20VC: Figma's IPO: The Full Breakdown | Index Returns $3.5BN on Two Deals | Why Melio's $2.5BN Acquisition is "Discouraging" | Asana's New CEO and the Great Founder Exodus | Oracle's $30BN AI Deal and What it Means for Incumbents

The amount of money we're investing in AI right now at 300 to $400 billion a year in Capex. Will you get the near end roi? Will it be an economically rational decision when you look back two, three years from now? I don't know.

My rule is if you haven't grown because of AI, you failed. I think Venture is just going to rip. You're getting a lot of money back as an lp, right? Just massive amounts of cash coming back.

This is 20 VC and it's my.

Favorite show of the week. This is the holiday edition of Jason.

Lamkin, Rory o' Driscoll and me shooting the shit now. Today we cover some incredible stories. We cover figma dropping their S1, we.

Cover the two and a half billion dollar Melio acquisition.

We cover PE being the saving grace for Venture.

Or is it? We cover the incredible tale of Index.

And they're returning three and a half.

Billion dollars in a matter of months to their LPs. This is an incredible discussion. Rory's in Italy, I'm in Essex.

It's a great holiday show.

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Well listen boys, I am so excited for this. This is the holiday edition. We have some travels from two of us. Thank you so much guys for joining me on the travels. Rory and Jason for staying up late and making this happen.

A lot going on in the world of AI and more.

Alrighty, let's kick it off. So Figma filed for their S1 last night numbers. Pretty phenomenal. You have 821 million in revenue, 46% up year on year growth. You have a billion five in cash, no debt. There's a lot to like about this.

And so I wanted to hear your.

Thoughts on where you think it will go out at and how you analyze this. S1 dropping.

There was a lot to like. I mean I went through it literally on my phone late at night. And went, wow. And you didn't even mention one of the more impressive ones, which is kind of the profitability and free cash. Free cash flow margins last quarter like 40% plus so, so upping positive. Free cash flow positive, growing 46%. So again, rough math on an iPhone on a small screen it's like rule of 80, right? Plus. So it's a company clearly tracking a billion dollars at rule of 80 plus or minus. I think it's going to get a great reception for sure.

This is just games to figure out what the model is going to be. Right. Is it going to be 20 billion or 25 billion or 30 billion? Will they listen to Bill Gurley? I mean Figma is not consumer, but it's got a big enough brand they don't need to leave money on. I doubt they need to leave money on the table. Right. So it's a minor issue. But you know, the only thing is at 20 billion, which is just what Adobe was going to pay almost 24 months to today, 20 billion is 20 times current revenue. Right. Even at 20 billion, it's not cheap. The overall NASDAQ's on fire. But you know, Bill McDermott from, from ServiceNow, just joined, that's about as good as it gets in the enterprise. They're not trading at 20x. So I actually, I'm not smart enough to know how much it will trade above 20 and how that compares to the IRR of selling to Adobe for cash and having no lockup and calling it a day and going to work as a junior SVP at Adobe for four years.

Yeah, I think the last sentence says it. Oh, look, to your point, it's probably not a better irr because by definition, you know, burden the hand two years ago is better than a bird in the bush now, but it's a much better way to live your life. I mean for the team, frankly, for the investors, I mean it just looks like a great company and presumably going.

To have a great run.

I think it's a great outcome for them.

You know, it also, you know, I mean Scott Belsky was right, they should have bought him. People made fun of them for overpaying. Right. 20 billion. Right. But I think the beauty is if you're Adobe, you can be a little patient. It's okay if you pay two years ahead if it's a winner. Right. It doesn't really matter. And people just thought they were paying through the nose and that this was a flashback to a 2021 deal. Fast forward today. If Adobe bought it, they would have a pretty good deal. Especially because they're synergies. They would have a pretty good deal.

Jason, what would you pay two years ahead of if you were Adobe today?

You know, when I was reflecting, you know, you, you kind of joked about questions you should ask Mark Benioff when we did this last time, right? And when I interviewed him I dug deep on the M and A and you know, years ago, John Samorgi, who's run Corp dev there since like he was, I think he was like a double digit employee, right? He's been there like 20 years and I caught with him, he's like, we're just really good at the big stuff. We're really good at buying a billion dollars or more of revenue and not and growing it, right? Mulesoft, Slack and others. So maybe that's the same lesson here. Adobe should buy, should stop screwing. You know, if you don't have the talent, don't screw around on the little stuff. And what else can you get that's approaching a billion of revenue that's synergistic, right? I mean Adobe's at 20 something, right? So that would have been another 10%. That's something. I don't want to say the obvious dumb answer of Canva, but you could do worse. It would be an easy glom on.

I think the beauty of the FIGMA acquisition was it was market expanding for Adobe and you know, reading even the S1, I think they said something like 30% of their users are developers, only 30 or 40% are designers. I mean it really has become a pretty pervasive piece of software for anyone involved in building software products. So the first thing he says, Jason, is absolutely correct, which is it was a great call by Adobe to try and buy it. There was a little bit of a thing for a while there when the deal cratered that Adobe's mentally moved on to Genai and obviously they have and figuring out their Genai strategy and how that reflects in media and how that reflects in video is really important. But the more you look at these numbers, the more you realize that could have been a really central key plank, a separate cool key plank for what they're doing. In other words, that kind of exposure to developers, exposure to designers in the software industry. So yeah, it was a great acquisition and you know, I'm sure they're looking at going, damn, wish that one hadn't got away.

You know, it's funny looking back on it, I'm sure reflecting on it now, I'm sure Scott Belsky talked him into Doing it. Dylan talked him into doing it, right? Scott Belsky, our, Our startups were required almost the same time as Adobe. But he went back from Benchmark, right? He resigned being a general partner at Benchmark to be Chief Product Officer at Adobe. I never got the call, by the way. I never, I was. Wasn't even like fifth in the line. I never got the call to go back to Adobe, even though I built a much larger business by revenue, maybe not by impact. Never got the. You know, everyone said he put his career on the line to do that deal at an insane price, right? But I think he had to talk him into it. I don't think. What Does Dylan care? 20 billion, 18 billion. You don't care. It's just so much money, right? The life lesson for founders, it's tough, is, look, Scott's gone now, right? It's always a weird thing when you do M and A, and it's not with the CEO, because there's a good chance you outlast them. There's a good chance you outlast your sponsor as a founder when you're acquired.

You joke, but it reminds me of like actually venture deals and the biggest problem that I see getting done today, which is companies being orphaned and junior partners moving on and then having no champion in the firm and actually being bluntly up shit creek without a champion.

Internally, you're right across the board, you're seeing a whole bunch of change. You'd think that any partner would stand up for the firm and represent the firm. But it is funny when it's not your deal, that willingness to go the last mile to make it happen to, you know, get on the plane to hassle the voice, you know, the CEO, to try and get around together to save the company. There's an argument that says the new person is actually a little more clinical and maybe they only actually invest in the very best companies and maybe the other guy should die. But there's no doubt that when you become an orphan as a company, your ability to get something done in that venture firm does go down. You know, parenthetically, I would say some people wrestle with the choice. Do I stick with the. If the company is. Do I stick with the partner who's moved on but is still willing, you know, the company, the VC firm, is still willing to say, hey, they can keep their board seat. In general, I found that doesn't work over time because you need to be in the room where the money is allocated. Because I'm realistic enough to say if you have a venture Board member who's an amazing board member but can no longer speak to the money because there's no longer at that venture firm, then to a rounding error, they're useless. If you want a great independent board member, put them on or her on as an independent board member. But you need to have people in the room to speak for the money when the money is needed. And that frankly is one of the top jobs that a venture firm has to do.

