# AI ROI Shifts, Open Source Disruption, and SaaS Roll-Ups

**Podcast:** The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
**Published:** 2026-07-02

## Transcript

I am getting burnout on struggling CEOs on Twitter sharing performative AI data when they're not AI companies.
Like, show me the money.
If you can be the largest tech company on the planet and still not make money, you might have oversized your ambitions a little and it might pay to come back a bit.
Software companies in the age of AI are either accelerating or irrelevant.
AI is going to be like the oil situation in the Persian Gulf today.
Poor old Warren Buffett is like, it's time for me to die because you people have lost the plot.
As we record this, greed will still trump fear, right?
This is 20VC with me, Harry Stebbings, and today it's my favorite show of the week.
Rory O'Driscoll, Jason Lemkin coming together to discuss the biggest, best news that's happened in the last seven days.
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Boys, it is the holiday edition, baby.
Coming to you from the British Riviera.
I'm looking forward to...
I always say this is like, you know, the UK's Saint-Tropez.
And then people look up Frinton-On-Sea and they're like, huh?
Americans don't get the British sarcasm.
Yeah, I get the joke, Harry.
We have a lot of news there.
I wanted to start on what I think is probably one of the biggest topics of the day, which is more a macro topic or meta topic, but it was brought to light by Brian Armstrong and Coinbase, which is Coinbase spend down 50% this quarter, but usage up with regards to how they're utilizing open source.
That's taking away from their frontier model usage.
How did we read this?
Is this the new normal?
Is this a frontier company with a frontier founder doing frontier things in terms of switching so efficiently?
How do you read this?
I have a lot of thoughts and this got so much traction, right?
And I think it's an important topic.
I agree.
I'm just getting burnout on performative social media from struggling CEOs that aren't in AI companies trying to act as if they're at the bleeding edge.
I really don't care what a lot of these CEOs think about the performance of the latest LLM on their boring old pre-AI SaaS or crypto company.
But man, I'm just...
Enough of the crap from Brian Chesky and the arm.
I mean, these are generational founders, use Harry's words, but I'm just, it's just performative.
Put the numbers up, boys.
Sorry, we're in a crypto winter.
Sorry, Airbnb is still below its IPO price.
Go do something about it.
Go fucking do something about it.
I've had enough.
I'm in a totally different place because I actually thought it was a really great piece.
It's precisely because in the continuum from frontier amazing AI company to boring, stodgy corporate America, Coinbase is now plus or minus in the middle.
This is your point.
It's not a four or five year old since been public.
It's not a bright shining frontier AI company, which is what makes the piece so good.
To me, it was like just a commoner garden tech CEO saying, I was spending X a year ago.
It exploded in the last.
five, six months, primarily because of the ability to cogeneration.
And I got to grips with this thing and I reduced my spend by 50% in the last two months.
And here's how I did it.
It's precisely because it wasn't some frontier leading company that it makes it more relevant.
Because I think every single company spending 50 million, 10 million on claw is going to look at this and say, if we haven't done all these three things in the next month, someone's head's going to roll.
It's cost management 101.
But what it said is, In the space of two months, by getting to grips with your spend, you can continue to innovate, continue to generate more tokens, but cut your spend by half.
So I thought it was a really great piece.
It is.
It's just Coinbase fell.
Minus 30% was its last quarter.
Yeah, but if those things are on target.
No, I'm not disagreeing with you.
I'm just...
And I think the graph and the chart were great.
I'm just burnt out.
I want a leader doing this.
Watch about this.
What about an even shittier company?
And we got lots of shittier.
If one of the automotive manufacturing companies, which are fundamental business challenges, also did the same thing and said we were spending $100 million on AI and now we're spending $50 million, it would be just as relevant.
And in fact, I would argue it's precisely those companies that are under cash pressure and earnings pressure that are going to get their shit together on not spending too much money on AI, which is why it's more important.
And frankly, that's most companies.
Very few companies have the luxury of a venture-backed AI-forward startup that can say, you know, just get this done no matter what.
Most companies have cost discipline.
Is optimizing your LL spend really going to help if your revenue is shrinking minus 20% to 30%?
I just don't see it's going to like reignite growth in your crypto-tied base.
Again.
You're just being a grumpy guy.
He didn't say it's gonna wait night long.
No, no, no.
I think it's a, Harry asked what we thought.
I think it's a sign.
I think the data is valuable.
Like let's move on.
Right?
I think it's great, but I am getting burnout on struggling CEOs on Twitter sharing performative AI data when they're not AI companies.
Like show me the money.
I don't think it was performative.
I'm going to argue again.
I think it was a fact.
I actually really liked it because it was a fact-based piece.
And by the way, it just showed here's our spend by month.
Here's our tokens generated by month.
Here's our peak.
And here's how we were able to clip 50% off it, right?
Let me put it this way.
Rather than arguing with you, Jason, which is usually not productive for either of us.
I'm willing to bet that every single CFO in the Fortune 500 sent some version of that article to the CIO and said, dude, look what this smart guy in the Valley is doing.
Figure your shit out.
So I think actually let's leave Coinbase out of it.
Let's pretend we don't even know the name of the person who wrote that article, right?
Let's ignore it.
I think the really interesting question is what does this mean for revenue traction for the hot sexy foundation models, right?
Because I was looking at the numbers and one says, oh my God, you reduce your spend by 50%.
terrifying if you're the company getting that revenue.
On the other hand, the positive spin, it only went back to the spend they were doing in, I think, November.
In other words, basically all that happened here was all these companies were spending and growing pretty aggressively in terms of their spend with probably Anthropic and OpenAI.
And then in November, December with coding, it exploded.
It took about five months for everyone to get their shit together and say, we can't be doing this.
Let's cut the burn.
And then they figured out and...
kind of reduced it by 50% back to roughly the spend in November.
Now, the interesting question is, does that imply, and I'm not saying it does to be clear, does that imply that, you know, Antropic, which last year exploded from 1 billion run rate at the start to 9 billion at the end to 44 billion mid this year.
I'm not saying this, but you could say, oh, you're saying that their revenue is going to go down by 50% so they're going to be at a 22 billion run rate?
I'm not, but it's going to have some impact on the growth rate.
And that's the- I think so.
Yeah.
I think there's two issues here.
One is it sharpens the question of does the rise of open source and others actually going to impact the growth of the frontier models more than we ever predicted?
That's a big question.
And I'm going to say, I don't know on June 30th.
It's easy to say that.
We could point to a lot of data.
I think maybe that's the topic here.
I think there's a second point where Coinbase was really helpful.
It's like the less dramatic version of what I was saying.
I do think there's a second point.
that the post made that people maybe missed, which is that as we round into the second half of 26, folks are realizing they radically ramped up their AI spend on product.
It seems to have worked subjectively, qualitatively, but the productivity isn't there to justify it.
I think that's what Brian was really saying.
He wasn't that the data didn't say it, but he's like, listen, if we had shipped so many new products to Coinbase, if our product velocity had quintupled because our token spend quintupled, I'm all in.
Like if that flipped him around from minus 30% growth to plus 30% growth, I don't think we'd be, he might've still done what he's doing, token routing a model.
He wouldn't be making this point.
I think if you look across even any of our port, many of our portfolio companies that are doing well, that are not purely reselling tokens.
They're coming to the conclusion that I'm not quite sure what the hell I, I know I want to do this.
I can't put the genie back in the bottle.
AI is great, but it's not lines of code.
What the hell?
And so many folks are not seeing the lift from net revenue, net productivity, they thought from agentic coding.
It's almost a conflict, but it's something that.
we're all gonna have to deal with in the second half.
And it's not the same as cutting costs.
It's saying, Jesus, I spent an extra 10 million in the first half of the year and we grew the same as we did the prior two quarters.
Like, where's the lift boys?
Show me, show me the lift.
And CFOs are struggling with that too.
Even if the business, my point is, even if the business is doing well, they're struggling with it now.
Depending on the company, this AI spend on engineering, if you're a software company, it should credibly give you lift, revenue lift, because you're making more.
The thing you make is software.
You're making more software.
You should give more revenue lift.
Or if you're a digital goods company.
So you're right, Jason, if you're Coinbase, you're like, I'd like to have seen revenue lift here, right?
I think it's even applicable for companies.
The further you are from a digital good.
Silly example.
If you have a tech team and you're a car manufacturer, going back to it again, you're not going to get a whole ton of lift from your extra software unless you're Tesla with FSD.
