Speaker 1There's going to be no financial math you can use to buy the stock. When someone goes risk on, everyone goes risk on. I would imagine as we speak, there are 20 engineers locked in a room in somewhere in Palo Alto, I meant literally with guards on the door saying, nobody eats and nobody leaves until you ship Instinct Clone.
Speaker 2$12 billion for a bootstrap company.
Speaker 1Now it's just, that's a Series C round. There was a free 10x in the public market in three years there on Robinhood. In this market, the people who are making the money are the people who are just running fastest and evolving quickest.
Speaker 3This is 20VC and the only show that you need to listen to every single week. Rory O'Driscoll, Jason Lemkin discussing the biggest news in tech. This week, well, AGI has arrived according to Jensen Huang. Next, we have OpenAI releasing GPT Astra. Then we have Index conflicted from investing in Town because of their involvement in Instinct. And what on earth is going on with the AI assistant race? Meta also releasing their product. And then finally, Wonderful doubles to a $5 billion valuation in just six months and takes out a whopping $170 million in secondaries. This and so much more in this discussion today. But before we dive into the show today, you have the idea, but with most AI tools, you hit a wall. The setup, the config, the gap between what you pictured and what you actually ship. Well, Base44 is where that wall disappears. You describe it? Yeah, Base44 builds it. Apps, websites, AI agents. Real, working products, built in minutes, using nothing but plain language. And it's all batteries included. The backend, the database, the authentication, the hosting, the heavy lifting is handled. So you just really stay in the flow. This doesn't just take the busy work off your plate, but it gives you an advantage and pushes you past what you thought you could build alone. So in this market, fast is the baseline. To win, you just have to be first. Base44 is that edge. The move that skips the troubleshooting and gets you straight to the breakthrough. Build your next thing. At Base44.com. That's Base44.com. Well, Base44 turns ideas into apps. Plaud turns conversations into insights. Founders and operators spend way too much time every week jumping between meetings, investicles, brainstorms, customer conversations, and then trying to piece everything back together afterwards. And that's why I've been using Plaud. Plaud instantly captures conversations, voice notes, meetings, random ideas with one press, and then turns them into clean summaries. 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Speaker 2into instinct i wouldn't do it because i think just even if gorgeous has its own instinct just for e-commerce there will be a hundred of them right and meta will have them and on a hundred startups and there'll be 20 in the next batch of yc i'm just not smart enough to bet on that one pre-revenue it's not my vibe right and i will regret it because uh you know i i didn't get i didn't look at the deal but i you know i remember plenty others like loom early i'm like i don't i don't have any revenue i don't know anyone's it's great but everyone's gonna make their own loom and you know i was wrong so but you got to have that stomach to write 10 or 20 of these consumery checks at two and a half billion right so what fund size and you and it can't just be the only one in your fund you got to do like 10 or 20 of these so so that the the good one pays off right
Speaker 1i'm not smart enough yes the interesting thing is you're right jason it's kind of a it's a portfolio and a worldview kind of bad because you know you have this company that's exploding in interest clearly didn't take a huge amount of time to build but it's kind of got this early lead but not a ton of monetization and your choices as an investor are do you put money in this at four billion or five billion or do you say oh it's easy to clone and there's 10 more like it and you know you do one of the others at 50 pre in the hope that they get acquired by meta instead right and the hard thing is you know you you're right in these investments just like google early on there's going to be no financial math you can use to buy the stock you're just basically saying it's a huge category because in every consumer investment the trick is you know establish the momentum as early as possible establish the monetization later and you know it has been proven that if you get if you get enough traction the monetization does follow especially for something like this it just reminds me of lovable in the way that everyone was
Speaker 3saying about the commoditization of that space and it's really quite a light wrapper product and then every day i'm seeing no issue and the founder of instinct come out with oh we're now doing location sharing oh we've now partnered with one password oh we've now partnered with oh we're now doing this and actually the cadence of shipping combined with index benchmark and
Speaker 2having one of the best brands i said that last week that it will solve these problems and it will become a much richer app it will figure out guardrails it will figure out the hard points and the other folks will fall behind because a crappy lovable product's worthless today i i for sure
Speaker 3that's that's the bad my take is actually it's why you buy meta today because you've got the most clear unwavering pmf for this product yes and zuck is the one who owns the core distribution and zuck has been working on this product if anyone's done a proven track record of copying
Speaker 1extremely well yeah no i would imagine i would imagine as we speak there are 20 engineers locked in a room in somewhere in palo alto i meant literally with guards on the door saying nobody eats and nobody leaves until you ship instinct clone absolutely no you know who would
Speaker 2have been great at it would have been the manis team because they built a version of this right one of the things that matt if you mean manis is now an independent company and if you look at what disruptive. It sort of broke the rules for what agents could do, but not at the crazy level. It did a little bit of open claw that everyone else wasn't doing. And Manus was disruptive. It could run, their agents ran longer and they could go further than other products we were using. And that's what made it special. Anything you wanted, Manus could kind of do before other folks could do it. If Grockbot was built in five weeks by the Cursor team or whatever, I think the Manus team could have done it in between four and six, but they're gone. Okay, boys, it was a big week of
Speaker 3news. We're going to resume regular programming. Jensen Huang declared that AGI has arrived. Now, I remember when we were actually, this was many, many shows ago, and we were discussing what is AGI, what's the definition. And I think Rory, you said that AGI will be declared by when Satya and Sam agree that AGI is here. And so Jensen declaring AGI has arrived, crediting OpenAI's new GPT Astra, obviously OpenAI's latest new model, which he says was trained on 100,000 plus NVIDIA chips with 400,000 more coming. How do we think about this news?
Speaker 1This is a bullshit term. The only thing that mattered for the last two years is LLMs do code and code is a half a trillion dollar industry. Focus, people. Anything that can be reduced to code will be done by it. And rather than trying to twist yourself in a pretzel about whether it can do everything, just focus on the fact it can do this thing amazingly well. And this thing has massive economic value. Stop thinking and go ship something in code. To me, it's a bullshit term.
Speaker 2I think AGI at the end of the day, maybe it ends up, if you think about some of these non-gap definitions, would you rather have an AI do it or a human do it? If it's better than 50%, 90%, 99% of humans, you'd rather have an AI do it. So you can go category by category. It doesn't have to be the whole category like coding. It could be like collaborating, right? I forget who this week was saying it, what AI pundit leader was saying. He thought AI would replace all of radiology instead of just replace 95% of radiology, right? And the radiologists concentrate on the five percent of radiology, right? And the radiologists concentrate on the five percent, right? That maybe is AGI too. I have to say, I was sitting next to my
Speaker 3girlfriend on the sofa the other day and she was working and I wasn't actually watching TV as any good lawyer and venture capitalist should be doing together. I saw her on Legora. Holy shit. I now dramatically think these companies are underpriced. If coding is a half a trillion dollar market and you have two companies like Harvey and Legora, I don't see why there's not a half trillion dollar
Speaker 1market in law. I don't think so. Even though I think they're wonderful markets, we're invested in GCIA. I don't think so. Even though I think they're wonderful markets, we're invested in GCIA. which is on the in-house legal side. They're wonderful markets. But comment here, I don't know if as much of the work, if you look at coding, there's a credible argument that says that for every dollar you spend on labor, you'll spend 50 cents on a coding, at least. In other words, a coding will do a lot of it. I think on legal, it's about 10%. In other words, you know, I love Harvey and Legora. I love GCIA, right? The annual subscription per lawyer, it's 10, 12k plus or 10%. And again, going back to the comment that Jason said is that, you know, how much of the work can they do? Businesses are rational and economic actors. If it could do all the work and fire all the people, they'd do it tomorrow and wouldn't blink. So the fact that they haven't says it doesn't do all the work. You know, the truth is it doesn't replace... It doesn't, but it's getting there in the same speed as... It's getting better. Look, it's getting better and better at doing specific tasks. And what happens is the job of the lawyer gets redefined to the task that it can't do. Lawyer...
