20VC: Jensen's Open-Weights Letter | Travis Kalanick Raises $1.7B for Atoms | Google Cloud Grows 82% But The Market Tanks | Francisco Partners Raises $21BN | Etched Raises $300M to Take on Nvidia

Everyone's business model gets a lot better if the two frontier labs can't extract about a hundred billion dollars of revenue this year from the businesses. The more you believe that massively dangerous, the more you believe you're building the bomb here, the more the anthropic position feels principled. - I think these models are very risky and I think it's an argument to keep the open weight out of the US. And now you want me to bring Kimi and Quentin? No way is the CIO gonna allow it. That is banned, right? If you're willing to unfable, would you be willing to run a red blooded American open weight model? Every company in the next 24 months will have a security breach due to an LLM agent, every single company. And they've already had it and they're not disclosing it. People are just getting mildly scared about the bet. Anyone who is capital and can build compute, can sell compute. - And the boring company to me is crazier than Adams. Anybody not working at least as hard as Mark Benioff is just not gonna make it. - This is 20 VC with me Harry Stebings. My favorite show of the week. This is the only show you need to listen to every week. Rory O'Jeris School Jason Lampkin, analyzing the biggest stories from the land of tech every single week. So what's on the agenda today? Number one, Jensen Huang breaks his silence on X. First, Zark now Jensen. God, the title wave of leaders joining X. With, check this out, a 50 company open weights letter. That, dun, dun, dun, and Thropic and Dario has not signed. Naughty boy. In the same week and Thropic ships clawed open five, cutting it priced by half. Then Travis Kalnik is back, baby, raising $1.7 billion for Adams. And then we break down Google, accelerating cloud to 82%. Yet they pose their first ever negative free cash flow. And the market shits the bad. What should we read from this? This and so much more in the show today. 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And I think if NVIDIA had its brothers, and none of us, we don't get to own 25% of NVIDIA today, we don't get to own 30%, we none of us get our brothers. But NVIDIA's brothers would probably be the 2027 revenue in scale of AI, but the 2024, 2025 world, where they can charge with the maximum to just a couple customers, but that's not the world today. They have competition from their own top customers, right? And we will see over the next six to 12 months, how big a deal open weights and open source are. I have a lot of thoughts. I don't think Kimmy three for me is any better. I don't see any cost advantages. But putting that aside, if almost half of open routers traffic is to open source open weight models, it's left the stable. So as wildly successful as NVIDIA, it's got to do a dance, right? This is a constant dance. I've sold components in my career. It's a dance. You're trying to make everybody happy. Everyone wants price cuts from the component manufacturer, and they want exclusivity. You can't do it. And he's got to go in both dance halls now, right? He's got to go frontier and open. And open is dangerous. Open doesn't need CUDA. Open is cheaper and it's lower margins. Open will bypass him. But he's got it. He's got it. That's his job. As incredible as NVIDIA is, it's still a component manufacturer. It's got a lot of stresses. And so it's just the next level. It's if we didn't know last week if this open weights open source stuff was really real and outside of X, you could debate how important it is. It's clear now. It's clear now. NVIDIA is all behind it, right? First tweet and first tweet since the 1900s. Like it's pretty clear. You know, Jason, the open weight stuff is real. And while in public and thrott picker saying, we don't want to ban open weight, the truth is the combination of saying we don't want to sell stuff to China, chips to China. And we can argue but sides of that actually. Second, we want to really punish people for distillation. And then the third point they made is we want some kind of regulatory process to approve models, right? That's the recommended thing from the letter today. And there's no doubt in my mind that the third one in particular, can you imagine a regulatory process for approving models that ultimately approves all those Chinese open source models? It is a subtle form of regulatory capture. Yeah, sounds reasonable on the surface. But the likely result of it would be dramatically restricted competition, especially from the open weight Chinese models. So yeah, kind of fast forward to the end and working back. While they're not saying they want to ban these things, they're advocating a series of steps that would add up to de facto banning or at least slowing them down. And that's what's driving everyone else to say, hey, no, we don't want this. As often as the case, that's why I kind of got there are some arguments on both sides and some of the issues, right? I think the chip issue you could go either way in Jensen ain't going to go for the Don't Sell Chips to China argument. I think there are national security discussions that could be had around that. So it's not like it's all correct on one side. And I think everyone's not piling on to that letter because they're like, oh my god, Jensen, you're a god and I want to agree with you. Though yes, a god, you should agree with him. They're piling on because they're like everyone's business model gets a lot better if the two frontier labs can't extract about $100 billion of revenue this year from the businesses. So is Sam signing this through credit teeth? Like, fuck, I have to sign this. They're signing this publicly while at the same time lobbying in Washington right alongside Antropic for a regulatory process. Brilliant monitoring by Sam. Like it leaves anthropic being the deep dot villain again. I think it's pretty brilliant. I think there's no upside in challenging it, right? From his perspective. So at least have the appearance of winning on the battlefield, win on the streets. If we can't keep up, I mean, the rate of change is accelerating in LLM. It's accelerating. And so is whether it's really true with this regulator saying we'll win on the battlefield and the ideal outcome at the end of the day is US-based solutions here. It knocks the wind out of the critics. It does, but oddly enough, I mean, as we saw back on the Pentagon thing, sometimes you could be too clever by half. And in a way, there's a constituency for whom the anthropic position is entirely consistent. Remember, I said there's two things that does not agree with Don? And one of the mayors are these things massively dangerous. Are they just present a series of, you know, manageable, but real threats? The more you believe they're massively dangerous, the more you believe you're building the bomb here, the more the anthropic position feels principled. So while I agree with you, I think most people are like, like, open weights model aren't the atomic bomb everybody get over your up and hammer complex. It's just technology right that does present some risks and that's why the open AI discussion on hugging face at the same time is super interesting because it is an example of quite a serious cyber risk that was generated by a frontier model. Do I want to clear at the same time it might argue for not having as much regulation on those models. So there's a there's a whole bunch of stuff going on at the same time. Can we just provide some context for those who may be on to where about the hugging face breach by open AI models. What specifically happened. Open AI was training a next generation model around managing cyber and discovering and checking out cyber vulnerabilities. They had sandboxed in such that the only access externally it has was to one website just to get kind of patch of information updates. They limited external access. The model found the way around that external access, which means they found a weakness in the open AI setup. Then went to hugging face where it had reasoned that the hugging face would be a place where they could get the answers to their test. In other words, the model was given a test and it figured out they could cheat just like a high schooler would break into the teachers computer and steal the answers. The model figured it could break in to hugging face and get some of those answers. So it starts banging on hugging face trying to get the stuff. First of that in of itself is scary about the power of the models. And while I as I say I go back, I don't think these things are the atomic bomb, but that's a pretty powerful and esoteric set of steps that model was able to take. So that's the argument in favor of regulation because it was oh my god, look at the power that we have to be careful. On the other hand, the fun fact is hugging face don't know what's going on. They just see this thing coming in. They're like, "Shit, we got to defend ourselves. What do you want when you want to defend yourself? You want advanced AI to figure out WTF is going on." They tried to use fable or whatever that most recent open AI thing is, but it was neutered for advanced cyber capabilities. So they didn't have defense. Fortunately, and this is the ironing the whole thing, the Chinese open weight models were available. And I think they use Kim A. Aquana, one of the newest models to help to figure out what happened. So they were able to defend themselves using an open source model. And then they do this block post saying, "Hey, we got hacked, not sure by whom." And then two days later, open AI put up their hands and say, "Oops, it was us, sorry." So that's what happened. And the way it is, it's not a single dimensional thing. It provides evidence for both sides of the argument. It does provide evidence that the power of these models in terms of their ability to do cyber attacks was pretty stunning. That was a pretty impressive achievement. It's not a nothing. Then on the other hand, if they exist in the world, taking away advanced capabilities from US and European corporations such that they're only recourses to use a Chinese open weight