The Twenty Minute VCPeter Thiel and Softbank Sell NVIDIA - Why? & Why VC Will Hit $1TRN and The Opening of Retail
EVERY SPOKEN WORD
90 min read · 18,054 words- 0:00 – 1:42
Intro
- RORory O’Driscoll
Entry price counts when TAM is unclear. Winning is the only thing that counts when TAM is huge
- JLJason Lemkin
If you're not seeing massive TAM expansion, there's just no point in even playing as VCs
- RORory O’Driscoll
The late stage business is either the best business in the world or the worst business in the world, and there's nothing you can do to determine which it is
- TTTomasz Tunguz
Coding is no longer on this extremely steep improvement path. As the models improve in performance dramatically, people switch
- RORory O’Driscoll
To say that would be ugly would be an understatement. [laughs] It, it would be terrifying. I mean, beyond terrifying
- TTTomasz Tunguz
I think we're at a point where if there's some wobble, the magnitude of the correction will be fast and brutal. Ready to go? [upbeat music]
- HSHarry Stebbings
Guys, I am so excited for this. It's always my favorite show to do. We have the wonderful Tom Tunguz joining us today. Tom, welcome to this wonderful trio. It's so great to have you.
- TTTomasz Tunguz
Oh, thrilled to be here. Thanks for having me on.
- RORory O’Driscoll
Not at all. Tom, I gotta say, have you become so Americanized, Tom, Tomasz, that you're just going with Tom now? Or are you just recognizing that Harry, like all English people, has no command of foreign languages?
- TTTomasz Tunguz
[laughs]
- HSHarry Stebbings
Sorry, I, I couldn't understand that.
- TTTomasz Tunguz
What? [laughs]
- RORory O’Driscoll
Would you like him to use your given name, Tom? Are we gonna stick with what Harry said?
- TTTomasz Tunguz
Oh, Tom's great.
- RORory O’Driscoll
Yeah.
- TTTomasz Tunguz
That's great. Let's, let's roll with it. Let's be brief.
- HSHarry Stebbings
We've become an American.
- TTTomasz Tunguz
Good point.
- RORory O’Driscoll
Tomasz.
- HSHarry Stebbings
Yes. Don't worry, Tom. R- Rory will remain this obnoxious way for the following 90 minutes. [laughs] It's all g- all good. I've, I've got used to it. He'll correc- correct your punctuation next.
- 1:42 – 9:40
Cursor Raises $2.3BN at $29BN Valuation
- HSHarry Stebbings
Um, but I wanna start on some very exciting news for Cursor. $2.3 billion at a $29.3 billion valuation. Andreessen Thrive, Coatue, DST, Accel, all the big players all involved. Chaps, how did we analyze this? And I, I look at this and honestly feel more irrelevant than I've ever felt. How should we look at this? And this is a free-for-all.
- TTTomasz Tunguz
Look, I think product market fit for agentic coding is probably the best of any use case aside from search. Uh, and so... And then you have this just, like, massive growth. So I think the bull case is the productivity gains for software engineers here are pretty enormous, 30 to 70%, kinda depending on what y- which company you're looking at. You have p- pretty significant multiple expansion. I'm not sure if you guys have played with the new cursor model, but it's phenomenal. It's unbelievably fast, four or five times faster on a tokens per second basis, and that allows them to capture a whole bunch of margin. And so... And then on a multiples basis, it's actually not that wild. You put all those two things together, plus the, the brilliance in the market, and so you see evaluation here. I mean, can you see a 3X? Y- you don't have a lot of ESOP dilution because total employee count is 30. And so [laughs] it's... You're not looking at like a-
- JLJason Lemkin
Is it still 30?
- TTTomasz Tunguz
Yeah, it's at 30. Maybe... They, they just hired a PM four months ago, so, you know, they increased head count by 5%. But you don't have a lot of the CapEx dilution that you always see within the foundation models. And so, uh, does it, you know, does it go public? You have massive revenue growth, increasing margin, but pretty attractive financial profile. We can debate the entry price, but I think go bull market bet. Classic bull market bet. Big question, I mean, we were looking at a bunch of the vibe coding company's typical growth, like, account retention is 50%. And so what does that really mean in this business? Can they push any of the price? I think that's probably the ultimate determining question. But just given the usage that we see, uh, I c- I can s- I can see the case. I can see the case.
- JLJason Lemkin
Just, just two... Maybe two thought- I think that's a great analysis. Just two thoughts to add onto it. One, I think this idea that you get a 30 to 70% productivity boost is almost a backwards way of looking at it, because the way I think about it now is it's just default and necessary. This is the way we code. So if we were talking earlier in the year, even if we were at Sastre in May, we'd be talking about... I was at ta- we were talking about productivity boosts, right? How... What are you getting out of Cursor and Windsurf and all? I don't know anybody not using Cursor or something.
- TTTomasz Tunguz
Yeah. You can't go back.
- JLJason Lemkin
Yeah. So it's, it's, it's moved to, like, we're, we're, we're gonna approach 100% penetration per developer of some sort of price per year, 5,000, 6,000. You guys, R- Rory and, and, and Tomasz are better than math me. You could do what's every develop... For, before we even get to Replit and Lovable, like ProSummer, for engineers, how many engineers are there on planet Earth today, and what's 5,000 times that? For seriously, we're gonna have 100% penetration, right?
- TTTomasz Tunguz
Yeah. No, I agree with you. So the th- so when I used to do market sizing models, you know, five years ago, we used to assume that there were 25 to 30 million developers.
- JLJason Lemkin
Okay.
- TTTomasz Tunguz
And in the most recent Microsoft transcript, uh, from the earnings, they're talking about 100 to 150 million developers just on GitHub.
- JLJason Lemkin
Okay. So 200 million times five grand. How much is that, Rory? Seriously.
- RORory O’Driscoll
Yeah, 200 million. I mean, look, 200 million times a grand is 200 billion.
- JLJason Lemkin
No, five grand. Five grand a year.
- RORory O’Driscoll
A trillion dollars. No, I don't buy that.
- JLJason Lemkin
Yeah. I think tr- Cursor can do a trillion if it has its current, current... Uh, okay, you could do 500 billion, right? Se- seriously, this is what we're missing. This is, this is all... The whole AI play to me, if you'd... If you're not seeing massive TAM expansion, there's just no point in even playing as VCs, right? There's just no point.
- TTTomasz Tunguz
Okay. So we were-- I was chatting with a sales leader last night, and he's, he's a commercial... He's a mid-market seller in an agentic company. And I asked him, "How many figures are in your mid-market deals?" And I think of mid-market deal... Like, a mid-market deal for me is like 20 to 50K. 50K on the highs, maybe 75.
- JLJason Lemkin
Yep.
