20VC: Anthropic vs The Pentagon: Who Wins | OpenAI's $110BN Mega Round | Cursor Hits $2BN in ARR | Block's 40% Headcount Reduction: AI or Overhiring

Whatever it is that's in the water at Unchropic, it's working and it is created unity. The state is more powerful than Unchropic. You've got to believe that the next round for this Unchropic and SpaceX are all public offerings. Tesla trades at a trillion today. I think if Elon died tomorrow to trade at 200 billion. Open AI trades at 800 billion today. I think if Sam Altman died tomorrow morning, we traded 600 billion. I think we got the SaaS apocalypse all wrong. Every single CEO I talk to, doesn't think they need 40% of their team. The lesson is never underestimate big markets and momentum. The knife fight doesn't start until the time is like 60, 70% saturated. The price for winning is to reinvent the company from scratch and the product from scratch every six to nine months. Congratulations at the fun game. This is 20 VC with me Harry Stabbins. Now it is time for my favorite show of the week, Rory O'Driskel, Jason Lemkin, analysing the biggest news in tech this week. And Thropic goes to war with the Pentagon. Do morals help Dario? Or do they hurt him? Open AI closes at $110 billion around four times the size of the largest IPO ever. And then finally, block lays off 40% of the workforce. Jason Lemkin predicted it in real time. This is my favorite show of the week. It's time to dig in. But before we dive into the show today, I run 20 VC fund and I get this question from founders all the time. Harry, I can't find a good dot com. Do you have a hook up? Let me tell you now, the answer is always gonna be no. I don't have a guy or gal for that. I do have a recommendation though. If you're building a tech startup, get a dot tech domain. Tech startup, dot tech domain. It couldn't be more simple or obvious. As an investor, I appreciate founders who put thought into their branding. When I see dot tech in your name, it tells me right away that tech is at the core of your build. It'll say that to your customers too. 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What's actually happening with the battle between the Pentagon and Anthropic before we dive in? OK, yeah, reminder of context. What happened is that Anthropic actually has a $200 million contract with the Department of War in an negotiation about that contract that culminated in a rupture last week. Anthropic was seeking to impose a couple of conditions on the use of their model that the Department of War was not willing to sign up for. And specifically, the two issues, as I understand them. And again, I want to preface all this by saying, unless you're in the room, you should assume that everyone who was in the room is spinning a version of this that makes them look good. So with that caveat, the two issues appear to be Anthropic wanting to specify two things. One, that you could not use their models for, quote, unquote, mass surveillance. And secondly, you could not use their software for autonomous weapons. Those were two restrictions they wanted to put on the use of their models. And the Pentagon's counter was we want to be able to do anything that is, quote, legal. That was the bid-ask spread. And it didn't converge. And on Friday afternoon, the Pentagon broke off the discussions and effectively threatened. The wise, yet I understand it hasn't been done too. At a minimum, cancel the Anthropic deal, but also pass away straight to clear them a supply chain threat, such that other vendors selling to the Pentagon or even to the US government couldn't use them. So depending on how that threat is interpreted, it's either a mild loss of a contract or something approaching thermonuclear. And it's not yet clear how that happened, or if it happened what it means. So that's kind of the facts simply put. Was it the right decision by Dario to have these principles and to stand by his beliefs in this way? Because Sam has since swept in and done a deal. And we can get to that repercussions on the consumer side. But Sam has done a deal in replacement. I think he got swept up in a tough position, which is his team as employees. Dario clearly since the day he was lead safety reachers or it open eyes felt profoundly important about safety. In fact, they refused to release Claude before chat GPT because he didn't think it was safe. They only released Claude under Dures. Finally he goes to his team and says, a while back and says, listen, at least we can make weapons safer. It's going to happen one way or another. There will be AI in weapons. This is my understanding. And he convinced the team that what we will do is we will make them safer. And that was the justification. And to a lot of folks in the eye, it's even Elon said a little while ago, I wish AI hadn't happened. But since it is, I'm all in on XAI. So if these AI's are going to be out there in the military, we'll make the safe one. And I think it just got pushed to the point where I think he has this personally. But I don't think he'd go to his team and say it was true anymore. It was just pushed too far to say at least we'll make it safer than our competitors were. At least this will be safer than XAI or chat GP or some tortured open source thing. Because at least the good guys will be in there and we'll make sure we don't do the wrong source of mass surveillance. And that when we do target folks, which we've been doing with some form of AI for years, at least we'll minimize the collateral damage. I don't think he could say it with his straight face. So he said, I've got to step out on this one. Like this is not only do I not believe in it, but I'll lose my team. If that's the framing, then I can answer the question concretely. I think you're right, Jason, which means he was wrong. I totally agree. One of the organizing principles on traffic has been this almost messianic belief in AI, the threat of AI, as yet the willingness to develop AI because the only people who can be trusted with AI. I find that weird, but I'd be an idiot not to recognize that this has been an extremely successful unifying principle of this company, right? Which is why they still have the seven founders when the other guys across the street have lost almost all but one or two of the founders, right? Whatever it is that's in the water that on traffic, it's working and it has created unity. And he would be a fool to blow that unity. And the man is clearly not a fool. So I get it, Jason, you're right. He had this belief on AI safety, that is not just a lightly held belief in his company. It's a core organizing principle. And arguably the engine that has driven the enthusiasm to build that company. Given that, I think it was naive to try and sell the government at all, at department of defense at all. They too, unlike a lot of us who are just ordinary people, have an organizing principle, which in the case of the Department of Defense, our Department of Wars, defending the United States of America. And they believe correctly that that's their task that they've been charged with. And the idea that someone's going to wall-send and say, I want a $200 million contract, but I'm going to tell you the safe way to use this is absurd. And I think the deal of the points was absolutely right to say we are not signing up for some bunch of guys in California to tell us what to do. We are the Department of Defense empowered by the president and the Constitution to defend this country go away, little boy. So I think they were entirely right. If you wanted to not sacrifice your principles, and if you believe that you have really nuanced opinions on how AI should be used in war, then you probably shouldn't sell the Department of Defense because they really don't correctly don't give a damn about your principles. And I know, again, I feel weird saying this, because I actually think I love Darryl Swriting and his speaking. He's someone the clearest best writing I've seen on almost anything. And I happen to know, because he writes, "There's a big believer in Richard Rhodes "the making of the atomic bomb as a book they share." And when you read that book, the first conclusion you should come to is, "General Goes didn't give a rat's ass "about the scientists. "He humid them. "He get them what they needed. "He let them not wear uniforms because it made them happy. "But when it comes to the crunch, "they weren't even in the room when they decide to use the bomb." And thinking that you're going to have the luxury of getting to be part of the decision is unrealistic naive and actually constitutionally wrong. I mean, I love the current administration, but they were elected by 80 million people. And Harry will remember, Tony Ben, the English politician used to say a cabinet minister, a very left-wing socialist whom I don't like in any dimension, but he had a great phrase for the civil servants. He turned them and say, "And who voted for you? "And who voted for you?" Guys are done shopping. 'Cause 80 million people voted for us, and the constitution says we're here to defend the country. So I think drifting into this situation, given that that's the core organizing principle, is probably a mistake. It might work from a business and a marketing perspective, 'cause you've got a huge bunch of outside-lift. And on that basis, it's been great. But this is the big butt. You're now a little bit at the mercy of how the administration wants to handle this. Right, and the thing that's in your favor is they often have a short attention span and they move on. And the thing that's against you is, they're quite hard-knows sometimes about grinding you down. And if they want to grind you down, they can. I don't think they should. I think they would be wrong. I think they should say the one topic. You know one of the business with us, that's fine. We'll keep our 200 million, but we won't grind you down. We won't declare your supply chain waste. We won't try and destroy your business. But you've drifted into a situation where it's at least plausible they can. I don't think that's a good idea. If you were an anthropic shareholder's day, would you feel more or less confident today? You mentioned the lift for contacts. They are now number one in the App Store, ahead of Chatchee PT for the first time. They have a consumer brand, which actually consumers care about, really at mass for the first time. And Daria has presented himself to be a very thoughtful and progressive leader that cares about safety. As a shareholder, would you be more or less happy? Same expected with turn-wide of variance by definition the risk increased. Therefore, you should be unhappy. Despite the lift, you were doing really well a week ago. You are clearly the dominant company. You made entire stock indices move at your will. You write a blog post and every legal tech company goes down 20%. You had a good thing going, as they say in that meme. And now you've drifted into the situation where you've got