OpenAI's Multi-Billion Deal with AMD & Polymarket, Vercel and Supabase Raise Mega Rounds

1. 0:00 – 1:06

   Intro

   1. RORory O’Driscoll0:00

      Paul Graham was right. Sam Altman understands power. He has more power than AMD, so he took 10% of their company for the privilege of selling stuff to him. The interesting thing is the leverage that OpenAI has, even though they're losing a ton of money, precisely because they have the users.

   2. JLJason Lemkin0:15

      NVIDIA's making so much money it's almost incomprehensible. So I think Jensen knows he's got to give up some of it.

   3. RORory O’Driscoll0:20

      The more you do this, the more you just say to yourself, you just need to do big, exciting deals in trends that are absolutely obvious, and every time you try and make it harder than that, you just, you lose money.

   4. JLJason Lemkin0:35

      Ready to go? [upbeat music] Guys, I am so looking forward to this. We have a lot of news to cover this week. Um, we're gonna start with... I, I did th- I did laugh when I was putting this together with Jason's brilliant suggestions, thinking, you know, th- this could also just be called This Week in OpenAI. Like-

   5. RORory O’Driscoll1:02

      Yes

   6. JLJason Lemkin1:02

      ... that could be a relevant name. Um, but obviously we had Dev Day yesterday.

2. 1:06 – 6:56

   OpenAI and AMD's Major Partnership

   1. JLJason Lemkin1:06

      I want to start, though, on the AMD deal. OpenAI, setting the scene, OpenAI announced a major chip supply partnership with AMD. OpenAI will buy AMD's upcoming, um, Instinct chips up to six gigawatts. As part of the deal, they get warrants to purchase up to 10% in AMD. Big news. If we start there, what the fuck does this mean a week after NVIDIA invest 100 billion in them?

   2. RORory O’Driscoll1:38

      [laughs] It, it means... Yeah, it means a lot. There's a ton in this, and it means, first of all, whoever does corp dev... The odd thing is, whoever does corp dev in OpenAI gets a bonus this year, and bizarrely enough, the, whoever does corp dev in AMD and NVIDIA all get bonuses this year, 'cause so far this has been, oddly enough, and I'll come back to that, a win-win. You know, you, you gotta talk... So there's, doing each of them in... I mean, zooming out a level, um, I'll maybe start right down in the weeds with the AMD deal, right? 'Cause contrasting with NVIDIA, because NVIDIA is strong, when they get to get equity in OpenAI in return for giving OpenAI chips, right? And they, and OpenAI uses that money to buy those chips. AMD, because it's weaker, has to give their own equity to OpenAI for the privilege of having OpenAI buy their chips. It speaks to OpenAI clearly, and this is why Paul Graham was right, Sam Altman understands power. He has more power than O- AMD, so he took 10% of the company for the privilege of buying stuff, selling stuff to him, and he has probably less power than NVIDIA, so he let them get equity for the privilege of selling him chips. So it kind of speaks to the, the hierarchy. There's, there's dominance clearly been established. That's the first thing we out of the gate.

   3. JLJason Lemkin2:54

      I just want to understand. He, he got warrants to purchase.

   4. RORory O’Driscoll2:57

      Yes.

   5. JLJason Lemkin2:58

      That is different to him purchasing, and that is different to him giving-

   6. RORory O’Driscoll3:01

      It is and it isn't. If you look what le- so one level down, what did, quote, he get? Right? OpenAI got warrants c- to purchase 10% of AMD at a penny. So in other words, they're o- they're free warrants, right? We, we'll come to the accounting of that in a second, but only if certain, only if they buy the chips and the AMD stock price goes up. So I can imagine the discussion. The discussion was OpenAI come in and say, "Hey, AMD, we're gonna buy some chips from you, and that's gonna be so good for your stock price that we want warrants to do that." Uh, we wa- maybe they didn't mention that. They said, "We want warrants to do this deal." And the O- AMD guys say, "No way. We're selling you chips. We're getting money. What the hell do you mean you're gonna get warrants as well?" And OpenAI said, "I bet you your stock will go up just 'cause you're doing business with us, 'cause you're kind of a no-hoper and now we're saving you, and we want to get some of that upside. So therefore," did I repeat, "we want the warrants." AMD eventually says, "Here's the warrants." And the interesting thing is, and remember, they have, AMD's gotta s- OpenAI's gotta buy the chips, step one, and step two, the stock price has got to be high. The interesting thing is that we'll see if that lasts when those warrants, when those chips get shipped, but as of right now, the stock price went up 30 something percent, so if they were shipping the chips today, they'd be getting the warrants today, right? So OpenAI was correct when they looked AMD in the eye and said, "Dude, your market c- We're gonna get 10% of this company. I think that's worth 30 or 40 billion," 'cause it's a 300 billion company, "and your stock price went up 60 billion, so you're up."

   7. JLJason Lemkin4:30

      I don't know what the, the goal was, right? It's always interesting, these warrant deals. I've had a few in my portfolio I've been dealing with lately where they're just immaterial sometimes to the, uh, to the company, okay? Sometimes. Here, 30 or 40 billion is not immaterial to, to OpenAI. It could, it could flip the stock, right? If it's allowed to. It could be material. I don't know what the goal is. My initial sense, which I think may be wrong now that you said, Rory, my initial sense was, listen, we're, AMD's getting the better end of the stick here, right? We, we need to diversify away from NVIDIA, uh, OpenAI it is, but we're gonna do much more for them in the short term than they're gonna do for us. You're, and then you're gonna turn around and monetize it with our competition. You're gonna sell them all to Elon, right? That's how I read it. So we don't want egg on our face. It reminded me at first of Shopify and Stripe, and Toby was so angry in his mind that he put Stripe on the board that then he went to Klaviyo and said, "Listen, I'm gonna do the same thing for email that I did with, uh, payments on Shopify, but you gotta give me 10% of your company." It felt like not getting egg on your face, but maybe, maybe they just want the money [laughs] .

   8. RORory O’Driscoll5:34

      Yeah, I mean, it, it's all together. It's, they, they, they came with a kingmaker package, and they, you know-

   9. JLJason Lemkin5:38

      Yeah

   10. RORory O’Driscoll5:38

       ... made them an offer they couldn't refuse.

   11. JLJason Lemkin5:39

       It's a kingmaker package, right?

   12. RORory O’Driscoll5:40

       Yeah, it's like-

   13. JLJason Lemkin5:41

       It's a kingmaker package.

   14. RORory O’Driscoll5:42

       And as I say, as of today it would work, but remember, they don't get those penny warrants until they ship the s- the, the chips and until OpenAI buys them, um, 'cause remember, 'cause whenever you do these vendor deals, you're worried, are they really gonna buy the shit? So two years from now, OpenAI still has to need whatever vast sum of chips that they set. If you zoom out a level, and I was genuinely thinking about this last night, thinking about what trying to say, and kind of go a little historical here, right? What you're seeing here is-The Windows Intel game beginning again, right? If you zoom back 30 years and everyone has shift- Windows, Microsoft... Well, actually, I should say DOS. Microsoft was the software company that took control of the PC monopoly, right? Their, their adjacent partner was Intel. IBM was the old school company that set them up by doing that famous DOS licensing deal, right? And AMD was the little player that got dealt into a 10% market share because, because IBM said, "Dude, we're not gonna just rely on, um, Intel anymore. We need a second supplier." That's 30 years ago, and the way it unfolded is Intel did well, Microsoft did better, and, you know, AMD got a little bit of money and, and IBM faded away.

3. 6:56 – 16:59

   Microsoft Have F***** Up the OpenAI Partnership

   1. RORory O’Driscoll6:56

      Fast-forward to today, the company that's dominating everything is OpenAI. They're the Microsoft of today. They have the consumers. They have the eyeballs, right? They're building this new monopoly, and the equivalent of Intel is now NVIDIA. In other words, the chip... The only... 'Cause think of it this way, the only other company that OpenAI needs to be, to, to, to make all this shit happen is the chip guys. If you've got chips and you've got these guys, you're golden. And obviously capital. So NVIDIA occupies the role of, you know, the dominant other part of the duop- of, of, of the duovirate. You know, it's the two armed people running the thing. In other words, you've got OpenAI and NVIDIA. But bizarrely enough, you still need the second source. In this case, OpenAI is driving that agenda, but up comes AMD again 30 years later with exactly the same shtick. "We're not as good as Intel, we're not as good as NVIDIA, but we're here. We're the second source. Give us some money." And history repeats itself. And then, you know, just to say it, the role of IBM has been played by Microsoft. They set this viper in motion, and [laughs] they've allowed it to exist, and in one sense, for a while, it looked like Microsoft got a good deal because they got access to, um, OpenAI's technology early on and they got a little bit of buzz. Brutal comment here. Just like IBM got a buzz when they shipped the first PC because they got a product out the door, but they let this competitor emerge in their midst. And I think OpenAI, g-going back to the Developer Day, it's uncanny how similar it is. And if you're sitting there right now and you're Microsoft, "Did we just create a monster?"

   2. HSHarry Stebbings8:40

      W-w... Sorry, sorry. Did IBM own a large chunk of the monster they created in the same way?