- TTTomasz Tunguz
He said they're all seven figures.
- JLJason Lemkin
Seven? Wow.
- TTTomasz Tunguz
Yeah. So it's an agentic, an agentic software company, a- and the mid-market is high s- high six to low seven figures.
- JLJason Lemkin
Yeah. That's TAM expansion.
- RORory O’Driscoll
That's TAM expansion.
- TTTomasz Tunguz
It's labor replacement-
- HSHarry Stebbings
Yeah
- TTTomasz Tunguz
... in some form or another, right? And so, you know, to that point, like, if the total number of developers increases... And look, willingness to pay, I mean, I play, I pay for a cloud code max, pay 200 bucks a month.
- RORory O’Driscoll
Yeah. And you run out
- TTTomasz Tunguz
I run out two days into the week, right? So now I'm at a place where like, okay, do I buy two additional seats, three additional seats? And so instead of sp- spending two hundred dollars a month, I'm spending a thousand dollars a month, and I have this total pain of being able to switch between these keys. But like, it, it makes me wonder, what is my willingness to pay for Claude? I will never go back to using a computer without Claude Code. I couldn't imagine.
- RORory O’Driscoll
A- and that sound you hear is them creating the Tomas, um, three hundred, four hundred buck a month plan because they need it and-
- JLJason Lemkin
Well, I spend more than that on Rep- you don't want to know what I spend on Replit. It's more expensive.
- TTTomasz Tunguz
And you would never go back, right? There's no way. There's no way you go back to-
- 9:40 – 32:14
What Gemini 3 Means for Lovable, Cursor and Replit
- RORory O’Driscoll
these businesses. My pushback on the con side would just be the emphasis and the focus that OpenAI and A- OpenAI and Anthropic are placing on Codex and on Claude Code, and then your alt- uh, alternative players like Cognition-
- JLJason Lemkin
Please. I said there's two negatives, and I'm going to list them: profitability and durability. And, and profitability is, do you make money? And durability is, someone else gonna take your money? And I think those are the only two issues, which is amazing. Just think about it. It's a thirty billion dollar market cap deal where on a revenue and a revenue growth and a TAM perspective, it's big resounding yeses. Revenue scale, hyper growth, huge market. Yes, yes, yes. So you're right. The two are profitability and then dura- and then competition/durability. So let's do them in turn, because I think they are linked, Harry, you're right. Because the odd thing about the current business is their direct competitor is also currently their supplier of the raw ingredient that makes fifty, sixty, seventy percent of their product. So you're right. It's a, it's, it's a very weird platform risk kind of deal. And maybe you can just lump them in together. Profitability, because look, with a hundred odd so employees, it ain't labor that's killing them. It's the cost of the tokens which they, which money they give to the company who also has a competing product. So Tom, I, I mean, I'd love to hear your thought. How do you think about Claude Code versus Cursor?
- TTTomasz Tunguz
Yeah, I mean, I think... Okay, so, uh, the way I'd put it is, as the models improve in performance dramatically, people switch. Gemini 3 just came out. It's a little bit better than Claude 4.5 Sonnet on coding. That's what matters to this audience. As when there's a lot of improvement, people switch. Why? I mean, I want to see. Is the C- is the Cursor model a whole lot better than the Claude model? 4, uh, 4.5 comes out of OpenAI. Great. I want to go... Uh, 4.1. I want to go, uh, check out that model on Codex. But as the improvements in coding start to asymptote, I'm going to stay where I am. I'm going to stay where I am because there's memory, and it remembers how I program, and it remembers how many tabs, uh, you know, my linting, which is how many tabs I put into each particular function. And so I think we're at a place where agentic coding is no longer on this extremely steep improvement path. And so people will stay where they are because the cost of... I've built, like, so I have a hundred tools in Claude Code. Claude Code wrote all of them, and now I have this whole setup where it does all kinds of stuff for me. And sure, I told Gemini this morning when 3-- when Gemini 3 launched, "Look at everything that I've done in Claude Code."And migrate it so that you can use it, right? And so I'm doing that at my expense, whatever, and it'll migrate. But I will only do that if I think that the benefit of the migration is significant. And so if you look at the distribution, initial distribution of Cursor, what fraction of people are really going to switch? Especially once the enterprise business starts to come in, because, uh-
- JLJason Lemkin
Yeah
- TTTomasz Tunguz
... Fortune 500 will pick one, standardize, buy effectively an ELA, and then the s- the switching diminishes. And so I think they'll be able to improve margins. And so as long as they're able to continue to grow, I bet they hold on, I don't know, five years from now, 75% of their audience, something like that. And so to your point, Rory, on like just inertia in the business, it will be there.
- JLJason Lemkin
What I don't get, uh, here's where I'm ignorant, and here's where the difference between Replit and Lovable is so different, right? Replit and Lovable, frankly, are using cheap models most people don't know or care, and they're well marked up. The margins are north of 50, the gross margins, okay? We're not bouncing back and forth between the latest Gemini and 4.5, right? In fact, Replit defaults you to an N-1 model unless you want to pay more, okay? And it works fine for that use case. Um, what I don't, what I still remain ignorant of, even as we're talking about, is I think Cursor has a moat and has switching costs and, and enterprise ELAs and others will lock in. But ultimately, even with m-mixing in their own model, which may not even have that much higher margins, right? They'll have higher margins, but that-- Like, how do they get to 60% gross margins? It, it-- How do they get there, right? But I totally get how Replit and Lovable are already at 50.
- TTTomasz Tunguz
Yeah, well, I think-
- JLJason Lemkin
I don't know.
- TTTomasz Tunguz
So, yeah, I mean, I don't know either, but I mean, so, so we've met a bunch of different companies and they're using-- they're taking small, uh, big models and then distilling them into small mo- And so we've done this internally. We've taken Claude Code, which is a, I don't know, a trillion parameter model, and then we've taken a 20 billion parameter model and said, "Claude Code, teach this little model how to call tools." And we can get to 97... I mean, this is a venture capital firm. Yes, we have a great head of AI, but we're not a research lab, and we can get to 97% equivalency on that tool calling distillation with a model that's 150th the size. Anyway, the point is, I think there is so much efficiency to squeeze out of these model architectures because there's just a lot of fat in these systems. Candidly, I don't know if they get, if any of these companies achieve 60 to 70 per-- I mean, we all know publicly traded software companies previous era were 70, 72% gross margin. I don't know if we ever get to that place, but the other, the other point is, do they need to?
