Is a $4.5BN Exit Enough in VC? & Harvey Raises $150M & Why Google is a Buy and Amazon is a Sell

1. 0:00 – 1:03

   Intro

   1. JLJason Lemkin0:00

      For me, it's like I don't even wanna take meetings with mortal founders.

   2. HSHarry Stebbings0:03

      This is one of the spiciest shows yet. It's my favorite show of the week. Jason Lemkin, Rory O'Driscoll breaking down the biggest news in tech that's happened over the last seven days.

   3. RORory O’Driscoll0:13

      This actually shows that sometimes Bill Gurley is wrong, 'cause his idea is that these IPO share allocations are, quote, "free money".

   4. JLJason Lemkin0:20

      The amount of wealth in Silicon Valley is just unprecedented in our lifetimes. It's just gone up dramatically the last 18 months. But the horrible question in venture and startups, it is horrible, is this a $4.5 billion exit good enough today?

   5. RORory O’Driscoll0:32

      A founder's optimized fundraising is a VC's below ownership target. The health of the entire US economy depends on the answer to this question. It turns out [censored] off and sell your shares is not an acceptable answer. There's a little part of me that's kind of a bit sorry for Sam Altman 'cause of where he's put himself.

   6. HSHarry Stebbings0:51

      Ready to go? [upbeat music]

2. 1:03 – 20:53

   Navan's IPO: Winners, Losers and 20% Crater

   1. HSHarry Stebbings1:03

      Boys, we are back. We have some big news this week, and we're gonna start with some liquidity, baby. We're gonna start with Navan's IPO. So in the theme of discussing and providing some context, Navan obviously IPO'd this week. Oren Zeif invested $150 million, returned a billion, and then it slightly cratered, uh, 20%. So I'd love to start, how did we analyze this? Take me to your thoughts.

   2. JLJason Lemkin1:33

      Well, look, I'll, I'll let Rory do some deeper analysis. I'll, I'll tell you the whole... This and, um, Dev stepping down from Mongo made me kinda wistful.

   3. HSHarry Stebbings1:41

      Mm.

   4. JLJason Lemkin1:42

      Um, it just feels like the very end of an era, the end of the SaaS 2 point, 2.0 era. Um, you know, Dev stepping down after incredible run at Mongo. Company dipped to, like, 13% growth. It's now back well into the 20s. It's a good run. Handing off the baton. Um, and I, I kinda posted on Twitter it was the end of the era, and Brian Halligan was like, "Yeah, a lot more are gonna retire soon," right? So that, and then for me, Navan, it just was kind of a bummer. I mean, Ariel is such a tenacious CEO. It's gr- it's a great IPO. You know, Rory's gonna tell us it doesn't really matter if it was down or up. You got it done. Um, Bill Gurley won. But it's just kind of a bummer that a company at 700-plus million in revenue growing 32%, you know, stru- struggles in its IPO at 5 billion. It's just, you know... All of our portfolio companies have to do much better, right? They've all gotta be Harvey or better, all of them. It's just... And so it's not, it's not discour- I just felt wistful that, like, the, the combination of Dev retiring and Navan's, uh, stumble IPO just felt like the, to me, some of the last pieces of the last era. And so be it, right? We're in the age of AI, so be it. But, um, time to move on to the new era, boys. [laughs]

   5. RORory O’Driscoll3:00

      Yeah. I mean, wistful, huh? Didn't have you down as a wistful guy. But I think there, there, there's actually a lot to unpack in this. And first of all, let's start with the basic. It's a great company. It survived a near-death experience. It's a travel company, and that's a tough place to be when COVID happens. It came back from that. The investors stepped up, financed the company. The CEO stepped up, kept the company alive, and now they have, you know what? Zooming out a million miles, it's a great outcome. It's a, you know, at the day of the IPO, 6 billion, now high 4.8, 4.9 billion market cap outcome, right? Big picture, it's great, and Jason's right. I am gonna say, you know, two years from now, the stuff will all be in the noise, and it'll be seen as a really solid outcome, right? So, and yeah, you als- you know, and so that's kind of the big picture. It's a good company. It's operating in compositive even though the financials look a bit messy. So that's the thing that counts. You can then, you know, so probably pause there, but then if you wanna talk about the specifics of the IPO, right? Look, what happened is they priced an IPO in the middle of the range, and it traded down a little on the first day, and then I think on the third day quite a lot. It's at 17 bucks a share right now, so a pretty tough debut from its IPO to today, right? And you said something, Jason, that I actually disagree with. You said Bill Gurley would be right. Actually, this actually shows that sometimes Bill Gurley is wrong, 'cause his idea is that these IPO share allocations are, quote, "free money." You get your IPO, it always goes up, and they're leaving value on the table. This is an example of an IPO where, you know, if you look at it from the perspective of the issuer of stock, not only did they not leave money on the table, they actually priced at what now looks like a high, right? So it's actually proof that the, that Bill Gurley's wrong and that the buyers of IPO stock are correctly saying, "I want a discount on the good ones because every once in a while, and you don't know when, this shit goes wrong, and the stock goes down. So I want the 20% pop on Figma," that became obviously a much higher pop, "in return for the risk of a 20% drop on Navan," right? So it, I, I would argue it actually is almost untypical to what Bill's saying, which is it's free money. It shows that sometimes... I mean, most of the time it is. It skews positive. The day one pop on average makes you money. But it does show that every once in a while, for circumstances that we'll talk about in a second that are hard to predict, things just go wrong, and it blows up in your face.

   6. HSHarry Stebbings5:37

      Can we touch on something that people don't talk about often but it's often reported? There's, like, the winners and the losers, and their stakes are always said very loudly in media. You know, Oren Zeif, 150 million to a billion. Lightspeed, 257 million to a billion. Andreessen's stake worth 635. A lot of people take that at face value and think that is cash in bank today for these firms.Rory and Jason, you've been through IPOs. That is not, for people that aren't aware, what does the lockup period look like? When does that turn into cash in bank? Can you just share some insight on that?

   7. RORory O’Driscoll6:11

      Sure. I mean, the typical lockup period will be six months, which means the minimum when you can start selling, other than in a registered secondary, is six months from now, at which point investors can start to sell and maybe they'll either sell or distribute their stock. It's highly likely that it takes at least 18 months to get out of your position in a company like this, which, you know, if you have normal appreciation on average, can actually end up doing better than you priced at the IPO. But if you have, for example, you know, the Figma thing where you have the pricing and then a huge first-day pop to 140 and everyone reports this, "Oh my God, X, Y, Z investor made 4 billion," and then you fast-forward a year and a half, they very happily make 2 billion, but maybe it feels like [laughs] a little bit of a disappointment if you're mentally spending that four that you thought you had for 24 hours, right? So the IPO pro- I mean, it's, it's significant, but the economic significance is limited. And in fact, when we used to track exits every year, which we do, we used to track as of IPO and then we used to call it the locked-in value 18 months later. And our mental model was that when you wanna figure out how much money people actually made, look at the market cap of the IPO 18 months later, and that's probably a much closer estimate. And in some cases it goes up massively, and obviously in some cases it goes down.

   8. JLJason Lemkin7:34

      Yeah, I don't know what, uh, what Scale's policy is, Rory. I'd be interested to learn. When I entered venture, what I was taught back in the day, right, was base case distribute for 24 months ratably after the IPO. That was, that... You, you know, if you didn't believe in the company, you might pull it forward. If you thought you had a Veeva in your pocket or a Shopify, maybe Bessemer didn't, maybe you hold longer. But to, for sanity's sake, uh, and also to manage flow, right? Because you can only sell so much if you own a large stake. That was a rough rule. Figured it would take you... So, so six months to lock up, 24 months to distribute, that's 30 months total after the IPO before you're getting most of your carry and your LPs are getting their distribution, right? So it could be well into 2028, 2029. Now, there was almost 200 million of secondary, right? Um, but I don't think the big guys sold any as near as I can tell. The, the founders took out 50, which I like. I like that much better than in the seed round, by the way. I'd rather see them take 50 in the IPO than after demo day. I think it's a, it's a better time. Um, but it looked like for the most part it was just the smaller guys that sold. Uh, I, I could be wrong there, but that's what it looks like.

   9. HSHarry Stebbings8:38

      Does this impact your price sensitivity today when investing, when you see 700 million revenue, 30% growth, positive economics, 5 billion market cap, and then you see some of the prices that we're paying?

   10. RORory O’Driscoll8:52

       I mean, well, the, but the problem is the prices you're paying are for things going at a very different rate. I mean, where it should. So let's unpick that. At a minimum, your operating assumption should be that for mature companies, SaaS, transaction type co- whatever, right, it's not just SaaS, it can also be non-recurring revenue companies with decent margin profile and 30% growth, we are back to six to seven times NTM. Right? And if you recollect a while back I said that's kind of like the, the 10-year treasury equivalent of SaaS, right? That's what they're worth. So if you own one of these things, that's how you should think about it, what it's worth, right? And yeah, that impacts how you think about your late-stage portfolio, how you think about a little extra growth is worth. But that's not directly applicable to, you know, some company doing 50 million and 5X-ing or doing 10 million and 10X-ing, right? Because, you know, those different growth rates mean it's not a like-for-like comparison, right? So pause in there. I mean, obviously what it says to you, w- I mean, again, it's the age-old thing. When that 10X year-on-year growth rate deaccelerates to a 30% growth rate, then you'll probably trade at the same valuation multiple as the companies that are already trading at a 30% growth rate, which is 7X. In the end, if these, if the growth rates of the new companies become much closer to the growth rates of the existings, they'll trade at the same rate. There's no magic there, right? But right now they're not. Right now, AI growth rates for these companies are in a very different place, as you know well, Howie.

