EVERY SPOKEN WORD
35 min read · 7,062 words- 0:00 – 0:38
Intro
- DGDavid George
Anthropic and OpenAI are adding more revenue per month than Meta, Google, or Microsoft. And I wouldn't be surprised if the combination of those two companies is doing 200 billion of revenue run rate.
- DCDavid Clark
Between 2020 and 2024, top 1% exits started at $10 billion. We updated those numbers in February this year, $20 billion. We just updated them yesterday. It's now at $32 billion. So we've 10X'd-
- DGDavid George
Yeah. [laughs]
- DCDavid Clark
... over the space of kind of 24 months.
- DGDavid George
When the models get really good and the products that get built around them get really good, you see this takeoff in usage happening.
- DCDavid Clark
Are we in an AI bubble?
- DGDavid George
I feel pretty confident saying that we're not in a bubble
- 0:38 – 4:20
The Scale Shift: Anthropic & OpenAI Adding More Revenue Than Hyperscalers
- DGDavid George
right now. The one thing that could shift that would be... I can't think of a time in my career where I have changed my mind about things-
- DCDavid Clark
[laughs]
- DGDavid George
... at a faster clip, uh, which is good, but is also humbling, right? Two big areas are scale and value capture. So scale, on the scale side, the world kinda changed in November as it relates to our business and, um, and I think sort of productivity in, in the workforce. Um, you know, the way that we thought about much of the AI work that was happening before that was sort of, um, you know, a sort of like nebulous promise in the enterprise, but we probably were contextualizing it around things like the cloud, um, you know, and software companies and, and productivity enhancement. And then on the consumer side, you know, you could think about AI companies like a consumer business, like, you know, how many users they have-
- DCDavid Clark
Yeah
- DGDavid George
... and, and what the price is and how big that can get. And, and by the way, I think that's gonna be much bigger than people expect too, uh, which we could, which we could talk about. But as of November, I think all of our priors shifted around what is actually gonna happen in the enterprise. But just maybe to contextualize what's happened since then, basically Anthropic and OpenAI are adding more revenue per month than Meta, Google, or Microsoft. They are already at that scale of revenue getting added, and actual diffusion of this technology into the real economy is tiny. It's like less than 5%.
- DCDavid Clark
Yeah.
- DGDavid George
Now, within coding and in tech-forward companies, yes, it's, it's much more advanced. Um, but as it relates to every other function in the enterprise, um, you know, full sort of utilization of the capabilities, we're nowhere right now. So if you pair that up with the fact that they're already getting bigger, you know, in terms of revenue added than the hyperscalers, and you're at less than 5% diffusion into the economy, I think the outcomes are gonna be extraordinary. Um, so the thing that we've started to try to look at to gauge, you know, what can possibly happen, like what's the upper bound, is enterprises are gonna have to pay for this somehow.
- DCDavid Clark
Yeah.
- DGDavid George
And so if you just look at the Fortune 500 or the S&P 500, they're actually pretty close. Um, it's, they generate like two trillion of profit per year-
- DCDavid Clark
Yeah
- DGDavid George
... at the collective.
- DCDavid Clark
Mm-hmm.
- DGDavid George
Um, and I wouldn't be surprised if the combination of those two companies is doing 200 billion of revenue run rate by the end of this year.
- DCDavid Clark
Yeah.
- DGDavid George
Not to mention people using open source, other vendors, so like you can add even more on top of that. So we're already talking about like a 10% profit, you know, into the Fortune 500.
- DCDavid Clark
Yeah.
- DGDavid George
And so I think the upper bound is gonna be where are the dollars gonna come from, and what are the implications, you know, like to buy this stuff? Like-
- DCDavid Clark
Yeah
- DGDavid George
... and, um, you know, one of the implications of this is we had all these theories why open source and local were gonna be really important, and it turns out that like cost is gonna hit us in the face and make them really important-
- DCDavid Clark
Mm-hmm
- DGDavid George
... sooner than we thought. So scale, we've updated our priors, [chuckles] uh, to, to get, you know, really pilled-
- DCDavid Clark
Yeah
- DGDavid George
... on this, on this outcome thing, on, on the size of the prize, um, and the scale. Um, and you can see the early signs of it in the numbers. But basically, almost no diffusion into the real economy. It's gonna get great for all these other functions. By the way, what's happened in coding, you can kinda start to see it in some other white-collar jobs. So like it's starting to happen in legal.
