SpaceX Valued at $800BN & Harvey Raises $160M at an $8BN Price & Netflix Acquires Warner Brothers

1. 0:00 – 1:38

   Intro

   1. RORory O’Driscoll0:00

      Every time that private market valuations came into contact with public market valuations, private market valuations were found wanting. And money is a great truth serum.

   2. HSHarry Stebbings0:10

      [laughs]

   3. RORory O’Driscoll0:10

      Don't tell me what you think, tell me what you do. It is possible to lose money on a great company.

   4. HSHarry Stebbings0:16

      It is the spiciest show we've ever done. Jason Lemkin, Rory O'Driscoll, the biggest news in tech. Airwallex at 8 billion or Ramp at 32? Which would you rather own?

   5. RORory O’Driscoll0:28

      Jason, bail me out here.

   6. JLJason Lemkin0:30

      I think it's VC condescending to tell the CEO how they're gonna work it out. It is beyond condescending. The great CEOs will figure it out.

   7. RORory O’Driscoll0:37

      I'm gonna push back hard on that. Hard on that.

   8. JLJason Lemkin0:40

      Okay. But, but people-

   9. RORory O’Driscoll0:41

      I, I-

   10. JLJason Lemkin0:41

       ... are gonna see you as condescending, Rory. I wouldn't push back

   11. RORory O’Driscoll0:43

       I, I disagree. I'm... And there won't, and there won't be the c-

   12. JLJason Lemkin0:45

       They like you a lot now. Don't make them think of you as condescending. It doesn't help at the end of the year.

   13. RORory O’Driscoll0:48

       No, I'll deal with that straightaway.

   14. JLJason Lemkin0:49

       Don't push back. Take a mulligan and delete this session.

   15. RORory O’Driscoll0:51

       No, I won't. I don't give-

   16. JLJason Lemkin0:52

       It's not your place to tell them how to do it. The-

   17. RORory O’Driscoll0:54

       Disagree entirely, Jason.

   18. HSHarry Stebbings0:57

       Ready to go? [upbeat music] Guys, it is so good to be back. Jason, I am loving this 20VC swag that we've got going on here.

   19. JLJason Lemkin1:15

       It is.

   20. HSHarry Stebbings1:15

       I mean, it looks fantastic. Rory-

   21. JLJason Lemkin1:17

       A reminder to founders-

   22. HSHarry Stebbings1:18

       ... we've gotta get you some, my friend

   23. JLJason Lemkin1:19

       ... and others out there, swag works.

   24. RORory O’Driscoll1:21

       Swag works.

   25. JLJason Lemkin1:22

       It works.

   26. HSHarry Stebbings1:22

       Actually-

   27. JLJason Lemkin1:22

       It's a, it's a good investment. It's a good investment

   28. RORory O’Driscoll1:25

       I- it is. Quality swag works. It's gotta be good enough that you wanna wear it. That's the test.

   29. HSHarry Stebbings1:29

       Or play with it-

   30. RORory O’Driscoll1:31

       It works
2. 1:38 – 8:48

   SpaceX's $800 Billion Valuation: A Deep Dive

   1. RORory O’Driscoll1:38

      are paddle batters.

   2. HSHarry Stebbings1:39

      O- okay, okay. We're gonna start. We're gonna start. We're starting with number one, SpaceX pursuing $800 billion valuation through secondary sale. This is obviously not the first we've seen in recent times with SpaceX doing large secondaries. It's the first time it's obviously been 800 billion. How do we think about this news? Love to hand over to you guys.

   3. RORory O’Driscoll1:58

      It's an amazing co- Let's start with that. It's just an amazing company. It's actually amazing, two companies. It's an amazing rocket company and an amazing communications and Starlink company. It's, you know, doing $15 billion, growing plus or minus 30%, um, this year. That's a pretty hefty valuation. I mean, that's, you know, north of 40 times run rate for a company this year going 30. Now, you could argue maybe there's some extra Starlink growth buried in there, but I, I remember thinking, "Hmm, I'm not sure I'd be a buyer at that price." And-

   4. JLJason Lemkin2:32

      [laughs]

   5. RORory O’Driscoll2:32

      [laughs] You know? And might even be s- if I, if I'd owned some, I might be looking to my seller. So yeah, I, I, I think there's a huge amount of Elon magic overlay and, you know, so far that magic has worked, but it's definitely a lot of non-obvious math baked into the price.

   6. JLJason Lemkin2:50

      It may segue into the IPOs of '26 and '27. I think it's gonna... Our jaws are gonna drop with the IPOs, right? And one question, it, I guess it's a minor question, is there's so many brands that will IPO. We had, 2025, we had no brands IPO. I mean, we had some good IPOs. We had some IPOs that traded weak, like Figma, but it's not like folks on the street knew who Figma or CoreWeave was, right? Who knows what retail will do to, to, to SpaceX and Stripe and, um, street names like Databricks, which everyone talks about. A little facetious there, but, but, um, what, what is, what do you... I don't know what the retail premium is for a hot name, but it could be... It's, it's, it's boosted Tesla over the years, for sure.

   7. HSHarry Stebbings3:30

      But I'll push back, Jason. Does this secondary sale not actually just show the lack of need for these names to IPO? The fact that you're doing it at $800 billion and furthering the discussion that we had with Tom Tunguz of, like, the lack of need for these companies to. I actually think it's, it's not gonna be a good '26 because of secondary sales like these at these prices.

   8. JLJason Lemkin3:48

      But, I mean, if Anthropic really IPOs at the end of next year, it will, it will just... You know, we haven't had an IPO like that a- almost ever. It will, it will just cha- change the course. And the amount of liquidity, the scale, I mean, who, who knows? If it's worth 800 billion, um, or whatever it trades at, it, th- these are just not like the VC deals we just used to, we used to do. [laughs] Even just two of them. Even s- you're right. Maybe Tunguz is right. Maybe these guys never IPO. Um, but, um, but, but the, the, there is... Eventually they will want the capital, I think. And I don't think Databricks, um, and, and Anthropic are hiding from an IPO. I don't think they're doing a Stripe. I think they've been very clear they're on a path to an IPO. We just don't know when Databricks and Anthropic will IPO.

   9. RORory O’Driscoll4:32

      Some of these are destined to go public in a way that maybe Stripe chooses not to. I think the question will be if you get locked into a high price on secondary, even if it doesn't have an IPO block, even if it's entirely secondary shares, will you get into this weird dynamic where it doesn't feel like a win if the public markets don't think you're worth 400, you know, 800 million, billion. They only think, only, did I really say that? Only think you're worth 400 billion. And I, I think that's one of the weird things about, um, these, you know, private rounds providing a high water mark. Does it make, um, IPOs, for lack of a better word, emotionally unattractive because it's gonna not feel like the win you wanted it to be? I mean, it's worth pointing out, I think-

   10. JLJason Lemkin5:13

       Does any, does anyone care anymore, Rory, if the, if it's a down I- literally, does anyone care any... I, I think we've given up caring about a down IPO.

   11. RORory O’Driscoll5:21

       Let's talk about that. First of all, you're, you're right. I mean, I think almost every IPO this year, 2025, was a down round on the prior private round, right? So, you know, as I say to people, every time that private market valuations came into contact with public market valuations, private market valuations were found wanting, right?

   12. JLJason Lemkin5:42

       [laughs]

   13. RORory O’Driscoll5:43

       So in what... And it c- kind of from a, from a do you care perspective, you, you survive it, you move on. It's not like it's, you're right, it's not like the end of the world. The person who obviously does care is the person who bought in the private markets at a price that's not now available in the public markets, and this is back to the how does this-

   14. JLJason Lemkin5:59

       I don't know if they care, thoughNo, what I mean is, what I mean is, i- is seriously, going into '26, of course they care, right? W- especially without a ratchet. My sense is it's baked into the business model, right? For Harry, on the off chance Airwallex is worth less than he paid, okay, I don't think Harry, Harry's gonna quit the business, right? I don't think he has a 3X ratchet on his investment. I'm just saying I think it's cha- much like the, you know, coming out of a hot accelerator, raising at 60 post with trivial revenue, I think even seed investors have internalized this, right?

   15. RORory O’Driscoll6:28

       Well, so you are right. It is in the business model in the sense if you think about late-stage investing, and obviously [laughs] I think we can stipulate that 800 billion pre is definitely late stage by any man's definition, um, you know, you're not running any other kind of meaningful risk except valuation risk. So you can't cry like a baby when valuation risk bites you on the ass. So at one level, you're right. Not only is it baked in the business model, it arguably is the business model. Just like investing in stocks, the business model is some go up and some go down, right? So yeah, I'm- I agree. It's not gonna be, "Oh my God, we'll never do that again," but what it will lead to is perhaps... I mean, that's the point in time at which either there's less capital or more circumspection in the private markets. I mean, if you continually price something at a high price, and you're continually wrong, and it goes public at a lower price, at some point, some adult in the room will say, "Maybe we should stop doing that and wait and buy them when they're cheaper," right? And you're right, it's not the end of the world. But that's the... You know, as I look at these, you know, as I look at $800 billion pre for a $15 billion revenue business, yeah, as I said, in the absence of the Elon premium, I think that price would look pretty sick in the public markets. Now, because of the Elon premium, I freely admit it's just not knowable to me in the short term. I think in the long term, everything, as we've said, is a weighing machine, and the cash flows will dominate. So they're gonna have to do a lot of going to get to that price.

