# SpaceX IPO, AI Efficiency, and Market Capital Flows

**Podcast:** The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
**Published:** 2026-06-11

## Transcript

But the one thing we know about Elon for the last 30 years is when he hears the word more risks, he says, yes, please, I'll have two.
I think the IPO nominally will be a dud.
I don't think it will trade up dramatically.
There's always money when people aren't afraid.
When things get scary, it's not that money runs out.
It's that money gets scared.
I'm kind of contentious of startups that need to be fat.
I'm like, what's your excuse?
In any business, there's only two things that happen.
People are either making stuff or selling stuff.
If AOL becomes the next hot thing, I mean, these guys are fucking geniuses.
Anyone who hasn't churned from AOL now ain't churned until they die.
We are back, the favourite show of the week, the two OGs of SaaS and a posh British podcaster.
It's Rory O'Driscoll, Jason Lemkin and me analysing the biggest news in tech this week.
So what do we have on the cards?
We have the largest IPO in history.
SpaceX begins their $75 billion IPO roadshow at a whopping $1.77 trillion valuation.
Is the future of AI always on as Sam Altman thinks?
OpenAI ships Dreaming V3?
People rebuild Siri on Google.
Thank God, Siri being what it is, is a disgrace as it turns on on my device.
And then finally, we have Ramp raising their latest round at $44 billion.
This and so much more.
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Okay, we are back.
And what a week it is.
We have the largest IPO roadshow in history.
We have to start with SpaceX.
We're speaking, and this is important to say, Rory's going to have a fit because we're speaking on Tuesday and obviously SpaceX is going out on Thursday.
And so there is going to be some time discrepancy there.
And so what we say will be able to be scrutinized in intense detail by the time you're probably listening.
True.
One of the things is there's usually two questions you're asking at this point.
What's it going to price that and what are going to trade at?
And the funny thing is, unlike 99% of IPOs, the first question's already been answered.
Elon has decided that instead of doing price discovery, where the bankers build a book and then they pick the price and they announce the price, you know, right at the end the night before, the IPO pricing typically...
takes place the night before the trade opens so then everybody gets to buy who participates in the ipo at that price and then it opens next day at whatever price up or down from that in this case elon has decided in advance of getting anyone's input that the number should be i think 135 bucks a share so um which values the company 1.8 trillion in other words he's kind of short-circuited the price discovery process And instead, we're not doing price discovery.
I'm telling you the answer.
And the only question is how much of it do you want to buy at that price?
So one thing we can't get wrong is that, Harry.
Is that a wise move?
He's leaving a lot of room for markets to move in between that.
That's why you normally leave it, obviously, as close as you can, because you don't want an Iran-Israel, a Broadcom moving markets, and then putting you in a precarious position.
It feels unwise, but Elon is a master.
So I'm not going to.
Yeah, I mean.
Calling someone unwise is about two days away from becoming a trillionaire is a big call, Harry.
But I think what it is, it's no surprise given it's ballsy.
You've got just way more error creep in.
You could be wrong to the high.
You could be wrong to the low.
You could leave, you know, maybe all the orders flood in.
You've left money on the table.
Maybe on the other hand, you're struggling to get the orders in and it feels very high and it opens down.
It's more risk.
But the one thing we know about Elon for the last 30 years is when he hears the word more risks, he says, yes, please, I'll have two.
Right.
And this kind of must appeal to him.
It's like, I'm telling you the answer in advance and I'm taking the risk.
That's how we became a trillionaire.
Is it wise?
We'll see in the day.
It's a huge amount of capital, Rory.
But if it's really only 2x subscribed or over, I'm not even sure oversubscribed is the right word if it's only 2x, right?
Plus Elon picking the price.
That suggests to me this one will pop.
I do believe the day traders will drive it up ultimately, but it doesn't feel like there's an excessive demand at 2x.
In most IPOs, it would be almost insufficient to close the IPO.
I agree.
But there's two separate things in that, Jason.
You're right.
I mean, one is the decision to pick a fixed price logically reduces the probability of a pop with no other information because the whole point of the banker process is to pick.
the price the night before that allows the pop next day.
And you simply aren't doing that because you don't have the information.
You're right.
But then the second thing you added is some information that's come out, which is to date, the book is two times covered.
And your comment is that feels low compared to normal IPOs.
Correct?
I mean, traditionally, you want 8 to 10x to get the deal that you want, but you're not raising the vast amounts of capital Elon's raising either.
Yeah, no, it's hard to get 10x oversubscribed on 75 billion.
To be really direct, what you're saying is...
You're pricing something on a fixed price that's not taking account demand, where you're looking for a very large amount of money such that you only have a small amount of coverage.
You look at those circumstances and you say, there's a non-trivial chance that it pops to the downside.
Is it 30%?
I don't know.
But if you think about it, normally bankers bend over backwards to try and have the damn thing pop.
So they're trying to get a 10, 15% pop.
And 90% plus of the time it pops.
But still 10% of the time it breaks IPO.
They get it wrong.
Even trying to fix the game, they get it wrong.
In this case, they're not even trying to fix the game.
And time will tell on Thursday night, are they too high or too low?
But there is obviously by definition some probably higher than 10% chance that on the day people go, everyone who put in for it, put in for it.
And it's not impossible to trade them.
It's just if you use mechanism A that's designed to create a pop and it works 90% of the time, and now you use a mechanism that doesn't have the information to allow you to make a pop because you've done a fixed price, then by definition, the probability of it going wrong goes up.
That's all.
I think what will happen, if that's accurate and 30% to retail, I think the IPO nominally will be a dud.
I don't think it will trade up dramatically, but...
I do think every time there's great news, more satellites in space for SpaceX, more things, it will begin an inexorable rise up.
People will...
We'll be excited, especially if the upside is tied to potentially significant revenue, right, as the last announcements have been with Anthropic and Google.
I just don't think it's going to pop that first week, I think.
Not enough buyers out there in this universe, or at least in this galaxy, at this price at 2x.
I'm going to step back.
I kind of hate that we got, and I caused it, so I apologize, got into the technicalities of the IPO, because zoom out a million miles here.
This is amazing.
This is an amazing technical company.
It's the iconic company of its generation.
It's going to go public this week.
It's a huge moment.
What do you say to Elon?
Congratulations.
What do you say to everyone involved?
Congratulations.
I mean, it's just a wildly impressive company.
I mean, look, I am skeptical of the valuation, but step back.
I mean, you know, I've watched some of the launches on my little YouTube, and I'm like, the whole thing's so impressive.
You know, at the risk of sounding a little, sorry, Harry, at the risk of sounding a little partisan America, this really is an only in America moment, right?
Where you could, yeah, I can see your little face, Harry, but you know, who else is going to find the capital to take that kind of risk to go for it?
And frankly, also to have a big enough capital market to fund it, a big enough and addressable market to sell to it.
It's a great outcome.
It's an amazing company.
It's a real asset to America.
End of day one prediction and end of day 90 prediction.
I actually think it's...
So you really are determined not to let him have his great moment.
You just want to see you're like those commentators in politics who won't talk policies.
All they want to talk is the horse race.
All you want to do is talk the horse race here, Harry, because, you know, that's what sells.
You're such a little media slut.
But just to I'll answer.
I don't think it's noble in the day one.
I think.
All three scenarios are equally likely.
One third, it just goes down just because there's weird pricing mechanism so they don't have demand.
One third, it's flat because whatever.
And then one third, to your point, retail enthusiasm, it goes up.
There's no information here.
Now, I will make a call, though.
I think over the next 12 months, I doubt it will retain this price.
There, I will make that step.
