Instinct Raising $1B at $10B & Meta Launches Muse | Miro Sells for $1.36B After a $17.5B Valuation

1. 0:00 – 1:24

   Intro

   1. RORory O’Driscoll0:00

      If you're building something that you can't control, then maybe you should stop building it. If the feds really thought that there was someone in downtown San Francisco building a technology that had a 10% chance of blowing up the world in the next 10 years, they would move in with a SWAT team, kill everyone in the place, and close it down.

   2. HSHarry Stebbings0:18

      So this week, number one, pacing the frontier. We discuss what it means for infrastructure, what it means for energy, and what it means for the biggest frontier model providers. Next up, we've got Town, we've got Instinct, and we've got Zuck and Muse. What happens here? Next up, Bending Spoons, baby. They are on an acquisition spree, having bought Miro for $1.35 billion. And then finally, Mistral raises €3 billion, Europe's largest ever tech funding round. This, and so much more in what is always quite a colorful discussion with Rory and Jason.

   3. RORory O’Driscoll0:50

      Market moves 0.1% on news of 10% probability of extinction. Capitalism took on board the risk and said, "It'll be fine."

   4. JLJason Lemkin0:56

      $2 billion is just a start-around in venture today. The real problem is that 10% or 15% of founders are sociopaths. They genuinely are. In fact-

   5. RORory O’Driscoll1:03

      If you're saying Mistral is now competing with OpenAI and Anthropic in the frontier model race, you and I know that would be bullshit. I think what you're really saying is-

   6. JLJason Lemkin1:12

      Ready to go?

   7. HSHarry Stebbings1:12

      [rock music]

2. 1:24 – 6:04

   Should Frontier AI Labs Be Forced to Slow Down?

   1. HSHarry Stebbings1:24

      Boys, we are back. Now, I was thinking about where we should start, and in all honesty, I just thought it'd be egregious to not start with the most important thing I thought, which was Dario coming out and saying that we need to pace the frontier, to which Sam Altman then agreed with him, and then Elon too agreed that it is important now to put in place some form of ex- external regulatory body to s- slow down, regulate the capabilities moving forward of model providers. How do we think about this?

   2. RORory O’Driscoll1:58

      I mean, it's been fairly universally panned. I tend to be on the side of the people who are saying that the hostile reception is deserved. I mean, what is the problem you're trying to solve? Dario-- If you read the note, Dario's definition of the problem was q- fairly well defined. It was, you know, cyber attacks, it was economics, and then it was we lose control of the AI. So even though that sounds like a lot, it's fairly controlled. The guy who quit and started this crazy thing as a coxon, whatever his name is, and then the employee within Anthropic kind of chiming in saying, "I think there's a 10% chance of, you know, human extinction in 10 years." That's a very different thing, right? So the problem-- Let's deal with that first of all, 'cause I'm just gonna call such bullshit. If you... And to be fair, and this is why I'm saying it's complex, is Da- every time Dario makes a comment, you know, so a lot of the tweets back are, "Hey, if you're going to blow up the world, you should stop." And they're right. The truth is he didn't actually say they were, to be fair. He didn't talk about P doom. But I'm going to do the same thing as everyone else, and I'm just going to throw some rocks first, right? If you really think-- If the feds really thought that there was someone in downtown San Francisco building a technology that was going to blow up the fucking world, had a 10% chance of blowing up the world in the next 10 years, they would move in with a SWAT team, kill everyone in the place, and close it down. I mean, replace the word AI with, "We're building a nuclear reactor. It's totally safe right now, but there's a 10% chance it goes wrong in the next five years and blows up the world." Issue that statement, how many seconds after that before the entire weight of the US military is shutting you down? And what it says is, what it says is, is this, these kind of 10% P doom people, the truth is either the US government is asleep, which I doubt, or B, it's looking at this going, "This is a bunch of excited teenagers. We'll step in later if it gets crazy." So m- my first point is the-- to be fair to Dario, not Dario, but the, "Oh my God, the world's gonna end. We're going to destroy the world, but we're going to keep doing it," people, they've cl-- I mean, I cling to the hope that the US government, if it, if it was a real issue, we'd do something, right? So I, I think all that's overwrought bullshit, right? Which is different than saying what Dario said is overwrought bullshit. It's just not realistic. Dario's stuff, it's ha-- On the other hand, it's hard not to disagree that the cyber risk is real, right? So when Dario says that... Of the three risks he raised, the cyber risk, real. The economic risk, i.e., we'll all be unemployed, I think is a little bit bullshit. And then the third one, we lose control of the agent, is hard to assess. So okay, that's the problem he's trying to solve, and then the solutions range from the unlikely to the impossible. You know, the unlikely is, yeah, we're going to install third-party monitoring agents voluntarily, but then the ask is that it be made a requirement. That's the first thing. Then the second thing is all the democratic governments have to agree, and that'll be easy because we get on so well with Canada and Europe right now. And then the third thing is we have to agree with the Chinese, and that's going to go super great, though it might go greater than the Canadians because we like the Chinese more than the Canadians. We should put in the Russians. We get on great with them, right? So the whole thing-- So stepping back from the bullshit side two and side three, right? Just side one, right? Si- side-- proposal one, you know, which is we're going to introduce these re-- these kind of third-party monitors. And if it's voluntary, knock yourself out. You do whatever you want, Dario, right? If the government decides that they should do something, which is different than Dario thinking they should do something, then it's not going to be your friend's regulator. You're not going to get to choose that. It's going to be a law and it's going to be regulators, just like bank regulators. And if-- And I'm not sure that's a great idea. I'm not sure it'll work really well for innovation. But, but if it does happen, I mean, a lot of the comments were either, "This is silly. We don't need it," or, if we do need it, "Well, who the fuck are you to tell us what we need? We're a government." I'm kind of sympathetic to both our responses. Sorry, that was a vent, but I just think it's so overwrought. Sorry. Sorry, Jason, I just launched though.

   3. JLJason Lemkin6:03

      No, no,

3. 6:04 – 10:24

   Is Anthropic Preparing Its Biggest IPO Risk Factor?

   1. JLJason Lemkin6:04

      no. My very tactical view, then I'll give you this, my very tactical view was this was just a risk factor in an S-1 done live. My tactical view is Anthropic's going public, um, and he, he is just i- you know, in part because of the employee that worked there four weeks or eight weeks that said there's a 10% risk of destroying humanity, which many agreed with. But it-- he's just getting ahead of a risk factor so that when the i- $2 trillion IPO happens, it's a non-issue. I, I, I honestly think he's enunciating a, a risk factor, and we're, we're ahead of it. We're gonna debate it as a society, and so when we go on the roadshow to New York and, and everywhere else, no one cares. That that was my... It's not even cynical. I think it's your job as CEO. That, that was less, less discussed.

   2. RORory O’Driscoll6:46

      Words have meaning. If you re... A- and again, I'm gonna be fair to Dario. He didn't say, "10% chance of blowing up the world," right?

   3. JLJason Lemkin6:53

      He responded to it.

   4. RORory O’Driscoll6:54

      He was-- Yes, you're right. He responded to it. I feel like con- if, if government was doing its job, we'd convene a congressional committee, we'd subpoena Dario and say, "Your head of safety," not the guy who quit, Jason, this is an important point, not the guy who quit, "but your head of safety said, 'Me and many of my people, there's a 10%-- think there's a 10% chance of blowing up the world.'" Get a fucking congressional committee, subpoena the guy and say, "Mr. Dario, as the head of this organization, do you believe that your safety commissioner is correct, and there's a 10% chance that you're gonna blow up the world in the next five years? Yes or no?"

   5. JLJason Lemkin7:27

      Right, but it's going to happen. This just started. You're, you're acting like the feds aren't gonna raid Anthropic, and I don't think it's literally gonna happen. The feds are going to raid Anthropic. Conception speaking, this just happened last... How many texts did you guys get from folks outside of tech asking if AI's gonna kill ourselves in the last week? I got texts from people, um, relatives I haven't heard from in years. "Are we g- Is AI gonna kill us, Jason?" There will be congressional committee and hearing after ad nauseam for the next twenty-four months. We have just awoken the, the sleeping giant here that AI isn't about a bunch of folks in SF becoming, uh, you know, centimillionaires. The public is gonna believe it's gonna kill us, and I think that's why Trump... I don't wanna go too much-- I think that's why Trump cut it off so quickly. I actually think he said it's not issue, we're going full bore. I don't think that was out of nowhere. I think this is because there's gonna be two years of con- e- every... It's, it's... This is all they're gonna talk about.

   6. RORory O’Driscoll8:19

      To, to be clear, I think you are right, is that... So maybe I should've said in the future tense, if this statement hap... You're right, is that we've kicked off a boulder cascade here now whereby, you're right, if I'm a, if I'm an ambitious politician, I would do this, right? [laughs] And maybe you are right. There's two risk factors in the S-1, what you're saying, Jason. Really good point. The first risk factor is, by the way, there's a 10% chance we're gonna blow up the world. We can discuss that one. That's a fun one. But the other risk factor is because I employ people who believe we have a 10% chance of blowing up the world, and I do this because they're actually very motivated to build great AI, and for whatever reason, that motivates them, we can talk about that with our therapists, right? Because I'm running this company where these people say these crazy shit, as Jason's just pointed out, I'm probably gonna spend the next two years being investigated, and there's a series of bad things could happen for that, up until including the government shutting me down. You're right, Jason. That's the risk factor. I agree with you, yes. It's gonna be the-

   7. JLJason Lemkin9:11

      Yeah

   8. RORory O’Driscoll9:11

      ... weirdest risk factor ever. We say dumb shit, so we may get shut down. [laughs]

   9. JLJason Lemkin9:17

      Look, I, um... There's so much going on here, it's, it's, it's hard to track, right? Um, I would just add two things that I thought were the best things said. Um, one may be a little political, one I think non-political. I think the best thing actually was David Sacks this week, who said, "If it's that bad, Dario, it's your effing job." Whether it's 10% or if there's any material risk your company is going to exterminate even a subset of humanity, right? St- That is your job. Your job is to fix it. Shut down the company if you can't, right? And if you're unable as CEO, bring in a new CEO. This is your j- if there's any company that had these sort of odds, it is, it is your job, right? Um, this is product liability 100001. You can't kill t- so-- You only, only so many people you're allowed to kill with your product.