   11. JLJason Lemkin10:25

       Listen, of co- it's, it's very interesting to see Navan at the same time as OpenAI and Anthropic raise their estimates, right? OpenAI raised it to 100 milli- 100 billion-plus in 2027, right? I forget what it was Anthropic, we should look. They just r- said their, they, they way raised their estimates. So when we see this, let alone the Harveys, uh, Harry, let alone the Harveys. When we see these, uh, it, it just, for me it's, it's, it's like I don't even wanna take meetings with, with mortal founders. I don't even wanna take them, and it, it's terrible, right? I mean, literally I just did a deal with some founders I love, and it was very expensive for me. I did a deal at 50 post. Okay, post, with everything else in it. Post, okay? That's a lot for me. And okay, for me to make 100X on that deal, okay, to, with dilution, and dilution in many cases is higher these days for a lot of reasons. It has to be better than Navan for sure. Like, it has to way be better than Navan for me to make any, enough money on that seed deal, right? Late seed. But so do I really believe this deal I just did is for sure gonna be worth more than Navan? I don't know. [laughs] And when we started, Rory, these deals would be... And I'm not being, uh, curmudgeonly or anything, but, but realistically when, you know, at this, w- it, they were easier to see. Actually maybe it was always hard. But now, like, it, you gotta see these $10 billion exits, but if they're not utterly breaking the mold, if they're not breaking the mold, it's hard to really believe it's gonna be worth north of 10 billion, is it?

   12. HSHarry Stebbings11:53

       S- so Jason, I, I get you, but I've actually adopted this mindset from spending so much more time with you.

   13. JLJason Lemkin11:59

       Yeah.

   14. HSHarry Stebbings11:59

       And I bring it to the IC, and people in my team are like, "You have to turn the next card to see sometimes." And it's not obviously a $10 billion company on day one, and actually value can accrue in increments over time, and you could miss some great ones by being flippant and being like, "Oh, it's not a $10 billion company."

   15. JLJason Lemkin12:20

       You, you will. It just makes, it just makes... Depends on your fund size. If you're doing more second and third checks and the first check is smaller, you have a lot more flexibility, right? I mean, you literally you can. If your first check for me is a very large percent of the fund, I don't have a lot of margin for error, right? I don't have m- if I'm writing five per- 4 to 5% of my fund as a first check, I don't have the other 145 million that, uh, that, that he had in TripActions [laughs] in Navan. I just don't have the other 145 million. I, I should... I guess I should have developed more SPVs and, and opportunity funds, but for me, that first one has to work. If it doesn't have to work, then you wanna p- I th- I mean, you wanna play more cards today. I do, I do think it's a good idea.

   16. RORory O’Driscoll13:02

       I recoil from the, "I don't do mortal humans." It's a bit... 'Cause I think, uh, you know, it sounds a little judgy, dare I say it, Jason. But what I do think-

   17. JLJason Lemkin13:11

       Judge me.

   18. RORory O’Driscoll13:12

       I love it.

   19. JLJason Lemkin13:13

       Judge me.

   20. RORory O’Driscoll13:13

       What I do think is-

   21. JLJason Lemkin13:13

       Just come closer to the mic.

   22. RORory O’Driscoll13:14

       And I, I can't argue with you

   23. JLJason Lemkin13:15

       Just come closer to the mic and then judge me.

   24. RORory O’Driscoll13:16

       I think the sobering fact here is, you know, you, that you now have to assume that that 400 million, 500 million is the threshold for an IPO, and if you say to yourself that you only wanna do deals where you at least have the upside of an IPO or the IPO potential, then you're... Th- then the bar to what a doable, successful venture-backed deal with upside has gone up, right? I mean, it's what we discussed, it's that the... You know, we talked about it in our fewer but bigger winners, right? So at any stage, if you're keeping the stage the same, if you, if you were doing seed before and you're doing seed now, before this seed was an eight-year journey where 20% of them get to the end of the line, and now it's a 12-year journey, maybe only 10% of them get to the end of the line, right? And that's just mathematically true. Now, the real question is, what do you do with that information? As Harry says, you can have one of two. You can either say a priori, I'm only gonna do the $10 billion ones, which is one approach. And the other, Harry's approach is more the, you never know up front which are gonna be the $10 billion ones, so you do 'em and you look at the next card and you play it out, right? And it's a little bit, if you have optionality, you can afford to do it the Harry way. If you're picking, and most of your dollars are going in when yours are going in, Jason, then you're exactly right. At some level, even though I don't like it, I'm coming back round to now, your comment is correct. I don't like the description of m- mere market, but you do have to go into these deals looking for a higher believable exit story, given that the exit bar's gone up. And you can't do, you, you can't do clever little small markets that are going to top out because you're probably only looking at an M&A outcome, and then you've just intrinsically eliminated the magic pixie dust part of the alternative.

   25. HSHarry Stebbings15:09

       Fuck, this business has got harder.

   26. RORory O’Driscoll15:11

       It has. It has. And, and the other interesting thing to note-

   27. JLJason Lemkin15:15

       Well, yeah, but, but also people are getting richer at the same time.

   28. RORory O’Driscoll15:18

       Yes.

   29. JLJason Lemkin15:20

       The amount of wealth in Silicon Valley is just unprecedented in our lifetimes. It's just gone up s- dramatically the last 18 months.

   30. RORory O’Driscoll15:26

       Yes, in a very concentrated fashion. Yes.
3. 20:53 – 34:16

   Harvey Raises $150M at an $8BN Valuation

   1. HSHarry Stebbings20:53

      you, Jason, you mentioned Harvey. Harvey raises 150 million bucks, $8 billion valuation led by our dear friends at Andreessen. Now, I actually tweeted about, I was talking about this, and, uh, a little insider at Harvey, uh, one of, uh, their not so, uh, quiet investors shared with me that they're at 150 million in ARR. Their DAU to MAU ratio is 40%, which I thought was astounding, right? Usage-wise, phenomenal.

   2. JLJason Lemkin21:22

      I don't think it's astounding, but keep going.

   3. HSHarry Stebbings21:25

      GRR-

   4. JLJason Lemkin21:26

      Uh-huh

   5. HSHarry Stebbings21:26

      ... 98%, NDR 170%. How do we think about this latest round for Harvey? And how do we-

   6. JLJason Lemkin21:33

      Sorry, what's the growth rate? That was at...

   7. HSHarry Stebbings21:36

      They didn't share that one.

   8. JLJason Lemkin21:37

      Okay. 150, uh, let's go 150 in revenue, right? Outstanding NRR. People there really buying more, 170. No one's leaving. GRR of 98%, right? And DAU, MAUs, you're impressed, but it just means they're logging in every day to use a legal tool. That's what I would... I, I, I g- that's table stakes to me. They use it every day, right? But it'd be a flag if they didn't, right? I... Hold on. Let me put it in the SaaStr AI, 8 billion, the SaaStr AI c- uh, val- valuation calculator says. What did the, what did it go out at? [laughs]

   9. HSHarry Stebbings22:05

      8 billion.

   10. JLJason Lemkin22:06

       If it's 400 forward revenue, that's 20X.

   11. RORory O’Driscoll22:09

       Agree. That's exactly-

   12. JLJason Lemkin22:10

       That's what it is. 400 next year. Their 400 ARR, that's what they're predicting. 400 ARR. Not GAAP, 400 ARR. That's my guess.

   13. HSHarry Stebbings22:17

       And 150 million raise. For Andreessen coming in, you're... I mean, this is like a dilution-wise, very small for the company.

   14. JLJason Lemkin22:25

       I love these rounds of, like, getting nine figures for 1 or 2% of the company, honestly. It sounds like I'm being facetious. I, I do love these as a seed investor. They're great. There's no dilut- there's no effective dilution to these rounds, to Harry's point. They're great, right? Now, there may be a little pressure on the exit, but there's no, [laughs] there's no dilution.

