Wall Street is the madman in the backseat.
In the end, the thing that bails out
our incompetence is your growth weight.
- Oh, we've had a billion sitting on our balance sheet
for ages and it's a bad round of--
- That's a flex.
- People, that just, I've had a billion nine around for ages.
What have you guys been doing this week?
It's the Mark Twain.
Reports of my death were greatly exaggerated.
Well, it turns out reports of the death
of Sassan Software were greatly exaggerated.
No one wants to say it,
but if you get the direct listing totally successful,
the people buying don't make any money.
This is 20VC, and it is that time of the week.
My favorite episode of the week,
Rorio Driscoll, Jason Lemkin,
and joining us, we have Canva co-founder Cliff Obrecht.
Now, today we are discussing Anthropics New Round,
Open AI Buying Star sig,
in videos latest results,
as long as the incredible results
from the slew of B2B Enterprise Sass companies
that came out last week.
This is a phenomenal episode,
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- You have now arrived at your destination.
- Guys, I am so excited for this.
This, as you know, is my favorite time of the week
and we get to bring in my buddy Cliff from Canva.
This is gonna be great fun.
I just wanna dive straight in this week.
- Rory, as always, I'm diving in with a later edition
because you love later editions.
But we had to, anthropic raises 13 billion dollars.
Started with five, moved to 10, now 13, at 183 post.
Wow, it's a lot of money.
It's a high price.
Rory, going to you first, 'cause you prepped for this one.
- Well, fun enough, Harry, I did,
'cause there's a little bit anticipated.
And I think to some extent, yeah, it's a high absolute number
because 173 billion is a lot of money.
But is it a high price?
And it's interesting, and we talked about this a little last time
and relying on reported numbers.
If the growth trajectory is really 100 billion,
sorry, 100 million two years ago,
to a billion dollar run rate, started this year.
To somewhere around five now,
maybe eight or nine by year end, right?
Let's just take that as kind of roughly true.
Let's say one in nine, which typically means
the gap revenue is roughly the average
of the opening and closing ARR,
which means gap revenue could be, again,
subject to around four or five billion dollars this year.
What are they gonna do next year?
If they go from one to nine,
and these are the facts, up until now,
all I've talked about are facts, things we know today.
The million dollar question is,
what does today's trajectory say about the next even year?
'Cause I mean, you know, you draw a rock forward
and it falls down, but it moves forward
and falls down at the same time.
How much does nine X revenue momentum,
this year, persistent to next year?
Do the math here.
Even if they go nine, I was doing it roughly nine to 30,
which is three X growth down from 10 X growth,
then gap revenue, average of 30 at the close,
nine at the opening, it's around 20 billion.
This is eight times FY 26 revenues.
The stunning thing with this growth rate,
if it persists, big underline,
is you only buy in eight to nine times next year's revenues
if the growth lasts.
Now, Willett is the billion dollar question,
but high absolute number, absolutely,
does it make sense?
If you think the growth rate's there, then it's not crazy.
And I did not go into that math, expecting that answer.
I mean, I went in saying,
"Oh, aren't those guys so silly paying so much?"
And you look at the numbers, you go out,
maybe those guys aren't being quite smart.
- This round was also super oversubscribed.
It was, I know folks in the industry have been clamoring
over this and it was hard to get into.
So they could have raised, I think, 10X that multiple
of funds that they put in.
- Totally.
Because I was just thinking, you're exactly right.
I mean, looking at the cast of characters who did it.
It's like, if you're a growth stage investor,
you know, you're a big growth fund,
it's hard to kind of imagine a world where you say,
"Well, we're growth stage investors,
but the two largest market cap companies in growth
in the last three to five years, the two LLM models,
we don't have a piece of that."
So there's probably some kind of huge corporate imperative
at every growth stage firm saying, you know,
well, I'd have taken a big ball's call
that this isn't gonna work.
All we need to get one of those.
So yeah, I imagine you write Cliff,
I'd say it was huge demand.
- It's insane on its surface, you know, anthropic
at what, 160 Databricks at 100, Canva at 42 sounds.
- There is multiple compression.
- That's barely 10X for us.
We sound very deep.
- That's the point.
- It's not that high.
It is, it is, I mean, literally if you're using
AR multiples, these are not,
especially if you use forward ones to Rory's point.
Like if you use next years, Canva Databricks
andthropics seem reasonable, right?
As long as the growth can persist.
I mean, Canva, I mean, again, I'm a super fan since the old days,
I wouldn't have thought it would be this big,
but the growth at scale is epic.
It's crazy Canva's growth that it's not growing 8% today, right?
It's growing five to six times that.
I don't know if you predicted that in the old days, Cliff,
but I mean, it like breaks your rules of tam, right?
And it's not even an anthropic.
My question is, we mentioned the over-subscribed element there.
Cliff, when you literally have a 5X over-subscription,
I'm sorry if I'm being naive here,
but in the same way that Dario did,
how do you literally choose which dollars you take?
- It's very tough.
And for us, we priced our round before Figubert went out
and had all those conversations and relationships.
And so the Figubert IPO kind of throw cat amongst the pigeons,
proving that we will close the year very close,
if not out 4 billion, growing close to 40% growth rate
and re-accelerating growth.
So we are compounding growth at scale,
which is a good place to be.
When it comes to investors, we really need to think long-term.
We have a lot of long-term partners,
and you want to pay a lot of loyalty
to the people that have supported you along the way,
but also we're thinking through what an IPO looks like.
Who are going to be the cornerstones of that IPO?
How do we see this not as a point in time deal,
but a relationship building exercise
through the next 18, 24 month period
with these really long-holding investors?
And how do we instill trust in them
and for them to trust us as a leadership team
that can take this through our beyond and make good decisions?
So we're not looking to ratchet up the price.
We're not looking at kind of playing any silly games.
We're really seeing this as like,
how do we build these long-term relationships
that are going to be with us well?
- Do you have fidelity?
- Yep.
- Super interesting.
We had Brian Halligan on from HubSpot,
and he was talking about the central role
that fidelity play,
and I actually wasn't quite as aware
as I'm sure Jason and Rory were,
as how important and strategic that was
in terms of aligning them for when you are popular.
- Well, I'm not sure how much I've done.
- Yes.
- But yeah, they're the anchor of the round.
They're the largest check-in this round.
- I thought you promised that to me though.
(laughing)
- I think we've checked some trees there.
So the problem now,
so this is all secondary.
We've got over $1 billion cash in the bank.
We don't need to raise money, primary funds.
We've been a profitable company for eight years.
So when we go out and do this employee's secondary,
and also we have some investors that want to sell,
and then they see Figma go out,
a lot of that sell-side demand dried up.
So we do have,
even though we're already oversubscribed,
we've got this supply and demand in balance at the moment
that yeah, it's an interesting dynamic to work with.
- It's a hard time problem to have,
but you don't want to disappoint people.
- How do you coach employees on that?
Do you stay out of it?
- Especially when you see Figma go out in the multiple, right?
It's tougher employees to process the decision, isn't it?
- Yeah, I like to be very transparent,
and I think Figma are the absolutely incredible company.
They don't have a massive float.
There's dynamics to any float that can make things go higher or lower.
What we do, we show them a spread of public companies.
We show them their growth rates.
We show them how we really think.
So if you compare us to some companies,
they're undervalued, if you compare us to some, we're sort of on par.
And we give them that spectrum.
So they're not just taking one single point
and referencing all their kind of marks to that.
- Oh, and also just talking through the long game nature of this.
I mean, we have been through trials and tribulations ourselves.
We in 2021 were worth 40 billion dollars,
which was, I think it was a 50x multiple
on our revenue at the time.
2022, everything came crashing down.
The market came crashing down.
And that took us down to 26.
And so that was a tough pill to swallow
when we thought we were riding high.
And we've slowly just compounded that growth.
I mean, the companies hasn't stopped growing.
We're still profitable.
All of the foundations were right.
And that's what I guess what we really focus on
and educate the team on.
The markets will do what they're going to do.
