Sequoia Leaves London, Close Scout Program & End Evergreen Fund | NASDAQ Loses $2.5T in 24 hours

1. 0:00 – 1:01

   Intro

   1. JLJason Lemkin0:00

      China loses big time here. China's gonna lose. It's gonna be harder to not only sell GPUs to China, it's gonna be harder to just host them across the border. It's gonna all get shut down.

   2. HSHarry Stebbings0:08

      So what do we chat about this week? Well, big changes afoot at Sequoia as they leave London, they shut down Scouts, and they merge into one core team. Then we have Jensen Huang, been a busy boy at Nvidia, which we will discuss. And then we have Anthropic. Where will they go out? How will it be received? And what is the impact on that on the broader AI economy? This and so much more in the show today.

   3. RORory O’Driscoll0:29

      It is far better in an IPO to start low and go up than to start high and come back. You'd much prefer to be these guys than OpenAI right now. They're gonna have the money, they're gonna have the float, and they're gonna be true with the private egging bowl bullshit. No one in 2026 is gonna say, "Yeah, I love me those tech bros."

   4. HSHarry Stebbings0:45

      Ready to go? [upbeat music] Boys, [laughs] so many things happened this week. Uh,

2. 1:01 – 1:41

   Sequoia Restructures: London, Scouts and Evergreen

   1. HSHarry Stebbings1:01

      I'm very, very much looking forward to hearing the different perspectives. We're gonna start on Sequoia. Sequoia made a lot of changes this week. They announced, number one, they'd be departing their London office, uh, and some of the team would be moving back, some would be moving on to different things. Um, they announced that they were ending the Scout program. Uh, they announced that they were having one team in terms of a early and a growth coming together. Um, [lip smacks] there were some personnel changes around it, but those were the core structural elements. Now, I think they're actually very meaty in their own right, and so I'd love to break them down. Sequoia deciding-

   2. JLJason Lemkin1:37

      Well, for what it's- I want you guys g- know them better than me, but I thought you missed the most interesting

3. 1:41 – 7:05

   Why Sequoia Is Ending the Evergreen Fund

   1. JLJason Lemkin1:41

      part of what I read in it, was getting r- winding down the Evergreen program. That, I don't care about the other stuff. I mean, there's partner drama. People are gonna come and go. No question in the SF Bay now, the kids from London are gonna drop by the office, and no question it's better to be local and close, like 20VC is. Like, all- we can talk about all this stuff forever, right? But man, the idea, which sure feels like it's back again, that you should hold these assets for, for decades, right? Generational assets for decades. What, what the hell happened there? Why the hell are we winding down the Evergreen fund? It's the... Not withstanding a few bumps this week with Jensen, what if they'd held all their Nvidia stock till today, right? That'd be a good one.

   2. HSHarry Stebbings2:18

      [laughs]

   3. JLJason Lemkin2:19

      What about all our Google stock? I mean, literally, what the hell happened to the Evergreen idea? What the hell happened? This is the best idea in venture ever. You have the dominant brand, right? Hold this cra- and then fal- and then m- my understanding reading about it is the LPs weren't allowed to leave in this Evergreen structure. You're pretty much stuck, right? So why, why do it? Once, once you got a, a couple hundred million or a few billion, go Evergreen.

   4. RORory O’Driscoll2:40

      No, actually, I, I thought the Evergreen structure, which to remind listeners, basically said it basically really incented or almost pushed LPs to allow Sequoia to continue to hold long after a public offering because they correctly analyzed and said, um, you know, "No matter how well we do as a venture investor, the real money is made after the IPO if you..." 'Cause, you know, they've been, uh, something absurd like 25% of the NASDAQ, so by definition, if they'd held all those stocks, they'd own a big slug of 25% of the NASDAQ.

   5. JLJason Lemkin3:10

      [laughs]

   6. RORory O’Driscoll3:10

      And so it's true. It's arguably almost always true that if you hold a port- a diversified portfolio of really interesting tech assets, over the long term they have, you know, compound well above, you know, any kind of S&P return. So the idea of, "Hey, why don't we just say we should hold them?" It wasn't illogical, and that was the thinking behind doing the Evergreen fund. There was probably three problems with it, though, right? The first problem is they picked a horrible time to do it, because, um, they implemented in '22, '23, which was when, you know, stocks actually turned down. And you know, over 20 years, that doesn't matter, but if you decide to make everyone hold stocks and then a year later they go down 30%, it hurts. That's the first thing. The second thing is LPs don't like it, 'cause they have different liquidity needs, and you wanna be able to make your own choices. And then the last thing, which is a super interesting one, you should always think about the comp plan, right? It's... A- and you know, how to put this, the individual partners in any venture firm can decide to hold their stock forever, right? And they, and once you've cleared carry, they get all the return they're gonna get from doing that. You know, if I was lucky enough to be Sequoia and lucky enough to do Cisco and take it public in, I wanna say '86 at 400 million market cap, I can hold my shares, I can distribute to my LPs, and they can make their own choices. Now, in retrospect, a lot of them would look back and go, "Oh, I wish I'd held my Cisco stock." But now you're basically trying to force LPs to take their own medicine. It's like, "Damn it, you want to sell the stock, but I'm gonna make you hold it." It was just, frankly, it was complex and trying too hard. It was, it, a- again, going back to first, it is intellectually correct in the sense that if you hold a diversified portfolio of, let's call them, high quality Sequoia-backed venture, Sequoia-backed venture companies that go public, you know, you'll have lots of variability in that portfolio, but in the end it'll be a compelling portfolio. So it wasn't a crazy insight. It's just trying too hard, too much complexity. So I think getting rid of it was just a, you know, "Let's keep it simple here, people. We can still make our money." So that made sense to me. Sorry, that was a bit longer than I thought.

   7. JLJason Lemkin5:06

      No, maybe when you have a CFO running the place, it makes sense. Like, it all makes sense on a s- that's what CFOs do. They make it, they ma- it all makes sense on a spreadsheet, right? It was interesting, you know what, I was watching something that Ho Nam from Altos Ventures said, who talks a lot about generational investments, right? But he said they set up a series of continuation funds to do this, right? So that LPs could exit if they wanted, um, and stay in if, if they didn't in their, in their funds. Um, I, I assume that if you, if you did that perfectly, other than Some conflict on how those funds work. It, it, it lets folks go each way, right?

   8. RORory O’Driscoll5:34

      Yeah. But y- y- the odd thing is you've already been fully paid for what you're doing. So now, as I say, now you're basically giving the LPs their vitamins. You're basically saying, "Damn it, you will hold these stocks 'cause it's good for you. I've already made my money." So look, I mean, we're gonna talk about Nvidia in a while, and one of the things we'll mention when we get there is that there's a Sequoia partner on that board from 1993, and I bet you he's held all his stock and I bet you he's worth a couple of billion bucks. So, you know, you can do what you wanna do individually, but I don't know if every LP in Sequoia would really have wanted to hold that stock from the n- from the IPO in, what was it, '95 or '96, all the way to today. So I, I... To me, that one was an easy give. Let's stay with Sequoia on the other stuff, though. Sorry.

   9. JLJason Lemkin6:12

      You know, the other, the other meta thing about Sequoia, just, um, I mean, I know it's captain obvious, but I think for founders and others it's a reminder the institution may be durable, no particular partner may be durable. The CFO who's the CEO's gone. All the London partners, gone. Bunch of the US partners, gone. Now, listen, this is a, this is an organization designed to make a, a buttload of money, and it is not a nonprofit. So it all makes sense, right? It all, it all makes sense. But, uh, you know, it is [laughs] if the... Founders think of, of sometimes their VCs being more permanent than they are, right? I, I, I float in and out. But, uh, like most things, the longest lifespan is the founder/CEO, right? Like Jensen. Like, the longest li- the, the founder/CEO, odds are, will have the longest lifespan in tech. [laughs]

   10. RORory O’Driscoll6:54

       Uh, actually I might argue that, but it, but the, your, your selling point is the right one. Change is the only constant there, and I give them credit-

   11. JLJason Lemkin7:00

       Yeah

   12. RORory O’Driscoll7:00

       ... for making change.

   13. HSHarry Stebbings7:01

       I, I think London's important. I think a lot of people-

   14. RORory O’Driscoll7:03

       Yeah

   15. HSHarry Stebbings7:03

       ... use this moment-

   16. RORory O’Driscoll7:04

       Well, clearly, cl-

4. 7:05 – 9:13

   Why Sequoia Thinks It Can Cover Europe From the US

   1. RORory O’Driscoll7:05

      clearly that's not an opinion shared by everyone, but keep going.

   2. HSHarry Stebbings7:07

      Well, I think it actually is. Um-

   3. RORory O’Driscoll7:10

      Yeah, I know. It's not. It's not

   4. HSHarry Stebbings7:10

      ... and I think when, you know, when you look at Eleven Labs, which is a phenomenal investment of Sequoia's, and Dollar App, which is an in- phenomenal investment of Sequoia's in London, and Odoo, a great investment in Europe too, and Bolt, I think bluntly what they're saying is, "Europe does have great assets, but we feel we can sufficiently cover it from the States."

   5. RORory O’Driscoll7:30

      Yes.

   6. HSHarry Stebbings7:31

      Which I don't disagree with.

   7. JLJason Lemkin7:32

      You know, one thing I will add, and there's obviously two sides to all this. I, I believe in being close to founders. I, I believe there's value in a London office. We can talk about it. But I will say, I don't get invited to all the things you do, Harry, um, um, but every, like, elite, like, event or dinner I'm at, Marty's there, okay? Half of them, Anton's there. I mean, it's hard enough to get to the Bay Area from London, but it's cool, but getting there from, from Sweden is a PIA, okay? But I mean, I don't need to go... Uh, forget about ra- You know, you wanna be in the deal and you wanna close it quickly, but, uh, especially if I'm not doing the pre-seed or something, I don't think I need to go there to meet these guys. They're everywhere. And, and kudos to them because it's, it's work, right? Um, it's like you don't... I would almost think Eleven Labs, and if it wasn't for, for Anton's accent, I would think they were Bay Area companies. I genuinely would. I... They're everywhere. They're everywhere. And so it is... Like, I, I do think pre-seed you wanna be local, right? And you could... Y- you're there. You could challenge later. I genuinely believe when it's not captain obvious. But, but if, but if Marty wants Sequoia, he's there every month. You're gonna... And, and, and, and you're gonna meet him. You're gonna meet him. And Sequoia has a good enough brand, you, you're gonna get a shot to put a term sheet in front of him. And if you're willing to pay up, you, you know, I don't know if it's so crazy. But again, pre-seed, I'm, I'm murky on this. I'm murky on pre-seed. It's, you gotta roll up your sleeves to do that job. That's, that's the Lord's work, the pre-seed.