But at a minimum, you should be seeing savings.
If you were spending $100 million on software and now you're spending $10 million on tokens, at a minimum, you should be seeing savings.
And if you're not seeing either, you're going to be looking at this with a pretty jaundiced eye.
And I think that's what's happening.
Yeah, I have a portfolio company that is every number, software company, every number is green, right?
way overloaded with investors, way overloaded with everything, hit the first half of the plan.
Everything's great, right?
You would love all the numbers.
But at the last board meeting, they came in and wanted to double their token spend, which was massive in the first half of the year.
And it was enough to move the burn from no big deal to- Big deal.
Even for a company in the top half percent, even folks were like, that's a lot of extra budget.
And the feed for the first time, the board was like, okay.
But if you want our approval, like- tie it to ROI and this amazing team couldn't, they couldn't.
Like the velocity is everyone wants to invest, but it didn't directly tilt the curve.
So there is a point for even the highest flyers where you're going to say, Jesus, you got it.
I got to see the ROI.
And I think that's the big, that's just time.
You know, we went into token maxing.
We're like, everyone just try stuff that made sense.
Right.
And that led to.
The early folks that got whiplash like Cursor having to go open source really early and that's an interesting niche issue on X, but the real issue is just, we just can't show enough lift from this spend that it's going to stress even the best of us, not just Coinbase, it's going to stress everybody.
And so be it.
It's time for the next mature phase of token spending and software development.
It's just time boys.
to grow up right if you're an anthropic shareholder though and you see dario say hey we need a trillion dollars in revenue or close to for this business to be viable or we will be bankrupt maybe he says it kind of superciliously or glibly but like he says it and then you see the dominance of open source now pervading into a lot of usage you have to be concerned that it will cannibalize that pathway to a trillion in revenue At least some concerns which will segue to one is going to be in part our discussion next on distillation and...
Antropic's perspective on these open source companies stealing their IP, as they would say.
We will leave the irony for a later discussion.
But yeah, I mean, it is plausible that you have a world where the front member, even if the bulk of the tokens are generated using open source models, it is plausible that the bulk of the revenue will still obviously come from state-of-the-art frontier models, right?
And therefore, there's clearly a very big business here, right?
And that's all great.
It's to your point, Harry, if you've...
constructed your world in such a way that only a trillion dollars is good enough, and you end up with the consolation prize of half a trillion dollars, which is still, you know, the largest company.
I'm just trying to think either the second or third largest company by revenue on the planet, and it would be the largest digital company on the planet.
If you can be the largest tech company on the planet and still not make money, you might have oversized your ambitions a little, and it might pay to come back a bit.
And that's exactly right, is that nothing in this Coinbase memo or 100 Coinbase memos implies anything like, oh, my God, these are not going to be amazing companies with great products that have differentiation.
It's just, as you say correctly, if you've built a cost structure and a capex band that you need at all, then the last thing you need are cheap open source alternatives at one fifth the price.
Before we move on to Anthropik's perspective on distillation, Jason, I love you, my friend.
What do you want from these CEOs then?
Candidly, he's being very factual and innovative in how he's presenting what the company is doing.
What do you want from him to just shut up and do the work?
I want to see how AI, listen, I value the data.
Okay.
I'm not being facetious.
I do feel this way.
I value the data.
So I appreciate that.
I want to see how AI, if at all.
can give Coinbase a revenue lift.
That's what I'd like to see.
Even if it's just them.
I mean, listen, Coinbase is subject to the whims of the crypto market, OK?
And investors should understand that.
And when crypto roars back, Coinbase has grown at rates that are almost anthropic levels for brief periods of time, right?
So it's part of being on a non-recurring revenue journey in a very volatile market.
But I'd love to see how growth is 5% higher.
from AI something in crypto.
I'd love to see how it's driving up insurance premiums and insurance margins.
I just want to see where this magical boost is from this utility.
The LLMs are a utility, right?
They're tokens.
They're not fungible utility.
Like we're kind of teasing at whether they're becoming fungible utilities, right?
Is one token replaceable for another is the meta issue.
I just want to see a boost.
I'm tired of...
Folks like Adobe saying we have 500 million of agentic revenue and missing the quarter.
That's performative too.
And listen, what would I be doing if I was the CEO of a company not accelerating the age of AI?
Man, I might be doing the same, but I don't respect it.
But I wanna see the real boost.
Everyone's faking, everyone's feeling like they have to be part of the AI age, but they're not delivering, Harry.
They're not delivering.
I want to applaud Jason for his consistency and disagree slightly.
Firstly, I give you credit.
You have been remarkably consistent on this.
And I'm going to paraphrase what you're saying.
Software companies in the age of AI are either accelerating or irrelevant.
And you're exactly right.
I don't think crypto gets an automatic lift from AI.
So I think you're being a bit harsh on that company.
But your Adobe example is exactly correct.
And it'll come, actually, it'll segue to the Microsoft discussion later on.
I do agree.
And again, I give you credit for this.
Strong principle, strongly held.
If you're not accelerating in the age of AI and you're a software company, you've got a problem.
That's your point.
And I think you're correct.
So if that tweet, let's put it this way, if that tweet had come from the CEO of Adobe, you would be totally correct in saying, that's great, but dude, you need more.
Exactly.
So I do agree with you.
I would exempt Coinbase from that because I lumped them more in the financial than the software space.
But in the software space, you are correct.
If you're not getting on board this train, you're getting left behind.
Even sometimes and I love them.
We all all three of us love them.
Even sometimes for a while I would get tired of Aaron Levy's constant AI stuff.
But to answer your question.
It has led to a boost at Box.
It hasn't turned Box into 100% grower.
It's gotten it back to double digit growths.
Some of Aaron's stuff is a little bit too, to me, and we all learn from it, right?
Some of it's a little bit too AI reflective, but he ties it to his revenue and his plan.
He's like, this is how it worked at Box.
We're processing documents.
We're processing content.
Here's how it literally ties to our business model.
So it's okay if some of it is a little bit performative.
I give...
But I give Aaron a huge thumbs up on it.
But the Brian one, I just, anyhow, it's all good.
It's great to have the data.
I've just become a skeptic when it's not tied to their business.
That's all.
I'm a skeptic of what the goal is here.
That's all.
You know, Rory, Jason is not only consistent, but he's also prescient in being ahead of the times because he's also cited his, I don't know if I could say disliking, but his.
favoring now Sam on OpenAI over Anthropic and his kind of boredom of Dario saying that we're all going to lose our jobs.
It seems the world doesn't like Dario right now.
And Dario has continued to whine.
Sorry, that's unfair.
And Rory did not say that.
Dario has criticized Chinese models for stealing, for brazen theft of their work through distillation of their models.
How do we respond and think about Anthropic's commentary on whether or...
not Chinese models are stealing their work.
Sure.
I mean, you have to power through the irony before you can have the discussion.
And we all understand the irony, which is all the foundation models, including Entropic, were trained on other people's IP to the point where Entropic recently settled litigation with a whole bunch of copyright holders on books because they had, quote, unquote, unfairly, to use Dario's word, applied to Chinese, leveraged their intellectual property.
I do admire the element of hypocrisy of being appalled when someone else does it to you or having done it to other people yourselves.
Be that as it may, let's move on from that.
Just wallow in it in a second, but then move on.
What's happening again, stepping back for folks, is the allegation which actually...
Daryl, which Antropic, let's not personalize it.
Antropic, the company said actually in a letter to the Senate Banking Committee recently that basically the Chinese open source companies are bootstrapping their development of their state-of-the-art models by effectively breaching the terms of service of Antropic and sending literally millions of prompts to Antropic, recording the answers, and using that as training data to start training their models.
It's basically taking, and to some extent they would say it's taking Antropic's IP.
and using it to build open source models which then compete against them.
So that's the kind of comment here, right?
And so other than so what and hat, that's funny.
What happens after that?
Well, the first thing is, the main thing is, is it illegal, right?
And the interesting thing here is it's clearly in breach of Entropic's terms of service.
And that's very clearly expressed, right?
But that's not illegal.
That's a contractual problem between Entropic and the Chinese model companies, and they're more than welcome to sue each other.
in, you know, you knock yourself out in Beijing.
Good luck with the lawsuit, dude.
Right.
I think the interesting thing, and that's why the Senate Banking Committee thing is interesting, is you could imagine a world where, because as well as just being in breach of terms of service, it is also arguable that you have copyright issues and our trade secrets acts.