But as a company, we can compound growth.
We can compound margins and increase margins.
And we can deliver value to our customers first and foremost.
And you're exactly right.
I mean, it's just kind of just talking about that.
'Cause even the little example you gave,
two things are clear.
Look, very smart people with MBAs,
swore blind, you were worth 50x ARR and 21.
And 20x ARR and 22.
And now you're worth 10x ARR.
So I have to do a little bit on funny, funny point.
It took discipline to take the 50x,
'cause we own name names,
but we had people coming in at higher multiples.
And they were like, this is bad shit, crazy.
- Jolly, and it is always what I mean,
I did a post years ago, beware the madman in the back seat.
Which is, Wall Street is the madman in the back seat.
It changed, I mean, finance, we all do.
You change your mind so drastically and so quickly, right?
That as you said, all you can say to the team is,
they're gonna do what they're gonna do.
They're gonna 50x, they're gonna 20x, they're gonna 10x.
What you can do and it's very impressive is,
we can, finance can be wrong literally by 5x,
from 50 to 10.
And you've been able to recover that valuation
by just working hard and growing for five years.
In the end, the thing that bails out our incompetence
is your growth rate.
And that's the dirty little secret deposit.
If you get in these companies,
which can compound for five or six years,
they can cover a multitude of cents.
- That's what worries me about some of the AI companies now,
because I've seen this time and time again,
with people trying to copy Canva,
or be Canva for this or Canva for that.
There is an early adopter syndrome
that pulls forward a lot of revenue.
And I think one thing we've done well with Canva
is cross the chasm to the mainstream.
Middle America, people all through Europe,
not the Twitter sphere or the X-Fear,
whatever you call it these days,
that are always using the latest and greatest products
and paying that because they're happy.
And then there's consolidation of those early adopter products.
And a lot of those products struggle to cross the mainstream,
because then it comes to distribution.
And distribution at scale is a lot harder
to reach those people in middle America,
than people that are actively tracking what AI is doing,
actively on product time to whatever,
and on X, seeing all that sort of stuff.
So crossing from sort of $50 to $100 million
to a billion dollars in revenue,
that's a big leap.
And I'm interested to see how some of the companies
can navigate it.
- It's interesting because yes,
there's two separate things embedded in that though.
One is, yeah, just the sheer fact
of going from 100 to a billion is a grind.
But the second thing that I thought you're gonna go there
and I wanna ask you about is separate comment,
our nagging suspicion is that some of the year two
AOR renewal rates for some of these AI products
will be pretty low.
In other words, that the AI product market fit
is getting covered over a little bit by AI enthusiasts.
Right, early on.
And be curious, how are you guys thinking about your AI products?
Are they doing great?
Are you getting the usage you want?
Do you think users are rocking them?
Or where are the AI adoption curve?
Are you and your users?
- Firstly, we're all about creating work courses
not gimmicks into Canvas.
So the mission of Canvas was to empower the world to design
and that's to take anyone's idea
and create a great piece of visual content,
whether that be a video, a marketing material,
a poster, a presentation, et cetera, et cetera.
AI is just accelerating that massively for us,
making it quicker, faster and better
for our customers to achieve their goals.
So we already have a user-based AI is accelerating that.
And I think what you're seeing now
when it comes to companies applying AI into their products,
people throw a lot of shit at the world, right?
And I hope it sticks.
And that was the right thing to do.
Like every company on Earth,
or hopefully, we're running AI hackathons,
what we don't know, what we don't know,
what can we get into the product?
Let's test it.
And then it consolidates down to a small number of things
that add true value.
And then there's a lot of periphery stuff
that is kind of neither here nor there.
I think to answer your question in a different way
around sort of AI consolidation and year two renewals,
particularly around enterprise customers,
if organizations were approaching AI,
the way Campbell was approaching AI,
the cost of implementing these tools and a breadth of tools,
as long as they meet our security requirements unnegligible.
Our approach was spray and pray, use all the tools.
I'm happy to open up an extra $10, $50 million budget,
hoping we can drive employee efficiency
and get more done with the same amount of people
using all these tools.
And I'm not going to be the arbiter of this tools
better than that tool.
We're running four coding tools at once, right?
Curse seems to be the one that's kind of leading the pack.
Same goes with all the LLMs.
We give everyone a choice.
You can only have two that we limited.
You can't have Gemini, OpenAI, and Anthropic.
You can kind of pick two.
So where we're like, use what you want
as long as it meets our security requirements.
Over the course of the next 12 to 24 months,
we'll start consolidating down as the clear winners take charge.
And so to answer your question in that way,
100% there's going to be consolidation down
from year to renewals.
Sorry, I do want to retain some semblance of structure
because you mentioned clear winners there.
And we spoke about Anthropic and the large raise.
On the flip side, today announced OpenAI by Static
for $1.1 billion in stock.
So it was the same price as the last round that Iconic led.
It's an incredible team with VJ, super obvious matchup
given Fiji, obviously joining OpenAI.
Business is doing 75 million in ARR.
My response to the team Mortesamp Group,
where one of our partners is Nangel Wars.
That's cheap.
And I wanted to know how you guys thought about that.
You agree with me, a billion one in stock
for 75 ARR company with an amazing team.
Guys, how did you feel?
Let's take the perspective of the person
who just did the last round.
In May of this year, I valued this thing at $1.1 billion.
On the other hand, I'm probably the same investor.
In fact, it was, I think Iconic did the round.
They just did on traffic at $170 billion.
They might be very happy.
Oh my God, I got me some OpenAI now.
And effectively within four or five months,
you rolled forward into the next OpenAI round
and the next OpenAI valuation.
Maybe that feels just as good.
I'm doing the math in my head,
but the revenue multiple might be that much different.
So you're kind of like, yeah, I thought I was investing
in Static, now I'm investing in OpenAI,
where things can happen.
Maybe the angels don't like it.
I think when I saw that the round was apparently exactly
the price of the growth round from Iconic, right?
It just makes you wonder,
if you're just getting your preference,
you don't really care as a late-stage investor.
You don't care whether it's $1.1 or $106 or $9.84
because you're making the exact same amount.
The fact that it was exactly the last round
showed this was something that everyone wanted to roll into.
Obviously, the CEO wants, now what's the CEO?
He's like number three at OpenAI, right?
He's gonna run it with, what's the--
Yeah, I mean, and he pushed the CPO aside
and now he's running the poll, that's a big,
for me, I'd rather run my own company.
I'm guessing Cliff would too,
but for 95% of people, this might be a quick upgrade
without risk, right?
So he got what he want.
Iconic rolls over 100 million into OpenAI.
They're not allowed to invest
because they led the ontropic round, right?
So this is the only way they can put nine figures into it
'cause they're soft band or hard band from the round, right?
That maybe the angels don't like it
'cause they wanted to play another card,
but everyone else, the fact that it's the exact price
the last round, not 2x, not less,
it's just perfectly engineered to check everyone's boxes, right?
And the people we didn't name,
who did the A and the B Sequoia,
are presumably, as always, happy and successful.
So there you go.
Cliff, here's $100 billion of OpenAI stock.
I'm not doing it, but uh-huh.
(all laughing)
We love OpenAI, we love them,
but it's just not, I mean, we're cutting our own course,
the bed acquisition offers.
Dude, I would always put you on this pot
and ask questions like that.
Rory knows that well.
The tough one, poor old Zuck.
Zuck is getting a battery.
Your I love is the transience of Zuck,
whereas Zuck's a hero, and then Zuck,
what a fool for buying scale.
And I mean, the wheels seem to be coming off
the scale acquisition in terms of the talent
that's leaving and the satisfaction
with the quality of scale's output.
Everyone wanting to use search, Edwin, great guy,
liked him a lot, actually.
And McCall, portfolio company, go McCall.
(all laughing)
And they're just very upset with the output of scale,
not being good enough.
Is this the wheels coming off the scale and the meta train?
Or is this media overhyping coming back
on Zuck in a way that's just unfair?
- I just feel poor, sorry for poor Zuck.
