Sam Altman Offers Trump 5% of OpenAI | Enterprises Fear Frontier Models | DeepSeek Builds Own Chips

1. 0:00 – 1:10

   Intro

   1. RORory O’Driscoll0:00

      It's like rewriting Atlas Shrugged, where John Galt goes to Washington and says, "Why don't you regulate me more? Why don't you take more? Why don't you take us, Mr. Mooch? Grab some of my stuff." What the [censored] are these people thinking volunteering for this stuff? It's madness.

   2. HSHarry Stebbings0:15

      [upbeat music] So what are we discussing? Number one, Washington lifts the Fable Five ban. What does this mean moving forward? Second, OpenAI floats giving the US government a 5% stake. Whoa, Sam, baby. Hold up. Number three, DeepSeek is developing its own chip. Oh, my word. And then number four, Meta Compute launches cloud business, which caused the stock price to jump 10%. Thank God. We've needed it, Zuck. This and so much more in the show today.

   3. JLJason Lemkin0:41

      No one's worried about making their last round high-priced investors' money anymore. Literally no one is.

   4. RORory O’Driscoll0:46

      Every technology company either goes bust or lives long enough to become next generation's IBM.

   5. JLJason Lemkin0:51

      As an employee today, why would you join something that you don't believe will have secondary options? I really think this is a big issue. Ready to go?

   6. HSHarry Stebbings0:59

      [upbeat music]

2. 1:10 – 3:58

   Washington Lifts the Claude Fable Five Ban

   1. HSHarry Stebbings1:11

      We are back, boys. I am no longer at the beach in the UK. I, I... There was one comment, did you see it, in the YouTube, which goes-

   2. JLJason Lemkin1:19

      Are you fried?

   3. HSHarry Stebbings1:19

      "Harry is so burnt," and then it goes, "He looks like a panda." And I was like, gosh, this, this whole holiday vibes thing isn't working for me.

   4. RORory O’Driscoll1:27

      You did look like a panda.

   5. HSHarry Stebbings1:28

      Thank you.

   6. RORory O’Driscoll1:29

      I mean, you had those great big... You looked dumb, but that's okay. Sorry.

   7. HSHarry Stebbings1:32

      [laughs]

   8. RORory O’Driscoll1:33

      I mean, it's a look.

   9. HSHarry Stebbings1:35

      Took us about 45 seconds, Jason-

   10. RORory O’Driscoll1:37

       No

   11. HSHarry Stebbings1:37

       ... but don't worry, we, we're good. Um, listen, we're gonna start-

   12. RORory O’Driscoll1:40

       Pale skin Dwight goes to beach. It's a common, it's a common thing.

   13. HSHarry Stebbings1:44

       Listen, we're gonna start with the news of the day, or one of the most pressing topics, which is Washington lifts the 19-day Fable Five ban. Um, how did we analyze Washington lifting the ban, um, and what it means moving forward for both OpenAI and Anthropic in terms of the permissions they have to get?

   14. RORory O’Driscoll2:06

       It's a quagmire in the sense that you've now... I mean, a space of... You've now been entrapped in some kind of preapproval process, and the fi- they're talking about some kind of structured preapproval process, but that hasn't been finalized yet. But the zoom out comment is, you know, six months ago you could ship s- software like a free man, and now you have to get permission from Washington before you do it. It's a big change, right? How does it pan out? Who the hell knows? There are some arguments in parting the cybersecurity for some process, but it's definitely a big step, and all other things being equal, you'd prefer not to have to get permission from any administration before you can pursue your business. I think part of the reason the US is such a dyna- dynamic economy is because we don't have a ton of debt. Europe does, and now we do. We sneered at GDPR, and here we are.

   15. JLJason Lemkin3:00

       Whe- whether more regulation is better, uh, beyond my scope. Um, I think people have been talking about safety in AI for a long time, which is not the same issue but a, but a related issue for a long time, and I think it's just this is the grown-up state of LLMs and AI. It's just going to have this level of oversight whether we like it or not. Um, at the end of the day, this particular issue seems minor only because Fable's going to sort of a, a, a variable pricing per token pricing in, in a week or two anyway, so most of us aren't even gonna use it because it's too expensive. It's gonna be a, uh, it's gonna be a niche model, at least until it, until it percolates into the standard Opus and Sonnet over the coming months. So the world impact will be minor. The world's changed. To me, Sam Altman offering 5% of his company to the US government was much more interesting in some ways than whether some suboptimal but inevitable oversight is coming to, to, to

3. 3:58 – 13:18

   OpenAI Offers the US Government a 5% Stake

   1. JLJason Lemkin3:58

      the LLMs.

   2. HSHarry Stebbings3:59

      I, I totally agree, and that was gonna be my next point, which is, like, if you take that one step further in terms of government intrusion or government, uh, opinion, uh, Sam saying, "Hey, take 5%," how do we think about that?

   3. RORory O’Driscoll4:14

      Well, if you own 100% of it, now you only own 95. You're kind of a little bit pissed.

   4. HSHarry Stebbings4:19

      Or if you own none of it, you're not very pissed because you're not getting diluted at all.

   5. RORory O’Driscoll4:22

      Yeah, exa- I will happily give you away some of... I'm not... Again, stepping back, what problem is he trying to solve? I mean, I think it's absurd, to be clear, but let's try and go from first principles. What problem is he trying to solve? By definition, it's not any of the security issues we just talked about, which at least are vaguely credible, right? It's not cyber. It's some kind of macro, you know, AI's gonna destroy everyone's jobs, so we gotta give back, right? And they produced a nine-point plan, OpenAI did, like, literally, I think about a month ago th- that, you know, some kind of we've got to rethink everything because of the economics of AI, and they're talking about maybe we, we need to s- we... I mean, let's put it out there, the grandiosity. We're talking about restructuring the taxation system of America to tax more on cap gains and less on income because so many people are gonna be put out to work, out of work because of AI that we want to lower the tax burden on labor and increase it on capital, right? And this is all part of that, and the whole thing is so delusional and so far from where we are now that I just stop listening. You've got a really great growing company, no discernible impact on employment yet. You've got a bunch of issues you've got to sort out because you have been lapped by your direct competitor, and your focus is, A, on telling Congress that they should... You know, remember, for context, i- if they give 5% of Anthropic, it's $50 billion. Your focus is telling Congress that raises plus or minus $5 trillion a year, so you're 1% of it for one year. Your whole donation gets rid of 1% of a raise for one year, that they should restructure their entire taxation system, right? Sure, we'll get right onto that. The House Ways and Means Committee will call a committee. Every lobbyist and... It's like kicking off a process That you won't be able to control, and I predict, it is exact- I mean, it, it does go back to the, the kind of comment on preapproval. You start with preapproval. Suddenly you end up with an ownership interest. Then you end up with a board member, and what the pe- what the... are these people doing? It's like rewriting Atlas Shrugged, where John Galt goes to Washington and says, "Why don't you regulate me more? Why don't you take more? Why don't you take us, Mr. Mooch? Grab some of my stuff." What the fuck are these people thinking volunteering for this stuff? It's-

   6. JLJason Lemkin6:37

      You know, it's funny ... madness. I, I, I completely agreed with you at first, right? 100%.

   7. RORory O’Driscoll6:41

      Oh.

   8. JLJason Lemkin6:41

      I'm like, "This is the weirdest kissing the ring in a weird, corrupt administration where our president made $2 billion off crypto and friends last year in profits, and that's cool now." It's cool for a president to actively trade any stock, his own meme st- coin, and make $2 billion in one year? I mean, the guy's 80. What does he need it for, right? So at first I was with Rory, but then I stepped back for a minute and I'm like, listen, Sam Altman, uh, beyond being the CEO of OpenAI, is one of the most successful investors of our gener- of ever, of all time, right? And, and he, and he knows everything about how startups and scale-ups are run, and he's seen it all. And I think in some ways he runs OpenAI with that playbook in a way the others don't, okay? It's like a super startup, how he funds it, how he thinks about it, the relationships, the scaling. And to me, when I step back, after I had the exact same view as Rory, like this is crazy kissing the ring, crazy stuff. This is not Intel dying. It's like, you know, you give 5% of your company to Shopify like Klaviyo, like Klaviyo did, so they, they don't destroy you. We see this all the time in our portfolio. Like, you don't want to give 40% of your company, right, to your partner, and 5% is not immaterial. What, what I've learned from my portfolio, and I think you guys will agree, is it creates an out- an, an, an unexpectedly large amount of alignment. You get- you sell 5% of your company to $100 billion partner. It don't matter, to Rory's point. It just don't matter if they own 5% of your startup. It doesn't matter if, how, almost how big you are. It is immaterial. But I'm constantly shocked how much that brings you into the boardroom, how it brings you... So my only point is, and I could be wrong, giving 5% of your company to placate the federal government so that you're the good guy now. You're, you get b- you're like Stargate 2.0 when Sam was up there, right? With Larry and everybody. He was the good guy for a little while. I think as an investor, I'd take the dilution.

   9. RORory O’Driscoll8:34

      No, no, no, no, no. I mean, I understand what you're saying, and so I, I, I'm gonna paraphrase. Yeah. Ownership stake with much larger entities align the large entity with the smaller entity, and that's what this is, and it's a good thing.

   10. JLJason Lemkin8:47

       Well, more than I would've expected as a founder.

   11. RORory O’Driscoll8:49

       More than you would've expected, I mean, so let's look at two examples.

   12. JLJason Lemkin8:51

       It's 'cause, 'cause it shouldn't, because it's immaterial to the federal government and it's immaterial to, to, uh, to, to Nvidia taking stakes in most companies. It's ininvi- it's immaterial to the economics, right?

   13. RORory O’Driscoll9:01

       There's two arguments I'll make against that, right? The first is a business one, and then the second is a government one, right? Business one. OpenAI, Microsoft owns 30% of OpenAI. If ownership stake resulted in besties, they'd be besties. They're not besties. They're in a stale marriage looking for a divorce, but can't quite pay, you know, pay the tax, right? It hasn't worked, right? And that's with 30% alignment with a profit-maximizing entity like Microsoft, who is rational, right? Now apply that to the US government. Do you... I mean, the, the idea that because they own some of you, they'll align with you, is just, that's just not the way politics works. Go back. Look at the TARP. And now admittedly, that was when the banks had screwed up, so yeah, they come in, they own a little bit. They don't have voting control, but they tell you who you can pay and who you can't pay, and the weak banks deserve that, but JP Morgan was like, "Why am I getting that?" That's the TARP. If you think, in this case, 'cause not only have you said, "Give me 5%," but you've also produced a document that says, "The things that we're doing are so catastrophically impacted on the economy of this country, Mr. Congressman, that you govern, that you need to redo your entire taxation system." It's about an hour before Bernie Sanders says, "You know, you're right. This is really impactful. Maybe we should go for 50." Because if it really, if you really-

   14. JLJason Lemkin10:19

       And Ro Khanna too

   15. RORory O’Driscoll10:20

       ... are impacting a $30 trillion economy, if that's your, in my view, absurd statement, but you've made it, and Dalio's made it, so you're entitled to own it, right? If you really are destroying labor in a $30 trillion economy, do you think the monster, the political monster, is gonna say, "I'll settle for five. That's grand. Call it $50 billion. You've destroyed $15 trillion of labor value, but we'll settle for five, $50 billion"? They're gonna... Bernie's already said he wants 50, right? And you deserve whatever happens to you, right? You deserve being regulated by the government. You deserve, you know, having to be inclusive. I mean, it, the idea is so pul- But I mean, maybe you get something small and tactical, but it's such a mistake.