   3. RORory O’Driscoll8:45

      No, no. Uh, look, exactly. History, a-as someone wisely said, "History doesn't repeat, it rhymes." IBM did not, does not own... Good point. Does not own a big slug of OpenAI, but as we've discussed, you don't get points for venture capital when you're a dominant monopoly. You gotta just stay a monopoly, right? So yes, um, better to own 10 or fif- 30% of it than nothing. So great... As I said, what we said, great corporate development deal for Microsoft. Far better corporate development deal for Microsoft than IBM did 30 years ago when it didn't take any ownership. So as we said, the corp dev guy at Microsoft, he also gets a bonus this year, right? But from a business perspective, I mean, we're gonna talk in a second about Developer Day. What you saw is OpenAI basically saying, "Here's the place in which you should run your other apps." Now, I'm not sure that vision sticks, but if you're Microsoft, you're like, "What? WTF. We're the place where you should run your other apps. That's what we do. Who the hell are you?" Right? So you're right, Harry. It's not a complete parallel, but there's a lot going on here that feels uncannily similar, and you kind of go, "Think about it."

   4. HSHarry Stebbings9:46

      Can w- can we just stay on the deal itself before we move to the Developer Day? If you were NVIDIA, are you not thinking, "Hang on a minute. I thought we had this trusted relationship, this wonderful partnership. We just gave you a ton of money. We just invested. What a strategic relationship," and now you're turning and biting the hand that feeds you. How do NVIDIA feel?

   5. JLJason Lemkin10:08

      Well, you know, it's, it's, I mean, Sam is, again, we've said it a million times, I, I learn a lot watching what he says because he is thoughtful and direct and showing... I mean, he was very careful to be complimentary to NVIDIA and be clear that they were his number one vendor, right? Here's my view. I don't know what you guys think. Listen, I mean, Rory's made the point, the only person making any money in AI is NVIDIA. Even Oracle isn't making any money. OpenAI certainly isn't making any money. NVIDIA is making so much money, it's almost incomprehensible, right? So I think Jensen knows he's got to give up some of it, right? And I think there's this elaborate dance of losing, chipping away. He's got to give a little market share. He can't... He's got to be a little polite in these deals. As long as at the end of the day he knows he's gonna have 90% market share, right? That's my sense. And that he's playing it... They're all playing it very carefully so that h-he can minimize his price erosion, which he has to deal with, and maximize his market share without creating, uh, a huge conflagration. But I, I think it was very carefully or-or-orchestrated. You can't... Th-this, this may end, end up being very little, right? If, if AMD isn't fully competitive, uh, no one may end up using these chips except at the, the minimum they need to maintain competitive, right? So I don't know. I th- I thought it was very thoughtful about everybody, and I thought it was sequenced in the right order. AMD didn't come before NVIDIA, did it? Certainly wasn't announced first. [laughs] And everyone showed up to d- to d- to, to pay h-homage to, to, to Jensen, and he referenced it when he did the NVIDI- AMD deal. So I think it was his, I think poli... What we can see from Elon is being impolite has consequences in this space. I mean, that Elon guy, he hates Sam, doesn't he? I-I don't know if xAI would exist if it [laughs] wasn't for his bone de- with bone to pick with Sam Altman. He, he might not have bothered. He might have just gotten to Mars faster. [laughs]

   6. RORory O’Driscoll11:54

      But sta-staying with that, and, and you're right, I think staying with the dynamics of the deal and what it reveals, it, it, you're right. On the chip side, it reveals, you're right, they're a wildly powerful company. They can shed a little, and, you know, they're gonna have a lot of other issues avoiding them, just people are gonna... No one's gonna go... No one's gonna see a four and a half trillion dollar market cap, two hundred billion revenue, 50% operating margin company and do anything other than say, "Get me some of that," right? So you're right. He's brilliant and playing out his hand. I mean, the interesting thing is not the perception of leverage that N-NVIDIA has, because the leverage is real and obvious. They allocate the chips. The interesting thing is the leverage that OpenAI has, even though they're losing a shit ton of money, right? Precisely because they haveThe, the users. When you have the users, even if you're burning cash, you know, there's no place you can- NVIDIA can put chips other than to a customer who themselves has enough users to use all those damn chips, right? And therefore the asset, the, the, the stunning thing here is the asset is the, the, you can be sitting there losing money like hand over fist, and still you get credit for committing hundreds of billions of dollars you don't have and can get market cap. You can, you can bestow market cap on your vendors, for God's sake, just because they'll-- you're willing to buy from them simply because the whole world right now believes, rightly or wrongly, that that 12 billion revenue line is gonna get to 200 billion and it's gonna take 100 billion a year in chips to do it, and therefore selling shit to OpenAI is a business so good that you're willing to give up 10% of your company for free for the privilege.

   7. JLJason Lemkin13:34

      Here's the weird thing, 'cause I've actually, in my first startup, I sold components. NVIDIA is selling components at the end of the day. It's a crappy place to be on the stack. You know what everyone does when you're selling components? Everyone's nice to you because they need you, and they bring you into the conference room, and they bring you coffee, and you know what they all say? "Harry, cost plus 20%." That's what-- Now, now you can laugh about that, but when you look at NVIDIA with 50% margins, okay, and you're, and you're buying from them, you can't help but feel that's the number one p- way to, to-- place I'd like to attack if I could. I'm fine if NVIDIA makes 20 cents on a dollar, 15 cents, right? But 50 cents, you're just... I mean, F me. [laughs] Like, if, if there was, if... And there used to be competition in the GPU market, there just isn't today, right? So it is this weird dynamic where normally you'd be beating up on your vendor. Your vendor would have lower margins than the software provider. Here it's highly inverted. It's highly inverted.

   8. RORory O’Driscoll14:28

      To play it out, 'cause I w- I, I thought I was gonna disagree with you, but in the end I'm, I'm in sync. 'Cause what you're saying is this: normally components businesses are hard because everyone understands the cost structure. You typically only have a few customers. It's like selling telco equipment to the telcos. There's only 20 big telcos. They know they have you over a barrel, and therefore those businesses become pretty tough, right? Because you're right, they just calculate-

   9. JLJason Lemkin14:52

      Brutal

   10. RORory O’Driscoll14:52

       ... costs and work back in. Right?

   11. JLJason Lemkin14:53

       Brutal.

   12. RORory O’Driscoll14:54

       But, but two comments. One is the only thing that defeats that is an architectural lock-in where you have a monopoly, and what you're seeing is this is a monopoly competing against an oligopoly and the monop- the monopoly provider being NVIDIA. And as long as they're a monopoly, you know, the buyer from an OpenAI can sit, or Microsoft can sit there and go, "You bastards, you're only paying, you know, $50 a chip to TSMC and you're charging me f- you know, 300. I hate you. I'd like to do it for less." And NVIDIA sits there and go, "Well, we won't." And you've got no other choice.

   13. JLJason Lemkin15:25

       We're s- we will, but we're sold out, Rory. We're sold out.

   14. RORory O’Driscoll15:27

       Yeah. Uh, so, but yeah. I mean, maybe in-

   15. JLJason Lemkin15:29

       Maybe in 2031 we can provide you with some of those chips. [laughs]

   16. RORory O’Driscoll15:32

       I mean, the fun thing about this semi business is, you know, by, I mean it was, uh, about 20 years ago, venture effectively walked away with one or two exceptions from semiconductors, and they were probably correct, right? Because from a startup perspective, it got really hard around 2003, 2004-ish. There's been a few since then. Yeah, and we, we actually, one of my colleagues did the deal, not me, but we are one of the last, Monolithic Power, which was a success about 2007 and '8. Since there's been almost no venture exits in venture land. At the same time, in public land, it's been wildly profitable. You've got NVIDIA, you've got Broadcom, Avago, you've got a bunch of others. So it's-- And it's-- They've basically consolidated, to your point, Jason, so that a- so that the remaining providers have significant leverage. If you're gonna only have six or eight customers, you better be sure you only have none or one competitor, 'cause otherwise it b- Like, for example, memory, for example, which is a chip market where there's three or four competitors, that tends to be wildly cyclical and prices go to shit in the downturn, right? If the GPU market ever turned into the memory market, which I'm not saying it will because of the complexity, then that business looks very sad. And just, you know, just take a look at how Samsung and Micron trade versus how, um, NVIDIA trades. You know, they, they, they h- Everyone left them alone for 30 years and they built a monopoly and now he's, you know, picking up the checks

4. 16:59 – 30:58

   OpenAI's Developer Day Announcements

   1. RORory O’Driscoll16:59

      from it.

   2. HSHarry Stebbings16:59

      So if we progress this forward then to DevDay, which we touched on slightly there, and why don't we start on kind of one of the major announcements was the opening up of apps into ChatGPT, so you can essentially use your Figmas, your Canvas, your Spotifys easily and natively within ChatGPT. I'd love to understand from your perspective. Jason, why don't we start with you? 'Cause, uh, we, we touched on it a little bit beforehand, but you left me with the cliffhanger of we'll save it for the show. Jason, were you impressed by this?

