The Twenty Minute VCNVIDIA Predicts $1TRN in Revenue: Everything You Need to Know From GTC & Anduril Lands $20B Contract
EVERY SPOKEN WORD
80 min read · 16,385 words- 0:00 – 1:12
Intro
- JLJason Lemkin
Man, this is summer at NVIDIA. I mean, they're on fire on everything
- RORory O’Driscoll
These are unprecedented levels of CapEx spend, and now we're forecasting them to keep going for four or five years.
- HSHarry Stebbings
What are we discussing this week? GTC, what happened with NVIDIA, Anduril's $20 billion contract. Then finally, why $50 to $100 million seed funds could be the worst performing size fund of this vintage.
- JLJason Lemkin
I think Travis Uber would be a trillion-dollar company today because it'd be five years ahead of where it is today.
- RORory O’Driscoll
Wall Street is simple. If you give them growth, they leave you alone. If you don't give them growth, you better give them profitability. And if you don't give them either, they're going to bust your chops. And today, compute eats jobs.
- JLJason Lemkin
You do not need to be technical to win with AI agents in Q2 of '26. You do not need to be even 1% technical.
- RORory O’Driscoll
The bigger your fund size, the more you have to be a power law junkie. There's no investment opportunity so good that excess capital won't destroy it.
- JLJason Lemkin
You're gonna get laid off because you're not gonna matter.
- HSHarry Stebbings
Ready to go? [upbeat music] Guys, I'm so excited for this. We were just talking about where to start. So much news, and, uh, Jason, I think you are absolutely
- 1:12 – 9:27
NVIDIA's GTC: What You Need to Know
- HSHarry Stebbings
right. It's very important to start with GTC and Jensen and s- data centers in space. Obviously, Rory said, "No, not gonna happen," but maybe it does. How did we think about the data centers in space and last night GTC, Jason?
- JLJason Lemkin
To me, I, I mean, listen, the interesting thing, which you don't even have to watch anything, you just have to look at the Twitter stream, is the sheer sense of energy and momentum and confidence there, and the confidence to do things, not only talk about data centers in space, but launch things like Nemo Claw, which are their version of OpenClaw, to launch a partnership with Thinking Machines and others for their own open source LLMs. I mean, they're just going for it, right? And you can just smell the... I mean, obviously [laughs] NVIDIA's a pretty good stock and a, and a pretty good company at the center of AI, but you can just smell the companies in decline. You can smell the companies struggling. You can smell OpenAI struggling right now. You can just smell it. You can smell the code red and the fact that they, they said yesterday, "We have to concentrate on enterprise. We have to stop side projects." It's not a critic- I mean, and anytime you've worked with any startups, you see the, the, the, the, the, the seasons, right? But man, this is summer at NVIDIA. I mean, they're on fire on everything, and all the things where you see-- And they're at risk. They're at risk from their customers using, uh, using, um, TPUs from, uh, from, uh, Google and from Amazon. But man, everything from already integrating Groq to data centers in space, to crossing a trillion dollars in bookings, to Nemo Claw, it just feels like a company firing on about 13 cylinders.
- RORory O’Driscoll
Yeah. So I'll, I'll come back to y- your, your mis- mis- misportrayal of what I said later, Jason. But let's hit the main point because it's all about, in the end, it's all about the money, right? Super interesting kind of counterpoint on something. On the one hand, you have an extraordinarily aggressive number, a trillion dollars in revenue. On the other hand, stock moved less than 1%. Why?
- JLJason Lemkin
It was already priced in.
- RORory O’Driscoll
Already priced in. And if you start parsing it out, I think what happened is it's as simple as this. If you look at the forecast, company did $215 mil- billion, billion in revenue last fiscal year, up from 130, I think, the prior year. You know, the forecast is mid-300s next year. So the soundbite was 25... Uh, sorry, well, next year, I should say this year, to be precise. The soundbite was half a trillion dollars of demand over the next two years, and that was the soundbite a year ago. And now the soundbite is a trillion dollars in demand, but if you listen carefully, it includes '27. And lo and behold, if you go and check the analyst forecast for '27, it's in the mid-400s. So it turns out if you add 500 and 400, and then you apply a salesman's roundup, you get to a trillion dollars. Another way of translating that wonderful, amazing number of a trillion dollars is the analyst forecasts for the next two or three years look roughly right. So once the analyst processed that, the stock said, "Yep, nothing, no new information here." Which is just fascinating because what it says is, you know, this is a company, by the way, for, for context, four years ago was doing $20 billion a year. Maybe five years ago now, actually. Well, yeah, five years ago because we're in '26. $20 billion a year. Last year, it did $215 billion, 10X growth over four years. You know, ab- about under 60% growth last year. Forecasting 60% growth this year, and attenuating down to 20%, 30% growth in a couple of years. So at one level, not insane relative to pa- you know, if past performance is predictive. If you have a company that grows 10X, saying it's only gonna go 20%, 30%, 40% over the next couple of years doesn't seem unreasonable. But what it does imply is a massive level of CapEx continuing for the next four or five years. That's fundamentally the bet. That's the big statement that came out here is, we think this level of CapEx investment is gonna keep going for the next four or five years. We're reaffirming our estimates, and, um, no one, none of my customers are gonna blink on our spend. That's the takeaway.
- HSHarry Stebbings
Jason, I constantly go back to something that you said, which is we're gonna see inference running 24 hours a day for a larger and increasing number of the worker population. If we think about that, in 2030, will NVIDIA be a $10 trillion company?
- JLJason Lemkin
Oh, I think $10 trillion in revenue is more interesting because he's just predicted a trillion, right? And so-
- RORory O’Driscoll
No, cumulative... Again, we've got to be precise. Cumulative trillion.
- JLJason Lemkin
Yeah, no, it's a cumulative trillion. Can I-- So, so, so how long does it take to do a cumulative [laughs] $10 trillion? That's an order of magnitude.
- RORory O’Driscoll
A lot longer.
- JLJason Lemkin
That's at the limit, I think, of general non-Andreessen level human, uh, ability to, to grok is about an order of magnitude. Um, so I think five years-It will have a, a cumulative $10 trillion from on it to... I know it'll take five years to go from $1 trillion to $10 trillion. That, that's my bet. I do think the inference thing... I mean, listen, there's a lot of interesting things in the math. How fa- how, how fast will the cost of inference continue to fall versus the consumption of inference, right? There, there's, um... W- will there eventually be a Moore's Law, an inverse Moore's Law where it doesn't, where we don't see the dramatic cost decreases we're seeing? Maybe that's why we need data centers in space. There's a lot, there's a lot of complexity here. But even if you think, like, why the, why the hell does NVIDIA do NeMo claw? Like, why? Now, Jensen said it's the most GitHub stars per unit time, faster than Linux, faster than anything. But the... I think the real reason is, is it uses a lot of inference. This is why all, everyone in China is give, all the, all the f- all the providers are giving away OpenClaw because you've got Grandma and Grandpa lined up on the streets outside of Tencent and Alibaba with their free OpenClaw because it just burns tokens, right? So, uh, part of it is Jensen saying, "We're gonna..." And this is probably part of the, um, you know, big part of the Groq execution, "We just want, we want you to be burning tokens at least 72 hours a day. We want at least three agents [chuckles] running 24 hours a day." So yeah. I mean, I, I think it's gotta be three orders of magnitude more inference we run in the next five years.
- RORory O’Driscoll
You could have 3X more tokens, but if the price per token goes down by 6X, the revenue would decline. Just pointing out the math.
- JLJason Lemkin
Yeah, but it's gonna be, it's gonna be like a, a, a, it might be 3,000 times more tokens, not 3X. But yes, the math, same math issue, right?