   16. HSHarry Stebbings11:05

       Why, why do they do it, then? I, these-

   17. RORory O’Driscoll11:08

       Because-

   18. HSHarry Stebbings11:08

       ... are not dumb people. You're bright, talented, and-

   19. RORory O’Driscoll11:10

       They're very smart people.

   20. HSHarry Stebbings11:11

       Yeah.

   21. RORory O’Driscoll11:12

       And because they believe, rightly or wrongly, that the impact of this technology is so important that all these things need to be on the table. And to be fair, that belief is what gave them the self-motivation and the confidence to raise billions of dollars and, uh, and tell that s- that narrative is what it took. 'Cause if you'd walked in and said, "Hey, I need $10 billion to build some stuff, and it's gonna have a minor impact on, you know, some parts of compute," I don't think you'd have got your $10 billion. You needed to tell a story, like every great CEO. This is the world's greatest fundraising CEOs, right, telling the biggest story, and they told the biggest story, and that's what allowed them to get the, you know, and now $160 billion, right? But once you've told that story, and genuinely once you believe it, and in the case of Anthropic in particular, once all your employees believe it. If you believe this thing is dangerous from a cyber perspective, from a jobs perspective, you just suddenly end up down this road, right? All these things become next-level logical- If in fact the basic premise is correct. And if on the other hand you believe as for what, you know, little old me does, and I'm not them, I didn't invent this shit, but it's like it's a really important technology, but it's not gonna put 15- it's not gonna put f- 50% of the US labor market unemployed, then you believe these kind of preemptive changes and conversations are a wild overreaction and wildly early. And we'll find out which it is. I mean, look, in five years' time, if Dario's correct and 50% of white collar jobs have been replaced by AI, which I don't believe for a second, then you're damn right there's gonna be political, political controversy. And if you think 5%'s gonna feed that beast, you're delusional. If half those nice middle class people in their middle class jobs all across this country lose their jobs to AI, you're gonna... It's gonna take a lot more than, I think it works out to, what, $140 per head, you know, which is what the, um, 5% of, uh, Anthropic would be worth to keep the wolf from the door. So if you believe these things are gonna happen, that's why they do it. I just don't, so I, I'm like, "Whatever, this is a mistake."

4. 13:18 – 22:14

   Why This Could Invite Much More Than 5% Government Control

   1. HSHarry Stebbings13:18

      Is this purely a marketing exercise?

   2. RORory O’Driscoll13:20

      What's... Who are you marketing to?

   3. HSHarry Stebbings13:23

      Congress.

   4. RORory O’Driscoll13:25

      What about yourself? What-

   5. HSHarry Stebbings13:25

      Senators, that you're willing to align yourself, you're willing to play ball, you're open, you're not this, uh, w- wolf stealing jobs, and, and you're participating-

   6. RORory O’Driscoll13:36

      You're not the wolf that you said you were. I mean, a- again, it's, it's like, "Hi, I'm a wolf, but I'm a good wolf."

   7. HSHarry Stebbings13:41

      Yeah.

   8. RORory O’Driscoll13:41

      Right? I mean, i- i- is it trying to clean up the mess you created to some extent? Yes. You spend three years saying everyone's gonna be unemployed because of this thing and it's wildly dangerous, and now you're, like, trying to walk that back while at the same time sucking up.

   9. HSHarry Stebbings13:54

      And if I'm gonna ask you to regulate, or as you said, Rory, last week, I think quite wisely, maybe tax Chinese or open source models, maybe it'd be helpful if we had alignment beforehand. If I'm about to have a big ask-

   10. JLJason Lemkin14:06

       I think Sam is a very thoughtful communicator, and he puts stuff out there early to socialize it, and they seem like little comments, and they seem like exposition, but I think they're all very carefully thought through. And I think the issue is less about... And then Rory just hit this with Bernie Sanders. The issue is less about whether it's a good idea to get 5%. I say do it, like the Klaviyo-Shopify thing, if you think it's gonna work. It's more so it's not 50 or 20. Sam is just anchoring this idea that, hey, 5% will align us with the American people, with the federal government, with the administration, without getting into politics. And he's anchoring this at five rather than 50, um, because, uh, not only does he need the alignment, he's sensing the political wind. So I, I think it's, um... You know, these things seem to come out of nowhere, uh, but I think he's a very interesting communicator. He's a very good anchor in, in a way that isn't triggering, generally speaking, the way he does this. Maybe other things are triggering. And he does a pretty good job of telegraphing where we might end up before it happens, right? Um, so I think it's just anchoring. Maybe it really doesn't matter what we think because it's already happened. The decision essentially has already been made that the federal government will be acquiring a stake in OpenAI, and Sam is just anchoring it as the smallest possible stake to get ahead of this discussion.

   11. RORory O’Driscoll15:21

       Th- th- that hasn't happened yet, to be clear. I mean-

   12. JLJason Lemkin15:24

       Yeah

   13. RORory O’Driscoll15:25

       ... when... That decision hasn't been made. Now, you are right. I mean, the US government, for the first time in a long time, and definitely absent a bailout, has already taken stakes in a bunch of tech companies like Intel, so who knows, maybe it'll happen again. A decision hasn't been, quote-unquote, "taken." I don't think this administration has a decision-making process. But you're right, it's definitely, quote-unquote, "on the table." Just being clear.

   14. HSHarry Stebbings15:47

       Does this change anything for Dario?

   15. RORory O’Driscoll15:50

       To be clear, the proposal from OpenAI, just to be grounded in facts, wasn't we give... OpenAI gives 5%, it was, like, companies should. So the implied statement is everyone should, including, um, Anthropic. It's like a, "Hey, we sh- everyone should give away 5% for the US government." So to some extent, you know, he's volunteering other people's capital, right? I mean, it just all gets to the same... And we started with Fable. It all gets to the same thing. The US government is going to get enmeshed in this, in AI, in a whole load of different, probably contradictory ways, right? It can range from, you know, as I say, cyber danger, to wider regulatory danger, to economics, th- to Chinese open source threats. You're just gonna be enmeshed in politics. And it's funny 'cause, you know, when you watch the internet take off, the whole emphasis was, "Cut us free." And then if you look at two of the biggest deals at the start of the internet, maybe three big... I'm gonna give you three really interesting 1990s regulatory issues that were amazing, amazing for the internet, and the exact opposite of today. One, you had the Telecom Deregulation Act that said AT&T, you gotta be broken up, and everyone's gotta give independent access, which allowed broadband to take off. You had section, I think, 230, the one that said websites are not liable for third-party comments on their website, which effectively is what Facebook, you know, Google, Facebook, and everyone has relied on. So it was a huge amount of free speech. And then the third one was for a long time no sales tax, which you could argue the justice of. But all those things were basically Silicon Valley managed to have a 20-year run with the internet where the message to Washington was, "Leave us alone," and we did great. It's just super int- And now many of those have been revisited. It's just super interesting we're going with the exact opposite approach now, which is, "Hey, don't miss us. Regulate us." You know, putting our hand up and saying, "Pick us. We'd like to be regulated too." I mean, oil and gas must be looking at this going, "Wow, these people are crazy."

   16. JLJason Lemkin17:49

       [laughs]

   17. RORory O’Driscoll17:49

       Like no one down in Exxon is saying, you know, "Oil and gas is really important. Why don't we give Washington 5% and check in advance before we do drilling?" You know?

   18. JLJason Lemkin17:57

       You know, there's a different... Since just 'cause this is 20VC, not that I disagree with any of that, but may- maybe this is too micro of a point. But I think in the age of AI, um, massive dilution has been, uh, sort of institutionalized. Founders don't care anymore. Not all founders. Not all founders. But even, even two years ago, before all of this, before these massive rounds, uh, mo- I would say most folks were fairly dilution-sensitive. Certainly VCs always have been to an extent. Now I find founders... You, you'll look at really hot startups, uh, in the news, and if you peel the layers back and you look at the stub rounds and the up rounds and the half rounds, they've done 16, 17, 20 venture rounds often, right? Even if each one is 5% dilution, 20 rounds at 5% dilution, Rory, help me with the math, it's a lot of dilution. And so... And look at, look at Anthropic. You've got, um, Dario at one-point-something percent equity, right? Sam's at nominally zero. So, a, y- I mean, Anthropic is the most successful startup tech of, of our lifetimes, but the founder owns one-point-something percent. It's just an example, but I see it across tons. Not all, right? But so 5%, it's like nothing, man. It's like I j- that's like the stub round I did last week. I did a round at 10 and then 14 and then 18 and 22 and 29, and TechCrunch runs it up each time, but those 5%s and 6%s add up. They really add up, right? Every Ramp press release, it's so exciting, but I hope they're not too dilutive because [laughs] there's just so many of them.

   19. RORory O’Driscoll19:20

       It's an interesting point, a- and I think fundamentally I don't think either of those CEOs are primarily money vot- motivated. But you are... And just great point, Jason. You are right. It is very different. Like, normally the two winners in a spa- you know, like, if you look at Microsoft, you know, Bill and Paul Allen owned, you know, a good slug each, and even Ballmer owned enough to buy a basketball team at the end of it and was the richest man in the world, one of the richest men in the world. And you're right, it is really odd where one, one of the two CEOs own 1.7% and the other owns zero. You're right. It totally takes the edge off the dilution conversation, 'cause it's someone else's money.

   20. JLJason Lemkin19:55

       It just, I don't... It's not that I say... A- as a seed investor, I sort of hate it because-

   21. RORory O’Driscoll19:59

       Yeah, you should

   22. JLJason Lemkin19:59

       ... I've watched myself be diluted to levels I never even thought would ever happen, right, when I started investing. Like, like literally. So as an investor, you have to internalize and realize it's basic- for me, it's doubling again my entry price, right? As a seed investor, I used to think my real entry price was twice what it looked because of dilution, right? Now I'm thinking it's four times. So Harry just talked about doing a seed deal at 60, right, I think. You're really doing it at 240, Harry, is the honest math today, right? And founders, not all founders... Look, there is absolutely a vibe of, "I'm gonna go through YC. I'm gonna raise six at 60 and never raise again, amen," right? But, but so many founders today after that first round are not dilution-sensitive. And, and maybe it makes sense if it's a huge outcome. It's just different. It's just different.