   8. RORory O’Driscoll8:49

      Yeah.

   9. JLJason Lemkin8:49

      Yeah.

   10. RORory O’Driscoll8:49

       And accepting all that, you go back to decision, it was the right thing for them. I mean, I think does it-

   11. JLJason Lemkin8:53

       For them.

   12. RORory O’Driscoll8:53

       It's-

   13. JLJason Lemkin8:54

       Yeah, for them. Yeah, yeah.

   14. RORory O’Driscoll8:54

       You're, you're trading off something which is maybe a little less coverage early on in the UK, but you'll get the good ones. And I think it's, uh, to... It's what you said, Harry. It's all about focus. We need to just get everyone in a room. We need to get our shit together. And I give them huge credit. They are always good at reinventing themselves.

   15. HSHarry Stebbings9:10

       One thing I didn't really get, I always did think the Scout program

5. 9:13 – 11:56

   Why Sequoia Is Ending the Scout Program

   1. HSHarry Stebbings9:13

      was relatively little lift for a very significant advantage, and I, I, I was surprised to see that. I don't know if you have an opinion there, but that one just seemed strategically, huh.

   2. JLJason Lemkin9:24

      Well, it did get cloned. It was be- I think it worked better when it was a secret.

   3. RORory O’Driscoll9:27

      Totally.

   4. JLJason Lemkin9:28

      [laughs] They were years ahead of everybody else.

   5. RORory O’Driscoll9:32

      Yeah, no.

   6. JLJason Lemkin9:32

      [laughs] It wasn't to be... I think in the early years, uh, it wasn't to be spoken of if you were a Scout. I mean, it wasn't like a... I don't know if you had to sign an NDA or not, but it wasn't spoken of, right? Um, and, uh, it may be that simple, is that how... You know, it just, it just, it just got too flat. And I just don't think they had... I mean, to your point, we can talk about it forever, I, I just read this as not having the energy. I don't wanna run a Scout program with the small partnership. I don't wanna run Arc, a mediocre accelerator that, that isn't really even speed run, let alone YC. But you know, I thought in the early days about running a, an accelerator for SaaSter when, you know, in the, w- w- when, when our brand was the hottest thing in SaaS. I'm like, "My God, I'd have to hire, like, 15 people?" And then I'm like, "I'd have to m- manage them." And the, like I... And my LPs would tell me to do this. I'm like, "I'm gonna jump off the roof if I have to recruit and manage 15 folks." All our... Like, it's just, it's too much, and I don't know if they have the time to do this and loop in six partners in London in a different time zone with different motivations and different economics. It just, it was just too much. This is too much if you wanna have a tight partnership. The other thing that I guess is part of it is obviously... I'll share one other story. You know, when, when, when Sam Blond, who's now at Monaco, was at Founders Fund for a while. I didn't understand Founders Fund when he was a partner there for a little while, and I'll tell you why I didn't understand it. It seemed like too much capital for too few partners. Like, I didn't understand how so few people could deploy so many. But when it works, you have to have the ability to conviction to write large checks into winners, right? But Sequoia's got some good ones. I mean, I know you can talk about what they missed out on, right? But if they have the conviction that every GP can easily, I put it in air quotes, "easily deploy a bill or two regularly," then you don't need all this crap. It's a distraction. It's, it's exhausting to manage the, the folks in Arc.

   7. HSHarry Stebbings11:13

      I don't disagree with you at all. Um-

   8. JLJason Lemkin11:14

      Total distraction.

   9. HSHarry Stebbings11:15

      And I mean, Founders Fund, when you... I mean, it's amazing. Founders Fund deployed the growth fund in 11 months. But what's amazing is when you look at the-

   10. JLJason Lemkin11:22

       With how many partners, and with how many, how many employ- just investing professionals?

   11. HSHarry Stebbings11:25

       I, I mean, honestly, like three-

   12. JLJason Lemkin11:26

       Six?

   13. HSHarry Stebbings11:27

       ... to five real ones.

   14. JLJason Lemkin11:28

       So yeah.

   15. HSHarry Stebbings11:28

       Yeah, yeah.

   16. JLJason Lemkin11:28

       Yeah.

   17. HSHarry Stebbings11:29

       But, but they're in Stri-

   18. JLJason Lemkin11:29

       It's crazy. [laughs]

   19. HSHarry Stebbings11:30

       But they're in Stripe, they're in Anduril, they're in SpaceX with that fund, and it's like no LP is complaining at the compressed deployment timeline there. It is phenomenal companies. But you're right. I mean, this is large amounts of money with very few people.

   20. JLJason Lemkin11:45

       I didn't even think it was possible when it was... I'm like, how do you... You know, how many people there? W- no associates? [laughs]

   21. RORory O’Driscoll11:49

       Well, that's because, look-

   22. JLJason Lemkin11:50

       How does this model... I don't get, I don't, I don't get it. [laughs]

   23. RORory O’Driscoll11:53

       You have to be somewhat diversified early on, but you have to be widely

6. 11:56 – 12:22

   Why Founders Fund’s Concentration Strategy Works

   1. RORory O’Driscoll11:56

      concentrated later on. So, and I think Founders Fund do a really nice job of, you know, doing both. You know, they do a lot. I mean, if you look at the early-stage stuff they do, they do a lot of little experiments, right? They do a lot of early deals that are small and kill them quickly, and then you ride on the growth fund. They concentrate down, you know, from I think 20 investments in the first fund to seven or eight. It's exactly how you should do it, right?

   2. HSHarry Stebbings12:16

      Um, okay

   3. RORory O’Driscoll12:17

      Go

   4. HSHarry Stebbings12:18

      M- moving swiftly on, we have Nvidia. Jensen Huang

7. 12:22 – 14:19

   Jensen Huang Investigation: What Happens Now?

   1. HSHarry Stebbings12:22

      admits to having an affair with an alleged or suspected Chinese spy. The border, as a result, opening an investigation into it as to what quite happened and what the impact of this is. This is not one I had on my bingo card, I'm gonna be honest, guys.

   2. RORory O’Driscoll12:37

      Look, it obviously sucks on a bunch of different level that, you know, just to put it out there and then move on. It sucks on a personal level for him, his family. It's just all yuck, 'cause, you know, you've got a personal drama going on and suddenly six billion people have an opinion on your married life after 40 years. That just sucks. M- moving on from that, 'cause I'm trying to avoid comments on that. It sucks from a company perspective. I mean, you're right. This is the most consequential company in AI. Uh, I think [chuckles] Sean McGuire had a post basically saying, you know, "Please don't-- Basically, please don't fuck it up just 'cause the Chinese, um, intelligence agency did some kind of kompromat." In other words, let's not lose the plot here. And in one sense, I'm sympathetic to that. It would suck if, um, you know, i- i- it would suck to lose Jensen, 'cause I think a different CEO would run that company very differently and perhaps wouldn't have the drive to make some of these deals happen. But then you gotta say the third point is government investigation if... And to be very clear, it's not an investigation into a relationship. It's an investigation into, you know, compliance issues. It's an investigation into, you know, did we know w- was there breaches of security? Are there issues vis-a-vis how the government handled it? Didn't Nvidia lobby the government, the Justice Department, to back off on a test on Megaspeed? There'll be a whole bunch of stuff like that, and it'll be messy. And, you know, there's at least some non-zero chance that the stuff that comes out is problematic, right? And, and as I said, to repeat, that sucks because this is a world-class executive who's, you know, remember, taking this thing, um, from '93 all the way to today, the longest-tenured tech CEO, period, full stop. And, you know, it's hard to argue he's not a success when you've had a $5 trillion market cap.

   3. JLJason Lemkin14:15

      Paul, all politics aside, I think w- he needs a pass.

8. 14:19 – 17:30

   Why Jason Thinks Jensen “Needs a Pass”

   1. JLJason Lemkin14:19

      Like, this is too important to AI. It's too important to the US. I think this is a point a lot of folks were, were making one way or the other. Uh, objectively speaking, he needs a pass, right? I, I, I, we briefly on an, on an older pod discussed how Steve Jobs got a pass in the backdating stock option days. This isn't the same, but we needed Jobs, and I think at least for now we need Jensen. I mean, he will-- Someday he's gotta retire, we-- I think. But what this-- It's kind of a bummer it was, like, Megaspeed in all of this. It's kind of a bummer that it [chuckles] is a... It, it's just a-- I, it'd be nice if it were some s- s- something not quite as in the center of where these GPUs should be going, whether it's really okay to host inference and GPUs for China-based models in Singapore and Thailand. It's just a really unfortunate, even beyond this spying thing, which I think is-- I don't-- He didn't leak secrets. I mean, come on. That-- I mean, it's possible. It's moronic. But it's just a bummer it's Mega-- It's a bummer it's Megaspeed, right? Which is banned by Nvidia now. Nvidia even said internally they're not gonna sell them anything.

   2. HSHarry Stebbings15:18

      Jason, I love you so much. You're like, "Why can't you just cheat with someone from SAP?"

