SpaceX Just Bought the Right to Acquire Cursor for $60 Billion. Here Is What That Actually Means.
In this episode of The Learning Corner, host Mia Farnam and Precursor Ventures GP Charles Hudson dissect a series of recent industry observations. They begin with Manny Medina’s LinkedIn post urging VC‑backed founders to actively eliminate competition, debating whether aggressive acquisition or a broader, category‑dominating vision is more effective. The conversation then shifts to the consequences of large capital raises, noting how abundant funding can distort go‑to‑market spend, spur wasteful acquisitions, and create a “Frankenstein” company dynamic. They discuss the growing tension around ARR reporting, warning that founders are increasingly inflating growth metrics to satisfy investors, which poses risks for both sides. A real‑world example of AI pilot fatigue is presented: a C‑level executive reports 263 AI pilots in a year with only two converting to contracts, highlighting the need for clear ROI timelines. The hosts examine Samir Khaji’s insights on the widening gap between small and large VC firms, the “legibility” bias of big funds, and the importance of regularly re‑underwriting fund strategy. Finally, they analyze SpaceX’s announced partnership with Cursor Ventures, unpacking the unusual deal structure that gives SpaceX an option to acquire Cursor for $60 billion or pay $10 billion for the collaboration’s output, and consider the implications of open‑source model choices, compute economics, and the broader AI infrastructure market. Throughout, the dialogue balances anecdotal founder experiences with macro‑level market observations, offering practical guidance for founders, investors, and anyone tracking the evolving AI and venture landscape.
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Strategy always looks easier in a business school case study than it does in real life, because in real life you don't actually know what happens at the end. I've had portfolio companies of ours sort of had somebody sneak up on them and eat a part of their lunch and vice versa. So I think this is one of the challenges in dynamic tech markets is you don't always know what new feature or what new thing is really going to matter in the end.
It's the week of April 20th. Welcome to The Learning Corner, a Precursor Ventures podcast. Welcome to the Learning Corner by Precursor Ventures. I'm Mia Farnam, and I'm joined by our GP and managing partner Charles Hudson, where we will be talking through the articles and good reads that caught our team's attention over the past week. Our first good read this week is a LinkedIn post from Manny Medina, co-founder of Outreach Ventures, and his reflection on a lesson he wishes he had fully embraced from the start: that the job of a VC-backed founder is to win, and winning means actively trying to kill your competition. Early on at Outreach Ventures, Manny had no choice but to outmaneuver rivals who had raised dramatically more capital and it worked. But over time, he says he was talked into going soft by conventional wisdom, like focus on your own race and there will be many winners. Advice he now calls out as fundamentally misaligned with what founders owe their investors. He points to real examples of companies that won by acquiring or suffocating competitors, DiscoverOrg, OneTrust, and Salesforce versus his own company that held back and watched billion-dollar businesses like Apollo and Gong fill the gaps they left open. The post mentions an observation at the end: Uber's market cap is 30x that of Lyft, and while everyone can talk about Uber's leader, most people can't even name who ran Lyft. Manny's framing here is really clear that killing competition is your job as a VC-backed founder. We've on the podcast and then internally on our team also talked about the risks of having your head too much on a swivel. So it's difficult to actually focus on your customers when you're so locked in on people building around you. Wanted to pause for for your reflections here, Charles.
Yeah, the first time I read it, I was like, ooh, there's something in here that resonates, but I'm not sure I would describe it in exactly the same way that Manny did. I started thinking about the companies he mentioned, Uber and Salesforce in particular, and I think it wasn't even as much about killing the competition as it was having this really big holistic view of what you're trying to do. And whenever I talked to my friends who worked at Uber in those ascendant days, they had this like world domination idea that we're going to be in a lot of businesses. And we're going to compete in a lot of geographies. And that's what it's going to take to become the global leader in transportation, logistics, and delivery. And I think it was more about the breadth of the vision required them to win in all of the— and remember, like, they didn't win everywhere. They spent a lot of money. But I will say Uber competed in every region, in every geo, in every category that they went into. And if I think about Salesforce, I think my sense has always been that's a company that wanted to be one of the, if not the most important software vendor to their customers. And to do that, you have to provide more of the things that your customers need. And again, not every acquisition that Salesforce has made has worked out, but Salesforce has always been, I think, aggressive in trying to make sure that if one of our customers has a business problem, whether it's customer service, whether it's CRM, we should have a solution for them. And I think it's, to me, it's more about two things. What does it mean to kind of dominate your category? And sometimes dominating your category does mean you have to snuff out competition early to not give them room. And sometimes it means figuring out like, well, how much space space can we really take up in our customers' lives? And how do I make sure that we're executing on strategy that maximizes that? To be fair to Manny, I don't think a lot of investors thought that companies like Gong and Apollo— I met the Apollo team early. I was like, this is a really neat feature or a really neat tool. And so I think that the danger is if you try to kill everything, like you don't build anything on your own. You're just being very reactive. And it's hard sometimes, you know, we have to fight this in our team meeting. Strategy always looks easier in a business school case study than it does in real life. Because in real life, you don't actually know what happens at the end. And so we've been on both ends. I've had portfolio companies of ours sort of had somebody sneak up on them and eat a part of their lunch and, and vice versa. So I think this is one of the challenges in dynamic tech markets is you don't always know what new feature or what new thing is really gonna matter in the end.