   23. RORory O’Driscoll20:42

       The only fact-based comment I'll make is, you're right, though the data from Carta, which is always excellent, says that dilution per round is going down, so maybe in part founders are willing to raise more because the dilution per dollar is lower. So maybe so- not the founders of Anthropic or OpenAI, but in general, if the pricing goes up, you know, y- you can do more rounds and end up with the same dilution. I think that's happening in a lot of cases as well.

   24. JLJason Lemkin21:06

       Yeah, but I think what I'm personally seeing, and I think Dario's an example, I'm seeing both. I'm seeing l- smaller rounds, but so many rounds.

   25. RORory O’Driscoll21:13

       Yeah.

   26. JLJason Lemkin21:14

       So many rounds that each round you, you kind of don't mind. As an investor or board member, great. Do, let's... Wow, that's a great deal at 6% dilution. Five- that's not double digits. And then four months later you do another one and four months later, and it's... I, I, it sounds like I'm complaining. I'm just learning. But if I'm doing that 5% to, to, uh, hold off any regulatory issues, man, that, just do it. Just do it.

   27. RORory O’Driscoll21:37

       You are right. I like the learning comment, 'cause you're right. Look, I will admit that one of the areas where I think I may have been too rigid is, you know, you do think about, you know, you don't have hard ownership targets, but you want to have between 5 and 10% of a, of, of an investment to matter. And, you know, you're seeing now, you know, Spark's gonna do amazing and very deservedly they're gonna own 1%-plus or minus. Um, SpaceX, I think founder, who did the original check when the rockets were still blowing up for God's sake, right? Ballsiest check out there. You know, they're sub 5%, at 3 or 4% of SpaceX, right? So you're right, Jason. I think for these huge outcomes, you know, the, the, the mental

5. 22:14 – 36:22

   DeepSeek Building Its Own Chip & Anthropic Talking to Samsung

   1. RORory O’Driscoll22:14

      math and the mental model you had gets really turned on its head, which makes sense if you have, you know, three orders of magnitude larger exit, you can get away with just about anything on the dilution side. Question is, how many of them are-

   2. JLJason Lemkin22:26

      I mean, Ramp's done 12 announced rounds according to Claude.

   3. RORory O’Driscoll22:29

      Wow.

   4. JLJason Lemkin22:29

      So I'm gonna guess it's more like, with stub rounds, like 24 rounds typically, right? I think it's done 24 rounds of funding, right?

   5. RORory O’Driscoll22:35

      A- a- and Databricks is down in the second half of the alphabet.

   6. HSHarry Stebbings22:39

      It was, like, a Series M, that lot. I love the way they actually named it, not just like another late-stage-

   7. RORory O’Driscoll22:44

      I know. I, I-

   8. HSHarry Stebbings22:44

      They really named it Series M. [laughs]

   9. JLJason Lemkin22:46

      It's honest. These are honest found-

   10. RORory O’Driscoll22:47

       Yeah

   11. JLJason Lemkin22:47

       ... these are actually old school founders living in the AI age at Databricks. They're honest, right?

   12. RORory O’Driscoll22:50

       Yeah, regrets? I have none.

   13. JLJason Lemkin22:51

       It's not performative at, at Databricks. [laughs]

   14. HSHarry Stebbings22:53

       You know who I love, though? And then we'll get back to normal scheduling. Carry at Linear. The dude is so disciplined and so focused. He's raised two rounds of funding. He never wants to meet VCs. He really, like, refuses all VC intros. Never meets VCs.

   15. JLJason Lemkin23:08

       But are you sure it's, that's the right outcome?

   16. HSHarry Stebbings23:11

       Uh, yes, it will return my fund one multiple times over, and I'm incredibly grateful to him and the team for doing so.

   17. JLJason Lemkin23:17

       No, I... Listen, I'm not being critical. It's, it's g- it's a beloved product, right, with real traction, and it'll return your fund one. That's great. Sometimes I... Everyone's, to use Rory's term, everyone's talking their game a little bit, right? And so when I, sometimes I see him say that, I agree with him as a founder, right? I love it, but sometimes I, you know, it, it, it, it, it, I hear a little bit of Bryan Armstrong in that. Um, you know, it's, it's a j-

   18. HSHarry Stebbings23:40

       Oh.

   19. JLJason Lemkin23:40

       Because, like, listen, maybe I could have done even better. As great as Linear is, maybe I could have done even better, but I chose to be capital efficient, and sometimes, like, and sometimes I feel like, but was that the right choice in 2026 when the prize is so large? If the exit's a couple billion, 5 billion, it's good. If the exit's 100 billion, right, then you just... I'm not, I'm not literally... I just sometimes wonder when I see it, and I'm not saying that I'm right. W- I'm not remotely saying I'm right.

   20. RORory O’Driscoll24:04

       I, I think what you're weighing off to try and kind of step back, what you're weighing off is optionality versus upside, right?

   21. JLJason Lemkin24:12

       Yeah.

   22. RORory O’Driscoll24:12

       Look, there's no doubt if the, if the prize is a trillion dollars, which it has been in at least three cases it looks like, it really doesn't matter what it takes to get there. You just have to get there. And if skimping on it reduces the probability of getting there even 10%, it's a huge mistake. If on the other hand, the prize is, as you say, a billion or five billion, then raising too much eliminates the optionality of taking that billion-dollar exit, right? And, you know, to be fair to a founder, 20% of a billion-dollar exit is life-changing. Life-changing, especially with QSBS for now. I think the truth is it's different by opportunity. Not every opportunity is an entropic opportunity, and there's gonna be... I mean, Linear's a hard one to place in that, 'cause you squint one way and you go very bounded, very well-executed, will be a great outcome no matter what you do. To your point, Jason, you can see another world where do you have to become something bigger to even matter?

   23. JLJason Lemkin25:09

       I think there's a related point just for founders today that's changed. This, in some cases, insensitivity to dilution is different. It's just different, right? Because if the, if the outcome's massive, it doesn't matter. And the other one that has changed, to Rory's point, and I think this is a positive, um, because it certainly terrified me as a founder, but it's not all positive, is no one's worried about making their last round high-priced investors' money anymore. Literally no one is, because I believe investors have learned to accept 1X when it doesn't work out, without drama, without blocking, without threats. I'm not saying weird PE firms and non-standard investors. They play games all the time. I see it, I see... I'm watching a threat through my portfolio from a non-standard VC right now that is blocking round after round after round. But org- the, the Scales of the world and every- they're, you're not blocking exits, right? And so I think founders, "Oh, I raised it $4 billion, but maybe I exit at 800 and I get a fif- 80 million carve-out," they're just not worried. I was terrified as a founder out of for every round I would get blocked by the douchebags, okay? I just don't see any of that fear exist in founders anymore.

   24. RORory O’Driscoll26:10

       A- and that's, that's true, and you're right. And it never made sense to do it, because the minute the founder wants to sell, you sell. But you're right, I do, I, across cycles, I have seen the, you know, the hedge fund that you let into the last round suddenly just refuse to sign the docs even though it's totally, you know, they're getting their 1X. Anyway, moving on from that, the... I mean, 'cause... Yeah, and it's appropriate, because if you think about the late-stage business, you know, y- you're only taking one risk, which is valuation, which means your downside is, is the 1X. You should be prepared to take that and move on. So you're right. There's no-

   25. JLJason Lemkin26:40

       Yeah, without drama, right? It's just changed all... I think this is the age of growth investing, and the fact there's no downside because your investors won't block that billion-dollar round adds, adds velocity on the, not on the investor side, but on the founder side. Like, uh, I would, I would've taken another round as a founder for sure if I, uh, uh, if I thought it wasn't gonna get blocked. I would've done it in a heartbeat.

   26. RORory O’Driscoll27:00

       And I, I didn't get it at first, Jason, but now I'm getting it. And you're saying... And that's the argument that says if the high price later round is relatively low blocking rights, relatively low dilution, and it gives you upside optionality and doesn't preclude downside optionality, which is my point, then, th- th- then you're saying I would, to be the w- I would be wrong. And in fact, there are cases where if you as a founder are running a company, you're doing 100 million, there's some chance it can be a billion-dollar revenue company. Take the rou- take the late-stage round. It might work if it's a 50% chance it works, and if it doesn't, yeah, you'll have the preference stack. Don't waste the money and you'll still be able to, you know, get out with the exit you would have had otherwise. I don't know if I buy it, but that's the argument, right?

   27. JLJason Lemkin27:45

       I think it's a big ch- but I can't think of a founder I've invested in doing a big round that is worried about the return on that high-priced round. It just, it ju-

   28. RORory O’Driscoll27:51

       I just, I agree

   29. JLJason Lemkin27:52

       And my generation of founders, we were terrified of it. We were terrified of the expectations-

   30. RORory O’Driscoll27:56

       I remember those terms-
6. 36:22 – 42:55

   Meta Launches Cloud Business — Plan B or Masterstroke?

   1. RORory O’Driscoll36:22

      CoreWeave, right? The interesting question, what, what, what does it mean over the longer term? There's two ways both Meta's... I mean, there's two positive scenarios. One positive scenario is they build these standalone models, they take that compute back in and they use it all. That's great. And the other positive scenario is being a hyperscale cloud provider turns out to be a great long-term business. That's great, too. Obviously, the bad scenario is If a whole load more companies go through the same journey Meta did, which is, "Oh, we think we need all this compute, but we don't, we can't build something useful enough for it," and then you're only left with a few buyers of compute, OpenAI and Entropic can clearly use it, and a whole lot of sellers of compute, maybe it won't be such a good business two years from now. And that's the risk, is that it turns out that, you know, right now the assumption, and Zuckerberg said it, is, "Hey, we should invest because if we can't use it, we can always sell it." And that, and this is what you're seeing right now. Everything there is true up until the moment that compute demand isn't there at the margin. That's not happening now, to be clear. It's never been tighter. But if that changes, then all these assumptions go out the window. Then, then the market will say, "No, I'm not glad that you bought this shit and are now selling it to other people. I wish you hadn't bought it at all. Take the hit." But that's not where we are today. Our compute demand still appears to be pretty strong. Right now it's working. But it is odd to be able to get away with having a plan A, reverse it, go with plan B, and getting a 10% lift.

