Speaker 1I am getting burnout on struggling CEOs on Twitter sharing performative AI data when they're not AI companies. Like, show me the money.
Speaker 2If you can be the largest tech company on the planet and still not make money, you might have oversized your ambitions a little, and it might pay to come back a bit. Software companies in the age of AI are either accelerating or irrelevant.
Speaker 1AI is going to be like the oil situation in the Persian Gulf today.
Speaker 2Paul Warren Buffett is like, it's time for me to die because you people have lost the plot. As we record this, greed will still trump fear, right?
Speaker 3This is 20VC with me, Harry Stebbings, and today it's my favorite show of the week. Rory O'Driscoll, Jason Lemkin coming together to discuss the biggest, best news that's happened in the last seven days. This is the only podcast that you need to listen to every week to stay up to date on what matters in tech. But before we dive into the show today, let me tell you about Omni. It's an AI analytics platform, and it solves a problem every scaling company hits. Your team needs insights. Not just data lookups, the stuff that really matters. And it's critical to get it right. Like CAC payback periods and net dollar retention. For AI agents to act on your company data, they need your business context, your definitions, your logic, your permissions. And that's what Omni's governed context graph provides. Your data team defines it once. Then anyone, your ops lead, your CFO, your PM, can ask a question in English and get an answer in seconds. Perplexity, Mercury, and DBT run on Omni. And 20VC listeners get an answer in seconds. For 20VC listeners, get a free three-week trial. Three-week, very specific. Not a month, but three weeks. Go to omni.co forward slash 20VC. That's omni.co forward slash 20VC. After Omni helps you find the right customers, checkout helps you close them. Over the past 15 years, Guillem Pozaz has led checkout.com through what he calls the velocity years, a period of hyper growth with relentless product building. The lesson, high growth is a gift, but it demands ruthless focus. As his mother put it, Play the game you're good at. For checkout.com, that game is digital payments, obsessing over data, chasing basis points, and compounding learnings over time. And that discipline is paying off. 2025, checkout.com processed over $300 billion in total volume, up 64% year over year, and returned to full-year EBITDA profitability. They now support over 1,000 enterprise merchants globally, including 63 that process more than a billion annually, with brands like eBay, Vinted, Amex, ASOS, and Timu. Guillem's message, though, it's pretty clear. They've earned the right to win anywhere. Now, they're investing in innovation across marketplaces, issuing, financial experiences, and agentic commerce. If you want payments built for what's next, talk to the team at checkout.com. That's checkout.com. While checkout powers the moment money changes hands, invisible powers the people behind the work. Why don't we hear more real AI success stories from big companies? The models are insanely good, but implementation's the problem. It's really, really hard. There's data all over the place. There's legacy tech and manual workarounds. It's a Ferrari engine in a shopping cart. Meet Invisible. Invisible trains 80% of the top models and then adapts them to the messy reality of your business. Take the Charlotte Hornets NBA team. Invisible took years of game tape and analog scouting notes to go from uncertainty to a draft pick and summer league championship win in weeks, not seasons. Get the data in order first, and suddenly AI can do almost anything. If you want AI that hits the P&L, go to invisibletech.ai/20VC. You have now arrived at your destination. Boys, it is the holiday edition, baby. Coming to you from the British Riviera. I'm looking forward to it. I always say this is like, you know, the UK's Saint Tropez. And then people look up Frinton on sea and they're like, huh, Americans don't get the British sarcasm. That's my lesson. Yeah, I get the joke, Harry. We have, we have a lot of news today. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK.
Speaker 1I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK.
Speaker 2I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK.
Speaker 1I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK.
Speaker 2I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK.
Speaker 1I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK.
Speaker 2I want to talk about the UK. I want to talk about the UK.
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Speaker 2I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK.
Speaker 1I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. I want to talk about the UK. Ram. up their ai spend on product it seems to have worked subjectively qualitatively but the productivity isn't there to justify it i think that's what brian was really saying he wasn't that the data didn't say it but he's like listen if we had shipped so many new products to coinbase if our product velocity had quintupled because our token spend quintupled i'm all in like if that flipped him around from minus 30 growth to plus 30 growth i don't think we'd be he might have still done what he's doing token routing a model he wouldn't be making this point i think if you look across even any of our many of our portfolio companies that are doing well that are not purely reselling tokens they're coming to the conclusion that i'm not quite sure what the hell i know i want to do this i can't put the genie back in the bottle ai is great but it's not lines of code what the hell and and so many folks are not seeing the the lift from net revenue net productivity they thought from agentic coding it's almost a conflict but it's something that we're all gonna have to deal with in the second half of the year but it's not the same as cutting costs it's saying jesus i spent an extra 10 million in the first half of the year and we grew the same as we did the prior two quarters like where's the lift boy show me show me the lift and cfos are struggling with that too even if the business my point is even if the business is doing well they're struggling with it yeah depending on the company this ai
Speaker 2spend on engineering if you're a software company it should credibly give you lift revenue lift because you're making more the thing you make is software you're making more software you should give more revenue lift or if you're a digital goods company you should give more revenue lift companies so you're right jason if you're coinbase you're like i'd like to have seen revenue lift here right i think it's even applicable for companies the further you are from a digital good you know silly example if you have a tech team and you're a car manufacturer going back to it again you're not going to get a whole ton of lift from your extra software unless you're tesla with fsd but at a minimum you should be seeing savings you know if you were spending 100 million on software and now you're spending 10 million on tokens at a minimum you should be seeing savings and if you're not seeing either you're going to be looking at this with a pretty jaundiced eye
Speaker 1and then that's what's happening yeah i have a portfolio company that that is every number software company every number is green right way overloaded with investors way overloaded with everything hit the first half of the plan everything's great right you would love all all the numbers but at the last board meeting they came in and wanted to double their token spend which was massive in the first half of the year and it was enough to to move the burn from no big deal to big deal even even for a company in the top half percent even folks were like that's a and the feed for the first time the board was like okay but if you want our approval like tie it to roi and this amazing team couldn't they couldn't like the velocity is everyone wants to invest but it didn't directly tilt the curve so there is a point for even the highest flyers where you're going to say jesus you got it i gotta see the roi and i think that's the big that's just time you know we went to token maxing we're like everyone just try stuff that made sense right and that led to the early folks that got whip like cursor having to go open source really early and that's an interesting niche issue on x but the real issue is just um we just can't show enough lift from this spend that it's going to stress even the best of us not just coinbase just going to stress everybody and so be it it's time it's time for the next mature phase of token spending and software development it's just time boys to
Speaker 3to grow up right if you're an anthropic shareholder though and you see dario say hey we need a trillion dollars in revenue or close to for this business to be viable or we will be bankrupt maybe he says it kind of superciliously or glibly but like he says it and then you see the dominance of open source now pervading into a lot of usage you have to be concerned that it will cannibalize
Speaker 2that pathway to a trillion in revenue you at least some concerns which will say yes i mean which will segue to one is going to be in part our discussion next on distillation and antropics perspective on these open source companies stealing their ip as they would say we will leave the irony for a later discussion but yeah i mean it is plausible that you have a world where the front member even if the bulk of the tokens are generated using open source models it is plausible that the bulk of the revenue will still obviously come from state-of-the-art frontier models right and therefore there's clearly a very big business here right and that's all great it's to your point harry if you've constructed your world in such a way that only a trillion dollars is good enough and you end up with the consolation prize of half a trillion dollars which is still you know the largest company i mean i'm just trying to think here either the second or third largest company by revenue on the planet and it would be the largest digital company on the planet if you can be the largest tech company on the planet and still not make money you might have oversized your ambitions a little and it might pay to come back a bit and that's exactly right is that nothing in this coinbase memo or a hundred coinbase memos implies anything like oh my god these are not going to be amazing companies with great products that have differentiation it's just as you say correctly if you've built a cost structure and a cap expense that you need at all then the last thing you need are cheap open source alternatives at one-fifth the price