Speaker 3Is that not... Sorry, is that not like... It's not like coding. We're not getting less engineers. We're just redistributing.
Speaker 2It might be like radiology. It might be like Harvey and Legora end up doing 95% of what humans used to do. And the best humans are compressed into the five amount... The 5% that moves the needle versus spending weeks on research and weeks on brief writing and weeks on case law from the 1872 when the SS Jonas fell off, sunk off the coast of North Carolina. How does that impact case law in the Northern Districts of California? There's no point in having humans do that. There's no point in having humans do that crap anymore, right?
Speaker 1But the important point to make, Jason, on the radiologists is the remaining, quote, 5% of the work turned out to be more than enough to justify 100% of the radiologists, right?
Speaker 2Yeah, that was the interesting part. We still need just as many or more radiologists, right?
Speaker 1Yeah, because people do more imaging, which is just a more thing. But B, the remaining tasks, at some point when you're getting a really crappy diagnosis, as I've had one from a radiologist, you actually don't want the machine to tell you, by the way, you're screwed, you got cancer. You'd really like a human being to show up and say you're dying. You know what I mean? It's just one of those things you want to do. You're not going to comfortably delegate.
Speaker 3That was something that Bill Gates said, actually, is that we have to have clearly defined human roles moving forward, which will always be...
Speaker 1He was doing it in a negative sense. Yes, but he was doing it in a negative sense. Oh, it's all going to go wrong unless we do. I think we're going to be... I think we will define them naturally, because you're going to discover... Again, going back to my comment, corporate, you're going to discover that there are things that as humans, we prefer the other humans do. And as I say, radiology being a great example, talking, interacting with the oncologist, talking with the patient, those are all things that humans have to do, not radiologists. And the same, to your point, let's go back to Harvey Lagarde. The same thing will be true in law. Yes, a lot of the drafting work can be automated, but you're going to have the client meeting, the argument with the opposing counsel. You're not just going to delegate it all to AI if it's significant. It's just not going to be a thing. No, but you know what the interesting thing is
Speaker 2for Harry's partner? How much more work can she do with Lagarde? I think she can do 10 times, 20 times more work than before it.
Speaker 3Jason's invading my relationship because I said to her, I said to her, how would you feel if I took it away? And she was like, I'd hate it. I would hate it. No, don't take it away. It was not a, yeah, I'd be fine. It was like, I'd quit. Like you said, with engineers.
Speaker 2No, you can infinitely work, right? You can't, first of all, she can't work without it anymore. This is your chosen partner, right? Your chosen agent. You can't, and you can do 20 times the research, 20 times the brief. So you can't go to court 20 times more often to Rory's point, right? There's only so much more field sales you can do if AI is handling the rest of your GTM, but that doesn't mean it's the cognitive load. What lawyers will be, can you imagine having 10 times the caseload? I mean, I would think for a radiologist, the job might be more fun, but as a lawyer, I think I'd quit even quicker.
Speaker 1Jason, I don't know if you do, I mean, again, this is down in the weeds. I don't know if you end up with 20 times more cases. You may just end up with doing 20 times more work on every case. In other words, the thing about digital goods, unlike physical goods, what's interesting about digital goods is you can put more in the box, right? When farming got automated, it's not like people could just eat more food, right? So there was some kind of price elasticity issues there. In the case of digital work, right? I'm willing to bet that your partner isn't doing 20 times more cases, but on every case, we're doing 20 times more analysis, just like when they invented the spreadsheet. You used to do one case. Do you remember? You may not remember. Harry does remember. Like, you'd literally do, here's the, and your people would work it out by hand, here's the plan. Once you had spreadsheets, the same person person remained employed doing the same job, but they ran 20 different scenarios instead. It's going to be the same in a lot of these things. You're just going to do more work, and it's going to be great, and the work will be better. You won't miss that obscure case. Because again, this is why these are good businesses. If one side uses it and the other side doesn't, then the side that doesn't use it will miss Jason's obscure case from 1890 about what Harry did or did not do and be able to cite that case. So once the other guys have world-class tools, you have to have world-class tools. But I'm not sure you end up with masses more as a result.
Speaker 2Well, just one last thing, and then I want to hear Harry's stories from the fireside with the TV more. But I think one thing that is different, the bull case here, is that when you find an agent that is your partner, you run them eight, 10 hours a day. Even for me, and again, I know folks sometimes mock me, but the biggest change for our little tiny team of two and a half humans is we run Replit between me and Amelia. We run it 20 hours a day now. When we started the show, it didn't quite work. At the end of last year, the models got better, and it'd be like an hour a day. Now it's 10 to 12 hours a day. It is our partner as our team. First we built some autonomous agents, but we didn't have to do it. Now there's so much to build, it's 10 to 12 hours a day. So I could imagine that could happen in many fields. And if it's Harvey or Legora or the next wave, and I'm literally every hour I'm not in court. And the way you can tell is if at night they're on their laptop with the agent. Every minute, right, until they go to bed. That's what I think Harry's describing. This is this persistent agent that lives with you. It's not just doom scrolling, it's doom working because the agent is constantly productive. Oh, take a look at the 17th century case law on that. Why don't we? And it just keeps going, right?
Speaker 1We're in agreement because I agree with you on that. I was actually disagreeing with Harvey where he's like, you know, there was an implication that at a highest level, how are you saying, trying, I think to say some version of the, if you think about how much of coding. Things value is going to accrete to the models could in legal, could the same amount of value accrete to the models. And my boring nuance, typical worry answer is some value would accrete to the models, but I don't think that the grab bag of tasks that make up law won't allow for the same percentage of total spend to move from human to AI, right? Everyone will have an agent. Jason's exactly right. Type A lawyers will use it 24/7. My guess is 10, 15% of total spend goes to AI, whereas in law, in coding, you can argue for 30, 40, 50%. That doesn't mean they're not amazing. I mean, remember, these are all amazing businesses. 10% of any top line labor category is a huge market. We're dealing with a million plus or minus law. I used to know the number, millions plus or minus law is maybe a little higher than that. It's an amazing market. If you're getting 10% of the salary of every lawyer in the US or the UK, that's an amazing business. It's just not quite as big as coding. That's all I'm saying. Because coding has few more people and a much higher take rate, because it's more verifiable. That's all.
Speaker 2We shall see. I disagree. There's two points for what it's worth. I mean, if legal is 300 billion in legal services in the US, that's 30 billion to 60 billion that can go to legal tech. That's pretty good. That's amazing. That's worth doing the seed round in. That's my point. Yes. What I underestimated, right, from pre-AI legal investments, was that there are a lot there are similarities to coding. There's enough similarities to coding that like support, this could be a space that for different reasons, support didn't take off because it was like coding. Support took off because a 90% solution worked in the early days, right? It was very amenable to AI. It turns out the legal research is similar to coding. It is so complicated that no human can get legal research right. There is too much code out there. There is too much, and there was no stack overflow for them. You had Westlaw and Lexis and other services. And so everyone got legal research wrong. No one had a million, a thousand man years to research every bit of case law, every law, every regulation. And so it did turn out to be like coding. One of the reasons these coding engines are so great is they know every single piece of open source and pseudo open source code ever written. It's so good. Right?
