The Twenty Minute VCOpenAI’s $10BN Secondary Sale, Ramp Hits $1BN ARR & Brex Hits $700M
EVERY SPOKEN WORD
100 min read · 19,951 words- 0:00 – 1:16
Intro
- RORory O’Driscoll
The real truth is the buyer has cunningly eviscerated the brains and the heart of the company and left the carcass, and we're gonna pretend it's real, but it's dead as the dodo, and everyone knows it, but no one's gonna go on the record saying it. And then secondly, I mean, Harry said something insightful. It must've been an accident. Um-
- JLJason Lemkin
[laughs] Scale was for sale for 28 billion. Brett's gotta be worth 56 billion
- RORory O’Driscoll
... quoted Gloria Swanson before, "I didn't leave Hollywood, Hollywood left me." This is venture capital today.
- JLJason Lemkin
Oh, we're gonna make your human beings 10% more efficient because of the AI copilot thing, when reality is they're gonna want a product that is like, "No, no, no, I don't need 75% of these people anymore. Give me that product." Venture rounds are all getting done on Saturdays. Forget about no diligence being done two years ago. Now diligence isn't even being attempted. I think the best control today would be if more founders that committed fraud went to jail.
- HSHarry Stebbings
[mouse click] Ready to go? [upbeat music] It is my favorite show of the week. I'm so happy you're back with the one and only Rory O'Driscoll, Jason Lemkin, and our special guest today, Jeff. It is awesome to have you with us. So Jeff, first off, thank you for agreeing to do this with us today.
- JLJeff Lawson
Great to be here. Thanks for the invitation,
- 1:16 – 4:26
Elon Musk's Trillion Dollar Pay Package
- JLJeff Lawson
Harry.
- HSHarry Stebbings
Now, we're gonna start with, uh, the most pressing or a big element of news, which was Musk and the first trillion dollar pay package. It breaks all, uh, prior benchmarks in terms of a trillion dollar pay package. I'd love to hear how we thought about this and whether this is a new normal that we should be expecting to see for your Sam Altmans of the world, or this is a one-off exception. Rory, I know you love it when I go to you first.
- RORory O’Driscoll
Yeah. I, I like this question. It made me think a lot, and I did a little work, and I think there's a lot to unpack here. Let's start with the first thing. I always say this, compensation is how boards reveal their real priorities. Nothing else matters as much. So you can tell everything about what the board wants in terms of how they s- if it's, how they structure the CEO package. So there's, there's two or three things here. One is, and I read the proxy by the way. It's 322 pages. I didn't read all of it, but I got through about 100, 150 pages. What's clear here is this: the board wants the Elon bet. That's just super clear. We feel they owe him the past and they're gonna get him the future. The second thing is they really did believe that if they didn't give him the extra 12% on top of making good the stuff that was disallowed in 2018, he might walk. I mean, that's in the thing every time. Might be wrong, you can argue that, um, but that's clearly what they believe in the proxy. And then the third, I think the most interesting thing is they're really paying him to double down again. I mean, if you look at it, yeah, the, the trillion dollar headline is, it's obviously a big headline [scoffs] , but some of those operational and market cap goals are huge. It's basically the board saying, "You know, we're the eighth or ninth largest market cap company on the planet. We'd like to double down again and be by far and away the largest market cap company on the planet. That's the bet we as a board wanna make, and Elon is the way to make it." Right? So when you look at it, you go, I mean, you know, you look at it, you've got the market cap metrics. I think it's, I think 8 trillion is the maximum cutoff, so you gotta make something about 8 trillion. You got EBITDA criteria. You gotta make 400 billion in EBITDA. For context, Google, the most profitable company this year, makes 100 billion, so you gotta make four times more than Google. And then I think the most interesting one was the four, um, kind of har- what I always think of the most interesting metrics, not the money metrics, the what do you gotta do metrics. 20, 20 million total cars. That's doable. They've already done 10. 10 million in FSD. That feels doable because why would you have a Tesla and not get FSD? I love my FSD. I'm a crap driver. But then the other two are, I think, a million Optimus robots, and I wanna say, don't quote me, about a million robotaxis. So when you look at those criteria, they're basically saying, "Yeah, double the existing business, but on top of that, build a whole new business on top." This is a board doubling down on Elon. This is the bet they wanted. I mean, we can discuss [laughs] whether they should want it or not, but it's actually intellectually very clear. I find it pleasing. If you wanted this bet as a board, this is exactly how you go and buy this bet from Elon. You say, "I will give you a shit ton of money if you take our trillion dollar company and, you know, doubles or quits it." So at that level, it was like, yeah,
- 4:26 – 19:03
Compensation Trends for Founders and CEOs
- RORory O’Driscoll
I get it.
- JLJason Lemkin
Jeff, what was it like on the other side of Twilio with your comp, I mean, thinking back, your comp package? 'Cause you, I mean, maybe they didn't offer you a trillion. I don't, I don't remember. Did you have one of these crazy packages? 'Cause they're becoming more common with startups now. In my portfolio I see it.
- JLJeff Lawson
No, I actually never wanted, um, s- major comp. Like, as a founder, I had ample equity, and I always thought comp, generally speaking, just distracted, like, all the time spent on that. At least for me, one of my principles of compensation was always the more levers and knobs and things you put into a comp package, the more opportunity it is for someone to just think it's unfair. And so, uh, the idea was once you pass the bar of fairness, this is Daniel Pink's whole philosophy, uh, from his book, Drive, that once people believe they're paid fairly, they focus on the work. And so the only thing you can really do with all these knobs and levers and variable comp packages is take someone who thought they were comped fairly, and then suddenly make it feel unfair because, oh, we missed that metric or that. I did my part. They didn't do their part. Whatever. And so I always wanted as simple as possible compensation for, uh, for the team, and that also went for myself, and so whatever they gave me, I just said thank you, and that was that. The more complicated you make these comp packages, the more shit can go wrong.
- HSHarry Stebbings
Dario, Sam Altman, uh, Mike Trul, Cursor, uh, you name any of these great founders who are very pivotal to a business could look at this and go, "Well, this is a new benchmark." Do we see this as a, a turning point in how we incentivize CEOs at scale given how central they are to businesses, or is this a one of one with Elon?
- JLJason Lemkin
I think this is the new standard for anyone whose board consists of their brother-in-law and other rel- relativesI think most boards are, are... It's a good point. I, I find boards are more and more created by founders. They're more and more in- they're more and more great job, um, and everyone wants to get into the deal. I think everyone's got, in a sense, their brother-in-law, uh, and, and ex-boss on the... Almost all my portfolio companies, the, the founders control the board, not just from a cap table s- perspective, but from a relationship perspective. They control it. And I, and I don't know what you guys see. I see all these deals happening. Um, I see lots of deal- once you've crossed a unicorn, which now is like a series A, right? Back in the old days of, of Twilio, every CEO's getting some, founder CEO's getting some massive upside package with massive goals. Instead of a, instead of a top-up for 2% or 3% after you've struggled for five or eight years, they're getting 7%, 8% or more, but you've got to have a massive outcome, 10 billion, 20 billion, 100 billion. It, it's becoming the, like, the growth VC playbook for, for right or wrong.
- RORory O’Driscoll
And, I mean, so it's definitely happening, and if you go back to the first Elon comp package in 2018, right? There definitely was a wave of wannabes that copy that in the 10 year, in the two or three years after that to the end of '21, right? It wasn't everyone, to your point, Harry. Well, it was about 10- my guess is 10% or less of CEOs went for it, right? And the first thing is it was typically the CEO asking for it. For some CEOs, something like this becomes important and motivating, and you can't ride every horse the same. And some folks are like, "This is how I... This is the core of who I am." And I think Elon is the urexample of that, right? I don't particularly love that style, but it's like, "It's all about me, and I am the most amazing person in the universe. Compensate me accordingly." So to some extent, as a board, you're left saying, what do you do in that circumstance? Now, you could have done, to Jeff's point, you could have done the bluff game and say, "I don't think you'll leave if we won't pay you." But my guess is they were angsty about that. Now I'm, again, not saying rightly or wrongly, but that's the thought process. Once you, once you don't believe that to be... Once you think someone can leave, and by the way, the one person who can leave is someone who has three other gigs that are equally exciting, which is why your leverage is lower in this particular case. Once you've kind of crossed those two doors, you have the person who wants the egotistical win, and he might leave without it, then you're left with a negotiation exactly like we just saw in Elon's case. I don't think that's the norm. I think that that will be the high water mark, not the norm, but I definitely think like all high water marks, it will push up other people's demands and aspirations.
- JLJeff Lawson
Rory, have you thought about the fact that maybe this isn't about upside? You made the upside case, that this is all about building, you know, a multi-trillion dollar business now. Uh, what about the downside case? The downside case being that Tesla is overvalued, and that it's all the cult of personality of Elon Musk that creates that value, and if he leaves, the house of cards comes tumbling down.
- RORory O’Driscoll
I totally agree. I mean, uh, you're exactly right. I think you're sitting there going, and as... Then yeah, 'cause there are two risks. One is the, if you were valued as a car company, you'd be valued at around 25% of where you are now. Maybe this is a car company worth 25% of our current market cap, and then Elon's special sauce, which is the other 75. So as a board, you probably feel a huge amount of pressure to keep that person. You're exactly right, Jeff. 'Cause the other option you could take, and, um, which they're clearly not, is to say, we... I mean, this is gonna sound really hard-nosed. You've built an amazing car company. We're a car company. Let's manage it like a really great car company. Let's accept that we don't want these future bets, and let... You, you could get a different person to manage that company. But you're right, the problem with that, quote unquote, negative vision is you're right. The stock would be down 75% next day, right? The market, the individual shareholders who, let us remind ourselves, have revoted this c- the prior comp plan twice when they didn't have to. They're like, "The indiv- the people who own this company wanna make this bet." I personally find it a little terrifying. It's such a risk-on bet that it makes my head hurt, but that's what they wanna do. And you're right, if they... The odd thing is, if that bet were canceled, if the board said, "We're not gonna do that bet. We're gonna play it safe," Jeff's exactly right. The stock would go poof, and it, you would get your, you know, as a board, you would be dealing with lawsuits from here to the end of human time. So it really is a prisoner's dilemma. It's, it's kind of a scary board to be on. I admire their courage. You know, you get c- you get compensated well. I think they have one of the best board comp packages on the planet, but it must be a really odd dynamic negotiating with Elon, knowing that, as you say, Jeff, if you try to demonstrate resolve, and he threatens to walk, you're down 75% next morning. That would be tough.