Imagine poor Zuck opening the newspaper
is fine every morning, looking at the news.
He's got to be a challenging life being the CEO of meta.
- Yeah, look, I mean, I don't think it's possible
for me to speculate on how he feels.
I don't know, and frankly, don't much care.
And it's not my problem.
And if he's not feeling great,
he can cry and he was $200 billion
and get over it on his own.
Right, take it up with the therapist.
- The actual most substantive question is,
does this new information make you feel better or worse,
just as objectively seeing how the deal's going?
Is there actually real fact-based takeaway, right?
Here, does information, it's not widely surprising.
I mean, when the deal was announced, you kind of go,
that feels an odd way to solve this problem.
Maybe it'll work, but it'll be messy along the way.
And this just feels to me like,
there's two different shoes dropping here,
and they both feel like exactly the shoes you expected.
The first shoe to drop is people.
It's hard to give people a hundred million dollars
and then give someone else a billion dollars
and then give someone else 10 million dollars
and then have more work together.
There's going to be some fallout,
even if they're all amazingly talented people
who want to work together, people of egos, people are human,
it's just going to be messy.
So the fact that some people are leaving, whatever,
I don't know, I don't know about the retention package,
but it's just not surprising.
And some of it could be directed.
Remember, we talked only last week
back to your comment on what kind of up and down on this
that they seem to be organizing the thing
in at least a structured fashion.
You're in, you're out, you're in, you're out.
So this human fallout that was predictable,
the second thing is just the acid itself, right?
The comments about how the meta team aren't as excited
about the scale data labeling stuff
makes sense to me.
I mean, from what you read,
the requirements of data labeling have evolved a lot.
From very simplistic, this is a dog, this is a cat,
to answering much more complex,
the training data that it takes to pass advanced bio
to pass advanced math.
And it's a different thing.
And I'm sure that the scale aren't dummies,
they're trying to do it.
But there's other firms and you mentioned too,
one of them is your portfolio company
because that's what you do, promote the product.
There's a bunch of others touring and all that.
There's a bunch of folks out there.
I mean, none of them just to be clear.
So no agenda.
There's a lot of competition.
And if you're sitting there as meta
and your ass is underlying to deliver,
then you're not going to say,
oh, I'm going to buy from what is now
our biggest investment, which is in scale,
just because that told me to do it,
you're going to buy from the best.
So there's probably going to be some of that.
Oh, we didn't get what we want.
Which raises the third,
if you remember the structure of this weird deal,
they put 14 billion into scale
as if it was worth 14 billion.
And to your point, Harry, it's kind of a one,
it was one extra last round.
And then the VCs promptly took out that 14 billion,
leaving scale as an empty shell
because all the money's gone.
And then there's this remaining asset
that we agreed wouldn't last a year,
but we had to pretend was like a company.
And now scale and meta on its balance sheet
has a 14 billion dollar investment in a company
that probably isn't worth 14 billion anymore.
There ain't any cash and they're in a great business.
At some point, the auditors are going to say,
hmm, you've got a 14 billion dollar venture investment there.
Do you really think the empty husk of scale
without all the team that's moved over to meta
or all the team that's left is worth 14 billion,
we'd like you to take a write down.
And that's going to be an attainment factor
back end of this year, early next year.
It was a quirky deal.
It has a bunch of problems.
It's just been a step on the journey
to fucking up the 14 billion dollar acquisition.
Roy, do you have confidence,
Zack's master plan will play off?
What does this leave you less confident than you were before?
He has a master plan.
He's won already.
He's worth 200 billion dollars.
And he's got one of the most 10,
seven most influential companies on the planet.
He's won already.
All you can say is you've had some big bets
that have worked amazingly, like WhatsApp.
You've had some small bets that worked brilliantly,
like Instagram, best acquisition of the prior decade.
And he's had some big bets that have flopped, like meta.
Metaverse thing.
My gut is this is more like the latter than the former.
I could be wrong.
Culturally, I think just the simple fact is,
he's assembled a pack of mercenaries.
He's gone out and hired all the best mercenaries out there.
Something forced them to report to each other
a weird structure, power struggles,
fiefdoms, but he's put them all together
in a matter of weeks, right?
Maybe months.
When I was a B2B founder, trying to be driven,
but touchy feeling, I was sort of anti-mercenary.
If you're not on my journey, I don't want you, right?
This is a long path.
Kanva's been doing this for, I don't know, 20 years, right?
Something like that.
But it's time has gone by a more nuanced.
Sometimes, you know, maybe you need mercenaries.
And sometimes there's cultures where it's okay.
And sometimes there's a tool for the job.
But I just think this is, we can pick at this.
And I think the criticism, but it's shit.
I think Zach knows this is a bunch of mercenaries.
Some of them are gonna fall in battle.
Some of them are gonna quit.
And he's given 20, 30 billion to a pack of mercenaries.
Kanva seems anti-mercenary from the outside, right?
But maybe there are times when you've had to hire a pack
of them to go into battle.
- Can I ask a question on that?
Sorry, how I, 'cause genuine interested.
We, as we look at kind of big classical SaaS companies,
we're trying to figure out their role in the AI world.
How much of your re-acceleration would you attribute
to the stuff you did in AI versus just, you know,
getting through 2022 and kind of finding your sea legs,
again, and just executing?
- COVID for us, we're growing faster than ever.
So you've got a decouple valuation and company greater.
- Decoupling valuation, just, yeah.
- COVID was a massive discovery event.
Everyone was sitting on their ass on their computer all day.
It was great for Kanva.
So what was the question?
- You know, I didn't post, I wasn't clear of it.
Post, like 22, 23, you de-accelerated, right?
And now you leave valuation out of it entirely.
Just talk revenue.
And now you're obviously re-accelerating at huge scale.
And you're doing what every SaaS company
pre-DII companies wants to do.
And that's the only way they're going to be back
to being relevant, being exciting.
And obviously, every one of us owns lots of them
and we're trying to figure this out.
So for you, do you think that AI was the re-ignitor
of growth in '24, '25?
Do you think it was just execution?
How much of it do you attribute to the AI initiatives
you guys took in the last year and a half?
- I would probably say 20%.
I think one thing you need to buck the trend of
as you become a larger company is insular thinking
and treating your user base like a wet tea towel
that you need to ring out.
90% of our user acquisition is organic.
And so we just needed to re-accelerate
all our core flywheels and AI enhanced that,
going really heavy on international enhanced that.
- We spoke about paying up for the team.
There's companies that are being paid up for.
Rory, I'm not shilling.
So before you get me for shilling, I'm not shilling.
But one of them is lovable and is in the FT
and is like, hey, new $4 billion around.
By the way, Cliff, notice what I'm about to do here.
I'm about to neutralize my argument for sale.
Another company in the similar space
has got a $9 billion around a company in the works.
Question being, do these markups very rapidly,
literally within a month or two really make sense?
Or is it excess capital supply that is exuberant?
That's pretty trying to find a home in an AI company.
- I'll jump in.
Definitely the latter is the,
there's the foam of missing out and that's real
and people throwing cash and realizing that
we're on a curve here with this AI boom.
And I mean, most people are thinking,
we're not at the top of the curve.
It's not gonna fall off where we're a lot closer
to the top than we probably were maybe a year,
18 months ago, but it still feels like there's money
to be made and Rory, I heard you the last time saying,
you're still investing.
This gravy chain isn't probably gonna end immediately.
We'll sort of start cooling off at some point.
And I think investors are just realizing
they need a good chunk of their portfolio in this category.
I do worry, as I mentioned before,
about some of these companies crossing the chasm
to the mainstream and turning that $100 million
in revenue to billions in revenue.
But companies like Lovable,
they're definitely well positioned to do that
if they keep executing at the right they are.
- The multiples can't make any sense because
we knew this when we did the round.
You knew, I mean, Anthropics Revenue
has tripled in four months.
And no question, there was some risk
it wouldn't make the plan, of course there's some risk.
But it wasn't that high, like we didn't de-risk.
