Circle’s IPO Soars, The Future of VC and Cursor’s Crazy Growth | E2135

I think this is like a moment in time. This shows to me two things, actually. Three. Number one, Jeremy Allaire is an incredible entrepreneur. He builds real businesses. I've known him through three different businesses. Bright Cove, et cetera. Number two, it's about crypto regulation. So David Sachs, the czar of crypto and SEC and this administration want to make clear rules. Under Gary Gensler, it was, you know, our way or the highway. Unclear. I think people were, you know, unlikely to go public because they were a little bit nervous, what if it gets unwound? And so in fact, Circle was going to go out via SPAC two years ago. Three years ago, they chose not to, I think because of the regulatory environment. So that's Number two is the crypto regulatory environment. Number three is public markets. You know, there's not enough opportunity for the dollar.

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Hey everybody. Welcome back to this week in Startups. I'm your host Jason Calacatnis. With me again, Alex Wilhelm. We got a huge docket.

Yes, sir.

For the press and everybody wanting to aggregate my opinion on recent events on Twitter with some friends of mine and the President, I am going to demure Alex from commenting because all that's going to do is get aggregated. Friend of says X, Y and Z. Yeah, my opinion doesn't matter.

This, this falls under the umbrella though, Jason, of your kind of 72 hour Trump, what we've talked about on the show a number of times. So wait a little bit and see what happens. I'll just. I said this before we started, but I'll just say this. It was once again a very interesting and fun day on Twitter and I have not had that much fun on social media in some time. So I do appreciate everyone providing the popcorn for us. But Jason, we have a lot to get to in the startup realm and I thought we'd start with a couple of updates from Wednesday show some big things have happened and I just want to make sure we kind of close the loop on a couple of stories.

Let's do it.

First up, Circle, the American Stablecoin company, previously a startup, tried to go public via SPAC back in the day, went public this week. And I got to say, I am blown away by the results. For folks who don't recall, it was initially looking at a 24 to $26 per share range. Jason, back up on depth to 27, 28, went out at 31, and then it opened at 69, closed yesterday at $83 per share and then today it closed at 107 70. And what I'm blown away by, Jason, is just the scale of the growth in value here. I mean, I've never seen an IPO of this scale go up so quickly so much. Like it's mind blowing to be bullish for IPOs, bullish for stablecoins, bullish for crypto. Seems like a big win. But I wanted to ask you, if you were an investor in this company and it listed at 31, how peeved would you be that it didn't price higher?

This is a classic issue. When you do an ipo, you're offering the public to buy shares in the company. The public bought shares in the company at $31 a share. And then the market price for the Shares is now $100, or apparently 107. So this means. And it was 25x over subscribed. What this means is they left $70 per share on the table. So if they raised $1 billion, they could have raised roughly three times that, four times that almost, if they had priced at $100 a share. Now, it's hard to know that that was going to happen, but with 25 times the demand for the shares, you did know that this was going to really ramp up. And this is where having an auction for shares or a direct listing of a small number of shares without raising money is a better option. So what's a direct listing? You put the shares up, but you're not selling any shares at that time. You're just saying, hey, the shares can trade. Then you make an offering, right, Alex? And so Spotify, when they went public, they just went public, they started trading the shares and then if they wanted to raise money, they would do it later when they got the market clearing price. If Circle had done that, they probably could have issued their shares at fifty to a hundred dollars a share, you know, later this week. So they did leave money on the table. But I think this is like a moment in time. This shows to me two things, actually. Three. Number one, Jeremy Allaire is an incredible entrepreneur. He builds real businesses. I've known him through three different businesses, Bright Cove, et cetera. And he's just been one of these, you know, incredible, you know, entrepreneurs with a long track record. So number one, Jeremy Allaire is what this is about. Number two, it's about crypto regulation. So David Sachs, the czar of crypto and SEC and this administration want to make clear rules. Under Gary Gensler, it was, you know, our way or the highway. Unclear. I think people were, you know, unlikely to go public because they were a little bit nervous. What if it gets unwound? And so, in fact, Circle was going to go out via SPAC two years ago, three years ago, they chose not to, I think, because of the regulatory environment. So that's. Number two is the crypto regulatory environment. Number three is public markets. You know, there's not enough opportunity for the dollar. So everybody wants to own the Mag 7. Everybody wants to own, you know, these great companies, you know, that are right behind the Mag 7, Coinbase, Robinhood, Uber Door Dash, that Airbnb, that whole cohort, let's call it the class of 2010.