   16. JLJason Lemkin7:48

       I think the meta point for me, the change to venture and founders, is even today on X, Harry's probably given this advice as well. He gives a lot of advice on X. You'll have an advice, "Don't raise a round at too high a price. You'll come to regret it. Do a fair price. Don't, don't take the highest price," blah, blah, blah, blah, blah. I think that advice is as sound as it ever was, but I think it has an audience of N equals zero. I don't think anyone cares. No one cares if they come out of a hot accelerator and raise at 50 to 60 on a bunch of safes with no rights and do a round at 30 later. They don't care. They just don't care. They don't care if, listen, if I need the capital at $800 billion and the IPO's at $500 billion. Uh, I mean, Elon Musk has kinda take care of his Twitter investors in a way, right? But I don't think folk- most folks really, they have the angst we used to have. I, I think the angst is gone around mispriced rounds, overpriced rounds. And good or bad, I think that advice, it has no audience. [laughs]

   17. HSHarry Stebbings8:46

       I, I wa- I wanna expand this discussion

3. 8:48 – 19:03

   IPO Market Predictions for 2026

   1. HSHarry Stebbings8:48

      to the broader IPO Market, 'cause we've seen not a huge amount of liquidity come back, it not be as exciting or as exuberant as we thought it would be in 2025. Two questions as direct as can be, will 2026 be the year of the IPOs? And if so, what will be the catalyst to drive that excitement?

   2. RORory O’Driscoll9:07

      When you kind of sent out the note, you said, you know, what happens if SpaceX, Anthropic, and Databricks go, go public, right? And, you know, just doing the math here, I did it. It's like $800 billion for SpaceX, $400 billion for Anthropic, and $200 billion for Databricks. That's $1.4 trillion of market cap. Let's say VCs own on average a little under half of that, plus or minus. That's $700 billion of money returned to VC. That would obviously, to state the banal, be a pretty darn good year, right? Now, sobering to realize it's only point-- it's only about 20% of the total private FMV, 'cause the total private FMV of venture is, you know, something like 2.8, 2.9 trillion. So it's, it's, it's a big chink in the ar- it's a big chink in the deficit. It's not all the deficit, but it would be a great year, right? And that's plausible. I mean, it-- the, the weird thing about power law econom- math is it only takes one or two at the top of the power law to go public to dwarf, you know, 10 little, you know, $2 billion pre-IPOs. You know, it's all lost in the noise of the banker fee if SpaceX goes public at anywhere from $4 to $600 billion. One of these years will be a bumper year for IPO, and the thing that will make it a bumper year is, just like 2012. You don't remember, but 2012 was a, quote, "bumper year for IPOs." Why? 'Cause Facebook went public, right? And the year, I can't remember, it was 2018, was, quote, "a bumper year for IPOs," 'cause Alibaba went public. And both of them were huge and ginormous, and if you look at the little bar graphs, it's like, oh yeah, that was the year of Alibaba.

   3. HSHarry Stebbings10:41

      What i- what is the Facebook or Alibaba of '26? Is it SpaceX, Anthropic, or Databricks?

   4. RORory O’Driscoll10:46

      At $200 bi- I can't remember Alibaba, but, um, at, uh, SpaceX and Anthropic would be bigger than both. I mean, I, I wanna say Facebook was around 70 or 80 bill. I remember Alibaba being bigger, a couple of hundred billion. But yes, I-- any of these would be as, would be bigger. At some point in one year, two or three of these will go out at the same time, and it'll be like the mother of all years.

   5. HSHarry Stebbings11:07

      Do we not feel pretty good actually looking at this? When you add in an OpenAI on top of that into an H1 '27, which is kind of where people are projecting it to be, you're looking at 18 months of pretty phenomenal funnel and liquidity.

   6. RORory O’Driscoll11:21

      If the markets stay strong and that happens, the overall return to equity will be extreme- you know, return to venture will be extremely good. I mean, just to say it out there, 'cause I am Mr. Debbie Downer, right? Markets are at an all-time high, both in kinda index terms, which is meaningless, 'cause they're often at an all-time high, but just in terms of valuation on a PE, any kind of Shiller PE basis. In a much more normalized market, if all these companies went, going back to perhaps disagreeing a little what something says, if all these company went public and every one of them was significantly down on the last round, you know, let's just say instead of being worth $1.4 trillion, they're just worth $700, $800 billion. Still the best year ever. Still three amazing companies go, going out. You could still have a weird feeling of, ooh, maybe I shouldn't have bought at $800 billion pre or even $400 billion pre. That's the dilemma here.I, I think net-net it would be, to your point, it would be good overall. I mean, the capital would come back. M- all the prior rounds would make money. You might just have this odd phenomenon of people going, "Ooh, that last price was a little, little, little reachier than the public," but you're still in a good shape.

   7. HSHarry Stebbings12:24

      Jason, do you wanna, do you wanna lose some more money? Do you remember our bet?

   8. JLJason Lemkin12:26

      I mean, I'm already out fift- uh, like I already thought this was gonna happen at the end of '24. I already owe you 50 grand plus interest.

   9. HSHarry Stebbings12:32

      [laughs]

   10. RORory O’Driscoll12:32

       Wow.

   11. JLJason Lemkin12:33

       I was too optimistic. I really thought that we would have a blip in '23. T- and '24 all the B2B leaders would come roaring back because, you know, growth stayed high for a while, right? Through early 2023. So I thought 2024 was gonna be... I thought we were gonna have an IPO, uh, a day again because of the unicorn backlog. Little did I know they would all stop growing. [laughs]

   12. RORory O’Driscoll12:53

       Yeah.

   13. JLJason Lemkin12:53

       Unless, except the AI ones. [laughs] All the, except they would all stop growing, so w- I don't even want... Hopefully, the interest rate's like 1% like Elon's loans. We'll have to, we'll have to figure it out. I'm good for it.

   14. RORory O’Driscoll13:03

       I, I, I don't, wouldn't, if, if, if your plan involves assuming we ever get to 1% interest rates again, I, I, I'd abandon that plan, 'cause, you know, even with-

   15. JLJason Lemkin13:10

       I can double down on the bet.

   16. RORory O’Driscoll13:11

       Yeah.

   17. JLJason Lemkin13:12

       The b- my bet is now it has to happen by the end of 2026. It is tight, right? Because it's the end of 2025, right? I, I, I think I'll take that bet. I'll double down on it. I think Anthropic and Databricks have an incentive to IPO, as best I understand it. They have an incentive. As Rory said, times are great. Um, and so I think it'll be the, uh, un- unless, unless, unless the market crashes for some reason, I think they're gonna do it when the timing's perfect. I think they're both gonna IPO in the back half of '26. And if I'm, if I, you know, Harry, if you double down on it, well the worst case we're even, right? Best case I get 100 grand and, and you can pay for it out of fees, so it's really ta- pre-tax.

   18. HSHarry Stebbings13:47

       [laughs]

   19. JLJason Lemkin13:47

       You can just write a direct check from me [laughs] from-

   20. RORory O’Driscoll13:50

       Okay, got it

   21. JLJason Lemkin13:50

       ... from 20VC Management LLC. [laughs]

   22. RORory O’Driscoll13:53

       I do agree with you, 'cause I think oddly, you know, Anthropic has been, you know, obviously very different in terms of founding story and effective altruism and angst about AI, but remarkably sober-minded and sensible and kind of mainstream in terms of the financial plan. You know, all along they've stated they're gonna be more efficient, burn less. They've talked about converging early. It feels like they will very sensibly go public when they can, um, because in this kind of capital-intensive business, I think at some point there will be a strategic advantage to going public. So, you know, just logically it would be the right thing to do, and they've been pleasantly more logical than the other player on this space, and more small C conservative, which is ironic, as I say, given the philosophical approach there. But in terms of finance, they've been conservative and I think they will be. And conservative, sensible, conventional maybe is a better word than conservative. The conventional thing to do [laughs] when you're valued at $400 billion and you need to raise a lot of money would be go out and access the public markets at scale. So yeah.

   23. HSHarry Stebbings14:53

       Jason, I'm keeping my gain. No deal. I think you're right. I think 2026 is when they go out. So I, I, I agree with you there. Um, I do-

   24. RORory O’Driscoll15:02

       Wow. Harry's pocketing his 50 grand and moving on. I love it.

   25. HSHarry Stebbings15:04

       I'm p- I'm pocketing my 50, baby.

   26. RORory O’Driscoll15:06

       But also remember, we've been, I saw it in one of the chart guys I follow, is that from April 15th, when remember we had the tariffs and the implosion then, this has been the most, the strongest bounce back from a bear market since 1982. It's been the biggest jump, right? So where everyone's head was in April versus where everyone's head is today, and you should remember it can go the other way just as quickly. You're right. You can, everyone can think they're filing and then something can go wrong. So you're right. When equities are at an all-time high, the window is open, and you know you're gonna need more money, maybe you should think about grabbing the moment.

   27. JLJason Lemkin15:38

       But if Anthropic's predicting their revenue's gonna triple next year, okay? Difficult to imagine, even in a amazing market like today, you're gonna get a much better multiple than in early 2026, right? Um, will it triple from 26 to seven- to almost $80 billion? I mean, may- maybe. But I mean, just the fact that you've got a 3X at that scale kind of in the bag, that's a good time to IPO. [laughs]

   28. RORory O’Driscoll16:01

       Yeah.

