpenAI did the A, I think. Um, actually, OpenAI did the s- another seed. Uh, Andreessen and Thrive did the A, then Thrive led the B and doubled down the whole way through. I don't know what the returns are on the A, but on the rest of it, I think they put in a billion and got, 800 million and got roughly a 4X. You know, great outcome of everyone. It's a great venture story. And, you know, all credit to the founders. I mean, this is pretty good three-year run. The two best deals that Thrive did amazing are this one and OpenAI. And, you know, the aggregate return on OpenAI, I think they're at a 4X, maybe 5.2X, I can't remember which. And on this, excluding the A, I saw the announcement, but excludes the A, which is bullshit, 'cause the A is gonna be a 50. On the rest of the money, it's a 4X. What it says is there are small numbers of growth funds that can deploy masses of capital, hundreds of millions of dollars, and get a high-end, you know, kind of venture return of a 4X, which is a good return, which is a... If you were doing an A or a B, that would be a, yeah, that's a g- that's a high end of good outcome, not yet great. You want a 10X plus on your best stuff. But the fact that you can do it on a billion dollars is what makes this special. It's not that you're gonna outperform some little seed like Neo. If you only... Again, it's the classic thing, Harry. It's actually why even though you think it's simple to one-dimensionally measure venture return, it's actually not, 'cause if you've only $1 to invest, right, and you can give it to Neo and get a 16X, or you can give it to Thrive Growth and get a 5X, you give it to Neo, right? And that's why from that perspective, you just rank on pure return. But if you're sitting there with $2 billion to invest, it doesn't matter what you do with Neo, and Thrive have proven-
- JLJason Lemkin
Yeah, it doesn't matter
- RORory O’Driscoll
... they can take 2 billion and turn it into 6 billion, and you're like giving that n- net to the limit and, like, giving that product all day, every day, right? From a, you know, personal net worth perspective, if you run the math as being the s- you know, the lead GP on Thrive, it turns out to be remarkably good business.
- JLJason Lemkin
We'll probably find, maybe w- thinking through Rory's point, and again, you guys are better experts than me, we'll probably find that, uh, that these products aren't even the same products even more.
- RORory O’Driscoll
No, absolutely.
- JLJason Lemkin
Okay?
- RORory O’Driscoll
That's for sure.
- JLJason Lemkin
Because they were never the same product. But if I can put 5 million, 8, 10 million into an emerging GP, okay, and they don't expand into a multi-billion dollar fund, it's, it's, it is irrelevant to a large endowment, unless you've got a little chunk of guys that are just doing emerging managers, and they'll put in the work or they'll put in the time, or you're a smaller LP. And as the numbers get bigger, it will just, it just doesn't matter making 10X on your Neo if it's irrelevant to your portfolio, right? It's irrelevant.
- RORory O’Driscoll
Jason, you know, different products for different folks. But I just gotta call it to the last comment I'm making Thrive is if, quote, all they'd done was the late stage stuff and gotten that four or 5X blended, that would be wildly impressive. But the fact that on top of that they were in the A alongside Andreessen is almost proof... You know, the typical rap on only doing late is you'd only doing late, you can't get the early round. It's very impressive to have shown up for the A and doing, then stuffing the money in like a foie gras from the B and beyond. I mean, that's really, that's the best way to play that growth stage. If you have enough ground game to s- to get in even under the tent for the A, and then you can stuff a billion dollars in from there on in, that's, that's the way you get the best of both worlds. You got some action on the table with a 40X or a 50X is my guess, and then you got a lu- and, you know, on 10 million, yay you. Maybe 20 mil, yay you. Right? And then you got all the action in the world on the table of 800 million at an aggregate of a four or 5X, and that feels great. Don't mind you, you will be sweating that SpaceX lock-up. [laughs] You will know the day and the hour when it expires.
- HSHarry Stebbings
All right, boys, onto the next bit of news.
- 34:55 – 39:07
End of an Era: Tim Cook steps down at Apple
- HSHarry Stebbings
Tim Cook announces he's stepping down from Apple after one of the greatest runs, 350 billion to 4 trillion. John Terminus will take over as new CEO. 24 years in Apple for him. He's been in Harburg before. How do we read this news, boys? Is this what we expected in terms of replacement? How do we feel?
- JLJason Lemkin
Well, look, f- Rory probably has better thoughts than me. I think there's, on the one hand, he's 65, right? So d- it, obviously, the board has been talking about this for years, right? They found, uh, their successor inside. They didn't go through the chaos of Shantanu resigning from Adobe when they still don't have a CEO, right? They did it all the right way. They did it at the perfect age optically. But the big question, along with Reed Hastings and Shantanu and others, is like folks turn over every year, and I'm sure Rory's gonna say that. But are they all leaving because they don't have an AI strategy? I think they are. I don't think Netflix has one. I don't think Apple has one. I don't think Adobe has a great one, even though they have AI. Like, actually, I learned this week, AI in Illustrator is great. Like, a- uh, AI in Ill- Adobe Illustrator is a 10. It's like, it's great. But it do- hasn't changed the trajectory of the company, right? So what would you do, uh, if you take an Apple from whatever, you know, 12X its market cap, successfully chaperone the jobs agenda to epic heights, and AI is changing the w- I mean, this show gets stale, like, uh, uh, less than a week. We gotta do, like, four of these a week. Like, I would, I, I would think [laughs] about r- So I j- any, uh, I just don't know if, if this is normal retirement or deep down folks are like, "Jesus, I, I, I'm not up for this."'Cause I think most CEOs I work with are not up for it, is the truth. Most pre-AI CEOs are not-- They're not up f- You guys know this too from your portfolio. Not all, but most are not actually up for, for the massive amount of... What's more than nine nine six? Twelve twelve eight? I, I don't know what it is, but most humans aren't up for it.
- RORory O’Driscoll
I think as a general comment on kinda AI terror, for lack of a better word, and the feeling that you need to be on top of it as I get out, I think y- y- you're right. I think on the specifics of Cook, I think, I think it's, uh, I think just he's been operationally excellent the whole way through. He was operationally excellent taking over the job. He's run it exc- excellently for 15 years, and I think he's operationally excellent on exit. And the proof of that is the stock barely budged, right? Um, I always think, uh, the stock is not always right. There's some fun examples of people thinking positive things in the short term and then totally wrong, but, you know, the fact is that resigns, not unexpectedly in the aggregate given his 65, but unexpected in terms of media timing, and the stock moves less than .5%. It's, it-- Basically, that says organized, well-managed transition, and I think he-- I think he was smart. I think you get out on a high. Recent quarter's great. As you say, you can't argue with-- I mean, it's, you know, it's, it's 12 or thir- it's three or four X the revenue, three or four X in 15 years, three or four X the, um, operating income. It's twel- it's 12 X the market cap, and just as a reminder, because they buy back shares, it's 20 X the stock price. As a holder of the stock throughout that entire period, God bless you. Um, so, you know, just a great run, and handing over internal successor, which as you say, is proof that you had your shit together, and you had, you know, a couple of options, and they went with this option. One of the other guys had pulled back recently. I think it all-- I think getting out on a high is not to be underestimated at 65. I, I think it's, it's a home run the whole way through, and so I, I g- just, just give credit where credit due. It's one of the great ones, right? Um, and you can tell I'm smiling 'cause I own a lot. Um-
- JLJason Lemkin
Sure. [laughs]
- RORory O’Driscoll
And, uh, and, and you know, remember, I mean, it's been funny 'cause I, I mean, I, I, as I said, do-- did some kinda thinking on stock price moves up and down and how they are and, you know, um, there was angst when he took over. I mean, when, when Jobs came back the first time, the stock popped 30% in four, four weeks. When s- Jobs stepped back, obviously tragically 'cause he was ill, the stock was-- and Tim took over, it was 5% or 7% down, which is, you know, quite outside the norm, and in this case, perfectly, perfectly fine. So competent execution the whole way through, kinda delivering to plan. And I think, yeah,
- 39:07 – 42:21
Why Netflix, Canva, and Adobe should be terrified of YouTube and AI
- RORory O’Driscoll
I mean, second comment, you're right. There is still some pending un- you know, do you have an AI strategy? But honestly, Jason, it, it, uh, I mean, I, I'm gonna commit heresy now, right? If you look at the three companies you named, Netflix, Apple, Adobe, I would argue that Adobe has to have an AI strategy. It's existential. Apple is somewhere in the middle. You know, y- yes, it's pathetic that Siri is not good, but, you know, you can continue to build the hardware platform that everyone kinda gets AI on, I think, for a long time to come. I don't think they're gonna be replaced by the OpenAI mobile phone anytime soon. And Netflix, I think it's the least, uh, AI-centric problem out there. I mean, they have, uh, interesting challenges, didn't get that big acquisition done. They're a media company. They have media challenges, as, uh, Benedict Evans says so well. So big picture, I, I, I don't think-- I mean, as I say, it's in the middle in terms of AI terror.