- JLJason Lemkin
You know, the, the, the tough thing is the, you know, we've changed so much in tech the last, like, 18 months. AI, the, the, the AI greed, which is not all bad. What Jeff said is how I felt as a founder. Our generation, it's not that long ago. I've got enough. As, if I'm in the double digits, like, don't get me wrong, I'd love more. I wish I hadn't taken all that dilution in the seed round. But this is about a team. I'm driving a team on a huge journey. I've, uh, leave me alone. Take care of my team. I've got enough, right? It'll work out. I think that's what Jeff said. That's how I felt. I don't hear that too often anymore. I think we've changed. I think we've changed. Um, when your cognition and you go, and this is amazing, you go from nothing to 10 billion in what? 18 months, Harry, or whatever. You just... I mean, this isn't, this isn't the Twilio grind or the Stub- I mean, Jeff was at StubHub before that. They're finally IPO-ing now. [laughs] This is a different world, and I don't... I mean, folks are building great teams, but they're mercenaries. I wanna cash out at OpenAI for 10 million after 12 months. It's not bad. It's just I don't hear what Jeff said much from the kids these days.
- JLJeff Lawson
Well, can we even just talk about the idea that founder CEOs quit to go join Meta?
- JLJason Lemkin
It's crazy, right? Or OpenAI, or I guess not founder, but Instagram. Yeah, crazy.
- RORory O’Driscoll
What is your take on that, Jeff?
- JLJeff Lawson
What, what's, what's the, what's the policy of profanity on this podcast?
- HSHarry Stebbings
Oh, you're allowed to say anything you want.
- JLJeff Lawson
[laughs]
- HSHarry Stebbings
We're, I, I, I, I, I'm British, so, like, we swear all the time. It's good.
- JLJeff Lawson
[laughs] I, I'm accustomed to the founder CEO being the most committed, the most long-term oriented, uh, and the most visionary of the group, and that's what makes startups great. And so when the person, it turns out, is just a mercenary and will go anywhere for a higher paycheck and leave the rest of the company that they started and they run to flounder, I'm like, this is a whole... A- as Jason said, this is a whole different world of why people are in the startup world to begin with. For, I think, a lot of folks, and I put myself in this bucket, it was, it was missionary. It was like, you believe the world needs this thing, and I believe that that's the best reason to start a startup because if you just wanna make money, probability adjusted, you should just go get a job at a hyperscaler. You will probability, probability adjusted, you'll make more money. Um, so you don't start companies to make money. You start companies because you love what you're doing and you think the world needs to have the thing you're building.
- HSHarry Stebbings
Do you think an Alex Wang is wrong then? I mean, his investors made a huge amount of money. It was a great deal for them. Um, it was a great financial deal for him. It- was he wrong to do that?
- JLJeff Lawson
I think it just shows that it's a mercenary move. Um, uh, think... Okay, his investors are-
- JLJason Lemkin
It is, but are we old?
- JLJeff Lawson
Maybe. Maybe.
- JLJason Lemkin
[laughs]
- JLJeff Lawson
But what, what about antiques?
- JLJason Lemkin
'Cause I don't see it anymore, Jeff. I don't see it since 2022. I don't see it. I don't see it. I just don't see it.
- RORory O’Driscoll
Okay. So first of all, yes, we are, yes, you are old, Jeff. Yeah, I mean, that's an objective fact. On the ge- I, I didn't think I'd be defending the mercenaries here.
- JLJeff Lawson
No, that is literally subjective.
- RORory O’Driscoll
[laughs] Okay, we're gonna have to put a pin in that one. Um, oh, wait, you're right. Jeff, you are right. You- my age is a fact, but whether it's deemed old is subjective. Oh, God.
- JLJeff Lawson
I, I, I... Yeah, 'cause from your perspective, I'm young.
- RORory O’Driscoll
You're totally right. By the way, that was another dig. You're two up, okay?
- JLJeff Lawson
And from Harry's perspective, we're all old, so the point-
- 19:03 – 24:34
Ramp at $1B ARR, Brex at $700M - Is AI Causing All Boats To Rise?
- RORory O’Driscoll
Yeah.
- HSHarry Stebbings
Guys, if we cross over to the private markets a little bit, t-turning tacks on this conversation, there were some pretty astonishing announcements this week. Uh, first Ramp hits a billion in ARR, Brex hits 700 million in ARR. Brex growing 50% after a little bit of a rough patch, uh, but seemingly back on now. Is everything just booming? Like, a billion and 700. Is everything just working? And d- is all tides rising right now?
- RORory O’Driscoll
No. I mean, I wish they were. I mean, I would not... I mean, yeah, I'd love to say all tides are rising. You know, I'm not one of those VCs who go, "Everything in our portfolio is killing it." No. All tides aren't rising. I think those two businesses are good businesses at scale. They've regrouped in the case of Brex. The kind of business they are, they're selling money, and they get interchange revenue. It's possible to ramp those businesses very quickly. So I think they're perfectly good businesses in a good place. I don't think it's a tell for the whole... I don't think everything's growing at 50%. I mean, you know, I, I just think they're, they're, they're good businesses with interesting dynamics. They're not really selling software to some extent in the case of Ramp. But, you know, most of the time they're selling companies a credit card, which means extending 30-day credit in return for interchange, which they share with the companies, which means your margins are much less than typical software. But if you're willing to lend money and ramp aggress- no pun intended, go aggressively, you can make revenue grow. I think, yeah, they're cleaning Amex's clock.
- HSHarry Stebbings
Rory, should they be valued like traditional financial services businesses, or should they be valued like a new technology-first provider?
- RORory O’Driscoll
I would think that's kind of a bullshit question because in the end, everything should be valued on a basis of risk-adjusted free cash flows. So just start with that. But what you're really saying is what's the best w- in the absence of free cash flows, what you're really saying is what's the best rule of thumb to value those things? And I think the truth is they have the margin profile and core dynamics of a f- of a financial services company, but they have the growth rate of a software company. So you, you have to adjust and come somewhere in the middle with the expectation that, th-this is the key sentence, once the growth rate slows, they will be valued just like... If they're growing the same as Amex, they will be valued the same as Amex. The growth is what's saving them.
- JLJason Lemkin
I do think Terry's point, the AI boom is filtering further and further down the stack and wider. We're seeing Broadcom explode. Cisco. Cisco, that's where our grandpa learned to be an engineer. It is accelerating, right? Um, Twilio's seen some acceleration from AI overall at an Uber level. It's not an AI company. No, no need to talk about Twilio per se. But w- I think we are seeing it, and I do think if you're a B2B company and you're seeing nothing, you're not seeing any boost from AI, you didn't get OpenAI or Anthropic as a customer, you're not seeing any benefits, like, you get an F. You get, you get an F. There's so much money flowing through this system, right? And, and OpenAI and Anthropic alone are spending so much of that money, right? I mean, they're, they're spending it. You gotta get some, guys. Go find some. [laughs] Go find some AI. It, it is floating so... It's like fish food at the top. It's floating almost down to where it's dark in the ocean now. It's embarrassing if you can't get any of it. [laughs]
- HSHarry Stebbings
Dude, sorry, that's metaphor of the day. Like, top marks for that one. [laughs]
- JLJason Lemkin
Okay, so I think we hit a bunch of things here. W- first question is, is the growth of, say, Ramp or Brex indicative of something bigger? And I, I, you know, I don't know, but I think you're right, right? If it's deposits, basically money getting spent, uh, then it's not really about Ramp and Brex. It's about, okay, how much venture capital's been deployed in the last, you know, 18, 24 months, and you look at, there's a fair amount of it. Well, great. It's gotta go into some bank. So are they winning some market share? Probably. Uh, I know I use Ramp for, you know, my most recent ventures, and so they've got a great product out there, which is fantastic. And so, but are they, is it all because all their customers are crushing it, or is it because there's just money out there? Are they winning market share from, from legacy companies? Uh, that could be also part of it. Uh, and then lastly is, like, if their, if their revenue is based on, you know, this debt product, then great. Maybe companies having debt on their books is, is a sign of not awesome things happening, but I doubt that's really the case. Um, so all that is to say, I, I think Jason's right. There's clearly a boom that's going on because of venture capital fueling it, which just pushes the question to, great, when, uh, will there be the returns that everyone expects, and on what timeframe? And, and that's the big open question it seems now. But from a infrastructure provider perspective, we certainly saw this at Twilio. You know, we had customers spending a lot of money on Twilio during the mobile boom, and a lot of them didn't make it, but didn't mean they didn't pay us millions of dollars along the way. Uh, and that's just, you know, what it takes to go figure out the, you know, who the winners and losers are gonna be of the boom. Uh, we saw a lot of those along the way, uh, and that's one of the benefits of being, uh, an infrastructure provider. It's also the risk because if all those companies didn't make it, that revenue went away for the, for, for, for Twilio, and so we had to replace that revenue with somebody else. So it was either gonna be more durable revenue or just the next thing that
- JLJeff Lawson
... grows really fast and might be the hit thing, and maybe not. We'll see what happens. But, you know, in the mobile boom, there were just enough companies coming constantly that even if some of them ended up fizzling out, you had another batch that was, was the next one that could replace the revenue, and that's probably a decent amount of that happening today, uh, in terms of, you know, the AI boom that's going on.