this ongoing fight with the government who has way more power as you're suddenly discovering than you do. I don't think you're happy about the increased risk in your deal. I think we're entering an era. We've entered an area where no one really cares as long as the numbers are there. No one cares. There's fewer ethical concerns. There's fewer anything concerns. If I just got my March 1 investor updated andthropic, and we just crossed 16 billion, my email back would probably be great job. With three exclamation points, and maybe an emoji or two or four on my phone, right? I mean, this is the world we live in. So we don't have the rights. We don't have almost none of the money in Anthropic has any rights whatsoever. I would say with most startups, it doesn't no longer matters what I think as an investor. It literally doesn't matter. Only the struggling ones doesn't matter what I think. And then you don't want to care. Yeah, then I have my board partner. You're scenic. To be fair, I think the question is not, do they care about your opinion? The question is how would you feel? And I think you're right. If numbers go up, you're fine. But I think you just have to accept the fact that in return for a significant boost in popularity, good. You have a mild existential risk that probably you can beat in the courts. But nonetheless, if the people on the other side of the table decide they want to be vindictive, can make things very hard for you. Just one thing that I was thinking about to highlight, if we get to block later, right? If we talk about the power of labor versus management, and I know we don't like these terms, they sound very smithy and stuff, but it's true. And Anthropic and OpenAI were at the extreme end of power of labor. I mean, people are leaving eight figures of vesting stock at OpenAI because they want to work somewhere else after 13 months or six months. I mean, this is unprecedented. Even at the hottest startups people used to stay, OK? On the other hand, for non-AI folks, for the blocks, we have the least power versus management ever. Like you're less than fungible. You're not even wanted, right? And so there's a subset of folks-- and listen, Anthropic's probably 15 billion. This is an important subset, right? There's a subset of folks. It's very weird where labor has all the power. And Anthropic has done the best job of anybody. A lot of the XAI founders are gone, too, right? This is like 2021 all over again. You've got to do whatever it takes to retain the team. Like everything. If they want you to take on the Fox News dude, Pete Tedgith, you do it. If they want you to tap dance on the roof of the company, you do it to keep the researchers, right? What Maggie told us-- I didn't even know this-- when we were in London with Harry, at OpenAI, they don't even let the salespeople talk to the engineers, the researchers. They're not even allowed-- their cards don't work at the building of engineers because they don't want to be bothered by the go-to-market team. They're not even allowed to do a 10 meetings in the good building. They've got to go to the building next door. That's protecting your talent at all costs, right? So that's why I think Dario had no choice. I don't think the team would tolerate anything else. First of all, I love the labor capital distinction. It's really more Marxian than anything else. And I'm going to go with it, you know, yet capital versus labor. It's super interesting to see in a situation like anthropic capital is weak and labor is strong because those are the most talented people on the planet who have the skill that you need the most. And you write in many other organizations this week. But I'm going to remind you, if we're going to do political economy, not politics, but political economy, as classically defined, there is a third actor. It's called the state. And I think what you're seeing very clearly-- now I just want to say it's a clear, the state is more powerful than anthropic. And I think that's the lesson you got to learn. And it's interesting. If you listen to some of the folks talking about AI, even two or three years ago, hinting at this, would it like move the state intervene? And I think the state has extraordinary powers because it's the state. That state has us vapor points out, the monopoly on violence with energy and geographical area. And I think that in terms of appeasing your employee base, you got to do what you got to do. But drifting into getting into a conflict with the Department of War on something where I think, logically, you're in the wrong because you're trying to interpose yourself over and above the people who are charged with doing this. It's just a bad place to be. And I would want a tip-toe back out of there. And if it all costs you with a $200 million contract in the context of a $14 billion business, you should declare aware and move on. For all this talk about AI being so scary. Let me tell you what we learned in the last week. AI might be scary in the theoretical after all. It could be used for this. It could be used for that. The state is scary in the real sense of we have laws. We have men with guns to enforce those laws. And we can take your company if we want to. And I bet you, even though you look at those laws, like the defense production act, you look at those laws like being declared what was at the supply chain risk. And you kind of go, I think I could win that one in court. It's still a sobering moment when you realize, hmm. The person in charge and most powerful military on the planet thinks that you are a supply chain risk wants to invoke powers granted to him by Congress to do that. And you've picked on them. I would have preferred to skip that. And you've got David and the rest coming straight for you. Non-stop, right? It doesn't help. But when you're talking about the power that labor holds, what you're suggesting with that given Sam sweeping in and taking it is that he does not face the same pressure from his employee base. No, he did. His team hated that he did it, right? He had to immediately say that he's going to unilaterally change the terms of the contract the next day. I mean, he's a very smart guy. He signed a few contracts in his day. That was num-nuts thing to say. I know he believes it, but we're just going to change the clauses ourselves on chat GBT so that they say what we want them to say. I mean, good God. I agree with Jason there, Harry. I think what the last four days have shown is the power of labor at OpenAI, too. And it's ironic because the first time we saw the power of labor at OpenAI was the power of labor to insist that Sam comes back. Back in 2023, when you had that magic moment, when everyone-- when labor basically said, we want to pick our boss. And the owner says, you're right, you should pick your boss. So it was Sam wrong to then do that deal in your mind. You said it was nine of Dario to maybe enter it. Do you think Sam should have not entered it also? It's the most entertaining of all possible outcomes. He's probably right on the merits. As often happens in life with a certain kind of person, it's only when you're absolutely right on the merits. I mean, when you actually believe what you're saying-- and I read what he's saying about in a democracy, the final arbitrage should be the government, not individual people. I actually think he was right on the merits on that, which, of course, means pleasingly it's the one thing that's going to bite him on the ass. I want to-- the one time I think he was like entirely correct in terms of how companies should interact with the Department of Defense. And I think actually signing the contract on the merits wasn't awful. But you're right, his labor doesn't want him to do that. So I think in terms of opening Pandora's box in his company, he was wrong. I mean, he wasn't even approved at the Department of Defense for this application, right? Only XAI was. And they had lost. They had lost because Palantir picked Anthropic. They'd already lost last summer. They'd already lost this war. And he saw all of a sudden there was a break, which happens to every founder, right? Through these moments in time when your competitor goes down for a week or screws up a key deal, and he did what most of us in B2B would do. He pounced on the deal. He immediately shot the email to the CEO. Rory Coe was down all weekend. I can have you up on our infrastructure on Monday. I'm actually going to argue something that's going to sound naive. I actually think it wasn't just a pounce while the other guy's weak. It actually was a roughly trying to do the right thing. And actually, as I say, I think the odd thing is, I think he was right on the merits. We should be willing to sign deals like this because the government should decide. But his labor's not going to consent to that. And I can tell board of you are looking-- Listen, I think it's just-- everything is accelerating in the capabilities of these models. Everything is accelerated since December, right? Everything's gotten better. So it's just very hard to predict for a military application what these models will be able to do in 12 months. It literally could be beyond what we could conceive these LLMs could do. And I'm not saying that that is a bad thing because there's bad actors in the world. But even understanding where it's all going to go, it's hard to predict. It's curious. Just to ask a political economy question, who should make those decisions on how to use this technology? A privately held company or someone elected pursuant to the Constitution of the United States of America with 80 million votes in a Congress? Who should make those decisions if they are a court and court and not? They're all tough. I mean, I don't want to spend all the time. It's tough because there's no good answer. We know the last thing we want is Rokana or whoever the version is on the right, making a hyperpolitical decision. We don't want that. We don't want to politicize, right? No, I disagree. We don't want political. How do you think we make any fucking decisions? It's called a constitution for a reason. I don't think most of our political leaders even understand how AI works. I don't think most of most of the folks, in general, even in on X, understand how it works. They don't understand. Well, guys, as logic and as rationality, you're logically right, Rory. But Jason is rationally correct. No, I disagree. But no, the majority of governments around the world are not sufficiently versed in artificial intelligence and deployment and evolution of it to make sound decisions. I think we would all agree on that. I wouldn't. Look, by definition, if you're running the government on any individual thing, experts no more. Your job is not to be the expert. Your job is to be able to manage the experts, right? And I think it's the same mistake, frankly, that folks made in COVID where they did it defer to science. No, it's listen to science and make informed judgments. Now, you