- JLJason Lemkin
On Netflix, uh, Harry, not that I-- we want to be yahoos on Apple and Netflix. Let's, let's stick to the code. But Blockbuster, I don't mean to use the old a- a- analogy. Blockbuster peaked in 2004 with 994 stores. Six years later, it was bankrupt. I think what's happening-- When it happened with Netflix, and I, I, I'll tie this together to a macro theme that Harry brought up on Twitter and others, um, I think all that has to happen is for these leaders to be maimed or for there to be stealth churn. I'll give you an example. I've, I've paid for Netflix g- I, I'm embarrassed to say how many years I've paid for Netflix, right? I think since, since it came on, uh, flash drives or, or CD-ROMs. I've been, I mean, I've been, I, I, you know, I've been paying for infinity. And it- its price has gone up, but it's not worth my life to churn, right? But I watch so much YouTube, and, and on YouTube, it's becoming more and more AI-generated content. I've stealth churned off Netflix. I'm still paying. I may pay for another year, but not-- But as more and more folks stealth churn off Canva because they're using AI tools, as we stealth churn... Uh, you know, Amelia was looking. Now that we've moved to Claude, she hasn't used O- OpenAI in four months. So we're paying for OpenAI 'cause it's 100 bucks a month, but she's stealth churned. So my caution is, and I think this is why so many lead, uh, so many leaders are at risk, is stealth churn is everywhere. If you're ma- Uh, like, and not to ramble, but I used to think as a B2B guy, MAUs and WAUs and DAUs were the dumbest metric. I'd get an investor update with, "Hooray, our, our, our WAUs are up," and I'd be like, you know, I g- I know Mamoon used to cheer that at Slack, but, but that's a sign of a struggling startup. Like, uh, I want-- Show me the revenue, right? Show me the money. Now I want to see the MAUs and WAUs. I want to see your usage of your Illustrator, of, of, of Figma Make, of Netflix, of Canva. I want to see those going up faster than revenue. This, I think, is the ultimate B2B test, or anything. Is your MAUs, WAUs and DAUs growing faster than revenue? If so, things are probably working for you in the AI age. If they're g- if they're declining, just like net new customer count, right? If it's declining, you're hiding, and I think, uh, Netflix just bought Ben Affleck's startup for, like, 300 million bucks, right? Or something like that, Harry. Like, th- they're not a- They're, they're well aware [laughs] that folks are watching AI-generated Star Wars content on YouTube and not watching Netflix. So, uh, I, I don't know. I would step down too. [laughs]
- RORory O’Driscoll
[laughs]
- JLJason Lemkin
I just might. I just
- 42:21 – 52:41
Anthropic Hits $1 Trillion
- JLJason Lemkin
might.
- HSHarry Stebbings
Speaking of Amelia hasn't used OpenAI in four months-
- JLJason Lemkin
Yeah
- HSHarry Stebbings
... so deeply entrenched in her workflows with, with Claude, Anthropic turns down $800 billion funding offers. I just came back from an LP literally 10 minutes ago, and I said, "What's your biggest challenge?" They manage the money for some of the largest families in Europe, and they said, "All of our families just want one thing, Anthropic. And the challenge we have is they don't want anything else, but they all want Anthropic, and that's the only thing they want." Every dollar wants its home in Anthropic right now, and it's caused secondary market prices to surge to a trillion dollars for Anthropic. The implications are, or the suggestions are, there is a clear market belief that they have won the enterprise race and they've surpassed OpenAI now with 850 with their latest. How do we read that? How do we reflect on that?
- JLJason Lemkin
Well, look, just two others to-- I mean, the fun thing in all of this, and I put "fun" in air quotes, is, um, it's so fluid. So Sam just said, "Codex usage is up 50% in one month." Okay? As we're taping this, OpenAI is gonna launch autonomous agents, OpenAI on steroids 24/7, okay? Um, three, I've run my-- I've done an experiment over the last week. I've run my own workflows through both APIs. I don't care, right? So our ability to predict what we thought two weeks ago when there was turmoil, executive turmoil, everyone was using the Anthropic API. It's just better. Claude, when we started the show, I was the only guy that used Claude. You guys probably thought Claude was ridiculous, like wh- why is this weird guy... It's less than 1% of the market. Now everyone's using Claude, right? I don't know what 90 days is gonna bring, but, um, the fact-- But I, you know, e- everything could change in our development environments in a week, and A- OpenAI could win in agents, in autonomous agents. We're just starting, like, uh, agents are just getting autonomous. All these goofballs on X with their O- with their Mac Minis and Mac macros, and 11 of them stacked in their closet. Look, what have they shipped? Nothing, okay? It's performative art. We're-- But, but autonomous agents are what we all are gonna live with. We built some, and they could win. I mean, literally, they're shipping it today. It could be the best thing in autonomous agents. Claude has a few now, too. I mean, Anthropic, but that war's just started. It's just started, so I can't honestly predict 30 days out. So does this, does a trillion f- feel like Anthropic, did that feel like a good deal on our last show? Yes. Am I sure it will three shows from now? I, I don't know. [laughs] Maybe they'll, maybe they'll invert. [laughs]
- RORory O’Driscoll
And if Jason is correct... Look, I, I believe both of you are correct. You're correct in the sense of, you know, AI is the biggest story out there, and Anthropic has, you know, in the last six, nine months been credited as the new winner in that space. So by definition, you're gonna have huge form off of that stock. So you're, you're accurately representing the facts, right? You know, whether or not that will prove to have a overall holding period return from here that outpaces the S&P 500 adjusted for the risk is something entirely different, right? You know, I think, look-
- JLJason Lemkin
It's hard to do in venture
- RORory O’Driscoll
... I mean, exa- I mean, I think the trajectory from-
- JLJason Lemkin
It's hard to do
- RORory O’Driscoll
... the trajectory from here is actually pretty straightforward, which is, you know, when you've got this level of white heat, you go public, right? Because up until now, as I think I said in a tweet recently, there, there's just been no way of... We've had an entire life cycle of a technology explosion with very little access to it in the public markets, right? And it's hard to imagine going through the entire cycle of a boom and bust without letting the retail investors lose their money as part of the show, right? So that's clearly the part that's coming up. So my assumption is Anthropic will go public, and it will be a fabulously successful IPO, which is different than saying at a trillion dollars you'll feel regret about holding it six months later. It can be an ama- it can be an amazing company, it can not be worth a trillion dollars, and it can trade at a trillion dollars for a period of time. All those things can be true.
- HSHarry Stebbings
What price does it go out at, Rory, if you were to make a guess?
- RORory O’Driscoll
Your job as an investor is to tell you what something's gonna be worth four years from now, right? Your job as a banker is to tell you what it's worth today. And those are s- different skills. One is about projecting the future, the other is about valuing the now, right? I, I'm not gonna try and project the future on this now. My guess is I come with a lower number, but your LP is right about the present. Today, if it went public today, right, you would be fighting them off at a stick at a, a trillion dollars. You would have a fabulous successful IPO, and because those guys are wildly smart, um, you know, really nice profile of the CFO recently, and because the other thing that's happened is the big counterattack on behalf of OpenAI has been, you know, compute is the ball game. These guys don't have enough compute, right? Um, my guess is the Anthropic guys are saying, "Hey, we got the better software. How do we get as much compute as possible? It takes money. This is America. Um, Jensen will take a order, provided we give him cash, and therefore go public." So my assumption is these guys are gonna go public, as we said, October Q4 time period, if they can, as soon as is humanly possible, which is, of course, why they're not taking the $800 billion valuation. I mean, you know, why even pause for breath? I mean, especially if it gives any kind of rights, which actually at this point I doubt it does. They are, you know, I assume heads down preparing to go public, 'cause as long as this mood lasts, you will probably raise money in the public markets for that stock at a price you mightn't see three years from now with three years of execution. They should go.
- JLJason Lemkin
After the IPO, if-- what are they gonna do? Are they gonna do massive secondaries? Are they gonna do pipes? Are they gonna do weird debt hybrid equity preferred deals? Because this isn't the last chance they're gonna need epic amounts of capital, right? And so maybe it's minor, but we're, we're talking about an IPO like it's a, it's an event, which of course it is, but the ultimate, I think the meta question is where is it easier to raise ongoing capital, like perpetual capital? Is, is it really easier public than private, um, for these guys? Not traditionally the answer is of course, but for these guys, is it?