   15. RORory O’Driscoll22:40

       You know, they've executed really well in a core domain where LLMs were going to have a profound impact. I mean, what's fun about it is, up until now, you know, legal had been a pretty barren place, I mean, in terms of software sales. You have companies like Filevine and Clio that have, you know, grow- built decent sized businesses, but haven't yet gone public. And not a lot have happened in legal. You know, I think LLMs, by virtue of the fact that they manipulate language, which arguably is exactly the definition of what a lawyer does, um, perfect fit. So I mean, and I think they've done a great job. They've established kinda market presence in the end law very quickly. They established a brand quickly. They've executed well. The growth is clearly there. I mean, I think when you start thinking, when you're really asking does quote unquote 8 billion make sense, right? What that really boils down to is a TAM question, right? They're p- they are, they're clearly in the lead. Lago is clearly second, focused on lawyers, uh, in, um, whatchamacallit, um, you know, corporate law practices. The question is that, uh, the, the constraint there will be the TAM size, right? How big is the TAM? How many, you know, how many law firms? How much spend per lawyer? There's a million lawyers in America, half roughly in-house, half roughly, you know, external. You know, does the math support a $24 billion 3X from here company? And going back to what we said earlier, 24 billion, let's assume that the law, let's assume that in the end it's a 30% growth company like everyone else, and it's a 7X times. That implies a $3 billion revenue line. Is there a $3 billion software business selling to lawyer, to, um, corporate law? Not crazy. Westlaw is bigger selling information, but, you know, that's the kind of scale you have to have. You basically have toBe such a big automation tool for these lawyers that they're willing to spend, you know, equivalent dollars, you know, thousands of dollars per year in subscription to make the math work. So it's a ton. We're clearly gonna be number one in that market, and the only question, if you were underwriting that at eight billion, is, is this a one billion a year spend or a three billion a year spend? If it's a three billion a year spend, maybe you get there.

   16. HSHarry Stebbings24:48

       Totally agree. I think it goes back to your statement that you said episodes ago, which is, like, the core determinant of our success in venture with the AI transition is will we see the transition from software spend to human labor spend... Or sorry, from human labor spend to software spend, and I think that's the time question-

   17. RORory O’Driscoll25:02

       You, no, you're trying to-

   18. HSHarry Stebbings25:03

       ... in other words

   19. RORory O’Driscoll25:03

       ... 'cause selling software to lawyers is a particularly shitty business. It's a more constrained business. You've gotta do more, you gotta help more, you gotta speed them up. And it's not all or nothing, by the way. This kinda, you know, I, I've been seeing a lot of good literature on it. It's not about automating people, it's about automating tasks. You've got to make them a lot more efficient, and they gotta be able to track that. And, and if that happens, then it all makes sense.

   20. HSHarry Stebbings25:25

       We, we mentioned liking these rounds for their low dilutive characteristic or nature. Um, you know, there was a, there was a good piece from the information this week about Benchmark lowering their ownership requirements, and McCaw being the example. They only have ten percent where they always normally needed twenty percent. We always knew this with Benchmark. In general, has AI seen a reduction in ownership across the board for this generation of venture?

   21. JLJason Lemkin25:51

       Every deal I've been in, my God, uh, it's, it, it is, uh, o-ownership is attacked at a level I've n- I've never seen. Um, and so that's my conceit investing today, um, is giving, giving up on that, right? Is for me, you know, I, I, I feel like I can only make money if I own double digits of two winners per fund. I feel like that, mathematically, that's the only way I can make money, and the last three investments I've done are in the six to eight percent range, even though that's my rule. But what am I gonna do? Not do the, not do the deal? We also know that's the dumbest thing of all time, right? Um, so I'm literally gonna write my LP, uh, report up in a couple weeks, and I'm gonna say, "My, my resolution for 2026 is to get my ownership up." [laughs] We'll see, we'll see how I do against my resolution, but that's my main, uh, my main resolution. It's like, yeah, I, you can do it a few times, but if you do, if you do it every time, it's tough. But I don't know what you do in this world if the companies are capital efficient, they don't need you. It's complicated. You don't really... In a hot company, you don't really control the die, to use kind of, like, lame VC terminology. You don't control the die.

   22. HSHarry Stebbings26:57

       Jason, why didn't you raise 125 and then you can have more ownership?

   23. JLJason Lemkin27:01

       No, no, that's, uh, uh, maybe that... Well, that's a different mistake, but this is really just, this is all there is.

   24. RORory O’Driscoll27:06

       Agreed.

   25. JLJason Lemkin27:07

       Yeah, you could, you could, like, if there's a co-investor, I guess you could be a total jerk and, you know, do the, say, you know, "It's me or nothing." Um, I've tried that once in my whole career and just not my vibe. It backfired on me. Of course, that company wasn't that successful. But, um, if you wanna be somewhat founder centric, um, the best thing I know how to do is say, "Listen, I just need to be the largest investor, and let me invest the maximum I can in the round," and that's as far as I go. If you, if you're not willing to put the extra dollar into the deal, don't do it, for sure. But if they're selling ten percent, it's hard to buy more than eight percent. [laughs] It's just gonna be hard.

   26. RORory O’Driscoll27:41

       Yeah, uh, 'cause I think it's mu- multi-causation. So, uh, I, I mean, I'm breaking apart your question, Harry. The one question is are, are VCs getting less on average in these deals? And then the second part of your question was, quote, "because of AI," which, um, we're gonna agree is a meaningless phrase and try and fix it later. So on the first, I, I, I think they probably are, right? I think there's no doubt in my mind, I mean, I, I think it is harder to get 20% ownership for the super early stage funds. It's harder at our stage. You know, our target would be 10 to 11% on average, A or... You know, probably late A or B. Some earlier, some later than that. It's harder across the board. There's no doubt that that's the case, right? And, you know, we can, you know, take M- Mercur as benchmark as a premier firm, and I will be validated again. As I said, reports of their death were greatly exaggerated. That sounds like an amazing 21 fund they've reported. But yeah, that's an amazing firm courting a great company and only able to get 10%. What, as Jason said, what are you gonna do? If they only need to sell 10% of the company to fund their needs, right, then, um, you're only gonna get maximum 10. And you can either decide not to play, which would've been a very dumb decision, or you can decide take 10% and keep going, right? Now, it's interesting. Why is this happening? There's a bunch of different reasons, 'cause you can't say because they're capital efficient, because let's be frank, some of these AI companies are the least capital efficient companies in the history of humanity, right? Mercur, pretty capital efficient. OpenAI planning to spend more money than we thought existed in most entire continents, and they're not stopping yet. So it's not capital efficiency, not capital efficiency, right? On the capital efficient ones, if you're so capital efficient that you don't need to raise a lot, then you, and you, and you, and you get, become hot very quickly, then you've got leverage as a founder. On the other extreme, if you're so capital inefficient that you need to raise $13 trillion, billion, then it turns out that no matter how much you put in at a... You know, if you put in 100 million, you still only have a couple points, right? Both of those, interestingly enough, would be pretty good deals, right? Which actually, and I'm doing this in real time, makes you realize that your mental rules of thumb have been smashed to pieces, right? You can only get 10... There's a situation where you're gonna get 10% 'cause it's capital efficient, and there's a situation where you only get one percent 'cause it's capital inefficient, and both of them has amazing returns. So that's just the way it be, right? And I think part of it... So maybe that's the aha. There's a compen- I mean, logically you'd say to yourself, if it's a, if it's a continuum, there must be some sweet spot in the middle where they needed to get 20%, but then they were capital efficient enough, so you make out like a bandit. And I'm sure those companies exist too, but I think that's the aha. It's a continuum here. It's a wider continuum than we've seen perhaps, maybe not in the early internet as I think about it aloud, but than we've seen in a lo- definitely in the SaaS era in the last 10 years, right? Companies, as you say, being able to get to hundreds of millions of dollars on 10 or 20 million bucks, and then other companies needing, you know, two, three billion just to get a model out the door.Right? Neither of them results in a standard venture ownership position

   27. JLJason Lemkin30:48

       Yeah, but just... N- maybe not to press on it too much and, um... But I do think when I was reading the ICONIQ's latest report, what they said is when you look at all the top quartile, uh, companies in, in their extended portfolio or not... Of all that they surveyed, yes, they burn a lot of cash, but the burn multiples, um, of their top companies are, are much lower because they're generating... They're growing so quickly. So even if you burn a lot, even if you ultimately raise a lot, that... If, if your burn ratio, if, if burn multiples, though, you're able to sequence capital differently. Like, you could raise... "Listen, hold off. I'm gonna do just 10% now, and then I'll do five, and then at 8 billion, I'll do 1.2." You may raise a lot, but a high... You know, if your burn multiple is low, even if it takes a significant amount of cash, it lets you optimize how you sequence fundraising

   28. RORory O’Driscoll31:37

       Agreed. Uh, and, uh, which... And there is... And remember, the words optimize how you sequence fundraising as an entrepreneur, the inverse of that is thou shalt not be optimized as a VC. Exa- A founder's optimized fundraising is a VC's below ownership target. You're exactly right

   29. JLJason Lemkin31:55

       I think that's right [laughs]

   30. RORory O’Driscoll31:56

       If... Yeah, if Merkur had needed 40 million to get rolling, then venture rock would own 20%. If they only need 20 million, then there you are, right? And you're right, they can increment, raise another two rounds. And even the extraordinarily ambitious, the other extreme, the extraordinarily ambitious LL- foundation models, not the new ones today, but, you know, early Anthropic and early, um, OpenAI, were able to do incremental fundraisings in a way that, as you say, preserves significant... Avoided significant dilution
4. 34:16 – 42:41