I disagree with Jason.
I think fundamental value here reasserts itself.
I mean, there's two reasons I say that.
One is...
Again, I always go back to the base rate.
The base rate on IPOs in general is, you know, you do see quite a lot dip.
The base rate on IPO is more than 10x forward sales, even more dip.
The base rate on IPO is at 70 times forward sales.
There hasn't been any, but you've got to believe there's a dip.
So I think valuation reasserts itself over the medium term.
And the probability of it being higher than the IPO price 12 months, in my gut, is lower.
Significantly.
So I would say I haven't a clue day one.
It's a tactical thing based on the mechanisms.
And I think over the medium term, this amazing company might shock horror only be worth one trillion instead of 1.7.
And it's still a huge win.
Two thoughts.
I don't know what you guys think.
One is, listen, there are many great IPOs like Facebook and Google that IPO with a whimper, right?
It would not surprise me if this IPO is with a whimper at the end of the day.
It doesn't matter for SpaceX.
We will have multiple layers of generational wealth created.
Elon will get his liquidity, right?
It'll all be great, whether it's a nothing burger IP or not.
I guess it might hurt OpenAI the most because they've been so aggressive on their valuations and so aggressive on their capital raise.
If that means they have to cut back their aspirations for the amount of capital raise.
Valuation maybe doesn't matter as much, but they are related.
That could be the biggest negative effect.
It's just they need so much capital too that it just could be, it could take some of the wind of the sails out of OpenAI.
The other thing I'll just say briefly, I was, Before I am, I'm in Hong Kong as we record this, but before I got on a plane, I spoke to one of my LPs who's getting lots of cash here, got cash in Cerebus, getting cash in all these other deals.
It does kind of tie to a conversation we had before, which is the expectations are so high now for performance.
And I think that will permeate through the ecosystem.
And I do think it's a minor negative, but I do think it's something for founders and others to understand that it's not a free lunch, right?
The bar will continue to go up after these events.
When LPs are looking for 7 to 8x routinely from GPs, which is hard to do, right?
Outside of anomalous periods of time, the expectations that GPs will have from founders continues to go up.
As this LP said to me, I don't know that little 5 to 8 billion.
dollar IPOs really make it make this math work anymore.
And so we've talked about it, but to hear it from a large LP, it echoed in my ears of how this how the bar goes up.
I don't think you can take a once in a decade event and start extrapolating it as a norm.
I think in life you should take this as the once in a decade.
But there's like four or five of these once in a decade events.
There's going to be Anthropic, Opening Eyes, SpaceX.
It's interesting that you say that.
But of course, the opportunity, the once in a decade.
I mean, SpaceX was once in a decade.
It was last decade.
Reminder here, founders wrote that check in 2008.
But it's now 2006.
It's 18 years ago.
So for that kind of huge return, I mean, yes, there's been a 10x since 2000.
When was the Mercer C check written again?
Remind me.
The Mercer C check three years ago, yes.
So maybe they do happen more than once a decade.
These decades seem to be shrinking.
I think you're going to have one trillion dollar outcome from the last decade and two it looks like from this decade if it all happens according to plan.
But my point is, yes, you probably can't assume 10.
You don't run your business on the expectation that every check you write is going to be a trillion dollar outcome.
If you're really smart and you get one, you should say yay.
So I think $8 billion outcomes will make everyone perfectly bloody happy.
Obviously, unless you have a $10 billion fund, in which case it doesn't.
Fund size dictates the amount of market cap it takes.
It's a Josh Koppelman thing from ages ago, you know, the Venture Arrogance Index, whatever, right?
The bigger the fund, the bigger the deal it has to be to make it work.
There's nothing surprising here.
Will this have knock-on effects in terms of LPs direct investing more and see an increase in fund investments from LPs?
You've got Ohio teachers who will make, I think, over $10 billion from their SpaceX.
To clarify, I know you think the entire Midwest is the same, Harry, but I think it's Ontario teachers, right?
Fair enough.
But now, at this point, you're conflating Canada and America, which is an easy mistake to make because we're making it ourselves, starting with the president.
And it does begin with O, and it's kind of in the middle.
So I understand your ignorance.
Maybe he's just a big fallout player, too.
But the bottom line is, yes, Ontario pension nailed it.
I mean, they're going to make a magnificent...
And there's a bunch of others.
It's great.
University of Washington, they have an extremely savvy CIO who...
And by the way, Washington, Harry, just to confuse you further, is not in either Washington state or Washington city, but we'll keep that for now.
But yeah, look, by definition, these are going to be the best co-investments ever because it's the best deal ever.
I mean, there's nothing surprising.
I know some of our...
RLP is going to come back and go, those that will get liquidity from this go, hey, we're going to reinvest more.
And will all that brethren be like, hey, we're going to join this because we want the next generation, even if we didn't have them.
Yes, because everyone's just going to go, wow, that looks amazing.
As I say, again, it's back to the extrapolation from the unique event.
Of course they are, because it is going to be amazing.
I saw, I think in a journal this morning, not University of Washington, Washington University.
Again, I'm not going to confuse, like it's 10 or 15% of their endowment.
It's awesome.
It's awesome.
This is the best venture capital deal ever in terms of absolute return.
And yeah, anyone involved is going to do really well.
Speaking of a once in a lifetime or once in a decade moment, as Rory very articulately put, another once in a decade moment is obviously OpenAI filing to go public.
Not so confidentially.
Anything to say here that we haven't covered?
The only thing I don't understand, maybe it's a question for Rory, because I don't get it.
Other than the Captain Obvious element, what's the point of hedging your bet on the timing but filing?
I mostly get it.
But I don't totally get it, right?
Yeah, I only half get this, oh, we may want to stay private, we want flexibility, but we're going public.
I think it's actually all they're doing is being smart a little bit and managing expectations finally.
which is I read that as we're filing to go public in a perfect world.
We'd love to go public as quickly as we can.
But if it's delayed for whatever reason, we don't want to have a whole bunch of negative stories there that says, see, it's slipping.
So if you preemptively say manage expectations and say we're filing, but we're not committing to a timeline, we're not all going to be sitting here in late October going.
They said they'd be going public in early November.
WTF is going on.
The big aha here, we said it two weeks ago, everyone's suddenly gunning for the door.
At some point, you need the capital markets, the public capital markets, because the scale involved is such that that's where you got to go.
And if everyone's just hit that point, they're going for it.
I think going back to your comment earlier on this SpaceX, it feels like the market is very risk-gone.
I mean, we had that little dip last week and then everyone got over it in two days.
So it's as good a time as any.
You keep cranking while you can and see if you can get it done.
I mean, I'm sure that they made that caveat of we'll take our time.
But they made that statement in the press department.
My guess is in finance and legal, the mandate is get this puppy done as quickly as possible so we have maximum optionality.
And we're pointing out, by the way, the SpaceX S1 went through the SEC very quickly.
And normally that's, I mean, I remember when that used to be a painful process with multiple iterations.
And it seemed to happen here extraordinarily quickly, probably because we don't regulate anything anymore.
So go team.
This may all process through real quickly, in which case, brace yourself for a fun fall.
Rory's on fire this morning, eh?
Gosh, I really want to touch on something kind of beneath on the product layer for OpenAI, which is, you know, Sam Altman's been driving towards kind of persistent and always on AI.
They shipped Dreaming V3, biggest memory architecture upgrade since launch.
I'm just intrigued, Jason, in particular to hear your thoughts on this.
Is the future of AI continuous, persistent, 24 hours a day, fabric of life always on in your mind?
And how do you see this and that?
I think we all believe it.