- DCDavid Clark
Mm.
- DGDavid George
Um, you know, the legal s- space is, is, you know, much smaller obviously than coding. Um, but, you know, when the models get really good and the products that get built around them get really good, you see this takeoff in usage happening. And I think it's gonna happen in a bunch of different functions in organizations and verticals, uh, over the next 12 months.
- 4:20 – 6:24
Skeuomorphic vs Native AI Applications in the Enterprise
- DCDavid Clark
And how much of that do you think is gonna be native kind of AI applications? 'Cause I kind of always go back to Chris Dixon's point around like the first three or four years, you kinda see these skeuomorphic applications-
- DGDavid George
Skeuomorphic. Yeah
- DCDavid Clark
... that kind of come in.
- DGDavid George
Yeah.
- DCDavid Clark
And, and, you know, we've, we've seen that. At the, at the minute, you know, most people are using AI to do their existing job in a way that's more efficient-
- DGDavid George
Yeah
- DCDavid Clark
... faster, you know, cheaper. Um, but we're kinda starting to see some of the native applications come in with the, you know, particularly around agentic AI.
- DGDavid George
Yeah.
- DCDavid Clark
How, how do you think that alters the landscape?
- DGDavid George
So I think the big thing that's gonna change in enterprise is we're kinda nowhere on how companies are run-
- DCDavid Clark
Mm
- DGDavid George
... differently today. And so, um, you know, the most cutting-edge companies, I, I, I happen to think that, um, you know, what's happening with some of the layoff things that we're seeing is, is kind of like trimming of previous fat. Like I, I don't think it's actually-
- DCDavid Clark
Yeah
- DGDavid George
... efficiency gains. And by the way, there's some, a really interesting thing that's happening inside these companies where, um, most of the resource devotion, at least for really good companies, is actually on product and new things as opposed to like automatic, automating the way they're run. So like they only have so many resources, and the best ones know that the size of the prize of getting something right on the product side... And by the way, the, the best people at those companies, best engineers, wanna work on that side of things.
- DCDavid Clark
Mm. Yeah.
- DGDavid George
Um, the size of that prize and, and the best people are gonna work on that. And so that's kinda where most of the work is happening. Um, you know, the more mature companies would be the ones who probably would be better suited trying to automate the way their business is done internally, but they're the slower adopters. Um, there's kinda this latent opportunity that we see in our portfolio companies to get more, you know, drive efficiency gains and stuff, but it's not the best people working on it, and, you know, it's not where the incremental dollar is gonna go just yet. Um, you know, the, the most cutting-edge folks inside those companies who are trying to do this that I've talked to are kind of in the documentation phase, uh, which is just likeTurn everything into markdown files, you know, have, you know, as much context capture as you can possibly get, uh, and then see, you know, where you can kind of still manage your business appropriately, not make sacrifices on customer experiences, um, but
- 6:24 – 8:14
How the Best AI Companies Run Themselves Differently
- DGDavid George
drive efficiency. So we're very, very, very early in that. Um, I would say that the, you know, the native AI companies run themselves totally differently.
- DCDavid Clark
Mm.
- DGDavid George
Like, the founders are just built different.
- DCDavid Clark
Mm. [clears throat]
- DGDavid George
One of the things that, you know, we've observed about the previous generation of founders, like if you look at, you know, SaaS companies, for example, I've written about this, like we didn't realize how inefficiently they were running-
- DCDavid Clark
Yeah
- DGDavid George
... until, you know, until, until much later. It's like the, the-
- DCDavid Clark
Or how much more quickly they could grow as well.
- DGDavid George
Yeah. Or, or how much more quickly they could grow. Um, and, and by the way, like, you know, it turns out that the, the magnitude of their market, it- we're already seeing is just, is so small compared to what we've seen in the models.