- RORory O’Driscoll
Again, going back to my comment is, you know, someone unveiled a trillion-dollar number, and within, you know, 10 minutes, the stock market processed to nothing to see here, right? Just points out the expectation of a, you know, railway boom, internet boom, level of CapEx investment continuing unabated, growing at 30% for the next four or five years, it's a pretty heroic assum- assumption. It's validated by the recent past, and there's nothing at this point to say it won't happen, but it is just worth pointing out, you know, 'cause, you know, for c- if, when NVIDIA does 200, the CapEx spend is probably 4 or 500 billion 'cause they get about half of it. If NVIDIA's doing 600, the CapEx spend is probably 1.2 trillion plus or minus. These are unprecedented levels of CapEx spend, and now we're forecasting them to keep going for f- four or five years. There is at least some probability, pick a number, 30%, that it doesn't happen this way.
- HSHarry Stebbings
Is there anything else that you think is notable from GTC before we move on?
- JLJason Lemkin
The thing that stayed with me, and this is... I think there's a lot of interesting things. I hit the things I thought were interesting. Um, but the message behind the message, right, was that, uh, open source, um, whatever models, everyone needs gigawatt centers. They all need massive amounts of data centers with inference, with GPUs, with everything, and that it doesn't really matter. It doesn't really matter, and that the best models are still going to win, which is where he's made his bet. He's announced another open source alliance. Other things will win. But at the end of the, at the end of the day, his main... You know, we're gonna win. We produce the best outputs. We produce the best. We b- we produce the best inference. We produce the best everything, and everyone needs data centers. And that level of confidence that most rolls of the dice lead to NVIDIA winning, um, you know, it's a g- you know, we c- you can take shots at, at, at, at its armor, right? At its moats. But I think there's a, a high degree of confidence that most of the roads lead back to NVIDIA reaching $10 trillion of cumulative, cumulative, uh, booking, bookings [chuckles] over the next five to seven
- 9:27 – 20:33
Meta's 20% Layoffs & Atlassian Lets Go of 1,600
- JLJason Lemkin
years.
- HSHarry Stebbings
Speaking of playing for this game, Jason, you said, like, you can feel energy in rooms. There are also tough times for certain companies where you feel other forms of energy. Two big announcement this week were in terms of layoffs, Atlassian announcing 1,600 people, and then Meta reportedly a speculative 20% workforce reduction, which would be 16,000 of 79,000. We've spoken about layoffs before. Is this really just the start of the dominoes falling? Is this, um, a sign of over-hiring from 2021 and beyond, and actually we're just relabeling it AI? How do we think about these very large scale layoffs from the biggest players?
- JLJason Lemkin
Well, look, I don't know that much has changed from our prior con- conversations other than that, you know, w- everything we've said has come true. Um, this is every conversation at scale. Here's the thing. It's not... Atlassian and Meta are both interesting, I think, because, I mean, I guess they're all the same. It's not really about layoffs. Neither of these companies has to lay off anybody, okay? Atlassian has substantial free cash flow. Um, Meta, I don't know, they're in the, th- their free cash flow has dipped, but it's still, like, in the mid-40s, right? They don't have to do this. This is not a unicorn trying to figure out what to do with the last 20 million that Saster Scale and 20VC gave it, okay? This is a decision. This is a purposeful decision, and what's happening behi- in board meetings and in management teams is everyone's looking at the teams they have and saying, "I just don't know what to do with half of these. I don't need half of these people. I don't need them. I do need people. I need people. I need different people, and I don't..." You know, there was a great LinkedIn post today, this morning, from the ex-VP of engineering of Ping Identity and, um, who said, "This is gonna be a sad post. I don't know if anyone's gonna see it, but, but my, what I learned is over. The craft art of creating code, creating modules, testing it, being creative, figuring out how to do something that hasn't been done before is why I got into engineering, why my teams join me," right? "That era is over. Now the AI writes the code, and all an engineer does is review the code. But now the LLMs are review- doing the code review. We, we won't need me anymore." And everyone's looking at their team and wondering, "Why do I need that engineer? And do I need half my sales and go-to-marketing team? Do I need to brute force sales and marketing the way it was when the three of us met?" You brute force sales and marketing in the enterprise. Everyone's looking, and they're saying, "I don't need to do these things." And so these are leading to radically different ways of thinking about the future, and some folks are gonna be very slow on this. Um, but everyone's talking about it. Everyone's talking about it, and just whether it's 10% or 40% or 15%, it, it's just an output of these conversations of what people do I need in the new world, and most folks are, m- probably half their teams are not the folks they need going forward.Do you wanna be ki- kind about it like Mike? Do you wanna be brutal about it like [laughs] Zuck? Does it matter? I mean, I, I, it matters to the humans, but at some point we're gonna end up in the same place over the next 36 months. The pace of change is so fast. So... But I do think that the Block thing, you could argue it's, it's different and they're growing 2% like we talked about and, and m- I think Mark Benioff said it was an, uh, Block is different, right? But these conversations are in every boardroom, even if you're in... The margins are in the 40s. In every... We have the wrong people, and everyone's on, is stressed at AF right now because including OpenAI, including Anthropic, everyone's stressed AF, and they need to reboot their teams for the future, and they can't stick with people in the past. You just can't afford to. You're gonna be obsolete in 18 months. And layoffs are just one way to re-engineer your company there. And as brutal as they are, they're just a small piece of re-engineering your company. We're running out of time. Everyone knows they're running out of time. Everyone knows they're run-- Un- unless you're Lagora or Shenora or Ladora, but even them know th- they're running out of ti- they, i- in 12 months, their current products will be obsolete.
- RORory O’Driscoll
That was helpful 'cause I actually have been thinking a lot about this layoff thing, and I came in with four different categories, um, of really what's going on, and Jason's actually added a fifth that I'll come to last. And I think if you try and be logical and use categories, it just kinda, I think yields more insight. There's a whole category of layoffs that are really, we never should have hired these people. We got fat. We're using AI as an excuse, but if you run the efficiency metrics, we just don't need these people, right? And I think there's some of that in there. Then the second category is the, you know, we used to have a business growing at 20%, we're now growing at two. If we were growing at 20, we'd need all these people, but we're not. We're growing at two. I need to give the financial market what it wants, and it wants profitability, right? Again, no com- you're not making any comment on the labor, you're just conforming to capitalism, right? And I think there's a lot of that going on in the SaaS world, right? I think that first category... But Block is clearly an example of the first category, and maybe Meta, but I'll come to Meta in a second. I think a lot of the SaaS world is that second category of, I have to give... Wall Street is simple. If you give them growth, they leave you alone. If you don't give them growth, you better give them profitability. And if you don't give them either, they're gonna bust your chops. Them be the rules, and if you can't give them growth, you gotta give them the second. That's what the second... That's the second category of layoff. And somewhat interesting, the third category is starting to get into what Jason talks about. The third category is maybe you just, that you did need these people pre-AI, but now there are AI efficiencies that allow you to do the same thing with less. That's probably true in coding. Um, I'm not sure it's true at the same scale across the board. The fourth one isn't the one that Jason gave me, but it is the cap- it is the Meta example, right? It's, that's something different. You spent all your money on computers. You need operating cash flow because you l- you, you got that depreciation hit coming, right? I mean, literally, that's reallocating dollars from humans to computers, right? To compute, right? That's not what's going on at Block. That's not, 'cause they're not investing massively in CapEx, but that is 100% what's going on at Meta because, yeah, Jason, you're actually wrong in that the, the operating margins are still 40%. The free cash flow, when you honestly account for the CapEx, is almost zero, right? And that depreciation's gonna start hitting, and they're gonna be firing people because they need to f- to give it to Jensen. And today, compute eats jobs, and that's what you're seeing at kind of Facebook. You literally can't afford to have NVIDIA and people. And then the last one that I didn't have, that Jason's added to me, which I think actually could be more of it than I realized, is this idea that in some cases, you actually are gonna hire back. Maybe not as many people, but maybe at twice the salary, but just different people. And maybe there's a little bit of deck cleaning. I think you're very right, Jason. I hadn't thought of it, but deck cleaning going on in that maybe I don't need 20 engineers who all know, you know, C++ and Rust. Maybe I need eight engineers who are just really awesome at AI. My aha is if that's not going on, it probably should be in every company. Even if you don't have any of the first four, e- even if you didn't overhire, even if business is still growing strongly, even if you don't need to feed Wall Street, even if you're not spending it all on compute, you probably are doing, to Jason's point, a pretty significant talent reshuffle in real time.