   2. HSHarry Stebbings37:52

      Do you think Zuck will, will execute on the strategy well? Elon did a masterful stroke with it. We've discussed it before. He got a great price for it, single customer, amazing job. It's not easy to do. Do you think Zuck will be able to pull it off?

   3. RORory O’Driscoll38:06

      I think you're phrasing the question wrong, with all due respect. You're basically saying, "Oh, it's a Zuck or Elon. They're both wildly talented." Let's use the d- uh, let's use the calm word, world historical figures, right? Which I think is true, actually, right? I think the real question is, is there another five gigs of demand out there that wants to be satiated? Does Entropic have an open to buy? If, if... The truth is this, if a customer wants to buy something, as every salesman knows, it doesn't take a freaking genius to sell it if you have it, right? If [laughs] if Facebook ha- if Meta has a gig of compute lying around and Entropic, you know, five miles down the, 20 miles up the road wants to buy that compute, I predict that sale will happen, right? If Entropic or OpenAI doesn't want to buy that compute, then all bets are off. So it, that's the only thing it boils down to.

   4. JLJason Lemkin38:53

      Listen, maybe I'm not that bright, but, um, on this, but Zuck also just paid essentially $900 million to hire a head for WhatsApp, right, by investing $900 million into-

   5. RORory O’Driscoll39:04

      Yeah, amazing

   6. JLJason Lemkin39:04

      ... into CRED, right? So it seems to me, I might be wrong, n- not trying to trigger anybody, but-

   7. HSHarry Stebbings39:08

      And just, just to provide context, if Meta invested 900 million into CRED, an Indian company with a f- CEO called Kunal Shah, I believe, and Kunal is now head of WhatsApp with that $900 million investment in CRED, I believe is the context.

   8. JLJason Lemkin39:20

      Yeah. Probably more, right, really, 'cause that was a 900 million investment. Let's... They just paid well over a billion dollars to get someone to run WhatsApp.

   9. RORory O’Driscoll39:26

      Yeah, he's probably getting paid something too, I agree, Andreas, and it was wildly interesting.

   10. JLJason Lemkin39:29

       So, so it seems to me, so, so what's happening there? Well, clearly, and you can see the numbers, the core Meta apps are working well, WhatsApp, Facebook, Instagram. It, this is the engine that keeps going, right? I mean, it, you, you don't, it's not confidential, right? And so in a way, Zuck's treading water while he figures it out, right? Did he overpay for Scale and A- Alex want? May- I mean, probably, right? But it, uh, but he's treading water. And, and listen, a lot of our founders are in this boat. The main engine's working, right? Something's working. I don't have all the answers today in the age of AI, right? My core business is still doing well, and I can either kind of hide from it or I can go maybe too all in without having the answers, but at least I'm in the game. And so as crazy as some of the, and, you know, did Llama really work out? Did Scale work out? I don't know. But when the core is so successful, you stay in the game, and then you rent out the compute. It's okay, right? So I give the same advice to founders that are doing reasonably well. Stay in the game, man.

   11. RORory O’Driscoll40:25

       I think you're totally right, Jason. I mean, the core business is doing amazingly well. Now, one minor nuance, they say that part of the reason it's doing well is the AI is improving their targeting, and I believe that, but I don't believe it justifies the 70 billion or so they're spending. But you're right, the core business is doing well, which means that there's no fundamental fatal error risk in continuing to invest in this new marketplace in, in AI, right? So if you were a Meta board member, not that the Meta board members have any power whatsoever because Mark controls all the votes, but I always think as a board member, one of the big-picture jobs you have, and you have very few jobs, but one of them is if the company is doing something that could have fatal error risk, that is when you at least record a no vote and you say, "I wouldn't do this," right? If the CEO came in to me and said, "I'm doing this," I'd have to say, "You, you've earned the right. You've got a $100 billion cash flow business. I don't understand where you think the 70 billion of investment's gonna get, but you've earned the right to continue to play." So even if there was a meaningful board at Facebook with actual votes, if I was a board member, I'd be saying, I, "I mightn't get it, but you've earned..." Jason's exactly right. You've earned the right to play. You've hedged. In worst case, we spend 70 billion and we're wrong, just like VR. So yeah, I agree. I, the, the... One of my bigger hahs is people talk a lot about, um, the, you know, the, the fact that all the hyperscalers are spending almost all their CapEx and even starting to tap the debt markets, right, to invest in compute. My bigger ha is this isn't, this spending isn't going to s- stop because the supply side says stop. Facebook aren't gonna say stop. Google isn't gonna say stop. Microsoft isn't gonna say stop. Really it boils down to demand side. As long as end enterprise customers, as long as that revenue growth rate, even though it's one-seventh the size of your CapEx bill, as long as the revenue growth rate is 2X-ing and 3X-ing, which is what we've seen from OpenAI and Anthropic even at today's run rate, the spend is gonna come. The demand side is gonna be what shuts off the spigot, not the supply side, and I think Zuckerberg is just the most, the best example of that. He is gonna keep playing as long as there's some hints on the demand side and it's not a fatal error, and neither of them have been triggered.

   12. HSHarry Stebbings42:39

       The supply of money and keeping that money machine rolling, Nvidia starts financing its own demand with Compute Now, Pay Later, essentially letting providers access their GPUs through revenue sharing and credit support instead of paying up front.

7. 42:55 – 50:32

   Nvidia's "Compute Now, Pay Later" Scheme

   1. JLJason Lemkin42:55

      I love it. Now that roundtrip revenue's, like, totally cool and not something you go to jail for, like, let's, let's do it every single place we can find it, right? Let's just, let's just do it. And I'm not saying there's anything literally wrong with it, but, um, uh, go for it, right? And, and, um, capture them early. I'm just shocked with how many folks have screwed this up over our investment histories, how many folks don't just go ultra all in on startups. And let- if you wanna pick YC, 'cause it's the simplest way to go all in, just do it, right? It is such a talent magnet. But why everybody... And, and folks have wa- woken up to it to some extent, but every leader should be showering, um, startups with infinite love their first 24 months. It's the best long-term in- investment you can get. If there's any lock-in or anything at all, show- shower them with love.

   2. RORory O’Driscoll43:43

      And, and, and let's talk about what's going on here, 'cause what Nvidia has said is, and the details matter, is that for, you know, next generation Neoclouds, and one, I think Sh- Sharon AI, which is one of the examples, they did two deals recently. In early July, they actually did a pa- they did some kind of explanation of what they're doing. They're basically, quote, "Selling you the chips up front." So they are gonna recognize that hardware revenue up front, and then they're giving you, as the buyer, the Neocloud, a backstop, that if you can't use that compute, you get kind of put back rights on it, right? So it's basically hedging the risk. And it wasn't clear for me in what I read when the money actually changes hands, but what was clear is they are taking the revenue up front. So it's, it's, you know, as legal as church on Sunday. It's AS 606. They're separating the revenue up front from the guarantee over time, so it's accounting legit. But it is pretty aggressive. I mean, what it's basically saying is the... I mean, their, their push has been to diversify away from the hyperscalers, and they've achieved that. Even though they, obviously the bulk of their revenue comes from a small number of hyperscalers, they are starting to expand their customer count, the, the number of significant customers, and the top three customers. I think, don't quote me on this, in the data center business have gone from the 80s to the 50s or something like that. So they're trying to make all these guys, these new Neo- Neoclouds work, right? And they're leaning in backwards. They're effectively... But the- there's a lot of contingent liability they're taking on, and Jason's right. Yeah, you do that, and it goes back to the same sentence over and over again. As long as the raw demand for compute and intelligence keeps going up and to the right, these deals will look wildly smart because they'll work. And if that slows down and there's excess capacity, these deals will look horrible because you're not just not b- if you're Nvidia, you'll not just be not growing quickly, you'll be de-booking prior revenue. You'll be kind of taking mon- you know, you'll be taking money back 'cause your customer will have gone bust. So it, the whole thing is a derivative bet on keeping this thing going. Not crazy, but that's what it relies on.

   3. JLJason Lemkin45:56

      I don't think in, in, in this point when we record this, that anyone's managing for downside in, in [laughs] in the AI age. I don't think anybody... I think, yeah, we're so far deep into a bull run like we've never seen before. Uh, bubble or not, I don't... I, I... You know, you're managing for downside, I think I'll check out of that board meeting, thank you. Here's my junior associate. [laughs]

   4. RORory O’Driscoll46:15

      You're right, Jason. And I find... I remember thinking a year ago when I realized Nvidia were talking about stock buybacks, I remember saying, actually, I think I said it on the pod, I said, "I wouldn't do that. I wouldn't do buybacks now," 'cause buybacks are a conservat- I actually think if you're gonna be stupidly aggressive with your cash, this is actually a better way, 'cause it keeps the thing going. Now, I do think the time to manage for the downside is when no one is managing for the downside. So there's a little part of me that just goes, "Oh, we're at that stage of the cycle," right? And you know, we remember that stage of the cycle in '99, 2000. It's... And you know, I want to say again, history doesn't repeat. It does rhyme, but it doesn't repeat. These are different companies, different times. But it is interesting. We've reached the point where the number of good customers who can pay cash and have a big balance sheet is tapping out, so you gotta find more customers to keep the growth going, and to do that, you gotta subsidize them.

   5. HSHarry Stebbings47:06

      Speaking of, like, uh, dependence on customers, customers having the money, well, one of the biggest customers for Nvidia is Anthropic. Um, and Anthropic opens talks with Samsung to build its own AI chip. That was on Thursday last week, and then today, DeepSeek is, well, have announced that they are, uh, starting to build their own chips. Is this the natural progression of an ever-maturing industry? Will everyone build their own chips? How do we think about this?

   6. RORory O’Driscoll47:35

      I, last week said I thought it was mad, and I actually saw the comment from Andrzej Meda, who I think is just super smart. Um, he responded to your thread, and his comment was, you know, you gotta own the... There's two arguments in favor of it that I didn't internalize last week when I said, I think it's crazy for OpenAI to be building their chips, and the two arguments were, one, Andrzej's comment, which was some version of you gotta own the compute. If you don't own the compute, you're screwed. Um, a little like the crypto, if you don't own the, if you don't own the keys, you don't own the, the crypto asset. So he was very much viscerally, you gotta extend the whole way down, and I just think he's been so smart about Anthropic in '21. He's been so smart about the need for compute, that that made me pause and think, am I wrong? And then the second thing, kind of more technical, is if you build your own silicon, you can optimize the silicon for your model and probably get way, you know, significantly more efficient than you might do buying a general purpose computing platform from Nvidia and adapting it to your specific model. So there are two arguments that I didn't have in my head literally a week ago, right, in favor of this thing. But I will admit, I still find myself going, if you're at the app layer, and that's where your value is, and then you have the model, and then you have the hosting provider, and then you have the chip, just needing to do that amount of vertical integration just feels weird. But I'm- I don't get it, but I could may not be understanding the big picture is my more tempered approach than last week

   7. JLJason Lemkin49:08

      The only thing that makes zero sense to me is the argument that, hey, at OpenAI, we need to build our own, uh, our own chips because we have very specialized needs that NVIDIA-

   8. RORory O’Driscoll49:19

      Yes

   9. JLJason Lemkin49:19

      ... can't meet.

