20VC: Benchmark Loses Another Partner | Elad Gil Raises a Monster $1.5BN Solo GP Fund | Why Apple Need a Management Overhaul | Why Google is the Best Performing Hyperscaler | Will Cursor Hit $4BN ARR & Lovable $400M ARR by EOY 2026?

Ironically, Google, whom we all piss on, has executed the best of the four. They have a model that works. Apple doesn't even have a product that works. Microsoft bought someone else's product but then doesn't quite own it. So it's kind of weird. Facebook is desperately trying to buy product, but it's not like out of success, it's out of terrible psychological need for a product. Even though they don't have a business to justify it. I don't think these guys are too powerful. If anything, I think there are a bunch of rich people on the back foot behind the new trend, desperately trying to catch up.

This is 20 VC with me, Harry Stebbings and it is my favorite week. Jason Lemkin, Rory o' Driscoll and me sitting down to discuss the biggest news in tech. I want to hear your thoughts on this format of show. It is very quickly become the most popular show that we do. Let me know harry@20vc.com this is the best one we've ever done. Very simply, incredible debate. Small lessons for me than ever before. Let me know what you think of the show and it was just so much fun to do. I'm so grateful to have these guys as my friends. But before we dive into the show today, let's talk about agents. Specifically Piper, the A SDR agent brought to you by Qualified. The agentic marketing era has arrived. And if you're a B2B marketing leader looking to scale a pipeline generation, Piper, the AI SDR agent.

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One, listen, if folks are, if the best AI researchers are jumping from meta to anthropic to whatever in six months or getting massive packages, there's no stability and it should be the same adventure. That's thought number one. Like this is not whether it was ever a bucolic, but the idea of Benchmark in the ebay days of a bunch of gentlemen investors staying together for 80 years. It's possible that's part of the past. And then the other tactical thing, I learned this myself. If you are going to leave a fund and you can, you have a hot hand, better to do it early. Like staying longer doesn't help. Like it might seem like it helps the fund, it doesn't help you. You're probably not going to leave with much carry. You're going to have to start over. So there's definitely reasons to stay at a fund, right? Especially a top fund. But you might as well leave the moment you can. There's not a lot of economic incentive not, you know, all things being equal to stay. Right. I mean starting over is not that fun.

Very interesting. I mean, I think stepping back, you know, I remember benchmark founding in 95. I remember them pitching us in 95. So I would have said what's happened here? And Benchmark will be fine. So let's start with that. They'll find two other people to fill those slots and they'll be fine because they've been fined for 30 years. I think the interesting thing is to a rounding error, I would have said being a partner at Benchmark is kind of one of the top gigs in venture. They've been able to hire people from other places, other good firms, get them to join Benchmark. We all know the shtick. Equal carry, focused fund, no layers of hierarchy. It's a really compelling story and it's been a compelling story for 30 years. The stunning fact now is someone can be in the best gig in venture and decide, no, it's not enough, I need something more. And they can actually probably pull that off. I mean, that to me is the big data point. It's less about Benchmark. It's like a talented individual with obviously prior entrepreneurial success can be in venture two years and decide to leave Benchmark. Not to go back to being a kind of a founding startup entrepreneur, but to say I can get money and continue this business on my own, on equally or more attractive terms. It just speaks to where the market is, rightly or wrongly. And we can talk about that in a second. For that kind of top tier talent, it's very much a sign of the times. And you made a comment. Most people who are good investors would prefer to just do it themselves. You stick together with your partners for, you know, you hope there's some strength and diversity of some diversification, to use a less loaded term. And because there was a perception for a long time of a bare minimum fun size, team size to get funded and clearly all those perceptions are gone for at least a small number of very successful, talented people. And that's what we're talking about.

The nuance I've thought about over the years is if it were me, if I were myself at that time at a similar spot, I wouldn't leave Benchmark. I wouldn't leave Benchmark because I think what a lot of these folks going out on their own miss. And Harry and I did it right. And Harry and I had brands behind us. We actually had brands, quirky brands, Sastra and 20 VC. But I think especially today we underestimate how powerful it is to meet a founder and say you're from Benchmark. It's friggin powerful. Harry, I want to get your thoughts. I would argue that you and I are at the edge. Anything less than a brand that we have, I wouldn't do. I just wouldn't. Everyone's different. But it's not that you don't have the skills of hunting. It's not that you don't have the skills of evaluating the relationship building or schmoozing. You know, there's a lot of the best founders, you know, they just want the same guys that are in figma and 20 VC is above the line. But it's not, it doesn't have the storied history of Benchmark. What do you think, Harry? That's why I'm not sure I would leave Benchmark.

I think people greatly over exaggerate the impact that this has on Benchmark. And I don't mean that rudely to Victor, but I don't think any Firm has played AI in the last 18 months as well as Benchmark. Benchmark have done despite the team churn that they've had. Let's just go through this. McCall. Over 100 million. An error. Hey Gen hitting 100 million Naira fireworks. 140 million Naira Sierra with Brett Taylor. Over 100 million Naira Manus AI the best Chinese AI team there is. Ligure are the best European AI team there is in many respects. All with double digits ownership in one single fund. Hell, how do I be an LP in that fund?

Yeah. First of all, do you think all.

Those deals would have happened? I'm going to call stop here.

Only because you actually didn't answer the question. We agree. I mean let's stipulate Benchmark will be fine because they're awesome investors. That's just not an interesting discussion. I actually think until you cut him off Jason was starting down the far more interesting discussion and it's super interesting with this group cuz I've actually never had this discussion with two people who've done the thing. There's very few people who've done the thing that Victor did which is raise a solo fund. And the odd thing is I'm on a podcast with two of the people who've done it. Both of you as brand names. Right. So I actually think talking about his Benchmark awesome is fun because they are fucking awesome. But it's just not that interesting.

Would I do it if I was Victor? Yeah, of course I would. I would because he showed in his investing that he likes to move across scale in a way that I don't think Benchmark likes or allows in that disciplined manner in a similar way almost to Myles Grimshaw who's another fantastic investor. But I think they are multi stage investors and just want to interse with founders whether it's at the pre seed like Victor did with Brex or whether it's writing a $55 million check into hey gen which is really outside of what a benchmark deal would normally be being that size check on entry and I think I look at it and go hey, I just want to engage with the best founders. I don't want the constraints of a partnership. I can get a lot of money privately from great individuals and I'll own 100% of the carry a frickin man. Thank you very much. I'll do that all day.

I hear you. I just have a more nuanced view now that time has gone on. Right. I remember when I left two top brand name funds reach out to me that I did not know well just it wouldn't have worked out right. But I had a pretty hot hand when I when I did. Harry will remember right. And I didn't even take the meetings right. For real because I'm like it's just not. It doesn't matter. I can't get the math to work in my head 100% of the carry. Right. I can't get the last. The lack of autonomy to work on my. And I'm like, I've been a founder with a modest level of success. I ain't going to go work for somebody I didn't take any of these meetings like. But time has gone on and I do think that if you're going to leave, understand the value of the brand you're leaving behind. If you have no brand, and here's my. And Harry challenged me. I just think in today's world, if you have no brand at all, it's tough. I think it's tough 100%.

You're so right. It's tough. But I do know Victor and he is in the most exclusive inner circle of Silicon Valley that exists. He's in the Saragua Elad Gil.

He has his own micro brand relationships that will make it work for him.

And I would actually say the thing that's more important and attractive than brand is scale of cash. The only thing that I find attractive about joining another firm, which I never would do ever, obviously, but is the fact that I could deploy $1 billion check into a great company. And actually, I think scale of cash is almost a more attractive magnet than stellar.

That's the one way the world's changed. Right. We wouldn't even be having this conversation even four years ago. Even four years ago we didn't have the conversation. Right.

Yeah. What you find attractive about being on your own, to your point, how the ability to employ large. I'm just trying to understand it. The ability to buy large amounts of cash. What Jason is missing is making the point is so you give up on the brand if the existing brand is strong. So you probably have to come to the table with an equivalent brand. And you probably do, because if you don't have an equivalent brand, you won't be able to get the big cash. So what you're basically is, and I agree, is that if I have, let's just say, a functionally equivalent brand as an individual to the brand of the firm I'm at. In other words. Hi. Hi. Right. So I'm not losing a ton on deal flow from transitioning and I get all the money myself, then I should just go do that because I can do what I want long term. What's interesting is the people who need to think about this a lot are the LPs. And I'll tell you why. Because what it says is we will now finance you to do all the things that we spent 20 years telling every other venture Firm not to do. And I think that's a big insight. Very much an lp. Focus on discipline, stick to your lane, do the stuff you do well. We value teams, we value cohesion, we value long term. And what they're now saying, and maybe correctly, this is not a dis. This is a reflection on where the world is. And sometimes the value of listening to advice, and sometimes the value of not listening to advice. What they're showing by their actions, and we'll talk about a lot in a second, is they also like a product that says, thank you for your input on being focused. I'm ignoring it. Thank your input on being a value add in terms of taking board seats in the last case, I'm ignoring it. Thank you for your input on small funds. I'm ignoring it. Oh, and by the way, after giving me all this input, I'm ignoring it all. And then you're going to give me the money. Note to self, what are you doing here, people? It's super interesting. What it says is, as I say, thank you for your advice now, thank you for your money. It's an interesting time.