- HSHarry Stebbings
I, I just wanted to ask Jason, if the people that we want are fundamentally different, the developers that we used to hire, we don't because AI writes the code for us, the marketers we don't want, the salespeople we don't want, who, who do we want genuinely? Like, what is the attractive profile? 'Cause your Anthropics and your OpenAIs are hiring. So, so what are the people that we want in the companies of the future?
- JLJason Lemkin
Look, I know it sounds trite, but, but the answer is simple. It's just the expression each year changes. We want folks that are genuinely AI fluent. It's pretty simple. Now, you know, maybe last year we called them prompt engineers, right? That used to be a job. I don't know if you remember. That actually used to be the hottest job on planet Earth. Now no one needs a prompt engineer because it's pretty easy to prompt all these tools. That job died, okay? Um, and now we need go-to-market engineers. Um, I think that job's gonna die. We need, everyone needs so many forward deployed engineer, like you can't hire enough forward deployed engineers. But, uh, you know, um, but Palantir just announced in whatever their, their big, their big event, they've gotten their deployment times down n- over 90% with forward deployed engineers. So that may become... So the, this wave of disruption for the titles and the specificity, it's also exhaustingly accelerating. But it's really simple. You meet anyone for any role, sales, marketing, engineering, product, QA, they're, they're either, they're either... They can't keep all of the ways they use AI to accelerate their job from spewing out of their mouth, or they're staring at youIt's just nowhere in the middle. Like, and the person that comes in and says it's, it, it sounds captain obvious, but like, you know, you just had the w- whatever from Lovable, the, the marketing head that was super popular on the show, right? She's just spewing AI native insights into Lovable, right? It's not that complicated. You hire her, E- Elena or whatever today. You just hire her. It doesn't matter whether she's still in college or a junior or a senior or a middle or a left or a righter. And honestly, if you interview people, I would say of all, even of the best startups I've invested in, maybe 30% of the management team meets the standard at best, 30%, maybe less. And of the interviews I do in general, it's single digit percents. It's just ... And in, in that sense, it's the same as ever. Like, you either lower the bar in hiring or you hire someone that's actually great. And someone that's actually great is so far ahead of you in how to employ, to, to employ the efficiencies of AI in their role, your jaw falls on the table. The difference is we used to need warm bodies. That's what's changing. We used to need warm bodies to answer the call, to do QA, to do code review, to, to get the blue pixel to go from the upper left to the lower right. You laugh, but you need, you literally needed to brute force this with humans. With AI, every day that goes by, the AI, you do not need brute force human beings on your team, and that's another reason they're shrinking. Why are all these new companies so efficient? They're just not brute forcing things with humans. They're just not. They're choosing not to. And so these team- all the brute forcers out there, everyone talks about how bloated teams got in 2021. I don't agree with that. I think they got as big as they needed to be when growth was high and you needed humans to do everything. All ... You look at these teams that gr- that doubled. Well, if growth continued at 60% like the rate in early 2021 for five years, Rory can help me do the math, and every single thing a software company did required a human, you are understaffed by your 2021 headcount. You'd be sitting here in 2026, you'd- ev- ev- every office in Soma would be triple packed and you, there wouldn't be enough humans to staff your company. It's just the world changed.
- 20:33 – 30:30
How to Test AI Fluency in Employees
- HSHarry Stebbings
Jason, you live on the bleeding edge. I think me and Rory see that, and I think the world sees that when they hear you every week in terms of how you run SaaStr.
- JLJason Lemkin
Yeah.
- HSHarry Stebbings
For all of the CEOs and execs who listen to the show, what would you advise them in terms of determining whether someone is AI fluent when they meet them for jobs, for talent?
- JLJason Lemkin
Here's my ... I realize, I was just asked this. I just did a review with a super fast startup growing, just crossing 100 million, and I was asked this question. And one of my favorite executives, I thought his answer was pretty dated, and because he gave me an answer that was about six months old. The answer six months old is, "I look for folks on my team, I look for, you know, uh, what tools they play with." Okay, that was a great answer in, in like summer of 2025, okay? I tried Lovable last week, okay? I ... Bomb. The answer in 2026 is, "What commercial AI tool have you brought into your organization this month?" That's the test. Anyone that is on the bleeding edge that you would wanna hire, now there are so many great products in the market, okay? There is no excuse in any role to have not brought one tool a month into your organization, okay? There, now, there's gonna be better and better tools and better and better products as the year goes on. What's the one you did? And you'll see folks with their deers in the headlights to this question. What, what sales tool? What marketing tool? What product tool? What engineering tool? What did you bring in? Why did you pick it? How is it working? Because if you're at, remotely at the cutting edge, you're all over this. You're looking for the next agentic tools that will radically improve how you do b- this is, the ... You think s- everyone thinks SaaStr is at the bleeding edge, right? You know, you know what we do is we're just looking for the tools and trying them, okay? We're one year ahead of everybody else because we did the simplest thing in the world. Like, we tried the tools early and we trained them. We trained them for a month, okay? I'll give you, you wanna hor- hear a horrible example from this week? Super hot AI company valued at 6 billion, okay? I'm not gonna name it. Um, this week, ye- yesterday told us we had to quadruple what we spent on their product, okay? Their agent told us, right? And why did this happen, okay? Well, at this $6 billion company, no one had trained the agent on its pricing properly. No one had tested it. They said, "We're, well, we've been in beta." And we said, "Well, when did the beta launch?" "A year ago." Okay? These are people asleep at, at the wheel. You want somebody who the instant this comes up, they exactly know what the issue is, and, "Hey, when I was at Lovable or Replit, we trained the agent. This is how we did it. I brought in this tool. I brought in this tool that, that Rory inve- invested in last week. It solved all these issues." That's what you wanna hear. And if they haven't brought in a tool in the last 30 days, at least deeply evaluated it, I don't really care whether they bought it, but gone so far down the funnel, they can tell you, pick whatever tool, Fi- Fixer, Reggie, GC, A- AI GC, I don't care. H- you went through it, you looked at it, you can tell me the eight ways it would improve the productivity of your business and the three you didn't. Just don't hire that person because they're gonna run your company into the ground. This is the job today. The job today is not to screw around on ChatGPT and to be a prompt engineer. The job today is to bring the best AI and agent, agentic products into your organization and leverage all the hard work that the engineers have done building those products. That's your job. You don't have to screw around, you don't have to be a prompt engineer anymore. You have to be an agent deploy expert, ADE. This is the new job we're making up today, an agentic deployment expert. That's your job from C-level to junior, agentic deployment expert. Don't hire anybody else. You're gonna regret it. They're gonna stare at the camera
- HSHarry Stebbings
He's good, Rory
- JLJason Lemkin
... stare at the camera
- RORory O’Driscoll
He's on a roll. We could probably just... I could slip away, get a coffee, and come back.
- JLJason Lemkin
No, and I, I sound exasperated, Rory, and I-- but the reason I am is I can just see, I can see my best companies doing it, and I can see some companies I've invested in not doing it, and I wanna cry. I just wanna cry when they have no ADs on their team. I just-- Like, you're flushing your years of your life down the toilet by not approaching your-- how you're building this company this way.
- RORory O’Driscoll
Yes. And at the risk of being positive, it's worth pointing out two things he didn't say. Well, something implicit in what he said. Jason didn't do the only hire... You know, he didn't commit the, um, employment law, I think it's a civil penalty of saying, "Only employ people below X who get the new, new thing." 'Cause he implicitly said anyone can do it, provided you're willing to learn, and I think that's the big a-ha-- That's one of the positive statements to make here, right? Look, and I think it applies... I'm always wary of being, hey-- coming across, "Hey, th-this is the things that you all have to do." I think it applies to everyone, including the investors, right? I mean, I will say I have found that unless you're willing to invest the time in learning these tools, you actually shouldn't be in investing in them. One of my partners, Andy, had this expression, you know, "If you decide you wanna stop learning new things, you probably should retire within six to twelve months and never write another check again." Right?
- JLJason Lemkin
For sure.
