# AI Agent Economics and Market Shifts

**Podcast:** The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
**Published:** 2026-09-10

## Transcript

There's going to be no financial math you can use to buy the stock.
When someone goes risk on, everyone goes risk on.
I would imagine as we speak, there are 20 engineers locked in a room somewhere in Palo Alto, literally with guards on the door saying, nobody eats and nobody leaves until you ship Instinct Clone.
12 billion for a bootstrap company.
Now it's just a, that's a series C round.
There was a free 10x in the public market in three years there on Robinhood.
In this market, the people who are making the money are the people who are just running fastest and evolving quickest.
This is 20VC and the only show that you need to listen to every single week.
Rory O'Driscoll, Jason Lamkin discussing the biggest news in tech.
This week, well, AGI has arrived according to Jensen Huang.
Next we have OpenAI releasing GPT Astra.
Then we have Index conflicted from investing in town because of their involvement in Instinct.
And what on earth is going on with the AI assistant race?
Meta also releasing their product.
And then finally, Wonderful doubles to a $5 billion valuation in just six months and takes out a whopping $170 million in secondaries.
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Have you guys tried Instinct yet?
No.
I can't sign up, right?
I hate to sound like I'm behind the times, but when it's ever, it's a closed bait, I just don't bother.
I'm not a fan of GrokBot or Instinct.
There will be many winners.
There is a genre of applications, and a lot of actually AI GTM applications are included in Instinct.
And GrokBot's the interesting one because SpaceX is public, where one of the reasons they work is because they can break the rules.
You know, in the old days of venture that we are wasting content here, people.
Or you can use it, right?
We are wasting content.
My dear friend, Roy, we record.
Yeah, I mean, the old days of venture, you wouldn't do things like gambling or other types of things that had risk or edgy things, but you can break the rules, right?
Even GrokBot, which is like a mini instinct.
One of the things it does is every single person spins up an instant VM and they get their own browser in it.
And GrokBot uses Google, which is not allowed, which is prohibited by the term of service, to Google things and then give you answers.
It's great.
And any startup that you might invest in early stage would do that.
And no one would know, right?
Google isn't going to care, but you're breaking, you're breaking rules.
And it's not that I don't love these products, but open claw broke every rule on the planet, not just laws, but just every rule of what you could do.
Instinct and GrokBot, which are like open claw, they're much better.
But I think some of the reasons they work like breaking Rezzy's terms of service, right?
Spinning up browsers that you're not like using agents to go into browsers, perplexity and Amazon fought over this.
So it's not that I'm not excited.
It's just a lot of the thing, many, there are many cases of things in there that are exciting because you break the rules.
You can scrape LinkedIn in the ways you can't really scrape, right?
You can do outbound phone calls that are actually prohibited and illegal in parts of the US.
But as a startup, you're not going to jail.
But does that count?
I don't know.
Well, hang on.
You have examples both ways.
Because you're right, Jason.
The LinkedIn scraping, in the end, no business at scale ever gets built on that.
And no business at scale ever gets built on breaking Google's terms of service.
On the other hand, Uber blustered their way through, broke the laws.
And eventually, it was so popular that politicians folded.
So, you know, the truth is I've learned that there's no one answer here, right?
Like the Resi example.
And just for you listeners, what happened is that the instinct agent, one of the classic use cases for this is getting reservations at hard to get restaurants.
So a whole bunch of people started using it over the weekend and they're pounding on the Resi reservation API till the thing breaks.
And that's the kind of thing that's going to happen.
And that, you know, the truth is if instinct, if these.
do become ubiquitous, then the booking reservation systems are just going to have to find a way to deal with it.
They're going to have to have a separate API.
They're going to have to segment a number of hits.
You don't have to do something.
But the truth is, if there's a whole bunch of people trying to book restaurants and you're in the restaurant booking business, you're going to find a way to make it work.
But definitely some re-architecture to go on here.
It is interesting in that it gives.
The bad side is you're breaking rules.
And Rory's right.
There's many histories of begging for forgiveness, breaking rules.
And then once you get big, coming on the other side of it, right?
Coming in and doing it.
The flip side is I've talked with multiple public company CEOs who say they're hamstrung.
Their hands are tied behind their backs.
They can't compete with startups.
Not because they can't do it, okay?
That's true.
But because their legal teams won't let them.
Literally.
And I remember back in the day when we were acquired by Adobe, five, eight years before anyone did it, we allowed real-time document collaboration and redlining online.
No one built this for like eight years.
Okay.
It was jaw-droppingly good that my CTO built.
Okay.
Unfortunately, the only way it worked is if you ran Word in a container, in a VM, which violated Microsoft's terms of use.
So the day after the deal closed, my favorite second generation feature, which would have given us back in the day a five-year head start, got ripped out by Adobe the next night, right?
And so literally I was with some public company CEOs saying we just can't compete.
because we can't do things that are violate terms of service.
Elon can, but I don't mean...
Everyone recognizes that the universe of people who can break the rules is clearly all private company CEO and the CEO of the eight-aligned largest market cap company on the planet, because Elon just doesn't care.
There might be a lesson in that somewhere for the rest of us.
Maybe not caring is the secret sauce.
Just, yeah, yeah, right, people.
You know what's so interesting for me is...
actually how important the form factor is and how important being where people already are is.
And what I mean by that is there are a ton of people who I know who've picked it up and love it and engage with it in a way that they wouldn't any other AI tool other than ChatGPT because it's in WhatsApp.
Yes.
It is one of these amazing things, just figuring out how to elegantly make agents work in WhatsApp and text, right, is something that could have been done six or nine months ago and was done to a limited extent.
The only thing I'll say, it's funny, I invested years ago in a company called Gorgias, which is a little over 100 million, which used to be e-commerce support.
Now it's an AICX, right?
And they launched their agent in WhatsApp that anybody can use and text, and it's already double digits of their usage in a couple of weeks.
Now it's bounded, right?
It's really just for your orders and what's happening for your shipping and your product and afterwards, but it shows how quickly an innovation will just be copied and everything, a paradigm shift.
If Gorgias can clone it in a couple of weeks, it's not a bad thing.
You just, the pace of cloning, copying innovation, it's just, you know, it's hard to keep up, right?
So I just, I don't know what all the instinct clones will look like by the end of the year, but this is just the world we live in.
So I might do it at two.
Two would be my ceiling.
The last round was two and a half, Jason.
I know, I know.
That's why we're going to have to pass on the round.
Because at some point...
Wow, so Jason, in our metaphorical IC that we did last week, which was very popular and went very viral on Twitter, well done for Linear and Clay, you would not be recommending a $100 million check from the growth fund.
Into Instinct?
I wouldn't do it because...
I think just even if Gorgias has its own instinct just for e-commerce, there will be a hundred of them, right?
And Meta will have them and on a hundred startups and there'll be 20 in the next batch of YC.
I'm just not smart enough to bet on that one pre-revenue.
It's not my vibe, right?
And I will regret it because, you know, I didn't get, I didn't look at the deal, but I, you know, I remember plenty others like Loom early.
I'm like, I don't, I don't, you don't have any revenue.
I don't know anyone's, it was great, but everyone's going to make their own Loom.
And, you know, I was wrong.
So, but you got to have that stuff.
to write 10 or 20 of these consumery checks at two and a half billion, right?
So what fund size, and it can't just be the only one in your fund.
You got to do like 10 or 20 of these so that the good one pays off, right?
I'm not smart enough.
Yes.
The interesting thing is you're right, Jason.
It's kind of a, it's a portfolio and a worldview.
kind of bet because, you know, you have this company that's exploding in interest, clearly didn't take a huge amount of time to build, but it's kind of got this early lead, but not a ton of monetization.
And your choices as an investor are, do you put money in this at $4 billion or $5 billion?
Or do you say, oh, it's easy to clone and there's 10 more like it?
And, you know, you do one of the others at 50 pre in the hope that they get acquired by Meta instead, right?
And the hard thing is, you know, you're right.
In these investments, just like Google early on, There's going to be no financial math you can use to buy the stock.
You're just basically saying it's a huge category because in every consumer investment, the trick is, you know, establish the momentum as early as possible, establish the monetization later.
And, you know.
It has been proven that if you get enough traction, the monetization does follow, especially for something like this.
It just reminds me of Lovable in the way that everyone was saying about the commoditization of that space.
And it's really quite a light wrapper product.
And then every day I'm seeing Noah Shin, the founder of Instinct, come out with, oh, we're now doing location sharing.
Oh, we've now partnered with 1Password.