Okay. So I actually know a firm and they say, hey, reserve decision making so broken that we have a different partner that makes the reserve decision. I think that's useless because they don't have so much of the historical knowledge and data of how that company's progressed changed. And then you come in as a net new investor, they say, oh, it means you come in without bias and without any lagging indicators which could be determine your decision making.

I think it's great idea to not have the partner make the reserve decision. Right. I like this because when I worked at a third party venture capital firm, when people would just want to do the like, just bail out their B's and C's all the time, like half the partner meetings were like, you know, Stebbing's Lemkin Corp. Back to 20% growth, let's put in another 4 million and those checks would often be gone in a year. Like the company was going under anyway. Right. I'm not even talking about one and twos. I'm talking about three and fours people want to put money into. Right.

I didn't get that confidence though, because every additional dollar you sink in, you're putting your name more and more on the line. If I don't have something that I don't feel great about, how I don't feel so good about concentrating more and more if it's my firm or not my firm.

Everything goes back in life to incentives, in my opinion. So your incentives as the ostensible leader of your firm are very different than your incentives. If you are the 15th most senior GP in a much larger firm, well, you're going to rise and, and keeping your companies alive. And frankly the overall return profile of the firm as a whole, I'm not going to say it doesn't matter, but it's hard to weight it highly. So you as that junior partner have every incentive to find every marginal dollar for your company to keep them alive because something might turn up. So it's a very different decision in that case. I can't imagine having someone else make those decisions. But equally it shouldn't be the partner making those decisions. I mean you have to have a combination of partner recommendation and a fairly robust group process because it becomes, I mean it's a very interesting discussion of reserve allocation because it's a finite process. You want to allocate as much as possible in your good deals at the lower prices when you can. But at the same time there is some value. If you end up naked and defenseless on all your deals, on anything other than your best deals, if you don't have any capital to play with, you do stand a chance of losing significant economic value.

My only point to add here is when I did fund one, I put out my five top performers that would be fund returners after an 18 month deployment period. And none of those five are actual fund returners in any way. And the five that will be I never had as the fund returners. And so bluntly, I think we overestimate our ability to predict our winners. And I said this on Twitter and Roger Aronberg at IA very much agreed with me. And so I think it fundamentally challenges actually reserves as a model entirely at C to A because what? Because you're unable to predict your winners. And so when you do allocate reserves, you essentially allocate to the fastest growing, not necessarily the best long term sustainable capital or value drivers.

Well, that's for sure. Or you put it you and you have limited reserves from a cedar smaller fund, you put it all in your fastest growing companies like 100 fucking percent. There's only one criterion, triple digits growth, you know, double digits per month. That's it. What do they do again? Sass for haircuts.

I'm in. I think your statement is possibly true at the seed level, which is not what we play. Right?

100%. I think between B and C you have a lot more to play.

I think so. Exactly. I mean you're even the truth is this what I say to people is, you know, we do it when you have product market fit. Once you have product market fit and early acceleration. If you get what you underwrite for the first two years after the investment, you're probably going to make money. And if you don't, you're going to struggle. I mean we've done that. I think I shared with you before is that when I look back two years in, if they're at or within 25% of the underwrite plan, you know, our probability of making a 5x goes from 30% to 70%. So at the product market fit stage, I think what you said Is not true. In other words, you can in fact tell your best quote unquote, your best deals. Not with 100% certainty. I would have said 70% and I'll come back to that. I'm not sure it is 70 anymore. That is when reserve allocation gets tricky because you have one the incentive to put a lot on the good deals. On the other hand, there is some value in having capital even to defend your mediocre deals with small amounts of money where financing get tough. It's not going to change your life. But you can take a 0.5x to a 2.5x by nurturing it along and finding a way to make a big difference and avoid a big hole in the fund. So there is some value in having some capital there, but the vast bulk of it should go into winners.

Rory, have you ever had a pay to play workout? I was doing a deal the other day and the lawyer's like, hey, you could lose your rights. And so in a pay to play, you could get fucked. And I basically responded and I said, I've spoken to many of the greats and all of them have told me very simply that in pay to plays, when they participated, it hasn't worked well. Has it ever worked well for you?

First of all, it never works well. I mean, my first rule of thumb is this. When you find yourself going to look at the legal documents in a venture deal, you're probably on your way to losing money, right? So the minute you start down this road, you've made a mistake. So first of all, let's start with that. So you definitely go from the, you know, if your chance of a good outcome on a normal deal is 30, 40%, a great outcome is 30%, you're definitely going to a different place. Whenever you're in these kind of trouble, your probability of making big money is very low. Famous example, however, it's worth pointing out, he died last week. FedEx. There was a down round in FedEx, like six or seven rounds in. And I think Weispeck and Greer, which is the antecedent of lightspeed, played pretty aggressively there and made out like bandits. So that is an example of a down round in a network business where it was the tipping point round and the people who played made out like bandits. So it can work occasionally. But you're right, the statistical rule when you're dealing with these trouble situations is the likelihood of a home run win is low. It's not zero, it's low. And that's why it should be a small amount of money is you're saying, can I manage this thing to get it to a decent exit versus just letting it implode and blow up.

You know, the second startup I worked at, Harry had a pay to play and it IPO'd, which unfortunately went bankrupt between that round and the IPO. So everyone lost all their money. So you could argue whether it worked out for the VCs, not only the ones that did the bankruptcy round, but it did work. Like it bridged them to the ipo, but they did have to go bankrupt.

And then you've got the challenge of the opportunity cost of that cash though, Rory being like, hey, do you want to put in that money to do the 0.5 to 2x? Which don't get me wrong, is an incredible transition, but versus putting two to three net new lines on the portfolio.

Yeah, no, you're right actually the real opportunity cost is the time. But I wrestle with this. I would say it's a weakness of mine. I would say sometimes you spend too long working with a company trying to work it out. But you know, it's funny partly, I think you get connected to the entrepreneur and you want to help them. If they're willing to keep on going and they have a credible plan to keep on going, you kind of want to try to find a way to help them. And you're right, probably on a cold blooded basis you shouldn't. But sometimes part of this business is not all cold blooded. You form these relationships with people, they crank for six, seven years, they hit a tough spot for them. Remember the difference between going bus spectacularly and laying off 100 people and maybe getting a 2x for the money might well be $10, $20, 30 million for them personally. So I will admit that weighs in. My rule of thumb is I tell the founder is look, I'm totally willing to help. I'll come back to the analysis. I've run the analysis on the money overall it gives a decent return. You tend not to lose money on the bridge is you just don't make as much as you think. So my rule of thumb is don't make this time hard as well. If you have a clear plan that you're going to execute and you're going to get it done and you're not going to dink around, you're going to figure out a way to cash flow positive, figure out a way to build value here. I will support you with a finite amount of money if on top of that you're going to make a drama. I don't need it because it's the time that kills you, Rory.

You are going to have even more fans after this.

I'm actually thinking of one deal where we've eked it along for three years. I haven't had to put money in. And the guy, Lily survived on fumes and the promise that if he ran out of money at short notice, we would cover his shutdown costs. So I haven't even had to put the money in. And I'm just so impressed with the guy for surviving that long, and I'm glad I did it. Who knows, we might make 0.5x, but that guy kept going, and I give him more credit.