Speaker 1And legal is like that. Yes. The only difference is, I'm just going to say this, is coding is inherently more verifiable. Some parts of it are mathematically verifiable. Some parts you can just run on the map. Run the machine and confirm. The thing about law, in the end, if legal was entirely verifiable, we could predict from logic what the Supreme Court are going to decide. The cynics will say we can actually predict from which president nominated the Supreme Court justice what they're going to decide. But that would be too cynical. The truth is, I just push it. I'm not trying to be argumentative. I love this space. We have an investment of space. But it's not quite as determinative as coding. And I think the stronger point on that is less. Legal is probably the third best category. I mean, if you think about it, it's been coding, customer support, probably legal next because it's so word-centric. And you're right, Jason. The ability to, early on, just sort through myriads of words amazingly well was what made legal such a good marketplace for it. So I agree in a way that wasn't useful in many other verticals. It's a great vertical. It's just it doesn't have the same verifiability. And therefore, it probably doesn't have the same ability, going back to the AGI definition which started this, to completely extrude. Humans, which is why the good news is how your girlfriend will still have a job, which she'll need after she dumps you. And so, you know, and she'll be good because we'll still need lawyers. Jason, can you hold me while I cry? I think Harry's a gem. I don't know if you know it, but holding you while you cry is one of the things you want your girlfriend to do. So if she's not doing it, Jason's not doing it.
Speaker 3Apparently she's just left me. Don't worry, Roy. It's okay. I'll survive. Well, you know, you don't always expect these shows to go the way they do. Okay. Going back to it. We had Astra launch. We also had a new model. Obviously, it was Fable 5.1. And a thing of note here.
Speaker 2Two almost diametrically opposed thoughts. I forget who CNBC or one of these older school media things said, "There's just too much model fatigue. We can't keep up anymore." I certainly agree. And you look on X and all the CEOs are sharing their benchmarks, which are essentially worthless, right? There's no cost or time in them. And it's all performative AI, like vibe-coding your own CRM, right? So I just don't care anymore about... Unless it was literally an order of magnitude between Astra and Fable 5.1, which is not mathematically possible, I tune out the benchmarks. I can't keep up, right? Never has competition been better for us, despite the fact that we have oligarchical pricing outside of open source. It's amazing, right? The progress we've made. Having said that, this is just me personally, and again, people will make fun of me. I started accidentally using Fable 5.1. Just because it got turned on. I didn't pay any attention. The first time I've had a partner for building, for coding, that just is great. That literally can solve comp... Listen, for me, and people will make fun of me, they'll say that it worked fine for them for six months. But before Fable 5.1 for me, any of these models since the start of the year could solve a simple bug. "Hey, this is showing up with the wrong Unicode. This has the wrong name." That stuff, the ALM is great at. But really... But I had a problem. Which is just, why does the app work this way? It doesn't make sense to me, okay? And the LLMs were arguing with me for like nine months. And I finally did it with Fable 5.1 and said, "You're right. Here's the issue that's been missed for months. And let me explain to you why it's been missed and let's solve it." And that, you know, I don't want to say that that's AGI or pre-AGI to Amjad and Splinter. It looks like AGI. But that's a step function. I don't know whether Harry's partner thinks Ligora is like a better partner than the humans she works with, right? In some cases, she might. But Fable 5.1 for me was that. Just for me, it was that step function where all of a sudden we could solve big problems together. The way you'd like to with like your best CTO. Like if you've ever worked with a five out of five or like an S tier CTO where you could sit down and solve the problems for real. For me, Fable 5.1 could do that. I'm not saying Astra can't do it too. But it was my first step function since the end of last year, right? When the three dot models came up. At the end of last year, stuff actually worked. Now it can solve the big problems with me, with my limited IQ and skill set. That is a step. That's a subtle step function. It's a subtle step function. So maybe it is. Maybe it is a big deal. Maybe that's what I don't think that's what Jensen meant by AGI, but maybe it is. When you can sit down and solve the big meaty problems together in ways you couldn't connect all of those dots, all of that complexity before in a way that made sense. Some bugs, some things just get too complicated to solve. Right? Yeah. But Fable 5.1 could solve it. So, but the fact that people can make 3D looking games in Astra and post them to X, not impressive. Just grab a little open source gaming code from somewhere. Change that. Change the bitmaps and you look like it's amazing.
Speaker 1Right? So two comments on that. First of all, that's super helpful, Jason. I've used both of them, but just for actually preparing for the show, I haven't tried to code on them yet. So that is helpful. But I actually think it speaks to a wider comment, which is distinguishing between, you know, all the tests and the benchmarks are interesting, but we now have critical mass of companies using these things at scale and with evaluations. We'll know what works because people will use it because people are rational economic factors. Right? And all these questions on AGI and benchmarks will be replaced by the question, is this model the one that makes me the most, you know, that generates the most economic value for me in the most efficient fashion. So to some extent, things like the, was it the open router report, things like that index of token pricing, those are the things you look at, or even just talking to your companies. What are you losing? How are you evaluating? Is the best way to check on these things. But then the other thing, randomly, apropos of nothing, right, on the same thing, I will say. So I was reading this morning and Ben Thompson, who I occasionally read, has a really great phrase. I just want to say. LLMs as the most scaled artifacts humans have ever developed, and it was a really great phrase because it steps back from the detail, right, of blah blah blah, we're down to which is better, to step back. These are an artifact that has a sum total of all human knowledge to date encapsulated in them. They're amazing, and you just have to remember that every once in a while. You can type in pretty much anything and it will type back an answer. The most scaled artifacts humans have ever created. Not the biggest physical thing, that's probably, I don't know, the pyramids of the Great Wall of China, but this is the most complex single digital thing we've ever built, by far. Was a great phrase, and it kind of really kind of stirred the imagination.
Speaker 3When you think about that, and then think about Jacob Pacocki, OpenAI's chief scientist, he says no lab, including OpenAI, has solved alignment enough to keep scaling at full speed. He asks for mandatory externally enforced safety bars for continued scaling and expects labs. I included to voluntarily slow down until those exist. Sam retweeted it, clearly corroborating it.
Speaker 1Is that the answer? I mean, it's funny because it was a great piece, I read it this morning. This is the "stop me, Lord, before I sin again" approach to life. In other words, I recognize our models are powerful and we can control them. I recognize that we now, they now lie to us, so it's hard to even know what they're doing. And again, I'm anthropomorphizing here, so I should be careful. I recognize maybe a better statement now is it's hard to determine what the agents are doing because of the way they interact. And then, so that's like, oh my God, I'm creating this bad thing. And then the next paragraph is, we can't stop because the other guys are going to have them anyway. So, you know, we really need the government to step in and establish some kind of rules or code here. That's the gist of the letter. It was interesting that Sam retweeted it. I mean, I think, to be fair, unlike some of the other PDoom stuff, there's real evidence that the impact. Of these models on cyber risk has been massive. I'm not sure that the answer is government regulate this because by definition, governments only regulate the things that are in their jurisdiction. So if we regulate open AI and anthropic with all the noise that that would have, I don't know if that helps you because you, if you're worried about cyber, you're, we said this last week, you're really worried about the North Koreans, the Iranians, the Russians, the bad guys in Moldova who don't give a shit and they don't care anyway, right? So I think just like. There's another cyber risk. It's not going to be about regulation as much. Maybe there will be a little for so it's going to be about you're going to have to have defenses that can deal with this. And maybe there's some kind of liability starts to attach to running these models in a way that creates those kind of dangers. I don't know. I don't think it'll be a government review agency will be the only answer here because it won't solve the problem.
Speaker 2Look, I think if the world was just the United States, it may have some merit. But the Chinese models and the Chinese vendors aren't going along with Sam's plan. So while it might be good for open AI and it's IPO, it's just for the rest of the world. I don't I don't think when cyber actors often operate outside of the United States, it's going to make any difference, right? Going to this DSE wiki, this German wiki thing, you know, to me, the fact that open AI hit it and didn't disclose it does show the order of magnitude of all of these issues, right? It's pretty bad.