We're all investing on forward multiples.
Anthrop, lovable worth $1.8 billion,
60 days ago, $4 billion today.
I know the error growth has been tremendous,
but it's probably exactly as predicted.
I mean, listen, if either of these out accelerated
their plans, it'd be one thing,
but I'm not willing to lose weight.
- This is why I'm getting super trouble,
but fuck it, it's late at night and I'm in London
and fuck it.
They're out accelerating plan.
Like they are 125 to 130 now, give it a take.
Plan to end the year 175, there'll be above that,
I think $1.85 to 200.
If you're $1.85 to 200 and next year,
say what, say they do it two hours to two and a half,
say they're at $4.5500.
Is it that, not supposed to be paying?
- I'm not saying it's not, Terry, what I'm saying,
and your data is more valid than mine.
What I am saying is most VC should have had that
in the model 47 days ago.
I'm not saying that they didn't achieve the progress.
You know, in the public markets, your Monday,
you miss by 1% and you get your head cut off, right?
You're down 30%, 40%.
Even though the range of variations quite tiny, right?
These, we're always valuing future growth.
It's not that I'm not saying, if lovable really in 30 days,
blew out the highest plan any VC had, then I'm with you,
but I don't believe Anthropic did.
I believe Anthropic said a crazy number,
as did OpenAI, right?
These numbers blew our minds when they put them out there
and they hit them or exceeded them.
The VCs couldn't put that in their spreadsheet.
- I'm going to come in, because the Monday comment,
put a pen on that, actually, I think
actually proves the opposite point.
So stepping back, 'cause I need a really interesting subject,
the second round, two months after the first,
I've been thinking about it a lot, right?
And I got to do big buckets and then go down each,
there's only three reasons largely this happens.
One is, it was priced right two months ago,
new information has occurred or something has changed
such that the new prices work more.
And that's kind of what we're talking about now.
Is that happening?
If that's not happening, that's option one.
If that's not happening, then the second thing is,
somebody on the price, the first round,
and now someone else is figuring that out,
there's been some kind of misprice out of the second price.
If there's not net new information,
either the second round is too high or the first round is too low.
And the third and the most zany one,
but I think is a non-trivial thing is,
there's this validation concept, which is,
oh my God, Sequoia were willing to do two billion.
I would never have offered two billion,
or two point two billion before,
but now I want to get in and so they're going to offer four billion.
So you get this kind of,
the last round provides the validation for the next round.
And those are three different things.
And I think they're all going on to some extent, right?
There's another point as well, it's like,
if this company is going to be a 20, 40, 50 billion dollar company,
who gives a shit whether it's two or four, right?
So if you can write the thesis that this company is going to
compound some level of growth over the next five years,
it's going to be one of the major players in a new category,
then who gives a shit?
You like Cliff, but largely I'm just going to be that painful person.
If that's correct, then the people who did the first round
on the paid and the company, let's just say if a company says,
be just be logical, if the companies did exactly what it said to do,
and they raised money at two billion two months ago,
and can raise money at six billion now,
they should have raised money at 5.5 billion two months ago.
They underpriced the first round.
By the way, it's quite like that whole IPO weirdness discussion.
Oh my God, you priced your IPO at 38 bucks in the stock open
at 76, you left money on the table.
It's actually the private version of the same thing.
I think it's the Harry, I think it's the Harry effect.
I haven't listened to a Harry podcast for years, and dropped.
He can talk up the stock.
I think you're about a two billion of market cap
to his company single-handedly.
But today, you can't do a shit.
But let's go back to the first one.
Because I think the first one's interesting,
because it's actually a fact-based common.
Is there net new information now they work more?
Because you'd like to think the whole world lives in the first area.
And if it doesn't, because then you went to weirdo shit.
The second thing is misprice again.
And the third thing is just kind of psychological dog hierarchy,
high school hierarchy phenomenon of I can invest of 8,000.
So go back to the first.
Jason, your point.
You said the Monday thing about you miss by 2%,
and the stock goes down by 30.
But my comment is that's actually proof
why you can in fact see these step-ups.
If you're underwriting 30% in the next two months,
and you get 35, by the same logic that if you miss by five,
you go down by 30%.
If you achieve, outachieve by five,
you can justify a higher price.
And I think on top of that, the beta is off the charts, right?
Yeah, and on top of that, it's off.
Some of the on-tropic thing could go down as that first example
is the performance this year, I think they rex,
and I'm willing to bet, it's actually, it gets a close point.
I'm willing to bet no matter how hard you tried, no one had,
they went from 100 to a billion last year,
they're going to re-accelerate in Q1 or Q2 of this year.
And it's obviously with the curse of Claude code, et cetera.
So there is new data I would argue.
That's an example of where you have a 3X step up from the early round,
I think with lightspeed earlier this year to today.
And at least some of that is justified based on new information,
which is they have re-accelerated at a scale
that probably no one imagined they could do it at.
So I think, so sometimes that follow-on round,
two or three months later, might be based on new information.
I don't think it's majority of them, but some of them.
I'll tell you one, just from just on this point,
what, to me, shows the inefficiencies in this, right?
The shoot from the Hippadness, it just is that
lovable closes Harry's favorite company,
closes at 1.8 billion in July 17th, 2005.
13 days later, the exact same company called Replet.
That's the one I use.
Same company, it closes at 3 billion.
Basically the same ARR, basically the same company.
Yeah, I can tell you my views of security
and rogue AI agents, but come on.
I mean, most people can't tell the difference.
And in the revenues, basically the same, 100-ish, right?
One's worth 3 billion because it's marked up by Andreessen.
One's 2 billion because Excel wants the deal.
I don't think either of those deals were perfectly efficient.
Is this fundamentally bad for companies, Rory?
If these companies are getting hundreds of millions of dollars
for a grout down their throws a month or 45 days
after they've just taken a couple of 100 million dollars more,
do you believe that is fundamentally bad for the company?
To change your values, Cliff, having an extra billion
on the balance sheet or did not really change the company?
Well, we've had a billion sitting on a balance sheet
for ages and it's a bad round.
That's a flex, people.
That's just, I've had a billion lying around for ages.
What have you guys been doing this week?
Okay, flex a week, Cliff, big guy, okay?
You want to sound all wise, Aalish, and say,
don't take too much capital.
But the truth is it's a rocky journey.
There's probably some bumps ahead.
Most founders will be happier with a bigger balance sheet.
The really great ones are the guys who can take the capital
and then have the discipline not to use it foolishly.
Sometime in the next two years in many of these markets,
there will be a shakeout.
And if you've pestered all the way in performance marketing,
shame on you.
But if you have that capital ready to move decisively,
you might find a good opportunity for it.
It all comes down to confidence in your ability
to execute and capture time and market share.
With Canva, we took a very different approach.
We were so bullish on where we were going,
we wanted to minimize dilution.
So we raised as little as possible at every stage
to get us as a high risk maneuver.
And I don't recommend this to founders anymore.
I say, be a bit over capitalized.
But we would run it kind of to the bones
in order to take as little money as possible.
We'd go for the highest valuation possible,
just to back ourselves to hit that next level
and get as minimal dilution as possible,
which worked out well for us, but was a riskier
than probably is recommended maneuver.
Guys, I want to cross the casem, so to speak,
and move from the world of privates to the world of publics.
This will be a fun one, because we had
quite a big week in publics, crushed for B2B.
Jason, baby, B2B publics is back.
Snowflake, Mongo, Box, Elastic, Octa, Zoom.
I mean, Zoom.
B, I mean, that's like Madonna coming back from the dead.
I mean, that is like--
- Oh, poor me.
- Sorry, Aurora.
Didn't want to say it, not you.
Jason, is this just like the return
of the good old days for SaaS, baby?
How did you analyze?
The uniform, great results from everyone.
- I mean, I don't know if it was quite uniform,
but it is interesting that some folks,
I mean, let's spitball at his half of the public B2B leaders
are finally getting an AI tailwind, right?
Or they finally are getting one.