   29. HSHarry Stebbings16:01

       Jason, baby, I got a new bet for you before we do the BFD. The new bet is Anthropic going out, what price does it go out at? And Rory, you're involved in this bet. Some chance.

   30. RORory O’Driscoll16:12

       Look, I haven't sp- again, I think there's talk about a private round at 300, 350. You know, again, looking at public information, when you look at the growth rate when they were doing the $170 million round, you can see the math working. So you could easily justify a 350 million type valuation in the public markets. So that doesn't seem crazy. I mean, it's amazing as a result. Um, but Jason's right. One more year of 3X growth. I mean, the thing that would derail all this stuff, as we've always said, is remark- would be sustained deacceleration. But the acceleration we're seeing attenuates but doesn't collapse, then that kind of number is totally plausible.
4. 19:03 – 30:33

   Netflix's Bold Move: Acquiring Warner Brothers

   1. HSHarry Stebbings19:03

      Okay. The, the big fucking deal, Netflix acquiring Warner Brothers, $82.7 billion. Um, one of the biggest deals. First question is, how do we analyze this? Second question is, will it even go through? How do we think about this?

   2. RORory O’Driscoll19:20

      First of all, you're right. You say Netflix acquiring. Netflix hoping to acquire, but with a lot of opposition from a hostile from Paramount. I think the big zoom out venture comment is Netflix won. They ate the media industry. Their market cap is $470 billion. The biggest studio is sub $200 billion. Comcast is, what, $100 billion. Netflix won, right? They can ingest this bite. It's 20- less than 20% dilution and keep powering through, right? That's the zoom out comment. They come to the table here. I mean, it's just so interesting how outmatched the other player is, with one caveat that'll come. I mean, Netflix is a, yeah, Netflix is a, call it a $470 billion market cap company putting 100 billion, just under 100 billion bucks on the table. Paramount is a sub $20 billion company putting 100 billion on the table, relying on debt plus PE investors like, um, the Kushner Fund and a bunch of other funds to bridge the difference. Those are very outmatched competitors in this hostile bid. And again, as I say, back to the big picture is the outsider, the tech-backed, the venture-backed company has basically a far better business model than any of the studios and is eventually gonna, as you're seeing it here, start to eat them. That's the big picture.

   3. HSHarry Stebbings20:40

      Do you think it will go through?

   4. RORory O’Driscoll20:41

      That involves knowing... I mean, there's, there's so many dimensions of going through. First of all, it's clear. What's clear? It's clear the board of Warner Brothers Discovery, which is their technical name, WBD, wants to do this deal. Um, Paramount had put the thing into play, but the board's dynamic is, you know, f- what do you do as a public board? You say, "What's the certainty of close? Hmm. The person who has $500 billion plus or minus is more likely to close than the person who has $20 billion plus or minus. Hmm. I'll go with him." So they wanna get that deal done, but you have a whole bunch of regular regulators, and then you have, you know, political overtones. And we also should put in the Hollywood artists, 'cause they're fun, too. From a m- from a regulatory perspective, Netflix is much more a concern for the FTC 'cause of monopoly power, you know, a l- alleged monopoly power, 'cause HBO is a streamer and Netflix is a streamer. Paramount is much more of a concern to the FCC from a broadcasting license perspective. So both of them have to go through everyone, but the, the, the, the, the, there's a different institutional, d- different regulatory pushback for each of the two. All other things being equal, you'd say it would go through, um, kind of just in terms of you... You know, it's the classic thing. If you do the near end analysis, oh my God, if you just focus on streaming, then Netflix is big. HBO puts them a little bigger. They're over 30%. Everyone wrings their hands and says it's over. Netflix will say, zoom out, call this entertainment, take into account YouTube, take into account broadcast TV. We're, we're still teeny tiny, pushing through. And that's a known regulatory issue, and it'll get, you know, debated and litigated. The two other things we haven't to talk about, both of them are fun in different ways. One is more than any and more than ever, you have political overtones here. Obviously, the investor base, even leaving aside Kushner, you obviously have the Ellisons appear to be pretty tight with the White House. You have Trump already commenting a little bit on the Netflix side. So you do have the thumbprint of the executive office probably coming in on this one, he said gently. And then the really fun one is, 'cause it's enjoyable, Hollywood hates the Netflix deal, and you have to ask yourself why. And it, it wasn't obvious to me until I did some reading. I'm like, yeah, Hollywood is all about the creators. It's, it's not monopoly power screwing the consumers. It's monopsony power, right? If Netflix becomes the biggest single buyer of content, then if you're making content, which is what Hollywood does, making m- right? You have to sell to, you know, the, the, the media buyer for Netflix becomes the most important person in your life and your biggest customers, and they correctly hate that. And, you know, they'll say it's because it'll be bland and boring content, and it will be, 'cause corporations are more boring with content than individuals. But it's also let's get real, because Netflix will exert its power to not overpay. So, uh, it's always interesting, 'cause regulatory's approach kind of really focus on the damage to the consumer, and that's not the case here. But if you're a producer of content, if you're, name me a famous movie star, you, like, hate this. You're like, "I do not want Netflix to have all that leverage on me, or they'll have me grinding out rom-coms on a low budget somewhere in Romania, and I'm not gonna like that. It's not gonna be fun."

   5. HSHarry Stebbings23:58

      I'm sure Leonardo DiCaprio is terrified about that. Yeah. [laughs]

   6. RORory O’Driscoll24:02

      Absolutely. I mean, he might have to go down into single-digit millions for those, you know, 20-minute movies.

   7. HSHarry Stebbings24:08

      I hope. [laughs]

   8. RORory O’Driscoll24:08

      And then he'll... Yeah. And, yeah, so many ways to pile on on that one. But yeah, interesting.

   9. JLJason Lemkin24:15

      You know, a small thing that's interesting to me is, um, is the CEO, Zaslav. Is that how you pronounce his name? David Zaslav?

   10. RORory O’Driscoll24:22

       Yeah.

   11. JLJason Lemkin24:22

       Clearly, he does not wanna do the Paramount deal.

   12. RORory O’Driscoll24:25

       Yeah.

   13. JLJason Lemkin24:25

       It is interesting, and if you've been... For folks, if you've gone through M&A, you really wanna have two, two real offers. Uh, backup, you wanna have one real and one fake offer. Like one st- at least one fake offer. You can tell corp dev you have another offer.

   14. HSHarry Stebbings24:38

       Yeah.

   15. JLJason Lemkin24:38

       But if you've ever had two as a founder, um, and I've done both, had two and had a, had a pseudo offer, but when you really have two, you really think about what you wanna do with your life more. Just the interesting dynamic is I just really don't think he wants to go work for, for, for Larry Jr. at Paramount. Um, it's confusing whether he'll make more money under that deal or less, but versus a deal where he gets to control more of his destiny, some of the assets stay on as a separate company. As a founder, and he's not a founder, as a founder, I would take the Netflix deal in a heartbeat. And I, I do think that is some of this, "Hey, s- go away, Paramount," because management doesn't wanna do the deal. Management just doesn't wanna do- So it'll be interesting when they do a tender, w- the, the hostile offer, right? If 51% of the shareholders [laughs] take it because we, there, this may be a divergence of interest at the margin between the two. But I don't think management wants to do this Paramount deal.

   16. HSHarry Stebbings25:27

       I thought it was interesting, David Allison said the board have not even responded to Paramount's offer. Like, no response at all. To Rory's point earlier in terms of where the appetite is from, you know, WBD's port-

   17. RORory O’Driscoll25:38

       And it's clear they were talking earlier. It's clear, as Paramount said, they put the deal into play, and then, you know. Again, that's the problem when a small company puts a deal into play. Y- yeah, the company that you're trying to acquire kinda mentally gets its head around selling itself, and then it can just decide to sell itself to someone else. And a- again, going back to the, the big picture here, someone else has a $480 billion market cap, and you don't. And that's the, that, that's, that's what's happening here.

   18. JLJason Lemkin26:06

       And at the margin, I don't know how important it is, but at the margin, Netflix also has a, a revenue arbitrage. It trades at a much higher multiple.

   19. RORory O’Driscoll26:13

       Yeah.

   20. JLJason Lemkin26:13

       That can come under a little pressure when you buy a large asset, but it still remains true. Netflix, Netflix's e- equity is cheap, relatively cheap to buy this asset. Um, and the, the pri- the m- th-they may be able to inflate all the assets to 10 times mult- revenue, right? If they do that, it, this is an incredibly accretive deal for them versus the most expensive deal Paramount could do, even if it's do or die, right? The revenue arbitrage is not to be understated in a deal like this.