   3. JLJason Lemkin15:22

      [laughs] Yeah. I, I mean-

   4. HSHarry Stebbings15:24

      Change your destination

   5. JLJason Lemkin15:25

      ... yeah, I mean, I don't think it was intentional. It's just a bummer that I think this is gonna last much longer than it otherwise would. I mean, s- I know this is Captain Obvious, because it's so tied up with an issue that everyone's been dancing around, which is, is it okay to sidestep selling GPUs to China by just sticking them in, in, in, in, in hyperscalers or data centers a few miles away? Like, this is, this is, this is something that kind of made no sense. Like, we'll let you train all your models. We'll let you do whatever. Just please keep the chips a few miles over the border, guys. Um-

   6. RORory O’Driscoll15:55

      A- a- and two comments on that. One is, do you need a pass? I mean, yes, you'd like a pass. You'd like this to go away. But just to be clear, I think because, you're right, you have all sorts of national security questions, i- i- there'll be interference questions. I don't think it's as easy to go away as some of the other things we talked about, you know, the, the, the backdating options thing with Steve Jobs. I think this is more problematic. You can imagine a series of facts starting to em- You know, you also have the dynamic of the government knowing about this early. Marco Rubio having a report telling Trump, them not passing information on. There's just a whole bunch of messy stuff here, right? So I don't think you can assume a pass. You, you can hope a pass, but you can't assume one. And then the second thing is the really odd thing, the amazingly foolish thing is this. My sense, just having listened to a bunch of the interviews, um, Jensen's done is, without any lobbying from any Chinese agent, from any entrapment agent, he wants to sell GPUs to anyone who'll buy them, right? It was all on that subject.

   7. JLJason Lemkin16:50

      Yeah, it's gonna-- This is the part that's gonna backfire. There's so many clips of him pushing hard to sell these chips to China, right?

   8. RORory O’Driscoll16:55

      But my point is I don't think he was doing that because someone was lobbying him. I think he passionately believed it, and correctly. From Nvidia's perspective, and his job is to run Nvidia-

   9. JLJason Lemkin17:02

      Yeah

   10. RORory O’Driscoll17:02

       ... and President Trump job, until there's another president, is to run the country. And from Nvidia's perspective, they need to sell chips to anyone who'll buy chips, right? Because what they don't want to do is have another alternative provider, you know, based out of China eroding their market share. So the-- my point is this. You didn't get anything by entrapping him because for entire logical reasons he's gonna be pushing, he's been pushing that agenda pretty consistently.

   11. JLJason Lemkin17:27

       No, China loses big time here. China's gonna lose. There--

9. 17:30 – 20:08

   Why China Could Be the Biggest Loser From the Nvidia Investigation

   1. JLJason Lemkin17:30

      It's gonna be harder to s- to, to not only sell GPUs to China, it's gonna be harder to, to just host them across the border. It's gonna all get shut down. It was already stalled in Congress. It was on-- I think it was passed by the House and not the Senate, right? This is, this is not what China wants. This is bad. This is bad for China, right? Um, the only other thing I might add for, for others, for founders and others maybe to get away from the salacious stuff. I've, and I was thinking about this before this. In my whole career, I've been involved in two incidents where boards did investigations with CEOs. Uh, one female, one male, actually. Um, nothing exactly like this, but, but it's all similar in some ways, right? It certainly wasn't Megaspeed and Transship GPUs. Um, the one Captain Obvious insight is y- y- y- you get, you kind of-- Now, this won't be true of Nvidia, right? Because it's under such scrutiny. But what level below, you kind of get who you hire in the investigation. You guys can challenge me on this, especially you, Rory. But the, the, you, the input of who investigates it, who you hire, what their, as objective as they are, are they biased in favor of the, of an outcome, um, they're paid, right? Whether they're a law firm or investigation agency. And ju- just, just be very thoughtful when you, when you, when you do have to do something like this that you, that you, that you understand that, that the out- the output may be already be decided when the input begins.

   2. RORory O’Driscoll18:47

      The only comment I'll make is I understand what you're saying that You know, y-y-you, you can-- if you're asked to run this investigation, you can set the terms of the investigation, and you can s- you know, choose whom you hire as attorney. That, to some extent, pre-biases it. That's arguably true. But on the other hand, and I s- again, I think I saw someone make this point, when you're doing an investigation that you know is going to be second-guessed by a different investigation, probably done by Congress, probably done by Department of Justice, the scrutiny level goes way up. And, you know, it's-- Look, I think th- one comment is this is an astonishingly long-tenured board. Four of the nine board members are two of the original VCs, Mark Stevens and Tench Coxe, and two of-- and the original, uh, audit chair from '93, Brooks Sewell, and then, uh, the CEO of Synopsys. I mean, these are people who've been in this chair for thirty years, clearly very loyal to Jensen. I'm sure, you know, looking at this like they need, like, a hole in the head, right? But people tend to be professionals. And if there's, you know, and the CEO of Cooley, the law firm, is on the board, is in fact leading the investigation. Professional people, especially when they know there's scrutiny coming, they're not gonna just close their eyes. So, yeah, unfortunately, this thing is gonna run, and, uh, they're gonna do an investigation knowing it's gonna get in-- You know, their homework is gonna be checked by someone else who's not gonna be as friendly, who might be in Congress, so-

   3. JLJason Lemkin20:04

      For sure. I, I'm gonna pull this back to the, the numbers-

   4. RORory O’Driscoll20:07

      Yeah

   5. JLJason Lemkin20:07

      ... that really matter,

10. 20:08 – 22:29

    NASDAQ Loses $2.5TRN: Is the AI Trade Cracking?

    1. JLJason Lemkin20:08

       which is NASDAQ 100 loses two point five trillion in a day. I had hedge fund managers, friends of mine, calling me just in a tone and depress sh- depressive state like I haven't seen in years. Guys, that much value eroded in such a short amount of time. Can you help me understand what happened here? What caused this? What's g- what's going on?

    2. RORory O’Driscoll20:33

       I mean, you can start by saying it, it's clear proof that, as the olds express, that no one knows nothing. No one knows shit because that crash, today it-- We're now recording this on Tuesday. It'll be released on Thursday. The crash you're referring to happened last Thursday. Reminder, on Tuesday night, it became pretty obvious the Dems are gonna win and win big, and that was g- right? And then on Wednesday, the stock popped. So in fact, the first response was to go up, and then a day later, there was some, uh, arguably some economic news, but then some kinda angst about data centers. So on Thursday, you pop back down. So a lot of this is fairly reactive. It's some version of, "Oh my God, we can't build data centers. All these people aren't gonna let us build data centers, so maybe we won't sell as much chips." But I don't know how deeply thought through it was. It was-

    3. JLJason Lemkin21:14

       So you don't-

    4. RORory O’Driscoll21:14

       And I think what you saw-

    5. JLJason Lemkin21:15

       You don't see this as the AI trade cracking, and it's showing first signs of that?

    6. RORory O’Driscoll21:19

       I'm gonna say this again, and I'm gonna say it every week 'cause I-- The AI trade doesn't crack on the supply side. Doesn't crack. It's like, doesn't crack because the data centers can be built, can't be built. It doesn't crack because chips, Nvidia loses market share to AMD. It doesn't crack with any, any of those other reasons. If the demand is there, I say this over and over, if the demand is there, and that demand will be evidenced in ARR for OpenAI and Anthropic, if the demand is there, everything else will be roughly fine. There might be some companies like, you know, they get ahead of themself like CoreWeave, but it'll all be fine. So I think looking at that, that last Thursday and trying to extrapolate some kind of informed, "Oh, I've suddenly realized we're only gonna sell three hundred billion of tokens instead of five hundred billion. Let the stock go down," I think you're just grasping at straws. I think a whole bunch of aggressive pods in Hedgeland got kinda nervous and kinda got blown up because they were over their skis. And remember, the good folk at Citadel and places like that, they basically take your checkbook away at five percent, and they fire you at seven and half percent drawdown. So it doesn't take a lot to have a bunch of these kinda pods just blow up. That's all that happened, I think, last week. You know, no great thought.

    7. JLJason Lemkin22:26

       Well, I would say two things. One, we've discussed it before. I think it, it makes

11. 22:29 – 23:28

    Why Anthropic’s IPO Matters More Than the AI Selloff

    1. JLJason Lemkin22:29

       sense for the markets to be nervous about this. There's a lot of assumptions. There's a lot of capital to be deployed. There's a lot of debt required. And, you know, a-as we're recording this, Anthropic's getting ready to I-- finally getting ready to IPO, and it's, it's a little murky to me what happened, but it looks like they couldn't f-fully fill out the round, right? The round's a hundred billion. They needed about a twenty million dollar private placement, I think twenty billion, to fill it out or so. Um, some of it was Google's pre-commitment repackaged, I think, as part of this round. And they had to lower the, lower the, the, the size of the round and lower the valuation. So, uh, the market is a lit- a little ji-jittery about this, even though I think Anthropic also said they're at an eighty billion dollar run rate right now, right? So you don't get much better than that, but they weren't oversubscribed at a hundred bill.

    2. RORory O’Driscoll23:14

       I d- just to explain that-

    3. JLJason Lemkin23:15

       They weren't oversubscribed-

    4. RORory O’Driscoll23:15

       I just, I just think-

    5. JLJason Lemkin23:16

       Or so it appears. Or so it appears.

    6. RORory O’Driscoll23:17

       No. Remember, no, pushing back on that, 'cause they're not at the oversubscribed stage. That's, that, that proc-- We're not in that stage of the process yet.

    7. JLJason Lemkin23:23

       It hasn't, it hasn't fully priced. You're right.

    8. RORory O’Driscoll23:24

       I, I actually think they've played it perfectly, right? They,

12. 23:28 – 25:27

    Why Anthropic Is Pricing Its IPO Conservatively

    1. RORory O’Driscoll23:28

       you know, given the dynamics of what's going on, they put a recommended price of seventy to seventy-eight bucks a share, which is relatively low. As a reminder, the last private round was fifty-four bucks a share, and we'll talk about the market cap in a second. So it's up from the last private round on a per share basis but feels modestly priced. And the whole plan, I'm sure, is to, you know, we talked about this in a favor, generate interest, and then if it's successful, walk it up, right? It is far better in an IPO to start low and go up than to start high and come back. 'Cause once you start coming back, everyone loses confidence, and you've blown it, right? So, um, so I thought it was fairly clever, right? And from a kind of valuation perspective, as I say, it's, it's literally up twenty, I think, twenty, thirty percent on a per share basis. The reason people are talking about one point four trillion versus one trillion is when you do it, a valuation on the private side, you include all the options, so the same price per share looks like a bigger pre-money. When this valuation on a public basis, they only e-e-account vested options. So it's, that's why the newspapers say it's roughly a trillion today, but a, but about a trillion three, a trillion four if you counted all the granted but not invested options. So I-- To me, it all looks smart. They're beating the numbers. They're pricing it low. Uh, and the plan, I assume, is people pile in, and maybe they can, you know, raise the filing range or at the very least get it done at the high end and declare victory. I think it's perfect.

