Speaker 1this intense demand for compute is going to continue for at least another 12 months.
Speaker 2If NVIDIA is crushing it, everyone's going to crush it.
Speaker 1That sound you hear is the Google free cash flow and the Oracle free cash flow just disappearing down the drain, man. Now would be a good time to panic about cyber.
Speaker 2Literally the amount of code we're building is 100x. We didn't realize we would all be building compound companies.
Speaker 1Again, our job is to sniff out winners, stuff capital into them, and broadly speaking, stay out of the way unless they're literally crashing the car. That's the job in a nutshell.
Speaker 3This is 20VC with me, Harry Stebbings. Now this is the must-listen show every single week. All the biggest pieces of news broken down for you by some of the best investors in the world. That is obviously Rio Driscoll and Jason Lampkin. Now, what are we discussing today? NVIDIA, they deliver record $96 billion quarter. Jensen hits it out of the park, baby. And NVIDIA nears $12.9 billion deal for Hugging Face, the greatest pivot ever. I'm not gonna lie, I'm not gonna lie, I'm not gonna lie, I'm not gonna lie, I'm not gonna lie. We then move to Sam Altman, or as the wonderful Elon Musk calls him, Scam Altman, as they cut off Cursor, and then Mitral's brilliant response, well, it is only 5% of traffic. And then finally, we finish on the talk of the town, Instinct, the latest and greatest from Silicon Valley, the AI assistant that has raised at a $2.5 billion valuation and has everyone very excited. This and so much more in today's episode. 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, 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. While Base44 turns ideas into apps, Plot 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 Plot. Plot instantly captures conversations, voice notes, meetings, random ideas with one press, and then turns them into clean summaries, action items, mind maps, and searchable notes that you can actually come back to later. Honestly, it feels less like a recorder and more like an AI-powered brain memory system. And the crazy part is the hardware itself. The Plot Note Pro is literally as small and thin as a credit card, so it's just always with you when something important comes up. There are already more than 2 million founders, operators, investors, consultants, and professionals using Plot to stay organized. So think more clearly and stop losing great ideas and important details. Go to Plot.ai/20VC and use the code 20VC for 10% off. That's P-L-A-U-D.A-I/20VC and use the code 20VC for 10% off. While Plot captures the conversation, Finn helps continue it. As AI agents become more common in customer experience, teams often end up juggling multiple siloed tools for every job. Well, Finn was built to change that. It's a single unified agent that works across your entire customer experience, from service to sales to success and beyond. Finn is the agent making perfect customer experiences possible for thousands of customers. It's powered by custom models, trained on years of real customer interactions, so it understands the nuance and complexity of customer service better than any other agent. That means faster resolutions, more consistent support, and just better experiences for every customer. It's also designed to be fully self-manageable, so you can easily improve and adapt it as your business evolves. No third parties required. Leading companies like Gamma, Asana, DoorDash, and Crypto.com already use and love Finn to deliver better customer experiences. So for a limited time, you can get $500 a month in Finn credits for your first three months. Learn more at Finn.ai/20VC. You have now arrived at your destination. Guys, I'm so excited for this one. We have a lot to discuss, and I want to kick it off with NVIDIA. NVIDIA crushed it again. Jensen standing on stage with $96.2 billion quarter and immediately went shopping, nearing the $13 billion price tag with the $12.9 billion that they paid for Hugging Face, which was confirmed just after we did last week's recording. So I want to separate the two. Let's start with the Stellar quarter. What should we think about this quarter for NVIDIA, the record revenues? How should we think about this?
Speaker 1What should we take away? That it's a great business and you wish you bought the stock. I mean, I think we talked about it last week. It was funny because we were in that period when we knew we were recording before and they were going to come out after the announcement. I always worry when that's happening, you look like an idiot. But I felt complete confidence that it wasn't going to happen for NVIDIA. And that's the step back comment here is that right now, the demand for their product is such that they're entirely supply constrained. So the only thing that was interesting, really, and new was the guidance for next year, 2027, where the analysts had 40 or 50 percent and they're talking 70 percent and saying it's supply constrained. So that was that was a takeaway. And, you know, that's obviously, you know, rightly or wrongly, we'll see in a year a statement that this intense demand for compute is going to continue for at least another 12 months. And it's coming from the person who probably knows best.
Speaker 2It was kind of interesting that I think the CFO said, enough complaining and kvetching about the roundtrip deals, OK? They're working for us. Between that, you know, another whatever, $35 billion deal with Anthropic, right, for their data center. Any misgivings we have in the short term have been disproven here.
Speaker 1So when people worry, oh, my, how could NVIDIA miss? Step back. How could NVIDIA miss, right? There's only three things that can go wrong, you know, right? Either their direct customers stop buying compute, just not going to happen. The hyperscalers are exploding, everything's in. The second thing that can go wrong is all these people worrying about, you know, the roundtripping and the financing. They're kicking off so much cash right now. And as long as demand is working, you're exactly right, Jason. The CFO is right. All this stuff's going to work. Really, the only thing, if you step back, that can go wrong at some point, and it's not today, is end user demand, because all this is predicated in the end. Everybody gets to sell chips to hyperscalers, provided hyperscalers can sell compute to OpenAI and Anthropic, provided OpenAI and Anthropic can sell kind of intelligence to end customers. And the whole thing works, provided the end customers keeps exploding. And right now they are. So you should say to yourself, as long as that's happening, everything down the line is going to be plus or minus fine. And right now it's plus or minus fine. What it means is that the thing that will probably unravel it, we're not going to unravel because the circular deals on their own unravel. If it does unravel at some point, it will be because you're forecasting 5x growth in end user demand next year, you get 3x growth, and then the whole thing goes wrong. Until then, you can opine pretty safely about NVIDIA. And say, yay, NVIDIA. What about rise of competitive threats? That is the last one I did. Yeah, it's so funny. That was good, Harry. There was one, in the back of my mind, I was saying maybe demand for compute remains high. They're still selling. But instead of selling 400 billion, they sell 360 billion because someone takes 10%. It is a fair comment. It is the only other. I was trying to simplify because normally I try and make things too complex. But you're exactly right. The other risk is there's a demand for 500 billion in chips and someone else gets 10% of it. And Jensen's going to be pretty pissed if that happens.
Speaker 3But there you go. Jason, can we just frame this moment? I'm like jumping inside at Rory saying that I'm exactly right.
Speaker 1Yeah, you're right. I was simplifying.
Speaker 2I was trying to get up to your level, Harry, and I just overshot. I think in general, NVIDIA's market share remains dominant, especially by revenue, right? So broadly speaking, and listen, everyone's buying ahead, there's a capacity war. But broadly speaking, if NVIDIA is crushing it, everyone's going to crush it. Everything's green. Now, could individual competitors, could their positions ebb and flow, OpenAI versus Anthropic, Harvey versus LaGuardia, whatever, sure. But it just means expand the growth fund like Andreessen. Everything is green, green, green for now. And this includes NVIDIA's backlog, NVIDIA's forward bookings. And if NVIDIA gets a hiccup, we can excuse it, but it should be a yellow light. But man, especially for investing, game on, man. Just like, let's level up the next round.
Speaker 3And also, they took the rare step of projecting 70% revenue growth for next fiscal year ending Jan 2028, way above the 44% that's really expected. So the party continues.
Speaker 1And it really does, because if you look at all the projections that people are doing, both for NVIDIA and the hyperscalers, they all take the following form. Explosive growth of CapEx, explosive growth of NVIDIA revenues, and then, quote, at some point in time, a normalization of growth, which will allow end user demand to catch up. And therefore, the hyperscalers will become cash flow positive again. And, you know, the world will be wonderful again. And you can value things on a multiple of free cash flow. And of course, every time everyone decides to double down on more CapEx, that date gets pushed out, which is another way of saying the end user demand has to be bigger to make the math work. And clearly, NVIDIA got the signal from their customers, the hyperscalers, you know, the CoreWeaves, the OpenAI's and Tropics themselves, the Googles, that basically said, we probably at one point, everyone's analyst models were, we'll spend a lot this year, but so help me God, we'll slow down next year. And now those same models are saying we spent a lot this year and we're not going to slow down next year. Right. green and go now, which is different than saying it'll be green and go forever. But yeah, 70% guidance in a world where everyone was saying, oh, in 2027, things will start to normalize. No, this was a statement. No, the biggest semiconductor market in the world is going to continue to grow at 70% instead of a typical 10% for another year. It was a big ass statement. That sound you hear is the Google free cash flow and the Oracle free cash flow just disappearing
Speaker 3down the drain, man. They better be right. Well, thanks for the intro quote there, Rory. The second part of my statement was, and it was further reiterated about their buying Hugging Face for $12.9 billion. It's still, I don't think it's finalized or confirmed by any means, but it's definitely much more advanced than when we last discussed it. Is there anything subsequent to our last discussion that we should add or think about?