   21. RORory O’Driscoll26:36

       Yeah. Yeah. Though it is interesting, the Netflix stock ticked down slightly, but I think that's a little short-termist. I think even a- aside from the revenue arbitrage, the beauty of Netflix is, again, z- zooming out, because you have global distribution, you can monetize content better than anyone else. The value of the... You can pay more for content 'cause you got more people to sell the content to. It's just that simple, right? The business model won. Could I... I think one of the questions you, you put in here was sup- 'Cause, you know, uh, I'm not gonna lie and say I spend my time agonizing about, you know, the entertainment industry M&A. Though I will, and I gotta say in passing, poor HBO, which was so good. It's been owned by so many dreadful people. It's, you know, it's, it was founded, it was incubated in Time, then it was Time Warner, then Time Warner AOL, and then, dear God, AT&T. And then they finally get out to be Warner Brothers Discovery, and they're kinda on their own doing their thing, and now they're subject of a hostile takeover. And poor A- the AT&T idiots made them change their name to Max and have you reload the app. And it's all... It's, I mean, you know, they've taken the best high-end TV product in history and just thrashed it through five different corporate owners. So whoever gets this thing, please be nice to HBO. It was great once. I have, you know, emotional connection. But I actually think that the fun question you asked, Harry, was, you know, what other examples of this will there be? This is the digital world. The zoom out comment here is this is the digital world taking over old school industries. Yet another old school industry has rolled over and died, right? You know. And I think that's a super question, and I, I thought it was a good one, you know. And you know, I was thinking about it a lot 'cause-

   22. HSHarry Stebbings28:15

       What, what is the other industries, if you extrapolate that out? Where do you see frailties?

   23. RORory O’Driscoll28:19

       I think there's a bunch, and that's the interesting thing. 'Cause tell me, when I started in, yeah, in the '90s, yeah, IT was exactly that. It was information technology, and most of it was sold to corporations to effectively account for their shit. You know? Like, you had computers to count people, to count money, to count... That's all it did. Hence the name. I mean, IT, information systems, those boring names. And that's still the bulk of, you know, core IT investing. You know, you have software to run B2B, right? But the amazing thing, this is to your point, Harry, is that in only since the last 25 years, digitization ate a couple of industries. So I mean, the, the, the obvious big ones it ate is it ate advertising. I mean, you know, Facebook and Google have 70% of not just all of digital advertising, but all advertising. Thanks for playing, newspapers. Thanks for playing, broadcast TV. They won, right? So in, from '95 on, venture-backed Silicon Valley startups ate the advertising industry and took all the money. And now you're seeing the second big one. The second... I mean, you know, Mad Men, it looked like it was fun to be in advertising in New York. And now little tech weenies in Silicon Valley, we just did it to Hollywood. Like, thanks for playing, guys. I know you have these cute studio businesses, but we've got distribution on the internet. We've got our algorithms for predicting which software works. We're gonna take over your, your, you know, your sexy Hollywood business too. And so you're right, Harry. What's next? And I was thinking, it was a great question. I started... I mean, to me, you actually talked about it last time. The next one is fintech. What point does someone like Revolut say, "Oh, I woke up and realized I'm the largest market cap company, bank company in Europe. Maybe I'll buy one of you branch baby thingies," like, you know, like Amazon bought Whole Foods, right? 'Cause that's the third one that got swallowed. Retail got swallowed. I mean, if you think about it, they swallowed advertising completely. They swallowed a lot of entertainment, not all of it. They swallowed a good slug of retail. Probably banking's gonna go that way and, you know, some point maybe auto. I mean, it's just amazing over an elongated period of time, just the power of digital software-enabled technology in conjunction with the internet to just-You know, eat, entirely destroy and consume other businesses

5. 30:33 – 36:23

   Tiger's New Fund Strategy

   1. HSHarry Stebbings30:33

      Before we move to some of the biggest AI deals that we've seen go down, a couple that I, I thought were super interesting, and you, you can choose. Like Tiger's new $2.2 billion fund downsizing. I know it sounds crazy, $2.2 billion is a huge amount of money, but from the lofty heights of '21, it's a big change. Anything of note that we should think about here?

   2. JLJason Lemkin30:56

      You know, I thought the most... I, I should have copied down the exact number. Um, I thought the most interesting thing in the reporting was that, um, so they did raise a prior fund of about 2.2 billion, right, in '23. They only did nine deals this year versus 100 and some odd in 2021. I, I think what's just interesting is this is a super smart group of folks. I think both strategies are of the moment. I think, I actually think the Tiger strategy in 2021 when we had an IPO a day and every recurring revenue company could IPO at a couple hundred million in revenue, growing 50% with 140% NRR. I think that was the, uh, strategy of the day. Now Tiger's seen itself reinflate with OpenAI and others, right? It had seen everything we've talked about, the huge growth, the unlimited growth for the winners, and, and now they've tilted to that strategy, and I think growth investors probably should tilt to the strategy [laughs] of the day. Um, but I, it's, I just think it's interesting, and, um, we'll, we'll see what the, the 2029 fund does. But at doing nine deals at that scale is pretty tight, right? It's a pretty, it's a pretty concentrated focus, isn't it?

   3. RORory O’Driscoll31:53

      It is. I, I give them credit. I just want to say, I'll start with giving... 'Cause, you know, it takes a... Look, the guy running that has got billions of dollars, doesn't need the grief, right? I- it speaks to a love of the game that he says, "I'm gonna swallow my pride." 'Cause I don't think he's gonna say the '21 fund was a success or the right idea. You might get bailed out by some of your big investments like OpenAI, but you don't look back. I mean, we all have periods as investors that we look back and we don't look back on in pride, where you go, "Hmm, I got that wrong." And I'm sure a smart, a, a team as smart as Chase Coleman looks back on 2021 and says, "That was hubris and I was wrong." And I give him huge credit for not going, "And now I'm just gonna, you know, take my $2 billion, $5 billion and, you know, stay in my house in, you know, Palm Beach or whatever. I'm gonna get back in the game, raise a smaller fund, you know, take the little bit of knocks from the knockers that say you're wrong, and just do my job and do it well." So, you know, I'm, I think it's great. I think all credit to them. And, and what you're seeing is, which is always true, is that the original strategy they had of, you know, doing the very best deals, doing them late, doing them with concentration, was the right strategy. It worked with JD.com in 2012 or whatever it was when they did that in China. It worked early on in internet land. They got carried away, they made some mistakes, and now they're sobering up, flying right, and staying in the game. So, you know, all credit to them.

   4. JLJason Lemkin33:11

      And a 20% GB commit is not small.

   5. RORory O’Driscoll33:13

      No. I mean-

   6. JLJason Lemkin33:14

      I mean, this is really putting your mo- Like, 20% is at the limit where it's almost not worth doing. You might as well just direct invest. You're just not getting enough leverage on your money, I've always thought. 20% was a weird number, right? Assuming you have 20% carry, right, um, you're not making enough money. You're not... Like, all the grief of having LPs isn't worth it at 20% GP commit, is it?

   7. RORory O’Driscoll33:34

      Well, it is, 'cause you need, you need the bigger check size. Yeah, you know, the point is at 4... I mean, 20% at 400 million you wouldn't be a late stage fund. No, I actually think-

   8. JLJason Lemkin33:41

      Yeah, you get, you get to write bigger checks, but you don't, you don't make so much more money versus investing. In theory, you don't make enough, you don't make enough money for the grief, I think.

   9. RORory O’Driscoll33:50

      I, I understand what you're saying. 'Cause you, you... I mean, the math is easy. You can do it in your head. It roughly doubles it. You have 20% of your money and then you have 20% carry. So if you 2X the fund, half your gains come from your capital and half your gains come from your carry. It's easy math. Ignoring fees just for a second.

   10. JLJason Lemkin34:04

       Yes, but, but in theory... Now you're right, this breaks down on late stage funds. For early stage investing, I actually think it's worse because it's harder to get into the deal, right? It may, it may be the opposite for growth, right?

   11. RORory O’Driscoll34:14

       Jason, you're exactly right. If you were running... If you were, if you had 100 mi- If you had $400 million of your own and you were doing an early stage fund, becoming an $800 million fund to take other people's money, this is silly. You're exactly right. I would argue, though, on the late stage business, there's a critical am- You ca- I mean, look, you can't show up at a $200 million round with a $30 million check and say, "Pick me." That's just not a thing, right?

   12. JLJason Lemkin34:34

       [laughs]

   13. RORory O’Driscoll34:34

       So he's sizing for the business at hand. And I agree, I think every LP probably draws a huge amount of comfort from that check. I mean, I personally think, you know, especially when you're dealing with wealthy people, where they put their money is what you wanna know, and I would f- Yeah, I actually think LPs don't focus on that enough. I, I find it enormously reassuring that someone cared enough to write, you know, 20%. And, you know, when things get tough or when you're trying to, God forbid, get your capital back versus play to win, that 400 million will keep these guys focused. So I, I think it's great. Again, I think it, everything about that's good. I haven't picked up on the 20%, but that's, that's awesome.

   14. JLJason Lemkin35:08

       For folks who might, who might, might be founders or others, like, that's a lot for a fund, right? I think the average growth fund is about 1%, um, and even that can be manipulated in where you come up with 1%, right? It can be, it can be just, uh, maybe one or two of the partners that are richer are putting the money in. It can be from loans. It can be from cashless things. To Rory's point, you gotta love the game if you're that rich. Even if you had a rough couple of funds, you gotta believe this is, this is worth it, right? This is so much of the fund.

   15. RORory O’Driscoll35:34

       It's... And money is a great truth serum.

   16. JLJason Lemkin35:37

       [laughs]

   17. RORory O’Driscoll35:37

       Don't tell me what you think, tell me what you do, right? At the end of the day, "Do you love me?" is one q- "Do you love the game?" is one question. "Do you love at 400 million?" is a very different damn question, right? And clearly they do. At 400 mil- You're exactly right. At 400 million you're in 'cause you're in. Yeah, 'cause you like it.