- DCDavid Clark
Yeah.
- DGDavid George
Like the model companies are adding more than the entire public software universe in terms of revenue added, you know, combined. Um, and so, um, so yeah, they're, they're not particularly tightly run, but they had great business models, and so they could grow, and they could do well, and everyone had a mandate to, to buy more software and, you know, headcount grew and so, so everything kinda worked out. The new companies are very lean, very aggressive, and they work all the time.
- DCDavid Clark
Mm. [laughs]
- DGDavid George
And so, uh, you know, it's fun to see like the most cutting-edge companies when you go in, you know, all their researchers are sitting there and they're, they're whispering in, you know, to the, to the-
- DCDavid Clark
Yeah. So they're not typing very well
- DGDavid George
... they're prompting their agents. They're not even typing. Like they're, they're so efficient. They're like whispering in and they're running, you know, swarms of agents and, um, you know, I think that's kinda gonna be the future. It's just really early. Um, you know, this, this-- I think the skeuomor- skeu- the skeuomorphic phase is the, you know, I would say it's like everything that is reactive today. Like I think there's gonna be a shift to proactive-
- DCDavid Clark
Yeah
- DGDavid George
... engagement, both in consumer and in enterprise.
- DCDavid Clark
Yeah.
- DGDavid George
Um, and you know, we're starting to see it in some of the cutting-edge early stage companies that we're doing, but it's, it's really, really early.
- DCDavid Clark
Yeah. When, when I think of our priors sort of 12 months ago, y- you know, there's, there's a couple of things that I think have, have, have
- 8:14 – 11:17
Top 1% Exits 10X'd in 24 Months
- DCDavid Clark
kind of changed. One's been reinf-reinforced, which was, you know, we always thought that the largest companies were going to continue to be an order of magnitude larger than we'd seen in prior cycles.
- DGDavid George
Yes.
- DCDavid Clark
And if anything, that's accelerating. So, you know, you know, we've, we've put out some data around the size of a top 1% exit doubling every five years or so. Um, so between 2020 and 2024, top 1% exits started at $10 billion. Um, we updated those numbers in, uh, in February this year. Um, and a top 1% exit for '25 and the first two months of '26 was then $20 billion. We just updated them yesterday. Um, and if you look at just the exits that have closed, it's now at $32 billion. So Wiz is the, is the threshold for the, the top 1%. And, and then if you then think about OpenAI and Anthropic coming in, um, you know, potentially we could be north of $100 billion by, by September.
- DGDavid George
That's incredible.
- DCDavid Clark
Which is just, you know, so we've 10X'd-
- DGDavid George
Yeah. [laughs]
- DCDavid Clark
... over the space of kind of 24 months-
- DGDavid George
Yeah
- DCDavid Clark
... what a top 1% exit looks like.
- DGDavid George
Yeah. I mean, just the combination of those large companies, I think is larger than the entire Russell 2000, if I'm not mistaken.
- DCDavid Clark
Yeah. Yeah.
- DGDavid George
And so the magnitude of these companies has just grown so great. And look, the, we've built our firm kind of in response to that. Like the, we believe the next subsequent generations of companies that get bigger, um, you know, as, as new trends happen, are gonna be bigger than their predecessors.
- DCDavid Clark
Yeah.
- DGDavid George
Um, you know, we, we actually did a, a similar analysis where we looked at all of the VC-backed IPOs that happened over the last six years, and if you sum all of them up, they're a little over a trillion dollars. Like they're, that's probably gonna be smaller than any of the three of the large IPOs-
- DCDavid Clark
Yeah
- DGDavid George
... uh, that we expect to happen.
- DCDavid Clark
Yeah.
- DGDavid George
So, um, you know, I'd say the, the observation is the outcomes keep getting bigger, um, but it's happening much faster.
- DCDavid Clark
Yeah.
- DGDavid George
The, the, the, the pace of value creation is, is, is extraordinary.