   Was Sam Altman Wrong to Snap at Brad Gerstner

   1. HSHarry Stebbings34:16

      I mean, you... Did you guys, did you guys see Sam Altman's response-

   2. RORory O’Driscoll34:20

      Yeah

   3. HSHarry Stebbings34:20

      ... to Brad Gerstner? What did you think of that? I was intrigued because it was, it was quite a retort publicly

   4. RORory O’Driscoll34:28

      It's a totally legitimate, entirely obvious question. Hey, you're doing 12 billion in revenue. You're planning to buy... How are you gonna fund a trillion dollars in CapEx over the next five years? And, you know, I'm sure there's an articulate answer he could have made. You're right. Th- the answer, if you want to sell your shares, sell your shares. It was a little snarky, probably because you're tired. You're one hour... You know, you're halfway through a one-hour interview. You do a million of these all the time. I believe you just have a baby in the house. You're tired, you're, you're grumpy, and you just make a snarky answer. Oh, well. I mean, I'm not gonna, you know... I, I, I think... Maybe to say it this way. The subs... The, the, the question is substantively important. What did you... You didn't learn anything about the plan to fund the trillion doll-, uh, trillion dollars from the answer. You learned a little bit about the persona of the person in a bad moment, but everyone has bad moments, right? You... If you want to know more about Sam Altman, there's, you know, there's 53 pages of testimony now on the internet. You can f- you can figure out... You can all come to your own judgment on that. I think the question itself is totally legitimate. It's going to be asked an increasing... Like, there's a, there's a story that can justify it. It's all about revenue traction. If you get to 100 billion, you can support, you know, 60, 70 billion of CapEx. But it's, it's a totally legitimate question

   5. JLJason Lemkin35:43

      He did say... Didn't he say to Sam, "I'll, uh, if you want to sell your shares, I'll find someone for you in 60-"

   6. RORory O’Driscoll35:48

      Yes

   7. JLJason Lemkin35:48

      That... I've only been s- a founder's only said that to me once in my career. I never said a critical word ever again. I ne- that... When he, when that was said to me, I, I, I never... I... That was a teaching moment for me. I'm like, "Okay, I crossed the line." Like, I didn't mean... I didn't realize I did. I never said a critical word ever, ever again when I was told, "There's a market for your... Just let me know how much you want to sell, Lemkin." [laughs]

   8. RORory O’Driscoll36:10

      But, but, but no. I mean, I'm not kind of doing the, "Oh, damn you for saying that." We all have bad moments, right? But it is kind of a bullshit answer, right? And if you shut... I mean, you know, it quite in... Y- like, if that ha- what would... If that happened to me in a board meeting, if I was a board member and the CEO or s- you might say to yourself, "Oh, I wanna find..." If it's a le- it's a le- if it's a legitimate company-ending question, as you have to have an answer to this question, because I'll step back to it, because not just y- the health of your company, but bizarrely enough, the health of the entire US economy depends on the answer to this questionIt turns out fuck off and sell your shares is not an acceptable answer at scale. And if I'd been a board member at this, you said to yourself, "Okay, maybe I shouldn't ambush him in public. Maybe I should have said, 'Hey, look, I just wanna spend some time...'" You know, you give your CEO the courtesy of not feeling ambushed. You maybe don't do it in a visible place, but you do have... If you are on the board of a company that's planning to spend a trillion dollars, or sorry, whatever it is, I can never keep up now, uh, a- and you only have 12 billion in revenue, it's a totally appropriate board-level question to say, "How are we gonna do this?" So-

   9. JLJason Lemkin37:22

      I don't know anymore. I don't know if that's true, as silly as it sounds.

   10. RORory O’Driscoll37:26

       It is beyond silly.

   11. JLJason Lemkin37:28

       I think, I think there is so much fear among VCs of getting out of step with the most successful founders. There's so much fear, and you guys are gonna disagree with me, but I, I see it all across my portfolio. The better the company is doing, the more everyone's a grin fracker. There's just, just ne- ne- never a critical word said.

   12. HSHarry Stebbings37:47

       Now you've poked the bear. I have a company that's going shit, and it's going to shit, like literally bust its balls. The board members will not intervene in any way to protect the shareholders because of the bad MPS that will come from damaging that founder relationship. That, to me, is one of the most egregious, um, escapes from fiduciary duty, and this is some of the most reputable investors. Harry, this is zero-

   13. JLJason Lemkin38:15

       But you're agreeing with me, right?

   14. HSHarry Stebbings38:17

       I'm agreeing with you 100%.

   15. JLJason Lemkin38:18

       Yeah.

   16. HSHarry Stebbings38:18

       This is disgrace.

   17. JLJason Lemkin38:18

       Yeah, you're seeing the same behavior, right? Yeah. I, I would... Listen, OpenAI has had an interesting history, um, but if it were a normal history, a normal startup [laughs] with the VCs we work with, and, and they had, had to come up with 1.2 trillion, I think everyone would be saying, "Sounds good, Sam. [laughs] Sounds good, Sam. Keep going. Good, good, good month." [laughs]

   18. RORory O’Driscoll38:38

       Fortunately, and again, I don't know the man, but I've just been very impressed with... I don't get the impression that Brett Taylor is a yes-man, right? At one point, I'm not sure if he's still on the board, I should know, Larry Summers was on the board, and Larry Summers is many things, but not a yes-man. He might be off now, which would be a shame, 'cause he would be worth being on a board with just to hear him speak, right? I think he's a very smart man. Um, but stepping back a level, there's a little part of me that's kind of a bit sorry for Sam Altman 'cause of where he's put himself. Basically, the entire... I mean, every public analyst will say, right, that... I mean, he did what he had to do to raise this kind of money, but every c- when public, covering the public markets will say, "The only thing between us and a 30% promote is the AI CapEx boom," right? And he is the poster child of the AI CapEx boom, right? And I al- you know... And if the AI CapEx boom unravels and the world and media is looking for a villain to throw rocks at, it ain't gonna be a big search. Right? A genuine, genuine comment here. If this thing starts to slow down, if the thing do- it'll just get real hard, real fast. And I think if you're on a board member in that, you actually owe it to your CEO to say, "Hey, dude, how are we thinking about this? Do we have good answers?" Right? We can't just be glib. I hope that in the boardroom, Brett Taylor and those guys are sitting down and saying, "Okay, what's the cash flow numbers that says we can honor all our commitments? What are the cash flow numbers that say maybe we can't honor 2029 and '30, but we can do the others? How are we gonna do all this?" Right? Because when someone invents numbers at the $5, $10 million level and they're wrong, they disappear without a trace. When you invent false numbers at the trilli- when you invent numbers that are wildly over-optimistic at the trillion-dollar level, and if it unravels, you just become the poster child in every economic history for the next 200 years of the great AI crash of 2026. It's a pretty shitty place to be. And one of the things we've talked about on the past is, you know, the job of the board, to your point, guys, is not to be a railroad. It's actually to help the CEO avoid things. I, I often look back on some of these young founders, and we talked about this. Yeah, they were wrong, but the older board members who should have had more experience were even, in one sense, they are less legally culpable, but morally they're culpable by not saying, "Hey, dude, are you thinking this through? Do we really have an audit, Sam Bankman? Do we really know where the money is? Do we really know where the customers are, Charlie whatever, Javice, or whatever her name is?" You know, you're, as a board member, meant to provide the guardrails. So I think when I look at this one, I go, "Hmm, I hope someone's providing really good guardrails," 'cause if, i- if it hits, it'll hit hard.

   19. JLJason Lemkin41:17

       A lot of founders feel like VCs should just be their allies, period, and period. That's your job, is to support me. That's your effing job. And, um, some like the critical feedback, but I think it's far fewer today than you might think. Your job... And, and if you're not supportive, you're not-- you're, you're a problem for me. You're not on-- you're making my job harder. I think that's how founders feel, and I think that's how Sam felt, was my, my guess. The second thing that's just interesting to, to watch, because I do think Sam's pretty transparent, is I think it did show there's, there's, there is some stress around raising 1.1 trillion. [laughs] I mean, I mean, not around raising it. He's raised, he's committed to it, about generating it. There's s- if there was no stress, it wouldn't have been, uh... he wouldn't have poked the bear, right? So th- there's n- I don't think it's actually a big deal. I do think they, they'll work around it, scale it back. But it did show there's some stress around hitting the 1.1 trillion in, uh... It's not even revenue, right? It's gotta be gross profit at, at f- six 50% margins, so they gotta do 2.2 trillion or more to pay for it. I g- or maybe I'm getting it wrong. But they've gotta certainly [laughs] do more than 1.1 trillion to pay off their capital commits. [laughs]

   20. RORory O’Driscoll42:17

       Yeah. I can't believe I'm saying this. It's only cumulative, so you might, it might be a little less. But yes, it's in the many hundreds of billions of dollars a year in a world where today only Amazon... I mean, you know, there's a couple of companies. Google does 100 billion in a quarter, so does Am- um, so does Amazon. You gotta be at that scale. And, you know, three, 400 billion a year, yeah, you're somebody. You can pay for these things. It's a

5. 42:41 – 50:30

   Why Google is a Buy and Amazon is a Short

   1. RORory O’Driscoll42:41

      real number.