- 24:34 – 30:18
Sierra at $100M ARR Worth $10B - Bubble or Brilliant Bet?
- HSHarry Stebbings
When we look at like a Brex, last round was 13 billion, now 700 million growing 50%, and then you look at a Sierra, okay? But I love Brett Taylor, phenomenal operator. Interviewed him before. [laughs] To not compete with Brett Taylor was the takeaway I had. Um, but valued at $10 billion at 100 million of ARR. Um, and Greenoaks leading it. We love Neil Mata, one of the best. Is this markets going AI nuts again to our last point, or is this again an extremely rational bet given the operator and the growth trajectory that they've been on to 100 million?
- JLJason Lemkin
Look, I don't know for the... Maybe, maybe Jeff and Maureen, you have better thoughts. But to me, when I looked at this, I'm sure there's a spreadsheet that justifies it, right? The, the, the, the, the 100X. But I think... I mean, Brett Taylor, if you buy Sierra, you get everything, right? You get the ex-CTO of, of Salesforce and Facebook [laughs] and his team. You get it just like you, what you would get buying one of these startups. A- and you, you get a potential leader. So my thought is, look, worst case, we make 20 billion. All these other deals are happening. Worst case, I make 20 billion on the deal if I'm, if I'm Greenoaks or whomever, right? This is a generational guy. I'd love to hear Jeff's thoughts about turning down being CEO of Salesforce to do this, right, which is pretty meta in its, in its own way. But it's like this is one of the top 10, I mean, guys there is, right? And this sounds, seems like a better deal than buying the, buying Scale. I'll buy him. If Scale was f- for sale for 28 billion, Brett's gotta be worth 56 billion. I mean, I, I, I, I think it's part of the math because it b- it b- you might not get it if it was Harry and Jason's, uh, company with the same metrics. [sniffs] You disagree, Harry? [laughs] You think we'd get it? [laughs]
- HSHarry Stebbings
I think it might be a push.
- JLJason Lemkin
But I think there's a lot of... I think there really may be downside protection here, right? It, it may be b- I mean, it's generational, right?
- RORory O’Driscoll
I think what's interesting about the bet is if you, you know, if you have a mental model of, you know, all these bets, I think th- th- it, this ticks every button but the, every box but the last box, which is I- I, my mental model is always, you know, we say this internally, is there a category that can support a big winner? Are these guys gonna be one of the winners in the category, and are you getting paid for the risk? You could argue that's the kind of sequence of questions you have to ask every time you look at a deal. Is there g- is there a category here? Absolutely. Other than coding, which is the infra play, at the app level, I think customer support, customer success is the number one use case for AI 'cause it, it's, it's just so obvious. You have lots of people answering phone calls, answering emails. You can do it all with AI. Not all with AI. You can do 70, 80% of it with AI. It just saves a ton of money. It's a cost center. This is going to happen, right? It's a thing, right? And then are they the winner in the space or a winner in the space? They're clearly one of a small number of people who are, you know, th- th- they've got a really nice position here. They're dominating the high end, and you've got a person running it who I agree, I didn't listen to your podcast. I listened to the Latent Space podcast with Brett, and I remember thinking, "God, that guy's smart," right? He was talking tech and business and can move between it. So if you're an investor, you're like tick box one, tick box two. There's so few deals that tick both those boxes that you're just so tempted. So the only box left is are you getting paid for the risk, right? There's only one question left, right? And the bigger the market size, the more you can squint and say, "Well, at some point this company will be 20 billion, 30 billion in value, therefore I can do it. You know, my downside is limited to a low IRR." I think in the limit, that's actually can be a fatal mistake, you know, 'cause you just over extrapolate too many things. But I can totally see. If, if you were to say to yourself, "I'm gonna m- I'm gonna commit this 'investing sin' only one time every year," right? You know, uh, which of course isn't how sin actually happens. Once you do it, you do it all the time. But probably at the apps level, this would be one of the ones you think about 'cause you're like, you know, a great guy in a big market at a terrifying price. Okay, I'll close my eyes. So I, I see how they got there. I mean, you know, 100 times ARR is pretty steep at that stage, but I, I, I see how they got into it.
- HSHarry Stebbings
The only thing I think through actually is just the opportunity cost of the capital for Neil. You're like, okay, 350 million there. Yeah, he's probably gonna be doing 275 in a $2.75 billion fund. Like, it's like 10% of the fund going into that, like, next check, which is the second check into the company. It's just an interesting one for me, which is like, hey, when he looks at the opportunities on his desk and where upside is, he sees this as one of the top. I think that's, that's, that's interesting, and given the percent of his fund that this will be, that's notable.
- JLJeff Lawson
You know what's interesting though, Harry? That is a, a, a very... That's a very relevant way for a venture capitalist to look at their portfolio allocation, right? And you get dangerous when you get that much concentration. The flip side though, a- again, I go back to I'm not a venture capitalist, I'm an entrepreneur. And so the way I've always looked at it is when I start a company, this is my... I mean, until now, all my prior ventures, that was 100% of my al- capital allocation for myself, for my life, for my time, for my bank account, for everything. And so the whole idea that an investor would, uh, you know, have a concentrated risk with 20% of their portfolio, that, that's easy.
- RORory O’Driscoll
[laughs] That's, that, this is why it's great having operators on. This is your reminder that don't say you're brave when you put 10% of the fund into one deal. On the other side of the table, they're putting 100% of the fund into one deal with no way out. Nicely put. Nicely put, Jeff
- 30:18 – 36:48
Kleiner Perkins Invests $100M into Anthropic at $183BN… WTF?
- HSHarry Stebbings
Spea- speaking of where to put funds, I thought one of the most interesting venture deals of the week was Kleiner Perkins investing 100 million into the $13 billion Anthropic round. They're priced at 183. It's their first investment in a model provider. And my question there was, does every large fund have to have a model investment, number one? And then number two, is this actually just an indication that the best way to make money staying in the business is to do late-stage AI when winners are confirmed?
- JLJason Lemkin
How big is that fund?
- HSHarry Stebbings
15.
- JLJason Lemkin
So it's probably a logo deal then, right? You gotta get, you gotta get, you gotta get a lo- you got... You can't walk into the partners and not have Anthropic or OpenAI on the website. It's not enough. Yeah, it's a lo- I think it's a logo deal.
- RORory O’Driscoll
I think at 100 million, no one just does a logo deal. I'm, I think they've got-
- JLJason Lemkin
[laughs]
- RORory O’Driscoll
Look-
- HSHarry Stebbings
Maybe. Maybe.
- RORory O’Driscoll
May- maybe. But I, I think, look, we did the math last week on the fly. Look, it's not my business, but when I started, yeah, at, when someone asked me that question and I eyeballed the math, I started off going, "No, of course you wouldn't." And then you run the math and you go, it's not a crazy bet at all. It's not a crazy bet at all. First of all, in the abstract, as you say, if you had one... So I don't think it's just, just a logo deal. I think there's, you adj- uh, when you look at the growth, w- again, to repeat from last week, one of two things is gonna happen. Either this is gonna be the fastest slowdown in history in the next two years, or if it continues anything like this trajectory, this, this round is gonna work. So that's the first thing. I don't think it's just-
- JLJason Lemkin
It's not that it's a bad investment, it's just not venture capital, right? B- you don't, you know, it's, it's a logo deal 'cause it doesn't c- you weren't there at Twilio in the seed round. You weren't Byron Deeter in the trenches with Jeff. This is throwing in 100 million at 13 billion. I mean, you lo- do you even get a meeting with Dario, or do you just get... You probably just get a Zoom.
- RORory O’Driscoll
You probably just get a Zoom.
- JLJason Lemkin
You probably don't even get to get to go in the office for... Uh, seriously, you probably don't get to go in the office.
- RORory O’Driscoll
But I think you made a comment here. This isn't venture capital, right? Um, you know, I, I think I've quoted Gloria Swanson before. "I didn't g- I, you know, I didn't leave Hollywood. Hollywood left me." This is venture capital today.
- HSHarry Stebbings
For sure.
- RORory O’Driscoll
Most of the money in quote unquote venture capital is with... Venture cap- it, venture capital is 20% old school venture capital and 80% plus or minus late stage, um, what would've been fidelity growth public investing, right? This is where most of the dollars are going today. And, and it also is j- uh, so, so first of all, it, it, objective fact, it is where the money is going just because so much, you know, just 'cause that's a fact. And then secondly, I mean, Harry said something insightful. It must've been an accident. Um, he, he, he, he said, "You know, may- is this, is, is this not only the main place it's happening? Is it the shrewd place?" You know, is there a put points on the board regardless? I mean, the thing about this is you have a chance to matter and be relevant. I can totally... Kleiner doesn't need to be matter. I think, I think Mamoon's awesome and I think they don't need anyone to matter 'cause they have Figma. They're glorious. But I totally get the idea of sticking some money in some ultra late stage, you know, ex 150 billion pre-rounds just to, just to feel you're relevant in the space. It's, it's not crazy out of multiple dimensions. It's not the business you probably sold to your LPs four or five years ago, but it's not, it's not necessarily absolutely wrong. I mean, it will be pushed to the extreme where it will become wrong. I have, I have total faith in that. My attitude, when all the other risks evaporate, right, when the... Remember the first two risks I raised are kind of, is it a category other? When the only risk left is valuation, in the end, valuation risk expands to fill like a vacuum. So in the end, what will happen is people will overextrapolate and a bunch of these will be overpriced. And then people will go, "Oh yeah, that's why you don't overpay." But along the way, there'll be some great companies and maybe this, this could well be one of them, where even these rounds math out. It's a diff- you know, it's a different bu- you're not in the trenches with Jeff and the seed like, you know, Bessemer were or any of the deals. But maybe you putting 100 million and getting 300 million, that feels like an easier way to make a buck.