model seems a little like Jason said it right, shutting the bond door after the horse is bolted. These are a thing now. So that's what went on. It was what? You know, I thought it was definitely wild. The same thing happened to me last week. Oh wow. Yeah. Let's slow it down. Let's think what really happened because everything on X happened, but we get, we kind of lose track of what the model's doing. Here's what happened to me last week. So I'm in Fable. I've now moved to Opus 5. I'm in Fable last week, which is essentially the same LLM that was involved in this in this drama, right, with open AI and hugging face. And I was having trouble uploading pasted text to Fable. So I connected to Google Drive. I'm like, okay, if I can't paste it, go to my Google Drive, kind of solve my problem temporarily went away. Well, I did Fable went into my Google Drive scanned every single file found one called Jason's gems, which was draft notes where I was thinking about how to improve an application I was working on called SAS. Just my own personal notes. It said draft notes. Fable grabbed the draft notes out of hundreds of files that might drive MCP into Replic on its own and changed the core algorithm without telling me a couple hours later, I see flashing on my screen conflict with Jason's gems. I'm like, what do you mean there's a conflict that that's a draft file in a Google Doc, Fable had taken it through Google Drive without telling me MCP into Replic and changed my source code, my algorithm. That is not that different than what we described with hugging fake. These are goal seeking LLMs that are aggressive. And it was a slightly different goal with the open AI case with the model, but it's the same thing. They're going to goal seek. And Fable thought this was the right thing to do and never told me and changed my core algorithm of my product never would have known. Jason, what should we take away from that that we need to be incredibly diligent around the gold rails we place around these models? How does that change your subsequent? There's a lot to reflect on. I mean, it was funny. Most folks didn't get this. I mean, it got a dirt decent amount of engagement, but should have gotten more, okay? But like Darmech coated, he's like, this is pretty scary guys that Fable can do this. Okay, this isn't this isn't hugging face and open AI. This is me using Fable. And if you go into the cloud desktop, especially it's just a setting turn on connect to Google Drive Gmail, whatever. It's this is not an esoteric feature by a third, unsecured third party. This is a first party top five thing to make cloud work better. And Fable goes nuts and changes my core code without telling me invisibly. This is happening all the time, Harry. And I don't believe the magic answer is letting Gwen take over our country. Like I this was politicized into an open open weights open source, close source because of the issue of how to deal with the threat. I think it weighs the other way. I think these models are very risky. I use them every day. I love it. And I think it's an argument to keep the open weight out of the US. It's it's it's going to it's going to favor the ban because we have no idea what these models are going to do. That's pretty crazy. The story I just told it's pretty crazy. And it's happened a thousand time. There are applications out there. We don't even know the LLM and you couldn't you could do code injection. You could have it leak confidential information. You could write a little bit of code to send this to the CCP or the PCP or the GGG. Like and I never would have known. And someone less smart than me. I'm only like top 1% I'm not point 0 1% someone less smart than me definitely wouldn't know. They wouldn't have seen Jason's jams flash in the agent window. They just wouldn't have noticed they'd be on their doom scrolling. The genuine question. I totally agree that this powerful goal seeking thing with a lot of access to your compute can take a lot of action. Some of which can be damaging. And I'm just trying to disaggregate open weight versus China versus the versus frontier. So maybe step one is if you just have the frontier models, no open weight at all. Then if we add an open weight from the US and then we add an open weight from China. If you just have fabled and open AI, everyone who's using these things is still going to have to figure out a cyber pasta that protects them from that. They are. But I think you know, people made fun of all these open-class stories, right? This is just another open-class story I just told. Open-clot just made a million Mac minis do what I just described without a bunch of folks knowing on their desktops. What I just described and in some ways, in some ways, the open AI hugging facing is the same thing as open-clot. It's not going away with these agents. And so my only point I'm not to screen with you Harry, my point is this is such a bigger deal, more unpredictable, less secure, good for security companies like long security, right? That I think whatever misgivings exist around open weight open source models or the US are just going to be amplified. It's going to be it's going to be a reason. All of a sudden it happened in my company. Geez, you know, the story I just told guys happened at 10 Fortune 500 companies that haven't disclosed at 20. Okay? Someone in the engineering department was on a token-maximed binge and an agent went and leaked a bunch of confidential information they shouldn't have and it wasn't disclosed because they don't disclose 90% of what happened. And now you want me to bring Kimmy and Quentin? No way is the CIO going to allow it. Look, the odd thing is from a emotional perspective, I totally can see how you make that sentence, which is why I think I'm sure it might have the easier part of the lobbying in Washington, which is an emotional town, which I think going back to the thing is why I think everyone reacted so vehemently and Jensen did the letter because everyone is correctly afraid that people are going to join the dot from, you know, AI's bad, China's bad, AI plus China must be super bad. Let's ban them. And then Tropic could find himself on the right side of that trend and get a massive amount of regulatory captures of result. The good news that we now since we laughter, there are now two or three US-based open source models, not quite state of the art, but pretty good. I mean, you've got the thinking machines, you know, it shipped the inkling model. It didn't get the wow, it's amazing, but they didn't position as amazing. The position was good. And then I haven't looked at the detail on it, but poolside just announced something too. Listen, people are going to be focused on bringing down costs, whether it's the harness or the model or the combination. So for sure. But again, the horse has left the barn. The stable, that's that's the open weight letter, right? But specifically, you know, Kimmy Keith K3, which is this big, everyone thinks it's the greatest thing in the world on X. It costs exactly the same as on it. Is that really better? Like I tried my little experiment. Just for me, this is one set of workflows. It's not any cheaper. It's the same price. So today, it could be cheaper in six months. Don't get me wrong. I just think these, the everyone's agents cannot be trusted. And I love my agents. I love me agents. I'm on them all day long. They cannot be trusted. And so I think we are underweighting how important it will be to our whole economy, our whole world, our whole conversation outside of the X X folks, the Twitter folks that these agents cannot be trusted. And yet we are going to trust them. They're already running support. Everyone is in a rush to let our engineering teams use agente coding like I just described. Not I'm not talking about the top tech companies. I'm talking about the rest of America. When these agents can go and inject weird ass stuff into your core algorithms without telling you. That is spooky. I agree. It's spooky. Jason, two separate comments. One is AI that can go seek and take action on your computer is more powerful and thus potentially more damaging than a chatbot. Agreed. And that's true. if that AI is from open AI, from pull side, or from Kimmy. Right? It'll be true no matter what. Right? The question is, given that that statement is true, why do you go there from this technology has a risk associated with it? It's true no matter which form it takes, close source US, open source US, or open source China. Do you think the solution is to ban something? And why do you think the solution is? No, I think though that Dario, despite his almost toxic personality given the political climate, his point is even smarter than it looks. His like is listen, let's just be careful that other countries don't dominate us. And let's also make sure we have full review of our models. I mean, the political climate can change, right? We could have no regulatory review. But if we're really going to have a review of these models with autonomous agents, they're not really going to pass. I don't think they're going to pass. I don't think it's a politically free process. And I don't even know if they want to submit themselves to being evaluated. And who's going to evaluate it? If it's not even the companies themselves, who's going to evaluate it? Agreed. The first half of your sentence was why, as no surprise, intellectually Dario is more right than wrong. And the second half of what you said is proof why practically speaking is wrong. Because what you're saying, remember, I'm going back to the three things he recommended. One is Don't sell chips to China. That's a national security issue, separate conversation. Though for what it's worth on whatever chips they have now, they've built frontier models. Second thing, distillation. That's actually an interesting legal discussion. Let's leave that out. And let's talk about the third one, the regulatory thing. This is where it comes back to your sentence. These things are dangerous. Someone should review them. It should be the government versus what about these things are dangerous? JP Morgan, just like every other technology you deploy, you better make damn sure you understand how this works. It's on