- RORory O’Driscoll
You don't need to. Absolutely. I think you're exactly right, 'cause those companies were selling workflow software with big sales force, lots of integra-- Here you're selling a, a tool that people can turn on, use themselves. You got low sales and marketing costs. In the end, things are valued on a multiple of free cash flow, in the end, in the limit, right? And I, I'm kinda with you. I think that as I listen to this whole discussion, if we buy the durability thing, in other words, most people won't switch once you ask them, talk out, then the only quote "negative" is this gross margin issue. And, and I think you're right, Tom, is that, that if the only thing between you and, you know, $50, $60 billion is your ability to chip away at a digital product where there's a ton of optimization to be done, my guess is you'll find a way to get it done.
- TTTomasz Tunguz
You'll get there.
- RORory O’Driscoll
And you're right.
- TTTomasz Tunguz
Yeah.
- RORory O’Driscoll
It mightn't be 80%, but if you can get to 60% GM and continue, and sell a billion dollars in revenue with 100 head count, you're gonna be kicking off cash.
- TTTomasz Tunguz
Totally. And then, you know, Microsoft also said they were producing... Compared to 12 months ago, they were producing 90% more tokens per GPU hour than 12 months ago. So that, yeah, that's the rate of efficiency gain.
- HSHarry Stebbings
So one, two, and three in this space in five years' time, who is gonna be the top one or two and three players? And assign a market ownership to it before we move on. So I think Codex is gonna have 60%, Anthropic's gonna have 20%, and Cursor's gonna have 20%, for example.
- RORory O’Driscoll
My gut would be Cursor 'cause they're there and they're, and they're ahead. GitHub because they'll bundle and it's Microsoft, so a whole bunch of corporate America will just go with that, especially, you know... It's like the, it's like the [chuckles] the Zoom versus Teams discussion. In the... They'll be bundled people, so that's those two. And then I don't... The third you have to, you have to put Anthropic in 'cause they're relevant, and/or Cognition just 'cause it's slightly different. Which leads me to assume Codex isn't a huge player here. I mean, I just did that on the fly and... But I think that you threw out Codex, Harry, but which is OpenAI obviously, but you look at people who have a natural lock on the space. You have the people who are first, which is Cursor. You have the people who can bundle, which is Microsoft at the enterprise level, at the distribution level. You have the people who can bundle at the model level, which is Anthropic. And then you got the clever guys out in the corner. Co- It's, it's, it's a crowded space. I don't, I, I don't know if you put OpenAI in the top three in this space.
- TTTomasz Tunguz
I, I agree with Rory. I think it's a very astute assessment. I think Cursor has m- 40 to 60% share. I think Microsoft, they really need to step up the product. They really had it. They had the market locked up and then, um, yeah, I don't, I don't even know what the agentic Microsoft coding product is, and it's definitely not, um, it's not the tab autocomplete, which is the last time I used it. But maybe, but, but maybe it's bundled within VS Code. And so, but they can come out the way they did with, uh, Teams and just, just come out of nowhere. And so if it's in five years, yes, in year four and five, are they probably the number two player? Uh, that's right on the money. And then you have Anthropic is just so good on coding, and it seems like that's where their focus... So that's one, two, three. 60, call it, yeah, 60/20/20, something like that. Yeah.
- HSHarry Stebbings
Love it.
- JLJason Lemkin
I, I could provide a slightly different perspective. Um, the latest version of Replit V3 blows everything out of the water. It's not just night and day. It's what's more than night and day. It's Pluto and Mercury, okay? And in V3 now, I'll just give you an example. Agents talk to agents.Agents talk to agents. It calls in an architect and reviews my code. It calls in a different agent and finds bugs. It calls in a different agent to review what it has. It has an unlimited context window that appears to go on for months now and remembers everything we've done. So my point is, my point is the rate of change is so high in this side of the things that I'm not betting there won't be someone else in 18 months that'll blow everyone out of the water. Do I think someone can invest what Anthropic and OpenAI can invest? Hard to, hard to imagine, right? Hard to imagine how much have they raised? [laughs] I mean, a lot, okay? So I don't know that you can build that. Um, but in terms of building a l- a, a layer or on top of other models, we-- there's a level of disruption to come I don't think we've even touched on yet. I, I... You know, it's just so much different and so much better. Um, so for example, for me, like the biggest issue... Now that this rep- the agents are so good, right? And so autonomous, I mean, this is true for all of software, the biggest issue is QA, right? It takes... Now I'm spending... Now that it-- Now that it's even better, I'm spending... What if there was a version that could truly do all functional QA agentically, right? That would be another step function, right? Then I'd be 10 times more productive. So I don't-- I think these, all these leaders are too big to go, to, to go away. But I mean, if 30 kids at Cursor can build this, a billion, are you sure 30 kids with where... 'Cause AI's not static. This rate of change is so crazy. It's not... I know Gemini feels like 8% better than four five Sonnet, but in a year what we can do with it, we, we may under-predict what we can do in a year.
- RORory O’Driscoll
I wonder, is that correct? Because it... And it's an important-
- JLJason Lemkin
[laughs]
- RORory O’Driscoll
... in the sense of there's one world which says the window opens with new technical discontinuity, and there's three or four years where it's up for grabs, and then things start to coalesce and settle, less because the technology is not continuing to train- change, but more because enterprise may... It's Tomasz comment. You make a decision, you get locked in, you know, a corporation buys for its people, and then just things be-- No, market share becomes harder to move. Another step function revolutionary change in, i-in the AI underpinnings and the models could cause that to happen. But my, my base case is that it will start to coalesce more and that market shares, market share will become less subject to flux. In other words, people will settle into their rough market share. And that's been typical for most markets. There's this new wild period, but after about three or four years, you grab what share you can, and then in most other markets, then there's a long 10-year, 20-year period where even though the market doubles, trebles, 10Xs, the rough market share at the start is the rough market share at the end.
- JLJason Lemkin
It's true, but, but, but I don't think we've ever seen software ge-get remotely this good this quickly in our lifetimes. It's like two orders of magnitude faster. Software used to get better maybe every five years. You'd have a major release, and it would, it would have an, uh, an API [laughs] or some me- It would integrate with Looker. That would be the big deal this year. We got our Looker integration working now. [laughs] This isn't like even 10X faster. This is like 20 or 30X faster than 24 months ago. Do you... I don't know. Maybe you disagree. It's... That's what I see. The rate of... It's, it's, it-
- RORory O’Driscoll
Just arguing back is that Intel doubled every whatever, 18 months, and, you know, market share didn't move for 15, 20 years throughout the entire life cycle of the CPU. You know, mass performance increase on its own often isn't enough to cause, you know, market share shifts once they get embedded in. Intuitively, yeah, four years ago, no one did coding using AI. Now everyone's doing coding using AI. There was a four-year period where everyone have to pick their AI coder. Once you've done that, are you just gonna lie back and say, "The AI coding company will just make my shit better"? As Tom said, is that am I, um, is he gonna be in the market to shift two years from now, provided they all stay roughly comparable? I mean, I, I think it's at least plausible that the, the balance of probability is no.