   18. HSHarry Stebbings35:52

       I also think it pains him greatly that their brand has been tarnished in the LP community-

   19. RORory O’Driscoll35:58

       Of course

   20. HSHarry Stebbings35:58

       ... and he will do everything possible-

   21. RORory O’Driscoll35:59

       Got it

   22. HSHarry Stebbings35:59

       ... to make other people money again. I think he is wounded and a, an, an incredible dude, actually. I'm a big fan of Chase.

   23. RORory O’Driscoll36:06

       Totally. I've never met the guy, but that's how I read it. Absolutely.

   24. HSHarry Stebbings36:09

       Yeah.

   25. RORory O’Driscoll36:10

       You, you know, there's a point at which you're not doing this for the marginal money, you're doing this 'cause you like it and you like to do it well. You take money from LPs. You value that relationship. I totally agree. I think they'll be, that'll be a highly disciplined, highly focused machine.

6. 36:23 – 40:19

   Databricks' Head of AI $500 Million Seed Round

   1. HSHarry Stebbings36:23

      Next, Naveen, Databricks Head of AI, announces his $500 million seed round at a $5 billion price. Um, we actually discussed this, like, months ago. I don't know if you remember it, but well before it was announced this week.It was just announced this week and caused a stir at the $500 Million seed. Anything to discuss that we haven't?

   2. RORory O’Driscoll36:48

      Sure. I mean, I think it's, I, I can't remember who wrote the book, um, about another entrepreneur where it perhaps didn't apply as much, but it was the, the, the, the, the, the title was Once You're Lucky, Twice You're Good. Um, Naveen's done it twice. I mean, you just look at that and you go, at this point, you can draw a line. And once you can draw a line, the VCs are gonna just show up en masse. It totally makes sense. Now, you know, and everyone's doing their, "I'm delighted to back Naveen" tweet this morn- yesterday morning. Yeah, I mean, and it is true to some extent, once... There's such a lot of data in someone who's been successful twice. You just gotta look at, I can totally see how you can extrapolate to that, you know? Whether the math of, you know, what kind of seed deal at $5 Billion can give you a 3 to 5X return, I don't have clarity on that. It's a lot of enterprise value to be created. But I know, I know how, I don't know if I... I, I know how I'd write that investment memo if I was writing it for my colleagues. It would be, "Once you're lucky, twice you're good. This guy's done it twice. Back him." You know, which is different than saying, "I see a $25 Billion outcome here." I just don't know it.

   3. HSHarry Stebbings37:47

      The one lesson that I've learned from a lot of these deals, whether it's Thinking Machines, or this, or some others, is that although it's $500 or $5 Billion on the sticker price when it's announced, there's actually several rounds before that Sequoia and Andreessen have done that are considerably cheaper. And the $5 Billion sticker seed-

   4. RORory O’Driscoll38:05

      Yeah, the headline

   5. HSHarry Stebbings38:05

      ... is, is actually very different to the first two rounds before that no one's picked up on.

   6. RORory O’Driscoll38:10

      I don't know if that's the case in this case, and you might know better than me, but you're right. We're seeing a lot of that. It's like, it's just so weird. It's, you know, if it's the same... And just for listeners, what you're seeing is it can either be different investors doing earlier rounds and not get announced, or even weirder, where you see one investor commit and they commit some money to you at $300 Million, some money at $500 Million, and some money at a billion. And from the investor perspective, they make the commitment and even the checks at the same time, so their blended cost is $500 or $600 Million, so that's how they, that's their economics and that's the facts. But y- the entrepreneur can then announce a headline billion-dollar raise, right? It feels a little FOMO-y, and you know, the, obviously the idea is both that you get attention and maybe that the next round investor is foolish enough not to realize what actually happened here. And maybe it works, but it's, it's, it's a, it's another, it's a sign when professional economists, you know, make lists of things that you see in bubbles, this is widely up there on, yeah, kind of weird stuff you see at top of markets.

   7. JLJason Lemkin39:12

      But it, it is, it does work in my limited experience because even if you do three rounds at the same day at 300, 600, and 900 or whatever it is, when you're oversubscribed, it's just a message to the new investors the price is 900. It might e- the price might even go to one two, like I've seen it too. It's just a step function. And, and v- investors that, that, that are, that are struggling to get into the round accept it. They, they acquiesce to it because it just is what it is. As long as there's a ration- as long as there's a, a... I think sometimes in venture and when deals are hot, you just have to pay the price that it is in hot deals. You just have to walk or pay the price it is. So if you can stair-step around even in a matter of hours so that the outcome is logical, then investors can either opt in or opt out. It is a, a little douchey, but it, it actually leads to a v- to a very efficient process for folks to opt in or opt out, right? I mean, YC's been doing this for over a decade. You know, even in the old days, you get in before YC Demo Day, you paid six pre. You got in after YC Demo Day, it was always nine. There was always a 50%. Now the step-ups are even higher before or after Demo Day. So this has been going on since I started investing in YC companies, right? In 2014, the first did one. Everyone had a step up after Demo Day. It just didn't used to be up to 60 or 100.

7. 40:19 – 1:06:14

   Harvey Raises $160M at an $8BN Valuation

   1. HSHarry Stebbings40:19

      Listen, it's not three rounds in a day, but it is three rounds in a year. Our favorite, the trusty, the trusty Harvey is back announcing $160 Million round led by Andreessen, $8 Billion valuation. Just to give the metrics, $150 Million in ARR, growing 300% year on year, 98% GDR, 168% NDR. Good numbers. Small raise in comparison. $160 Million led by Andreessen at $8 Billion, so like less than 2% dilution. Thoughts?

   2. JLJason Lemkin40:56

      You know, it's funny. First of all, I've, I've joked about this. I, I'm... When you can get a, a round for this for, like, 3% or less dilution, I'm super in favor as an early investor, right? It's a great deal, especially if we no longer care about the downside risk, if we no longer care if it's worth less. I think it's an amazing deal. The funny thing is when I started investing, I was taught, and in fact I was told by one of my anchors, these kind of deals you can't recognize the markup. It's too small. I had a deal like this during, during the b- 2021 boom. It quickly got marked up to $3 Billion by a good investor, but it was 2% of the company, right? To get into the company, and I never recognized the round or marked it up. My LP said you can't do it. I guess here it's $160. That's not chump change, is it?

   3. RORory O’Driscoll41:35

      No.

   4. JLJason Lemkin41:36

      But it's so small. It's so small. Is it a real, is it a real valuation? I don't know.

   5. RORory O’Driscoll41:42

      Ju- just to push on that, right? $160 over $8 Billion is 2%, right? I mean, let's just do the math here. At $800 Billion in SpaceX, 2% is $16 Billion. They're not doing a $16 Billion, um, second round. We t- we just took that valuation seriously half an hour ago. I think the interesting thing is, again, we said it a million times, so there's no c- there's no legal com- I mean, so at, a 3X is $24 Billion. There's no legal company, software company been worth more than $2 Billion ever, so it's 10X that. The data companies, the Westlaws and the Thom Vests are worth more than $2 Billion. They're, you know what, fives and tens of billions, so still less than this. So this is hu- this implies huge TAM expansion into labor and, and if you go on the website, huge TAM expansion, I'm sure, beyond just legal into other professional services.

   6. HSHarry Stebbings42:32

      That's what you have to believe if you're gonna see this being attractive from here.

   7. RORory O’Driscoll42:36

      You do. You really do.

   8. HSHarry Stebbings42:37

      And you also have to see market dominance, I think. You've also got-

   9. RORory O’Driscoll42:40

      Yeah, you, oh, you have to be the winner. Like, number two, the, yeah. Th- this is not the price for the, you know, the number-

   10. HSHarry Stebbings42:45

       Not only the winner, though, Rory. I think actually market dominance in a way that Uber and Lyft is. You can't have a cloud competition there where four players take... But there are so many, and, and there are so many fragmentations of this. You know, you did GCAI. I mean, so-I think you need to win the whole market

   11. RORory O’Driscoll43:02

       Yeah, that's actually a good comment. What you're saying, to paraphrase, is not the typical apps oligopoly, but almost like, you know, the way Netflix, to go back to, dominates streaming. It's like not only did I win, I have 80% market share of stre- or whatever it is. You know, I, I'm the winner. I'm the Uber. Yeah. No, you're right. 'Cause yeah, you gotta extract a lot of money.

   12. HSHarry Stebbings43:20

       But also not the unbundling, Rory. As I said, we're seeing this vertical unbundle into lots of different niches that we're both in and invested in. I think you have to believe they subsume all of those and be able to expand broader.

   13. RORory O’Driscoll43:33

       And yeah, and the theory would be first marquee customers in the law firm in particular, that's the investment thesis. You know, top of class.

   14. HSHarry Stebbings43:43

       The challenge to that, though, is Lagora are 40 million ARR, so a lot less, but they're doing 10X year-on-year growth on a smaller base, admittedly.

   15. RORory O’Driscoll43:51

       Yeah.

   16. HSHarry Stebbings43:52

       But they are doing very well in Europe. Like, Lagora's European, uh, progress can't be underestimated, and really the, uh, analysis from investors today is that Harvey have won the US and Lagora are winning Europe.