   10. RORory O’Driscoll49:20

       Yes.

   11. JLJason Lemkin49:20

       I, I, I'm, I, I have a lit- little bit of experience in the semiconductor industry. If, if you're driving that much volume to them and you need a special version of a chip, they'll build it for you. Like, this is not true. Like, okay, frazzle m- fry me in the comments or whatever. I admit, I, I, my, my experience is a little dated. For this amount of dollars, in my ex- limited experience in the semiconductor industry, th- they, they'll, they'll make y- they'll do your own tape out. They'll build you your own. It's so much money, 80%, 50%, whatever the revenue. If OpenAI needs a different chip, and it's really that simple, you're gonna get it. This is just responding to believing that the margins are so high in NVIDIA to survive, we have to recapture that margin. I just think the idea that it's customized for us is just soft language s- 'cause everyone's kind of dancing around being, being, uh, Zuck-esque aggro here, right? Everyone on either side is maintaining relationships, but it makes no sense in my experience. It just makes no sense.

   12. HSHarry Stebbings50:11

       Kling raises $2.8 billion at an $18 billion valuation. It's the biggest AI video business in the world. Uh, it's doing 500 million in Q1 ARR-wise. Um, it's clearly gonna go public on the Hong Kong Stock Exchange soon. Uh, interesting in the f- context of OpenAI shutting down Sora.

8. 50:32 – 57:46

   Kling Raises $2.8B at $18B — Why Did Sora Fail Where Kling Didn't?

   1. JLJason Lemkin50:32

      I think th- there's two interesting things, right? One is, uh, why, why, if, if Kling can pull this off, why the hell couldn't Sora pull it off, right? Why couldn't you build the more cost... I've used all these models, right, inside of Higgsfields, right? We could talk about it. The second thing is it's just more interesting that I wondered, um, so Kling, you said 18 billion, that- that's what they're doing it at, at 500 million. Now, Higgsfield, where Harry and I are both investors, I was one of the first 10 users or customers. Higgsfield just announced they're at 500 million in revenue, um, actually doing 2 million a day now just in credit card billings outside of the enterprise, okay? So however we define ARR [laughs] in today's world, 600, 7, whatever. More, m- 500, 600 million revenue. Kling is just one of the models they use, but it is important to their product, and they're a l- they, they're allegedly raising it 5 billion. So one question that asks, I sort of thought is, is there a Chinese valuation bubble potentially in AI, like there have been in prior rounds? It's a different market, right? And that just creates different dynamics for capital raising, right? For startup foundation evaluations, AI valuations are go- and I don't know this to be true, are going to be meaningfully higher in China than US. It just, by its very nature, it changes how the game is played if valuations are higher, right? 'Cause you got one at 500 million doing AI video models, 18 billion, one a partial layer on top of it that's c- that's cash flow positive at 5 billion. Is that a 3X arbitrage? I don't know.

   2. HSHarry Stebbings51:54

      Jason, with the greatest of respects, you've got DeepSeek raising at 50 billion, a gross discount compared to any Western alternatives, and you've got ByteDance-

   3. JLJason Lemkin52:02

      It's a counterargument

   4. HSHarry Stebbings52:03

      ... ByteDance at 500-

   5. JLJason Lemkin52:04

      I just didn't, I didn't get the 18 billion. It's a question more than a, uh, b- banging my fist on the table, right? Um, but, uh, but the meta learning, I just didn't know that video would be this big, this type of generation, right? Uh, you know that it's big on the consumption side. We just sit doom scrolling all day, right? All of us, right? Um, but I, I... It wasn't clear to me when a year and a half ago when these, when the outputs were pretty crappy, just like a lot of the... It wasn't clear to me that the demand would be so insane. But now that people are actually beginning to build films on these, on these platforms, uh, the amount of video you can consume, it's, it's, it's, it's in- the amount of video you consume is infinite, right? So maybe Sora should have figured it out because it was pretty good. And when I would run all four together, Kling, Sora, Veo, and I forget the other one, the other big Chinese one, 'cause you can run them all on Higgsfield. You can just run them all on videos. I mean, it's pretty... Sora, [laughs] I mean, I, it's kind of a bu- I think everyone thought it was kind of a bummer they shut it down, right? Uh, they just couldn't make it cost-effective, and, you know, a slightly inferior product. Maybe, maybe that's what the market wanted, right? Kling is still pretty cool.

   6. RORory O’Driscoll53:12

      Yes, I also think there's much less freebies on Kling. Uh, they're very quick to charge. I mean, I think that I, uh, from recollection, it's, it's so funny how quick do we forget. I can't remember how much Sora gave for free, but look-

   7. JLJason Lemkin53:23

      Too much probably, right? [laughs]

   8. RORory O’Driscoll53:24

      Exactly. 'Cause the point is that if you're OpenAI, your highest and best, you have another use for that compute that's enterprise-centric, where you can make real money, so you're probably at the margin cutoff. Sora, on a standalone basis, if you were charging, you're right. So that's one comment. I can see if I have a finite number of GPUs and I'm falling behind on coding, there's more money in coding than consumer video. Separate comment, if all I have is a consumer video business and I can validate with a charging model that, you know, allows me to make money, then that's great. I mean, I saw an estimate as well, Jason, for a kind of a 30-second video generation. It's about a buck 30 to $2 in GPU generation costs. It's kind of a rough, very rough estimate. So provided you can get some kind of money from it, there's a, there's a business there. Different business than enterprise coding, where those GPUs from OpenAI presumably ended up. But nonetheless, you're right. Kling has proven that there is a business here and people will pay for it.

   9. JLJason Lemkin54:22

      But you're right. I mean, 500 million to OpenAI or Anthropic today is nothing. Not only did you lose your capacity, to Rory's point, which was the biggest issue, right? It's just not, it's... And not only was it under-monetized, even if they were able to, uh, monetize it at the Kling or better level, it's, it's a distraction. It's n- it's, it's below the materiality line and a lot of, a lot of capacity is used. But for Kling, it's not a distraction.

   10. RORory O’Driscoll54:41

       Totally. It's a, e- exactly, it's a wonderful business.

   11. JLJason Lemkin54:44

       Yeah.

   12. RORory O’Driscoll54:44

       I mean, it'll be interesting to see how it-

   13. JLJason Lemkin54:45

       This is why we get to invest in startups, because the s- distractions can become very large businesses. [laughs]

   14. RORory O’Driscoll54:51

       Yeah. Yes.

   15. JLJason Lemkin54:53

       That might be a lot of great investments, right? Hmm, that's just a distraction for, uh, for us. [laughs]

   16. HSHarry Stebbings54:58

       The most commercially successful AI video product on Earth is Chinese. The top six models as of today on Open Rudra are Chinese. Do you think China's running away with the model there?

   17. RORory O’Driscoll55:11

       I don't think those... I don't know is the quick answer. You have to be more fine-grained. Well, stepping... First of all, the top social network sharing short video was obviously Chinese. It was TikTok, and it got adopted here. They just, you know, competed in the same rough market as Insta Reels and all the others and what. So that's kind of on the pre-gen AI video business. On the gen AI video business, you're right. You know, Kling is the top model. Sora decided they got better things to do, right? We just had that discussion. On the big market, which is obviously, you know, LLM for compute, LLM for coding, look, the US is clearly running away from it in terms of, uh, frontier models, right? And the Chinese counter-strike has been open source models, yeah, distilled in some part, reasonable people might differ how much, uh, off OpenAI and Anthropic, but yeah, they are clearly numbers one to six in terms of the non-closed source financial models. So, so that market, they're running away with it. It's kind of the classic-

   18. JLJason Lemkin56:14

       You know, just one thought I didn't fully appreciate, I just got back from two weeks in China and Hong Kong, which I didn't appreciate being till I was on the other side of the great firewall, is that now I think Jensen was right about, about this, because when you're in ch- uh, China, OpenAI and Claude will not, and Anthropic will not serve you. It's not just a question of being blocked. You cannot access it. Now, you can get around it, right? There are ways, but they try to block VPN access, so you kind of got to side-buy tokens or side-buy things. What do you expect China's going to do, the second largest economy in the world? They're... Of course, they're going to build things that are as competitive or better than we are because you can't even use Claude in China. If for some reason we don't like what's happening in China, we created it by not allowing Chin- And Jensen's point was you better let the GPUs go over there, right? Or they're going to just do it themselves. And you know, literally the fact that even in Hong Kong, which is much more open than China, I just couldn't use, you know, uh, ChatGPT or Claude or the, or the APIs. What do you expect? And, and to Rory's point, you know, probably video's g- they're going to go with it because they have s- they have so much strength there already, so much da- domain expertise, but of course they're going to build it all. You can't even use ours. [laughs] And of course, they're going to be pretty good. There's some pretty damn good engineers in China. They've been working on the internet and software and, and, and AI for a while, and it, you know... This is not... This is a... If we don't like what's happening in China, I, uh, having just gotten back from two weeks there, what do you expect when you can't access the leaders, when you simply can't access them? They're going to build something as good or better if they can, and they can. They can come close. At least we know they can come close.

   19. RORory O’Driscoll57:42

       I think, Jason, you're right, and it's well expressed. I think the only

9. 57:46 – 1:07:16

   Open Source Plateau: Are Cheaper Models Actually Delivering Results?