might argue that the people making those judgments at various times have been mediocre are even bad judgments. But the way to solve that is to elect different people to make judgments. You can see, I don't trust the US government so I don't want to deal with them. I'd say totally rational thing to do up until the moment when they enfoked the Defense Production Act, right? Totally rational. But what you cannot do is say, I'd like my $200 million, but I'd like to tell you what to do as well. Just one interesting thing on the deal, just structurally, putting aside, and then why don't we move on? Like, it wasn't being negotiated before it was being signed, right, by the nature of any big deal. So it was signed last summer. That means, anthropo is probably closer to a billion dollar run rate and still trying to break it. Because this is a billion dollars in January of 2025. So signing a $200 million deal, plus $200 million from Palantir pull-through, plus blocking your competitor from Palantir and others. That was a pretty big deal at the time. That was probably one where he was honest that he swallowed some of his principles, like raising money from sovereign wealth countries. But it was so important to winning in the enterprise and building this cloud. It probably actually made more sense to take the risk at a billion-ish, right? Then at 15 billion, where you're like, oh, you know, everyone's going to be like, you throw away the $200, $400 with Palantir, OK? $200, $200. Tough or decision at a billion run rate. Like, most of our portfolio companies have they came in and said, we can grow an extra 40% this year. If we sign a contract, we kind of rather not sign, but it's totally legal. And Rory, instead of growing 60% this year and having no exit, we can grow 110%. I think most investors would kind of say, take the deal. Swallow your pride, right? And so it was a bigger deal at the time than it is today, I think, right? Good. But actually, anyone now having been harsh, I'm going to compliment. I don't think this happened because they needed the money and they don't need the money now. I think like often happens in life. People drifted into a situation that nobody fully thought true. And then you end up at this point, even though you didn't plan to be there. I think actually the relationship happened initially by Palantir. So they were selling to Palantir as one would, a great customer to sell to, Palantir sells to the government, you get dragged in, and you probably sit there thinking, well, that'll be reasonable. We'll go and talk to them about how we operate. I mean, there was a journal cover today. Part of this, as always, the case is personality clashes. You're like, oh, this is the way I look at the world. This guy at the other side of the table looks at the world totally different. Final thing on opening our hands, we will move off them. The ultimate deal maker that is Sam Altman closes $110 billion around four exercise of the largest IPO ever. I mean, Jesus, you've got to give the man credit. I mean, what an absolute machine. Anything other than plaudice? Is there any money left in the world to fund these businesses? The 200 and 400 million in revenue seems relatively poultry compared to the $110 billion he just raised? Yeah, I mean, there's some medical, I mean, obviously, they're not public. And obviously the benefits are enduring to a relatively modest amount of shareholders, right? All of that stuff. But it does make you wonder if we should even be talking about the IPO window or any of this crap. It doesn't even matter when opening I can raise $110 billion. Oh, we're all worried. Some B2B company can't IPO at 400 million, growing 40% at $3 billion. What difference does it get so minuscule? I mean, it matters to the humans that work there. But it's not even relevant to the economy when OpenAI does $110. And they're going to do another one before the IPO, probably before the IPO if they can, right? Maybe not. It'll either be an IPO or another round like this, but it's a force of nature, right? First of all, it's clearly a fortunate and it is astonishing. Anyway, you cut it. He had a venture of dollars raised, invested year to day. You kind of go 30 on an anthropic 110, if you call it VC, it's 140. It's more than US venture for all of last year. So these are astonishing numbers, right? I do wonder. It's a very odd circumstance to have a private round be for exercise of the largest IPO ever, right? And it does make you wonder how that IPO gets done. There's little nuances here. Amazon's, I think, 40 or 50 billion. Some of it's up front. Some of it's commenced on either an IPO or AGI, which is just one of those weird things. That some of the money only has to go in once the company out of achieves AGI or goes public, which to me and Jason, you mentioned a while back, exudes a little bit of the IPO support coming in. In other words, is this really 15 million now and 35 million as kind of a placeholder for the book on the IPO or something? There always a precedent, Savina. And video investing 100 billion. And then the kind of walk back of up to 100 billion. Is it that again? I'm genuine. No, it's not quite that because Nvidia talked about investing 100 billion. You remember I printed out the press release. And then they ultimately invested 30 billion. So they folded back slightly. Amazon came in for 50, but of that 50, it's not like it's a press release. It's actually a real commitment, but it's commitment on closing conditions that are either an IPO or AGI. So it's not money now. If you needed to pay your workers next week with that 35 billion, it wouldn't be there. When does this go public? You've got to believe that the next round for this and traffic and SpaceX are all public offerings. I take you to let who writes the next check privately and what the investment thesis is. I don't think there's more capital there. It's hard to imagine another round after this. So you just, therefore, by a process of elimination, at some point you got to go public. And the next round probably is a public round. An important point on an asterisk that we have a double asterisk too. So it's 110 billion round, but 50 billion from Amazon, of which only 15 billions up front, right? The rest is AGI or IPO. But Amazon's own free cash flows fall into 11 billion a year. Because it's spending so much. OpenA had to go to Amazon and they had to go to everybody on planet and Videon saw and they're exhausting. All like Amazon doesn't even real, it has the resources, but it does not have the free cash flow to fund its commit. Could Amazon do 150 billion, 300 billion? I mean, there's a limit here where the folks that did this round literally cannot do anymore, right? And this is probably why Jensen walked 100 billion back was there's a theoretical idea where it makes sense. But the world is changing. And that's a lot of free cash flow, even for Nvidia 100 billion, right? So we're reaching their limits. I know this is an absolute stupid property suggestion. You can both fire me for it. Is there a Sam Altman premium? We've spoken about the Elon premium before. If Sam wanted to say, I don't want to do this anymore. I don't think in the same way. His genius has been deal doing and the umph and the hoots per to raise 200 billion plus privately held. But Elon's genius at the margin has been the ability to pull off amazingly complex engineering projects sequentially. So I don't think there was the same premium there. And you could even to make it a little more pointed as well against Elon just for a second. Open AI trades at 700 billion, pre this round. But that's because it's hyper growing at, you know, I can't remember the growth from 12 billion last year, from three or four billion in gap revenue to 12 billion, 20 billion ARR one rate. It's 30 or 40 times revenues for hyper growth. Estonationally, I continue to point out Tesla continues to trade at 10, 12, 13 times revenue for the climbing revenue. The Elon premium is way higher, you know, relative to the performance of the underlying asset. You asked who's got the better premium? Elon or Sam. And actually the easiest way to ask that question is to set yourself, remove the person with the premium. They'd go, we better get someone else to wonder, they'd say, Brett Taylor would be in charge, right? And Brett Taylor would be great. And he'd figure it all out. And they'd build a company, he'd go public. If Elon goes, who's going to make the robots? And who's going to make the robot taxi? And if you don't make one of those two things, you've got a car company with a declining car product line, flat revenue growth in a tough market for electronic vehicles. You'd be down 800 billion bucks. If Sam left, you buy Sierra for 80 billion, 10% of the value. You buy out the shareholder, whatever the math works, whoever gets what, you just do it overnight for 80 billion. And your problem is solved, impossible, the company's stronger afterwards, other than the fundraising. It might be better. Yep. Agreed. And if you have one of the greatest technical CEOs of our lifetimes in charge of it, instead of a very brilliant, but ultimately non-technical founder, I mean, it's tough to be, it's tough to be Brett Taylor's background. It's, it's, it's already on the board, right? But you know, at Fundamentary Jason, you are right. Fundamentally, you'd be like, oh, we're just going to build a company now. We're going to build Chachy PT. We're not going to have distractions. We're just going to be fine. I'm going to push you both before we move on. When does it go out and what price does it go out at? Open AI? I think there is now a subtle, unspoken rush to the money that is taking place between those three mega-cap companies. Everyone else is kind of too arounding out on the sideline until these deals get done. I personally would say to soon in the batter for everyone. So I'd love to go public as quick as I can and get it over with. The question is not when they go public, because I think if they could, if they could all wave a magic wand, by the end of the day, I think that all of three of those companies would wave the wand and say, let's be public, it'll be, it'll be safer. I'm going to say October, and I'm going to say it's going to go out at 1.5 trillion. I think you can trade that in polymer on some of these kind of tokenized bets. I mean, you know, which probably should be something we should do. I think it's a logical bet. They might actually seek initially a lower price to not stretch it for an IPO and then see what happens. The SpaceX IPO price that Elon is making up 1.75 trillion, it's a crazy number, but it's not 2x the last round, right? So it may make sense to have a modest step up, but that's really just the aesthetics. You know, the market will settle. It would, I do think there's risk that they've exhausted some pools of capital from the round trippers, the soft banks, the Nvidia's and now Amazon. Like the fact that so much of the money