- TTTomasz Tunguz
I'm trying to figure out the right blog post for this debate. I think it's, it's the bacon in the skillet debate, which is when does the fat congeal?
- JLJason Lemkin
Yes. [laughs]
- TTTomasz Tunguz
Right? Like [laughs] right now-
- JLJason Lemkin
When does the fat-
- TTTomasz Tunguz
... everything is hot, everything's moving around. There's a lot of sizzle, and then all of a sudden the heat comes off, and then everything's fixed, right? And it's just, it's much harder to move through.
- 32:14 – 39:01
How Ramp Grew from $13B to $32B in a Year
- HSHarry Stebbings
Ramp 13 billion at the start of this year, now it's 32 with the latest round announced yesterday.
- RORory O’Driscoll
They've seen four rounds this year. I looked it up. Ramp's had four separate financings this year. And to give a statistic on that, uh, we look every year at the newly minted unicorns for that y- for that quarter, 'cause that's mentally the outer edge of where we play. So I'm like, "Okay, what did we miss?" And there was something like 20, 24 minted unicorns in Q1. By Q3, 15% of them already had a step-up. And now with Cursor, some of them had two. So if you think about the velocity of, you know, step-ups and th- that's almost... Normally you think your financing is, you know, 12 to 18 months. 15% of your companies within six months that you enter at a billion, above a billion, have already had a step-up. To your point, it seems it's a high velocity, big numbers w- and it looks like [chuckles] a remarkably easy game from this. I'm sure it's not. But you're right, you look there and you go, "Let me get this straight. You put in 100 million and a billion, and you have a 15% chance of being worth two billion within six months. Why not do that for a living?" I mean, I think that's what you're saying, Harry, effectively. Buy Ramp in January 13, sell Ramp at 13, uh, 26 in May.
- HSHarry Stebbings
I'm saying, is my insertion point fundamentally challenged because it is just so much easier? And, and, and, and you say, "Oh, it's all... It's not easier, Harry." It, it absolutely is. Like, with the brand-
- RORory O’Driscoll
It looks easier to me
- HSHarry Stebbings
... with, with, with, with the brand and the platform that we have, access to a certain extent is the core challenge for most. Respectfully, I could be doing 10 to $25 million checks into these high flyers, like your Harveys of the world that we've discussed before at length, and we would be able to get them, and I could get the step-up. But no, I go back to the craftsmanship of Seed and the building companies in the trenches with entrepreneurs, and I'm thinking, "Why the fuck do I do that?"
- JLJason Lemkin
Well, I'll tell you what's interesting, um, you know, I... Watching Bessemer, who's wildly successful in cloud and B2B, right, for, for generations, uh, just co-lead the last Ramp round. And, you know, they did Anthropic, what, a year ago, right? And that's probably up 10X, right? So they did 100 million or something into Anthropic.
- HSHarry Stebbings
Canva so late. Byron, I love Byron, but-
- JLJason Lemkin
Well, Canva I think might... This is my observation from afar. They did Canva in 2021, and then I think maybe they had a little bit of shock. They're like, "Wow, maybe that's a great one. Maybe we overpaid." Now they're in the money on it, right? But then they did Anthropic, which seemed expensive [chuckles] . We should look it up. And then going from that, being conservative but wildly successful, then going to Anthropic, then going to Ramp at 30 billion saying, you know, the classic post, "We're so excited to partner together now." Bessemer must think that is a low-risk investment. That's what I'm saying. They must think that Ramp at 30... I know y- I know it's Captain Obvious, but these are guys that have thought... I mean, th- this is a venture capital firm that's been around since the 1800s, right? Or something like the Hem- Bethlehem Steel or Bessemer Steel or something. Um, they think Ramp at 30 billion is the best play [chuckles] in the market. So I don't know what Theory thinks, but it's to your point, right? This is not, this is not Tiger or Softbank rolling the dice. This is Bessemer saying Ramp at 32 billion is a, is a good, is a safe bet.
- HSHarry Stebbings
Joe Kleiner and Mamoon doing Anthropic at 180, another example.
- RORory O’Driscoll
I mean, and one of the interesting thing here is a large number of the folks who these kind of rounds are not the late stage crossover people, who to some extent got snookered in 2021, have, you know, have licked their wounds and crawled away, right? It's actually, you know, the great large early stage, now multi-stage firms who are going, you know, having the same... They're looking at the same map we just looked at in Cursor, and they're saying to themself, "Risk adjusted, is this a good pl- is this just a great place to put my money?" If you have the scale of capital to be relevant at that stage, 'cause, you know, you really need to... I mean, you, you maybe can show up, Harry, 'cause you're a media celeb, but you're 25. But normally they wanna talk to people with 100 plus. If you have a fund that size, so far it's been a very excellent place to put one's money, and many of the big, you know, uh, what we would have called early stage firms 10 or 15 years ago are doing it. You're right. It's Bessemer's, Kleiner, LightSpeed led, I think, the Ramp round. This stuff is working. I always used to say to my LPsThe late stage business is either the best business in the world or the worst business in the world, and there's nothing you can do to determine which it is. When prices go up, putting in a hundred million and having it go to two hundred million with no effort on your side, that feels as good as life is gonna get. And obviously when prices go down, it ain't so much fun. See '21, '22 for details.
- HSHarry Stebbings
I think the secret to success in that business is just being a trader. I was walking in the park with a, a multi-billionaire today who is in this market, and he is a trader, a ruthless trader. He buys at sixty, sells at one eighty in the same year, and it is absolutely a m- book that he manages. Not with the ride your winners, hail this unicorn founder. It's fucking trading.
- TTTomasz Tunguz
It's, it's the new, it's the new public market.
- RORory O’Driscoll
Oh, we- one-- guys, one huge fucking difference, excuse my language. You c- there's no liquidity to the downside. You made a sta- It is the new public market, 'cause these are companies that by any rational stretch could be public today, first comment. And Harry, you're right, in public markets, some people have a trading strategy and some people have a holding strategy. But the key sentence you're missing is you can't execute a trading strategy if they're private, because when things go wrong, the liquidity won't be there. When things go right, you can. You can trade on your way up, but it will be ha- it'll be a lot harder to get out of one of these investments on the downside because the liquidity will not be commensurate for the public markets.
- HSHarry Stebbings
One, 100%, but Rory, putting twenty-five into a, I'm just making up, any chosen company that's sold this year, a Ramp at thirteen and then selling it at thirty-two now would not be difficult.