   10. RORory O’Driscoll10:00

       Agreed. And Jason, it has been, uh, first of all, you're exactly... I gotta hand it to Dave. I think it was spot on 100%, and I think it was really odd to see Lina Khan, who is probably the antitrust regulator most of the Silicon Valley hates the most, come out on exactly the same point, right? You know you co- when you get David Sacks and Lina Khan both on the same side and both making excellent points, it's a really fun issue. I, I, I agree with

4. 10:24 – 17:46

   What Happens if AI Becomes Impossible to Control?

   1. RORory O’Driscoll10:24

      you. I think you nailed it.

   2. HSHarry Stebbings10:24

      I, I'm sorry. I'm naive. If you build recursive self-improvement in the way that people talk about it, i- is what it becomes not relatively unknown? Like, I could have good intentions for it-

   3. RORory O’Driscoll10:38

      Yes

   4. HSHarry Stebbings10:38

      ... but it could become something else, or used by malicious actors, could be weaponized to be something else.

   5. RORory O’Driscoll10:45

      And I think... Okay, and I'm being really clear here. I agree. That is actually the only one of the three risks itemized in the Dario thing that I think is interesting, right? Because the other two, economics, I, I think it was a foolish thing to say for a whole bunch of reasons. I, I think you can say, "I'm not gonna invent technology 'cause it puts people unemployed." We'd still be back on, on, all on our farms, 73% of work in the farms. That was a dumb point, just trying to be nice and sucky uppy. The whole cyber thing is real, but that cat's out of the barn. The commies have the, the cyber, so we're done. The only thing that was a fair point... And then on the other hand, the P doom thing, he didn't talk about. So the only thing in his letter that was actually simultaneously, "Yeah, that's a fair point," and I don't have the answer, is exact- that we, we could, quote, "lose control of the things," recursive self-improvement, that kind of stuff. You're right. That, that is a fa... Of the three issues he raised, as distinct from the three responses he gave, that was the one that you go, "Hmm, okay. I can't..." Jason's point, I think Da- Jason and David's point's spot on at that point. What you're saying is, forget the other two, which are about other people will do shit with our technology. We can come back. What you're saying is you're building something you can't control. If you're building something that you can't control, then maybe you should stop building it, right? 'Cause you're the CEO, and as Jason... Again, I'm gonna agree with Jason and David. Do you... I mean, the third parties can keep an eye on you, but if there's people cleverer than you who can figure out the problem that you can't figure, you'd have hired them years ago. We should probably assume you're the cleverest people doing this. So either you think this is a manageable problem, in which case keep building, or you think it's not a manageable problem, in which case you probably should stop. But stop wringing your hands and saying, "If only the rest of the world could stop me killing humanity." You're the CEO. I, I, I actually think the, the cacophony of anti was really good there.

   6. HSHarry Stebbings12:35

      But you've also taken it to a level where you've weaponized a Chinese economy to have an open source ecosystem that's incredibly strong. And now to go mea culpa, let's put the brakes on, you've weaponized them enough to be a serious cyber threat to all of our institutions, and now you wanna put the brakes on, and if you expect us to p-

   7. RORory O’Driscoll12:54

      First of all, I'm gonna push back on the weaponized. You're basically saying, "Oh, they wouldn't have had these models without us doing..." I, I'm not sure that's the case. I mean, you can get into how much of Open's, OpenWeight has been distilled, and I, I can't assess that. So there's some of it. But you know, they got smart people, too. I think there's too much attribution of godlike status to individuals. The truth is, independent of probably what Anthropic did, there's probably gonna be a bunch of LLM alternatives in China. This technology, the cat's out of the bag. Um, it's, it exists, and you're right. So your, your, your m- your main point is correct. Um, it, it's out of the bag, so you can't... I mean-

   8. HSHarry Stebbings13:33

      But it's out of the bag because you let it out of the fucking bag. Like, that's-- Sorry, to be blunt.

   9. RORory O’Driscoll13:38

      Well, I don't know if he just did. You are, you, you, you are the best at it. You are, you are, yes. It's, it's like, it's like-

   10. JLJason Lemkin13:43

       It's done

   11. RORory O’Driscoll13:44

       ... I mean, again, I hate the atom bomb metaphors because they're like Nazi metaphors. They're just so crude and simplistic, and it actually in this case feeds the ego of all involved. But it's a really good metaphor here, Harry, unfortunately, because you can say if these folks who are all the Oppenheimers in the US invented the bomb, there's no doubt that the Russians had the bomb f- you know, by n- by like four or five years later, three or four years later, and in part because they stole our shit, right? They had spies in Los Alamos from the UK, let me remind you, Hans Fuchs. Um, and then, um, they s- stole our secrets and they built a bomb too, but you know, what are you gonna do? Right? They probably would've got there anyway.

   12. JLJason Lemkin14:19

       But Elon, Elon's been clear on that for three years. He said he, he, he wished he, that AI hadn't happened. He said, "But since it did, I'm going to do it anyway because it's too late." He, he's, he didn't just say this last week, he's been saying this for three years, that it's gotten too strong, right? Before X AI even got anywhere, he was consistent. "Uh, we shouldn't-- I wish, I don't want to be doing this, but it's already been done. It's too late. I, I, I don't think we should have this much progress," right?

   13. RORory O’Driscoll14:42

       And in fairness to the CEO of Anthropic, some of... As I, as I said, some of the most kinda hyperbolic stuff he's not saying, but you have the, that pacing letter that a bunch of scientists signed. The, but it-- There's a lot of hyperbole that's not coming from him, and he's a little more nuanced on what he can, what his propo- what he is worried about, where the only one that's really meaningful is this kind of losing control of it, right?

   14. HSHarry Stebbings15:08

       But I think this is where his prior messaging's come back to bite him on the ass.

   15. RORory O’Driscoll15:11

       Yes, of course.

   16. HSHarry Stebbings15:11

       'Cause to Jason's point previously in episodes, where he's so dogmatic about what it's gonna do to jobs and employment, now when things do come out, it's tied to him, sometimes unfairly-

   17. RORory O’Driscoll15:22

       Totally

   18. HSHarry Stebbings15:22

       ... just because he's had that stance because of his labeling before.

   19. RORory O’Driscoll15:26

       Yes, and yes, and to, to Jason's point, which I think is spot on, my God, is this unpopular in the rest of the world. I mean, 'cause yeah, it turns out if y- I mean, you know, [chuckles] we're building a technology, it's gonna definitely cause 20% to 30% wide column unemployment, and my VP of safety, whom I haven't fired, has said on Twitter there's a 10% chance it blows up the world, right? Hmm, I wonder why we're not popular. Well, let me give you a few quick clues.

   20. JLJason Lemkin15:53

       Can I just say what I thought the best thing I read on all of it was on Twitter or anywhere? Uh, like, I know it's simplis- it may be simple. It was Jay Kreps, who was the founder of Confluent, um, acquired by IBM for, I don't know, $12 billion, just stepped down. This is the best thing I thought was written on all of it. Said, "A lot of people have fake, fake and stupid takes." Um, it's a lot of marketing. Said, "Here's the, here's the captain obvious point. Most positive use cases for AI have a corresponding dark version. If you're superhuman at coding, you're superhuman at hacking. If you're superhuman at structural engineering, you're likely superhuman at finding structural flaws that knock buildings down," right? If you're even superhuman at designing drugs, you're superhuman at designing novel undetectable poisons. If you cure viruses, you can create them. Some of these are not that bad. They're manageable. Others are scary. It is a fact. Like every p- every, every positive, uh... If you don't get guardrails right, and there are no guardrails in OpenWeight's models for the, for all intents and purposes, dark versions can be created. Your AI will be just as good, all things being equal, at the dark version as the light version. It's a fact, right? We need to solve these issues, but it is a fact, and it is not even... There's so many opinions and anthropomorphizing and 10 percenters, but the dark versions will escape into hugging face.

   21. RORory O’Driscoll17:07

       I do agree with what you said, Jason. Absolutely right. When people invented books, when Gutenberg invented printed books, the Catholic Church were pissed 'cause they really liked to have a control on all knowledge, and they just didn't like in- in- information dissemination. Ditto the internet. There's a reason every totalitarian regime hates it, right? Every... I think it's, it's great framing. Every, every technology has a positive side and a negative side. We're gonna do what we do every time. We're gonna roll out the positive and find a way to manage the negatives. But in the interim, we're not gonna sell chips to China, which of course produce a Jensen response like you've never [chuckles] you know, the usual Jensen response. So i- i- on the implementation

5. 17:46 – 21:11

   How “Pacing the Frontier” Could Hit AI Infrastructure

   1. RORory O’Driscoll17:46

      side, not realistic.

   2. HSHarry Stebbings17:47

      Do we see ripple effects in, across the infrastructure layer, in publics, in privates?

   3. RORory O’Driscoll17:54

      There was a one-day minor hit on kinda the semi stocks on that first day. Separately, pleasingly, CrowdStrike and all the, um, cyber stocks jumped 10%. Um, so it's actually interesting. I looked at Monday. It, and we're recording this on Tuesday, it'll appear on Thursday, which is a whole lifetime away in the world we live now. But the instant response was slight markdown on semis and the AI CapEx, but not a lot. Right? So no discern- I mean, it's maybe, which implied some level of slowdown. Significant mark up on the cyber stocks, because it looks like that's where the actual reality of the problem exists. And overall, I always look at World Cloud, which is the software index, versus SOX, which is the semiconductor index, and it was a great day for World Cloud relative to SOX. S- software up, semis slightly down, but not big. I mean, I loved-- I saw a tweet, you know, [laughs] which was basically, "Market moves 0.1% on news of 10% probability of extinction." [laughs] In other words, capitalism took on board the risk and said, "It'll be fine."

   4. JLJason Lemkin19:00

      This may be, like, a much faster version of the '20s. There's no regulation. Everyone just wants to get rich as F in the '20s, right? Um, and what our version of 1929 will be for AI, you know, we don't know yet. But, uh, everyone just wants to get rich. The amount of weal- the, you know, $2 billion is just a start around in venture today, right? I was literally thinking that today when I saw Shield raise a 20 or 30 billion, and they had a little chart. I'm like, "Wow, two billion's a start around now in today's world." It's, it's just so much money, and AI is so much money that it's just too easy to take advantage of the dark version if that's how you make money. It's too easy for you to be-- Because every LLM has a dark version, it's, it's too easy to cut that corner if that's how you can get raised at a billion after demo day. It's too easy.