- RORory O’Driscoll
And maybe that's down to three to six months at this stage, right? And I think, you know, it's... You know.
- HSHarry Stebbings
I actually-- Oh, Rory, I actually j- I had a meeting with mine and Jason's biggest investor the other day.
- RORory O’Driscoll
Yeah.
- HSHarry Stebbings
And I, I am pretending he's not here. I said, "I think he's the most equipped investor for this generation of investing, because I don't think anyone quite sits at the bleeding edge like he does on the investor side." Like-
- RORory O’Driscoll
In terms of using the st- equ- stuff, yeah.
- HSHarry Stebbings
Yeah, in terms of using the stuff, understanding, understanding bottlenecks and constraints.
- JLJason Lemkin
For sure, but can I just add one point? We can-- Just 'cause it's so important if it helps people, okay? We are... And thank you, Harry. We're, we're going through these phases, okay? And when AI started to blow up for real for us, uh, call it early 2024, right? Maybe late '23. I wasn't equipped. It was too technical. I wasn't gonna go in and figure out... I wasn't smart enough to figure out how to deal with a massively hallucinating LLM API and turn that, and turn that into something magical. Kudos to investors and others that, that got it in early '23, '22. I mean, I remember, I, I guess it was maybe Saster annual '23. I was with David Sachs, and I did a Q&A, and I said, "How are you thinking about AI at Kraft?" He's like, "Well, we're all in. We want eighty percent in, um, '23 of our investments to be AI." I'm like, "Great, but, like, show me the, show me the great ones in market." He's like, "They're all prototypes. We're all t- They're all, they're all proof of concepts, but we're all in anyway." That's where you kinda had to be in '23 if you weren't investing at, like, the LLM level, okay? I wasn't smart enough. Then we went through this weird-ass prompt engineer era where, like, you, you could torture these products to do something good, right? But you had to torture them. You had to, like, craft these crazy things that made no sense. Now we are in the era where mere ordinarily smart generalists can make these tools do magical things. And literally, I go to these meetings, and people's be like, "I don't know how to... Like, this is so scary. I don't know how to do this." And we show them our backends. Do you know how to do a workflow generator? Do you know how to do a, a decision tree? Like, we've been building these since software in the '90s, okay? If you... I can show you all of our agents. The-- How they work is novel. They do have to be trained. You can't be LAF and have these agents work. But honestly, the, the UI, the UX, the way we interact with them, it's just software. And so my point is pick yourself off the ground. This is your time now. If you felt lost in the AI era, if you felt like you're behind, you don't understand what all these people are saying on X and Twitter and their claws and, and their L... And talking about all the d- four point, six point, nano point, and it's o- like you just... It's not your world. This is your time. This is your time for the generalist that knows how to use software tools really, really well. And I-- This is my last point, but it's so important. If ever in your recent life, and this is why you could be... All you need to be is young at heart, to Rory's point. If in the last three to five years you have successfully deployed a piece of enterprise software of any sort, y- you yourself, not some agency you hired. But if you have deployed it, you can deploy any agentic tool. Any. And you can become the hero in your company, and you can become the hero in your functional area. But I watch folks... I, I'm literally helping a company now. They're, they're adding hundreds of sales folks this year with the new s- pre-AI CRO. He's not-- hasn't brought in a single tool. He's scared of it. Okay, it's not that hard. Did you use Saleloft? Did you use Outreach? Did you use HubSpot? You know these tools? If you can deploy these tools, you can deploy a world-changing AI agent. And so this is the time for people, like the folks that, that were shut out of the AI revolution. Right now, the generalist folks that are not-- that know how to deploy software, that don't even know how to build software. Like, vibe coding for me was folks who knew how to build software, but you didn't have to be an engineer. Now you just need to know how to deploy software to win with AI agents. That's all you need to know. So many people have these skills, and they're petrified of AI. "How did you do that? How did you deploy an AI BDR?" Well, we bought a piece of software. We figured out how it worked for a day. We set it up in an afternoon, and then, and then we did spend thirty months training it, which you didn't do with this old software. Because in the old days, we just had to manually upload all the data, right? And there was no training. The, the only n- non-intuitive part is training these things, and it's, it's, it's just work. So that's why when I see folks on the management team not doing this, there's no excuse. You do not need to be technical to win with AI agents in Q2 of '26. You do not need to be even one percent technical. Not at all. So it's your time. It's-Or you're gonna get laid off. Or you're gonna get laid off because you're not gonna matter
- HSHarry Stebbings
You said not mattering there, Jason. Uh, and thank you. That was an impassioned rant that I learned a lot from, and I love AD. That's a fanta- I think you should coin it. I would say write a book, but I don't think writing a book is ever useful these days given the speed of news and on the attention-
- JLJason Lemkin
Given the known wisdom, yeah.
- HSHarry Stebbings
Yeah, 100%. The amount of VCs that write books, I'm like, "Seriously, what, what are you doing wasting a year doing this?" [laughs] Um, anyway-
- JLJason Lemkin
Well, you're getting your friends to go on the book tour with you. There's something to be said for that.
- HSHarry Stebbings
Oh, yeah. That would be great. Yeah, yeah. Totally agree with you.
- JLJason Lemkin
Get used. Come on. We're actually meant to add value here. Keep going.
- HSHarry Stebbings
Okay.
- 30:30 – 48:24
Anduril Lands $20BN Army Contract
- HSHarry Stebbings
Anduril lands $20B Army contract. The reason I said this is when you said about just mattering, I, I remember reading this being like $20B Army contract, 10-year deal, five-year base, and a five-year option to consolidate 120-plus separate procurement actions into one enterprise contract. Um, it's enormous. I... When I read this, I was like, "God, the shit I do just doesn't matter." This sweet little lean company that's d- going from one to four million ARR. How did you guys think, analyze this $20 billion annual contract?
- RORory O’Driscoll
Well, first of all, yes, it's obviously a vast contract, but as a reminder, they have four or five own- they only have four or five customers, so you better get 20 billion from each of them if you wanna be a big company, right? I mean, what it really told me is they succeeded, right? Ba- 'cause this isn't as much a new program. This is basically the Army saying, "Look, we got 120 separate contracts with you. We get it. You're now effectively a prime supplier. Why don't we consolidate all the paperwork so that people one level down have less process to go through every time to buy your stuff," right? So I, guess, more a procurement thing. And also there's a systems lock in here. I, you know, the primary product I think they're talking about is the Lattice, which is a software connectivity system. You know, you've got all these different physical hardware products out there, some made by Anduril, some made by other people, right? And as is becoming clear in recent conflicts, a huge part of the problem is making all these systems talk to each other, dare I say it, autonomously and quickly, right? And connecting all these things in not just near real time, but real time. Because, you know, as we're learning right now, turns out if you're in the Strait of Hormuz, you've got literally seconds before you can take down an incoming drone. You don't have time for a slow connectivity protocol. You definitely don't have time for a human. So you need this integrated communication system that connects all your different physical hardware, offensive and defensive weapons. And I think it looks like the product that these guys have, that Anduril has, is becoming at least the primary default for that, for effectively moving information between different systems. So it makes sense for what the Pentagon's doing. They're basically saying, "Look, we've gone from trying you out in a lot of different areas to saying, 'Okay, damn it, you're the dominant provider of this layer,' so why don't we just systematize the contract?" It kind of picks them as, it picks them as the clear new prime.