- RORory O’Driscoll
No. You're, no, you're exactly right. On the way... Let, let me repeat. On the way up, the late stage business is the world's best business. No, and-
- HSHarry Stebbings
But mo- but mo- mo- mo- most are on the way up. I mean, I'm su- I'm, I... We have, we have our YOLO segment, which you've taken the piss out of me before, Rory. They're all just riding freaking high.
- RORory O’Driscoll
Well, stocks go up.
- HSHarry Stebbings
I mean-
- RORory O’Driscoll
But, but, but apparently you might wanna check it. You might wanna turn on your ticker for the last twenty-four, forty-eight or thirty-six hours. But yes, in general, stocks go up.
- HSHarry Stebbings
I did. There's so much red, Rory. There's so much red. Duolingo, it's like a, it's like Titanic. It's like, ooh, it's all under the surface, you know?
- RORory O’Driscoll
Totally.
- HSHarry Stebbings
Oh.
- RORory O’Driscoll
Um, but yeah. No, it, it, it, it's just, yeah, it's a super interesting time for that.
- HSHarry Stebbings
Totally get... Two elements worried/concerned me
- 39:01 – 40:35
Peter Thiel and Softbank Sell NVIDIA: The Bubble Bursting?
- HSHarry Stebbings
this week. Well, there were several, to be honest. Uh, one was the thinking machines at fifty billion, and the other was Thiel and SoftBank exiting NVIDIA and just, like, what it means for are we top of the market? Both of them potential signs for top of the market. When you look at those two, unpack either of them, both of them, but both kind of concerned me when I saw them.
- JLJason Lemkin
The only thing I would note at, with, from the media, Peter Thiel sold a hundred million of NVIDIA. What's the dude worth? This is like me selling three sh- a, you know, a tenth of a Bitcoin. I mean, it ju- it's just not-
- RORory O’Driscoll
The estimate's between ten and twenty, so you're right, it's sub one percent of his net worth. It, it's, you're right.
- JLJason Lemkin
A hundred million, I mean-
- RORory O’Driscoll
And that one, a bargain of the night. Though I will say it's been my life experience that people rarely sell stocks 'cause they think they're gonna go up. So at some minor level, in the ten seconds it took to run that decision by the big guy, he said, "Yeah, you should sell that stock." Right? So yeah, but I, you're right. It's not like he's unloading, he was, when he was unloading his Facebook position. And again, I, I'll do the NVIDIA one, is that the other one, the others, I don't think there's any data in, um, SoftBank selling. They just need that... I mean, they're selling the profitable public company, NVIDIA, to put that money in OpenAI. This is a guy ramping up his risk. I mean, this is not a de-risking, right? This is someone saying, "You know, that profitable publicly traded chip company just isn't risky enough for me. I'm gonna roll out of this one and into OpenAI." So I don't know, like, you might be well be right. I mean, my comment is you might well be right on a market top, but it isn't 'cause of those two data points.
- TTTomasz Tunguz
The data points I'm paying attention to are in the credit market. So I'm looking at
- 40:35 – 1:03:57
Oracle Credit Default Swaps: The Risk is Increasing
- TTTomasz Tunguz
Oracle credit default swaps, you know, triple what Amazon and Microsoft and others are. I'm looking at the, like even in consumers, you're looking at, uh, gosh, here's a data point. Subprime borrowers in the past sixty days hit the highest delinquency rate on auto loans in recorded history. And then you have Blue Owl, which is, has frozen redemptions for like one non-traded BDC vehicle, and it's moving it into another one, right? And then you have the f- the first brand's default on private. So-
- HSHarry Stebbings
Can we just unpack those? You said about the Oracle credit default swaps. Can you help me understand what's going on there-
- TTTomasz Tunguz
Yes
- HSHarry Stebbings
... and why that's important?
- TTTomasz Tunguz
Okay. Oracle has a big deal with OpenAI. Oracle needs to build lots of data centers. To build those data centers, they borrow money, like a mortgage, and they've borrowed money and there's a thing called a credit default swap, which you ma- remember from the great financial crisis, which is the odds that Oracle defaults on its debt, that they cannot pay their mortgage. Google and Microsoft and other major technology companies are, um, at a certain level, which is basically the same rate as the federal government, right? So government grade. And Oracle is three times that in the last three or four days. So it's a big move. It's, the, the risk is still quite small, so the overall probability of an Oracle default is small. The magnitude of the move suggests a meaningful repricing of risk.
- RORory O’Driscoll
And worth pointing out at the same time, the entire value of the quote Oracle deal. Remember we talked about it when the stock rose thirty-three percent, that it was crazy. That entire deal has been unwound. The market cap of the core company is actually below where it was when the deal was announced. And I think both that data point is saying the same thing, which is, Oracle, you've just underwritten a risky piece of business, so your equity's worth less, and I'm gonna have to reinsure your debt. All people at the margin are going, "Maybe I want to be one of the first people off this pain train, and maybe I can, you know, insure my risk or, you know, hedge my bets." And I think that you're right. That, that's, that, that's the tell here.
- TTTomasz Tunguz
Yeah. And so is it just like big screaming flac? No, it's notIt's, it's just a data point that people are start- the market is starting to perceive an increasing amount of risk in some of these big contracts. And then you have a, you know, the, uh, the Anthropic deals today from Microsoft and NVIDIA with a 15 billion investment, and the circularity questions, and all those kinds of things. So there's just, people are perceiving more and more risk as the CapEx for data centers goes from 500 billion a year to 800 billion a year or more.
- HSHarry Stebbings
Do you think there are any screaming flags from the last week?
- TTTomasz Tunguz
I don't think so. I mean, most of the hyperscalers' GPU capacity is sold out for the next two years. Um, uh, they generate cash. The, the debt as a percentage of free cash flow is really small. I, I think the major red flags from, from me are customer concentration risk is higher than it's ever been. So NVIDIA, two, two customers for NVIDIA represent more than 40% of revenues. 4% represent more than 50% of revenues. I went back and looked at the dotcom era, the networking companies, NVIDIA is 10 times more concentrated in terms of revenue than Lucent was. So I think that's an issue. But most of NVIDIA's customers are super cash flow positive, right? Like Google, and Meta, and others are spitting out cash, and they can decide to stop at, at basically whatever point. Um, so I think it's, it's all okay. How does this m- merry-go-round stop? Like, w- it's a game of musical chairs where it collapsed and everyone falls on there. But, uh, and the see... what happens, it's inference demand slows. And it, if there's a hiccup, if Google says, "We built this amount of capacity and we can only fill 80%," if that happens, then you see, yeah.
- RORory O’Driscoll
And you-
- TTTomasz Tunguz
A-
- RORory O’Driscoll
You're about to learn something about doing this podcast on Tuesdays that you mightn't have internalized, but I'll tell you what it is. This thing comes out on Thursday, and NVIDIA reports on Wednesday night. So we've now been pontificating, and one of two things is gonna happen on Thurs- when, when you, we, listeners are listening to this, right? If NVIDIA is steady as she goes and it's doing fine with a few little warnings, we will look like balanced and rational people.