What does that tell you then? That a lad has such a strong brand that he is able to do that, Say, thank you for your advice. I'm not going to take it over and over again. I don't mean that badly against him. He's incredible.

I think what it says is exactly that. I think it probably says two things and they're nuanced because they go one way. One thing it says is, in the end, idiosyncratic success triumphs. Bland, mediocre standard advice. Winners win. If you see something working, you're just going to lean into it. Because I think LPs correctly are saying, I had this pattern matching thing and these are the things that I said we shouldn't do. And then I look at this. Moving on to a lad here because we had him on to talk about next. Oh, my God. This guy was a seed investor. Airbnb and Stripe he's ridden the last 15 years. He's not put a foot wrong. He has access to the best deals. Screw my rules. This guy's going to make money. So on the one hand, it says capitalism works. And so part of what's going on is there's a big signal coming here that says the things that we believe for 20 years mightn't be as true today. We should lean into the new. That's the positive side. And I believe that to be clear. I actually look back and I go and I'm sure you'll ask about this when I say it in a second. So we'll put a pin in this. You look back and you go, hmm, there are things that I thought one had to do that you look back and go, maybe you don't, but let's leave that for a second. The other side of the table is this. Sometimes rules of thumb or heuristics are in place because across cycles they've been proven to be correct. My guess is some part of this trend makes total sense and some part of it, you look back after the next down and turn and say, oh, yeah, that's why we had that rule. That's why we had the stick to the knitting rule. That's why we had the more than one partner rule. And I think you'll find some parts of this, like totally free and easy, will prove to be challenging as you move across an entire cycle and zooming out. Never forget, there's no data on anything through a cycle yet for anything that started from about 2010 on. So I think the LPs, they're discarding some of their rules of thumb and in some cases they'll be right. But my guess is there was an embedded piece of wisdom in that that will come back when you discard it to bite you in the butt as you go to the next downturn. So that's a long answer, but it's a super. Frankly, I think it's a super interesting subject.

I think Elad is the best embodiment of the concentration of value. And to your point of picking your space, you said very wisely, Roy and I always remember this. Josh Kushner is a master property developer in the way that he picks the block and buys the best house on the Block, Stripe in FinTech, Databricks and Data OpenAI and AI. And I think Elad is very similar in terms of making sure that whatever that category leader is, whether it's Helsing or whether it's a bridge or whether it's stripe, he, whether it's Harvey, he is in that leader and he's in it big. I think that's really impressive with him. And then he's also an amazing picker. I remember he sent me Vanta at Pre Seed. The man has access like no one else. He's able to cover spectrum like I've never seen before. You know what I worry about when I see this news? Speed of deployment equals relevance. And I think about this because we're very disciplined on three year fund cycles. Temporal diversification I know everything that we've said. Maybe Jason doesn't agree with on temporal diversity, but just like doing what we said we'd do on how we invest and how slow we are. I see. Actually, cadences of deployment can lead to relevance in a way that really benefits that manager.

It does. We talked about this before. You internalize that. In the short term, that's true. The only people who mind money are the people in charge of minding the money and the people who are in charge of the mining money. Here are the LPs, and they're trying to figure on the one hand they want because people who are deploying capital quickly and getting capital are by definition getting short term positive feedback. No one deploys a billion dollars values at 800 and then gets more money. So if you're deploying capital quickly, you can assume you're getting markups, you're getting success, you're into hot deals, and what you're left with is the LPs trying to figure out, is this a hot hand that I have to follow or is this a flash in the pan signal and it could blow up in my face? It's a tricky thing to figure out because by following you've made a common inconsistency. By doing what you said you'd do, by being consistent, you lower the chance of just drifting off and screwing it up. But you probably pass up on the upside of being as aggressive as someone who's not honoring the temporal diversification and who is using that velocity. So all other things being equal, the person who's doing more deals has more relevance. So therefore the only question, as long as they're deploying it well, it's a double win. You have relevance in the short term and returns in the long term. If you deploy it badly, you have relevance in the short term and failure in the long term. I've seen examples of both. I mean, I think Elad Gil is example of the latter. I think Wiley Successful seems to be doing everything right. I'm willing to stipulate one of the most talented investors of the generation and will do it really well and continue on doing it well. That's one example. I've also seen the examples of people who've been relevant for two years because they're putting the money out and then the money blows up and they're gone. Tiger's the obvious example. Now they're still around, but a shadow of their former selves. Their quote unquote, relevance in 2021 meant that they saw every deal that year but they picked badly, so they got sent home. Same thing with softbank. Any early stage VC worth a dam in Silicon Valley knows who the dumb late stage money is. And you can tell. I remember watching, I won't even name names, I was like, oh, that late stage investor is attending that early stage investor. Meaning I know why they're there. That's money, that's dumb money that they need. And those investors obviously blow up. So in the end, relevance is a short term thing. Like I say about this job, the only thing that's true about this job over the medium term is you have to be right. And the hot hand who's right across an extended period of time and as I say a lot I think is one of the best of that. But you deserve to get the capital, you deserve to get the Runway because you've proven over 10 or 15 years your ability to pick and as you say, stunningly pick both early and late. We can come back to what is wrong with the single person model. But I'm willing to say the following. If it doesn't work out, it won't be because the person in charge of it isn't brilliant, he clearly is. It'll be because structurally there are problems with that model or that stage.

Well, the interesting thing is when you look at bluntly the best performing managers or the breakout managers the last few years, I think you put probably Thrive, Green Oaks Founders Fund and even LA Gill definitely up there. And all four of them are one person led. I'm not saying there's not great teams beneath them, but they are one person led very dominantly. That is interesting. And that's a very significant change from the venture partnership of old that was so predicated amongst the industry.

It is. And it's easier, I think perhaps wrongly, to be one person led the later you go. And the reason I say that is this, let's just play it out. If you want to be an early stage investor and you're putting up doing series A's, I'm going to say just doing early stage because I recognize that all the names you cited have some amazing early stage investments. And I want to come back to that because it's important, right? Because there was an insight in that that the pure late stage guys didn't have. If you want to put most of your money in early stage investments, what it means is every partner can only do so much. And if one partner is called the dominant partner, then all the others are to some extent not able to speak for the firm. And you don't want to have a person doing a 10 or 20% ownership position who can't speak for the firm. So I think in early stage, if all your dollars are going early stage, even as a partner in the firm, I want the guy in the Next who's running 10 more deals beside me to be roughly a peer of mine. Because I don't want some weak person who's not that good, who's frankly a bit of a beta, who's willing to work for half nothing to be running my money. Which is why benchmark, as the quintessential early stage firm internalized, you need to have equality so that anyone can be a premier partner. It's totally different late stage, when you're not trying to be on the board, you're not trying to be involved day to day, your time is not consumed by the deal, you're just making decisions. Making decisions arguably can be best done as a smaller group. So in the limit, you can have one person making the calls on late stage deals, and it's much more scalable. Remember, if you're trying to put out a billion dollars and you want to write in $20 million checks, someone has to make 50 decisions. But if you put it out in $100 million checks, someone only has to make 10. And it's hard to make 50 decisions. So I think what you see about these mainly late stage funds is that someone is capable of making the big decision. They have structure to do other things, but then someone is calling the big shots and they've been getting them right. And that's true for green. That's clearly true for founders. And I mean, my guess is fast forward three years, there'll be three other people in the firm in junior roles, but that guy be calling the shots and he's earned the right term.

Rory, can I be so blunt? Does it make you question your model when you see these kind of dictatorial LED firms? Not in a horrible way, but dictatorial LED firms with mass capital sources. And then you look at yours, more discipline, LED sized and with partnership structure.

No, no, because I think we're all children of the era we grew up in. You know, we survived two downturns. And typically in the downturn, the high price late stage guys go bust. And I'm not saying all these guys will, but it's what happens at every time. Because remember, you're only taking one risk as a late stage investor, which is valuation risk. And when it goes wrong, it goes wrong in 100% correlated fashion. Everything blows up in your Face.