Sure.

And yeah, pent up market demand for, you know, these products. And so we had core weave and core weave has done pretty well post ipo. I believe that their stock has run up as well and Etoro as well.

Has done well post IPO price. So I mean, the way that I framed this was it's three for three for technology IPOs this year in the US and they seem to be doing increasingly well, which is very, very bullish. But for the, for the nerds out there, Jason, who are really into crypto, I came up with a new useless metric, which is what percentage of USDC circulating stablecoins is Circle now worth? And it turns out they have about 61 billion in circulating USDC stablecoins and their market cap is now about 20 billion, which means that they're valued at about 0.3 stablecoin AUM as a ratio. And that sounds high.

Yeah, that is actually a very interesting metric because what you're saying is how they don't own those that value. Right. The value of the stable coins is money that was given to them that they have put on chain that they own Treasuries for. But by doing a percentage, the market cap is, hey, how much could we value? What's the value of Those stable coins of those deposits, essentially.

Sure.

So the deposits are making 4 or 5% a year so that you're giving them credit for six years worth of, you know, revenue coming in. But they split it with some of the markets where they're at. So maybe it's really like net two or three points. So you're giving them. In that case it was net 2. You're giving them like 10 years or 20 years of revenue credit. Yeah, that does seem extremely high. Obviously it's overvalued right now. Like Palantir is all overvalued. You do have these moments. That doesn't mean I would short the stock. It just means this would not be the entry price where I would buy in if I was making a trade. And, you know, these things happen. Things spike up in value when they're scarcity and there is scarcity. Core Weave is probably another one of those where I don't know what their price to sales ratio is right now or their earnings. But, you know, price to sales is a pretty good way to look at these businesses. And you really do need to look at these crypto businesses with a fresh, fresh metrics and fresh eyes. The problem with stablecoins or the thing to be aware of, is they are dependent on the return rate of treasuries, of bonds, of whatever devices they're putting that money in. Very predictable. 4 or 5%. What if it goes down to 1%? Again, what if it goes down to 2% or 0?

I mean, we were zirped for a long time. It's interesting to me, and this is just inside baseball, but currently Jerome Powell over at the Fed by, by not cutting rates is really throwing a huge bone over to Jeremy Allaire and Circle. And by the way, if you want more from Jeremy Allaire, we had him on twist episode 2004. Jason, that was September 6, 2024. Really fun chat with them in a kind of pre IPO context, if you want to go back a little bit. I think you're dead on, though, about crypto regulations and regulatory kind of certainty being key here because we also saw today, this afternoon that Gemini announced that they have filed privately to go public. If you don't know Gemini, it's kind of like Coinbase, kind of like Kraken. It's a consumer crypto exchange, does a lot of business. Probably best known, Jason, for having the Winklevoss twins behind it. They're best known for their early Facebook era, but they've really had a crypto second act, if you will. Now we don't have any numbers here because this is a confidential filing. But they made noise about it, which gives a lot more credence to them actually going out because in March we heard they were preparing a filing privately. But it wasn't really from the company. It was more like, you know, the Journal and Bloomberg and such. But now they're really pushing forward and I'm not shocked to see this drop right after we saw Circle do so. Well, clearly they were watching this and hoping that it was going to go out to push the button.

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But we could see another pretty big IPO here in the States. So I, I'm just. Yeah, feels great.

Yeah, it's great. You know, I think these marketplaces have shown that there is a market for people who want to trade stocks, cryptocurrency, other financial devices, shorts, whatever. Obviously I'm a long term shareholder of Robinhood, never sold a share in it and I think it broke $70 a share. It's at all time high right now.

7488. It's worth 66 billion. Which actually leads me to my question for you, because Coinbase is currently worth 64 billion, which sets up a really funny split screen between those two companies. Now they started off different places. Robinhood was zero cost consumer trading of equities that moved into crypto. Coinbase, of course, started off with a crypto base and it's been moving into other products as well. But they're worth the same now in terms of their market cap. So if you had a dollar, which one would you pick?