   3. JLJason Lemkin17:28

      I was underwhelmed, um, because... Fir- first of all, let me step back. We, we had Marc Benioff on this show a few weeks back, and I, and I told him this is what I wanted. I wanted to talk to my apps, remember? And Marc at the time was, I mean, we love Marc, right? He was like, "Oh, you don't wanna... That doesn't make sense, and you don't wanna do vibe coding." Now they're doing vibe coding at Dreamforce. The world changes in the four weeks since he's [laughs] been on the show. I'm like, "I want this." I don't wanna log into Salesforce, okay? I wanna go to ChatGPT or Claude and say, "Tell me how Harry and Rory are doing this month." I'm, I just, I, I've literally been a Salesforce customer for 20 years and haven't logged in in a decade, okay? I want my Salesforce in ChatGPT, okay? But I had two thoughts watching this. One, my point is this Canva, Spotify, I didn't see an aha moment. These are my two thoughts. I didn't see magic. I didn't see something that was so great, uh, my jaw dropped and I would copy it. The second thing I thought as B2B guys is, um, this is like Slack 2.0, okay? Slack was our ChatGPT until 20, 24 months ago. Like w- it, this is why Marc Benioff bought it for $27 billion. It was our OS, right? We didn't know how to communicate. We didn't know how to work async, and everyone's in Slack all day long. Even today, we still use it. It's just not like it was, right? It's not our... ChatGPT took a lot of that mind share, and we would be, we'd be sharing in Slack and, and, and every app has a Slack integration. It's actually, now that I, I'm-I don't know, Harry, I don't know if you know I've been vibe coding lately. Have I told you?

   4. RORory O’Driscoll18:50

      I, I didn't know that actually. Please tell me more.

   5. JLJason Lemkin18:52

      And I will tell you of all the things that, that are ea- some stuff is hard to do, some stuff is easy to do. OpenAI is really easy. Uh, Zapier is really easy, but Slack is super easy. It is still the easiest software to like push updates and do and, and, and work, um, bi-directionally. But where are all the apps in Slack? The, the, the connectors are there. How often in j- how often in Slack are you pulling up, are you, are you creating a Spotify playlist or creating a Canva image or, or, uh, pulling, even pulling up a CRM record, which you can do? How often do you do it? I bet never. Do you, do you track deals in Slack? You probably could. So none. So I, so I thought this is great, it's like Slack, but what do we do in Slack? So I was hoping this aha moment where there... What I saw, that Sam would show one or two use cases where my jaw dropped. I'm like, "Holy crap, this is integrating my memory, my data, my learnings." It's, it's combining apps in ways you can't without an API or without a Zap. Like, I just didn't see the, it's, it, the, the great use case, right? And I'm, I'm, I'm hoping it comes 'cause someone's gonna figure it out and build a huge business out of it, but I don't know if there'll be a thousand. [lip smack] Um, I'm also not sure we need another app marketplace for the other side of the announcement. I'm not sure we need the 10th app marketplace. Maybe we do. We'll find out. But, um, that was just my thoughts. I just, nothing, nothing, n- I didn't fall out of my seat for a magic moment, and maybe that's 'cause they built it in eight weeks.

   6. RORory O’Driscoll20:15

      The demos and read the blog posts that they write, which are always so good by the way. Um, but I, I think when you, first of all, when you talk about using apps within ChatGPT, that was one thing and then whilst AgentKit was more about getting ChatGPT functionality into other apps as I understand it. But going first to IM, 'cause it's so important to zoom out for folks. The, so the first use case is I am in ChatGPT and the, the example they use is I wanna... I'm doing something and I wanna do something and I wanna get information from Zillow, right? And I can invoke Zillow or invoke some other apps. There was a l- they had Canva I think is another app. And there I'm in within ChatGPT and I'm talking and I'm saying, you know, um, you know, c-create me something if it's, um, Canva or, you know, get me five houses in this area that have this and this and this, and you're effectively doing, doing s- doing Zillow search in ChatGPT, right? So cute and clever. Uh, we'll see the use cases because sometimes, I mean it's like the classic example you have over and over again of, you know, when, when Facebook Messenger launched, there was the, you know, oh look, you can order a ticket in Facebook Messenger and it's true that you can, but what you discover very quickly is boring though it is to say this next sentence, pick menus with lots of options are actually a better UI for booking a flight than actually just being given one. Because there's a little part of me wants to say, "Do I want to get the 1:10 out of LA or the 3:20? What time does it get in? And you know, what's the, what's the equipment?" So a lot of times all these little, oh, you can do everything and fill in the blank, right? Turned out not to be true. Now, the, it, it, it's, it's not a, how'd you put this? It's still amazing freaking business 'cause it has my m- it has 100% of my mind share when I'm doing any kind of research or thinking. The question is when I'm dr- at what point... I mean, and the second comment is, I think if I'm doing research on houses, the ability to access some Zillow information is really useful, right? And maybe even to manipulate that information. But where the cutoff is between, you know, first of all, what you can access from Zillow just on search. In other words, if it's just very data-driven, you know, OpenAI already has a search f-f-feature which you can get that information. If it's a little more manipulative in the sense of you're gonna, you wanna access Zillow and you wanna search on within Zillow, right? Like find me all houses in the Burlingame area under $2 million near a good school district. The answer's zero, but we can pretend. Um, that would be a thing you couldn't do in ChatGPT calling Zillow externally. So you do have... I can see a use case there getting access to Zillow for that. But once you go two or three steps beyond it, I think very quickly you'll find, uh, you know, I'm buying a house, to hell with it, I can just go over to Zillow and do my work, right? So it's not clear, uh, kinda, and it's another way of saying Jason's point. It's not clear... You'll wanna do something in this, but it's not clear how much. And if you wanna v- and you know, we could be wrong and this is a better implementation than the last two, but on the last two, if you look at the kind of very, what's the word, wide-eyed, excited comments day one on the, you know, custom GPTs and the GPTs or whatever it was two years ago, like the world h- there's a whole bunch of the world has changed comments and they turned out not to be true, true. I mean, the world has changed 'cause ChatGPT in and of itself is amazing, not clear, and they probably will extract more of your quote unquote time in, in ChatGPT leveraging these apps, but I don't think it's gonna be to the death of apps entirely. Does that make sense? J- you look like you're critical there, Harry. No, I totally get it. I completely understand and, and I agree with you where it's like, hey, it probably removes 20% of like superficial one quick response answers.

   7. JLJason Lemkin23:58

      Yeah.

   8. RORory O’Driscoll23:58

      And then everything else you actually just go to Spotify to see the playlist 'cause you want to engage with it in the gym and you don't just wanna see it in ChatGPT. So I, I totally get you there. My question was, especially around AgentKit, which you mentioned, which is, you know, the ability for people to build pretty good quality agents very, very quickly. They did it in eight minutes in a demo. Um, does that kill a litany of companies like your N8Ns who, who promise the same in terms of customer delivery?

   9. JLJason Lemkin24:25

      That's a harder one to assess. I don't know because... Y- 'cause it, 'cause it's harder to assess that on the basis of an eight-minute demo. I, I think I can envisage w- The kind of agents you're gonna be building for enterprises probably are gonna require a lot of orchestration, a lot of management. There's a lot of product surface area

   10. RORory O’Driscoll24:50

       That a software company just focused on that has to do-- If it's a trivial problem and, you know, and it's easily integrated with OpenAI, maybe they do kill some of these companies. But my guess is there's more complexity involved, and, you know, over the next two years, will OpenAI spend the time on that because they got bigger fish to fry? Or will they just make it easy to connect and move on?

   11. HSHarry Stebbings25:11

       I think the thing that worries me, I, I do wanna make sure we move away just from OpenAI, because the thing that worries me is I saw these crazy rounds, and two that stood out to me. Naveen Rao, who was VP of AI at Databricks, yeah, raising a billion at five billion pre.

   12. RORory O’Driscoll25:28

       Right.

   13. JLJason Lemkin25:29

       Yeah.

   14. HSHarry Stebbings25:30

       Does this just break venture, though? Like a billion at five billion. For me to get a 10 X, it needs to be a hundred billion dollar company with dilution.

   15. RORory O’Driscoll25:39

       No, I mean fifty bill- Well, with dilution. Okay. I, I was worried you were unclear on 10 X math, Harry. That was a bad moment. So-

   16. HSHarry Stebbings25:44

       No, no, no, no, no. I, I was accounting for dilution, thinking 50% given the stage and the company style be 50%. Does this just break venture math?