I remember a founder I had to completely bail out from fumes with more money than I had. And that company's doing over 300 million today. And I caught up with the founder the other day. He forgot. I have a second story like that, too, if it's. I wish it was the only one. I could tell you another one that the founder forgot, but this one really stunned me. Literally had. No, it wasn't like sort of forgot. Literally did not remember that that was the way history had occurred.

It's like child, but you just. You just forget the pain.

The other thing that's just insane with this guys is it's going to be three and a half billion back to Index between this and Skale in a pretty compressed amount of time. I mean, I know there's obviously the hold and the lockup, but it's pretty fricking phenomenal in terms of liquidity and numbers back. We have a lot of the numbers. The two firms that are able to do 3x DPI on fund sizes this big is Founders Fund and Index. Unbelievable.

I think Venture is just going to rip. Dave Clark said on LinkedIn the other day that just massive amounts of cash coming back mass. I mean, you got to be in the good ones. Like, you're looking to get so much back on the Superhuman deal. But if you're in. If you're in Kleiner and Index and Sequoia, you're getting a lot of money back as an lp, right?

Yeah. And I think there's two things. One is at the macro level, you're right, cash is coming. And at the macro level, what's happening here is the fewer, bigger winners, comma, and it's what I always say to people, it's fewer, comma, bigger come at winners, you're seeing less winners, there's less IPOs, but because they've grown so much longer, they're just so much bigger. So when you're in a winner like that and you're in early, Instead of getting 400 million or 500 million, you're returning $2 billion plus. It's the inevitable outcome of the concentration on the longer holding periods. Now. Second comment. The real skill is making sure you're in one of those that get it and you add all credit to index. I mean, it's an amazing achievement to get that Excel just had scale and the stablecoin deal. Absolutely. It's a great time to be right. And I always tell people in this business there's lots to like about this business. The terms, the hours, the money, et cetera, the intellectual interest. There's only one problem. In the end, you gotta be right. You gotta pick the right deals and be in them.

I think this is the problem though. When we look at fund sizes of today and saying how large they are and not actually picturing 10 years out to what our outcome sizes will be in 10 years time because bluntly, you know, $30 billion exits for your figmas or potential $30 billion or $25 billion IPO would have been inconceivable 10 years ago when the figma investment was made. Honestly.

Yes, inconceivable.

And so what is that outcome size in 10 years time? Is a trillion dollars more likely?

People always make mistakes, Harry, when they extrapolate trends ad infinitum. I don't think just because the outcome here is 30 billion. It used to be 1 billion. The outcome 10 years from now is 900 billion. I just don't think the math works like that. I think there's been a step function change in the stage at which companies go public. I doubt it will, you know, I don't think it will continue like that. I think you're seeing, you know, listen.

Roy, you don't need to get salty just because my friend Sam told me that you were in this shitty, messy middle thing. Your shitty shitty middle fun site.

I. I'm not surety. I am not surety.

I just asked Claude now yes to do these numbers for me. I did it. I did one today. I could see it on my screen. I asked Claude today to do this.

Exact analysis that explains the mild hallucinations we occasionally see from you.

It is. I said, there's an investment Today, it's worth 544 million. Nominally. Right?

Yeah.

I uploade all the financials and the investor report from today and I said, what will it be worth in 2029? And give me Give me, give me a sensitivity analysis. It told me 3.6 billion. That's the most likely outcome from Claude. So I feel better, like it's in the bag. I just, all I have to do is hang out, hang out at the beach until 2029 and it will get to 3.6.

Good to know. I mean, serious comment here. I think this is still a cyclical business, right? And you know, and what you should not do is extrapolate a cyclical trend. I mean like what you see is the window opens intermittently and when it does, if you have the assets you can do really well. But I don't think you can extrapolate, as I say, from where we were to where we are and keep that line going for another 10 plus years. But you don't have to. The truth is you mentioned fund size. I was thinking about it this morning. Is that seeing the strong performance from antropic in terms of top line growth and then just looking at the burn five last year going to three this year. To some extent the fund size argument has been answered by the burn argument. Some of the most compelling opportunities here require, require a level of capital to be significant in terms of their cap table such that it warrants at least some of the larger fund sizes. It's never as good as when you go in expecting a billion dollar outcome, you price accordingly, which is what all the investors did in Figma, and then end up with a $30 billion outcome. That's the amazing result because you get 10, 20, 30 times what you expected. Now that maybe perhaps people are more adjusted to higher outcomes and bidding accordingly, you'll probably see some deals missed to the downside. Again, I don't think it extrapolates on forever, but it's definitely, I mean we're definitely playing on a bigger stage with bigger dollars and there is at least some justification for being able to deploy those dollars.

We talk about kind of bigger, fewer outcomes, but the meaningful nature of them. The thing that I also found really encouraging though was like Melio, a company that is very good but not in the top 0.0001% bought for $2.5 billion by 0. I thought that was really encouraging to see this kind of mid level or not even, I don't mean that badly to them, but this kind of slightly smaller but still very meaningful outcome.

I'd love to hear how did you.

Guys think about this? How did you break that one down?

I thought it was discouraging. Melio gets acquired for 2.5 billion. Look, that's a lot of money by, you know, hopefully folks will watch this and mock me for like not thinking that's a lot of money.

It's. It's a lot of money.

But guys, they're at 153 million in AR growing 127%. 127%. At 153 million. Like, why, if you knew nothing, would you advise your portfolio company to sell growing 127% at 153 million for two and a half billion? I just got pitched an AI startup at 2 million AR. You know, it's only growing that fast, worth the same amount. Like I could imagine what happened if you guys know the story. But this is not a deceleration story. This is crazy.

I'm not convinced that the growth rate was that high on a sustainable basis. I'd be surprised. I mean, maybe it is.

Might not be sustainable, but I'm literally reading zero slides where that's, that's where they're selling their own shareholders on it. That's what they claimed, right? 153 million in revenue. Whether it's going 120, 27% or 100%. This is not the greatest multiple of all time, is it? That, that, that intimidates me, that it's not a great multiple, that I find it intimidating as an investor, actually, because I have plenty of deals that are great and not as good as Melio.

Yes, it's like 13 or 14 and depending on NTM revenue, I thought. But honestly, I thought it made a ton of sense. I had a peg for a lower sustainable growth rate. We were investors in build.com, very happy investors. It's public, it's much bigger. The market's been tough to it recently.

It's a tough comp today.

It's a tough comp today. Right. And I think that that kind of bill payment, accounts payable space is fairly crowded. There's a number of plays and consolidation and being acquired by the ERP adjacent competitor kind of made industrial sense to me. So I was like, yeah, that's about the right price. And that all makes sense. Again, I'm disconnecting from the growth rate comment and you have the advantage over me because I haven't read the press release and no one I'm sure would ever lie in a release.

So no, I think the number, I don't think zero can lie in what they're saying, but, but they're not showing the forward growth. So. So your point, I'm sure is correct, but trailing velocity is a force of nature. Right.

It's just they had some interesting strategic deals that are always challenging at scale. But yes, I think the other interesting comment about it just worries me.

For M and A we all throw around, oh, they'll buy my portfolio company for 900 million or 2 point billion. But are you sure you're better than Melio?

I think the interesting thing also about that one was that you know, they'd raised a couple of rounds significantly AB that in value. I think they'd raised in 212 rounds, the last of which was four and a half billion. So you know, you look back on that and you go look, on the one hand it just shows what a lovely rigged game the late stage business is. If you always get a 1x on your losers and you have enough winners, by definition you have a positive irr. It's a nice thing. On the other hand, it just shows how wrong you can be. You know, you sat there in 2021 thinking I should buy at four and a half billion in the expectation of making it 2 or 3x which implies 13 billion plus. And you fast forward three or four years and you're happily taking 2 billion.