Yeah, I mean, I'm a, I'm Team Robinhood, but these are, you know, great contemporary. So you might be looking at a, you know, Amazon, Google, Microsoft, Apple Meta kind of situation here. These are all great companies. I don't know enough about Gemini to know if it's a great company like Robinhood or Coinbase. I don't suspect it's as good as those companies. Yet. You know, what makes Robinhood very special is Vlad is an incredible product guy who keeps adding products to the mix. And so I think they have, you know, many different products, including their credit card, which now has millions of people on the wait list. I have never sold a share. We distributed those shares from our first fund at I think 12 or $14 a share. I probably should have held those shares and distributed them like two years later. Distributed half and half because then we would have gotten credit for, you know, on our books. But you know, I did tell everybody when we distributed them, I'm not selling just as a one piece of data for you and making your decision. And then people who are LPs in that fund, I talked to a couple of them who didn't sell. And you know, that's a 4 or 5x difference, right? More, you know, 5x difference. 6, 6x difference. That would have made that fund, which was close to 5x on paper and 1.2 or 3x DPI already. And there's still a bunch of different assets in that first fund of mine. I think it would make the fund like maybe double that. Right? Like, and so, you know, this is the nature of venture, but these things going public, when you see all these companies go public, what you're seeing is a bunch of venture capitalists get their wings, you know, and a bunch of LPs get distributions. And then it's up to the people who are LPs in these funds to decide if they keep them or Not I wouldn't sell a share of Robinhood ever. I mean, I think the amount of assets they have under management and the way they keep releasing great features to me makes it a huge winner. Yeah, stable coins you probably sell. Uber Dar was talking about maybe having using stable coins for currency fluctuations between their different markets. So I think the idea would be, you know, if they have dollars in South America, in Europe, in euros, etc, in Japan, wherever, you know, do you keep them in yen or do you move them into stable coins? Do you move it into dollars at some point? And this will reinforce the value of the US dollar. So we're going to see many more IPOs and I'm hoping the regulatory frameworks around crypto continue to become really tight and regulated tightly so that we don't have people losing their money, which is just in Singapore, as you know. And I'm talking to a lot of people in Dubai, Singapore about the possibility that venture funds will become tokenized.

So, Jason, tokenizing a venture capital fund, what would that look like in practice?

Let's say we have a $10 million fund. It's a, you know, Alex's first fund. And I decide I'm going to put a million dollars into it. And Mike Savino decides he's going to put a million dollars into it. David Sachs puts a million in Chamath, puts a million in, et cetera. So you got 10 people each own a million. Let's say one of those people says, you know what, Alex has done great, he invested in Robinhood and it's, you know, we think this has, we think the value of his fund went from 10 million and the Robinhood shares have gone up 50x and Robin Hood makes up 10% of the fund. Therefore it's like a 5x fund on paper. I'm willing to sell you my million dollars in that fund, knowing that million represents 10% of the funds, Robinhood Holdings. And I'm just going to write down all the rest of the holdings or put those at zero. But there's a winner in the fund. So I'm going to sell my million dollar position, which is going to be worth, you know, whatever. You could debate it, but let's say 5 million, I'll sell it to you for four or three. Well, we have that Destiny publicly trading open end or closed end fund that has SpaceX in it, right? And every time Space X News comes out, if people want to have access to it, they buy that Destiny fund because it's a quick way to instantly get access to it. Well, Then it would be a way, if I had Uber in that first fund or Robin Hood or whatever it is, some breakout, those people could, you know, maybe cash in some chips. And then people who wanted access to that pre, that early stage fund, that early stage startup could get in and it would then create a market for and a market clearing price for a fund, which would then mean I'd have to release a little bit more data or people would have to be more speculative and then I would have to put some rules on it, like I need to approve who that LP is or we need to know who that LP is and they need to, I don't know, be an American citizen or, you know, have a certain net worth or we have to have their driver's license, we have to know they're not on a terrorist watch list, we have to know our customer kyc, right? So there have to be some rules of the road. But if anybody out there is working on this, you know, it's, it's not clear on regulations who can do this in the world, but there are definitely markets where people could do it. So you have to be thoughtful about it. Is the end is the long story.

So interesting to me? Because I see a couple of things that could get a little silly. Like for example, let's say that the fund hasn't called all of its LP capital yet, but I'm an LP and I want to sell my theoretical allocation of the total fund. And that only happened after all the capital calls, because then I could sell my interest and then not do my later capital calls and wiggle out and that would get a little dicey. But my question, that would have to.