- RORory O’Driscoll
Yes, I think I'm gonna say again, being opinionated on this one, yes, I think it will be, even though so far it hasn't been. I mean, so far the most stunning fact so far is the biggest IPO in history is talking about raising $75 billion and the biggest private round in history raised $122 billion. What that says is the biggest private round is bigger than the biggest IPO. That is bizarre, and we've kind of grown accustomed to it to the point where we don't even focus on that fact, but it is of course absurd, right? Given that logic, you would say, "Oh, stay private, you can raise more," but I absolutely don't buy that, as you know I've said. I mean, yes, Anthropic could get one more round done, but the truth is the big liquid markets are public. The-- and Jason, to your point, I think they go public, you raise a big slug of equity out of the gate. You raise more, you know, y- y- you obviously expand the capital base over time, and then you have access to a whole bunch of other things. You have access to convertible preferreds. You probably can do more compelling debt structures. You become a viable player for more people to lend against. So if your business model is, as they think, perhaps insanely, but whatever, t- "I need to raise $200 billion, $300 billion," and at some point you have to go public, why don't you go public when the FOMO is at its peak, when your relative kind of desirability is at a peak? I-- it would be hard for me to imagine a better moment to go public if you're Anthropic than, like, this minute.
- JLJason Lemkin
But I'll give you this, a counterargument that I might be wrong on, that admittedly I might be wrong on, which is, uh, Figma and the need for capital. So if Anthropic does not need any more capital, go public q- tomorrow, to your point, right? Or Q4 when you're ready. Go public. Go public at a trillion. Uh, trade up like Figma did to $2 trillion, right? Uh, up a- a- and ride it out. But Figma's down 87% from its trough. Imagine for some reason something like this happens to Anthropic. It still grows. I mean, what's Fig- Figma is still growing at top 5% rates, right? But the market has fallen out of love with Figma. What happens if Anthropic IPOs at the perfect time for a company that does not need capital, but the markets fall out of love with it? They get worried, like, the construction costs go up. The, those, those space centers we're arguing over don't work as well. Rory was right about the space centers, and it falls 87% like Fig- just what happens to, to capital raising.
- RORory O’Driscoll
Yeah. Re- re- okay, respectfully, no, right? Um, because, uh, if everything that you articulated happens, right, then the person who's public wins and the people who are still private are ex- existentially screwed. The Figma example is driven-- The Figma soundbite, which I hate, of the 83% decline is more accurately represented as follows: Figma priced at 35 with sensible people. Idiots drove it up to north of 100 bucks a share. Then the same idiots sold it down, and so that's one factor, right? But then second factor, at the same time, Figma was at the tail end of a 20-year cloud software boom, where the zeitgeist switched to the AI boom and the world fell out of love. So that took it from 35 down to where it is now, which is 20, right? That explains Figma. I don't imagine-- Look, if there is a world where the AI zeitgeist goes out in the ne- uh, well, so I think we're at the start, well, maybe not the start, but we're, the AI zeitgeist, we're not gonna hit a stage in the next year or two where the, people are saying, "Oh, my God, the story's dead. We've moved on to the next thing." You're at, you're closer to the start than the finish of the zeitgeist. So I don't think you have... I don't think ev- I think there could be a hit to the stock, and I'll come back to that in a second. But I don't think it's the same as Figma, where literally it's like... I mean, what's happening at Figma is everyone's saying, "Your operational results are no- are amazing, but we're in love with someone else, so we're just not even gonna talk to you," right? I think if Anthropic were to go out and if the stock were to go down, it would be because, "Oh, my God, it's overvalued, and this w- this revolution's gonna take 20 years, not 5, so maybe overpriced." And in that case, you'll sit there, and I've been in much smaller scale on this, when you go, "That's really bad. Our stock is down. On the other hand, we've got $50 billion in cash, and our head-to-head competitor's still losing money in private. We win." So no, uh, there's no argument. There is no argument for overstaying your welcome in the private markets at this point.
- 52:41 – 1:09:47
Claude Design vs Figma
- HSHarry Stebbings
Jason, uh, you, you brought up Figma and you brought them into the conversation. Tying that to what we were talking about, Anthropic launches Claude Design. For those that don't know, it's kind of their competitor product to Figma, very bluntly. Um, obviously, Figma as a result were hit, and price was hit significantly, uh, as was Adobe's. Jason, you, you actually did a like for like and you've tried, you know, um, Claude Design extensively. I'd love to hear your thoughts. What were your reflections? Does it compete with Figma in a very meaningful way, and how do you leave feeling?
- JLJason Lemkin
Well, look, let's, uh... I, I, I leave with a lot of anxiety over Figma and others, but not for the reason the yahoos on Twitter said. Um, if you use... Here, let's be clear what, two things about F- uh, about Claude Design if you haven't used it. One, it is definitely better than the design tools that were in Claude the day before. You've always been able to design a website that looks exactly like every other website built with Claude artifacts and purple gradients, and the same, they all look the same, okay? Half of demo day looks like it was built in Claude artifact at most, okay? You can smell them in 60 seconds. But design was always there. It just wasn't what a lot of designers would call design, but you could always design a website. Now, Cl- Anthropic did something which is important. We'll see where it goes. They didn't just improve it. They built an application. Claude Design is an application. There are only so many Anthropic and OpenAI applications. There are skills, there are workflows, there are prompts, there are little things you can do. They went to the trouble to build a design application that works. It is, whether it's 50% better or 200% better than the day before, you can design better websites, better properties in Claude than you could before. Does that mean you can build what you can build in Figma, let alone Illustrator? NoSo a lot of the Yahoos are like on... Uh, the other thing Yahoo said on Twitter is, "Of course, this isn't a threat to perfect design, to taste, 'cause we're all about taste now in AI. Taste. We have no threats because of taste and the combination of taste and moats means we're unassailable." So will your typical, um, you know, hoping to, hoping to afford tickets to Coachella designer that takes two weeks to respond to a ticket to res- to develop an asset, are they gonna switch? Maybe not, right? They're not gonna switch from these things. But it means normal people can design stuff and get into production much faster. So I think it is an existential threat. It is- it will maim and nibble at Figma more, more, more. Because, like, if the three of us wanted to build an app together and we c- we don't wanna wait for a designer to turn it around in 30 days and give us a Figma file or a still, the- what the hell do I even do with a Figma file? I can stick it in Replit. Now I can just do it myself. So we will bypass designers more and more. That's the risk. Not that... But the, I do not believe Anthropic will ever build a direct Figma or Illustrator or Adobe competitor. They don't have to, to, to maim them. Um, and so yeah, is it a design tool? Maybe it's designed to production like the, like, like, um, some folks call it. Who cares? If it maims you, it mai- it maims you, right? And I think people are missing the point. The meta question is, and then I'll just say one last thing, that no- I saw no one talk about it. It is an application. It comes up as a full application. It has sharing, it has users, it has hierarchy, it has... It can save assets. Maybe there are... I do not believe there are many other applications that Anthropic or OpenAI built. And this, if you look at what the public markets are s- they're scared about a lot of things, but we make fun of vibe coding. Oh, we're gonna vibe code our Salesforce. But what if they start building A-tier applications, not just prompts, not just outputs? Like, it is something to reflect on. [laughs] It is, it, it is something to reflect on, and I'll just... Sorry to ramble, but I'll give you one last story to compare. So the oldest piece of software we use is Marketo, okay? Terrible email marketing service. About two weeks ago, it started to violate the CAN-SPAM Act. We started, I started to see things on tweets, "Jason, how come I can't unsubscribe to your goddamn SaaS-ter newsletter?" And they'd ping me again and again. I'd be like, "I don't know." And, and, and, and then you, you get more of them, right? So that's when a bug's been introduced into the system two weeks ago. We flagged it for Adobe and Marketo. Uh, they said it was unfixable. CAN-SPAM violation. Okay, this was a week ago. Then they said they would only help us if we got on the phone with their engineering yesterday. We did. They did nothing but blame Salesforce and said they could not commit to a fix. So my point is, this is what old software looks like, okay? And as, if Anthropic and OpenAI are gonna build applications, sell them all [laughs] as a bucket. Like, keep, keep the gems, don't get me wrong, but they're coming for old software. They're coming for old software. This is an application. This is not a prompt. And, uh, but nor is it gonna maim Figma next quarter. Like, there's just... But those don't, those both can be true. Those both can be true that we won't see it in Figma's numbers next quarter, and that over four, six, eight quarters, it will maim its growth. We won't wanna use grandpa's software anymore.
- RORory O’Driscoll
But that's just... Honestly, I wanna ask a lot of questions because, you know, th- one, that's what we do here. Two, uh, you've used both products, and I just, and I tried to look at some demos today, but I just have a ton of questions. So-
- JLJason Lemkin
Yeah
- RORory O’Driscoll
... 'cause, 'cause I think this, th- this, uh, it's like the Emerson quote, "If you understand one thing, one man well, you understand every man. If you understand one competitive market well, you unders- you have a kind of a framework for all these markets." So I just wanna drill down on this, because it's the same question in every market. So a couple things. One is, how do you think it impacts... I mean, I believe Ca- the Canva design engine is at the heart of what they've done on, um, Claude. How do you think this impacts Clau- um, Canva versus Figma?
- JLJason Lemkin
Well, first of all, kudos to Canva. If you use, um, Anthropic d- I mean, Claude Design, it exports to, to Canva.
- RORory O’Driscoll
Yes.