- JLJason Lemkin
I'll tell you to answering Harry's question, and this may be wrong. Like, this, this may be a flaw in me. Like, I completely concede this, but Harry's part, part of Harry's question was, hey, am I investing in things that don't matter when Anduril has a $20 billion contract? My version of it, I, I feel that, and my version of this is I have given up on an, an, an, an investment thesis I had for 10 years because I was a B2B founder, which is that a smallish TAM is okay with a great founder. Start small, but you know what? Everything... We can all point to small things. For me, you know, when I started in e-signatures, the TAM was two million. It was two million. Obviously, if you just look at Rory's investment in DocuSign, it is doing more than two million today as I haven't checked the latest quarter. But even with some challenges, the TAM certainly grew, right? So as soon as I realized that, I'm like, "I'm, I'm investing in areas that are going through phase transitions with great founders, and they will grow the TAM," right? And for sure we can show it, I hate to, to do trite things we've done. Certainly the legal tech space is one that has shown an explosion in TAM, right? Because of AI. So there's many examples. But, but in my heart and soul, I can't do any of those investments anymore. I can't invest in anything that is mid-size or smaller. I just can't. This is the Anduril problem, and this is also why I think a lot of funds are gonna have terrible returns. Because a lot of early stage funds are gonna swing so hard for the fences that they're gonna invest in the number three or the number four and get just zeros after zeros because there isn't a chance to stairstep your investment. There isn't a chance to go from the $50 million TAM to the 150 to the 500. So I think there's gonna be a lot of zeros. But I can't help myself, and literally, I can't even... I, I, I don't like... I can't even bring myself to take a meeting with a startup where I don't believe the TAM will be utterly massive. I just can't take the meeting anymore.
- RORory O’Driscoll
Ja- Jason, you, you, you... There's a lot of... In that I wanna unpick and try and be more precise, right? What you're say- I think you're saying two things, just to be clear. When you see what a big TAM feels like, and let's agree them, the, the, being the comm system for the Army probably is one of those big-ass TAMs, right? You're saying is you just can't get excited by super small TAMs. That's, that's one statement. And the second statement you made is, if everyone's thinking like that, they're all gonna do a swi- they're all gonna swing more aggressively at the big TAMs, but in the third or fourth player in those TAMs and probably lose. Is that what you're saying? I didn't understand the venture-
- JLJason Lemkin
Yeah. And they're, and even worse, they're gonna pay up hundred p- pre for these seed investments because it all... Because as the best accelerators tell us, it doesn't matter in these big outcomes. It doesn't matter whether you pay 60 post or 100 post at a top accelerator, because when it's $100 billion outcome, that's a better return than a unicorn, right? Mathematically it's true, but I think it's gonna lead to a lot of zeros.
- HSHarry Stebbings
But Jason, do the best markets not start small?
- JLJason Lemkin
What's that?
- HSHarry Stebbings
To your point there when you said... To your point, do the best markets not start small?
- JLJason Lemkin
I don't believe it anymore. The, uh, uh, the dif- I, uh, Rory, correct me if I'm wrong, I still think defense is the number one largest segment of our spend in the country. Maybe healthcare is number one and defense is number two, right?
- RORory O’Driscoll
No, it-Yeah, defense isn't, uh, shockingly, defense isn't at large. We just spend a little over 3% of GDP on it, and turns out most of that... Not most of that, a good slug of that, almost half is people. It turns out the actual amount of m- what, uh, because I make a comment that's not counted there. I think Arnold's gonna do amazingly well. The Pentagon budget for new shit is fairly finite, and I think there'll be five or six big winners in defense. I'm not sure there'll be 100. Um, but-
- JLJason Lemkin
But, but isn't that the game of venture is f- four or five, not 100?
- RORory O’Driscoll
What?
- JLJason Lemkin
But that's the game of venture is to find the, the four or five-
- RORory O’Driscoll
True. Agreed-
- JLJason Lemkin
... not the 100
- RORory O’Driscoll
... that's my point, that's my point is that, you know, power, p- the thing about power laws is they get in your head like it's getting in your head, and you can over-project from nothing matters except the $100 billion outcome. Well, if you want 10% of 100- of a billion dollar outcome and you are a $100 million fund, that's a 1X fund. So I, I hear you. I understand what you're saying. The bigger your fund size, the more you have to be a power law junkie. At some level, you wanna be a power law junkie because in the end, even if you have a $100 million fund, wouldn't you prefer to be in the trillion dollar outcome than the billion dollar outcome, right? The question is: when does that focus on the power law, could it become overly myopic and, a- a- and lead you to swing? You know, you know when gamblers can go on tilt, where they're so desperate to earn, you know, their money back that they start swinging at anything, right? And, you know, if you're like, "Oh my God, I just gotta get... I wish I'd done..." I mean, i- if someone's saying, "I wish I'd done OpenAI or Anthropic, therefore I'm gonna fund eight next gen foundation models 'cause maybe one of them will be like that," right? That's another failure mode that, as you said, it could happen-
- JLJason Lemkin
But we might be seeing that happen right now, right?
- RORory O’Driscoll
Yeah, that's my point. So I, so I'm not sure I fully... I hear you on the small... No one wants to be in a small TAM, but, but almost as important as TAM size, there's two other things. There's TAM velocity, for lack of a better word, y- your ability to dominate that TAM. There are mid, small and mid-tier markets that are wildly profitable software markets for the winner, and you can make, you know, really good coin in a $4 or $5 billion market with a great outcome.
- JLJason Lemkin
But not if your en- but not if your entry point is, is what they are today, right?
- RORory O’Driscoll
Oh, yeah, you can't... No, totally. Yes, you can-
- JLJason Lemkin
The thing is now that, like YC has productized a $60 million post, right? Nothing wrong with it. I'm not criticizing it. More power to them, right? But what is, as a seed investor, I mean, Harry made this point that all these classic seed investments can't make money, right?
- RORory O’Driscoll
Yeah, yeah, yeah. Just, agree. You can't go into a game paying power law prices for mid-tier market outcome, for mid-tier markets, 'cause you're exactly right. You, you'll be wrong.
- JLJason Lemkin
That's the game today, but that's the game, that's the game today.
- RORory O’Driscoll
And I think that, yeah, I under- that, that's a fair comment. That, as a combined com- that's why I was trying to unpick what you're saying. As a combined comment, that's fair, is that if you price every deal like quote, unquote, it might have a $2 billion, a $20 billion contract, most of them won't.
- JLJason Lemkin
Harry wouldn't do this, but if a founder came, a classic founder came to me with a, a structure that made sense and I believed in them, I might still take the bet, but at 60 post for a pre-seed investment, right? You, you can't risk that it's not Anduril or better. Like, you can, you can take risk it doesn't happen, but you have to believe the ta- the opportunity is so large. How else are you gonna get your 100X with dilution, right? That's 250X in today's world, uh, post-dilution and everything. What's two... Help me. What's 250 times 6 billion, uh, 60 million post? Like, lots.
- RORory O’Driscoll
13, 14 billion, isn't it?
- JLJason Lemkin
Yeah, so let's round up to 20. How many public co- s- tech companies today have t- nor- market caps north of 20? Not as ma- less than when we started this podcast. The math is grim.
- RORory O’Driscoll
Yeah. No, I have that count somewhere. Sub 50. Yes. No, I mean, I think that if you look-
- HSHarry Stebbings
Jason, if you take this mindset though, like genuinely when a deal comes through the door, what is big enough? 'Cause, you know, you've talked about your qualifieds and your artisans and your monikers before. Are, are they big enough? Like SDRAIs. You know, I'm seeing like constant call center replacement for healthcare assistance for auto manufacturers. What is big enough?
- JLJason Lemkin
Well, so, well, listen, there's, there's, there's arguments they are, right? If you look, um, the, uh... But, but what... I think it's why the growth fund is the winning strategy at the moment because they wait for the proof, okay? It's easy to be cr- take any... I, I mean, I, I, I, I, I'm getting bored of talking about the same companies, but to have a thread through our conversation, certainly I, I wouldn't have believed that being in this space m- having made so many investments, I wouldn't believe that Decagon and Sierra... Now granted, the, the revenue multiples are very high, right? I wouldn't have believed they would be doing what they're doing. I'm not even sure I would've believed to, to, to, to Rory that Intercom would've re-accelerated as it has or others. I w- I wouldn't have believed it, but the beauty to, to doing the deal when Rory did it, is he gets the proof points. [laughs] That's when, that's why it's such... But, but, but hoping that a slide and a vibe coded website proves it is tough. But, but Harry, going to your point, like what... There is a bulk, like there... This is... I'm not saying I'm right. Like, here's the counterargument where I'm wrong, right? And this is Captain Obvious. But like the reason and, and like, I, I mean, I barely know Decagon, but they just talked about it this week and, and, and, uh, and, uh, Owen talked about it last week. All these spaces are converging. So Owen said there's not gonna be any difference between support and sales in a lot of what we do. All these agents are converting to a meta, a meta agent that does more, replaces a lot of humans, and is worth a lot, okay? If that bet comes true, and it's already happening, then your TAM... But here's my point, your TAM explodes, right? Your TAM explodes, right? The question is: will you invest in a space where there's no evidence that the TAM is exploding due to AI? That's, that's where it's tough, right? Will you invest in... And it's kind of the question that you're asking, uh, Harry.