Be in the smart contract, right? That if you haven't completed it, you could only sell interest in the smart contract of the called capital. So if you had a million and you had 500k called, you could only sell that 500k, you couldn't sell the other 500k.

This to me seems a little bit complex. When we have venture capital funds that are already publicly traded, like Molten Ventures over in the uk, which shows that you can have a more liquid valuation set on a venture firm.

But what are they selling when that company's public? Are they selling the management fees and the returns to the gps? I think that's what they're selling.

I think it's actually the assets. But I'll double check that and get back to us on Monday. Because I haven't actually looked into Moulton for a couple of years. I'm a little out of date. Yeah, but it is. That is one way to go about this. I always get a little concerned. People want to tokenize something, Jason, because it sometimes can be a little bit more complexity than value. But if you're talking about it with that many people, I presume, I think it's the next through.

I think it's the next big innovation in venture capital would be, you know, if venture funds are going to exist for 15 years as opposed to just like, you know, 10 to 12, because that, you know, then maybe it would be good that they could trade. So maybe you can't trade them until year five, but you know, year six on you could. So then you could leave the fund open for 20 years and allow people to trade in and out of it. So if you had Stripe in there and you were 13 year investor in Stripe, 14 year investor in Striper, 12 year investor in Uber, 13 year investor in SpaceX, you wouldn't have to do secondary transactions of selling the shares. You would just sell the share in the fund and people would know the fund has this in it. I think it would also be fun for there to be like, I would take that fund and I would have all of our holdings be public and I would release like quarterly statements maybe of those companies and what we've invested in. So it would be kind of like an index fund where, you know, I told you I bought that KDEF, the Korean Defense Fund, and boy, that's up like 30%. And you know, I bought like a quarter million dollars worth of it just because I bought Korean Defense Fund. That sounds interesting.

Oh, wow.

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Yes, it's done.

I think I bought it at $28 a share and it's at 36 or something.

37. And it's up a total of 74% so far this year. If you bought it at January 1st, that's incredible.

Yeah, I bought it like whatever, three or four months ago. I think people are starting to realize that, like defense contractors outside the US are to do quite well, you know, and there's, there's a bunch of them anyway, that's, this is my thinking is like, there's going to be some very interesting opportunities and then maybe the ability to tap into markets where, you know, somebody sitting on a billion dollars of crypto, 100 million in crypto. But they say, you know what, I want to slowly move my crypto wealth over to startups, over to real estate. I'm not in the real estate game, but if somebody was in the real estate game and they tokenized, you know, their thousand apartments they owned across the US in a real estate trust or something, and it was tokenized and you could buy in and out of it, that person could then use different coins to buy it or they could get loans against their coins to buy into it. So there could be some very interesting ways that money could flow. And even programmatically, maybe you say, you know, I just. As my crypto wealth grows, I want to move 10% of it into startups. So if my bitcoin, If I got 100 million in Bitcoin and I bought it at 50k and now it's 100k, it's worth 200 million. Okay, that 10. That was a hundred. 10 million of the 100 million is now 20. I want it to automatically buy into and buy more shares of these venture funds or real estate funds so that I stay in that, you know, private asset, alternative asset world. More balanced. Right. So you can do interesting programmatic things.

Oh, I just want to say I'm so blown away that I've heard you say both tokenization and programmatic on the same show without you casting dispersions on crypto. I've also come around a little bit on crypto in the last 12, 18 months. It does seem to be these companies are maturing. I'm just glad we're, we're past the NFT boom and kind of some of the silliness. Where there's utility, there's value. Where there's value, there's business. I'm fine with that. All right, let's keep moving on. So, on Wednesday, we talked a little bit about Windsurf, the coding service. They got cut off by Anthropic and they threw a very polite public fit about it, saying, hey, we want to give them money, we want to use their models. They've cut us off. And what we didn't have at that point in time, Jason, was Anthropic's response. The good news is that we now do, and the gist is that they want to basically work with people for the long term. And because OpenAI is broadly expected to be purchasing Windsurf, that deal still hasn't closed. Oddly. I don't know what's going on there. It's a little weird that everyone's been talking about it for this long and it hasn't reached the sign line yet, but they're basically saying, we're not going to let an OpenAI thief use our stuff. So it is what we thought it was a competitive point, but I just think that it underscores platform risk for foundation AI model companies in a way that I don't think people were thinking about before. But as anthropic, as OpenAI develop their own cloud code and codex tooling, there could come a time when they don't want to serve competing companies that are building on top of them. And I wonder if Anthropic is going to regret this decision later because it's poisoning the well a little bit for commercial AI models, in my view.