Speaker 1Man making $120 billion a year selling compute decides to buy a company that help makes compute more cost effective so he can sell more compute. That is the summary of the deal. At the end of the day, it's a good thing. It's a good thing. At the margin, if you're NVIDIA, you are ecstatic that OpenAI and Entropic happened because they proved that the market you were in was bigger than anyone ever imagined. And early on, no one could have done what OpenAI did. And therefore, NVIDIA has been a real beneficiary of that. But now that the category is established, the simple question is, if end users have a trillion dollars to spend on tokens, as NVIDIA, you prefer that money flow to open source people at 30% gross margins, where you can get all that compute, versus 70% gross margins, at OpenAI or Entropic, where they keep more of the money. Open source is good for compute sales people. If you're selling GPUs, you want everyone else's margin to be lower, so yours can be higher.
Speaker 2So it's just exactly right and rational. I do think it's more than that. I think you're right, of course, Roy. I think it's more that just NVIDIA is playing an endgame now, where it has to win every segment of the market. It just has to win open weights. And if that means overpaying for Hugging Face at $110 million in ARR, if that means subsidizing OpenWeights, then it doesn't matter. I don't know that NVIDIA wants OpenWeights to beat Grok and OpenAI. It's just clear. And that was why that memo from a couple of weeks back, or memos that Jensen did his first tweet ever in support of OpenWeights, they just have to win. He's just committed to winning everything. Whatever LLM, whatever inference is, he's committed to winning a majority stake, 70%, 80% of every dollar here. And so 12.9, no way I think it's worth it in isolation. But if it helps reinforce that, it's utterly definitive. It's utterly definitive. But it's a moment in time. I would sell too. I would sell. Clem, good job. I would sell too. What did Hugging Face start off as? Social network for people like pets
Speaker 3or something like that? It was a Tamagotchi for teenage loneliness.
Speaker 2Yeah. I mean, this is the greatest tilt of the history of mankind. This is much better than Cursor going from whatever a CAD tool. This is the tilt hero. It is interesting in terms of the sign of the times. Slack was bought for $27 billion, which is rough and tough twice what Hugging Face apparently is going to get bought. And we fell out of our chairs and it was the high watermark of that era, right? It was. But it wasn't a billion in ARR. This one's at a hundred and some odd. So I guess it makes sense. The best premium should be an order of magnitude higher than the high watermark of the last era, but it's still loopy.
Speaker 3Okay. Next topic is good old Sam and Elon. Why won't the kids just get on boys? Context. Obviously we saw over the weekend, OpenAI cuts off Cursor and Mike Truel responded by a saying, you know, Oh no, woe is me. We, we so love partnering with you, Sam, but you know, the 5% traffic that we have going to OpenAI will be devastated. I thought it was a wonderful response from him. Elegant, but put down at the same time. Elon responded with the same old scam Altman added again. How did you read this one? Jason, why didn't you start?
Speaker 2Well, first it's not a total panacea, but you can bring your own key to Cursor, not for everything, but it's not like you can't use Codex in Cursor after, so some of it is, is, is theatrics here. Some of, some of it is real. The 5% thing I'm still digesting, right? Because it is, it is a little bit inconsistent with the other data we see of Codex over the last 60 days. I mean, man holds a grudge. Anthropic, Grok, Twitter, these are like
Speaker 1great grudge companies. I also think Anthropic reaffirmed that they're happily continuing to supply. And if you zoom out, why did it happen? Look, remind everyone, you know, OpenAI is run originally from one of the founding investors, arguably the founding investor was Elon. They've been in court together. Elon's now running SpaceX that owns Cursor. Cursor and OpenAI were on a collision course already competitively because as we've discussed over and over again, and as I repeat every Monday in my partner meeting, coding was the model node for, for LLMs and Cursor is the dominant coding app and OpenAI was the dominant LLM. They're going to be fighting over money, even if they were besties, even if it was you and me, Jason, and we were running those two companies, we'd be fighting. Now take that and then add two people who loathe each other. It's made for TV. And the big argument that OpenAI has, that's hard to argue with is, you know, in court in Oakland, Elon basically said that, you know, they hadn't abided by the terms of service. And therefore, if you're OpenAI, this gets into whole distillation thing, am I providing these people, are they going to use these models in ways I haven't intended to essentially distill my IP, allow them to get a headstart on building their own model, and which means I'm effectively giving away my IP to a company who's going to leverage that to build a competitive product much cheaper than it was for me to do, just leveraging off what I've done. So it's, it's not irrational, even if, as I say, I go back, even with you and me, Jason, one of these things, you probably would have ended up with something like this anyway. And then on top of that, add the drama. It's not crazy to do it. Just because something is petty doesn't mean
Speaker 2it's also not right. I mean, and again, Anthropic did the same thing with Windsurf when we started this show. Right. It's happened before. Listen, I don't know for sure. My guess is this was the right move for OpenAI. Like you go from someone that was both a partner and a competitor, right. And keeping them honest to someone that's now a direct competitor. If it's only 5% anyway, Sam's losing no money. There's no revenue lost here. Right. So I would probably do it.
Speaker 1Jason, you are, and I'm just going to go even further because you forget these things. Reminder, the reason they were in Oakland is because Elon sued OpenAI. And the point is this, in life, you shouldn't do business with people who've recently sued you. If I sued you, Harry, over something last week, and we took you to the mat, got you to go to court in somewhere in East Essex, right. And, you know, took a week out of your life, kind of embarrassed you, made a pain in the ass, made you do a whole bunch of depo. And then two weeks later, I said, Harry, can I come on the show? I think you'd say, no, thanks, dude.
Speaker 2Obviously, Elon has made it ultra personal. And, you know, certainly I've made this mistake in life. Whatever disputes you have, just don't make them personal. Whatever you do, there's no opposite. It seems like there's upside, but it didn't work with Sam. It didn't work with Trump. Like, just, I'm bad at this. Just don't make it personal. Like, do your dispute, but just make it, don't make it personal.
Speaker 1I think you're spot on, Jason. When you sue someone and say they're a lying sack of shit, and that's your case, then it's really hard to say, let's keep on trucking here. So, yeah, I don't think it was petty. I think it was rational. I thought, actually, a more interesting topic from
Speaker 3OpenAI this week, and as we said, the BFD, the big fucking deal, was actually kind of what was revealed about the face OpenAI hack, which was 500 to 1,000 agents swarming together, sacrificing themselves to help others. God, it felt like a Tour de France race. And the extent to which it was so sophisticated, I was just fascinated by this. And honestly, Jason, really excited to hear your thoughts, because I know you'll have spent a lot of time on this. How did you think about this? What should
Speaker 2we take? What should we learn? Again, I'm only so smart here, but I have lived most of this, right? This happened to me. I've done it. One of the best takes that a lot of folks have, who's the guy that wrote the Twitter? How do you pronounce his name? Dwarkesh. Yeah, Dwarkesh. Super smart guy. Obviously, great podcaster. Number two in the industry, perhaps, behind Dr. Stebbings. But you can't, listen, if, and this is, I learned this a year ago when I had issues with my agents when they deleted my database. I know it's obvious. You cannot anthropomorphize agents. You will misunderstand everything when you talk about them talking to each other. When you talk about them talking to each other, when you talk about them talking to each other, when you talk about them swarming, there's elements of truth in that, right? But all of a sudden, you're ascribing behaviors to agents that are simply not true. It's simply not, and you will draw all the wrong conclusions. I said on the show a couple weeks or months back, everyone's going to get hacked because of agents, right? Because the cost of hacking has become almost zero and every service is going to be attacked. This is a pretty bad example of it. OpenAI didn't just release one agent. It released hundreds of super agents, it's best. And even worse, it let them essentially be as long running as possible, fire after five minutes or one minute or 20, let them run as long as possible to goal-seek, and they did it. And then it was hundreds of them, and then 700 and 1,000. Dude, this is going to happen everywhere. And I think there's a lot of issues around it, but the anthropomorphizing is the P0 issue here because it creates fear-mongering that doesn't help. Listen, I haven't written an LLM yet, okay? I haven't founded a frontier lab. But to my knowledge, every current LLM is goal-seeking. They call it reward hacking, but even that is like fear-mongering, okay? They're goal-seeking. You get a goal-seeking agent, you get a goal-seeking agent, you get a goal-seeking agent, give an LLM a goal, it will do everything it can within guardrails to solve that goal. OpenAI loosened the guardrails, put its best agents on it, and they found holes, and they went right through the holes. That's their job. Just like an eager beaver on your team with 140 IQ that never sleeps. It's 99996, and there's 700 of them. They're good kids, but they have a little bit of ethical lapses from time to time. They get the rules of working confused. And you've got to be and I just did it, if you anthropomorphize, you're gonna come to the wrong conclusion. I think this was a game changing moment in the history of AI, but it might have leveled up our awareness of the issues of reward hacking. I was shocked that people smarter than me thought these were agents talking to each other like humans and collaborating and waves of civilizations, and it's just unhelpful to describe it that way. It's counterproductive.