   1. RORory O’Driscoll57:46

      nuance I'd say would be, don't know if Jason's right, is that Jensen was right that this is the consequences of, you know, us not allowing access to have a front, you know, kind of state-of-the-art chips and then state-of-the-art frontier models. Now, you can decide as a country, going back to the government thing where we started, that that's an acceptable price to pay because you believe the national security issues are significant enough that you want to do that. And I'm deliberately saying that. I'm not saying they are or not. I'm not frankly equipped to assess that. But you... actions have consequences, right? If... And it goes back to when we talked about that famous Jensen podcast with Dourish where they were kind of getting, talking past each other. If you believe there's a national security concern on these models and these chips, then... And it's legitimate and real, and you've made that decision soberly as a government and responsibly, then you can choose to block access to these technologies. But you're right, you can't expect the other side to say, "Okay, you caught us. We give up. We won't have this stuff. We'll build our own." And there will be a commercial consequence to that, and that's what you're seeing here. You're right, Jason. They didn't say, "Okay, we can't have cool, um, LLMs from Silicon Valley. We'll just give up." They said, "No, we'll build our own, thank you very much," and they've done a pretty good job. And now it's interesting, Harry, you just men- I haven't even seen this pre- so I hate talking about things I haven't seen, but Harry mentioned just as we came on the set here that there's, uh, information out from China that they're starting to say, the Chinese government is saying maybe we'll deny access to overseas users to some of the Chinese open source models, which is kind of hilarious in one respect, 'cause we're nervous about using them because we think using them is dangerous, and they're worried about letting us use them because they think letting us using them is dangerous, which is kind of just a zany thing, 'cause both of those things arguably can't, can't be true at the same time, but that's where we are. And it would be very significant in terms of competition, the competitive environment, if Chinese open source models were removed as an alternative going forward. Um, I think that would be obviously pretty excellent if you are, A, a US frontier model. See prior conversation, Jason, you might be right. They might be getting something for their 5%. Or B, you're a US open source model provider like Reflection or Poolside. This would be best thing that could happen. We'll see. I don't know. I haven't seen the press release. Uh, not the press, the... I haven't seen the news story.

   2. HSHarry Stebbings1:00:07

      I just see more and more moving towards open. Did you see today, uh, the co-founder of DoorDash, um, announced that they were moving... I'm getting it up now.

   3. RORory O’Driscoll1:00:17

      Towards open source. Yeah, I mean, everyone's trying to do that 'cause of the expense.

   4. JLJason Lemkin1:00:20

      If there wasn't a more cost-effective answer, we wouldn't be building chips either. It's the same thing, right? The margins... It's just that the... We're, we're reaching... We've, we've... We're now graduated from the experimentation phase, right? And now the, the, you know, we, we have to deal with managing costs. That's what CIOs and companies do weirdly but reasonably well net-net, right? And, and it, it, it's just gonna, it's just gonna accelerate. But it's, but it's, um... You know, it's funny, I'm trying to build this project right now and launch it with, um... And it's got a sufficiently complex algorithm that I can't understand it. I'm not smart enough, right? The folks can fry me in the comments. I just don't... It's an application I cannot fully understand how it works, and I'm using the mix of the models in Replit, which there's... It's Sonnet plus open source, okay? Is basically what I'm using. You can use Fable and, and Opus, but I'm basically using it Can't quite get it right. So I've got... I'm passing it to Fable and Opus, and then I'm running both side by side, Claude running Fable and Opus with Replit. And my point is, after spending about 10 hours in Replit, I couldn't solve this big algo problem I solved in about 20 minutes in Fable and Opus, right? So there's gonna be, even for me, there's gonna be this grade of problems where I lost so much time and money using the N minus one step-down model. I lost a day. Endless cycles. Forget about the money, 500 bucks, whatever. I lost a d- I got stuff to do. I got portfolio companies to rescue with my grand insights, right? I got, I got stuff to do. And, and by using Fable plus Opus, and I'm not sure which combination really did it, I was able to get to the heart of the problem in an algorithm I could not understand. So I j- that's why I'm just saying, I don't know how this all plays out over the coming years, but, but, uh, this is a... As the problems we solve get bigger and more complicated, I'm not sure I wanna waste a day on a mediocre answer that doesn't work.

   5. RORory O’Driscoll1:02:03

      I, I, I, I think you're right, Jason. And I, I, I, actually, Jesse Zhang, the Decagon founder, did a nice post on that just now. It was good. Yeah, basically, he said, "Look, when you're trying new stuff or you don't know the problem or you can't bound the problem, you're gonna use frontier models, 'cause they're smart, and they'll figure out the kn- you know, the unknown unknowns," right? The more it becomes a commoditized answer where you know the answer you wanna give, the more you're gonna push it to open source, right? It was a good paper, totally made sense. And his comment was, you know, we're at the explosions of usage now, so you're seeing a lot of, you know, frontier model usage. It may well be in two years' time that, you know, you didn't need to pay that tax. But right now, if, if the only way to solve the problem is with the frontier model and the problem is worth solving, you're gonna pay for it. Which is why, you know, the m- the open router, you know, all the tokens with, uh, you know, with open source is a little misleading, 'cause all the tokens can be in one place, but all the dollars can be in the other place, to your point, Jason. You know, you... At the end of the day, you're glad you spent that $1,000 to give me the answer in Fable. I don't wanna be dicking around today.

   6. JLJason Lemkin1:03:03

      It was actually cheaper because I needed 10 minutes.

   7. RORory O’Driscoll1:03:05

      Yeah. Exactly.

   8. JLJason Lemkin1:03:06

      It wasn't just more expensive, it was cheaper. It... Soft and hard costs. Eight h- instead of eight hours and 500 bucks, it was 20 minutes, and actually zero, because I get it in my $200 max account, right? So it's free. Um, it's subsidized, but, um, yeah.

   9. RORory O’Driscoll1:03:19

      It's no more than any advice business. There's a reason sometimes you go to the nurse practitioner and then sometimes you go to the heart specialist.

   10. JLJason Lemkin1:03:26

       And we may end up blowing a t- uh, listen, we need help, and there's, there's vendors that do this, right, that are on fire. But we- we're gonna need help making sure that when we use cheaper models, that we're act- it's actually worth it. And I think even in, I, I, I, I'm bored of talking about this subject, but, uh, but you brought up Decagon. Um, if you really go deep on a lot of the data today and a lot of folks doing next generation AI CX, there is some plateauing. And the r- the reason, uh, there is some plateauing is this, some of this pressure to, to contain, to have reasonable costs per resolution, okay? We're kind of standardizing th- this industry around, like, 50 cents per resolution, okay, in CX, right? That's sort of the, the cost, right? It's gone down from a dollar to... So how... Assuming you- you're not just burning venture dollars, if you can charge 50 cents for a resolution, what, what do your LM costs have to be? 25 cents? May- maybe less, right? So everyone going to j- I didn't read the Decagon point, but I'm sure they're doing it. So they're all rushing to say, "Okay, I gotta push this," right? And Fin- and Fin just got bought for $3.6 billion, right? I gotta push the open source thing. I've seen a lot of data. I'm seeing a lot of plateauing, and that may push people back to a limited, more high-end models so that you can get to the next level, so that you can get to 95% true resolution of complex problems instead of, no matter what the internet says, 40% resolution of sort of not that hard problems to solve, right? So, so, so we'll, we'll see. We'll see how, whether this open source stuff, over the next six... Now that we've all internalized it, we may not get all the, we may not get all the benefits out of it that everyone thinks we are.

   11. RORory O’Driscoll1:04:54

       Two comments on that, though. One is yes, um, you're right, but I, I think the point that Decagon's CEO was making is it, it, it's not just a pricing, it's also a latency, it's a response time. There's a bunch of reasons. But I think the meta point is this, I'm gonna make on the CX space. E- everything you said is correct. What I love about it is, if you think about the chasm concept, this is a market that's the other si- the positive side of the chasm. Because implicit in everything you said, Jason, was a recognition that there is an ROI there and the shit works. One of the reasons I like this space is a lot of these other apps companies are wrestling with, how do I price per outcome, right? These guys have a- this market has already gotten to the point where the custom- not, it's not important to vendors, that the customer says, "I get it. I can increase my resolution rate from 30% to 65%. I get it. That's worth... I c- I spend three bucks an email to answer a, a, a query, so a buck or even 50 cents on customer support is well worth it." In other words, it's moving from, I mean, today, it's moving from the experimental side. You know, there's a lot of talk about 95%, whatever bullshit, you know, AI, ROI's not there. This is a category where everyone can articulate the 30% where it is there, and then to your point, they can go, "Ooh, the next 10%'s gonna cost more." That's a high-class problem. Maybe what you're saying is you get, you go from 30% resolution to 65% resolution at a buck a pop, and maybe from 65 to 75 it's two bucks a pop. You'll still happily pay it if you're the customer.

   12. JLJason Lemkin1:06:25

       Probably. It's just, it's just gonna be another, uh, another stage in the evolution of AI, right? Where you can either say, "Listen, I got 20 cents of that 50 cents to provide the best resolution I can," right? And that's, that's a great answer today. But as your competition gets smarter about this and blows by you, it's gonna create a, a, a, an amount of competitive pressure that it'll just be interesting, 'cause it will all have to get much better at this stuff.

   13. HSHarry Stebbings1:06:46

       Does it ultimately provide the value? Microsoft launches two and a half billion dollars and 6,000 people to embed engineers inside enterprise clients, targeting the MIT finding that 95% of enterprise AI pilots deliver no measurable P&L impact. What a positive finding that was. Um, Amazon made the same move two days earlier. Is this

   14. RORory O’Driscoll1:07:10

       A continuation of the shift from a model to a services ecosystem.

10. 1:07:16 – 1:17:04

    Microsoft & Amazon Embed Engineers in Enterprise

    1. RORory O’Driscoll1:07:16

       How do, how do we think about this?

    2. JLJason Lemkin1:07:18

       I think it's gonna fail.

    3. RORory O’Driscoll1:07:20

       Ooh, good take.