Speaker 3before we move on to anthropic's perspective on distillation jason i i love you my friend but what do you want from these ceos then candidly he's being very factual and innovative in how he's presenting what the company is doing like what do you want from him to just shut up and do i want to
Speaker 1see how ai listen i value the data okay i'm not i'm i'm i'm not being facetious i do feel this way i value the data so i appreciate that i want to see how a if at all can give coinbase a revenue lift that's what i'd like to see even if it's just then i mean listen coinbase is subject to the whims of the crypto market okay and investors should understand that and when crypto roars back coinbase has grown at rates that uh are almost anthropic levels for brief periods of time right so so it's part of being on a non-recurring revenue journey in a very volatile market but i'd love to see how growth is five percent higher from ai ai something in crypto i'd love to see how it's driving up insurance premiums and insure i mean insurance margins i just want to see how where this magical boost is from this utility the lms are a utility right they're tokens they're they're they're not fungible utility like we're kind of teasing it whether they're becoming fungible utilities right is one token replaceable for another is the meta issue i just want to see a boost i i'm tired of folks like adobe saying we have 500 million of agentic revenue and missing the quarter that's performative too and listen what would i be doing if i was the ceo of a company not accelerating the age of ai man i might be doing the same but i don't respect it but i want to see the real boost everyone's faking everyone's feeling like they have to be part of the ai age but they're not delivering harry they're not delivering i want to applaud
Speaker 2jason for his consistency and disagrees rightly first of all i give you credit you have been remarkably consistent on this and i'm going to paraphrase what you're saying software companies in the age of ai are either accelerating or irrelevant and you're exactly right i don't think crypto gets an automatic lift from ai so i think you're being a bit harsh on that company but your adobe example is exactly correct oh and it'll come actually it'll segue to the microsoft discussion later on i do agree and again i give you credit for this strong principle strongly held if you're not accelerating in the age of ai and you're a software company you've got a problem that's your point and i think you're correct so if that tweet if that tweet had come from the ceo of adobe you would be totally correct in saying that's great but dude you need more exactly so i i do agree with you i i would exempt coinbase from that because i lumped the more in the financial than the software space but in the software space you are correct if you're not getting on board this train you're getting left behind even sometimes
Speaker 1and i love them we all all three of us love them even sometimes for a while i would get tired of aaron levy's constant ai stuff but to answer your question it has led to a boosted box it hasn't turned box into a hundred percent grower it's gotten it back to double digit growths some of aaron's stuff is a little bit too to me and i and we all learn from it right some of it's a little bit too ai reflective but he ties it to his revenue and his plan he's like this is how it worked at box we're processing documents we're processing content here's how it literally ties to our business model so it's okay if some of it is is a little bit um performative i i give but i i give aaron about a huge thumbs up on it but the brian one i just anyhow it's all good it's great to have the data i've just become a skeptic when it's not tied to their business that's all i'm a skeptic
Speaker 3of what what the goal is here that's all you know rory jason is not only consistent but he's also prescient in being ahead of the times because he's also cited his i don't know if i could say disliking but his favoring now sam and open ai over anthropic and his kind of boredom of dario saying that we're all going to lose our jobs it seems the world doesn't like dario right now and dario has uh continued to whine uh sorry that's unfair and rory did not say that dario has criticized chinese models for the fact that they're not going to lose their jobs and they're stealing for brazen theft of their work through distillation of their models how do we respond and think about anthropic's commentary on whether or not chinese models are stealing their work
Speaker 2sure i mean you have to power through the irony before you can have the discussion and we all understand the irony which is all the foundation models including anthropic were trained on other people's ip to the point where anthropic recently settled litigation with a whole bunch of copyright holders on books because they had quote unquote unfairly to use dario's word applied to chinese leverage their intellectual property so i do admire the element of hypocrisy of being appalled when someone else does it to you or having done it to other people yourselves be that as it may let's move on from that just wallow in a second but then move on is it what's happening again stepping back for folks is the allegation which actually darryl's which anthropic let's not personalize it anthropic the company said actually in a letter to the senate banking committee recently that basically the chinese open source companies are bootstrapping their development of of their state of the art models by effectively breaching the terms of service of Anthropic and sending literally millions of prompts to Anthropic, recording the answers, and using that as training data to start training their models. It's basically taking, and to some extent, they would say it's taking the Anthropic's IP and using it to build open source models, which then compete against them. So that's the kind of comment here, right? And so other than so what and that's funny, what happens after that? Well, the first thing is, the main thing is, is it illegal, right? And the interesting thing here is it's clearly in breach of Anthropic's terms of service. And that's very clearly expressed, right? But that's not a legal, that's a contractual problem between Anthropic and the Chinese model companies, and they're more than welcome to sue each other in, you know, you knock yourself out in Beijing, good luck with the lawsuit, dude, right? I think the interesting thing, and that's why the Senate Banking Committee thing is interesting, is you could imagine a world where, because as well as just being in breach of terms of service, it is also arguable that you and our trade secrets acts, and they go above the level of contractual, and then start to get into actual, you know, kind of legal issues that the government might take an interest in, or maybe at its most extreme, I could see Anthropic saying to the government, hey, these are strategic U.S. assets. We're getting regulated separately on how we produce our products. You've got to stick up for us and say, you're not going to let this happen and put the full weight of the U.S. government behind it. And that takes what was a contractual dispute between two parties and makes it the U.S. government putting the thumb on the scales. And clearly that's what they're angling for. Going back to the Coinbase comment, what happens if in return for Mythos kind of complying with U.S. government restrictions on overseas access, the quid pro quo in the next piece of legislation is no Chinese model that has been proven in a U.S. court of law to distill using U.S. foundation model technology can be used by a U.S. company. It's not crazy. So you can see where they want to go. I mean, they're not just kind of crying because it's unfair. In my view, they're laying the pipe for a set of trades to push back on this open store stuff if they're in fact doing distillation. So that's, I think, what's going on here. To Harry's point, whether he's no longer
Speaker 1become a successful communicator at this point, whether the spite startup vibe of where the safe guys has expired and led to conflict with Trump, putting that aside, I think he wants the models banned for use by U.S. companies. I think he wants Chinese models banned. I think he wants Chinese models banned for use by U.S. companies. And I think in an era where SBF may get pardoned, the founder of Binance already got pardoned, this is pretty imaginable. I think it might be perfectly logical for them to get around the table, especially when we're jostling on geopolitical level and say, listen, we're just going to ban it or we're going to do some weird tariff on any U.S. startup that uses a Chinese model. They have to pay 100 percent tariff tax. That's beyond my skill set. But clearly they just want U.S. company. You can't stop China from doing what China's got. You ain't going to stop China from doing it for a million reasons, but just put an end to what Cursor and Harvey are doing. No more. You guys can't do it anymore. You guys have to on grounds of national security. This is theft of our IP. This is theft of our data. We can't trust them. And hey, Cursor and Harvey, your models are just destroyed, your business models. Thank God you sold for 60 billion because Chinese open source is banned. I don't think it's implausible. Is it on Kalshi? It seems to be more than a 10 percent chance it's going to happen.
Speaker 3Would you not say it's actually almost inevitable, not plausible, when you know, when you look at both Sam and Dario advocating for it and the people around the administration advocating for it, too, you don't exactly have an opposing side?