   2. HSHarry Stebbings42:42

      You mentioned Amazon. Amazon crushed this quarter, plus 20%, AI shopping assistant, Rufus, additional 10 billion in sales.Things looking up for Am- they obviously have their ownership in Anthropic, which I think is at seven and a half percent. How do we feel about the state of Amazon today? Where they sit considering last quarter, how do we feel?

   3. RORory O’Driscoll43:04

      The overall growth rate was, I think, 11 or something, but the real point is Amazon Web Services, their cloud business grew at 20%. You know, the story had been they were the dominant provider pre-AI. They felt they'd slipped versus Google and Microsoft in the AI world, and in fact, in terms of growth rate, they still have. Google and Microsoft were both in the mid-high 30s, but AWS kind of came back from, I want to say, 13% to 20%. So the story was, oh, we're doing... We're relevant, too. We're not irrelevant in the land of, in the land of AI, um, and the stock popped. And I think the real take away from here is, and this is the counterargument to all the cynical it's-a-bubble people, it would appear, and Microsoft said the same thing, that demand for these products is still exploding, right? Yeah, if you, if you have it, you can sell it, right? And that, yeah, at some point, maybe that won't be the case. I have my concerns, but right now the objective facts on the ground are, you know, Microsoft was saying, "My biggest problem is I can't build data centers, so I'm capa- capacity constrained." Amazon was saying, you know, "My growth rate is up." Uh, interestingly, they just signed a deal with OpenAI, 'cause everybody signs a deal with OpenAI, and to sell them more compute, so they clearly found some capacity for that. But overall, the story was n- continue high demand for compute, and if you're selling compute, stocks go up. That was the takeaway. I don't have a sense of their consumer business and the Rufus shipping age, uh, sorry, shopping agent. I, I believe it's in limited beta. I haven't run into it. Have you? And the compute story was strong across the board. That was the aha, right? In other words, the people who wanna articulate a it's-all-going-to-go-wrong story, right now you have to still make that story prospectively and say it'll go wrong in the future. What you can say is it's going wrong now 'cause the demand was still there.

   4. JLJason Lemkin44:58

      But to me, it's, making a press release that says you're now the number five or number six partner to OpenAI for, uh, NVIDIA GPUs is not that impressive. [laughs] Like, it's just, you're behind Microsoft, you're behind, uh, Oracle. Oracle? You're behind Google. You're behind... And, and so it's interesting that they found some GPUs in a closet. Um, I, I'm, I'm, I'm not speaking literally, but I, I don't actually think it means much to be late to the party to sell... It m- it may mean a lot over time, don't get me wrong, but I think today it feel- like, there is a lot, there is a lot of AI performance theater today. There's real incredible growth. Um, there's growth in our retirement funds across the country, but there's still a lot of theater. There's a lot of folks who are doing a lot of work in AI and not seeing huge benefits, so this felt part, partly theatrical to me, but it's okay. I, I'm, I'm in favor of keeping the ball moving when you, when you don't have all the answers.

   5. RORory O’Driscoll45:51

      And it's very cynical, Jason.

   6. JLJason Lemkin45:55

      I, it doesn't rank them. I mean, it l- literally-

   7. HSHarry Stebbings45:57

      No, I think, I think-

   8. JLJason Lemkin45:58

      They're like, "Okay, we called the CoreWeave guys. We, we call [laughs] w- we called AWS, we called Microsoft, Google, and Oracle. We even called Benioff in case he had some GPUs or TPUs hanging around." [laughs]

   9. RORory O’Driscoll46:10

      Yeah, no, I, I, I, I think the-

   10. JLJason Lemkin46:12

       Amazon found some. [laughs]

   11. RORory O’Driscoll46:14

       Yeah, they, they, I, I think the stock popped more 'cause of the objective fact that the actual revenue growth grew than, you're right, than the OpenAI deal. But, you know, I, I... It's almo- While you are right that it's not huge compared to the $250 billion for Microsoft or the $300 billion from Oracle or the $400 billion for Broadcom, it is still better than not having one, 'cause now at least we can say they don't have one, so tick, done.

   12. JLJason Lemkin46:37

       It is, but it's tough from AWS being, having really created the category, right, of cloud providers, and being what we all grew up on, it, it, it's, it's a major comedown to be, not even to be above the fold on the, on the leaderboard.

   13. RORory O’Driscoll46:50

       I think that's a different statement and totally correct. You exact- Look, you're, you're exactly right. Five years ago, AWS dominated cloud compute. Now they don't, right? Because cloud compute evolved from being simple compute to being AI-centric computing, and they didn't evolve fast enough with it, and they let a whole bunch of people into their little oligopoly. Yeah. So zoom out a million miles, that's a bummer. If y- if they knew then what they knew now, I think in 2019 they would've bought a lot more GPUs and been a lot more aggressive.

   14. JLJason Lemkin47:18

       And yeah, 20% growth also is, is a lot, right, at this scale. Absolutely. But Shopify, which is a competitor, right, on the other ha- side of the house, it blew it out. 32% revenue growth this quarter, 32% GMV growth, which is a close analog to Amazon. I mean, Shopify is re-accelerating at, at, at, uh, eight digits of, uh, of revenue, which is pretty crazy. So, uh, I mean, kudos to Amazon, but it's, it's, it's also lucky that both of its core product lines are getting, uh, a, uh, just a general b- a, a general boost, right? [laughs] There's a lot of tailwinds going on here.

   15. HSHarry Stebbings47:51

       Jason, I know Rory won't answer this one. Given what you just said there about them not being above the fold and they're losing market share in one of their core markets which they used to own, and then considering the 20% pop, how do they sit in terms of being underpriced versus overpriced?

   16. JLJason Lemkin48:06

       Look, at some poi- at some, at some level, this isn't my, my strength, right? I, I don't do a lot of public equity investments. Uh, since you asked me, I, I, what I do think about as a B2B guy, right, is I do think that for the, for the moment, for the moment, Google is underappreciated and Amazon is overappreciated. Um, Google is, you know, we made... Google was slow to AI. Google had to bring Sergey Brin out of jet skiing and windsurfing and retirement to whip the troops into shape. Uh, but Google's really good now at all levels, right? It's really good at consumer AI. It's really good in searches back. Search is growing for Google again. The TPUs are good. It's a good partner, and it's, it's, you know, it's the only one other than NVIDIA making real money. So I feel like Google is, is underappreciated, and it has the application layer. It has all the applications. Not, that we, so many that we use. Amazon has noth- none of the application layer, right? It has very little at the hardware layer. It has a niche search, which is incredibly powerful, but only used for e-commerceIn a way, it just doesn't have as much going for it

   17. RORory O’Driscoll49:08

       To be fair to Goog, I mean, you used the word underappreciated. I think the stock has appreciated very nicely. I mean, the catastrophists at the start of the year were, "Oh my God, it's awful," and I think it's up 53% from there. I'll admit it, in Q1 we talked a little bit about the companies, and I was positive on Google. And I admit it, and Harry knows this, I was, retrospect, I thought about, it felt so contrarian that I even said, "Please don't lead with that on the highlights," 'cause I felt a little stupid. And you fast-forward two quarters and it's turned out to be broadly correct that they have the key ingredients and a place to put them, and the ability to monetize them, and Facebook's missing that last key element, right? I still think, to your point, Jason, when they... I still think at some macro zoom-out level, if you had a monopoly in search and now you've gone to having ChatGPT as a de facto competitor, you're still better off if it hadn't happened, right? You just can't deny. Like, it was a really good gig when you had this monopoly, but so you're not that o- you know, y- you wish it hadn't happened, but once it has happened, what you've got to give them credit for is getting almost everything done to be able to play in the new world. They had the key ingredients. It took them a while to put it together, but now they have all the boxes. You'd still prefer not to have to do any of this shit and just, you know, optimize your 10 links from now until the end of human time, right? Versus having to compete, but they're competing well.

6. 50:30 – 52:21

   Meta Down 10%, Buy or Sell?

   1. HSHarry Stebbings50:30

      In terms of playing in the new world, it was bad week for Meta. I'm one big-ass Meta shareholder. Never argue with Zuck or don't doubt Zuck. But wow, the $15 billion fine and then the reaction to their commitment to CapEx moving into 2026 and the exa- like, the enormous spend that they continue to do and will continue to do, I mean, down double digits. How do we think about how they fare in the new world?