   5. RORory O’Driscoll19:46

      A different version of the same thing is this. Everyone's saying, "Oh, my God, this is evil and bad and could be dangerous." And as it were, they're purging their conscience by worrying. But Jason, you're exactly right. No one's saying, "I'm gonna push away from the table." And I don't think the people running some of these companies, especially Anthropic and OpenAI, oddly enough, they're not profit-- I mean, you gotta defend them a little. They're not profit maximizers. If they were profit maximizers, they would own more than 2% in the case of Dario and 0% in the case of Sam, right? It's kind of weird.

   6. JLJason Lemkin20:12

      No, they're not profit maximizers. It's the, it's the other folks that we should be worried about, not the three of them.

   7. RORory O’Driscoll20:17

      Agreed.

   8. JLJason Lemkin20:17

      We actually have half-decent stewards at the top. Sam, Dario, and Elon are about as good as w- There may be better in theory, but in practice, we can't get three better stewards. They have the right reasons to do what they're doing. They genuinely do. The real problem is that 10 or 15% of founders are sociopaths. They genuinely are. In fact, m-m... j- especially w- the successful ones. You won't-- It, it, it lets you drive will something out of nothing into existence, the ability to manipulate people, the ability to have that look and do it, and that's where the bad people using AI come from, the sociopaths. If, if you don't think that's true, you, uh, you guys have re- You really don't think 10% of the founders you've ever invested in are sociopaths? Of course they are.

   9. HSHarry Stebbings20:56

      We're gonna move on. Next, we have the AI assistant race that we touched on last week, but I was really annoyed because we actually missed Meta releasing Muse, which is Meta's product that is an AI assistant in many ways. Um,

6. 21:11 – 27:21

   Meta Enters the AI Assistant Race With Muse

   1. HSHarry Stebbings21:11

      people like to-

   2. RORory O’Driscoll21:11

      What, what did you say, Harry? We didn't miss it. Did you say we missed it?

   3. HSHarry Stebbings21:15

      Well, like, it w- came out after we recorded the show.

   4. RORory O’Driscoll21:17

      Correct. I mean, I'm actually gonna give us an A. I'm gonna give us an A. We s- we recorded on Tuesday, 'cause I, 'cause you used that clip of me. On Tuesday, I was like, "Somewhere, there are 20, um, Meta engineers locked in a room being told to ship something." We said that on Tuesday. On Wednesday, [laughs] Muse shipped, and on Thursday, the, the, the pod shipped. So I think we nailed it, man.

   5. JLJason Lemkin21:38

      You just didn't know it was 500, not 20. That's the only slight thing that was missed.

   6. RORory O’Driscoll21:41

      Actually, yeah, 500.

   7. JLJason Lemkin21:41

      It's 500. You didn't realize that the minute OpenClaw took off, Zuck took a huge chunk of his AI team and said, "We're building OpenClaw for consumers." And from that night on, they, people worked days and nights. I mean, I was logging bugs over the Muse weekend on Twitter for fun. The engineering team was responding in real time Saturday night, Saturday morning, Sunday morning. I mean, they're working 9-9-6 on this thing. This is not 20 people. This is a top priority since OpenClaw launched, right? That's-- It's interesting it came out, uh, you know, seemingly oddly after some of the other agents. But it, it, this has been a, a P1 since OpenClaw, right? Let's take-- 'Cause, you know, people were, like, lying in the streets with their Mac Minis trying to get, figure out how to run an agent. Now I can do it on Facebook.

   8. HSHarry Stebbings22:21

      Well, let, let, let's actually just start with this, Rory, and I think you'll be as interested as I am by Jason's analysis.

   9. RORory O’Driscoll22:26

      Yes.

   10. HSHarry Stebbings22:26

       Um, I'm not able to use it being in the UK, so would love your thoughts.

   11. RORory O’Driscoll22:30

       Oh, I am.

   12. HSHarry Stebbings22:30

       Jason, uh... [laughs]

   13. RORory O’Driscoll22:32

       Yeah.

   14. HSHarry Stebbings22:33

       Um, Jason-

   15. JLJason Lemkin22:34

       Jason, I'll get you a VPN.

   16. HSHarry Stebbings22:36

       Yeah, thanks, dude. Um, what did you think? How good is it?

   17. RORory O’Driscoll22:40

       Yeah.

   18. HSHarry Stebbings22:40

       How, how good a response is it to Instinct? What do we think?

   19. JLJason Lemkin22:44

       Well, first of all, as software, it's very, very, very good. It instantly works. This is the definition of great software. Like, you just can't believe how well it works, 'cause all the hard work was done that you can't see, right? Um, 'cause it's... And, and so most of the things you want it to do, create a reservation, send an email to... I, I asked Muse to, to send us a bunch of stories for this show, right? It sent it to, it sent it to me and Harry, and I forwarded it to Rory. It did it at the right time. It sent it to us, right? Uh, I had it rebuild the entire saastr.com website for me. Log into WordPress, redo it. It did a pretty good job of it. Um, a lot of the things you want it to do, it just works. Um, I'll add one more thought and then the, the, the meta question. The really interesting thing is, you know, w- we, we didn't talk about, but it is something I know a little about. Th- th- it's not cheap, okay? You're giving everybody up to a certain point a free VM, right? Which I think two CPUs, two GPUs, eight gigabytes of RAM, 100 gigs of storage or something. I do know that, like, the Replit's, Lovable's, Vercel's, and others, it costs about three to four bucks per person to deliver that, okay? And Muse is at the edge of it. It gives you more than they do, okay? And those guys are working on it every week because it's such a huge part of their cogs, right? Because every time you spool up a website, not a free one, but a paid one, they've got a three to four dollar nut. You know, Wix before Base44 has a two cent nut to serve that website. Now it's three to four. So they're very incented every day to work that down, right? Meta is lucky. Not only does it already have the infrastructure, right? So we could argue whether it's free, but it has tons of infrastructure. This is running on, on its own LLM, Muse LLM. So it has a massive infrastructure and LL benefit that no one else has, and it's, that's why it's fast. That's why it works well. That's why you get more VPUs, more GPUs, more everything. So I think from an infrastructure perspective, it's, uh, almost no one can compete. You get all the VM, all the infrastructure, all the storage, and they have their own LLM, Muse. And, and my learning is for these lay usages, like what we're talking about, not frontier drug discovery, Muse LLM's really good for this. So it's a good product, but the question is, does it matter?

   20. HSHarry Stebbings24:53

       Wh- Wh- What do you mean does it matter? Sorry.

   21. JLJason Lemkin24:55

       What's the killer app? Another reservation at, at, at, uh, at Cheesecake Factory or TGI Fridays? We, we need to see the, the Visicalc of Muse. We need to see what is the killer app. Every horizontal platform needs a, you know, traditionally needs some sort of killer app, right? I, I'm just skeptical... I'm just- I'm just wondering, right? I don't think, on this whole thing, I don't think there was a killer app for OpenClaw, you know? I don't- I don't know if there is a killer app for Muse because, or Instinct, 'cause there wasn't one for OpenClaw.

   22. HSHarry Stebbings25:25

       Is it- Is it not being your discovery mechanism to shopping? Like a- a WeChat, a super app. You know, Zuck has spoken about taking portions of transactions as being the business model as well. Do you not buy it for-

   23. JLJason Lemkin25:39

       The model's good, but what are- what are his examples? Scheduling his daughter's carpool. Is that really what a trillionaire needs to do with a general... He can't even come up with a good use case of Muse for himself. He's making up consumery things. "I had to schedule ballet lessons for my daughter." I mean, you've... Great. Great. But what- what... You need to run this thing eight hours a day, I think, like Claude Code or Codex or, to really matter. And so if- if we're in it eight hours a day, like a super app, it's cool. If it's a random task, I just don't... W- I'm just waiting to see what the killer app is, and I've run... And, and Muse is really fun. Like, it's so beautiful. It gives you all-- The beauty is it gives you all the ideas. It has an Idea tab, and it tells you all the things to do. I've done most of them, um, and they're great. I just don't know if it's killer.

   24. HSHarry Stebbings26:25

       I don't know if it needs to be, and I know that sounds stupid. No, but I use Instinct in a similar power user way. I think latency's a real problem with Instinct, by the way, which might not be with Matter. I wait minutes-

   25. JLJason Lemkin26:35

       Meta's faster

   26. HSHarry Stebbings26:35

       ... for responses. Minutes. It's like the first days of ChatGPT. It's a real problem. But, but I don't know if it needs to be. Like, it does all of my bookings, travel, restaurants. It does all of my shopping. It's very good. It does all of my calendar invites. I know there's no killer app, but it's just incrementally better than everything else. I don't know, but is lots of little bits not good enough? I don't know.

   27. RORory O’Driscoll26:59

       I have a feeling it might be, right? Look, I- I think... One, I'm skeptical of the category on a standalone basis, but, you know, I always go back to, I always have my three venture questions. Is this a category? Who's the winner? And are we getting paid for the risk, right? And is this a category question is, do people want... Is there a role for AI in a kind of personal assistant messenger-type

7. 27:21 – 29:11

   Can Standalone AI Assistants Beat Meta and OpenAI?

   1. RORory O’Driscoll27:21

      thing? And I will say, having used both Instinct and Muse, I can see it, right? I don't- I don't know if I love the word killer app, 'cause Vis- Visicalc, a single thing that does everything, uh, you know, that, that, that just ignites a platform like Visicalc. Let's leave, let's leave the killer app concept out there, right? At the margin, you kind of go, "Yeah, I'd use this," right? I mean, if you look, we do have the ex... I mean, if you step back, you do have the example from long ago of WeChat, you know, Chinese messaging systems having very much all a super app. Facebook tried to do that with the Messenger. It didn't take off because the truth is the UI, pre-AI, the UI of trying to book things on a chatbot is a pain in the butt, right? It's actually a lot easier just to go to the United website and see all the flights at the same time and book it, right? It is possible that with intelligence at the back end as this thing from, you know, non-intelligence, you, you actually have an interaction on a mobile device where enough of the intelligence is in the cloud that it can do a lot more for you, it knows a lot more about you, and it just becomes an easy place to get shit done, right? And therefore, to, to your point, Howie, at the margin, you can imagine people using this, right? So it just, you know, if you're a Facebook user, you get Muse, you're a ha- you're a happy little camper, you chug along, right? Um, so I, I, I... Do I think there's more that's gonna happen? Yes. The real... To, to me, the interesting question is, the second one is, do you think it's a standalone company that wins here, or do you think it's gonna be Facebook with Muse and OpenAI with whatever product they come up with? Do you, you know, do you think that the Instincts of this world can build a standalone business here, giving that, to put it out there, having raised at something like 50 pre less than five months ago, then 400 pre, then a couple of billion pre, then now rumor has it raising it north of 10 billion. Do you think that the-

   2. HSHarry Stebbings29:10

      They are raising-

8. 29:11 – 32:08

   Would You Invest in Instinct at $10BN?