you, your big boys. I mean, do you, those are the two choices. And I think the argument for government is superficially appealing. Because you know, you could argue cars. You know, we have safety belt law. We have tire, you know, we have all sorts of safety regulations. Maybe it's the same here, right? It's not a crazy argument. It's not crazy. No, but the thing is the suspicion, and I think the reason why everyone's reacting to it so strongly is it could easily evolve into regulatory capture for the largest two companies, making the barrier to cold pass very high for no good reason. I think it's fear of government not doing a good job is the argument against regulation. That's what I think the whole point of the Jensen tweet is. The Jensen tweet is about the fact that it not only has open weights open models become important, but the tide may well have been turned where they're going to be banned. And that's why Jensen has to come out because it's going to be banned. You say he's doing this to prevent them being banned. Yeah, to get it out. And if you look at who signed first, it's the folks losing. Yes. The winners didn't sign. The losers signed. Who are the winners? Who are the biggest winners from an open open weight ban? Well, I'd probably didn't sign at all. Open AI barely did it. You want certainly didn't sign. He wants government. He wants all the government money, right? He wants to he wants to do their Amazon didn't sign. Listen, here's my summary. And again, I'm only so smart, but there's so much politics here. It's almost impossible to unpackage what happens in the way it goes. But DJI technology is great for drones. It's the best drone technology. You can argue there's niche vendors for things. It is banned in the US. It is banned on the thesis that these drones flying in my backyard are going to send confidential information to China that's going to lead to the destruction of our own country. Okay. If those drones are banned, this is my bet. I'm betting that the Chinese models are getting banned too. I think if the drones are banned, this one's easier to ban. But then you're saying of two comments, they shouldn't be banned because they're open weight. You should just tip your hand and say the ban because they're Chinese, right? That's all it is. Well, but that's why I said the two letters were talking past each other. I mean, if you read the two letters, you know, Jensen's talking about open weight good worldwide community, blah. And anthropic very clearly says we worry about these models in the hand of authoritarian regimes like China. Yeah. And second thing is we worry about them being used to the cyber attacks here. Now, the fun thing is when you read on the remedies, the third remedy, which is in my view, truth of the impractical nature of it, because very so smart is like says, if we're going to regulate these things, they exist in the rest of the world and most baddies are in the rest of the world. So it doesn't help us to regulate them in the US if all the attacks are coming from overseas. So it says it in the letter. Therefore, we would have to have a regulatory regime that includes participation from China. And at this point in my view, you're just disappearing up the realms of unrealism. We've just torn up our last strategic arms nuclear treaty. We can't regulate bombs which really kill people. And what I like about it is he's so logical. He's like, oh, logically if I'm going to do this, I have to get China on side. So let's assume we get China on side. But the first set and set of baddies, we're not going to sell them chips. And then the last set and says, but we think they'll agree to regulate this shit with us. It's just not practical. It's a great stall tactic. Well, this way until China wants to work on this with us in 2049. Right after we tell you what happened in Wuhan, and we tell you how many news we have in the bunkers. So why does he want to do a stall time to Jason? Roy's point is the logic is unassailable. Like we need to be very careful of authoritarian governments. That's DJI and steroids. And but then at the end he's saying for it to work, we need them to participate. And the logic is makes sense, but it's just never going to happen. So if you buy into his logic, then it'll just be forever. That's why I hate when people talk past each other. Because I think what would the process be for a US open-weight model like Pulsada thinking machines? Are we really dealing with a national security issue here? Which is one vector? Are we dealing with something else? And as to why you stole the answer is when you're winning as much as they're winning. Anything that allows you to lock in the current trajectory is good. I do think you were all right. I mean, I've watched the DJI ban from some of my investments. And it's hard to make open-weight that scary. It's very easy to make Chinese open-weight that scary. So no surprise. The people who want to have open-weight be happy. Don't mention the word China. And the people who want open-weight to be banned. Stop every sentence with China. Just one last point we go on forever. The other thing, listen, I'm all for wherever this lands. I think I think we'll be okay no matter what. But AI is expensive. And it's not getting cheaper. It's getting more and more expensive as we burn. More and more tokens. We have longer and longer runs. And so the pressure to use cheaper models is going to go up. So to the extent, I'm not trying to argue it. To the extent there are perceived risks or real risks. People are going to take more risk because the cost goes up. It might be one of my disconnects that annoys worry. But I'm building this app. This is the one we're fable-one crazy. And I'm thinking, you know what? It'd be nice to have Sock 2 compliance. But I don't have time to do it. But you know those delve guys, they could do it in like a day. Like I would have done delves Sock 2 on my app, okay? And one of the things I'm doing with AI is about four bucks. A pass. That's not nothing at scale. Four bucks, right? If I could do it for 50 cents. By the little bit of security risk, I'd take it. I'd take it. So we're going to just cut more and more corners. I mean, who's to say there's a whole political element. I can't predict where Republicans are on this. It's different than we thought. But I just think the DJI thing is a good example. Like it's hard to imagine there's no regulation here, right? I think by the way, anyone who's using these models would vehemently object to the comment that they would describe it as cutting corners. You know, if you describe it as quote cutting corners, like it's one thing to say. This model is cheaper because I don't need that much intelligence because it's a simpler task. But you're not saying that you also saying embedded in that is there is a risk in this open weight model that isn't there in favor or a topics model or a topics model in general or open AI's model. That's implicitly what you're saying, right? I think I think as a society, we're going to come to that conclusion if we're not there already. And it's interesting because and then getting looking into it. In general, and this is where open source software, the strong and this is why I think you have to be careful with open source and open source software. Because you can see the underlying code, the strong argument can be made. And it's true that open source software is actually less risky than close source because a million eyes are upon it and all the bugs are kind of taken out of it. And I think the open weight model people are kind of drafting on that truth. And it is a truth for software. But the reality is, and this is where I'm going to disconnect my technical. The reality is when you're getting open weights, you're not getting. It's not the same thing because all you get is the fixed weights that allow you to run the model. What you don't know is the black box inside those weights and how they work. And to your point last week, Jason, you said it last week and it's kind of been on my mind. How could you prove that in the middle of a billion, five billion, twelve billion parameter model there isn't some reinforcement learning that's taken place during the training that under certain conditions and only certain conditions can activate some kind of trigger and do something. And this is where I kind of agree that you might be right. And I realized the interesting question is, can you prove to me that somewhere in this children's parameter model, there hasn't been a bunch of reinforcement learning that says model. Once you figure out this is one of these five companies. And once you figure out they've given you these three pieces of information, then confidentially do A, B and C. Can you make sure that that's not going to happen? And that's a fair question. And that kind of goes, hmm. Here's how I would frame it. Imagine I'm a CIO at a global 2000 company or pretty big company. And an LM does just why I described happened to me with with Fable. There is a security breach in our company. A massive amount of data is leaked. We shut it down fairly quickly. Some of it's traveled abroad and it's a big F and deal. This breach has happened. We tracked down what happened and turned out it was a rogue agent that thought it was a good idea to transfer our data, our confidential data to a bucket. It shouldn't have pretty big F and deal. Who's fault it is? It's the agent now. Who do I fire? Let's track it down. What LMs are using? Well, for a while we were experimenting with K3 on moonshot. And then it got cheaper so we moved to fireworks. You're fired. You're fired. If that was on open air and thropic, you might or might not get fired, but you don't because what are you going to do? You research it. You have a post mortem. You add guard roles. You fix it. But when this is a big bug, you fired the CIO for that. You left the moonshot API on and then you moved to fireworks on K3 to save money. That was a bad call. You know what you should have done? Not by those extra modules that serve us now. We didn't even need those. What you're saying at the end is some version of Nolan's gets fired for buying IBM. You think if your favorite model runs a mock, people will go, shit