- JLJason Lemkin
So you can import from Figma-
- RORory O’Driscoll
They got in there
- JLJason Lemkin
... and you can export to Canva-
- RORory O’Driscoll
Great
- JLJason Lemkin
... right? Should you choose to. [laughs]
- RORory O’Driscoll
Yeah.
- JLJason Lemkin
But what's happening is product teams and engineering teams are already, uh, like, okay, if we go back 12 months ago, you had design, okay? Back in the day when I worked at Adobe, there was a design group. We weren't allowed to design anything that was public-facing. You'd face a ticket, and n- 60, 90 days later you'd get a PDF of what your website had to be look like, okay? Then your product team would have to figure out what to do with that PDF, argue with your engineering team, and months later [laughs] you c- That's the way software used to work until not too long ago. Then as everyone started working in Claude Code toward the end of last year, product and engineering teams p- s- just started to working in the code together. Product teams first would vibe stuff in Replit and Lovable on their own, right? Now a bigger and bigger deal is they're committing to the code base. Product teams are able to do this. And so th- they're, these PRD teams are becoming more cohesive, and then design's still way out over there in s- in, in, in their own, in their own hipster land. A- as these combine, everyone's gonna wanna work directly onto Clodex, Codex and Claude Code. It's g- not gonna be this designer enforces a w- a, a collaborative hierarchy on Figma, like, the, the... Because the designers hold the, the, the PRD organization hostage. They hold them hostage before AI. It's the worst.
- RORory O’Driscoll
Yeah. It's worth just pointing out a high-level comment here.
- JLJason Lemkin
Hostage. [laughs]
- RORory O’Driscoll
When you're saying des- implicitly, what you're saying here is it's the Figma digital design websites and apps world, the software part of design-
- JLJason Lemkin
Yeah
- RORory O’Driscoll
... not the part of Canva that is printing out real-world pictures, posters, and, you know, le- you know, the, the, the physical design where it's decoupled from software.
- JLJason Lemkin
You're right. Design's such a confusing term, right?
- RORory O’Driscoll
Agreed.
- JLJason Lemkin
It's a bigger threat in the short term to things like Gamma. It already makes slides like Gamma.
- RORory O’Driscoll
Yes.
- JLJason Lemkin
Okay? It's not a threat to, to Canva today, but every single thing you do in Claude Designer that you don't do in Canva or Figma or Gamma is a, is a threat to them.Even if it doesn't kill them, every single thing you do
- HSHarry Stebbings
I think the smartest thing Jason always says, Rory, which always sticks with me, is just the element of maiming, which is quite hard to deny. Which is just, like, if it takes 20 to 30% away because you're already there and it's easy, that's very meaningful. I always-
- RORory O’Driscoll
It is meaningful. And again, I'm not diminishing that. I always thought one of Google's interesting strategies for a decade and a half was their strategy with G Suite. It was email, you know, and effectively a Docs and, and a spreadsheet, which just gnawed away at the bottom end of the Microsoft Office Suite. And if you fast-forward a decade and a half, you know, you, you, you get both sides of it, though. They, they yanked... Basically, they could spend a billion dollars yanking Microsoft's chain on a $40 billion business. It's exactly what Jason says, "I'm messing with your head, I'm maiming you, and it's not, and it's not core to me, so I don't have to win here, I just have... You just have to lose," right? On the other hand, m- fa- 15 years later, yeah, Office is still a plus or minus $40 billion business, lower growth rate. So my point is simply this: There is a range of outcomes from it gnaws away at the low end, takes away a lot of users, but only 5% of the revenue to it bites 30% of the users, 25% of the rev, and it really impacts. And th- those are big differences in terms of value creation. You understand me? So the, the, the di-
- JLJason Lemkin
How, how much... We'll have a maim meter in board meetings. How much have we been maimed this quarter? And it'll go from 1% all the way to 50%. And, and then we have to... And our agents will decide. We don't let the founders decide, 'cause they're always at 1% or fif-
- RORory O’Driscoll
No, I, I, I think the-
- JLJason Lemkin
Or they're, they're the overactive one, 50. [laughs]
- RORory O’Driscoll
Yeah. Th- th- this is cue for the Monty Python "It's only a flesh wound" sketch, you know? [laughs]
- 1:09:47 – 1:17:10
Rippling's God-Mode Growth
- HSHarry Stebbings
Um, w- w- one that I, I thought was fascinating was Rippling crossing a billion, growing 78% year on year. Um, is this the new, is this the new bar for a great B2B IPO?
- RORory O’Driscoll
Well, first comment, is this the new bar? Well, it's not going public right now. But I think, let, let's step back even one level beyond the IPO. I think what this sentence, if true, and you never know, but I believe it to be true, exposes the whole SaaS is dead meme is bullshit, right? Low-growth SaaS is bad and high-growth SaaS is good, right? This is a market where we can talk about the reasons why. If you're doing a billion dollars growing at 78%, then collapse of the entire discussion about, you know, SaaS is going away, SaaS is bad, what's it worth, right? What it really points out is the real objection to these public companies, s- these public SaaS companies, is not, oh my God, you're SaaS. It's that your market is now top stop, then your growth rate is 10%. If Rippling is growing at that rate, that's amazing, it's compelling, and they'll get an excellent IPO.
- JLJason Lemkin
And they're accelerating. The crazy thing is they're accelerating. So if they were at less than 500 11 months ago, which I do know, right, and they're at a billion growing 70-something percent, do the math with me, Rory. They're acceler- It's not just 70, which is enough. They're, they're accelerating, right? And you can say that's great for SaaS, and it is, right? Um, as Parker said to me, not bad for a SaaS company, right? Um, kudos. But, you know, and, and we can talk about what that means. I'm not even sure what it means. But not that many are accelerating like this, right? Uh, it's, so it, this is not good news for anybody not accelerating at scale, right? Let's not, it's not even 70%. It's accelerating from, like, under 50 to 70 in a year. I mean, you know, candidate for CEO of the year, right? Uh, not, not to, not, not to, not to disparage Deal, but candidate for, to drive that level of acceleration, I don't even know how to do that. [laughs] Unless it's people buying, unless it's people buying tokens, I don't even know how to do that in today's world.
- RORory O’Driscoll
Agree.
- HSHarry Stebbings
I mean, bold candidate for CEO of the year. I mean-
- JLJason Lemkin
Yeah
- HSHarry Stebbings
... respectfully, he's, he's got a bit of competition, Jason.
- JLJason Lemkin
Yeah, but that-
- HSHarry Stebbings
[laughs]
- JLJason Lemkin
Uh, driving accelerate- like, they've just launched their agent. Driving that level of acceleration without a, a, a massive AI tailwind, like, just, just blowing your, blowing your phones up, right? It, I, I... You know, bring 'em on. We'll talk about it. I don't know, I don't know how to do that without AI, right?
- RORory O’Driscoll
I think it's what they return, w- w- refer to in sporting terms as a win against the run of play. Against the odds, you're, you're, you're playing the SaaS game where everyone's walking around saying the world is dead. Y- yes, Anthropic's putting up 6, 700% growth, but you put s- 78% growth and acceleration up in a category where most ill-informed people were saying you can't do that. So-Um, h- maybe the better, a, a more clear expression is highest outperformance relative to, quote-unquote, market expectations. I think that's a clear example of it
- JLJason Lemkin
Yeah. And it's better than Figma by the numbers, right?
- RORory O’Driscoll
Yeah, yeah.
- JLJason Lemkin
It's better than Figma by the numbers by far, by far.
- RORory O’Driscoll
And this, what it says is... And what it just, serious comment, what it just says is there's markets where the entire agentic AI vibe coding discussion is rubbish, and one of them is financially related stuff and payroll. I've, I've run a business and you have, you guys both run businesses. You can screw up on a lot of things. You screw up on employee payroll and you pay them at 3:00, they'll be in your office at 3:01, right? You can't get this wrong. You're not interested in vibe coding it. [laughs] You're interested in having it right. You've got legal and statutory obligations that carry criminal penalties if you don't pay your taxes. You're like, "I wanna outsource this to someone wildly competent, have them take the responsibility, and no, I don't want non-deterministic processes, you moron." Right? These are entire businesses that, you know, might have some impact at the margin in terms of agentic efficiency, but this core business will be there in five, 10 years' time. It'll compound because payroll is not, s- not, not everything is... I mean, it's, we're actually talking about this a lot internally. What gets eaten by AI? What doesn't get eaten by AI? What's defensible? Payroll is one of the best examples of this is just something you do. You might build a software better using AI, but the core value proposition is something that, it, it's just orthogonal to AI and it has to be done right. So big category. It'll go public. It'll be a great outcome. Good for him.