   1. HSHarry Stebbings29:11

      They are raising 1 billion at 10 billion, and the most popular segment of the show that we got was Jason's IC. So Jason, [snapping fingers] ding. We have a billion-dollar round for Instinct. Welcome to the partnership meeting, and it's a $10 billion valuation. Will we be putting in $200 million into this billion-dollar round at 10 billion?

   2. JLJason Lemkin29:38

      Well, we, we will, and I w- I'll be honest to the team, it's a, this is a risky one. I am impressed with what Muse has done, and if we had to compete head-on with Meta, and that was the only thing, we'd be in trouble. I would not recommend this investment because we can't compete with their ballot- we can't compete with their servers, we can't compete with their GM, they can't compete with the LLM. However, after having done several reference calls and over a dozen synthetic ones on Claude, uh, I've learned a f- a couple things. First of all, Meta cannot go, uh, cross-platform. It cannot go in... It, it, it does own WhatsApp, which is a real threat. It won't be work with all carriers. It won't work across all services. It won't work across. It's highly focused on its own- on its own platforms. And so that is, uh, only a subset of how we communicate. How many folks, uh, between the ages of 18 and 55 are on Facebook all day? Very few, right? It, it's really your grandmother's application. Now, WhatsApp is popular and Instagram, but the fact that it is not going to be interoperable across all these different services means it's got a fairly limited reach. Two, um, how long will Meta maintain the energy here, right? When this produces essentially trivial to no revenue. Anyone remember Workplace? Workplace in its own way was probably better than Slack for folks that lived in Facebook. It was probably better. It had a lot of neat use cases. It worked well. It was architected, and it was actually the highest NPS of any product in the entire Facebook Meta platform, but they couldn't maintain the energy. My reference checks say when Alex leaves Scale, this product will fall apart. Um, if this was the only thing that Meta had to do, I wouldn't bet against them, but we're just not gonna see the commitment to do the kinda things the Instinct team is gonna do. And let me tell you, this is one of the greatest teams I've seen in my history of investing, right? Um, it- they're great. Um, these kids come, and they play World of Warcraft in real time during the, during the pitch. Um, they're, they're, they're top 10 each, all- they're both top 15 on league. Um, I recommend leading the round, um, but being cautious with reserves because the next round valuation may hit into realistic IPO limits.

   3. RORory O’Driscoll31:40

      So you would do this round?

   4. JLJason Lemkin31:42

      I wouldn't. You asked me to do it. There's no effing way I would do this round.

   5. RORory O’Driscoll31:44

      [laughs]

   6. HSHarry Stebbings31:45

      Okay, good. Okay, we have got you-

   7. JLJason Lemkin31:47

      No effing way

   8. HSHarry Stebbings31:48

      ... to help him.

   9. RORory O’Driscoll31:48

      What the fuck?

   10. JLJason Lemkin31:49

       I believe... Here's why I wouldn't do the round, okay? And you can call me a fuddy-duddy for it, okay? I believe most of that, okay, for the pitch. I just believe the, the infra costs here are so high, and, and, and the incumbents... This is like if... We've been talking since this show started, what if Claude, what if Anthropic

9. 32:08 – 35:18

   Why Meta Is the Biggest Threat to AI Assistant Startups

   1. JLJason Lemkin32:08

      and OpenAI actually built apps, okay? In the entire history of this show, they've only built, uh, out- outside of, um, Codex and Claude Code, they've really only built half an app, Claude Design, which isn't even really a fully an app, okay? Here's Meta building the app. They have the LLM. They have the cost advantages. They have the speed advantages. They have, they have more available compute and GPU in all of it than anybody else in the world, and they're building the app. This is the threat that every VC worried about, and we all got a hall pass since the start of AI because the LMs didn't build any apps. This is the one that they're building, and, um, that's why I would not... I, I just don't wanna compete against this 'cause I do think, uh, for the next 24 months it's a big priority. And it's just, it's just, if it's co- uh, uh, Harry already said Instinct is slow. That's a sign. That's a sign of compute costs, of other... That's why they have to raise a billion. And can they subsidize with venture capital five to $10 per user per month? Sure, but if they have to over-monetize it, what if it- they become Poolside? They could become the next Poolside. Like, it's great, but literally I've got 10 million users at 10 bucks a month. Now I've got a $1.2 billion nut a year to pay off, and, um, I, I'm struggling to raise the next round. I'm not Databricks. So just I worry when the incumbent has infinite, all the capabilities here and wants to build the app. That's why I would say no, but I might be wrong, right? I, I might, I might be wrong. I wouldn't bang my fist on the table at the, at the meeting.

   2. RORory O’Driscoll33:34

      I, I'm trying to remember, was it Socrates or who was it? One of the ancient Greek philosophers where you could literally say, "Take one side of the argument," and then halfway through you could say, "Now take the other side of the argument." And Jason clearly can do that here, right? That was a perfect, "This is why you should write $200 million."

   3. JLJason Lemkin33:50

      Well, Harry put me on the spot. I didn't do this deal.

   4. RORory O’Driscoll33:51

      He didn't put you on the spot, but I, I'm just impressed with the mental facility which, which you can do both sides. It's terrifying. It's like a human LLM. You can be convincing on whatever you want me to be. It was good. Pulling the boat together, right? I actually think, and I wanna take the pulse out on that. It's an... What you basically said is this is core to Meta, and it feels like something that they would, would want to do. And f- and despite your comments on cross-platform, you know, today Muse is a standalone app, so it's not a cross-platform issue. But to the extent that they fold it into... I've, I've just got to assume they're gonna make it accessible in Messenger or make it accessible on, you know, iMessage, et cetera. But it seems to me if there was one thing that Meta should do within the world of AI, it would be this. It's hard to imagine spending, you know, 100 billion-plus on AI, saying that we're gonna build the personal AI, and then not putting all your effort on this. So I agree with you, Jason. I think this has to be an all-in Meta bet in a way that frankly I reject the comparison with Slack. You know, the, the Facebook for Work product was, like, a toy. It was not a core issue to them.

   5. HSHarry Stebbings34:57

      [laughs]

   6. RORory O’Driscoll34:57

      This is a core issue. So I think you're right. They go for it hook, line, and sinker. Now, the interesting thing about the Poolside analogy and Ins-

   7. JLJason Lemkin35:03

      That's why it's good

   8. RORory O’Driscoll35:04

      ... the Poolside analogy-

   9. HSHarry Stebbings35:05

      That's good

   10. RORory O’Driscoll35:05

       ... and Instinct is you could have the same outcome here, which is Poolside said, "We ran out of capital to keep playing, but we had an excellent outcome because there was a company with an even bigger market cap who wanted the

10. 35:18 – 42:16

    Could Instinct Become a $50BN Acquisition?

    1. RORory O’Driscoll35:18

       assets that Pool Hideside has assembled." Nvidia wanted access to the model, access to the talent. I mean, let's put it out here. The same thing could happen here, which is that Instinct executes, build a huge user base, and an OpenAI steps up and says... And it's interesting. I think that the founder of Instinct, um, either worked at Sierra or Bret Taylor's a big fan of. So you can fas- and Bret Taylor's obviously, among the many other things that man does, is the chairman of OpenAI. It may well be that Instinct builds a lot of traction, doesn't have a cash flow positive IPO potential but has a very attractive upside exit. I don't discount that. Maybe 10 billion's a little lofty, but you gotta believe if, if it got meaningful differentiated traction, that it would be interesting to someone who wants to build a business in this space.

    2. HSHarry Stebbings36:09

       The only thing I will say is Noah Shin, the founder of Instinct, from every single person I've spoken to, they cite him as, like, one of the most generational talents. And in a wo- and i- and in a world where generational talents in strategically attractive segments are very acquisitive to multi-trillion dollar-

    3. RORory O’Driscoll36:31

       Totally

    4. HSHarry Stebbings36:31

       ... you can see that being a very legitimate upside scenario case for 50 to 60 billion, as crazy [chuckles] as it sounds.

    5. JLJason Lemkin36:38

       It's possible. It just... As, it, it... I just think if, a- as a... Listen, we all have different experiences. Um- The way I was raised to invest in venture was don't take bets that 100% require an M&A outcome to be successful, right? They're just too, they're just too unpredictable. I've been on the other side and know how capricious it... Like, you know, you could be Clem's best friend, he brings you in to meet with Jensen, and then he quits the next day, right? I mean, you just, you literally, you, you literally just can't predict it. So it's, it's just, you, you need some real something to steel to make a bet where an arbitrary super high-value outcome's the only plausible exit. I'm not saying it's not a bet. Like, it is definitely a bet, right? It's just-

    6. RORory O’Driscoll37:19

       I, I agree, Jason

    7. JLJason Lemkin37:19

       ... it's a big one.

    8. RORory O’Driscoll37:20

       And, and just to come back on that, 'cause I've been thinking about that. You're right, it's not what I'd do either. But I look at this, and I do... You know, you always question yourself, is there anything you can learn? There is an argument, I'm not yet making it, but I'm just acknowledging that the expected value of a number of those bets could be strongly positive. Admittedly, the variance is high. In other words, it's a risky way to make money. You should ask yourself as you're building a portfolio of 30 bets, is it okay to have three of those bets in your portfolio? Probably not at $10 billion, but, right, it wasn't reckless. I think Kleiner did around at 500. Moon's overshrewd. It's not reckless to do around at 500 even if you believe the expe- the profile, the payout profile is, you know, two in 10 chance of a 20X positive multiple, right? And if you don't get the positive multiple, you're gonna build a company that just can't cash flow and doesn't make it. You know, the, it's, it, it has a positive expected value.