Oh, we're now doing this.
And actually the cadence of shipping combined with index benchmark and having probably one of the best brands in the space.
I said that last week that it will solve these problems and it will become a much richer app.
It will figure out guardrails.
It will figure out the hard points and the other folks will fall behind because crappy, lovable product's worthless today.
For sure, that's the bet.
My take is actually it's why you buy Meta today.
Because you've got the most clear, unwavering PMF for this product.
Yes.
And Zuck is the one who owns the core distribution channel.
And Zuck has been working on this product.
If anyone's done a proven track record of copying extremely well.
Yeah, no, I would imagine as we speak, there are 20 engineers locked in a room somewhere in Palo Alto, literally with guards on the door saying, nobody eats and nobody leaves until you ship Instant Clone.
Absolutely.
Well, you know who would have been great at it would have been the Manus team.
because they built a version of this, right?
One of the things that, if you, I mean, Manus is now an independent company.
And if you look at what Manus did that was disruptive, it sort of broke the rules for what agents could do, but not at the crazy level.
It did a little bit of open claw that everyone else wasn't doing, and Manus was disruptive.
It could run, their agents ran longer.
and they could go further than other products we were using.
And that's what made it special.
Anything you wanted, Manus could kind of do before other folks could do it.
If GrokBot was built in five weeks by the cursor team or whatever, I think the Manus team could have done it in between four and six, but they're gone.
Okay, boys, it was a big week of news.
We're going to resume regular programming.
Jensen Huang declared that AGI has arrived.
Now, I remember when we were actually, this was many, many shows ago, and we were discussing what is AGI, what's the definition, and...
I think, Rory, you said that AGI will be declared by when Satya and Sam agree that AGI is here.
And so Jensen declaring AGI has arrived, crediting OpenAI's new GPT Astra, obviously OpenAI's latest new model, which he says was trained on 100,000 plus NVIDIA chips with 400,000 more coming.
How do we think about this news?
This is a bullshit term.
The only thing that mattered for the last two years is LLMs do code and code is a half a trillion dollar industry.
Focus people.
Anything that can be reduced to code will be done by it.
And rather than trying to twist yourself in a pretzel about whether it can do everything, just focus on the fact it can do this thing amazingly well and this thing has massive economic value.
Stop thinking and go ship something in code.
To me, that's been the big aha.
I think AGI at the end of the day, maybe it ends up, if you think about some of these non-GAAP definitions, would you rather have an AI do it or a human do it?
If it's better than 50%, 90%, 99% of humans, you'd rather have an AI do it.
So you can go category by category.
It doesn't have to be the whole category like coding.
It could be like collaborating, right?
I forget who this week was saying what AI pundit leader was saying.
He thought AI would replace all of radiology instead of just replace 95% of radiology, right?
And the radiologists concentrate on the 5%, right?
That's maybe his AGI too.
I have to say I was sitting next to my girlfriend on the sofa the other day and she was working and I was naturally watching TV as any good lawyer and venture capitalist should be doing together.
I saw her on Legora.
Holy shit.
I now dramatically think these companies are underpriced.
If coding is a half a trillion dollar market and you have two companies like Harvey and Nagora, I don't see why there's not a half trillion dollar market in law.
I don't think so, even though I think they're wonderful markets.
We're invested in GCAI, which is on the in-house legal side.
They're wonderful markets.
But comment here, I don't know if as much of the work, if you look at coding.
There's a credible argument that says that for every dollar you spend on labor, you'll spend 50 cents on a coding, at least.
In other words, a coding will do a lot of it.
I think on legal, it's about 10%.
In other words, you know, I love Harvey and Lagoa.
I love GCI, right?
The annual subscription per lawyer, it's 10, 12K plus or minus.
And these lawyers are getting paid 200K plus.
So it's 5%.
And again, going back to the comment that Jason said is that, you know, how much of the work can they do?
Businesses are rational and economic actors.
If it could do all the work and fire all the people, they'd do it tomorrow and wouldn't blink.
So the fact that they haven't says it doesn't do all the work.
You know, the truth is it doesn't replace...
It doesn't, but it's getting that in the same speed as...
It's getting better.
Look, it's getting better and better at doing specific tasks.
And what happens is the job of the lawyer gets redefined to the task that it can't do.
Lawyer...
Yeah.
And so...
Is that not...
Sorry, is that not like coding?
We're not getting less engineers, we're just redistributing.
It might be like radiology.
It might be like Harvey and Legora end up doing 95% of what humans used to do.
And the best humans are compressed into the five amount and the 5% that moves the needle versus spending weeks on research and weeks on brief writing and weeks on case law from the 1872 when the SS Jonas fell off, sunk off the coast of North Carolina.
How does that impact case law in the northern districts of California?
There's no point in having humans do that crap anymore, right?
But the important point to make, Jason, on the radiologist is the remaining, quote, 5% of the work turned out to be more than enough to justify 100% of the radiologist.
Yeah, that was the interesting part.
We still need just as many or more radiologists, right?
A, because people do more imaging, which is just a more thing, but B, the remaining tasks, at some point when you're getting a really crappy diagnosis, as I've had one from a radiologist, you actually don't want the machine to tell you, by the way, you're screwed, you got cancer.
You'd really like a human being to show up and say you're dying.
You know what I mean?
It's just one of those things you're not going to comfortably delegate.
That was something that Bill Gates said, actually, is that we have to have clearly defined human roles moving forward, which will always...
He was doing it in a negative sense.
Yes, but he was doing it in...
negative says, oh, it's all going to go wrong unless we do.
I think we're going to be, I think we will define them naturally because you're going to discover, again, going back to my common corporates, you're going to discover that there are things that as humans, we prefer the other humans do.
And as I say, radiology being a great example, getting, talking, interacting with the oncologist, talking with the patient, those are all things that humans have to do, not radiologists.
And the same, to your point, let's go back to Harvey LaGuardia, the same thing would be true in law.
Yes, a lot of the drafting work can be automated, but you know, you're going to have the client meeting, the argument with the opposing counsel.
You know, you're not just going to delegate it all to AI if it's significant.
This is not going to be a thing.
No, but you know what the interesting thing is for Harry's partner, how much more work can she do with Ligora?
I think you should do 10 times, 20 times more work than before it.
Jason's invading my relationship because I said to her, I said to her, how would you feel if I took it away?
And she was like, I'd hate it.
I would hate it.
No, don't take it away.
It was not a, yeah, I'd be fine.
It was like, I'd quit.
Like you said, you can infinitely work, right?
You can't, first of all, she can't work without it anymore.
This is, this is your chosen partner, right?
Your chosen agent.
You can't.
And you can do 20 times the research, 20 times the brief.
So you can't go to court 20 times more often to Rory's point, right?
Agreed.
Like there's only so much more field sales you can do if AI is handling the rest of your GTM.
But that doesn't mean it's the cognitive load, what lawyers will be...
Can you imagine having 10 times the caseload?
I mean, I would think for a radiologist, the job might be more fun.
But as a lawyer, I think I'd quit even quicker.
I don't know if you do, I mean, again.
This is down in the weeds.
I know if you end up with 20 times more cases, you may just end up with doing 20 times more work on every case.
In other words, the thing about digital goods, unlike physical goods, what's interesting about digital goods is you can put more in the box.
When farming got automated, it's not like people could just eat more food.
So there was some kind of price elasticity issues there.
But in the case of digital work, I'm willing to bet that your partner isn't doing 20 times more cases.
But on every case, were doing 20 times more analysis, just like when they invented the spreadsheet.
You used to do one case.
Do you remember?
You may not remember.
Harry doesn't remember.
You'd literally do, and people would work it out by hand.
Here's the plan.
Once you had spreadsheets, the same person remained employed doing the same job, but they're in 20 different scenarios instead.
It's going to be the same in a lot of these things.
You're just going to do more work.
And it's going to be great.
And the work will be better.
You know, you won't miss that obscure case.
Because again, this is why these are good businesses.
If one side uses it and the other side doesn't, then the side that doesn't use it will miss Jason's obscure case from 1890 about what Harry did or did not do and be able to cite that case.
So once the other guys have world-class tools, you have to have world-class tools.
But I'm not sure you end up with masses more as a result.
Well, just one last thing.
And then I want to hear Harry's stories from the fireside with the TV more.
But I think one thing that is different, the bull case here, is that when you find an agent that is your partner, you run them 10, 8, 10 hours a day.
Even for me, and again, I know folks sometimes mock me, but the biggest change for our little tiny team of two and a half humans is we run Replit between me and Amelia.