- HSHarry Stebbings
I, I think the same with a lot of the fintech players that we see today. You know, your, your Ramps or your Stripes or Airwallets of the world are not-
- RORory O’Driscoll
Absolutely
- HSHarry Stebbings
... fortified. [laughs]
- RORory O’Driscoll
Yeah, exactly. Um, and-
- JLJason Lemkin
You know what, though? I, I know it's not to harp on the, the, the Maim episode. The moat is stronger, it is less impacted by AI, but I will tell you, e- everything I... And I know I'm a, a few months, not ahead of everybody, but a few months ahead of many. Everything I view now in terms of its, how well it works with our agents, how well its API and workflow works with our agents. And so for example, like w- after SaaStr Annual in May, we're gonna build our own AI VP of Finance, our own, okay? And the number one thing we're gonna do is automate collections, okay? So we've been on Brex for f- six years. We're, you know what the first thing we're gonna look at? Which, which API works best with our agents. I don't care what Ramp's dashboard looks like. I don't care what, what its, uh, what its office of the, of the, of the, you know, the GDP anal- I don't care. I care how our agents work with its API and its, and, and we're gonna pick the best one. And that, that is just starting, but it is a BFD, and it also means that folks that seem to have a huge moat, it may weaken when... And I'm not just, I'm not just being a, a, a yahoo on X. We're gonna build an AI VP of Finance, and he don't care what the UX is.
- RORory O’Driscoll
Well, that's, yeah, Jason-
- JLJason Lemkin
He don't care
- RORory O’Driscoll
... y- first of all, you're right. You're absolutely right, and you are gonna build a V- and, and, and therefore the payroll and, and kind of, um, AP collectibles that has the best API will win. But I'll tell you something, you're not gonna build an entire fintech stack. So someone will get those dollars. You're right. There are, I'm gonna-
- JLJason Lemkin
To someone.
- RORory O’Driscoll
Yeah, so the-
- JLJason Lemkin
But, but it could be a new vendor.
- RORory O’Driscoll
It could be that.
- JLJason Lemkin
It could be a different, or it could be a different vendor.
- RORory O’Driscoll
You're, you're right. I mean, this gets to the soul for it. There are three or four vendors of, you know, um, AP-related stuff. You've got Ramp, you've got Bill, where we're involved. You've got, um, Ramp or Brex, whatever, right? Whichever of those doesn't have an API-forward product will lose market share, whichever one does will gain market share. And if all of them are dumb enough not to do it, then a new vendor who says, "I'm an API-first product," will get your business and all the people like you, right? But in every case, w- but on the, so I think you're correct in that, which is a platform shift, which is what we're dealing with at this level, has implications for everyone in the tech stack. But if you are doing something like what, you know, Ramp, Brex, Bill, all these people are doing, the core thing you do itself won't be replaced in a way, for example, Figma might be, right? My point is there's degrees of change here, right? But I, I, and your point is well taken, yeah.
- JLJason Lemkin
But, but if the degree of the, just the comfort that we're protected, like w- you know, Ramp has asked us to switch from Brex for, for, for seven years. I bet we finally switch over the summer, and it's only because of the agent. If it, if it wins the bake-off, we will switch in one week. We will switch, and we will never go back to Brex.
- 1:17:10 – 1:21:32
Salesforce Goes Headless: Marc Benioff's genius move to survive the AI agent revolution
- RORory O’Driscoll
to your point, Salesforce just announced a whole, an entire headless API strategy. What are your thoughts? 'Cause I thought that was smart. Um-
- JLJason Lemkin
Well, while, while we debate where to move our Marketo data, we're already using headless Salesforce to move all of our Marketo data, our, v- agentically over to Salesforce. It'll be done in a couple days.
- RORory O’Driscoll
See, that's a great story, because g- give him credit, give Benioff credit. He's like, "If you can't beat them, join them," as they say in private, you know, right? I mean, remember, it, it's, it's less than a year ago there was talk about, "We're gonna charge you a, you know, we're not gonna let you have your data," and now we've gone to getting a headless product out the door. So yeah. So they've, the, you're an example of where he's taken share from the adjacent companies like Marketo just 'cause they're doing that, and that's your point.
- JLJason Lemkin
Well, starting. The other, the only thing I will say, [laughs] listen, we already, we're already living the headless vision, right? We, we, we don't log into Salesforce. It's our hub. But, um, it's also, this is a lot of stuff that's gonna run on MuleSoft in a couple of months or six months. This is also, with love, this is also a classic B2B. You know, Anthropic s- uh, drops a design tool, and we can use it in an hour, right? This is something that will be dribbled out in classic B2B fashion over here. [laughs] It's just like, it's different worlds. [laughs]
- HSHarry Stebbings
Can we provide some context also for those that haven't heard in terms of just Benioff's move with headless that he announced? Just so we set the scene there, 'cause I wanna ask some questions on it.
- RORory O’Driscoll
Sure. I mean, I, I, I think that traditionally the Salesforce app, it really had two com- um, parts of value. There was the, the user interface that every sales rep or everyone in the organization uses to input and output information and effectively record the work they're doing. And then at the back end, you have effectively this massive database and workflow that records all the information and allows you to track customers, leads, pipeline, all that relevant stuff. So there's two components of value.And by going offering a headless offering, what he's basically saying is if, if those people who are doing the work are replaced by agents doing the work, then they don't need my UI anymore, right? Because the people aren't there anymore. They need a totally different agent-based UI. But what I'm gonna do as the leader of Salesforce is I'm still going to allow them to access the database side of my product, which means I keep, I keep my value even in a world where most of the selling or the customer support is not done by humans typing into the Salesforce UI, but is done by agents go ac- proactively going against the Salesforce backend. So he's preserved-- he's given up some... He, he's given up trying to drive per seat pricing to preserve long-term value, 'cause I think he correctly has identified the real long... To Jason's point, he, he said it as a negative, but it's also a positive. The real long-term value that Salesforce has is it's taken you five... I mean, it's taken us 10, 15 years to get all those integrations in place, all that data in place. If you make it easy for Jason's agents to work with Salesforce, then he mightn't get around to killing you for the longest time. So that's the big move they made in the last few weeks, right? I think it was a week or two ago.
- JLJason Lemkin
I think like the f- like, like, like, like Claude Design, though, everyone completely misunderstood what headless Salesforce is. Um, so Salesforce is already headless. Salesforce is, it made... And this is actually pretty crazy. S- Mark m- really, Mark and Parker, to their credit, G- JFC, in 2000 and friggin' six, they launched an enterprise API when this was seen as a not, not possible. You could not build, allow third parties to integrate into enterprise softwares. Too risky, too problematic. They opened this platform up, and they have 20 years of it getting better. And I will tell you, all the APIs that our agents use, our AI VPN marketing, VPN customer service, Salesforce is the best. It is the best API out there. It crushes everybody, okay? This includes all the new guys, e- everybody. But it's because they've built this for 20 years, and because it's, the APIs are so good, um, the agents can work with it, like it's not a problem. What, what headless is... And, and, and that's what Mark's out there pos- I mean, the greatest marketer in B2B, right? But it's already done this since, since agents started. What he's really pitching, which is the bigger threat to these leaders and the bigger opportunity, is an agent fabric, is the layer that manages all your agents. This is what it's really... If you really p- look at what this is, it's about Salesforce says, "We are gonna be the fabric to manage all of your agents, your 20 agents, your 50 agents, 100 agents. So some of them will be built on Salesforce. A lot of them are gonna be built on Mulesoft," as crazy as it sounds, their, their, their platform, which has been renamed. It will be
- 1:21:32 – 1:32:44
The "Agent Fabric": The next trillion-dollar battleground for the enterprise
- JLJason Lemkin
in their data platform. But we will be the layer to provide the context, the guardrail, the management, the security, the everything. And this is the biggest issue for 2027 is agent fabric. People are under-discussing this. They're all talking about evals and this crap. This is what really matters in the enterprise is agent fabric. You can't let these crazy agents run amok.
- HSHarry Stebbings
I'm sorry, I'm just going back. When you say agent fabric, you're saying-
- JLJason Lemkin
Yeah
- HSHarry Stebbings
... agent orchestration, management, training, uh-
- JLJason Lemkin
It manages everything, all the governance, all the security. It knows, here's the key part, it knows what every single agent is doing in real time. That's the, the fabric. That is more than orchestration, okay? It literally knows every data, every operation, everything that's happening through 200 agents running 24/7 in parallel with multiple sub-agents in them. Who's gonna go to, to poor p- to poor, uh, Jacob O'Driscoll at CIO of wherever, that, that if there's any security breach, he loses his job. It's his worst job. He wants a trusted agent fabric to manage these crazy agents his team is deploying, and he, he... They can't be done on, out of ChatGPT. They can't be done out of Base44. Jesus, JFC, this is a security nightmare, right? I mean, even this week, and I don't want to get into it, two leading vibe code platforms arguably had massive security issues this week. I don't want to talk about them. But th- this is only gonna compound, and as Mythos comes out and finds every security breach in nanoseconds, I need an agent fabric I could trust, not someone that came out of YC and claims they have an orchestration platform. But I don't know if Salesforce can deliver it because it's so effing complicated. But if you... But if you're in their ecosystem, if you commit to everything, all of... And it, w- when, when most folks hear about Salesforce, they think it's CRM. It's 14% of their revenue, okay? If you commit to everything, uh, e-commerce, marketing, data analytics, Slack, and you run it, your whole business on Salesforce, this is the old SAP pitch, we will give you the agent fabric so you can accomplish everything you want. It can be trusted and safe. You'll, and, and, and you, this is an agentic platform you can trust. This is the big bet coming, and this is all the warm-up phase for agents. Enterprises need an agent fabric they can trust.