I mean the pref stack here was 650, so 650 total pref stack and then the last round was 4 but in by GC. And so to your point on pref stack to outcome size being the risk that you're taking, 100% here you have pretty minimal risk when going in at.

Point that now you're still getting a 0% IRR. But yeah, I guess it's great but.

You'Re getting a 0% IRR on your losers.

Again the interesting to me, I guess this is captain obvious. Okay, I'm a little slower than the two of you, but this is actually a little bit good for founders. Okay, last round at Melio, 4 billion, okay, 500 times revenue or something like that. Right. And then there was a corporate round at two and a half billion. But like if you're getting your preference back, you know, and it's below your 4 billion, you don't really care what the price is. I almost killed myself as a founder. They're fretting. I had to like at least quintuple my investors money. But as long as if it's, if they're only getting 1x, they don't really care what the headline number is, do they? Like in a way the pressure's off a little bit.

Well, they don't. I mean, but I thought you're going to say something different, which is it's.

The earlier guys care, the early guys.

Care and more importantly, the founder cares.

Yeah, yeah, but they're going to just going to get, they're going to make their own decision. It's binary, right? I think it's liberating for a founder to say, goodness, I can sell my company for two and a half billion and these bozos with the blazers aren't going to say no. No, right. That was the fear when I grew up as a kid, right. I was terrified my VCs would say no to everything. I was terrified every day.

I can tell you, if you're a founder stuck in that situation right now, no one who wrote a check in 2021 at 4 billion. If the company's underperforming is going to stop a 1x right now, they'll be like, they'll be grateful as could be, give me my money back and move on.

And it doesn't matter if they did it at 40 or 4. They're going to get the same outcome in Melio, right. They're going to get the same 1x back.

Which separate comment creates a large amount of weird dynamics on various boards as people wrestle with these price. But you're right, you're in the room considering this price at 2 billion and you've got some people who are blankly indifferent and just want to sell because nothing's going to impact them either way. And then you've got people like the early investors and the founders for whom the difference between one and a half billion and two billion is just a huge amount of money, all of which is going to them. And that's great because the founders created the value here, right?

You say give me the cash back. The only thing I'll say to that is yeah, give me the cash back or even a discount as the cash back. But don't give me X billion dollar company stock at some ridiculous price. I think I have more airtable than anyone at $11 billion because they've acquired about four of my companies.

It just shows a couple of comments. One is private to privates are hard, right? And you always have this like am I getting shafted Feeling which again, going back to first principles is one of the beauties of being public. When you get bought by a public company you don't have to have this existential debate or in your case, Harry, this existential whine about how much or how little you value the stock. You read the Wall Street Journal and you know exactly what your damn thing is worth, right? It's Another beauty from a speed of acquisitions perspective, being able to do Publix.

Rory, I'm sitting here in Frinton on Sea in Essex. Chamath is in Portofino. Okay. I have a reason to whine when my stock is given at a $15 billion price.

Yes, you do, Jason.

I really appreciate that because it totally made me think differently about the Melio outcome there in a way that I wasn't before, which I love.

187 million, March, actually. So they could have been at 200 over. Well over 200 when the deal closed, got signed. Right. 187 in March.

I can't get my head around why you do that.

Then you can also look it up. And that 500 at that 4 billion round, which was 500 times revenue. I think it was 500 million. So, listen, I know what the zero slide says. My understanding is a lot of the early guys sold very quickly. Like it was two years to getting out of 5 billion for the small guys, not for best. I think Bessemer might have found it. I mean, that guy finds all the good Israeli ones, right? Yeah.

Adam Fisher.

Yeah. But I. My understanding is maybe nine figures of that quick 2021 round was out at 4 million. Right.

Good for them.

I mean, there's no hopping, but it's pretty good secondary.

Jason, Thin line.

I was on a sales call this week when a kid was yelling at me, Harry. I was trying to explain to him something that I knew more about AI than him. And he's like, well, that's not how I did it at hopping. I'm like, what did you learn in the three months you guys are big, that market existed. Exactly. Well, that you went from infinite demand to zero demand. Right, Right. I mean, the easiest job in the world was hop in May 2020. Right. Easiest job in the world. Hardest job in the world, May 2021.

I'm just going to say one thing, and I get in trouble for this, and then we can put a pin in this one. The founder always gets chastised for founder secondaries. I remember when he was being forced to take cash off the table by hungry growth investors who were foie growing the shit out of him. And he was going from 49 to 42% or whatever it was. And it was a completely rational decision.

I think it's okay if the investors got to sell, too. You're not the founder. But my point is, if he's being foie gras, okay. And that does happen, like it's happening again today. People are Getting foie gras.

Right.

Even though the investors want you to be conservative, they want to put so much money in the hot company that they. The only way they can get it is by giving it to the founders. Right. Buying their stock. But it sure would be nice if the investors had the same option. I had this happen to me just once, Harry, where there was a fog ride and I said, listen, if you're out, I'm out. This is what I said to him. Whatever. I just want proportionally, whatever you're going to. If you're going to sell more than 10 million bucks, you're making the right decision. I just want to sell too. I mean it makes sense to me. That was my only ask. Me too.

Reversing my comment earlier, I would point out to you both that you do have that right. It's a co sale. Right? Right. Read your doc. How are you?

Yeah, it's not enough. Like you can't always get as much as you might think from a co sale. But you're right.

But you're right.

You have a co sell. Right. And the reason it's there is for exactly this purpose where if a. I.

Think you assume we have any rights ro I think the challenge of 21 is that we, we didn't have any.

Rights but typically there would have been a. I mean, look, it comes up because, you know, can't they be waived.

By the majority investors?

Yes, you can.

If you're getting waived by some guy bigger on the cap table than me, I guarantee the last deal I had, like, they didn't even tell me when my rights were waived.

You're both sounding a little punchy and a little bitter. Remember, no one's going to cry for either.

But good, good, good criticism actually. You're lucky to be able to invest. Right.

Exactly. Some stuff works, some stuff doesn't and you know, move on.

I would like a super co sale in that situation. That's all. If you're selling more than like 20 million, I would just ask for a super co sale.

It's a genuine comment. It's funny you use the expression the foie gras ing them, which I love, but it's odd. It's. This is a foie gras process where frequently the person doing the feeding ends up dying. My point is, in the case of hoppin, you far grad the people and yes, the company died, but you died too because you lost all your money. But you're right, the thing that blows it up, Jason, you're right is I Love that expression. Far grae. Some late stage investor who just has 100 million to put to work and is just going to do it. No, what the question that I have.

Is actually do AI researchers have the same challenges that f startups have, which is when you stuff them with $100 million, do they become less efficient and less focused? That's my question for Zuck that no.

One seems to find out about 12 months from now.

Seriously, you give these guys 100 million bucks and they go and buy a massive pad in Atherton?

Like, I don't know, I'm worried. You know, we all have the, the guys, the founders that bought the massive patent Atherton. It's a really issue. The massive patent Atherton is like almost 100% correlation to decline in revenue. It's like, it's almost a one to one. I can't prove causation, but I can't prove correlation. Almost one to one.

Rory's just like, I can't believe I'm.

With these two degenerates.