And they go above the level of contractual and then start to get into actual legal, you know, kind of.
legal issues that the government might take an interest in or maybe at its most extreme I could see Antropic saying to the government hey these are strategic US assets.
we're getting regulated separately on how we produce our products.
You've got to stick up for us and say, you're not going to let this happen and put the full weight of the US government behind it.
And that takes what was a contractual dispute between two parties and makes it the US government putting the thumb on the scales.
And clearly that's what they're angling for.
Going back to the Coinbase, what happens if in return for Mythos, kind of complying with US government restrictions on overseas access, the quid pro quo in the next piece of legislation is no Chinese model that has been proven in a US court of law to distill using US foundation model technology can be used by a US company.
It's not crazy.
So you can see where they want to go.
I mean, they're not just kind of crying because it's unfair.
In my view, they're laying the pipe for a set of trades to push back on this open store stuff.
If they're in fact, Ewing distillation.
So that's, I think, what's going on here.
To Harry's point, whether he's no longer become a successful communicator at this point, whether the Spite startup vibe of where the safe guys has expired and led to conflict with Trump, putting that aside, I think he wants the models banned for use by US companies.
I think he wants Chinese models banned for use by US companies.
And I think in an era where SBF may get pardoned, the founder of Binance already got pardoned, this is pretty imaginable.
I think it might be perfectly logical for them to get around the table, especially when we're jostling on geopolitical level and say, listen, we're just gonna ban it or we're gonna do some weird tariff on any US startup that uses a Chinese model.
They have to pay 100% tariff tax.
That's beyond my skillset, but clearly they just want US company.
You can't stop China from doing what China's got.
I just got back.
You ain't gonna stop China from doing it for a million reasons, but just put an end to what Cursor and Harvey are doing.
No more.
You guys can't do it anymore.
You guys have to be on grounds of national security.
This is theft of our IP.
This is theft of our data.
We can't trust them.
And hey, Kurser and Harvey, your models are just destroyed.
Your business models, thank God you sold for 60 billion because Chinese open source is banned.
I don't think it's implausible.
Is it on Kalshi?
It seems to be more than a 10% chance it's going to happen.
Would you not say it's actually almost inadvertently or not?
plausible.
When you look at both Sam and Dario advocating for it and the people around the administration advocating for it too, you don't exactly have an opposing side.
Well, you should have because this is, and Bill Gurley's great on this, this is regulatory capture in the extreme.
The truth is, because there's two separations that they're brilliantly conflating.
One is, should they be bad, quote unquote, bad because they distilled our prompts and as such got a leg up on that?
Naughty them if they did, just like naughty Anthropic and naughty OpenAI for stealing your 1.5 million books to leverage your property three years ago.
So pay the naughty fine and move on.
No one's banning OpenAI and Anthropic because they were naughty.
So logically, the distillation thing shouldn't result in banning.
Separate thing is, and conflating the two, is are you really trying to find a motivation from the government that says ban not because of the naughtiness, but because Chinese open source running USAI sounds scary?
And I can imagine that.
There are products that in the interest of national security, like Huawei, are banned in the US.
So it's not crazy that if we believe frontier models are equivalent, that you can see that kind of thing.
Now, the argument that every tech CEO will and should be making is these are open source models that are sourced and running in the US on US inference.
There's literally nothing going.
The code is open to inspection.
There's no backdoor here.
There's zero risk involved.
But to make that argument, implies that you have on the other side of the table a government entity willing to listen and do nuance.
And that's hard.
So I think that you could imagine in the absence of a sensible regulatory function, you know, that.
You conflate the naughty tax for stealing the intellectual property, the security risk because it's China.
And then the deep, dark secret is the frontier models are actually just trying to defend their vast CapEx spend by eliminating a low-cost competitor.
And it all comes together in a big kind of policy mismatch in return for some of these restrictions on security and our usage.
There's also a middle ground too or a partial win for Anthropic and OpenAI is just listen we can't stop Cursor which they could we can't stop Cursor and Harvey but you know what we can do?
We can make every single Fortune 500 company uncomfortable banning open source like they're not comfortable from security security there's enough ambiguity out there that it's just not worth it, right?
Whether a startup can take a, startups can cut corners that enterprises are not comfortable cutting, right?
All you have to do is make it look dangerous to enterprises and they can just ban any open source use in their company.
And again, to be clear, I'm going to distinguish something.
They wouldn't say ban open source.
They would say ban non-US, Chinese-based companies distilled on US models.
Because, you know, they're not going to ban reflection or poolside.
Because look, one of the interesting things here is clearly, I mean, All these U.S.
companies don't want Chinese open source.
They want open source.
And at some point, there's going to be an interesting opportunity for a U.S.
open source company like Reflection, like Poolside, to take some of this revenue.
But you're right, Jason, some version of banning these companies that have been found, quote unquote, guilty of distillation that are based ex-U.S.
in China is plausible.
Stepping back, one thing I noticed here, that Anthropic wrote to the Senate Banking Committee.
Obviously, the minority head of the Senate Banking Committee is Liz.
Warren.
You really have to want to get something done.
Whereas a tech company, you say, what I'm going to do is pull in Liz Warren on my side.
Very few tech companies say, that's what I really need here today.
And it just shows that you're trying to get something interesting done here.
Guys, personally, and you don't have to answer, but I'm just intrigued.
Do you think we should ban them?
No, because I think you have to be very pragmatic in terms of what you, and again, I'm willing to be correct, there's two separate issues.
If they've done the naughty.
then they should pay the naughty tax.
They should pay exactly as much as Antropic had to pay to the book guys, and they should pay to Antropic.
It's easily priced.
And we could use the argument, I mean, and that would make things quote unquote fair.
So from a distillation perspective, no.
Separate comment from a national security perspective, again, as I understand it, if you are downloading the model, the code is open for inspection, the weights are available, and there's nothing running and no telemetry back to China, then I don't think there's any danger.
So I think you probably shouldn't ban them.
That would be my take.
I think that AI is going to be like the oil situation in the Persian Gulf today.
We are so, as an economy in the U.S., we are so addicted to this, our 401ks.
our stock market, everything we do, every bet, every reelection for every politician, we are so tied to the AI boom.
I'm not going to, whether we can debate whether it's a bubble, right?
I mean, at some level, it has to be a bubble.
We are all so, we're all on this journey together.
40% of the S&P 500 is tied to this bubble.
I think we have to protect it.
You know, Sarah Fryer, whatever, a year ago saying that the US government should back all of our data centers.
That was, you know, I think it was her that was flamed for saying that, right?
She was...
She's probably, it was true.
And she probably shouldn't have said it the way she said it off.
I think it was offhanded in a comment.
I mean, everything, I think what I mean is everything's going to be circular because it's like, we can say we don't need that oil because we make plenty of it from fracking, but look at the impacts, right?
Even if gas prices go up a dollar a gallon, people are freaking out.
And if their 401ks go down 20%, if NVIDIA stops selling chips, if all of this moves to, I don't know.
I think we're going to end up doing.
everything we can as a society to prop up, prop this up.
I think we're all going to be, and I think it may even be more important than the other issues.
We just don't, we just don't want unemployment.
We don't want these things to happen.
And we're all in on this, whether we realize it or not.
I think we're all, we're all tied to the AI economy.
It's all about me.
I care about unemployment.
I care about it, but my 401k, don't touch it, man.
You think I'm kidding?
I think we're all in just like the price of gas.
Like, yeah, you know, I feel a little bad about, but don't raise the price of my gas.
Don't touch my 401k.
These are don't don't touch it.
What you're saying might be true, Jason.
I'm not sure.
It is, but it might be true.
But if it is true, what's implicit in that statement is really very negative.
In other words, what you're saying is keep up the price of AI as an input to the rest of the economy by protecting these foundation models' pricing structure so that they can get a trillion dollars in revenue.
And the loser, as always is the case with trade restrictions, is the rest of the economy who won't get cheap intelligence.
They'll get dear intelligence.
So what it means is...
The stocks in your 401k that are making AI will continue to make money, and the stocks in your 401k that should be getting the lift from AI are going to lose money.
It would be like as if in 1981 or 82, the government's… I give it IBM.
IBM licensed MS-DOS and they should have protected it.
And instead, everyone was able to clone it like Compaq.
It would be like the U.S.
government coming in and says, no Compaq, no Dell.
You can't make clones of the IBM.
We've got to keep IBM stock price up.