Speaker 2Well, you should have because, you know, this is and Bill Gurley is great on this. This is regulatory capture in the extreme. The truth is because there's two separate issues that they're brilliantly conflating. One is, should they be back, quote unquote, banned because they distilled our prompts and as such got a leg up on that? Naughty them if they did, just like naughty open AI for stealing your 1.5 million books to leverage your property three years ago. So pay the naughty fine and move on. No one's banning open AI and anthropic because they were naughty. So logically, the distillation thing shouldn't result in banning. Separate thing is and conflating the two is, are you really trying to find a motivation from the government that says ban, not because of the naughtiness, but because Chinese open source running USAI sounds scary? And I can imagine that there are products that the interest of national security like Huawei are banned in the U.S. So it's not crazy that if we believe frontier models are equivalent, that you could see that kind of thing. Now, the argument that every tech CEO will and should be making is these are open source models that are sourced and running in the U.S. on U.S. inference. There's literally nothing going. The code is open to inspection. There's no backdoor here. There's zero risk involved. But to make that argument implies that you have on the other side of the table, a government entity willing to listen and do nuance and, that's hard. So I think that you could imagine in the absence of a sensible regulatory function, you know, that you conflate the naughty tax for stealing the intellectual property, the security risk because it's China. And then the deep, dark secret is the frontier models are actually just trying to defend their vast capex spend by eliminating a low cost competitor. And it all comes together in a big kind of policy mismatch in return for some of these restrictions on, you know, security and. Our usage.
Speaker 1There's also a middle ground too, or a partial win for Anthropic and OpenAI is just, listen, we can't stop Cursor, which they could. We can't stop Cursor and Harvey, but you know what we can do? We can make every single Fortune 500 company uncomfortable banning open source. Like they're not comfortable from a security security. There's enough ambiguity out there that it's just not worth it, right? Whether a startup can take, startups can cut corners that enterprises are not comfortable cutting, right? All you have to do is make it look dangerous to, you know, enterprises and they can just ban any open source use in their company.
Speaker 2And again, to be clear, I'm going to distinguish something. They wouldn't say ban open source. They would say ban non-US, Chinese-based companies distilled on US models. Because, you know, they're not going to ban Reflection or Poolside. Because look, one of the interesting things here is clearly, I mean, all these US companies don't want Chinese open source. They want open source. And at some point, there's going to be an interesting opportunity for a US open source company like Reflection, like Poolside. And I think that's going to be something that's going to take some of this revenue. But you're right, Jason, you know, some version of banning these companies that have been found, quote, unquote, guilty of distillation that are based ex-US in China is plausible. Stepping back, one thing I noticed here, that Anthropic wrote to the Senate Banking Committee. Obviously, the minority head of the Senate Banking Committee is Liz Warren. You really have to want to get something done. As a tech company, you say, what I'm going to do is pull in Liz Warren on my side. Very few tech companies say, that's what I really need here today. And it just shows that you're trying to get something interesting done here.
Speaker 3Guys, personally, and you don't have to answer, but I'm just intrigued, do you think we should ban them?
Speaker 2No, because I think you have to be very pragmatic in terms of what you, and again, I'm willing to be correct, there's two separate issues. If they've done the naughty, then they should pay the naughty tax. They should pay exactly as much as Anthropic had to pay to the book guys, and they should have paid to Anthropic. It's easily priced. And we could use the argument, I mean, and that would make things, quote, unquote, fair. So from a distillation perspective, no. Separate comment from a national security perspective. Again, as I understand it, if you are downloading the model, the code is open for inspection, the weights are available, and there's nothing running and no telemetry back to China, then I don't think there's any danger. So I think you probably shouldn't ban them. That would be my take.
Speaker 1I think that AI is going to be like the oil situation in the Persian Gulf today. We are so, as an economy in the US, we are so addicted to this. Our 401ks, our stock market, everything we do, every bet, every reelection for every politician, we are so tied to the AI boom. I'm not going to, whether we can debate whether it's a bubble, right? I mean, at some level, it has to be a bubble. We are all so, we're all on this journey together. 40% of the S&P 500 is tied to this bubble. I think we have to protect it. You know, Sarah Fryer, whatever, a year ago saying that the US government should back all of our data centers. That was, you know, I think it was her that was flamed for saying that, right? She's probably, it was true. And she probably shouldn't have said it the way she said it. I think it was offhanded in a, in a comment. I mean, everything, I think what I mean is everything's going to be circular because it's like, we can say we don't need that oil because we make plenty of it from fracking, but, but look at the impacts, right? Even if gas prices go up a dollar a gallon, people are freaking out. And if their 401ks go down 20%, if Nvidia stops selling chips, if, if all of this moves to, I don't know. I think we're going to end up doing everything we can as a society to prop up, prop this up. I think we're all going to be, um, and I think it may even be more important than the other issues. We just don't, we just don't want unemployment. We don't want these things to happen. And we're all, all in on this, whether we realize it or not. I think we're all, we're all tied to the AI economy. It's all about me. I care about unemployment. I care about it, but, but my 401k, don't touch it, man. You think I'm kidding? I think we're all in, in just like the price of gas. Like we, yeah, I, you know, I feel a little bad about, but don't raise the price of my gas. Don't touch my 401k. These are don't, don't touch it.
Speaker 2What you're saying, might be true, Jason. I'm not sure it is, but it might be true. But if it is true, what's implicit in that statement is really very negative. In other words, what you're saying is keep up the price of AI as an input to the rest of the economy by protecting these foundation models, pricing structure so that they can get a trillion dollars in revenue. And the loser as always is the case with trade restrictions is the rest of the economy who won't get cheap intelligence. They'll get dear intelligence. So what it means is the stocks in your 401k, that are making AI, continue to make money. And the stocks in your 401k that should be getting the lift from AI are going to lose money. It would be like as if in 1981 or 82, the government's, IBM licensed MS-DOS and they should have protected it. And instead, everyone was able to clone it like Compaq. It would be like the US government coming in and says, no Compaq, no Dell, you can't make clones of the IBM. We've got to keep IBM stock price up. And therefore, we're going to ban the clones and we're going to keep the PC industry, a small, tiny, profitable industry for IBM. It could happen in this case because the dynamic of overseas national security makes it happen, but it would be for the record, so freaking dumb. Well, look, here's the counter argument. I'm not
Speaker 1saying you might be right. It might be dumb, right? I think if you step back for a minute.
Speaker 2To be clear, dumb things happen all the time, especially when governments are involved. I have high confidence in dumb. See Harry for details. I mean,
Speaker 3you're okay. Sorry, Harry. I thought you were going to stop and see Harry for details and I was really hurt there, Rory. No, no, no. Sorry. If you look at the history of LLMs on this show
Speaker 1since it started, right? What has really changed, and Coinbase is just one example of this, we are probably leaving the oligopical age, right? And we had an oligopical, when we started the show, actually, you could argue there were two monopolies, okay? Anthropic owned coding. Elon Musk, when we started this, said those anthropic guys have something special. I can't compete in coding. Open AI owned consumer. Right? They both had sort of weird pricing they made up and were losing lots of money, but it was, and they had these sort of dominant. Now, then we, as we began to begin this year, we entered an oligopical era where we had two leaders, okay? And for a while, what happens in oligopolies traditionally is you compete aggressively on features and not on price. You essentially soft collude on price and the models were somewhat similarly priced. Open AI would be like, oh, we're half the price for codex, but not really we're as competitive, right? And then typically, I mean, Harry's the master here. When you leave oligopical stages, there's massive price erosion because you're no longer competing on features, you're competing on price. And that's exactly what we're seeing. And governments do support oligopolies all the time. And the number one example in EC is medical device companies and Medicare. You fix pricing so you can get innovation and I just
Speaker 2wouldn't- No, you fix pricing because you fix pricing because of regulatory capture. I agree with what you're saying is oligopolies are great for the people involved because yeah, you can have a- And sometimes for innovation.