- HSHarry Stebbings
So you're saying it's kinda like going to the mall with your parents' credit card as a teenager? You, you spend a bunch of someone else's money to feel relevant?
- RORory O’Driscoll
On a bad day... I mean, that's a bit harsh because if your parents-
- HSHarry Stebbings
[laughs]
- RORory O’Driscoll
... if your parents were grading you on the quality of your purchases, then yes. So I mean, I mean, n- n- I, I hear you. No, I'm not gonna say that. 'Cause look, the funny thing is we've chosen not to do that, right? But I-
- JLJason Lemkin
Harry is literally hiding behind his microphone.
- HSHarry Stebbings
I just love Mamoon. I just don't want Mamoon to hurt me. [laughs]
- JLJason Lemkin
[laughs] Okay, I'm just trying to make some good entertainment here.
- HSHarry Stebbings
He's one of the best of all time. I, but the 100 million can't 3X the fund on its own, can it? I mean-
- JLJason Lemkin
Rory, I would argue that you should.
- RORory O’Driscoll
Yeah, agreed. So i- in other words, you would say you're quote... You're basically on my side, but I'm saying it's craz- it's not crazy. Y- Jeff is being, I don't say this a negative, being a little pejorative about it. And you're saying, not only am I right, but I actually am being a wimp not doing it myself.
- HSHarry Stebbings
Yeah. [laughs]
- RORory O’Driscoll
Which is another way of saying, just to be clear, which is another way of saying n- to, so therefore to say it more directly to Jeff, you're disagreeing with Jeff. You don't think it's just kids buying with their parents' credit cards. You think it's a rational strategy in 2025 for venture funds to put a big slug of their money in ultra late stage investments 'cause risk-adjusted, the return might be the most attractive.
- JLJason Lemkin
But you know what? There is another thing in all seriousness.
- RORory O’Driscoll
I think you might be right.
- JLJason Lemkin
I mean, Ma- Mamoon's one of the best there ever was, and Figma's, I mean, that was his first deal at Kleiner. I mean, that's multiple billions back, right? But here's the weird thing today. Here's the weird thing. Figma's $25 billion company. It feels small. It feels niche. It feels niche in this weird world. It feels small compared to Canva, when we had Cliff on last week, and it feels very small when we're talking about Databricks just crossing, you know, 50% growth at 4 billion. It feels small compared to Anthropic and OpenAI. It feels small, and as great as Figma is, you know, when these, when the, when the, when the founder, the 19-year-old founders walk in and all you've got is Fig- well, where's your AI one? Like, I mean, Figma's great. I mean, my old, my old team at, at, uh, used to use it, butIt's so... That's just a little niche SaaS application at 20, 35 billion. Y- I know it sounds facetious, but listen to this sh- I mean, the numbers are so big today. There's... And this is the greatest wealth creation, wealth hunt, greed hunt, venture hunt ever. I mean, these are orders of magnitude larger. Orders of magnitude. Te- a little $10 billion company is not enough today. Look at Brett Taylor, he's just getting going with his
- 36:48 – 42:30
$10B in OpenAI Secondaries — What Happens When 1,000 New Millionaires Hit SF?
- JLJason Lemkin
A.
- HSHarry Stebbings
Staying on something very notable there around the space is, you know, OpenAI, and the secondary that they did, which is $10 billion. It's expanded more and more. The greatest liquidity event of all time. How does this change surrounding areas? And it can be anything from San Francisco's real estate market to the retention of those employees, to the amount of angel investors. The Valley is about to get a lot, a lot of millionaires that it didn't have before. What changes?
- JLJeff Lawson
I just remember feeling that way before Twitter's IPO back in like 20, was it 14, 15? I just remember, because I actually was like looking for, you know, our, our first house, I think around that time. And it was like, I just remember thinking like, oh my God, I got to get, if I'm going to buy a house, I got to do it before the Twitter IPO because everything's going to go nuts. And, you know, and the question is, did it? Like, yes, it did. Is it because of that particular batch of people that finally got some liquidity? I don't, I don't know. But, uh, I think that it's, um, I hope that San Francisco, and I know some of the leaders now in the Bay Area are focused on, on a, on a abundance and growth mindset in terms of housing and in terms of building capability to absorb, uh, new wealth and also, um, not have it d- displace, uh, other folks. And I think that that is the mindset of folks in office now, and I think it's a good time for it. I don't know if that's your, your thought process. Or more, uh, flip side, which is it'll create more entrepreneurship, and so you'll probably get more founders now spinning out of OpenAI once they get liquidity because they're afforded the ability to take that risk. That's another upside.
- RORory O’Driscoll
It... Can... I, I, I agree. Because, because you made a comment that's not correct. You, you made it, it's unprecedented. The, and a private secondary of 10 billion is unprecedented, I agree. But if this company were public and were worth half a trillion dollars, like reminder, Apple was only worth 800 billion in 2018. It was the largest market cap company. Half a billion dollar company, 20% held by inve- by management, that's 100 billion. The headline could be portrayed as, people who are very wealthy choose to sell 10% of their total holdings to slightly diversify as an entirely rational move, right? Much less dramatic. I'm willing to bet when Apple was worth half a trillion dollars, this kind of money flow was taking place every year because people would be crazy not to diversify some of their holdings. It's only anomalous because it's private. A company with the same market cap in the public would, it wouldn't be as obvious what's going on, and we'd digest it just like, as Jeff said, they digested Twitter, you digested Meta, they digested Google. You know, it'll... It, it's not as anomalous as it seems. Only, it only is weird because it's private and it's relatively early in its life.
- JLJeff Lawson
I don't even think, it's not even that early.
- RORory O’Driscoll
Yeah, true. You're right, they are 2016. Good point. I mean, yeah. Yeah, I mean, in one sense, yes. I mean, it must feel early if you only joined two years ago and you're getting 10 million bucks. You'd feel pretty good. But yeah. I mean, and of course, the other thing, the fun thing, Jeff, is that if you think of Nvidia, the guys who peeled off of Nvidia at half a trillion dollars four or five years ago are probably like, "Ooh, you know, I took 10 million off the table, it could have been 60. Bummer." [laughs] You know, right? So if you believe in the journey, and Sam Altman clearly is articulating that journey, you know, you might be leaving money on the table. Just saying.
- JLJason Lemkin
I think the biggest... Listen, maybe, Harry, you want to move on. I think the biggest difference from like the Twilio time that Jeff was talking about was, oh my God, this is so much liquidity, right? Or other times, is the impact on recruiting is so much bigger in this generation. It's so big, and if you're running a boring B2B company only going triple, triple, double, double, that's all you're doing. Even just 36 months ago, you would have been S tier, right? Today, how... You're not gonna get a lot of people. You're not gonna get a lot of people. And in engineering talent and, you know, we've asked a lot of folks on this show. We haven't gotten great answers from CEOs [laughs] on this question. How do you compete? And the answer has to be, we don't. You know, we don't, we don't compete, or we're not trying to hire those folks, or we're not building an LLM. But, um, it's, it's tough to get AI talent. It, it, it is tough. Uh, it's just tough when everyone's making, uh, eight figures like, like handed out like candy.
- JLJeff Lawson
You know what you should do, Jeff? Like, like have like Jim Farley from Ford on the show and ask him, "How did you recruit developers during the teens when they could have gone and worked at Twitter and Facebook?" And it's the same problem, right?
- JLJason Lemkin
Yeah, or the NSA, I wonder too. Who could get a-
- JLJeff Lawson
Who won, you know, who won in that era against, you know, Silicon Valley?
- JLJason Lemkin
Well, Tesla's the only one that can really do what it does.
- JLJeff Lawson
And there's another, like Domino's Pizza. Amazingly, actually, I point to Domino's Pizza.
- RORory O’Driscoll
Yes. Best stock. 10 year, 10-year killer stock.
- JLJeff Lawson
They built a great tech operation in Ann Arbor, Michigan. So maybe the key is get out of Silicon Valley.
- RORory O’Driscoll
Yeah. Oh, I thought, interesting you said that, Jeff, because the other thing that turned out, or maybe it's correlated, it probably is correlated, they also have been a stunning 10-year stock.
- JLJeff Lawson
Oh, yeah. The best return. Better return than Google over that time period.
- RORory O’Driscoll
Which I just love. And I did not know that they built a... 'Cause I did not know they had a great tech operate. Interesting. Yeah, you, but you're exactly right. You, you probably shouldn't be competing for the same people in Mountain View, but there's lots of people who don't want to be in Mountain View. Can't imagine why. And you know, as you say, go down to Arbor, Michigan.
- JLJeff Lawson
Well, and I struggle to think of a single, like kind of, let's say, legacy company who said, "Hey, we gotta get in on the software thing," and opened up their Silicon Valley office and actually succeeded in that. Yeah.
- RORory O’Driscoll
Interesting comment. Yeah, 'cause Walmart did it for a while. I think they closed it.Um, GE did it with that whole weird thing that totally blew up. Yeah, no, you're probably right
- 42:30 – 46:44
Anthropic Pays $1.5B to Authors — Fair Deal or Pure Piracy?
- HSHarry Stebbings
Going from employee payouts to one we didn't expect, author payouts. Anthropic had paid out $1.5 billion to authors. Is this a one-off prayer for forgiveness? Is this a continuation or a new business model? How did we analyze this?