- RORory O’Driscoll
Agreed. Because, you know, you're empowering these software agents to do things, to change things in your systems, to upgrade things, to change, you know, to approve orders, to make commitments. How do you audit what's going on? How do you know? How do you keep control of it? That's-
- JLJason Lemkin
Yeah
- RORory O’Driscoll
... you're exactly right. That, that's going to be the issue.
- JLJason Lemkin
I've got 300 agents doing accounts receivable. I've got 200 updating our, our documents. I've got the, all of these interacting autonom- our autonomous customer success agents, our economist data, data analytics agents. Who's gonna manage all of this? It's much... Orchestration is the nerdy term, but most folks talk about orchestration as just a, a, a limited dashboard on top of a couple easy APIs to connect with. It's, it's, it's fine for a startup or a, for a team that has human resources, but how's an ordinary company gonna manage these agents? How the hell is an ordinary company without a, a team of a- agent deployment experts gonna manage these, these agents, these rogue a... They'll go, they'll go rogue if you don't manage them.
- RORory O’Driscoll
Yeah. Th- th- this, this analogy may be totally useless. It's only 'cause I've been doing it a long time. But I remember in the late '90s when, you know, online commerce took off, and people really started getting a meaningful percentage of their revenue from online commerce, right? And you have all these executives who were retailers to the core, right? And what do retail executives do when they want to know what's going on? They go walk the floor. They want to know what's going on in the shop. And, you know, like even if you're running a 5,500 person... chain like Walmart. You know, Sam Walton used to walk around, touch the merchandise, see what's going on, and suddenly the whole thing's going on online and you just don't know. People are clicking. That's all you got, right? And, you know, you saw a whole wave of companies doing kind of analytics around how do you track your website, 'cause the, the big guy just wants to know what's going on. That was the value proposition. We did NetGenesis, we did Omniture, made a lot of money in that space. And the value proposition at its core was you've moved to this new way of doing business, senior people wanna know what's going on. And frankly, AI is way more powerful than that because at least in that you had very deterministic, I'm selling stuff at a certain price for a certain thing, and even then you wanted to know you didn't do anything dumb. In this case, you've empowered your agents to make decisions, right? Now you're the executive in 2026, you're gonna know what's going on. What's Gong? Gong is all about listening into calls to understand what people are saying. Once you have AI agents doing all this stuff, you're gonna wanna know what the AI agents are doing, right? And I think, Jason, you're exactly right. This is gonna be the huge thing. How do I think about what my little automated bots are doing in my business?
- HSHarry Stebbings
But w- my question was, are Salesforce best placed to be the agent fabric, or is someone else better placed? If that's the whole holy grail-
- JLJason Lemkin
Of course they're well-placed. Of course, just like... I- it's a bad analogy, but just like in the end, Google, Microsoft, et al, were well-placed for, for the, the last generation of AI. If they can get their rears together, the leaders are well-placed. They are well-placed. Um, Salesforce, Shopify, um, Datadog, Databricks, they, if they can execute faster than they've executed the last 20 years or eight years, however old they are, of course CIOs wanna buy from Salesforce. Of course they do. But it's, it's much bigger than buying one Agentforce agent. They want this whole agentic fabric. So, so they... And, and here's my meta point to folks. It's an opportunity where you have time. It's just not infinite. It's like if you're not building up that whole fabric, right? That's why I'm a fan of Mark. This may not get there. It is c- it is a bigger vision than it looked. It's not just headless like all the yahoos said, okay? This is a complicated vision, and maybe they won't get there in time, but at least he's driving the right vision and forcing thousands and thousands of people to deliver against it, right? I'm, I'm, I'm much more worried about folks that are, that are, it, it's more performative, right? You gotta work as hard or harder than Mark to do it. But it's just, I don't, I don't mean to be repetitive, but the saddest thing is when you have an install base and you're not delivering the agentic solutions they want. This is the tragedy of 2026 and 2027. I have the customers, but Lagora or Replit or whoever, pick any application you want. Um, what, what's the, what's the AEO one you invested in, Harry? What's it called? The AEO.
- HSHarry Stebbings
Which one?
- JLJason Lemkin
The AEO. The AEO startup.
- HSHarry Stebbings
Peak. Peak.
- JLJason Lemkin
Yeah. HubSpot launches their thing and it's a dud. It could- should've been, it should've been Peak or the other one. Like, it's just a tragedy because HubSpot has 280,000 customers. It's a tragedy you did not deliver them the best-in-class AEO agent. It's a trag- it is not just a test or a miss, and I just, I, it's, it's a... So, so, but, uh, so that's why I think Salesforce is extremely well-positioned, and we are right to be stressed, like everyone is stressed, that they will achieve it on time. We're right to be stressed.
- HSHarry Stebbings
It's, it's really interesting. Um, yeah, they, they've had inbound be bought by, by, uh, so many people. Um, and Eli Gilday tweeted a load of predictions, and one of his predictions was that a load of these AI companies should actively sell and try to sell. Do you guys agree?
- JLJason Lemkin
To whom?
- HSHarry Stebbings
[laughs] Uh, uh, so sure, like to, uh, HubSpot, to like sell just now.
- JLJason Lemkin
Literally, Harry, I was on the phone last week with the CEO of a $20 or $30 billion market cap public company, okay? And, uh, doing massive revenue. And he's like, "I get, I get these m..." Um, and we're talking about M&A a little bit. I brought it up. He didn't bring it up. I'm like, "Well, go buy some of these kids, right? Uh, you have the base, right?" He's like, "Well, everyone wants a billion on 5 million in revenue after their last round." He's like, "It's almost a waste of our... Like, I have a corp dev team, but, like, I haven't seen a single one that I'd wanna buy that will sell at a valuation that makes sense." So h- Google can buy them, but HubSpot, what's HubSpot's valuation as we record this, in the teens of billions? They just can't afford a billion dollar for every YC startup. They don't have the money.
- RORory O’Driscoll
Yeah. I would say try harder, stay close. There's gonna be plenty.
- JLJason Lemkin
Plenty of exits? How many Wizs can Google, is Google really gonna buy though, Rory?
- RORory O’Driscoll
No, I'm not talking about those kind of ex- I, I, I, I think to your po- what's that?
- HSHarry Stebbings
12 billion, HubSpot.
- RORory O’Driscoll
Yeah.
- JLJason Lemkin
So who... So they could afford 50 million, right, to take a risk, right? Not, not a billion.
- RORory O’Driscoll
But I think, I mean, it's funding fact, uh, and you know, you know I like this space, but I, I... Someone told me that, uh, is it G2 crowd said there's, like, 250 AEO/GEO competitors out there. Maybe you can't afford numbers one to five, but somewhere between 10 and 250 there's gonna be one that has a good product. So I think Elad's entirely right.
- JLJason Lemkin
But isn't Elad saying sell at a billion, I think is implicitly what he's saying.
- RORory O’Driscoll
Oh, yeah, I mean, yeah, yes, and if you can, great.
- JLJason Lemkin
Sell now for an easy billion, right? [laughs] Uh-
- 1:32:44 – 1:39:30
Cerebras IPO 2.0
- RORory O’Driscoll
bad.
- HSHarry Stebbings
Okay, let's do good over bad. Cerebras files for IPO, it's the second time. Uh, uh, some of the concerns that were brought up last time in terms of a dependence on G42's, um, uh, revenue and the revenue concentration they had, um, have been resolved. How do we feel about this? Is this gonna go out well? They're now at, where are they? 510 million revenue in 2025, up 76% from 290 in '24. They've done a great job.