I mean, we can make fun of Apple this week, basically repackaging Gemini and giving up on AI, right?
If that's the way we want to view it.
But that's a little piece of wanting ultimately AI to be persistent.
24-7.
We do want this.
We already live little hints of it.
And it's pretty silly that AI, for the most part, lives in our browser, right?
Which is, if you think about it, very dated.
So dated that we still use browsers.
I mean, who would have?
We got to get Marc Andre.
I mean, the fact that we still live in the era of Netscape in so many ways.
So I do think it's exciting.
I do think as this show continues.
you know, the, whatever we want to call it, the token apocalypse, I think it will morph into just standard business practice, right?
At some point there's only the IT budgets can only be so large.
There's only so much, even if we lay off half of the unemployment, I mean, employment keeps growing, we're going to have to manage spend.
So there is a conflict, but I do think we're going to look back in two years and think of this non-persistent AI as, is almost archaic, right?
As almost sort of desktop-like.
Yeah, I mean, yeah, because you're true in a lot there.
Rory, you pulled several faces there.
For the audience listening, Rory's facial.
No, no, no.
Jason, as he often does, covered a lot of different things.
And I'm just processing through it more slowly.
On the memory thing, I'm kind of with Jason, is that it just totally makes sense.
And the question, if you step back, you have the core models.
And then you have what people are calling all the harness, which is all the stuff around it to make those models effective.
And part of that, and it can either be in the...
it should be in the model or it could in theory be in the harness is just understanding memory and the impact of that and i think why jake jason went to the token token economics part of it is part of the thing should be you should get better answers with memory and part of the thing it should be more cost effective in terms of token because you're not passing through all the context all the time.
I mean, I think a lot of the trend on these harnesses will be adding stuff to minimize your cost on frontier models.
And part of that will be having memory, right?
It also leads to a better experience, right?
I think that I actually just went in and tried to see, has it been switched on in mine yet?
Because it just makes a ton of sense.
You should know who I am after I look up.
58, 20 VC podcasts.
I'm probably here to look at my 20 VC podcast research, you guys.
So it just makes a ton of sense.
Rory, most people know who you are now as well.
No, I'm sorry.
But my open AI sometimes doesn't.
So yeah, it's a really, it's absolutely, it's one of the necessary to-dos and they're doing it and it's great.
Rory, you pulled the face when Jason said about Apple giving up on AI with Gemini.
You're right there.
You're moving on to that.
That was an interesting one.
Ben Thompson and Strackery did a really good piece on it this morning I was reading.
To some extent, in the sense that they're paying Google a billion dollars to use their model as the default model.
But reminder, Google pays them, I think, 12 or 20.
I used to know the number.
$20 billion to be the default search engine.
So it's a minor asset.
I give them credit.
I actually think that they're making some...
Yes, it would be better if they had the wrong model, but they're making progress on the use cases that just make a ton of sense for the consumer.
And I think the amount of context you have when you're on someone's phone is such that they should be able to deliver a unique and compelling consumer experience.
for the kind of things they demoed on the thing about knowing context on which Rory.
It's like to your memory comment, Jason.
It's like knowing which Rory Harry's talking about, knowing your calendar, knowing everything, and deliver a much better experience.
Now, should they have been able to do it with their own model?
Yeah.
But the bottom line is they control the handset.
And for the consumer, it's a pretty powerful product.
So I think they're in a good position to make products.
I don't think they're giving up.
I actually think they're pragmatically saying, we kind of screwed up and not have our own model.
But that's actually now what matters for us, for Apple.
What matters for us, Apple, is delivering an amazing experience to our consumers.
Because if we do that, they'll keep buying handsets.
And if they keep buying handsets, we can probably afford to give someone a billion bucks a year.
So I give them credit for getting their shit together.
I mean, yeah, it is stunning that Siri is so bad for so long.
So I think actually trying to fix it is just awesome.
So I give them credit for stepping in the right direction is my takeaway from it.
So the opposite.
I don't think they've given up.
I think they're doing what it needs to win coming from behind.
And they have a great position.
I mean, it's interesting.
The person you have to think about this a lot with, obviously, is if you're OpenAI versus if you're Entropic, because Entropic has made the enterprise bet and OpenAI in part has made the consumer bet.
And, you know, I like my OpenAI subscription.
Because I sit at my desk and I do research.
But for a lot, I mean, it was a great line.
Give Ben Thompson credit, he said.
Very clear.
I thought it, but he hadn't let anyone say it clear.
He said, consumers don't want to work.
There's not a big market for consumers in their non-working life to do a whole bunch of complex.
research or kind of using AI for productivity.
They just want delightful experiences because they want to relax and attain.
So I think actually the consumer space is going to be a tougher space for open.
The enterprise space has really been validated because an enterprise is all about automation efficiency.
In a consumer space, it's about experiences.
Apple's well-placed to do that.
Open AI has got to compete with that and compete with Google.
And it's a tough space, especially if Apple's getting their shit together.
Well, speaking of consumers not wanting to work, soon they won't have to.
Uber cuts 23% of HR.
It's just to make Jason happy.
We can now have Jason.
I'm so sorry.
Obviously, it's people losing jobs.
It's terribly sad.
But I'm the one who fucking said no great CEO likes HR.
And everyone got angry at me.
And then everyone starts cutting HR.
Anything of note here from Uber cutting 23% of HR, remote work rescinded, three-day in-office mandate, company denies AI played a role despite 95% of engineers using it daily.
Anything of note there?
Well, look, HR and recruiting, right, let's consider them different, are the easiest things to cut.
You always see any big tech leader stumble a little bit and they lay off 30% of the recruiting department.
You often want them back.
I always wonder, I always think this is, I mean, it makes sense on paper, right?
The HR one will be interesting.
I mean, we've put out a call for someone to report to our AI VP of marketing, and I've gotten my head cut off a lot on social media for that by people not.
It's okay not really listening to what I'm saying about that.
But I do think HR is one of these areas that many parts of it.
will be better managed by AI.
I think an AI can be a better VP of HR for certain parts of the job than a biased human.
I think there are advantages to having an AI VP of HR.
I don't want to get rid of all of the humans or even lay people off, but an AI VP of HR can evaluate every single thing you've ever done, every little bit of your work, all of your issues, whether an AI VP of HR can figure out, hey, maybe it really is your idiot boss, Jason.
Maybe that really is the problem.
It's not you.
An AI VP of HR can find out a lot of things and process of ask.
So I think it's under discussed versus other areas, but it should be massively disrupted.
The big picture question in all these areas is, you know, how much efficiency do you get?
My God, it felt...
23%.
I doubt everyone is automating and saving 23% using AI in the non-engineering departments because adoption there isn't as strong as engineering.
Do I think there's some?
Of course I do.
So my bottom line is, my guess is some portion of this is quote-unquote AI automation.
I doubt it.
20% because I'm always calibrating off, you know, what percentage, it's the Dario number, what percentage of quote unquote knowledge work is going to be automated?
And it's knowledge work, tasks, and then knowledge jobs.
Is it five?
Is it 10?
Is it 50?
As Dario has said, 23% felt like a lot, but whatever.
Again, what you don't know is how much of it is just too many folks there and they're just partly rationalizing.
So it's a data point.
I mean, I think the other data point from Uber is far more interesting.
which is not the AI for HR, but the AI for autonomous driving, that they continue to make progress on autonomous driving.
They're actually rolling out some more autonomous driving experience in Europe, in Madrid, I think, right?
So partnering with, I think it's a WeRider, some of the technology providers.
But I mean, you know, if you want to talk automation, driving is one of the biggest targets in terms of the number of humans that do that job.