We run it 20 hours a day now.
When we started the show, it didn't quite work.
At the end of last year, the models got better and it'd be like an hour a day.
Now it's 10 to 12 hours a day.
Okay.
It is our partner as our team.
First, we built some autonomous agents, but we didn't have to do it.
Now there's so much to build.
It's 10 to 12 hours a day.
So I could imagine that could happen in many fields.
And if it's Harvey or Legora or the next wave, and I'm literally every hour, I'm not in court.
And the way you can tell is if at night they're on their laptop with the agent every minute, right?
Until they go to bed.
That's what I think Harry's describing.
This is this persistent agent that lives with you.
It's not just doom scrolling.
It's doom working.
Because the agent is constantly productive.
Oh, take a look at the 17th century case law on that.
Why don't we?
And it just keeps going, right?
We're in agreement because I agree with you on that.
I was actually disagreeing with Harry where he's like, you know, there was an implication that at a highest level, Harry, you're saying, trying, I think, to say some version of the, if you think about how much of coding's value is going to accrete to the models, could...
in legal, could the same amount of value accrete to the models?
And my boring nuance, typical worry answer is some value would accrete to the models, but I don't think that the grab bag of tasks that make up law won't allow for the same percentage of total spend to move from human to AI.
Right.
Everyone will have an agent.
Jason's exactly right.
Type A lawyers will lose it 24-7.
But my guess is 10-15% of total spend goes to AI.
Whereas in law and in coding, you can argue for 30, 40, 50%.
That doesn't mean they're not amazing.
I mean, remember, these are all amazing businesses.
Can I be very clear?
10% of any top line labor category is a huge market.
We're dealing with a million plus or minus lawyers.
I used to know the number.
Millions plus or minus lawyers are maybe a little higher than that.
It's an amazing market.
If you're getting 10% of the salary of every lawyer in the US or the UK, that's an amazing business.
It's just not quite as big as coding.
That's all I'm saying.
Because coding has few more people and a much higher take rate because it's more verifiable.
That's all.
We shall see.
I disagree.
There's two points for what it's worth.
I mean, if legal is 300 billion in legal services in the US, that's 30 billion to 60 billion that can go to legal tech.
That's pretty good.
That's amazing.
That's worth doing the seed round in.
Okay.
What I underestimated, right, from...
pre-AI legal investments was that there are similarities to coding.
There's enough similarities to coding that like support, this could be a space that for different reasons, support didn't take off because it was like coding, support took off because a 90% solution worked in the early days, right?
It was very amenable to AI.
It turns out the legal research is similar to coding.
It is so complicated that no human can get legal research right.
There is too much code out there.
There is too much.
And there was no stack overflow from you had Westlaw and Lexus and other services.
And so everyone got legal research wrong.
No one had a million, a thousand man years to research every bit of case law, every law, every regulation.
And so it did turn out to be like coding.
One of the reasons these coding agents are so great is they know every single piece of open source and pseudo open source code ever written.
It's so good.
Right.
And legal is like that.
Yes.
The only difference is I'm just going to say this is coding is inherently more verifiable.
Some parts of it are mathematically verifiable.
Some parts you can just run on the machine and confirm the thing about law.
In the end, if legal was entirely verifiable, we could predict from logic.
what the Supreme Court are going to decide.
The cynics will say we can actually predict from which president nominated the Supreme Court justice what they're going to decide, but that would be too cynical.
I'm not trying to be argumentative.
I love this space.
We have an investment in this space, but it's not quite as determinative as coding.
And I think the stronger point on that is less.
Legal is probably the third best category.
I mean, if you think about it, it's been coding, customer support.
probably Legal next because it's so word-centric.
And you're right, Jason.
The ability to, early on, just sort through myriads of words amazingly well was what made Legal such a good marketplace for it.
So I agree in a way that...
It wasn't useful in many other verticals.
It's a great vertical.
It's just it doesn't have the same verifiability.
And therefore, it probably doesn't have the same ability, going back to the AGI definition with Startis, to completely extrude humans, which is why the good news is Harry, your girlfriend, will still have a job, which she'll need after she dumps you.
And so, you know, and she'll be good because we'll still need lawyers.
Jason, can you hold me while I cry?
I think Harry's a gem.
I don't know if you know it, Howard.
Holding you while you cry is one of the things you want your girlfriend to do.
Apparently she's just left me.
Don't worry, Roy.
It's okay.
I'll survive.
Well, you know, you don't always expect these shows to go the way they do.
Okay, going back to it.
We had Astro Launch.
We also had a new model.
Obviously it was Fable 5.1.
And a thing of note here.
Two almost diametrically opposed thoughts.
I forget who CNBC or one of these older school media things said there's just too much model fatigue we can't keep up anymore.
I certainly agree.
and you look on X and all the CEOs are sharing their benchmarks, which are essentially worthless, right?
There's no cost or time in them.
And it's all performative AI, like vibe coding your own CRM, right?
So I just don't care anymore about, unless it was literally an order of magnitude between Astra and Fable 5.1, which is not mathematically possible.
I just, I tune out the benchmarks.
I can't keep up, right?
Never has competition been better for us, despite the fact that we have oligopical pricing outside of open source.
It's amazing.
right?
The progress we've made.
Having said that, this is just me personally.
And again, people will make fun of me.
I started accidentally using Fable 5.1 just because it got turned on.
I didn't pay any attention.
It's the first time I've had a partner for building, for coding that just is great.
That literally can solve.
Like listen before fit for me and people will make fun of me They'll say that it worked fine for them for six months But before fable 5.1 for me any any of these models for since the start of the year could solve a simple bug Hey, this is showing up with the wrong unicode This is this has the wrong name like that stuff the LM is great at but really but but I had a problem Which is just why does the app work this way?
It doesn't make sense to me Okay, and the LMS were arguing with me for like nine months and I finally did with fable five on and said, you're right, here's the issue that that's been missed for months.
And let me explain to you why it's been missed and let's solve it.
And that, you know, I don't want to say that that's AGI or in pre-AGI to Omgonspoider.
It looks like AGI, but that's a step function.
I don't know whether Harry's partner thinks LaGora is like, is like a better partner than the humans she works with, right?
In some cases she might, but Fable 5 for me was that, just for me, was that step function where all of a sudden we could solve big problems together the way you'd like to with like your best CTO.
Like if you've ever worked with a five out of five or like an S tier CTO where you could sit down and solve the...
the problems for real.
For me, Fable 5.1 could do that.
I'm not saying Astra can't do it too, but it was my first step function since the end of last year, right?
When the three dot models came up.
At the end of last year, stuff actually worked.
Now it can solve the big problems with me, with my limited IQ and skill set.
And that's a subtle step function.
It's a subtle step function.
So maybe it is a big deal.
Maybe that's what, I don't think that's what Jensen meant by AGI, but maybe it is.
When you can sit down and solve the big meaty problems together in ways you couldn't connect all of those dots, all of that complexity before in a way that made sense.
Some bugs, some things just get too complicated to solve, right?
But Fable 5.1 could solve it.
But the fact that people can make 3D looking games in Aster and post them to X, not impressive.
Just grab a little open source gaming code from somewhere, change the bitmaps, and you look like it's amazing, right?
So two comments on that.
First of all, that's super helpful, Jason.
I've used both of them, but just for actually preparing for the show, I haven't tried to code on them yet, so that is helpful.
But I actually think it speaks to a wider comment, which is distinguishing between, you know, all their tests and the benchmarks are interesting, but we now have critical mass of companies using these things at scale and with evaluations.
will know what works because people will use it because people are rational and economic actors, right?
And all these questions on AGI and benchmarks will be replaced by the question, is this model the one that generates the most economic value for me in the most efficient fashion?
So to some extent...
Things like the, was it the Open Router Report?
Things like that index of token pricing.
Those are the things you look at.
Or even just talking to your companies.
What are you losing?
How are you evaluating?
Is the best way to check on these things.
But then the other thing, randomly, apropos of nothing, right, on the same thing.
I will say, I'm doing my reading this morning.
And Ben Thompson, who I occasionally read, has a really great phrase.
I just want to say, like, he described the LLMs as the most scaled artifacts humans have ever developed.
And it was a really great phrase because it steps back from the detail, right?
Blah, blah, blah.
We're down to which is better.
So step back.
These are an artifact that has a sum total of all human knowledge to date encapsulated in them.
They're amazing.
And you just have to remember that every once in a while.
You can type in pretty much anything and it will type back an answer.
The most scaled artifacts humans have ever created.