   17. JLJason Lemkin44:06

       I think we're making it too, too dr- too dramatic for VCs. Here, here's be my analysis, okay? If Harvey went from 50 to 150 this year, okay, and 10 to 150 in, in two years, I would just draw the ch- I would just do some classic math and just draw the chart out, okay? And, uh, my entire life in B2B as a founder or investor, e- every time we try to be too negative on TAM, it bites us. Now, we talked about, what did we talk about la- in Live in London? The, the something TAM? What did we call about it?

   18. HSHarry Stebbings44:33

       The TAM trap, dude. It's the TAM trap.

   19. JLJason Lemkin44:34

       The TAM trap. I believe in it. I'm living it with my portfolio, but-

   20. RORory O’Driscoll44:38

       But we agreed that those were older companies. I agree. And you are-

   21. JLJason Lemkin44:41

       Yeah. When you go 50 to 150 in, in, in one year, and if, if the last quarter, last four months, uh, if the growth's consistent so you can see a path to 400 next year, this isn't, this is the same multiple we just talked about, um, for, for, uh, for, for Anthropic, 20X.

   22. HSHarry Stebbings44:57

       But dude, you could argue Shopify is not from infinity. 150 becomes just 450.

   23. JLJason Lemkin44:59

       But that's our job as investors is to find outliers, and if this growth is... Here's my point. Listen, I'm a simple man, okay? I'm a simple B2B guy. If this growth is durable, okay, if we're seeing signs that it's durable, if it has the, if it really has 170% NRR and 98% logo retention and it's accelerating at 150, this is just the bet you do. You don't, you don't, you don't, uh, pull your hair out or have to have lengthy dinners about supplanting labor with AI and, and whether it'll be 10 trillion tokens. You just do the deal if the revenue is durable and it triples from 50 to 150 in one year. You just do... And the guys that got in at 3 billion in the beginning of the year got an insane deal. It's just not, it's not that complicated. Rory and I can go back to old SaaS spreadsheets and justify this deal.

   24. HSHarry Stebbings45:41

       But dude, you cannot assume that it will grow infinitum at the same growth rates at the scale-

   25. JLJason Lemkin45:46

       Great, then step out of venture and return your last fund to your LPs.

   26. RORory O’Driscoll45:50

       You, you, you guys, as usual, are doing the extremes that loses the plot. But no, I mean-

   27. JLJason Lemkin45:53

       No, I, I'm, this is a pretty simple math. This is-

   28. RORory O’Driscoll45:55

       Well, I, but I, I, your point is a fa- your big picture point's a fair one, but let's just talk about the numbers behind it, right? 'Cause Harry, he's not saying the same. I mean, what we're basically saying is it grew 10X last year, it grew 3X this year. This is amazing growth. Lean in. That's the thought process Jason's saying. And the only argument against it is, you know, 3X this year is slower than 10X last year, so probably next year is 2X. I mean, it all boils down to the same thing, is these growth rates, these kind of t- multiple companies doing 10X growth rate is not something you saw in SaaS. So one of two things is true: either they'll have that kind of 10X growth rate and then decline with the same rate of decline as SaaS companies, in which case they'll continue to grow for a long period of time, or they'll grow fast and they'll slow down fast. If it goes 10X, 2X... If it goes 10X, 3X, 50% growth, then you might have been wrong. It's the, that's the knowing fear. I mean, I agree. You lean into the things that are working, 'cause I think the alternative, which is trying to be clever and do things that aren't working that might work in the future, is just too hard.

   29. HSHarry Stebbings47:01

       So help me just understand this. 10X to 3X, totally get. Then let's say it does 2X, okay? So 150 turns into 300. Fantastic.

   30. RORory O’Driscoll47:10

       Agreed.
8. 1:06:14 – 1:16:29

   Chinese Open Source Models in US Startups

   1. RORory O’Driscoll1:06:14

      about the-

   2. HSHarry Stebbings1:06:14

      I don't see the volatility of revenue on the consumer side because you have memory, and I think now, I don't know about you guys, but I'm seeing this so much in the LLMs that I'm using, where memory drives so much of the actual end product that I get, and that's incredibly sticky and will drive a lot of value. But on the B2B side, where you can have our companies on the B2B switching so easily, there isn't that stickiness.

   3. JLJason Lemkin1:06:34

      Well, m- just two thoughts. On, on the B2B side, we, we, we, we talk about a couple LLMs, but, like, so many of the, the hot companies use their own LLMs, and they're Chinese models. Cursor's own model, Chinese model. Windsurf, Chi- So, like, all of our portfolio companies that are using their own LLMs, they're not really using their own [laughs] LLMs. They're using cheap, open source, or if they could, they would use Chinese-hosted models, and sometimes they do, because they're a fraction of the cost. So they're, they're, this is, um... W- where exactly this all goes, we don't know, but all of these startups that have their own model, they're, they're Chinese open source models. They all are, including Cursor, right? So there's a whole nother group that is competitive that, uh, because they're not raising massive venture capital, and maybe they're inferior in some ways, but if Cursor's using its own model 3 or 30 to 40% of the time, it's not that inferior, 'cause Cursor's doing pretty good, right? So comment number one, Chinese models are already being used by our hot startups. It is a real threat. Idea number two, w- you think, Harry, you think memory is, is, is a moat and permanent, and it absolutely is. But I think why Sam called the code red is imagine today, imagine today when we're doing this, if Open- if ChatGPT went away tomorrowOkay, here's what's changed. Google AI mode's pretty good. Now, it can't, it's not gonna be our therapist, it's not gonna have as much memory, but AI mode's pretty good. The Google stack's pretty good, and if OpenAI, for some reason, just ChatGPT went away tomorrow, we would survive. We would survive. We would complain, we would, you know, Keith would have some good comments, you'd have some comments, the, uh, t- Twitter would explode, and in a week we'd be like, "Whatever, we've moved on." Some folks would go to Claude even though we've forgotten about Claude, but Google's pretty good. This is why I think Sam called the code, right? Because to- OpenAI is a consumer company, and even said, "Listen, we're gonna do even more on ChatGPT. We're gonna do less on apps, we're gonna do less on imaging and video. We gotta make it good," because it could... We would s- we would, we would be in a tough spot for a while if Anthropic went away, 'cause all our apps wouldn't work. That would suck. But if ChatGPT went away tomorrow, we'd be fine in a couple days. We'd lose a little memory, we'd have to rebuild it in Google, but we use Google every day. It would not be the end of the world.

   4. RORory O’Driscoll1:08:45

      I don't know if I buy that. I mean, yeah, it's not the end of the world-

   5. JLJason Lemkin1:08:48

      Not the end of the world

   6. RORory O’Driscoll1:08:48

      ... 'cause nothing is the end of the world unless it's the end of the world.

   7. JLJason Lemkin1:08:50

      Be worse to lose Netflix. That has more proprietary use cases than ChatGPT.

   8. RORory O’Driscoll1:08:55

      That, that, that's a more interesting comment, actually, genuinely. It's like I pay 20 bucks a month-

   9. HSHarry Stebbings1:08:59

      It's not, not true, but you could apply that to... Could you not apply that to all of them, like including Anthropic? I'm genuinely asking here, Jason. You're the coder here, and I-

   10. JLJason Lemkin1:09:07

       Yes

   11. HSHarry Stebbings1:09:07

       ... I submit to you on this one. Like, you could switch Anthropic out, and it would get, like, a 90% efficiency on other models. Netflix, like, it would just be like-

   12. JLJason Lemkin1:09:15

       Well, there aren't that many m- y- y- y... I do, I do think, look, look, Anthropic is more enterprise. In my experience, it is stickier because of that. There's more work than, than just moving in a day. Um, that's why I slightly challenge your point that you're saying consumer was stickier. I, and I do think memory's a big deal, right? It's getting really, really, really good, at the edge of creepy. But we would just... It would be like a, it would be like a TV show. We would just shrug, and we would just switch the next day. [laughs] Life, life would... The greatest consumer app of all time so far, we'd be fine.

   13. RORory O’Driscoll1:09:46

       Put me down for not agreeing.

   14. JLJason Lemkin1:09:46

       But without our Stranger Things.

   15. RORory O’Driscoll1:09:48

       I, I, I think we w- look, obviously we would get on with life, 'cause, you know, we, three years ago apparently we were without this and we were fine. But I think it would leave a significant gap. I, I, I think, you know, there's no doubt that it's a superior product and you'd miss it. So I, I, I disagree. I think that, like, let's put the, the, the test you'd use is this. When we were looking at consumer hardware once, one of my colleagues gave me a mental test that I actually think was one of the most insightful things I heard about consumer products ever. He said, "The only test you need to run on this one is this. If you lost it today, would you go out and buy another one tomorrow morning?" And it's actually very... Like, if you lose your phone, you instantly go out and get one in the morning, right? If I lost our coffee maker at home, I would be down to Soul de Taco in an hour, right? Then there's other things where you go, "Yeah, I... Would I take a week? I might get round to it. Maybe I wouldn't bother," right? And it's just a really good test. And I think in that, using that test for ChatGPT, I think if I lost ChatGPT now, I'd be like, "I gotta go find something," and I don't think Gemini's quite there. So I think it would leave a void, which I think is, speaks to their strength, 'cause it's, maybe it's not a I-would-die void, but it's 800 million people who use it. So I, I, I think there's a lot of gravity in those em- individual consumer users and the habit involved. I think it's their biggest asset.