- RORory O’Driscoll
Yeah, easy and super clear. Does, doesn't... If you read the judgment, it's really interesting. I, I, actually, these judgments are interesting because the bas- the judge said the following, "If you bought the damn book once, and you used it to train your model, and provided you paid the 15 bucks per book, that's totally legal. If, however, you downloaded this corpus of books, didn't pay anything, and used it to train a model, I'm gonna fine you $3,000 per book," which is how the fine was advised. It was 500,000 books at $3,000 a book. So it's actually a fair amount of clarity here. What it says is, if you want to train on 500,000 books to, to build your LLM, what you actually have to do is buy the book, slice it off, OC- so I have to go OCR the whole damn book, and you can legally use that, right? But if you don't do that, and you just don't pay the 15 bucks per book, you get fined three grand. So I thought it was actually a fairly coherent legal opinion that said, "This is where-- this is the cutoff between fair use and non-fair use." And I think Anthropic just made the mistake way back when of not doing that and got caught for it, but cheap at the cost, probably like, "Yeah, we should've done it." It's not a, like, it's not a crime. It's like, "We should've done this. We're gonna pay our three grand per book. Wish we'd paid 15 bucks a book. Life goes on."
- JLJason Lemkin
So the future is you're gonna go to the bookstore and you're gonna buy a book, and it's got, like, a steel bar through the cover, but the version without that costs $3,000.
- RORory O’Driscoll
[laughs] I as- it's cute. That's fun. I assume that there will be a much more efficient way than that of doing it. You're exactly right.
- JLJason Lemkin
[laughs]
- RORory O’Driscoll
I'm sure, for example, that there will be a corpus available of a purchased copy of every... You know, I'm sure that scale-- some, one of these label guys who says, "We have bought for you and just for you 500,000 books, scanned them just for you, so we are-- we have a legally compliant book set that you can use for training."
- JLJason Lemkin
Having said all that, like, this is pretty bad. Um, I think a- begging for forgiveness, right, the classic startup thing, it is interesting. But they downloaded this from pirate websites, okay? This wasn't cutting a little bit of a corner, okay? This wasn't claiming something that wasn't quite open source was. This is literally, "Guys, we gotta get this rocket ship going. I need a trillion books. I'm going to the two places where I can download them." [laughs] Pure piracy. Pure pi- this isn't even stealing YouTube videos like OpenAI did. This is as bad as it gets. You can't defend it. You can't defend Pirate Bay for books. [laughs]
- RORory O’Driscoll
No, you can't defend it. But to be fair-
- JLJason Lemkin
[laughs]
- RORory O’Driscoll
... they just paid a two thou... You know the concept of triple damages? Triple damages would've been 45 bucks. They just paid 200 damages. In other words, for every-
- JLJason Lemkin
Yeah, they may end up paying more. They may end up... It's not over. They may end up paying more. I'm not saying it's bad, but this is as bad as begging forgiv- this isn't just pretending I'm not using someone's API. [laughs] This is-
- RORory O’Driscoll
Which is why, again, why I admire the coherence of the judicial ruling. The, again, again, these guys think, unlike, you know, some of the other ones. Yeah. Um, they just said, "Look, this is, if you'd done this, this is what it would've cost. You didn't."
- JLJason Lemkin
Yeah.
- RORory O’Driscoll
"And we're gonna charge you 200 times as much per." And you're right, it, it, it's a big fault, and no one's gonna make that mistake again. No, you're right. 'Cause, you know, you could, y- you could've got to pick a number, or you could've said you're injuncted from not using it, but that wouldn't make sense in the context of, you know, you have a damages claim for, you know, 'cause your loss of earnings. 'Cause they said because you're not directly reproducing the book, it's fair use. So your only damages claim is 15 bucks. Now, the interesting case is where some of these artists are saying, "It's not a question that you're just using my art to train a generic model. When I go onto the model, I get effectively my art or my sentences back." At that point, you go from 15 bucks a book to a much bigger damage. So I think there, there's still litigation to be had and decisions to be made in terms of how fair use manifests itself in the digital, in the kind of AI age. But I thought this was kind of a, okay, clear, that, that's one piece of the puzzle
- 46:44 – 55:26
Why Did ASML Just Invest into Mistral at $14BN?
- RORory O’Driscoll
established.
- HSHarry Stebbings
We've discussed OpenAI, we've discussed Anthropic. Mistral announced recently, this last few days, that ASML have become their largest shareholder at a $14 billion price. Everyone is slightly scratching their heads at this, if we're being honest, going, "Did every other venture investor turn them down? Why is ASML funding this? $14 billion is a huge amount of money." How did you guys analyze this? Help me understand what is going on here.
- RORory O’Driscoll
I don't know if I can, but just so everyone kn- in case everyone doesn't know as they listen, ASML is a semiconductor capital equipment company based in Holland. It's one of the two or three most important capital equipment companies on the planet. The, the machines they make and sell to TSMC make pretty much every semiconductor possible. It's one of the most strategically important companies out there, and I think it's one of the largest market cap companies in Europe. So it's far removed from AI software. It's at the, the top end of the va- if you think, if you think NVIDIA's complex, one level below NVID- or, or distant, one level below NVIDIA is TSMC, but one level below TSMC is ASML. So it's in the AI value chain, to use the ge- Jason's metaphor earlier, but much further upstream. So that's kind of just the context of what it is. As to why it's doing this, I have no clue other than some kind of European, um, maybe the biggest tech company in Europe should support... 'Cause it is the biggest and most successful tech company in Europe, should support the biggest tech AO, um, AI LLM company in Europe in some kind of, you know, Euro conglomerate kind of basis. I don't know.
- JLJason Lemkin
So they have less of a right to do this than Mamoon, in your opinion?
- RORory O’Driscoll
Um, almost everyone has less of a right to do things than the moon. He's done so well.
- JLJason Lemkin
[laughs]
- RORory O’Driscoll
Um, but yeah, I-
- JLJason Lemkin
One, one thing, one thing, and I don't know how European FASB works, um, but I'd love... Jeff may have some thoughts here from Twilio. When big, when big companies with a lot of cash make corporate investments, it's weird because if you're gener- at least in the US, if you're generating massive amounts of cash, it's orphaned on your balance sheet. You can't just go hire 1,000 engineers. It hurts your EPS, right? But if you can swap it one asset for another and that asset is not impaired or it's impaired many years down the road, it can basically be free. It can basically be free. So there has to be some synergy here, don't get me wrong, but it doesn't have to be a VC synergy, right? If the asset isn't going to decline, if they, if they're looking at all the AI revenue that TSMC and others have, and they think they're not gonna lose money on this. I mean, I remember, you know, a few years ago, someone that used to be high up at Salesforce Ventures said it to me and it resonated with me, he's like, "I..." And w- you know, he just said, "Mark, our job is to make money at Salesforce Ventures, but it's more important we don't lose money. Because if we lose money, we ha- we may have to take an EPS hit or an impairment charge. But as long as our investment doesn't go down, it's pretty much okay." And so just the motivations here, they have to make business sense, but not, just not losing money might be okay 'cause cash is, is locked. It's lo- it's hard to get, do anything with it. You can re- you can repurchase your shares. That helps. You could invest, and that's about it. [laughs]
- JLJeff Lawson
But it's kind of like having the, you know, the, the, the, the, the entity in China, which is like, okay, well, it may go make a bunch of money, but is it your money?
- JLJason Lemkin
[laughs]
- JLJeff Lawson
No. And so all you can do is then reinvest it in the next thing in China or the next and, and you'll basically never have that money back. That's kinda what the VC thing is for companies, which is you're right, if you've got this money burning a hole in your balance sheet, now your investors might say, "Well, give it to us and let us make those investments." That's the argument. But if not that, then you're right. They can feel free to go make this and that, the, the, the income they make from that will be discounted, but it d- not 100%. They'll get some credit for it. But again, now you just made your problem bigger. You got more cash in the balance sheet. You go, "Oh, I can do the next investment and the next." So, you know, it's kind of a wash. But so the really, the thing I would say if I'm, say, Salesforce or a corporate investor like this is, is it giving my core business some sort of fundamental advantage? And in that, in the Salesforce world, the answer I would say definitely is yes. Obviously, it cemented their role in the center of an ecosystem. They ended up making acquisitions. They have more information to make their product decisions on, like all sorts of benefits accrue to Salesforce, and I don't know if you could say the same with ASML.
- RORory O’Driscoll
I, I think you're right, and I love the comment on cash. 'Cause just as a reminder, if you think software business is hard, the semiconductor business is way more cyclical than the software business, and you have to be tough as nails to run a semiconductor business.
- JLJeff Lawson
Who thinks the software business is hard?
- RORory O’Driscoll
Uh, I, so Phil, but hold that thought. He, leave it.
- JLJeff Lawson
[laughs]
- JLJason Lemkin
It's hard to stay on top.
- RORory O’Driscoll
I, I gotta tell you, you... Okay, we can come back to that. But if you think the semiconductor business is hard, the most cyclical business on the planet almost is a semiconductor capital equipment cycle because it's kind of a leverage versus the semiconductor cycle. So to your point, Jeff, I doubt it because they're so s- but there may come a day when you need that 1.5 billion, and sometimes you just need cash. So, you know, I'd always be wary of tying up capital. So you do wonder about that. Uh, th- and you're right, the strategic value isn't obvious to me. I mean, I don't know if you need to own the models to sell, I mean, to sell the capital equipment. And again, you know, look, I don't know if anyone's ever seen the picture. This is the most complicated machine on the fricking planet. I joke you not. It is. They are huge. They are enormous. They take months to assemble. They make a Boeing jet seem trivial in terms of their precision. So these guys are not dummies. They perform the single most complex engineering feat on the planet, and they make a lot of money doing it. So, um, but I agree. I just go, "Hmm, whatever." I... M- maybe it'll work. Maybe you'll make a 3X. I don't know. Good, g- but I think a lot of it could well be just knowing Europe. I think a lot of it can be... 'Cause it has been interesting to see this whole dynamic of non-US regions, a non-Chinese region now, feeling the need for some kind of local champion because the combination of hubristic talk about AI coupled with the hubristic nationalism behavior of the US and China means if, if AI is terrifying and these other countries are very aggressive about enforcing their stuff, maybe you do need a national champion, and maybe some element of this is that behind the scenes stuff, just like in the Middle East, you're seeing that. You know, I'm not saying I agree with that even slightly, but it's what's happening.