No, yeah, you are putting together. I mean, because my, my look, I don't think large amounts of money necessarily demotivates people across the board. I think what large amounts of money do, it reveals what you really want to do. That's why you see some people make lots of money in venture and decide what they really want to do is double down and keep doing this. And you see other people say, I made large amounts of money all along. I really wanted to be, you know, I really wanted to tour the world and play golf. It's just, it liberates you to do whatever it is you choose to do and thus by definition your real person comes out. I think the risk you're running here is, you're exactly right. It would be absurd to suggest that no one who gets $100 million won't be a little bit deincentivized. So yes, there'll definitely be some hit from that. I don't think it's a law of nature is what I'm trying to say. I think it's more kind of a. It doesn't change people as much. It reveals what they really are. Maybe some people have been doing this coding for the last five years going, God, I fucking hate AI. I wish I could get out of this and here's my hundred and I'm done.

This is tough stuff to get. The incentives are so hard, right? Anything incentives are hard. But I mean Zuck made it work with Brett Taylor, right? He made it work with Kevin Systrom. Eventually they flamed out out. But those worked for a long time. He got his money's worth out of those deals. Zuck doesn't need 10 years out of this team, Right. He has a history. Maybe sometimes we look too much in the past, but he's made it work before.

I think if it doesn't work, frankly it won't be because XYZ Engineer got 100 million and went weird. I think at someone point out it'll be because some other engineers got really pissed off. It'll be A internal disruption, the weirdness of different people on vastly different kinds of. But B the wider comment of will it be a great roi? Anyway, it's not clear to me that this money will yield. This is almost going to be heresy here, right? The amount of money we're investing in AI right now at 300 to $400 billion a year in capex and then lump in a bunch more salaries on top. Sometimes I do wonder, in the end it'll be magnificent. But will you get the near end roi? Will it be an economically rational decision when you look back two, three years from now? I don't know.

No, I think it has to be an economically rational decision when you put it in proportion to market cap.

I know all those arguments. You're right. The proportion to market cap argument which I've made as recently as last week, I get it. What you're saying is, but you're redefining economically rational. What you're not saying is there's two definitions of economically rational. One is it will yield a positive npv. That's kind of a very boring accountant logical thing and I'm questioning whether it will. What you're saying is some grand theoretic game theory version of economically rational. In other words, I got to show up at the party with AGI otherwise I won't get invited to the party. So fuck it, I'm going to spend 60 billion to make sure I'm there. And as I say, it really feels like heresy even to say it but at some point in the process we will become over invested because that's just what humans do when faced with this kind of opportunity, right? Is it now, Is it two years from now? Was it last year? I don't know. But if you look at what this CAPEX is doing to the balance sheets of the most the largest companies on the planet, what it's doing to their free cash flow. So it's just astonishing the amount of investment that's going on here.

Totally. I mean you said it turns Warren Buffett's idea of a dream business into a cash incineration machine.

Absolutely. The poor man would be like people, have you lost the plot? I only left six weeks ago. God damn you all. What are you doing?

I think an interesting one on that perspective is Menlo raised another billion and a half record replatforming in venture. And when I looked at that, I was like amazing for Manlo. Fantastic. And my question to you is one, sure, how do you think about that just generally, but two, do you think LPs are more excited by incredible returns driven by Chime and some other historical great investments or by Anthropic and a forward looking AI glance that Menlo I think have pioneered?

Well, I think it's good to have both. I think they've done a great job and deserve the money end of. I think Chime is a big ass return. All credit for that. It's hard dollar money on the table. And then on top of that, I agree. Menlo has done an amazing job job glamming onto Anthropic, doubling down on Anthropic and you know, telling a strong AI story. It totally makes sense. All credit to them. There's, you know, you win, you get the prize. That's how America works.

Jason, anything to add there?

No, the only thing I would say and listen, you guys have a broader LP base than I do. I think the LPs that I talk to are acute, maybe certainly even more than me. Acutely aware of the math we discuss here. They're acutely aware of what it takes to return these size funds. They're acutely aware that their managers, what their managers ask is and what the commitments are in terms of the size of returns they need to do. I've certainly heard skeptics that these outcomes are there, but they get where the market has to go to with the outcomes. They know the math on the back of their hand and so they're participating. It's the game on the field. You want to sit out Index and Kleiner and Sequoia after, after Figma, probably you, probably you don't. You're not allowed to sit it out.

Agreed. And the only proof you can have that someone will be in the deals in the future. There's only two proofs. Either you have some kind of story for a new fund or you can say they've been in the deals in the past. And you know, you can look at Menlo and you can say Uber, you can say Chime and you can say Anthropic. You can Join the dot in those three sentences and say they probably will show up in the right place.

We mentioned like the numbers needed to make it great. It's an unsexy discussion topic, but it did actually again give me hope. And Jason, I hope you don't dash my hopes on this one like you did in Emilio. But Couchbase, a company most people actually haven't heard of, acquired for a billion five. Again, not massive, not huge, but still very important and meaningful. And the question there is like, hey, will we see a plethora of these PE buyouts or PE LED buyouts at similar scale which will actually drive a meaningful amount of liquidity? Or is this a relatively one of few?

I'm hoping, yeah.

I mean I don't think it's indicative of a trend. I mean I think that I took a look at it and Couchbase was bought by Haleli. I think it's the firm in Austin which is the former co founder of Vista, Brian Sheet, who is extraordinarily good investor at Vista and then spun out out in 2020 after a split with Robert Smith and you know, talented guy, looks like he's building a very concentrated thematic portfolio. I get the impression went out to find that asset because he has a perspective on what can be done in this space with that particular product. I don't think it's a, hey, every $200 million so. So infrastructure company with 16% growth is going to get hoovered up at 5.7 times. I think it's much more thematic. I think this can be relevant in AI. They have a newer product that's growing much more quickly. Think it's someone taking a very rifle shot bet which may be right or wrong. We'll see. But I don't think it's indicative if you have 10 other $200 million database companies don't hold your breath waiting for PE to come along. I remember we, for example, we were in data stacks which is similar size, private health company sold to IBM. Great outcome for all concerned. Very happy to get it done. But yeah, they're on the plethora of PE buyers. It's not typically a PE app asset because they're complex technical products.

The thing that encouraged me here was it was 215 million revenue growing at 12%. So not stellar growth.

I love how PE firms will do those bets with the, with the mediocre growth, bless them.

Yeah. And not profitable, which I'm not dissing them at all. I'm encouraged that this is PE1.

No, I agree. And that's Why? I said I don't think it's typical. I think it was much more a. Hey, there's a perception that this asset that they have is a valuable. See, I mean look, every, every venture firm, you know, including us, including everyone, has lots of 1, 2 $300 million revenue companies subscale for the new world of IPOs and you know, subscale in terms of growth and trying to figure out where they go. I'm not expecting PE to save all of us, put it that way.

This is such a small number, it's barely useful other than anecdotally. But I have two portfolio companies that are kind of in that intersection where a tech company and a PE buyer might buy buy them. And they both got mediocre M and A offers recently.

Mediocre, right.

Not bad, not great. And the first thing I asked the founders, well what, what do the P firms said to you? And no one's contacted them like ever, even two years ago was like every week you're getting a call, right? Who, who's Driscoll STEVINS and, and limited.

Right.

They neither of them had gotten any calls from PE firms. Nuns.

Zero.

Right. That worries me. Like Rory said, like these are, these are ones that like you could go either way. Right. They're cash flow neutral. They have good growth, they have strategic and non strategic value. You could mash them into somebody. The point is you can mash them into somebody else. Right. You'd think you'd at least be getting the VP or the analyst calling them. Right.