I think what's actually happening here is that there was probably an auction and Anthropic had the chance to buy Windsor and they didn't clear the bid. And they said, okay, well, if we were the home team and we helped you get here and OpenAI is outbidding us, well, we reasonably need to not empower you. And we have this, like, one chance to extract some pain from our suffering that we didn't get to buy the company. So we're going to do it. You know, it's like there may be a little bitterness from Anthropic that they weren't able. This is all speculation.

Speculation.

I. This is the. Don't reblog. I don't have inside information here. I'm. I'm literally just speculating on what typically happens. Right. The board of Windsurf obviously would do their diligence and their duty to all shareholders by creating a marketplace. If OpenAI was part of the acquisition marketplace, so was Google, so was Gro, so was, you know, Microsoft and obviously Anthropic and Amazon. So they all had a chance at buying this, I'm certain. And probably Anthropic was like, you know what? This Jared Kaplan, who's the chief science officer was like, yeah, their value comes from our model or some significant comes from our model. So what are we doing here? You know? And yeah, so everyone loves Claude, man.

I mean, Claude's coding abilities get consistently high marks across the Internet. People want to use it and another company that does is Cursor. We'll talk about them in detail in a second. But I found it interesting that Anthropic, While talking to TechCrunch at their event about this decision, cited Cursor as a long term customer of theirs. So I went back through the Cursor, which is the product made by any sphere, but we call them Cursor because it's easier. They raised some of their earliest capital from OpenAI.

Okay.

Which just goes to show how intertwined everything is here.

It's kind of no conflict, no interest. Yeah. I mean, things grow and people place bets. It happens all the time. You know, I'm an LP and other funds, those funds might invest in a competitor to a company I'm working on a company I'm working on my pivot into a business that they're already investing in. And yeah, you know, bad feelings happen and you know, but all's fair in love and war and startups.

So on that point, one last final question about this, because I've been, I've been trying to figure out what the advice for founders here should be, because on one hand you're not going to get cut off by Anthropic unless you're a big name and something goes awry. But at the same time, if you were picking a way to go about building your startup and you have closed models and open source models, would this Anthropic Windsurf beef push you more towards the open source side?

Yeah, yeah. And. Or being multimodal. So, you know, if you were building, you know, a product, you would want to just be multimodal for sure. Absolutely.

And that we can swap out models as needed as they improve. That makes a lot of sense to me. So essentially you just don't want to be have. You don't want to have platform lock in effectively.

Correct.

Okay, yeah, that makes a lot of sense to me.

Yeah. And I think they probably have the ability to move it over. But you know, who knows if they're ready to do that under what timeframe. And this is why you have an agreement and a long term agreement. So if Windsurf was being built off of Anthropics products, you would probably want to have a two year contract, a three year contract to avoid this kind of thing happening. So who knows if they're on a month to month contract, a quarterly contract, but that's what a two year contract would do. If this was a two year contract, they couldn't be cut off. Right. Or else they would have a legal action they could take. So yeah, this is complicated stuff.

Or there used to be a break clause that got the money or something other than, you know, having their API access snipped and then having to go tell their users. Sorry. All right, moving on. One last update from us. Recent news, Jason. We've been covering the Rippling spine saga.

Alleged spine.

Sorry, the alleged Rippling spine. Thank you. Rippling is an American, Alex.

To get sued.