I wanna talk about the piece that Manny mentioned earlier about competitors who raise far more capital than you did, which seems to be happening more and more, especially if you're building with an AI. If that is the space that you're in as a founder and you see a quasi-competitor or a direct competitor come out of stealth Having raised 3 to 4x the amount of capital that you did, how do you make the decision as a founder of how much to take that into consideration when you're running after the same customers? Or do you really try to just stay focused on the path that you have already outlined for yourself? I find that that's just something that comes up in meetings with founders oftentimes when they, it's like the elephant in the room almost. As investors, I've never felt like it's a helpful thing to bring up of like, oh, did you see the $30 million? Like, it's just obviously they've seen it. I don't, unless I have something really valuable to share about how they can use that to their advantage, I just don't think it's a good use of time. But I don't know sometimes if founders know where to prioritize after seeing stuff like that.
I just talked to a founder in our portfolio who's selling her company and she said, look, a bunch of my competitors have raised a ton of money. None of their businesses are really working, but A, they've sort of sucked the fundraising oxygen out of the room. And B, like they're engaging in business practices that like don't make any sense from a pricing go-to-market standpoint. And she's just like, I don't know if any of them will win. And I'm not gonna pick on specific companies, but I can think of a few categories where VCs piled in, funded a bunch of other companies, and then the VCs moved on. But those founders were stuck with those businesses. They raised $50, $60, $70 million to dominate a category and turn out the category either was harder to dominate or was less interesting than originally thought. And they're still running those. Businesses. And I'm like, well, to what end? My sense is when people raise lots of money, it tends to create some fairly predictable distortions in your category. They tend to spend a lot more money on GTM, so they will flood the zone from a marketing standpoint. The smart companies will spend that money in ways that actually create value. A lot of it's wasted. They will look around at like, hey, we have product and technology gaps. We should maybe go acquire companies. That can help us solve those things. And cash makes that easier. I think the third thing is I tend to find the people who are able to raise those rounds are naturally more aggressive or can convince VCs that their vision for the category or the product is more expansive. So it's kind of like a what's first, like, is it the expansive vision that comes first or is it the money that enables expansive vision? I'm pretty sure it's the expansive vision that comes first. And then once you've got the $30 million, you probably told the investors, hey, we're going to flood the zone with marketing. We're going to go acquire some smaller companies and we're going to patch this thing together and we're going to build a brand. And yes, is it a Frankenstein company? Sure. All those, all those things apply. But I think for the people who are wired that way, that playbook's never been easier to execute than it is right now.
The one thing that I do want founders to prioritize, or they just have to, if they're going out to raise money and they have competitors who have raised much more capital than they have in the market, is like, you have to be able to speak to the story as to what your competitors have done that you're not going to be doing. That's going to be more effective because to your point, I find that's actually the likely scenario. There's been way more money that's flooded into a specific industry that leaves scar tissue with investors. So it's not like, oh, these wonderful experiences make me more excited to jump in. I've seen that a lot with healthcare of we've done this back in 2021, we're all set. So I would say for founders who see competitors building, if you are choosing to wanna stay your path, just know that you do have to speak to the folks who are in your own space and how you're gonna be differentiated and maybe what they've left open as gaps that you can take over. You have to be educated about that space for sure.
And, and I think you have to be realistic. I sometimes I sometimes hear founders tell me a story and I'm like, I understand why you want that to be true, that, oh, you know, the product sucks and this and that. And, but is it true? And I think it takes a lot of intellectual honesty to be able to say that like, yeah, it's frustrating when you're, when your competitor who you think has an inferior product raises a lot of money. The dismissal can't be, well, their product sucks. I'm like, well, they have a lot of money. They're probably doing something. So let's at least be honest about what are the things that they're doing that we cannot do.