- DCDavid Clark
Yeah. I mean, l- particularly something like Wiz and Cursor, you'd, you'd kind of like four, five, six years and, you know, to get from nothing to, well, $30 billion and then potentially $60 billion.
- DGDavid George
I, I would say, you know, similarly, you know, there's, there's, there's a lot that we, you know, we talk about all the time about deployment pace and how big our funds are and things like that. And if you, you know, extrapolate out and you say, "Hey, previous, you know, previous trends are kinda 10X smaller and the outcomes get much bigger." Um, and by the way, there's a tremendous amount of concentration in the, in the companies that are the winners. Um, you know, now we believe is a great time-
- DCDavid Clark
Yeah
- DGDavid George
... to be in the market investing. You know, ChatGPT moment is, I think, less than four years ago. Um, so we're just now seeing some of the most interesting things happening on the back of the foundational technology.
- DCDavid Clark
Yeah.
- DGDavid George
We could have a long talk about who captures it-
- DCDavid Clark
[laughs]
- DGDavid George
... which is another thing where priors change all the time.
- DCDavid Clark
Yeah. Yeah.
- DGDavid George
Uh, but we believe, you know, now is the moment where the companies are getting created that are gonna be the generational companies of the next 10 years.
- 11:17 – 13:11
The Half-Life Problem: Why 40% of AI Leaders Drop Off Every Year
- DCDavid Clark
companies.
- DGDavid George
Mm.
- DCDavid Clark
Because we've seen in prior generations that it's not necessarily the first movers that ultimately captured the economic value of a market. So, you know, think Google wasn't the first search engine-
- DGDavid George
Yeah, yeah, yeah. Of course
- DCDavid Clark
... Facebook wasn't the first social media site. And, and, you know, one of the things we, we track is, you know, every year Forbes comes out with their AI 50 startups list.
- DGDavid George
Mm-hmm.
- DCDavid Clark
And what was really interesting was, you know, from, from last year to this year, 40% of the companies that were on that list last year dropped off.
- DGDavid George
Wow.
- DCDavid Clark
So, like, the half-life of these companies feels-
- DGDavid George
It's changing so fast
- DCDavid Clark
... kind of incredibly short.
- DGDavid George
Yes.
- DCDavid Clark
So, you know, the, the, I think, I think where our kind of priors have, have evolved a bit is, yes, we think the outcomes are gonna be much larger, but trying to predict who captures that feels like it's getting much harder.
- DGDavid George
Yeah.
- DCDavid Clark
Is that something that you guys are seeing-
- DGDavid George
Yeah
- DCDavid Clark
... like internally in your portfolios?
- DGDavid George
Yeah, it is getting, it is getting much harder because the shift in the technology has happened so much faster. And so, you know, we, we always talk with our founders about, you know, the, the shifting sands underneath you.Like that is very, very true. And our priors have been updated a ton about where value is gonna be captured.
- DCDavid Clark
Yeah.
- DGDavid George
You know, when we first, we, we invested in, as you know, uh, OpenAI before ChatGPT. And, you know, there were moments of time in the early days where we said, like, model companies are gonna be everything. There's never gonna be any more application companies. They're all gonna go away. And then we went through a cycle where we said there's gonna be application companies for everything-
- DCDavid Clark
Yeah
- DGDavid George
... and the model companies are just gonna be APIs. And then now we're back in this moment where the model companies are kinda legging their way up into the application and, you know, this is their biggest way to drive stickiness. Um, so as it relates to assessing something's place in the world, first of all, like right now, you have to be in the token path.
- DCDavid Clark
Yeah.
- DGDavid George
Like that is the number one thing that we're looking to for our companies. And, um, the reason that's so important is what I had said earlier. So there's actually cost pressure happening at buyers of technology already. Like very-- It's happened very fast.
- 13:11 – 17:00
Token Path, Cost Pressure & Who Captures Value
- DGDavid George
Um, so they're not gonna be increasing budget for things that are like previous generation software.
- DCDavid Clark
Mm.