And, you know, when you see Uber making experimental progress on Robotaxi in Europe, you know, it's something obviously to keep an eye on.
It's worth pointing out this stuff is still moving way slower.
than I think people anticipated.
It hasn't been, you know, Waymo and San Francisco are resulting in, you know, Waymo is everywhere within six months.
It's been a long, steady progress for Waymo.
And Uber is doing what it should do.
The Travis Kalnick devotees would say the failure cutting of their autonomous project in 2016 or 17 was a fatal error for Uber.
I'm not sure.
I think 10 years later, they can pick up the thread.
and which is what they're doing and catch up on that because it's not like the technology tip like a domino.
But I think they're smart to now start pushing robotaxis and partnering with technology providers.
And this is the, because, you know, the question on the Uber stock is always, oh my God, is robotaxi existential, which is a bad scenario, or the good scenario is lots of people build robotaxi technology and Uber is in a wonderful position to be the...
coordinating thing because it's the app we use.
And if they just add 10,000 robotaxis to the fleet, then things continue just fine.
And frankly, it's good to see the Europeans do something.
I mean, I say this respectfully, Harry, but typically, you know, Europe is the slow technical laggard, especially on stuff like that.
So go Madrid.
Should we discuss the Revolut 115 billion?
115 billion, you know?
Amazing.
Yeah, thank you.
And I think you're doing that.
I'm going to push it.
I think you're doing that defensively.
You felt I was dissing on you in Europe and you're basically implicitly saying, oh, look at Revolut.
It's amazing, correct?
Correct.
And it is amazing.
And you know why it exists?
Because the European banks, unlike the American banks in general, are so crappy.
There's a reason that Revolut's worth $115 billion because the incumbent European banks were fat, dumb, and happy in making margin off their customers.
And there's a reason why Chime is worth $5 billion.
Still a great outcome, by the way.
That's because the U.S.
banks are now a little more efficient.
That's also why NewBank is such a valuable business.
Because the Brazilian banks were inefficient.
I think all these fintechs, I mean, it really is a, I mean, it's proven markets.
It's a function of how egregiously priced the incumbents are.
You know, Europe, especially when it had non-single currency, you had all this foreign exchange, because you guys aren't in the euro.
You had, you know, the FX chargers, you had all this transporter bullshit and Revolut just blew a hole for that.
So I think it's amazing.
And I know you're a big fan of the CEO and I wish him all the best and pound those old school European banks into the dirt.
I mean, at some point, we're going to have to deal with the fact that the largest bank by market cap doesn't do much lending.
And that's actually going to be a real problem in the aggregate because the whole point of banking is to recycle savings into lending.
And right now, you know, Revolut's not a long-term lender, but that's by the by.
They're killing it.
I'm fascinated to hear Jason's thoughts on this one.
What's dominated my Twitter over the last week is Greg Eisenberg's original tweet about a horror story of venture fundraise.
It led to hundreds and hundreds and hundreds of founders sharing horror stories, including the Cloudflare CEO who said about his experience with Kostler and Vinod Kostler.
Jason, I'm really intrigued to hear your thoughts on this one.
I'm sure you have some.
How did you feel about this slew of founders bluntly saying how terrible a VC experience they had in certain cases?
Well, I'd say a couple of things.
First of all, when I was in the most intense phase of founder, I had those stories too.
We forget how deep some of these things cut, these slights.
Folks that are friends of ours now that we co-invest with.
I thought terrible things of at the time, literally.
One that we both know really well would constantly use me just to do diligence on another investment, constantly.
And now I'm pretty zen about that crap.
The founders, I'm like, just take the meeting and do reverse Intel.
Like if you're just being used for a competitor, then sit down with him and just find out about your competitor, you know, get the exact information.
But man, that stuff really, it really burned me.
So a couple of things.
First of all, the whole thing with...
The CEO of Cloudflare, just remember founders hold grudges.
I still do.
I'm just getting over them now.
I'm just getting over my founder grudges.
So founders hold grudges in a way that VCs actually, I think don't because VCs, you missed the deal.
You got to find another bus, right?
Having said all that, get over it because it's sales.
The only thing that to really have a true grudge on is if you got fired.
I think the folks that hate benchmark from Uber, I think they deserve to hate benchmark.
I think there's others.
But if you're treated poorly during the fundraising, get over it.
It's sales.
Have you never sold?
This is what I say to people.
Have you never sold anything?
Have you ever never thought a customer?
deal was going to close and it didn't.
Have you ever not talked to a prospect where they told you, Rory, of course, we're going to buy by the end of the quarter.
And then you just send them 28 emails and 87 texts and the deal never closes.
How is it any different selling stock than anything else?
So there's a bunch of issues to separate the grudge, the firing, which is a niche issue and learn to sell, man.
Grow some.
In one sense, you're right.
But I think the difference for the founder, and I think a ton of what you said is super insightful.
The difference is the founder in this case isn't selling their product.
They're selling themselves.
So I think you're right about one thing.
The rejection's cut deeper.
And there's no doubt.
Even on my side, I remember VCR 30 years ago said to me, you never forget the LP turndowns.
And 30 years later, he's so right.
You remember.
those people who turned it.
It's just a personal thing because you're not just selling your product.
You're not selling Ford cars on the deal a lot.
You're selling yourself.
And when you get turned down, it hurts.
So I totally with you, Jason, is that you do have to grow a pair.
You do have to get a thick skin.
But I totally get the way founders, even if it's something doesn't go wrong in the process, I totally get rejection sucks.
And as yet, so that's the founder side.
And I thought you were super sympathetic there.
And then just to put the other side of the table, every venture person is in a business where we turn down 99 out of 100 deals that we look at.
So rejection is our default MO.
And that's why I always rest with these ratings businesses, right?
You know, the kind of rating VCs.
It's doable.
And I think there actually is appropriate ways to do it.
But you do have to remember.
The default is a no, and it's really hard to high customer sat when 99 times out of 100, you're going to tell the customer no.
It's why no one ever loves the bank that they apply to the lending money because a well-run bank turns down five out of six customers.
No one likes that experience.
Rejection sucks.
So it's set up for failure out of the gate.
Sometimes, you know, in the course of turning down 200, 300 people a year, you get some stuff wrong.
What was interesting is Matthew was really upset.
that Vinod asked him to consider getting rid of Michelle, who we know who is great, and his CTO, and giving him the shares, not stealing his shares, which I think was misinterpreted.
He made a suggestion and a pitch.
And listen, I'm a super fan of Michelle.
I would not make that suggestion.
But let's step back for a minute.
We've all had those meetings with founders where the team is very unbalanced.
Am I of a node?
Would I say it that way?
No, but you might know me well enough.
I almost would, you know, in a different situation.
I almost would say that to a founder.
I just wouldn't do it during a pitch.
I would just say it's not a fit for me.
But I find myself constantly post-investing the only one that would say things like, what are you going to do with your co-founder?
Rory's just not committed enough.
He's not getting it done.
I think his directness is interesting that it bothered CEO of Cloudflare so much.
But in a way, it was just his read of the team.
I think it was wrong, at least for one of them, but the read of the team.
And by wrong, you mean incorrect relative to the subsequent outcome?
I don't know Michelle that well.
I think she's a great founder, so I would keep her.
But the fact that...
BCs go in and you see that the founders are not equal in terms of their commitment and skill set, right?
Don't comment on this.
Because look, it's clear given the superb outcome that whatever Cloudflow had, it shouldn't have been touched one little bit.
It should have just been let do exactly what it did.
It's a great outcome.
So you're right.