   2. RORory O’Driscoll50:56

      I think it's easy because the core business performed really well. Let's start with that. The core business, I think, grew 20%. You know, despite, yeah, some usage being down, it's kicking off cash. Yeah, it's a great business, right? The market is just entirely co- and we said this a few months ago, entirely correctly saying, "Dude, you have this wonderful business, and then you're taking the entire cash flow and you're building this AI stuff." And unlike Google, Microsoft, or, um, or, or, um, in the, in the, let's say Google and Microsoft or Amazon, you don't have an enterprise business to sell this shit to. And unlike ChatGPT, you don't yet have an obvious AI-forward app that's gonna give you a lot more time, that give you a lot more consumer engagement. So you're basically spending $70 billion a year, but with no revenue attached. What the hell? Right? And you know that Mr. Zuckerberg's answer appears to be, "I think it's relevant to be in this space. Thank you for your opinion. I refer you to the articles of incorporation. I control this company. Have a nice day." Right? So the market's just saying, "Hey, you're doing the thing you did in '21, '22, putting a whole bunch of CapEx into something that might not work," and that's why the shares are slightly down, despite objectively pretty good performance. It's entirely rational. They're saying, "I don't know why you're making this bet," and he's saying, "That's why I'm a founder." I personally don't get it either, but, you know, I didn't build Facebook. He's, if he's got a plan for it, we'll see. Doesn't appear to be the most efficient way to spend $70 billion, as judged from the amount of infighting, but we'll see.

7. 52:21 – 1:10:05

   If You Have Not Accelerated with AI, You Are Dead

   1. HSHarry Stebbings52:21

      One that made me happy was Twilio. Twilio bounced 20% after beating expectations. Question being, when you look at that and you look at that generation of companies, your Dropboxes, your Boxes, maybe your under-loved, under-appreciated companies, are we gonna see a series of bounce backs on better than expected results do we think?

   2. RORory O’Driscoll52:43

      If you're undervalued and you perform reasonably well. I mean, what happened here, 20-- let's start back. Bill- Twilio, a $20 billion company doing four or five billion a year, valued at four or five times revenues. You know, as you say, had a decent quarter, bounced 15%. Uh, I think, yeah, revenue grew at up 15%, had a nice stock bounce. It's still in a bounded universe. The, the zoom out point is this. These company, they're in a much more bounded world now. They might grow 15%, they might grow 5%, they might trade at six times revenues, they might trade at four times revenues. You know, if you look at the stock chart, the area of magic is gone and now they're just perfectly good $20 billion market cap companies kicking off cash. Really strong cash performance. That's what successful, mature companies look like. They'll be valued accordingly. That's the good news. And yeah, the, the bad news is as you look at the AI first universe that exists, they're not really playing in that 20 degree of significance. In a world where you're cash flow positive and trading at four or five times, you can feel really good about yourself, and then you look up and realize, oh my God, Palantir is trading at 123 times revenues, [chuckles] and is cash flow positive. You know, they're not in that ballpark. They're not in that game. So yeah, that's, that's what a mature business with mid-level growth prospects look like.

   3. JLJason Lemkin53:58

      My take was a little bit, little bit different. M- my take, so Twilio goes from single digit growth to 15%. That's still significant re-acceleration. We talked about Devs stepping down at Mongo. He went from 13% growth five quarters ago to, uh, 24%. 13 to 24, right? That's almost doubling your growth rate. And here's my point from both of these. It's now, we're go- heading into 2026, you better have gotten a few nickels out of the AI expenditures, the, all the AI dollars. This is not new, guys. This is, what, 60% of the growth of our GDP. You can't miss AI. And so Twilio said its voice AI customers are a huge part of that re-acceleration. It says voice AI is up 60%. We all know a million companies using voice AI, right? It said its top 10 voice AI startups are up 10X. The same, AI, AI is fueling the number of databases we use. Now, sometimes we use Supabase or Neon if we're, for vibin', but, but a lot of folks use Mongo. So not to be the, the only guy in the board meeting that says something, but going into next year, you sure better have seen re-acceleration because of AI, 'cause there's so much money there. You got none of it, guys?You had 18 months to not launch a single feature, tap into a single trend to re-accelerate. Now, I'm not expecting you went from 30 to 300% this quarter, but if you didn't- if you're not growing faster at the end of 2025 than the start, as a founder, I give you an F minus. There's so much money, and you don't have to be Harvey to get a little piece of it. Twilio and Mongo and Cloudflare and tons of folks have a little piece of it, a little piece of that massive pie.

   4. RORory O’Driscoll55:40

      I think that's totally fair, and that was well put 'cause I would, you know, I, I would almost amend what I said as you... Exactly. They're not the AI native exploding two X year on year. But what you're saying is correct. There's a big point spread between, you know, we'll talk about some of these companies in a second, having no AI magic pixie dust and getting taken private for three times run rate revenues to be, you know, destroyed by their PE machine, and getting just enough AI pixie dust and lift to get that growth rate in the mid-20s plus, like Mongo, see some re-acceleration. And we've just agreed, you know, from the Navan com- you're still only gonna trade at seven times revenues, but it's a damn sight better. You have six or seven times revenues and some kind of forward story is a big point spread from three times revenues and being sold to PE. And that's the story we're actually articulating to a lot of our private companies. You know, I get, you know, you, you can't go from the $100 million revenue to just be- being Harvey. You're not. But you better find a way to be relevant, and I like your expression, uh, you, you're afraid, you, you can... Jason, the age of AI. You better find a way to matter in this world and co-attach to the spend. And even if it only takes you 10 basis points up from 15 to 25, that's a night and day difference in terms of your relevance and viability. And actually, 'cause I, I always like to come back from the publics where I think we have opinions, but maybe it's not our day job, to the deals we all work with where it is our day job, and I think you're exactly right, Jason. That is the message for any of your companies that were pre-tw- 2021, that are pre-GPT companies. Maybe you can't make yourself into the next Harvey or the next OpenAI, but by God, you better co-attach to that spend 'cause it's the only game in town. I, I, I think you're totally right, and, uh, I think you, you should be preaching that to all your guys as we come into the end of the year when looking at '26.

   5. JLJason Lemkin57:26

      And look, sometimes it's luck. Like the CEO of WorkOS, Michael, he was posting, I think they, they went from... I'm, I'm gonna, I'm gonna get these numbers wrong, but something like 20 to 40 in five months. Okay? And they've- he's been working hard for years on WorkOS to be an OAuth and authentication layer for... But, but all the AI guys used them. [laughs] So seen insane growth. I've se- we've all seen portfolio companies and, and you sometimes you gotta make your own luck, but we've had 18 months. Like tap, like get a little bit of the Harvey, uh, like and there, and so there's just, you gotta find it and it's like it's at the edge of too late, not because there's not time. I actually think there's plenty of time for startups. It's because your team isn't good enough. If you haven't gotten a boost this year from AI, fire half your team right before the holidays. Give them a turkey and s- three months of severance, but they failed. You have a... Your team is not good enough. They had 18 months to ship a product that mattered in this world. Where's your agent? Where's your re-acceleration? F. F. No more excuses after Thanksgiving. But the irony is it's early. [laughs] At the same time, what we're all learning now, we feel like it's late with cur- all the stuff we talked about, the cursors and repl.its and levels and, and, uh, Sierras, but it's actually so early in so many categories, right?

   6. RORory O’Driscoll58:40

      It's just three years since ChatGPT shipped.

   7. JLJason Lemkin58:44

      Yeah, but you got nothing. You did not re-accelerate this year. Fire yourself or half your team. Take your choice. Fire yourself or half your team at the end of this year. Don't keep those folks that, that don't have the answers around. You're better, you're better off just not having them. You had time, right? And if we wanna be... Like I, I almost hesitate to say this, if we go back to the publics, because we love these folks, if we wanna be critical, you know, HubSpot and Salesforce gotta deliver in 2026 because they, they're in play. They have the AI things. They built, they shipped the products, but they haven't seen the bump that Datadog and Twilio and, um, and Mongo have, and, and maybe that's okay. They're not at the infrastructure layer. Maybe it takes longer, but, but, uh, if I were Marc or Yamani, I would fire half my team if I don't see real growth from that by middle of next year. I'd just fire half of them. You got the wrong people. There's 2,000 people building Agentforce, and we've deployed it. It's pretty good. It's quite good. It's very competitive with any other agent you're gonna buy. Time to monetize it in 2026. It works. It's a good product. It's not just smoke and mirrors. It's really good. So your team, maybe some of those folks that have been hanging around for a decade, maybe they're not the right people going forward. I don't know. [laughs]

   8. RORory O’Driscoll59:50

      Sometimes when Jason is cruel and harsh, I disagree, and then sometimes I listen and I go, "He's absolutely right." This is one of the latter ones. I, I mightn't say it as harshly, but I think you're exactly right, Jason. If you're not on this train now, you're just not gonna be relevant, and you will be sold for three times run rate revenues to a PE firm who will smush you in with something else, never to be seen again. And you have your chance, and it's raining money in this space, and you should just... You need to navigate your product towards it. A- and I think that's probably pretty common advice across, as I think about our portfolio and, you know, all those co- we talk about them a lot, and that's why the Navan thing was so good. All these companies that are doing 100 to 200 to 300 with, you know, sluggish 20% plus or minus growth rates, they need to figure out how to co-attach and re-expand, or eventually you are, you're gonna get tired, the VCs are gonna get tired, your team's gonna get tired, and something's gonna just not work out.