Well, my liquidation preference always bails me out, doesn't it, Rory?

Yeah. And by the way, and just for our listeners, you're being sarcastic there. You're exactly right, it doesn't. So I think to build over an extended period of time, I think you have to be much earlier. And that's been our primary focus. And I think to do that you have to have much more of a partnership structure. So I think that's the place you end up in. If you wanted to build a late stage firm, you can be much more hierarchical by definition, almost you should be, because there's a whole bunch of economic reasons we can talk about that. Cynical comment. Not cynical, realistic comment. I'd say this to my own page. If I'd known in 2009 that we were heading into the best equity decade ever with zero recessions coming out of the worst equity decade in a long time with two recessions, I might have played a different hand. If you know that stocks are going to go up pretty unstoppably, we're at an all time high today. They've gone up for 15 years. If you knew that the correct risk adjusted work, adjusted money, adjusted play was to just do Tiger and not quite shank it in 2021, if you knew then what you knew, you might make that play and make more money. But. But you design to survive the cycles.

You'Ve seen, we can move on. But I actually would go that Tiger will do better than people think. Given their positions in OpenAI scale. There's many others that actually are not bad companies. You said that they picked wrongly. I would argue they didn't pick wrongly, they just picked everything. And in that there's some good and.

Some bad and it's not a oh my God, look, they're stunningly successful investors. It's just, you know, as an lp, you probably would prefer to have skipped that experience because one of the things you have to look at is you'll have this phenomenon of the average IRR is great, but if most of the funds went in at the top, you know, the LPs who just participated in that, not so happy. I agree. It's not that they're not going to make money. I'm sure they have many mentions, but it's not investment excellence as you'd want to live it. But I just got to commit one other point because it was important and I put a pin on it. I think the names you cited, those excellent investors, the Green Oaks, the Thrive. One thing that's super interesting about those firms Versus I'm going to call it the quintessential late stage only firms is these guys also have done some amazing early stage investments. I mean, by definition, Peter Thielich foundation did the best early stage investment ever, Facebook for 500k. The interesting insight is it's not that they're, quote, not early stage investors. Their real brilliance was realizing that being a great early stage investor with an implicit 2, $300 million fund size allowed you to have a $3 billion fund size where the median, the pooled dollar return is on your late stage investments because you're deploying lots of capital at late. But the entree to that has been your brilliance at early stage investing. And that's why those guys are different and in my view, better more likely survivors than the late stage players who dash in from the public, think it's all a financial game and then get blown up. The list you named have in my view, played it perfectly. And including jumping a lad in that, having really great early stage deal flow and access, and then realizing that the best way to monetize that is to Follow on your $10,000,000 a check with a $200,000,000 Series E check and collect the money everywhere.

The brilliance of Josh and Neil from Thrive and Green Oaks. They made half a billion dollars plus from Carvana in the public markets, buying when it was in the dumps and then riding that up. That is a fucking good picker when the world tells you otherwise. I mean, such a.

It was tough to look at that stock chart and make that bet. It was. It was a falling knife, that one. Right.

And then Neil also does windsurf at seed.

Yes.

Okay, I give up. Neil too good. Anyway, we said about concentration of value. Anthropic started out raising at 100, got so much demand. It went up. It went up. It landed somewhere between 150 and 180. I heard it was closer to the 180, which wouldn't be surprising. I'd love to hear your thoughts on how you guys read this, what you make of it.

Well, look, the interesting thing here is I believe that there was a billion late last year and 4 billion this year. So this is classic. The thing of what really counts as the first derivative, the growth rate, maybe even the second derivative, not just the growth is good, but the growth rate appears to have accelerated, which is stunning, right? In other words, because most your expectation is you start off growing at 300%, then 200%, then 100%. See, the absolute numbers are going up, but the growth rate's down. These guys appear to have re accelerated at scale. So you're doing a billion, you're, I don't know, doubling more than doubling and Suddenly you're doing 4 billion and you're 4 or 5 Xing. So if these numbers are correct, that's amazing and I think that's what's getting valued. And we can both feel smart last week because you pinged us on OpenAI versus Anthropic. OpenAI at 300, Anthropic at 100. Feeling pretty good about that. 1.8x in a week. If only we bought. So yeah, people are looking at the RE acceleration and it's clearly a two horse race, brutally and with everyone else either not shipping or not monetizing and are not relevant in the case of some of the smaller things. And you're buying the re accelerating winner.

I'll tell you for what it's worth. You also asked about capping Claude code, right? For overage. I know there's just one part of Anthropic, but my experience in vibe coding, I mean my captain obvious learning is we're vastly underestimating the revenue potential per developer per user of Claude and Anthropic. We're vastly underestimating it. We're vastly underestimating it.

Why?

Jason just educated because what was clear to me, I was on a path to spend $8,000 a month vibe coding. Okay. And even with that, Harry, what's happening now? Now the context windows have gotten longer. So now on replit and I think lovable just did in the new release, you can have up to a 15, 15 minute long context window while it's thinking through debugging or complex stuff. Okay, you know what I would love to do now? Run four of them at the same time. Or maybe even 15. Okay. So that 8k bill, all things being equal, could easily be 10k. And I remember and I didn't get it. You know, maybe a month or two ago, Farhan, one of the CTOs at shop, I think CTO Shopify let all their developers use the most AI they wanted, no caps. And the top guys were using 10k a month on credits because they are running multiple things in parallel.

Okay?

And if we're talking about 15 minute context windows and this, you know, whatever open open, I mean ChatGPT5 has a, you know, whatever a million tokens or billion token windows, right? Debug my entire code base. Now do this other thing. And now I'm doing 10 things in action. I think everyone, every developer at a top tech company growing is going to give them $10,000 a month of AI code credits. Everyone's going to get 10,000, not 200, which is what we're thinking. We thought that was a lot a couple months ago. They're all going to get $10,000 a month. Every leading tech company. It's cheaper than hiring any human and you can't find humans. So if that means a 50x growth per developer spend, it's going to be a CFO's nightmare. But putting that aside, that's 50x growth from where we are today. For Claude Code and Anthropic or if they use it through Cursor, it really doesn't matter where you're buying the tokens. 50x per human, that's a lot of growth, isn't it? I'm convinced. Like, it's not even. It's like blindingly obvious to me now. And Shopify already got there. Like 10k is fine, not 210k, you know, and the other thing that the CEO of Replit said, I think yesterday about this was you can't cap it because any great developer will consume almost unlimited tokens no matter how cheap they are. So I think we're all going to land at this 10k, 8 to 10k per month. If you're a good developer, you're going to be on 24 hours a day, you're going to be on AI, not a couple of minutes here or there's.

Directionally, I totally agree with what you're saying, which is zooming on a million miles. I think what you're saying is, and bringing it back to Entropic, these guys have something, a model that makes developers who are expensive assets extraordinarily productive. Somehow the market's going to find a way to massively reward them. I agree. And you made a comment on capping and it's been interesting separately, Entropic did some capping for their plans, and I think Cursor did some capping and some token limiting for their plans. And you'd ask the question, harry, is that good or bad? I think it's amazing any good. What it says is there's infinite demand for this product right now at the price point of 200 bucks and the cost of generating those tokens. The economics doesn't work for the model provider. And, you know, you could look at that and go, oh my God, I'm going to worry about the fact that is the economic model wrong and at a point in time it probably is. My guess is somebody's gross margins are Troubling. But when you're selling something, we have a couple of facts. One is the long term trends are in your favor because all these costs just go down over time. Thank you very much, Mr. Nvidia. And you've got almost infinite demand. You just price it to the point where you just get these people hooked and over time your costs are going to go down and their hookedness, as Jason said, is going to go up. And maybe today you're selling them 200 bucks worth of tokens, you're getting 200 bucks and maybe you are spending 250 bucks in tokens. So you cap them now at 170 and you think your margins are crap, but next year that 170 will be 120 even if the token count goes up. And as Jason says, you raise that 200 to 400. What it says is there's a not infinite but an astonishingly strong demand pull for Claude code and related products, either directly using it via Claude code or indirectly using the entropic models with one of the other providers like Cursor. That's going to reflect in the entropic numbers, which is reflecting in the valuation and it's going to reflect in a whole bunch of pushing and shoving around gross margins for a year. But in the end you'll stabilize out to something that works for everybody. It's astonishingly bullish on market size and growth.

We're all going to be coding 247 with our agents. Everyone's saying that like it's so hard to get a job in software today. If you look at the Wall Street Journal, it's not remotely true. If you have the skill set today, if you're super smart in math or CS or physics and you're in, you're in any school today. My son's a freshman and he's off the charts of math. He already has offers. Okay. If you're top tier developer, you just want to arm them up with every tool you possibly can because no one wants the folks that went to DeVry programming school like they wanted in 2021. That market is dead. Right. So we're going to arm them up with 10k a month.