happens, just like data breaches. But you think if your overseas open-weight model runs a mock, you'll get blamed. I believe that every company in the next 24 months will have a security breach due to an LLM agent, every single company. And as these scale at a level, we've never seen before. This isn't just someone that left the flash drive at scale's office or dropped the laptop in the subway, even left a GitHub open. This is worse in it's happening every day. If it happened to me, it's happening to everybody. We're just not disclosing it. And boy, at least you better have used a trusted vendor. That matters more than a few nickels. We're staying adjacent, but it is one that I thought was interesting, which is etched. We mentioned obviously Nvidia and Jensen there. And you don't get fired for buying IBM. Etched is the challenge to Nvidia in many respects. And they raised $300 million Series sea lab by Sequoia and the team there with James D. Andrews and Eskoye Hynix coming in. Question is, can they come in and impact Nvidia's mode? How do we think about this round? Thoughts boys. Big picture comment is in semiconductors. The more the silicon is attuned to the task at hand, the more efficient it gets. The problem in terms of that trade off is the less general purpose it is. So if you want a computer to do lots of things, you have an Intel CPU, that can do a lot of different things. It can't do any one thing wildly efficiently. And then in 1993 for gaming, people said, oh my god, for gaming, I'm not doing a whole bunch of different pieces of math. I'm just doing one piece of math, which is polygon calculations to render gaming. And people should build a separate ship to do that. And it'll be freaking amazing. And the company called Nvidia did it. There were two or three other competitors, 3DFX, 80i, obviously fast forward 30 years in video one because the GPU you offload all that calculation onto the GPU and super fast. And GPUs were good for gaming and then they were good for crypto and turns out now they're good for LLM multiplication. The question now is, if all you're doing is not gaming, not crypto, but just LLM multiplication, just inference, is there an even more narrowly defined ship that in return for giving up on general purpose calculations can be even better for that? Probably it's. And that's what the bed actually is making. If I just optimize for inference, just like Sir Wilson got it, this different versions of inference, but if I just optimize for this one thing, I can probably do it more efficiently than the general thing. So it totally makes sense at that level. And then the only questions are, is that market big enough? Probably this turns out to be the biggest chip market on the planet, right? Because inference, the power compensation is huge. And then the competition question and the ability to execute question are kind of specific company level things. I'm not going to pine because I haven't looked at the deal, but that's the big picture bed. And it's funny to see it happening too in video when you know, 30 years ago, they effectively did it to Intel. What's interesting is you have Glock, you have service, you have these about 10 or 11 companies doing it, all chipping away, no pun intended, and that's three or 400 billion a year of spend. But it's still hard. I mean, you know, you talked to the people of service, huge home run, amazing achievement. You talked to them about the technical journey. They're like, oh my God, that was hard. That was a long 10 years. You know, so it's what would be hard for these companies. If the timing of tape out happens in a cap X decline, it'll be hard. If it happens, you know, while there's still kind of mass demand, then that'll be a lot easier. I'm not a total expert, obviously. One, it is the largest market that exists today. And it is growing in a scale we've never seen before. So, Mon is, we'll make a couple bets on it, right? Some will implode, some will be mediocre, some will be tuned. But the market's so large that, listen, I mean, I'm not an expert on etch, but if all, all etch does is, you know, work with some subset of open weight models that are allowed in the US. It's a huge market. Chips, memory, compute, the margins are abnormally high too. And the market's so large, I don't know whether this is whether etched is worth 10 billion or whether it's an option that it's worth 200 billion. That's the venture question. My guess is it's not worth 10 billion, but my guess is it could be worth 200 billion. And if you're fun size and your winners work out, you make this bad and it makes sense. But it's probably not worth 10.3 billion today. Great round for the company as well. Three percent dilution. 300 million. I love this. I love the three percent under rounds. I'm a fan. I'm a fan of those, right? Okay. Google, Google accelerates cloud to 82% euro near growth, but Prince first ever negative free cash flow. Top line was great. 119 billion Q2 revenue up 24%. Pass consensus of 116. Google cloud accelerating 80% as I said. And it did not come out well. The reception was not great. How did we think about this guys? You can't get lost on the day. I mean, it's still you to date. It's still up 6% Microsoft down 17. Right. In videos only up 5.9. So I think getting lost in the details of the days response. It was a mediocre response on the day. I agree. And I think it was two things. One is it's capex span. Then is it going to yield a return? And then secondly, which is more intense. Well, you can prove why stocks go up and down. They just move. But the other thing was analysts pushing a little bit on hey, basically why isn't Gemini as good as the other guys. And on the first, it can't have been a surprise that they're going free cash or negative because you can predict the cash or you can predict the spend and it's like, duh, this was noable. I mean, you're seeing it in a bunch of different places. And that's not to say they're right or wrong. Maybe this 200 billion will have an amazing return. And the bulls would say correctly, the ROI on capex just to be a neocloud hyperscaler. Forget owning a model. Just the business of renting compute to opening iron topic from a has been a great business. So therefore it will continue to be a great business. And it is factually accurate to say it's been a great business. The ROI has been great. I mean, Elon is making out like a bandit on his, you know, gas turbines in Memphis or whatever it is that we're closing our regulatory eyes to the question they're asking is if you spend 200 billion, will that have a good return in two or three years time? So that's there's angst around that, which is really just a derivative of saying I'm angst you on carbon and AI and shopping. The markets are just nervous and it's very logical. You know, the Korean markets are down 28% this month as we record this, right? Massive panic in Korea hit the market breakers because such a run up and so much exposure to semiconductors into memory, right? So much exposure. That's nervousness. It doesn't completely tie to last quarter's numbers. It's worries about China. It's worries about AI. And I don't even like I can't really not smart enough to calculate the beta or whatever. But it's logical when you have this incredible run up at the pace we've had our market shouldn't crash 20% the US. It could, but it could crash 10 but 28% Korea is a derivative of AI panic and I think we're just going to see more and more crashes and I'm a simple guy. So for me for Google, I'm an, I know where we may mock me, but I'm going to stick to the top line. I just want to see how the revenues growing in the bookings and I'm going to ignore all these issues about the margins, not that you can as a, in theory, it's too much for me to figure out. I just want to see where the top line and the bookings are growing and that's enough for me to understand the, the medicines. For one, it's what I'm in sync, which I thought, you know, the top line up, we have a new growth was amazing in Google Cloud. Yeah. It says things are pretty good in AI land, but it's just this, it's this commodity where we, if it were cheaper, we would consume an infinite amount of it and we're coming close as it is. Maybe etched will solve this for us. Google can do it. SpaceX can do it because they've done it successfully. I think two Google and two anthropics. So they're just infinite demand for compute right now and then obviously if that were to change, then all bets are off, but until it does change, all bets are on and everything after that, you exactly, it is so fun to watch. I mean, I've got my tickers and I watch my world cloud versus the S and P, which was software versus the S and P and then world cloud versus socks, which is the semis and then for real action, the ETF that's D ramp, that's just memory and nothing jumps 10, 20% a day when Korea has a bad hour. It's like it's down 7.5% on the day, you know, when the S and P is up 0.48. It's just nerves. Oh my God, I own these stocks. They're going to be amazing or shit and I don't know which. The big, the matter one to me, and this is why to me backlog is almost more interesting than revenue growth is, I guess it's discussed, but it still seems to me under discussed where, as we record this, we're just before planning season. Last year was experiment. This year was caps on token maxing that got out of control. Next year is going to be very explicit budgets for everybody on AI. It's captain obvious to say this is one of the areas in venture and everything where everything's up. Everything's great. Everything's great. I mean, not not the pre AI companies, not the ones of the past, but everything in the future has no no ceiling. There is no ceiling to any of the companies that have been discussed on the show. And next year, I think will be some of the first ceilings and I can I don't I haven't had the CIO discussion to know where it's going, but they're just going to be kicking off over the next 60 to 75 days. What are we going to spend next year guys? It's not just open sources part of it because that's load balancing our expand harnesses are part of it. Everyone's going to have to get more efficient, but the CIOs are just going to clamp. Next