    9. JLJason Lemkin38:18

       For sure. If you've got the right portfolio and you can take the risk-

    10. RORory O’Driscoll38:20

        Agreed. It's not the way I roll, ru- run, run my business, but I'm, I actually f- I... In a bull market, or as Harry said, there's a whole bunch of upside acquirers with, frankly, free mark- you know, market caps that are fairly untethered themselves and have a massive need to move quickly. It's actually not a crazy way to make money. Now, when it turns-

    11. HSHarry Stebbings38:40

        And you don't even need much. You've got a billion and a half pref to reach. So, like, your downside is relatively capped on an incredible team that everyone acknowledges is tier industry-leading.

    12. RORory O’Driscoll38:51

        If you look at... I mean, this is the classic Silicon Valley thing, is that if you look, e- examine that risk-return profile at 50 pre, which is as far ago back as April, I think. That's a wonderful pr- profile. At 500 pre, which I think was the May or June round, that's interesting. Yeah, that's a good bet, 'cause they're a little further along. The interesting thing is in the space of two or three more months, you've had around... Is it, was, was the other round the two billion, Harry, from memory? I can't-

    13. JLJason Lemkin39:18

        2.5 billion. Yeah.

    14. RORory O’Driscoll39:19

        2.5 billion. Now you're getting into the, hmm, it's a 4X if you get out of the billion, and now you're raising a 10. Now you really need that 50, or, you know. You need a... A reminder, the largest M&A outcome ever was Cursor doing 4 billion, got $60 billion, right? I don't know if you get a $40 billion outcome without a shit-ton of revenue. My point is the risk-return profile was wildly attractive in April, and decreasingly unattractive fairly quickly [laughs] right? By the time you come to September. So that is the problem with those kind of bets. But-

    15. HSHarry Stebbings39:56

        You know one interesting thing, though, it's just, like, the consumer product market fit for this product is so wild. I did an Instagram Reel on it. I had over 1,000 DMs asking for invite codes.

    16. RORory O’Driscoll40:06

        Yes.

    17. HSHarry Stebbings40:06

        I've never had 1,000 DMs on the back of a Reel. That, that's pretty wild.

    18. RORory O’Driscoll40:11

        It's awesome. No, um-

    19. HSHarry Stebbings40:13

        Um-

    20. RORory O’Driscoll40:13

        And I gotta say, I've been using it-

    21. JLJason Lemkin40:15

        Can I just add one interesting thing?

    22. RORory O’Driscoll40:16

        Yeah.

    23. HSHarry Stebbings40:16

        Yeah.

    24. JLJason Lemkin40:17

        Just on your, on your thing. You know, Alex Kerlen just, uh, left to go t- to Menlo Ventures, right?

    25. RORory O’Driscoll40:22

        Yeah.

    26. JLJason Lemkin40:23

        From Meritech. He, he was on the board of Owner with me. Known him since the very beginning. He's OG SaaStr when he started in the industry. And he wrote a little presentation about how Menlo thought about this. And, and not that this is so profound, but he said kind of the, they're targeting 25 billion-plus tech, tech exits. They're p- they're targeting 100 of them. That's how Menlo's modeling the world, and that's what he went to join. To find, you know, some of these 100, not all hun- they don't have to be in all 100 of the $25 billion-plus exits, right? Um, that's the model. We, we can say, wow, Cursor was at 60, but Cognition just raised at 48, right? So if this is your world model, that there are a total of 81 billion, 81 25 billion tech companies now, but that's up from 23 10 years ago, and that that trend is going to continue in the age of AI. Um, you know, I wrote that twen- the new decacorn's 25 billion. These Instinct rounds make sense. Like, if, if the, if the nor- if the, if the good exits are all north of 25 billion, then at least I can make 3X on Instinct, right? Um, it was just interesting to see that's their model, right? Is that we're targeting $25 billion-plus exits, uh, in any investment that we do, and we see there to be another 100 of these. Now, how that all math works out with GDP and the market caps of trillion-dollar companies-

    27. RORory O’Driscoll41:33

        Thank you

    28. JLJason Lemkin41:33

        ... I need to defer to, to Dr. Rory O'Driscoll next to me, because I can't make it work in my head without an LLM. But I assume there was some thought [laughs] behind the Menlo math here of 100 $25 billion exits.

    29. HSHarry Stebbings41:43

        We're gonna go a layer up and just a little excursion out of, like, deliberate AI, which is Miro.

    30. RORory O’Driscoll41:49

        Good.
11. 42:16 – 45:30

    Miro Sells for $1.35BN After a $17.5BN Valuation

    1. HSHarry Stebbings42:16

       it. Excel made money. Um, founders and employees made money. Later-stage investors, eh, not really. Well, not at all, actually. 1X. Um, how do we see this exit, guys, for a darling of the SaaS ecosystem?

    2. RORory O’Driscoll42:33

       Inevitable and not bad. All right? Inevitable because, you know, I... Funny, I have a little report on our Salesforce that literally lists every unicorn, right? And I can do it a bunch of different ways. One of them being literally by post-money, right? So you, I, and I'm, I'm, I just eyeball down and you see what's going on. And, you know- It j- you know, and you just rank them by... And it jumped out at you like a sore thumb. The last round was in '21 at $17 billion. And when you eyeball, you know, you, you, you start to see the Lago, you start to see the level, you start to see all the cognitions just above them and just below them, you know, new rounds at, you know, $10 billion, $20 billion. You see, we track headcount growth at the same time, oh my God, headcount's exploding. And then you have the thing stuck at $17 billion, and it was really the largest utterly stale valuation from that period, right? So you look and you go, "Ah, y- almost inevitably you're high and dry," 'cause you're a personal productivity- a productivity tool in a world that just doesn't work that way and can... I- I- It's, it's obviously way ahead on valuation, I mean, of where its actual market size or traction can be. So this is just an inev- it was inevitable that at some point it would get done. I mean, Andrew Reid from Sequoia had a really cute tweet. It's like a little graphic of... You know that picture of the, the de- the, the, the death with the si- with the, the sickle knocking on every door, and it knocks on the, um, Evernote door, and then it knocks on the Airtable door. And then in this case it's knocking on the Miro door, and instead of a sickle, it has a bending spoon, right? You know, death comes for us all in SaaS land, right? And it was exactly right. It was just an inevitable cleanup operation because it was just hi- so far wrong in terms of pricing, and it was a good outcome for everyone. And I, and I... You kind of snidely said something about the late stage guys, but I'm gonna say something. The great thing about the late stage business is this: if your losers give you a 1X, then you'll die rich, right? So Iconic, I think. Iconic had a ton of money in that deal, right? So that's a bad deal. A bad deal is when they get a 1X. You know, if you're playing the venture game and because you're playing late and your preference gives you 1X on everything, on, on the worst case outcome, by definition, I mean, just using simple math [chuckles] the overall distribution is net positive. So it was a good outcome for everybody. It needed to happen. It's now part of a liquid asset. I think interesting- I didn't know this until today, so I'm winging it a little. I did see some portion of the consideration rolled. In other words, some people said, "I'll take-

    3. JLJason Lemkin45:07

       Yeah. [laughs]

    4. RORory O’Driscoll45:07

       ... ev- I'll, I'll take stock in Bending Spoons for that," which is interesting choice.

    5. JLJason Lemkin45:14

       Yeah, I don't know whether it was required or whether it was a way to juice the outcome, right, by rolling it over. You could see it being either way, right? Bending Spoons needed the ca- You know, they don't have, they don't have an unlimited balance sheet. There's only so many Miros they can do, right? Um, but it could have also been a rol- it could have been a rollover into, uh, a company on

12. 45:30 – 48:22

    The Bending Spoons Playbook: Raise Prices, Cut Costs

    1. JLJason Lemkin45:30

       a positive run, right?

    2. RORory O’Driscoll45:31

       The cynic in me says, it's interesting if you do roll. It's like basically saying, "We couldn't do what it takes to turn this company into a cash flow positive machine, so I'm selling it at three, 2.7 times to guys who are trading at 14 times 'cause they are tough enough to do what it takes," right? 'Cause that's really what's happening. And to some extent, even though that sounds bullshit, it's true. I- I- Venture syndicates, I've been in boards where the company just flattens out and it needs to get ruthlessly efficient. Venture- it's just not our DNA. It's not how we roll. It's a syndicate of five different people. Oftentimes, these assets are better owned by a single owner who says, "Look, this is the way it's gonna be," right? [laughs] "This is what we're gonna do." I mean, I don't know if you saw the CEO of Bending Spoons. He made a wonderfully controversial take, right, where he said something to the tune of, "You know, we don't really like to f- you know, we don't basically get all excited about the title founder," right? "We don't wanna know what you did." His basic comment is, "We don't want to know what you did 10 years ago when you founded this. We wanna know what you're doing now," right? And what it's basically saying is, "We can't do what it takes to fix this thing at 3X revenues, so we'll sell it to you for 12 times revenues, and you'll be val- We'll sell it to you, take your stock at 12 times revenue, 'cause you'll be hard-nosed enough to cut extraneous costs, raise prices, accept a fair amount of churn, and plow through," right? Just interesting, but also not qui- It's kind of an interesting comment on how institutions can determine outcomes. It's not all rational economics, and it probably makes sense. Bending Spoons will probably do a better job than a venture syndicate at making that thing cash flow positive. And if you're a customer of any of these companies, just be ready for the 40% price increase. Well, that's the churn. I mean, they're clear on that.

    3. JLJason Lemkin47:15

       Yeah, the churn, the churn on their acquisitions, the churn on their acquisitions is brutal. When you actually study the graphs on usage-

    4. RORory O’Driscoll47:20

       Yeah

    5. JLJason Lemkin47:20

       ... the churn is absolutely brutal. They are not revitalizing these.

    6. RORory O’Driscoll47:23

       No.

    7. JLJason Lemkin47:23

       They're increasing prices and cutting costs to the extreme.

    8. RORory O’Driscoll47:27

       I would say, well, you're right, but let me describe a different... What they're really finding out is the marginal propensity to pay versus how much... The VC, we probably almost certainly, as an industry, over-invested in sales and marketing and sold people who had to be sold into the product. What they're saying is, "I don't want the customers who have to be sold into the product. I want a customers who hate us so much for doubling our prices but still need this product and won't go away," right? [laughs] It's a different worldview. Actually, 'cause yeah, you're gonna get initial churn when they put through those price increases, but the, the perspective is the people who stay really need the product. You know? This is like what happens when you have to pay full boat.