- DGDavid George
In fact, they can't even cover the growth in their costs that is happening from AI with that, with reductions in that. So there's gonna be pressure on those. Um, and you know, honestly, it's probably gonna have to come from either higher prices that they can charge or restructuring of, of the labor force. Um, the biggest driver of where value is gonna get captured right now is, I would say, something that is totally unknowable, which is what is the market structure of the model companies?
- DCDavid Clark
Mm.
- DGDavid George
How much competition is there? If there's a couple at the frontier, token prices will probably be higher.
- DCDavid Clark
Yeah.
- DGDavid George
If there are five at the frontier, token prices will probably be lower. Token prices being lower probably is better for the overall economy because there's not this pressure to-
- DCDavid Clark
Yeah
- DGDavid George
... kinda restructure the labor force as quickly-
- DCDavid Clark
Yeah, yeah
- DGDavid George
... as things get really, really big.
- DCDavid Clark
Yeah.
- DGDavid George
Um, you know, right now the, the number is smaller. It's not five. Um, there's a tremendous amount of inelasticity for frontier intelligence right now. There's also a question of how much does that change over time? Like, are a lot of the jobs that can be done fine to be done with previous generations of models? That's not the way anyone is consuming tokens today.
- DCDavid Clark
Yeah.
- DGDavid George
Um, so you know, that's an unknowable. The market structure's an unknowable. Um, you know, what role does open source play? You know, that's a tenuous situation. Um, you know, how much can you run locally? Um, how much can you run with small models? Like these are all the open questions that I think-
- DCDavid Clark
Yeah
- DGDavid George
... will determine who captures value. Um, but for the broader ecosystem to thrive, it's probably competition that, that keeps token prices, you know, lower.
- DCDavid Clark
Yeah. So, so a couple of my colleagues are in China at the minute, and-
- DGDavid George
Yeah
- DCDavid Clark
... uh, it, it's been really interesting just getting their feedback, you know, relative to what we're seeing in the US. Um, and, and one of the things that, that, that they were saying was the, the, the leading LLMs in, in China are probably six months behind where we are in the US in terms of the capability of their models, but they're 10X cheaper.
- DGDavid George
Yes.
- DCDavid Clark
And so, like one of the unknowns, I think at the minute and is, is, you know, to what extent are they, you know, what percent of the market will those type of companies capture? How much of, of what we end up doing over the next decade will need to be done through the very frontier models-
- DGDavid George
Yeah
- DCDavid Clark
... and what can be captured by that next level down? And it's, you know, it's the classic innovator's dilemma, isn't it? That, that you get the next generation product that, that can do 80% of what the, the frontier product can do, but at 10% of the cost.
- DGDavid George
Yeah. Yeah.
- DCDavid Clark
And over time, those capabilities extend, and it's harder to be at, at, at that frontier.
- DGDavid George
Yeah. As of right now, we've been surprised at how voracious the appetite is for the absolute frontier. Um, that's probably partially because we're not in like the optimization phase-
- DCDavid Clark
Mm
- DGDavid George
... yet, but the optimization phase is probably gonna happen sooner than we would've expected-
- DCDavid Clark
Yeah
- 17:00 – 22:51
Loss Ratios, Risk & How We Think About Early Stage
- DCDavid Clark
is a bit like in, in 2021. I felt 2021, the market there was kind of peak emerging manager-
- DGDavid George
Mm-hmm
- DCDavid Clark
... because a lot of these managers had done the seed round, you know, established firms were coming in and, and writing things up, you know, six months after the, the seed round had done, and there was basically a zero loss ratio.
- DGDavid George
Yeah.
- DCDavid Clark
And, and, you know, we know that's not how venture works.
- DGDavid George
Mm-hmm.
- DCDavid Clark
It, it feels like we're in a little bit of that situation today, but with the more established firms, because it's the established firms that have been by and large capturing the, the early breakouts in the AI space.
- DGDavid George
Mm-hmm.
- DCDavid Clark
But when I look at it, like historically, when we look at our early stage firms, there's a 60% loss ratio.
- DGDavid George
Yeah.
- DCDavid Clark
So 60% of deals don't return the capital that was invested in them. If I was looking at the loss ratio for the last couple of years in the AI space, I mean, it's not, it's not zero, but it's probably single figures percentages.