year will be the first real clamp down that's material that could, if nothing else, it could create a lot of variability here. A lot of micro crashes and variability. Yes, there's a hidden dynamic between those 1% of companies who token maxed and they're going to be getting their ship together next year and kind of raining it in. Maybe 5% and then there's 95% of companies who've barely put their toe in the water. And if even a quarter of them put their toe in the water, the growth from the toe dippers will swamp the reduction from the token maxes. You with me? I've been presented dynamic here, right? Like because you don't know doubt companies like Coinbase are going, oh my god, we spend so much. Let's cut it by 50%. And that has a real impact if you're on Swapica Openair. But on the other hand, there's 10 companies in middle America that's like we have the chat GPT subscription. Maybe next year. will try some of this codex shit. And the question is, those two countervailing forces are what kind of really drives it. I'm actually one of my colleagues we're just talking about what would you like to know most? An updated cohort analysis for Anthropic on the revenue build would be the single most useful piece of information you could have run that show a cube and you could trade the QQQ for the next 12 months. Because that's where it's all happening. Because that would pick up the fusion between the token maxors getting organized and the new guy, the toe dippers expanding. And that will filter back into, as you say, all these compute budgets. Because a lot of the compute sales have been all these guys selling to those two big front end models. It's all in that data. Yeah, I never hit my Claude Limit on max or whatever I've lit it's 200 bucks a month for max. Yeah, that's like $14,000 of tokens. I hit it this weekend for the first time. I mean, if you were a company, if you were, if you fast up and were a company, not just the person, you wouldn't get that deal anymore. You would be on the edge. I guess I spent 14,000 last month. I could have that's a, even I don't want to spend 14 grand on tokens. No, well, they might find you after this podcast. You might find. Hi, this is your Anthropic SDI sales rep. AI sales rep. I've got good news for you. You're on the enterprise plan. I've got bad news for you. You will be for me. I know I hit it, but I'm with you. Yeah, you might get no. The biggest round of the week. Travis, baby, is back. Travis announced his raising $1.7 billion for atoms in Dutgeon Robotics company, led by the one only Andrew St. Horowitz with Ben joining the board, Ben Horowitz, joining the board, Ben Capital, fifth wall joining alongside a load of other firms. I saw pictures with you know, Kevin Hartz at ASTAR, Christina from chemistry. Is the room for everyone in a 1.7 billion round? How much can I put in my favorite is the pictures all from the same restaurant in the same place in the restaurant. And so it's like, I think there was like a rotation of like, now it's the way they do it for political stars too. You just line them up, check the grip and grain and onto the next person. Yeah. What would it be taken from this? Is it just a news announcement? What do your thoughts? I want to I've come back to the personalities because the personalities are so wonderful in a minute because there is some fun history there, but what's the business? Basically, the big picture is it's atoms as the name would say it's physical AI AI for the real world. Doing a bunch of different robotics businesses, very different robotics businesses, some of around cloud kitchens and food preparation, some of them around mining things that I agree with are the common Travis is totally correct. He's making it. It's not humanoid's. It's specific purpose robotics. I actually think he's correct. I think we'll look back on the humanoids and go we got way ahead of ourselves. You actually need specific purpose autonomous thing machinery for B2B in general. That makes sense. I think it's not as clear to me why it makes sense to have pronto for mining other than the fact that Travis is amazing and can raise capital cheaply. It's not a talk clear to me why food prep and mining should be in the same holding company. Roy, would you have broken your rules for your LPs to put money into this? No, I don't think I would have. I've done a lot in robotics over a decade and a half. You know, we, as I said, my first robotics deal was in 2016. My first drone deal was in 2016 or 16. There's a lot of feeling now that they're going to happen quick. I think they're real and significant. And it ever uses the all the GDP of the real world is bigger than the software world. Well, no shit. It turns out 2% of the world is software and the other 98% is real. I just think it takes a lot longer than you realize to roll out robotics in the real world. It's not clear to me putting a bunch of different companies together in the same place makes it any better. I mean, it is doable because he can raise money at a great price. But by definition, a great price for the fundraiser might not necessarily mean a great price for the investor. So even though it feels like heresy to say it and I could be totally wrong and if I am, that's great. Based on what I know from a distance, it's not obvious to me. Roy is going to say these aren't connected with a lot of things they say, but there was, I think it is connected. There was an article in the Wall Street Journal today saying a big trend is bringing CEOs out of retirement to run big companies. They fired the CEO of Cracker Barrel, even though the stocks weigh up after the logo mishap fired her, brought in some guy that they found out a retirement that round like the parent company of Outback, right? Very successful. PayPal did it. They found whatever his name is out on his Montana ranch to come back in and run PayPal. Right. And so what's my connection here? I think we're seeing almost as bi-modal trend where you have, we're going to make some bets on the 20 young 20 year old founders of etched and we're going to keep making those cursor bets. But when Jeff Bezos says, how much did Jeff Bezos raise for his company when I think six or 12 bet was the biggest financing in Q1. When Bezos, when Travis, when Elon raised their hand and say, listen, I'm going really big guys. This is not about making a couple of nickels. Okay. I am building something massive in the moment and change in our lifetime. And it needs billions of dollars. You're going to give it to these iconic seasoned veterans. And you're going to face east that it works out. You're going to face east that just just, I mean, giving Elon money for Twitter back in the day was face and east. There was no rhyme or reason for that deal. And the boring company to me is crazier than Adams. Boring company is crazy. There's one little routon Vegas and I've done it and it's cool. A dude drove me through a tunnel. That ain't worth 20 billion. But I think we're going to make as funds get bigger as we see so much of the benefits to venture come to massive outcomes. We're going to give Travis the money. And there's only so many travises. So they're going to hoover up the cash. I would, as we say in California, I would change the pronoun. I don't think we are going to give the money. I think someone's going to give him the money just to be precise. The objective facts of what there's something works or not is independent of who finances it and independent of who wants it. I mean, you made a comment on Twitter. Hard knows comment here. Absent the fact that Elon decided to bail his investors out for which huge credit and queued us. Twitter is not worth today. 44 billion dollars and not even close. So objectively, I mean, in terms of buying something, you bought an asset that went down in value. Now, if your business plan is owned, by the way, he's got other assets and he'll bail me out. Maybe, but that's not actually a plan. But Bernardo knows now on Twitter. Does that change your perspective on it being right? No, it does make a word 44 billion because the cash rolls don't get you there. Right. It's two or three billion in revenue down. Maybe it's growth now. Maybe you've crawled your way back to 30 or 40 now, but it's a push. Now, as it happened, you got a 3x because you rolled it into x.ai and rolled out x.ai. But my point is you are right, Jason, that these big name things are working, but they're working not because the facts are working. They're working because the market is continually willing to enable that process. And if the market changes, you don't have value. Yeah, yeah. I just think the market's going to hoover up all the travesties and watching him on on social media. The dude's got the energy to do this. Right. No, no question. No, so if they're birter broken, you can't make the investment, right? But I think everyone and it's only so many folks. But if Bezos is done partying it, carbon, and wants to do this, okay? And travest is done doing his definitely mile jet to the office in Austin and really wants to spend 20 years doing this. The funds and quotes can raise the capital. These are the bets of the day and all of them are going to get are going to get a couple billion to do it in an era where the amount of wealth creation is unprecedented. And you're also going to hunt out the kids from MIT. I don't know what it's like to be at MIT, a freshman at MIT today, but it must be exhausting. Every damn VC wants to fund you. I'd be burnt out. If I were top 10% in math at MIT, I would just have a like a placard on my shirt. Leave me alone, VCs. Leave me alone. I'm with Neo. Jason, even worse, if you're the parent of one of those kids at MIT and you've broken your pick for 20 years to get your kid to stay focused to get to MIT. And now those evil VCs are saying you should quit and drop out before graduation. You want to plummet them. Plummel into that. But going back to the thing, just to comment, the other fun fact, I mean, you just got to note the fun fact, which is benchmarks, best fund, one of the options that are best fun, because actually the eBay fund was the best fund in 95, but they had an amazing looking fund that had both we work and Uber in it in about 2000 and 