- TTTomasz Tunguz
[laughs]
- RORory O’Driscoll
If they pull the pin to the downside, we will look like the last men on the Titanic here, right? And it's terrifying because that's just the nature of the recording clock. But for what it-- But now to lash myself to that mast with you, Tom, I think you're right, and what you're not seeing is, and, and now I'm gonna do something I hate doing, which is you almost, um, to some extent, I suppose, predicting something that by the time this is played, our listeners will know. What you're not seeing is mass collapse of demand or anything like that. You're seeing s- really strong demand. All the hyperscalers are saying, "We wanna buy more, we wanna build more, we want to invest more," right? The stuff at, the stuff is at the margins. The, the negatives are at the margins, which are the over-levered people trying to do this. People are correctly worried about their debt, the people who have bought the balance sheet. And the need for these products, on the other hand, the Microsofts and Googles, people aren't worried at all. And in the middle you have Meta where it's like, "You can afford it, but why are you doing this, dude?" So, uh, you've, y- you internalize that. I doubt NVIDIA are gonna get on a call tomorrow and say, "Demand's gone down." So all should be-
- TTTomasz Tunguz
Yeah
- RORory O’Driscoll
... fine for a while. But I just think-
- TTTomasz Tunguz
Right
- RORory O’Driscoll
... it's to your point now, over the medium term, people are going, "Hmm, the debt that some of these folks are taking on, like the Blue Owls, like the Oracles, that's just a risky bet if things turn down."
- TTTomasz Tunguz
And I think we're at a point where if there's a va- if there's some wobble, the magnitude of the correction will be fast and brutal. Like it's, it's not, e- everyone knows we're kind of like the tachometer is at a red line, right? Like we're, we, we are going as fast as we possibly can. In fact, we're going so fast that we are, as an economy, really uncomfortable with it. Like I was reading a, um, a macro hedge fund's tweet last night, and he's talking about how because of the big companies borrowing lots of money, they're paying less tax revenues to the US government, and those tax revenues are so significant that it actually will increase the f- the national debt. This is where we are. [clapping] We are going like 1,000 miles an hour on a car that's designed to go 999, right? And so the whole thing is shaking. [laughs]
- RORory O’Driscoll
I, I totally agree. I mean, the fact that people argue about the depreciation schedules on GPUs, and the answer to that question can move the entire US stock market is beyond bizarre. But you're right. We are where we are. We're making this bet. And e- e- e- even a mild, even a mild slowdown would be painful. My, my theory, random comment, is because no one can get the power to do these, we actually might be saved from ourselves. If we can bla- i- if, if no one has to say there's no inference demand, then everyone just says, "Well, I would love to build that extra 10 data centers, but we just can't get the power, so we'll just gradually slow down the ramp," maybe it'll kind of just slow a little bit more less ostentatiously than if someone gets on a conference call and says, "We built another brand new spanking data center. We turned it on and nobody came." 'Cause that's the moment, as Tom said, where you go, "Hmm, maybe the other 20 we have in the works ain't gonna be worth much either." Right? So may- maybe our inability to connect power will save ourselves from overcapacity, would be my, and that, and that's my upside case, people.
- HSHarry Stebbings
What do you think the chance is that we actually just continue smooth sailing into the sunset, and that we don't hit a air pocket, a challenge for the next three to four years? What if we're overestimating?
- RORory O’Driscoll
Zero. Maybe 10%, 20%. I'll, I'll be more... Yeah.
- JLJason Lemkin
I don't, I think the past is, was s- so much more s- s- moved so much more slowly than, than the present in, in, in B2B. But if we go back on our history ofSaaS, which we all can do, we had a lot of minor bumps on the way to the peaks, okay? We had, we had, you know, a, a de- a, a meltdown in 2016 we've all forgotten, I think, where SaaS fell, like, 30% or 40% in two weeks. It was right during SaaStr Annual, right? So if you go back and you kind of squint on those charts, you'll see massive corrections that then we fully rebounded to right until 2022. So why wouldn't we have micro massive corrections, like, on the way to, to, to us all living in, in a data center? Which I think we all are. I think data centers are the new cities. Um, we're building more data centers than offices, I think. Uh, uh, but why, why shouldn't we have 30% or 40% corrections along the way? We should. We should. There- how could there be no bumps, right? Well, maybe Oracle can't get its debt refinanced. Maybe CoreWeave, maybe those CoreWeave contracts aren't quite what we hoped, right? Maybe it's something small. Maybe, uh, Nebius just, uh, has a bump and it creates a contagion in the market, or Microsoft has some issue. I mean, why, why, why should we not expect three to four, three to four cont- little, little thir- 30% to 40% drops? We've seen it before in our life- investing lifetimes.
- TTTomasz Tunguz
I'm trying to imagine what a house would look like with a white GPU fence.
- JLJason Lemkin
A white GPU fence.
- TTTomasz Tunguz
Next to these.
- JLJason Lemkin
Oh my God, that's the video for the day.
- TTTomasz Tunguz
[laughs]
- JLJason Lemkin
The new, the new American dream. I love it, Tom.
- TTTomasz Tunguz
[laughs]
- 1:03:57 – 1:06:22
Stripe Does Tender at All-Time High: Why the Best Companies Will Never IPO
- HSHarry Stebbings
high of forty-one bucks. Tom, love your thoughts.
- TTTomasz Tunguz
Yeah, the, I mean, we have a new public market. I, I think this is, this is wild for me, right? Like, uh, I went back and looked at Microsoft. You know, you needed, like, fifty million in trailing revenue and six quarters of profitability to go public, right? And the cost to take a company public was a couple million bucks. To do a late-stage financing, I mean, what is the legal cost? Rory, you'd know. What is, what is the legal cost in, like, a Series D?
- RORory O’Driscoll
Yeah.
- TTTomasz Tunguz
Like, a million bucks?
- RORory O’Driscoll
Probably less on a D, but actually, I think once you get into the employee selling, it gets a lot higher because you have a lot more transaction costs.
- TTTomasz Tunguz
Let's call it a million. Okay, what is the average cost to take a company public in the US according to, I think it's KP, um, uh, KPMG? What, what... Just the transaction costs.
- RORory O’Driscoll
Well, it's seven percent. It's six to seven percent of the raise, and the raises are now two hundred, three hundred million, so yeah.
- TTTomasz Tunguz
It's twenty-five, twenty-five to thirty million bucks-
- RORory O’Driscoll
Yeah
- TTTomasz Tunguz
... transaction costs. And so there's just no... Like, why in the world would you pay that amount of money w- to raise a round of capital? Why? It's just like... I mean, it's like getting a million dollar mortgage and having to pay a hundred and fifty thousand in legal fees.