- JLJeff Lawson
Can, can I ask you, Rory, when has sovereignty ever been the sole driver for a company's success in the past?
- RORory O’Driscoll
The British East India Company did pretty good. [laughs] They just went over and took everything. But I agree. It's ha- I, I'm not, I'm not a believer in the tech spa- I, look, I said I don't believe in it, but I think there's the national champion of X in most tech markets. I'll give... Actually, cancel that. I'll give you an example. If there's a free market, I can give you a very clear... If there is a free market in trade, then the national champion of any tech makes no sense. You should have a, you know, couple of companies competing on a global scale. But let me give you an industry where there absolutely are national champions that's high tech. Defense. Because people, when people are afraid that other people won't sell them guns or weapons, they make their own weapons. And what's been interesting is this perception, rightly or wrongly, and I think wrongly, that AI is caught like that, right? You start having this perception of national champ, not 'cause it's the best solution, because it's a suboptimal solution based on concerns. And I think that is true. You know, how, I mean, you asked a question. That is ac- I was thinking in real time, but that is the answer. The Europeans make a whole load of defense equipment that they have no business making from an economies of scale perspective. They simply do it because they're like, they don't want to rely on the Americans, and this is the AI version of that. End of.
- HSHarry Stebbings
I agree. The ironic thing is if you go anywhere in London right now, Rory, the only thing you see is Android billboards everywhere. Everywhere
- RORory O’Driscoll
They've done, they've done a great job of seeming European in Europe. I actually thought that was one of the slickest things they've done, establishing the local subsidiaries, talking the talk, you know, in a way that some of the other vendors haven't been able to do, where there's been talk about disabling advanced features, and a lot of Europeans are holding off buying. I, I, I'm not for sure it's the S16 or the S35, but yes, Android's done a good job, but they've had to do it.
- HSHarry Stebbings
And they made a super strategic acquisition in Australia, which also made them a lot more Australian to the Australian government, people on the ground, an Australian company incorporated. Made a lot of sense. In terms of going back to kind of the, the corporates investing and the benefits that come, you mentioned Salesforce there and how it put them at the center of the ecosystem, Jeff.
- 55:26 – 1:09:25
Atlassian Buys the Browser Company for $610M - Genius Move or Panic Buy?
- HSHarry Stebbings
Atlassian's M&A team is just popping corks these days. I mean, these guys are going on a tear. Uh, they, they acquired one of my companies, uh, Cycle. It was a small acquisition, like $21 million in cash. Great, thank you as a seed investor. The Browser Company, $610 million in cash. Josh is amazing, fantastic product team. $610 million in cash is a lot of money. How did, how did you guys analyze that? And were you as shocked as I was?
- JLJeff Lawson
You know, you know, Mike's always been a real forward thinker, uh, but I would say the thesis didn't really resonate with me in terms of we need a different browser for work. Um, I could imagine some upsides, but is, is enough upsides to actually change behaviors? I, I don't think so, but did that thesis make sense to other folks?
- JLJason Lemkin
Yeah, I don't know. I, I mean, listen, everyone's got... I, I think we're at a moment in time where everyone feels like they gotta make a play, right? And maybe, maybe, Jeff, you've lived it. Maybe you don't really have to make a play when you feel like you have to make a play, but I think everyone's itchy in the seat, right? Whether it's, uh, ASML and Mistral, and Atlassian is one of the greatest of all time, right? Um, but it hasn't seen the AI boom, uh, play.
- JLJeff Lawson
Would this be the play?
- JLJason Lemkin
Yeah. I don't know, but when we're, sometimes when we're itchy, and it's true for investing too, sometimes when you're itchy-
- JLJeff Lawson
[laughs]
- JLJason Lemkin
... it's not that you make the wrong investment, but you might not make the ideal investment if you're not itchy. Like, if you've already gotten three deals done by September, you might just phone it in for the rest of the year. But if you haven't gotten a deal done by this point, you just, you just might throw in 100 million into the last round because it's the best idea you have.
- JLJeff Lawson
We, we can call Mike and ask him.
- JLJason Lemkin
Let's, uh, let's, uh-
- RORory O’Driscoll
Nice
- JLJason Lemkin
... yeah, bring, bring him on.
- JLJeff Lawson
Yeah. Do you want to?
- JLJason Lemkin
I don't think there's any-
- RORory O’Driscoll
I, I'm sure as a public company CEO, there's nothing he'd enjoy more than an unscripted conversation-
- JLJason Lemkin
[laughs]
- RORory O’Driscoll
... with this group of idiots about one of his products while he's still-
- JLJason Lemkin
Well, but when Jeff puts it that way, I mean, look, that's, if that's the bet that, that, listen, Atlassian has a massive footprint in the knowledge worker, both enterprise and developers, right? We're gonna push this browser, um, and it's gonna give us an AI play. Um, I mean, there's, there's worse bets. The only other thing I'd love to hear from J- when I look, I, I watch Jeff as an M- doing his M&A, and I watch Michael. Mike, it seems like with Atlassian, they do what Michael thinks works. So Loom, um, Trello, these made a lot of sense, but maybe they weren't impactful to Atlassian at the other end. Jeff, when I watch him, I'm like, "This guy isn't wasting time." He's like, "I'm gonna buy SendGrid. I'm gonna buy, um, uh..." Sorry, uh, marketing one. Sorry. It's, it's-
- JLJeff Lawson
Segment
- JLJason Lemkin
What's that?
- JLJeff Lawson
Segment.
- JLJason Lemkin
Uh, Segment. I'm gonna buy Zipwhip. Like, this was a man on a mission. He wasn't gonna wait for these new things. This is my view as an outsider. He wasn't gonna wait for little things to germinate eight years later. He was gonna put points on... I loved your M&A strategy even if it had risks, right? 'Cause you, you weren't waiting, were you?
- JLJeff Lawson
No, I mean, uh, here's the thing. We were never under the misconception that, like, SMS would be the most dominant way of communicating 25 years from now.
- JLJason Lemkin
[laughs]
- JLJeff Lawson
Right? We knew that at some point SMS, it was already legacy tech when we started the company, but we breathed new life into it. But, like, at some point that will no longer be the... So we have to parlay our success in that world, in the amazing customer base, the amazing revenue base we have, and parlay it into the next era. And so the question is, we don't know how long that timeframe is, so we better get busy doing it, is the, basically was our philosophy. And obviously the messaging business is a great business for us, but it was always seen as a bridge to an even bigger play that at some point in the, in the hopefully distant future we'll be glad we did. And, you know, I always liken it to, you know, Intel going from memory to CPUs or one of those. Like, you know, in the fullness of time we'll be seen as, people will say, "Oh, remember Twilio started doing SMS messages?" And, and, you know, and you'd ask grandpa, "What's an SMS message?" "Well, let me tell you." And, um, and so that's how we kind of thought about it and that kind of urgency. And the thing I would say, though, about any company in SaaS today, and Atlassian is a prime example of this, is they are primed for, uh, disruption right now because AI is going to decimate their seat base for their products. It'll decimate the roles people are playing. Uh, AI will do the jobs that people are sitting there in Atlassian products doing today. And so the question is, what, you know, what are they doing? And now I look at, at the Browser Company, I'm like, I'm not sure that's the answer to what's gonna potentially replace a whole lot of revenue if AI is taking over these jobs that humans are doing in Atlassian products today. I, I think I would go, I would, I would skate directly there and say, "Great, what is the job that humans are doing in Atlassian products? And here's the AI version of that today," is what I would be doing, I think.
- RORory O’Driscoll
It won't be the soundbite of the show 'cause I know Harry, but that should be. You're exactly right, Jeff. It, and I, I think it was a super insightful set of comments from you to Jason and Jeff. Yeah. It's the, you were able at Twilio, y- to some extent you were like, "This is a good business, but we have to add on top of it." It's a lot tougher now when you're like, "My existing business could go away. I better do something." Right? And, you know, y- and, you know, you gotta call those shots. And maybe this, I, I, I hear you, this shot didn't resonate, but it's like you're probably sitting there as a SaaS CEO, as a company saying, I, you know-You don't have the option of just letting the existing thing compound because it's not gonna asymptote out in cash flow. It could start declining. And that's why to, [laughs] again, to Jason's point, I love the, the, the descriptor, you do get trigger happy. It might... I mean, you know, to some extent what you're really saying is, "This mightn't be the best deal ever, but it's the best deal of the three deals on my plate right now, and I need to do something because I feel the imperative to act." Right? It's probably a very honest, in aggregate, reflection of the dynamic right now if you're a CEO, and frankly also if you're an investor. You know, you- if you're not in, you can't win. But oh my God, it's hard to know.
- JLJeff Lawson
Well, you can't buy Sierra.
- RORory O’Driscoll
Yeah. You can't, you can't buy the things that are great. I mean, there's no point.
- JLJeff Lawson
You can't buy Sierra. [laughs]
- RORory O’Driscoll
Yeah.
- JLJeff Lawson
It's a tough-
- 1:09:25 – 1:26:32
The Next Wave of Aggressive Acquirers
- RORory O’Driscoll
[laughs]
- HSHarry Stebbings
Jeff, I'm sure you're in-
- JLJeff Lawson
Maybe overpaid
- HSHarry Stebbings
... I'm sure you have consistently over the years spent time with a generation of public company CEOs and founders from your Atlassians to your Zooms to your Mongos to your Octas to your Boxes to your Dropboxes to your... All in the same kind of generation. When you look today at that crop of companies, which founder CEO do you think will be most aggressive and strategic in the acquisitions that they make?