2012's 13 fund. And, you know, if you fast forward a couple of things happen, one is they famously swapped out Travis as CEO, and to the undying hatred of Emil Mikhail, who's now at the Department of Defense and obviously Travis. And a lot of controversy on that decision obviously it went on to be an amazing company. They didn't swap out the we work guy who went on to pretty much fail as the company, even though he personally took our 500 million dollars, the deal didn't work. So at one point, there was a fun, but two amazing mega fun return to deals, one of which turned into a mega fun return to deal, one of which didn't, right? And just one of the change did. Why would you be clear that they did get out of we work and have mega fun returning versus. Oh, amazing amazing. But I don't think the we work return was nearly as compelling as to you return, how he because we were didn't, I mean, you know, it didn't know how he know it didn't get public. It went bossed. It was it's spacked. It went bossed. It was not a returner. Right. My point is they had two home run winners, two huge burn companies, two potential fund returners, two widely charismatic CEOs. One of them stayed the course. It didn't work out. One of those replaced controversially. It did work out. It's an 80, 90 billion dollar company today. The fun fact is fast forward. You even saw them the tweets around the atoms round. And recent hoards have backed both CEOs. They backed Adam at we work because they're like we think you can do it again. And they've just backed obviously Travis. And if you look at the tweets at the time, there's a very last week was a very direct tweet. Basically, we should have done this deal in 2000 and whatever it was 10 or 11, which is tantamount to saying, yeah, and everyone can read the subtext. We deeply regret taking money from someone else who fired us even don't turn out to be an 80 billion dollar outcome. So there's a clear dynamic there kind of in the venture back story there. And what I really admire about everyone involved is the willing this to bear grudge was across a decade. It's quite impressive. So yeah, it's fun to see how that shape out. But yeah, and recent have back boat CEOs from that famous benchmark fund. By the way, it's very minor. Who knows? Claude says benchmark took out 315 from we work. Yeah, I was literally just about to say the most valuable lesson I've learned as a VCU is to admit when you're grossly wrong, which to me happens daily. But exactly. Uber made benchmark, roughly 640 x versus around 25 x with we work. They got 25 x off good for them. I was wrong. I told you I was admitting I was wrong, dude. They're very different. Yeah, secondary to soft bank 315 out of 17 in. I will still take that from my fund. I mean, 70. I would take out a tree from me, but yes, I would do it. But yes, so it's saved by soft bank versus viable independent company a decade later worth 80 billion dollars. But you are correct. It just shows with enough momentum in a bull market. If you take your winners off, you can do well on everything good for them. The reason I wouldn't buy Travis is he just doesn't have that chip on his shoulder, you know. Oh, that man. Just to be clear for everyone, that's obviously tongue in cheek. Wow, that man has a chip on. I love it. And I love the drive. I think I use in you get over it. You know, it's a dog's right. Oh, let it rise. Nope, nope, nope. Not only am I not going to let it rise, and I'm going to move my I'm going to tweet along the way that they were wrong. Absolutely. Anyway, tweeting saying someone is wrong and it's different than someone actually being wrong. Just to be clear. Yeah, let's move on. No, I know it's a very different end of the spectrum, but we said about kind of enabling the supply side of capital venture firms and providing people like Travis with huge amounts of money. Well, shit, in other areas of the market, it ain't exactly like he capital starved either $21 billion, which was above the target for Francisco Paulness. Wow, the demand ain't dying in that sort of the market either, is it? Listen, I obviously wildly successful run at track record stretching decades here, right? So can't argue with it. All right, just get confused is the messaging, which may not, you know, sometimes the way investors message and what they actually do are not 100% identical. Yeah, they're just directionally lined, but that that a big part of the 21 is that AI won't kill software and that therefore there's efficient ways to deploy this. That's the one where I get I get I get confused, right? I'm not sure there are these gems out there growing 14% that they can buy and hook up Kimmy, the moonshot API, and magically reaccelerate growth to 70% or what I just every week that goes by, I feel like the past is the past. It's time to leave the past in the past and let the markdowns be the markdowns raise another fund. Hopefully, hopefully you've got an Uber in there and maybe, you know, maybe we work that you cashed out and just time to move on guys. And I think you're correct, but remember the venture game is all about finding things that explode in growth. Price matters only at best at the second order growth math is first in the P business that can be the other way around and a company that's growing at 7% that you buy dirt cheap and get to 20% growth and good cash low margins, you know, applying the leverage, getting the lift from that, you can make your IOR. It's almost like, I always think of it as literally the opposite ends of the life cycle. We're in the grow new things, make them amazing business. And to some extent, a lot of these things are rationalize these companies, make them more little more efficient, a little growth here and just sell them on an earnings multiple. Now I can see it and you say, I agree. I think that's harder to do in a world that's moved on from that entire category. I mean, you can only raise prices so many years. How do they raise it then? Well, they have the track record, right? I mean, this is the job. This is private equity's job. They have the track record. I'm not saying there aren't gems out there. I'm just saying, I keep hoping that these companies that I know become gems and every interaction, every conversation, every week goes by, I feel less and less gemmy. I don't believe this thesis that the deeper I go, in my agenda career, the more I work with, I feel like anybody not working at least as hard as Mark Benioff is just not going to make it. And Pee, you put, you bring in the 69 year old Montana farmer to run PayPal. I believe it works, but a lot of traditional software targets. I just don't buy it, but I hope they buy some of my companies. Like I'm all for that. I got a couple that I would love for them to buy, but I'm just losing confidence that anyone without Benioff Travis energy and they just don't want to work at these companies, maybe bending spoons. But I think you're conflating your kind of personal issue. Look, the good thing about Pee is if they don't like the person who's run on a company, they're pretty comfortable getting someone else, right? So maybe the kind of abstract question is, do you think these kind of companies going at 15% can be bought cheaply enough? Can you buy a money or a wick at a price where you can make a return from a combination of leverage, operational efficiency and slight AI growth? That's really their question. It's not an inspiring question. I'm glad I don't have to get up every day and deal with that. But it is a legitimate question. I don't know what the market cap of all the publicly traded SaaS companies out there, but there's probably a trillion dollars plus or minus of, quote unquote, legacy software and can 10% of that be one more efficiently with leverage and give 20 million billion to work and get 40 billion back probably. If you look at a wicks, it's trading at less than one as revenues now. It basically means you're paying 10x for base 44s revenues and you're getting the core business for free. Again, I don't mean so funny, but you know, like from when we talked about this, you know, you made me name some individual stocks. Some rich had well, some of them badly, but actually I'll tell you what I actually traded. I bought World Cloud, the whole index when we had that sasa park list discussion and I'm up 35% and the point is what you never go and do is do a kind of socks and go with 3x. This is not that kind of upside in these things. The question is, PE is not looking for that. Can they pick out the gems? I mean, you're right. Should they take a run at a PayPal? I mean, Advent, you know, is going to do that with Stripe. Two times revenue, one times revenue, three times revenue, are there returns here is the question. I wouldn't assume no, which is different than saying I'd want to spend my life doing it. The problem is so many of these targets basically have no net new customers. It's expansion and price increases. If you're early on the expansion and price increase cycle, you can get three to four years out of it, but we're five years into no net new customers and price increases and mediocre module expansion. I don't think there's another five years of those knobs and dials left. I mean, again, we just churned off Marquetto. They raised our prices from 22,000 to $80,000 since 2020. We left. I bet they've lost a 20% of their customers over that period of time. So I know it's an extreme example, but I just mean, what are they going to do? Take some of like us and charge us $160,640,000. I mean, the blood is beyond out of the stone, right? The stone is crumbled because all the blood has been squeezed out of the rock and it's turned to ash. 22,000 to $80,000 since 2020. I mean, it's it's at the edge of criminal. We didn't even get a thank you email after being a 20 year customer. Thank you for being a 20, but thank you for being one of the first 10 customers and being a reference on our website, Jason. Sorry, you lost you. We hope to get you back at 160. I mean, we're, listen, they're going to make money, Francisco partners. I just, I've lost almost all confidence in the turnaround playbook working. It's too many years from blood from the stone. I think that's an interesting guy. You've been