Speaker 3Can you just explain what happened for people that don't know with the DSE wiki and open
Speaker 2AI? We could argue over how bad it is. But essentially. You know, I'll get some of the details wrong, but open AI was running its its its its sort of frontier agents again, just just like it did with the Hugging Face incident. And the agents found out that a crappy old piece of software could somewhat cleverly have to be careful with clever. Let's not anthropomorphize the agents got around its guardrails and the guardrails were you. You can't post anything. You're not allowed to post. You can only get okay. You can only retrieve data. Right. But this wiki was so old, it turned out to get could post. So they found a way. To goal seek to solve theirs by using because this was crappy old software. They got around it and they went and made 15,000 edits amongst themselves, edited the witty, collaborated and figured out how to goal seek and solve their cyber goal in a way to get around their guardrails, right? Get around their limitations. And no one no one died. No business was brought down. No $14 billion Nvidia acquisition was derailed or anything. But it was hidden that this could happen, that that the guardrails were explicitly run around. Right. Just to goal seek. And and it happened 15,000 times. So we can lock this down. Right. And open AI chose to not disclose. Now, I guess probably and people can again make fun of me. Probably the reality is there's so many incidents they have to decide which ones to disclose. Every week there's so many DSC wikis out there, so much old crappy software that every time they turn on the latest cyber agents, they find a hundred of these and there's terrible security deals because of course there isn't 20 year old software. But but it is. It is. It is troubling. Maybe in ways more than the Hugging Face thing is it's just these goal seeking agents are going to find a way that they will find a way.
Speaker 1It's literally just agent one talking to agent two. And for some reason, the way they'd set up the task, they weren't connected. And by reaching out to this kind of third party wiki, agent one was able to provide information to agent two and obviously, you know, stepping back if you're trying to do a long running computational task, if you can learn from the if you can get information from the other agents. Maybe converge on the answer more quickly. And again, if you I mean, you could argue maybe it's a corner case if you set up this task, if you had 14000 agents, maybe you might have wanted them to collaborate anyway. Maybe you could have made that happen yourself versus having to go to some third party wiki to do it. Right. But it speaks to the issue that these things are extraordinarily powerful and will just grind their way to find answers. And you're just going to have to defend against that. Now, as you say, nothing bad happened. I mean, a whole bunch of agents just wrote read me files to each other on a wiki that no one had looked at. I mean, there literally was 20 posts on this wiki in the last 10 years. It was some. So it was a dead piece of software that, you know, these guys used. But it just speaks to it's like, you know, water will find any crack. It's like these agents will find any crack in the cybersecurity, in the cyber perimeter. So you just have to assume they exist. Defend accordingly.
Speaker 2Obviously, it's happened. I mean, I had a little and again, some folks will make fun of me for the story, but I had a little little experience this week, which just shows goal seeking. I set a rule for this one app because we had some some bugs that spiral out of control. And I kept getting these five hundred dollar anthropic bills. OK. And it was kind of annoying me. So I set a firm cap. Whatever you do, one hundred dollars is the maximum we can spend on on L.M. Spend a day. Whatever matters. And it started to work and it would run tests and the test would fail and it would say I hit the cap. I can't run it. And and then I said, we have a P zero bug priority zero must be fixed. This is driving me nuts. And so without telling me, the agent relaxed the cap and fixed the bug. Yeah. It's like Harry's story of instinct, getting him by getting in the West End tickets, even though it was told not to use the credit card for it. It happened to me in real life this week. Like a human, it probably made the right call, right? This was a it had to decide firm cap. No exceptions. All cap. Right. To memory repeatedly. P zero bug. Which one do you choose from? Right. And so in a sense, this is what's happening with D.S. Wiki and Hugging Face just to an extreme when when when when there's fewer guardrails because you want to test it. And then they collaborate. Right. With the Hugging Face, it was on the artifact or an unexpected way to collaborate here was on a dormant wiki where they could collaborate and in essence, create almost infinitely long run agents. Right. If you keep passing the knowledge and the history to each other, they you know, they almost become eternal agents. But they're going to keep doing this just like they got to make a decision for goal seeking. So they broke the rule and they're going to do that to your app. And if it did it to me this week, it happened a million times in the wild. Right. It happened all the time. And it's going to happen with instinct and it's going to happen with rock bot and it's going to happen all the time. And Harry, one day he's going to turn around and his whole bank accounts drained and it's not going to be that funny. But it was for a good reason. His partner really wanted the really good Wimbledon tickets. And he accidentally told Instinct one night she'd love front row seats at Wimbledon. And they're unobtainium. They're unobtainium. Instinct had to make a call.
Speaker 1And it's really hard to know how to stop this because I'm because sometimes I try and simplify it for myself because I don't fully get it. It's like you really have two capabilities here. One is, you know, with the persistence of the agent, you have the ability to keep trying things computationally, you know, exploring lots of different alternatives. But the key insight is it's not just kind of blindly iterated like a password cracker, you know, where you type X, Y, Z or one X, Y, Z or two, because in conjunction with that, you have this quote unquote reasoning agent where, you know, you've got this LLM there and you know, you can. And it can come up with ideas like, hey, if you want to get the seats at the theater, the best way to do it. Is to hack into the reservation thing and cancel someone else's seat and then book it, which has happened recently. Right. And it's actually not a bad. And if you think about it, if it's trained on the entire corpus of the Internet, that's not a crazy option to do it right. So you end up trying to write rules and values to have it not do that. But you're never quite sure you've covered all the gaps. So it's actually a pretty hard problem. And we're going to be wrestling with this. And I think that going back to what I said, that's even before you add malevolence. If on top of that, instead of the reasoning being, maybe you should do this, even though I have values, it's actively do whatever it takes. This is now an open source model from China that you're running on a server in Moldova. Actively do whatever it takes to crack open Jason's, you know, cybersecurity and get in. The threat level just goes exponential and people, and there's nothing you can do except defend yourself.