    9. JLJason Lemkin48:08

       Yeah, you triple the prices and you have 30% to 40% churn-

    10. RORory O’Driscoll48:11

        And there you are

    11. JLJason Lemkin48:11

        ... and the math's pretty straightforward, right?

    12. RORory O’Driscoll48:13

        Absolutely.

    13. JLJason Lemkin48:13

        I'll tell you, my thought on, on the Miro one, it, it, it was... I almost want to move on. I- what's the game Duck Duck Goose with kids, where you... And don't you take out a chair each time you go around?

13. 48:22 – 1:03:50

    Are We Entering the Era of SaaS Capitulation?

    1. RORory O’Driscoll48:22

       Yeah, yeah, yeah, yeah.

    2. JLJason Lemkin48:23

       I felt like there's only, like, one or two chairs left from the pro- pre-AI era. And, and Miro took... Bending Spoons looks, they said in one of the interviews this week, uh, they do 1,000, they look at 1,000 targets seriously and do five to 10 a year, right? And even they are- do not have an unlimited balance sheet. Everyone, PE is sitting out. Thoma Bravo is mostly sitting out, these folks. So I feel like there's one or two seats left for 1,000 unicorns, and we can talk about why the, why Iconic got 1X back and, like, like, if, if there were, like, a lot of options. I felt like it's different. There's, like, two chairs left at the end of Duck Duck Go. Miro grabbed one. Okay? They, they, and they got, just like Airtable, you- they only got one offer. When you sell for a two-point-something X, you know for sure there was, there was no other offer, because anyone can pay 2.4X or 2.5X. It's not much more for Salesforce or Thoma Bravo, uh, or Francisco Partners outbid. So you have two, and, like, m- for what it's worth, I almost wanna move on, because I can tell you personally, I've g- I've ended the game for me of duck, duck, goose. I'm not running around the chairs anymore. Whatever, it's fine.

    3. HSHarry Stebbings49:28

       Final one, Jason.

    4. JLJason Lemkin49:29

       I'm done. What?

    5. HSHarry Stebbings49:30

       Who, who's n- who, who's next, then?

    6. JLJason Lemkin49:32

       No one... I don't think... Look, there, of course there will be more deals, but it's-- but I think we've entered the era of capitulation, and if there is a seat left in duck, duck, goose, grab it, grab it. But otherwise, the game's just ended, and these companies are gonna go into zero percenter mode. They're gonna go into zero to 5% growth mode, and no one, no one may buy them. Like, because if Bending Sp- this is, like, this is the best Miro and Airtable can do. What if you're not Miro? These are not bad companies. Miro's $600 million in ARR, still growing high single digits and cashflow positive. Like, it's a pretty good asset, right? Um, so anyone worse than Miro or Airtable is not gonna get one of the last one or two chairs. They're just, they're not even gonna... Just no one wants to buy these things. And I, I don't mean to be grouchy. I just mean I've just given... Like, kids, go, go do whatever you want. Here's the keys to the house. I've moved to another city. Have parties. You know, crash the cars. Do whatever you want, because, uh [laughs]

    7. HSHarry Stebbings50:29

       Boys, mo- mo- moving swiftly on.

    8. JLJason Lemkin50:31

       What do we got, Harry?

    9. HSHarry Stebbings50:31

       What, what would we like to do next? Jeff Dean's company hitting $50 billion after just raising it 10. We've got, we've got Citrini selling his company to Dylan Patel and Sammy Analysis for 100. We've, we've got OpenAI pausing pro signups.

    10. JLJason Lemkin50:49

        I mean, I think you're just... Is SBF getting out?

    11. HSHarry Stebbings50:52

        Ooh. Well, I, I mean, he's gotta accept his Mi-

    12. JLJason Lemkin50:56

        Is the Supreme Court gonna take the case?

    13. HSHarry Stebbings50:57

        He's gotta accept his Midas list, doesn't he? Like-

    14. JLJason Lemkin51:00

        What's that? [laughs]

    15. HSHarry Stebbings51:00

        Doesn't he have to accept the Midas List award?

    16. JLJason Lemkin51:02

        [laughs] He m- he might have even been on the under 30, under 30 or something when he got it, too, when he did the Anthropic deal. I think it was under 30.

    17. RORory O’Driscoll51:11

        I'm gonna be the voice of humanity. I mean, yeah, he d- you know, he is doing significant time, which really sucks, and that's a life wasted. So I, I'm not gonna pile on on the guy yet, right?

    18. JLJason Lemkin51:21

        I think the Supreme Court's gonna take the case and overturn it, uh, narrowly. Say it as a non-lawyer. I don't think you... No, 'cause I watched his lawyer on YouTube. He was pretty good, who's done 50 cases, Supreme Court. He's like a badass, like, Supreme Court lawyer. Basically his... And listen, I'm not the, I'm not the lawyer. His point was, this is an Eighth Amendment issue. You can't fine somebody $12 billion, this is unconstitutional, that can't repay it, when at least, at least according to the terms of the bankruptcy court, everyone was repaid in whole with interest. We could argue whether they would've made much more money, right? But there, there are some constitutionality issues. Uh, I think he's gonna get his da- I think the Supreme Court's gonna take it. They don't have to take any case. And I think he's gonna get it. Um, and you know, whatever he's in jail for, 30 years and $11 billion, I think it's, you know, Sam may be freed eventually. This, get... The Supreme Court hearing the case is a far f- cry from being freed, but I think he may have his day in court.

    19. HSHarry Stebbings52:14

        Jason, do you think he should be freed?

    20. JLJason Lemkin52:15

        I mean, he seemed like the biggest scammer of all mankind when the... What was this all, way back in 2023?

    21. RORory O’Driscoll52:21

        Yeah.

    22. JLJason Lemkin52:22

        Right? It is weird he didn't enrich himself as far as we know materially, right? It is weird that argu- this is very arguably, very arguably. It's of course terrible that he's, he, he moved assets between Alameda Research and [laughs] and af- it's terrible. But the argument that it was allowed by terms of use is an interesting argument, right? It i- it is an interesting argument. He did not self-enrich. The reality is, if you, if you use a generous version of made whole, folks were made whole. Should he go to jail for most of the rest of his life and have to pay $11 billion when he get out? It, it's, it, it, it seems like a lot in the era of sentient AI that could kill us all. It does seem like a lot today. But at the time, you know, Silicon Valley Bank failed. I lost $10 million over the weekend. I don't know about you guys. It seemed like it was just desserts at the time, right?

    23. RORory O’Driscoll53:11

        Yeah. For, for what it's worth, one, I hadn't prepped on this 'cause it wasn't on the list, and I don't like a pi- my wife, who is a lawyer, gets mad when I practice law without a license. But I will say it was so low down, Harry, I didn't think we'd get to it. You never do, right?

    24. HSHarry Stebbings53:25

        Oh, there we go. It wasn't on the list.

    25. RORory O’Driscoll53:27

        But here we are. Genuine comment. Genuine comment here. I, d- look, separating the fine, which no matter the issue then it doesn't matter, but there was misallocation of funds. It was white-collar crime. It should be punished. I actually think 30 years was probably disproportionate with the... I mean, I, I think, what was it? I'm trying to remember the ex-Goldman Sachs guy who misallocated, um, in, in brokerage funds, an MG brokerage in, about 10 or 15 years ago. I mean, I think he, I think he walked entirely. I can't from memory think. I think white-collar crime should be punished, and it's a shitty world where someone steals $20 and they go to prison, and someone else steals $10 billion and they don't 'cause they're white and upper middle class. But I'm also not sure if 30 years is the commensurate thing. Now, the interesting thing is that's not the issue at hand in the Supreme Court. I don't think they're appealing the sentencing c- on the sentencing guidelines issue. They're appealing the facts and circumstance of the case. So we'll see. Right? Um, yeah, and I don't think it matters that, uh, he, he... The fact that he took the money and was a brilliant investor doesn't excuse him for taking the money. Because by definition, if it worked, then anyone could take money provided it worked. "Hey, I stole your money, Harry, but I bought put call options and the stock went up, so we made money. Here's your money back. You shouldn't mind." Well, of course you're gonna freaking mind, because when you took the money from you, you didn't know what the outcome would be, and there was a 50% chance it would go down. So you're gonna want that guy punished, 'cause you're gonna want that behavior stopped, 'cause you're not gonna want the next guy to think they can do it. So it doesn't matter that he was the most brilliant, genuine, the most brilliant equity investor of our generation between Anthropic and Cursor. It just matters if he, if he took money and if that was against the rules, and I haven't heard the terms of service argument, Jason. That will be interesting. If he took money and it was against the rules, then he should be punished. If he took money and it wasn't against the rules, then he probably should walk, and the process will take place. Not my problem.

    26. JLJason Lemkin55:15

        So related to that, what happened to Matt Mullenweg? He was, he was out for a day and back. What happened to poor Matt? Did someone not read the bylaws, Rory? What happened? Did someone forget to pull the certificate of incorporation from Delaware?

    27. HSHarry Stebbings55:25

        So, so Matt Mullenweg is the founder and CEO of WordPress. Um, and he was ousted by the board, and then he came back, uh, and overrode them, it would seem. And now he is back as the CEO, and the power to the founder has reigned true here, and he is back as CEO.