   17. RORory O’Driscoll25:54

       These deals are unusual. I mean, if you think about what, what kind of deals get this, and it's, it's like, you know, most early-stage startups, definitely consumer, definitely I believe in apps in particular, are a little bit voyages of discovery. You don't know if the market's there. You're trying to get product market fit. It's not, quote... Does... It doesn't ma- Even if the executive, the CEO, is really good, you're not just gonna... You, you don't get that automatic right to win. Where you do get it is in, in these hard infrastructure markets, the number of people who can credibly say, "I can solve this level of technical problem that we're now facing," is much smaller, right? So you do have that kind of star effect in raising. I mean, you're seeing it in thinking machines, you saw it in safe super intelligence, and you're seeing the same kind of thing there. The number of proven people who have the magic in this space is low, and we should add that Naveen has successfully built two companies, one of them broadly interesting, a har- from my recollection, a hardware company back in the day that was sold to Intel. And then the second one obviously was sold to Databricks, another clever infrastructure company around LLM. So this is someone who has twice built a successful deep tech company in precisely the hottest space on the planet today, knows everyone, has a proven record of success. I can totally see why, you know, he gets that money because you can-- what you can do is you can stipulate he'll probably pick the right problem, and he'll probably get, uh, the answer right. So really you've kind of compressed a bunch of the venture questions, and then you only... You're right. You're only left with the third one, which is does it make economic sense? In other words, if he picks the right problem, if he solves that problem, is the market big enough to justify, as you say, at least a fifty billion outcome from your, what is it, five billion, whatever it was, pre-money? And the answer is clearly right now people believe these infrastructure markets are having those kind of outcomes. We'll see if there's room for everyone. I, at the margin, may be skeptical, but I can totally see each step of the logic train that gets you there. Proven person, hard problem. Hard problems are getting rewarded. Would I prefer to back him versus two comp sci graduates out of a really good school who might figure it out? A priori, hell yes, I'd prefer to back him. Now, once the two c-comp sci graduates actually get the work done, you can go, "Ooh, that might be a far more attractive bet," and that's most of what we would do, right? But I can totally see, you know, the proven person saying, "You can deploy capital at scale with me." Remember, especially for these bigger funds, I'm a s- you know, "You can deploy capital at scale with me. I'll probably solve the problem. I'll probably pick the right problem. You'll be in a good deal." So I can totally see how it happens. I, I can totally see why, especially folks who've backed him before, where they know they have the relationship. I think Lux, give them credit, I think have backed him twice. They've... If you'd backed someone twice in a row to build complex technical problems, and one took a long time and you showed grit, and then the second one took a short time and you made them a ton of money, [chuckles] when he comes in to you offers the third time, believe me, he gets a nice coffee and a nice seat, and you're like, "What do you need?" Totally. I mean, I, I can totally see how this happened. It's, it's probably quick decisions in all those founder meetings.

   18. JLJason Lemkin28:58

       You know, I think some of it, I had two thoughts. One is it is a confidence game. Venture has changed, to Harry's point, was the question, right? One, if you're Naveen, you're at Databricks, you've seen $100 billion and more going up, right? So five to 100 seems plausible. It's hard as... Listen, I'm, I'm not as great a founder as any of these guys are, but, but back in the day when I met Rory, it was really hard to see north of a billion dollar outcome for a lot of these startups. It was just hard to see it. And so my whole life, and the reason I sold was I... It was probability. It's like, "Wow, man, I own 30%, but if I get to IPO, a bill, like it's just... I can't even make more money." Like, like you couldn't see it, right? And then quickly you could see 10 billion, right? And now it's very easy if you, if you are a Databricks alum to see 100 billion or more, 'cause you were just there l-last week. You just saw how... And that round wasn't hard to close, was it? I mean, everyone and their, and their uncle and aunt wanted to get in at 100 billion. So it's bec- all become... Venture's always been a game, but for founders, man, it's a s-super game today, right? It is nothing but... I mean, walk out of YC Demo Day, and as an investor, you feel gamed. Um, so if, if the game's 100 billion and you've already played it once, going to Rory's point, like, like when you start off as a VC, it really helps if you have a few hits in your first few deals [chuckles] because then you have the confidence. I would have... I wouldn't have the confidence to raise at five billion in my seed round, but if I was [chuckles] the CTO of Databricks, I probably would, right? Um, that was my one thought. My other thought on the other end of the spectrum, I was reading this, I guess this was, um... And someone on LinkedIn had just brought up the fact that Balderton bought d- led the seed round in Revolut, two million at eight post. Two million at eight post, and then led the A on top of it, right? That they may have one of the top three venture funds, top five of all time, uh, which, you know, for at least for this show is interesting. Two on eight versus [laughs] this deal. I mean, you ask if venture's changed. I know those deals are sort of still out there, but man, those aren't even, those aren't even, uh, in the same, uh, uh, genus. How does it go? Species? Genus? What's above a genus?

   19. RORory O’Driscoll30:57

       Genus. Yeah, yeah.

   20. JLJason Lemkin30:57

       What's above that?

5. 30:58 – 42:29

   Why VC is the Most Forgiving Asset Class on Price and Valuation

   1. JLJason Lemkin30:58

      [laughs]

   2. HSHarry Stebbings30:58

      So, so I, I t- I just interviewed Ma- Mike Cannon-Brookes from Atlassian.

   3. JLJason Lemkin31:02

      Yeah.

   4. HSHarry Stebbings31:02

      And he said, "Listen, the trouble, the trouble is there'll be a load of shit that will lose money, but there will still be some Amazons in this. AI-... wave. Yes, but Amazon was priced as Amazon was, and that generated Amazon-level-

   5. JLJason Lemkin31:15

      Correct

   6. HSHarry Stebbings31:15

      ... returns. These are not priced in any universe of Amazon-level returns. And so actually, even if you have Amazon-level plus, plus, plus outcomes, they're still not venture star returns.

   7. JLJason Lemkin31:28

      Well, it might- the IRR could be tolerable if you put enough money to work, right? Put a, put a, put half million, half billion into the round.

   8. HSHarry Stebbings31:34

      If your time to value is much quicker, then sure.

   9. JLJason Lemkin31:37

      Yeah.

   10. RORory O’Driscoll31:38

       Yes. I mean, let's state the banal. A lot more has to go right. W-watch this, watch this then so you can laugh.

   11. JLJason Lemkin31:44

       A lot more.

   12. RORory O’Driscoll31:44

       A $5 billion pre then an eight post, right? [laughs] Exact- exactly. Did I really say that and think I'm gonna get value from that? But yeah, no, totally. Look, it's, you know, give a bunch of examples. I mean, you look at what the Stripe seed round that Elad and others did was dirt cheap. The Airbnb round that Sequoia did was compellingly cheap. You know, I look back and we have very successful '09 and 2013, '14 funds, and you can see it when I'm talking to the younger partners. The thing in their eyes is, "Dude, you were able to buy so cheap, even a moron like you could make money," right? "You should try making money today, big guy," right? And, you know, entry price has an impact. It's not the only thing. The wonderful thing about venture is, this is a positive comment, it is the most forgiving equity business of getting the price wrong. Let me tell you what I mean by that. PE, if you get the price wrong, there are low variance assets. If you overpay by 50%, you're toast, 'cause they're 3X assets and they're not gonna ever be 7X, right? Your degrees of freedom as well. Same thing in the public markets, right? The great thing about venture, it has maximum variance, which means that it is the most forgiving of getting the price wrong because you can get... because you have exponential growth on your side. Now, I think we all rely on that, and then sometimes we rely on it too much, and we find that just 'cause you're maximally forgiving on overpaying doesn't mean you're entirely forgiving on overpaying. And to your point, Harry, you, you can push a theory to destruction. And you know, what you're saying is, if you pay for everything where you've got a 5X return if you do something wildly amazing, and only one in three of the companies or one in five of the companies does something wildly amazing, 'cause that's just the way wildly amazing runs in this world, you don't have much of a return. And that, that's a fair comment.

   13. HSHarry Stebbings33:28

       I think it's another clear example, though, of the Alex Wang, um, changing venture mindsets on entry price acceptance because we all go, "Well, if Alex is worth fourteen point eight, Jesus, Ilya's worth 30 in Mirror," and it justifies these prices on the acquisition of a talent.

   14. RORory O’Driscoll33:48

       That's why whenever anyone uses comps to discuss what we should pay for a deal, I wanna bludgeon them to death. Because the problem with comps is they tell you what an as- what company A is worth relative to what company B and C is worth today, right? In the public markets and the private too. You know exactly what... If Scale AI is worth 14, and then you're like that, you're worth 15, so you can pay 15. And it's a logical way for a banker to relatively rank things today. But it turns out, as investors, we're trying to answer a slightly different question is, which is what are they gonna be worth in seven years, right? And the problem with comps is if you use the comps, you would buy in 2021 a whole bunch of assets that were only priced at 50 times revenue 'cause the other shit was priced at 80, and you're getting a good deal, right? And that turns out to be a very bad way to invest. So you're right, you can't rely on nearest neighbor comps type analysis to do investing. And we all do to some extent because it's easy to be a comparison shopper. But you're exactly right, Harry, is that you have to have a view that says not only is Scale AI worth 14 today, to take your example, but that you believe on a sustaining basis that companies who are doing five, six, 700 million in this kind of business can trade at 20 times revenues over an extended period of time that includes the next decade. That's a lot harder story to believe.