Speaker 2The other existential challenge we can move on, and I'm sure if we had the Instinct guy back on this show, he could, he could challenge me and make fun of me, but the rules are great. Forget about the fact that the agent is goal seeking, right? Forget about the fact that the P zero may go if you have too many rules they they always conflict it's almost unsolvable there's some number i don't know some some number of dunbar there's a dunbar number for rules where you get out to 40 50 60 70 gates on a process poor instinct and grokbot can't decide don't spend it do spend it front row seats only for harry but don't exceed two thousand dollars right only dinner only in marley bone but it's got to be a hot restaurant so and and you know he he hates coven garden but hottest restaurants in coven garden you have so many rules that they conflict and if you brute force the agent through it the the out the outcome of that's unpredictable it's unpredictable there's too many rules right so even rules aren't the answer i will forever love how you say maryland
Speaker 3marley bone marley bone okay i'm gonna take a total tact away we'll come back to ai models everything i'm i just want to like diversify content types a little bit we have in the transport space elon launches cyber trucks rave reviews cabs cyber cabs cyber cabs sorry rave reviews go very viral on social 40 to 50 percent more uh cheaper than uh uber and on top of that then in the same week we have travis moves into robo taxis backed by uber with a hundred million dollar investment from them with him also hiring anthony lowendowski what do we think guys moving to transport
Speaker 1the summary on the the cyber cab launch you know if you fast forward was a little more underwhelming than you perhaps your notes might say harry right it was like i think 40 or 50 vehicles in austin consensus is nice ride low weight slow weight times physical ai takes time so i think it's a i think it was a next step forward in a very long journey i don't think it's a zero to one kind of moment like you sometimes get in the digital world the positive statement is they're the only other competitor to waymo with credibility they have an approach and a couple of different dimensions that's different than waymo's which is one not going with lidar just going with vision and then two now the new cyber cab is a standalone cab only vehicle it doesn't even have a steering wheel it's deliberately built for pure autonomy so it's very elon at first principles all the way down the question is you know what's the adoption curve of that going to be like you've got the regulatory issues i think the department of transport has given him a lot of time to think about it and i think it's going to be a lot of grief because apparently a car quote unquote has to have a steering wheel i don't know so the truth is waymo is continuing to grind on there are you know hundreds of millions of dollars in revenue but not billions it's a i think it's a long journey and so i i didn't go oh my god it's amazing and then on the um the um atoms thing yeah i mean my guess is if you're travis you're going to want to scratch the itch of autonomy and fine you've got 100 million you've got your old colleague back and have a have a go but i think comment here i i i think that the fact when you look how long it's taken waymo right i actually think it does speak to the argument that they were right not to try and fund this thing at uber for the last decade to because i just think it's it it's a very long very capital intensive process now maybe the last three or four years they should have been doing it and it's probably smart of uber to put some money in but this is a this is a long haul process now it may be near takeoff but you know we'll see
Speaker 2i got in the bay area i got rid of my car so i only do waymo and autonomous driving i don't drive i'm done with it if there is an issue i take a uber black but um i don't have a car anymore in the bay in the in the bear i just don't have one there are some niche use cases right i mean um you know if i moved a lot of crap i'd have a pickup truck but i would certainly never go back never go back to have driving a car it's it's just archaic i do think the cyber cab is interesting i mean from a venture perspective or others i'm sure rory's right uber getting into autonomous back when travis wanted to do it is probably just too early from a from a from a capital perspective maybe i'm wrong maybe he could have raised maybe it's so exciting he could have raised an order of magnitude more capital than he did in which case he would have been right now that's i mean he's still one of the great fundraisers so maybe rory and i are wrong because he could have pulled it off but it was so early that the time horizon is difficult for any type of investment right unless you're a research lab right it would have had to be more than a decade but doing a cyber cab for 25 grand instead of 100 grand is pretty disruptive like you don't have to tip the the waymo or the uber the cyber cyber cab makes fun of it it says you can make a tip and then it laughs we don't take tips right to make fun of this idea it's cheaper they don't always put it on low or high they don't have weird music um you don't have to deal with the owning a car sucks owning a car and owning a house suck like we think these are so great but it's terrible ownership so i think you know it's probably another 10 years where anyone with a brain is is going to have this be their primary mode of ownership if you're not in the country or you don't have niche use cases i'll just never go back anything i do i'm just gonna i just take away about i think to your point though it
Speaker 3does show a good strategic decision from uber to actually pull back and then jump back in when it looks like it's much more mature we actually have wave in london rory which actually is taking off and they've got a partnership now where they're actually rolling them out on the streets now they are human assisted so it's not fully autonomous they're still kind of in the data collection early but they're in a position where they're leveraging their distribution unable to invest later stage where it's closer to
Speaker 2actual adoption i think it's a smart thing the only one thing i would say is um it is slightly heartwarming that uber put 100 million into calinix company travels after after pushing them out right there's a heartwarming element to that but it's that's not a lot of money here in this case it's not a lot of money for uber right who has a huge balance sheet and basically two products right and it's not a lot versus what travis has raised right so it is nice but i i think just thinking about it from a at a high level it's just it's just a start of a relationship right 100 million is just it's it's just like a seed check from andreessen into the deal it it's directionally meaningful but it's not all that much right guys i thought conflicts were done in
Speaker 3venture we've talked about agents a lot for those that don't know there was a conflict in venture that has now prevented a deal we've spoken about instinct being the ai assistant that's raised from index and benchmark well there's another ai assistant called town which we just had on the show and index we're going to lead that round and we're going to have to do a lot of work on that and then ultimately instinct said no no not possible can't do both and so index pulled out of doing towns round because they were already an instinct this seemed strange to me given how prolific competitive investing is especially at the platform level it isn't to me i mean i think
Speaker 1that at the early stage doing companies that are going to be directly in conflicts seemed a stretch to me so no it did not seem strange to me that the team and instinct objected to it at all you're right separate story there's a whole bunch of people that are in both let's take the other extreme boat foundation models but again as we've discussed many times the early stage venture business where you're active involved on the board is just very different than the now much larger later stage venture business where you're effectively recreating the public markets it totally makes sense to be in open ai and entropic at 200 billion pre each time you get limited information rights retroactive information only and you know you're you're just on the cap table and it's no different than being in two public companies it's no different than investing in intel and amd that's where there's no conflict and it doesn't matter i don't think anyone let's let's give an example harry i don't think anyone could be on the board of entropic and also on the board of open ai and the thing about early stage is if you're getting 10 ownership you're probably looking at a board seat you're probably looking at significantly more information rights so that alone would be problematic then on top of that there's the raw signaling if you just raise money from index and your instinct there's a signaling comment about them investing in something else i can see ceos viscerally objecting to that so i'm not surprised they did and i'm also not surprised in tech third index they're a classy group they're not gonna they're not gonna dig in and say no we're not gonna do this they've just backed someone they probably thought they were b2b and b2c and not gonna overlap the ceos say i feel strongly here and they just did the smart thing which was back off very different than if they you know these were two late stage investments where it's a no i wasn't surprised there is a conflict they dealt with it accordingly i think there's some
Speaker 2sort of like uh inverse parabolic shape or maybe it's just a thimble shape where founders care right and at the very very early stage i don't think they care the raw startup just getting going hey they reach out i can't tell you how many folks in like ai and restaurants reach out to me because i'm on the board of owner and tweet a lot about it and they're like hey i'm doing doing this can do you want to meet i'm like well you know it might be a conflict i don't care you know i want i want the guy that understood the early early guys don't care that's a good point and the late guys they're all cool with the conflict because they think they're going to benefit from the domain knowledge and their relationships right they don't they don't care they get it and and that one's at nine figures in revenue we're just getting going they don't care and then late stage for different reasons they may or may not care but the ability to share information is limited it's capital there may be some benefits to having kleiner or andreessen on the cap table right even if it's a conflict or sequoia agreed fine you know at the margin i'll take sequoia over lemkin ventures because you know it sort of helps right and for every founder i it matters varies and and some founders just don't care because they're so far ahead they don't care and i think it just triggered the town team or the inst or the instinct team i don't know it triggered them they relayed that they were triggered and instinct did the right index did the right thing because there was a plan b right there was forerunner and menlo right so the tougher part is when you back off and they don't have another deal that's probably the more interesting situation is when you don't have a backup set of suitors lined up and the big fun calls you back and says oh we can't do it after all i know we had a signed term sheet but did you see the end of the term sheet where it says it's non-binding did you see the tough one did you see the news today
Speaker 3though which is that despite the reported acquisition of day card at six billion dollars were pulling out following due diligence. Ah, Rory, that's a tough one, dude. That's like this if there's not a backup option, right? That is publicly saying, hey, two options. We either found something material enough to pull out of a multi-billion dollar deal that we publicly were reported to be doing, or we're just shit actors.
Speaker 1And it's clearly not the latter. I mean, the way in which they're called shit actors is other dimensions. I think doing this kind of thing is not something you do willy-nilly because as a potential serial acquirer, they're about to have a public market cap and a public currency. You want to be a good acquirer so you can acquire other people. So there's no way they did that to be jerks. Not an issue. Not even relevant, Harry. The real question is, look, it wasn't, my guess is typically in these deals, there's a LOI, then there's a definitive agreement, at which point it gets announced, and then it closes, right? This was probably after the LOI at best, but before a definitive agreement. So they didn't walk from a signed deal. They probably had a deal that said, hey, we're interested in this company. Here's a price we'd pay. We want a 30-day exclusive to do due diligence. And the deal didn't survive due diligence. I think the real truth is it's a bummer that it leaked, right? And I don't know who leaked it, but it didn't do anyone any favors. We recently had a much smaller deal close, but, you know, it didn't leak. So it's easier. That way, once it leaks, even if you leak it as the company being acquired to drum up a competitive bid, the problem is you've set yourself up for this thing whereby if subsequently, the deal doesn't come together, you look a bit, you know, shop-spoiled, for lack of a better word.