Listening to everything that you say then Jason Anthropic is at least a $2 trillion company maybe.

Right. There's just so much investment here right now. Are there issues if obviously open AI is coming very hard at them right now. Right.

I'm not signed up up for 2 trillion. And I don't have to be to say that, you know, this is going to be an extraordinarily valuable company. There's only four or five companies that are worth more than a trillion. And it's worth pointing out only one of them is selling. Just kind of develop Nvidia, obviously, which is pretty much a monopoly selling, you know, 100% market share in the most valuable commodity you have. All the others touch every human being on the planet who has it, Apple, you know, Google, Facebook, and Microsoft, for a record. Just to say it, I don't think you get to more than a trillion dollars if you're just selling stuff to developers and infants. Which isn't to say I don't think.

You do extraordinarily well if Anthropic ends the year at what, 7 billion in revenue, right? And let's say the average Anthropic developer customer is paying $100 a month now and that goes to 5,000.

Okay, yeah, if you multiply.

So what's 50? What's 50 times 50?

Everything's amazing.

But I'm not being facetious. This is my Captain Obvious epiphany. This is bigger than the $4 a month we spend on JIRA at atlassian. All the VCs like to talk about how AI is going to tap into the human budget and some of it is just Sony baloney. I've learned this is completely true for developers. $10,000 is nothing to replace a $500,000 fully burdened developer that quits in seven months. Rory, I'm not being facetious. When I think it's 50x, I'm not being facetious. It may not add up to 2 trillion, but I think the TTAM, the true TAM, is 50x what it is today without question. Because this is the greatest case not of making developers just more efficient, but of truly tapping into that non existent human budget that people have. Right? There's no one to build this software out there or there's no one to build it. There's outside of cursor, no one can hire anybody. And even in Harry, even a cursor, it's hard to hire, isn't it?

Gary? Listen, you mentioned lovable, we mentioned ratl it, we saw Microsoft, we saw Google roll out lovable slash rattle it competitors. Question being there, is it too late? These are actually very established brands in ratplet and lovable in this case, is it too late or is incumbent distribution so overwhelmingly strong that they will be.

The victors with these the Microsoft competitor to lovable and repl.it right and bolt. Now this will change. It's Beta. Right. It's limited. Did everyone shares one database? So you may have seen some issues I had around my database, but at least I had my own one. Everyone shares the same database so Microsoft has to clear warning, be careful what you put in the database. Maybe you don't want to build what's the, what's the app that just had the terrible leaks today that we were just talking about before we started? Yeah, don't build the T because everyone's sharing the same database. What that says to me is look there, listen, Microsoft can catch up. That's not taking this seriously enough. Or it's being so panicked that you have to put something out there. Right. Which is probably more the case. They're so panicked that it is a big deal. Right. The replit and lovable are 200 million in six months that we'll put something out there that no one in their right mind would use. Yeah, one database. They only bought one. They could only afford one instance at Microsoft. They only could afford one database at a time.

They could only code one. But yes, the answer to the direct is it too late? In other words, are the lovables already too established for Microsoft to matter? I think Jason's is the right answer. It's more a question of are they going to focus on this thoroughly and comprehensively enough to win? Because if they did, if they put all their eggs in winning this basket, right, they probably could. It seems odd, for example to angst as Microsoft about oh my God, I'm losing $100 million revenue to lovable when wake up. I'm losing $900 million to cursor in a product I already have been shipping for five fricking years in GitHub Copilot, if the thing you delivered first can't beat the newcomer, how are you going to beat the even more trivial newcomer where you're later than them?

Roy, is GitHub just a massive fuck up for Microsoft? If you're sitting in that meeting, you're going oh my God, we had the start, we had the Runway and we've let someone come up from behind and seemingly trounce us. Is that the mindset you think?

I mean, they probably would say, oh, we have $500 million of revenue, we're doing. They probably have some corporate story why they're better. But the truth is, yeah, it's a mistake if you start with a monopoly and you fast forward three years and someone exists by definition you screwed up your job as a monopoly was don't lose the monopoly. Right they had massive market share with GitHub. They added the Copilot when Nat was CEO. It was an excellent product. And fast forward four or five years they seem to have slipped up. I mean you can't not say it's a mistake because you shouldn't let that happen. And that's my point. If you're chasing shiny object symptom on the next thing, which is now I have to do a lovable thing, really putting enough effort into making sure that your cursor competitor is as good as it should be. And I'm not fully formed on this yet, so I'm kind of going out. And for all the Microsoft is amazing in AI story, they're better than AWS out of the three hyperscalers, but they don't have their own model. The relationship with OpenAI is a bit tortured. Cursor's now 900 million and they're developers, which is their core kind of raison d'. Etre. In a world where they're at 500 with a five year start, I don't think they're playing a perfect game. And I don't know if trying to do still more things is the way to win here versus actually doing some things well. You know, Satya made the ever so funny comment that, you know, he wanted to make Google dance. Well, you know, fast forward a year or two, they appear to be dancing pretty fucking well.

Microsoft own OpenAI in many respects. Amazon own Anthropic in many respects. And then Google owned distribution and Gemini in a way that is very, very powerful and important. You have to buy one and you have to short one.

Which one do you do buy? Google short aws? Amazon. Google has the advantage of underestimation. It could lose its search business. That knows it does a lot in this because remember I was just talking about the hyperscalers. If you looked at the three hyperscaler execution then it's easy. Let's just do the hyperscaler first because otherwise we don't have to think about retail and search, which are big things. I'd mention on the three hyperscalers. Five years ago Amazon built the category and was the dominant one. Microsoft was number two because they could lever everyone into the Azure. So they were kind of limping onto the field with a bunch of relationships and Google was nowhere to the point where there were credible stories about them getting out of cloud. Fast forward to this quarter. Google's nailed it. Great growth in Q2 as of the recording, we don't know where Amazon and Microsoft is but funnily enough, by the time you produce this podcast, people will know because I think they're reporting tomorrow. But my gut is just looking at the trends that Google is pulling ahead and is the smallest, but by far the fastest growing. Microsoft is roughly equal in scale to aws, admitting that there's always some weird accounting of Azure and has a slightly better growth rate. So by definition of the three, AWS is the hyperscaler underperformer. And I'm 100% certain I could make that case.

If I had to make the bet today, I would make Rory's, but I won't make it for the Captain obvious reason. That one of the reasons is there's unlimited demand and it has its own tpu. Right? As Amazon licks its wounds and recovers, which it's already working code red on, right? When it gets back in the sweet spot of what its customers need, demand will be unlimited.

Agreed. I think you're right, Rayser, which is.

You look at Oracle agreement.

I mean, and I look at this a lot because there's a little part of the contrarian in me that says, could you hit the point where that stops? Because if it does stop, the correction's gonna be super interesting. Right? So I look at it and then I have to. And I'm kind of trying to be the cynic and I'm trying to find some evidence of overshooting on demand. And to your point, Jason, you're exactly right. I can find none. You kind of go, I can't remember, was it Amazon or Microsoft said, you know, biggest problem didn't have capacity? I think one of the other hyperscalers said we could sell more shit if we had more shit to sell. I knew I did. And that is the best thing in the world is to be selling something that everyone wants to buy. And it's just a beautiful place to be in right now. And all those guys are there. Yeah.

And the Wall Street Journal had an article yesterday of what the number one KPI for public company CEOs is. It's reducing headcount and growing revenue. Reducing headcount. That's the number one from bank of America on down. It went through all these big. Not just the little tech startups, everyone wants less headcount. And the answer meta is AI. There's unlimited demand to do that, to drive headcount down and revenue up. So I guess it's going to end. But when we're all just living in the matrix, I don't think it ends that way.

I'm Just going to go on another limb, I don't know, I've had two coffees today. I don't think it ends when everyone's automated and the demand stops. And I'm keeping an eye on this because there's a trade to be done when it happens. I think what's interesting is the creation of AI kind of is happening at hyper pace. So you know, $600 billion of CapEx, whatever, just a huge amount going on. Enterprise's ability to adjust it is still relatively slow. Even though demand is growing, you're still at the super early and I think one of the weird things would be how long can you continue investing 600 billion a year against a $30 billion growing revenue line. Like for example, even Microsoft. It was interesting, they did a bunch of layoffs. Satya did his comment on the enigma of growth I didn't quite get. I think what he's saying is really, yeah, it's pretty cold blooded to fire a bunch of people when you have hypergrowten 40% operating margins. But what he didn't say is part of the dirty little secret is we're going to have to start depreciating half our free cash flow in CapEx through the income statement over the next 3 years. So we're going to have to take people out just to be the same level of efficiency. At some point someone's going to depreciate all these Nvidia chips and someone's going to have to pay for them. I do think there might be a slowdown at some point, some point in time, but right now there's no evidence of it whatsoever. Everyone did the oh my God, Nvidia is in trouble at 140 and now it's at 170. The only trend worth a damn in the last year has been lean into the hypergrowth.