Speaker 1For innovation. If you look at this study, when you have folks that are brutally, like we're still competing, but if we agree that basically, listen, we're 200 bucks each for our max program and we're going to charge this much per token, how do you win? You win because Anthropic comes in and builds this disruptive coding model and takes all that revenue, right? That's how you win in an oligopical market when pricing doesn't matter and features do. And it actually can be great for innovation in the short term, but maybe not in the long term, right?
Speaker 2Include me out on that. Competition works. I mean, again, going back, I think any number of examples say you just got to let competition rip. You got to let the open source providers rip. I mean, again, it's the Coinbase example. Counterfactual is if those open source product didn't exist, the Brian Armstrong tweet would have been, we were paying $10 million six months ago for our AI intelligence. Now we're paying 60. What the frick do I do? It wouldn't have been as good a tweet. We need competition to make this shit happen. So I hear you, Jason. It might, by the way, it might happen. You might see some pressure,
Speaker 1but I think it would be a bummer. Move on. Hard to predict at least, right? Hard to predict as of this date, I think. Hard to predict. We're going to jump around a little bit here,
Speaker 3but few companies have had the competitive tussle when it comes to regulation and government intervention or trying to than Microsoft. Microsoft is in a pretty poor state. It's the worst month since 2000, I found. And I mean, they're down 16 percent, 16.5 percent as of today. What is going on? I'm a holder of Microsoft. And just when I think it can't go lower, it does. Guys, can you help me out here? Microsoft. I mean, look, I don't have
Speaker 2a theory of the case of why this month it suddenly kind of dawned on everyone that its strategic position was weak. Ironically, just when they had one of their big announcements and Satya made all this conversation about their direction on AI, maybe it suddenly opened people's eyes. Because we've been saying for the last year, look, they don't have their standalone model. Their AI story is we spent a lot of money on CapEx, which we do to support open AI. We have a good investment in open AI, which is looking pretty good, but perhaps not as good as it was a year ago. But our core software business doesn't have a compelling AI product. And let's get real. Cowork and Claude Code are eating the two core parts of the Microsoft franchise back in the day, which was offers for the individual knowledge worker, which is what Cowork is becoming. And developers, developers, as Steve Ballmer used to say, which is, what Claude Code is becoming. So when you zoom out a million miles, Microsoft, which isn't a software business, unlike Apple, and therefore can't afford to stay apart from the great AI wars, other than its equity ownership in open AI, doesn't have anything compelling to bring to the table. And I think the market's looking at that and going, you're not going to zero, Harry. Don't panic. You've had your hit. I mean, you don't get the lift that you get from the growth stories. Jason's comment, do you really have an... I mean, they'll say they have an AI growth story, but if you break it out... And the numbers, which they don't do, a lot of that is just, hey, we're selling inference to open AI, so we have a growth story. But what they don't have is a compelling end customer growth story here that they own themselves. So I think the market's finally caught up with the bullshit.
Speaker 1Look, I don't know the answer either, right? It's a very complex business model, Microsoft, right? It's a conglomerate. It's got Xbox, which I'm not a total expert on, and a whole bunch of pieces. Stepping back for a minute, I think what is troubling is Microsoft guiding that Azure growth is decelerating. And I think any time you see deceleration at all, right? And Rory can say, Jesus Christ, how can you keep growing 40% at this size, right? Law of gargantuan numbers, right? Sort of massive. But I think just as a student, the only way your stock price is going to trade up is if you beat, raise, and grow. You have to accelerate in this market. And you can be an oldie like Okta and Twilio, and just your stock can blow up, or even Navon, if you re-accelerate. But the market's expectations are... They're so high that guiding to 37% from 40% growth is a fail. It's a fail for Azure. And it's just... This is why maybe that regulation is coming for those Chinese open source models, because we just can't afford the deceleration. We just can't afford... But it's not the only... Azure is not the only factor, right? But it's so important. And it's almost a canary in the coal mine that if there's any issue in Azure, we should at least reflect on why it is, right? If there's any slowdown in this era where we're claiming we're all going to be running 20 agents 24-7...
Speaker 2Yes. I mean, again, because Azure... I mean, I cited developers and knowledge workers, but you're talking about the separate aspect of the business, which is the cloud business. And you're right. Yeah, the Azure cloud business de-accelerates. But I think more fundamentally, a huge slug of the Azure cloud business is simply just inference for other providers like OpenAI. So yes, I agree. But it should accelerate, right? That should accelerate. Yes. If you recollect, and this is a harsh comment. Three years ago, Satya did, they were going to make a Google dance comment. And the truth is, since then, Google's massively outperformed. And for all their faults, and I still think they have significant issues and risks, they at least have their standalone model and a product to sell. The truth is, today, Microsoft has a 30% ownership interest in OpenAI and doesn't have a state-of-the-art frontier model themselves. That's a big difference.
Speaker 1You know, it'd be interesting if Anthropic really does IPO in the coming months, right, if it stays on track. I have to imagine it's going to be one of those volatile, volatile stocks out there, right? Even a hint of news will send it up and down math. I mean, even Syrbis is massively volatile, right? But if Microsoft has this level of volatility, you know, we're going to be reading every, every tea leaf on Anthropic. Anthropic looks perfectly linear. I mean, well, I guess it's, I guess it's, it all looks perfect and up to the right today while it's private, right? All these rounds, but man, I wonder how the volatility in that stock
Speaker 3rise. A hint of bad news. Boom. Well, the experts in volatility are Cauchy. And Cauchy, are apparently raising a new round at $40 billion. They raised that last round in May at $22 billion. Is this just the ultimate sign of kind of the casinoization of society and risk on mentality from consumers? They recently announced being at $2 billion in revenue.