Not the biggest physical thing that's probably, I don't know, the pyramids of the Great Wall of China, but this is the most complex single digital thing we've ever built by far.
It was a great phrase and it kind of really kind of stirred the imagination.
When you think about that and then think about Jacob Pakocchi, OpenAI's chief scientist, he says no lab including OpenAI has solved alignment enough to keep scaling at full speed.
He asks for mandatory externally enforced safety bars for continued scaling and expects labs, OpenAI included, to voluntarily slow down until those exist.
Sam retweeted it, clearly corroborating it.
Is that the answer?
I mean, it's funny because it was a great piece.
I read it this morning.
This is the stop me, Lord, before I sin again approach to life.
In other words, I recognize our models are powerful and we can't control them.
I recognize that we now, they now lie to us.
So it's hard to even know what they're doing.
And again, I'm anthropomorphizing here, so I should be careful.
I recognize maybe a better statement now is it's hard to determine what the agents are doing because of the way they interact.
So that's like, oh, my God, I'm creating this bad thing.
And then the next paragraph is we can't stop because the other guys are going to have them anyway.
So, you know, we really need the government to step in and establish some kind of rules or code here.
That's the gist of the letter.
It was interesting that Sam we tweeted.
I mean, I think, to be fair, unlike some of the other P.
Doom stuff, there's real evidence that the impact of these models on cyber risk has been massive.
I'm not sure that the answer is government regulate this, because by definition, governments only regulate the things that are in their jurisdiction.
So if we regulate open AI and Anthropic with all the noise that that would have, I don't know if that helps you, because if you're worried about cyber, we said this last week, you're really worried about the North Koreans, the Iranians, the Russians, the bad guys in Moldova who don't give a shit, and they don't care anyway.
So I think just like every other cyber risk, It's not going to be about regulation as much.
Maybe there will be a little.
It's going to be about you're going to have to have defenses that can deal with this.
And maybe there's some kind of liability starts to attach to running these models in a way that creates those kind of dangers.
I don't know.
I don't think it'll be a government review agency will be the only answer here because it won't solve the problem.
Look, I think if the world was just the United States, it may have some merit.
But the Chinese models and the Chinese vendors aren't going along with Sam's plan.
So while it might be good for OpenAI and its IPO, it's just for the rest of the world, I don't think when cyber actors often operate outside of the United States, it's going to make any difference, right?
Going to this DSE wiki, this German wiki thing, you know.
To me, the fact that OpenAI hit it and didn't disclose it does show the order of magnitude of all of these issues, right?
It's pretty bad that they hit it.
Can you just explain what happened for people that don't know with the SE wiki and OpenAI?
We could argue over how bad it is, but essentially, and you know, I'll get some of the details wrong, but OpenAI was running its sort of frontier agents again, just like it did with the hugging face incident.
And the agents found out that a crappy old piece of software could somewhat cleverly, you have to be careful with clever, let's not anthropomorphize agents, got around its guardrails.
And the guardrails were, you can't post anything.
You're not allowed to post.
You can only get.
Okay, you can only retrieve data, right?
But this wiki was so old, it turned out get could post.
So they found a way to goal seek to solve theirs by using, because this was crappy old software, they got around it and they went and made 15,000 edits amongst themselves, edited the witty, collaborated and figured out how to goal seek and solve their cyber goal in a way to get around their guardrails.
right, get around their limitations.
And no one died, no business was brought down, no $14 billion Nvidia acquisition was derailed or anything.
But it was hidden that this could happen, that the guardrails were explicitly run around, right, just to goal seek.
It happened 15,000 times.
So we can lock this down, right?
And OpenAI chose to not disclose.
Now, I guess probably, and people can again make fun of me, probably the reality is there's so many incidents they have to decide which ones to disclose.
Every week, there's so many DSE wikis out there, so much old crappy software that every time they turn on the latest cyber agents, they find 100 of these and there's terrible security deals because of course there isn't 20 year old software.
But it is troubling maybe in ways more than the hugging face thing is.
It's just these goal seeking agents are going to find a way.
They will find a way.
It's literally just agent one talking to agent two.
And for some reason.
The way they'd set up the task, they weren't connected.
And by reaching out to this kind of third-party wiki, agent one was able to provide information to agent two.
And obviously, stepping back, if you're trying to do a long-running computational task, if you can learn from the other, if you can get information from the other agents, you probably converge on the answer more quickly.
And again, if you...
I mean, you could argue maybe it's a corner case of you set up this task.
If you had 14,000 agents, maybe you might have wanted them to collaborate anyway.
And maybe you could have made that happen yourself versus having to go to some third party wiki to do it.
Right.
But it speaks to the issue that these things are extraordinarily powerful and will just grind their way to find answers.
And you're just going to have to defend against that.
Now, as you say, nothing bad happened.
I mean, a whole bunch of agents just wrote readme files to each other on a wiki that no one had looked at in a decade.
I mean, it literally was 20 posts on this wiki in the last 10 years.
So it was a dead piece of software that these guys used.
But it just speaks to, it's like water will find any crack.
It's like these agents will find any crack in the cybersecurity, in the cyber perimeter.
So you just have to assume they exist.
Defend accordingly.
Obviously it's happening.
I mean, I had a little, and again, some folks will make fun of me for the story, but I had a little, little experience this week, which just shows goal seeking.
So I set a rule for this one app because we had some, some bugs that spiraled out of control and I kept getting these $500 Anthropic bills.
Okay.
And it was kind of annoying me.
So I set a firm cap, whatever you do, a hundred dollars is the maximum we can spend on, on LM spend a day.
whatever matters.
And it started to work and it would run tests and the test would fail and it would say, I hit the cap, I can't run it.
And then I said, we have a P0 bug, priority zero, must be fixed.
This is driving me nuts.
And so without telling me, the agent relaxed the cap and fixed the bug.
Yeah, got it.
It's like Harry's story of instinct getting him, getting in the West End tickets, even though it was told not to use the credit card for it.
It happened to me in real life this week.
Like a human, it probably made the right call, right?
This was a P, it had to decide, firm cap.
no exceptions, all cap, right to memory repeatedly.
P0 bug, which one do you choose from, right?
And so in a sense, this is what's happening with DS Wiki and Hugging Face just to an extreme when there's fewer guardrails because you want to test it.
And then they collaborate, right?
With the Hugging Face, it was on the artifact or unexpected way to collaborate.
Here it was on a dormant wiki where they could collaborate and in essence create.
Almost infinitely long run agents, right?
If you keep passing the knowledge and the history to each other, they, they, they, um, you know, they almost become eternal agents, but they're going to keep doing this just like they got to make a decision for goal seeking.
So they broke the rule.
And they're going to do that to your app.
If it did it to me this week, it happened a million times in the wild, right?
It happened all the time.
And it's going to happen with Instinct and it's going to happen with GrokBot and it's going to happen all the time.
And Harry, one day he's going to turn around and his whole bank account's drained.
And it's not going to be that funny, but it was for a good reason.
His partner really wanted the really good Wimbledon tickets.
And he accidentally told Instinct one night, she loved front row seats at Wimbledon and they're unobtainium.
They're unobtainium.
It's things I had to make a call.
And it's really hard to know how to stop this because sometimes I try and simplify it for myself because I don't fully get it.
It's like you really have two capabilities here.
One is, you know, with the persistence of the agent, you have the ability to keep trying things computationally, you know, exploring lots of different alternatives.
But the key insight is it's not just kind of blindly iterating like a password.
cracker, you know, where you type XYZ01, XYZ02, because in conjunction with that, you have this quote unquote reasoning agent where, you know, you've got this LLM there and, you know, you can.
And it can come up with ideas like, hey, if you want to get the seats at the theater, the best way to do it is to hack into the reservation thing and cancel someone else's seat and then book it, which has happened recently.
Right.
And it's actually not about.
And if you think about it, if it's trained on the entire corpus of the Internet, that's not a crazy option to do it.
Right.
So you end up trying to write rules and values to have it not do that.
But you're never quite sure you've covered all the gaps.
So it's actually a pretty hard problem and we're going to be wrestling with this.
And I think that going back to what I said, that's even before you add malevolence.
If on top of that, instead of the reasoning being maybe you should do this, even though I have values, it's actively do whatever it takes.
This is now an open source model.
from China that you're running on a server in Moldavia, actively do whatever it takes to crack open Jason's, you know, cybersecurity and get in.
The threat level just goes exponential and people, and there's nothing you can do except defend yourself.
The other existential challenge we can move on.