- DGDavid George
Yeah, it's gonna, and it'll go up.
- DCDavid Clark
And like that's not sustainable.
- DGDavid George
Yeah.
- DCDavid Clark
So how, uh, how, how do you kind of think around, around where we are kind of in, in that cycle today?
- DGDavid George
Yeah.
- DCDavid Clark
Because at some stage, like the laws of gravity will, will, will reassert themselves.
- DGDavid George
Yeah. Maybe it's helpful to sort of explain our philosophy at the early stage, 'cause we, we also don't wanna target... a low loss ratio. Like that's not-
- DCDavid Clark
No.
- DGDavid George
We're, we're not taking the appropriate amount of risk if we have a low loss ratio.
- DCDavid Clark
Exactly. Yeah, yeah.
- DGDavid George
And so, you know, we, we, we joke all the time, there's a, you know, a prominent VC, uh, ar-ar-around in our ecosystem and, you know, one of his, uh, big points of pride is that he's never lost money on a deal. And we're like, "That's not, that's not a point of pride." Like, that's a horrible data point. Like, that's not what you want.
- DCDavid Clark
Yeah, yeah.
- DGDavid George
Um-
- DCDavid Clark
That's a PE firm.
- DGDavid George
Yeah, exactly. And so, like, c-c-certainly you can make the case that you're not taking enough risk if that's the way you approach it. The way we've approached it historically, and this is sort of a, you know, Chris Dixon philosophy, um, is, you know, any major space where there are multiple very talented entrepreneurs building, where we think there's tailwinds, where we have a point of view on the technology that it's good, we should pick the best founders, and we should, we should b- try and back the, the leaders at the early stage, the market leaders.
- DCDavid Clark
Mm.
- DGDavid George
Um, and you know, if the space happens to work out and we've got the leader, excellent. If the space happens to not work out and we have the leader, no harm, no foul.
- DCDavid Clark
Yeah.
- DGDavid George
Actually, that's part of our business.
- 22:51 – 27:36
Are We in an AI Bubble?
- DCDavid Clark
And we know historically that that basket will increase in value over time-
- DGDavid George
Mm-hmm
- DCDavid Clark
... even as the majority of those companies might fall away.
- DGDavid George
Yeah, yeah, yeah. Look, this is, this dynamic is exactly why it's so important for our business to be centered around early stage.
- DCDavid Clark
Yeah.
- DGDavid George
And so w-we, we have to do the early stage investments in those companies that end up working out, and then many won't work out, but that's the nature of the beast.
- DCDavid Clark
Yeah.
- DGDavid George
And so, you know, our business kinda starts and ends with how successful the early stage business is. And then at the growth stage, you know, a lot of the stuff that we spend our time trying to think about, um, you know, is similar to the venture stuff that I described, our, our lens on the venture side, um, but also, you know, how much do we invest in a given company in a given situation? And so, you know, slugging percentage is very well covered, uh, as an industry topic, uh, but we really have to get slugging percentage right-
- DCDavid Clark
Mm
- DGDavid George
... because of that sort of risk dynamic that you described.
- DCDavid Clark
Yeah, yeah. Um, we also get, you know, lots of questions, um, around are we in an AI bubble? And, and one of the things that it, it feels, that feels different today is, is that, you know, typically bubbles are characterized by excess supply destroying the economics.
- DGDavid George
Oh, yeah. Yeah.
- DCDavid Clark
You know, today, like we are, we're in a situation where there's, there's, there's scarcity. You know, there's not enough compute, not enough memory, not enough data centers, not enough power. It feels like we are, we are supply constrained, not demand constrained.
- DGDavid George
Yeah.
- DCDavid Clark
Um, and, and do you know, how, how do you think that kind of changes the, the shape of the, the sort of cycle?
- DGDavid George
Um, you know, first of all, it's, it's probably a healthy thing right now that we're supply constrained only in the sense that, um, you know, it, it probably makes it less likely that we have a bubble.
- DCDavid Clark
Yeah.