Speaker 2How do we feel about this? People like to bet and US had a prohibition. And we talked about this last week. They had a prohibition on gambling and sports for the longest time. Poor Pete Rose never got into the hall of fame because he bet on himself. And now we have, you know, a couple of hundred billion dollar a year industry doing exactly the same. So they're just riding that trend. And they've, you know, they got other products. It's not all sports betting, but it's about, I think, 70% plus sports betting. It's killing it in revenue. So it's makes, it totally makes sense. Will Cauchy be a hundred billion dollar company in 12 months time? I doubt it. I mean, look, you get there one or two ways. Either sports betting continue to expand and they can take disproportionate market share. That's one option. Or the other at all, crypto perpetuals business, which I just really started to learn about, which is effectively kind of futures on crypto, which is, which is gambling to the end, right? Either that business turns out to be much bigger than we realize, which is not impossible, right? I mean, look, I ice, not the ice, but ice has in the owners of NASDAQ, the, I think, intercontinental exchange has a big ownership stake in polymarket. Why that's relevant is that's a company that runs ice, that runs stock trading and, you know, real financial markets. It's taking an significant, I think, about 20% ownership interest in the other big kind of online betting prediction market player polymarket and they're clearly saying this is a huge thing that can have 50 or 100 billion dollar kind of valuation so it's not crazy but it happens one of two ways either a sports betting gets ultra huge and they don't get tied up by regulation and the whole issues around that or b the non-sports betting side of prediction markets in particular the financial products becomes huge i don't think predicting who's the next who's going to win the general election or in the uk or who's going to be the next president in the us is a huge enormous ginormous business i love it i find it fun it's actually the most interesting part of polymarket and calci but that's not going to get you to 100 billion bucks because the number of people who actually really want to bet on the next president is actually pretty low it's either sports betting which works because we all love sports good luck tomorrow harry and then or it's financial betting which we all love betting because we all love money and i'm sure if you you know you've got sports you've got money if you could bet on sex you'd have the trifecta it's the human desires it's the big to get a big ass company you need to cater big markets and predictions on politicians is a small market betting is a big market on sports people love sports betting on money is a big market that's my point dude i
Speaker 3totally agree i did a deal into fomo which just got their new round on my index and usv and their new product is perps which obviously allows you to do much simpler up or down on stock prices for
Speaker 2consumers i've meant to actually try that product guys that looks incredible it's amazing dude no i mean you know paul warren buffett is like it's time for me to die because you people have lost the plot but if you want action if you want action on the table then perps is your boy you know right if you have a strong feeling on where the market's going the next hour then go
Speaker 3for it also also like when you look at tam expansion perps is a brilliant way to expand tam to a mega mega market very exciting okay spacex has spacex ipo frozen the ai ipo market for now given the size magnitude weight of it does it put barriers up to subsequent ipos i mean
Speaker 2we're pointing out that the anti-ai ipo is about to happen today lily we're recording this on tuesday i think june 30th bending spoons is going to go public tomorrow july 1st and this will come out on july 2nd and lily bending spoons is the anti-ipo it's by company and they own aol for god's sake right which by the way i remember has killed their aol email product but still is an ad network they own evernote they own a bunch of stuff like that so that's a company that it literally is you know 20 year old software companies going public at 20 billion dollars so it's not like the ipo market is shut right which is what i thought you were saying what you're basically saying is is the hidden question here harry has the volatility around spacex made open ai and antropic nervous about going out is that
Speaker 1really your question yeah i thought this was more interesting when i added to the list but as i reflect on it i think as long as the ipo remains up right i think they'll be fine the volatility has been high and extreme as we record this uh greed will still trump fear right but but it's uh the volatility has been sufficiently high enough you could imagine that changing right before now in the day anthropic ipo so i'm sure the bankers who have less to do are monitoring this every day and i think the board and dario will think about it weekly right just making sure it is the right time there it definitely shows there's risk it isn't the right time it shows there is some risk that anthropic might delay its ipo it's it the volatility says it's not a slam dunk but up is up like everyone's except for the poor korean bank that forgot to put in their orders ever everyone most folks that at least bought in the ipo are up right you brought up bending spoons when we look
Speaker 3at multiples attached to ipos you know bending spoons going to go out at 20 billion dollars which will be a pretty hefty multiple i think it's about a 12 to 14 x given revenues of one and a
Speaker 2half yeah one and a half trailing but 600 million in q1 yeah so it's going to be a pretty hefty multiple so probably yeah eight nine x forward revenue yeah healthy multiple for the antithesis of ai
Speaker 3company is that not an extremely juiced up multiple it is funny because you're exactly
Speaker 2right it's like you have a whole bunch of single product crap you know b2b sas companies that have slowed out to 10 growth and are trading at three times revenues and then you have this company which is an agglomeration of a whole bunch of tired consumer products that were growing at 10 until these guys took them over and when you read the s1 you realize they don't get organic growth they don't get new users they just raise prices cut costs and suddenly that's being valued at eight nine ten times revenues so it definitely feels kind of a little weird it would be like as if all the sas it's not quite the same it would be like all the sas companies that were slow growth were trading at two times revenues and constellation software which is a roll-up of sas companies was trading at nine times it definitely feels like wow that was a clever way to make money and you do kind of you know it's a well-executed strategy maybe and it's where clearly there's clearly value being created you do wonder is it a little
Speaker 1farthy but you know good luck to them i think it's going to do well i think over the medium term here's why i mean listen good god don't take risk factors in a perspective seriously right or whatever perspective said but but there's a grain of truth they said there's at least a thousand businesses they've already identified that our material can move the needle i think if they're this good at buying repackaging these companies and there's a thousand targets they can maintain outlier growth rates for longer than we would be in the stock right so can they rate i guess the meta question is going back to the microsoft issue no rory's going to think it's an odd tie but can they maintain this outlier growth for five plus years right to justify some sort of premium we can debate whether the premium's too high but outlier growth gets a a premium i think for without question if they can execute at the level they have it's justified for five years because there's there's a thousand targets and i think there's also going to be another bending spoons in b2b that's going to nail this they're going to buy these horrific products like marketo and others put a few smart people in it and just boost the nrr they're just going to boost the nrr and a few other things and so i think there's there's a chance for several bending spoons to take the struggling software companies and do a revenue arbitrage because they can package them together into something high growth i think there's five good years here i think that's smart
Speaker 2jason because you're exactly right like because if you're one of those thousand privately held companies and let's assume they're all consuming there's nowhere else to go i mean that's the big attraction these guys are the only way out so they they can lock it at least until someone else comes along they can lock in some kind of rev arbitrage yeah that's interesting and yeah you should be looking at it for b2b jason you are you are the
Speaker 3new ceo of bending spoons goes b2b and you are able to choose three targets for your opening quarter which three targets would you choose i mean bending spoon has one trick which is it uses
Speaker 1a lot of folks in italy that are lower cost for engineering right but i assume the other trick it has is it's able to incent gms to do a decent job on these like fine kids and these kids may be 60 and not 16 about 26 but fine kids to run these event brides and aols and let's assume you have a steady enough flow of these kids they give a shit okay then i would start to buy up almost any b2b company with nine figures in revenue with a sticky customer base because i mean literally our work i know i talk about our worst and the worst product that we use today is our most expensive product it's marketa rory will remember it and they threaten us they threaten us the api doesn't work it breaks every day they just told us they're raising prices 20 next year like bending spoons but without any features or functionality the site went down for a full day the other day you put a kid in here that gives a crap okay and you say i just want you to take whatever marquetto still has at adobe 300 million of revenue left right it's probably decaying take that 300 million and give a crap don't threaten your customers actually launch some features remove the rate limits on the api like do something so that to retain your base it would work like we even our worst software we would stay it's not that hard so i would take all these ones that have a sticky base and buy and listen you then you take 10 folks at 200 million you got a 2 billion dollar business growing 30 40 and stack it you got something pretty nice but the problem is they're just putting mediocre people in charge of these like the non-bending spoons are having p firms put these recycled mediocre executives in charge of it that are going on learning tours for 90 days and coming up with no ideas that's just not going