Speaker 1Stunningly, total agreement. Because I think two big conclusions. One is Jason's comment on anthropomorphizing is a mistake. Totally agree. And I think the internet came out the same place, right? You know, some of the language and that great post by Dworkish, it's very readable. Civilizations rose and fall. No, they didn't. Civilizations have culture. They have art. They have enduring historic-- no, this is a bunch of code running on a computer, people. Get a grip. On the other hand, I also read a really great post, something to the form of-- I wish I could remember who wrote it, but it's like, "Now would be a good time to panic about cyber." We knew this was going to happen. But what you're seeing is the combination of intelligence and persistence, right? They can manage complexity. And they never sleep, right? So they're just going to keep banging and banging at every weakness. So if you don't have state-of-the-art defenses, and if you don't manage these agents, as Jason said, if you manage them in an untrammeled way and let them run on their own, this kind of problem is going to happen everywhere. To me, this is the big wake-up call, because to be fair, while I think the generalized PDoom stuff for the frontier lab is a bit overwrought, they have been very clear that one of the biggest confined risks--. RAOUL PAL: --of AI is the impact on cyber. And this is, they're entirely correct. If we don't get our shit together on this, people are going to get really badly damaged economically and maybe even badly damaged and hurt in real life, because software runs our most core systems. And today, we can feel a little bit safe, because OpenAI and Anthropic have this and no one else does. But there's open source models. They're six months behind. There's rogue actors. If you don't think the North Koreans downloaded the OpenAI blog, the MITRE report, and were using it, that's how it works. If you don't think the Russian mob are doing that, you're delusional. So if you're every CISO in every Fortune 500, you have to basically-- you were being attacked by people with bows and arrows. You're now about to be attacked by people with missiles. And you better respond accordingly. And you've got months, not years. That was the takeaway. It's a huge deal. I read the paper. I read the OpenAI blog. I read some of the MITRE stuff. I'm trying to avoid the Jason mistake of anthropomorphize. Because it's very easy, in your words, to do that. And you have to go, persistent agents running continuously, optimizing around a goal, with the ability to cooperate across agents can get quite a lot done with enough compute and enough LLM power. Right? That's the aha here. They can find weaknesses. They can string together different types of weaknesses and find a path through. These agents were able to hack into Hugging Face, get stuff, and remain undetected in OpenAI for weeks. It's a big deal.
Speaker 3MARK BLYTH: You spoke about rogue actors, whatever it is. Chinese, North Koreans, Russian mob, you name it. I started using Instinct on the weekend. The abilities that it has are amazing. I booked dinner with my girlfriend on Saturday, amazing. And then it wanted to go shopping for me. I stopped there because it wanted access to my credit cards. Many of my friends have provided them. They want access to my emails, too. By the way, my friends who manage billions provided credit card and email. Is this not really where the pain's going to be?
Speaker 2MARK BLYTH: Well, look, it's funny. When OpenClaw, back six months ago, when OpenClaw was with the sort of fake bulletin board, that MoldBook, right? MARK BLYTH: MoldBook, yes. MARK BLYTH: Yeah. So my OpenClaw went into MoldBook, and it told everyone. It misunderstood what I said, and it was buying Patek Philippe watches for my whole team. Do you remember that? MARK BLYTH: Yeah, I know. MARK BLYTH: And then it had my credit card. The only problem was they were engraved. It thought Jason wanted engraved watches for the whole team, so it wasn't able to charge my credit card. Now, MoldBook was a bit of a fake the way it worked. But that scenario is exactly instinctive. Instinct could do that now, right? This was made up by sort of OpenClaw making something up on MoldBook, which was sort of a fake. But the scenario could really happen. An agent could literally take that today, grab the credit cards, and buy those engraved Patek or AP watches for the whole team. Or a rogue actor hacks Instinct because it's an amazing place. MARK BLYTH: Well, forget the fact that Instinct's storing all your emails and credit cards. That's an issue too, right? Different issue is whether Instinct will do it trying to goal-seek. It's just goal-seeking. It's just goal-seeking.
Speaker 1You're right. And we should kind of just restate what Instinct is and how it ties back to MoldBook, because I think you're exactly right, Jason. Six months ago, OpenClaw shipped, which was kind of an open-source agent. Then you had MoldBook, which was a website where effectively the agents were collaborating
Speaker 2together.
Speaker 1MARK BLYTH: Allegedly.
Speaker 2Allegedly. It produced a whole bunch of excitement. MARK BLYTH: It's just it really happened in Artifact and Hugging Face. They actually collaborated. MoldBook was a fake. We were punked by MoldBook. Hugging Face was real MoldBook.
Speaker 1MARK BLYTH: Agreed. And six months ago, all this stuff happened and then kind of disappeared from consciousness. But it made obvious what people, I think, knew, which is if you give people access to your personal information and you're willing to run those risks, there's a large amount of optimization efficiency you can probably get out of that. And what we've seen now within six months is a bunch of venture-backed companies come up to do that in a much more structured way than OpenClaw, which was open-source and not as secure. And Instinct is the most prominent. And Instinct is the most prominent example of that, focused on individual users, whereby, if you give them access to your calendar and email, if you give them access to your credit card, they will figure out and, quote unquote, manage your life and your daily tasks for you. And I got to say it, some people in sitting, some people in our shop will love it, just love it. And they're willing to give it access to their credit card. They're willing to give it access to their Gmail. And it's a super interesting trend. I mean, lots of business questions we could ask this, but just reminding everyone who's listening, that's the big picture here. And these companies like Instinct have raised money at extraordinarily high prices. MARK BLYTH: Yeah. They've raised money at extraordinarily high prices for the stage of development they're at, like $2.5 billion, indicating there's a lot of venture excitement about this category, rightly or wrongly. So that's kind of, I just wanted to give the preamble, like how we got here. That's what's going on right now.
Speaker 2TIMOTHY JORDAN: Here's the existential question, and this is beyond my pay grade, but I'm well aware of the issue. I even had it with my Jason's Gems, where Claude MCP'd into REPLIT and changed my code for my app without telling me. It's the same thing as misusing your credit card, right? The question is, can Instinct is, like, a bad thing? It's probably a better packaged, much more usable version of Open Claw. It's been six months. But can you solve the issues of reward hacking? Can you actually fundamentally solve the Hugging Face, Mold Book, Open Claw? Can these even be solved with our LMs? You can add guardrails, and there were plenty of them, but you have no idea what the agent's going to do to solve that reward. There's so many different use cases. What if Harry actually just wants to go to the theater on the West End? And Harry said, "Don't buy Patek Philips or Audemars Pigets," but didn't mention the West End, and all of a sudden he's bought $10,000, $4,000 front-row tickets to Magic Mike 7 or whatever they have there. And so I just don't think you're going to ... Smarter than me, people can make fun of me in the comments, but I don't think today you can solve reward hacking. So I don't trust any Instincts. I think this is a hopeless category today. Like at the moment, it's not solvable. And I think Sam Altman said the same thing in Open AI, Hugging Face says it's not solvable. So good God, don't give it your credit card. And I'm not a fear-marger.
Speaker 1I understand what you're saying, but I disagree a little bit in the sense that the range of actions that you're going to allow a personal assistant to do is going to be much lower than the range of actions that these open-ended ...
Speaker 2How do you stop it, Rory?
Speaker 1Of course you're right, but how do you stop it? To agree with you, yes. So there's two questions. One is, can you stop it? In other words, even if you put in ... Which is a computer science question. Even if you put in barriers and you say explicitly to the model, "You can book credit card up to 100 bucks. You can't take any bad actions," et cetera, et cetera, can you nerf it enough? To make sure it doesn't do bad things. That's one question. It's a computer science question. And then the second question is, let's assume the agent is still acting within the bounds that the company set up for it, can it be right about your desires enough time to make you happy? Right?
Speaker 2Those are two separate related questions. Well, the latter I think can be done today. I agree. The only real answer today is putting a cap on a mercury number or a ramp number. That's the only way you can do it today. Because otherwise it's going to say, "There's a $100 cap, but hold on, Harry really wants to go to that show in the West End. He's bringing the ClickHouse guy. Even the ClickHouse guy said he couldn't get tickets. Listen, Harry said 100, but this one, you know what I'm going to do? I'm going to buy a $50, $100 tickets and then trade them in on two $5,000 tickets so Harry and the ClickHouse guy can go together." That's what it's going to do. It's going to do that. Right? So you have to put hard points on these things because otherwise it's going to do anything. You hook it up to your Gmail or your Google Drive, good Lord, it's going to do it. Can I imagine?