Just so I understand Roy, you're saying depreciation is the primary reason why you'd see that dampening.

No, I'm saying if you continue to spend and run through your income statement, large capex without an associated revenue line, eventually the world says dude, maybe you shouldn't be doing this. And the truth is right now you're getting the depreciation, you're not getting the revenue commensurate with the spend. You're getting revenue growth. Jason is right. There is large corporate demand, but even with the best will in the world, they can only digest so much software in a year, right?

It's David Kahn from Sequoias.

Brilliant. I love that piece because honestly I thought about writing something like it and I was like, oh, it's done now. Don't need to say that. But the interesting thing is it's a great quote. The market can stay euphoric longer than you can stay solvent. If you traded that position a year and a half ago, you'd have said, demand's going to top out. You'd have shorted Nvidia at 100 and you'd be one sad puppy at 170 and forget even the stock prices, the spend by the hyperscalers have gone up since then. So I think the thesis is actually correct at some point. But that's, excuse my language, fucking useless if you're a stock trader. Is it correct today is the only question worth a damn. And I don't know when that happens.

And I think when you bring that back to Jason's point of the $10,000 per developer, I just want to buy more and more and more Nvidia today.

And I go fully priced for that baby. So I'm not in the same place. But I think Jason is right, fundamentally, that insatiable demand is there. The only question is how quickly can it be met? Quick enough to cover the nut.

Can I ask you, and I sound like a communist here, but we have never seen incumbents at this size and scale before with this dominance, where they can drop $15 billion on a team and it's 40 days of free cash flow. Who gives a shit about the money? It's worth the chips on the table. And when you look at Google's asset base, it's insane. Are these companies too powerful?

Powerful?

No. I'm just going to go straight out to the no, because whenever people have been equivocal on that. One of my bigger hobs, whenever we've been equivocal on these kind of questions, you end up with people coming up with dumbass things like the whole AI regulation, like the whole FTC process. So there are some things about these powerful corporations I don't quite like, and I wish we could do nuance and, like, fix some of the problems without going crazy. But if you have to pick one of two worlds, either idiot regulation or just let free capitalism run wild, I'm voting for the latter because I think in the end, Mr. Market will take care of these things.

I don't know, dude. Mr. Market says that Adam Smith's invisible hand. And you're seeing that now with Zuck hiring with an unlimited budget, making B2B hiring. To Jason's point, the biggest problem in startups that will just get worse.

The interesting thing is we have to decide if oligopolies are okay now monopolies, we could. The case is clearer, right? And maybe monopolies are good, monosopies are even more complicated. But we could argue the monopoly dynamic here. All of these that we're talking about, the reason they're interesting is they're oligopolies. We have three to four players, right? Oracle's all of a sudden competitive, right? Massively competitive with Google, with Microsoft, with Amazon. We have OpenAI anthropic grok in friends. Like I think if you want to give up an oligopolies, I quit this venture, I, I quit this business. Let me return capital, I'm going to do an open view, I'm calling it a day, here's the rest of the money. I'm going to write out my winners because if oligopolies aren't okay, I quit like and the, you know if you read a classic textbooks on oligopolies, they compete on features, not price. There's a lot of hints of that, right? That these products kind of are the same price right today and a lot of folks believe that's good for an economy because oligopolies maximize innovation, they don't maximize discounts but they pour all the money back into R and D because they're competing on features, not price, right? If you believe in technology, you might almost want oligopolies, three to four players.

I totally agree with Jason. I just want to come back to your point on toothpaste because I think they're two actually slightly different comments. All the incumbent older companies, the trillion dollar companies are in their own market monopolies. Apple I would argue near Microsoft, Facebook, Google in an old market, search, iPhone, social though they'll resist that definition forever and whatever. Microsoft is corporate. So in the old businesses they're in their monopolies. But Jason's exactly right. In these new businesses where they're putting their money and where the new startups are coming in, what you're seeing is oligopolies, which is what you'd expect. Now maybe fast forward 10 years and they grind down to monopolies. But right now, in the markets that matter, for all the power that Apple, Facebook, Microsoft and Google brought to the table, it's OpenAI and Entropic that are making the run in. So I would argue that says there's simply no need for these whining, worrying FTC people to sweat it. Because the truth is none of those companies executed well. I Mean, ironically, Google, whom we all piss on, right, and say, that's good, has executed the best of the four. They have a model that works. Apple doesn't even have a product that works. Microsoft bought someone else's product, but doesn't quite own it. So it's kind of weird. Facebook is desperately trying to buy product, but it's not like out of success, it's out of terrible psychological need for a product, even though they don't have a business to justify it. So I don't think these guys are too powerful. If anything, I think there are a bunch of rich people on the back foot behind the new trend, desperately trying to catch up.

Rory, what do you do if you're Apple?

Apple?

You're looking at that assessment, which I completely agree with.

I think as a board, you say to yourself, do you have a management team that's too old because that's the only button you have. And I love Tim. Apple is my largest single position. I have agonized about selling it for a decade and a half and I haven't. So I love that man. Thank you very much, my little house. Much gratitude. But you just do wonder, is this the team to grab what's going on in AI, which they absolutely should have a product on? And at some point do you say you just have a bunch of folks who aren't figuring it out and do you make a change? That was the comment, rather than some kind of tactical, hey, you should buy X, Y or Z, look in the mirror and say, are you getting this done now? I think it's very hard for a board to do. I think it's very hard for a board for supernuntaries to do. It's very hard when the numbers are still good. But, you know, you haven't grown in five years. You've done a magnificent financial engineering. Thank you very much again for your dividends. But you're not winning. And at some point the buck stops at the top.

Do you guys think AI is a legitimate threat on its own to the App Store?

No.

Because if I look at Apple today, it's 25% of the revenue is from the App Store, 40% of its profit, right?

Yes.

And 75% of its revenue is iPhone and App Store. So if AI just enables more apps to be purchased and Apple keeps its tax, right, maybe you should stick to your lane in the short term term. Right. If you couldn't get Siri to work after 27 years, if app Store is, is a monopoly to your earlier point, and it's not, not everything's under threat from AI. If it's a beneficiary of AI, right, then maybe, maybe they have the last laugh. Maybe they have this high margin, last laugh of all this AI revenue gets more and more of it gets routed through App Store and they take their 26%. It could be worse, could be worse than taking 26%.

I, I, by the way, I agree with that, Jason, because you're right. When you make the hardware and the logistics of making the hardware the thing you're amazing at and hopefully designed, your whole business doesn't go away. You can talk about Google ironically and say existential threat. To the downside, if no search, no matter what stuff we're using for AI, I think we'll be using on our iPhone. So I think that's a very fair pushback. It's not as existential, but the brutal thing about capitalism, it's like, what have you done for me lately? Congratulations on building the best consumer product in the last 50 years. Thank you for the App Store business and the services business, which is fucking awesome. But did I mention what's the new, new thing? Do you want to run the risk of another waving my arms furiously here, OpenAI type personal companion that knows everything about you? Do you want to let anything get between this and you as a user for your 1 billion user base? So I agree it's not existential. It's not in a way, but it's a, you know, it's the shark thing. If you're not moving forward, you're dying. And they're not moving forward. In AI, Google pays them to be the search provider and maybe they just collect their tax that way. You're exactly right, then that OpenAI can do the same thing. And maybe Apple says we build great hardware. Our hardware has such a dominant place that people will continue just to pay us money. So, you know, we got it from Google and we're fine. Even though the courts are trying to stop that now. We're just going to get it from OpenAI. You are. That's the argument that says stick in your lane. You make the 20 billion from other people giving you money. I don't know if I buy it, but yeah, that's the argument.

I don't know how much OpenAI pays Apple today. Let's assume it's still zero. Right? Which it used to be. I'm skeptical, but you know, if it's, I mean, Jesus Christ, 108 million going through per month. Even if there's a sweetheart deal here, if Apple can just keep 25% of all of that. It's a good model.

Yeah. One of the challenges I would push therefore is owning the hardware is a great business and it has a long inertia factor. In other words, long after you stop innovating, you can keep monetizing, which is I think the stage where they're at now. And the question is at some point do you need to do more than that to keep not just surviving but growing? And maybe it is stay in your lane and just get paid by everyone else effectively for placement.