of Amazon isn't in the bank today, to me, it doesn't count. Like maybe it sets the IPO up to Rory's point. Like that's great to set up to have 35 billion of your IPO pre-sold. Like that does make the IPO easier. Let's be clear. Like it's a gift walking in and a half, half your book sold. But if they've exhausted the money, then yeah, they should go public in October. But I think it's right. Just the comment on the valuations. I mean, I'm not in the, oh, it'll be fine at 1.5. I think those are such huge numbers that they're very much predicated on the overall market, continuing extremely strong. I mean, you know, S&P, despite all the noise within the system and all the SaaS apocalypse, S&P is plus or minus 2% from an all time high and trading at a 20-year high in terms of any kind of trailing KPE basis. So this is selling securities at a time when people are hot to try out and buy securities. So getting it done in today's market, who the hell knows how it gets done. It could easily get done at an incredible price. But it is worth pausing and just looking at the vast distance between the valuation on any kind of fundamental basis and the amount of leaning into the future you have to do to get to those kind of valuations. And it's kind of slightly different between them because OpenAI is a, it's going fast, really fast. Provided it continues to go really fast for two or three more years, it all works. So you can pay, you know what, 40, 50 times revenues. I mean, the fact that I even said that sentence at scale is how that one happens. And if there's an appetite to pay 40 or 50 times revenues at that point, time you can do it, space X is even harder because you're basically having to underwrite a fair slug of next generation technical risk. Admittedly, you're underwriting it with the person who in the last 20 years has proven most able to deliver that technical risk. But you've got the whole Starship risk. And then you've got the next generation, Starlink 20 direct to cellular risk. And then you got the data centers and space risk. And you need all that time because the existing business is 18 billion going 20%. So it's not obvious that it's worth 100 times trailing revenues for 20. If that was a SaaS company doing 18 billion, growing at 20% with modest profitability, Jason would be sneering and saying five times. I wouldn't be sneering, I'd be saying five times. Yeah, you would be. Yeah. I'd be lamenting it. Like I'd have my head in my hands, but I would not be sneering. I'd be commiserating. I'd be like, could I just go back to December 2025, please? Could I just roll back time just to heartbeat just till at the end of last year? The eternal, oh my God, if I'd known that well, I know now I just sold everything. But yeah, but you might, Jason, and it's a big gap between that and 1.7 trillion. You said if it was a public company doing, you know, 18 at 20%. Jason, before we started recording, you said something and I wrote it down. You said you thought every public company would miss that numbers. I mean, I don't mean to be negative. I think almost all the public software companies are just going to do worse and worse for the rest of this year. I think Manga was down what, 20, the largest drop ever after a strong quarter because they said they're going to growth will drop back to the teams, right? Even though they crushed their quarter, you know, you had Iran from Monday on, the other 20 BC this week, it was great. But the public markets think that they're going to keep re-rating growth lower and lower each quarter. I just don't see any positives for the existing group of B2Bs. And Rory's point is we just need more good ones in to raise up the median and the numbers. And maybe it's that simple, but I think we got the SaaS apocalypse all wrong. It's not vibe coding that's killing us. It's just we, everybody has lost the way to growth. And I think because of NRR, because of revenue retention, because so many of these numbers are backwards looking. I think almost everyone is worse than it looks. You know, it's funny. I wrote it up this week. You could expand the basket very widely. But for the stocks that I follow, the most successful one is digital ocean. Yeah. Digital oceans up 28% this year. Digital ocean it all these years to a billion in cloud revenue. Like in some ways, very impressive to a billion, right? But in their hand, like it's pretty good business to only be doing a billion, right? You're pretty, you could be critical, but you need to be radically accelerating growth and profitability at the same time. And you're looking at these public eyes and you're like, who the hell is going to radically re-accelerate growth? Who the hell? And that's why I want to have to come up with my Florida bet on. I could only find three. Like I'm still going to do four, but I could only find three, because I can make the case that this one's undervalued and that the markets are, don't see the inherent value. And but the markets are saying you guys got to re-accelerate and they're all going to de-accelerate. And so I just think almost all of these public B2B companies are in worse shape than they look. And while I wish we didn't have the SaaS apocalypse, man, I just, I think it's worse than Vibcoating. I think Vibcoating's one of those minor threats to software companies in our lifetimes. And I Vibcoed constantly. It's a minor threat. And that's why they all have to cut half their teams to our conventional last week. That's what I sounded so pressing. What are you going to do when for the next two quarters you keep, like you may even make the quarter, but you keep having to drop your earnings estimate and rate down. At some point of the course here, you're just going to have to cut half your team, because otherwise you can't make the math work. Well, I want to talk about the team, but before I just want to put one caveat out there, right? You do have to take price into account. And what do I tell you what I mean by that? Yamango had a very strong quarter, modest delten terms of future guidance versus expectations dropped 25%. Why? And so it was trading at 40 times the next year's EBA DA. When you're trading at a super high price, eight or nine times gap revenue, right? When you're trading at a super high price, and you go from 30% growth to even, you know, I think the guidance is 23, 24. Clearly, assumption would be 24, 25 would be actual result. When you're trading at 40 times EBA DA, it doesn't take a lot to knock you off your pedestal. Conversely, a whole bunch of these things are now trading at seven, eight, and nine times next year's EBA DA, where even a 10, 12% growth can probably make it at the very least highly unlikely to decline by 30% and arguably more upside than downside. But why will they reexamine? I just don't believe these. I didn't say they were exhaleratiation. I think there's two separate things. And it gets you a block comment. You've got to do one of two things. I do agree you're right, but you've got to do one of two things. If you reexcelerate enough, then you'll cut you slack on profitability provided you have some either profits or convergence on profits. If you don't reexcelerate, then you write all your selling as a profitability story, and then we're going to segue straight to block. The only way to do that is to look at your cost structure and say, if my, I mean, I hate the rule of 40, but let's put it out there. If my revenue growth is 10%, I can subtract 10 from 40, and I come up with 30% free cash low required. So you write, you start running the math. It's just brutal because there's been the amount of spend that has gone to cloud in LLMs is like nothing we've ever seen before. And if you're a public software company, you've captured none of that. It's a disaster. It's a Titanic. It's worse than it looks because you can't figure out any way to take all of that spend and turn it into an agent and LLM that your 10,000, 50,000, 100,000 customers want to pay you more for. I mean, it is the biggest fail and own goal in our history. And it's going to get worse. There's so many public folks who are rolling out a beta, or we've added a cloud connector this week. And it's a disaster at this point in 2026. It is-- and you can see it when a lot of these public companies see us speak. They don't have the-- like I was on the earnings call with Mark Benioff. He's got the confidence. He believes that there will be a lift from Agent Force. He growth already. Now some of it is an organic growth is up. And he believes he has a performing agent. Like I was there in the building. The dude believes. OK? No, I hear you. But I can smell the lack of belief in other public. I know Harry can too when he interviews. And you can just smell it out of the pores. And as a human being, I have empathy. But good God, that's why I think because of retention, it's all worse than it looks. It's all worse than it looks because you can hide under-- multi-year contracts and annual contracts and price increases. Like these three kids from Stanford that figured out how to use Opus, why couldn't you? It's out there. It's not even that expensive. Why can't you figure out how to use Opus? Why can't you put your 20 best engineers and just freaking clone Harvey or 11 Labs or Lovewell? How hard is it to clone those apps, guys? You all deserve to be fired. Actually, I thought Owen and Anna Com had a really great piece just this week on what it took to take his existing business. Got it and built fit on top of it. And that's what I meant when I said Jason, it's hard. Not from a technical perspective, that's part of it. But just from a fortitude to make all those changes, to put all your bet on the new thing, there was probably a year of feeling ridiculous because you're talking about the small thing and the big thing is so much. Customers are saying, why aren't you focused on the big thing? And he just described very well what it took to be bloody minded enough to make that happen. And you write, Jason, I do think you are correct. That's the kind of attitude that any-- I mean, the opportunity is there. And I'm interested to hear you take on agent force either this week or next week or whenever. But that's the kind of bloody mindedness it's going to take to push through. You do need it. And I just don't see it. I just don't see it across startups. And I don't see it in the public companies. I don't see-- and now listen, Owen had to come back as CEO. There's complexity there, too, right? But he's been brutal that this is a founder market and it's hard. And yes, it was harder for them because they had an institutional base. He had to partially retain, but also partially abandoned. A lot of complexity. But what was me? His points are all really good. But maybe he got there a quarter or two earlier than others because it wasn't CX in support. So he could see the change earlier than everything. It wasn't just going all in. It was that also he was in one of the two categories