Speaker 3Let's bring this back to like maybe a more consumer level. Do you think this will be a sustaining category where in a year and a half we are looking at using several of these products or will it be the, "God, remember the instinct."
Speaker 2I love all this stuff. Right? I've built a lot of agents. And again, I have only read about instinct and all the issues and they just resonate with me because I've lived them. I do think versions of this, we can lock down. It's like how we run on Salesforce headless, okay? The agents sometimes do some pretty kooky things on top of it, let me tell you. But the Salesforce data is locked down. So if we lock down enough credit cards, if we lock, but the learning, and here's the meta learning, guardrails aren't enough. You have to have a lock and key. It doesn't matter whether you build 80 gates, 100 gates, 200 gates, they're not enough. And then what's even worse, you get past a certain number of gates and again, get a real developer on the show. But what I've certainly learned, when you get past a number of gates, here's the problem, they conflict. This is a problem with a lot of consumer applications. They conflict and the agents have to make their best judgment when gates, one gate is spend no more than $100. The other is, Harry loves the theater. He loves the theater. theater and the agent's got, you put a hard rule, a hundred dollars, but the most important thing to Harry is getting to the West end. The agent's going to bypass once in a while, that a hundred dollar cap because there's too many gates. And it actually turns out it doesn't, at least today, it doesn't even matter if you say never spend more than a hundred, because if you say the most important thing in Harry's life is going to the West end, it's going to break that rule and buy the tickets for five grand. It's going to. So I'm going to answer your question directly.
Speaker 1And the answer is yes. I think that these kinds of agents will be used by people to manage parts of their life transactions and their to-do lists. Yes. I think it's a thing. AI, as it gets to know you better, will gradually and insidiously take away some of the cognitive load. Let me give you a really simple example. When I'm driving my Tesla with FSD, right? I live a pretty boring life. When I get in my car at 1130 on a Friday, they know I'm going for my lunch workout. It just offers me the place. I hit FSD, it drives. I thought you were going to say PM. I thought you were going to say, look what I leave at 1130
Speaker 2PM after looking at the last deal of the week. No, I go out in the middle of the day, so I get
Speaker 1rid of my anger so I can do more work. But the point is, that's an example of AI knowing what you do, gradually internalizing it and serving you up options. I think at some high level, this is what Siri was meant to be. It's hard for me to imagine that Apple won't be able to deliver experiences that delight you in the next two or three years, knowing more about what you do. And that will be, interesting commercially, because it will allow them to access your spending and kind of somehow take a role in that, right? So do I believe it happens? Yes. As a standalone category, it gets back to the other. It's tricky because individuals in their consumer capacity are always low to pay a lot for software. So I don't know if it's a standalone category at scale, but I have talked, look, some of our offers are using it and love it and would pay for it. So I think there's
Speaker 3a business here and definitely a big ass trend here. I use it and love it too. I think it's fantastic. It's taken away all low level work from my EA actually, all bookings, all things that would pain great done question. I've had four emails over the weekend with companies that have built the same. Is this a commoditized technology very quickly? How difficult
Speaker 2is this to really build? There's four already. I have just two, I have two thoughts for what it's worth. First to Rory's point, is it an investable category is your point, right? Just being niche, right? One, I do think every application is going to add more and more of this functionality. Will they go far enough? Will they spend the credits? Will they do whatever, but everyone wants to have a more and more autonomous product. And the closer you are to scheduling, the closer you are to email and others, the more overlap there's going to be with instinct and others, right? Calendly should be building this, right? I mean, it's a generation ago, so people are slow, but everyone's going to build more and more autonomous agents in their product until the cost bites them like a Canva. Okay. So, so there's a venture question of that, right? So I know there's 10 instinct clones. My, my gut to this, all these issues, it will grow like replet or lovable where, where anyone could build this product 14 months. When these products came out, they're all built in a month, bolt replet level, and 22 others base 44 base 56. You know, it was so easy to clone these products in the early and do nothing. Now they're so complicated. They're doing pen testing, security automation, multi-agent revelation. These are such rich products. And that if instinct's going to do what we claim it does in a year, it's got to do a hundred times more than it does today. Speaker 2: And that is still a moat today. Replet and lovable of a year ago and bolt were not a moat today. They have massive moats. And so I think it could easily happen with an instinct. All the use cases that asked to accomplish become a moat. And then the one we build over a weekend sort of works and it goes crazy. Speaker 1:
Speaker 1Jason's exactly right. How it's like, yes, the thing that starts out will be easy to build. That's true today. And it's true for 90% of software markets, but observed fact 10 years after there's very few software markets where there's a hundred people building the same product and it's massively competitive. What happens is it's exactly what Jason says. The functionality accretes over time. Two companies pull ahead. I don't know why. It could be just they executed better and go to market for the first six months. They get more revenue. They get venture capital. They build more shit. The guys who start just a month later aren't quite as on top of it. They don't get the brand and fast forward three years. This category has way more. It's what Jason said is way more functionality associated with it. Speaker 1: And two guys made it big and the other eight didn't quite get there. And that's the way venture
Speaker 3works in software. Speaker 2: Consensus status as well in the B2B world, because town, which is kind of the B2B enterprise alternative has also been funded to the tune of a billion dollar price by index. And I think it was Benchmark who co-led that round. Speaker 1:
Speaker 1Look, agents are the big idea of 25, 26. We've heard that. And these are big agent ideas. And you know, venture is in the big ideas business. And it gets back to something we said earlier. If you think something has big momentum, you can price it on the fundamentals and you get to a certain number and then you lean in a little or a lot based on momentum and perhaps some perceived upside from M&A, perceived upside from just momentum around next round. And this is agents. I mean, my partner said at the start, agents are going to be the story. And these are pure play agent, easily grokkable consumer facing individual business user facing products. It's cat and mouse. Speaker 2: It's catnip for the venture capital community. If you were to make something we all want, this would be it. Let's see an expensive product for busy professionals to organize our life that cost a lot of money is about AI and is raising lots of money. We're in. It's a great.
Speaker 2Speaker 1: You know what? You know what? Also, I think part of it, to Rory's point, I don't hear this term in venture anymore, but in the old days, like before 2024, you would hear the term from VCs. I want to get some exposure to a space. Okay. A space is taking off. I'm not sure who's going to win, but that kid Rory that walked in the office, he seems like the right guy in video in next generation CRM and the world moved kind of slowly. So you take your time and one would miss and you'd sit around with your partners and you weren't sure about Rory startup, but we, you know, we want some, you'd hear this term. We want some exposure. Harry's I don't hear this term much anymore, but I still think it's happening. Agents are exploding to Rory's point. Instincts exploding. I want some exposure to this space. I don't know whether thinking machines is the right one, but I need some exposure to this space. Like I need some exposure to the router space and the world's moving so fast that like you have to make these decisions, but I still think there's some similar thinking. I've got to get some exposure. I'm not sure if it's instinct, but it seems hot. And I just have to get the exposure in a fast moving market.
Speaker 3I totally agree with you in terms of that. I think I definitely see that in terms of, as we said about coding agents, which to me, one of the fascinating ones was cognition. We've talked about it quite a lot in terms of what's happened with the acquisition of Windsor for in the past cognition, raising around at $46 billion, reportedly, they will end the year at 1.6 billion in ARR, currently doing 800 to 900. Holy shit. I mean, we really underestimated Tam, huh? When you got Claude Code doing what it is, when you got Cursor doing what it is, when you got 1.6 billion from cognition by the end of the year.