Speaker 3to work can you buy these assets for a reasonable price i think you can buy some yeah what's the
Speaker 2what's funny about this is the minute you ask you can tell jason i'm going to do it too you have this hot button of these are markets that's been bugging you and companies where you're like for god's sake will you do something and yeah i think the marketo marketing automation space is one we both know and there's something to be done there you know there's other i mean i think i'll give you two examples one of which is traded already i mean i know jason haste the first market i said it before semrush semrush is the old seo optimization it's so obvious that every one of those customers is going to need geo you know ai optimization you should buy semrush buy some other little tool and just bundle them together and sell them you can't do that now because adobe bought semrush for on the two times revenues great deal right you could have turned that thing into something and then another example which you know the world continues to poke at is pager duty which is a company that's been out there it has commanding market share and it's never added ai enabled incident resolution
Speaker 1yeah put a kid on if you can buy pager duty for what it's to put a kid on it that really that's really motivated it could work i totally agree a business oriented executive who maybe picks up a
Speaker 2yc you know failed swe kind of software incident automation software product and put it together and just you know as jason says if you're not re-accelerating you're dying but dry i mean if you can get re-acceleration to 20 percent by just upselling a slug at the installer base yeah at 2x revenues you could be jason lemkin's ben b bending spoons b2b bs b2b i think what folks don't realize
Speaker 1is it's so many of these companies we're talking about right i can tell you because we interact with these people they've given up the entire team team, their customer success team has become a force of evil, right? They threaten you with lawsuits. They threaten you with everything. You can smell that their culture is, it's not that we're not in terminal. Like I used to have a guy on my sales team whose last job was working for the Yellow Pages, okay? And his job, he got a huge bonus if his patch shrunk less than 20% each year. He was one of the top performers, right? His patch shrunk like 16%, okay? I mean, at some point, you got to move on from that job. I feel like this is working with the Marketo team and other teams we work with, the knives are out, okay? So my point is, it is not hard to turn around a team that has completely given up if they have a sticky customer base. This is not, but you got to find people that want it and the cultures are just broken. It's not just Marketo, they're broken everywhere, right? These cultures have given up. So I like this model and I think there's a thousand targets for bending spoons. And I almost wonder if Constellation needs, listen, they've been wildly successful. I wonder if their model needs to be rebooted so they can get it up. I don't know if kids want to work for Constellation or not. In the portfolio company where I've watched PE take them over, right? They're not running the right model. Because I've sold a lot of companies to PE, right? And I'm not close to them, but I watched them. They're still bringing in 2021 managers. They're bringing in folks that, yeah, they're never a CEO before. They were never really a great success on their own, but they have a good set of logos on their account and they're a people person. Jason's really a people person. He's going on a speaking tour. He's going around the world for 90 days to just meet with the team. Jason's really a people person. He's going on a speaking tour. He's going on a speaking tour. And then I want to meet back with the board in three or four months and come up with my ideas. Like that don't work today, boys. Okay. That was great when you bought, when Tom O'Bravo bought you in 2021, right? We need the bending. I bet at bending spoons when you buy that thing, man, crap happens the first 30 days. People are moved out. People are moved in. Products are shut down. We need that level of action, man. Pushing on that. It may be
Speaker 2in part because, and I could be wrong, but what bending spoons is trying to do is similar to what Jason and PE was doing five, 10 years ago in B2B SaaS. In other words, don't change the business all that much, but just optimize it. And you're right. So that's an easier task. I think what you're saying, Jason, I think it's true is if you buy a B2B software company today, it's pre-AI, it is highly unlikely that simply optimizing and pressing the buttons will be enough. In other words, you can play the Vista moves from 2021. You can cut the cost. You can move headcount overseas, et cetera, et cetera. But I think what you're saying is correct. Unless you're kind of generating new revenue from AI and significantly re-engineering the company, which is a bigger ask than just optimize the existing thing, it won't be successful. So to that extent, I think that Jason's B2B, B2B dot, sorry, Bending Spoons B2B run by Jason will be actually a harder managerial task than Bending Spoons. Because I think all Bending Spoons had to do was take Evernote, take AOL, and just ruthlessly raise prices and optimize. It's a little... There was a little less innovation required than I think would be required in B2B now. Just thinking aloud here, I hadn't thought about that until now. But I think the upside can be bigger.
Speaker 3You also need a monster checkbook. I mean, PagerDuty's market cap says $750. You buy it at $2X, you're a billion five on one asset. We times that by five.
Speaker 1No, no, you buy it at $760. No one's buying PagerDuty for $2X. The board would have to take that deal in six seconds from a fiduciary obligation, right? You think they'd sell it at $760? I think any public company today... I mean, we're always live this more than I have. I think any public company in decline today that gets an offer, a premium of even 15%, they have a fiduciary duty to take that very seriously. They have to come back and say, we genuinely believe this thing. We got to go hire an investment bank and say it's underpriced at a 15% premium to market. And then management with their earn out, they're going to take that deal in a heartbeat. I get to leave? I get to bail out of this sinking rat hole? I'll take this. Management's going to be so aligned to take any deal where... I mean, some of them, they just get fired. They're not going to be excited about that, right?
Speaker 2They just had a good time. They just had a good time. They're not going to be excited about that. But yes, I mean, it's $700, $800 million. You're right. But that's because Jason wanted to start at the $100 million level. I mean, you could do the bending spoons thing and start with smaller
Speaker 3deals and roll up to it. Well, that's what they did. I mean, it's a very long journey. This
Speaker 2company is, I think, 15 years old. The point is, I think the meta point Jason's making is correct, is that especially in a world where standalone IPOs, you need $500 million and 30% growth. There are a whole lot of companies that aren't that, that are sub that scale, this is going to sound stupid when I say, but aren't family businesses you leave to your kids. They're venture-backed things with a CEO. And at some point, everyone gets old. Everyone wants to do something else. And all those businesses have to find a home. So yeah, I don't think it's correct. I think I'd love to see the bending spoons consumer list of a thousand names, but I believe it would be there. You know, good digital assets that are just like, eh, that matters enough.
Speaker 3Jason, I push you. You've got Mercado, one. What are the other two targets we're going for?
Speaker 1Patriotty was a good one, right? I mean, Rory's right. That's a very good one because, I mean, you've got the right customer base, right? Datadog's extremely expensive. They have cheaper competitors. I mean, Patriotty got crushed from all sides and across its whole suite, right? But its customer count is flat, but it's real. It's still got 15,000 customers or so paying for this product constantly. That was a good one. Asana? Boy, I have too much scar tissue attempting to use that product. But probably, yeah. I mean, you have a company literally where the billionaire founder just up and quit a year and a half ago. I mean, that's one that you've got to be able, there's got to be some way to turn this thing around in a space that, listen, that has existential challenges, right? Do agents need Asana? Agents don't need Asana, but I think you can make it more agent-friendly. I think you can do better, probably do better. This is easy for me to, I don't want to be too much of an armchair quarterback from a product that feels terminal, but it's probably a good one. I think it's a good candidate, right? It is, it is, it's a good candidate without all the pressure too, right?
Speaker 3Okay. I feel like there's a private company fundraising that we need to touch on before we do a rage bait, but real. Chamath Palihapitiya raises 135 million for his AI startup, 8090 or 1890, whatever he calls it. But he also is now CEO. For people that don't know, what do they do? It's a software factory platform that lets teams collaborate with AI to handle the full software development cycle from new builds to code refactoring, complete with governance. What did we think about this one, Tim?