   9. JLJason Lemkin1:00:50

      The one thing I, I, I got a little bit w- I get a lot of things wrong, right? Is, um-You know, uh, it took me a while to see the data to believe that software companies could really capture dollars from replacing humans for real, okay? The, I, I... It's not that I didn't believe it, it's just so much of the stuff was VCs talking out of their rears, making stuff up, talking about how every human's gonna be replaced with an agent, when the software wasn't very good. It just wasn't good. It was hard... You know, it was a great dream, um, and when Vinod says it, I believe it, but when most of the rest of the VCs belie- say it, I, I think they're just watercooler talk. But now we're really seeing it. Agents are better than mediocre humans. So you better be tapping into that revenue too. They're better than mediocre humans, so get, get going, [laughs] guys. Like n- if the age of the co-pilot is behind us, how are you replacing humans? This is your job in B2B software, is to genuinely replace humans. I'm not a Harvey expert, but I do believe Harvey is partially replacing associates, right? That's a lot of money there. Whatever Harvey is today, it's gonna get better ne- I guarantee you it's a better piece of software next year than it is at 8 billion, right? And it will replace more mediocre associates that make terrible, that, that don't wanna do it and want to go home at 4:00 PM, and don't wanna work on the IPO prospectus. It will just replace, find that money, and you're, you can grow 50% faster. Harry is with me on this.

   10. HSHarry Stebbings1:02:09

       I, I am, but the trend I'm finding acro- the trend I'm finding across shows is that Jason is becoming more and more right with his assertions. Have you seen this? In the more recent-

   11. JLJason Lemkin1:02:18

       [laughs]

   12. HSHarry Stebbings1:02:19

       ... episodes. Yeah. And, and you're agreeing more and more with him. It's, it's-

   13. RORory O’Driscoll1:02:22

       Well, and bring one comment here. I think the conviction that he brings from his use of the product is really valuable. You know, we, y- you know, I've a number of my colleagues who are engineers, and it's just really great when you can say, you know, when you actually touch and use the product, if it's an app, I try and use it, if it's Cursor or something like that, my colleagues will be using it. You just, I don't want opinions from people who just saw it on PowerPoint. When you use the product, it all becomes clear. And he's running a business where he's literally had people and now he has machines. That's what this is all about, right? And it doesn't mean the humans go away entirely. It means they find other uses, it means they find other roles. But this, when you see it happen, you believe. 'Cause if you wanna be a good investor, I have this conflict. You can tell when people are saying something that they actually understand. It's a very good habit to have as a... And I'm listening to him, and sometimes on other shit I'm like, "Jason, you're just talking out of your ass. I don't believe it." When he's talking about this shit, you can tell he has built these products, he has automated this process, he's transitioned out those employees, and is getting a better product. And I'm like, yes. I, I don't know if I believe in all the claims for AI that the maximists say, but I totally believe what you're... There are areas where right here, right now, you can replace a $40,000 worker with a $10,000 a year agent and be better off, right? And that's why it's not all just hype. I think the, the million-dollar question is how fast that diffuses into the whole economy, but there are places here and now where you should just be using AI. And, and Jason is living that. He probably is right on the pointy edge. But he's right. If he's the most pointy edge Salesforce customer, in the next two years, they gotta get 20% of their customer base plus, maybe 30%, onto being as pointy edge as Jason in terms of automation. Otherwise, these guys are gonna go somewhere else to get their automation. And that's, that's what it's gonna take.

   14. JLJason Lemkin1:04:13

       This is what I've learned. If they don't buy it from you and you have a market position, they're gonna buy it from somebody else, right? And that, that's why I think Agent Force is so important because, you know, we've, we, we have this thing on SaaStr, saastr.ai.agents, where we share all the agents we use. It, it came out of nowhere. It now gets, like, 12,000 views a month, okay, out of, out of nowhere. It's not even highlighted, so that's a lot of traction. But we have tracked it. We've sent millions in revenue to two vendors, Artisan and Qualified, that we use because we use them. Million, millions in a couple of months of deals. Like, and we send it to Agent Force now too, that we use it. If you're, if, if you're par- if other folks are building these agents and you're not building them or they're not on your platform, they're gonna find them somewhere else. The demand in some of these categories is insatiable. Like v- vendors, if you really can replace humans with software for real, not for pretend, not for San Francisco, for real, and you, and you have a, m- even a mini brand, you will find you have more demand today than you can actually service. You can't even onboard the number of customers that want to replace their sales team with an AI. Now, there were blowup, there was the X11s and the blowups of last year, but, um, Harry can talk to us about that. But the demand is, like, something we've never seen. It's just, it's insatiable to replace humans with software.

   15. HSHarry Stebbings1:05:29

       Uh, I, I, so, I mean, it's kind of tied to this, but it was, uh, talking about, I'm just trying to find it, um, but it was speaking about the adoption of OpenEvidence. Uh, I think, yeah, OpenEvidence grew to $300,000 in one year, which is one-tenth of the amount of time it took Doximity. Thought that was interesting, just in terms of, like, market pull and adoption rate. Give, going to what we said, yes, uh, last week, which was just everyone being in market at the same time.

   16. RORory O’Driscoll1:05:55

       It is super interesting, right? You're exactly right. And the fascinating thing is that OpenEvidence got there in a year what took Doximity 10 years. And it speaks to, yes, this latent demand for, for kinda AI. You just gotta put the negative in, the, the, the gnawing worry, which is you just gotta say to the following fact though: there aren't any more doctors as a result. And this is something Jason said last time. Everyone's in the market right now. You could have a world whereby you get every doctor on the platform in three years a- a- and, you know, the, have you saturated TAM more quickly, right? And that's why one of the things when you look at these hyper-growth rates, and they're so compelling, and I think you just gotta say to yourself, you've gotta be sure that once you get all the, the names, that you have enough follow-on stories for those names. You don't wanna be one and done, right? 'Cause yeah, Doximity is a really good company. It has a finite TAM associated with the numbers of doctors and the amount of advertising and kind of stuff you can sell to them. OpenEvidence plays in roughly the same market, right? Probably at its current privately held valuation, it will need to expand that marketsubstantively to offer a return from here. Totally doable, but it's not just going to be, you know, getting there quickly and then stopping. Does that make sense?

   17. JLJason Lemkin1:07:11

       'Cause-

   18. HSHarry Stebbings1:07:12

       Totally makes sense

   19. RORory O’Driscoll1:07:12

       ... 'cause as I said, time count... And one of the things we started to do with all these tools, you should know for each of the tools, professional tools, how many of that profession exist. How many lawyers, how many doctors, how many bankers, how many, um, wealth advisors? 'Cause that's your tie, you know, and, and tracking that. And then it's, so it's really number of people times amount of their work you can automate. 'Cause in the end that, that, that, you know, these are finite money piles. But, but great adoption. It sta- does speak... And what it means is, that's, that, that sounded a little more negative, but let's put the positive out there. OpenEvidence seized the moment, and if you come along, to Jason's point, a year from now with a slightly better version of OpenEvidence, to a rounding error, no one will care because you missed the moment when 90% of the people who are ever gonna adopt a tool like this are probably in market now for, uh, in the last two and the next one year. They're all gonna make their initial decision pretty damn quickly. You've shot up the S-curve super fast, and if you've missed your moment, you've missed your moment.

   20. JLJason Lemkin1:08:11

       Yep. Ha- having said that, just going to Mark Benioff's point, which I think was a good one from before when he was on the show, you, there are categories where you'll miss your moment, right? For, for sure. If you are a little slow, maybe find the areas that are slower. I mean, Mark's point was, like, only a couple percent of his customer base is fully ready for AI today, right? So if you are a little s- maybe play to your strengths. [laughs] If you're a little slow, maybe, maybe go into retail or manufacturing or areas... It's not that AI isn't there, but it's not, it hasn't changed overnight, right? Play to your, play to your strengths.

   21. RORory O’Driscoll1:08:41

       I, I, I agree, Jason, and it's interesting 'cause OpenEvidence, just like ChatGPT, is an individual adoption product. I think the velocity of individual adoption, you see it in Lovable, is explosive. The adoption of corporate adop- the adoption of corporate adoption, the pace of corporate adoption is much slower. So you're exactly right. I don't think everyone's gonna buy Agentforce or their equivalent in a year. It might be five years, not 10 like SaaS. It might be half the time of SaaS, but it still could be five or six years. I think the fascinating thing is the consumer has shown they're gonna adopt in a year, right? And, and that's what you saw with the OpenEvidence. I mean, it was interesting. If you looked at some of the general AI search and AI science tools, the number one user was doctors using general research tools to look up very specific pa- very specific medical questions, presumably meeting some patient with an odd disease, and OpenEvidence caters directly for that need. It was a perfect product, and the adoption's been enormous and super quick. You exa- And I think that's what you're seeing in all the individual users. Like, we can talk about the pace of adoption in corporate law of people like Harvey, but I can tell you every individual associate is legally or illegally using ChatGPT to help them format their masses of writing, and every, every, you do any kind of, any kind of market research, you confirm that. Even if, you know, they don't have a corporate use case, they just have their laptop open and are cranking along.

8. 1:10:05 – 1:18:36

   Why Now is the Best Time for Series A and Worst for Seed

   1. HSHarry Stebbings1:10:05

      Okay, fantastic. Uh, it has never been harder to do Series A investing than today. Agree or disagree?