- JLJeff Lawson
A couple of thing. I- in term of, purely in terms of acquisitions? Um-
- HSHarry Stebbings
AI strategy as well.
- JLJeff Lawson
AI strategy as well.
- HSHarry Stebbings
Acqui-
- JLJeff Lawson
So I, I think Mike will be one of the more aggressive on the acquisitions front, uh, 'cause they've always been. Uh, and so I think it's in the DNA of Atlassian, so I do think we are looking at one of those, even if I am not fully on board with the most recent. Um, the... I think, I think Drew has a interesting vision for w- where Dropbox can go with AI. The question is will they have a right to play there? Because I think Dropbox has struggled to expand out of core sync and sharing market, 'cause they've tried a lot of things over the years. Uh, will AI provide an opening for them to provide a new market for, uh, their customer base? Um, we'll see. I think he's got an interesting vision there. Um, but it's hard. It's hard to break out of, out of the, the jail you might find yourself in in those scenarios.
- RORory O’Driscoll
When you're at the Dropbox stage in terms of growth, it's just when you need acquisitions the most, but you find it hardest to do as a public company 'cause you're still in the low-growth penalty box, and that must be a frustrating place.
- JLJeff Lawson
Here's the thing I would say about both Dropbox and Box, bo- both Aaron and Drew. These, these guys are cockroaches in the public market, right? Like, they've been through hell and back in the 10 or so years that they've both been, um, public companies, and they've managed to survive. And I know Drew's got good protections. I think Aaron does too. I don't remember. But, like, they've managed to figure out how to compete brutally and manage to continue the path as public companies, continue to invest, uh, a reasonable amount in R&D and, and advance the stories of their companies. And so what I... I would bet on those two to continue to do that. Now, I wish they were both doing it faster, and I wish they were both able to do it more at scale. Neither of them have relied o- on any kind of big and A, uh, big M&A really. Um, and that's probably a function of, of their presence as public companies. But I also think that, you know, their history of being able to plow forward and, and make it happen, uh, will help them here. Uh, and hopefully what it takes though is some kind of breakthrough. Like, they'll need some little bit of luck. They'll have to push through some opportunity that breaks for them, and then it could be amazing. Uh, and so I, I, I think both of them have a shot at it, but it, it probably won't be through big M&A. It'll be through product smarts. And I think they've both been l- Like, knowing both, you know, Aaron and Drew, they've both been looking for that opening, kinda like I was as a CEO. Looking for that opening that's gonna let you break out of your jail and, uh, you know, kind of expand your product portfolio in a new direction, uh, and earn the right to play in a new area and, and AI is certainly one of those opportunities.
- HSHarry Stebbings
In what way did you most want to break out of your jail that you were not able to do?
- JLJeff Lawson
Well, the thing that frustrated me... So our most successful product was our messaging product, right? And so as a messaging API, the, the crux of that product was three, uh, was, was an API with three primary fields, right, if you will, like from, to, body.That's a text message. Who's it coming from, who's it going to, and what does it say? That's a text message. And so we had millions of developers who integrated Twilio into their code and, and specified in their code a to, a from, and a body. Now, in that world, how do you add more value to the customer over time? They specifically said, "I want you to send a text message from this to this that says this." What do you do [laughs] to add value? You're kind of in a box. And so if you look at the last, say, 10 years of Twilio, it was all about how do we add val- how do we create a product that allows us the expressiveness to go add value because the customer hasn't explicitly stated exactly what they want us to do, and therefore any deviation from that exact thing is called failure [laughs] by the customer. Uh, and so that's a lot of what we were always trying to do, is to create a surface area that allowed us more expression as a product team, uh, and as a company. You know, think about if you're a file storage company, uh, you know, success is I stored your file and I didn't lose it, uh, and failure is, "Oops, I lost your file, sorry." Like, and so you have to break out of the world of like, no, no, no. And customers want you to add value beyond just, "No, my file was there, thank you very much." Um, that's the, that's the challenge. And so certain product arenas and the nature of how customers use the product and the nature of the product's promise g- give you more ability to expand. Like, I always thought, I always admired the product surface area that Cloudflare had because they sit at this super strategic intersection of the world and then your website, and then you can ask the qu- and it's a dashboard. So once you're inserted into the DNS and you're proxying all the traffic, now without writing another line of code, they could add another feature to that dashboard that says, "Oh, flip a toggle to do this, and do that, and do that, and do that," and all you gotta do is flip a switch and it's beautiful. That's a great position to sit in because you're at the point in the product where you can just add that feature and make it a toggle switch. That's beautiful.
- RORory O’Driscoll
To your point about it, it's funny, I, that actually was inside... 'Cause I always thought that 10 years ago there was only two API companies, you guys that abstracted the complexity of messaging, and Stripe that abstracted the complexity of money, right? Both of them, you know, you were the interface for developers and a whole bunch of complex shit behind the, the curtain. And I think what I hadn't realized, and you made clear to me now, is you probably had more degrees of freedom as Stripe 'cause there's more things you can do with money than you can do with to, from text, right? And you were trying to find the unlock on top of that, is my takeaway from that.
- JLJeff Lawson
Y- yes and no, right? So I don't know Stripe's financials, but I, given the fact that they've fiercely stayed private all this time, I wouldn't be surprised if they struggle with a similar thing and they've been looking for a better answer. I don't, I don't know. I've, have heard whispers that a lot of their product portfolio is not really contributing to the business. It really is the core business, which is, you know, pretty common. I'd say probably the same of, you know, largely the same of, of Twilio too, right? It's a, it's, there's a main product and there's a bunch of other stuff that you hope will break through, but it's always hard to do that. What, you know, if you want, if we want, we can take a detour and, and I can tell you my, my theory of all developer APIs.
- RORory O’Driscoll
Yes.
- JLJeff Lawson
Um, or we can talk about the CEO of IRL who was arrested for fraud.
- RORory O’Driscoll
Oh, [laughs] when you, when you put it like that, big guy. [laughs]
- JLJason Lemkin
I'm passionate about the fraud topic, but I am, I mean, Jeff has been... I mean, what's, what was the billboard on 280? Ask your developer, right? Since inception. But I feel like, Jeff, I'm kind of bummed you're not in the game because I, I'm on Replit two hours a day, okay? I'm, I, I couldn't be a developer before Replit. There is a renaissance of the developer. Like, everyone's becoming a developer, right? It's not just... I mean, literally I integrated the SendGrid API in 60 seconds. I couldn't have done that six months ago. I, I mean, I'm not stupid, but I just couldn't have done it. Now me and Replit just did it, right? So I'm just, I am curious, I wanted to, do wanna talk about IRL and then we out of time, but I, I do wanna hear your theory of all of it 'cause I feel like it's just become, it's, it's a new world for developers. Maybe, maybe, maybe I'm too naive, but...
- JLJeff Lawson
I'll tell you my, my theory of developers, let's say pre, uh, AI, um, and then, you know, maybe we can talk about how it evolves. But, so my theory on, on pre-AI developer stuff, and I tell this to every, uh, entrepreneur who would, who would listen, who would think about it, which was, um, it was kind of one of our guiding philosophies as well. I thought that we're, uh, you know, in, in 2018, 2017, 2018, we kind of were at this critical junction in Twilio where we were saying, "Okay, do we just go more horizontally in terms of services for developers, or do we go more vertically in terms of communication?" And we chose to go more vertically in terms of communication, and part of the rationale was I analyzed every developer thing that was out there and I decided there were three categories of developer, um, companies. And, uh, only... Sorry, there were many kinds, only three that actually got breakaway revenue. And there were a lot of folks that were stocked with 10, 20 million, whatever, but there were only three that actually could break away into hundreds of millions or billions in, in revenue. And those three categories are, number one, business development as a service. I like that Rory's taking notes.
- RORory O’Driscoll
Yeah, I'm actually, yeah.
- JLJeff Lawson
Or, or he's writing poetry. I don't know. Uh, the-
- RORory O’Driscoll
I wrote down business development as a service, question mark. Okay.
- JLJeff Lawson
Business development as a service. So if I'm a software developer at some company, I am not allowed to go open a bank account on behalf of that company. I am not allowed to go strike a, uh, uh, a, a business development deal with AT&T on behalf of my company. I am not allowed to go, uh, you know, stand up a new data center on behalf of my company. Uh, these are things I'm not allowed to do. But with Twilio, with Stripe, with AWS, you can now engage in these business relationships on behalf of the company that you weren't able to do previously. And this empowers you now to go build the thing you need to go build, and it turns out that when you just backdoor in that way, uh, the developer has a lot of power because the thing everybody wants in the organization is a working product. And when the developer says, "Here's our working product," it just turns out that in order to have it, leaders of the company, you gotta go pay the bill to Twilio or to Stripe or to AWS. It turns out people are willing to do that, right? So business development as a service. Second, CapEx. You got your pen ready? CapEx as a serviceSo it's similar, uh, and more relevant to the AWS story, which is a developer's not empowered to go spend $10 million to build a data center, but can they put it on a credit card? Yes. So there you get your CapEx now as a service that developers, again, they're spending money of the company that they previously weren't allowed to spend, but this is a CapEx, uh, uh, play. So that's all of AWS and Google and everything else. All right. The third, and this is ex- uh, exceedingly rare, the third is algorithm as a service.
- RORory O’Driscoll
Yes.