that changed the most quickly, right? But what about the rest of the world? You've had time. You can go out there and say on Twitter, LLMs are fungible and that systems of record should benefit because we own what matters. And LLMs are commodity. I mean, give me a break. You've-- where's your hunt? Show me 100 million. Show me 200 million. Show me 500 million. You've had 16 months now. But I think that Toby at Shopify is one of the most brilliant CEOs and technical minds. Gustav at Spotify is, too. I'm genuinely naive here. Are you telling me they've missed a beat? As CEOs. No, Toby is dragging his company mercilessly into the agentic air. Rowling out their agentic commerce. I don't know how successful it will be, but it'll be front and center of Shopify. It's becoming front of center. But he feels to me roughly at the pace of Salesforce. He probably should be faster, right? Because it's a more agile organization. But they're dragging their companies with real product into the future. And I think everyone else, they're already starting to fall into the event horizon into a state of terminal decline that their teams don't want to do the work and that they don't have the ideas. They don't have the ideas. Oh, Jason, I rolled out AISDRs. Great, but you're a software company. Where's your agent? Where's your agent that goes out and does all the work for your customer base, right? They're just heading the event horizon and they're trying to put on the jets, but it's getting tougher each day to recover. Yeah. We're going to do a Christmas party that's for you. And Jason's all bring a wrap up. Yeah, he's the moon. Yeah, he's going to be the fluffer up for us. I, Alison, if you're really in the game, no, seriously, if you are in the game, I will be your biggest interruptor. I will use your product. I will support your product. I will say it's great. That's why-- honestly, for a long time, you know, been a friend of mine. That's why I was so supportive of Agent Force. Because we started using it and it works. So I'm like, I'm going to take this example. And it is not perfect. I can tell you all about it more than almost-- I don't think there's that many people who use 28, 5 different, 10 different GTM agents, including Agent Force. We might be end of one. And I can tell you the flaws and the issues and the challenges. But at least they're in the game. Armies of FDEs, armies of folks deploying custom agents. And it will get better. And I will tell you, it is still changing. Agent Force has constantly changed. It is not static. But like a real AI company, it gets better every month or two. It keeps getting better and better and better like our AI tools are, rather than be sticking to beta. So I'm not saying Salesforce is going to turn into 50% growth next year. But I want to see this or better from anyone, anyone in software. You've got to be doing as good or better than Salesforce. I think you're hopeless. You're hopeless. Oh, our industry doesn't really like AI. Oh, you know, our cut-- good luck to you. Good luck to you. I will bring the holiday cheer. I mean, I just want to reiterate my position in the boring middle here, which is, I think the strong end of these public company CEOs are ignoring it totally. It isn't really true or fair. I do believe that most of these SaaS companies-- I don't think they evaporate or go away. I think it's-- I think provided they get with the program, depending on the industry and market, you know, there's a market where you've got plenty of time where AI is not going to be widely disruptive from a top-line perspective. I'll talk about our next next. All the way to where it's obviously disruptive. I think it's well within the capabilities of highly compensated executives who have the loss on the line to figure this out. Most of the companies that already have scale should not be vanished from this, which is a different statement than saying they will ever regain their 2030X, EBITDA, multiple, still less. God forgive us, 20X. We have any multiples which they got in 2021. Here's the thing that I don't understand about the SaaS fockelips, but this is what I think makes these companies terminal. What happened through December 2025 is basically the public markets said, listen, we're actually going to give you a growth premium for ever lower growth. Like the top tier in 2025 was, if you grew 30% or higher, you were, I think, on average, a value to 25 times revenues. And this held even each year through 2024, our growth slowed. And the markets were like, for whatever reason, the markets would say, listen, it's cool. We will ratchet down what we expect from public software companies. We'll ratchet. And then at some point in January, the market said, no longer. No longer will we ascribe high-growth premiums. And it came out of a shot in the blue. And this is why everyone is still stunned now, because it worked in this, like, this deceleration, but multiple stains strong. If you were in the top core tile, it worked for three years. Agreed on the facts, not the stun, because you're right, zooming out 20 years. I see them stunned. I think Harry thinks he's them stunned too. Then they just didn't look at the chart, right? If you look at the chart, it's really simple. No, it's your stock price fell. It's just, it's not. It's not. For us, what I agree on the conclusion, where you were at, right, is there was 15 or 16 years of the bucket growing at an average of 30% valued an average of six times revenues. Then there was two years of COVID bucket growing, 40% average of 20 times revenues. And then you're exactly what happened as we de-accelerated, not just back to 30%, but down to 15. And then the market said something stupid, like, well, we're back to six times revenues. It's OK. Like it used to be. And you righteous. And it was wrong. Once upon a time, you were six times revenues and going at 30%. Now you're at six times revenues going at 15. And you set there for two years. And it's why when you do a chart that just shows revenue multiples over time, it's a stupid chart. Because it looked like it had gone back to normal. But you're right, Jason. The growth had gone out at the bottom. And then all that happened last year is people's eyes were opened. And they were like, it's not a temporary growth decline because of X, Y, R, Z. It's now permanent because of AI. Oh my god, what are we thinking? You should be at four times. That's the movie. That's a really interesting statement. We obviously saw following Jason's statement. I don't know if Jack was listening. I'd like to think that he has in took Jason's guidance as instructions and announced obviously laying off 40%. It's kind of all under the hood of AI efficiency improvement. Is it truly that? Or is it a very bloated organization that needed resizing? Jack's continuously overstaffed his companies. And it was just a resizing with a mosque of AI. Jason, you should go first because you called this last week. Didn't name the company, but you called the catastrophe. Well, look, I think people missed on block in particular. I know their profitability was way up, but I think their top line is only going like 3% something like that, right? So this story misses, everyone missed this. Everyone got suckered in by the press release that said, profit per share, gross profit was up 27%. That's true. But you only lead with that when you're not growing. When you're growing, you lead with revenue growth. What are you going to do? I think the story is simpler than it looks. They're growing 3% and he is completely given up on returning to growth, which I think most public software companies will get to during the course this year. They will give up. The CEOs will give up. This is my point. They will give up on returning to growth. They will give up. And he gave up. And what's your next play? You've got to get more profitable. There's a limit where it's not more than 50% operating margins isn't worth it unless you're an IP licensing shop. But it's get it done because I got to get to my next state, which is hyper profitable. And so my only point is people reacted to this, like this was a high growth tech company. It has been many years, or at least years, since it's been a high growth tech company. 3% is pretty tough. I mean, a SaaS company at least can raise prices 4%, at least we have that in SaaS. We just go out to our customers. Due to the incredible features we've added this year, including changing the colors of our buttons, we're raising prices 6% this year. I think there's a lot in that. Big picture agree. A mid-twenties billion dollar revenue company, 10% growth a year or a go down to almost no growth last year. So you've given up the revenue growth. So there's only one button to press. You're exactly right. If you want to make the stock go up. So a couple of common stuff. One is an employee count. You had ballooned up. There's a couple years where it goes on 50%. And you've got to calibrate that because eventually, if you look at revenue per employee, a growth margin per employee, compared to SaaS companies, it actually wasn't that far off. But of course, it's not a SaaS company. It's a financial services company. And when you look at it on that basis, where obviously, revenue, you have all these interchange and pass-through costs, you're relative to best-in-class financial services companies, there was clearly fat to cut there. And that's what Jason, you exactly right, that's why they did it. But talking about AI, you're never using AI word. And there's two separate uses of the word AI. Are you talking about AI on your top line, or just AI on your apex? And it's worth pointing out here. This is not an AI top line story. Salesforce is an AI top line story. AI is either going to increase your top line if you deliver agent force. I would say, reduce your top line if someone else delivers agent force and you don't. It's an AI top line story. I'm not going to use more at the margin, maybe a little. I'm not going to say no, because Jason will correct me like you did entirely correctly on YouTube. But cash out at the margin, or by now, pay later or square. AI is not going to fundamentally change the top line offering here. So this is not an AI positive or negative transformation story. All they're saying, when they use the word AI, as they're saying, dude, we don't make our sale AI to our customers. But maybe we can use AI to cut some apex. Is that true or not? I doubt it's true at the 40% level. So when you look at it at that basis, it's not a growth story. It's not an AI growth story. It's a, we need to make the profits go up. And therefore, cut all these expenses and plan slash hope that some combination of people working harder and AI can allow me to service the customers at a much lower head count and get the stock up 20%. The other thing Jason Uiders, it is implicitly an abandonment of revenue growth as the plan out of here, at least in the short term. Yeah, I'm not saying that this doesn't