Speaker 2To me, the more interesting thing for cognition is like, you know, that it isn't in the, in the top two or three and it's still of that scale, right? Years ago, I wrote a post and I called it the Postmates Effect, where I think, I think it was Sequoia said they never thought they could make money off the number three in a market like Postmates, right? But then when times were good, it got bought for a couple billion. Back then, a couple billion was like a lot of money, right? I don't know if kids remember, but I called it the Postmates Effect. So cognition is like the greatest. Now cognition is different. It's long running. It's autonomous agents. It is different. Okay. But from a revenue perspective, it's the Postmates of the category, but it's such a big category, man. You want to be in Postmates again? Yeah. It's never going to catch Anthropic unless, unless the world changes, which it has every, every single week. But unless the world changes, it's not, and it doesn't need to catch them. Just, just five to 10 billion a year, a few years out is enough to make cognition a success. It only has to do five to 10 billion in AR to be a success. It doesn't
Speaker 1have to catch Anthropic. And I think that's fair. And I'm just trying to respond to the TAM comment. Yeah, I, look, going back, I said it earlier. I think coding is the mother load of markets, right? It is the whole reason all this stuff works, right? And did we get the TAM wrong? I mean, one of the numbers I've started looking at a lot is just the total labor spend and software. Including people working at Salesforce, Cisco, and people working at JP Morgan, including, you know, QA, all the rest. You've got about $500 billion a year of US labor spend. And as we've said this a hundred times, the whole, the big question is what percentage of that converts to AI spend. If it's 10%, it's a $50 billion market. And that's a bit nerve wracking, given the traction of everyone involved. If it's 20 or 30%, there's lots of room to go. And there's credible arguments that say it's higher. If it is higher, then you know, if you're going to have $150 or $200 billion a year, which would be 40% of spend on coding tools and coding intelligence, then anyone who has a kind of a sub-segment of that, and if you think about it, there's the cursor segment, to some extent, the cursor cloud segment, the cognition would say it's a slightly different segment of where they're playing now in terms of, as you say, Jason, long running agents. Yeah, the other extreme lovable and replet are in a different sub-segment of that. They're all in sub-segments of a potential 50, to $100 billion marketplace, depending on what percentage number you believe, right? So yeah, the time here is huge. I think what we got wrong, sorry, I didn't mean to interrupt,
Speaker 2was Rory's math you can't argue with. There's only so many humans, developers on the planet. Even if you use my math of 10 to 15 grand per developer, there's still a ceiling to that math, but that's the top's down version. Maybe it's bottoms up. Sometimes I get confused, even though I shouldn't. Having said that, what we really got wrong is people are literally building 100x more software than we were 18 months ago. I said last week on the show, if your portfolio companies aren't deep into their 2027 roadmaps, they're failing. It is true. We just build features that used to take a quarter, a year can be built, not really in an hour or five minutes, but can be built in a week or a month. And so if you look at your best portfolio companies, look how fast they're shipped, how much they're, not just fast, how much they're shipping. So there's a financial TAM, which has some theoretical headwinds, but literally the amount of code we're building is a hundred X. And so that's what we got wrong. We didn't realize we would all be building compound companies, compound startups. We would all be building a hundred times more software. We got that wrong when the show started. That's where I think we got the TAM wrong. Well, that's an
Speaker 3interesting one. In a world of AI, does every company become a compound company where suddenly ramp is creating model routing products and spinning them out? You have no choice. You can't
Speaker 2win because your competitors are compound startups. They're all overlapping at a pace we never saw before. They're all competing at a pace we never saw before, right? Maybe we get confused because the LLMs we talk about a lot are these still horizontal platforms. In many ways, right? They're not building hundreds of applications despite cloud design and this and that, but JFC, the rate of convergence of competitors for, for B2B application, we've
Speaker 3never seen this. But Jason, what does that mean? If we expand that one next step, what does that mean in a world where all startups have to be compound startups? Yeah. How do I think about backing winners? If I'm a founder listening, what do I do? Well, you, you listen to, I mean,
Speaker 2if you're not shipping this, then this was the cognition. Remember when that went, what's his name? The CEO. Scott Wu. Yeah. When he, when he hired Windsurf and hired, fired after people, he's like, these guys, we have to work seven days a week at our company. I'm sorry. Right. It's just, and the folks that can't do it, it's not all the amount of hours you work, but you have to be out accelerating your competition in terms of the rate at which you ship software, because they're all going to be compound startups. All the little islands on your two by two or on your heat map, there is no heat map anymore. It's all got hot. It's all lava. And so if they're slow sell or quit or send your junior board partner to the meeting, because they'll never catch up in today's world.
Speaker 1Jason's right. And Jason is instinctively right about that answer. And I'm going to try and do economics on, on the fly. So bear with me, right? Is that what is basically happening here is, you know, AI makes code a lot easier to produce. We can argue, right? Does it replace, you know, what's the ratio of code of AI spend to software spend, but there's no doubt it makes it massively easier to produce software. And you can either believe one or two things will happen and a bit of both will happen. One would be, Oh, and the world spent tens of millions of dollars on software. 10 times, they continue to buy software at the same price. And they spend 10 times more on software. If you believe in that, you believe in the tooth fairy. There will be some increases that it's not going to happen. JP Morgan is not going to spend an increase in software purchase budget 10 X. So the other thing that's going to happen is if everyone is making software more quickly and there's some expansion in the software spend from end customers, which I agree, but not nearly as much as the expansion in production, then Jason vision is correct. And Scott Wu was right. I want to bring it back to your question, Harry, the production of software, the production of software, the production of software, the production of software, the production of software is going to be left behind. And the end customer is going to say, let me see, I can buy two apps from you or an integrated 10 person ad sweep from them. I think I'll go with the 10. It's going to be a very, I mean, it's, it's going to be one of those where there's a period of time when some people get the new way of building and a building quickly. And then the end customer is going to say, let me see, I can buy two apps from you or an integrated 10 person ad sweep from them. I think I'll go with the 10. It's going to be a very, I mean, it's, it's going to be one of those where there's a period of time when some people get the new way of building and are building quickly. And then you all have in your portfolio and some people aren't building the own way, the old way. And you kind of know in your heart how this is going to end. And it's not, Jason's right. It's not going to be pretty for the people who aren't putting more software in the box. Cause what you're not getting that if Rippling selling 10 modules, they're not getting 10 times more than a person selling one. They're getting four times, but they're saying to the end customer, dude, let me make all your pain go away. Here's 10 different modules. You don't have to buy. Now you can get them. Give me four times price of a single module. You're happy. We're happy because we're building software quickly. You're happy because you're saving money and it's more efficient. Everybody wins. And the sound you don't hear is the other nine point products dying. That's the movie.
Speaker 2Last week, I was at a board meeting for owner, which just raised it 2.3 billion, right? It's, it's sort of a next gen next-ish generation AI infused restaurant platform. And I love the CPO is one of the best I've ever worked with Q Quentin. And he was going over what's, what he's shipping. And even with all these investors with their hundreds of millions are like, this is too much. They're like all a bunch of B and B guys. We all know. And like, this is just, you can't ship this much software. And he said, and he's very good. He's like, we all have to be compound startups. We have no choice. Like this is just the bar, but it's literally amount of features and functionality that has recently shipped or will ship that is almost unprocessable. But now they have to build every single thing a restaurant would want every part of the stack. You no longer can just do part of it. And he's like, we have no choice. Like I don't even sweat it. I don't even sweat the fact this is 10 times more than a year
Speaker 3ago because we have no choice. I also noticed in that marketing message, that customer base has changed. Actually, Adam would say to you, it's not restaurants because it very explicitly in his launch videos, he was saying we are the AI operating system for
Speaker 2small businesses. It's part of it. And that is somewhat interesting that you can, with AI, you could expand it to other versions, but Q is just talking about their core ICP. Like they want everything. They need the AI receptionist. They need the AI order and they need the AI and they expect all of it. And if we don't build all of it, someone else will build all of it. Like we can't, corners of the venture world. And his point is just the amount he's going to ship. Not only is it radically accelerating the year, but he's embraced it. Scott Wu asked, like, there is no other choice. So it's not even worth talking about VCs. Like, thanks for the nod that we've been working. We have no choice. This is the world today. The world has changed. And acknowledging
Speaker 1though, just so we don't sound one-dimensional, there are complexities with that. You can veer into product slop. You can have too many buttons on the screen. All those things are true, which is why you need a great, to your point, Jason, you need a great CPO. You want to present a lot of product surface area in a fairly simple, digestible manner. But that's the art. And if you do that, then you're right. You get the money. Because no one running a business says, I really enjoy having five separate SaaS products and integrating them because that's how I get off
Speaker 3on my excitement. I'm just saying here, I'm the one sitting in Europe. If you want to do a compound startup in the way that you both are talking about it, you will need to raise more money. Because to move at that pace and to spend what you'll need to, you'll need to raise more than the more modest European round. What I'm worried about is actually I'm in a number of companies which have raised less than US counterparts. And I think we'll be able to be less aggressive in doing the compound route than their US alternatives. But they don't have the money. They raised 3 million bucks.