- 48:24 – 51:55
Travis Kalanick Returns With Atoms
- JLJason Lemkin
I do want to talk about Travis Kalanick. Um, came back in r- in force with Atoms. Um, it w- to be clear, eight years in stealth, thousand employees, rebranded City Storage Systems and CloudKitchens, which is more well-known, into this new company, Atoms, building gainfully employed robots, food, mining, transport. He came out with a pretty, um, I don't know if you'd say scathing, but a, an opinionated piece. "I bled, but I did not perish." He wants to be more aggressive than Waymo. How did we read this, guys?
- RORory O’Driscoll
I thought on the, I thought on the merits of what he said about robotics, that he's correct, and was pleased because it's something we believe. So as, again, to remind the viewers, obviously Travis Kalanick, the wildly successful founding CEO of Uber, famously terminated by the board, enduring feud with Bill Gurley, which can cycle back to the Anthropic, um, Pentagon discussion, because, uh, Travis's number two is now driving at the Pentagon, and also showing an ability to maintain a grudge, which is just one of those things you've just got to admire in people. But anyway, went away, founded CloudKitchens, surfaced last week and basically said, "It's not about CloudKitchens anymore. It's about robots." And Atoms is building robot for a variety of industrial use cases, and he has an investment in Pronto, which is an autonomous driving, um, company, um, founded by Anthony... I, I always mangle his last name, my Polish sucks, Lebowski, who was with him at Uber, right? So it's basically coming back and saying, "I'm doing... I was doing CloudKitchens, I'm now using that information to build robots, and I'm also thinking about autonomy," which obviously cycles back to Uber. So that's kind of the background. I thought he was spot on on the robotics call. And let's be clear what he said. He said he didn't fundamentally think humanoids are the answer. He thinks robots on wheels are the incremental next step. And the big aha that he, that Travis had was, it's not clear if you're building an industrial machine for a lot of use cases that you add legs. They, you know, the humanoid robotics that we all see, they have these legs, they consume a lot of battery life, they're pretty unstable. And most of the time in factory work or logistics warehouse work, you don't want someone using... You don't need legs, you just need wheels, right? They're a lot more efficient, and I think it's a big picture insight of Travis to say, "This is the direction things are going." And you know, worth pointing out is he's effectively making a call against a whole bunch of the humanoid companies. Not saying it's not gonna happen ever, but saying it might take a l- a lot longer than you think, and the path to humanoid robotics might be true specific purpose, non-humanoid type machines, maybe expanding over time. So big ass call on robotics that, for what it's worth, I agree with. And it's interesting, just one more comment is, Sunday, which just raised recently, which is another one of these robotics companies focused on the home, if you actually look at the form factor, they've gone with w- um, wheels too, right? If you look at the... It's very cute. It's a really cute robot. It's kind of nice, happy plastic. But you look at, you know, at, at the ground and it's actually running on wheels because they too have recognized that spending the money to give feet to many robots is just a waste of money here, right? Because you don't need them. So I think actually on trend, he's correct.
- 51:55 – 58:56
If Travis Kalanick Ran Uber Today, Would it be $1TRN Company?
- JLJason Lemkin
The main thing when I saw the TBN interview, the main thing I thought was, um, if he were running Uber today, it would be a trillion-dollar company. Without que- um, to me, without question in today's world. It's, it's his time. Uber is $160 billion company with massive free cash flow, and it is epic. And it, you know, I think the th- the, the, his hyper-aggressiveness, which in a different era led to his downfall, which I come back to, but it worked, right? It destroyed Lyft. So his, his view that like if you're not as h- a f- 57 on the 1 to 10 scale of hyper-aggressiveness, you're not gonna win this. And this is the era we're in today, right? He was just too early. Like, and there was toxicity to him, and there's, there were elements of, you know, treating women and other things that, that are probably terrible and not okay. P- putting that, and it's hard to, but putting that aside, he, he was just early for his time. And look at Uber today. Despite that, wildly successful, but mostly been engineered since then, right? Acquire, get into food delivery, which is huge for it, but a lot of that's through acquisition and managing his existing fleet. And when Travis was CEO, all he wanted to do was get into autonomy. He said from the beginning, "Our business is dead at its terminal state." No one was going to be driving cars around in Uber. And now they're years and years and y- years behind where they could have been. When I look today, the trillion-dollar companies are becoming commonplace. I think Travis Uber would be a trillion-dollar company today because it'd be five years ahead of where it is today. And that's all I thought. Do I actually think this CloudKitchens eight years out in the, the, the, the winter land, do I think it's gonna make it? Probably not, right? But that guy, that guy would be running a trillion-dollar company today if Gurley and buddies didn't force him out. That's what I thought.
- RORory O’Driscoll
I disagree. And so picking apart the argument-
- JLJason Lemkin
Would you have pushed him out?
- RORory O’Driscoll
I'll come back to that at the end of this conversation.
- JLJason Lemkin
[laughs]
- RORory O’Driscoll
I will answer, I will answer that question. But first of all, it's interesting you made, you made a comment here, "CloudKitchens, I don't know if I believe in it, but Uber would be a million do- a billion-dollar comp- a trillion-dollar company."
- JLJason Lemkin
Trillion.
- RORory O’Driscoll
That's what you said, right? Implicit in that statement is a repudiation of the logic of it, which is you're saying the great founder is everything, but what you're saying is the great founder can't make this company worth a trillion dollars. So implicitly what you're saying is it's a great founder plus a great opportunity. It's not, quote unquote, "all about the founder."
- JLJason Lemkin
Well, he has to start from scratch now.
- RORory O’Driscoll
Y- y- yeah. But yes, I, my, my-
- JLJason Lemkin
Starting from 80% market share in, in ride hailing is a pretty good platform to start from if you start, if you know everything about the industry, every inch, every, every, every, every inch of this industry you know cold.
- RORory O’Driscoll
So now let's talk about that.
- JLJason Lemkin
Right?Dara had to drive Ubers to learn it. And bless his soul, he's great, but he had to drive cabs. Travis, uh, didn't have to drive any cabs to learn how Uber, Uber worked. Like, he already knew the, he already knew how it worked
- RORory O’Driscoll
So given... Let's have a question here. Given... Okay, so let's talk about that, right? And I wanna leave aside, you know, p- the personal behavior stuff where I frankly don't have visibility, and I'm, I'm genuinely not gonna try and make a call on that. The hypothesis that Uber, instead of being a $160 billion company, would be a trillion-dollar company, implicitly has to be some ve- The only thing that could bridge that gap would be autonomous driving, correct?
- JLJason Lemkin
Well, no. You would, you would be five years ahead of autonomous driving, which i- i- is already, is now taking off, and I think you would dominate food delivery more than it does. Because you al- you already had such a head start ahead of your competition. You wouldn't, you wouldn't dribble-drabble into it, and you wouldn't then, uh, go buy or do this and that. You would just dominate it, and you would use capital, and you would use weaponize, and you would use implicit, and you, you'd u- use some dark arts in your mobile app so that, so that the competition would get blocked and all this crap, but you would, you would dominate it with... You would just go for 90% market share in food delivery, 'cause it's a better market than autonomous, autonomy in the short term. Maybe not in the long term, but it's a better market in the short term than ride-hailing.