- JLJeff Lawson
And this has got to be an algorithm that is so complicated, so obviously beyond the reach of most developers, uh, that you are willing to pay someone else to do it for you as opposed to do it yourself. And the reason why it has to be so complicated, and a lot of folks, I think, think that their thing is gonna fit this bill. They're like, "Well, we're not business development and we're not CapEx, but we're a thing that's really cool." And the problem is that developers, A, take your really cool thing that you're trying to charge them for as a challenge. "Can I go make that myself?" It's like a challenge. Like, you're challenging me. You're saying I'm a developer who can't build the thing you built? Screw you, I can do that. Um, especially true when it gets to actually meaningful revenue, because even if you do get your foot in the door and you get into a product and suddenly that company's paying you 5 million a year, now the developers in that company are like, "Hey, I know, I can go save the company 5 million bucks and be a hero. I just need to go recreate this thing." And that's what happens. And so when you're CapEx as a service or biz dev as service, you have a backstop to that instinct with, well, you could go build your own Twilio messaging layer, but you still have to go integrate with hundreds of carriers around the world. Why would you... You, you... That didn't solve any problems, really. Uh, but the algorithm one has to be so hard that the developers say, "You know what? I'm just... Uh, frankly, I'm not smart enough to go and figure that one out." And in that category, I used to only put, uh, DynamoDB. Like the infinite scaling database is like, that is such a hard problem to solve that even if you have an open source project, operating it yourself is so hard. You just pay Amazon, they take care of it for you, and you call it a day. Uh, and now I'd put inference in that category, except [chuckles] that pretty quickly, you know, inference became open source and people are running it themselves too. So it's not even necessarily in that category anymore.
- RORory O’Driscoll
But you would put, you know, accessing the core Anthropic and OpenAI core... I mean, you, that, that is their business, the, the enterprise... I mean, because you say in... Yeah. I mean, do you th-
- JLJeff Lawson
Well, except for the fact that you've got open source models, right? You've got Llama, so you can run Llama yourself and do inference yourself, right? I'm not saying that it is, uh, necessarily the right thing for folks to do, but people can do it. And so that argument of, "No, I can do it myself," actually is valid. They can. And a lot do.
- RORory O’Driscoll
Which, by the way, I, I remember... Look, honestly, back in 2016, '17, we looked at a bunch of these NLP APIs that were, you know, mid-level, trivial, hard. They got some developers. And you're exactly right, they got taken out. And, you know, give KV credit, they did a bunch of those that only did okay, but then they very wisely did the one that did amazingly well in term- i.e. OpenAI. And maybe what you're saying is it may well be that the secret sauce is if you just continue to spend an order of magnitude more money every year making the algorithm better, then no one can catch up to you. And that obviously is the OpenAI slash, um, Anthropic play now because yes-
- JLJeff Lawson
Yeah
- 1:26:32 – 1:34:01
IRL CEO Arrested for Fraud: Is More To Come?
- JLJason Lemkin
Uh, my final one is, uh, what, what Jeff mentioned, IRL CEO arrested for fraud. What happens here, Jason? This is a topic you're passionate about. You can kick it off. Well, I, um, listen, I, I'm not a criminal l- l- litigator or lawyer. Um, Rory's got one in the family, but yeah, uh, hopefully he goes to jail for, for stealing millions from the company. I genuinely believe our, I mean, our ecosystem is, is so turbocharged right now, right? But with, in the Bay Area, I mean, venture rounds are all getting done on Saturdays. Um, there's no, we ... Forget about no diligence being done two years ago. Now diligence isn't even being attempted. I think the best control today would be if more founders that committed fraud went to jail. I just think if every month someone went to jail that completely lied, I know Rory disagrees, completely lied in a round, comple- sent financials where they aggregated all their year's revenue in one month, or they pretended unpaid pilots were pilots. I, if a couple of these went to jail every month, it, I think it would have the proper chilling effect and mitigate the rampant fraud we're seeing, uh, today. I just think it would be he- it would be helpful for the ecosystem if that were penalized. And I know Rory thinks it's a cost of venture, but I think it's reaching an all-time high and it, and it's a net, in the end it's a net negative if trust breaks down in investing. Because there's just so much, we can laugh about it in, when so much money's being made, but if trust leaves the system, it's just so much harder. There's so much trust in this system. There's so much trust, and it's not ear- there's not enough time to earn it in, in, in investing. Sometimes there isn't enough time to earn it. You can't get to know someone for four months anymore, even four weeks. You might have four minutes. So I wish a few more people went to jail.
- RORory O’Driscoll
Okay. Um, the hanging, uh-
- JLJason Lemkin
Because there's no consequences today. There's no consequences to standing up at a top accelerator and saying, "We have millions of revenue," and the next week, the, the revenue isn't there. There's just no consequence and, and maybe that's funny to some people. I don't think it's funny. I think it's like Jeff, like, founders used to, every founder, almost every founder used to have this ethical standard a few years back that I think has, uh, dissipated in today's world, and, and it's just rampant greed. And I like the greed 'cause it'll make us money, but there's too much of it.
- RORory O’Driscoll
I think dishonesty ebbs and flows with greed, and I think peak, you tend to see peak dishonesty at a time of peak greed. So you see more of it now, but I don't think human beings have changed. I don't think we're more moral than people 30 years younger than us. I think the truth is, you know, you look at 1929, you look at the, you know, the boom in the '80s, when there's lots of money at stake, you tend to just see more fraud, right? And no surprise it's happening right now. That's the first thing. I do think people who absolutely lie should suffer severe consequences up to and including prison. I think, you know, so that's a generalist concept. I will say in the f- all these cases tend to be very facts and circumstances, and, you know, i- ranging from, oh, uh, you, you gave an example. We had contracts and they w- they had opt outs. Is that ARR split one way? It is, maybe it isn't, all the way to forging documents, which is clearly illegal, right? So I think what the truth is, it's, uh, and I'm not gonna comment on specifics 'cause I don't know. I think it'll range from you absolutely lied to you told things in a way that's very poor you, and they should have asked the right questions and you didn't. So my comment is myth, the, the legal ... And you're right, I have a lawyer in the family, a criminal defense lawyer way back in the day, long since retired. But the average fed conviction rate for most crimes is 70, 80% plus. It's slightly lower I think for white collar crime only because you get lost in the details and the noise of what exactly is intent. So I don't think it's a layup, but I do believe, as you say, Jason, some actions are just so far blatantly out on there. I just flat out lied. I forged invoices. I co- That, yeah, if you do that, you should go to prison 'cause there's a lot of tacks. If you can't rely on that kind of stuff, there's a lot of tacks you have to do. I'm not calling for vengeance and death, but I would be careful.
- JLJason Lemkin
Yeah.
- JLJeff Lawson
All righty, team.
- RORory O’Driscoll
That was a grim ending. That, that felt like a bit of a law and order lurch at the end there. Come on, say something nice, Jeff.
- JLJeff Lawson
Well, between Jason, who wants some sort of venture capital ICE regime, and, and Rory, I'm closer to Rory.
- RORory O’Driscoll
[laughs]
- JLJeff Lawson
Like, I actually think a little bit like, like, if VCs are, like, so eager to get a deal done because they're like, "I ca- I don't have time to even ch- check any of this stuff," then it does feel like-Like, uh, th- their greed in that scenario gets rewarded with some amount of fraud. You're like, "Well, that, that seems about right." And there's a German word for that, I'm sure. The-
- RORory O’Driscoll
There would be
- JLJeff Lawson
... I, I think, I think the... Here's the pattern that I see every time I read these. Like, I, I saw this, you know, CEO of IRL abducted or, uh, um, accused of fraud. I've never heard of IRL, actually. [laughs] And the pattern that I've seen is that whenever I read these stories about CEO, founder, you know, committed fraud or whatever, and they've took bill- you know, millions of venture capital and so, the pattern I see is I've never heard of any of the companies. And so maybe that's just me, like I'm an old man and I'm not keeping up with all the, the cool things, but there's like this sort of thing where like, well, if I've never heard of all these things, maybe there wasn't a lot of real behind them and they just look good on paper. Because as a real human being operating in the world, if I've never even read a story about these companies, let alone an active user of them, something seems a bit odd. But that's all. That's my take.
- RORory O’Driscoll
Actually quite insightful. I don't want to share, break a confidence, but I did talk to someone regarding this actual case who actually had done some primary due diligence and concluded effectively what Jeff said. These guys are claiming millions of users in a certain subgroup. We researched that subgroup and no one had heard of them.
- JLJeff Lawson
You can't find a single user who's like, "I know that."
- RORory O’Driscoll
So yeah. I mean, I don't like that people lied to us, but I do agree that there is an honest... I mean, I remember about 15 years back, we instituted the very obvious check the cash balance before you wire test, because another firm had wired money on the basis of a certain balance sheet. And it sounds really obvious, but they were lied to. So every time we do that now, we do a little mini audit and just talk to the bank, don't just rely on the statement, et cetera, et cetera. Yeah, it's interesting comment, Jeff, your point. The commission of the crime is on the 22-year-old who lies, and they pay the consequence. But you, there was a little bit of me saying the 40-year-old running a lot of money, who's sophisticated, who's running a big firm, they kind of owe the system the duty of care to check some of this shit and not be carried away, you know? Yes, SBF went to prison, but maybe all the... But he was, relatively speaking, a young man with a lot of hubris, and we've all been there. I know I was when I was that age. It would be better if the people who are paid for their judgment exercise that judgment, and a few times said, "Slow down here. Maybe we should have an audit, people, before we manage, you know, 50 billion of other people's money." So I, I, I'm... The incidents may fall on the guilty, but I'm not sure the moral blame should be allocated the same way. Yeah. Well.
- HSHarry Stebbings
Jeff, I, I, I have to say, dude, you have been a fantastic guest.
- RORory O’Driscoll
Yes. Lovely.
- HSHarry Stebbings
Like I ha- I have loved having you on. I know Jason and Rory have as well. I mean, seriously, awesome.
- RORory O’Driscoll
Lovely.
- HSHarry Stebbings
Uh, thank you so much.
- JLJeff Lawson
Thank you for having me on. A pleasure.
Episode duration: 1:34:12
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