I love that debate by the way. That was a fantastic discussion for me as an observer. It was, was brilliant. But you said there about management team switch. Maybe Zuck hired again with another stellar hire from OpenAI Chief Scientist or whatever it was. He is going all out. To what extent are we like 80% of the way there in his mind, do you think in terms of his acquisition on talent spend versus this is 5% of the way there. When does Zuck stop this siege?

I don't have a clue. I mean his argument which when you heard the speaker, If I'm spending $30 billion on capex a year or 40 billion, whatever it is now, should I skimp on the five or 10 people who can spend that most correctly? It's Jason's point. The super S tier engineer is spending so much money that you don't care. My assumption is that at some point the marginal return on the next scientist gets negative. So you probably stop spending 100 million bucks a pop. But you know, I get what he's done. He said I'm going to spend 40, $50 billion in CapEx. I better spend a billion, $2 billion, $5 billion to make sure I have the smart people to kind of implement that program. It makes sense.

You know, it's not even that big of a deal because if he wants, which isn't going to happen, he can always just stop. It's only in the past. He can stop tomorrow and say we're just going to harvest classic Facebook ad revenue. We're going to become the next Yahoo and we're going to kind of just be a cash cow. If you're a public company that's massively profitable, the past doesn't matter, does it? You can write off anything, you can fire all the people and you're still obligated with these massive contracts. But you can also write them off as one time expenses or stick them another bucket. They don't matter. They don't matter if you have massive cash you can always do a mulligan at least every eight quarters.

Yes, and obviously they did the mulligan on virtual reality with the whole.

Yeah, the mulligan.

The argument again, he gets to the Are you buying insurance or is it existential? I mean, implicit in that statement is that if you do nothing, if you're unsuccessful in AI, your core business just continues to compound. And as long as that's true, you're right, Jason, if the core business is kicking off, what's it, 200 billion a year of revenue? 40%. If your core business is kicking off 40 or 50 billion dollars and you make a 40 or 50 billion dollars mistake, you just go in the penalty box for a year and you move on. You're exactly right. But of course, part of the reason he says he's doing it is because he says it's a existential. The horrible outcome is you misfire on the new innovation and the new innovation eats your core business. Like I would argue for Google, if they misfired on AI, they wouldn't have Search. Whereas I think your point was right. More right than me. If Apple misfires on an OpenAI type AI product, they'll still be making hardware and it won't be existential. And to your point, if Facebook misfires on Meta, they clearly still have Facebook. And if they Misfire again on AI, as long as they still have 40 billion of free cash flow, nobody cares. So you're right.

Intentionally. Zuck is telegraphing to the market. I'm making this bet very clearly when I was a VP at Adobe. You're trapped with your 40% net margins because you can't invest in anything because the market is expecting cash to reign to the bottom line. And yes, shot new did a good job when they were moving to the cloud of getting started some credit once for a massive generational shift. But Zuck can not only spend all this money, but he can say to the market, give me a little bit. And Larry's doing the same right, at Oracle. Give me a little time. Right. We're going to get back to those classic margins. And the market won't punish you because most public companies are trapped in their margins that are profitable. You're stuck. Like, you can't go back. It is almost impossible for most public companies to actually spend the cash they're generating. So Zuck's got a triple down here because he's getting also a hall pass gas. The market's saying it's okay to spend everything.

Remember, it's not only that the market won't punish you. The more important point is the market can't punish you because in the case of Meta, you're avoiding control.

Well, yeah, your market, but your stock price could be punished.

But it's worth pointing out. That's why I think you're exactly right, Jason. If you're a, quote, normal company, your stock price goes down and the vulture circle. Whereas if you're Meta, your stock price goes down and you're sad and you say sorry and your employees don't do as well and there's dissatisfaction, action, but you still have control. Same thing with Oracle. So I think that you're right. Those two players can swing a bat secure in the knowledge that no one has a voice other than them and.

They can actually spend their cash, which is otherwise trapped. It's trapped with these large public companies. It just builds up in weird areas and it's unspendable. All you can do is repurchase your stock. All you can do is buy something, an acquisition and do some accounting shenanigans. Right? Or repurchase your stock. Most steady state, boring public tech companies are trapped when they're probably profitable. It's great because you're not losing money, but you know, the lay people like, why don't, why don't you invest it? It's not that simple. Your EPS goes down. No one likes that with a normal company. No one wants to see Zoom's revenue EPS go down like it's the whole value of the company today, isn't it?

And this is why Mr. Buffett is right. Once a company becomes ex growth, the most important thing to assess about management is their ability to rationally allocate capital, including sending that capital back to the shareholders, which is, as we've said before, Oracle has done in spades.

Final one and then we'll do a quick fight. It's just Figma is obviously going to IPO this week. I do think we have to talk about this. I don't think enough people are excited enough about it. I remember when this would have been the most exciting thing in tech this week and it would have dominated news. This is, you know, it looks like it'll price at, you know, 18.8. I think it prices 5pm either today or tomorrow, which is yesterday. When this is out, are we excited enough about this? How do you expect this to pan out? Is a pot baked in? Help us understand it as an audience.

I think it's unfolding. If anyone listened last week and this week, by definition, they were glutton for punishment. But it's unfolding exactly what we said last week, which was the price, the filing range was I think 24 to 28 or something like that. They've drummed up the MA. We felt low. They've drummed up demand just in the last 24 hours, they've refiled to, I want to say 32 to 30. So it's worked. The bankers are doing a great job. They've whipped up enthusiasm. Now that they know they're multiply oversubscribed, they've raised the filing range. I'm sure the rest of the drama is pricing at the high end or maybe above the range and then a pop. So the whole movie's unfolding. Exactly, you know, mission executed. There's been a lot of talk about how they're trying to make people be more specific about their demand to better allocate the shares and avoid that pop. But I think think the structure of these approaches means that that's almost unstoppable. So my gut is, and this is horrible, because you're predicting something, you're breaking the first rule of predictions. You either predict the number or time, but never bolt. And I'm predicting something now that by the time this thing comes out, people will know if we're idiots or not. But my sense is it's hard not to imagine this thing pricing and then popping very well because the structure of how they went at it is such that there will almost certainly be that money left on the table feeling. But I'm wildly excited about it. I think it's great, by the way. I think everyone gets excited once it prints. It's all just talk now, but the reality of four VC firms each making a billion dollars, that'll focus the mind.

You know, it's funny, I just remember September 2022, Saster Annual was in September. Then the Adobe deal acquisition happened. 10,000 people talked about nothing but Figma, nothing. It was a fascinating deal because the 2021 bubble had implode, had crashed, right? And all of a sudden Scott Belsky and Tim are heroes. They're going out in 2022 and paying 2021 prices for this scrappy startup, Figma. And it was people's jaw dropped, right? It's like this was the deal of the century, right? Fast forward to today and in my ecosystem, people aren't talking about it. Listen, four VCs making a billion dollars, great topic for the pod, right? Don't get me wrong, but it's just boring to people today. And it was 10,000 people, executives, the crowd was hushed in 2022, September 2020 you no one ever nothing to talk about and now let's, you know, I might burn 6,000 on my cloud credits this month is Lovable did what again? I mean it's just, you know, hopefully this is a 30 billion dollar market cap company for all of our sakes. But the zeitgeist has been lost here in traditional software. Even the best of the best of the best. Figma is, is S tier. It's the. Maybe it's the, but it's, it's not capturing our imagination the way it was and maybe that's okay. B2B software used be to be boring. Maybe it's super boring again.

First of all, I just want to cue to Scotty Schlafer the interview, the five minute interview when he says you win the Masters and then five minutes later it's like the press is asking me how are you going to play next week? This feels like that. It's like venture returns $30 billion and all Jason's got to say is, well, what's going on at Lovable?

It's the vibe. We're all vibers now.