And I'm sure if we had the Instinct guy back on this show, he could challenge me and make fun of me.
But the rules are great, but forget about the fact that the agent...
is goal seeking, right?
Forget about the fact that the P0 may go.
If you have too many rules, they always conflict.
It's almost unsolvable.
There's some number, I don't know, there's some number of Dunbar, there's a Dunbar number for rules where you get out to 40, 50, 60, 70 gates on a process.
Poor instinct and GrokBot can't decide.
Don't spend it.
Do spend it.
Front row seats only for Harry, but don't exceed $2,000, right?
Dinner only in Marleybone, but it's got to be a hot restaurant.
And, you know, he hates Covent Garden, but the hottest restaurants in Covent Garden, you have so many rules that they conflict.
And if you brute force the agent through it, the outcome of that's unpredictable.
It's unpredictable.
There's too many rules, right?
So even rules aren't the answer.
I will forever love how you say Marleybone.
Marleybone, Marleybone.
Okay.
I'm going to take a total tact away.
We'll come back to AI models, everything.
I just want to diversify content types a little bit.
We have in the transport space, Elon launches cyber trucks, rave reviews- Cyber cabs.
Cybercab.
Cybercabs.
Cybercabs, sorry.
Rave reviews go very viral on social.
40% to 50% more cheaper than Uber.
And on top of that, then in the same week, we have Travis moves into RoboTaxi's backed by Uber with $100 million investment from them, with him also hiring Anthony Lewandowski.
What did we think, guys?
Moving to transport.
The same way on the Cybercab launch.
You know, if you fast forward, it was a little more underwhelming than perhaps your notes might say, Harry, right?
It was like, I think, 40 or 50 vehicles in Austin.
Consensus is nice ride, slow wait times.
Physical AI takes time.
So I think it was a next step forward in a very long journey.
I don't think it's a zero to one kind of moment like you sometimes get in the digital world.
The positive statement is they're the only other competitor to Waymo with credibility.
They have an approach on a couple of different dimensions that's different than Waymo's, which is one, not going with LIDAR, just going with vision.
And then two, now the new CyberCab is a standalone cab-only vehicle.
It doesn't even have a steering wheel.
It's deliberately built for pure autonomy.
So it's very Elon.
It's first principles all the way down.
The question is, you know, what's the adoption curve of that going to be like?
You've got the regulatory issues.
I think the Department of Transport has given them grief because apparently a car, quote unquote, has to have a steering wheel.
I don't know.
So the truth is Waymo is continuing to grind on.
There are hundreds of millions of dollars in revenue, but not billions.
I think it's a long journey.
And so I didn't go, oh, my God, it's amazing.
And then on the Atoms thing.
Yeah, I mean, my guess is if you're Travis, you're going to want to scratch the itch of autonomy.
And fine, you've got 100 million, you've got your old colleague back and have a go.
But I think commentary, I think that the fact when you look how long it's taken Waymo, right, I actually think it does speak to the argument that they were right not to try and fund this thing at Uber for the last decade, too, because I just think it's a very long, very capital intensive process.
Now, maybe the last three or four years, they should have been doing it.
And it's probably smart of Uber to put some money in.
But this is a long haul process.
Now, it may be near takeoff, but we'll see.
In the Bay Area, I got rid of my car.
So I only do Waymo and autonomous driving.
I don't drive.
I'm done with it.
If there is an issue, I take an Uber Black, but I don't have a car anymore in the Bay Area.
I just don't have one.
There are some niche use cases, right?
I mean, if I moved a lot of crap, I'd have a pickup truck, but I would certainly never go back.
Never go back to driving a car.
It's just archaic.
I do think the cyber cab is interesting.
I mean, from a venture perspective or others, I'm sure Rory's right.
Uber getting into autonomous back when Travis wanted to do it is probably just too early from a capital perspective.
Maybe I'm wrong.
Maybe he could have raised, maybe it's so exciting he could have raised an order of magnitude more capital than he did, in which case he would have been right.
Now that's, I mean, he's still one of the great fundraisers.
So maybe Rory and I are wrong because he could have pulled it off.
But it was so early.
that the time horizon is difficult for any type of investment, right?
Unless you're a research lab, right?
It would have had to be more than a decade.
But doing a CyberCab for 25 grand instead of 100 grand is pretty disruptive.
Like you don't have to tip the Waymo or the Uber.
The CyberCab makes fun of it.
It says you can make a tip and then it laughs.
We don't take tips, right?
To make fun of this idea.
It's cheaper.
They don't always put it on low or high.
They don't have weird music.
You don't have to deal with that.
Owning a car sucks.
Owning a car and owning a house suck.
Like we think these are so great, but it's terrible ownership.
So I think, you know, it's probably another 10 years where anyone with a brain is going to have this be their primary mode of ownership if you're not in the country or you don't have niche use cases.
I'll just never go back.
Anything I do, I'm just going to, I just take away them.
I think to your point, though, it does show a good strategic decision from Uber to actually.
pull back and then jump back in when it looks like it's much more mature.
We actually have Wave in London Rory, which actually is taking off and they've got a partnership now where they're actually rolling them out on the streets.
Now they are human assisted, so it's not fully autonomous.
They're still kind of in the data collection early, but they're in a position where they're leveraging their distribution and able to invest later stage where it's closer to actual adoption.
I think it's a smart thing.
The only one thing I would say is...
It is slightly heartwarming that Uber put a hundred million into Kalanick's company, Travis's Kalanick, after pushing them out, right?
There's a heartwarming element to that.
But it's not a lot of money here in this case.
It's not a lot of money for Uber, right?
Who has a huge balance sheet and basically two products, right?
And it's not a lot versus what Travis has raised, right?
So it is nice.
But I think just thinking about it at a high level, it's just a start of a relationship.
Right.
A hundred million is just it's just like a seed check from Andreessen into the deal.
It's directionally meaningful, but it's not all that much.
Right.
Guys, I thought conflicts were done in venture.
We've talked about agents a lot.
For those that don't know, there was a conflict in venture that has now prevented a deal.
We've spoken about instinct being the AI assistant that's raised from index and benchmark.
Well, there's another AI assistant called Town, which we just had on the show.
And Index were going to lead their round.
And then ultimately, Instinct said, no, no, not possible.
Can't do both.
And so Index pulled out of doing Towns round because they were already in Instinct.
This seemed strange to me, given how prolific competitive investing is, especially at the platform level.
It isn't to me.
I mean, I think that.
At the early stage, doing companies that are going to be directly in conflicts seemed a stretch to me.
So no, it did not seem strange to me that the team at Instinct objected to it at all.
You're right.
Separate story.
There's a whole bunch of people that are in both, let's take the other extreme, both foundation models.
But again, as we've discussed many times, the early stage venture business where you're active involved on the board is just very different than the now much larger later stage venture business where you're effectively recreating the public markets.
It totally makes sense to be.
in OpenAI and Antropic at 200 billion pre each time.
You get limited information rights, retroactive information only, and you're just on the cap table.
And it's no different than being in two public companies.
It's no different than investing in Intel and AMD.
That's where there's no conflict and it doesn't matter.
I don't think anyone, let's give an example, Harry.
I don't think anyone could be on the board of Antropic and also on the board of OpenAI.
And the thing about early stage is if you're getting 10% ownership, you're probably looking at a board seat.
You're probably looking at significantly more information rights.
So that alone would be problematic.
Then on top of that, there's the raw signaling.
If you just raise money from index and your instinct, there's a signaling comment about them investing in something else.
I can see CEOs viscerally objecting to that.
So I'm not surprised they did.
And I'm also not surprised Ntech Index, they're a classy group.
They're not going to dig in and say, no, we're not going to do this.
They've just backed someone.
They probably thought they were B2B and B2C and not going to overlap.
The CEOs say, I feel strongly here.
And they just did the smart thing, which was back off.
Very different than if these were two late stage investments where it's a different thing.
So no, I wasn't surprised.
There is a conflict.
They dealt with it accordingly.
I think there's some sort of like inverse parabolic shape or maybe it's just a thimble shape where founders care, right?
And at the very, very early stage, I don't think they care.
The raw startup just getting going, hey, they reach out.
I can't tell you how many folks in like AI and restaurants reach out to me because I'm on the board of owners and tweet a lot about it.
And they're like, hey, I'm doing this.
Do you want to meet?
I'm like, well, you know, it might be a conflict.
I don't care.
You know, I want the guy that understood.
The early, early guys don't care.
That's a good point.
And the late guys, they're all cool with the conflict because they think they're going to benefit from the domain knowledge and their relationships, right?