    2. JLJason Lemkin24:52

       Guys, what does it go out at?

    3. RORory O’Driscoll24:54

       But, I mean-

    4. HSHarry Stebbings24:56

       I know you don't like predictions, Rory

    5. RORory O’Driscoll24:58

       ... not things that can't be predicted. I mean, I think it'll be very successful.

    6. HSHarry Stebbings25:02

       Do you?

    7. RORory O’Driscoll25:03

       I think it's a great company, yeah. I mean, I think it's-

    8. HSHarry Stebbings25:06

       So you think it'll go at 1.1 and pop to 1.4?

    9. RORory O’Driscoll25:09

       Wouldn't be surprised. In today's market, I mean, look, well, yesterday's market, today... Yes, in a normal market, you know, if nothing crazy happened, yes. Uh, if nothing crazy happened, then, yeah, I wouldn't be surprised. Totally.

    10. JLJason Lemkin25:24

        Look, it's not my, it's not my gig, but for what it's worth, I think it's

13. 25:27 – 26:12

    Will Anthropic’s IPO Pop or Trade Flat?

    1. JLJason Lemkin25:27

       gonna trade flat.

    2. HSHarry Stebbings25:28

       Why?

    3. JLJason Lemkin25:28

       Because I- I- I, listen, I- I, Rory's right, it doesn't feel like the round got fulled out. I'm just using round for fun, right? Um, it hasn't priced yet. Um, they can go high into the range. They can even, they can even raise it again, I guess, if they want, right? I think there's still time. Maybe I'm wrong. I mean, retail's hard to predict. Don't get me wrong. I'm, I've been a p- big proponent of this, but I- I feel like they've, the market is fatigued here. They couldn't raise the full 100 billion from, uh, it directly in the IPO. OpenAI fatigued its market. It was only able to raise 10 billion, right? We're just getting fatigued. This is my view. So I could be wrong. I just got my email from Robinhood saying I can finally be an Anthropic shareholder. Hooray. Very exciting. But I think we're, I think we're fatigued. I think we're fatigued.

    4. HSHarry Stebbings26:09

       I- I- I actually just spoke to one of the largest allocators,

14. 26:12 – 27:17

    Is There Enough Capital to Keep Funding Anthropic?

    1. HSHarry Stebbings26:12

       uh, trillion-dollar funds. Um, and they were like, "Listen, I'm not worried about this 80 billion. I'm worried about the next 100 billion, 'cause that layer is very thin." And you know-

    2. JLJason Lemkin26:22

       Well, that's the same point really, right? Yeah. It d- it do- they do s- it does seem to have been fatigued.

    3. HSHarry Stebbings26:26

       Yeah.

    4. RORory O’Driscoll26:26

       How do you mean the next 100 billion?

    5. HSHarry Stebbings26:28

       They're gonna need more and more money, all of these companies, so to speak, but especially Anthropic and OpenAI, and I just don't think there's the depth of capital to continuously fund them.

    6. RORory O’Driscoll26:38

       Again, God, it's fin- it's odd that I'm being the bull here, right? I think they get, uh, I think it's been the first chance to buy a pure play gen AI next gen company other than just, you know, picks and shovels. So I think there'll be wild interest. And on regards on the capital thing, I think that if they continue to grow like a weed, they'll need a lot more capital. But if the c- if the growth slows down, I... Remember, this is a company that will have $200 billion of cash on the balance sheet. More company, more cash on the balance sheet than any other company in America. So I- I- I think, I think it'll be fine. I think it will, as I say, trade up well and be... It, it's, going back to first prin- it's a great company, right? And strategically, I mean,

15. 27:17 – 29:09

    Why Anthropic Is in a Better Position Than OpenAI

    1. RORory O’Driscoll27:17

       if you... Put it this way. All I can say for sure is if you think this is a tough discussion, you'd much prefer to be these guys than OpenAI right now.

    2. HSHarry Stebbings27:23

       Why?

    3. RORory O’Driscoll27:24

       Oh, God. Because they're gonna get their IPO done in the next, um, month.

    4. HSHarry Stebbings27:30

       Yeah.

    5. RORory O’Driscoll27:30

       They're gonna have the money, they're gonna have the float, and they're gonna be true with the private begging bowl bullshit, right? And I'm willing to bet six, nine months from now, that CFO will have a convert on file. He'll raise a couple, you know, 50 bill- They'll do all the tricks you can do when you're a big ass public company. They will access public capital at scale. Meanwhile, OpenAI is smaller, starting to reaccelerate, doing great stuff, but, um, still unprofitable, still private, and still, you know, trying to raise $11 billion plus retail. Ah, tough place to be. I would much prefer to be public. I think that the exhale that you'll have if you're on the Anthropic board when you go, "Ah, we're public. We got $200 billion. We're kind of out of c- operating in compositive, breakeven, depending on the quarter. We're done. We're golden," versus, "I'm still private." No. It's, it's such a better position to be in.

    6. JLJason Lemkin28:21

       Yeah, Rory's right. I assume if they can, they'll do a convert or a secondary or some sort of offering, what- whatever var- whatever the myriad of variants they'll be able to do at that scale, within four to five months if they can, right? They'll ra- they'll put another 40, 50, 60 billion on the balance sheet, and they, they'll be able to, right? The float'll be there. Uh, and that'll hoover up that last bit of demand. Um, it's a good point. It's just gonna be easier for them to do it. Not easy, but easier. It'll be, finally, to Rory's point though, it's gonna be a gift because we'll finally get quarterly real numbers. They're not gonna disclose everything, but we're gonna learn a lot more. We've had to sit around trying to figure all this crap out from CoreWeave and Nvidia and, and Nebius. Now we're gonna have Anthropic every quarter having to disclose at least far more than we've ever seen before. It's, it's a gift to all of us.

    7. HSHarry Stebbings29:05

       We mentioned OpenAI and rather being public. [laughs]

    8. JLJason Lemkin29:08

       Yeah.

    9. HSHarry Stebbings29:08

       Uh, OpenAI

16. 29:09 – 30:01

    OpenAI Reaccelerates: Enterprise Becomes the Majority of Revenue

    1. HSHarry Stebbings29:09

       did come out and say, this is Greg Brockman. I think it's interesting also Greg's further prominence into the spotlight. Greg is the one who's saying a lot of-

    2. JLJason Lemkin29:16

       Yeah

    3. HSHarry Stebbings29:17

       ... these statements now, which I think is interesting and it wasn't the case before. Annualized revenue grew 70% in Q3. Enterprise doubled and became a majority of revenue, which I thought was interesting.

    4. JLJason Lemkin29:27

       Yeah.

    5. HSHarry Stebbings29:27

       Um, and I mean, obviously also Codex is crushing and really handing it to Claude Code in a lot of ways. Um, any note on that, them closing 11 billion at 1.25, or just would rather be Anthropic?

    6. RORory O’Driscoll29:41

       No, I mean, again, again, you know, I don't want to be ever snide with any company. I mean, se- if they really did reaccelerate to 70%, that's stunning, and yeah.

    7. HSHarry Stebbings29:48

       And for that quarter, it looks like faster than Anthropic. So you know what, what's interesting now is, you know, wildly competitive two-way race on these products. So it'll be interesting to see token pricing. I mean, we're gonna discover what the demand elasticity of token

17. 30:01 – 31:29

    What Happens When AI Token Prices Keep Falling?

    1. HSHarry Stebbings30:01

       pricing is, because I think these guys are gonna push down on pricing. I think, you know, you're already seeing some of that, and then we'll discover what is the demand elasticity of tokens. Does a 10%, a 20% reduction in price, does it result in a 21% increase in usage, such that revenue goes up, or does it result in a 15% increase in usage, in which case net revenue goes down? That's what we're gonna find out. 'Cause two people, the basis of computation will be pretty clear: compute, capital, and token pricing.

    2. JLJason Lemkin30:31

       I, I think it's just interesting, if they're growing at 70% now, and what was it earlier in the year at the Nader, right? 30% or something? I mean-

    3. HSHarry Stebbings30:36

       Yeah, there was an 18%. It was a miserable-

    4. JLJason Lemkin30:38

       Okay

    5. HSHarry Stebbings30:38

       ... quarter of, yeah, Q1.

    6. JLJason Lemkin30:38

       It's just a reminder to me, I, I, I know again as Captain Obvious, when Dev was on the show from Mongo, what he said is there's no loyalty with developers.

    7. RORory O’Driscoll30:45

       Yeah.

    8. JLJason Lemkin30:45

       I just think we can't predict anything. We can predict that Anthropic and OpenAI will have more revenue 12 months from now than they have today, and we can predict it will be radically more. But literally running, running a very simple eval between Astra and Fable or Astra, uh, and Opus It, it, it is truly trivial, and it, it, you know... And so it will, this ping- We've just, the, the entire time we've done this show, it's been ping pong, right? Ping pong between these guys. They both grow, and it's gonna continue to be ping pong. So, um, you- no one else can acquire the compute they have, at least in the US, but har- hard to, hard to predict what the ratio will be 12 months, a hundred days from now, hard to predict, hard to predict.

    9. HSHarry Stebbings31:25

       They did also come out and say that Dots, their agent product, is very

18. 31:29 – 34:17

    Can Persistent Consumer Agents Ever Have Good Unit Economics?

    1. HSHarry Stebbings31:29

       expensive and compute-heavy. Uh, they bring to bear the question of, like, is this agent proposition and consumer product about to be challenged before it really is able to hit prime time?