   16. JLJason Lemkin1:11:04

       But it could be just as sticky as Yahoo Mail. We survived and moved to Gmail. It was okay.

   17. RORory O’Driscoll1:11:08

       It was, but it took a sustained five years of under-execution by Yahoo to get that done, right? And I think, and I think the Yahoo Mail and Gmail were more similar. I would argue even today, despite all the progress in Gemini, I, the ChatGPT experience I think is still better. Controversial take, perhaps.

   18. JLJason Lemkin1:11:26

       Well, let's pl- play on it some more. Let's talk about it in January. I think you're gonna come around to my position, that it's p- to, it's just the same one that Sam has, which is it's pretty good now. [laughs] I don't think it's gonna, I think it, I don't think it's gonna stop, uh, OpenAI's future, but it, it's a, it is a, it is a, it is int- everything's just unstable, um, including, including the, including Harvey, I think.

   19. HSHarry Stebbings1:11:47

       I think what you're seeing with OpenAI is the awareness that they've been massively diversified way too much. They need to consolidate. They need to concentrate. They are absolutely aware that they have fumbled the ball over the last 12 months, and they need to massively reduce the portfolio of products that they have. There's a focus on healthcare, there's a focus on codecs, and there's a focus on obviously the consumer product, and that is the BFD for them, and I think Brad feels the pressure, I think Sam feels the pressure, and it's game time.

   20. RORory O’Driscoll1:12:15

       I just think the way markets work is there's this formative period where there's a lot of change, and then it locks in, and then change is much harder to happen. Remember we were talking to Tomas, he had some, you know, congealed grease thing, right? My mental model is always it's like the Big Bang. Early on in the Big Bang, everything happens, and from then on nothing, yeah, it's just expansion and nothing changes, right? This is one of those moments in time where how you end up ranking by the end of '26, '27 probably, I think, will determine the trajectory for 10 years. And I think the variance, the high fluctuations we're seeing now will steady out. I, I can't prove that. You could have a world where it remains constantly changing, but in my gut I think that economics tends to force that kind of stability. So you really wanna be sure that when things start to lock down, you lock down in the number one position.

   21. JLJason Lemkin1:13:06

       Well, just as a reminder, just, I know we, we'll move on, but Andreessen said a couple months ago that 80% of its startups use the Chinese open source models for AI.

   22. HSHarry Stebbings1:13:13

       Th- this, this is what I wanted to go to, Jason, which is, um-

   23. RORory O’Driscoll1:13:16

       That's not a correct quote. I, I misunder- Martin Casado then tweeted and said, "That's not quite a correct quote." I think it was something like, "Only 20% of the time my companies are using open source, and when they are using open source-

   24. JLJason Lemkin1:13:29

       I say 80%

   25. RORory O’Driscoll1:13:29

       ... 80% of that open source is, is Chinese open source," which is a very different thing, but still a significant thing, right?

   26. JLJason Lemkin1:13:36

       Yeah.

   27. RORory O’Driscoll1:13:36

       What it says is, and it's an interesting comment here. What it says is that there is a demand, no surprise, for a quote-unquote cheap open source model, and given that both, you know, ideal- formerly idealistic, now highly commercial [laughs] corporate entities have stopped providing, you know, state-of-the-art open source models, there is a latent demand for that which, for their own good reasons which we can speculate about in a second, the Chinese, um, tech industry appears willing to fill.I mean, e- e- even though the market tells him to stop doing it, it was kinda nice when Zuckerberg was willing to fund R&D development and keep churning out excellent LAMAs for everyone to leverage.

   28. HSHarry Stebbings1:14:13

       Jason, should US Startups be able to leverage Chinese models?

   29. JLJason Lemkin1:14:17

       Listen, assuming there's no security issues, I don't care. I, I think the issue that I don't fully understand inference, because for most cases, if you're running a no- Chinese open source model on a- on, on Amazon, it's really not any cheaper. Like, you're, you're not saving that much. You save a little bit of money. You, you- correct, you don't have to pay for the, for the model, but the inference is where most of the cost is. So I, I think there's still this gray area where it, where obviously it works for Cursor, right, at scale. Um, whether exactly where it works, I don't know. But, um, look, as long as we're not sending data back, and maybe we shouldn't, I, I could... And more importantly, listen, I just wanna make money like everyone. It's 2020, going into 2026, Harry. Don't tell me about it as an investor. I- this, this is an area of, of unlimited greed. I don't wanna hear about it. We're gonna forget about it in a week anyway. We already forgot about Real and Dipling. We forgot about all of it. I just don- I j- I just wanna make money and be quiet. Okay? Just don't talk about it. I just wanna make money.

   30. RORory O’Driscoll1:15:11

       The question on, quote, Harry's, "Should we use Chinese open source models?" You have to break it into two. Are there national security issues or regulatory issues? And it's the job of the government to figure out that, and we should take our lead from that. If the government says, "No, you should abide by the law," if the government said, "Yes, you should at least take that into account," then you can say there's not national security issues. Frankly, and then separately from that, you have the business issues. Is it good value? Is it cost effective and all that stuff? I mean, I think the interesting thing is, 'cause, you know, Harry, I've, I've watched your little dispute with Keith on Airwallex on Twitter, but hang on, let me finish, right? The odd thing is I can't quite figure out what I'm... The national security guidance on China's quite confusing, 'cause obviously we're now back to selling them advanced Nvidia processors. I think the logic is some version of they're gonna figure it out anyway, so we can sell it to them. So it's not clear to me where we can say we can do it and where we cannot. And then separately, if you can do it legally, then after that it's just practical, functional, if the models work and you do what you can. Sorry, that was a little long and convoluted.
9. 1:16:29 – 1:27:30

   Airwallex Raises $330M at an $8BN Valuation

   1. HSHarry Stebbings1:16:29

      But Airwallex raises 330 million at an $8 billion valuation led by Lee Fixel at Addition for, like, what, a big investor in Stripe. And then in the last few days, Keith Rabois has been very public in stating that there is a data concern about the data flows that will go back from Airwallex to potential Chinese officials, government, you name it, whatever institution that is, and that is the news.

   2. JLJason Lemkin1:16:58

      Based on all the conversations we had, a billion in ARR, eight billion revenue. Why is it so cheap?

   3. RORory O’Driscoll1:17:04

      Because it's a excellent, excellent payments company, and it'll be valued like payments company and a payment company. I mean, excellent growth rate, excellent payments company with an Asia discount, right? In other... Cheap in the context of it's, it's not the AI magic pixie dust, so you probably would have a higher m- and then on top of that, you have the Asia discount. You're exactly right.

   4. HSHarry Stebbings1:17:22

      No, but, yeah, Rory, it's doing the same revenue that Ramp does. It has more integrations and more underlying infrastructure. It is absolutely the Asia discount.

   5. JLJason Lemkin1:17:31

      Okay. Yeah, let's assume it's growing the same as Ramp. It has the same gross margins, right? It's the same ARR. Let's assume, maybe the margins are different, but let's assume it's the same for the sake of argument. It's trading at a quarter of the price, right? I, I get why it's dual headquartered in SF, um, but, uh, may- maybe that's the answer. Like, I literally don't know. It just seems a quarter of the price. It seems, uh, uh, a bargain.

   6. HSHarry Stebbings1:17:51

      Uh, dude, I, I, I, I completely agree with you-

   7. RORory O’Driscoll1:17:54

      [laughs]

   8. HSHarry Stebbings1:17:54

      ... which is kind of why it's such an obviously good pick.

   9. RORory O’Driscoll1:17:56

      I'm not sure. I mean, okay, I, I think some portion of it is the, a significant portion is the Asia discount. I also think-

   10. HSHarry Stebbings1:18:04

       What is it if it's not that, Rory? I would like your thought.

   11. RORory O’Driscoll1:18:06

       I think it's a slight... I mean, one is I think Ramp has, versus the median fintech, you're taking the other extreme. Ramp has an extraordinarily good revenue multiple. I think most... I mean, my com- my wider comment is fintech multiples tend to be significantly more bounded than open-ended AI multiples. Ramp, you're right, is the most extreme.

   12. HSHarry Stebbings1:18:24

       No, but I would, I would actually push back and say look at Brax at $13 or $14 billion with a much worse growth rate-

   13. RORory O’Driscoll1:18:31

       Yes

   14. HSHarry Stebbings1:18:31

       ... much less, much less profitable, and 400 million less in ARR. You know?

   15. RORory O’Driscoll1:18:36

       I agree with that. Between that median one and where you come out, that is a, an, some kind of Asia discount. You're exactly right. My point is between that and Ramp, I would argue... 'Cause look, there's obviously a difference between Ramp and Brax, and I think that's the high-end execution, et cetera, et cetera markets. And there's two things in the discount is all I'm saying. But yes, let's stipulate to advance the conversation that there's a significant Asia discount in here.

   16. HSHarry Stebbings1:18:58

       And then the question for me becomes-

   17. JLJason Lemkin1:19:00

       75% off's a lot

   18. HSHarry Stebbings1:19:01

       ... yeah, it's a huge amount. But the question for me becomes actually when is that shed? Because in the case of a ByteDance, it's never shed. You know, ByteDance is still the massively discounted versus a Matter despite it being a phenomenal business both in margin and revenue scale.