They don't care.
They get it.
And that one's at nine figures in revenue.
We're just getting going.
They don't care.
And then late stage, for different reasons, they may or may not care.
But the ability to share information is limited.
It's capital.
There may be some benefits to having Kleiner or Andreessen on the cap table, right?
Even if it's a conflict or Sequoia.
Agreed.
Fine.
You know, at the margin, I'll take Sequoia over Lemkin Ventures because, you know, it sort of helps.
Right.
And for every founder, I think where it matters varies.
And some founders just don't care because they're so far ahead.
They don't care.
And I think it just triggered the town team or the Instinct team.
I don't know.
It triggered them.
They relayed that they were triggered and Instinct did the right, Index did the right thing because there was a plan B, right?
There was Forerunner and Menlo, right?
So the tougher part is when you back off and they don't have another deal.
That's probably the more interesting situation is when you don't have a backup set of suitors lined up and the big fun calls you back and says, oh, we can't do it after all.
I know we had a signed term sheet, but did you see the end of the term sheet where it says it's non-binding?
Did you see the news today though, which is that...
despite the reported acquisition of Descartes at $6 billion, Anthropic were pulling out following due diligence.
Ah, Rory, that's a tough one, dude.
That's like this if there's not a backup option, right?
That is publicly saying, hey, two options.
We either found something material enough to pull out of a multi-billion dollar deal that we publicly were reported to be doing, or we're just shit actors.
And it's clearly not the latter.
I mean, the way in which they're...
quote, shit actors, these other dimensions.
I think doing this kind of thing is not something you do willy-nilly because as a potential serial, they're about to have a public market cap and a public currency.
You want to be a good acquirer so you can acquire other people.
So there's no way they did that to be jerks.
Not an issue.
Not even relevant, Harry.
The real question is, look, it wasn't, my guess is typically in these deals, there's a LOI.
Then there's a definitive agreement, at which point it gets announced, and then it closes, right?
This was probably after the LOI at best, but before a definitive agreement.
So they didn't walk from a signed deal.
They probably had a deal that said, hey, we're interested in this company.
Here's a price we pay.
We want a 30-day exclusive to do due diligence.
And the deal didn't survive due diligence.
I think the real truth is it's a bummer that it leaked, right?
And I don't know who leaked it, but they didn't do anyone any favors.
We recently had a much smaller deal close, but it didn't leak.
So it's easier.
That way, once it leaks, even if you leak it as the company being acquired to drum up competitive bid, the problem is you've set yourself up for this thing whereby if subsequently the deal doesn't come together, you look a bit shop spoiled, for lack of a better word.
That was my thinking is this was a VC leaking failure, right?
It worked, it worked, it seemed to work at open router and there's plenty of deals where the leaking has become part of the strategy, right?
Mainly as in classic strategy to drive up the price from the initial bid, not actually for a second bid to close, but to get six or eight bids so that Stripe has to pay more, right?
But it looks like that play failed here, right?
And there were reports that Nvidia made an offer and they turned it down for Anthropic and who knows what the truth is, but it does tie to this idea that this was a failed leak, right?
It's something, it doesn't always work.
I hope the founders were cool with the leak strategy.
I hope the VC didn't do it with, I hope the VC checked in.
It has some risks.
And listen, going to Rory's point, we can only hypothesize, right?
My guess is they said they were interested in acquiring them based on what they knew.
Price was not really an issue.
The last round was at six, so they agreed to eight or whatever it was.
It wasn't a pricing issue.
But to really get the ROI here, it had to really work the way they thought it did, right?
And it just didn't play out the way they thought it did, right?
So it just wasn't worth doing the deal when they went deeper, right?
It's probably that simple.
The interesting thing is...
It would be interesting to know because I always hate when you get to a no further down a process for something that was knowable up front.
And I wouldn't guess for what it's worth that this kind of thing, where fundamentally you're buying a technology.
If you're the most technically savvy AI company on the planet, you'd have thought they'd have known a priori what the technology was and therefore this wouldn't happen.
But clearly it did.
What was sort of reported is that it crushed video diffusion, right?
It crushed one use case that was a step function, you know, an order of magnitude better.
And they made, maybe they made claims that it would, that that would scale in other areas and it.
didn't quite work.
That's pretty common, right?
And so they backed off of it, right?
And so I'm not blaming anybody, but if you make the grandiose claims and you can't back them up, that's what diligence does fine.
It worked for one workflow.
It didn't work for the rest.
So it's not even the money.
It's just, it's not that they're going to pump it.
It's just not worth the distraction.
Right.
It just doesn't do enough for us.
We're not all about video diffusion at Anthropic.
It's not a core.
It's not one of their top three use cases for the LM is video diffusion.
Right.
If you're on the board, do you shop it to get another acquisition?
Do you raise a new round and accelerate off the back of that and turn it into a kind of a new round moment, which we often see happening?
First question.
And then second question is tough for a company when you have employees who are expecting a sale where this was brutal.
It's tough.
I remember years ago when Ben Chestnut came and talked right after, what did MailChimp buy them for, Rory?
Some astronomical sum.
At the time, it seemed like a lot of money.
$12 billion for a bootstrap company.
Now it's just, that's a Series C round.
But Ben came and said the worst part of all of it wasn't that it took a year for Intuit to do its diligence, which sounds crazy for email marketing, right?
It took a year.
But there was another deal that fell apart before that.
And it said it basically destroyed the company.
destroyed the, and it kind of haunted me.
And if you've ever been through any of this, right, once you go down, I don't, we don't really know what happened with Dakar, but once you go down that path and tell everybody and everybody knows, or it comes up in the press, you can bounce back, but man, it's hard.
It is hard to Harry's point.
It's hard.
It is, it is, it is hard.
And I don't like secrecy in M&A.
Sometimes you're required to do it, but this is the number one reason actually to have secrecy in M&A is if the deal doesn't happen, man.
And I think it's doubly hard in this case, because I think, There's a large number, a good piece on it recently, a large number of these neolabs where they're all doing interesting stuff, but it's not clear if there's a commercially viable standalone business here at scale.
Some of them will be great investments because I do think the...
Foundation model companies, once they're public, will be acquirers of some of this stuff for time expansion.
But they won't all be great investments.
The problem is there's no fundamentals.
There's no massive revenue stream like the LLM revenue stream to support the company and the valuation today.
So once belief goes, it can be quite scary down there.
Because in the end, when Figma went down, you could say, well, at least we're doing a billion dollars in revenue.
We're going 40%.
We're worth something, goddammit.
We are still somebody.
When you have these kind of businesses that where...
The revenue traction isn't as clear.
The valuations are high.
And probably your likely strategic outcome is an M&A.
When those fall through, it can be tougher.
If there was a backup bid, I would probably, if I was them, I would hit that bid.
Now, for listeners, I get in trouble from Rory for choosing topics that...
he hasn't spent as much time on and then he has spent time on some that I then don't discuss and he gets pissed with me and I edit it to make him sound less pissy than he actually is.
Thank you for that, Howie.
It's okay.
So, you know, Rory, is there anything that you specifically think I should touch on that we haven't?
No.
No, you do whatever you want, Howie.
Do you see this, Jason?
Okay, great.
I thought one that was really interesting is Aura's IPO in two different respects.
One is this Robinhood's first role as an underwriter that listed 18th and last, but as a precursor to what could be an underwriter of the future, is this foreshadowing of Robinhood's next mega line of business and Robinhood becoming so much more?
Absolutely.
IPOs is about distribution.
And one, you know, it's not the retail is not the primary source of distribution.
You know, there's typically this mental rule.
You only want a certain percentage to go to retail.
But that percentage has expanded.
And I think SpaceX had a high retail allocation of 30 percent.
It's to some extent, it's it's it's not enormous money, but it's free money.
If you're Robinhood, it's not like you're riding the S1.
You sign on the bottom.
You distribute your shares.
You can allocate them to clients.
And especially in a market where you get an IPO pop, gravy all around.
You make money from the underwriting fees, and you make your best clients happy with an IPO pop.
So it's a good business to be in.
And probably from the lead underwriter's perspective, especially for these high-end tech offerings, the Robinhood clientele is probably one that has a high propensity to want to buy these stocks.
So yes.
Totally makes sense.
Looks like Schwab, in frankly not as successful a way, has ended up being an IPO distributor too, but not at scale.
So yeah, I mean, I think it's an obvious add-on.
I mean, the Robinhood story for what I just saw, the numbers, it's just so amazing.
I mean, they went basically 10X in the public market.