And therefore, we're going to ban the clones and we're going to keep the PC industry a small, tiny, profitable industry for IBM.
It could happen in this case because the dynamic of overseas national security makes it happen.
But it would be, for the record, so freaking dumb.
Well, look, here's the counter argument.
I'm not saying you might be right.
It might be dumb, right?
I think if you step back for a minute.
To be clear, dumb things happen all the time, especially when governments are involved.
I have high confidence in dumb.
See Harry for details.
I'm in the UK.
Sorry, Harry.
I thought you were going to stop and see Harry for details and I was really hurt there, Rory.
No, no, no.
If you look at the history of LLMs on this show since it started, right?
What has really changed, and Coinbase is just one example of this.
We are...
probably leaving the oligopical age, right?
And we had an oligopical, when we started the show, actually, you could argue there were two monopolies, okay?
Anthropic owned coding.
Elon Musk, when we started this, said those anthropic guys have something special.
I can't compete in coding.
Open AI owned consumer, right?
They both had sort of weird pricing they made up and were losing lots of money, but it was, and they had these sort of dominant, now, then we, and as we.
began to begin this year, we entered an oligopolical era where we had two leaders, okay?
And for a while, what happens in oligopolies traditionally is you compete aggressively on features and not on price.
You essentially soft collude on price and the models were somewhat similarly priced.
OpenAI would be like, oh, we're half the price for codex, but not really we're as competitive, right?
And then typically, I mean, Harry's the master here.
When you leave oligopolical stages, there's massive price erosion because you're no longer competing on features, you're competing on price.
And that's exactly what we're seeing.
And governments do support oligopolies all the time.
And the number one example in ECK is medical device companies and Medicare.
You fix pricing so you can get innovation.
No, you fix pricing because of regulatory capture.
I agree with what you're saying.
Oligopolies are great for the people involved because, yeah, you can have a price.
And sometimes for innovation.
If you look at the study, when you have folks that are brutally, like we're still competing, but if we agree that basically, listen.
We're 200 bucks each for our max program and we're going to charge this much per token.
How do you win?
You win because Anthropik comes in and builds this disruptive coding model and takes all that revenue, right?
That's how you win in an oligopical market when pricing doesn't matter and features do.
And it actually can be great for innovation in the short term, but maybe not in the long term, right?
I mean, include me out on that.
Competition works.
I mean, again, going back, I think any number of examples say you just got to let competition rip.
You got to let the open source providers rip.
I mean, again, it's the Coinbase example.
Counterfactual is if those open source product didn't exist, the Brian Armstrong quote would tweet would have been we were paying $10 million six months ago for our AI intelligence.
Now we're paying 60.
What the frick do I do?
It wouldn't have been as good a tweet.
We need competition to make this shit happen.
So I hear you, Jason.
It might happen.
You might see some pressure, but I think it would be a bummer.
Move on.
Hard to predict, at least, right?
Hard to predict as of this date, I think.
Hard to predict.
We're going to jump around a little bit here, but few companies have had the competitive tussle when it comes to regulation and government intervention or trying to than Microsoft.
Microsoft is in a...
pretty poor state.
It's the worst month since 2000, I found.
And I mean, they're down 16%, 16.5% as of today.
What is going on?
I'm a holder of Microsoft.
And just when I think it can't go lower, it does.
Guys, can you help me out here?
So Microsoft, I mean, look, I don't have a theory of the case of why this month it suddenly kind of dawned on everyone.
that its strategic position was weak.
Ironically, just when they had one of their big announcements and Satya made all this conversation about their direction on AI, maybe it suddenly opened people's eyes.
Because we've been saying for the last year, look, they don't have the standalone model.
Their AI story really is, we spent a lot of money on CapEx.
which we do to support OpenAI.
We have a good investment in OpenAI, which is looking pretty good, but perhaps not as good as it was a year ago.
But our core software business doesn't have a compelling AI product.
And let's get real, Cowork and Claude Code are eating the two core parts of the Microsoft franchise back in the day, which was offers for the individual knowledge worker, which is what Cowork is becoming.
And developers, developers, as Steve Ballmer used to say, which is what Claude Code is becoming.
When you zoom out a million miles, Microsoft, which isn't a software business, unlike Apple, and therefore can't afford to stay apart from the great AI wars, other than its equity ownership in open AI doesn't have anything compelling to bring to the table.
And I think the market's looking at that and going, you're not going to zero, Harry.
Don't panic.
You've had your hit.
I mean, you don't get the lift.
that you get from the growth story.
It's Jason's comment.
Do you really have an AI?
I mean, they'll say they have an AI growth story, but if you break it out in the numbers, which they don't do, a lot of that is just, hey, we're selling inference to open AI, so we have a growth story.
But what they don't have is a compelling end customer growth story here that they own themselves.
So I think the market's finally caught up with the bullshit.
Look, I don't know the answer either, right?
It's a very complex business model, Microsoft, right?
It just has, it's a conglomerate with, it's got Xbox, which I'm not a total expert on, and a whole bunch of pieces.
Stepping back for a minute, I think what is troubling is Microsoft guiding that Azure growth is decelerating.
And I think anytime you see deceleration at all, right?
And Rory can say, Jesus Christ, how can you keep growing 40% at this size, right?
Law of gargantuan numbers, right?
Sort of massive.
But I think, I think.
Just as a student, the only way your stock price is going to trade up is if you beat, raise, and grow.
You have to accelerate in this market.
And you can be an oldie like Okta and Twilio, and just your stock can blow up or even Navon if you re-accelerate.
But the market's expectations are so high that guiding to 37% from 40% growth is a fail.
It's a fail for Azure.
And it's just, this is why maybe that regulation is coming for those.
Chinese open source models, because we just can't afford the deceleration.
We just can't afford it.
But it's not the only Azure is not the only factor.
Right.
But it's so important.
And it's almost a canary in the coal mine that if there's any issue in Azure, we should at least reflect on why it is right.
If there's any slowdown in this era where we're claiming we're all going to be running 20 agents 24 seven Azure should be shouldn't it be accelerating even at this scale?
Yes.
I mean, again, I cited developers and knowledge workers, but you're talking about the separate aspect of the business, which is the cloud business.
And you're right.
Yeah, the Azure cloud business de-accelerates.
But I think more fundamentally, a huge slug of the Azure cloud business is simply just inference for other providers like OpenAI.
So yes, I agree.
But it should accelerate, right?
That should accelerate.
Yes.
If you recollect...
And this is a harsh comment.
Three years ago, Satya did, they were going to make, you know, a Google dance comment.
And the truth is, since then, Google's massively outperformed.
And for all their faults, and I still think they have significant issues and risks, they at least have their standalone model and a product to sell.
The truth is, today, Microsoft has a 30% ownership interest in open AI and doesn't have a state-of-the-art frontier model themselves.
That's a big difference.
You know, it'd be interesting if Anthropic really does IPO in the coming months, right?
If it stays on track, I have to imagine it's going to be one of those volatile stocks out there, right?
Even a hint of news will send it up and down.
I mean, even Cerebus is massively volatile, right?
But if Microsoft has this level of volatility, you know, we're going to be reading every Teevleaf month, Anthropic.
Anthropic looks perfectly linear.
I mean, well, I guess it's, I guess it's, it all looks perfect and up to the right today while it's private, right?
All these rounds.
But man, I wonder how the volatility in that stock rise.
A hint of bad news.
Boom.
Well, the experts in volatility are Calci.
And Calci are apparently raising a new round at $40 billion.
They raised their last round in May at $22 billion.
Is this just the ultimate sign of kind of the casinoization of society and risk on mentality from consumers?
They recently announced being at $2 billion in revenue.
How do we feel about this?
People like Tibet and U.S.
had a prohibition.
We talked about this last week.
They had a prohibition on gambling and sports for the longest time.
Poor Pete Rose never got into the Hall of Fame because he bet on himself.
And now we have a couple of hundred billion dollar a year industry doing exactly the same.
So they're just riding that trend.
And they've got other products.
It's not all sports betting, but it's about, I think, 70 percent plus sports betting.
It's killing it in revenue.
So it totally makes sense.
Will Calshi be a hundred billion dollar company in 12 months time?
I doubt it.
I mean, look, you get there one of two ways.
Either sports betting continue to expand and they can take disproportionate market share.
That's one option.
Or the other at-bat is the whole crypto perpetuals business, which I just really started to learn about, which is effectively kind of futures on crypto, which is gambling to the end, right?