    2. JLJason Lemkin31:42

       I do think it's interesting. Maybe I guess I added that question. I do th- You, you, you and Rory kind of jumped all over me. Rory said they'll figure it out, great startups always do, and I believe if you didn't need billions and billions of compute when none was available, it would be true. Um, r- r- Harry said he'd do Instinct at 30 billion. It was to, a deal to die for. I'm waiting to see. I just, I just, it's just these products are so good, um, but they're just so expensive to... I, I misunderstood. I thought back when we started talking about this that the cost to run Dots or Groq or Muse or Instinct was, like, four to five bucks. That's what it costs to run Lovable or Replit, okay? And it's, it's VMs, it's, it's non-persistent VMs that spool up and spool down for your website. That's what it costs those guys, and it's a good business, right? If, if they can ch- If Lovable and Replit can charge you 25 to 30, um, it's a g- and it's a good business for even for Wix, right? At 200 million for Base44. I was wrong. This is, like, up to 20 bucks or 30 bucks a month to run these things, and we w- and the, the learning from GroqBot and Dots is we want them to do even more. My Muse is running all day life- all day long for 20 bucks a month. I mean, I know Rory thinks it doesn't matter for Meta, and maybe it doesn't, but, uh, you know, these, these... Everyone else is compute constrained. And V- I mean, they gave up on video for I don't know how long they can say. We'll just have to see. I don't know. Compute is going up. GPU prices are going up. Every- There is no deflation, right, in, in, in, in GPUs. So I don't, I don't know if it's sustainable. We'll, we'll see. And I just think... I'm sorry to ramble. I think ultimately these products are less interesting if they're not fully persistent. If you can't run an agent as often as you want 24/7 doing your work, it's just not that interesting. It's just an automated workflow. Um, it's, it's great, but it's not that interesting.

    3. RORory O’Driscoll33:22

       Yeah. I hear you. You're right. Costs go down. And you're right, short-term compute prices go up 'cause of supply and demand. Long-term compute prices go down 'cause of Moore's law. In the end, it'll get cheaper. It'll be fine. The question is, are you two years away or five? I, I don't have, you know... My, my intuition is-

    4. JLJason Lemkin33:39

       Yeah, maybe five. Maybe five.

    5. RORory O’Driscoll33:40

       Yeah. My intuition is, yeah, the boys at Meta can carry the cost. Okay. [phone alarm ringing] Oh, God, Harry.

    6. HSHarry Stebbings33:46

       [laughs]

    7. JLJason Lemkin33:48

       What's that?

    8. HSHarry Stebbings33:49

       Investment committee time. Do you know, honestly, the, the, the team edited Rory's statement last week-

    9. JLJason Lemkin33:55

       Yeah

    10. HSHarry Stebbings33:55

        ... where he said, "Harry, that was so much better. That was so more intelligently posed," just for us to play in the office, which is nice. Because the way that we structure investment committees has changed within O'Driscoll Lamkin Ventures. Um, and so we have three deals on the table today. We have Zipline raises $1.5 billion at $21.5

19. 34:17 – 37:05

    Investment Committee: Zipline vs fal vs Revolut

    1. HSHarry Stebbings34:17

       billion, three times its January price, option one. Option two, Fal doubles to $16 billion price on more than 800 million of ARR. And we have Revolut, the fintech juggernaut from London. Price is at $115 billion in a secondary round, which was up 53% from their last round. Now, Mr. Lamkin, of the deals on the table.

    2. JLJason Lemkin34:44

       Listen, I like all three of these deals, and if, if we really wanna slice, if we really don't care about having a concentrated strategy, and I think the fund needs to, I'd be good doing all three of these. I think these are all great deals. I think Zipline went long. I didn't get Zipline years ago. You know, this is, this, this has been forever. I didn't really get doing drones in Africa. I know people love the founders, they love the company, but it never made sense to me, right? But fast-forward where we are today with autonomous everything, autonomous delivery, autonomous Waymos, autonomous cyber cabs, Zipline appears poised to be a winner. Um, it seems rich, but I, I like it better than, than investing in Waymo. The unit economics are better, um, and I think it, it's clearly a winner. I think we should make this bet. Revolut's market sh- Re- Revolut appears unassailable, right? And unlike the others, the margins are more attractive, right? And it seems to be going from strength to strength. Uh, it's the simplest one I could see doubling or tripling. You know, Fal, it's just for now, and I know Rory's right, compute will become a commodity in three to five years. Um, you just can't get compute today. So Fal, Fireworks, and others, I have long-term concerns about these businesses. H- uh, Fireworks was hacked twice this month. It's brutal. Um, but this is unstoppable. This, we... And in, in venture, sometimes we just have to be tourists. We have to be part of a wave, and if you make me pick, I'm gonna pick Fal because the underlying trend's for the next two to three years. Um, and I know some of the guys at Ultima and at others, I think we can flip this at 40 billion, worst case. So we have more than our pref, so I'm, I'm gonna do this one. But I'm co- uh, unlike all the other weeks, I'm good with all three. I'm good with all three. I just don't think we get the concentration for the fund that we want. Um, I remember Peter Thiel and my other good buddies at Founders Fund said, "We gotta, we gotta pick." Um, but this is the toughest week. These are good ones. They, they all have-- The reason is they all have the right trends going for them. Um, you know, maybe Fal with the 6% gross margins, that, that might be an issue, but-

    3. RORory O’Driscoll36:36

       Is that a fal-

    4. JLJason Lemkin36:36

       ... the trend is so strong

    5. RORory O’Driscoll36:37

       ... or just a snide comment?

    6. JLJason Lemkin36:38

       I don't know what it is. [laughs] It's gonna be pretty low. [laughs] But, uh, they're all-- These are good ones. These are good ones, right? We d- Th- you know, that's what I really believe. But obviously Fal might be the least durable of them, right? I, I could flip it around and say, if we really wanna go long in our Evergreen Fund we just set up, we're going a little counter to the other funds, we're going to Evergreen, we can't do Fal because it's just unpredictable, but Zipline and Revolut are enduring properties.

    7. HSHarry Stebbings37:01

       Oh, I'm starting to feel really uncomfortable about where this market's at.

20. 37:05 – 41:16

    Why Revolut Could Become Europe’s Biggest Bank

    1. HSHarry Stebbings37:05

       I want security and I want safety, and I think Revolut is the best asset by far here with by far the best founder of our generation. Give me Revolut at 115 every day. Let me compound for 10 years and I'm calling it a day.

    2. RORory O’Driscoll37:17

       Harry just wants to put his money in a preferred stock of a bank.

    3. HSHarry Stebbings37:20

       Yeah. Yeah.

    4. RORory O’Driscoll37:20

       And I respect that.

    5. HSHarry Stebbings37:21

       No, funny enough, uh, yeah, that, that, I, I... 'Cause yeah, they're super interesting. I mean, look, they're all interesting and high-quality assets, very different. I mean, let's just go to Zipline. Biggest attraction of Zipline, N of one

    6. RORory O’Driscoll37:32

       Right? They are, you know, people know what they're doing, but they started off doing drone delivery of medicine in Africa, but the big business now is making drone, doing drone delivery in the United States. They have a contract with Walmart. They're doing a ton in Dallas. They're rolling out in other markets. That's the real positive here, and there's just a huge shit ton of logistics to make all that happen. The scary thing is you're probably getting-- They've, they've, they've done three million deliveries in the US. You know, you probably only get five, 10 bucks a delivery, right? You've got to do a lot of deliveries to make this work, right? So this is an amazing company. I don't-- I've not seen the numbers, um, but my guess is you don't get there on a revenue multiple. You get there on the, "This is the next infrastructure play, and if people are willing to have drones drop stuff everywhere, you can make out like a bandit." And it's a plausible-- It's a big story and a plausible story, but at $21 billion, you're really leaning into that Walmart contract. So that's amazing but scary.

    7. JLJason Lemkin38:32

       Yeah, that was, that was sort of the Waymo, uh, the, uh, uh, that's why I brought it up as a comp. Like they-

    8. RORory O’Driscoll38:36

       Yes

    9. JLJason Lemkin38:36

       ... make sense if you, if you ignore a, a, ignore a bunch of things. It's, it's hard to argue with the market position and the technology's exciting, right? But-

    10. RORory O’Driscoll38:42

        Yeah, getting there from here

    11. JLJason Lemkin38:43

        ... the math may not pencil out. [chuckles] How does the math pencil out to get our 3X? [laughs]

    12. RORory O’Driscoll38:47

        Agreed. And then fal, almost the opposite. It's not an end of-- And then they have a differentiated position in generative, um, i-in kind of more, um, kind of video delivery versus kind of more generic inference-based tan and fireworks and all those. But yeah, in that broad market of people doing that, you are-- The, the big argu- the argument, yes, there is what you said. I think Jason, you said the trend is your friend. Right now, you know, the total inference market is kind of third-party inference market. In other words, excluding the foundation models, it's $5 billion plus or minus growing like a weed. So you probably get a couple of good years' growth here or there, but you would be scared that the dynamics of that industry, which is wildly attractive now, could change at scale. I mean, you'd be tempted to do that one just because it's worked so well. I mean, we looked at these inference providers early on and angst it incorrectly, incorrectly about the long-term structure of this industry. It turns out you might be right on that in the end, but when demand is trebling, quadrupling every year, no one gives a shit about the long-term implications. So when you look at that, you know, so at, at $1 billion, $2 billion, $3 billion, they've been great, and at $16 billion, you might be closer to the end than the beginning. So you are driven back to Harry's choice, which is maybe I'll just put it in Revolut, who are busy destroying, you know, taking away the business of every European, you know, retail bank and taking their young customers. And, you know, the attraction about that, to your point, Harry, about the next 20 years, is when you look at the demographic of their customers, I mean, Revolut, even though we call it a bank, it's mainly money movement. It doesn't do a ton of lending, but over the next 10, 20 years, all those customers who are, you know, 19 to 25 today are just gonna get older. They're gonna want mortgages. They're well-positioned to be the biggest bank in Europe.

    13. HSHarry Stebbings40:29

        They are obliterating European incumbents.

    14. RORory O’Driscoll40:32

        Yeah.

    15. HSHarry Stebbings40:32

        We will see market share for Revolut unlike we've any, ever seen for any historical incumbent, and we'll see a product suite much broader. And so both the depth of market-

    16. RORory O’Driscoll40:43

        Got it

    17. HSHarry Stebbings40:43

        ... and the product suite they have means that I really do think there's, uh, this has a 4X from here. I think with the downside that we have key man risk on Nick, do not let him leave the building. I want him near no roads, cars, any moving objects.