- RORory O’Driscoll
I, I, absolutely. That's why I wanted to cover it. I think it's a great classic venture deal. Credit to Benchmark, Eric, credit to Steve at Foundation, credit obviously more than anything to the team. You know, this is a 10-year journey, and I, I think in a way that wasn't true a year ago, they got the, the elements of success in place. I mean, you know, you look at the P&L, it's a little noisier than at first glance, 'cause you at one point said, "Harry, it's profitable." It's not. It had some weird reversal of liabilities. At the operational level it's still losing money. But the big aha is they've pr- I mean, the fact that they've done exactly what it takes. They've proven the product... And stepping back, this is a semiconductor company, one of the very, potentially one of the very few startup semiconductor companies in the last decade and a half. The product they make is a wa- is a big-ass wafer scale chip that, really good for inference 'cause it's really fast, right? And obviously it's very optimized for AI, and if you read the founder letter, it's been optimized for AI since they founded it in 2016. Right? What they've done really well is they... Yeah, 'cause this is a very hard, step back, this is a very hard market to enter, no mat- no mat- no matter how good your chip is, 'cause there's only a small number of big buyers, right? Obviously the hyperscalers, right? And you know, some of them have their own chip, some of them might wanna trust you, right? These guys have done a couple of things to kind of parlay their way in. They've done some big deals in the Middle East with folks who've been willing to use the product. They've started to offer a cloud offering, and one of my companies has used it, whereby they are effectively saying, "Our chip is so good and so fast that we'll offer inference services on a cloud basis, and when you use it, you'll be like, oh my God, this is really fast." And as I said, one of my companies has had that experience. It's really fast, low latency. It's a great product. And those things allowed it to prove that the chip worked. And in the last three months they've signed a deal with OpenAI and a deal with, um, Anthropic. Sorry, no, a deal with OpenAI and a deal with AWS. Sorry, I should be precise, right? And you know, the O- OpenAI deal is for the usual $20 billion of commitments. Who the hell knows what that means? But the point is they've gone from niche to mainstream, right? And they've clawed their way into the mix. So I just give them huge credit, 'cause, you know, that's a long journey. It's a hard journey, and you know, a year ago it was easy to sneer and say, "Yeah, you got a bunch of, you know, investor contracts in the Middle East. It's all bullshit." Now you've got the inference bus- you got the service business, you've got the incipient contracts with two of the largest players in, um, AI. It's a credible play. So I think it gets done, and it gets done well, and it deserves to get done well. I mean, and you know, now I'm on my soapbox, but this is a c- this is just great. It is just great that venture does this kind of thing. A 10-year journey to finance a new chip for a new use case that's complex technically, complex business, and they pull it off. I hope they make a ton of money.
- HSHarry Stebbings
I agree. I really like Andrew Feldman too, the CEO. He's a really good dude, uh, so like him a lot. Where does this go out at? Groq sold for 20 billion. Like, does the benchmarking of Groq enable this to be a $25 billion IPO?
- RORory O’Driscoll
When things are valued on a PE or an earnings basis, you can have an opinion, a meaningful opinion on where they should trade. In this case, it's gonna be so much narrative-based, it could go well above that. I mean, again, we talked about this a while ago. It's like, if the leading player is worth $5 trillion, right? And then the next two leading players after that are kind of in- well, you got AMD and then you got in-house Silicon from, um, Google and, um, ba, ba, ba, ba, um, Amazon. This is the only other standalone play you can make, right? You know, w- I mean, you know, do the math here. 1% of Nvidia is 50 billion, right? If you just think of it as a call option on some percentage of a $5 billion market, you can see a very big outcome here, right? Now, you can squint the other way and go, "Oh my God, they're never gonna..." You know, it's a high beta ra- again, it's back to what we said. In these kind of huge markets, y- you're way out there on the risk continuum. But when risk appe- when w- maybe that's a summary. When risk appetite is on, and risk appetite is on today-High-risk, high-return stories go at a premium, and this is a high-risk, high-return story with a big market. So in today's market, in today's environment, that could price extremely well.
- JLJason Lemkin
It'll create a, an interesting case story with Groq, who has the better... I mean, I, I know this is such an annoying investor thing, but who has the better outcome, risk, and time-adjusted, right? Both took huge risks to start their companies. Both started ahead of the curve, right? Um, Cerebras, I guess, even more, right? Um, would you rather take $20 billion in whatever, I don't know, combination of cash and stock with weird taxes you got from Nvidia, or ride the, uh, ride the, uh, the up-and-down and emotional rollercoaster [laughs] of running a public company for a decade and trying to get liquidity, and seat of Morgan Stanley will, uh, give you a, a loan against your stock? Uh, we're all on different journeys. I don't know.
- HSHarry Stebbings
I can tell you I'd rather sell to PE like Saleloft did for $2 billion and peace out. [laughs]
- JLJason Lemkin
Well, that's, that's a different journey altogether, right?
- HSHarry Stebbings
[laughs] That, that sounds better.
- RORory O’Driscoll
You guys, you're doing the heights. I mean, yeah, look, equally say, you know, I think they're pretty glad they didn't sell Google to Yahoo for, you know, a billion dollars or whatever it was. Look, when it works, you're glad you-
- JLJason Lemkin
But what about Figma and Adobe that didn't happen? That one I'd be, I'd be pulling if... Um, Dylan's better than, uh, me, but I'd be like, "Farts." [laughs]
- HSHarry Stebbings
[laughs]
- JLJason Lemkin
Farts. Farts, farts, farts, farts. [laughs]
- RORory O’Driscoll
Maybe, I mean-
- JLJason Lemkin
I don't mean to be political, but man, that was a rough stretch there.
- RORory O’Driscoll
Yeah, but maybe they like what they're doing. I mean, maybe... You know, lots of folks do, actually. Maybe they just couldn't-
- JLJason Lemkin
They do, do do, but, but it's just, it's tough when the, when the team's RSUs are not worth what they were and the options are struggling and, and people are leaving to go to, to Anthropic. It's just, it's not a fun env- Like, no matter how great, it's just not fun to run those companies, right? It's not fun.
- RORory O’Driscoll
But my point, you're exactly right. When the momentum turns against you, you wish you'd sold. And when the momen- I mean, yeah, um, Jensen's glad he didn't sell Nvidia any time along the way. When the, when it works, you're glad you didn't sell.
- JLJason Lemkin
Yeah.
- RORory O’Driscoll
And when it doesn't work, you wish you had. It's as simple as that.
- JLJason Lemkin
It's a derivative of Elad Gil's point, which one are you, right?
- RORory O’Driscoll
Yeah.
- JLJason Lemkin
Like, be honest once a year at the board meeting. Be honest, who are we? Are we, are we Nvidia, or are we... [laughs] Which one are we? And then, uh, you know, it's, it's easy on Twitter to think that you're Jensen.
- RORory O’Driscoll
Yeah.
- JLJason Lemkin
Right? We used to think we were Zuck, right? I'm the CEO be, right? Now we all pull on our leather jackets and think we're Jensen,
- 1:39:30 – 1:45:23
Jensen Huang vs The Podcasters: Reacting to Nvidia interview.
- JLJason Lemkin
right?
- RORory O’Driscoll
If you're gonna be Jensen, I hate to tell you, but you've just got to be willing to eat a podcaster for breakfast once a week, 'cause oh my God-
- HSHarry Stebbings
Yeah. O- okay. So I, I was gonna bring this up as like a kind of end it, but, uh, what did you guys think? I'm sure we both, we all watched the-
- RORory O’Driscoll
Yeah, I watched it. Yeah
- HSHarry Stebbings
... interview. What, what did you think?
- RORory O’Driscoll
Where I thought he was excellent is his comments on, you know, we don't kind of have this preferential status. We're here to sell chips. If you wish to us a PO, we'll sell you chips. You know, his relationship with TSMC, all that stuff I think was super grounded, and you just go, wow, that's a world-class executive who shipped gazillions of chips, right? What you're really talking about is the argument about China, correct? With Dorkus, and he and Dorkus got into it, and it was a little bit-
- HSHarry Stebbings
Yes. And when he was saying bluntly, when you look at two of the largest frontier model providers, neither of them trained on your chips. And he bluntly provided a pretty cagey response at best, and then admitted we should have invested in them.
- RORory O’Driscoll
Well, I think there's a lot of things lumped into that, right? I mean, I think that... I don't think, I think, I think it's clear that OpenAI does train in... I think OpenAI definitely trains in part on Nvidia chips and, and whatchamacallit, um, on Tropic, I'm not as clear on what they train on. It's, I've had mixed comments on that, but whatever. Um, and I don't think he said... I think his comment on I couldn't do it was, it, uh, his comment on I wish I could have, on, on not investing in Tropic was he couldn't do it at the time because he didn't have, which makes sense. In '22, '23, you weren't in the business of writing $30 billion venture checks. I thought he was, I thought he was very rational there. He said, "Made a mistake. Didn't have the capital at the time. Wish I had," right? Just bring him closer to. So I didn't think that was bad. I think the problem with the China discussion is there was two priors that neither party agree. And just neither party agreed. And when you have a discussion and they're talking past each other, right, and you don't agree on the ground truth, it's just a waste of time. And two things are, one is, how big an enemy do you think China is? Is it just a competitive trading, you know, partner, competitor in the way that Microsoft and Apple compete? Uh, all the way from there to, is, is it the new Russia and we got to not give them a single thing because we're scared they're going to nuke us? And then the other thing that I think is the... Dorkus clearly thinks that, m- you know, frontier models are as dangerous as uranium, and Jensen clearly thinks that's bullshit. And if you don't agree on those two things, if the question is should we make it easy for China to build frontier models by selling them Nvidia chips? Which was the question. If you don't agree on what you think about China and you don't agree on what you think about frontier models, you simply don't have a useful discussion because neither of the nouns in the sentence have been defined. So once you internalize that, you're like, oh, that's two people talking past each other, [laughs] and one of which just doesn't give. And it turns out, yeah. And that, that's why that part wasn't that useful, but it was kind of funny. It was like, it was a cl- It, it reminded you what semiconductor executives were like when I started investing. You know, a lot of business was semiconductors. Just hard-headed guys who just say, "No, no," and enjoy it, right? It was a just... It, it w- So I enjoyed it at that level. It was a little bit of a, a culture clash of generations and it was fun. But I thought he did... Look, I, you can't argue with the guy.