And not everybody, you know, we love Salesforce,
we had Marcon, they haven't seen it yet,
they have the demand, it hasn't hit yet,
but Box, Zoom, Mongo should be crushing it,
because every time I spin up a new vibe app,
I need like two or three databases, right?
I mean, that's just one corner of the world,
but Mongo should be crushing it.
And so it's exciting to see, it's not even,
I mean, the Atlassians from down under the Dropboxes
aren't all of the Asanas aren't seen yet.
Like Cliff said, you just got to be smart,
you're not building our own LOMs.
If you have a billion dollar install base,
you have a distribution channel, the Cliff's point, right?
It's kind of sinful if you haven't re-accelerated
by the end of 2025.
You kind of failed as a founder,
because yeah, you may miss some of the cool kids, right?
They may be using, but you have a billion plus of distribution,
you have no excuse, you had 18 months.
So thank God we're seeing it, right?
Because it would be almost catastrophic
if none of the leaders were getting an AI tailwind boost.
And it's good, but it's not a dead cat bounce,
but we're not outside of Mongo and Snowflake,
we're seeing modest, modest re-acceleration.
But it's great to see them have it,
otherwise we have to give up on all the public guys
and bet on the Canvas and Databricks in the year.
And drop Xing, give up on the last generation.
- Taking Mongo, 'cause that was the one that jumped 40,
45% of the stock price.
It's back to the point Jason made earlier,
which is the year and year gap growth rate
is back up to 24%.
I think it's higher Q and Q,
so I think they guided a little more forward aggressively,
but they were at that rate two years ago, right?
So it's not like they're 10 Xing or something like that.
I think what happened here is everyone got into the,
oh my God, Sassy's dead, everyone's sad,
none of these guys are gonna make it.
And even small, and this is back to the Monday comment,
because these markets are trying to get,
it's not just about fundamentals,
but it's about how you perform relative to expectations.
If you're expectations are low and you just do moderately well,
you can have a 45% jump in the stock price in a week.
It's back to, and if you look at the absolute stock price,
if you look at the revenue multiple,
it's just back to where it was two years ago.
It's a great core company.
It's the Mark Twain, reports of my death were greatly exaggerated.
Well, it turns out reports of the death of Sassan software
were greatly exaggerated.
If you are a good CEO and dev is an extraordinary good CEO,
just like the cliff story there, because he did,
I mean, I noticed cliff, he didn't say,
oh, it was all just AI.
We got our shit together.
We did a whole bunch of things.
We raised our expectations.
We said, hey, we're the leader in a big market.
Let's make stuff happen.
And if at that point you value it at seven times,
and then you beat plenty even by a little bit,
you get that kind of bounce.
That's what happened here.
Cliff, when you see this Monday getting hit
for being a couple of percentage points off,
again, I would never ask on timing
or anything quite that ludicrous.
But you go like, yeah, that's an arena I want to be in.
Or do you sit and watch cheeky pint with the Colossans
and go, that's the fucking arena I want to be in,
sitting drinking in on our call it beer
with the founder of Cognition, doing a hamstand with Vlad,
enjoying the wonderful splendor of the private market.
I still love my beer.
It's alcoholic, I haven't followed that trend, but I love it.
I think it comes, I mean, yeah, yeah.
There's a lot less scrutiny as a private company,
but as a late stage private company
with the likes of all the big cats
that are playing in public markets,
already invested in us and continuing to do so.
Our reporting obligations and our expectations
to beat and raise are pretty much the same.
So it does get me thinking like, what is the real difference?
And then I think to your point that you've made
on previous podcasts, the public markets
are valuing companies a lot higher.
So when the public markets were valuing companies
lower than the private markets,
you were kind of like, well, whatever, whenever.
But now at a lot higher marks, it's sort of, it is appealing.
It is becoming more appealing.
In the show, we actually mentioned you,
probably heard it, sorry.
Where we were like, you know, Figma goes out, Jesus.
But like Figma goes out, sees the pub.
If I were you, I'd be going back to the team,
going like, that's for us gum, this one.
Like, we should go out now.
That's right.
I mean, we're gearing up to be ready to IPO.
We want to be an IPO ready company.
We recently, you mentioned Zoom.
We brought in Kelly who led their IPO
and she's been fantastic addition to the team.
She was there, CFO.
So our goal is to be ready when we actually go out
is another question.
But yeah, we're gearing up to be an IPO ready company.
Can I ask a question we've talked about on this show a bit?
You have a billion in cash.
You're profitable or cash low positive.
I don't care which one, probably both.
You're able to do tender offers for your employees
and provide liquidity.
And whatever, whoever of your early stage investors want out,
you can probably flip their shares.
Why I don't know.
I'd love them to sell more shares because it has helped
solve my problem right now of not having enough sales on it.
Yeah, so why at a meta level, why IPO, right?
You have an even MNA probably isn't a reason on its own, right?
Unless you want to buy something for $10 billion.
Why would you IPO?
Yeah, I mean, that's the question we've always asked ourselves.
And I think there's three key points.
There's availability to capital, which we have access to.
I think it's probably liquidity and there are restrictions,
particularly around employee liquidity
and what you can do in the US and whatnot around that piece.
And so we do believe in where 13 years old as a company,
our employees should have liquidity.
They've created all this value.
How can we make it easy for them to access that wealth
that's built up?
And while secondaries, annual secondaries
are a mechanism for that, it's pretty janky
and particularly in some jurisdictions,
it's downright impossible.
That's probably the biggest one.
Yeah, as you'll get a bit more publicity.
Personally, we don't want to be more in the public eye.
We're happy just being in Australia
working away, building great products.
But yeah.
I mean, I'm not going to be too nice to you, Cliff,
because after last week, Harry gave me grief
for being too nice to our guest, Mr. Banny.
Oh, good to me, I love it.
But I know it's going to be nice this time
because I totally agree.
And you mentioned the other one in passing.
And I just want to put it back on the table
because you said it, oh, and by the way,
the public markets now are giving me
cheaper capital than the private markets.
Because if all the numbers are as reported,
you're getting roughly 10 extra revenues.
And the fine folks at Figma are getting between 17 and 30,
depending on how available you think the current price is.
Right.
I think that's the byproduct of these large,
large crossover funds probably have 80%
of their capacity allocated to public
and 10 to 20 to private.
And so you're chasing a smaller pool of capital,
even though we're in a good position.
Ultimately, the volume of capital dictates that multiple.
And there's such immense amount of capital being deployed
in public markets that just is driving up those values.
Great.
In this conversation which we have rolling all the week,
I'm a huge company that's scale like yours should be public.
If for no other reason it is bizarre
that we've evolved the system whereby to allow ordinary people
to invest in you, instead of paying 50 bips to fidelity,
we have to pay 2 and 20 now and enrich the middle man like us.
And God bless it.
But it doesn't seem a mission-driven company
would make that their mission but call me cynical on that.
Right.
It's just the whole structure is absurd of, you know,
and it's exactly what you said.
Having to get permission from your employer
to get liquidity as a secondary after 13 years,
it's better than no liquidity, but it's a little bit surf-like.
And you really, when you're public,
you can make your own choices.
So I'm totally with that answer in terms of companies at scale
when they're ready should go public.
And it feels like the better way to run a business at scale.
Yeah, I mean, people deserve liquidity.
And having our customer base,
we've got 240 million monthly active users.
A lot of them want to invest in Canva.
And you see Figma had a huge retail demand.
We want people that have helped create our success
to share in that success.
And we really want to deliver for them.
So it very much works into our mental world.
So yeah, we're not anti-IPO.
I love it.
You're not the perfect contender for a direct listing.
Oh, I've looked into this.
And while I've looked into it in depth, it just...
You've got a great consumer brand.
You've got 240 million consumers that would love to buy in.
They're at listing all the way, baby.
Yeah, it is an option.
I'm not sure it's going to be the option for us.
We'll look at all options when the time comes.
You can still get all those dynamics.
You're not really getting much out of it.
And if you look at all the historic direct listings
and how they've gone over time,
I believe the data proves that none of them
have been greatly successful.