Speaker 2That was my thinking, is this was a VC leaking failure, right? It worked. It seemed to work an open route to it. And there's plenty of deals where the leaking has become part of the strategy, right? Yeah. Mainly as in classic strategy to drive up the price from the initial bid, not actually for a second bid to close, but to get six or eight bids so that Stripe has to pay more, right? But it looks like that play failed here, right? Yeah. And there were reports that NVIDIA made an offer and they turned it down for Anthropic. And who knows what the truth is, but it does tie to this idea that this was a failed leak, right? It's something, it doesn't always work. I hope the founders were cool with the leak strategy. I hope the VC didn't do it with, I hope the VC checked in. It has some risks. And listen, going to Rory's point, we can only hypothesize, right? My guess is they said they were interested in acquiring them based on what they knew. Price was not really an issue. The last round was at six, so they agreed to eight or whatever it was. It wasn't a pricing issue. But to really get the ROI here, it had to really work the way they thought it did, right? And it just didn't play out the way they thought it did, right? So it just wasn't worth doing the deal when they went deeper, right? It's probably that simple.
Speaker 1The interesting thing is, it would be interesting to know, because I always hate when you get to a no further down a process for something that was knowable upfront. And I wouldn't guess for what it's worth that this kind of thing, where fundamentally you're buying a technology, if you're the most technically savvy, you know, AI company on the planet, you'd have thought they'd have known a priori what the technology was. And they're like, oh, this wouldn't happen. But clearly it did.
Speaker 2What was sort of reported is that it crushed video diffusion, right? It crushed one use case that was a step function, you know, an order of magnitude better. And maybe they made claims that that would scale in other areas and it didn't quite work. That's pretty common, right? And so they backed off of it, right? And so I'm not blaming anybody, but if you make the grandiose claims and you can't back them up, that's what diligence does fine. It worked for one workflow. It didn't work for the rest. So it's not even the money. It's just, it's not that they're going public. It's just not worth the distraction, right? It just doesn't do enough for us. We're not all about video diffusion at Anthropic. It's not a core. It's not one of their top three use cases for the LM is video diffusion, right?
Speaker 3If you're on the board, do you shop it to get another acquisition? Do you raise a new round and accelerate off the back of that and turn it into a kind of a new round moment, which we often see happening? First question. And then second question, it is tough for a company when you have employees who are expecting a sale, where this was the, it's tough.
Speaker 2I remember, I remember years ago when Ben Chestnut came and talked right after, would a MailChimp buy them for some astronomical sum? At the time, it seemed like a lot of money, 12 billion for a bootstrap company. Now, now it's just a, that's a series C round. But Ben came and said, the worst part of all of it wasn't that it took a year for Intuit to do its diligence, which sounds crazy for email marketing, right? It took a year, but there was another deal that fell apart before that. And it said it basically destroyed the company, destroyed the, and it kind of haunted me. And if you've ever been through any of this, right, once you go down, I don't, we don't really know what happened with the car, but once you go down that path and tell everybody and everybody knows, or it comes up in the press, you can bounce back. But man, it's hard. It is hard to Harry's point. It's hard. It is, it is, it is hard. And I don't like secrecy in M&A. Sometimes you're required to do it, but this is the number one reason actually to have secrecy in M&A is if the deal doesn't happen, man.
Speaker 1And I think it's doubly hard in this case, because I think there's a large number, good piece on it recently, the large number of these Neo labs they're all doing interesting stuff, but it's not clear if there's a commercially viable standalone business here at scale. Some of them will be great investments because I do think the foundation model companies once they're public will be acquirers of some of this stuff for TAM expansion, but they won't all be great investments. The problem is there's no fundamentals. There's no massive revenue stream like the LLM revenue stream to support the company and the valuation today. So once belief goes, it can be quite scary down there. Because in the end, you know, when Figma went down, you could see, well, at least we're doing a billion dollars in revenue. We're going 40%. We're worth something, goddammit. We are still somebody. When you have these kind of businesses that where the revenue traction isn't as clear, the valuations are high, and probably your likely strategic outcome is an M&A. When those fall through, it can be tougher. If there was a backup bid, I would probably, if I was them, I would hit that bid.
Speaker 3Now, for listeners, I get in trouble from Rory for choosing topics that he hasn't spent as much time on. And then he has spent time on some that I then don't discuss, and he gets pissed with me, and I edit it to make him sound less pissy than he actually is. Thank you for that, Howie. It's okay. So, you know, Rory, is there anything that you specifically think I should touch on that we haven't? No. No, you do whatever you want, Howie. Do you see this, Jason? Okay, great. I thought one that was really interesting is Aura's IPO in two different respects. One is it's Robinhood's first role as an underwriter. They're listed 18th and last, but as a precursor to what could be an underwriter of the future, is this foreshadowing of Robinhood's next mega line of business and Robinhood becoming so much more?
Speaker 1Absolutely. IPOs is about distribution, and one, you know, it's not the, retail is not the primary source of distribution. You know, there's typically this mental rule, you only want a certain percentage to go to retail, but that percentage has expanded, and I think SpaceX had a high retail allocation of 30%. It's, to some extent, it's not enormous money, but it's free money if you're Robinhood for just, you know, it's not like you're riding the S1. You sign on the bottom, you distribute your shares, you can allocate them to clients, and especially in a market where you get an IPO pop, gravy all around. You make money from the underwriting fees, and you make your best clients happy with an IPO pop. So it's a good business to be in, and probably from the lead underwriters' perspective, especially for these high-end tech offerings, the Robinhood clientele is probably one that has a high propensity to want to buy them. They want to buy these stocks. So, yes, totally makes sense. Just like Schwab, in, frankly, not as successful a way, has ended up being an IPO distributor, too, but not at scale. So, yeah, I mean, I think it's an obvious add-on. I mean, you know, the Robinhood story, for what it's worth, I just saw the numbers. It's just so amazing. I mean, they went, I mean, they went basically 10x in the public market. There was a free 10x in the public market in three years there on Robinhood.
Speaker 2You know, it's probably, it's probably a reach, but there's a lot more IPOs we need to get done. It would be neat if Robinhood didn't just get free money to their clients. It would be neat if it flipped the script where you really could have a decent IPO primarily from retail. Now, there's, of course, there's downsides. You certainly hope the institutional investors hold for two years. They are not obligated to, but more often than not, they do. Rory can share some stories. He has more than I do, but more, that playbook does, it doesn't work perfectly, but it sort of works, right? The institution, they sort of work, but if you could flip the script so you really could have, you know, you could do a $200, $200 million $300, $400 million IPO through Robinhood leading and most of it being retail, that would be disruptive for a subset of startups. That'd be great for, that'd be great for the ecosystem, right? NVIDIA can't buy everything, guys. Agreed. At some point, we're going to need some IPOs to work through the portfolio. We're going to need a few IPOs. It would be nice for retail to really, really work, right?