I think, again, Jason, you raise a good point.
You go in, you see things, and especially at the earliest stages, if you think the team is wrong, but you want to do the deal, then that's a really tricky conversation.
As was when you're as successful as Vinod, you're like, I could take three meetings and slowly and delicately get to this point or maybe I'll just say it.
Now, it's also worth pointing out, he said very clearly, he doesn't believe that happened.
So I think, you know, I think stepping back, I don't know if it's a useful way to rehash.
I mean, the more successful you are, the more meetings you'll have, the more meetings you have, the more likely some of them go wrong, especially if you're direct and Vinod is nothing if not direct.
So stuff happens.
I mean, as someone pointed out.
He was on the Midas list the first time for Juniper and he's on the Midas list this year for OpenAI.
And there's 30 years between those two events.
So he must be doing something right overall.
Which is still not to say that on an individual day, you can piss people off.
And look, I'm sure I look back across 300, 400 turndowns a year for 30 years.
I know there's been some where I wish I'd handled it differently.
There's been one or two where Lily at the term sheet level, I wish I'd handled it differently.
It happens.
It's not ideal.
You know, if you're aware of it.
You apologize later and say, look, I got that wrong, and you just have to move on.
Some element of breakage is inevitable.
I have to admit, Rory, I disagree with you.
What?
I've been turned down by lots of LPs.
The best way to have revenge is that you forget they even existed.
I'm being a dick here, but a lot of them ping me now.
I'm like, wow!
When they turned me down when I was 21, I'm like, whoa!
And you're like, who are you?
Yeah, maybe early on, you remember, you're right, over time.
To Jason's point, you develop a thick skin.
And you're right, I remember much less the turndowns on Fund 7 than on Fund.
Yeah, the first independent fund was Fund 3.
I do remember on Fund 3, our first independent fund, which we foolishly timed literally for the week of the great financial crisis in November 2008, getting turned down three times in the space of an hour.
So I do remember that pretty vividly, but life goes on.
Okay, so again, Big milestones for Lovable and Cursor this week.
Lovable, literally just before we came on, Lovable hit 500 million of error.
So 500 million of error with 146 employees.
Cursor has hit 4 billion and it's targeting 6 billion at the end of the year.
Jason, you're the man of the hour for this one.
You're the coder.
Any thoughts on this?
I think there's two different things you said.
One was about the scale, right, of these companies, right, which we've talked.
I do think the headcount thing is something that we're still learning about, right?
And so I think when we started this show, we were in an area where folks were very lean and growing very quickly.
But the question was, does this normalize over time?
As you approach scale, as you approach $100 million, $200 million, $500 million, a billion in revenue, will startups get fat again?
Do you just need these layers?
And I can think of a number of hot AI startups that are getting pretty fat, especially on go-to-market teams and others.
But we're seeing more and more examples to the contrary.
And it is disruptive on many levels if you can stay as efficient as these guys are.
It is disruptive.
to investing, it is disruptive to employees because it will shrink the number of these great roles and it will increase compensation, right?
To the click-up point, to Zeb's point, I'm doing layoffs to give million dollars to a handful of folks.
Lovable can pay its team whatever it wants.
With less than 200 employees, it can pay whatever it wants.
But man, if this becomes the steady state for startups, and maybe it was in the old days, maybe in the old days of Microsoft, it was true, but it's just so different if they're not going to reflate is what I think about.
And because it's not a lot of people, man.
And it's not a lot.
And what people don't understand, I know Replit a little bit of lovable, but they're the same.
They're pushing out a lot of code.
Like one thing you could say is, oh, it's easy because they only have one product.
Right.
That would be a comeback that I think a little bit like you don't have to have 22 products like Datadog or 7000 like Salesforce.
Well, maybe, but these are pretty complicated products.
OK, you've got database, you've got hosting, you've got management, you've got SEO you're running.
You've got so these guys are pushed because it's the most brutally competitive space it is.
They're pushing out more features than any of us did our entire lifetimes a generation ago.
So I don't think these folks are working.
They're incredibly hard and they're incredibly productive.
And if you want to be, you want to have some contempt for VCs tying this together, I'm kind of contentious of startups that need to be fat.
I'm like, what's your excuse?
What do you need another 200 people for?
And when I'm at a board meeting and a VP says, or they're all C-levels now, right?
A C of something.
There's no VPs anymore in startups.
They're all Cs.
And they say, well, I could do that, but I need another 50 or 100 heads.
I need another 10 or 20 or 40 million.
I just think that person should go.
The only comment on, and first of all, broadly agree, but the only pushback I'll make is this.
We're having the, oh, they're amazing that they can do this with only 146 heads.
But remember, if you're spending 50 to 70% of your revenue on intelligence.
from Entropic or OpenAI.
You don't have the, I mean, it's a different business.
You don't have the option to also have 50 to 70% of your revenue on employees because there's not enough room in the percentages, right?
So there's some, I mean, they're just different businesses with different business models.
They are, but you have the choice of who you invest in or who you work for, right?
We have our legs in pocketbooks, right?
No, of course.
You would, and this is actually one of the core challenges many of these other companies are going to have.
If you can be one of the 146 employees, that is, I agree with you, Jason, 100%, that is getting levered from this AI such that your economics are compelling because you're one of a small group of people making a lot of money in a business that's leveraging technology to have a very high revenue per headcount.
It means we can pay you a lot.
That's a far better place to be as an employee.
You're right.
Then, you know, one of...
Yeah, 18, whatever it is, 90,000 employees at Salesforce.
You're exactly right, because you're not getting leveled from the models on intelligence, right?
And this is the how much will be labor and how much will be intelligence.
This is the kind of what's the split.
And what you're seeing to your point, I'm sorry, I'm rambling on this, but it's clear in my head.
I want to get it across.
In businesses that are using a lot of intelligence, and I'm using tokens as a proxy for that, then small numbers of people can achieve a lot and make a lot.
And those are better places to be as an employee and often as an investor than to be slogging it out with 10 times the employees, not a ton of new leverage from AI, and you're stuck in 2010's ground game, which sucks.
That's what you'd want to do if you could as a founder, as an employee, as an investor.
If you could, that's the model you'd want.
That's where I'd want to go work.
I want to go work somewhere where I'm empowered, where I'm one of 172 people at 500 million in revenue.
I matter.
To your point, Jason, I do think, and I want to call it out, I do think as you start to develop an enterprise motion, and you implicitly said it, you're probably talking about the foundation models who are building big go-to-market machines, because they have to.
We are going to see way more bodies.
I don't buy, there's not going to be an infant number.
Right, it's not just, I mean, it's Lagor, it's Harvey, it's your Sierras.
When you're selling to enterprise.
This idea that 157 people can do it on their own is not going to be true.
I think for products, because remember, in the end of the day, someone wants to- Hang on, agree.
In any business, there's only two things that happen.
People are either making stuff or selling stuff.
And if they're not doing any of those two things, they're just overhead.
And to your point, if you're selling stuff via PLG, then you only need people to make stuff.
So you can be pretty lean.
Once you start selling to law firms- once you start selling to corporates, then you do end up with a big-ass sales force.
And one of my theories is that that doesn't change from cycle to cycle.
The Entropic sales force in five years will look like the Oracle sales force, the Microsoft sales force, and the IBM sales force 50 years ago.
But here's the thing.
I don't know that that's going to be true, Rory.
And first of all, I don't mean to go back to, well, if we compare Replit and Lovable, I know Replit's hiring 250 sales reps this year.
So that's going to look very much like a traditional organization.
Lovable isn't, okay?
And it's different DNAs and different goals.