There's no doubt that once you announce a 20 billion acquisition, everyone's kind of mentally ran the cash register so you don't get to, you know, it's odd to take the victory lap twice, but I totally think they deserve it. But I think the more salient fact is what you're saying is there's still going to be a few more pre AI IPOs at scale because there's a couple other companies like that, like Canva and stuff. But you're right, the hype cycle has moved on to the new story around what's going on in AI. Which by the way, doesn't mean that massive amount of money can't be made in other areas. And even in, you know, I think if you look back, semiconductors. Semiconductors became uninvestable by venture in about 2005 and in the subsequent 20 years in the public markets, people made out like bandits. It was the best performing sector ever, even excluding Nvidia. So what's happening is startup activity in the space that Figma plays is not going to be a thing anymore. Imagine you're not going to build a non AI collaborative design tool. You're not going to build a non AI any kind of B2B software. So as you say, Jason, the excitement, the new, new thing is not that, but that's a function by the way of it taking 12 years to go from a startup to an IPO by the time you get to an IPO. And I think we're going to see this across the board, by the time companies that are 10 year old get to an IPO, you probably are half a tech cycle or a tech cycle behind. It's terrifying. I said this to an lp, our holding period is now longer than the tech cycle. That's a terrifying fact. Figma's holding period is 12 or 13 years. And you're now in a world where they talk in the S1 about we're going to have to adapt to AI now. It's going to be an amazing company, it's going to be great and I think they will adapt to AI, but it's just we're talking here about intangible things, not money things. And I usually prefer to talk about money things but you're right, Jason, from a buzz perspective, the caravan's moved on. But on the other hand it's moved on and deposited 20 to 30 billion dollars. I think everyone involved will get over that, their sadness very, very quickly when they look at the stock search and.

When Figma nails Vibe coding, man, that's going to be what we all want.

But I mean they're going after it with Figma.

I know, but it's what we really want. We don't really want because if you look at the replits and the lovables like today and the world's going to change and I'm a super fan of both right now, sending my bumps. But a huge use case today is prototyping. If we're being realistic, it's prototyping apps and it's very powerful and it's very fun and the pixel perfect osity is terrible. Like the apps look, you can smell these apps and they're not what real apps look like. So as soon as I go into Figma and do this and it looks like I really want it to look like, like a designer, I'm out. I'm out of anything that's not pixel perfect. I just don't want it. It's just like a squarespace site. I don't really want something that looks like squarespace and I can smell a lovable or replit app within six seconds of hitting their website. Figma isn't going to disrupt programmers right like the way lovable Replit is. But this prototyping, I don't really want to do it in these apps. Listen, you're closer to it, Harry, that I am, but I can't imagine this isn't a very interesting war in 2026.

The war between Vibe coding and Figma.

Right now they're great. You can go into Bolt or Lovable and Replit in different ways and in some cases in one click go from Figma back and forth. It's great. But today they're great partners. It doesn't make sense that they will be great partners for prototyping in 12 months. It makes no sense. And Canvas saw this early right? I don't know whether they'll really get there but they saw that's why they went really tried to go really early into this. They got it right.

I think Canva's product will much more compete with Lovables being the much more consumer friendly children doing science project, mothers doing businesses. I think the designer to really average consumer bluntly is a very different product paradigm to design for. And I, I don't see that competing.

Makes sense that Canva is a bigger competitor at the low end. Right. And you know that's why Wix, Spot Base 44 whatever. But I, a lot of developers are using these products to prototype the folks that have helped me as a Vibe coder. These are CTOs. I had a CTO reach out to me at 80 million. He's like I just didn't want to distract my team. I'm building my own app in replit. Here are my 10 tips and so I would rather do that in Figma that use case so it just the comp as you the competition is at multiple levels. Right?

I'm tracking now yeah because some part of the Figma user base is you know more picture perfect make full on built out apps. But some is rough me up what this thing would look like. And your point is? You might want to do that now using a tool that actually builds you a vaguely functioning prototype.

Well even more like listen mad respect for Figma but as an end consumer I hate it when I get a Figma link because the thing doesn't work. I don't want to click through from like this is why working with designers I want to blow my brains out. I don't want static stuff like when you send me my Figma. Okay Now I'm not, not expecting that it works in production right. I'm. I want it to work. I don't want, I don't want, I don't want design elements. And so as soon as my Figma works out of the box it's Vibe coded. That's all I want.

And then the fun thing for those guys, I Mean, look, the very best companies run by founders who see this, who've demonstrated, and in my view, these guys clearly have the ability to bounce back from stuff, are going to be all over this shit. And you're right, 12 months from now, it's going to be. If you don't have the billion dollars at stake in it, it's going to be fun to watch what kind of products these guys roll out to be competitive with parts of either the coding, the cursor, or the prototyping marketplace, and how that design all the way through the code marketplace shapes out. Because, look, there's a big pot of money here, and everyone's trying to make sure they get that bit.

We're going to have some fun here. Okay, so we're going to do a Kalshi quick fire, but I'm just going free rogue on this one. And I tweeted this last night because I was just super freaking intrigued to see where everyone landed. And so the tweet was, let's play a game. End of next year, over, under. Rory, you're gonna love this. I can see it in your face. You look thrilled.

There's been no situation. You haven't shared the information. Okay, go.

You look like a sad puppy. Over. Under. End of next year, number one cursor hits 4 billion in ARR by the end of next year.

Over.

Under.

Under, but close.

Yeah, well, you think. Harry, help me multitask. We're coming up on a billion today, right?

Yeah.

And the bet is 4 billion next year, right? What is just my L4M model, say, just trailing velocity, say that gets me to almost 3 billion or so, doesn't it?

Yes, you get to 3 billion. Yeah.

So, okay, now, now use my math of at least spending twice as much per developer, bare minimum. Right.

You get there.

You're right. I gotta go. Yes. On this one, the 4 billion, you're exactly right.

I buy that. And that, by the way, is also proof if they're doing 4 billion, I don't believe the gross margins are as negative people say. But if the gross margins are 50%, that's another 2 billion coming on Tropics Way. So it's been good for them too.

Yeah. I don't think the gross margins are negative at scale. At a truth, they're not scale. I can tell you, as someone who keeps paying these Replit checks, they ain't negative. I guarantee you Replit's gross margins are pretty good.

Okay.

I bet they're in the 60s even today. I could be wrong, but they're not losing money, at least at the gross margin level. There's no way they're losing money with what they pay what they charge.

Right.

It's a high markup up to give you this environment. Right. It's a high markup on those tokens.

Lovable hits 400 million ARR by the end of next year.

End of next year. I have no doubts. Yeah, that's easier to do the math. One to 100 in six months. I mean that would be a colossal F up if it doesn't get to 400 as crazy as it is. Right.

It's interesting when I look at those two bets, they're not dissimilar in the sense of a lover ring at 400 million versus cursor ring and at 4 billion. Right. I'm just trying to assess the relative likelihood of the two. I think the cursor bet's a little more sure. Look, the trajectory of lovable as you know better than me, 100% points to that. The only thing that could bite you in the butt would be some kind of churn explosion. And you obviously have the data and I obviously don't. So I'm just trying to come up with hey, it's your job as an investor to think what could prevent that from happening. Yeah.

The bull case is easy to make to pull out of our rear. The bull case case is easy. We could do that.

The bear case is you were wrong about long term duration of subscription and you know, you would argue Jason, that's not the case because you're now a guaranteed vibe quarter subscriber.

Final one. We've chatted a lot about predictions. The final mother of predictions. OpenAI is it over or under 800 billion valuation for a company When? By the end of next year.

Oh.

Reportedly raising now between 360 and 380 under. Why?

I'll tell you what I'm doing mentally I'm just looking at the step ups in the rounds as you'd expect are getting smaller. You get 2 or 5x and then you have you go from 80 to 150 which is almost a double just under 300 to now. 350. I don't know if they raised at 300 and there's an hour 350 going on. I'm just guessing. Do you see another doubling round by the end of next year? It's a lot to have happen. It might be worth it, but another price round above 800. Don't know.

I'll take the contrarian on you there and say that because of GPT5 and because of Kodak's being two very significant breakthroughs. They'll have enough. Plus Jony, I've coming out with something, a first product. The three combined will be enough to get enough excitement over 800. I'll take that over.

Just two quick thoughts on it. One, I think there is so much money and more invested in this company. Sometimes these valuations are just willed. People are too deep. Everyone's too deep into OpenAI. And if OpenAI needs 800 to survive, OpenAI will, will find 800. It may be through investors that get other things. It may be through existing investors. It may be through weird combinations of offshore money. No one can afford for it to lose anymore. There's so many stakeholders that if that is what needs to be solved 800 it will. It will be solved. And I actually think the meta issue, you know, the. The CEO of Anthropic had this thing this week where he was explained because they're supposed to be the good guys, right? This. We left open AI to build something safer. And he's explaining why we have to take money from the Middle east now we have no choice. We. His point. I guess the flip side is he didn't want to that this was lowering their f. Their. Their pristine ethical values to take money from the Middle East. But his point was we have no choice, right? So I think the bigger issue isn't 800 billion because people are. Are invested. The bigger issue is when will all the capital on Earth and Mars be exhausted? And there is. That is a finite number, right? It is a finite number. Trump has already lassoed into Stargate with David Sack. I mean, Rory can help me figure this out. There is at some point open I could consume all available capital available to it in the Western world or in the Eastern world.