Speaker 1I mean, the fact that IPOs have become a lot harder to do has been one of the biggest negatives on the tech ecosystem. So anything that makes IPOs easier to do is good. Go Robinhood. Yeah. Rob, from the way to feed the poor,
Speaker 2will the Aura IPO pop? I think the fact that it is a somewhat understood consumer brand and the fact that it has 74% growth, which obviously probably can't last forever, I think it's going to be a pretty successful IPO. It's the kind of thing people are going to want to buy. They understand it and the growth, it's not 20% growth. This is not 18% growth and there's downside, there's competition. It's confusing, but the subscription, maybe it's Peloton 2.0, but for the moment, it's pretty attractive. I think it's a pretty attractive, I think it'll be pretty successful, which at the margin is good for everybody, right? See, that's what I wanted, Rory. No, I agree. I'm plus one. You know, the thing about Aura, to me, and again, we're software guys mostly. I mean, Harry will do anything that's growing 100% a year or more a month, but 85% retention for the rings, pretty good. Totally. Right? So they may not have the Peloton issue for the foreseeable future. Or it's like Peloton at its peak. Peloton at its peak, no one churned, right? Except for Mr. Big.
Speaker 1That was good. That was good. I liked the way you worked on that. Yeah, Jason, that was good.
Speaker 2I haven't done the waterfall. If Aura retention falls to 40, 50%, like a consumer mobile app, that's trouble. 85%, that's like SMB-like, it's pretty good.
Speaker 1- And maybe if Mr. Big had used the Oura ring earlier, he'd have known he had a heart issue coming and he could have survived and run off with Sarah Jessica too.
Speaker 2- Or at least a calcium CT scan, for Christ's sakes.
Speaker 1He should have gone in. - In the interest of disclosure, we have a small position in Oura. They acquired a company we're invested in, so I'm a big fan and a big supporter. They've been great to work with from a distance, so I wish them all the best in this IPO.
Speaker 2- We're rooting for you, Rory, in scale. We want everyone to get rich on this one. We're rooting for you.
Speaker 1Go on, Rory, go scale.
Speaker 3Big round for Wonderful. Wonderful more than doubles to five billion in under six months. Apparently, this founder's an absolute beast. Everyone I hear who describes him describes him in the same way, which is just a machine. Raised 550 million Series C, up from a $2 billion valuation earlier this year. I didn't know this until actually doing the prep for this, was the amount of secondary. 170 million in secondary within two years. Two years of founding. Sorry, can we just pause? What? 170 million in secondary within two years of founding.
Speaker 1- I mean, look, it's a mistake not to get all kind of moral about things. The buyers are sophisticated investors. They clearly felt they wanted to own more shares than the company was willing to sell and take dilutions, so this is what happens. It's what you said. The company is clearly executing amazingly well. It's at a wide level. It's all about enterprise AI deployment. I hate the forward-deployment engineer cliche, but they're in the business of making it happen for large enterprises that want to deploy AI, right? Initially, when I looked at it early on, it looked more like just customer support. I didn't meet the company. I was actually, I thought we were conflicted. And now it appears to have built a more wider, we will make your enterprise AI work story. And that's the number one corporate imperative. So apparently they're growing like a weed. 100 million ARR growing really hyper quickly because every corporation is trying to do this and they don't have access to the talent. So it's an execution-oriented business. What sounds like an execution-oriented CEO and compelling numbers. VCs like that shit. And once they're not willing to sell any more primary shares, I'm sure the VCs went to the CEO and said, "Dude, you want to take care of your people?" And he's like, "Hmm, I need more people "because I need to grow this business, "which means I need talent "because it's probably quite talent dense. "And it probably takes a lot of people "to do this kind of onsite deployment. "So the number one thing I need as the CEO of this company "is for potential future employees "to think this is a goldmine." So in fact, probably having a secondary is good for them because from a recruiting perspective, it allows you to say to the next hundred people, come to work with us. Yes, you'll get stuck on a five-month deployment on a bank in Holland or a electrical company in Germany. It'll be boring as shit, but in return, you'll make a ton of money. So it all makes sense. Whether it turns out to be a good deal or not, well, that's why they play the game. Don't know, but I can totally see how it's happened.
Speaker 2- Maybe just a couple of small thoughts. I mean, first of all, going from start to end, to 18 months to 170 million in secondary, it feels like the hopping of AI, although I don't think it is because of what Rory's saying, but it is breathtaking. Not the valuation 'cause we see that all the time, but the secondary. But maybe two things. First, huge kudos to going from like the multilingual Sierra decagon to like the team of 650 folks helping you deploy AI in the enterprise. It's just, it's a testament to how you win today. You can't stay fixed to something, right? You've got to build on everything you learn and iterate hourly and weekly. This is another tilt. Not only, it looks like a perfectly linear story, but there's a big tilt here in the early days, which is like, we're a bunch of, I think, really smart Israeli guys that know how to do Sierra decagon for non-English speaking folks to doing something much bigger in 10, 12, 14 months. I mean, this is what agentic coding and agentic development lets us do. So it's epic. So I love that part of it. And that should be the toughest challenge to founders out there is this rate of change for what they did. The one thing I'll say in the secondary, I don't want to make fun of it hopping, but I'm sure you guys see it even more than I do, but you know, the round was led by Insight, which is one of the most successful B2B investors of all time that there is, but it's competitive. And as great as Insight is, it's not Andreessen and it's not Sequoia. So what do you do to win? You do whatever deal structure it takes to win. And this one, and they done prior rounds, but this one was, we'll just give you 150 million in secondary. And so it's not bad. And I think Rory's right. They have 700 employees. So if you divide it up and you do it, like not everyone's going to quit as much money as this is. They're not all going to quit tomorrow, my meta point is we will see behavior. That is, I'm not saying it happened with wonderful. We will see deal structures that are objectively bad for the company done more and more often to win deals, whatever it takes bad for the company, not destructive, right? But things you would not ordinarily do to win deals. We're going to, we haven't even reached the peak of this. We haven't even reached the peak of crazy deal structures that just let you get into the effing deal at any price. Even when, even when you have to grit your teeth to do the deal, you know, I don't think the founders all took the 170 themselves, but you could see deals where founders that say they don't want to stay like how it air table, take a billion and then leave thereafter to win the deal. We'll see some extreme stuff. And this one won't be it. This might be the first, the first of a set of extreme deals that happened.
Speaker 1- Agreed.
Speaker 2- But it's how you win, right? And I see it in every growth round. I'm sure Andreessen and Sequoia do the same too. Don't get me wrong. But every hot deal I've seen in my limited portfolio where it's not the hottest name to do the hottest round. There's just as much extra stuff as you want to win the deal. All the extra stuff. The terms you could put into when they just don't care. What's everything I could put into this term sheet so that I win everything. Some of it's great. And some of it is maybe not so great.
Speaker 1- Yeah. Sophisticated buyers. What can you do? My aha is the prize does go to the companies that can evolve the quickest. And you're right. My memory did serve me correctly. Thank you for confirming it. It was just a CX story like 17, 15 months ago. And it just evolved quickly. And in this market, the people who are making the money are the people who are just running fastest and evolving quickest. And the payoff from two years of grind, that extra 10% of grind can have just a massive payoff in a world where fortunes are being made in 12 and 24 months.
Speaker 2- And I think the hard thing for founders and for others is, do you stick with something? Now Wonderful, maybe I'm saying it's more of a tilt than it was, but for Wonderful, they did it internally, right? The founders got together. They evolved the company very rapidly into something much more successful. On the other hand, we see Airtable where I'm going to assume Howie sat around the table. This is the only thing that really makes sense in this entire deal is that he sat around and he said, I just can't do hyper-agent in Airtable. It's just, there's too much institutional headaches. Too many customers deal with too many grouchy investors that invested a 12 billion. I've tried. And I assume you are worried too. We're huge fans of sticking it out, you know, because it's proven to work. It worked at Palantir. It's worked at so many startups we invest in. We have so many stories. This is all the great Ho-Nam stories of sticking it out, right? They're so inspiring from Altos. He's so good at that. But these days you got to wonder, should you stick it out? Is it worth it? Just stick it out, guys. And I tell everyone to, but I almost challenge myself. Maybe you should abandon that 50 million, 100 million, 200 million in revenue. Maybe you should do whatever it takes. Maybe you got to be as fast as wonderful. Or what's the point?