give folks cover to make similar cuts. And I'm also not saying AI is exaggerated as root cause. But this isn't quite the play people think it is. When growth is decelerated to 10 to 3, I mean, you're in a tough spot. And I just think we're, it may inform other CEOs as folks in the mid to low teens may adopt this. They may throw in the towel, not 3% growth, but at 12 or 13% growth. If by the end of this year, they're like, you know what? This AI is such a force in nature. But I haven't found a path to acceleration by the end of this year. You may see people copy it just for that reason because they're out of ideas. I want to ask a question with Jason. I'm going to deliberately do it in a way to separate two things. AI on the top line and AI on topics. Let's assume there's no AI impact on the top line. It's some financial services business that just has no AI revenue left. And let's assume they were efficient beforehand, which I think block wasn't. Right? You could definitely argue there was some-- what's your mental model of? If I have 100 people doing X, whatever revenue this year, how many per year do you think a well-won company should be trimming based on AI? Do you have a mental model for that? Because I doubt it's 40 in one year. What's your mental model? Well, look, just one thing for us, then I'll answer the question directly. I do think that even if you don't think that a company like Block is threatened by AI, I'm not saying it's like YouTube. But here's the thing I know, even just for my own portfolio, folks are building agentic applications that do what Block and others do. And therefore are displacing them because that's where the energy is. There's a lot of products at Block, right? There's a lot of products. But if you go back to some of the more simplistic products like Square, right? As a gentrgic products, process, point of sale, and other transactions, and add more value, you can lose even if you say the atomic version of my product doesn't really need AI. It doesn't, but when these agents are doing everything in your industry-- so I think the agents are capturing so much value that there is just limited budget in every space, and they're going to take budget away from you. So I don't think even folks that are immune, I don't think are immune, because the new entrances will find ways to tap into that budget and add more value. In terms of cutting the team, honestly, worry, I think everyone thinks 40% of their team they don't need today. Every single CEO I talk to doesn't think they need 40% of their team. And so I think that the Block number will become the default. I don't need 40%. It's a gift. I got in a bit of trouble, but I tweeted over the weekend. So it's a 3CE, it's between 500 and 1,000 people. And all three said to me that they were cutting by a minimum of 20%. And I think this does create more acceptability around layoffs. Yes. And it's the over-the-windal argument. I was stunned to learn that in recent memory, this was the largest percentage head count cut. I saw a bunch of data on that where, you know, there's a few 15 or 20% cuts that were bigger, because when someone like Amazon cuts 15 or 20%, it can be 30 or 40,000 people. And this was, I think, from 14 to 10,000, I think. 10,000 to 6,000. 10,000 to 6,000, you exactly. I've been looking at the before and after head count numbers. Because obviously, look, in venture-backed deals, there are occasional horrible moments when you cut by 50 or 60%. But that's typically when you have 40 people and you lose product market fit. This is the biggest percentage change for a publicly held tech company in the last 20 years, which is just an astonishing statistic. So I think, Jason, to your point, it definitely expands the over-the-window of what's doable if it works. - Well, let me give you just a simple example for fun. So I was helping a very hot AI company think about growing their GTM team. We get called into this stuff all the time now, right? And they're going from 10 folks in sales last year to 250 this year, okay? Let me just ask you, how many of them you think are gonna be great? - 20. - 20 out of the 250? Yeah, maybe, maybe a few more. So look, a few years down the road, if you have to cut, this is gonna be so easy. I mean, I know the human impacts are horrible, but I can't think of any company have ever worked with north of 500 people or 80% of the people were great. It's just managers of management. It doesn't matter in the age of AI. Now, what's changing is companies are gonna be permanently smaller to start. That is utterly changed. And that's why in some ways, Block is a window to the past. It's like looking out to the galaxies out in the sky because I don't think we'll build for the most part companies like Block the same way today. We may stumble into them in times of plenty. This got them going from 10 to 250 in sales in one year. But when you get that bloated, I know we all wanna say we don't lower the bar, but managers and managers always lower the bar. First time managers always lower the bar. It always becomes head count driven and hegemony driven. And 40% of these people, we just have no, even in AI companies have no idea what they're doing. They don't even know my team. 500, 800 people. What are the 28 people doing in marketing again? They don't know. - Yeah, it's funny because whenever you are like this extra, I always wanna argue with you because it's so extreme on it. But sometimes I find myself realizing that you're correct. Right, I mean, 'cause I'm just reflecting on this. Like going back to Capital versus Labor. In the 1950s, 1960s, the biggest companies were, 300,000 employees like General Motors, like Walmart had a billion at one point in time. The amazing thing now is, you know, Apple has 160,000, Google has 190,000. The trend says you're right. Because even before AI, the valuable companies have been the high IP low head count people. And you look at the trend today, you look at the revenue per employee at someone like a cursor, you know, it's about the same already as Apple, maybe even a little higher than Apple. Apple's about 2.6 million revenue per employee, you know, Google is 2.1. So these guys are already at that level at a much smaller scale. So I don't know if it's as extreme as you say, but the trend is definitely proven you're right. More and more valuable companies with less and less people. I don't think it trends to one. I don't think it trends to the billion dollar single person company, but the direction of travel is on your side of the table. I do think we'll see an acceleration of layoffs. So with founders appreciating this kind of acceptability of doing large layoffs in the wake of this. I always hate the word acceptability. I think the more common, the harshest common is necessity. You know, in other words, acceptability sounds like it's a social thing. I wouldn't like to get rid of people's career just because it suddenly caught became acceptable. If you are sub-scale growing sub-tan and kicking off 10%, if you don't take the actions in someone, does it remember price list all markets? I was like, we peep myself over and over again. If you're only doing 10%, less than 10% revenue growth and 10% free cash flow, you'll be trading at four or five times and three or four times, perhaps. And someone will know how to come in and buy you and make those changes. And then a month later, they'll be worth eight times. But for what it's worth, I think you do have a choice. I think Harry's point's an important one. And I don't even think it even matters at some of the goods that's the past, but I think the block thing frees CEOs to make what they believe is the right decision for the company without over analyzing the horrific human impacts. They are now free to sit in the board meeting next week, probably. These meetings will probably all happen in March. And they'll be like, guys, let's just talk about block calmly. I'm not saying we should do this. But what is given that we missed the quarter again for the fourth quarter in a row, guys? We missed, you said we were coming back and I get it, but we're at 110 million in revenue, we missed it. Whatever, 400, we missed the fourth quarter in the row. What could we do like block? It's at least going to be a conversation, right? I think it goes to the extent it allows them to cut deeper. The 40% is a big number and I think it allows them to probably-- Yeah, but it's also these companies are in the past. I think the future companies are just not going to hire this way. And the weird thing to think about, there's a chance we look back at 20 years of brute forcing revenue growth with sales, human-led sales and marketing as an anomaly in the air of software. And the old days of software, when I was a kid, software was wildly profitable, right? And then for two decades, B2B software grew like nobody knew until AI, but it was never really profitable. And we may look back and it's just jaw dropping the efficiency of AI leaders and we may just not go back to that old era. We may not go back and we may also say, listen, those double or triple sales quotas for traditional software companies and just let the chips fall where they may. Just let them fall where they may. Like, I'm not going to do the 400K quotas anymore that you wanted the 500K. I'm done. Why do we talk about one of the future companies that we mentioned on the revenue account? Because I'm confused, Chaps. I speak to everyone about that product teams and the engineering teams and everyone has moved off-cursor and moved to cool code. I tweeted about this the other day and thousands of people comment this and everyone is in universal. Cursor's dad, Claude Rousel, then cursor announces that movement from a billion to two billion in revenue in three months. Rumors of secondary round being done at 50 billion. Maybe in my favorite saying that Rory often said about benchmark reports of my death have been greatly exaggerated. And I thought of that here. This is one of those situations clearly where VCs judging the world based on their portfolio versus the real world are atticing. Literally right before this all came out and blew up, I had two board meetings that my fastest growing portfolio companies. And they all joked about how folks weren't using cursor. And one said, mostly it's only grandpa's at the company that still use it. And the CTO stood up who's pretty young. It said, grandpa over here, I still enjoy it. And he's like, there's a couple of us that still use cursor. And then I was with another company that was blown up. And there were two people that used cursor. So you heard these stories all the time. And you just assumed that everyone had mainly moved to Cloud Code directly, right? And product teams said, too. And you just assumed that's the way the rest of the world works. And that's why cursor was smart to slip this news release to Bloomberg that they'd happened to double in the last 90 days. So our portfolios are not