    4. JLJason Lemkin1:07:21

       Yeah. I'll tell you why, 'cause we have a lot of FDs at SaaS, 'cause we have so many agents, right? We're working with- we have, like, the best FD at Salesforce, the best FD at all these folks. Not the best, but we have o- some of the best-

    5. RORory O’Driscoll1:07:31

       Yeah

    6. JLJason Lemkin1:07:31

       ... at all these companies, and they're effing great. Literally, the FDs we work with at these leaders, okay, are better than anyone I've ever worked at in customer success or support my entire career, with maybe one or two exceptions. They are so good, the best FDs at this company, okay? And then one leader, not Salesforce, another leader, our FD went on paternity leave for three months, and the new one told us they couldn't fix our bug for three months until the first guy got back. This was a leader, an FD. They said... So my point is, I think this is gonna fail because I don't think there is enough talent to do what we want to do in the enterprise. The idea makes sense to- on a, on a spreadsheet it makes sense. Sadhu's smarter than me, but I, my, today my experience is it's going to fail with all the companies we work with 'cause there's not enough depth to do it. Literally, this is a public company said, "You're gonna have to wait three weeks to fix a fact that your AI is still talking about SaaStr 2026," which already happened. It happened in May. It's now July. We are gonna have to wait until August to fix that bug until our better FD comes back from paternity leave. Think about, this is not someone, uh, and our, this is not someone that was hired last week. Uh, how the hell are you gonna scale this? [laughs] Wait three months to fix the fact that you're talking about an event that already occurred 60 days ago? That's an F, isn't it? I'm gonna throw 10,000 people that were terrible at customer success into solving massive enterprise problems? Uh, g- good luck. Good luck with that one. [laughs]

    7. RORory O’Driscoll1:08:53

       I disagree. I, I think it will work in a ve- in a, in a, in a limited but interesting sense. I mean, stepping back, I, I don't buy for the record that 95% MITs. There was a lot of kinda cases where-

    8. JLJason Lemkin1:09:05

       You don't buy the story. I literally just told this public company leader where we were told it would take three months-

    9. RORory O’Driscoll1:09:08

       No, I buy that story. I totally buy that story. I'm saying the 95%. I'm saying, I don't think 95% of these things fail, but I do buy your story, Jason, which is all of these, even a smart company like you, and you're way more technically adept than 90, 90% of corporate America needs assistance to make this shit work, right? And it's obviously very bad that they couldn't answer that in three weeks, but the solution is not don't b- don't get that support. The solution is someone has to build a business whereby they have, shock horror, two people capable of answering your questions, right? And the big zoom out question, 'cause I actually didn't see this until I thought about it, but I'm now clear on it, is who's gonna meet that need, right? W- if corporate America's gonna adopt all this stuff, and they're who they are, they're an oil and gas company, they're a banking company, and then on the other side of the table you have Anthropic and OpenAI, who are product companies to their core. You're gonna need something in the middle who are services companies to help them adopt, right? And what's interesting that's happening to Microsoft, and oh my God, every technology company either goes bust or lives long enough to become next generation's IBM. Mic- IBM was the enabler to the PC and to some extent the cloud revolution, helping corporate America adopt. When you don't have an amazing product yourself, what, but you do have large enterprise trusted relations, what you do is you sell to those relations the ability to adopt new technology from other people. And to some extent, what I- that's what IBM's been doing for the last 20, 30 years. IBM Global Services has been all about, you know, we don't build e-commerce, we don't build any of these cool things, but we'll help you adopt.

    10. JLJason Lemkin1:10:45

        Yeah, and, and we'll launch your product in 2020, 2030, but that doesn't work today.

    11. RORory O’Driscoll1:10:50

        J- Jason, to be clear, I'm not saying IBM is amazing, and I'm not saying Microsoft would be amazing at this. I'm saying that, and this is a harsh comment for Microsoft, wrapped in a positive one, they're no longer the com- they used to be the company with the new technology, and other people built consulting services to help adopt Microsoft 30 years ago. Now, OpenAI and Anthropic are the companies with the new incredible product, and Microsoft is the more mature company with the enterprise relationships who's gonna build a large services businesses just like HP did, just like IBM did. If you went back and s- read those press releases from 20 years ago, you know, HP, your trusted partner in global services, IBM, same thing, it would read exactly like this. And the summary is, "Mr. Corporate America, you need to adopt this new technology. Those dudes in Silicon Valley are pretty scary. You've never met them before, and they talk about crazy shit like the end of the world. We have been selling stuff to you for 20 years. You trust us, we trust you, we're gonna make this work." And to your point, Jason, you're right. They mightn't make it work great, but it will be better than the enterprise trying to do it on its own. So summary, I think Microsoft will build a huge services business here if they want to, which also speaks to it won't be nearly as profitable as selling operating systems.

    12. JLJason Lemkin1:12:07

        I actually think they're both right. Um, stepping back from it.

    13. RORory O’Driscoll1:12:09

        Yeah.

    14. JLJason Lemkin1:12:09

        I think I-

    15. RORory O’Driscoll1:12:09

        I think they are, yeah

    16. JLJason Lemkin1:12:10

        ... w- because literally we work with the top one or t- two or three FDs at so many vendors, and I can tell you the depth, even at the hot- some of the best companies, the depth is not there. It does not go... And these are not old companies. There is no depth to the FD chart. So I know that these, this is gonna fail. It doesn't, but Rory's also right. It is better than doing it yourself. And so how, just like a lot of things, how this plays out when it doesn't really work because the FDs have no idea how to actually develop this business process change, rather than run the same goddamn Salesforce deployment playbook, it's gonna lead to a lot of tears, but it doesn't mean it's still not better than trying yourself, which is often hopeless, right? But I am right that the depth today just doesn't exist, so a lot of board members and folks not close to it are gonna say, "Let's go do this." A lot of VCs are trying to invest in s- in AI-enabling business, old businesses, right? And I believe if you could attract the talent, this would be great. I just don't, I don't know that, th- there's just not, uh, there's not a couple hundred thousand f- people that want these jobs that are off-the-charts smart. They just, you're, you're lucky... We're, in some ways we're back to the early d- early days of B2B software where you'd have a couple folks that kinda understood how it all works. And no one else could solve the problems on your tool. We're back, we're back that way with a lot of these agentic pro- uh, products, I think

    17. RORory O’Driscoll1:13:28

        Which what it means, by the way, is for the model companies, the rate of adoption of their technology is to some extent a little bit outside their control, which is why they are doing the services business. The biggest problem when I'm picking Exxon or Bank of America rolling out gen AI is not their ability to buy from Anthropic, it's the ability to do change management and application building in the enterprise, and that's gonna be solved by large trusted partners who deliver the services and the expertise. And it's gonna... For the record, I think the interesting point on this, circling back to demand is, if Jason is right and the quality isn't there, that means the adoption cycle will be longer. And the biggest single question on all of this is what's the rate of diffusion of this technology? Because it's, for the first, for the last three years, it's been way faster than the diffusion of any other technology in history. The rate at which, you know, OpenAI, Anthropic got to 4 and 12 billion respectively, uh, other way around, sorry, 12 and 4 billion respectively in GAAP revenue, never before seen, right? If the next 10X takes three times longer because corporate America can't adopt, th- that's gonna have consequences, and I think it's the big question. How quickly can that spend from Anthropic go from 4.5 billion to 40 billion to 80 billion?

    18. JLJason Lemkin1:14:42

        I don't know how much it'll impact the top line, but I definitely think you're r- right in my ex- it's just this, this type of rollout's gonna be slower than folks hope, right? There's just not enough, there's just not enough talent to do it. Whether that really stops Anthropic in the aggregate is a different, it's a diff- it's a different question, right? Um-

    19. RORory O’Driscoll1:14:56

        Yes, but nothing stops, slows down. You're right.

    20. JLJason Lemkin1:14:57

        Yeah.

    21. RORory O’Driscoll1:14:57

        It's not a stop, it's a slowdown. You're right, Jason, it's a slowdown. It's a question of how fast.

    22. HSHarry Stebbings1:15:01

        I'm, I'm gonna take us on a totally different tangent-

    23. JLJason Lemkin1:15:03

        I'll tell you what, just as an aside, sorry to go into the details you don't wanna hear. One thing I learned that was really interesting, it's at our SaaStr AI annual this year, we had a CPO panel and we had the CPO of Harvey there, who came from Muplin. You guys might know this, but I, I learned something, right? Every deployment they do at Harvey has an FD and a lawyer. Every single deployment has a lawyer, right? And so to the extent Harvey can bring in, uh, and I'm sure they do, I wanna go deeper on this, to the extent they can bring in consulting firms and Microsofts to deploy them and maintain that, like, uh, that'll work if they're like a three-way team. But it just, it's just interesting, if you have a lawyer and a very experienced technical resource deploying Harvey, which has a high price point, right? You can, you can afford it. That might be what you need to have a successful deployment there. And can you... Rolling this out to generic B-tier or C-tier people today may not just be successful, but that clearly works. But I just didn't... It- it's Captain Obvious, but I don't think most of the companies we work with deploy a deep subject matter expert and an FD at the same time together as a team.

    24. RORory O’Driscoll1:15:59

        It's a good point, and it makes sense because if you think about it, when all you're buying from the vendor is a database, all you need is a database, um, expert. But when you're buying from the vendor intelligent answers about your own business, and if you're, I'm going back to if you're running Exxon, right? You better be damn sure that those answers are grounded in oil and gas facts. And you're right, actually, it's an interesting combo. Probably everyone will be some combo of tech expert and domain expert.

    25. JLJason Lemkin1:16:22

        It's a good combo.

    26. RORory O’Driscoll1:16:22

        And that's why these services companies will be tricky to build, to your point.

    27. JLJason Lemkin1:16:26

        Yeah, they go in, they learn about how your entire law firm's business process works, and they map it against Harvey, right? Um, that's very... Like, I would love to, like, that'd be great if these services companies can do it. I just, I'm skippy, but, uh, maybe.

    28. HSHarry Stebbings1:16:38

        Ashton Kutcher, one of the most successful investors of the last few years in terms of SPVs and OpenAI-

    29. JLJason Lemkin1:16:44

        Yeah

    30. HSHarry Stebbings1:16:44

        ... Anthropic, um, Sound Ventures, obviously his firm, announces he's leaving his own VC firm, and he's gonna start a new VC firm with Morgan Beller, uh, previously at Andreessen and then NFX, and now starting her firm with Ashton. Um,

11. 1:17:04 – 1:21:19

    Ashton Kutcher Leaves Sound Ventures

    1. HSHarry Stebbings1:17:04

       it's a notable move in the world of venture, I guess. New firm, one of the biggest AI investors of the last few years. Jason, what did you think?

    2. JLJason Lemkin1:17:13

       You know the gossip. I need to know what really happened. Uh, I mean, on its surface-

    3. HSHarry Stebbings1:17:18

       They've known each, they've known each other for years

    4. JLJason Lemkin1:17:18

       ... it's just crazy to leave your own firm, right, like this. It's one thing, it's one thing if you're managed out, right, and, and, and, uh, or something like that. That can't be the case here, right? I mean, this is the guy from That '70s Show. I mean, we need him in the, in the fund, right? Um, maybe he was managed out. That, I find that un- unbelievable, right? Unbelievable, right? To leave it behind like this, um, it's ju- it's just, it's interesting, right? It's like, in, in a way it kind of reminded me of Jack Altman, um, raising-

    5. HSHarry Stebbings1:17:45

       It raised a lot of money as well

    6. JLJason Lemkin1:17:46

       ... a massive amount for a solo GP fund and joining Benchmark. Like, these are counter, these are things that make sense today, but just a cou- when we, almost even when we started this podcast, they wouldn't even make sense. Like, what, Jack, why? And I, and I love Jack, but why would you raise a half billion dollars and have LPs dying to fund you and go join Benchmark, right? Because it makes sense in 2026.

    7. HSHarry Stebbings1:18:03

       And Jason, Sound has raised a lot of money. Like, they've, they've got-

    8. JLJason Lemkin1:18:06

       Yeah

    9. HSHarry Stebbings1:18:06

       ... yeah.

    10. JLJason Lemkin1:18:06

        Billion dollars. They're in some good names, right?

    11. HSHarry Stebbings1:18:09

        Yeah.