   2. JLJason Lemkin1:10:13

      I'll tell you why I disagree. Ignore some of the stress around price and otherwise. This is a, the best of times to be a Series A investor because there's just an explosion of seed AI startups. There's so many, and they can't all get funded. And I know it's stressful, I know it's hard, but it is a gift that thousands of founders are in San Francisco raising seed funds from multiple accelerators now, YC, Neo, um, South Park Commons. All these folks are creating hot, very smart, good candidates that, yeah, it's hard and you gotta hunt and it's competitive, but the, the funnel is better. The, the, the, the, the top of funnel is the best it's ever been. So even if it is hard, this should be the best of times to be Series A 'cause the funnel's the best. The one layer up on your funnel is the best. Um, and I think it's the worst for seed because e- everyone each year wants to be a seed investor even more. It, it, it, it's, it's, it's the, it's the, it, everyone, you know, e- you know, Jake Paul, Jake Logan, whatever, which of the Jakes. Um, you know, it's not just the chain smokers anymore and Jared Leto, it's everybody is p- playing at that, at the hot seed startup level. [laughs]

   3. HSHarry Stebbings1:11:20

      Sass, Sassquan, sort of, of football.

   4. JLJason Lemkin1:11:23

      Yeah, all, everyone. Everyone's in. So it should be a gift to be in A. It should be the best stage, stressors and price aside.

   5. RORory O’Driscoll1:11:30

      And I think the stressors and the price are the issue. But y- yes, I actually do agree. Yes, there's a lot of... And the other thing that's actually helpful is the direction of travel is now clear, right? Post... I mean, uh, if you think back, in that last couple of years before ChatGPT, we were at the end of the SaaS era. It wasn't obvious what was going on. A lot of the deals you did then turned out to be evolutionary dead ends. I do at least feel now, since ChatGPT, that the direction of, architectural direction in enterprise B2B for the next 10 years is pretty much obvious and a given. You know, it's some form of agentic software. I hate that word. It conveys a lot. But some form of re-architecting the enterprise stack to enable AI to do more of the work. That's the mission. The task has been assigned, and the only question now is which verticals first, which tasks first, which, who will be an early adopter, who will be late? So the direction of travel is pretty clear. That's the good news. But unfortunately, I think the bad news is just there's just a lot of capital doing it. And, you know, we're finding from a, just a raw competition and speed and need of speed execution, it's a lot. But that's life. It c- it should never be easy to make a lot of money.

   6. HSHarry Stebbings1:12:41

      The most recent person I lost to was Andreessen Horowitz. Who was the most recent person you lost to?

   7. RORory O’Driscoll1:12:50

      Um, I would say earlier on this year, very talented senior investor at Kleiner Perkins. Great name. Can't argue with it, you know? Right. So yeah, I mean... And I think the relevant point there is I would have s- maybe take a lat- expand on that r- versus just having it be a litany of shame. Five years ago, I would have said those guys would be slightly earl- you know, some firms would be earlier and, you know, we, we'd run into a, um-A slightly different peer set. But what's happened now is, you know, we typically do in revenue As and Bs, so it's kind of early product market fit on. Given the fund size, all the large firms that were, you know, typically Seed and A are doing all those deals. So the competition set has stiffened, right? You're up against tougher, better firms, and you've gotta bring up your A game, right? There's no doubt. If I was to list things that worry me, um, it would be that. And in the face of that, you've gotta do all the things you gotta do. You gotta work on your relationships with the entrepreneur earlier. You've gotta see the deal earlier. You've gotta be more decisive. You've gotta play to win when you want it, which means you gotta know what you wanna win. So I share with my LPs that I would say that the, the talent of the people we are competing against has gone up markedly, and the good news about this is, you know, we're fishing in the same ponds as some of the smartest investors on the planet, and the bad news is you're competing against some of the best investors on the planet, and you just gotta find a way to win.

   8. HSHarry Stebbings1:14:15

      Nice, man. Final one. I would rather be in Kalshi at $5 billion than Polymarket at $9 billion. Agree or disagree?

   9. RORory O’Driscoll1:14:27

      I actually think the real com- my comment would be this. I wish I was in one of them, and I don't mean that just glibly 'cause they're good, right? It's typically consumer's not our focus, but I really like that space. I really like the idea of prediction markets. I think it's a very clever and good idea. I think there's gonna be a lot of issues around the g- the, the sporting... I mean, the s- the sporting gambling side of that, you, you, you, you can get troubled by that. I know in the States we can be. Coming from Europe, we bet on, you know, sports all the time. As, you know, Paddy Power is an Irish company. There's a lot of great sports betting goes on. I do think the fascinating thing about Kalshi and Poly is the whole Brian Armstrong thing about you have these prediction markets, and then the person can tilt, put their finger on the scales of who wins. In this case, Brian Armstrong, by using a certain set of, um, kind of phrases during his earnings call, basically dictated a, I think it was a Kalshi bet one way or the other. There's gonna be a lot of weird stuff that happens as a result of this, like some of these policy bets where you just know an insider was making a trade, you know, one hour before the administration announced something, you see it hit on Kalshi and Polymarket. So there's a lot of fun stuff. But as a deal to be invested in, they would be fun, and at some level, that's worth having.

   10. HSHarry Stebbings1:15:37

       So Kalshi?

   11. RORory O’Driscoll1:15:39

       Well, I mean, as I'm a customer, yes.

   12. JLJason Lemkin1:15:41

       If it is accurate to say that Kalshi is, uh, fully US compliant in all 50 states today, and Polymarket is still in an ambiguous position even with Nasdaq's investment or Dice investment, if that's true. I don't know if that's true. It's confusing-

   13. RORory O’Driscoll1:15:54

       I think they've gotten... I think it's changed now. I think it's j- under the current administration, pretty much everything is legal.

   14. JLJason Lemkin1:15:58

       Yeah. So my... What I was gonna say is my... Listen, uh, politics aside, there is a chance there will be a new administration that will be less sympathetic to this category. So based on my limited knowledge, I'm going Kalshi because I feel like it is a safer long-term bet than someone that is riding the current political vibes, which are f- all in favor of everything here. It just could ch- it ch- it was a lot different a couple years ago, and it could be a lot different in a, in a, in a couple years to come. And, um, so if I could minimize, if I could slightly de-risk the regulatory side 'cause it's, uh, you know, uh, CFTC approved or DCM approved, I would take that bet just because I don't know who the heck's gonna be president next. I don't know. I don't know. But the first act could be to undo everything, everything that, that Sachs and buddies have done. That could be the [laughs] January 1st, whatever. Uh, but I, I mean, uh, these edicts, it's all going. Uh, crypto's out, Kalshi's out, Polymarket's out, everything's out could be the next administration. It's all gone.

   15. RORory O’Driscoll1:16:55

       Just to make a prediction and which is in theme, in keeping with the idea here, I predict that any re-regulation won't happen because of any new administration. I think the real challenge to sports betting like this will actually be the leagues themselves wrestling with the fact that when you have sports betting, you have sports cheating, and if it becomes endemic like some of the European soccer leagues, it'll be a problem. So I actually think a fun problem for the next baseball commissioner, basketball commissioner, NFL commissioner will be what the hell do you do about this thing when you have these very particularized bets? Not will the Cowboys win by seven, but in the third quarter, will the quarterback throw a second thing that... throw that misses? The possibility for cheating just becomes high. So I actually think that problem, the next administration will have plenty of other things to deal with. That particular problem will be the purview of, um, as I say, the sports folks is my gut.

   16. HSHarry Stebbings1:17:51

       I hope-

   17. RORory O’Driscoll1:17:52

       I don't know

   18. HSHarry Stebbings1:17:52

       ... I hope you Americans don't watch any Pakistani cricket then, 'cause that'll really show you the way to do it. Um, but, uh, guys, this has been a joy.

   19. RORory O’Driscoll1:18:00

       No American spends a single second watching cricket. You know, it's ri- it's just torture. But I, uh, but we respect that you guys love it, even though you're not good at it anyway.

   20. HSHarry Stebbings1:18:09

       Oh, Rory, do you know what, Rory? I would love to take you to Lord's.

   21. RORory O’Driscoll1:18:12

       Yes.

   22. HSHarry Stebbings1:18:12

       Come to London. We'll sit and watch a five-day game.

   23. RORory O’Driscoll1:18:15

       Yeah.

   24. HSHarry Stebbings1:18:15

       Yeah? And we'll watch every day, and then it's gonna be a draw at the end.

   25. RORory O’Driscoll1:18:19

       A draw. No, absolutely. Yes. A product that was not built by them. The one thing you know about cricket, it was not designed by an American TV executive. [laughs]

   26. JLJason Lemkin1:18:27

       Hopefully mobile phones are collected outdoors too. That's my hope. You have to put it in a, in a basket [laughs] so that nobody-

   27. HSHarry Stebbings1:18:32

       Yeah. Oh, yeah

   28. JLJason Lemkin1:18:33

       ... nobody can be on their phones.

   29. HSHarry Stebbings1:18:34

       Si- si- silence in the stadium. Yeah

Episode duration: 1:18:46