What logo is right there, man. Yeah, I'm this week in startups. Okay. Yeah, yeah, sue Jason, not me. Rippling is an HR tech and payroll giant. Recently raised a Series G at about a $17 billion valuation. Deal in the same space was worth at 12 billion. Just giving people context about the companies. The background here is that earlier this week Deal tried to create two bits of news, Jason. They said that one Rippling former contractor, now employee had done something slightly untoward. Fair enough. And also that they reached the 1 billion-ARR milestone. Rippling came right over the top of that with new allegations. And I want to get your your take on a couple of things. There's some stuff in here that I would say is not surprising. Rippling writes in its new suit that Deal was regularly bragging about new hires bringing secrets from other companies that I think the CFO said that he maintains, quote, spies at other companies and that Rippling was behaving poorly. None of that's kind of a shock given the other allegations that they have said. But something that did catch my eye was this. And I'm going to quote from the suit here. So again, I'm not saying this. This is what Rippling has said. Around April 23, 2025, just two days before the financing was scheduled to close. This is their Series G, a quote, Tier 1 investor, quote, in a position to know about Deal's response to Rippling, contacted a very senior partner at Rippling's Series G investor. That person claimed Deal would quote, soon be hitting back with material information against Rippling in this litigation and urged the investor to delay until Deal's response came out.

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Which to me is a bit of a surprise because if I was an investor in Deal and this had gone down, I would be trying to back away from the company to a degree, just given the ethical lapses that are alleged to have happened. I was surprised that an investor would try to scupper Rippling's own round and then perhaps hope that that wouldn't get out. So question for you is, is that sort of skullduggery school duggery normal in venture circles? Because this seemed more underhanded than I could.

I mean, if it was two friends and we worked together and we went to business school together and I was helping them out and just giving them a heads up like, hey, Deal's got their own response coming. You might want to just hear that because it's coming out tomorrow. That wouldn't be dirty. That would be helping your friend out. Right?

Ah, so there's a possible humanity.

That would be. Maybe how. Yeah, that person might explain it. Now, if you had met at a trade show and you've been at conferences and you knew each other and, you know, you were at, I don't know, Andreessen, and I was at Sequoia or Spark or CO2 or YC, you know, all these shared backers, whatever. And I said, hey, you Know, you might not want to drop that wire and sign that term sheet until you hear the full story, because, you know, I've seen it, and it's pretty gnarly, brother. And you were doing it to sink the funding. You would be. There are some legal concepts around trying to impede the other person's ability to do business, but it would be very hard to prove, I think. I'm not a lawyer, but, yeah, generally, yeah, it would feel like it all feels a little dirty and backhanded and back room. Unless it was like, hey, we were, you know, fraternity brothers, sorority sisters, and I was just trying to let you know, like, hey, just heads up here, you know? And, yep, you. You. You make your own decision as to what level of risk you want to take, because obviously, the person who is doing the series G knows about this lawsuit. They know all about it. They just don't know the response. So he's just saying, hey. Just, hey. The response is coming. Yeah. But it does feel like, yeah, maybe this has gotten so bitter that we're just going to have a hundred of these little updates until they settle. And then I think the big winner here is that both of these companies now are probably going after something very significant. So there's the big prize. Therefore, people are behaving badly, allegedly. And sometimes when there's a big prize, people get petty or they lose their ethics and morals and. And do crazy things. Yeah. So I've seen this kind of thing before when you have two competitors who are dogged and aggressively going after each other. And. Yeah, I've gotten emails, you know, or back channels during the Lyft Uber days.

That's what I was thinking.

Yeah. Yeah. I mean, there's this, you know, Robin Hood and everybody else, whatever. You know, I've had these call. I had one time somebody calling me trying to just character assassinate you. Oh, this person is a bad person for these reasons. And, you know, it's like literally another VC calling me to sort of badmouth the founder that we were investors in. And I think we were. It was during a funding round because we were going to invest more. So, yeah, these kind of shenanigans can happen.

So the way that I'm reading this very, very selfishly is that all the complaints by venture capitalists about, quote, hit pieces, is this them projecting contained guilt for them bad channeling on the back channels versus, you know, doing it in public. One more little detail from this case, though, Jason, because this can be true. Yeah, yeah, it's true. Both can be true. So Apparently Deal had an agreement with the startup accelerator, not named, but there's only so many out there. And I know it wasn't launched because I'm pretty sure you would have told me that essentially Deal stole their CRM, which Rippling describes as its trade secret customer database containing confidential and valuable non public information about customers. Customers. They just took it.

They took the accelerator. CRM.

Yeah. So part of the, part of the, the new allegations from Rippling is that there's other companies that have been harmed in similar ways.

So if DL went to YC or techstars, the allegation would be they downloaded their CRM. But it could be the public list of Companies on like YC's list of pub companies and Techstars are listed on their website.