Either that business turns out to be much bigger than we realize, which is not impossible.
Right.
I mean, look, ICE, not the ICE, but ICE as in the owners of NASDAQ, the Intercontinental Exchange, has a big ownership stake in Polymarket.
Why that's relevant is that's a company that runs ICE, that runs.
stock trading and, you know, real financial markets taking a significant, I think, around 20% ownership interest in the other big kind of online betting prediction market player, poly market.
And they're clearly saying this is a huge thing that can have $50 or $100 billion kind of valuation.
So it's not crazy.
But it happens one of two ways.
Either A, sports betting gets ultra huge and they don't get tied up by regulation and the whole issues around that.
the non-sports betting side of prediction markets, in particular the financial products, becomes huge.
I don't think predicting who's the next, who's going to win the general election in the UK or who's going to be the next president in the US is a huge, enormous, ginormous business.
I love it.
I find it fun.
It's actually the most interesting part of Polymarket and Calci, but that's not going to get you to 100 billion bucks because the number of people who actually really want to bet on the next president is actually pretty low.
It's either sports betting, which works because we all love sports.
tomorrow, Harry.
And then R, it's financial betting, which we all love betting because we all love money.
And I'm sure if you've got sports, you've got money, if you could bet on sex, you'd have the trifecta.
It's the human desires.
To get a big-ass company, you need to cater to big markets.
And predictions on politicians is a small market.
Betting is a big market on sports.
People love sports.
Betting on money is a big market.
That's my point.
Dude, I totally agree.
I did a deal into FOMO, which just got their new round on my index and USV.
And their new product is PURPS, which obviously allows you to do much simpler up or down on stock prices for consumers.
Yeah, I've meant to actually try that product.
It's incredible.
It's amazing, dude.
I mean, you know, poor old Warren Buffett is like, it's time for me to die because you people have lost the plot.
But if you want action on the table, then PURPS is your boy.
If you have a strong feeling on where the market's going the next hour, then go for it.
Also, when you look at TAM expansion, PERPS is a brilliant way to expand TAM to a mega, mega market.
Very exciting.
Okay, SpaceX.
Has SpaceX IPO frozen the AI IPO market for now, given the size, magnitude, weight of it?
Does it put barriers up to subsequent IPOs?
I mean, we're pointing out that the anti-AI IPO is about to happen today.
Lily, we're recording this on Tuesday, I think June 30th.
Bending Spoons is going to go public tomorrow, July 1st, and this will come out on July 2nd.
And Lily, Bending Spoons is the anti-IPO.
It's by company, and they own AOL for God's sake, right?
Which, by the way, I remember has killed their AOL email product, but still is an ad network.
They own Evernote.
They own a bunch of stuff like that.
So that's a company that- it literally is 20-year-old software companies going public at $20 billion.
So it's not like the IPO market is shut, right?
Which is what I thought you were basically saying.
What you're basically saying is, is the hidden question here, Harry, has the volatility around SpaceX made OpenAI and Antropic nervous about going out?
Is that really your question?
Yeah.
I thought this was more interesting when I added it to the list, but as I reflect on it...
I think as long as the IPO remains up, right, I think they'll be fine.
The volatility has been high and extreme.
As we record this, greed will still trump fear, right?
But the volatility has been sufficiently high enough you could imagine that changing, right, before now and the day Anthropic IPOs.
So I'm sure the bankers who have less to do are monitoring this every day.
And I think the board and Dario will think about it weekly, right?
Just making sure it is the right time.
It definitely shows there's risk.
It isn't the right time.
It shows there is some.
risk that Anthropoc might delay its IPO.
The volatility says it's not a slam dunk, but up is up.
Except for the poor Korean bank that forgot to put in their orders, most folks that at least bought in the IPO are up.
Rory, you brought up bending spoons.
When we look at multiples attached to IPOs, bending spoons are going to go out at $20 billion, which will be a pretty hefty multiple.
I think it's about a 12 to 14x given revenues of one and a half.
Yeah, one and a half in trailing, but 600 million in Q1.
Yeah, so probably, yeah, 8, 9x forward revenue.
Yeah, healthy multiple.
For the antithesis of AI company, is that not an extremely juiced up multiple?
It is funny because you're exactly right.
It's like you have a whole bunch of single product crap, you know, B2B SaaS companies that have slowed out to 10% growth and are trading at three times revenues.
And then you have this company, which is an agglomeration of a whole bunch of tired consumer products that were growing at 10% until these guys took them over.
And when you read the S1, you realize.
They don't get organic growth.
They don't get new users.
They just raise prices, cut costs, and suddenly that's being valued at eight, nine, ten times revenue.
So it definitely feels kind of a little weird.
It would be like as if all the SaaS, it's not quite the same.
It would be like all the SaaS companies that were slow growth were trading at two times revenues, and Constellation Software, which is a roll-up of SaaS companies, was trading at nine times.
It definitely feels like, wow, that was a clever way to make money.
And you do kind of, you know, it's a well-executed strategy maybe.
And it's worked clearly.
There's clearly value being created.
You do wonder, is it a little faulty?
But, you know, good luck to them.
I think it's going to do well.
I think over the medium term, here's why.
I mean, listen, good God, don't take risk factors in a perspective seriously, right?
Or whatever perspective said.
But there's a grain of truth.
They said there's at least a thousand businesses they've already identified that our material can move the needle.
I think if they're this good at buying, repackaging these companies and there's a thousand targets.
they can maintain outlier growth rates for longer than we would be in the stock, right?
So can they, I guess the meta question is going back to the Microsoft issue, I know Rory's going to think it's an odd tie, but can they maintain this outlier growth for five plus years, right?
To justify some sort of premium.
We can debate whether the premium is too high, but outlier growth gets a premium.
I think for without question, if they can execute at the level they have, it's justified for five years because there's a thousand targets.
And I think there's also going to be another Bending Spoons in B2B that's going to nail this.
They're going to buy these horrific products like Marketo and others, put a few smart people in it, and just boost the NRR.
They're just going to boost the NRR and a few other things.
And so I think there's a chance for several bending spoons to take the struggling software companies and do a revenue arbitrage because they can package them together into something high growth.
I think there's five good years here.
I think that's smart, Jason, because you're exactly right.
Because if you're one of those thousand privately held companies, and let's assume they're all consuming, there's nowhere else to go.
I mean, that's the big attraction.
These guys are the only way out.
So they can lock it, at least until someone else comes along, they can lock in some kind of rev arbitrage.
Yeah, that's interesting.
And yeah, you should be looking at it for B2B.
Jason, you are the new CEO of Banding Spoons Goes B2B, and you are able to choose three targets for your opening quarter.
Which three targets would you choose?
I mean, betting spoon has one trick, which is it uses a lot of folks in Italy that are lower cost for engineering, right?
But I assume the other trick it has is it's able to incent GMs to do a decent job on these, like find kids and these kids may be 60 and not 16, 26, but find kids to run these Eventbrights and AOLs.
And let's assume you have a steady enough flow of these kids, they give a shit.
Okay.
Then I would start to buy up almost any B2B company.
with nine figures in revenue with the sticky customer base because I mean, literally our, I know I talk about our worst and the worst product that we use today is our most expensive product.
It's Marquetta, Rory will remember it.
And they threaten us.
They threaten us.
The API doesn't work.
It breaks every day.
They just told us they're raising prices 20% next year.
like bedding spoons, but without any features or functionality, the site went down for a full day the other day.
You put a kid in here that gives a crap, okay?
And you say, I just want you to take whatever Marketo still has at Adobe, 300 million of revenue left, right?
It's probably decaying.
Take that 300 million and give a crap.
Don't threaten your customers.
actually launch some features, remove the rate limits on the API, like do something so that to retain your base, it would work.
Like we even our worst software, we would stay, it's not that hard.
So I would take all these ones that have a sticky base and buy, and listen, then you take 10 folks at 200 million, you got a $2 billion business growing 30, 40% and stack it.
You got something pretty nice.
But the problem is they're just putting mediocre people in charge of these, like the non-bending spoons.
are having PE firms put these recycled, mediocre executives in charge of it that are going on learning tours for 90 days and coming up with no ideas.
That's just not going to work.
Can you buy these assets for a reasonable price?
I think you can buy some, yeah.
What's funny about this is the minute you ask, you can tell Jason that I'm going to do it too.
You have this hot button of these are markets that's been bugging you and companies where you're like, for God's sake, will you do something?
And yeah, I think the Marketo marketing automation space is one we both know and there's something to be done there.