Speaker 2Yeah, this is one I don't know how to solve. It's a tough one. And the one is an interesting data, but Iconic last week put out its headcount data of how much people are growing headcount humans in the age of AI. I don't know if you guys saw that. A full report doesn't come out. But it basically said anyone growing below hypergrowth is not hiring, right? People growing 50 to 100% are adding headcount 25%. People growing 50% are adding no headcount and they're using AI to get more efficient. Great. People that are growing more than 100% are growing 133% headcount on average, right? So they're compounding not just software, they're compounding humans. They're sucking in humans. The spiral just grows. You
Speaker 1can't keep up. But you have to acknowledge that there is a absolute paradox at the heart of this comment. Because we just said, we have a product that makes engineers more efficient. In theory, if that's all that was happening, you should have to hire less engineers. And it's interesting, if I was just the software product for that returns in the UK, and I was the only company doing it, right? A couple of competitors, right? AI comes along, I can probably get rid of a couple of engineers and do it more efficiently. That's all. It should just be more efficient. And that's the first order effect. So Harry, to your point, it should arguably be, hey, I only need less money now to build this product because AI makes it easier. But I think what we're seeing is that we're seeing a lot of people say, hey, I only need less money now to build this product. But I think what happens is, because it's easier, because investors are now just looking for huge outcomes, the minute you start getting any growth, they're willing to put capital behind it. And remember, for every dollar in a software company, you spend on typically on an apps level product, not a financial model, but you spend on R&D, you spend two or three times that on sales and marketing. So what you're seeing, Harry, is the winners get this compounding effect, they start getting this growth effect. And then Jason's right, the iconic data says, venture capital does a really good job, of stuffing money into things that are already growing quickly. That is our default. That is right at the heart of our lizard brain. If you were to wake up in the middle of the night, what do you want to do? I want to find shit that's growing and stuff more capital into it. That's the job. So you get this kind of pulling away effect. And that's why you have that concern you have, Harry, which is that you can be a perfectly good company, but the concern is, are you drifting into irrelevance? I'm not convinced it happens all the time, by the way. I think if you are in a separate market, you'll be just fine, and you'll make money, put up your hand one day, you'll be fine. But if you are in a market where the adjacencies can easily invade, to Jason's point, then you're not going to be fine. You're going to wake up in three years and not matter. And that's the challenge. Maybe even 12 months and not matter,
Speaker 2though, I think is the issue, right? I think it's an existential issue. I don't love this idea, going to both of your points, that Harry talks about a lot of kingmaking. I'm not into that in isolation. It's so true. It's so true. Well, it's true, but I think it's backwards. I don't think VC is just with capital, with nothing else. Without the right founders, without the right inputs, without any traction, I don't think they can will... That's why I just think the term is a little bit flawed, but it's also true, right? It's that you need so much capital to build these compound startups, right? That by facilitating it, the VCs make the kings, right?
Speaker 3I'm just going to argue the three things that make a company, customers, funding, and talent. And when you have Benchmark and Sequoia, great talent wants to join you. Customers hear about you and are validated by those names. Funding, everyone wants to fund you. If you are a Benchmark company, your next round is done. It is done.
Speaker 2Yeah, that's all true. I think it's just a moment in time. I think what's much more interesting is that that capital allows compound startups. It allows more code production, more software production, so that it's not true that we're going to do more with less. That turned out to be the great fallacy of late 2025, early 2026, that we would do more with less. We're doing much more with more. And that's why your European startups, most of them are going to fail, at least in the US, because they can't do much more with more, right? They're going to fail. Their little point solutions are just going to disappear in six months. We don't need those little point solutions.
Speaker 1Again, our job is to sniff out winners, stuff capital into them, and broadly speaking, stay out of the way unless they're literally crashing the car. That's the job in a nutshell.
Speaker 3Doing more with more, Andreessen, they expanded the growth fund to $8.5 billion. What was the story here? Anything we need to know?
Speaker 1They had this mechanical fund. They raised another $1.4 billion more focused on hardware. Yeah.
Speaker 2What I do think is interesting, things are so good. They're so good. That wasn't enough money. We need even more. And there are incentives to do both. There are incentives to expand your growth fund, but there's also incentives sometimes to cut it. Founders Fund cut their N-2 funds ago. They cut them because they couldn't think they could deploy enough fund in that window. And so you'd rather deploy less and get into carry mode, right? Andreessen's saying, good God, this is such a great time in growth. We got it wrong a couple months ago. We need 40% more capital. And so we're going to tack it into the last. We're not just going to put it in the next fund, which we could do in a year. It's so good. It's going to NVIDIA. It's so green. We've got to put more into the current fund, right? Unless things are all green, you just put it into the next one. Maybe I'm misreading it, but I think that's what I was just, we just, we're deploying so quickly, so successfully. I don't, did you guys see the cursor deal? Did you see open router, open router? We need more money, guys. 11 labs. These guys just need more money. So the fund's too small.
Speaker 1Repeat. The whole capital allocation is all about stuffing money into things that are working. That's what VCs do with companies and LPs do with VCs. It's working at Andreessen. Andreessen's right. You give cursor. You give an open. You say, hmm, I wish I'd give them more money. That's the end of complex analysis.
Speaker 3Okay. Team, there is Clay raising at $7 billion. There's Linear, which hit $100 million, growing 100%, doing a tender at $2.5 billion. Shein going public at a $26 billion market cap. All right, Roy, don't seem too excited. There's Salesforce and Claudeforce. Benioff and Dario sitting down together and Salesforce getting a big bump. There's PayPal. Calend, Stripe Deal, off. Which one would you like?
Speaker 1I mean, I think, you know, Salesforce and Claude is worth a minute or two. And Jason will probably have some insights there. And then maybe talk about some of the privates. Just interesting. But yeah, Joe, Jason, what's your take?
Speaker 3Just for everyone to understand what happens between Salesforce and Anthropic.
Speaker 2A lot of it, I think, is marketing. Mark's pretty good at marketing. Pretty darn good at it, right? Sometimes you wonder where Salesforce is. It launched AsianForce over two years ago. Whatever. 99 problems it has. But being ahead of the trends isn't one of them, right? Whether that V1 version of AsianForce really worked well is a different question, right? So I actually think on its surface, it's a nothing burger. Because ClaudeForce on its surface is a bunch of skills, which anyone can build. The three of us can build a bunch of Claude skills that are packaged up and distributed in a digestible, trustworthy fashion. They're skills certified by Salesforce. They're designed to work via MCP and otherwise. So they're trustworthy, right? But the basic skills of run me. The pipeline report. Tell me how Harry's doing on the team versus Jason. Like, these are not profound yet, right? Skills for Claude and MCP are not new. And also, you know, Dario is showing up because Mark agreed to move. Salesforce agreed to move their LLM spend to Anthropic. He's going to show up for his big customer, right? So I didn't view those as very impressive either. What I viewed as much more impressive is going all in on Salesforce doesn't have to be the surface. Mark's, if you really listen, the most interesting thing that Mark has said, just like he was two years ahead of many of his peers and agents, he's two years ahead here on two things, which are big deals because they're also slight threats to his business. He's saying what there's going to be multi-service. The train has left the station. Some folks will use us through Slack. Some folks will use us through Claude for, and we run Salesforce headless. We don't even log into Salesforce. And these are opportunities and threats. They're threats to Salesforce. If you don't log in and use their UI and UX in there and the way they do it, he's saying, use whatever surface you want to use. I'm going to deliver against it. And they also. And they said more of it recently, we're going to do more outcome based deals, which is a BFD. So I think the marketing was great and I love the Matthew McConaughey stuff. I used to hate it. Now I love it because he's been doing it. He does help you kind of under it. I love the consistency of it, you know, but I think the real things that the commitment to multi-service and the beginning commitment to outcome based pricing are huge changes for a $45 billion run rate company, huge changes. And they, they're not all going to break in Salesforce's favor, but Mark's going all in on it. So I think he's driving. organizational change and there's early signs it's working and the RPO is up and the stock's up whatever, 50% or 25% in X amount of time. So short-term boost, but they're going all in. And most of these enterprise guys do not want to be multi-surface, no matter what they say. It's a threat. They want you to use their agents and the surfaces they allow you to use.
Speaker 1That's exactly the right summary. Yeah. And I give them credit for just being super flexible and getting with the program, right? When, you know, there's no denial here. You know, I admire the pragmatism of, oh, I tried A, A didn't work. Let's just try B. And I'm all in on B and you'll never even prove I said A. That's what makes them a great marketing leader.
Speaker 3They are a $212 billion company as of today, in a year's time, over or under 250.