- DGDavid George
Um, I feel pretty confident saying that we're not in a bubble right now. I'm less confident, you know, that we won't be in a bubble three years from now.
- DCDavid Clark
Yeah, yeah.
- DGDavid George
But all, all I can speak to is where we are right now.
- DCDavid Clark
Yeah, where we are today, yeah.
- DGDavid George
Um, we're massively supply constrained. You can't get data center capacity at scale until late '28, early '29 right now, and that's just a fact.
- DCDavid Clark
Mm.
- DGDavid George
Um, I think that's gonna get harder. I think we're probably a year behind schedule of what people would expect for data center buildup in the US. Um, you know, so we're already behind. We're supply constrained in pretty much everything in the supply chain for the data center. Um, part of that is, you know, TSMC showing restraint and, you know, trying to be balanced. Um, you know, but part of that is just other components that are hardware that are hard to manufacture and spin up to meet demand. Um, I think this data center resistance stuff is absolutely crazy.
- DCDavid Clark
Mm.
- DGDavid George
Um, you know, the, the arguments that I see are, are just wild. Um, you know, the best data center operators are going into communities and saying, "You know, we're gonna fund a nature preserve, and we're gonna fund high-speed internet in your school, and, um, you know, we're gonna make it beautiful, and we're gonna create a bunch of jobs, and we're gonna create a bunch of tax revenue," and, like, that should all be good things.
- DCDavid Clark
Yeah.
- DGDavid George
And then, you know, we're, we're met with resistance like, "Oh, it consumes too much water." And I'm like, well, I'd rather eat four or five fewer almonds-
- DCDavid Clark
[laughs]
- DGDavid George
... and, like, make sure that I have capacity to do all the things, uh, that, that I need to do. Um, you know, my, my, my yard consumes a lot more water than data centers.
- 27:36 – 29:59
What SpaceX, OpenAI & Anthropic IPOs Mean for Public Markets
- DCDavid Clark
Do... What, what will that mean for the public markets kind of generally, do you think? And is there enough capacity in the, in the public markets to, to, to consume that and to digest it? And, and, and what does it mean for the next generation of companies that are coming along? Is there gonna be some indigestion post those, those IPOs?
- DGDavid George
Yeah. Look, I think having these companies get into the public markets while they're in hypergrowth is an excellent thing, uh, for the investor community.
- DCDavid Clark
Mm.
- DGDavid George
It's really, really good. Um, you know, there's been all this debate about the inclusion of those companies into indexes, for example.
- DCDavid Clark
Yeah.
- DGDavid George
And, you know, my parents' retirement funds are in index account, and so my hope is, you know, and it, it seems like it's gonna go that way, that, that there'll be index inclusion and, and broader ownership. And so I think it's a good thing. You know, we've been going through this shift, uh, over the last, you know, whatever, 20 years, where the number of public companies has shrank in half. Um, so I think this is gonna be a good shot in the arm-
- DCDavid Clark
Mm
- DGDavid George
... to bring some very high growth, interesting stuff into the public markets. I've talked about this a lot. If you exclude the data center supply chain stuff right now, there are very few companies that are growing fast that are available for people to buy in the public markets. You know-
- DCDavid Clark
Yeah
- DGDavid George
... the Mag 7 are all growing sub 30% at this point. Um, you know, uh, all the software companies are growing sub 30%. You know, all the internet-
- DCDavid Clark
Yeah. Palantir's the only one that seems-
- DGDavid George
Palantir's really the only one-
- DCDavid Clark
Yeah
- DGDavid George
... growing, you know, whatever, 70% or whatever it is. Um, so I think it's, I think it's good for the market to get some high growth.
- DCDavid Clark
Mm.
- DGDavid George
Um, and so they just happen to be at larger absolute values. But again, I think that the, the future of those companies is probably hypergrowth for many, many years. And, you know, we'll look back 10 years from now and say, "Wow, look at how big the biggest companies got," in the same way that we have about the Mag 7.
- DCDavid Clark
Yeah.
- DGDavid George
Where we say, "Wow, you never would've thought 10 years ago that we were gonna have a $4 trillion company or $5 trillion company."