But the majority of Anthropics, enterprise sales, are not allowed to talk to a human.
And so my point from that, we can't all be Anthropic.
Founders are choosing, they are choosing to have leaner.
go-to-market teams, leaner sales.
They just don't want this crap.
They just don't want 250 people running around.
And they're willing to trade off some marginal revenue.
I mean, Anthropica is less than 5,000 employees, right?
So they're just saying culturally.
So I don't think that they're all going to, I thought they would all look like SAP and Oracle and Salesforce.
We're not seeing that.
It's not going to be 147 people doing 500 million when it's enterprise sales.
Nope.
But what you might see is two to five times the level of efficiency.
And it just changes the culture, the headcounts, where people are.
That's the difference, right?
It doesn't really matter whether it's zero or 4x, right?
Agreed.
It will be better.
No matter what happens, when you start with a clean slate and leveraging intelligence, you just become way more efficient.
I agree.
These companies, on average, will be way more efficient.
When you do a comparison, it's over 3 million hour per head versus, and I'm not...
But like a Salesforce, which is 350K per head, it's nine times more efficient.
Yeah, but again, I'm just going to say it here.
Yes, you're true.
But Salesforce, enterprise heavy, R&D heavy, no intelligence costs.
Remember, they have 300 million of the decettative tokens, which let's just do it here.
We did the math.
That's roughly 10 or 15 grand per engineer.
And engineers are about only one fifth of what they have.
So remember that 300,000 ARR, probably only 1% of that.
is tokens.
Do you understand me, Harry?
In other words, Salesforce has $300,000 of revenue per head, which means if they're going to make money, they can't pay anyone more than $200,000.
And they're probably spending 1% of revenue per head on tokens.
Contrast that with your example of Repplet.
They're getting $2.3 million per head, but they're probably spending 70% of dollars on tokens.
It's just vastly different businesses.
And one of them is more aggressively leveraging the new enabling technology.
So to Jason's point, it's probably a sweeter spot to be one of the 147 people in that gig than one of the, I used to know the headcount, now I don't, I probably could do it by a map that 20, 30,000 people in a much larger organization where you don't have leverage.
They're just different businesses.
But to me, this is much more interesting than layoffs in these stories.
I think everybody, every founder...
Forget about older companies.
Every founder today wants to run a startup that's at least a million in revenue per employee or more.
They're targeting two million.
They want to be in a million and they want it because they want great teams.
They want lean teams.
They want the best people.
They want to work this way.
They want to go to work with people they look up to and respect.
They don't want bloat.
My sense is that roughly over the coming years, startups will be half the size that they used to be for revenue, including enterprise.
This is very much B2B focused.
That's a much bigger change than whether this company does a 10 or 15% lab if everyone's half the size they used to be.
It's a much bigger change.
Can I make a comment here?
definition, if you invent something that's meant to augment humans and make them more efficient, and that thing is called AI and it does a trillion in revenue, by definition, you need to see a trillion of efficiencies.
And the way efficiencies show up is less humans per unit of task.
You're exactly right.
That's the bet.
If it wasn't happening, the entire thesis of the case would be bullshit.
So you're right, Jason.
It's got to be happening.
If the people who sell AI can't be efficient with AI, then what chance is there for the rest of them?
Do I agree with you?
Did Elon have the acquisition of the year buying Cursor for what will be 10 times end of year revenue?
Looks a pretty prescient buy if they're going to hit target.
It was a clever deal on every dimension.
I mean, when I was thinking about this, because I'm always skeptical on the valuation, but...
Elon did such an amazing job of meeting the AI moment.
You know, you look back and you go, he obviously founded OpenAI and then all the drama happened, blah, blah, blah.
But in the last 24 months, he moved from ground zero to building Colossus, building Colossus 2, failing with his model.
But just because he had the...
guts to show up and spend that kind of money because to be fair he does have the cheapest cost of capital on the planet he found himself with you know gigawatts of capacity just when everyone needed it was able to sell it to them and then did the cursor deal also to kind of backfill the space and everything stems from the fact that he had the big picture conviction that ai mattered and he was willing to put 30 i mean it's astonishing 20 to 30 billion dollars of capital in the ground in advance of revenue because he felt this was the trend to back.
And at least right now, it looks like a great trend.
You're right.
Pressing is exactly the right word.
He found two of his biggest competitors who want to buy from him.
You know, he's getting $2 billion a month, $1.25 from Antropic and $9.50 from...
No, the other way around.
$9.50 from Antropic and $1.25 from Google.
The other way around.
$2 billion a month, $2 billion a month, $24 billion a year in terms of compute revenue.
And then on top of that, he has cursor coming in at the back end to fill those servers.
So he is the most efficient core weave with the lowest cost of capital.
Now, separate comment, it doesn't mean you have a foundation model.
It means you're just a better core weave.
But oh, my God, did he turn a loss into a win in the space of three months?
I mean, in January 1st, you could have said, look at all those data centers and you don't have a foundation model.
You're screwed.
Here we are June 9th.
And he can say, I have a.
$24 billion outsource business, and I have this other business that's coming in that's going to be doing $6 billion that will run on my servers.
I went.
Great move.
Incredible transition.
Two private rounds that were large.
Ramp raises $750 at $44.
We've discussed Ramp a lot.
Tripled in a year, crossed a billion in ARR, positive free cash flow.
And then also Suno, the AI music creator company, raised $400 million and a $5.4 billion.
Teasing first license model, Bond led that one.
It was double the previous valuation just six months ago.
Anything on either of those?
I mean, Ramp, we've said it before.
It kind of gets to the revelry.
They'll trade like financial companies, financial services companies, but they will be adjusted for growth.
And, you know, we kind of do them.
When Brex slowed down to our, I can't remember what it was, 30%, 40%, they sold for 6x.
And here we have Ramp.
I've heard they're actually as much as 1.25%.
billions, so they're trading at 30 to 40 times, right?
Whatever the number is, right?
Of that order, it's a growth bet.
And if the growth keeps up, this will be a smart run.
And if the growth goes down to anything like, quote unquote, normalized growth, it won't be.
And it's the same bet with Revolut.
They're raising at 100 and something.
They're doing, what, 4.5 billion in revenue, 1.5 billion in operating income, which is freaking amazing.
These companies are great.
Banks don't trade at 40 times, 50 times earnings.
They trade at 12 times.
So on both of them, it's really just, I mean, people always say, you know, will this trade like a tech company or like a financial services company?
And I was, it'll trade like a financial security, but it will be adjusted for growth.
And Ramp is getting the growth and they just seem to do a very good job of riding the zeitgeist and, you know, their AI story, their adoption story.
They just seem to do a good job on all that.
So for now, they got the growth.
And as long as they got the growth, the math works.
And it's a big time.
So we'll see.
Jason, you're trying sooner than music AI company.
you having for your personal office, Suno just playing AI music?
I do like Suno.
I pay for Suno.
It's one of those ones that if I were more cost sensitive, I would cancel my subscription because I think I pay 15 or 20 bucks a month for three songs.
There are certain apps that I think they're fragile for certain users because I'll pay to continue to pay them, but barely.
The utility's there, but barely.
You know, it is amazing.
I don't, I'm not maybe, even though I'm a customer for a while and user, the rate at which that valuation doubled and, you know, the $20 billion outcome for it, I'm not smart enough to see it yet.
So it feels a little bit to me like risk on, right?
Because the revenue justifies it, the growth justifies it, the stickiness justifies it.
justifies it.
The brand justifies it.
You can't lose an AI, but I don't know.
We'll see.
We'll see at the IPO.
I just don't know where all this money's coming from.