- RORory O’Driscoll
The only reason you would, Tomas, is the point you made earlier, is if the capital you get is cheaper than the capital-
- TTTomasz Tunguz
Right
- RORory O’Driscoll
... you get private. And as you pointed out, in fact, it's not.
- TTTomasz Tunguz
No, because now you... There's illiquidity premium, right? There used to be... I remember when I joined the venture business, I was taught about the illiquidity discount. Private companies should trade at a discount relative to public.
- HSHarry Stebbings
It was always, you were taught it was twenty to thirty percent to the public multiples. That's the, that's the discount. It should be-
- TTTomasz Tunguz
Yeah
- HSHarry Stebbings
... right? It should be-
- TTTomasz Tunguz
Right
- HSHarry Stebbings
... for late stage.
- TTTomasz Tunguz
Right. A- right. And now, now there is an access premium. Harry mentioned this.
- RORory O’Driscoll
But wait-
- TTTomasz Tunguz
And so what, what is the... So have we completely inverted? Is the access premium now twenty to thirty percent above?
- RORory O’Driscoll
It probably is. From the, so from a company's perspective, it's a cheaper cost of capital with a lower, um, with a lower transaction cost. Yeah. Why wouldn't I do that?
- TTTomasz Tunguz
And then, and then the ongoing service of that financing round is significantly less burdensome to the business because, uh, you know, quarterly earnings and all that kind of stuff. And so you really only have to go public if you need to raise a quantum of capital that is so massive that the privates cannot support it in some form or another.
- HSHarry Stebbings
Do you think that even, even is a blocker? Like, why would you not be able to raise billions privately? OpenAI are proving that you can.
- TTTomasz Tunguz
I guess you're right. I guess they could raise in the private.
- 1:06:22 – 1:21:37
Why Retail WIll Cause a Surge of Capital into VC Funds
- TTTomasz Tunguz
Yeah.
- HSHarry Stebbings
And, and we have a liquidity mechanism now where you can trade in and out, not quite as efficiently, but still pretty efficiently.
- TTTomasz Tunguz
Right. And it's, and it's a form of regulatory arbitrage, right? If you think about it that way, it's a whole lot easier
- HSHarry Stebbings
So the reason that you would actually go public maybe is bluntly because you need dumb retail investors to supply you with cash. Not... I'm... That's the only reason-
- TTTomasz Tunguz
It's the capital market of last resort. [laughs]
- HSHarry Stebbings
No, I just, I, I, I disagree with that, I mean.
- RORory O’Driscoll
I think... I love the access premium thing. I think there's a small number of companies who even at super scale have this desirability and cachet such that they can continue to raise in the private markets, right? You know, I think Stripe's a good example of that. Obviously, AI models. I don't think it's true for most companies. I think, you know, let's take Navan, they just went public, or Commandery, um, Com- uh, ServiceTitan, right? Went public this year, or maybe late last year, right? Great cloud companies, but, you know, they're not gonna raise 10 more private rounds because there's, you know, it's not wildly sexy, it's just a per- they're both just perfectly good businesses, right? So they didn't have access to this, I love the expression, access privilege, access premium private capital. They couldn't get done. You wouldn't be able to do a $200, $300 million employee liquidity for a company like that. It's just not desired enough. Bring it back to Jason's comment. Your dentist doesn't get excited about being in ServiceTitan privately. So ultimately they had to go public 'cause that was the lowest, that's the capital available to them, right? And that is going to be true for most companies. There will be this small number of high taste, high premium Silicon Valley beloved companies that can push it off a lot longer. Anyway, the only time Stripe will go public, and we've said this on a call before, is when the capital available in the private markets is too expensive.
- TTTomasz Tunguz
Okay, but, okay, so let me push... Let me, let me make the case why I disagree with that. And I don't know if I believe this, but, uh, let me straw man it for a second, which is retail has had no access to venture for the last 15 years. It's been in technology basically where you want to be. And so now with upcoming changes in regulation, I can take my 401 [k] , put it into an ETF. ETF goes into a fund of funds. Fund of funds invest in a venture capital group, right? And as a result of that flood of retail capital, those dollars need to go someplace. Well, they'll probably end up going into the businesses that, you're right, are not the, like the top, like the Pareto optimum 80% of secondary dollars where the market is effectively liquid, but those retail dollars are effectively going there, and they're still probably cheaper than the private market, uh, the public market dollars.
- RORory O’Driscoll
That's a fair counter, and it's true. Provided the capital keeps coming in because it perceives the returns to be high, more and more people will be able to stay private. Again, we- the reason that capitalism has bankruptcy, and downturns, and pain, and suffering, and wipeouts is to stop the extrapolation to infinity. And until that happens, it's not gonna stop. You're exactly right. If returns go monotonically up for another five years in venture, more and more money will come in, and all it will ensure is that when they do in fact go down, they'll just go down further.
- HSHarry Stebbings
Do you think the, the supply of cash is dependent on the returns? I was with Hammond from GC. I was with, um, you know, one of the great investors from Co2, and they were saying the opening of retail is the next frontier of the supply of our business. Do you think the opening of retail is predicated on great returns actually, or are we just gonna see it open over the next few years regardless?
- RORory O’Driscoll
I think in the end when people lose money, they figure it out. They may take longer, they may be last to the party. In the end, the only thing that matters is returns. The only question is how long does in the end take? We're in an industry which has very long reaction cycles. You know, you put in the money, you don't get signal for five years, you don't figure it out for seven. So I think the runway at which things can continue is very long, but in the end-
- HSHarry Stebbings
But we could see the opening of retail much quicker than the runway happening. And, you know, we've got Co2 with $3 billion now in retail funds, and we're seeing GC be very aggressive in opening up retail funds. That could come in the next 24 to 36 months, whereas that evolution of poor returns could be a five to seven-year lag.
- TTTomasz Tunguz
You mean there's a mismatch between, uh, uh, assets and liability? I mean, how many times do we have to learn this lesson? I, but I think you're totally... I mean, you look at Blackstone's real estate investment trust. They went, I mean, huge retail. I think 21 billion, huge flood, and then all kinds of redemptions issues associated with that. So I, I agree with you, Harry. I think there's a, I think there's a tsunami of retail capital that's coming into venture, which is another reason to believe why the asset class broadly defined will hit half a trillion before the end of the decade. And because they were liquid assets, they're not marked to market very often, right? T- I mean, the hottest ones, sure, it sounds like they're marked to market every four months. Um, but the ones that, uh, the 2021 marks on the unicorns, they won't be marked to market 12 to 18 months, maybe longer.