Speaker 2I just love the fact that you had Chamath Nath in the rage bait category. I mean, in and of itself, it shows progress, right? All credit to him. I mean, at the risk of making the cliche, you know, he used that quote a long time ago, but give him credit. You know, he did the man in the arena quote and he got slammed for it. Well, now he is the man in the arena and all credit to him for trying. Good luck, right? It's a super interesting market. There's obviously a ton, a ton of competition, but as he said in his tweet, it's the most exciting space you've seen in decades. You know, how is all of software going to be remade? So I just give him huge credit for going for it and good luck. I don't mean to be snarky. I will say one thing just in general, right? This is abstracting away
Speaker 1from Chamath. And there are counterexamples. I can give a few counterexamples, but I, my scar tissue, I don't believe he's working 100% on this. I don't believe every waking hour is on this. I believe he's got a team. I don't believe he's got a team. I don't believe he's got a team. Right. At this point in life. And I just, when wealthy folks, especially VCs want to be a CEO, but they're not working at the insane rate of a traditional founder CEO, I just find those run out of energy. And I'm not saying he's not the exception to the rule, right? I know the Spotify guy that Harry's close with runs the scanning company to that. We have a lot of CEOs running side companies that are very successful, right? Listen, anyone that started a startup, it's all fun and games in the early days. If you have any money, you pull the money, you pull the money, you pull together a team. There's a lot of whiteboard talking, use your brand to get Accenture, whoever's backing you. It's all kind of fun until the S hits the fan. But do you want to be running this services, AI business forever, a hundred hours a week? Or do you want to like be hosting $25 million fundraisers in your palatial home? I mean, I don't know that you can do both successfully. I know there are examples. I just wouldn't like, I just wouldn't invest. There's certain things for me personally, I have scar tissue. I've written small checks into my bank account and I'm like, well, I'm going to do this. I'm going to do this. I'm going to do this. I'm going to do this. I'm going to do this. I'm going to do this. I'm going to do this. I'm going to do this. I'm going to do this. I'm going to do this. I'm going to do this. I'm going to do this. Right. And I remember one of them, I asked this successful vendor. I'm like, I don't really need to know what, I don't care about the valuation. I don't just, are you telling me this is the only thing you're going to be doing? He's like, yeah, this is the only thing I'm going to do. And 30 days later, I see him working on another startup, right? So I'm, I'm out. If literally Chamath drops everything, but 80, 90, everything. And I see the sweat from his brow. And I see that because the dude's fit, he's looking good, right? He, uh, he just had a massive, the massive largest win of his career as an investor. I want to see the, I want to see the paunchy middle, the hair loss, the, his right-hand person quitting on him. Then I'll invest. Not until then. I too much scar tissue here. It's too, it's too easy to start up today. Whether you're, whether you launch into YC and raise it 30 pre when you started three weeks ago, it's not easy, but it's too easy. It's just too easy to start up today. Seeds for suckers, boys. It's for suckers. It's for suckers. We're
Speaker 3making the t-shirts. I really raised the internet again this week. Why? Turned down a founder this week. Why? They were finishing the year at one and a half million ARR, finishing next year at 5 million ARR. Today, brutal as it is, this isn't good enough to raise a good series A. Opportunity is real. Now I deleted it because honestly, no one engaged. It got 30 likes after an hour, which is not very much for our tweets. And so I took it down because no one cared and it looks bad on my timeline. And then they took it back up and it became a thing.
Speaker 2do you think i was wrong i think you okay i can answer yes i think that the factual statement you made is correct in the kind of growth rates you're seeing now the bar the opportunity cost of doing something with a lower it's not impossible we have done deals with those kind of growth rates which would have been very top quartile in the age of sass but isn't in the age of ai i can imagine doing some of those deals but it's the exception and you'd need some other extenuating factor so as a matter of pure truth you were it was a correct reflection of the current venture market were you correct to put it up if you're not careful i find as a vc when you're saying your one and a half to five million deal isn't quote good enough you really have to phrase it carefully so you don't sound like an obnoxious prick i'm telling people their life's work is
Speaker 3not good enough and that's tricky harry well i'm i'm really sorry if that's going to ruin your day don't be a fucking founder life's harder than a vc tweeting and it ruining you
Speaker 2i agree but but but i think life is up but it's precisely because the rest of your life is so hard that a little bit of compassion from the capital wouldn't hurt but your message is correct and i
Speaker 3had loads of found and vcs be like oh class suit child i was like dude legora lovable macaw
Speaker 2i'm just pushing that look yes you a lot of people say you're mean but what you're saying is correct but again you want to look we've discussed this before you think rage is still engagement so you're all happy okay now i'm going to say my important i definitely don't think you should have taken it down because that looked like you were blinking and you know yeah that was a mistake you blink dude that's the bad part can i can i break it down just a little bit on the on the
Speaker 1tweet first of all i think listen i'm supportive if i would have retweeted it and i'll be supportive here i think the problem with the and i want to share a story the problem with the tweet is there's two things going on right the first part of the tweet is the state of the series a market the second part which is which is more triggering although people might not miss it is opportunity cost of cash is real because those are different points okay i'll tell you something that i think is subtly toxic that all these nice vcs are doing it's subtly toxic i've watched two portfolio companies i have recently that were growing at great rates okay we're going to compound to huge winners okay that are capital efficient but they're not quite at harry's level they're not at the a at the b or the c okay i've watched all the vcs say good luck guys go go do your round i do this thing where i built an ai pitch deck generator that uses all the benchmarks from iconic and benchmark it tells you honestly your odds it told all of them that for a round they're a b okay it will tell you go to saster day i use pitch just upload your pitch deck it will tell you not a single vc in either of these companies would be honest with the founders i've tried in the past i get my head cut off in both of these cases now i said well why don't you back here's my new thing i'm like the high companies in your space are basically their later stage right they're getting funded at like 30x arr okay back solve into what numbers you would need to get to raise it 30x and then you're going to raise it to 30x arr right this is me trying to be to guide founders there it's too subtle they don't listen and then i'm two months later they're like hey i'm growing you know at this still top 10 rate but not enough and no one's honest so the honesty of harry's thing was very helpful the opportunity of cash it's a little it's a little it's more for people to process right
Speaker 2what it's worth i do agree and maybe i don't know if i don't think i'm changing my mind but i like what you said jason because i'm playing the pattern back and i've seen the same thing where you look at these companies and you're like they're planning to raise everyone around the table knows that that's not a deal they do but they say to the company you know have a go and they're not being they're not you know they're looking at the growth rate and they're saying that's not compelling compared to the other things i'm seeing just have a go when perhaps the better advice might be if you're only growing at 50 you know should you converge on profitability should you raise a lower amount but you're right sending people out to get a harsh message from the market just because you're too big a winner you're not going to be able to do that you're not going to give it in the boardroom is actually a pretty pathetic act and i do agree with you jason and so to some extent i'm backing into harry's maybe people do you know what i told this i told this
Speaker 3founder which is why i actually tweeted i told this founder exactly this no bullshit he said you know that's really helpful i had no idea that wasn't good enough and so he was super receptive he was like honestly dude i didn't know that that's really helpful and i'll change how i project
Speaker 1future revenues to dig deeper maybe harry doesn't want to go this deep i do think there's a logic here's the what's wrong in harry's tweet okay harry's tweet is turn down a founder 1.5 finishing finishing next year at five that's not good enough to raise a series a if if this was a long tweet it might be or maybe it is but you might have to meet 150 vcs that's what i would kind of add and so i think if if you're if people are honest i think they should be like listen you're at the edge good there's nothing wrong with one five to five like you did better than i did back in the day there's nothing and put it on a spreadsheet if your burn is low and you don't quit you can build a generational company with those numbers but but and but what it means is i mean literally friggin you know higgs field where i invested in seed and hair invested you know they're just crossing 500 million in revenue in less than 18 months okay and when i when i thought about that this day is i i look back on my email i'm like why didn't i invest even more and so then i get a another email from a portfolio company growing at decent rates it's hard to even pay attention right it's hard to even pay attention and so you have to realize just getting the attentions hard in this crazy world and you've got to hunt higgs field or better that's your job right and the fact that when i started talking about higgs field in the show nobody even heard of it you know you know why that's interesting that means go find it go find and stop stop worrying about the 1.5 to 5 but if you talk to 150 investors you're going to find someone that believes in you and says because the 1.5 to 5 doesn't really matter does it it's where it's going to go over the next decade right and someone may take that bet but don't run a process don't build a data room give people one week to look at it and and ask for checks right uh