But that's why it says what are you stealing? Confidential and valuable non public information is the key, key bit from.

So that means on the internal on book face, which is YC's internal, they scraped book face is going to be the allegation if it in fact is yc.

If it is yc.

Yeah, if it's yc, then there would be that. They scraped Bookface, which might have the email addresses and you know, whatever. Yeah.

What's the board's responsibility here in terms.

Of, I mean, if they find out about it, they have to investigate it.

Okay.

Yeah.

And that's where, that's where it stops.

Or what you investigate it and then depending on what the investigation shows, you have to take action. So you do an investigation, you hire an outside counsel, they investigate, did you steal this? What happened? They find out who stole it and then they say, okay, that person has to go and we have to inform the company that we took the data from, that we've deleted it and come to some settlement with them. So you can have all kinds of crazy things that occur. You know, in a harassment or case you would have something similar. They would do an investigation, oh, this person harassed another person in the company or fired them for no reason. And yeah, or this person stole something or they were putting personal stuff on their corporate credit card. I've seen that one happen where somebody was putting stuff on their personal credit card. They shouldn't. A little investigation occurs and then you say to the person, okay, yeah, you're being fired or you're being demoted. You can take whatever action the outside counsel says you should do. So that's where lawyers make a lot of money because these investigations tend to cost 100k, 250k just to do them. Wow. So now you got a 250. I've been in the middle of it many times by many times. A few times actually. I take it back a few times.

Well, I'm curious to see what the board eventually does in this case. To me, again with the allegations just being allegations still. But if they are proven, I would hope that the board would move to replace leadership to rebuild the moral integrity of the company.

All right, tell me about what's going on with Cursor. Fastest growing startup of all time, maybe.

Fastest growing startup of all time. We have talked about this impending funding round several times on Twist. I'm glad to kind of bring it to a conclusion. First of all, one, it's more money than we thought. It's 900 million, not the 500 we have been discussing. And the valuation is a little bit higher than I anticipated. It's a $9.9 billion, I presume post supply 9 billion free plus the capital to call it 10 thrive led, Andreessen, Excel and DST were in there, all that, blah, blah, blah. Who cares? It's another AI round. What matters is this Cursor says that it's now not at 300 million ARR. As was reported, it's now above 500 million in annual recurring revenue. Going from essentially 100 to 500 in six months.

100 to 500 in six months. So that would be doubling every month. Basically you went from 100 to 200 to 400. No less than double. 50% a month. From 100 to 150 to 25 still. 325. Yeah, it's. It's like 50% growth month over month. It's crazy.

It's absolutely insane.

That would be like 10% growth every week. Something in that week over week. 10% growth is crazy.

But from a nine figure base, I mean if a seat stays for a.

Paid product, like 10% would be fast. For a free photo sharing app.

Yes.

To do it for a paid product is bonkers. This is bonkers. So it's spreading like wildfire. It's kind of like Slack spread like wildfire.

Yeah, but I wanted to go back and get some historical context on how fast is this growth. Because one of the best IPOs ever and going back to different ways to go public. Google went out via a reverse duck auction and that went so well that no one ever tried it again. But I went back to their S1 and I pulled their numbers and Google went from 19 million in revenue in 2000 to 86 in 2001 too. And this was the key moment for them. 350 in 2002.

Yeah, four times. Yeah.

But that's still so much slower than what we're seeing from Cursor here. So I think this goes to show one, that AI driven tooling for highly paid professionals is something that companies will just pay for. And also I think it shows how much bigger the Internet is today.

Just I was about to say like 2000, there was probably 500 million people online and now there's 4 billion. Yeah, it's 10 times as many people online probably and probably three times as many developers. And they probably all have corporate cars now and they weren't allowed to buy this stuff. This is combining the virality of consumer with a subscription model which it's kind of like Netflix or Disney plus. When we saw Disney plus come out, it really grew fast for that first couple of years in terms of the membership, especially at $8 a month. So yeah, it's awesome. And this company could be going public. So Cursor, if it does this again, if it gets to a billion in revenue, they should go public, I think so.