representative. I think the end-- listen, this is as much as I know. Other than we all made the same jump to the conclusion based on our 40 portfolio companies, but if they said 60% of our revenue is enterprise, and probably the answer is right there, is that this is a trusted tool with a lot of things, including guardrails that can manage agentic swarms and others. They're pointing out how banks use them and other conserved enterprises and are just rolling them out. And I don't know this to be true. But if cursor is the more conservative choice, that's not the worst place in the world to be, especially if you can pick your model. Maybe that's the answer. But it's not my five fastest growing investments. That's not where they're crushing it today versus six months ago. But it's so funny, we got to rock. Numbers don't lie. The feedback that I go from the tweet was very simple from insiders. It was two of us one that you have enterprise crushing it, exactly as he said. And then two actually just annual subscriptions that cycle is not being complete yet. And so there will be a wave of unsubscriptions. And that charm will be real on the consumer side. But that can't-- Rory's the expert here. But even if that's true and it's a really interesting topic in general, you don't go from one to two billion in 90 days if you're having massive deferred churn at the end of the contract. That's a different issue that's going to come down the road. I mean, that is growth that is just massive market pull. Like epic market pull to grow that quickly. Just to sign the deals takes so much energy. If you come into last year with the momentum they had or the middle of last year, even if things are slowing at the margin, even if at the marginal startup you're losing to Claude code. You've built your name, you've built your brand. Every enterprise is trying to adopt code. The adoption cycle there isn't. Oh, I tried cursor yesterday. I'm going to try Claude code tomorrow. It's like corporate's got to approve. Purchase order's got to be raised. We got to have security review it. Legal's reviewed the contract. We signed a deal. You're not going to run in next day and say, we should switch to Claude now. It's like, no, we're going to use it for the year. We'll do an Eval mid year. I will think about it next year. I mean, Jason knows better than me. So the bigger high here is when you're in a great big market with a massive trend of adoption in the course of two, three years. If you've got your share of that, you're going to do just fine. I mean, you know, at the margin are you probably losing share wealth of the Claude at least in the last three months since the last set of models probably, but it still means a big outcome. I mean, we talked about this two or three months back. It's clear that they're going to be one of the two or three players at scale and scale gives you a lot here. I would add, you write how eight numbers don't lie. What I haven't seen the numbers, right? And you're having to see in the revenue and haven't seen the most margin, but you can easily see how someone with an early lead would be able to maintain that lead even when you got a super credible competitor who can bundle the product into an adjacency taking some of that space because the market's expanding enough to cover a multitude of sins. Maybe this is the real sense, how it, the knife fight doesn't start until the time is like 60, 70% saturated, which by the way happened to SAS in 2021 and that's when the knife fight started. Suddenly you're like one in two of every new customers is a switch. Now it's time to kill the other guy. Until then, let's all grow one big happy family. We all have a win rate of 60%. We don't compete against each other. All those happy things that you hear in the board when the market is so big that we're not overlapping. Once things get saturated, then it gets uglier. Yeah, there was, I think there was a, I think there was a quote or something from someone a cursor, I might be wrong. I think it fits in, it's an interesting point, which is that a Barclay suggest rolled them out. Okay, that was the first agente coding product that was approved at Barclays, okay? And banks are big deal because they have the biggest budgets, but they are conservative at the same time. It's an odd dichotomy, right? They're super aggressive and super conservative. And we might have gotten cursor wrong. I mean, cursor is more enterprise. You can run it without data retention. You have full SSO, you have roll-based access controls and all these things that you just got a build in the enterprise, the right audit logs, the right hooks and to a CISO or CIO, as long as the product works, that could be 10 times more important than what someone in the other building wants, okay? And the other thing that's happening right now, good God is, it's been in all of these products for a while, but in Clawed 4, Opus, these swarms of agents got really good, okay, these swarms of autonomous agents. And Michael from cursor wrote this, not only did they leak the 2 billion, but he wrote a post, which a, you know, a tweet article, which seemed kind of weird, but talking about how the whole future of cursor is sort of safely managing these autonomous agents. Not, you know, the early days were clicking tab to finish a line of code, which was what Codium and Windsor got going with. And when you have swarms of autonomous agents, good God, they're not totally safe. Not much as we all love our open clause. They're not totally safe. And the more of them you have that are autonomous and the more they can touch your data, they're not safe. And so if cursor can do both, if it can unlock the power of the swarms of autonomous agents running in real time, running concurrently and make it safer, I would got to think 95% of CISOs want that one. And a lot of conservative organizations, the cranky CTO doesn't get to make all the decisions like at our startups. At our startups, the CTO decides, you know, what the team's gonna use, right? But good God, at a bank, what if you repeatedly leak everybody's confidential data? I mean, it's exhausting to have to go through that. This is not a joke. Like every agent will leak data if it's allowed to. Like every single agent will. That's how goal seeking works. Being the most enterprise leader in these mature spaces, you can win because 99% of the world is not like us. Jason, sold. I mean, all you have to do is look at Azure's market share in cloud, where for 20 years, the value proposition, having said in millions of board, in the millions, but tens of board means what we've talked about, you know, we're running on AWS, shouldn't be one on Azure, our customers one on one on Azure. The value proposition of Azure for 20 years was, it's not nearly as good, but it's getting there. And Microsoft have great relationships with every CTO, so it'll be fine. You exactly right. You know, there's a large amount of software selling that can be done on the basis of safety and integration and selling all those boring bits. What you're dealing with is a massive market, wherever it's making adoption decisions in an extraordinary short period of time, and let me repeat what I said earlier, is they're both going to crank as fast as they can, they're going to end as people make initial decisions, and more and more of that market has an initial buy decision made, you're going to start running into each other. Is that going to be a little, yeah, the competition's just going to intensify. They're not, I mean, let's just do it. If cursor went from one to two, I think in the same period this year, I saw some entropic statement about, you know, we've added $2 billion in ARR, year to date. So, both of them are exploding. This is a huge, this is the biggest trick in market, and those are the two most viable players in it. Going back to last week, it's the Fortnite effect. Like, Claude will keep doing more, and cursor has to keep ahead, that's the job. - Done it. - Exactly. Apparently 60 to 70% of cursor, model calls are still using Anthropics API, okay? So, even of that $2 billion, a lot is flowing back through to Mom and Dad. This is the point Michael Cannon Brooks made the other day. And Claude, even if they may not even care about cursor as a team, but they will inherently build all these features as an enterprise play. And so, the bubble will shrink, and then cursor just has to do more. And what we've learned this week is they've kept ahead. They've kept ahead of the Fortnite storm. And every CEO out there crying and saying how hard it is and that hasn't kept ahead, they're gonna be, that Fortnite storm's gonna shrink to a pixel and they're gonna die. - Jason, I think you're right, that is the sound, but I mean, the correct response is, congratulations in the great race for what looks like a $50 to $100 billion minimum coding prize. You have conquered level three, which means unlike a whole bunch of people who are stuck on a back and level two, you now get to go to level floor and play again. It turns out it's hard to make $100 billion, but they deserve all the credit for, you know, being the early winner, cranking and keeping grabbing the story. I mean, it also, just again, back to the swarms of age, it's just worth stating. And again, this is obvious, but just to say it, if you look at the cursor story, I mean, he's spelt it out in that kind of pose, which I thought was very good. If you're not, this is back to Jason's point. If your story is not changing significantly every six to nine months, you are probably falling behind. In fact, not probably you are falling behind. You know, you were auto complete. Then you were an IDE, now your agents, now your swarms of agents. These models are moving so quickly that the technology is moving so quickly that the prize for winning is to reinvent the company from scratch and the product from scratch every six to nine months. Congratulations at the fun game, but the prizes are great. You know, the fun, the one thing I'd still love to know about cursor and it is incredible, the growth is, and not to be very 2025 about it. But the cloud API is expensive. You know, I've measured RAPI calls. It's so much cheaper to run something inside of cloud. My God, so like, I mean, I'm on cloud max, Amelia runs out of credits using cloud desktop and everything. She runs out of time, she doesn't even run out of credits, but what I get for a hundred bucks a month, and then I track what some of our API calls cost. And for a good prompt, a good call, it can be well over a dollar. And maybe for code, it could be more. Like that adds up really quickly. And it is, whether you think it is subsidized, whether you think I'm throttling a subsidizing that's onative use or not, their margins are strong, it doesn't really matter. So if that is still the more like, hooray you hit the top line, but when you're still paying, probably RAP, like I can't imagine and throttling is so desperate for cursor's