- HSHarry Stebbings
Tom, should we do a $10 billion retail growth fund?
- TTTomasz Tunguz
Let's do it. [laughs]
- HSHarry Stebbings
Fucking A. Boom.
- JLJason Lemkin
Only fees. Only fees required. Only fees required on this, on this fund.
- TTTomasz Tunguz
We don't even carry. [laughs]
- JLJason Lemkin
You keep the... You guys keep the carry. We want you to make money. We'll, we'll just take 5% a year in fees. [laughs]
- TTTomasz Tunguz
Yeah, we just want finder's fees.
- JLJason Lemkin
That's enough. Yeah. We want you to capture all the upside. [laughs]
- RORory O’Driscoll
I will say one hard-nosed thing. This is all great until you've had to go in a room and look people in the eye and say you've lost them money, right? When I... I, I did my own business when I was 21, and it didn't work out, and at 26 I had to shut it down, and I had to go into a room and say to people, "All your money's gone." All these folk... You know, we're talking all this great game, but there'll be a miserable part of this when you've taken these big funds, and it was fun, and you put all the money out, and then you realize you've locked in a whole bunch of retail investors to a subpar return for a decade, and that will not be fun. Just remember that. H- H- Hold that thought for five years from now.
- HSHarry Stebbings
I'm not gonna let you read the kids a bedtime story.
- TTTomasz Tunguz
[laughs]
- HSHarry Stebbings
Thanks for ruining that party, Grandpa. Fucking hell. We were talking about 5% fees on 10 billion, and you come in with like, you gotta come in and, you know, throw water on the fire. All right.
- RORory O’Driscoll
You're gonna have to have an annual meeting for 10 years and explain to them why you've made a ton of money and they've lost.
- HSHarry Stebbings
Ah, that's why Jason, that's why Jason doesn't have an AGM. You don't, you don't do that meeting. [laughs]
- RORory O’Driscoll
You gotta do the right thing.
- HSHarry Stebbings
Right, team, before we do a quick fire, are there any final topics that we need to discuss that I've missed?
- JLJason Lemkin
You know, just one since we have Tom here, um, uh, I don't want, want to go over, but I, I just wrote it up today on SaaStr. You know, we're not ending the year with a great IPO market. We're not. We st- when we started this show, 30-something shows together, uh, IPOs were just coming back, and it looked like 2025 would be a pretty good year. Now, in, uh, some senses it's a good year, right? Um, but we're well off our peaks, and the number of deals is not what we thought. Um, Step Hub is, is a mess, right? Um, we have some deals that are a mess. Navan's a mess, even though it's a great company. We're, we're, we're ending the year with an IPO whimper. It's kind of a bummer despite, you know, Cursor hitting, uh, 30 billion in 22 months. It's kind of a bummer.
- 1:21:37 – 1:26:29
Quick-Fire Round
- RORory O’Driscoll
did... This is what we're gonna-
- HSHarry Stebbings
Yeah.
- RORory O’Driscoll
He loves his Kalshi, Tom. It's a pain in the butt, but you gotta deal-
- TTTomasz Tunguz
No, I love Kalshi. It's awesome. It's another new stock market. [laughs]
- HSHarry Stebbings
Yeah, yeah, yeah, yeah, yeah. Thank, thank you. Optimism. Optimism, Rory. See that? We love Kalshi. Thank you. Uh, would you rather invest in Cognition at 12 billion or Cursor at 29 billion?
- TTTomasz Tunguz
Cursor.
- HSHarry Stebbings
Ooh. Rory?
- RORory O’Driscoll
Cursor.
- HSHarry Stebbings
Jason?
- JLJason Lemkin
Yeah, I don't mean to ma- I usually go the cheap one, but the, the, the, the, the, the numbers are just, uh, God-stopping with Cursor. You gotta, you gotta go with it.
- HSHarry Stebbings
All right. Harvey at 8 billion or Lagora at 2 billion?
- TTTomasz Tunguz
I'll go, I'll go Lagora, and that's know- knowing very little about the business. It's just entry price.
- JLJason Lemkin
I'm seconding it. I'm not yet... Listen, I'm only so smart. I don't see the $30 billion exit in the category yet, but it may be ignorance. It may... I believe in the AIGC. I believe in that model. I, I, I met, I met her at the seed round. I think it's a great investment Rory did. But I don't see the $30 billion exit to justify Harvey yet, but it may be my ignorance. Like, if I had the numbers in front of me, I might say I'll do it at 12. Uh, but I gotta go Lagora just for math. I'm backing Tom on this one.
- RORory O’Driscoll
Oh my God. We're, we're, we're in sync again. Entry price counts on this one. Funny 'cause we-
- JLJason Lemkin
Sometimes
- RORory O’Driscoll
... Actually, it's an interesting point. Yeah, you're right, because we didn't do entry price counts on Cursor. Entry price counts when TAM is unclear. Winning is the only thing that counts when TAM is huge. So I think what, our two choices have been rational. Okay.
- HSHarry Stebbings
Love that. Uh, give me a quarter for when OpenAI will go public.
- RORory O’Driscoll
That's not on the list.
- HSHarry Stebbings
Well, think on your feet.
- TTTomasz Tunguz
Q3 '26.
- HSHarry Stebbings
[chuckles] Tom's brilliant. There you go, Rory. There you go.
- RORory O’Driscoll
Late... Yeah. I mean, Q3 or Q4 '26. Stated next year, hasn't started yet. It's already end of the year. You'd wanna be going into, leaning into '27. That was a very good call. Yeah. Sorry. We're well in sync again.
- JLJason Lemkin
I think that's a good idea. I think, I think Sam will come up with so much alternative financing, it'll slip into mid '27. But I think that's the straw man today, would be my guess. Like, that's the plan, but there'll be so much, so many other sources of maybe the government will guarantee it. Uh, who knows who will guarantee the money? But I think it's gonna, gonna... That's gonna be the straw man, but it'll get pushed to '27.
- RORory O’Driscoll
To be fair, we do now know from Intel that the price of a gov guarantee is 10% of the fully diluted common stock. So for $50 billion, I'll gu- gladly guarantee OpenAI myself. So, uh, that, that's been a priced, that's a priced call here. But it is also worth noting that-
- JLJason Lemkin
If you can, if you can guarantee infinite compute, it might be a good deal.
- RORory O’Driscoll
It might be a good deal. Okay.
- JLJason Lemkin
It's not like Sam's seen a lot of dilution.
- RORory O’Driscoll
[laughs] We need-
- JLJason Lemkin
I mean, if I were running OpenAI, I would not be dilution sensitive [chuckles] if I had no shares.
- RORory O’Driscoll
No, exactly.
Episode duration: 1:26:39
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