- RORory O’Driscoll
I, I ag- uh, for what it's worth, I agree with that. So two separate arguments. Wait, do you... They had to get public, they had to get them cash flow positive. Hard nose coming. You could... Another spin on autonomy is you could say, "Yes, we need to do this thing," but we can't afford to spend at the level they were spending in 2015 on something that, reminder, 10 years later, is still only now finally doing a meaningful number of rides sub-economically in San Francisco, right? It's a trend, it is the future. It was 10 years away, and they had to get public, and they had to have a c- plan to cash flow break-even to get public to dominate Lyft. And, you know, un- it wasn't an option then as perhaps it might be today to stay private longer. Do you think they had to cut back on their autonomous spend? Maybe not to zero, which I think probably was a mistake, but dramatically focus on getting cash flow positive, giving Wall Street what it wants to get public, to have the acquisition currency to do the food things. Wha... A- and, and growth at all cost had reached its limits there, and maybe a different manager was the right person for the next stage of that journey.
- JLJason Lemkin
Listen, I, I, I think in this p- in this universe, um, outside management through t- just like many companies, performs as well or better through early 2022. Remember, it was a decade where no products changed. Even Uber didn't change much, right? Uber seemed feature complete about two years after it launched, okay? Great. They added, they added UberX. Now, now for five bucks I can get to work, and nothing changed, okay? These, th- this app was frozen in time for a decade, right? That's why outside management can run it. And I believe what it would probably look like is that as, as late as two years ago, both, both... They might have led to similar outcomes or maybe even a better outcome with outside management, right? But today it'd be a trillion-dollar company. My point is now would be his second, second time, because he wouldn't have quit, he wouldn't have stopped building, and, and for... And one of his best friends is Elon Musk. Maybe he would have owned autonomy with Tesla in a way that, that, that, that you can't... Who knows? But good God, it would be a trillion-dollar company today.
- RORory O’Driscoll
I actually think... Now I would agree with you. I actually think there was a period of time where they needed to conform to that realities of the market at that time, get cash flow positive, and run it like a financial engineer, and he didn't wa- he clearly was unwilling to do it. Actually, it turns out, in retrospect, they should have done the Steve Jobs thing. They should have swapped him out, got it public, got it cash flow like crazy, and sometime in '22 should have got him back and said, "Now, now is the time to do autonomy." So I, I do agree in the last two or three years. It's still unproven, by the way, whether or not Uber needs to own the technology to still make autonomy work. But I agree. I like your framing that there was a period of five or six years where the best manager for a lot of companies was a, you know, professional executive with a financial bent, and I, I can see why they made that change. If there was no more private capital to be raised, and if your CEO just was unwilling to focus on convergence at the expense of long-term projects, and you had a risk of going bust, I, I can see why you made the change. But I agree with you. Now you can say in the last two or three years, the financial management game is out and the product innovation game is back in.
- 58:56 – 1:08:25
When is it Right to Replace Founders
- JLJason Lemkin
And accelerating. And it's accelerating
- HSHarry Stebbings
Rory, you said you would answer the question which Jason posed. Would you have made that decision and switched him out?
- RORory O’Driscoll
You should be very, very, very wary of ever swapping out a founder, right? It's like I tell people, it's like open heart surgery and 50% of people die, right? It's a shitty business. Occasionally, I've done it for a bunch of reasons, and it's hell on earth. Forget morality. Forget am I a good guy or a bad guy. It's just the most exhausting thing you do. It is easier to just lose money, right? So I hate doing it. There's only two reasons why you do it. If the business decisions they're making is literally gonna bankrupt the company, right? If you feel that, you know, they're investing in... To take a concrete example here, if they were investing in a way whereby there simply just wasn't gonna be any more private capital and we could run out of money and they were unwilling to change course, then at some point you have to consider that. And then we finish. And then the second option is the thing we said we wouldn't discuss, which is if any internal behavioral issues rise to the level of a s- really systemic problem with a high bar, right? Board of... If board of, if one or board of those things is present, then wildly reluctantly you have to do it, right? And even, and you have to take the heat.
- HSHarry Stebbings
Would you have done it?
- RORory O’Driscoll
If one of those two things were the thing, then reluctantly you would have. You'd m- move heaven and earth not to. But if it's the former, at some point you gotta say, "We're gonna run out of private capital. You're not doing what it takes to get profitable. We need to focus on profitability, give Wall Street what it wants," then yeah, y- you, you might have to. You'd hate doing it. And again, I, I hate this positioning. I'm not the guy... Like, nine times out of 10 I'd be like, "Sell the company, get a president, get therapy, be better," all the other things. But especially, uh, my, my logic is this: knowing-What it's like in those board meetings, and knowing if you're a founder-friendly firm, like I would say Benchrock would like themselves to be, you don't do that lightly. So you gotta believe that some, one or two of those issues was on the table for them to have to do that, and they felt that maybe it was necessary.
- HSHarry Stebbings
And I think you obviously see that with, with, uh, Adam and, and WeWork being the first there in terms of just the fiduciary responsibility in terms of how they spent money and the financial profile. So totally get you there. Are we bullish on Atoms now? Do we look at this and think, "This is exciting. This is gonna work. [laughs] Awesome"?
- RORory O’Driscoll
Jason, you- you're the fan boy. What do you think?
- JLJason Lemkin
Look, I d- I don't know. I g- I get, I get, I get the big bet, and certainly making this bet seems to be a lot more, make a lot more sense than betting on the WeWork founder, right? Who just d- d- d- is, is not as deeply product and software-focused, um, you know, building co-working spaces and then having everyone figure out the finance. Listen, I can only use... If, if I were a huge fund and he wanted my money, I would give it to him. Don't get me wrong. But my smell test from watching the interview, some of the things he said felt like I was back in 2017 when this happened. The world is different now, and so I've just, I've just gotta use my G2. And the question is, do I, do I think he's past it, right? Do I... And not being, not being able to execute, but being able to... At some point, you, you, you do lose it. You lose the ability to create, and you're better off amalgamating. And this is in the middle, right? This is a combination of amalgamation and creation. So you just asked my opinion, would I invest. Based on the interview, no, I wouldn't.
- RORory O’Driscoll
It's so funny the way you answer that question the way we pro... 'Cause I, the same question, I didn't process to any kind of internal analysis of Travis Kalanick's soul. I literally found myself thinking, do I... I, I kinda come from the market side. Do I buy the market? I think there's two businesses going on here. One is the Atom/robot business. As I said, I like the tho- I like the approach of more bounded industrial robots versus general purpose humanized. So I think he's on the right broad track, but I think all those markets tend to be very different, and trying to do one robot for all of them is hard. So I think that's a hard road and will be less amenable to any kind of, quote-unquote, "blitzscaling". And let me finish, Dan. The autonomy thing is interesting. I think we are at the stage now. The other company that he's invested in, is it Pronto or Pro... I'm sorry, I should remember the name.
- JLJason Lemkin
Yeah, Pronto.
- RORory O’Driscoll
Pronto, yeah. That's super interesting because we're now at the stage, you know, where, you know, autonomous driving in freeways is kinda hovering on the edge of being a thing with Waymo. But autonomous driving for mining and for industrial equipment is a category now, and there's some players in that space. So I buy that that market is there and doable. I'd have to do the next level down. Why is our technology different and better? Credible market and focused for autonomy. Believable market, but lots of sub-segments in industrial robotics to really play there. So that's my comment on the mar-
- JLJason Lemkin
Would you invest at 20 billion post? That's probably what he's looking for. That's what Claude thinks he's looking for in the round. He's fundraising. That's why he did the interview. He's fundraising, right?
- RORory O’Driscoll
Oh, God. Dear God, no. No.
- JLJason Lemkin
Yeah, because the last round was at 15. Claude thinks he's ba- thinks he's looking for a, a, a flat or up round, so up to 20 billion.
- RORory O’Driscoll
No.
- HSHarry Stebbings
Absolutely you would do that shit every-
- JLJason Lemkin
He's got the personality
- HSHarry Stebbings
... absolutely you would do that shit every day of the week.
- JLJason Lemkin
You'll put in your own 20 VC money at 20 billion?
- HSHarry Stebbings
I'm absolutely not. If I'm General Catalyst raising $10 billion now, or I am Co2 with the multi-bi- 100%. Do I wanna chuck a couple of hundred million into Travis, one of the greatest founders of our time? Yes. I have to mo- I have to move hundreds of millions of dollars a month. Rory, I completely agree with you from our fund size.