You know, there's other, I mean, I think I'll give you two examples, one of which is traded already.
I mean, I know Jason hates the first market.
I said it before, SEMrush.
SEMrush is the old SEO optimization.
It's so obvious that every one of those customers is going to need GEO, you know, AI optimization.
You should buy SEMrush.
buy some other little tool and just bundle them together and sell them.
You can't do that now because Adobe bought SEMrush for under two times revenues.
Great deal, right?
You could have turned that thing into something.
And then another example, which the world continues to poke at is PagerDuty, which is a company that's been out there.
It has commanding market share and it's never added AI enabled incident resolution.
Yeah, put a kid on it.
If you can buy PagerDuty for what it's to put a kid on it that's really motivated, it could work.
I totally agree.
A business-oriented executive who maybe picks up a YC failed SWE kind of software, incident automation software product, and put it together and just, as Jason says, if you're not re-accelerating, you're dying.
But if you can get re-acceleration to 20% by just upselling a slug of the install base, yeah, at 2x revenues, you could be Jason Lemkin's Bending Spoon's B2B, BS B2B.
I think what folks don't realize is it's so many of these companies we're talking about, right?
I can tell you because we interact with these people.
They've given up.
The entire team, their customer success team has become a force of evil, right?
They threaten you with lawsuits.
They threaten you with everything.
You know, they've given, you can smell that their culture is, it's not that we're not in terminal.
Like I used to have a guy on my sales team whose last job was working for the Yellow Pages, okay?
And his job, he got a huge bonus if his patch shrunk less than 20% each year.
He was one of the top performers, right?
His patch shrunk like 16%, okay, every year.
I mean, at some point, you got to move on from that job.
I feel like this is working with the Marketo team and other teams we work with.
The knives are out, okay?
So my point is, it is not hard to turn around a team that has completely given up if they have a sticky customer base.
This is not, but you've got to find people that want it and the cultures are just broken.
It's not just Marketo, they're broken everywhere, right?
These cultures have given up.
So I like this model and I like the thousand, I think there's a thousand targets for bending spoons.
And, you know, I almost wonder if Constellation needs, listen, they've been wildly successful.
I wonder if their model needs to be rebooted so they can get enough.
I don't know if these kids want to work for Constellation or not.
In the portfolio company where I've watched PE take them over, right?
They're not running the right model.
Because I've sold a lot of companies to PE, right?
And I'm not close to them, but I watch them.
They're still bringing in 2021 managers.
They're bringing in folks that, yeah, they're never a CEO before.
They were never really a great success on their own, but they have a good set of logos on their account and they're a people person.
Jason's really a people person.
He's going on a speaking tour.
He's going around the world for 90 days to just meet with the team.
And then I want to meet back with the board in three or four months and come up with my ideas.
Like that don't work today, boys.
Okay, that was great when you bought, when Tomo Bravo bought you in 2021, right?
We need the bending.
I bet at Bending Spoons, when you buy that thing, man, crap happens the first 30 days.
People are moved out.
People are moved in.
Products are shut down.
We need that level of action, man.
Pushing on that, it may be in part because, and I could be wrong, but what Bending Spoons is trying to do is similar to what Constellation PE was doing five, 10 years ago in B2B SaaS.
We know those don't change the business all that much.
but just optimize it.
And you're right.
So that's an easier task.
I think what you're saying, Jason, I think it's true is if you buy a B2B software company today, it's pre-AI, it is highly unlikely that simply optimizing and pressing the buttons will be enough.
In other words, you can play the Vista moves from 2021.
You can cut the cost.
You can move headcount overseas, et cetera, et cetera.
But I think what you're saying is unless you're kind of generating new revenue from AI and significantly re-engineering the company, which is a bigger ask than just optimize the existing thing, it won't be successful.
So to that extent, I think that Jason's B2B, B2B.
Bending spoons B2B run by Jason will be actually a harder managerial task than bending spoons because I think all bending spoons had to do was take Evernote, take AOL, and just ruthlessly raise prices and optimize.
There was a little less innovation required than I think would be required in B2B now.
Just thinking aloud here, I hadn't thought about that until now.
But I think the upside can be bigger.
You also need a monster checkbook.
PagerDuty's market cap says $750.
You buy it at $2.00, you're a billion five on one asset.
We times that by five.
No, no, you buy it at $7.60.
No one's buying PagerDuty for $2.00.
The board would have to take that deal in six seconds from a fiduciary obligation, right?
You think that's $7.60?
I think any public company today, I mean, Rory's lived this more than I have.
I think any public company in decline today that gets an offer, a premium of even 15%, they have a fiduciary duty to take that very seriously.
They have to come back and say, we genuinely believe this thing.
We got to go hire an investment bank and say it's underpriced at a 15% premium to market.
And then management with their earn out, they're going to take that deal in a heartbeat.
I get to leave.
I get to bail out of this, this sinking rat hole.
I'll take this.
Like management is going to be so aligned to take any deal where, I mean, some of them, they just get fired.
They're not going to be excited about that.
Right?
They just had a good day and are up a few, but yes, I mean, it's seven, $800 million.
You're right.
I mean, but that's because Jason wanted to start at the $100 million level.
I mean, you could do the bending spoons thing and start with smaller deals and roll up to it.
Well, that's what they did.
I mean, it's a very long journey.
This company is, I think, 15 years old.
The point is, I think the meta point Jason's making is correct, is that especially in a world where standalone IPOs, you need $500 million and 30% growth, there are a whole lot of companies that aren't that, right, that are sub that scale.
That, you know, this is going to sound stupid when I say, but aren't family businesses you leave to your kids?
They're venture-backed things with a CEO.
And at some point, everyone gets old.
Everyone wants to do something else.
And all those businesses have to find a home.
So, yeah, I don't think it's great.
I think I'd love to see the Bending Spoons consumer list of a thousand names, but I believe it would be there.
You know, good digital assets that are just like, yeah, not matters enough.
Jason, I push you.
You've got Mercado, one.
What are the other two targets we're going for?
Patriot was a good one, right?
I mean, you didn't need Rory's right.
That's that's that's a very good one because I mean, you've got the right customer base, right?
Datadog is extremely expensive.
They have cheaper competitors.
I mean, Patriot got crushed from all sides and across its whole suite, right?
But it's it's a it's customer count is flat, but it's real.
It's still got 15000 customers or so paying for this product constantly.
That was a good one.
Asana.
Boy, I have too much scar tissue attempting to use that product.
But probably, yeah.
I mean, listen, you have a company literally where the billionaire founder just up and quit a year and a half ago.
I mean, that's one that you got to be able, it's got to be some way to turn this thing around in a, in a space that, listen, that has existential challenges, right?
Do agents need a sauna?
Agents don't need a sauna, but I think you can make it more agent friendly.
I think you can do better, probably do better.
This is easy for me to, I don't want to be too much of an arm jump quarterback from a product that feels terminal, but it's probably a good one.
I think it's a good candidate, right?
It is, it is, it's a good candidate.
Without all the pressure too, right?
Okay, I feel like there's a private company fundraising that we need to touch on before we do a rage paper reel.
Chamath Palihapitiya raises $135 million for his AI startup 8090 or 8090, whatever he calls it.
But he also is now CEO.
For people that don't know, what do they do?
It's a software factory platform that lets teams collaborate with AI to handle the full software development cycle from new builds to code refactoring, complete with governance.
What do we think about this one, Tim?
I just love the fact that you had Chamath Nath in the rage bait category.
I mean, that in and of itself was progress, right?
All credit to him.
I mean, at the risk of making the cliche, you know, he used that quote a long time ago, but give him credit.
You know, he did the man in the arena quote and he got slammed for it.
Well, now he is the man in the arena and all credit to him for trying.
Good luck, right?
It's a super interesting market.
There's obviously a ton, a ton of competition.
But as he said in his tweet, it's the most exciting space you've seen in decades.
You know, how is all of software going to be remade?
So I just give him huge credit for going for it.
And good luck.
One of the things I'm trying to do, Harry, is like, I don't have to be a snark all the time.
If, you know, because it's easy to be snarky at someone like Chamath, who just lends himself so well to snarkiness, given his stuff.
But let's just kind of take the high ground and say, well done.
Good luck.
You know, go team.
I don't mean to be snarky.
I will say one thing just in general, right?
This is abstract and away from Chamath.
And there are counterexamples.
I can give a few counterexamples.
But I, my scar tissue.