    28. RORory O’Driscoll55:42

        Correct. And this is a company, Automatt, that has been the steward of the open source project WordPress, which is, you know, one of the most commonly used blogging and website platforms out there, right? Very successful product. Matt's the CEO of the company that manages the product. I think it's fair to say that the stewardship in the last few years have been tr- troubled. He's been in a big argument with WP Engines about, you know, a- which... Well, the argument is WP Engine is a hosting company that is hosting WordPress sites, and I think Automattic wants some of that revenue, so they've been pushing WP Engines. But the way in which he's behaved has been unhelpful to the open source project, because it's kinda like, "I will use my leverage to exert, uh, uh, d- I will use the leverage of my company to try and, frankly, uh, prevent other people from benefiting from the open source ecosystem," which seems to be antithetical to the idea of it. So I think it's been a troubled situation for a while. I think the truth is, the real issue is the world is passing that product. It's kind of a sad little thing, 'cause the world is passing that product by, and Jason will be able to tell you that, you know, you can build most of what you have in Lovable W- in, in WordPress with Lovable or Replit or any one of 10 things. And increasingly, they are, as I've quoted before, the Henry Kissinger thing about academic problems, a- academic arguments. The fights are so vicious because the prize is so small. The truth is, Aut- Automattic doesn't matter a damn anymore. It should try and build something new, but it's, it's kind of on the tail end of... I mean, to Jason's point about Matt, it's on the tail end of the tech trends. They should be doing things totally differently to try and survive in the brave new world. Instead, they're arguing internally. So that's kind of the zoom out comment. Within that context, that's kind of the big picture, and the funny thing is, like all litigations, when you get caught up in the detail of the day-to-day, you forget the big picture. The big picture is this company needs to point WordPress in a forward direction to think about how you take advantage of what's going on in AI and become a relevant player in the next five years. Otherwise, you won't be. That's the corporate imperative. Instead, the corporate imperative has turned into a pissing match between the board and the CEO, where now it looks like the CEO has won. Congratulations, you've won the poison chalice. You get to keep your diminishing empire. And it's worth pointing out, this is not a board full of evil VCs, right? And I've been on boards as an evil VC where you've had to take a f- you know, replace a founder. It sucks to the end. This is actually a board of, I think Salesforce is an investor. They have some really good independent board members. They don't need this grief. I'm willing to bet what happened, like now down in the tactical weeds, I think Jason probably nailed it. You probably have a board, they probably have a majority. They probably said to the CEO, "We're a majority of the board, we're independent directors, we think we should replace you." And my guess is the founder CEO went deep into the bylaws and says, "You are the board and you can vote to replace me, but I can actually also vote to replace the board."

    29. JLJason Lemkin58:46

        [laughs]

    30. RORory O’Driscoll58:46

        "I'm hereby voting..." I've seen this once. "I'm hereby voting to replace the board. You're all off the board. Oh, look, the new board is me, my pet dog, and my ventriloquist dummy, and a- after due consideration, we've decided I would be a great CEO." There you go. And all the independent board members at that point promptly resigned, 'cause there's no point in wasting your life and getting into a whole bunch of litigation about an ever dema- This is... Remember, Jason, your island, was it the Fortnite island that's continually getting smaller?
14. 1:03:50 – 1:06:38

    Why Venture Is More Extreme Than Ever

    1. RORory O’Driscoll1:03:50

       ... if you think about a couple of different agenda items that we've talked about here, you know, on the one hand, at the tr- at the trailing edge of tech trends, you have Miro getting bought for 2.7 times, and you have a nasty little spat over a decline- of a, a flat to declining asset in open source land in Automattic. And then on the front edge of the thing, you have companies like Instinct, you know, raising literally four weeks ago at two and a half billion, now raising a 10. You mentioned-

    2. JLJason Lemkin1:04:20

       [laughs]

    3. RORory O’Driscoll1:04:20

       ... the Jeff Dean kind of spinout raising at 10 million a few weeks ago-

    4. JLJason Lemkin1:04:25

       Billion

    5. RORory O’Driscoll1:04:26

       ... now potentially raising at fif- sorry, 10 billion. Now it's, of course, a million is not even a number anymore. A million is a unit of account for, you know, home design only. [laughs] Um, 10 billion, now raising at 50 billion. The, the big picture point, it, it, it's really Captain Obvious here, but it just shows venture, so unlike PE, is not about valuation and there's not, there's not any, uh, safe assets. It's just you're either in the head of the train in the new, new thing, and you know, everything is possible, or you're in the tail end of the train and life is shitty, right? You just need to, you know.

    6. HSHarry Stebbings1:05:03

       I was with one of the biggest CIOs the other day, and I said, "You've been doing this for 30 years. Have you ever seen a time like this? I'm cognizant that I'm on the younger-

    7. RORory O’Driscoll1:05:11

       Yeah

    8. HSHarry Stebbings1:05:11

       ... spectrum. I'm not that young anymore, but I haven't seen all cycles." Uh, and he said, "I've never seen a time like this. This is more nuts than it's ever been."

    9. RORory O’Driscoll1:05:20

       Yeah, for sure.

    10. HSHarry Stebbings1:05:21

        "This is unprecedented."

    11. RORory O’Driscoll1:05:23

        I think that's true because I... Look, and I was, I was investing only since, I love this, only since '93 or 1994. So I did live through the dotcom investing thing, and it was pretty crazy because you also had the whole millennial thing about, you know, Y2K and the world was going to end, just like now, we always have to have a world-ending thing. And you know, let's be honest, New Year's Eve, December '99 was a pretty wild freaking party in San Francisco, right? Half the people were getting toasted drunk because they were rich, and the other half of the people were staying up making sure that the Y2K thing didn't bring down the world, which was the actual, uh, worry at the time, bizarrely enough, right? But it's nothing compared to this. I think the ability of AI to just excite the imagination is just way higher. And the internet was awesome, but AI, you know, you can start talking about the AI, the software is human. You can get carried away. And then the second thing is, you know, instead of existentially worrying about the computers won't work because of Y2K, we now get to worry about the whole world ending. It's all, it's the same thing on a way more magnified scale, and the money is 10X bigger.

    12. HSHarry Stebbings1:06:23

        Because speaking of the money being 10X bigger, I sit in, in Europe, as you know, Rory, and remind me frequently. We had a-

    13. RORory O’Driscoll1:06:30

        Actually, Harry, you don't. You actually sit in England-

    14. HSHarry Stebbings1:06:32

        [laughs]

    15. RORory O’Driscoll1:06:32

        ... which deliberately chose not to be part of Europe, but I know what you mean. It's okay. Sorry, that was mean.

15. 1:06:38 – 1:10:32

    Mistral Raises €3BN: Europe’s AI Sovereignty Bet

    1. HSHarry Stebbings1:06:38

       Uh, listen, you know, I wasn't pro-Brexit, but I, you're technically right, I agree.

    2. RORory O’Driscoll1:06:42

       Yeah.

    3. HSHarry Stebbings1:06:43

       Very sad. Um, Mistral raises €3 billion. It's Europe's largest ever tech round. Um, they're gonna hit a billion in revenue by the end of the year. Uh, for a company that's had, I think, a lot of criticism, definitely in Europe, this was a very meaningful sign of progression and hope that actually we do have a horse still, so to speak, in the race. What should we take from this round?

    4. RORory O’Driscoll1:07:08

       It's less about being a competitor of Frontier Lab and more about AI sovereignty. I don't think you should take the fact you have a horse into it. If you're saying Mistral is now competing with OpenAI and Anthropic in the frontier model race, you and I know that would be bullshit. I think what you're really saying is Europe has decided based on, based on the antics they see from the companies, from the companies at the frontier in the US, coupled with the dynamics of the political interaction between the United States of America and Europe, that a, a technology as important as this has to have a sovereign European component. And, you know, even though it's obviously ludicrously inefficient from any kind of rational perspective, they've decided we just gotta make this thing happen and give Mistral enough business to make sure that it is a viable European AI competitor. And it's clearly Mistral and, you know, there's a long tradition of Europe doing... I mean, Airbus is an example of that, right? They said, "We can't just be relying on the Americans to make planes, because otherwise we're a vassal state." And they said, "We're gonna make it happen. France and Germany are gonna make planes, you know, and we're just gonna do it." And it took 10 or 15 years, but they built a viable competitor. It's probably the same thing here. They're simply saying, we can't afford to have... I mean, you know, we've seen instances where, I think recently, I'm doing it from memory here. I think the US government said to Anthropic, "Thou shalt cut off all other countries from Fable." I think it was Fable or one of the most recent models. "Cut 'em off because it's a security risk." And we didn't say cut off, you know, Russia, but leave the United Kingdom and France and Germany. We said cut off everybody. If you're in Europe the day that happened, you said to yourself, "We can't rely on these guys anymore," right? And the day that happened, you made Mistral a viable European competitor, right? Is it gonna be as big as us? Nah. It's not gonna... I mean, I don't think it's gonna be as... I mean, Airbus has actually overtaken Boeing. Took 30 years, right? But in the short term, it's not gonna be any near as big a market cap as OpenAI or Anthropic, but it's gonna be a winner, and it's gonna be the European winner. So thank you very much politics. If you, if you're a, if you're a Mistral shareholder, you should be very grateful for the current political tactics. It's just made you a couple billion bucks.

    5. JLJason Lemkin1:09:19

       Also, you know, just to be techni- I mean, the round's led by Samsung, right? So-

    6. RORory O’Driscoll1:09:24

       Yes

    7. JLJason Lemkin1:09:24

       ... they're generating, I think, $200 billion of free cash flow a year right now. So $3 billion, like, I don't, I, I don't know if I take the markup.

    8. RORory O’Driscoll1:09:31

       It's not even much.

    9. JLJason Lemkin1:09:31

       I, I mean, I guess I would take the markup, but you could argue it should have an asterisk and a dagger next to it, because is it really real if it's led by Samsung, right?

    10. HSHarry Stebbings1:09:39

        Well, and the last round was led by ASML.

    11. RORory O’Driscoll1:09:41

        Yes.

    12. JLJason Lemkin1:09:42

        Yeah, I don't know if those count.

    13. RORory O’Driscoll1:09:44

        But the, the money counts. I, I agree. Look, the valuation-

    14. JLJason Lemkin1:09:47

        Yeah, yeah, yeah

    15. RORory O’Driscoll1:09:47

        ... I agree. Jason, I agree.

    16. JLJason Lemkin1:09:48

        The money counts-

    17. RORory O’Driscoll1:09:48

        Yeah

    18. JLJason Lemkin1:09:49

        ... but I don't know if the valuation is, is connected to any rea- Like, we should... That it's the same as, uh, as an objective valuation done by financial parties. I just, it's just not, right?

    19. RORory O’Driscoll1:09:58

        Agreed, but there is some intrinsic value to be... Like, you know, if... I mean, let's ask what the... I mean, brutal comment, if the American winners are worth a trillion, and the European GDP is roughly 70, 80% of the American GDP, I don't think that implies, to be clear, $800 billion, but you might get to 30, 40, 50. It's, it's not a crazy end state, but I agree, Jason, it feels like you're prob- I don't think they did it on the basis of market comps and compost. I think they did it on the basis of state strategically.

    20. HSHarry Stebbings1:10:28

        Boys, is there any others that I've missed that you think we should do?

16. 1:10:32 – 1:15:55

    Adobe’s New CEO

    1. RORory O’Driscoll1:10:32

       Jason, any comment on Adobe linking on, new CEO taking over? I saw the results. W- Any, a- any thoughts? 'Cause you're the Ad- you're the Adobe expert here.