    18. RORory O’Driscoll40:59

        Yeah.

    19. HSHarry Stebbings40:59

        Um, okay. Jason, you mentioned Fireworks and the-

    20. RORory O’Driscoll41:03

        Yeah

    21. HSHarry Stebbings41:03

        ... security incident there. Do you wanna touch on that? Or we can touch on the security M&A because CrowdStrike and Palo Alto have been making moves.

    22. JLJason Lemkin41:13

        Well, I think the Fireworks thing is interesting from a security perspective.

21. 41:16 – 45:05

    Why AI API Keys Are Becoming One of Cybercrime’s Biggest Targets

    1. JLJason Lemkin41:16

       I think, um, i-it's niche, but, um, you know, Fireworks has had two major breaches in this month, or in the last 30 days. It's pretty bad. Two things that are interesting to me. Um, one is that every-ev-everyone's trying to steal API keys for inference, and f- they're all trying to steal Anthropic and OpenAI keys, and they have massive swarms of bots. And everyone's been hit by this, right? Um, Railway was hit by this. North, North, Northzone or Northgate, the other com- competitors hit by this. They've been hit by this. And the genesis of this is trying to steal any, any Anthropic or OpenAI tokens you can. And, and I, as an individual user on Ultra, on, on Claude, my spending, I didn't even know, was set at $100,000 by default. So if someone stole mine because it was on Fireworks and Eval, they could have charged $100,000 in minutes. That's what they do. These crime syndicates steal these. They, they, they scrub it. You can get cheap inference. And, uh, they, they instantly-- There's so much demand for it, as we're talking about, right? They can spend that $100,000 in seconds. It's gone, and that's what happened. And Fireworks was hit twice. Everybody's been hit. And any way you can get inside of someone's infra and take these, these, these, these keys, people are gonna do it. It's the most lucrative criminal trade you can do right now, right? It's, it is, it is better than selling Rolexes you steal off someone's wrist in London. This is the crime of, of the year, and it's only gonna get worse. And, um, and I know a lot of folks, I, I, I know tons of folks that have, um, been hit similarly. I wouldn't say tons. I know multiple other folks that have been hit similarly. And, and, and you're gonna be hit, and it's exhausting, and, um, it, it's, uh, it's just beginning. And the flip side is, you know, it seems like going, also going back to fal, like this is terrible, right? But no one can leave. You can't get-- You can't replace the capacity. Where's Harvey gonna go, right? Where, where's Stebbings, O'Driscoll, and Lemkin's startup gonna go? Like, you just can't. If it's a, i- you can't, you know. All these guys just have seven-figure and up contracts. There's nowhere to go. But, um, boy, everyone's gonna get just more and more sophisticated to, to just steal, to steal your API keys. Can Harvey trust them now, right? Harv-Harvey runs on it, that they've trained their models, they've done all this, but what are we gonna do? And, um, it's just very interesting and very complicated if even Fireworks couldn't do anything about it.

    2. HSHarry Stebbings43:36

       That was point one. Was there a second point?

    3. JLJason Lemkin43:38

       Yeah. Are you... Oh, just that it's gonna happen to everybody, man. Oh, here's the thing. Listen, may- m- listen, Fireworks is not that old a company, right? So, so maybe, maybe as embarrassing it is, their SecOps and DevOps team's a little bit immature, right? I guarantee you it's better than 99% of SaaS companies that just laid off their whole SecOps team last week as they're trying to get fit, right? Um, so e- just everybody's gonna get hit and everyone's data's gonna get stolen. Um, it's, it's... And aga- it's great for the, it's great for the big guys, it's great for the big security companies, it's great for folks figuring out, because it's just... I mean, everyone got hit in, in Black October, or whatever we called it, right? Um, everyone. And it's ju- it's only gonna get worse with these swarms. Everyone said they got hit by swarms of bots, swarms of them. It's something we just haven't really seen before. Fireworks is... And, you know, maybe they didn't disclose everything that happened, but they are pretty clear that the, these swarms are, are difficult to mitigate. Yeah, it's terrible. It, it, it's really... I, I, I... You know, this and down- and outages were the things I, I... That's why I wanted to sell my last company.

    4. HSHarry Stebbings44:39

       [laughs]

    5. JLJason Lemkin44:40

       It's so stressful. Wiz said nine of the leading AI developers disclosed a, a swarming incident in October alone. Nine.

    6. HSHarry Stebbings44:47

       Yeah.

    7. JLJason Lemkin44:47

       [laughs]

    8. HSHarry Stebbings44:49

       Wow.

    9. JLJason Lemkin44:51

       Unit 42 said bills are $1 million before detection. If it's e- if it's 100K by default for, like, basically a ProSumer key, pretty easy to steal a million pretty darn quickly, right? [laughs]

    10. HSHarry Stebbings45:01

        Guys, which M&A's the most interesting, do we think? CrowdStrike and Palo Alto,

22. 45:05 – 47:29

    Why Security M&A Is Accelerating

    1. HSHarry Stebbings45:05

       Dialpad, Fox and Roku, the potential of Silver Lake and PIF taking out Unity?

    2. RORory O’Driscoll45:12

       I think you have to break them up. I think you, you highlighted two categories of M&A that are kind of very classic fast growth company, you know, bigger company a- acquiring an adjacent product, and that's the CrowdStrike, Palo Alto. They're all doing kind of small, you know, 400 million plus or minus, perfectly great outcomes, um, you know, products and agent security, which totally makes sense. You know, the end-to-end platform, agent security is the number one issue. I mean, you know, we've, you know, CrowdStrike and Palo Alto are consummate acquirers, and they know their job is if, if the new, if the new a- security issue is agent security, then just go do acquisitions, deal with the problem. So that just... It's kind of in the category of incredibly obvious. You know, I th- I think one of my colleagues had looked at this space, and there's typically three or four companies in the space. The trick is to buy the hot one, get intercepted by CrowdStrike or Palo Alto fairly quickly. So that made sense. And then the same thing with the coding agents. Meta and, uh, OpenAI buying adjacent kind of products all about the software development life cycle, which is all just being redone from zero. So I think those two groups of acquisitions, the cyber and the coding agents, are very classic, you know, incumbent buys product to meet the needs of an evolving technology market. And it w- and it all made total sense. And look, great to see, 'cause, you know, there's been a dearth of venture M&A, and it's nice to see, you know, these guys just coming in and, you know, making good offers.

    3. HSHarry Stebbings46:35

       When you get a Dialpad buying Ada for 400 million in stock at a 21 valuation, if you're the Ada investors, are you like, "Yay"?

    4. RORory O’Driscoll46:44

       I think, you know, um, disclosure, we actually also sold a company to Dialpad in the past, so I have an investment in Dialpad, and we actually had a competitor to Ada, which we sold to Zoom three or four years ago, right? So I, the good news is I have some form in the space. I think if you're Ada, you are a very good pre-LLM kind of chatbot, services chatbot, right? So the problem is you're up against the fact that you had a prior generation of technology. Maybe you've re-platformed to an LLM-first technology, but you kind of probably lost the wind out of your sails, so your ability to now compete with, you know, at some level Sierra, maybe Decagon, is just hard. So I think getting acquired as part of a bigger company makes sense.

    5. JLJason Lemkin47:25

       You know what just depresses me a little bit related, it's related to this, we can talk about the deal set.

    6. HSHarry Stebbings47:28

       Sure.

23. 47:29 – 51:48

    Why Older SaaS Companies Are Struggling to Become AI-Native

    1. JLJason Lemkin47:29

       Uh, there was, there was some Marc Andreessen clip this week about it and it, and it really resonated with me, which is it just... You know, when, when, when maybe a year and a half ago folks started talking about AI-native startups, it, it kind of triggered me. I don't really get triggered, but, but I mean, uh, it got triggered to me. It's like, oh, uh, what, what magical sauce do they have using GPT-3, right? Uh, well, these, these, these kids are so brilliant because they grew up in the age of AI. I'm like, I, I think a smart CTO or two can figure this stuff out, right? And indeed they can. But as we, as we're rolling into 2027, guys, like Ada, I'm just so disappointed that these non-AI companies can't get their acts together. They can't run their companies differently than 2021, '22, '23. They can't move faster. Their teams are stuck basically shipping at the same rate. Hooray, bolt an LLM on, but look at poor Canva, right? Too effing slow. Everyone's too slow. And, um, you know, this isn't a bending spoons deal, but if you can't accelerate your team, y- you gotta find some sort of, I guess, soft landing. I, you know, I, I added this to the list 'cause everyone said this was an amazing exit. I don't view it as an exit, right? If there's no liquidity, I don't think it- it's technically an exit. It may be the right thing for both set of investors, right? Dialpad gets another player, probably with 50 million of revenue that's somewhat enduring and, and some folks. But, um, man, I'm just bummed that people can't get their act together. It is really true, um, how much effing faster, uh, quote, "AI-native startups" are, um, than four or five years ago. And it just... I just did an investment this week, and I, and, and, and you could pick at it a little bit. I love it, but man, the, the rate a- at, at what, the rate that they're pushing out software is, is maybe the fastest of, of anyone that I've seen. And I just culturally, uh, you know, for your portfolio, uh, 1231 might be the time you gotta kind of give up. You had, you had two years to... And, you know, you get these email updates, "We're gonna put together next year an AI-native team internally." I mean, that was your 2025 plan, guys. All these CEOs and startups pre... They have the right ideas. They all get it. They're just-

    2. HSHarry Stebbings49:36

       This doesn't matter

    3. JLJason Lemkin49:37

       ... too slow. And I've given, I've, uh, I've just about, I mean, I kind of have given up, right? So is this an exit for the Ada investors? I mean, I don't think it is, but it's probably the best option that's, that's out there, right? Craig's a great CEO, right? Dialpad will find its way to an exit. They're probably at 600 million or something like that, right? It's still gonna be brutal if, if, uh, in today's IPO world, but at least they'll find a way to an exit. Um, but Man, no one c- they can't c- they just can't move. They can't move like the kids these days, and kids could be older. Like, it's actually not even an age thing, but it is truly a generational thing. I'm just shocked

    4. HSHarry Stebbings50:13

       If I was Orlando Bravo, Rory, I would be paying 50 million bucks a year to Mr. Jason Lemkin to come in and talk to our CEOs about how to make our very monolithic, old, stale organizations AI first, make every CEO see what Jason sees, 'cause I think that'd be the most valuable $50 million any large PE fund will spend.