There was an interesting story in, I think it was Reuters a couple days back that said that Windsurf and Cursor have negative gross margins. I don't know if they actually meant negative gross margins or negative operating margins. I would be shocked if they actually had negative gross margins. But there's an interesting kind of split screen here that we can draw. So we've talked about Anthropic, the Foundation, a model company, $60 billion reportedly at a $3 billion run rate now 20x recurring revenue, more or less. What's interesting is cursor 10,500,000,000 also 20x.

Yeah, that's a trend.

Both just seem so cheap to me given their pace of growth. Is the market just concerned that they're not going to keep growing this faster?

20 times top line is, you know, pretty juicy if, but appropriate if you're growing, if you're doubling year over year, tripling year over year, etc. So you know, you're getting a big premium there because when it becomes a public company, it will be 20 times earnings as opposed to top line. Right. So you know, sometimes people conflate the profit with the top line, you know, sales. So Sales here is 20 times sales, not 20 times earnings. So at some point the quality of this revenue. Is it profitable is going to be the question. Now we don't know how much compute is being used by each of these players. What if, you know, like YouTube or other businesses you know, they were in a J Curve or Uber where they're selling rides for less than the right cost and they're losing money every ride. You know, that J Curve could be what's driving some of this revenue growth. They could be selling hundred dollar bills for 50 bucks right now. And they need to fill in that gap. And that gap would get filled in by people becoming addicted, the price of compute going down, and maybe their ability to charge going up. And that's the J Curve. Right. You invest and you lose money. Lose money, lose money. Then you stop having to invest money and you're growing, growing, growing. And then wildly profitable because the costs stay fixed. Yep. And you're raising your prices and it's growing viral. And you don't have to pay people to download the Uber app because they're just getting invited to Uber Teen by a friend. Or you don't have to get somebody to know what cursor is because the other four developers that they know are like saying to the two developers, you don't use cursor. Are you an idiot? And the. And they get pulled in without an advertisement, whereas the first couple might have needed to get hit with an advertisement.

Yeah.

So these are going to be incredible businesses. The business is strong, venture has a bright future. The wrath of Khan is over. And I think DPIs are going to spread through the heavens and America's going to win again.

All right, now, I know we have to go, but before we do, let's just do one quick look at Polymarket. Now, I have polled what I think is the juiciest single chart I've ever seen on polymarket. For us, there's a great market that they're running. Discussing what's going to happen with interest rates in the U.S. jason, you and I pay a lot of attention to the labor market and the price of money. And if you take a look at this chart here, this is about the Fed decision in September. Now, I. We're at the furthest edge of this particular market on polymarket. So the dollar volume here is much lower than for the June decision or the July decision because there's multiple Fed meetings coming up. Yeah, but what I really appreciated about this is if you look at the chart, you see a lot of movement in the last couple of days. And two things happened that really shook the numbers here. One, ADP dropped a very small drop report, if you will, saying that employment growth was very low. And so people said that, hey, there's a higher chance of a decrease by September in the federal rate as a response to that. Then today the BLS dropped to different data was much more positive about the labor market and you can see how it swapped yet again. So this, to me shows that the poly market betting is incredibly responsive to news events on a very sober basis, I think it's pretty good to see, you know.

Yeah, I mean, there's the majority chance is no change. And the second most expected outcome is a 25% decrease. 39% no change, 57%. So most people believe the Fed's not going to do anything in September. And like the July and June numbers are even lower. It's like 90% and 80%. So basically with the GDP report, there's some projections that GDP is going to be like 4%, 3.8% in the second quarter, far from a recession, which is two negative quarters of GDP. So what this means is no rate cuts. There's not going to be free money. So stocks are not going to go crazy because the economy is healthy and GDP strong.

Yes.

So in one case you get cheaper money because the economy is weaker. In the other case, you get consumers and enterprises that are strong because the economy's strong and they have more money to spend. As a startup, both of these things can be helpful. On one side, you got great consumers who want to buy cursors products, who want to buy DL or rippling, and they're adding employees because the economy strong. On the other side, you get free money, which means you can invest in starting new companies because you're in a zerp environment. So I think what we're looking at is the former. We have a strong economy, therefore don't expect the rates to come down. We're not going back to that. Which means homes and mortgages and car loans and all that stuff is going to be expensive for some time to come.

Yep. So hopefully you're buying everything in cash, everybody. Jason, I know you have to go. We're back on Monday with even more. It's going to be a blast. Bye, everybody.