I'm surprised we haven't seen more bending spoons like models in sas. Bending spoons, obviously. Does consumer subscription roll ups for subscale outcomes for venture firms, but also for too small outcomes for pe. I'm surprised we haven't seen that more in venture.

I think you're going to see a lot of it. You had mentioned is it Visma, which is a company that's going public in the UK and we'll come back to that. But the AHA prior to that is it's a roll up of, you know, hundreds, literally hundreds of subscale software companies. And Constellation out of Canada does the same thing. It's going to have to happen once the sellers are willing to take price because all these assets can't go on forever. Subscale. And you know the interesting thing about something like Visual Constellation is at scale, scale, they're interesting $100 million revenue business in where the Lawton has nowhere to go. But if you assemble 20 of them and you're at 2 billion and you have 10% EBITDA. It mightn't be the sexiest business alive but the market will price it, it will value it and you'll be able to get liquidity.

But Constellation wants to pay 2x is the slight hitch. That's their model 2x right?

I know that, yes.

Yeah I had them even present at Saster annual this year. The team came and then it was. That was their. I think that was the title of their presentation 2x who wants 2x show up 2pm on the, on the west lawn. I mean quite a few people came which is maybe telling, right? But it's like they'll do some deals at 3x but 2x is the, is just, it's just the model. Right. Is 2x revenue Agreed.

Because they've been able to build a model whereby they can take all the risk out of the deal on their side. And the question is, you know, going back to even the carriage based acquisition where it's 5.7x is there something more sensible, you know, a little more growthy that you can do with these assets combined together maybe with a more thematic approach than just Constellation such that you know, the clearing price can be three or four. I don't know but you're right Harry. Someone's going to have to figure this out because these 300, 400 companies aren't going anywhere until somebody does.

I think someone who's really well placed to do it is actually Grammarly they've.

Got just keep going.

I mean seriously, if you can build a next generation productivity suite and do a number of great acquisitions, hopefully superhuman beings start of them then you know, maybe you can piece together something exciting. My Grammarly stock is going to the moon.

Good for you. I don't know.

I do. Listen, we could talk about it forever. I. I just, I want to believe in Rory but for as long as I've been in tech I've heard this story like it's going to happen like more of these companies are going to get rolled up and mashed up and it's. And VC say it's going to happen over lunch and cocktails. I don't see anybody stepping up. Just because it makes sense on paper doesn't mean it happens in the real world. Right?

I don't know. Stepping up imply. I mean there's two people that have to step up, the buyer and the seller. So from the buyer side look throughout tech people have made money doing this computer associates way back in the day in kind of mainframe land Made money doing this. You know, you write, you've Constellation, you've gold Platinum, you have a bunch of others. So there is willingness to do it on the buy side at the right price. The question to your point, Jason, is what is that price? And is that price one at which sellers are prepared to transact act, don't you think?

Roughly everyone that hasn't raised around since 2021, that's still doing okay. That's north of nine figures is cool with selling for 5x. They've already rationalized the 2021 valuation away. Just like the Melio example. Okay, listen, I don't want to move off that mark. Right. But everyone like it's growing 18 like it's a 5x. Like let's, let's just sort the public companies, it's a 5x deal. I think they'll take that deal. I don't think anyone's saying no. After four years of this money sitting there making no interest in the bank.

Are they on average, you're probably right. At 5, 6x, I don't know. But yes.

But no one's buying all these 109 figure B2B companies for 5x. No one's rolling them up. Right?

Yes. And what you're saying is the owners thought they were worth 10x to 20x plus. Now they think they're worth 5x, but the buyer still thinks they're only worth 2x. So there's still a gap.

That worries me. I think a lot of them would sell for 5x right now. Without arguing, I think they would sell for 5x. Yeah.

Well, as I always say, price clears all market. We, we will find out. As you get into these older and older funds and as the growth rate becomes more locked in, then your willingness to get realistic has to just go up. As I mentally run through even my portfolio and stuff, I'm involved with the stuff that's growing mid teens where I know why it's growing mid teens and there's a credible story of re acceleration and then there's stuff that's growing mid teens and it's never going to re accelerate. And you don't know at 100% fidelity, but you should know know you should have some sense of what that is. And for that latter category, you're right, you should just seek an exit.

Yeah, I just worry that AI changes so many markets that like a lot of these candidates are just viewed as hopeless. Now it was one thing in 2021 when the software hadn't changed in seven or eight years, right? But man, like it's the second half of 2025. My rule is if you haven't grown because of AI, you failed. It's not just so you have a co pilot. You have to have grown, you have to have done an intercom, you have to have re accelerated your business. You had 18 months since chat GBD launched or whatever it was to do this right? And if you didn't get it done in these 18 or 20 months, you ain't never getting it. It ain't going to happen.

I like your line, Jason. I just really, if you're not accelerating, you're losing because someone else is accelerating. So by definition that's a good point on a relative market share basis. If you don't have A that story and B some of those facts, you're nowhere iconic.

Just put out this set of metrics of how everybody's growing across like 300 B2B companies, right? This isn't causation, it may not be correlation, but roughly 3 or 400 including all the AI leaders, all the hot AI startups, all the Harveys and schmark Harvey's and all the other ones. Growth is exactly the same as it was 12 months ago, just about when you throw them in. So I know we're not like we are stealing budget from each other. And yes, sure our CIO's adding an AI budget or this and that, but it's net zero. We've learned it's net zero at this point, right? If you haven't pulled yourself out of now, I, you know man, I mean, I don't mean to agree with Sam lesson, but you might be utterly irrelevant. It's probably too late.

I think it consistently goes back to one of Rory's most pressing statements which is are we able to transition labor budget into technology budget in the next wave of AI? And if we are, let's make hey, markets are huge and if not, then it's net zero. I think the thing that I just think about is like being AI native is such an advantage. We are in a company that is similar to Superhuman, that will be at more than their revenue in nine months for what it took them eight years to go to. And that's no discredit to Superhuman. Just the benefits and the tailwinds that come from being AI first versus layering on is massive.

And the other, you know, a fun one Clio, which just raised at 3 billion, right? 20 year old company, great CEO Jack Newton, they just bought a 25 year old company, Velix out of Rock in Barcelona for $1 billion because it AI fied its legal libraries. It did AI it by June 30th of this year. It did get the message for ChatGPT, right? It became this data source. Right. I mean, I'm not a total expert, but you know, in some minor ways it became a scale for legal. Right, right. And all of a sudden it's worth a billion dollar. It's an AI leader, but they got it done. Right? And Clio gave up a third of its market cap. Wow, that's a big deal to do, isn't it, for a, a Barcelona company founded in 2000. Oh my God, 25 years ago. But they got it, they made the transition, right?

Just curious, Jason, because you're not being clear. Are you saying I totally get that, that that's magnificent, well done, Cleo. Or are you saying.

I'm saying that VX, a 25 year old Spanish company, made the AI jump. They became AI rock relevant. They had the time, got us. They got it done and now, now they're worth something again. Right? Harvey tried to buy them, Cleo then bought them, they became a hot prop. Right? But if your other, if you're playing vanilla B2B company hasn't done it by June 30th, I don't think June 30th, 2026 or 20 or right in that bridge note or that series C7 is going to make it. I probably would vote Harry and Harry down at the, at the reserves meeting on that one.

But to be clear, what you're saying, which I think is this, what you're saying is there are examples of pre gen AI companies being able to move quickly enough to become relevant in the gen AI world.

Yeah, I spoke too quickly. This one's amazing. That Delex, founded in 2000 in Barcelona, could become AI relevant today, right? I mean, it's impressive, right? At least superficially, it's very impressive.