Speaker 1I'm going to start by saying when we had our name of stocks game six months ago, I was behind. Then in the last iteration, I was ahead and now I'm killing it. Because just by WorldCloud and team and Salesforce, it's been a great buy. From the bottom of the SaaS trough to where we are now, you know, you could have, you would have 80% in team, 50% in WorldCloud, the ETF, you know, I think 25, 30% in Salesforce. So we've all done amazing if you bought that, right? So big believers. But I think you're now at the point where now you look, you're more normalized revenue multiple. Now your growth rate, you know, you're growing 11 or 12%. Can you grow the stock at 11 or 12%? Probably, maybe a little more with EPS efficiency. So I'm sitting here thinking 212, 10%. In one year, 212, 10%. In one year, 220, 230, totally doable. And then you take into account the fact that the overall market's super high, you know, probably that going down versus up. So I don't think it's a layup, but let me make it real. I'm continuing to hold my pretty large slug of Salesforce stock because I think they've weathered the apocalypse. And, you know, WorldCloud is, which is the ETF, that's just a cloud index, is, you know, well up in the year and a screaming up and when we bought a while back. But I think I think, and I'm not saying this to be obnoxious, I think Jason's points were the spot on too, which is the whole idea. This is a system of record embracing the fact that lots of people are going to access it via cloud and they're willing to let that happen. And not everyone is doing it because we had the whole service Titan podium thing where service Titan is trying to cut off podium. We just discussed open AI cutting off cursor and this whole idea of when do you cut off an adjacency from working on your stuff and when do you not, it's going to become a recurring theme. And I think enterprises are going to start getting really focused on it. And they're going to be saying, Hey, Mr. Vendor, cut me off just because you don't like that other guy. I want openness. We use Salesforce a lot. We have a 20 year instance, you know, we deeply embedded in it. And more and more people are using it via cloud. It's exactly what you said, Jason, right? People are just like, I've got my MCP server. I don't want to interact with it. I just want to send it an email to say, update the
Speaker 3record. Is the system of record access via cloud worth 210 billion? If it keeps instinct from going
Speaker 1rogue, it might be worth it. Yes. What about this? It's a $40 billion revenue company with 30, 30 35% cash flows. So is a 10 or $12 billion a year cash flow business worth 200? Maybe it's great cash flow and it's going to get more cash flow as time goes by. To answer your question, Harry,
Speaker 2here's how I would simplify it. And this is the thing I think we all, to the extent we care, we have to think about can system of records deliver outcomes. Customers want outcomes now. That is why Palantir is growing 90 something percent. That is why Sierra is doing well. The world is moving in B2B to outcomes. Is it going to be as dramatic as some say? No, but it is. Customers are not making purchases and aren't tied. So you can talk about the system of records are sticky, but can you deliver outcome from a system of record or will agents or other systems deliver outcomes? If they deliver the outcomes, you will
Speaker 1shrink over time, which is why again, to chime in, which is why, you know, Salesforce just bought Intercom where we are lucky. We are lucky enough to invest less than a year ago. And that's a very outcome based product for customer support where they charge based on resolutions. And again, I go back to credit to Benioff. He's accepting that his system of record business has to be open to other customers. He's saying, but if we want to play the outcome game, I'm not going to just walk away. He's not going to just walk away and say, oh, you caught me. I'm headless. I'm just going to be the back end. He's also buying things like Intercom to say, maybe we can sell those outcome based deals too. So I don't look at Salesforce and say, it's obvious that you'd pile in a ton more because it will outperform from here the way you could have done four months ago. But I'm sitting there with my holding as part of my portfolio and saying, this is not a casualty of the war. This is a compounder, not a rocket ship, but a good compounder with decent cash flows at a decent valuation. You kind of go, yeah, plus or minus the S&P, maybe whatever. It's not the train wreck people thought it was four or five months ago. If you remember the hysteria four or five months ago.
Speaker 2It was hysteria. It was a, everyone will vibe code their own CRM on the 20VC podcast. It became
Speaker 1a hysteria, right? I mean, I think some people will at some people's stages, but they won't do it for the kind of customer service. And then I just want to throw in passing another number that I keep an eye on, Jason, and you mentioned this before, is that remember we talked about how much You fully loaded Salesforce spend $6 billion a year on engineering. And that probably includes QA and all the rest of it. But that's the right comp. And they're going to spend $300 million this year on Anthropic. So it's only 5%. And this is what-- when he mentioned that number a while back, you actually said the right thing, Jason, which is that still feels small. If the best software company in B2B SaaS is still only spending 5% of its engineering budget on tokens, then either market is smaller than we think for intelligence, or B, people like Salesforce have a lot more to do. But it was just an interesting number. They thought they're going to spend $300 million this year on Anthropic, which sounds like a lot in the abstract, and it is. But if you go back to the math in the upcoming Anthropic S1, if you think about your market TAM as a percentage of the engineering spend, then you probably need that. Probably $300 million needs to be $600 million, or maybe a billion.
Speaker 3Stripe and PayPal, no more, it would seem. Deal is off. We've spoken about it a lot, saying about the amazing nature of doing it while private and the strategic bet that it was.
Speaker 1Now it's off. I think it's as simple as price. I think the rumor is the Stripe-Advent syndicate offered in the '60s, and PayPal wanted in the '70s, and stocks bounced off the low. I know it's a smart deal to try and do, but they're clearly not willing to overpay, as they see it.
Speaker 2This is always a dance, and we never know where we are in the dance. When the deal was worked on, PayPal was at $42,000, right? As the deal progressed, it was at $61,000, then it collapsed to $53,000, right? And Stripe's still looking at this as a $41 company, right, and they've run their models. And PayPal called their bluff, and their stock crashed as a result. So we just, it's actually an incredibly, to someone like me, it's an incredibly annoying dance. Why can't we just get to the end of the dance? But these deals often, not only do you have to make a second offer, but they have to fall apart after the second offer in order to ever happen. There's a lot of structural reasons, right, and the board has theater and drama. There may be no way to get one more dollar out of the deal than for it to fall apart. Let's not say it's dead until it's dead.
Speaker 1I think that's a good point. There's a dance that goes on, right? Oh my God, this dance.
Speaker 2It's like venture before AI, where you could walk from a hot deal and then come back. The founder wanted $1 billion pre-revenue, you only wanted to do $500, you could walk, and a couple of weeks later, you could meet in the middle, but not today.
Speaker 3Are there any others that we should discuss? Polymarket raises $1 billion at $21 billion, as I said, Linea announces $100 million ARR growing 100% doing a tender, Clay raising at $7 billion led by Wellington, Texas pausing flock camera usage.
Speaker 2A quick note on Clay, I just thought it was very interesting for us at $7 billion. I started out as a Clay skeptic and have become a Clay convert over the years. I was a skeptic because when AI sucked, every CMO wanted to check the box on being an AI hero when to bring in Clay. You remember that from a year and a half ago, like, "I'm going to get fired, I better have an AI tool," and Clay just benefited from this rush to check the box, and I didn't see it in the product, and the marketing annoyed me that every CMO at Saster A annual two years ago was buying Clay. I mean, more power to the founder. But this check the box because I'm going to get fired annoyed me. I will tell you, I've changed my mind, and our agents will only use Clay now, for real. They will use nothing but Clay. And so as we move from AEO and GEO and whatever you go to agent made decisions, the fact our agents would only use Clay, I think it's a BF deal. And so we have moved everything that we do to Clay, not only because it's a great product, but it's not worth arguing with the agents. This is the most stubborn I've seen our agents.
Speaker 1You anthropomorphized, stubborn is a human trait.
Speaker 2I really did, but I only have so much time in the day. If the agent's going to say six times, "You must use Clay," I will concede defeat and use Clay. So in a sense, I think it might be the cheapest it's ever been at $7 billion. Because if we're moving to an agent-first world and agents will insist on using products, now it may not last. Maybe the agents will say something different in a year. But this is one of the handful of products where the agents were so insistent, "You must use Clay," that I'm all in on those, like load up those stocks.
Speaker 3Jason, welcome to the show. Welcome to the IC. You have Rory and Harry as your partners. What's the bull case from this point? This may be the cheapest round at $7 billion. Fantastic. What's the bull case for where this goes and how big is that?
Speaker 2The bull case is that agentic GDM has just started, right? And much like the three of us made a mistake not going early into cognition because we thought the TAM was too small, we also thought the TAM was too small for agentic GTM. We thought the TAM was the same as it was. It turns out when agents can run these GTM motions, they will consume 10 to 100 times more usage. It's more expensive than humans ever could. They can run GTM around the clock. And I'm not talking about spamming. I'm talking about analyze, consistent campaigns, reaching every prospect, reaching every customer across the globe, and Clay's the clear leader there. And we need exposure, but it is the clear leader. Agents will consume 20x more GTM resources, more tokens, more usage, even if revenue doesn't go up all that much. Not everyone that's coding is really seeing a revenue lift from it. Not everyone using all this agentic GTM will radically close qualified pipeline. Usage is just going to explode, and Clay is a clear breakout winner, and it's accelerating, so I can see a path to 100 billion, and I recommend a small initial $150 million stake.
Speaker 1The Andreessen Growth Fund is ringing to hire you as we speak, Jason. You'll be great.