- RORory O’Driscoll
So funny. Yeah, yeah, yeah.
- HSHarry Stebbings
We have $10 billion.
- RORory O’Driscoll
This is just so... This is so everyone's a victim of their fund. If you're a seed stage fund, you assess the guy. If you're a growth stage fund, you assess the opportunity to put quantities of money to work. And if you're down the middle like us, you're looking at the market trying to be intelligent and maybe overthinking it. [laughs] It's funny.
- HSHarry Stebbings
Drive have $9 billion in their growth fund. Putting 250 million with Travis here, 100% I would do it.
- RORory O’Driscoll
Okay. Good to know.
- HSHarry Stebbings
Would you, would you not agree with that rationale, Rory?
- RORory O’Driscoll
I always struggle with the, "Oh, just have a go. It's only..." One of the, the, the-
- HSHarry Stebbings
Let, let me, let me put it in another term for you. You've got $4.5 billion a year. That is $400 million a month you've gotta move.
- RORory O’Driscoll
I understand, but it, whenever you find your... I'll give you an honest answer. If you find your logic being reduced to, "I've gotta get rid of this much money this month, and this entrepreneur is amazing, so I'm not sure about the opportunity, and I don't like the price, but have a go," if that's your logic, let me give you some advice. Halve your fund size.
- HSHarry Stebbings
And that's why you're not playing the AUM game. [laughs]
- 1:08:25 – 1:17:39
Adobe CEO Exit Shock
- JLJason Lemkin
win.
- HSHarry Stebbings
Okay, we can choose one final topic. We can go for Adobe. They beat earnings, their stock tanked, and as a result, CEO leaving.
- JLJason Lemkin
I bet Shantanu step down in 2026. That's my bet. Shantanu.
- RORory O’Driscoll
I think you've got the... I think the interesting comment, and I want to hear Jason's comment 'cause he's worked there, be precise in your sequencing. They beat earnings. At the same time, the CEO announced his resignation without a successor, and the stock tanked. That's... It wasn't the stock tanking and then they whacked him. It was the two were announced together, which is odd, and in response to one or both of those events, the stock went down. Correct?
- HSHarry Stebbings
Correct. Yes, correct.
- RORory O’Driscoll
Jason, over to you, 'cause I think your take is right here.
- JLJason Lemkin
Well, look, th- th- there, we don't really know exactly why he stepped down without a successor, other than that it's odd. Okay? Uh, it is odd because a lot of folks on the internet are saying David Wedwani, who runs Creative Cloud, is gonna be his successor. But this is David's se- Like, he quit Adobe and went to AppDynamics and VC when he was passed over for CEO the first time. Then he came back to be CEO, and then Shantanu steps down and he isn't made CEO. So that suggests to me the odds that he becomes CEO are less than 100%, right? Because certainly the most elegant thing is to hand it off to your president, right, of your largest business unit. Then to say, "We need- The board's gonna do a search while I step down," like, it's, there's just no way that's confidence-inspiring, right? So I don't know what happened. There could be multiple things, but, uh, uh, to me, it suggests he left the keys on the table after a ver- 18 years, not, not five years, not was fired quietly, right, by the board. I don't think that, for a million reasons, I don't think he was fired. He's v- very competent, right? Very insightful. I think he left the, the, he calmly and respectfully left the keys maybe after a quarter of discussion and, um, now they're gonna go to go recruit somebody. Um, and it's not a good sign. And I, I think we're gonna see a lot of these. I mean, you know, Dustin Moskovitz quit his own co- company, Asana, in a hiss and, and left, left the keys, threw the keys on the ground, right? No successor, no anything. And i- these are not fun times to run most public companies. There's a handful. I mean, Alex Karp seems to be having the time of his life, moved to a $50 million mansion in Miami. He's, he's crushing it. Yeah.
- RORory O’Driscoll
Yeah. 'Cause, 'cause he's winning. I mean-
- JLJason Lemkin
But who else is having fun that's, that's public? Not, not too many are having fun.
- RORory O’Driscoll
The, the correlation between winning and having fun is pretty high in the correlates.
- JLJason Lemkin
Pretty high. Pretty damn high, right?
- RORory O’Driscoll
And I tell you what, i- you're not having fun if you're the CEO of Adobe, and you're not having fun if you're any CEO who realizes, I wa- Going back to you, I think it's, you're spot on. Going back to your, where we started this conversation. Oh, the only way to make my, I have an obligation to my shareholders to make the stock go up, and the only way to make the stock go up, given my growth rate's gone down, is to sack 20% of the people I've spent the last 10 years hiring. Now, you might know it's the right thing to do, you might even be willing to do it, but it's not gonna be the best week in the office. So I, I agree with you. It's a tough... You know, I don't know if 10 quit this year, but I can totally see more than 10 saying, "Should I quit this year?" Going home to their spouse-
- JLJason Lemkin
More than 10 are thinking about it. I, I, I think it's 10
- RORory O’Driscoll
... Yeah, going home to their spouse and saying, "Now tell me exactly why you're doing this." Right? And, you know-
- JLJason Lemkin
Yeah
- RORory O’Driscoll
... to the specifics of Adobe and-
- JLJason Lemkin
I give you 18 years
- RORory O’Driscoll
... you know, we've all been on boards, uh, where we've had to do CEO transitions, and no matter what's going on underneath the surface, right, provided you've good relations and you've reasonable level of trust, you always go for the leave the person in place, find the successor, announce an orderly transition, look like you have your shit together, 'cause at the margin you never wanna show you don't have your shit together. The only reason... So, so that's not what happened here, and there's only, to Jason, to your point, there's only two ways that, that occursThe first is if the board decides they want to make a statement, right? We, you know, and I've, I've been in those meetings where sometimes you're like, "You gotta go right now 'cause there's crimes of moral turpitude. You're out. We've totally lost confidence in you." Or much more likely, the team's totally lost confidence in you, you're out. That doesn't feel like what had happened here, right? Because he's m- go- staying on as chairman. If they've run the damn thing for 18 years, you probably should let him run it for another quarter or two while you line up the successor. So I don't know. I wasn't in the room, but I... It may well be some version of what Jason's saying is right, because you just go in as the CEO and say, "I, my heart's not in it." Right? It was a weird, it was a weird outcome. Right?
- JLJason Lemkin
It's interesting. Now, now th- someone wrote this, p- pointed out that N- I mean, Adobe had a great run, right? Um, but now its, its aggregate returns are just below the S&P over the last decade or something like that. So when you look at that after 18 years, and you're not really excited about agentic change, like you're, it's not, you're not waking up each morning and saying, "I'm excited about my agents," this is a good time to leave the keys on the table.
- RORory O’Driscoll
And, and to be clear, hang on. Actually, one thing, I, I, we're assuming something. He, is, is he, he's contin- I mean, he's continuing the role until you get a new CEO. I just didn't check that. I think he is. Is that correct?
- JLJason Lemkin
I believe, I think so.
- RORory O’Driscoll
In which case, it's not keys on the table, it's more making an announcement before you have the answer. It's a little less herky-jerky, you know?
- JLJason Lemkin
I mean-
- RORory O’Driscoll
Just to be clear
- JLJason Lemkin
... it's leaving the keys on the table, but still grabbing a drink at the ba- at the bar in the kitchen.
- RORory O’Driscoll
Yeah, no, it's... I, I'll, I'll do the right thing, but we'll tell you in the morning.
- JLJason Lemkin
I'm leaving the keys, but I'm hanging out at the house until, uh, Dad gets home, or whatever the extended metaphor is.
- RORory O’Driscoll
Yeah, yeah. Metaphors never work. You should just say the thing itself. It's-
- HSHarry Stebbings
Where, where is Adobe in five years' time?
- JLJason Lemkin
A massive install base. You have a set of corp- Here's the meta issue. A, a, God, someone on Twitter, the guy you just had. Who'd you just have? The super smart guy? What's his name? Uh, l- the last one. Go- what's his name? Sorry.
Episode duration: 1:17:49
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