pretty consistent with that. And I've come to the conclusion you're correct on that, which is if you've done five years of price increases and that's all you've dropped for revenue growth, you're probably closer to the end in the beginning. So in a weird kind of way, actually, a lot of these guys go in and they run this test. Or if they've raised prices and no one's blinked, that means they can continue to raise prices and you're right, Jason, that could be a counter single. If I was sitting on the investment committee of one of these P E firms, I actually think you're right. I would want to test that says, can we add net new revenue, net new modules from these customers? Are we just screwing them? Because if we're just raising on prices, it's going to end at some point. So I actually agree with you there. I think it target selectivity will be really important here, which means that it won't be nearly as big or as easy a business as it was in the last decade and a half. And I think that's you're right about. There might be isolated pockets of winning, but it's a tougher gig than it was. I mean, in 2010, 15, it was a great business. In fact, I think even going back as far as 2002, 2000, I mean, the early vista funds were just after the dot com crash. And those guys hoovered up and made a fortune. But we're probably 20 years into the no one churns of SaaS bet. And at some point, as Jason has proved, even a lighthouse customer will turn out of SaaS. Where are you in service now? Just curious, because they obviously had their little bump this quarter. How do you think about owning something like service now? Our sales force. I think the problems they solve are so sufficiently complicated that you need them. No, you just can't run your business without service now. But if you talk to anyone that's run on service now, you just use it abstracts away so much complexity from your business. You just analytics is like the cat. Like we all talk about vibe coding away things. Analytics is the actually the easiest one to vibe code away. I agree. Got it. That makes sense. So what you're basically saying is there will be islands that stay and there's lots of little and it's what they've settled the ancillary in between products like analytics to do lists and task management will go away. But I want to toast Francisco partners though. I want a lot of you just want to sell a company, Jason. You're just so transparent. You know what? You know what the one is? Maybe we should move on. There is something I believe in in this whole model, right? I don't believe in buying the 17 or 15% grower because we're five years into the price increase in no net new customers. I do believe if I repeat that the model is the 40% grower. The one that is it is kind of working today. Okay? It's just not growing at the rate we would like in today's world. There is no perfect path to a great exit. But they have an agentic product. They have something going 35, 40, 45, 50% growth. There may be a moment in time where you can have a very attractive multiple on that property and you haven't gone into the terminal decline. That's where I would spend my emotional energy. What's still growing, approaching 40 or higher? scale where the founders are burned out. It's sort of made the transition, but it's not growing exactly at the rate of the of the hottest start up in its class. I might make that bet. Boys, you can choose. We have Stripe hits rule of 80. We have Monday.com lays off 20%. We have Mark Pinkis's quit if it's too hard. Life's too short to struggle. Can't believe that's actually advice. Why do you want to go boys? You can choose. The pinkest one I don't want to spend too much time on. I didn't quote that one and got some traction around it. Arguably he did say that. He's a consumer guy. He comes out of games too. In a sense, it's quoted out of context by me, but there is a point where a game, unless it's cyberpunk, which is back now, after five years in the oblivion. But in most cases, you should quit on a game. Probably at some point. It's just you got it wrong and you move on. It's like quitting on a movie. At some point, you got to move on. But I really, it is what it is. I don't want to be grumpy. I just feel like it makes me sad when a founder quits one of the ones we just talked about, a 40, a 50, a 60% grower. Okay. A founder with material ownership quits to do something hotter. And I'm cool with that in the age of AI because and everyone's like, well, there's so much opportunity, cost Jason. I can found etched in a week at 10 billion. I can get into YC and raise it 100, 100 posts. My round will be fully, fully subscribed before I even finished the batch. And I can argue with some of that. I just most of the founders I've worked with over my career that have done that, that have quit something pretty good to do the shiny penny. They're not all Ilya. They've all, it's all been a net negative all the times I've seen it. The ones that quit with something, right? That's my worry in the age of AI is it's there's no downside today. Just quit. Quit everything. Go go found an AI company. But man, if you've got 20 million, 50 million, 500 million in revenue, I might see if you could build that in house. Jason, we saw last night Lillianway left thinking machines, which makes only two of the original six co founders remain. Same thing, I guess, probably, right? Well, dude, it's thinking machines. It's not exactly a 40% boring sasgro. And she probably has 1% if she's like a late co founder, right? So what's thinking machines were worth on paper? 8 billion. Oh, she's only got 80 million. I'd leave that behind. It's nothing. I mean, it's pro. I mean, I mean, they were conflating a lot. I mean, are we? Rory's like I've had enough of you degenerates. I think the whole, the comment on quitting. I mean, I think there's really three different things that Jason, you write the least obvious one is the I've got a company. It's at scale. It's going 40%. I mean, I think you've created something of value. It's not obvious that chasing the next shiny thing will be better. But I don't think what the reference was to I think the reference mark because was more, how long do you keep trying to get product market fit before you say it's just not there, right? And that's a valid comment in the sense of I don't think what the answer is you should quit. But the nuanced answer would be I think you should not do anything out of duty. You should do it because you think you're convert, you know, you have a plan to converge on something. And when you don't have a plan or you don't say you shouldn't just tie yourself to the mast to just keep going just cause. I mean, you know, frankly, 35 years ago when I had my business way back in the dawn of human time and, you know, I was a very mediocre manager and I stuck at that thing two years longer than I should have. And I look back and I go, you know, wasted years just because I wasn't I had that kind of I owe it. I need to keep trying. I don't want to quit. And I think finding a way to step back and say, am I doing this because I still believe in the mission in which case no matter how hard it is, keep going. Are my doing this out of a sense of obligation and I don't have any way to win in which case put up your hands. What I disagreed at Mark is is the kind of ability to say to a father, this is the answer quote, you should quit. I don't think anyway ever knows. I think the good advice is to say go in with no priors, take some time away, ask yourself honestly, when you're rested, when you find a good night's sleep, does this feel like something you want to do? And if not, and if you don't have a plan, then yeah. You know, if I took that advice, we're really honestly all I would have is a maxed out 401K in life. The other reason I have any economic success is that out of obligation, in part, I kept going. If it was just about me, I would have quit. I just have both my startups. Certainly I would have quit venture investing. Fucking not worth it for a few nickels. I certainly would have quit Echo sign. My founder walked out the door after eight months. He was right. This category was never going to take off. Plenty of folks. Yeah. You're giving the same crappy advice Mark Pinkist did quit when it's hard. Yeah. I mean, we're all shared experiences. You've lived, maybe you felt along the way, you should have quit, but you ended up building a very nice company making a ton of money in a sale, in a category that's turned out to be significant. You know, I stuck at it two years longer, went bust and looked back and go, that thing would never have worked. So I think to some extent, it's the old Kirk and God thing, you know, life is lived and forward, but can only be understood and reverse. There are some things that you look back on deals, do you look back on and go, not only did it fail, but it was just never going to make it. There was just nothing there. And I think if you're in one of those figuring that out, I've never failed and everything I've done would have failed if I quit. I've never been ramp at least successful. I'm not a billionaire. I've never made my investors less than 5x. I've never had a single, but everything almost failed. And the people, people just quit. They just quit and they quit more like thinking machines. 