No, I'm saying with all the IPOs and then you mentioned Revolut again, Rory, is that targeting 750 million with the secondary sale that they're doing at the 115 and then all the IPOs, we say, should know where all this money's coming from.
There's always money when people aren't afraid.
I always say the converse is important.
When things get scary, it's not that money runs out.
It's that money gets scared.
And in the same thing in a bull market, it's not that more money's been made.
It's that people are brave.
There'll always be money when people are brave.
And there'll be nothing but treasuries when they're not.
How long will they be brave for, Rory?
If I knew that, Harry, I wouldn't be sitting there talking to you.
I'd be trading QQQ.
I don't know.
I mean, at some point, they won't get brave.
But right now...
Right now, it fills everyone's risk on.
So yeah, I think people are brave.
Well, we've all convinced ourselves the rules have changed now, right?
You can go one to 100 in a year and so many other things have changed.
We throw these numbers, these growth numbers out as if it doesn't require a massive change in externalities to justify them.
Like, oh, everyone, all the best startups go from one to 100 in a year.
One to 20 in a year is pretty good today.
You want to be doing five to eight by the time you get out of YC.
The rules have changed and they have changed, but there's a limit to how much the rules can change, right?
It's called GDP.
Yes.
And it's also...
called human nature.
I think that the rules have changed what's doable.
But what we do is in the face of these increased opportunities, we all get more aggressive and we keep on getting aggressive until the only thing that stops us being aggressive is someone gets burnt.
It's the whole Minsky analysis of, you know, you're going to do what you're going to do and it's going to continue.
And the only thing that will stop it is overreaching.
And the skill is to figure out when you're at that point.
Like it was funny.
Last Friday, there was a little dip.
And you never know why stocks go down when things are overpriced.
But, you know, the narrative was, you know, the employment numbers were good.
So therefore rates won't go down and therefore stocks went down.
And, you know, intellectually, yeah, I generally find things don't go to hell in the handbasket because employment is good.
But that's not going to be how this thing ends.
Well, it was because of chip guidance, to be clear.
Chip guidance of 16 billion missed the 17.2.
Yeah, you're talking about Broadcom.
Yeah.
Which triggered it.
It was some of that.
And then it was just some, yeah.
But yes, they definitely got, I mean, I think what that, if we're going to talk about that, all that said is when you're priced for perfection, which is always true, when you're priced for perfection, even a small miss to expectations, you know, filters through very quickly.
And that's all that happened there.
You know, the semiconductor index is up 100% year to date.
So it turns out it's pretty vulnerable to correction.
Oh, well.
One that's amazing, which we may not have comment on, but it is amazing, is Bending Spoons.
This is kind of a roll-up play on traditionally kind of consumer companies.
You know, some of their properties are very well known, but, you know, Evernote, Vimeo, WeTransfer, AOL, Eventbrite, very massively executed roll-up strategy, a billion three in revenue, and they're filing to go public at $20 billion in the US from Italy.
I hasten to add one of the few.
large italian success stories to be very blunt i thought it was amazing i don't know if you guys have a comment on it but i thought fantastic success story well to me the part i didn't i didn't appreciate and i do appreciate it is that they turned around these f'n companies i mean evernote was dead and they re-accelerated the growth of evernote with a fifth of the employees I mean, it sure makes you think a lot of management teams are pretty suspect if friggin' Bed and Spoons from Italy can turn Vimeo around, Evernote around, good God.
You know, if AOL becomes the next hot thing, I mean, these guys are fucking geniuses.
I did read it in detail because I was super interested, right?
Turned around is an interesting expression.
And so, I mean, what they do, their MO is they buy these things.
They cut all extraneous expenditure, including a lot of the acquisition expenditure.
It's very like...
a little ironic like the Vista playbook in enterprise, and then they raise prices massively.
So if you look, I actually tried to figure out the organic growth rate of each enterprise because they're growing nicely overall, but a large part of the reason they're growing is they're adding new companies.
So by definition, revenue go up, right?
I think they had...
I'm trying to find my notes here.
I had the growth rate last year.
It was stellar, like something like 90%, but most of it's acquisition.
So you're trying to piece through, Jason, and you're trying to find out what did they do in terms of growth by entity.
That's the next level down.
And even then, they get pretty good growth rate, to your point, out of the gate.
But then you go one level below that.
How do they do that?
It's mainly price rising.
It's very hard to get any sense of unit growth by individual price.
So in other words, what they're doing is they're taking Evernote.
That's an example.
It's doing...
$200 million in revenue.
They just cut all the marketing initiatives other than high ROI stuff.
So they take out 80% of the marketing spend, focus the team on features, raise the prices 80% over the course of two years.
10% of the existing users go maybe 20%.
Their net retention is reasonably decent.
It's below 100, but it's reasonably decent.
So they raise prices and the people who really want it stay.
And it's really hard to grow new businesses, but what it means is it kicks off cash.
And let's get real here.
Anyone who hasn't churned from AOL now ain't churned until they die.
So you can raise money on that.
You've had a whole two decades, people.
I mean, it is 26 years since the AOL Time Warner acquisition.
You've had 26 years to churn off this thing.
You're going nowhere.
So they have very sticky inertia customers and they stick it to them.
It's an excellent business.
I mean, you know, the big three properties are AOL, Eventbrite, and I want to say Vimeo.
It was interesting, in the top 10 are about 80%.
I think Evernote, which I use, is in the top 10, but not top three.
You still use Evernote?
I don't use it, but I have a bunch of stuff in it, so I paid for another year.
I need to get it out and figure out where I'm going.
It's a long story, but I'm not using it.
I'm using ChatGPT, but I got to get all my shit into one place.
It's a long story.
Rory, what was the last supper like?
Let's focus on the business.
So yeah, I looked at my goal.
The odd thing is this is a consumer internet version of early Vista's Toma Brava.
Buy those companies, cut the costs, raise the prices, and...
probably tap them out.
So the question, is it a great business?
Absolutely.
Should it go public at 20 times revenues or 15 times revenues?
Maybe not, because you are relying on the acquisition for, I mean, you're not getting organic growth.
You're getting a profitable business.
And you probably have to look at the sustainable profit, but it's hard to value it on a growth multiple.
And you might be leaning in a little 20 billion.
But I think it's a great story because everyone was playing in the enterprise space.
What these guys realize is there's similar opportunity.
and the consumer side, which just as the whole idea was in these verticals, no one's going to change their car dealer accounting system because they put prices up 20%.
In the same way, the default consumer is going to stay.
So it's totally sensible, an orthogonal plate, what everyone else was doing.
So they deserve the prize.
Should the prize be 10 or 20?
That's a different question.
But yeah, great story.
Does it diminish what we've previously said about the bar to go in public today?
You know, don't get me wrong, they're fantastic scale.
It's a billion three in revenue, which is awesome.
But we have said that we're seeing this kind of bifurcation and you need to be huge.
No, you said it.
I haven't said it.
But they're growing, what, 70% or 80%?
What are Benningspons growing?
Acquisition, yes.
I mean, Rory would know better than me.
I'm not even convinced the markets care as much as we think, whether it's organic or inorganic.
Salesforce itself is the balance of it is inorganic at some point, and then it becomes organic.
We don't even think about a lot of these products as inorganic or organic.
I mean, does anybody really care?
I mean, as long as it works.
If they can keep finding these targets for the right price, if they can do what they did with Evernote, which is raise the pricing from $75 to $250 a year on average, if they can find enough of these without just running out of affordable targets, go into the founder's letter.
It sounds better to me than starting something from scratch.
There's got to be 800 unicorns to buy.