    2. JLJason Lemkin1:10:40

       I, I think it's great. You take, you take two non-founder folks slowly leading different business units into no growth, and you, you pick from the, you pick from the lesser of two okay leaders. I mean, you know, I, I, I, I, I, I think it's just Miro at scale.

    3. HSHarry Stebbings1:10:59

       Ooh.

    4. JLJason Lemkin1:10:59

       But with so much scale that it, it survives, right? It's a rem- You know what it is? It's a reminder that Miro didn't... In today's... You know what's funny? If when the three of us met, I told you about this $600 million company in collaboration, we would think that was scale, right, in the old days. It's not scale. Adobe has scale. So even if Adobe isn't really making the right moves in AI, and it can't really afford it, and it, and, and it's, and it's just moving the deck chairs around for its CEO team, where the CEO said, like a year ago, Shantanu said he's gonna retire, and it took him a year to, to decide which of the two internal candidates to promote. I mean, it's pretty bad. Um, I think it's a nothing burger. It's a, it's a sign that nothing's gonna change. If... You know what it is, Rory? It, uh, I mean, I could add one last. It's a sign just nothing, nothing's gonna change. It's a sign of capitulation. It's a sign that we're gonna just keep bull- bulldozing our way through the world the same way, right? Uh, versus really changing. Super high margin, bleed our core products, um, add some imaging from, with AI, and kind of call it a day, right?

    5. RORory O’Driscoll1:11:56

       I broadly agree with you, and it's interesting. They did the, "We're not leaning into AR growth, we're leaning into getting free usage," and that was the play they did in the '90s.

    6. JLJason Lemkin1:12:05

       That's their fake AI metric of the week.

    7. RORory O’Driscoll1:12:07

       And that's where I was going. I, I think, you know, uh, 'cause this is where I, the reason I asked you is, that's a playbook that might've worked two or three years ago. But to your point now, what you're basic... 'Cause their net new ARR went down significantly. In other words, the growth of new ARR didn't happen. So they have their ARR, AI, AI ARR metric went up, but overall ARR went down. And you know what that means, is you're just channeling some into the good thing. But yes, you at least with the program that you need to win, which is a start, but you're not winning, 'cause th- the Jason rule, which I go back to, if it ain't growing, you ain't winning. If people ain't paying for it, you ain't winning, right? And yeah, they have scale. They're not going away. You know, $25 billion in revenue, whatever. Um, but yes, uh, there was no news here. Which is interesting 'cause overall it's been a pretty good few weeks for software in general. I mean, you've seen big jumps and thing... I'd say huge jumps in the cyber stocks, big jumps overall in world cl- And the entire SaaS apocalypse has been unwound. But I think, Jason, to your point, what's been happening is there's been a real distillation of, oh, these kind of businesses aren't gonna be winners. They should stay low, and then these kind of businesses are doing super well. And, you know, Adobe is in the first, more in the first category than the second

    8. HSHarry Stebbings1:13:20

       So boys, their market cap today is 105 billion.

    9. RORory O’Driscoll1:13:24

       Yeah, about 100 billion. 25 billion, yeah, exactly. Kicking off cash.

    10. HSHarry Stebbings1:13:27

        In, in three years' time-

    11. JLJason Lemkin1:13:28

        Jeff Dean should buy them just for some extra revenue on the side

    12. HSHarry Stebbings1:13:31

        ... in three years' time, in three years' time, what is their market cap?

    13. RORory O’Driscoll1:13:34

        120, 130.

    14. HSHarry Stebbings1:13:37

        Oh, wow.

    15. JLJason Lemkin1:13:37

        Same as today. It'll be the same as today.

    16. RORory O’Driscoll1:13:39

        Yeah. Plus or mi- You know, it's not going away. Basically, I, I, again, from memory, you get to that m- It's a sub 10 times cash flow mul- multiple, Harry. So unless it, unless the ARR evaporates, not just doesn't grow, but evaporates-

    17. HSHarry Stebbings1:13:52

        [laughs]

    18. RORory O’Driscoll1:13:53

        ... you know, you can get down on cash flow multiple. But it won't be ex- you know, but you'll have lost relative... If Jason's view of the world, the Menlo view of the world is correct, if there are 10 or 100 $25 billion plus outcomes, which by the way I don't think, the point, your relative significance will go down. I mean, you know, I couldn't tell you HP's market cap now to save my life, right? Because it doesn't matter, right? And that's the same thing. You know, just you, you'll do fine. You'll cash flow positive. Maybe if you find the right leader and the right product, you'll reignite growth. You know, your trajectory is not to blow up, but your trajectory is to trade at eight or nine times cash flow.

    19. JLJason Lemkin1:14:28

        Well, that's the way it was for decades.

    20. RORory O’Driscoll1:14:30

        Yeah.

    21. JLJason Lemkin1:14:30

        Adobe stock didn't move for a, for a decade. It was traded on cash flow. Shantanu was amazing of that. Then cloud worked better than anyone expected.

    22. RORory O’Driscoll1:14:37

        Yeah.

    23. JLJason Lemkin1:14:37

        And either they're gonna run that playbook for another decade, or they'll have some magical AI thing that even Canva hasn't figured out. I'm not betting, I'm not betting on it today, but they, you know, I, I was there when cloud happened. They didn't expect it. They, they could have a killer AI app that just... We- we're early in the AI thing, so.

    24. HSHarry Stebbings1:14:53

        Would you rather invest in Canva or Adobe today?

    25. JLJason Lemkin1:14:56

        I'll tell you why you just can't invest in Ca- I want Canva to win very badly, right? I, I love them. He, he... You just can't be sh- not growing. Like ServiceTitan got destroyed for lowering guidance. Fell 30% last week, okay? I think Canva fell 30 or 40% this year when they had to lower guidance, right? Maybe more.

    26. RORory O’Driscoll1:15:14

        They are growing at 20.

    27. JLJason Lemkin1:15:14

        Right? They're just not public.

    28. RORory O’Driscoll1:15:15

        And look, to be fair, de- defending the big-

    29. JLJason Lemkin1:15:17

        But you gotta grow. But you, but, but you gotta, you got... At least Adobe is gonna get to this stable plane, to Rory's prior point. It's gonna get to a stable plane. It's not impressive, but it's gonna grow 6 or 8 or 9% a year with lots of free cash flow, right?

    30. RORory O’Driscoll1:15:31

        I'm gonna give you the numbers. Canva's numbers, right? They are growing. They're growing 20%. They, they, they, they were growing 30%. They're growing at 20% now, and I know that because in Australia you have to file your revenue with the watchman columns.
17. 1:15:55 – 1:19:17

    What Happens When Growth Companies Become Value Stocks?

    1. JLJason Lemkin1:15:55

       or value?

    2. RORory O’Driscoll1:15:55

       Okay, I'm gonna agree with you now, and the only reason I interrupted you, Jason, I didn't agree when you said they're not growing. I wanna be precise because they actually-

    3. JLJason Lemkin1:16:02

       I missed, hang on. They're decelerating

    4. RORory O’Driscoll1:16:03

       ... hang on. Let me finish.

    5. JLJason Lemkin1:16:03

       Their growth is decelerating.

    6. RORory O’Driscoll1:16:04

       What you said now is really the insightful point. Seriously, I wanna pause on this 'cause it actually comes to a lot of different things. Going from a growth story to a value story is really tough, right? You go from a revenue multiple to a EBITDA multiple. I think, is it Gokul? I don't pronounce the guys name. He had a really good points, post on T- Twitter recently where he basically, above 30% growth you can use a revenue multiple. Below 30% growth you have to use an EBITDA multiple. It was a very insightful comment. It basically said if you're growing fast, everything is forgiven, and you'll be valued on a revenue multiple. If you're growing slow, nothing is forgiven, and you'll be valued on an EBITDA multiple or something li- or a low revenue multiple, right? It's just a different world, right? And I actually did, I remember I did a post way back that, you know, Box, when out as a public company, went through that transition and came out the other side, but it takes three or four years. Because when you go from six or seven times revenues to 20 times cash flow, you gotta get that cash flow to 30% just to hold the stock flat. It's brutal. It takes an, did that po- it takes forever. And this is going back to the point is I think Canva is still growing very nicely, but it is deaccelerating. And e- even though I like them and I want them to win, they're founder-led. Whereas Adobe, as you say, is at this point exploiting me every time I buy their product. I loathe their licensing system so much. The hard truth is if, if I have to go through that transition, if you're, when you're going through that transition, it's hard to get to a public offering. So when you ask about the two stocks, Harry, what you're basically saying is would you like to own something at eight times cash flow with 13% growth where at least you're liquid, or would you prefer to own something at 20% growth, admittedly deaccelerating? The question is can they get through the liquidity window? You know, price clears all markets, and there's a relative... I mean, I think the interesting question y- yeah, is how you think about relative valuation, right? But I just think the, uh, uh, uh, and having to go from the growth valuation world to the value-based world sucks, and doing it while private is hard 'cause it takes a long time to just get through that nut. And during that time you're standing still, right? I mean, it sucks doing it as public too. It just sucks doing it in general 'cause you get an, a different investor base, you have different dynamics, but it's just a hard row to hoe. And, you know, it's, it's the risk of being private for a long time. You know, Stripe avoided that risk 'cause they reaccelerate, and I really hope Canva can find a way to reaccelerate too 'cause I want, you know, the good, I want the founders to win. I want good guys to win. But, you know, if you look at it, if instead of Stripe reaccelerating to 40%, they'd accelerated down to 20 and 15, then they'd, you know. I mean, they still have, they have huge cash flow, so they, yeah, no matter what they're fine. But it's just interesting. Slowing growth, getting to ca- and being valued on a cash flow basis is a profound adjustment in the valuation metric. Oddly enough, as I think about it, Stripe is the only guys who could weather that storm 'cause apparently it kicks off so much cash. Good job, them.

    7. HSHarry Stebbings1:19:07

       Rory, we gotta go let Jason be a superstar at Dreamforce.

    8. RORory O’Driscoll1:19:10

       Oh, you what? I'm sorry, Jason. You're off to be a superstar.

    9. HSHarry Stebbings1:19:13

       Yeah. He's off to be a superstar with Mr. Marc Benioff. Yeah. He's the star attraction

Episode duration: 1:19:28