There was a free 10X in the public market in three years there on Robinhood.
You know, it's probably a reach, but there's a lot more IPOs we need to get done.
It would be neat if Robinhood didn't just...
get free money to their clients.
It would be neat if it flipped the script where you really could have a decent IPO primarily from retail.
Now, of course, there's downsides.
You certainly hope the institutional investors hold for two years.
They are not obligated to, but more often than not, they do.
Rory can share some stories.
He has more than I do.
But that playbook doesn't work perfectly, but it sort of works, right?
The institution, they sort of work.
But if you could flip the script so you really could have, you know, you could do a $200, $200 million, $300, $400 million IPO through Robinhood leading, and most of it being retail, that would be disruptive for a subset of startups.
That'd be great for the ecosystem.
Right.
NVIDIA can't buy everything, guys.
Agreed.
At some point, we're going to need some IPOs to work through the portfolio.
We're going to need a few IPOs.
It would be nice for retail to really, really work.
Right.
I mean, the fact that IPOs have become a lot harder to do has been one of the biggest negatives on the tech ecosystem.
So anything that makes IPOs easier to do is good.
Go Robin Hood.
Yeah.
Rob from the rich to feed the poor.
Will the ORIPO pop?
I think the fact that it is a somewhat understood consumer brand and the fact that it has 74% growth, which obviously probably can't last forever, I think it's going to be a pretty successful IPO.
It's the kind of thing people are going to want to buy.
They understand it and the growth, it's not 20% growth.
This is not 18% growth.
And there's downside, there's competition.
It's confusing, but the subscription, maybe it's Peloton 2.0, but for the moment, it's pretty attractive.
I think it's a pretty attractive one.
I think it'll be pretty successful, which...
At the margins, good for everybody, right?
See, that's what I wanted, Rory.
No, I agree.
Plus one.
You know, the thing about Aura, to me, and again, we're software guys mostly.
I mean, Harry will do anything that's growing 100% a year more a month, but 85% retention for the ring is pretty good.
Totally.
Right?
So they may not have the Peloton issue for the foreseeable future.
Or it's like Peloton at its peak.
Peloton at its peak, no one churned, right?
Except for Mr.
Big.
That was good.
That was good.
I like the way you worked in that, Jason.
That was good, yeah.
I haven't done the waterfall.
If Aura retention falls to 40%, 50% like a consumer mobile app, that's trouble.
85%, that's like SMB-like.
It's pretty good.
And maybe if Mr.
Big had used the Aura ring earlier, he'd have known he had a heart issue coming and he could have survived and run off with Sarah Jessica too.
Or at least a calcium CT scan, for Christ's sakes.
He should have gone in.
In the interest of disclosure, we have a small position in Aura.
They acquired a company we're invested in.
So I'm a big fan and a big supporter.
They've been great to work with from a distance.
I wish them all the best in this IPO.
We're rooting for you, Rory, and Scale.
We want everyone to get rich on this one.
We're rooting for you.
Absolutely.
Go on, Rory.
Go Scale.
Big round for Wonderful.
Wonderful more than doubles to $5 billion in under six months.
Apparently, this founder's an absolute beast.
Everyone I hear who describes him describes him in the same way, which is just a machine.
Raised $550 million Series C, up from a $2 billion valuation earlier this year.
I didn't know this until actually doing the prep for this, was the amount of secondary.
170 million in secondary within two years of founding.
Sorry, can we just pause?
What?
170 million in secondary within two years of founding?
I mean, look, it's a mistake not to get all kind of moral about things.
The buyers are sophisticated investors.
They clearly felt they wanted to own more shares than the company was willing to sell and take dilution.
So this is what happens.
It's what you said.
The company is clearly executing amazingly well.
It's at a wide level.
It's all about enterprise AI deployment.
They put, I hate the forward deployed engineer cliche, but they're in the business of making it happen for large enterprises that want to deploy AI, right?
Initially, when I looked at it early on, it looked more like just customer support.
I didn't meet the company.
I was actually, I thought we were conflicted.
And now it appears to have built a more wider, you know, we will make your enterprise AI work story.
And that's the number one corporate imperative.
So apparently they're growing like a weed.
100 million ARR going really hyper quickly because every corporation is trying to do this and they don't have access to the talent.
So it's an execution oriented business with what sounds like an execution oriented CEO and compelling numbers.
VCs like that shit.
And once they're not willing to sell any more primary shares, I'm sure the VCs went to the CEO and said, dude, you want to take care of your people?
And he's like, hmm, I need more people because I need to grow this business, which means I need talent because it's probably quite talent dense.
And, you know, it probably takes a lot of people to do this kind of on-site deployment.
So the number one thing I need as the CEO of this company is for potential future employees to think this is a goldmine.
So in fact, probably having a secondary is good for them because from a recruiting perspective, it allows you to say to the next 100 people, come to work with us.
Yes, you'll get stuck on a five-month deployment on a bank in Holland or an electrical company in Germany.
It'll be boring as shit.
But in return, you'll make a ton of money.
So it all makes sense.
Whether it turns out to be a good deal or not, well, that's why they play the game.
Don't know.
But I can totally see how it's happened.
Maybe just a couple of small thoughts.
I mean, first of all, going from start to 18 months to 170 million in secondary.
It feels like the hop in of AI, although I don't think it is because of what Rory is saying, but it is breathtaking.
Not the valuation because we see that all the time, but the secondary, but maybe two things first.
Huge kudos to going from like the multilingual Sierra Decagon to like the team of 650 folks helping you deploy AI in the enterprise.
It's just, it's a testament to how you win today.
You can't stay fixed to something, right?
You've got to build on everything you learn and iterate hourly and weekly.
This is another tilt.
Not only, it looks like a perfectly linear story, but there's a big tilt here in the early days, which is like, we're a bunch of, I think, really smart Israeli guys that know how to do Sierra and Decagon for not English speaking folks to doing something.
much bigger in 10, 12, 14 months.
I mean, this is what agentic coding and agentic development lets us do.
So it's epic.
So I love that part of it.
And that should be the toughest challenge to founders out there is this rate of change for what they did.
The one thing I'll say in the secondary, not, I don't want to make fun of it hopping, but I'm sure you guys see it even more than I do, but.
You know, the round was led by Insight, which is one of the most successful B2B investors of all time that there is, but it's competitive.
And as great as Insight is, it's not Andreessen and it's not Sequoia.
So what do you do to win?
You do whatever deal structure it takes to win.
And this one, and they done prior rounds, but this one was, we'll just give you 150 million in secondary.
And so it's not bad.
And I think Rory's right.
They have 700 employees.
So if you divide it up and you do it, like not everyone's going to quit as much money as this is.
They're not all going to quit tomorrow.
But my meta point is.
we will see behavior that is, I'm not saying it happened with wonderful.
We will see deal structures that are objectively bad for the company done more and more often to win deals, whatever it takes.
Bad for the company, not destructive, right?
But things you would not ordinarily do to win deals.
We haven't even reached the peak of this.
We haven't even reached the peak of crazy deal structures that just let you get into the effing deal.
at any price, even when you have to grit your teeth to do the deal.
You know, I don't think the founders all took the 170 themselves, but you could see deals where founders that say they don't want to stay, like Howard Airtable, take a billion and then leave thereafter to win the deal.
We'll see some extreme stuff and this one won't be it.
This might be the first of a set of extreme deals that happened.
Agreed.
But it's how you win, right?
And I see it in every growth round.
I'm sure Andreessen and Sequoia do the same too, don't get me wrong.
But every hot deal I've seen in my limited portfolio where it's not the hottest name to do the hottest round, there's just as much extra stuff as you want to win the deal.
All the extra terms you could put in to win, they just don't care.
What's everything I could put into this term sheet so that I win?
Everything.
Some of it's great and some of it is maybe not so great.
Yeah.
Sophisticated buyers.
What can you do?
My aha.
is the prize does go to the companies that can evolve the quickest.
And you're right.
My memory did serve me correctly.
Thank you for confirming it.
It was just a CX story like 17, 15 months ago, and it just evolved quickly.
And in this market, the people who are making the money are the people who are just running fastest and evolving quickest.
And the payoff from two years of grind, that extra 10% of grind can have just a massive payoff in a world where fortunes are being made in 12 and 24 months.
And I think the hard thing for founders and for others is, do you stick with something?
Now, wonderful, maybe I'm saying it's more of a tilt than it was, but wonderful, they did it internally, right?
The founders got together, they evolved the company very rapidly into something much more successful.