I don't believe he's working 100% on this.
I don't believe every waking hour is on this.
I believe he's got a team, right?
At this point in life.
And I just, when wealthy folks, especially VCs, want to be a CEO, but they're not working at the insane rate of a traditional founder CEO, I just find those run out of energy.
And I'm not saying he's not the exception to the rule, right?
I know the Spotify guy that Harry's close with runs the scanning company too.
We have a lot of CEOs running side companies that are very successful, right?
Listen, anyone that started a startup, it's all fun and games in the early days if you have any money.
You pull together a team, there's a lot of whiteboard talking, use your brand to get Accenture, whoever's backing you.
It's all kind of fun until the S hits the fan.
But do you want to be running this services, AI business forever, 100 hours a week?
Or do you want to like, be hosting $25 million fundraisers in your palatial home.
I mean, I don't know that you can do both successfully.
I know there are examples.
I just wouldn't like.
I just wouldn't invest.
There's certain things for me personally, I have scar tissue.
I've written small checks into successful founders doing multiple things just for fun.
And they're all zeros.
Right.
And I remember one of them, I asked this successful and I'm like, I don't really need to know what I don't care about the valuation.
I don't just, are you telling me this is the only thing you're going to be doing?
He's like, yeah, this is the only thing I'm going to doing 30 days later.
I see him working on another startup.
Right.
So I'm, I'm out.
If literally Chamath.
drops everything but 80, 90, everything.
And I see the sweat from his brow and I see that because the dude's fit, he's looking good, right?
He just had a massive, the massive largest win of his career as an investor.
I want to see the, I want to see the punchy middle, the hair loss, his right hand person quitting on him.
Then I'll invest.
Not until then.
I too much scar tissue here.
It's too, it's too easy to start up today.
Whether you launch into YC and raise it 30 pre when you started three weeks ago, it's not easy, but it's too easy.
It's just too easy to start up today.
It's for suckers, boys.
It's for suckers.
It's for suckers.
We're making the t-shirts.
I really raised the internet again this week.
Why?
Turned down a founder this week.
Why?
They were finishing the year at one and a half million ARR, finishing next year at five million ARR.
Today, brutal as it is, this isn't good enough to raise a good Series A.
opportunity cost of cash is real.
Now, I deleted it because honestly, no one engaged.
It got 30 likes after an hour, which is not very much for our tweets.
And so I took it down because no one cared.
And it looks bad on my timeline.
And then they took it back up and it became a thing.
Do you think I was wrong?
I think you, okay, I can answer.
Yes, I think that the factual statement you made is correct.
in the kind of growth rates you're seeing now, the bar, the opportunity cost of doing something with a lower, it's not impossible.
We have done deals with those kind of growth rates, which would have been very top quartile in the age of SaaS, but isn't in the age of AI.
I can imagine doing some of those deals, but it's the exception and you'd need some other extenuating factor.
So as a matter of pure truth, it was a correct reflection of the current venture market.
Were you correct to put it up?
If you're not careful, I find as a VC, when you're saying your one and a half to five million deal isn't quote good enough, you really have to phrase it carefully so you don't sound like an obnoxious prick telling people their life's work is not good enough.
And that's tricky, Harry.
Well, I'm really sorry.
If that's going to ruin your day, don't be a fucking founder.
Life's harder than a VC tweeting and it ruining your day.
Agreed.
But I think life is up, but it's precisely because the rest of your life is so hard that a little bit of compassion from the Capitol wouldn't hurt.
But your message is correct.
And I had loads of fans and VCs be like, oh, class of child.
I was like, dude, Lagora, lovable, McCaw.
No, I'm just pushing.
Look, yes, a lot of people say you're mean, but what you're saying is correct.
But again, look, we've discussed this before.
You think rage is still engagement, so you're all happy.
Okay, now I'm going to say my important...
I definitely don't think you should have taken it down because that looked like you were blinking.
And, you know, yeah, that was a mistake.
You blink, dude.
That's the bad part.
Can I break it down just a little bit on the tweet?
First of all, I think, listen, I'm supportive.
I would have retweeted it and I'll be supportive here.
I think the problem with the, and I want to share a story.
The problem with the tweet is there's two things going on, right?
The first part of the tweet is the state of the Series A market.
The second part, which is more triggering, although people might not miss it, is opportunity, cost of cash is real.
Because those are different points, okay?
I'll tell you something that I think is subtly toxic that all these nice VCs are doing.
It's subtly tucks.
I've watched two portfolio companies I have recently that were growing at great rates.
Okay.
We're going to compound to huge winners.
Okay.
That are capital efficient, but they're not quite at Harry's level.
No, not at the A, at the B or the C.
Okay.
I've watched all the VCs say, good luck guys.
Go, go do your round.
I do this thing where I built an AI pitch deck generator that uses all the benchmarks from iconic and benchmark.
It tells you honestly your odds.
It told all of them that.
for around there a B.
Okay, it will tell you, go to Sastrad AI, use pitch, just upload your pitch deck, it will tell you, not a single VC in either of these companies would be honest with the founders.
I've tried in the past, I get my head cut off.
In both of these cases now I said, well, why don't you back, here's my new thing.
I'm like, the hot companies in your space are basically, they're later stage, right?
They're getting funded at like 30X ARR, okay?
Back solve into what numbers you would need to get to raise at 30X ARR, right?
This is me trying to be, to guide founders there.
It's too subtle.
They don't listen.
And then two months later, they're like, Hey, I'm growing, you know, at this still top.
10% rate, but not enough.
And no one's honest.
So the honesty of Harry's thing was very helpful.
The opportunity of cash, it's a little, it's a little, it's more for people in the process, right?
What it's worth, I do agree.
And maybe I don't know if, I don't think I'm changing my mind, but I like what you said, Jason, because I'm playing the pattern back.
And I've seen the same thing where you look at these companies and you're like, they're planning to raise, everyone around the table knows that that's not a deal they do.
But they say to the company, you know, have a go.
And they're not being, they're not, you know, they're looking at the growth rate and they're saying, that's not compelling compared to the other things I'm seeing.
Just have a go.
And perhaps the better advice might be, if you're only growing at 50%, you know, should you converge on profitability?
Should you raise a lower amount?
But you're right.
Sending people out to get a harsh message from the market, just because you're too big a wuss to give it in the boardroom, is actually a pretty pathetic act.
And I do agree with you, Jason.
And so to some extent.
I'm backing into Harry's.
Maybe people...
Do you know what?
I told this founder, which is why I actually tweeted it.
I told this founder exactly this.
No bullshit.
He said, you know, that's really helpful.
I had no idea that wasn't good enough.
And so he was super receptive.
He was like, honestly, dude, I didn't know that.
That's really helpful.
And I'll change how I project future revenues.
To dig deeper, maybe Harry doesn't want to go this deep.
I do think there's a logic.
Here's what's wrong in Harry's tweet, okay?
Harry's tweet is, turn down a founder 1.5, finishing next year at five.
That's not good enough to raise a Series A.
If this was a long tweet, it might be, or maybe it is, but you might have to meet 150 VCs.
That's what I would kind of add.
And so I think if people are honest, I think they should be like, listen, you're at the edge.
Agreed.
There's nothing wrong with one five to five.
Like you did better than I did back in the day.
There's nothing, and put it on a spreadsheet.
If your burn is low and you don't quit, you can build a generational company with those numbers.
But what it means is, I mean, literally frigging, you know, Higgsfield, where I invested in Seed and Harry invested, you know, they're just crossing 500 million in revenue in less than 18 months.
Okay.
And when I thought about that this day is I look back at my email.
I'm like, why didn't I invest even more?
And so then I get another email from a portfolio company growing at decent rates.
It's hard to even pay attention, right?
It's hard to even pay attention.
And so you have to realize just getting the attention's hard in this crazy world.
And you've got to hunt Higgsfield or better.
That's your job, right?
And the fact that when I started talking about Higgsfield on the show, no one even heard of it.
You know why that's interesting?
That means go find it.
Go find it and stop worrying about the 1.5 to 5.
But if you talk to 150 investors, you're going to find someone that believes in you.
and says, because the 1.5 to 5 doesn't really matter, does it?
It's where it's going to go over the next decade, right?
And someone may take that bet, but don't run a process.
Don't build a data room.
Give people one week to look at it and ask for checks, right?
Give it time.
No one fast process.
I think, yes, some versions of what you're saying, you're right.