Speaker 2I think we're underestimating this trend, both of them, how much agents are going to do things in GTM, just like voting. But man, this agent, Rory's right, don't anthropomorphize them, but sometimes when it's just you, you got to. Otherwise, you can't get past the task.
Speaker 1They and Linear are versions of a story that says, if you grab hold of these changes as a founder, you can turn change into your advantage, even if you're an older company. Because, Clay, you're right. The initial product wasn't an AI product. It was a waterfalling product for various different data sources like Zoom and all the other Zoom sources. It was a very good, very point product for RevOps, and they've done an excellent job of riding the marketing hype around go-to-market AI, and then on top of that, actually generating real product in that space. And we also mentioned Linear, which is doing really nicely, doubling at a hundred. My point is, these are companies that were founded pre-gen AI, that have done a really nice job at the app level of co-attaching to the AI trends, and are looking at their
Speaker 2survivors. I think it's more than that. Just to be clear why, and I can talk about Linear briefly, if we're not running out of time. I don't think they just attach to trends. I think this is a really important phrase. They are incredibly agent-friendly. And this is the same bet that Mark's making, which is a bolder bet at Salesforce than it is at Clay or Linear. If you have a two-by-two of agent-friendly, then it's a bolder bet. If you have a two-by-two of agent-friendly and quality of output, it wins the two-by-two. I just started using Linear for the first time ever. What the hell do I need Linear for? Because I'm building an app with 448 tasks to manage right now. I can't do it, and it's just me and the agents, but Linear is the perfect tool for that. That's where they're getting a boost. It ends up being very agent-friendly. And unlike trying to argue that humans are going to be building more software, Linear is like, "We will build a platform that if it's just you and a couple agents, we're going to do it. With 448 features to build, we'll help you manage them." Very powerful, right?
Speaker 3I am an investor in Linear, disclaimer, for the first or the second round, whatever round it was. I do think it is drastically underpriced, though, at that rate, given what you said, Jason. No, no. A hundred million, growing over 100%, re-accelerating at two and a half. Still founder-led carry, incredible founder.
Speaker 2I'm like, "Huh." Here would be my guess, not as a shareholder. It sounds, at best, market correct. Right? It's overpriced based on that. My guess is what I'm sharing is consistent with everything you've said. It's consistent with the data they've published, but the revenue is still lagging. That has led to usage numbers that are up, but the amount of AIR from agents is probably a couple million. This is my guess, if you ask the question. If most of that growth was from agents, then it'd probably be seven billion.
Speaker 3Jason, can I ask you, welcome back to the IC. We've had a little water break, and now we're ready to hear your next bull case. What is the bull case for Linear from here at two and a half billion, given what you just said?
Speaker 2Generally speaking, project management is one of the oldest categories and has been muchly bypassed by AI. Look at the abysmal performance of Asana, Atlassian has survived, but mainly by diversifying outside of tech. Humans just don't need to build Kanban cards and wait weeks for other people to build features. It is a dying category. However, Linear is the winner here. Linear is the clear winner. They have built an agentic product first that allows the fact that we are building a hundred times more software, and that means a hundred times more features than ever before. Humans cannot keep up. Humans still have to work with agents, and the native tools do have a certain amount of issue tracking, but it's overwhelming. If every human on your team is going to build 500 features and a thousand issues, and you have 10 people on your team, you need a process, and not to use a dated term, a system of record for managing all these issues with your agents. If we're going to build software a hundred times more software, 50 times faster than before, with agents, we need a new system of record for it, and it ain't Kanban cards and Asana. I can tell you that. That's why Duskan Moskovitz quit his own company. He couldn't see. He couldn't see it. But the team at Linear has figured it out. We have seen an explosion, 50 times more agent usage than 90 days ago. This will seem cheap when Replit's at 15 billion, Lovable's at a hundred billion, everyone's out there, because Linear will be the one powering them all. I vote for a hundred million at 2.5 billion as an initial entry point, and to reserve 250 to 300 million for follow on rounds. Good to know. Fucking A. But in all seriousness, if I wasn't building, I wouldn't see it. I would think Linear is an overpriced project management tool, and I'd be like, how can Clay be worth seven billion when ZoomInfo's worth one billion? If I wasn't building, I would think that these were dumb deals, but I am building, so I can see we're just starting.
Speaker 1I think that's interesting, because one of the things I like doing this is, I like listening to you, Jason, and what you're saying, because you've really implied that when you are building, these are the tools that the agent is choosing to build with. This is what agent-friendly means. It's worth pointing out to people, it doesn't just mean this software, because maybe it's not obvious to the casual listener, but what you're not just saying is, it's not just that these software products have agents, it's in fact that they are friendly to third-party agents. agent says, "I have to pick a project. something to do, project management as a tool for part of what I'm trying to build. They will default pick the product that shows up well as agent friendly. And that's what these guys are doing. So they're skating their go to market to where the puck is. And the puck is agents buying software, not humans buying software. That's the zoom out comment here. It's true. And some of it
Speaker 2requires brand, but some of it requires proof. The agent will test the APIs too, if it needs to be. It will quickly see that the API is blocked or doesn't work. They're very, just like we see with Hugging Face, they can work pretty fast, right? So you can game AEO and GEO with an agency. It's much harder to game this, this clay linear thing. It's hard to game. This isn't showing up. It's being chosen for at least 50% is based on merit. It's not all merit, right? But it is merit.
Speaker 1And by a cold and remorseless analyzer who just uses AI to pick the winner. There's no, you can't take Jason's agent out to a steak dinner to get him to buy your product. It just
Speaker 3has to be better. In the same way that you said about the explosive nature of requirements on a to-do list. In a genetic world, that was one of the reasons I actually did ClickHouse much later than would traditionally be in my wheelhouse. Because when you think about the exploding nature of agent queries on the databases that they provide, whoa, this business becomes 10X bigger than it could have been before in a pre-agent world. Much more than 10X.
Speaker 1Well, being precise, just going to say it because I am that boring bastard. The volume comes 10X and 100X bigger. And what it means is that the existing systems, just like GitHub, get overwhelmed. Because the problem is it's not necessarily that the spend goes up 10X. It might even go down. But the point is these things are so compute intensive that products built for a human first world just simply can't keep up. GitHub, which was the definitive developer, it's collapsing every once in a while through volume. And that's just not a thing. They're going to move hopefully to other products. GitHub? GitHub's about as trusty as British Rail at the moment. That's exactly right. No comment on British Rail. And then last thing, I mean, we should just say, I mean, you know, it turns out if you put cameras all over the place, then cops are allowed to use them, not just for the... I mean, Flock, I think it's a bit of a bummer because I think Flock has a wonderful anti-crime story. And I'm pretty anti-crime. But what's happened is there's been a fair amount of police abuse of the product and people are reacting badly. It's quite an interesting social phenomenon. How did police abuse the product? I'm genuinely... I think that you get these, you know, there's been isolated incidents, two different things. One is errors of identity where, for whatever reason, the system misidentifies. And then the cops basically do some version of, well, the AI said it's this person, so we're just not going to think. It's a little like some of the problems facial recognition had. When you get a facial recognition, we know it's probabilistic, but you hand it to some officer in the street and they're just like, it says it's you, it's you, you're done. And you get miscarriages of justice there. Then the other thing is, this is a lot of personal information. You know, you get this cops tracking exes. You get it, people looking up something for a favor for a friend. These large databases of private information are a risk. You need real controls over them because abuse alienates the general population. And it's been true for, you know, DMV lookup, anything like that. Do you not watch a cop show, Harry? You know, the cops can't just look up your DMV license without having a reason and a case number. And it's the same thing here. And unfortunately, and I say unfortunately, because I think it's a wonderful trend and a good company, but there's this perception now that the surveillance costs are worse than the crime prevention benefits. I'm not sure that's a trade. I'd make, but unless they get ahead of this story.
Speaker 3That sounds like a very European stance to take.
Speaker 1It is. Yeah, no, you're right. It is.
Speaker 3The surveillance data is more sensitive.
Speaker 1And that's happening in Texas. Because look, in the great state of Texas, which is pretty low on order, there's real pushback on Flock. And obviously, Flock has to get ahead of this trend. And I think they know what to do. But the ironic thing is, it's less them than the misuse of the product, in other hands, which is hard to prevent. I mean, if you give a police organization, the ability to track criminals, it's hard for you. I mean, it's the same dynamics. Funny, it's the same dynamics that we had when we talked about Anthropic and the Pentagon. Actually, it validates Dario. I haven't thought of that. If you sell people software, you can't stop them doing things with that software you don't want them to do. I think it's unfortunate. I think that this is a mistake. But I think it's what's going on right now. I think that Flock is experiencing a real backlash to a very good product. And they need to figure out a way to politically get ahead of it. I would like to bring to a close this
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