Talk about a more nuanced version that. Because I do. It's actually an interesting question and I think Paul Kadrovsky did a piece which is just looking at the Capex investment in AI as a percentage of GDP and comparing it to two other booms, the dot com boom and the railway boom in the 1840s. I loved it because again, I was trying to think through one of the comparables and the railway track analogy is a good one. So we're running now at about 1.2% of GDP, which is basically 1.2% of GDP, is going into making Capex data centers, which is a little above the 1.1% of GDP that was going into bandwidth at the top of the 99 2000. So we were already slightly bigger than the bandwidth boom, and we know where that ended. But interestingly, and I did not know this, it was 6% of GDP in the railroad era a year. So at peak railroad mania, it went to 6%. Now, as they pointed out, in that case you were building an asset that lasted 150 years and in fact just today did a huge huge acquisition. Whereas in this case you're building an asset that appreciates over three years. So it's not like with like, but just to kind of give a sense of the outer bounds to your point, Jason, of how crazy could this get? We're already a bigger boom in terms of capex than 99, 2000, but we're nowhere near as big as boom as the railway boom. The pleasing thing about that answer is it allows both parties to continue to feel great. If you're a nervous guy, like I sometimes am, be like, shit, this is crazier than 99, 2000 makes me nervous. The Internet was big. Dunno if you're an optimist, you're like, hey, we're only spending one quarter of what we spend to build the railroads, and intelligence is better than railroads, surely, so we're fine. So it's a nice piece of analysis that literally doesn't allow you to conclude anything. Right? My gut is I don't think you can get to 6% of GDP.

Apollo is 4.4% Apollo.

Now I'm winging it, but I'm totally willing to do it that that's 4.4% of GDP across eight or nine years, which is an annual spend of about 3.4%. It's not a single year. There's no way we spend 4% on Apollo. You know, we were only spending 6% on defense, so no if I believe.

Reddit, which is always correct, but four point, it breached 4.5% in 1969 and was just under it in 1968. 4.4% of our whole economy. And in all seriousness, I think that that's why Sam Altman named it Stargate. I think everything he says that that seems simplistic and calm and almost cute. When he says Stargate, he's like saying, listen guys, we spent 4.41% for several years on Apollo. We should spend more on AI. Took me a little while. I don't think anything he says is flippant. I don't think it's flippant. I don't think it's. I don't think it's off, off, off the Cuff, I think he's, he's doing his own nerd suit, nerdy style of clip. Their communication Stargate is Apollo, we need it all and David Sachs is making it happen.

So 6% on railroads ended in a bust. 4% on. I'm going to give you your 4% for two years and I'm going to check it later. But let's say you're right. It is worth pointing out in 1970 they just stopped funding NASA like crazy.

Because the crash, if you look at this, if you look at this chart on Reddit, the crash is bad man. Actually peaked in 1965. Peaked in 1965.

It almost take, We've got, got the moon, we're done. Let's kind of recycle the dollars here. So 4%, then it crashes. So yeah, you can look at 1.2% in bandwidth and it crashes. So we're clearly above the possible crash limit, but below the outer bounds. I don't know what to make of that. Right. I don't know if you spend as much per year for five or six years on this as you do on railroads. We'll see. And this is why, going back to what I said earlier, you can love the long term trends, but at the same time you can say to yourself at some point there could be a break in the spend to bring it back to your point. It's also why you have to go to sovereign wealth funds, because you need, I mean we're now so irrelevant in the context of financing this that it's almost laughable.

I think I'm going to get in trouble for this. Laughable that that's a moral debate on, oh no, I'm sorry we have to go to Saudi for money. No shit you do, because that's where the money is.

I also think it's fair to them and I'm trying to don my. They obviously from day one, Antropic was set up very much to be more angsty than most about trying to do good. And it's interesting if you look at both companies, I mean if you just read OpenAI and Antropic, it's been a long journey from we only want to do good to oh my God, we need to raise a lot of money. And it's almost touching and it's starting off with innocence and then coming to grips with the fact that it turns out it's very hard to raise $200 billion for charity, whereas $200 billion to turn into $800 billion. You can find pretty much anyone to do it. Basically watching a whole bunch of folks realize that there's a reason why capitalism exists. It's actually very, actually life affirming. As a capitalist. You can go, these are people who a priori would have been appalled by all this. But when they went out to actually pursue their dreams and they wanted the capital to get those dreams possible, they had to join the system. Yeah, welcome to capitalism.

To tie it back. And that's why I think open if OpenAI needs to raise it 800, not wants to if it needs to, it will solve for it. Whether it's sovereign wealth, money, whatever marked up stuff warrants, we don't see a backdoor. Promises, promises for access.

That's actually an interesting point.

It'll solve for it.

That last one will be the. I mean, we didn't talk about it, we didn't have time. But you're right, Jason, part of the asset you have to monetize is your ability to tell, you know, large sovereign wealth, you know, you can tell. I mean, I think OpenAI is a way to telling it. A domestic sovereignty story will give you, your model, will give you a thing. And people aren't going to put an ARR multiple on that. They're going to for the right, they don't care. So I think you're right. I'm not sure It'll be worth 800 but again, one of the reasons I like doing this is I change my mind when I hear good arguments. You're right, Jason. They probably could find a way to back into it, which is different than saying it'll price the day it goes public in a public market, which will be a very different discussion team.

I got to be honest, I think the best show we've done, I mean for me as a spectator, I've enjoyed it the most. The debates have been fantastic. Bravo, both of you, really amazing fun. Thank you for this, guys. Now I want to make those shows the best shows they can be. So please let me know what we can do to make them better, improve them. If you want us to have a guest on the show, I'd love to hear your thoughts. Email me harry20vc.com and you can find the show on YouTube by searching for 20VC. But before we leave you today, let's talk about agents. Specifically Piper, the AI SDR agent brought to you by Qualified. The agent marketing era has arrived. And if you're a B2B marketing leader looking to scale a pipeline generation, Piper, the AI SDR agent. Wow. It is here to help. Piper is the number one AI SDR agent on the market according to G2. And hundreds of companies like Box, Asana and Brex have hired Piper to autonomously grow inbound pipeline. Fucking sign me up Anyway, Qualified customers see massive business impact with Pipe Piper 3x increase in meetings booked and 2x increase in pipeline. Wow, that is some results. Hire Piper the 1 AI SDR agent and grow your pipeline today. Learn more at qualified.com 20VC that's qualified.com 20VC with the 20VC spelled out in letters for goodness sake. And while Piper builds your pipeline, Attio gives you the CRM power to close and grow those relationships. Attio is the next generation of CRM built for the AI era. Fast, flexible and powerful. No, it's not a sports car, it's a CRM system, baby. It is Attio and it takes less than a minute. Sync your email, your calendar and you'll instantly get all your relationships enriched in real time with incredible data, no manual input needed. Attio also integrates with your existing tools and syncs with your product data to deliver an AI native platform that's tailored to how your team actually works. You can model your CRM around your business, automate complex tasks and surface real time insights all in a platform designed to scale with you. With Atio, AI isn't just a feature, no no it is the foundation. It's powerful. It's AI automations, it's research agents that transform your go to market motion. It's a data driven engine. From intelligent pipeline tracking to smart approach product led growth, fast growing startups like Flatfile, Replicate and Modal are all experiencing what's next. So get ready to build without limits and start now. Attio.com20VC and get 15% off your first year. That's attioattio.com20VC. Okay, pipeline sorted. Woohoo. Now what about your own legal team? Enter Logora. Logora is the category defining AI platform that's fundamentally reshaping how legal work gets done about frickin time. Empowering lawyers across tier one law firms and in house teams to achieve more with greater precision and confidence. So Ligura does this by solving really concrete tasks such as document extraction, reviews against a firm playbook and suggesting well crafted markups directly in Microsoft Word based on your preferences. My Word, that is a topic list of conversation that will not get a second date. But anyway, the adoption of legal AI is surging across the world and Lagora is at the forefront of this shift as the chosen partner to 250 industry leaders in law across more than 20 markets. The likes of Goodwin, Bird and Bird and Deloitte are making daily use of Ligora platform to review and research with Precision, Draft Smarter and collaborate seamlessly. They recently also got an $80 million Series B from Iconic. They're backed by General Catalyst, Redpoint, Benchmark, and YC All. Also, they operate out of New York, London, Stockholm. Yes, they're Swedes. Always a wonderful race. With over 100 employees from some of the world's leading global law firms and tech companies, the team is growing super rapidly. They're just freaking awesome. Just go use Legora. Honestly, I love Max, their founder. He's just a great dude. Go find out more legora.com as always, I so appreciate all your support and stay tuned for an Incredible episode of 20 Sales Tomorrow with Databricks. CRO Ron Gabrusco.