    5. RORory O’Driscoll50:36

       Yeah. Oh, I thought, I thought you were gonna say you're gonna have him talk to all the companies you want to acquire and make them so depressed about their prospects on a standalone basis that they'll sell to Orlando for three times run rate. Sorry, take.

    6. HSHarry Stebbings50:46

       P- possibly. Say, but I mean, that would be great, too, for Orlando. Um-

    7. JLJason Lemkin50:49

       You know what the problem is, too? I've been thinking about this a little bit. Sorry. You wouldn't have to go down this, this rat hole for too long. You- then you might think, "Okay, so that's true, right? The, the pr- the pre-AI data companies just can't get there fast enough, right? But wh- why, why don't the AI guys just buy them? Right? Why don't you just buy them, buy the contracts, buy the customers, and have your kids just, just buy them out, right?" And actually, the problem is the AI-native guys are just growing too quickly. It's not worth it.

    8. RORory O’Driscoll51:16

       It's never worth doing.

    9. JLJason Lemkin51:16

       It's not worth it.

    10. RORory O’Driscoll51:17

        It's never worth doing, no.

    11. JLJason Lemkin51:17

        It's not worth it. You both have to be kind of growing within a band for this to be worth it, right?

    12. RORory O’Driscoll51:22

        No. It's not worth it because the truth is you buy someone else's old contracts, and then you incurred all their problems, and the customer's never grateful for you for solving it. It just matter you, right? So I agree. I mean, the point is, it's what you said, Jason, for all these older customers, it really is march or die. You either get with the program or you're toast, and it's, it's not even interesting to say it anymore. It was interesting two years ago when you started saying it. Now it's just a given, so let's move on.

    13. HSHarry Stebbings51:44

        Okay.

    14. JLJason Lemkin51:44

        Yeah.

    15. HSHarry Stebbings51:45

        It's like, like, uh, shape, shape up or shape out.

24. 51:48 – 54:31

    Why Cloudflare Is Winning From the Agent Boom

    1. HSHarry Stebbings51:49

       Well, Cloudflare's kind of done that. I mean, they, they shaped up, baby. 20% layoffs earlier-

    2. RORory O’Driscoll51:54

       Yeah

    3. HSHarry Stebbings51:54

       ... in the year, and they're crushing up 39%. And then you've got f- you know, Freshworks crossing a billion with 30% fewer employees. God. Efficiency at its finest, huh?

    4. JLJason Lemkin52:09

       Palantir at two million, two million per employee. It's very enterprise, but it's two million per employee.

    5. RORory O’Driscoll52:13

       Yeah.

    6. JLJason Lemkin52:13

       Growing 100%, growing 98%.

    7. HSHarry Stebbings52:16

       So we just didn't need the people.

    8. JLJason Lemkin52:18

       I think AI may be the excuse, and w- [laughs] we didn't need the people, and AI, AI opened our eyes to the reality of it when it was always staring us in the face in 2021, working 20 hours from home and doing our four side hustles. It was always true. Uh, it's just AI, AI made it, made it clear. [laughs]

    9. RORory O’Driscoll52:36

       I think that's the real truth, yes. I mean, s- to some extent, there's probably, there is AI leverage, but I think the real truth is you can, yeah, especially when you've got that kind of growth, if you've got a giant secular demand pull, right, you don't need to do all the marginal things that you were doing in 2021 to make revenue happen. You just gotta staff the machine and take the business as it comes, right? And, and, and therefore you can have compelling efficiency. So I, I do agree. I think it is eye-opening how efficient some of these companies have been able to be.

    10. HSHarry Stebbings53:06

        Yeah.

    11. RORory O’Driscoll53:06

        Right? Which makes sense. I mean, if you're selling, if you have two and $5 million contracts like Palantir, and, you know, w- if revenue doubles, you probably can't hire headcount fast enough to catch up. You literally can't stop your margins going up, which is a wonderful place to be.

    12. JLJason Lemkin53:20

        The one interesting just for Cloudflare, we don't have to spend too much time on it, uh, and even Twilio, right? These are not brand-new companies, right? We're just talking about an AI native versus non-native. Uh, Cloudflare may be more agile company still founder-run than Twilio, right? Which is not found... I mean, who knows what it'd be like if Jeff was still there going, when he was on our show. I think it'd be even better. Putting that aside, it, these are... Sometimes you wonder, you know, how big a deal are agents? Not AI, not LLMs, but agents, right? It's s- it's still in some ways I run, I run everything on agents, but it seems niche. But this is what's fueling Cloudflare from 20-some-odd percent to 39% growth at almost 4 billion in revenue. It's, it's agents, and it's, and it's agentic spend at Twilio, too. And in some ways for 2027, all I want to talk about is agents. It's just age- this is what's driving it. We had LLMs. We had inference. Those are good ones. I know we just did fall. I, I feel good about the deal. It's fi- it was a good 2026 deal. But all I want to talk about is how agents are changing buying, building, sharing, learning because it's, it's gonna be the majority of everything in our space is agents are gonna do it all. And Cloudflare is a public beneficiary of it. So let's, let's, going forward for the fund, uh, if, if it's not an a- agentic beneficiary, I don't want to hear it anymore.

    13. HSHarry Stebbings54:27

        Is that why Atlassian falls after it warns on

25. 54:31 – 55:21

    Why Seat-Based SaaS Is Under Pressure From Agents

    1. HSHarry Stebbings54:31

       seat and subscription growth? Is that it? If it's not agentic, I don't want to hear it anymore.

    2. JLJason Lemkin54:34

       Yeah. Listen, we all love Mike, but his idea that was, i- was how critical the, the front end and the UX is on the 20VC, I just didn't love it. I mean, agents don't care. They don't care about your UX and their UI, and they don't, they don't care about any of this stuff. Humans do, but they're a declining percent of everybody's user base. The percent that are humans is declining. Even in vertical B2B, it's declining.

    3. RORory O’Driscoll54:55

       Yeah, I mean, y- you talk Atlassian. They had April of last year, the world is ending, then it exploded in the back half of the year. Probably a relief rally, and now it's a little bit like, okay, you're not dying immediately, but the new trend is not your friend because the new trend is agencies not, a- a- agents, not engineers, and that means the seat license thing is brought into question, but still up on the year.

    4. HSHarry Stebbings55:18

       Jason, you said about Canva earlier, uh,

26. 55:21 – 59:37

    Figma Below $10BN: Did It Miss Its Best Exit?

    1. HSHarry Stebbings55:21

       in a challenge bucket as well as Figma falling below $10 billion, uh, for the first time in a long time. I think today it's about 10.2 billion. Any thoughts there?

    2. JLJason Lemkin55:30

       Well, my meta thought is, and again, I don't want to talk about politics. Well, we have a new Congress, and we're gonna have a new chair of the banking committee and others. We haven't had a change in the, in the, in the executive branch. I am worried even with that antitrust gets harder. I mean, Figma, listen, I know, I know maybe Dylan's happier running the company. He may well be, right? You know him, Harry. I don't know him. He may well be, right? Um, but man, it would just, it would eat at me, not every day 'cause you gotta move on in life, right? It take- you gotta move on in life. But we've now fallen into the single-digit billions when I had 20 billion plus a big, I think a big package for him and others, right? Plus instant liquidity for the investors in what? 2022? I mean, this is just a, a tough one on the, on the lifetime IRR, right? Uh, and do you really think you'll get back to 40 or 50 billion? Do you really think agents are gonna be using Figma? Even though the numbers are great for Figma, right, the trends are not id- ideal, and it just... Uh, so I just worry antitrust is gonna get harder and that we had this brief window where, where it was good. And i- i- if it gets harder, man, it's just a, it's just a bummer for everyone in the venture ecosystem. It's a bummer.

    3. RORory O’Driscoll56:38

       Agreed. Though, at the same time, just, just, just to commemorate success, I mean, you are dealing with a 40%-plus-or-minus revenue grower, very strong free cash flow, even though they're still operating, uh, positive, and the whole... So the trends are good, and the whole hit was because they're, they're putting, they're spending more on AI, so that's gonna have more gross margin hit. So yes, I, I, I agree. Yeah, it's a thing they tell you when you, y- you know, when you have these M&A discussions and someone says the old boring statement, but it's actually boring 'cause it's true, "Hey, you're getting an offer of X now. If you turn down X, you could work for the next three years, do an amazing job," 'cause Dylan has done an amazing job, "grow your damn company 40% a year, get it to free cash flow positive, get the damn thing public, and at the end of that, you're gonna be worth half what you are today." You know, no one ever said capitalism was fair or easy, right? And that often is the argument for taking that preemptive offer, which obviously they did, except for the government wouldn't let them. But you're right, Jason. It, it's gonna psychically hurt. I don't know well enough to know how it gnaws at him, but yes, I, I'm doing all this to get back to half what I would had for free in 2022.