   19. RORory O’Driscoll1:19:18

       First of all, I think that the ByteDance situation is trickier, 'cause one, ByteDance itself is clearly a Chinese company. And then what you're really talking about, are you talking about the ByteDance, this guy then talking about the fact that you have the whole TikTok dynamic, 'cause that's a, you know, a media company present in the phones of, you know, millions of Americans who has an end owner that is ultimately based in China. So that's that discount. And I think-

   20. HSHarry Stebbings1:19:41

       I'm saying that, I'm saying ByteDance just the, the overall company with the size-

   21. RORory O’Driscoll1:19:44

       Yeah, agreed

   22. HSHarry Stebbings1:19:44

       ... yeah.

   23. RORory O’Driscoll1:19:44

       Well, there should be a China discount, not just 'cause of us, because, you know, for all the problems of our government, the Chinese government, the dictator of China said about five years ago, "You shouldn't be doing social media. You should making hardware shit." And he is a, has complete and untrammeled power. So there's a reason there's a discount. The reason there's a discount is the, you know, the, the, the one party dictatorship that runs the country doesn't think those are good businesses. So it's not like it's a China discount for nothing. Now, the question is, is it too much?

   24. HSHarry Stebbings1:20:12

       Can we just appreciate, sorry, Airwallex is not a Chinese business.

   25. RORory O’Driscoll1:20:15

       I know, but you mentioned ByteDance and addressed the-

   26. HSHarry Stebbings1:20:17

       I, I, no, I'm, I'm, I'm, no, I'm ju- I'm, I'm just pushing my... I'm intrigued by, you know, Zoom. Zoom has m- many more engineers in China than Airwallex.

   27. RORory O’Driscoll1:20:22

       So this is what I'm gonna say. So you, you mentioned ByteDance, so I went down that rabbit hole. What you're really talking about in the context of Airwallex and many other companies is something like the following. These are absolutely not companies... domicile that were headquartered in China, not own- not owned by Chinese investors. They are, you know, US or international companies. International in the case of Airwallex, I think they're originally based in Australia, that are headquartered in Australia, subject to Australian law, et cetera, et cetera. So the idea- so when someone says that something like a Chinese company, that's a gross... That's incorrect. What is true, however, is if you have a significant number of engineers or data centers based in China, then you are also subject to Chinese law, just as when you have data centers in Europe, you get the Europeans on your case, and when you have... And if you're a European country based in America, you get the Americans on your case. All the superpowers, if you lump Europe kindly into that, any of those countries or entities in the case of Europe, yeah, regardless of where a company is headquartered, they have a regulatory role to the extent you're operating in those companies, in those countries.

   28. HSHarry Stebbings1:21:32

       So, so my legitimate question back to you is-

   29. RORory O’Driscoll1:21:35

       Yeah

   30. HSHarry Stebbings1:21:35

       ... if Zoom has more engineers there than Airwallex does, why are we not holding them to the same account? Microsoft and Apple do too.
10. 1:27:30 – 1:35:21

    Prediction Markets and Insider Trading

    1. RORory O’Driscoll1:27:30

       Anyway.

    2. HSHarry Stebbings1:27:31

       All right, boys, this, this has been fantastic. I'm gonna push you to three companies, okay? And you've gotta pick one, okay?

    3. RORory O’Driscoll1:27:36

       Oh, God.

    4. HSHarry Stebbings1:27:36

       Yeah, I know, I know, Rory, you love it. [laughs] I know. Uh, I almost do it 'cause I know that you [laughs] really get-

    5. RORory O’Driscoll1:27:42

       I know. You do it to humiliate me

    6. HSHarry Stebbings1:27:44

       ... get going. Uh, no. No, not to humiliate. To, to force great thinking. Um, Airwallex at 8 billion or Ramp at 32, which would you rather own?

    7. RORory O’Driscoll1:27:55

       If they- let's assume the revenue and the growth rates are the same, and I don't think they are. I don't have the time. But I think Ramp is a more enterprisey product, and Airwallex is more money movement. So, but I, so I, and I think that's a significant point. But just to give you an interesting discussion versus a boring one, if I was on the Airwallex board, 'cause I don't think it's, quote-unquote, "a Chinese company," I think it's a perfectly normal Australian company. I would put in at 8 billion, and part of my closing condition would be within 24 hours we do not have a single paid employee in China, and we relocate the entire service organization to some other jurisdiction. Get out. Then I would do it at eight, if they are equivalent, 'cause I think that's something you can do. I'm gonna give them credit. I think Madness did a great job on that. I think it's very much not a, you know... I think Benchmark did a good job of making it very much a company from people who used to live in China, right? And I'm not saying that, I'm just saying that would be a value add moment. And I've had that with another company where, I'm not gonna mention names, but we had a significant Russia presence, and this was before 2014. And I was like, "Let's just hire people somewhere else. It's not worth the extra 20%." So I think the same thing here. I would do Airwallex at eight or nine. I would go on that board and I would say, "Figure your location strategy and get relocated out of China within a twen- within, you know, the next 12 months."

    8. JLJason Lemkin1:29:10

       I wouldn't make that a condition at all. I would just trust Jack to figure it out. I think obviously he's, obviously he's well aware of the issues. He's well, he well aware of the trade-offs. He's well aware-

    9. RORory O’Driscoll1:29:20

       Disagree. Disagree entirely

    10. JLJason Lemkin1:29:20

        ... engineers are global. I think it's con- VC condescending to tell the CEO how they're gonna work it out. I think it is the kind of VC I, I think it's, it's, it is, it is beyond condescending. The great CEOs will figure it out.

    11. RORory O’Driscoll1:29:34

        I'm gonna push back hard on that. Hard on that.

    12. JLJason Lemkin1:29:36

        Okay. But, but people are gonna see you as condescending, Rory. I wouldn't push back.

    13. RORory O’Driscoll1:29:39

        I, I disagree. I'm, and they won't, and they won't do that.

    14. JLJason Lemkin1:29:41

        They like you a lot now. Don't make them think of you as condescending. It doesn't help at the end of the year. Don't push back. Take a mulligan and delete this section.

    15. RORory O’Driscoll1:29:48

        No, I won't. There are a few things where it is a board's place to say something, and this is one of them, where you're like, strategic fatal error risk is exactly what a board has to do, right? The ability to sell the company is something a board has to work on. I remember this other case, saying to CEO, "Look, you will limit your pool of buyers dramatically if you have this significant exposure to this thing." You know, how you get rid of that, you can talk about as a CEO. But it is one of the few things where you as a board member might have a little more perspective than someone. 'Cause when you're down in it, you can go, "That's silly. It's wrong. I know these people. They're trustworthy. It's not really an issue. They don't have access to the data." And one of the roles of the board member is to say, "Step back, dude. Everything you're saying is true, but when it goes to shit, no one will care," right? Why pay the tax? How much extra would it cost? So I disagree. That would be one where I, I would think that would be something you should say. But this is good, 'cause we're meant to have disagreements. Okay.

    16. HSHarry Stebbings1:30:41

        [laughs]

    17. JLJason Lemkin1:30:43

        I think you just do the deal at Airwallex and trust them to figure it out. I think it's that simple. I, I, I think, I think 8X ARR is a good deal. You trust great founders to figure it out. I think it's a fine deal. It, it sounds like a dislocation in the market, and, and you could do worse than invest in a dislocation in the market.

    18. HSHarry Stebbings1:30:59

        Calshi raised a billion at w- uh, 11 billion. Um-

    19. JLJason Lemkin1:31:03

        That doesn't seem like a dislocation in the market. That seems like a location in the market.

    20. HSHarry Stebbings1:31:08

        [laughs]

    21. RORory O’Driscoll1:31:08

        [laughs]

    22. JLJason Lemkin1:31:09

        A very precise heat-seeking missile, just like, just like Maverick and his team of Tomcats hit that, right in, right [laughs] in the movie. This seems like-

    23. HSHarry Stebbings1:31:18

        Dude, prediction markets, it, it's a thing. You can have Calshi at 11, or you can have Polymarket at 13.

    24. JLJason Lemkin1:31:25

        I want- whichever one is better for insider trading, I'm, I'm gonna do, right? [sniffs] 'Cause that, that's really the exciting part, right? Either betting illegally on sports or, or even better is betting illegally on, on, uh, betting legally on, on confidential Google information and Meta information like they're doing, right? This is a great time to be an engineer at these... You don't have to be Nancy Pelosi to make money legally out of confidential information anymore. You could just be a senior engineer at Meta or Google and make millions on the side. It's a great time to be alive.

    25. HSHarry Stebbings1:31:53

        He's come up-

    26. JLJason Lemkin1:31:54

        It's a great time to be alive

    27. HSHarry Stebbings1:31:55

        ... pumped today, haven't you, Rory? [laughs]

    28. RORory O’Driscoll1:31:56

        And just in case anyone doesn't notice these c- doesn't know this, these comments are driven by an anonymous, um, prediction market persons have made literally millions of dollars betting on things like what will the number one query term on Google be today, and getting it right like sequential days in a row, leading the suspicious mind to assume that they have, in fact, access to that data. Correct, Jason? You're exactly right.

    29. JLJason Lemkin1:32:19

        Well, also Pony Pony's bet on OpenAI news. He's doing great. He, like, just being able to sell 20 million every two years isn't enough. Now he can day trade on the information. These are great days.

    30. RORory O’Driscoll1:32:28

        No, I think you're exact- Th- yes.

Episode duration: 1:35:32