If you're the one and a half to five, it has to be the, if you want to raise money, just understand the facts.
which are the deals that people, the deals that are getting swept off are going one and a half to 15.
You're not that.
So that has consequences.
It has consequences in terms of the number of people you'll have to talk to, the range of people you have to talk to, the amount of capital you can realistically raise, et cetera.
I don't discount the fact, but I just want to say this because founders listening, I do agree with you, Jason.
You can be one and a half to five and still end up with an amazing generational company because Yeah, we've seen that data.
I can't remember when, but there is a correlation, but it's modest between initial growth rate and overall outcomes.
And companies that have grown slowly at the start have been huge at the end.
Procore was a slow grower and then became a huge outcome.
So I do agree.
What you don't want to be saying to a founder is your dream is impossible, go away and die, because that's just not productive, especially when they're growing 1 million, 1.5 to 5.
What you do want to say is if this is your reality, you better think about how to cut your cloth accordingly and how you plan your race.
And maybe you're not a venture asset anymore in a new world adventure.
And that's totally fine too.
But like, that's okay.
You might be.
I still think, listen, I just think, I think there's two different tweets in your tweet, right?
To Rory's point.
The reality is 95% of investors you're gonna meet today are gonna say the opportunity cost of cash is too high here, right?
They're gonna believe that.
And even if they don't believe it, their job's on the line.
They have to find a high fly.
Like, even if they'd be happy to do this deal, they might get fired, right?
If they don't run the place, right?
So they've got to find, everyone's gotta have one of these lighthouse investments in their portfolio, or you just might not be part of the next fund, right?
This is a reality issue, right?
So they're...
That's a different tweet than what are the odds if you're at 1.5 going to five that you're going to raise funding today?
They're just different tweets.
And listen, I've got your back.
But you gave people two different reasons to get triggered.
And you saw the reaction, right?
Doesn't mean any of it was it was all correct, though.
It's all correct.
You should just run the Jack Nicholson.
You can't handle the truth quote.
You know, that little film of Jack doing the in the movie.
That's what you're saying.
They just can't handle the truth.
I agree.
You are a little bit punky.
You are a little bit punky.
It's going to work in my favor, isn't it?
Really win them back with that one, Rory.
Yeah, you're really going to win them back.
Is there anything else?
Yeah, one thing.
I would be curious to get people's thoughts on the whole, you mentioned here, Claude Tag and Claude Tag in Slack.
Jason, I'd love to get your thoughts on that.
Can we just provide some context?
What is Claude Tag for those that don't know?
Just context that here.
It's basically the ability to have...
Claude is a fully present member of a Slack channel focused just on whatever that is.
If you look at the announcement, be it your legal team, it's a Claude agent that's legal, that's just focused on legal, that just has access to that sort of information, but is a fully present member of your channel.
Yeah, and in theory, it's autonomous.
Yes.
Right.
That's that's the it's not just that it has.
Well, listen, first of all, I don't know because I tried to deploy tag.
Right.
But you have I'm not.
You have to be the analyst.
You might have to.
I think we're just I'm just not on the right enterprise plan.
And Claude is the biggest issue.
So I haven't used it.
Right.
I tried to use it for the show.
Right.
So a lot of things like Claude design.
before the internet and information says the world has ended, let's give it, let's actually see how important this product is to Anthropic.
If this product is essentially important to Anthropic, this is...
could be the biggest deal for traditional software there ever is, right?
It runs across, it runs crop platform, it runs on Salesforce, it runs on HubSpot, it runs on all the other things.
If the agent can run 24 seven autonomously, take all your data and build all the analytics, build all the dashboards, run autonomously out of it, then your data can flow between apps and you won't even care where it lives and all the fears about headless become true because Claude is your head and you don't need, and Salesforce and HubSpot really do become dumb databases.
Like there is a version of this.
where Anthropic puts its best people on and doesn't quit, where it is existential to everything, let's give it a week, right?
Or is this Zapier on steroids?
Or is it even very good because Slack has a Slack bot, which is pretty good, right?
So one of the things that press was like, why is Salesforce supporting this when they launched their own version of this a couple months ago?
Well, what choice do you have, right?
At some level.
But I wouldn't be surprised if this vector does not maintain so much energy that Slack bot isn't better, right?
That'd be the most logical thing, but we could be wrong.
Like enterprise is the big battlefield.
And as much as tag created some anxiety at Salesforce, it might be the Trojan horse.
And in six months, it's like, it's a big effing deal, but we have no evidence of that, right?
We have no evidence design is going to kill Figma in any way, shape or form at this point.
We have no evidence.
There's a long-term commitment to that.
So I'm, I'm skeptical, but existentially, man could disrupt everything in software and business software.
That was a good summary, Jason.
I agree.
I think someone did the wider Salesforce, let it happen.
They have no choice.
They own Slack.
They have their Slack bot.
But you can't be the cross-platform comms, communications platform for your company and then not allow access to an agent that's enabling you to do better work because that just pushes people away from you.
I think the interesting thing here, look, is if you're lurking on a Slack channel...
as an AI, you really just do get a very good handle on how people do, you know, the context part of work that, you know, that lovely post from Jaya and Foundation Capital talking about capturing contests, basically, which is a fancy word for...
Capturing all the weird shit people do on top of the actual apps, which reflects how they actually do their work and how they configure their work to suit the SaaS apps, which is what happened in the prior generation of software.
And capturing that context is really useful because it allows you, it allows an AI to automate that work.
And the truth is a lot of that context exists in Slack.
So if you're watching people interact on Slack, and if you watch it autonomously for weeks and months on end, you probably will get a pretty good handle on how people do it.
do work and how does Jason and Rory handle whatever exception we're dealing with when we're talking about it on Slack.
So I think it's an interesting entry point.
You're right, it's only an entry point.
It's not the end of the world.
But I think Salesforce is right to say, okay, you're in there now and we're going to make sure that the Slack bot is better and remains better.
So yeah, I agree with your assessment.
Super interesting.
Watch this space.
But definitely an interesting entry point into capturing what's going on at the context graph level.
I mean, by the end of this year, Anthropical will have more revenue than every public software company combined.
Unless Brian Armstrong has his way and cuts it in half.
It may be, but it's just, it's just for predictive.
We just have to wonder is some of the stuff that we think is very, and the media and acts like it just may not be material to Anthropic and nobody.
It's just not like, as these guys cross a hundred billion in revenue, 200 billion in revenue, they just may, it may be like the early day when, when I started in B2B as a founder.
And when I first met Rory, most folks thought it was just too small.
It just wasn't worth anybody's time.
These markets were just too small.
Now they're, they got big.
But AI got so much bigger and they may not, it just may not be worth Dario's time to worry about whether he's disrupting Salesforce.
It's just, it's not even the salesforce is 42 billion.
He may be looking at the net new bookings.
What is Salesforce adding at 10%, 8 billion?
He's like, because, you know, materiality has always been 10%, right?
So if I can't make 10 billion plus, I don't know if Anthropoc can get out of bed for something that's not, doesn't generate 10 billion of revenue.
It's not, that's always been the definition of materiality in my experience.
I think it was even the SECs, right?
10%, you got to disclose it in the old.
I don't know if Anthropic can get out of bed for less than 10 billion of revenue by the end of the year.
It's just not enough.
It's just not enough.
Now it's one thing to just do an experiment or build something that makes Claude better, right?
That's an integration.
Like we'll make Claude better.
They want to integrate more with every single app and take in the data, but I don't think they may not care about that revenue that the leaders are terrified of losing.
That's probably why there was that crazy disconnect with the guy from leaving the Figma board, right?
And like, it was such drama to Dylan, to Anthropic.
They're like, oh, we didn't know you'd care.
Gotcha.
Like, this isn't even important.
Like, sorry.
Sorry.
Genuinely sorry.
We didn't even, it wasn't even, we don't even talk about this each week at the...
It's the, you know, when elephant stands, the little people get trampled.
Exactly.
No, sorry.
Genuinely sorry.
Yeah.
Whoopsie.
Next time we'll be more careful.
Boys, it's a wrap from the British beach.
Thank you so much for this, Rory.
Always a killer line at the end there.
What is it?
When elephants dance, the little people get trampled.
I think it's something about mice get trampled or something, whatever.
Yeah, no.
Well, Harry, by the time this comes out, we'll know how the US and England have done.
And by the time I see you next week, hopefully you'll both be progressing to...
Let me see it around us.
Yeah, we should be...
I'm going down pub for the game.
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