A lot of them have been really successful companies
over a long period of time.
But that period post-direct listing, none of them
have really kind of nailed it over that short term.
You are right in one sense.
But it's always worth pointing out
that the definition of success is weird,
because you wait.
They didn't nail it in the short term.
In other words, the stock didn't go up a lot
after the direct listing.
But a little part of mine wants to say,
that's the frickin' point, right?
You know, no one wants to say it.
But if you get the direct listing totally successful,
the people buying don't make any money, right?
And you know, people like their pop.
So you've mentioned this in a prior podcast.
It is about getting the right long term in business.
So you want people that are going to hold your stock
if you deliver, if you deliver being a key point,
you need to deliver for five, 10 years
and compound that position.
And so yes, from a sort of logic perspective,
it makes sense, supply and demand match that key point.
And you definitely don't want a huge, huge pop.
And I think you can sort of manage that through
how you stagger the lock up periods, et cetera, et cetera.
There's ways to manage that.
So it isn't everyone locked up for six months,
and then it drops.
And there's better ways to kind of manage that.
But yeah, I think you're ultimately optimizing
for the large, long shareholders
that are probably going to hold 50% of your stock
for an enduring period of time.
And the relationship will be all those investors
incredibly important, and from what I understand,
pretty anti-direct listing.
And that answer, that very coach and answer
is how everyone in theory will argue this.
And then when you're the guy and point
with your life's work on the line, just like halogen,
and you're like, do I want to be an experimental baby
on the biggest day of my life?
I do I just want to land this frickin' plane.
There you go, baby.
- True, true.
- I think your point on Figma was totally right,
the Rory, which is everyone's hour.
Here's the task case for why we need to have a diorama
and you're like, well, it had it been a diorama listing,
it would not have listed anywhere near the price
that it went, it would have been three to four bucks higher,
maybe it's 36 to 40, but it would be ridiculous
to assume it would have been a 75 starting price.
And I think I was really well articulated.
I was listening to Jensen on an earnings call.
This was also great clip about doing these shows.
I actually have to do some work
and really listen to earnings calls again, okay?
He said over the next five years,
we're going to scale into it with Blackwell
and with Ruben into effectively a $3 to $4 trillion
AI infrastructure opportunity.
$3 to $4 trillion.
Can that level of campaigns be supported
by enough AI-driven revenues, guys?
- Yeah, I mean, look at it, that's to $4 billion.
You want a 20% return on equity.
You got to be generating $800 billion of profit a year.
That's not a profit when, you know, Facebook, Matt,
all these guys make a couple hundred billion a year.
So you've got to believe in you're going to create
another four Microsoft, another four Facebooks
to justify that kind of spend.
So it feels deeply lofty to me
and not grounded in kind of the macro.
On the other hand, it's hard to argue
and it's the guy who built a company,
the most valuable company on the planet.
So, you know, you can get him credit for the specifics.
I don't see where the macro works, but whatever.
If you want to make that bad, Harry,
there are Nvidia puts that I keep my eye on
that you're more than welcome to plow into anytime you want.
Tell me when you do, Roy, I will.
Look, I don't know.
I mean, Roy's math's hard to argue with.
All I do know is, you know, I know it's a small percent
of the economy, but when you listen to what Cliff's saying now,
when you listen to what Mark Benioff said last week,
I mean, basically Mark said we're like 0.1% AI penetrated
in the Salesforce space, right?
So Salesforce is coming up on 50 billion.
They alone are going to have 200 billion of AI
attached to their model.
I'm not saying Mark's going to get all of it,
but the attach is going to happen.
It's just so, it's so early.
It's hard not to see everything easily
being 100x bigger than it is today.
We just started.
We just started.
It feels like 100x.
Now does 100x get us to that number?
I don't know, but I do think that Jensen and Sam Altman
have a pretty good sense of it.
So I'm not betting against it.
We can ask Cliff how deeply AI is penetrated there.
- Yeah, we have billions of AI usages in our product per month
and that's accelerating a clip.
So it is just beginning and the amount of calls
and inference we're going to rely on
is just going to grow exponentially
as these products evolve.
- Well, it is easy to see 100x growth, right?
- Let's try and quantify it.
- And they're all going to get it run on device a lot more.
So there are optimizations that are coming.
- Thank you.
Take on that, because you'd mentioned the notion
common to spending 10% of the revenue on GPUs
and in front of the model training, right?
I mean, so turning back and using it,
they've gone from a 90% gross margin
to an 80% gross margin.
Which is effectively where it's saying,
to deliver their AI magic,
they have to part with roughly 10% of their revenue
to the big AI companies,
just as maybe they probably did roughly the same to AWS.
Turning back to Cliff,
do you envisage spending 10% of $4 billion,
$400 million on NVIDIA chips
and our third-party models and GPU acceleration?
Does that feel wildly too much?
- 100% yes, 100%.
- So we do our own foundational model training,
which requires a huge amount of compute,
but then there is a lot of expenses,
and I think this is where the notions and Mondays
and all the other companies of the world
are flowing through revenue to the model companies.
But those costs are coming down exponentially.
You want to have the best model in your customer's hands.
- But do you think 10%, I mean,
you're spending like a quick,
do you think it could get to 10%.
- Yeah, definitely.
- There he is.
- Wow.
- That's it.
- But especially in the short term,
it will be probably less than that over time.
So you've got to separate training your own models
versus serving AI.
So currently, yes, I mean, if you look out lovable,
what is their pass-through in regards
to what they're paying anthropic
or whoever the model providers are?
It will be a lot.
It will be way more than 10%.
But over time,
they're betting on distilling these models down,
understanding user queries
and where I need the foremost frontier best model.
First, where I can deploy the model that's on device
or the model that we're self-hosting and running.
You'll get a lot better.
Companies will get a lot better
picking the right model for the right job
and only using the expensive models connected
through an API to open AI or anthropic or whoever
for the most premium queries where you need that answer.
But 90% of it will be run on device or be self-hosted.
And we know that over time,
we'll use the best models and that.
So take image, for example,
if there's the latest and greatest image model
that has additional capabilities,
it may cost us four cents an image.
We know we can get that cost down to 0.02 cents an image.
And we're banking on that over a six month period.
So we view some of those upfront costs
that are having a big eating a chunk into our margin
as more of a marketing cost
than a long-term enduring cost of goods.
Got it.
And that's a huge difference.
I mean, the assumption of getting 10%
from every software vendor is crucial to the idea
that you can expand three trillion dollars.
And if Cliff and all the other cliffs optimize,
and that 10% becomes 5%,
I mean, we're just still a hefty tax to pay from you.
Yeah, but I don't want to speak for Cliff,
but creating a static image such as it is today,
you could bring it down to our magnitude.
But like, let's, when Canva adds everything that Gamma does,
I mean, Gamma's consuming a lot of tokens
to build dynamic presentations for every single person
at my little team on the fly.
This is not a loading yet.
Coding every presentation from scratch.
That's a lot of time.
And it's not, and it's only pretty good.
Imagine when it's great and they redo every presentation
three times and run it through multiple models.
And then, and then Canva does it and Canva has a higher bar
because you have 240 million users.
But we don't need to code it, right?
So that's why we're building our own foundational model
to generate a presentation that's like phenomenal.
It doesn't need to code every line of a presentation.
So that's a heavy compute cost to create a presentation.
That'll be looking at, we don't need to essentially
go to anthropic and write a whole thing,
a whole essentially website every time
we want to create a presentation.
It's a lot, there's a lot easier ways to create presentations
that are a lot lower costs.
So they'll be thinking about that just like,
we've thought about it.
But if we were doing the Gamma approach,
which you're not, you might not go into Rory's point.
Let's compare it.
Oh, we've got the Gamma, but we've got Canva code,
which you can code a presentation.
You can go to website.
That is a high compute cost.
So we've got the equivalent of Lovable,
where it's more for creating widgets
and for education purposes, et cetera, et cetera.
It's got 20 million active users already.