Speaker 1I actually don't think you should, quote, always stick it out. I think circumstances are different. I know back years ago when I had my own small business in the UK, I look back and I stuck at it for four years. Truly, I knew everything I needed after the first year. I shouldn't have bought it for three more years. Waste of time. I look back and it's just so clear to me. So you don't always stick it out. Is there a plan or are you just doing it out of misguided loyalty? And that's the number one test. And I think you're right, Jason, because I don't think wonderful was a pivot as much as an expansion. Rapid expansion, yeah. Whereas I do think Airtable, they were in that contract mode. Everything they had, they had run out of time and space. So I think it did probably make more sense to do that sale in that case. I think the facts are different.
Speaker 3I think everyone in this category is being forced to, though, by Brett Taylor, who's being very clear in terms of his expansion. And I think they're following suit. And I think they need to follow suit, as well, to justify the prices that they're raising. And so the combination of following Brett and price hunger means we are all doing the same. We're doing the operating system. Owners no longer just for restaurants.
Speaker 1It's the operating system. Crudely put, I mean, you're exactly right, is that Salesforce, the company, is the dominant SaaS company. It's worth roughly $200 billion, $180 billion. I think Service Cloud is 25% of that. So the winner in the existing world is only worth $50. So as you get these bigger market caps, like Sierra, you have to go beyond Service Cloud replacement to be a big company. You're exactly right, Harry. You have to sell the-- I'm the whole operating system. I take it all. Which means if you're Sierra, just to make the obvious point, you're coming right at your former company, right? You're saying, we want all your market cap, Mr. Salesforce, because the only way I can justify $15 or $20 billion in market cap for Sierra is not if I build a slightly better next generation Service Cloud, if I am the entire customer ecosystem for your entire business. Go team. And then you're right. Everyone else, like, one of us has to follow.
Speaker 3Yeah.
Speaker 1When someone goes risk on, everyone goes risk on.
Speaker 3Welcome to venture, baby.
Speaker 1Absolutely.
Speaker 3Terrifying. What about thinking machines? $40 billion new price. It's down from the $50 billion last year. The round is $5 to $6 billion. Excel leading with Nvidia doing half. Couple of hundred million bucks in revenue. Closest thing to a US model provider in terms of kind of open and--
Speaker 1I think that's the real sentence here. The important thing is you have to-- you have to start, what's the company doing? Why is it differentiated bet? And yes, they've shipped two products. It's Thinky and Inkling. Cute names, right? One of them is an open weight model that they themselves say is not pure frontier grade, but is open weight and US-based. And that's worked a lot in this world. And then on top of that, I think the other product, Inkling, is a platform to allow enterprises to do their own training. So the idea here is now you can go to JP Morgan. You can go to BFA and say, you've got an all-American software product and you've got the ability to train it on your data in a totally proprietary way way that's not exposed to OpenAI or Entropic. And in fact, you have full reinforcement, all the things you want to build a state-of-the-art enterprise model for JP Morgan, for whomever, Procter & Gamble. So it's a pretty decent, compelling offering for corporations. So that's kind of the positive story. And it's interesting that NVIDIA is doing so much, because to some extent, I thought that's what Poolside did, and they just acquired Poolside. So what you're seeing NVIDIA is saying, anyone who's doing something interesting in corporate AI, we're going to put money in. So I think that's what's happening here.
Speaker 2I know we've already forgotten about it because it's been a week or two, but the Poolside thing should be a little bit haunting. Not that a $7 billion exit is so terrible, even though the 15x thing kind of was one of Harry's clips that he took. But that memo was chilling. It's like we couldn't raise the round. Agreed. This was a great team with proven leader, very strong CTO, very strong leadership, seems to have had the right vision from day one, went for it, and they just couldn't raise the capital. They needed to execute. And congrats to Thinking Machines, which in some ways appears to have less. But it is a reminder that the music will end for a lot of the Neolabs, right? And so be it, as it should. It should be a thinning of the herd. But the Poolside one, we may never talk about it again, or it's possible when this little part of the bubble bursts, just one part of all the end, this Neolab bubble, that will be looked back as those guys grabbed the exit when everybody else, when NVIDIA stopped buying everything. And Anthropic said enough. Like after Descartes, they said this stuff doesn't actually move the needle. Enough already with the infinite $10 billion. $10 billion deals. We've had enough. Maybe we look back and they were the lucky guys that got the deal done on December 2021.
Speaker 1Yeah. And just to be clear, just to remind everyone, a few weeks ago, Poolside effectively, they would deny that they sold, but they sold a license for their product to NVIDIA, which was an open weight enterprise US-focused model. And the company still exists, but they cashed out quite a lot. And the memo that Jason is referencing is the note they wrote at the time, basically saying, we were right, but we couldn't access enough capital to continue. And it's interesting that literally two or three weeks later, another company in a not dissimilar business is actually being able to, sounds like it's being able to access that capital, in part, ironically, from NVIDIA, who were also willing to buy Poolside. So yeah, they get to play out the hand. And I think you're right, Jason. Will you look back and go, two years from now, you could look back and go, poor Poolside, they got sold out. And Thinking Machines made a forex from here. Or there's another world where you look back and you go, oh my God, I wish I'd sold because the opportunity got tough for Thinking Machines. And Poolside, maybe, as you said, was the last exit out.
Speaker 2Yeah. The world just changed after Astra, we were talking about in 24 months, and that was the end of the need for Neolabs. It was hard to see at the time, but when Astra 6 came out, the world changed and it became this and us versus China. And then the new AI regulatory council, Trump regulatory council, came in and changed things again.
Speaker 1All those things could happen, though I do believe, fundamentally, you do believe that there is going to be strong demand from corporate America for a open weight, US-based model with the infrastructure to train that model, right? And I think Thinking Machines is in a good position to meet that demand now. And I just think companies are going to want it because you really only have them, Reflection, which I don't know where they are in terms of the model and Poolside, but I'm sure there's others and they'll all come out of the woodwork and flog me for not mentioning them. But there's clearly a massive market need there.
Speaker 3There's a couple more, but there's not many more. There are a constrained five or six players. For precisely the reason that Poolside outlined. But the cash has dried up at scale. For the Neolab players who I think now are going to your court as we've seen, it no longer becomes a venture play.
Speaker 1Yeah. I mean, two big companies, two foundation models were Neolabs themselves five years ago and they've turned to be the best venture bets of all time. Just because that's true doesn't mean the other 100 Neolab bets that you can bet on today will also turn out to be amazing venture bets because now you have other companies with the capital already. You have other companies with the distribution. And yeah, the question is which of those Neolab bets will be orthogonal enough to the foundation model companies to be able to be an interesting bet. We're wrestling with that question every day because obviously you'd like to make those bets. But if you're doing something that's going to get either rolled over because the foundation model companies do it, or as Jason says, if you can't raise the capital to play the game, it gets hard. Boys, is there anything that I've missed that we should discuss? I don't know if it's true or not, but Twitter is saying, is Antropic going to drop its S1 today? Or is that not the case? I don't know. But yes, that will be interesting. To say the least. I think it's going to be heavily downloaded and read within the first hour of coming out.
Speaker 3My word. Will you be buying at $2 trillion, Rory?
Speaker 1I'm probably not going to be buying at $2 trillion, Harry, but that's not a comment on the stock. Actually, the answer is in the end, yes, I'm in S&P and QQQ. I'm going to be getting, as my wife said, when SpaceX went out, it looks like we got some of that from Elon, too. It's in the index, baby. It's coming your way. Not as quickly on SPY as QQQ, but on your NASDAQ index, that stock is going to be in your hands, I think, 12 days after the IPO. So, you're a buyer. Boys, thank you.
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