   15. JLJason Lemkin35:05

       Slight variant question on here is, um, let's assume you can... y- your LPs will support you, like you can do these deals, right? Like, like, like this deal. Um, th- there's only-- You've got to deploy the capital, and maybe you're trying-- Let's assume you have access to a lot of capital like Andreessen or, or others, right? H- how fast are people trying to deploy these funds? Eighteen months or something like that, right? How many candidates are there like, like these? How many of these generational founders, e- even if you have to hold your nose when you make the investment, even if you have to hope and pray, even if r- you see Rory's math, it's like, God, like 80% of these have to work out for the math to work. You do have to dep... There always is pressure. For 90% of VCs, there's pressure to deploy it, right?

   16. HSHarry Stebbings35:48

       Le- le- le- let's actually take that drill down because I think that's really important, which is that, you know, let's look at Andreessen's new fund. You know, six billion now expanded to seven and a half, uh, reportedly. Um, seven and a half billion. Say you're putting in $300 million, $400 million of this billion raise.

   17. RORory O’Driscoll36:05

       Yep.

   18. HSHarry Stebbings36:05

       How many of these... Gosh, you've got to find 15 of these in, let's say, a two-year period.

   19. RORory O’Driscoll36:09

       Twenty, but that's okay. Depend-- Yeah, 300 times twenty is six billion. Keep, keep rolling.

   20. JLJason Lemkin36:14

       You gotta find, you gotta find them, right?

   21. HSHarry Stebbings36:17

       You got fees, my friend.

   22. RORory O’Driscoll36:18

       And reserves. Okay. I agree. Fifteen to twenty.

   23. JLJason Lemkin36:21

       How many are there, right? Not to keep going here.

   24. RORory O’Driscoll36:23

       Yeah.

   25. HSHarry Stebbings36:23

       Yeah.

   26. JLJason Lemkin36:23

       How many of these candidates are there out there?

   27. HSHarry Stebbings36:25

       Is that eight a year? 'Cause that's kind of the... seven and a half a year to... If I'm being really precise, Rory, we can cut Naveen in half-

   28. RORory O’Driscoll36:32

       Yeah

   29. HSHarry Stebbings36:32

       ... and then you have seven and a half. Um, yeah.

   30. RORory O’Driscoll36:36

       Y- yes, but you've also got to say... I mean, look, we're all Pavlovian. Yeah, we do the things that feel good. Once they start feeling good, you keep doing until something hurts, right? And you know, based on... I saw the nuke of the leaked Andreessen numbers, you gotta say they're excellent. They've earned the right to throw seven billion on the table and, you know, the truth is we're, we're human, we'll just keep doing this until Mr. Market delivers a sad lesson that says you've overreached, and so far that hasn't happened.
6. 42:29 – 58:02

   What Does it Take to IPO in 2025: Why Snyk Will Not IPO

   1. HSHarry Stebbings42:29

      People should just IPO, right, Rory? Yeah?

   2. RORory O’Driscoll42:32

      They, they probably should.

   3. HSHarry Stebbings42:34

      And then, and then you, and then you've got a company like Snyk, which has slowed down growth to now twenty-six percent. I think it's about $300 million in ARR. It's down from 150% in 2022, so a big growth hit.

   4. RORory O’Driscoll42:50

      Yeah. First of all, I, I would actually go with the more conventional English, has slowed down rather than has slowen down. I just... It's sticking with the Queen's English.

   5. JLJason Lemkin42:56

      We'd be slowen down.

   6. RORory O’Driscoll42:58

      It's, it's slowen down.

   7. JLJason Lemkin42:59

      In Ireland, I think.

   8. RORory O’Driscoll43:00

      Um, but, um, that was just me being me and Harry. Sorry. You know I have to do it once per show. Um, yeah-

   9. HSHarry Stebbings43:05

      Dude, you've corrected me on every fucking sentence. [laughs]

   10. JLJason Lemkin43:09

       Hold on. Harry may have this weird accent, but he's one of the most well-spoken people I know.

   11. RORory O’Driscoll43:13

       Yes, he is. He's wonderful.

   12. HSHarry Stebbings43:15

       Every, every man-

   13. JLJason Lemkin43:16

       He's pretty good. Harry's pretty precise

   14. HSHarry Stebbings43:17

       ... which I put right.

   15. RORory O’Driscoll43:18

       Okay. You're all good. I'm-

   16. JLJason Lemkin43:19

       I'm full of malpropism in every paragraph, and Harry just nails it in every question.

   17. RORory O’Driscoll43:22

       Yes.

   18. JLJason Lemkin43:22

       I don't know how he does it.

   19. RORory O’Driscoll43:23

       It's all good.

   20. HSHarry Stebbings43:24

       Unbelievable, dude.

   21. RORory O’Driscoll43:24

       I was just, I, I was just being snark. Uh, let's, let's talk about Snyk.

   22. HSHarry Stebbings43:27

       I, I think he just likes beating me up. Um-

   23. RORory O’Driscoll43:29

       Yeah. I, I will admit, you can truncate almost... You can ca- calibrate everything by coffee consumption before a show, and this is a three-coffee day, so it's just gonna be tough. I'm sorry about that. Normally a one-coffee day, it's easy, but I got a lot going on. So sorry about that. So what are you saying about Snyk? Let's go back to the t- task at hand.At 26%

   24. HSHarry Stebbings43:49

       What, what I'm saying about Snyk is like, hey, has growth slowed down to the extent that they are now no longer able to IPO? Because there are rumors now, and this was the news, growth down to 26%, revenues at 300, PE buyers circling, and PE is the option. Are they at a stage now where they're looking for a PE buyer and IPO's off the table?

   25. RORory O’Driscoll44:08

       I mean, the interesting thing is 300 and tw- ARR and 26% is about the low bar. We were just looking at this now. There's been 15 IPOs year to date, and the median IPO this year was a stunning, get ready for this, $931 million revenue run rate. 931. So the median blew me away, right? And the cutoff, there was a couple of 2 or 300, right? Growing at around 30%. So the first comment just to put it out there is it's not like they're miles away from it, if that's, if those are in fact the numbers. But yeah, it's just below... If it's just below that line, then yes, you've only, you've got to do... There's, there's three routes, and we discussed one of them last time. You either, you have PE, you have, you have, if you're lucky, a strategic buyer. But if you're not in the AI world, I don't think people are buying strategic stuff at this point, or you have to consolidate like dbt and Fivetrans to get to scale.

   26. HSHarry Stebbings45:02

       And what price does that go for? They raised it 7.2 last time.

   27. RORory O’Driscoll45:06

       I mean, that's the, the tough thing because, um, PE buyers are six to eight, you know, plus or minus. So you multiply 300 by eight and you just end up with a different number.

   28. JLJason Lemkin45:17

       I'd say in the twos based on j- I'm using Netskope as a rough comp.

   29. RORory O’Driscoll45:21

       Yeah.

   30. JLJason Lemkin45:21

       Right. Netskope's at eight. It was at 700 million growing 33% at IPO. So this is 300 million growing 25%. I, I'm just, I'm using the roughest VC math, but if that's worth eight, this is worth in the mid twos?
7. 58:02 – 1:04:59

   Vercel Raises $300M at $9BN: Suicide Round or Strategic

   1. HSHarry Stebbings58:02

      Speaking of those moments where you go, "Wow, you know, well done. I'm in a great company," there are a couple of like standout raises that I wanted to talk about. One is Vercel raising three hundred million at nine point three billion dollars. Jason again highlighted this. Announced pretty quickly after the post from Guillermo, the founder, which we're not getting into because we don't do politics, but the timing's interesting to bring up. One, I want to hear your thoughts on the timing. And then two, I've heard these described before as suicide rounds, but just because it's like a super high price with actually not such a huge amount going in, three hundred million. And so it sets a huge expectation with not massive capital injection. How do we feel about those two, the timing and the suicide round status?

   2. JLJason Lemkin58:51

      The suicide one is an interesting one. The, the, the Vercel thing, I don't claim to be a total expert, but I am two hundred hours into my vibe coding journey. I think Vercel and Supabase are actually tied in a sense, which is that these are not the most, uh, uh, uh, profound bets that the world of software development has completely changed. That everyone that's gonna build a web app going forward is going to build on Supabase. It's, it is the default choice to how to, how to, how to host and manage Postgres in this world. And when folks want to host apps live, right, they're gonna use Vercel. It's super easy to use. People do love Vercel. Uh, and you've gotta, you've gotta host this app and you need a database. Like, these are two structural components. And that the number of apps is also exploding, which it is. So if this is the future of hosting management database and it's exploding, you got... These are good bets to make. These are the leaders. These are two leaders. Um, y-you could debate the valuation, whether it's a suicide round, but I think in terms of valuation aside, these are actually Captain Obvious bets. I think they're both Captain Obvious bets because this is where developers are going. Like, that's how you make money. I mean, Michael Cannon-Brookes would probably iterate that from a few years back. Like, follow where the developers are going [laughs] . If you become the leader, bet there you're gonna make money because those markets are pretty, pretty damn large if they're growing. Um, beyond the suicide round, I think these are, these are good bets. Just Vercel is at nine billion. It's still a lot of money. Hopefully, you have more than one of those bets at nine billion, to, to Rory's point.