It's going really, really well.
But you could roll that up.
I like, it is cool.
I can use it today, but you could do much more.
Like you have it pretty locked down.
Like what you can do with it is create assets
and overviews.
It's great, right?
But you could spend a month
and this could be lovable prime if you wanted to.
But you use 100 times of tokens.
Yeah, totally, totally.
Yeah, and that is an expensive product
to serve our customers.
That is the most expensive product
to serve our customers.
I mean, the macro, this sounds really arcane,
but it's actually going to really kind of drive
a huge amount of downstream implications
on the whole discussion we're having
and it's the ROI there, right?
Because like, big picture that the cloud business
pre-AI, you know, AWS, Microsoft Azure, and Google,
you know, plus or minus, 150, 200 billion of total revenue.
If every software company spends as much on AI inference
and AI training and the whole enchilada
as they did on cloud compute,
that's a 200 billion dollar a year business.
Just as I said, rough analysis.
There's probably some double counting there, right?
That's pretty damn impressive.
And it's still going to be hard.
That's the minimum they need.
200 billion dollar top line revenue.
100 billion dollars of profits.
Going back to that, you wouldn't want to spend
four trillion dollars to make a hundred billion dollars
of profits.
For three trillion of CappEx to have a return,
people like Cliff, one and Vincent,
I'm going to have to yield a lot of cost over two,
the hyperscalos, the model providers.
And I don't think a large number of software
exactly are going to do that at least easily.
So it will be interesting to see how that math actually shapes out.
And if you can, in fact, you command a return on that level.
My gut is something over and above what we've seen now is required.
And Jason, you're pushing and you always do.
Maybe that is there.
Maybe it is instead of optimizing compute,
you trope compute at everything and then
use as a woman to pay for it.
But it's something more than what we got now.
I just think we're underst, I mean, Cliff made the point.
We're underestimating the processes we run today.
We'll figure out how to use on less tokens or our own models
or other things.
If the world doesn't change, it will come down
in order of magnitude a year, or possibly faster.
But our ability to use orders of magnitude more tokens
can be could turn this on tomorrow.
And we could consume massive amounts of tokens.
They already have the product, it's already cool.
It's just, it's just, it's here.
We genuinely have to, we do say, this is an interesting point.
We genuinely have to think about this deeply
because we've got 240 million users.
We're about to launch in October a whole slew of new AI products
deeply integrating it into every part of the workflow.
We need to seriously run the math.
So I'm, hey, if 20% of our users,
50, 80% of our users use this 10 times a month,
what are the costs going to be?
And they can look pretty big and eat into margins
very significantly.
So we need to be sort of dumb.
And if it comes to a shifting pricing accordingly.
No, no, so we are doing that actually.
We're moving to a unified credit model around AI.
So your premium subscription free gets a certain amount,
premium subscription gets you a certain amount.
And then if you're a super active user,
and so that means it can't eat into our margins too much.
So you need to maintain that margin
and we'll have sort of that scaled usage-based pricing
beyond a certain point.
Claire, if we need to look at usage within the company itself,
Jason said something I think very apt.
A couple of shows ago.
Jason, you can remind me specifically what you said,
but you said about basically equipping developers
with, I can't remember the number.
Was it $10,000 a month in terms of assistance
through coding tools?
And that's where it's coming from.
And a Shopify was pushing it up to $10,000 a month.
If you can prove the ROI, that's the budget.
When you think of equipping your engineers at ConvertStay,
would you feel comfortable in a future world
equipping them with $10,000 a month of coding engines?
We haven't done that down to an individual level,
'cause I don't believe we've got over 2,000 engineers
doing that at scale would be the right approach.
But from an engineering leadership perspective,
and we encourage all our engineers
to use the best security certified coding tools
that can increase their efficiency.
And we're not price sensitive around that at all.
We know that ultimately the playing field levels out
and there'll be competition.
But yeah, so we're very open with whatever tools
they wanna use, but there's always the two or three
great ones, and it is already consolidating.
Push on that, and you probably have guys,
at the 20-buck level a month as a given,
the 200-buck level, 'cause Jason's visualizing a world
where you can go 1x order of magnitude beyond that
to the not the 200-buck a month,
but the 2,000-buck a month level, and even beyond that.
And yeah, I've gone.
- We need to rethink our seat-based pricing model,
because some of the tools, particularly our marketing tools,
we're creating, enable a single marketer,
deploy tens of thousands of pieces of content.
So one person can create so much content,
be feeding that into all the social platforms,
and wherever their marketing visual content ends up,
and then getting the feedback from how that's performing
in the wild and feeding it back into the creation loop.
So one person can do inordinate amounts of work,
and that's using a huge amount of compute,
and you can't charge 20 bucks a seat for that level of breadth.
So then it hits a certain, you give that functionality
for a per seat price, but then over that,
it needs to be based on consumption.
- So it's a hybrid seat and consumption-based model.
- We saw Monday got hit because a lot of that
growth relies on SEO.
You're seeing SEO really reduces
a customer position channel for a lot of companies.
I know you've only got 10% which is paid cliff,
but given 10% being paid,
are you moving forward with the assumption
that SEO is going to be a much smaller part
of your customer acquisition funnel moving forwards?
- I think SEO is about 15% of the 90% organic to date.
So it used to be our number one channel,
but now our user flywheel, word of mouth,
and people sharing designs are our biggest.
No, I mean, we're seeing a lot of some of the SEOs growing
for us, but also we're the number one productivity
up on chat GPT, and we're the fifth highest domain
that chat GPT refers to.
So out of all the websites, it's like Google Meta,
but we're number five in regards to,
essentially it's SEO for LLM.
Because we've invested a lot over the years,
they're obviously taking a lot of the same signals
that Google's taking, and anything we're losing
on the SEO front is translating to LLM SEO,
which is a huge tailwind for us.
So to give you an example, a year and a half ago, 0.02%,
I think it was of the images uploaded to Canva
were from chat GPT, that's now over 5%.
So the fuel and content being generated in these LLMs
are being propagated into Canva for that editing,
for how they're using it in designs,
and for that collaboration storage deployment,
that whole visual communication workflow
that we excel at.
I know what Harry's fishing for,
trying to figure out how his investments are doing.
Have you proactively tried to win
in terms of how you show up on chat GPT
in the same way you did on SEO,
or has it just happened organically
just by virtue of being who you are?
- I would say 100% we have won.
As soon as these LLMs started taking off,
we had the conversation,
is that SEO team working on LLM optimization?
And there's definitely a team at Canva working on that.
- Cliff also, yeah.
- The whole thing about SEO being dead is stupid.
It's dead for folks that don't have a brand,
don't add value and don't ever reach.
I mean, I just popped it into cloud,
and best overall Canva, what best design product
to make YouTube sound?
- What would we remember?
- What best design product to make YouTube sound?
Best overall Canva, I mean, it's just...
- In fairness, kind of the SEO,
I think you have to distinguish between people like Canva,
whether they have a product to sell,
and they're totally happy to sell it via ChatGPT.
And then media companies,
where the only product they have is their content,
where if Google or ChatGPT serves up the answer
and no one clicks on the website, then they're toast.
For Canva, this is not existential, you guys are fine.
But if you're a mid-tier review site,
you just get scraped and summarized.
Well, thanks for playing.
- Cliff, you've got OpenAI at 500.
You've got Anthropic at 183,
and you've got Groc at 100.
Why do you put your money?
- All of them.
- I'm on big hands with all those companies,
I'm not gonna, I'm not gonna cheat.
- We're still a constitutional company.
Country, you have the right to remain silent.
- Yeah, yeah, yeah, yeah, yeah, I'm, yeah.
They're all doing great work.
- Mutual.
- He doesn't fall for your traps, Harry.
Not like me, who foolishly feels
to answer these questions again to trouble.
- No, but I generally believe they're all companies
that are gonna be the foundations of our AI future,
they're gonna feed pretty much every single product.
So it's like betting on Amazon and betting on power.