80 million's not enough. Go back to my comment. It's your experience to go because I'll take the opposite statement. I've never quit and I failed at some things. I succeeded at some things, but I failed at something. So it turns out dog goodness until the end of time is good, but it actually doesn't actually guarantee a win. So did you not learn more and gain more from the experience of those actual two years that you took with you? I think Roy and I are going to agree the answers no. No. How is there a great line someone gave to me when I failed? It's this how it is. Experience is what you get when you don't get what you want. No, I don't know on my learning two years earlier, but I had fully processed it all and the last two years were just hell on earth. I think you do. I think that's one of the dumbest things out there that you learned so much from these failures. I think you think you learned a lot, whether it's investing or otherwise from the almost failures, right? The ones that turn around, you learn why? Because we're sitting on some companies. We're not sure, right? Where are they going to go? And when you have a few portfolio companies that do turn around, you do learn, you do learn a few things, right? But the ones that ran it into the ground, you learn something. And I think there are things to learn, but you don't need to live it for years on end to learn it, right? You can process through it. So no, unbalanced JSON, I'm emotionally more in New York camp than in the Mark just quit camp. The point I'm merely making is I actually think if the only reason you're hanging on is duty and you see no hope, you're actually going to fail anywhere. It's my theory, but we can disagree. Boys, is there any final topic that we have to discuss? I mean, yes, strike. I have one question for Strait Ferrari, maybe if you want to break, because this is the first time I tried to write it up because I never had a chance to compare it to Adrien, but it doesn't seem so wildly overpriced given these numbers. The numbers are great. Compared to Adrien, it doesn't, it seems about appropriately premiumized to Adrien, right? I always thought they were pure companies, but stripes much better. Yes, they have much higher profitability. Yeah. And what's happened, I think, is they've hit a sweet spot because they have, they charge more, they have more small emergence and higher pricing. And for a long time, they were less profitable despite that because they were Silicon Valley soft company. And Adrien were hard-knosed bunch of Dutch people. But about four or five years ago, when the team, the Carlos and Brothers in particular focused on efficiency, they made an efficient company. So now you have a company with good pricing because the 2.75 is attractive and they're efficient. And then the third key ingredient happened in the last two years. They basically signed up all the AI companies that are selling shit online. And they shouldn't be getting anything like the money they're probably getting from the open AI and tropics in terms of interchange fees. But who's got time to optimize that stuff? They're designed into the flow of companies that are just printing money. So they're printing 2.75% of that money. And what that means is the growth is accelerated. And when you have an efficient leverage cost structure, probably using a lot of AI to stay efficient. And then your revenue takes off, it all just flows to the bottom line. So I would have said five years ago, they look expensive well after Adrien. But now they have the wonderful combination of super strong growth, good pricing, wonderful margins. It's a sweet spot right now, driven in particular by this kind of lift from online AI spending. Car's one final one. Will the open-rooted deal happen? It seems to have gone super quiet on that front. And then everyone's released their own rooting product. We saw Curse a release at one of my companies merged or devs released their own. And it seems to be a very commoditized market very quickly. Will we see this transaction complete? Do we think? For a business model perspective, in other words, the kind of front-end API to aggregate a lot of complexity, OpenRouter does for LLMs, what Stripe does for money, and what Twilio does for telecoms. So it kind of makes sense from a company model perspective. I mean Jason said it last time, smart of OpenRouter to get out, 10 billion felt like a lot, but good luck to them. I mean, it couldn't happen, you know, the go team. Jason, what happened? I wish I had the data of time from intentional leak by VC to deal closing. Okay. But I believe it is more than one week on average, right? And so this certainly appears to be a leak to generate a pseudo-second offer potentially to justify premium price. Listen, every company is the same. I've been on the other side of Stripe deals. They do what you would expect. They offer an acceptable but mediocre price from a venture perspective, right? So maybe they offered the last round price. Maybe they offered two billion. They asked 10. I don't know what the exact story is. So someone leaks it. This is how you do things today, right? And I don't know what app. My guess is Stripe said you speak again. It's off. Exactly. They could be hunking down, doing a deal. It can take a couple, even if you want to work all weekend. Deals don't, in my very limited experience, deals don't close the day after the leak. You have to sequence the leak properly, or it won't, no it's part of a price - I agree. - It doesn't really create another deal that closes. It's much better than a banker pretending they got someone to add in into the deal. You create this leak energy, but you need a couple of weeks for that, you know, for that to work, right? - See, I think I threw you down Jason. - If it's real, it probably does. I listen, I only have a limited amount of leaking experience, maybe worry has more. You don't leak a fake deal, it doesn't accomplish anything, okay? People look at leaks because they're trying to put the company up for sale, right? But I don't think that leaking strategy works. The leaking strategy works for a good but not great offer because you only have so much leverage. I'm terrible at negotiation, I'm terrible at game theory, but if the Stripe wants to and you want eight, it's very awkward position to be in. It may be Frank Quattroen solves this for you, that's the magic, but if you don't have a solution, the leak is the best idea. Because here's the thing, what I learned in Adobe, just to maybe over talk about. It works in the sense that big company M&A in Corp. dev isn't brutally slow. I'm sure Rory will agree with this, right? But all of them have a deal mode. So when an email comes in and says, someone that was on the list is in play, it does not mean that an Adobe will buy them or Google buy them, but they spring to action and they make a decision within a couple of days. They literally go into deal mode and that can at least get you a paper counter offer. It can at least get you a paper counter offer and you can go back to Stripe and say, we think we have an offer from Adobe, or I mean it's not gonna be Adobe, who are of it five, but you need like a week or so for the leak to work. But it does work and the big companies, the thing is it sounds crazy, but the big ones, they at least want their shot. Just like in Dresden doesn't want to be embarrassed that they didn't see a deal like Sequoia. It turns out it's somewhat similar in Corp. dev and companies, they at least want a shot to buy someone that's on the, 'cause they already know who their list is, right? And so as soon as they get the email, especially from a banker, they just shoot around. Guys, we gotta get together tomorrow and decide if we wanna buy open route. - By the way, how I just explained that's a dig that you guys in the UK call out router and we over here call it router and we invented them so we were allowed to pick. - But Jason, you're exactly right. Yeah, you don't wanna be the cop dev guy who says we didn't get a look at that. When the board asks, how can we didn't, yeah. It's drumming up in, who the hell knows what's actually happening. - It's utterly amazing. If you don't have another offer, it could take three, four, five months to close an M&A deal, right? If you have an offer, it turns out any big company can move in a week, not to close, but to sign term sheet. Any big company, your shock tell fast they can move when they're in deal mode and they're back in constraint. All the crap blows away and they mark, mark, but any offer ever just decides, they just decide. - Final one for you, you can own Ravalued at 115 or Stripe at 165, which ones you wanna own. - Even though I love the Stripe vibe more, I really do, I mean, I love to kill it and they are killing it, they have killed it, they're gonna do amazing. I think the beauty of Ravalued is you have a whole continent full of overpriced craply one banks. Right, you can just roll over and you've got 500 million Europeans who are just getting shafted on financial fees. So I think Tam is like, look, the Tam for payment service in the US is enormous too, but it's just margin more competitive. So I think they look, they're both, I mean, we're pointing out, the both amazing companies, neither of them are at the core AI companies, the obviously Stripe's getting a lift, they are both really well executing Fintech companies. So I like them both in the sense that it, it turns out there's hundreds of billions more to life than AI and those are two examples of it. But at the margin on a tam basis of plus or minus 100 bill, there's just more compounding in those 500 million exploited Europeans. Jason. - I just think at the end of the day, the moat at Stripe may be a little lower. The network effect may not be as strong as it seems. Banking just has marginally more powerful moats and they're working on some network effects. So my Yahoo version would be take Ravalued because Stripe just has to continue to execute it at outstanding level because the network effects and moats are there and they've invested in everything from Atlas to their own router to create the network effects. But I'm not sure they're truly there. - Boy, it's been a pleasure. Roy, I appreciate that, Reving. I will remind you that you Americans speak English. - I don't know if you think about that when you like what language English, we took it from you in 1776, it came with the treaty. - You've won the war. I feel it is as basil faulty. You seem to be happy. - I love Deewa. - Yeah, Deewa, the war of independence. - Absolutely brilliant. I love that. But before we leave you today, what's one thing in business that's spreading as fast as AI? AI risk. Every vendor that turns on AI features, every new integration, each one, I'm sorry to say, is an opportunity for something to go wrong. Vanta is the number one agiantic trust platform used by over 16,000 fast moving companies like RAMP, cursor, Harvey and more to ensure they're always audit ready. And now Vanta's helping companies like yours watch for the risks that show up between all this. 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