I mean, stepping back rather than pretending certainty, you know, you're wrestling all the time with can the company that has scale become relevant? In some cases it can. And then the other hand. Or are you better off with the brand new company that's less than two years old, old that started off the day after ChatGPT was invented and doesn't know any other world. And implicitly, Harry, you're implying the latter. You're saying it's just easier to start at ground zero, November 22 and crank and Jason's example is the former, which is someone who was around beforehand and then just successfully inserted themselves into Relevance. And I'll admit I don't have a doctrinaire answer here. We've seen boat work, but it is probably one of the big investing questions.

Mine's pretty simple. It's like for the vast majority, I want the AI nation. Except for the exceptional product builder that genuinely is like a DES trainer. Like, I've interviewed the best product builders in the world, just got. Des is the.1 of the best of the freaking best. Him and Owen, I think is so phenomenal at this transition.

But they got it done by June 30th. They got it done. Whether it's Intercom from 2000, whatever, 8, or. Or Velix from 2000. They got. They had until June 30th. They got it done. Right. But the ones in our portfolio that haven't really, they're still talking about. About it. I've given up on them. They had their time.

Yes. If you're still going to the board meeting arguing about you need to do something in AI, just stop going to the board meetings.

You know who deserves credit as well, though, is that Howie at Airtable TBD on whether it works. But like, what he's done in terms of like, the unbelievable shift in product strategy very, very quickly is impressive. Again, tbd, it works. But to the Owen and dez, really burning the boats to make it happen. Bravo. How.

Yeah, you gotta do it.

It's bold.

It's bold. I will freely admit to biases, cognitive biases. And I just know that's the board meeting where you get up with a sinking feeling and you're like, you know, for three, four years you thought you had a home run on the existing thing. You could smell the money. And now you're coming in and saying, oh my God, I'm in a 14 billion priest startup and I just want to throw up. There's a lot of cognitive dissonance for about a day there where you just go home and go, wow, that hurts.

Oracle just closed a $30 billion a year deal with OpenAI. Right. Extra 30 billion. I mean, if Oracle can get AI native by June 30th and your portfolio of startup can't, I mean, I'll smile, but I'd give up. If Oracle can do it, founded in 1972, they could become AI native. Ish. And you can't. You're still working on it. Like, you're still. Your team's still arguing. You're. You're not sure about hallucinations. Like, you're making fun of fixing. That's not real. That's stupid. Those emails don't really work. Oracle wouldn't close 30 billion with OpenAI. 30 billion a year. Larry got it. Larry got the message, didn't he?

Yes, he did. One version of the message is he stopped brilliantly by as I said, he stopped brilliantly buying his stock back with his free cash flow and instead spent it on Nvidia GPUs. But it seems to have worked because it's converted into cloud business for Marco.

But he did it as early as Intercom and earlier than airtable like he did. He went all in, right?

He did go all in in. And it's so funny if you look at the P and L, I mean in the P and L it barely shows because you know, cloud and PAAS is only a small percentage of the total revenues and within that AI is an even smaller percentage. It totally shows up in the capex budget because all the money's going out. It's amazing. It's got this wonderful upside down AI business inside a wildly profitable old school business. But you're right, Jason, A the market loves it because the market thinks it's leaning in and B, if he can get this kind of revenue on the end, I'm going to say the sentence here in Debbie Downer fashion and the investment boom in AI continues for three or four more years, then it'll be a great deal.

I mean I'm looking at Oracle's stock price. This is like the best stock I've ever seen. Just watching, looking at Yahoo Finance or Google Finance here, this is a dream stock.

Do you know what I also found interesting? I was actually reading this morning before this surge. AI, which is a scale competitor, is now raising first time money at $1 billion at a $15 billion valuation. We had Garrett on from Handshake who said literally he's staying up night and day. I', Macaw, which is absolutely crushing, reportedly raised a new round, who knows? And there's a tailwind. Who's picking up the business of scale? Does the Skale acquisition create an unbelievable net new economy for these businesses and influx of cash? Do you think setting a benchmark.

Short answer, Yes. I mean Jason said it last time, which is literally the day or two after the deal was announced. The remaining asset is an empty house husk. Two weeks ago you could maybe have said maybe. Perhaps the new CEO of Scale AI will be able to figure out what to do with the business and build it back and get relationships with the other LLM companies and continue to sell training data, blah blah blah. Since then the 49% owner of Scale AI has spent their time stealing your best people and offering them kazillion dollar packages. No one from any of the other kind of cloud providers are going to give Scale AI the time of day. Why would they? They're not going to give them confidential information. Why would they? So, no, there's no business there, which by definition means all the business that was there has just gone to someone else. So I assume a billion dollars in revenue has been allocated out between, you know, Turing, Surge, Mercour and Handshake and whomever else got there. Now again, once that's reallocated, then you're back to kind of equilibrium again, as it were. Then the bet remains the continued growth of CapEx spend, spend on the AI boom. And that's what all these companies are writing.

And if Serge did a billion dollars last year, bootstrapped, right, or pseudo bootstrapped, did everybody know about them except me?

Dude, no one knew about. I didn't know about them.

Well, what, what excuse is there for, for, for venture capitalists and technologists to be talking about the 800 million one just because it raised all the money? Not know about the one that did a billion without any outside capital. Shame on everybody for if, for not knowing about, about a billion dollar competitor and everyone talking out of their arse on social media about scale, like they even know what it does.

I'm sure you'll find that all the big firms had. I'm willing to bet that the guys at Insight had a cold place to surge once a week for the last three years.

I would hope so. Their website is badass. Look at it. It's nothing. This is a good company. Go to Serge hq. AI, the quality of your data determines the ceiling of your ambitions. That's it. And for four paragraphs, we're making so much money we don't need anything on our page.

And good for them. I mean, remember, genuine comment. I assume what happened here was they had a small profitable business five or six years ago and then only seven customers turned up and basically said to them, we're each going to spend 100 million bucks with you. You don't need to spend anything on marketing. You only need seven sales reps. It's like, why make a whole bunch of noise? Just put your head down, hire these people and make some money. I mean, I assume that's what they've been doing.

Well, it looks like he's super smart. He was core science at Google, ads at Twitter. Research at Facebook founds this in 2020, right? And just quietly gets it to a billion.

Dude, that. That is the most Thrive capital benchmark style website I've ever seen.

I mean, look at this web. Serge is doing a billion. It has a one page website which says what made Hemingway extraordinary? His life experiences. War, love, triumph and loss. This is the most badass star startup. Let's get him on the pod next week. Can you track him down, Harry?

I'm gonna track him down.

I mean, he only goes by Edwin C. Which is badass too, right? He goes by Edwin C. Founder. He doesn't even say CEO. Doesn't say I'm the cob. And this is his greatest website founder story of all time. Twitter, do your magic.

Yeah, he only when you only have seven customers and they're all desperate to spend money with you, you just don't spend a lot of time wasting time doing sales and marketing. Good for him.

Listen, there's so many places we could take it. I want to do one more topic before we do a quick fire. We've got LaunchDarkly CEO quitting to be CEO of Asana. We've got Stanford layoffs with the 2.9% endowment tax. We've got Benioff saying about 50% of work being done by AI. Where do you guys want to take it before we rack up wrap up with the Kalshi quickfire?

I do think this quitting is under discussed. A lot of folks are quitting. A lot of CEO resignations, founder resignations. I mean, quitting launch barkley to go to Asana. It's weird, man. But like, it's. I guess it's okay today, after two.