Speaker 2give it give it no one fast process i i think yes some versions of what you're saying you're right if you're the one and a half to five it has to be the if you want to raise money just understand the facts which are the deals that people the deals that are getting swept off are going one and a half to 15 you're not that so that has consequences it has consequences in terms of number of people you'll have to talk to the range of people you have to talk to the amount of capital you can realistically raise etc i don't discount the fact but i just want to say this because founders listening i do agree with you jason you're right you're right you're right you're right you're right jason you can be one and a half to five and still end up with an amazing generational company because yeah we've seen that date i can't remember when but uh there is a correlation but it's modest between initial growth rate and overall outcomes and companies that have grown slowly at the start have been huge at the end procore was a slow grower and then became a huge outcome so i do agree you it's not what we're not what you don't want to be saying to a founder is your dream is impossible go away and die because that's just not productive especially when they're growing 1 million 1.5 to 5 what you do want to say is if this is your reality you better think about it and you're going to be able to do it and you're going to be able to do it and you're going how to cut your cloth accordingly and how you plan your rates and maybe you're not a venture
Speaker 3asset anymore in a new world of venture and that's totally fine too but like that's okay you might be
Speaker 1i still think listen i just think i think there's two different tweets in your tweet right to rory's point the reality is 95 investors you're going to meet today are going to say the opportunity cost of cash is too high here right they're going to believe that and even if they don't believe it their jobs on the line they have to find a high fly like even if they even if they'd be happy to do this deal they might get fired right if they don't run the place right so they've got to find everyone's got to have one of these light lighthouse investments in their portfolio or you just might not be part of the next fund right this is a reality issue right so there that's a different tweet than what are the odds if you're at 1.5 going to five that you're going to raise funding today they're just different tweets and listen i i've got your back but you gave people two different reasons to get triggered and uh you saw their reaction right doesn't mean any of it was it was all correct though it's all correct yeah you you should just run the jack
Speaker 2nicholson you can't handle the truth quote you know that little film of jack you know doing the in the movie that's what you're saying how they just can't handle the truth i i agree but you are you are a little bit punky you are a little bit punky it's gonna work in my favor isn't it really win them back with that one rory yeah you might win them back you really want to win them is there anything else yeah one thing i would be curious to get people's thoughts on the whole you mentioned here claude tag and claude tag in slack jason i'd love to get your thoughts on that can we just
Speaker 3provide some context what is claude tag for those that don't know just context that here it's
Speaker 2a fully present member of a slack channel focused just on whatever that is being you know if you look at the announcement be it your legal team it's a it's a claude agent that's legal that that's just focused on legal that just has access to that sort of information but as a fully present
Speaker 1member of your channel yeah and and in theory it's autonomous yes right that's that's the that it's not just that it has well listen first of all i don't know because i tried to deploy tag right but you have i'm not you have to be the analyst you might have to i i think we're just i'm just not on the right enterprise plan and claude is the biggest issue so i haven't used it right i tried to use it for the show right so a lot of things like claude design before the internet and information says the world has ended let's give it let's actually see how important this product is to anthropic if this product is existentially important to anthropic this is could be the biggest deal for traditional software there ever is right it runs across it runs crop platform it runs on salesforce it runs on hubspot it runs on all the other things if the agent can run 24 7 autonomously take all your data and build all the analytics build all the dashboards run autonomously out of it then your data can flow between apps and you won't even care where it lives and all the fears about headless become true because claude is your head and you don't need and they and salesforce and hubspot really do become dumb databases like there is a version of this where anthropic puts its best people on and doesn't quit where it is existential to everything let's give it a week right or is this zapier on steroids or is it even very good because slack of the things the press is like why is salesforce supporting this when they launch their own version of this a couple months ago well what choice do you have right at some level. But I wouldn't be surprised if this vector does not maintain so much energy that Slackbot isn't better, right? That'd be the most logical thing, but we could be wrong. Like enterprise is the big battlefield. And as much as TAG created some anxiety at Salesforce, it might be the Trojan horse. And in six months, it's like, it's a big effing deal, but we have no evidence of that, right? We have no evidence design is going to kill Figma in any way, shape or form at this point. We have no evidence. There's a long-term commitment to that. So I'm skeptical, but existentially, man, could disrupt everything in software,
Speaker 2in business software. That's a good summary, Jason. I agree. I think, you know, someone did the wider Salesforce, let it happen. They have no choice. They own Slack. They have their Slackbot, but you can't be the cross-platform comms, you know, communications platform for your company, and then not allow access to an agent that's enabling you to do better work, because that just pushes people away from you. So I think the interesting thing here, look, is if you're lurking on a Slack channel, as an AI, you really just do get a very good, handle on how people do, you know, the context part of work that, you know, that lovely post from Jaya and Foundation Capital talking about capturing context, basically, which is a fancy word for capturing all the weird shit people do on top of the actual apps, which reflects how they actually do their work and how they configure their work to suit the SaaS apps, which is what happened in the prior generation of software. And capturing that context is really useful because it allows you, it allows an AI to automate that. And the truth is, a lot of that context exists in Slack. So if you're watching people interact on Slack, and if you watch it autonomously for weeks and months on end, you probably will get a pretty good handle on how people do work and, you know, how does Jason and Rory handle whatever exception we're dealing with when we're talking about it on Slack. So I think it's an interesting entry point. You're right. It's only an entry point. It's not the end of the world. But I think Salesforce is right to say, okay, you're in there now, and we're going to make sure that the Slackbot is better and remains better. So yeah, I agree with your assessment. Interesting. Watch this space. But definitely an interesting entry point into capturing what's going on at the context graph level. I mean, by the end of this year,
Speaker 1Anthropical will have more revenue than every public software company combined. Unless Brian Armstrong has his way and cuts it in half. It may be. But it's just, for predictive, we just have to wonder, is some of the stuff that we think is very, in the media and the apps, like, it just may not be material to Anthropic and nobody. It's just not, like, as these guys cross $100 billion in revenue, $200 billion in revenue, they just may, it may be like the early, when I started in B2B as a founder and when I first met Rory, most folks thought it was just too small. It just wasn't worth anybody's time. These markets were just too small. Now they got big, but AI got so much bigger, and they may not, it just may not be worth Dario's time to worry about whether he's disrupting Salesforce. It's just, it's not even the Salesforce's $42 billion. He may be looking at the net new bookings. What is Salesforce adding at 10%? $8 billion? He's like, because, you know, materiality has always been 10%, right? So if I can't make $10 billion plus, I don't know if Anthropic can get out of business. I don't know for something that's not, doesn't generate $10 billion of revenue. It's not, that's always been the definition of materiality in my experience. I think it was even the SEC's, right? 10%, you got to disclose it in the old days. I don't know if Anthropic can get out of bed for less than $10 billion of revenue by the end of the year. It's just not enough. It's just not enough. Now, it's one thing to just do an experiment or build something that makes Claude better, right? That's an integration. Like, we'll make Claude better. We'll integrate, they want to integrate more with every single app and take in the data, but I don't think they, they may not care about that revenue that the leaders are terrified of losing. That's probably why there was that crazy, disconnect with the guy from leaving the Figma board, right? And like, it was such drama to Dylan, to Anthropic. They're like, oh, we didn't know you'd care. Gotcha. Like, this isn't even important. Like, sorry, sorry. Genuinely sorry. We didn't even, it wasn't even, we don't even talk
Speaker 2about this each week at the, at the. It's the, you know, when elephant stands, the little people
Speaker 1get trampled. Exactly. You didn't even know. Genuinely sorry. Yeah. Whoopsie. Next time we'll
Speaker 3be more careful. Boys, it's a wrap from the British beach. Thank you so much for this, Rory. Always a killer line at the end there. What is it? When elephants dance, the little people get trampled. I think it's something about mice get trampled
Speaker 2or something like that, but whatever. Yeah, no. Well, Harry, we've got a time. By the time this comes out, we'll know how the US and England have done. And by the time I see you next week, hopefully you'll, we'll both be progressing to, we see it around us. Yeah. I'm going, I'm going,
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