    12. JLJason Lemkin1:18:09

        I'm being facetious. [laughs]

    13. RORory O’Driscoll1:18:11

        No, no. I mean, yes, they're in some excellent names. And that, you know, frankly, we've co-invested with them in some deals. They've been wonderful to deal with. I actually think it's simpler than this. I don't think there's a... And I c- I could be wrong, and I'm usually a cynic in venture. And, but I actually don't think there's a deep dark story here of bad, of, you know, plot. I don't think any of that applies. I think this guy is so successful. Like, why do venture firms hang together and paper over the story? 'Cause, you know, the asset is the firm and the name, and even if you hate each other, you wanna manage the process well so you can keep the thing going, 'cause the firm has a brand and a reference, right? And therefore, you know, I, I know many situations where effectively partners look at each other and say, "I'm mad at you, you're mad at me, but we're gonna hold this thing together." None of that applies here. He's Ashton Kutcher. He doesn't need to... I mean, I, I, I knew who Ashton Kutcher before I knew Sound Ventures, right? If he wants to go do something else, it's just cleaner to say, "Now I'm Ashton Kutcher doing this. I'm doing..." I think it's very much seed, pre-seed, deep tech. It's a new thing. I mean, I think very few people are in the position whereby the name is such that they don't have to worry about the firm brand. They just say, "I'm a famous person who's..." For the record, I'm sure most people when he started investing would've had a little sneer, and he's killed it. I've been, I'm a famous person who's now been a brilliant investor, and now a famous person in doing DeepTech seed. So I, I actually get the impression from the vibe from the folks I've talked to at and near the firm that there's much less of this angst than you think, and just two people wanting to do different things. 'Cause look, a lot of the OpenAI and Anthropic's brilliant investments were late stage, you know, obviously multi-billion dollar pre-monies, which is very different than DeepTech. So I think the beauty about being a famous rich person in America is you can pretty much do whatever you want, and if you're TV famous and movie famous, you don't have to worry about your brand, the firm's brand name. There are very few people... There are very few investors where I know the name of the investor, and it took me months later before I figured out the name of the firm. This is one of the few investors on the planet where it's the investor name. I mean, to this day, if you said to a bunch of people, "Who's on your cap table?" And Stan was an investor, they'd probably say, "Ashton Kutcher's on my cap table." Right? So the name doesn't matter. It's never-

    14. JLJason Lemkin1:20:22

        Yeah, but there's only, like, six brands in Venture anyway. The, the, let's not exaggerate how many brands there are

    15. RORory O’Driscoll1:20:26

        And there's not one, and Ashton Kutcher's more famous than all of us, so move on. It's, it's like, you know... I'm willing to bet there are more... If you check Google Trends, he gets more searches than Sequoia, without even blinking. 'Cause 330 million people have some sense of who he is, and maybe 3 million know who Sequoia is.

    16. JLJason Lemkin1:20:42

        I'm with you. Listen, we can move on. I just... Even for me, and I... Listen, I'm a solo GP who would not deal with any of this crap today. I would s- if I had a CFO that was working, if I had investor relations working, if I could stand my partner, if I liked my partners, if I liked coming to work, I would stick... Even if I had to get, get some of them out, I would stick with my entity if I liked all the stuff around it, all the, all, all... It's, it's just, uh, not that you can't rebuild everything, right? It's not that there's no equi- I don't think there's any equity in the brand, but if the engine is working, I'd rather, I'd rather just stay. I'd rather just stay.

    17. HSHarry Stebbings1:21:15

        Boys, you can choose one more topic. What topic should we discuss?

12. 1:21:19 – 1:26:55

    ElevenLabs at $22B

    1. JLJason Lemkin1:21:19

       Well, look, I think you hit a lot of good stuff. The, the one that maybe we've discussed before but I still think is a, is a topic that, that resonates, right, is the, um, the ElevenLab. I added this one, the ElevenLab secondary at 22 billion, right?

    2. HSHarry Stebbings1:21:30

       Yeah.

    3. JLJason Lemkin1:21:31

       I don't think... Like, it's a high valuation, maybe that's interesting, but I think the growth in today's world, it's, it's consistent with other rounds. So I don't think the price is actually that interesting. I do think, even though it's not a new topic, the, the one I said is interesting. It's like, as an employee today, why would you join something that you don't believe will have secondary options? I really think this is a big issue. Like, one issue is why would I join you rather than Anthropic, right, where I can make so much money, or OpenAI. But there's plenty of reasons to not join an Anthropic and OpenAI, we could talk about that, right? They're pretty big companies. Your role's gonna be very narrow, right? It may not be the job you want. Um, ElevenLabs probably is more agile than Anthropic or OpenAI, right? Your job is probably a, a little bit more interesting in some, for some folks. But Jesus, if I was a ta- a hyper-talented employee, I would not wanna go somewhere without liquidity. I, it just doesn't seem worth it today. It just... And, and so it's just question, do you have to create this as founders? What do you do if you're close to this level? Because the liquidity is thi- there's only so many ElevenLabs that can pull off a tender offer of 22 billion, right? They're there, and then... But if you're not quite at that level, they go away. [laughs]

    4. HSHarry Stebbings1:22:35

       Well, do, do they-

    5. JLJason Lemkin1:22:36

       Right?

    6. HSHarry Stebbings1:22:36

       You see Clay do... I know, I know it's much smaller, it's, it's 5 billion, but they did a tender offer of five. And so you see-

    7. JLJason Lemkin1:22:43

       Yeah, that's the minimum. Like, I'm not saying... There's some line where you can pull it off, but maybe... And I'm not saying this literally with Clay, but sometimes with something like Clay, even next year you might not be able to pull it off, right? What if it's a little bit soft, right? There's only a handful of companies that can always pull it off like clockwork, right? There's only so many Databricks' and, and OpenAIs. But what, uh, but that's a good- Why would I join anything sub Clay? Because even if the nominal valuation's three instead of five or two, if there's no regular liquidity program, why, why would I join it? Why would I join the startup? Life's too short, man.

    8. RORory O’Driscoll1:23:13

       No, I disagree, because i- it, it's incorrect framing, Jason. I, I don't... 'Cause it, the point is this. If you join something that's already doing tender offers, right, then you'll get an equity grant reflective of the fact that we're already doing tender offers, so it'll be slower. If you join something that never does a tender offer ever, then you, then you lost. The whole trick for f- employees, just like it is for VCs, is to join something that isn't doing a tender offer today, get a healthy grant, and join a company that within a year or two, when you've vested 50, 60% of your things, starts doing tender offers. So I'm just... It's a slight nuance. You said, "Don't join anything that isn't doing a tender offer." I think it's different-

    9. JLJason Lemkin1:23:53

       I mis- but I just misspoke. I meant to make the-

    10. RORory O’Driscoll1:23:55

        Yeah

    11. JLJason Lemkin1:23:55

        ... exact point you're making. Why is a f- why would you join anything that you don't have high certainty is... Not just they're gonna be a unicorn, 'cause it's not good enough, that they're going to have tender offers, right, in the next 24 months.

    12. HSHarry Stebbings1:24:06

        Jason, how can you, how can you know? For people listening, how can you know if something's gonna have-

    13. RORory O’Driscoll1:24:10

        I mean, two years is hard, but I think in the end, look, it, it doesn't actually change things all that much. It's the same as whenever you join a startup, right? You gotta join startups that have the potential for big upside. And you know, it's no d- look, 10, 20 years ago, it would be go public. Now, that window takes 12 years in some cases, so you gotta have something else, and tender offers are the proxy for public. Anyone who joins a startup does it for two reasons, and I think you have to start with mission. Second one definitely is chance of a payday, right? So I, I tell everyone, and it's funny, I, I say this to them. I tell everyone that I op- on the operational side, "Hey, you're a single shot VC. You gotta pick only one deal and get it right." And I always say to them, "Look, when you come to choose a couple companies, and if you want any random VC input, feel free to ring me and, you know, maybe I can give you perspective." Very few people do. It's just funny that way, right? I think actually, one of the things I often look at is how operators make decisions, and there's a lot of things that get fed into it, and maybe there are perfectly good other reasons. You like the people you're working with, you like the market, it has a mission. But from a pure stock picking perspective, Jason is right. The, the, the mission, the job at hand is to pick a company that within one to f- three years will be a unicorn, will be tender worthy, and yeah, and then you make out like a bandit. And it's, it's a hard thing to do. We get 20 shots and... I mean, I feel guilty almost. We get 20 shots on goal and they get one.

    14. JLJason Lemkin1:25:37

        Well, if you're leaving every year, you might get 20, depending on, uh-

    15. RORory O’Driscoll1:25:40

        That's true

    16. JLJason Lemkin1:25:40

        ... I'm not quite sure. It's, uh, it's just there's sequential f- employees are sequential venture capitalists, right? They're just sequential rather than parallel. Um, you know, um-

    17. HSHarry Stebbings1:25:50

        Down those vesting schedules. Fuck, uh- [laughs]

    18. JLJason Lemkin1:25:54

        Well, now that there, now that there aren't even vesting schedules at OpenAI and Anthropic, those issues have been solved, right? A lot of startups don't have vesting schedules for top employees, right? It doesn't mean you vest into all your stock, right? Sorry, they don't have cliffs. You vest until... You don't have a cliff, right?

    19. HSHarry Stebbings1:26:06

        No cliffs.

    20. JLJason Lemkin1:26:06

        That problem's been solved by eliminating cliffs, right?

    21. HSHarry Stebbings1:26:08

        Boys, this has been fantastic. Uh, I, I've so enjoyed this. It's so nice to be back in the studio. I was not enjoying the holiday setup. I like to be, like, in the studio for this. Um, but you've been awesome, so thank you so much for joining me. And Rory, we've got to let Jason go back and deliver insight to his portfolio.

    22. JLJason Lemkin1:26:25

        Yeah, they need that profound, those profound insights on, uh, you know, uh-

    23. HSHarry Stebbings1:26:29

        [laughs] That they can't get on X.

    24. JLJason Lemkin1:26:30

        Have you, have you looked at o- have you guys looked at open source?

    25. HSHarry Stebbings1:26:33

        [laughs]

    26. JLJason Lemkin1:26:34

        Have you thought about managing your token spend a little bit better?

    27. HSHarry Stebbings1:26:37

        [laughs] Can we increase sales? Is that a... Can we do that?

    28. RORory O’Driscoll1:26:41

        You know, I, I, I've long since internalized and tell my CEO, "I'm actually not here to give you insights. I'm simply here that if we're driving the thing off the cliff, I scream stop." That's probably [laughs] the only value add. Other than that, you guys are gonna figure it out. That's the way it works.

Episode duration: 1:27:05