You know, it's in every sort of,
and the power question is an interesting one
because every big revolution when it comes
to technology shift has largely been power-based.
And I think one thing that's interesting
is the amount of energy that Jensen's $4 trillion
investment's gonna take is just insane.
And I think it's akin to really what Tesla
have done with the electric cars.
And so while I see AI pessimists and environmental pessimists
saying, oh, so much more energy,
it's gonna be bad for the environment.
I actually think it's gonna rapidly accelerate our shift
to green energy, particularly nuclear,
which we're just gonna have to solve.
And once we have solved it,
and it's way more economically viable
than burning fossil fuels,
it's gonna kickstart the entire shift to renewables,
or zero emission energy sources,
which I think is ultimately gonna be huge
for the environment, like midterm.
- Before we wrap, there's one interesting topic
that we said about before, which is like,
you said, oh, you should invest in Riverside.
And I was like, oh, no, I saw it at seed and I missed it.
And then I've seen it every round since,
and I didn't wanna do it.
You said it was an interesting thing
about kind of the VC regret pathway
and not engaging later on.
I had it again today with Revolute
when people asked me, well, I'm investing in Revolute
and I was like, well, it's been embarrassing
as an early stage ambassador to buy Revolute
off Goldman's ice, my plan.
That's when you really fucked up
as an early stage ambassador.
Brory, Jason, I'm just intrigued to hear your thoughts
on the ones that you've missed
and the regret pathway on investing later.
- I think you should do it.
It's a short answer.
And this, for the viewers, this happened
before the canvas, before we kind of went live,
Cliff was talking about folks who looked at Canva
early on past, and then really struggled
later on to pony up and pay obviously much higher prices.
I am the exact opposite.
Many of my most successful deals I've passed on prior,
and I've just learned, if you pass on something
and then you get another data point,
like a year or two later,
and they've done what they say they'll do,
you literally don't need any more information.
It's so much more telling,
'cause with a new deal you're starting off
and all you're seeing is one data point,
the difference in information content
between two data points over time,
the border which are positive, and one data point,
and where you have no calibration, is almost infinite.
I can think of two or three deals way back in the day,
I didn't get amateur in 2003,
and a year later I saw it at twice the price,
and I bought all I could.
Same thing on box, past at the start of 2010,
I didn't even get done.
And nine months later, I literally woke up and said,
what's the dumbest thing I did all year?
I didn't do that deal, and I went down and did it.
And I think I'm trying to discipline myself
to do it even more, because when you go back,
let me just repeat it again, when you see the company,
when they sell, they'll do A, B, and C,
and you pass, you don't believe they'll do A, B, and C,
and then they do A, B, and even if they do C, prime,
a little less than C, you have what you need to know.
And then, then Cliffs Common Applies,
is now you're seeing a category leader,
you know you can lean into the execution,
you really should say to yourself,
unless you think there's a time problem,
unless you think there's a time problem,
you should say to yourself, I was wrong,
how do I kind of change my waiting and lean in here?
And does that leaning in apply in an AI world
where sustainability of revenue is a question?
'Cause a lot will say, oh, I'm gonna do 10 million in a year.
- I think the two separate issues,
because you are right about one thing,
sustainability is a lot harder in AI,
we're seeing a lot of people drift in
and out of product market fit,
but that's gonna be true in the new deals as well.
You know, the new deal that you see,
where you have no context from two years ago,
and it looks golden today,
that can drift out of product market fit too.
So it's a separate factor, and I do think,
even in an AI world, so taking it one step beyond,
I think the really positive sign in an AI world
would be you find the find, whatever reason,
you passed two years ago, the best of all signs is this.
The product has evolved three times,
because that's what's happening in AI land,
and the founder has been able to evolve it,
and then you're like, oh my God,
this guy has a survivor gene, run, don't walk,
because I think that's one of the identifying characteristics
of the people we see figuring it out,
which is the damn thing keeps changing,
but they just keep changing faster than the other guy.
So again, I think there's always signal,
'cause the hardest thing, the thing you can't change
in this business is time, you can't compress time,
you can't fast forward, you can't rewind.
So when you have two data points over time,
that's just so frickin' powerful.
And I totally get it, could I wrestle with this?
You get hung up, oh my God, I could have done it
for 10 million, or 100 million, or whatever.
Now I gotta pay 500 million,
and you just gotta look yourself in the mirror and say,
that is the tax you pay for being stupid, pay the tax,
and just get off the stupid train.
- Does the same apply for follow-on rounds as well,
because it's amazing to me when I've seen investors
have the inside lane on all the company data,
and the company is performing like crazy.
They've got a big chunk, very early call it, seed A or B.
And the best investors that have done best out of Canva,
like they were early stage funds,
but they realized, holy shit, we're onto something here.
So they raised SBBs or additional vehicles
to move further up the value chain,
like going later and later stage,
and compounded their position,
or at least didn't get diluted over time.
They've done the best first,
there's a lot of early stage investors being like,
they call themselves being disciplined,
oh, we only stuck here.
But if you're on a winner, keep betting on that winner
is my approach, but it's amazing to see
how different investors kind of treat
follow-on investors as investments as well.
It's a great point, and I think two separate issues.
You have the individual, the investment,
are you making the right investment?
In other words, did you really think
that the third follow-on round was overpriced
'cause you thought the market was smaller,
were you wrong on the investment?
So that's one factor, and we can talk about that.
But then separate from that, you know,
you have the institutional thing.
Are you set up to do those big rounds?
Do you have to raise an SBV?
Are you able to raise an SBV?
And I would say Cliff, one thing I've internalized is,
I think especially being scarred by the probably three decades
doesn't help sometimes.
And you write in a company like yours
the correct response is piling at every level
and find some way to do it.
So there's two separate things.
One is do you think it's still think it's a good deal?
And to your point, one of the things we've observed is
the round after the round we do,
if it gets a quick outside lead up round
and you have positive data,
it always feels expensive.
Going back to, oh my god, it's too much.
That's the round you should do every dime
'cause it's roughly in the same strike zone as your sweet spot.
It's not like we typically invest,
your plus or minus 100 million per day.
The 20 billion round is hard to get your head around.
But if you do the round at 100 and then a 12 months later,
there are three or 400 and everything's working,
that's a signal that we have constantly underestimated
and are constantly corrected and have been validated on.
Or actually, or not,
or actually there's been a price inflection point
but that hasn't been a company inflection.
And so you're actually paying up for little company growth.
I'd rather pay up to the 800 to a billion
where there's real company inflection
and the price inflection matches that.
- Well, there's two things.
One, if it's price only and you're not, yes,
if you believe your inside information
pushes to the negative and you know something, then yes.
But I give Peter Thiel said it,
is that the outside, the data on and out is a good,
and maybe not in this market,
and I haven't processed that yet.
But he's very courtable as saying,
you know, the outside lead up round,
the follow on and the outside lead up round,
was the strongest positive signal
and they consistently underestimated the value of that.
And I do believe that to your point, Clef is the case.
I do admit sometimes that, you know,
if you're doing, if your business is relatively early stage,
it is hard to think, how do you go at 20 billion?
And what do you do and how much do you put into it?
But there's no doubt, we've talked about this before
that concentrate, being willing to massively concentrate
on a small number of deals,
get you the last absolute dollar without performance.
Yet you do have to, as you say,
that the key thing is to be able to distinguish the Canva
from the 10 other companies you've had
that got a billion pre-evaluations in 2021
that aren't worth a billion.
- Sure, sure, sure.
- In the end, you still have to be vaguely good at picking.
- Guys, listen, I can't thank you enough for this.
You've been fantastic, Clef.
I so appreciate you joining so late in the morning.
It's so great of you to join.
And I really appreciate it, man.
- Thank you so much for having us.
I appreciate it.
It's great chat.
- Rock and roll. - Awesome.
- Thank you, Cliff.
- I think you can just tell how much fun we have as a group.
I want it to be the best show, though, for you.
So let me know any feedback that you have.
[email protected].
I want to know what we can do to make it
the best show of the week for you.
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