   3. RORory O’Driscoll1:00:20

      First of all, I agree, Jason, what you're saying. It's... I was talking to one of my partners yesterday, we were just talking about it, and we're just saying, you know, the more you do this, the more you just say to yourself, you just need to do big, exciting deals in trends that are absolutely obvious. And every time you try and make it harder than that, you just, you lose money, right? And both of these things are exactly right. They are on trend, Captain Obvious for the, there is a bigger... Th-th-there is a new wave of people building apps, and these are two parts of the infrastructure that people will use to build those apps. Both of these companies, you know, have done a brilliant job, who, who were pre, just as a reminder, Vercel and, um, Supabase were, are infrastructure components, for lack of a better word, that existed pre-OpenAI, pre the AI trend, pre-vibe coding, but just have inserted themselves into relevance as kind of components to build, you know, these next generation of apps, and are just riding the train, right? And, you know, riding the wave, sorry, for lack of a b-b-better description. And because of that, they just have momentum, they have growth on their side. And yes, the price might have doubled in, you know, six or so months. It may also be the company doubled in six months. So the revenue multiple's the same, which is actually a super interesting discussion. What you're effectively saying is normally you figure you start with high revenue multiples because by definition, your revenue multiple is infinity on the seed round, and your multiple is six X when you get a thirty percent growth, and your idea is your, your revenue multiple is coming down as the rounds go up.But what you're seeing in some of these AI companies is people are effectively saying, you know, when they were doing $100 million, I paid 20 times or 50 times. When they're doing a billion, I'm gonna pay 20 or 50 times because the growth is still the same, right? And it's logically correct. I mean, there was a market size question jumping at the end of it. But from a growth rate perspective, I'm willing to bet that you look at those two rounds and they're not, you know, wildly different.

   4. HSHarry Stebbings1:02:19

      Is that logical? Because actually it depends where you intersect with it on the growth curve.

   5. RORory O’Driscoll1:02:24

      It does.

   6. HSHarry Stebbings1:02:24

      It's like you, you can have the same growth rate, but actually you only believe they've got 20% left of the market to go, right?

   7. RORory O’Driscoll1:02:31

      Totally agree. That, that's why I said... Actually, you just, uh, you, you, you said it correctly, Harry, and you're agreeing with me exactly, is the odd thing about... And, you know, it applies even to Anthropic. The growth rate's remaining the same, and normally you expect growth rates to decline, so you can have this mental model, and we talked about growth persistence, but they're not declining here. So when you do these rounds at the same multiple, but with an order of magnitude more in the valuation, the thing that can go wrong is you hit a market size wall or some kind of wall, and they deaccelerate rapidly, and then you're wildly wrong at scale, right? That's the risk. If the Vercel market or Supabase market is finite and can't support a $10 or $20 billion valuation, even if you have 100% share of vibe coding, then you could see very abrupt valuation changes. So, and I'm not discounting that. I'm simply saying, I know how they get to doing the same nu- you know, these quick rounds because the underlying growth's so quick. You know, we've been looking at some markets where we've seen two and maybe even three rounds within the year, and part of me goes, "That's crazy," and part of me then goes, "Hmm, the B was at the same multiple as the A. Maybe, Rory, you need to update your priors to the world as we see it now and accept that, you know, if you're getting this growth rate, if you're getting the growth rate, y- and these growth rates are..." And I, I really... Jason, you called, um, the discussion a while back it well beyond, you know, a triple, triple, double, double, double. Maybe you can lean in and maybe it does make sense to have these rounds. So I'm not in the o- uh, so not, not what we d- but I definitely wouldn't call them suicide rounds, Harry, because the h- because the g- either growth might justify. And B, um, y- the other part of what you said is, are they raising enough? Yeah, they are. Because if you think about it, take Supabase when they did two rounds. Someone, smart dudes at Excel, looked at the 2 billion and said, "You need, whatever, $300 million." And then six months later, they pick up another 100. They still have the 300. So it's n- yeah, it's only a suicide round if two things happen. One, you deaccelerate quickly, and two, you start losing money such that you're forced back into the market in the next period of time be- a- a- where you would have to take a down round. So I don't think it's wildly, outrageously, stupidly risky. I mean, if you want to talk about risk, there's a lot riskier things going on in infrastructure land than, you know, Vercel raising a $300 million at $900 billion. I don't think that will be the problem that brings the whole thing to its knees.

8. 1:04:59 – 1:18:49

   Does King Making Really Work in Venture Capital: Legora vs Harvey

   1. HSHarry Stebbings1:04:59

      An interesting thing for me is like this is like, uh, one lesson for me is king making, which is like when you obviously-

   2. RORory O’Driscoll1:05:05

      Yeah

   3. HSHarry Stebbings1:05:05

      ... have very quick rounds and a lot of money going into categories does absolutely exist in this space.

   4. RORory O’Driscoll1:05:11

      Yes, it does.

   5. HSHarry Stebbings1:05:12

      But it doesn't in large enough categories is what I'm seeing. And what I mean by that is in law, for example, there are many who have got a lot of funding and a lot of traction. Same in healthcare, same in customer service, same in coding. But then as you go smaller markets, king making really becomes more prevalent. And the smaller the TAM, the more prominent the king maker ability is.

   6. RORory O’Driscoll1:05:37

      I'm not sure I buy that at all, right? I think it's-

   7. HSHarry Stebbings1:05:40

      It-

   8. RORory O’Driscoll1:05:41

      I mean, sure. I think it's obviously easier to be a king maker in a small market because it takes less money [chuckles] and more people have small money than big money, right? You know, it's, it's, it's the Julius Caesar quote, "I'd rather be first in a village than second in Rome," which indicated he was a psychopath, by the way, but we can come back to that. But I disagree because I think king making is going on in the biggest markets. I think to some extent everything OpenAI done has been both brilliant technically and financial king making, right? I think in many of the markets you raise-

   9. HSHarry Stebbings1:06:12

      Well, just put pa-pause on that. What do you mean by that? They have not been like king made, so to speak. They have many competitors, and it's, it's by no means a monopoly.

   10. RORory O’Driscoll1:06:23

       I think it's a duopoly. Uh, uh, okay, so controversial. Co- Yes. I think their capital strategy has been to the point where it's gonna be very har... I think it's going to be very hard for anyone else to attract that kind of capital. I mean, you know, if you take someone like X. I mean, if they really do need $100 billion and they've locked it up, I can't remember how much X has already owned, but there's a lot more to be ways to do that. So I think that is a king making strategy, right? I think you mentioned Le- Law-

   11. HSHarry Stebbings1:06:50

       And you don't think, and you don't think, you don't think that Anthropic could and Groq couldn't?

   12. RORory O’Driscoll1:06:53

       I think it falls away very quickly. I don't think it's a monopoly, but I think it's definitely an oligopoly, to be clear. So I think that, yes, th- the number two, Anthropic clearly can. It's a differentiated number two with an overlapping but, um, strategy, but not, you know, one is winning in consumer, one is winning business. But I think, do I think all of the other recent very high-profile startups are gonna be able to attract the kind of capital it takes? No, I don't, because there's not that much capital out there. So that's an example I would say of the largest market king making.

   13. JLJason Lemkin1:07:22

       There is so much more capital in venture, but it's so stratified, right, into 20, however we define it, 20 companies, 50, 100. We could go down a, a, a lot, uh. But, um, you know, it's one thing back in the day when you would king make with a $20 million round or a $50 million round, right? Or king make very late stage, very late stage with 100. But now you really c- even though there's more venture than imaginable, you, you really can exhaust the capital in a category, um, the nine figures or more. How many of these categories can support $200, $300, $400 million rounds? If it is capital intensive, it's tough to compete. It is tough to compete. Um, I mean, I mean, it's crazy. I mean, if, uh, Base44 has 10% of the vibe coding market, right, as part of, uh, Wix, if that's accurate, it's crazy. But where would they have afforded those tokens?I mean, if Replit and Lovable are, are losing [laughs] money, where, where, where would, where would this poor guy in Israel with eight developers get 50 million of tokens? Like I don't know. I mean, there is kingmaking happening here, right?

   14. RORory O’Driscoll1:08:20

       I've been thinking about it too, and I'm actually gonna change some of what I said, Jason. Actually listening to what you said, I, I think I, I don't like the word kingmaking, I- I've decided. 'Cause I think what's... 'Cause it, it, it imputes way too much value to venture, right? Like as if we're making the difference. And I think there's often l- mild versions of that. You know, uh, you, you see something where, "Oh, my God, Sequoia led this round." Maybe people back off the other competitors. But in general, the entrepreneur is the king, and the entrepreneur makes the good company. Hang on, right? And then with so much capital available, they can get into this virtuous circle of getting the prestige names, prestige amount, and significant amounts of capital, right? That help build barriers to entry and deter invaders. So, but ke- but the fundamental act of creation that allows that to happen is the entrepreneur and the revenue success.

   15. HSHarry Stebbings1:09:11

       But that's just not true.

   16. RORory O’Driscoll1:09:12

       Yes.

   17. HSHarry Stebbings1:09:12

       I'm sorry.

   18. RORory O’Driscoll1:09:13

       Go on.