- HSHarry Stebbings
For the first time ever, it wasn't an easy interview.
- RORory O’Driscoll
No, it wasn't easy. And give Dorkus credit, he tried to punch, right? And it's really hard to punch someone who, A, talks his book, and B, has 30 years of knowledge.
- HSHarry Stebbings
When you're a 25-year-old podcaster. [laughs]
- RORory O’Driscoll
And you know, I think one of the things I like about where you come from dictates how you approach things. We're doing this in a spirit of inquiry, because to some extent we're all trying to figure out what we think, and talking things through often helps. So I often find I revise my priors based on the discussion. But I'm not here as the CEO of a $5 trillion company. He's here to talk his book.Like, and let's be clear, he wants to sell... Th- the 30% of his entire market is in China. He wants to sell those guys Nvidia chips, and there's simply no argument on God's green earth that's gonna convince him that he shouldn't get that $40 billion of revenue from shipping chips to China. So, thank you. I'm h- look, he spent time with the President lobbying to be allowed to sell Nvidia chips. If he's had to do whatever that takes, and I shudder to think in terms of sucking up, to be allowed to sell chips to China, he's not gonna roll over and play dead 'cause some 25-year-old said, "Maybe you shouldn't." And he'd do the same to you, Harry. Be the straight handoff, right in the face. It's like, "Thank you, but no, big guy." And did I think he won the argument? No. But he knows how to fold his corner. So it was fun. I listened to it. I, I, I worked out and listened to it. I was like, "Whoa." It literally was a meeting of non-minds. It was just fun.
- HSHarry Stebbings
Boys, is there any other topics that we haven't discussed that we should discuss?
- RORory O’Driscoll
We ran out of time to cover Snap, but I just don't care.
- HSHarry Stebbings
[laughs]
- RORory O’Driscoll
Um, I mean-
- HSHarry Stebbings
And for anyone listening, Snap cut 1,000 jobs, 16% of the workforce, and the stock popped 11%. Wow.
- RORory O’Driscoll
I, yeah, it's just been, they just need to figure out a converging business model and, you know, this, this... Yeah, and they haven't. Amazing company at the start, and now it's just dr- drifting around and needs to figure it out.
- HSHarry Stebbings
Master of stock-based compensation. [laughs]
- RORory O’Driscoll
Yeah. Yeah, no, I mean, i- i- it's going to... Look, it's going to be an advert for the, the dangers, to some extent, of dual class votes. I used to agonize about this, and now I don't. Now my perspective would be, look, you had a chance to buy two social media companies with dual class votes. If you bought Snap and if you bought Facebook, you're 50% down on Snap and you're 10X up on Facebook from the IPO. Shut up, take the check, move on. You know? Turns out untrammeled power has good outcomes and bad outcomes. There you go. Like I said, I don't care.
- HSHarry Stebbings
Get married, get married to a supermodel, though, so, like, it's not all downside, you know?
- RORory O’Driscoll
[sighs]
- HSHarry Stebbings
That, that is a positive note to end on, Rory.
- RORory O’Driscoll
Uh, that, I hope everyone has happy marriages. There.
- HSHarry Stebbings
[laughs]
- 1:45:23 – 1:49:54
London vs The Valley
- JLJason Lemkin
Rory, okay, I have one last one if we're out of time, but I want to get Harry's thoughts.
- RORory O’Driscoll
Go on.
- JLJason Lemkin
So-
- RORory O’Driscoll
Harry, Jason, you're good
- JLJason Lemkin
... the other thing Elon had, r- r- retweeted something that went around many times. 91% of all AI unicorns are now in the Bay Area. Um, thoughts from London on this? Thoughts from Lon- from London?
- RORory O’Driscoll
Oh, nice one.
- JLJason Lemkin
Yeah. How many, and h- I want to know in particular how many are in Marylebone. But, but 91% of the Bay Area, uh, Project Europe. Um, what, how are you thinking about that from, from London, this increasing concentration-
- RORory O’Driscoll
I like that
- JLJason Lemkin
... of AI unicorns in the Bay Area? This is from this week.
- HSHarry Stebbings
I think some of the best AI minds, or the majority of the best AI minds want to be in Silicon Valley, quite rightly. You're seeing the recentralizing of power back to Silicon Valley, um, more so than I think any of us ever expected post-COVID.
- RORory O’Driscoll
Agreed.
- HSHarry Stebbings
Um, that said, I think you can still build unbelievably great AI companies, as we have done in London with Demis and DeepMind, and with, you know, Matty at Eleven Labs, and I think it's easier to be in Europe. Because with your 91%, you also have 91% of the capital, and every other person on the street being a venture capitalist. And so I think you see this gluttony of cash combined with a gluttony of companies, which makes detection harder and makes winning harder. And so I agree with that. Sure, the majority of great AI companies are there, but I also think it's harder. And I think for me, being one of the top three brands in Europe, I would rather be here with much less supply side than there w- fighting against Benchmark, and Founders Fund, and Andreessen, and everyone in between.
- RORory O’Driscoll
Got it. It's a combination... Well, I've two comments on that. One, uh, yeah, it's the old Caesar quote, "I'd rather be first in a village than second in Rome." That's really what you're saying, though of course I would add he was a killer psychopath and really, you know, not a good man. But-
- HSHarry Stebbings
[laughs]
- RORory O’Driscoll
... the more important point is, um, w- he, yeah, the evil that men do lives... We can, we can let it, we can go back to Shakespeare, but we won't. Um, I think the real point, what you're saying, and it's fair, it- it's interesting, it's 91% in the Bay Area. What this says is companies are in the Bay Area to the point where the marginal advantage of being in the Bay Area is less than the marginal advantage of being in Europe and having access to a talent pool. What it says is the equilibrium point for indifference is now roughly at 90%, which is another way of saying, yeah, to a rounding error, it's, yeah, Bay Area wins, but there's still some wins in Europe. Exactly.
- HSHarry Stebbings
100%. And I think actually trying to be a startup, stay recruiting and maintaining that team in the Bay is next to impossible unless you have an egregious amount of money.
- JLJason Lemkin
No, no, no, no doubt, right? And I wasn't ex- I was just curious as a last point what you thought of this from the week, right? I don't have an opinion-
- HSHarry Stebbings
Yeah
- JLJason Lemkin
... on this. Uh, certainly you can't argue with the talent question, right? But it's, it's just a, there's just a lot of complexity here as everything concentrates, right? As we're not... Everything's concentrating in everything. [laughs]
- HSHarry Stebbings
And also, Jason, just, like, the competitive funding landscape, and I, I do not mean this arrogantly, but there is just, you know, one-tenth of the competitive elements-
- RORory O’Driscoll
Agreed
- HSHarry Stebbings
... in Europe that there is. I, I have so much respect for Silicon Valley early stage investors. God, it's fucking competitive.
- RORory O’Driscoll
It is. And again, back to, and the equilibrium will be reestablished when the price, when the costs of being here kinda a- are equivalent to the advantages. And you, what happened is for a coup- I mean, look, I think really what happened is for a couple of years, and it gets back to, uh, Anthropic and everything like that, is that in that period when they just first cracked the code at OpenAI of what could be done, the closer you were to knowing what was happening, the bigger the advantage you had, right? And it was intrinsically a local thing. So li- I mean, you know, you'll look back and go, yeah, 10 years after, you know, '22, knowledge will be widely dispersed, but there was a period of two or three years where the knowledge was available tribally in hacker houses in San Francisco, and wasn't available widely across the rest of the world, and that, and that's why you had this Cambrian explosion here. I mean, it's, it's a, it's a point in time, just like the start of the internet. But yeah, great companies in London. I mean...
- HSHarry Stebbings
And just to be clear, I'm not a... W- was it a, a psychopathic serial killer? Was that-
- RORory O’Driscoll
Yeah, I, I know you're not, Harry. I know you're not.
- HSHarry Stebbings
A slightly me- slightly mediocre moderator, but not a, not a killer, Rory. [laughs]
- RORory O’Driscoll
Yeah, yeah, yeah. I mean, remember, Caesar killed a million Gauls. I mean, let's just keep score. Gratuitously, just-
- HSHarry Stebbings
Not quite as good as Pol Pot, but, you know, up there. [laughs]
- RORory O’Driscoll
Yeah, up, up, up there in the baddie category, yeah. Okay. Anyway.
- HSHarry Stebbings
Awesome, boys. Well done.
Episode duration: 1:50:04
Install uListen for AI-powered chat & search across the full episode — Get Full Transcript
Transcript of episode s61XVZAt5ns