    4. JLJason Lemkin57:42

       It's also really hard if, if when you go into these companies, if you, if you visit them, right, you'll see it really is hard to retain people. It creates a malaise over it for the, for the top performers, right? You can fix it with RSUs, and you can fix a litt- little bit with additional grants and targeted stuff, but there is just this malaise at folks. Even, I mean, Figma, like, okay, we can ta- I wanna talk about a second point about whether seat businesses are stable, but yeah, almost 40% growth at its scale, you, you can't argue with it, right? It, it's, it's S-tier. But with the stock so far down, um, this just malaise sets in. It sets in, and as a founder, you can hun- as founders, you can hunker down. "I'm still worth a billion," right? Or whatever, 500 million to a... What the hell does it matter? It's not liquid anyway, right? This is my life's work. But man, that malaise, it's just, it's, ugh, it's hard to pull, pull out of it, right? And it's, and it's hard to attract new people, right? So you double down on the existing folks and that's... I don't have an answer to this one. When the malaise sets in, it's, it's just tough, right? The, the one thing I would say, Rory, I, I, I, listen, again, I'm not an expert in the public markets. I'm not e- I'm not even, um, an amateur. But I think, I truly believe if you look at all the, the most impacted companies, right, the, they are seat-based ones that the markets do not believe will benefit from agents and AI. And I believe Figma, unless it radically changes, it, it's gonna be in the doldrums, relatively speaking, right? They are multiples still like seven or eight. But it's gonna be in the doldrums because people believe seat models adhere at Monday, at HubSpot. They're just terminal. They b- the markets believe these companies, not, not that they're gonna die, maybe terminal's the wrong word, but, but that more and more is gonna be agent-driven, and they'll bid up Cloudflare and Twilio, well, you know, moldy oldie Twilio, and they're... I don't see any way that, that the seat-based guys are coming back.

    5. HSHarry Stebbings59:32

       But Jason-

    6. JLJason Lemkin59:32

       The markets don't like it

    7. HSHarry Stebbings59:33

       ... okay, so you are the new CEO of Figma. What do you do differently

27. 59:37 – 1:02:16

    What Figma Needs to Do to Win in Agentic Design

    1. HSHarry Stebbings59:37

       then? Okay, I hear all the... What do you do differently?

    2. JLJason Lemkin59:40

       Well, okay, first of all, I, I thought, I think I knew, like, 10 months ago, right, when, when the world changed. I'm not close enough to, to do Figma today, right? I, I will say this. The agentic design, the ability to go into an agent, into, into Claude, into Replit, into whatever, and say, "I want a perfectly designed end-to-end experience for my app," that does not exist today. Design mode in these apps are a joke. I use them all the day. I use Replit's canvas design today. It's a joke. Claude Design is really neat, and it's built in. It, it's still kind of a joke. Lovable and Replit are both at a billion. They're not... They are great tools for product people, but for design, they are a joke. So it's not too late to do that, but you would have to just own it. Like, I would go all in on agentic design. We will be, we will deliver, uh, a sort of, a, you know, a Notion. I just picked Notion 'cause, 'cause it's famous for... I, I... You can build it. We will build you agentically your app. Every page, every element of it will be as good as Notion or better using our AI and our agents, and it's gonna cost us a lot of basis points. It's gonna cost us a lot of gross margins, and we're gonna have to cut a bunch of things for our enterprise customers, which is where all our growth is. But if we don't do this, um, we'll be like Adobe. Like, we'll have our role, our workflow role, but we won't, we'll be part of the past because agents will bypass us. You know, we talked a little bit when, when, when Claude Design launched. I generally think, I... And I use all these products every day. Don't get me wrong. Thank you for they exist. They are a joke from a design perspective. They're a C-minus. So there's still a chance, but if you don't... But you can't do it at the Canva pace.

    3. RORory O’Driscoll1:01:16

       I actually agree, and I, you know, we've looked at the creative market, and I'm instinctively not creative. But one of the things we did was we worked with two or three, you know, uh, graphic designers and literally watched them do their work and had them do the same task in Canva, Figma, and then some of the modern video editing tools. And it's exactly what you saw, Jason, is that when they fall into one of these modern ones that's very agentic-based, it all just goes quicker. They just type in what they want, and it shows the node display. And when you just look at that flow, I mean, 'cause then you ask them, "Well, why'd... What was the experience like in each of these three or four different products?" And you get some version of, "It just happened easier. It was, you know, I was easier able to launch and just do it seamlessly with the agent." And you didn't get that experience, isn't it, Figma Make and Figma whatever the other one is, right? There's two different ones depending on if it's the, if it's kind of graphic or coding type stuff. But yes, you have to start with the product, which- And really make it for that customer, really make it super usable

    4. HSHarry Stebbings1:02:12

       Team, is there any that I've missed? The wealth tax we can

28. 1:02:16 – 1:04:28

    Why California Rejected the Billionaire Wealth Tax

    1. HSHarry Stebbings1:02:16

       talk about

    2. RORory O’Driscoll1:02:16

       I mean, lucky us, all the billionaires can come back home. Right? It is always fun, yeah, it al- always fun to watch Califor- and, you know, the country swung Dem like we haven't seen Dem swing since 1974. It was a real, "We're done with these people, we're voting for the other guys," top to bottom. I mean, you know, we're running, we might be, have a, a, you know, Dem senator from Mississippi. It's, you know, amaz- amazing swing. And at the same time, California, the most prototypically Dem state in the country at some stage said, "Yeah, we're doing all that, guys, but we're, we're, we're not doing this. We're not doing this wealth tax thing," which is just really interesting

    3. HSHarry Stebbings1:02:52

       What was the takeaway from that then? I'm a Brit

    4. RORory O’Driscoll1:02:54

       I think the takeaway from that is, one, I think, I think, one, there's generally a suspicion of propositions. We talked about this six months ago, is that, you know, t- there's generally a no bias in propositions because I think Californians recognize it's an incredibly stupid way to make legislation. So there is kind of a default no. And then on top of that, I think the, the no vote won the argument, right? I think they made good noise. And I, look, and it's, it's impressive because no one in 2026 is gonna say, "Yeah, I love me those tech bros. I love me those tech billionaires." But as yet, you know, give credit to the Google founders, give credit to Stripe, they were able to make the case, "Look, this is just not good." Right? You'll lose these people, they'll go to another state, you'll lose their income tax, you'll end up net down. Right? And I think fundamentally, I ne- I always say that I think the voters are smarter than we ever give them credit for, and they basically said, "Yeah, we're gonna get rid of the old lot, we're gonna vote, make a clear signal we're done with what we have in Washington, but we're just not gonna screw things up totally here, people." So yeah. 'Cause there was a no, and it's interesting, it was a no on that one. That didn't pass. And then the one that banned them doing it again, which was, I think, Prop 42 or whatever, the one after that actually passed. The one that says, "Not only are we not doing a wealth tax, but you can't do it, you can't try and do it again." So I think it was a very empha- I mean, emphatic mid-50s vote, but it was a clear, "Please don't do this." So a big loss for the side that wanted it. I thought it was good. I mean, I'm not-

    5. JLJason Lemkin1:04:14

       The only thing I might add is, you know, Sergey and friends did outspend the, the unions 10 to one. Um, I do think that impacts propositions if nothing else. Uh-

    6. RORory O’Driscoll1:04:21

       Hey, especially propositions about money [laughs]

    7. JLJason Lemkin1:04:23

       Yeah

    8. RORory O’Driscoll1:04:24

       Exactly. [laughs] In fact-

    9. JLJason Lemkin1:04:25

       I think it's a very, I think it's, I think, I genuinely think this

29. 1:04:28 – 1:07:13

    Why Losing Founders From California Would Hurt the AI Ecosystem

    1. JLJason Lemkin1:04:28

       was very important because, listen, I, and again, I don't, I don't network the way Harry does. I don't have his network. But I spoke to two s- quiet billionaire founders, but not CEOs, who were both planning to leave. Not, not the Zucks. They were already planning to leave when this happened. And it's not, it's not just about this, it's, um, it almost ties back to the beginning of this conversation with Sequoia and London. I mean, it's just a bummer if the best people leave California. It's even a modest bummer that, that Elon, uh, politics aside, that Elon left and went to Texas. It, it makes sense for his current businesses. It was gonna happen anyway. It's a modest bummer the more and more folks that just leave. The, the, the, it's not just billionaires. These are not, these are not, uh, passive wealth managers managing strings of, uh, laundry, laundromats and Fed- These are folks building, right? You don't want them leaving California. You just don't want it. And this, I genuinely believe if this passed, um, it would've s- sent a clear message that California is toxic to the most successful entrepreneurs. Parker said it from Ripley and others. And I think it would've, I genuinely believe it would've had a domino effect. Not as big. It's easy to say things on Twitter, not as big as they said, but I knew b- folks already planning to leave. It's just not good for the center of AI and wealth. I mean, Anthropic's gonna generate, the average Anthropic employee, $41 million in the IPO. The average employee, and that's average. $41 million. You wanna kill that? You want that? You want that to go to Miami? You really don't. You really don't. $41 million, the average employee. More wealth created in this IPO, far more wealth than any other IPO that's ever been created for employees. The founders are down to 1% each, 1 point something percent. Um, but, um, crazy, right? Crazy, right? 216 billion going to current employees and 160 billion in the pool.

    2. RORory O’Driscoll1:06:16

       Wow. That's real money.

    3. JLJason Lemkin1:06:19

       Yeah, it's real money. Nothing like that. You don't want them leaving. I think Anthropic's a hot enough company. It, it, like it needed to be here, but maybe they could've moved. [laughs] Maybe they still could've attracted some talent to the beach. It's possible. [laughs]

    4. RORory O’Driscoll1:06:33

       But I think even if the company doesn't move, people can move when they're making their tax decisions. So we agree.

    5. JLJason Lemkin1:06:37

       Yeah.

    6. RORory O’Driscoll1:06:37

       There's nothing more to say. It collapsed. As I say, super interesting to see it collapse in the context of an otherwise massive blue swing, which I would argue is, you know, sh- as I say, shows people were awake and voting for a clear centrist majority. So all good.

    7. JLJason Lemkin1:06:52

       Yeah.

    8. RORory O’Driscoll1:06:52

       Okay.

    9. JLJason Lemkin1:06:52

       This 41 million average for Anthropic, right? Founders are each selling 264 million, which I don't think is a big deal, right? Um, but it's pretty crazy, right?

    10. RORory O’Driscoll1:07:03

        It is.

    11. JLJason Lemkin1:07:03

        It's pretty crazy.

    12. RORory O’Driscoll1:07:04

        Good for them.

    13. JLJason Lemkin1:07:05

        Wow. Yeah.

    14. HSHarry Stebbings1:07:07

        All right, boys. Rock and roll. What a busy week, huh? Thank you so much for joining me.

    15. RORory O’Driscoll1:07:12

        No problem. See you soon

Episode duration: 1:07:23