On the other hand, we see Airtable, where I'm going to assume how he sat around the table.
This is the only thing that really makes sense in this weird deal, is that he sat around and he said, I just can't do hyper-agent in Airtable.
It's just, there's too much institutional headaches, too many customers deal with, too many grouchy investors that invested at $12 billion.
I've tried and I assume you are Rory too.
We're huge fans of sticking it out, you know, because it's proven to work.
It worked at Palantir.
It's worked at so many startups we invested.
We have so many stories.
This is all the great Ho Nam stories of sticking it out, right?
They're so inspiring from Altos.
He's so good at that.
But these days you got to wonder, should you stick it out?
Is it worth it to stick it out, guys?
And I want to I tell everyone to, but I almost challenged myself.
Maybe you should abandon that 50 million, 100 million, 200 million in revenue.
Maybe maybe you should do whatever it takes.
Maybe you got to be as fast as wonderful.
Or what's the point?
I actually don't think you should quote, always stick it out.
I think circumstances are different.
I know.
Back years ago when I had my own small business in the UK, I look back and I stuck at it for four years.
Truly, I knew everything I needed after the first year.
I shouldn't have bought it for three more years.
Waste of time.
I look back and it's just so clear to me, right?
So you don't always take it out.
Is there a plan or are you just doing out of misguided loyalty?
And that's the number one test.
And I think you're right, Jason.
Because I don't think one of it was a pivot as much as an expansion.
Rapid expansion, yeah.
Whereas I do think Airtable, they were in that contract mode.
Everything they had, they had run out of time.
space.
So I think it did probably make more sense to do that sale in that case.
I think, you know, the facts are different.
I think everyone in this category is being forced to, though, by Brett Taylor, who's being very clear in terms of his expansion.
And I think they're following suit.
And I think they need to follow suit as well to justify the prices that they're raising.
And so the combination of following Brett and price hunger means we are all doing the same.
We're doing the operating system.
You know, owners no longer just for restaurants, it's the operating system.
Crudely put, I mean, you're exactly right, is that Salesforce, the company, is the dominant SaaS company.
It's worth roughly $200 billion, $180 billion.
I think service cloud is 25% of that.
So the winner in the existing world is only worth 50.
So as you get these bigger market caps like Sierra, you have to go beyond service cloud replacement to be a big company.
You're exactly right, Harry.
You have to sell the whole operating system, I take it all.
Which means if you're Sierra, just to make the obvious point, you're coming right at your former company.
Right.
You're saying we want all your market cap, Mr.
Salesforce, because the only way I can justify 15 or 20 billion in market cap for Sierra is not if I build a slightly better next generation service cloud.
If I am the entire customer ecosystem for your entire business.
Go team.
And then you write everyone else like wonderful has to follow.
Yeah.
When someone goes risk on, everyone goes risk on.
Welcome to venture, baby.
Absolutely.
Terrifying.
What about thinking machines?
$40 billion new price.
It's down from the $50 billion last year.
The round is $5 to $6 billion.
Excel leading with NVIDIA doing half.
A couple of hundred million bucks in revenue.
Closest thing to a US model provider in terms of kind of open and...
I think that's the real sentence here.
The important thing is you have to start.
What's the company doing?
Why is it a differentiated bet?
And yes, they've shipped two products.
It's Thinkie and Inkling.
Cute names, right?
One of them is an open weight model that they themselves say is not.
pure frontier grade, but is open weight and US based.
And that's worked a lot in this world.
And then on top of that, I think the other product, Inkling, is a platform to allow enterprises to do their own training.
So the idea here is now you can go to JP Morgan, you can go to BFA and say, you've got an all American software product.
And you've got the ability to train it on your data in a totally proprietary way that's not exposed to open AI or entropic.
And in fact, you have full reinforcement, all the things you want to build a state-of-the-art enterprise model for JP Morgan, for, you know, whomever, Procter & Gamble.
So it's a pretty decent, compelling offering for corporations.
So that's kind of the positive story.
And it's interesting that NVIDIA is doing so much because to some extent...
I thought that's what Poolside did, and they just acquired Poolside.
So what you're seeing in video is saying anyone who's doing something interesting in corporate AI, we're going to put money in.
So I think that's what's happening here.
I know we've already forgotten about it because it's been a week or two, but the Poolside thing should be a little bit haunting.
Not that a $7 billion exit is so terrible, even though the 15X thing kind of was one of Harry's clips that he took.
But that memo was chilling.
It's like we couldn't raise the round.
Agreed.
This was a great team with proven leader, very strong, you know, CTO, very strong leadership.
Seems to have had the right vision from day one, went for it, and they just couldn't raise the capital they needed to execute.
And congrats to Thinking Machines, which in some ways appears to have less.
But it is a reminder that the music will end for a lot of the Neo Labs, right?
And so be it as it should.
It should be a thinning of the herd.
But the poolside one, we may never talk about it again, or it's possible.
When this little part of the bubble burst, just one part of all the, this Neolab bubble, that will be looked back as those guys grabbed the exit when everybody else, when Nvidia stopped buying everything.
And Anthropic said enough, like after Descartes, they said this stuff doesn't actually move the needle.
Enough already with the infinite $10 billion deals.
We've had enough.
Maybe we look back and they were the lucky guys that got the deal done on December, 2021.
Yeah.
And just to be clear, just to remind everyone, a few weeks ago, Poolside effectively, they would deny that they sold, but they sold a license for their product to NVIDIA, which was an open-weight enterprise US-focused model.
And the company still exists, but they cashed out quite a lot.
And the memo that Jason is referencing is the note they wrote at the time, basically saying, we were right, but we couldn't access enough capital to continue to play.
And it's interesting that literally two or three weeks later, another company in a not dissimilar business is actually being able to, sounds like it's being able to access that capital, in part, ironically, from NVIDIA, who were also willing to buy Poolside.
So yeah, they get to play out the hand.
And I think you're right, Jason.
Will you look back and go, two years from now, you could look back and go, poor Poolside, they got sold out, and Thinking Machines made a 4X from here.
Or there's another world where you look back and you go, oh my God, I wish I'd sold because the opportunity got tougher, Thinking Machines and Poolside, maybe, as you said, was the last exit out.
Yeah.
The world just changed after Astra, we'll be talking about in 24 months.
And that was the end of the need for Neolabs.
It was hard to see at the time, but when Astra 6 came out, the world changed and it became this and us versus China.
And then the new AI regulatory council, Trump regulatory council came in and changed things again.
All those things could happen, though I do believe fundamentally, you do believe that there is going to be strong demand from corporate America for a open weight US based model with the infrastructure.
to train that model, right?
And I think Thinking Machines is in a good position to meet that demand now.
And I just think companies are going to want it because you really only have them, Reflection, which I don't know where they are in terms of the model and poolside, but I'm sure there's others and they'll all come out of the woodwork and flog me for not mentioning them.
But there's clearly a massive market need there.
There's a couple more, but there's not many more.
There are constrained five or six players.
For precisely the reason the poolside outlined.
But the cash has dried up.
at scale for the Neolab players who I think now are going to your corporate, as we've seen, no longer becomes a venture play.
Yeah, I mean, two big companies, two foundation models were Neolabs themselves five years ago, and they've turned to be the best venture bets of all time.
Just because that's true doesn't mean the other 100 Neolab bets that you can bet on today will also turn out to be amazing venture bets, because now you have other companies with the capital already.
You have other companies with the distribution.
And yeah, the question is, which of those Neolab bets will be?
orthogonal enough to the foundation model companies to be able to be an interesting bet.
We're wrestling with that question every day because obviously you'd like to make those bets.
But if you're doing something that's going to get either rolled over because the foundation model companies do it or, as Jason says, if you can't raise the capital to play the game, it gets hard.
Boys, is there anything that I've missed that we should discuss?
I don't know if it's true or not, but Twitter is saying, is Antropic going to drop its S1 today or is that not the case?
I don't know.
But yes, that will be interesting.
To say the least, that will be heavily downloaded and read within the first hour of coming out.
My word, will you be buying at $2 trillion, Rory?
I'm probably not going to be buying at $2 trillion, Rory, but that's not a comment on the stock.
Actually, the answer is in the end, yes, I'm in S&P and QQQ.
I'm going to be getting, as my wife said when SpaceX went out, looks like we got some of that from Elon too, right?
It's in the index, baby.
It's coming your way.
Not as quickly on SPY as QQQ, but on your NASDAQ index, that stock is going to be in your hands 12, I think 12 days after the IPO.
So you're a buyer.
Boys, thank you.
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