   19. HSHarry Stebbings1:09:13

       I mean it in the nicest way. Like A, the cash enables that execution.

   20. RORory O’Driscoll1:09:17

       Yes.

   21. HSHarry Stebbings1:09:17

       So, and the execution wouldn't happen without cash. And then two, what you've seen is kingmaking pre-revenue, which is companies that are at three, four, five million dollars in revenue, which is great, but bluntly not a huge scale, getting $50 to $200 million successive rounds on the back of a tier one with an Iconic or you name your multi-stage fund coming in very quickly afterwards. And at that point, it actually is the venture investor that is doing-

   22. RORory O’Driscoll1:09:44

       Uh, first of all, I agree what you're describing as a phenomenon. You know, we've seen it in a bunch of markets. We've looked at those markets. We've st- struggled to find a way to compete in those markets and figure out what to do, can we really do it, right?

   23. HSHarry Stebbings1:09:55

       But this is my point, and everyone knows them and goes, "Oh, fuck, we don't wanna go in after, you know, Sequoia and Iconic-

   24. RORory O’Driscoll1:10:00

       Yeah

   25. HSHarry Stebbings1:10:01

       ... into a company that competes with a Relit of the world."

   26. RORory O’Driscoll1:10:04

       That's exact- B- but I think that going back to kingmaking, I think in every one of those cases, I just... A- and it, we, we may just be arguing semantics, but it's an important comment. You start with the company doing an excellent job. You know, they build a good product. You're right, they get to $2 or $3 million in revenue. In other words, the, the moment of gestation is the company doing a really great job and having a small early lead, right? And then you're right, the wall of money allows you to build on that lead and defend it. The brand name firm allows you to raise a follow-on round very quickly. Arguably, the growth allows you to do it. So there is this self-reinforcing thing going on. I think we're describing the same phenomenon. I just wouldn't call it kingmaking.

   27. HSHarry Stebbings1:10:46

       We are, I'm just, I'm just saying it's earlier and earlier 'cause I don't even think-

   28. RORory O’Driscoll1:10:49

       Agreed

   29. HSHarry Stebbings1:10:50

       ... you know. In, in some cases it, i- in some cases literally, Rory, it is pre-execution. Its founder has unique insight on, uh, GTM, on a product insight, on you name it, and that is enough to catalyze the fire.

   30. RORory O’Driscoll1:11:04

       Yes. A- and but in most cases, I think you'd agree, you described more correctly, it's a couple million dollars in run wa- revenue with prestige customers, a strong founder growing quickly, raises... has done one seed, raises a good A from a top-tier firm, gets a B six weeks later. Now you got perceived momentum. And yeah, we struggle with those, and frankly both struggle to know should we compete, and then secondly struggle to compete because once you have the top-tier firm, you get a whole bunch of people willing to pay up.
9. 1:18:49 – 1:21:58

   Chamath Raises Latest SPAC: SPACs are Back

   1. JLJason Lemkin1:18:49

      out there today.

   2. HSHarry Stebbings1:18:49

      Chaps, is there any other topics before we do a quick fire that you would like to cover or think we should cover?

   3. RORory O’Driscoll1:18:58

      Oh, okay. Um, I'm just gonna say it here. I, um, Chamath's terms are almost legit [laughs] . And there you go. It's like the new SPAC... I mean, I will say the new SPAC terms, the SPACs, which were a, a, an alternative mechanism for going public in two thousand and twenty-one. They've been around for a long time, but exploded in two thousand and twenty-one. Um, subsequent return of those investments was miserable, and it became obvious that one, if not the only, but one of the primary reasons for that was the incentives between the person sponsoring the SPAC and the investors in the SPAC were, were misaligned, and the sponsor made money simply by getting a deal done. It's like a venture capitalist getting paid your 20% just for investing money in the ground, and, um, turns out that if you do that, money gets invested, and now the terms are still not cheap, but you only make it if the stock... if you make it, there's the 50% appro... u- um, uptick on your stock. So it is a more rational structure. I still think there's issues with it around incentives, uncertainty. I still am skeptical it'll be an amazing replacement to IPOs, but it definitely is less egregious and less misaligned than the last time.

   4. HSHarry Stebbings1:20:17

      Does it prevent Cha- from- Chamath from having the ability to pump and dump like he is accused of doing?

   5. RORory O’Driscoll1:20:23

      That's nothing to do with that. It doesn't... No, you used the wrong word. Prevent is about... Well, I'm just gonna process it. Prevent, there's two words used, pump and then dump. Pump is an interesting... In the context of SPACs, the whole thing about SPACs is entirely separately, the SEC has really tight laws about what you can say about an IPO, really, really tight, and you can't make any future leading statements at all. But bizarrely enough, SPACs are exempt from that, so you're allowed, because it's a merger, so you're allowed, um, from a legal perspective, so you're allowed s- articulate any future leading story you like. So anyone, let's not pick on poor Chamath, uh, anyone can pump all they want. 'Cause you could... I mean, it's such a weird difference. You have one company going public in an S-1, and you can say nothing about the future, and then you have the other one going public in a SPAC where you can say, "It's gonna be fricking amazing. The next 10 years are gonna be enormous. I'm tweeting like crazy." So the pumping takes place 'cause of the regulatory thing, but you're right. The dumping, here now you can still dump, but at least you have to get the stock up before you can dump it. Before, literally, you had the odd circumstances. The investor could come in at 10, the stock could go to five, but the p- the sponsor got their stocks at a penny, so even at five they could dump, and the investors lost half their money, and the sponsors made money. That's not a thing anymore. Now, the investor comes in at 10. Until the stock gets to 15, the sponsor gets nothing, but once that gets to 15, they get a 30% promote. So it's not cheap, but it's a little better than before. This probably makes SPAC a marginally more attractive competitor to the IPO, but I still think a well-run IPO beats it by a head.

10. 1:21:58 – 1:26:34

    Polymarket Raises $2BN at a $9BN Valuation

    1. JLJason Lemkin1:21:58

       Can I just add, uh, no, for one last, the crazy deals like, like this, the SPAC, the SPACs, the, the, the reason-

    2. RORory O’Driscoll1:22:03

       Yeah

    3. JLJason Lemkin1:22:03

       ... it comes up as SPACs are back, right? It's, it's, it's really a sign of the times. We're running out of time. Related to that, good God, um, you know, the New York Stock Exchange invest $2 billion in Polymarket, which was essentially illegal, illegal last year. It was essentially illegal, and the Biden administration [laughs] decided this was gambling, offshore gambling, and was gonna, as I understand it, was gonna shut down Polymarket. Trump... And listen, no politics here, okay? But it is interesting.

    4. RORory O’Driscoll1:22:30

       No, okay.

    5. JLJason Lemkin1:22:30

       The world changed. Trump comes in, his son joins the board and invests in the company. David Sacks, who I am a fan of as a SaaS founder, we go back, um, uh, trying to remove all the regulations from crypto and all this, and now you go from something that was essentially illegal, illegal last year in the US, to now something that Trump, [laughs] Trump Jr. owns a significant share of, and now the New York Stock Exchange is investing 2 billion at a $9 billion valuation. I mean, if that isn't a sign, like SPAC's coming back, if that isn't a sign of the times, a sign [laughs] that is such a change, forget about it. I mean, AI isn't the only thing in the world. Just removing all this regulation, and now that Polymarket's on the inside and the New York Stock Exchange is investing, to me, that's quietly the, the craziest story, uh, a- and the, the, the, the legitimized self-dealing in it. It's just a different world, right? I don't know if it's better or worse, no politics, but it sure, [laughs] sure is different.

    6. RORory O’Driscoll1:23:24

       I think the deregulation's great, to be clear. I, I, I think, you know, I'm not a ... I think the fact that the Biden administration chose that hill to die on was, I think, both probably wrong and definitely stupid, uh, which is the low quadra... And, and goes a long way to explaining their terrible polling numbers among the 20 to 30-year-old male demographic. And I actually give credit. I think the deregulation is one of the few joyous parts of, you know, all the rest that's coming out of current administration. I think it's great, right? Go team. Um, whether or not, I'm not gonna comment on the, you know, what interpersonal relationship it takes to get something done, and, and I don't think it impacts the deregulation, but separate, but yes, I, I... That's a morass that I have no doubt will be unpicked at another day by, um, someone other than us with judicial powers. Um, I think, you know, the interesting thing about those businesses is if you look at the volume, and I, I, I didn't check Polymarket. I think I checked Calci. It's still 70, 80% sports betting, right? But the real question is, can you build prediction markets for other things? And you're seeing that. And to the extent that you can do predictions for other things, like the questions we're gonna be asked, like, you know, I just saw it, you know, who's gonna be the next prime minister of Japan was running 'cause the election thing. Whether or not there's a, quote, "legitimate" non, non-sports gambling business there that someone like the, um... It was, it was the NYSE, which is really Intercontinental Futures, that, um, Atlanta company back in, you know, is the core owner of that. Whether or not that's a non-sporting business is TBD, but I think it's super interesting. I think those are two really interesting companies, and credit to the venture investors who stuck with it, right? During the regulatory time. I think you go, you got a really nice asset now.