business, they're giving them a massive discount, right? Harry may find that out through his network, his in-per-but if they're paying close to RAC rates, which I think they are, because they also say you can bring your key with you. Like if it's cheaper, bring your own API key with you. It says there's not much of a discount. That remains your ad and throttpix win because they're already subsidizing their own product. - Totally. - We're lucky people are not that, no matter what anybody says, we're not that price sensitive today. - It was super interesting. I got to give a shout out to Tomashe, who we had on here a few months back. Did an interesting post just today is, basically would you buy a camera? It's a good metaphor, I should remember, I can't. Basically just looking at the pricing of, you know, top of the line frontier models versus six-month-old open source Chinese open source models, and you know, the 10, 15, 20X difference in cost-protokin. It was a good piece. And you write, right now people are paying full RAC rate for the new stuff because the new stuff is so great. His point, he was making is it's only six months from so new that it's amazing to, oh my God, you can get an open source for 120 at the price. And it just really, again, brings home pace of change and the need to be on top of it. - I think OpenClaw confused things, but the power of running swarms of agents autonomously to build software, the rate of change, we think the rate of change is like, I know you didn't literally mean it, but the way you describe Tomashe's thing suggested change might be slowing down, right? And we might get a benefit of these cheaper models. It just, I know you didn't suggest it, but there was a hint of it. I think it's going to radically accelerate this year, because what changed in December, which it's so like, listen, I've been on Repel, it's not to talk about forever, about Repel, but I've been on it since June, and when I started, you couldn't finish anything. You'd ask Repler, lovable to build an app. You remember in the early days, Harry, and you'd get a lot of buttons that didn't work. Okay, nothing worked. They'd be fake buttons, everything was fake, right? Then it got better and better, and then by December, especially with Opus 45, all of a sudden it could fit, it wasn't just you could have a code for hours, whatever, and that doesn't really matter for a lot of use cases, it could finish apps that worked, like really worked, right? And then on our team, Amelia took it over, and she built an entire AIVP of marketing that is better than anything on the market, and she finished it without any drama, like it took work, but she just completed it. It's in production every day, doing all of our marketing, not just execution, but it has all the ideas. It's like, how? It wakes up every morning and tells us what to do with data. It's a little freaky, and one of the many reasons was he was multiple agents running in swarm and working on the software together, an architect, a security expert, a backend expert, a database expert, and Repel, it just did one thing early, which is, and maybe Kersher did this too, they built a framework so you could use these multiple agents together efficiently before you couldn't clot, right? You could do it earlier. And so now that someone that's just very smart, can birth an AIVP, that marketing literally works, in six months, the applications we will build, our jaws will just drop. Already, I don't even know what to do at Demo Day. We literally got a sponsor that just raised $50 million. Their website was all built and lovable. We just, we were just laughing about it, but maybe that's not funny anymore. Maybe these apps are so good. - What do you mean you don't know what to do for Demo Day? I think I guess you can hear. - Because if it's, what's his face from Angel List that software is an uninvestable, it should have been on the show, it should have been a topic. - Yeah. - I agree, and I'm struggling with it, and what I mean is you can show up to a Demo Day and build anything you fucking want now in any of these coding tools, that's really good. That is so much better than anyone would show up to a Demo Day 24 months ago. 24 months ago, half the folks would show up, they didn't have a product, it was barely working. You could make fun of it. We went through it, and now you go, and like there's no excuse to not have something that's like great, hey, I could take what we built, the million I could show up to YC, and say we built this AI VP of Marketing, it's managed a million marketing transactions, it would blow your mind. Like, and then just to be precise Jason, I mean, because the sentence software is uninvestable. I mean, if software is uninvestable, why bother making the Demo at all? Because it's not investable. So clearly saying is, you don't invest on a Demo anymore, because a Demo simply means 24 or 48 hours earlier, you kicked off a coding project and you got it done. So there's no information in the Demo anymore. - I don't think that, I think, for most cases, I don't think there's any signal or information in a Demo anymore, yeah. - Agreed. So I think at the early stages, there's no, that's what you mean by Demo, because the software is investable. Obviously, it turns out Microsoft's stock is holding up pretty well. So software is uninvestable, it's one of those hyperbole statements, right? Well, what I mean is, listen, I had one of the reasons I was modestly successful when I started investing, is I was a founder that turned into an investor, okay? And one of the superpowers you get when you make that transition, is you know what's better than you. You know the CEOs that are better than you, and you also know who's better at building software. So when I would meet a founder that week for week, pound for pound had shipped better software than I did, I knew they had a decent chance. Like, if the Demo blew me away, and the CTO blew me away, even if there are a couple thousand in revenue, I'm like, these kids can't lose. - Yeah, they can't lose. - They can't lose. - Jason, can you name one founder? One founder who is able to create architect, maintain agents in the way that you have done. And I'm not blowing a smoke up your ass, but Rory, I think this is where Jason's like, oh, it's gonna accelerate so fast, so fast, so fast. I don't know one founder who has built an AI VP of marketing in the way that Jason has done. - I do think I am ahead of most, listen, there's obviously, there are folks just building agents that are so far ahead of me, I can't even, they mock me on X and I deserve it. But I would say for your average AI focus B2B founder, I am ahead of them on this stuff, right? 'Cause I've been doing it for six months longer. They'll eclipse me later in this year, but they don't get it. They're most, I'm sure you're getting investor updates in March, which even talk about how they're stunned with how much more productive their team is. We're all getting these, they're just stunned. Like, I know we've been talking about this, but now it's finally happed. Like, it's not just a few more poll requests and this and that, they're literally, their jobs are starting to drop in March because of what they built in February and late January with these tools now because they can finish stuff. And when that 10X is this year, here's the thing, like the rate at which your product has to accelerate will be like nothing we've ever seen before. - That's the real version of software is not investable. The real version is there's going to be infinitely more software. So software alone will not be a competitive advantage. So there will still be extremely large demand for software and there as well to that will be very big software companies, but they will have to do something more than, hey, I wrote a bit of code for this particular vertical and this particular use case, that's not going to get you there. It's going to be some other elements of competitive advantage around network or on distribution or on mode or on vertical knowledge. That's the true version of the statement. - I think it may, and listen, it the latest, you know, investing in 11 labs today is, it's a very coherent bet, right? It just makes this idea that you could judge, or at least if you had the right background that you could judge early stage experience better than many and write a check very, and even more so, listen, I had two investments. There weren't huge investments that, but they weren't tiny recently that did a million or more of their first week in market, AI investments because the demand was so strong. It's not one of them, literally 45 days before, 50 days before they were showing me a demo. I'm like, guys, I know all the vendors in the market. I put it back into oven for a little while. I don't think it's competitive, and then you roll out and you dominate the market. There's a lot of reasons, but that level of pace we just didn't see before is going to accelerate. So, how the hell do you pick favorites? How the hell do you pick favorites? Unless they had, what's his name, Frankl from, what's his name, Harry, that did so? - David Trinco. - David Trinco, yeah. - Yeah, he said he had as one of his never too braggy. So, until I was the only pre-seed investor in Sono, which is 300 million in two years, right? And he's like, why did I invest in it? He's like, well, PhD from this, masters in that, understood the whole space. I met him, everyone said it was the smartest guy in the world. I mean, that signal still exists in 2026. - You wanna hear it, Jake? - What's the joke? - He tried to bring me into that round. - Well, you should have done it. You should have done it. - Oh, no. - He probably saw that that you couldn't see quickly, though that level of depth, right? - You couldn't see, right? - Rory, are you gonna have your bets ready for next week? - I will have them for next week, Harry. I will have them for next week. I'll give you a round of rounds 'cause it's 10 o'clock in London and-- - No, I appreciate that, and I will, a genuinely wild will, but I'm still up on my world cloud. I'm up about six, six or seven, I was up to six percent at one point in time. I'm not, which is the wisdom tree index of all sass. I just, yes, as the idiot version of that. So, what I remember, now I haven't looked at today and it's been pretty grim, so who knows? But, yes, I will have my act together for next week because it is late in the day there in London. - But before we leave you today, I run 20 VC fund and I get this question from founders all the time. Do you have a hookup? I do have a recommendation, though. Nothing dot tech, one x dot tech, a rora dot tech. See, yes, dot tech, ultra dot tech, Alice dot tech, neon dot tech, blaze dot tech, Pi dot tech, great tech companies. While dot tech gives modern companies a home online, checkout helps that home convert by turning traffic into revenue. 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