Years, for context, LaunchDarkly CEO quits to be CEO of Asana. Asana is obviously a public company. LaunchDarkly is not. Asana is obviously much bigger than LaunchDarkly is. So why do you think it's weird?

Jason, maybe it's not weird. It's just the turnover everywhere is accelerating. If you're not in the elite of the elite, people are just bailing faster and faster and the capital's only going to to. Crunchbase did an article this week. There's no such thing as unicorns anymore because forget about AI. Only the money goes to 5 billion and up. It's got to be 5 billion corns. 50% of all the unicorn money is north of 5 billion. So it's either those like even bigger than launch darkly. Asana might not even be worth 5 billion today. Let's look it up. But I bet, I mean it's probably above the line. 3 billion. Okay. So it's just, it's, it's tough and it is. The, the everyone going to join meta for 100 million is mercenary and it's just, it's the world we're living in. Right. And at the same time, AI is going to lead to a lot of layoffs. I don't think Mark meant to say 50% the way it sounded, but that's what every CEO talks about behind closed doors of a public company. They say, I don't know, I need to reskill 20 to 30% of my people, but they really think I might not even need half.

Look, if you signed up for four to six year journey and it turns into a 12 or 13 year journey, it's not surprising. But you're seeing, you are seeing people say, this is, this is more than I thought for a whole bunch of reasons. I can't keep doing this. Life reasons, exhaustion, whatever. So we're definitely seeing that as a thing whereby founders are just saying, you know, I, maybe I need to get a president, maybe I need to not be the CEO. It's just a lot longer and harder than I think it looked. When you, you know, took, you know, Dusk and Moskovitz. Yeah. When you took 500k from Y Combinator and said, this is a fun journey, you know, fast forward 10 years, you know, that's probably a third of your working life. And if you're still five years away from an exit, that's half your working life. If it's not your past passion, it's almost impossible to keep going. And even if it is your passion, it gets hard. So we're definitely saying that. We're trying to deal with that lots of different ways. Sometimes you have to re incense founders, sometimes you have to accept that a transition is appropriate. And then you have to figure out, do you go through that pain and hassle of finding someone else, or do you actually just say you should look for liquidity for the company? And then separately, Jason, you're exactly right. There's this weird kind of concentration at the top effect, which is by only the winners seem to matter. The payouts of the winners are becoming so skewed. I saw a tweet that said something.

Like, go From Instacart to OpenAI to make money. Right.

That's exactly right. That's what happens when you're in extreme wealth and extreme volatility. Even being 10th doesn't look nearly as good as being 5th. And the differences are so stark at the outer edge of the curve that you're just seeing all sorts of weird deal hopping and people hopping.

I mean cursor are raising more money now and I think It's a reported $28 billion. Just going to your point on the escape velocity that this 0.00001% have being so much more than ever before.

Yes.

I mean it's last year according to Wall Street Journal record number of CEO departures record of our all time tracked from public companies. And overall 2,221 CEOs quit last year up 24%.

And it is a little bit. I saw a tweet about it.

It is weird.

It is a little bit like, you know, someone did the really fun thing about, you know, the Ronaldo post besides some dude that just got hired by Facebook and a book and 100 million. And it definitely is. First of all, it's Revenge of the Nerds, which on balance, I mean good at because no one ever confused me with Ronaldo. But more importantly, they made the point anything that becomes that high stakes maybe ends up like that, whereby, you know, are we going to end up like the English soccer? You know, any sporting thing in the soccer like, you know, take the PGA. You know, you win the PGA, you get 5 million bucks. If you're 20 or 30 at 50, then the PGA you're barely scraping along covering your expenses. And that's what it is like in this winner take most economies. And it's interesting, it does feel like this is a stage where more even than normal, it's a winner take most world. And that's just really challenging for venture funds. It's really challenging for to be an entrepreneur if you're not in one of the winner take most deals.

I think what's even more challenging about that for us at the earlier stage is when you have that situation arise, the opportunity cost of not being in those winner take all deals becomes even higher. And your willingness to pay whatever to get in for your entry price becomes anything totally. And so your 10 million for a seed for Andreessen or Inside or any of the others, whatever, who gives a shit? Because the opportunity cost of not being in those with the outcome sizes being so much bigger is so much higher.

I agree. And it raises the risk for you. And even at our stages, you can be a perfectly conscientious little seed investor, do your 30 deals per fund and just not be in the one that matters. And if everything else doesn't matter, then you don't matter, which has all sorts of downstream Implications in terms of how should you think about portfolio? How should you think about fund size?

We lost a Series a, actually last 10, and it was doing 5 million. An ARR started at like 225 million, ended up at 600.

Eventually, it will overshoot, but along the way, it's really hard.

Let's do it. So, Kalshee Quickfire. Will Elon Musk create a new political party this year? Yes, you get $230 if correct. No, you get $160 if correct.

Does it count? If it creates a party? And I mean, it can create a party. The question is, will a poll win? Well.

Well, the question is, will he create the party? So, Cali Quickfire, will he create the party?

I say no. I think he's just. I mean, I. I empathize in a sense. I think he's just too emotional about all this. He's just shooting from the hip. He's so upset. And I've been there myself. I have the same flaw. So I get it. But it's not going to happen because he knows it's not going to work. He's. He's so smart. He knows it's impossible to win in.

The US Know from Jason, Rory, I'll go with no. Because there's not an option that says I don't care. Care. Because that's really what I think. I just don't give a damn.

Okay? No, you just don't care. Fine. You know this one, Rory, I've been looking forward to. I found this one, and I was like, jason's gonna have a banger. Will Royle, founder of Cluli, become a billionaire before 2029? Now, yes, gets you $534. No, gets you $109. Now, my question is, how do you value a paper?

Paper. We mean, just to be clear. It doesn't.

We can.

We can get. We can cut a little slack for. Yeah, for our $2 billion friends here, Jason. So is it worth 5 billion? Is that the question? By 2029?

Yeah.

Listen, I think that he's badass smart, but everyone's a little full of shit in AI and revenue, right? But if he claimed it was 5 million. Run rate before Andreessen invested. Okay, let's put some asterisks and daggers. I think a billion. It could someone that. So 200x. That's already a billion, isn't it? Someone might do that deal at a billion half.

So he's worth half a billion.

Let's assume he owns 25% now, maybe own that. So this gets more and more plausible the more we work through the math, doesn't it?

Wow.

If he's really at 5, growing at this rate and it doesn't, it doesn't crater 200, 300 XR AI deals. You know, we could probably move this to 20, 28.

Wow. I'll see you in race.

Paper on paper, on paper, rory.

I'm getting 100 to 109. I'm basically, if I say no, I want to get nine bucks for a win. It's barely worth it.

But that's a terrible bet. If that's the way it works, it's a terrible bet.

Bet. I just want to be a curmudgeon in my heart, I think. No, but I suppose this is proof that the story is, you know, pessimist sounds smart and optimus makes money. I'm going to join Jason in the optimist camp. I'm going to go with yes.

Despite myself, I'm going to go with yes too. Boys, this has been fantastic. Rory, thank you so much for joining us from the holidays. Jason, thank you so much for putting up with the late night. Essex coast has never been sunnier. It's raining outside, which is why you don't go to Essex.

Enjoy the family, Harry.

There's so many reasons why you don't go to Essex, Harry, but I'm willing to put weather in the top five.

My word, that was fun. As always, my favorite show of the week. If you want to see the full episode, you can find it on YouTube.

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