Just go buy those ones.
I really liked his letter.
He said, well, kind of finding product market fit is just a continuous mission of luck in some ways.
And then the execution machine built after that requires no luck at all.
Totally.
Absolutely.
It's just traditionally, the Constellation version was one to two X revenues, right?
I don't know what Bending Spoon's blended price they have, and maybe it's not revenue based.
I just don't know.
Yeah.
This is Constellation for consumer.
a much higher valuation because right now software is under pressure and this stuff isn't.
Speaking of big enough to go public, guys, Databricks come out today.
No, no, we're going to do another round.
165 billion, price up from 134 billion earlier this year.
Obviously not going public with that announcement anytime soon.
How do we think about that?
I mean, look, the argument we said for why the big...
model providers are going public or they have a huge capital need.
And, you know, I actually think I was, might've been Diamond or someone who said, I mean, the Goldman guy said recently, there's three reasons to go public.
You want capital, you want currency to buy other things, you want to get liquidity for your shareholders, right?
If you don't have one of those three things, then, you know, do you want the hassle?
So I think Databricks, unlike these guys, for now at least, may well be in the position where their capital needs are still manageable.
I mean, for context, Reminder, the last private round at Anthropic was 30 billion, and the last private round at OpenAI was 122 billion.
So this is less than, oh my God, it's 0.1% of the last OpenAI private round.
So what that says is, if there's money to fund OpenAI, there was money to fund Databricks private.
So they can do it for longer because it's just not the same need.
It's a software company.
They don't quote unquote have to.
Now, I personally think you should at four or five billion in revenue at the margin.
I think in the end, you'll find logically in the end, the cost of capital should be cheaper in the public markets.
But right now, it's not.
Databricks can get capital at a higher revenue multiple because they're higher growth rate than Snowflake can and on hassle-free terms.
I also think the other argument he did make, which does resonate a little with me, is the idea that this is just going to be a noisy year.
I mean, you've got SpaceX by Friday.
You've got the two big model companies by the end of the year.
There's just a lot going on.
It may well be next year is a clean deal.
But yeah, I mean, the bigger hub was they don't need.
It's just the amount of money that you need to build a foundation model is two or three orders of magnitude more than anything else.
So the imperative for those guys to do public is just different.
All right, boys, is there anything that I've missed that you think we should discuss?
Other things that made it to the top?
SaaS now trades at a discount to the S&P 500 for the first time in history.
Wow, that's sad.
Meta weighing tens of billions more for CapEx spend following in the suit of Google.
Zuck.
Attaboy.
I'll tell you about the one small one I'll pick just for fun if we're breaking.
I think it's actually a more important story, but maybe it takes time to track it is, you know, Microsoft's new models that it launches, right?
Which I think it said they were clear there.
I don't know what terms they use.
Sorry, I'm traveling.
It's in beta.
I found it very interesting that the models can't even search the web.
So there are certainly use cases where that's not important, but it's interesting to me that you would launch a model that can't extend its knowledge by searching the web.
It's a flashback to when this show started when basically...
You know, every, every, you chat, talk to chat GPT and everything was nine months ago.
Right.
I don't remember.
My memory is only through September, 2024.
The only thing that says to me is hard to predict whether anyone can, can really, we think everyone can catch up.
We think Microsoft can catch up.
We think deep seek and open source can catch up.
But if Microsoft launches these models and it doesn't even search the web, can we really keep up with the pace at Anthropic?
I mean, the pace of change is so rapid.
It's so impressive.
Like so much.
progress.
I just can't predict.
I can't predict where it will play out over the rest of the year or next year.
But you are right, Jason.
It did matter because it was the final recognition that frankly, you can't for Microsoft to have such a core foundational technology and the way they don't control it just wasn't a long-term sustainable state.
And they and OpenAI are somewhere between an open relationship and actually divorced.
I can't quite figure it out.
or they're allowed out of partners, but they're still together.
I can't quite, but whatever.
Microsoft needs its own control and they needed to do this.
And you're right, Jason.
You know, the reviews, I haven't used it yet.
The reviews are like good, but not even as good as the best open source.
But my takeaway on this, you know, well done because you needed to do something.
And it's hard to imagine not playing here.
And they tell a story about, you know, local use and, you know, range of models, which I read all as some version of.
We don't have to be the very best because we know we're not the very best.
In general, in life, you need to be the very best.
But at least you need to be playing.
It's a step to the goal.
And that's why Google is so much further ahead.
They're at least in the game.
But yeah, this was the end of the period where you could fool yourself even slightly that your plan for AI is to partner with OpenAI.
That's just not the answer anymore.
And it hasn't been for a couple of years for Microsoft.
So yeah, onwards from here, my guess is they'll, you know, they will become the next sucking sound for talent and money.
And you're right, they need to add the stuff that the other guys added two years ago.
It's an interesting question.
Can they do the Microsoft thing and grind their way to good enough over three to four years?
Like Azure was never as good as AWS, but it was good enough for most of their corporates.
Can they grind to something that's good enough in this space over the next two or three years, whereby they're not going to be as good as Entropic or OpenAI, but they're good enough for the bulk of low-end intelligence work?
I don't know.
It's an interesting question.
I mean, they never cut up.
in mobile.
They never caught up in search.
They did catch up in cloud compute with Azure and, you know, who knows here.
But you're right, it is the one that matters.
One of the big questions is between Microsoft and then the open source vendors, are the open source vendors especially, is it going to be a non-Chinese US open source vendor that's kind of even within a spinning distance of the frontier models?
Because that matters a lot from a pricing perspective.
There's a lot of open source models today that are within spinning distance, no?
Yeah, there are, but mainly Chinese.
And yeah, the question then is, you know, is that sustainable?
And a lot of our companies are using them and is that sustainable?
Even though it's open source, is that sustainable over the medium term?
If your only plan is you can download Kimi or DeepSeek and you can fine tune it, that's great.
But A, some of those.
Chinese companies are themselves going closed source.
I think what happens in terms of an open source competitor in the U.S.
matters.
And obviously you've got, I think it's recursive and poolside, a couple of reflection and poolside doing that.
But that's to Jason's point.
Sometimes you get caught up in the stories and you're the worst for that, Harry, because you just love the gossip.
But Jason's right.
What really matters is, is this going to be an oligopoly or is it going to be four or five players in foundation model and two years from now, which is why what Microsoft did matters.
I just did a show with the founder of Nebius and he said the single biggest threat to Nebius is consolidation of models.
If we have concentration of model winning, we are in a tough space and we want an ecosystem, not a monopoly.
There's a reason, yes, that everyone other than Anthropic and OpenAI shoving money furiously at anyone else who can help erode that competitive advantage.
I just did a show with Aaron, the perplexity, and he said that export controls have actually hurt the US in many ways.
because it's meant that they've innovated on architecture that they wouldn't have needed to and really built muscle that they wouldn't have had to.
And combined with the open source model capability that they have, it's now a competitive threat that's even stronger.
It was an interesting discussion.
Rory, I have to say, we'll wrap.
My mother texted me after our last episode and said that your quote on making money is like sex.
was the favorite moment of any trio show that she's heard.
And I got about 50 texts from people being like, that is the quote of the century.
I've got to tell you, I think it's not in direct format, but there's a version of that, either in Fred Schwed's Where Are the Customers?
Yachts from the 1960s, or in Reminiscence of a Stock Operator from the 1920s.
One of those two investing books hinted at that, but I always remembered it.
So I'm not the original author, but the books are...
kind of three to five times older than you are, Harry.
So it's kind of like the Bible as far as you're concerned.
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