- DCDavid Clark
Yeah.
- DGDavid George
But here we are.
- DCDavid Clark
Yeah.
- DGDavid George
Um, so, you know, I think there'll be some, uh, some shifting of, of ownership of things to make space for buying those companies. Um, but I think the market's really gonna be able to bear it, and it's a, it's a great thing.
- DCDavid Clark
Yeah. One last thing I, I'm keen to get your thoughts on, David, is, like, if the optimistic case for AI is right, like, what do you think the VC industry looks like in, in five years' time?
- DGDavid George
That's a great question. Um, there's so many unknowns [laughs] that drive this. Um-
- DCDavid Clark
If we can't speculate on a podcast, you know. [laughs]
- DGDavid George
I know, exactly. Yeah, there's, yeah, thought leadership of, uh, totally unknowables. Um,
- 29:59 – 32:54
The Future of Venture Capital in an AI World
- DGDavid George
so the number one thing that I think is gonna drive the next five-year structure of our industry is what I had talked about, the, the sort of market structure of the model industry and the labs. Um, you know, the role open source plays, how much competition for tokens there is. You know, there's the Bill Gates quote, um, which is, you know, the, the value of a platform... I'll, I'll butcher it, but it's like effectively, you know, if you're a platform, the value of the companies that are built on top of you need to exceed the value of the platform itself.
- DCDavid Clark
Mm.
- DGDavid George
Um, and so-If that's the future, I'm very optimistic that we're, we're gonna have a massive wave of really valuable companies that get built on top of, of tokens, um, you know, and AI and, and intelligence. Um, and we're at the very early stage of seeing those. So we just need to be in position to, uh, to back those founders. You know, if you look at sort of health, health of our business, like we measure it by, you know, are we, are we seeing and, and doing the best companies at the early stage, and then following on and backing those founders on and on, you know, time and again. Um, and, and that all looks really good. Um, but I think there's, you know, this sort of market structure question of the, of the labs and-
- DCDavid Clark
Mm
- DGDavid George
... what happens to token costs that's probably the biggest driver of how value's gonna get created in the VC industry in the next five years. Um, I, I tend to think that there's enough smart people working on this that it's gonna work out.
- DCDavid Clark
Yeah.
- DGDavid George
And it's probably an and where the labs are extraordinarily valuable, and then there's this massive ecosystem of companies that are built on top of intelligence that are really, really valuable. Um, you know, and then, and then lastly, I'd say some of the biggest outcomes, probably the biggest outcomes, um, you know, tend to come from the consumer side.
- DCDavid Clark
Mm.
- DGDavid George
We've spent a lot of our time talking about the B2B side. We're very early in shifts in consumer. One of the things that I'm most excited about is, you know, the last 10 or so years has basically been a story pre-AI of time spent getting captured by all the big tech companies, and then competing with them was extremely hard. And so I'm optimistic that with all these technology changes and breakthroughs, we're gonna see a shift in time spent, you know, consumer attention, um, which I think will probably create, you know, really extraordinary outcomes.
- DCDavid Clark
Yeah. Yeah. I mean, I, I, I've been investing in VC funds for 34 years and, and like this is by a distance the most exciting and scary time that, that, that I've been involved with. And, um, I, I just find it, you know, the, the pace of change is, is, you know, a real opportunity, but you've got to get things right as well.
- DGDavid George
Yeah.
- DCDavid Clark
Um, and I, I just feel super excited about, you know, what we're seeing and, and what the potential is for venture to, to really, um, be at the, at the, at the center of, of, you know, changing the way we live and work.
- DGDavid George
Yeah. Yeah, same here. I mean, the, the opportunity is so great. I think, um, you know, changing the way we live and work, I, I happen to feel strongly that it's gonna societally make the way we live and work a lot better.
- DCDavid Clark
Mm.
- DGDavid George
Uh, and so, you know, I think the way that we do things is gonna change a lot, and I think there's gonna be a lot of value that gets created out of that.
- DCDavid Clark
Cool.
Episode duration: 33:09
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