    7. HSHarry Stebbings1:25:04

       The thing that I did just find, like, a little bit confusing, like, $2 billion is a huge amount of money. Again, comparing that to the Vercel's $300 million. And this is, I don't im- I don't know, but there is not a compute or infrastructure spend. I guess there's a right spend in a lot of cases. But $2 billion. I mean, did you need $2 billion?

    8. JLJason Lemkin1:25:23

       I think it's, listen, we have to see the details of the deals. I think there's some level of implicit exclusivity here. There's data sharing, right? You invest 2 billion to, for it to be a, an, an essence, a subsidiary, right? An affil- and it will maybe subsidiaries aren't, an affiliate of the company, right? Um, it's, it's maybe, there may be some vague similarities to the beginning with, uh, with, uh, OpenAI and AMD. It's a, this is a bonding investment, right? This is buying a quarter of the company or 20 some odd percent and some sort of exclusive. Someone's putting, uh, something in here more than money. In return, they wanna own a lot, right?

    9. RORory O’Driscoll1:25:56

       These guys are strategic investors. They're not doing it for a 2X return. They're doing it because they own, I can never remember, is it NYSE or the NASDAQ? I should have checked. They, you know, they own a bunch of market-making companies.

    10. JLJason Lemkin1:26:08

        Intercontinental Exchange, owner of the New York Stock Exchange, right?

    11. RORory O’Driscoll1:26:10

        Yes, exact- And ICE... Yes, and they are called ICE, and I was gonna say ICE, but of course, that would be confusing to the average reader, uh, listener, right? The, yeah, Intercontinental Exchange. They bought London Financial Futures like 20 years ago. They're like, if there's a financial mar- if there's an exciting and interesting financial market-Where people buy and sell electronically really interesting shit, we like to own some of that. So it totally makes sense strategically. Good for them.

11. 1:26:34 – 1:32:25

    Quick-Fire Round

    1. HSHarry Stebbings1:26:34

       Okay. We're gonna do a quick fire. Good addition there, Jason, by the way. I totally with you. Fucking nuts deal. Nuts. Um, okay, so number one, this is an official cow-she. Tim Cook leaves Apple this year. Yes, $100 turns into eight seventy-nine. No, 100 turns into one oh seven. I mean, is he already, is he already confirmed? Those odds are terrible.

    2. RORory O’Driscoll1:26:58

       Agreed. They are the... But leaves is the word, right? Um, I mean, again, I, I, I hate these things 'cause I'm riffing, but... And Jason can do it in real time and look things up. But didn't they anno- Didn't there some kind of... Aren't they... Wasn't there some kind of succession planning announcement? I can't remember. The VP of engineering would in time... I, I, I should have looked it up. I didn't. So there's clearly a succession plan here, as one would expect if you're a competent board and you've got, you know, a, a chief executive over 60. But leaving, I, I think the, the only reason, I think it, leaving this year is a very tight bet. So the only way that would happen if you thought things were failing. So I actually, I know why it's, it's a very modest payout, 'cause it's very unlikely. Which is different than saying, separate comment, the board is starting to think about what is the transla- what's the skills required for the next leader. I think, and again, I could be just imagining this, I've been so crazy this week, but I think it was the SVP engineering. So it's very much a, the next-

    3. JLJason Lemkin1:27:50

       Yeah, that was a leaked rumor that he was a successor.

    4. RORory O’Driscoll1:27:52

       Yeah.

    5. JLJason Lemkin1:27:52

       He's 50, and Tim Cook's turning 65.

    6. RORory O’Driscoll1:27:55

       Yes, exactly.

    7. JLJason Lemkin1:27:55

       So it's their job, but there's no way it's this year. Unless it's a health issue, there's no way it's gonna be this year. The, this-

    8. RORory O’Driscoll1:28:01

       You're exactly right, Jason. I think both sides of that are correct. It's not this year. But it's exactly, it's their job. If you were to, if you're on the board of the most valuable, second or third most valuable company on the planet, and your CEO is hitting 65 and you're not thinking about succession, then just call yourself the Disney board and give up.

    9. HSHarry Stebbings1:28:14

       Are you still a holder?

    10. RORory O’Driscoll1:28:16

        I'm still a holder. Uh, I trimmed a little when Warren did. I got in before him, but I'm like, I pay attention to-

    11. HSHarry Stebbings1:28:23

        Trimmed a little, 99%. [laughs]

    12. RORory O’Driscoll1:28:25

        No, no, no, no, no, no, no, no, no. I didn't hold a lot. And, you know, continue to worry about the growth rate and continue to worry about the AI story, but fundamentally, you need instantiated physical products to consume all this stuff, and they're the platform of choice for middle class consumer on up worldwide. So it's still been good, and it's bounced back nicely from where it was. I mean, there was a little low there, and I'm like, "Ooh, maybe I was wrong."

    13. JLJason Lemkin1:28:46

        I don't get these VCs that invest in the public markets, but it's, it's good content.

    14. RORory O’Driscoll1:28:49

        I, I honestly-

    15. JLJason Lemkin1:28:50

        It's good content

    16. RORory O’Driscoll1:28:50

        ... it's not what I do.

    17. HSHarry Stebbings1:28:51

        Do you know-

    18. RORory O’Driscoll1:28:51

        I, so I feel the need to defend myself. I have almost no individual public stocks other than companies that I get distributed to. But I also wisely bought in 2009, and my basis is so low now that I just can't bring myself to pay the 37% tax.

    19. JLJason Lemkin1:29:08

        Don't sell it until you move to Puerto Rico or whatever.

    20. RORory O’Driscoll1:29:10

        No, I'm not gonna move out of California, but I just can't bear to give it up. But maybe I'm just stupid. [laughs]

    21. JLJason Lemkin1:29:16

        Just borrow this.

    22. HSHarry Stebbings1:29:17

        Okay, next one. Replit and Lovable, over under 250 million ARR by end of year. They're both in the 160 range now, 160, 170.

    23. JLJason Lemkin1:29:27

        Is there a, is there a cow-she or are you just, is this a binary question?

    24. HSHarry Stebbings1:29:31

        This is a binary question. This is a Harry.

    25. JLJason Lemkin1:29:33

        I'll tell you the only interesting thing. So I, I, I would say o- over, over 250, but barely. There was an interesting report this week. I f... It wasn't Bloomberg, it was, uh, someone at Barclays. Barclays tracked, um, just, uh, what they believe the web traffic was to all the categories. And, and what was interesting was it, it looked very accurate in the sense it had Base44 hitting the numbers that tied to what, um, uh, Wix publicly disclosed. So we can assume that's accurate, right? And it had Replit tying to when they launched V3, which was a big boost, and then they had Bolt's numbers, which ti- roughly tie to what I think they are. And so what it said is, look, like traffic has flattened, flattened to down, okay? Um, and so initially you might say, "Oh my God, sell your, sell your, sell your stock." But I actually think it's a good thing because the looky-loos aren't gonna renew. Like, the problem with these products is you have to segment churn. There's folks like me, I'll never churn off Replit, okay? I'm 200 hours in. I've got n- eight apps into production. It's impossible to leave. The odds that... I'm gonna spend somewhere between $300 and $3,000 a month for a long, long time, okay? But, but Abigail that wanted to build her own CRM and, and was told you could do it in, in 60 seconds and it didn't work, she's gonna churn, right? Or he's gonna churn. So it's good to get rid of the looky-loos because even though they got these guys to 100 million, they ain't gonna get them to a billion. They're just gonna churn and get rid... We've all had companies wh- where this is the case, where we had a segment of customers that were very high churn and a segment that's very sticky. So I think it's okay that traffic's f- like int- not traffic, interest is flat, um, because it'll be higher value, but it is something to reflect on. It looked right to me that, that we've seen at least a temporary plateau in interest in these platforms, and it makes sense to me because a lot of use cases, they're not viable. Like, you cannot, you know, this, the, it is, it is a, it, the... I love Replit to death, but it's a, all of this is a, the edge of marketing misrepresentation. So rambly answer, I think they'll hit it, but, um, but I, I do think there's deceleration in, in... It's not like ChatGPT. There's gonna be deceleration in lay users wanting to use these platforms.

    26. RORory O’Driscoll1:31:36

        For the record, there's deceleration in ChatGPT too. It goes back to what I said earlier. What rate of deacceleration gets you from 10? How much deacceleration can you do at 12 billion to make sure you still hit 100 billion is my question, but we don't have time for that today, but I'm thinking about it. Next, Harry. I don't have anything to add on Lovable and Replit. I defer to Jason entirely.

    27. JLJason Lemkin1:31:55

        They're getting better.

    28. RORory O’Driscoll1:31:56

        Nice.

    29. JLJason Lemkin1:31:56

        Here's the thing people miss. It's, like, it's so, this, I'm a hu- almost 100 days into vibe coding. The, it's, the platforms are so much better than 100 days ago. So it's like a lot of things in venture or startups. You gotta be careful how you predict, 'cause these are not, this is not SaaS of 2016, okay?

    30. RORory O’Driscoll1:32:11

        Totally.

Episode duration: 1:32:36