Yeah. Also the product could suck, but does that even matter? Like if I, I would say for most B2B SaaS features and products that are sold at Fortune 500 companies, they're not good products, but they have multi-million dollar deals under the belt, which means that it stinks, but people are happy to use this like half-baked product because it's what they've used before. So being realistic is such a throughput here. Our next good read is also a LinkedIn post from Samir Khaji, CEO of Allocate and host of Venture Unlocked, sharing what he calls his fundamental truths in VC right now. It's a really tight list of observations, but a few stood out. The barbell between large and small VC firms is wider than it ever has been, and LPs should treat them as entirely distinct asset classes. Samir also flags that no portfolio construction model, whether concentrated or diversified, rescues a bad portfolio. And that the real variable is whether you are in great companies to begin with. He raises a quiet but growing concern around ARR reporting, noting that founders are increasingly coached to show growth to maintain valuations, and that is getting dangerous. He closes on a note of honest uncertainty about AI, arguing that the people who sound most certain about how it all plays out tend to be the most financially invested. Interested in a particular outcome being true. Samir says that the barbell between large and small firms is as wide as it's ever been, and they're just genuinely two different asset classes now. As a seed investor, how do you think about where we sit, or maybe, you know, folks who've started funds back 10 years ago are and, and haven't grown their fund sizes out too tremendously just to keep that same strategy? And has the pressure from both ends changed how you see the firm operating at all?
I didn't realize this when you picked that. There's like a through line with the last article too, which is, you know, we talked about what do you do when you're a portfolio company? I think the same question applies to venture capitalists. You know, we've kept our funds small for out of a mix of strategy, personal preference, a lot of things. And I tell a lot of, I tell a lot of people last year, it'd be very comforting to think that you're allowed to execute whatever strategy you want, but the market has the vote too. And so I think Part of what's happening in venture, we've, this has been, I think the theme of the last year is this continued pulling apart of small and large firms. And, you know, as a small fund, you've got to remember there's a lot of short-term incentives for you to, to mimic the investment decisions of big firms. I just saw someone else posted a, one of these charts. These are the seed funds that have the biggest follow-on uptake rate by the big tier 1 firms. I'm like, great. I don't, I don't know what, I don't know what to do with that information other than to say like, congratulations. Like, doesn't necessarily mean that those companies will be more successful or better. It is just a data point. So I think about, I think about this a lot. I mean, I'd like to say I spent most of last year re-underwriting the whole use case of small firms in venture. And I came away with one big conclusion, which is on average, to make a broad generalization, most of the larger players in our space, this whole legibility, this is one of those words that I'm like, ugh, but I get it. They're looking for legibility as in like founders with backgrounds and working in categories that are easy to understand and underwrite for them. So people who went to a narrow set of schools, people with a really specific set of backgrounds, maybe they graduated from an accelerator. They know that is not going to be the totality of returns in venture. If it ever becomes 100%, then everybody else should just go home. But I think we're far from that world. And so I do think that no matter what your strategy is in venture, you should constantly re-underwrite it every 12 to 24 months and say, like, is the thing I'm doing, does it still make— and I've talked to a lot of friends who are simultaneously increasing their fund size and becoming even more concentrated because they're like, look, the only way to make the returns math work is we need more money to compete for the best deals, and when we win them, we have to own more of them. And I'm like, that is a strategy that's based on a set of assumptions about where venture is going. And if you're right, then that's the right strategy. If not, you're going to end up with a gigantic hole. So I think strategy making right now for VCs is no easier than it is for founders. And the other thing I will say is that I read everything Samir writes. I would say a subtle tone shift from him expressing caution about AI. He's been one of the most bullish, positive, I wouldn't say unabashed, but really positive AI voices I know. And I think I too have had the same questions and concerns around ARR reporting and, you know, forcing people to grow. It's dangerous. So it's really a tough time.
Do you think that last piece that you mentioned of making sure you're being cautious around reporting, do you think that that's something that is a call for maybe LPs to carry out a little bit more heavily? Because I think in our job, we've known this to be true for the last year and a half.
I think part of the challenge is the reward to caution is you maybe don't raise your round. And the question is like, are companies fooling VCs or are VCs in on it too? I kind of think it's more of the latter. You don't have to usually scratch too hard to figure out, is this ARR number, is it all deployed or is some of it contracted? As someone once said, they have to pay you twice before you can call it recurring. There's a lot of things that, but the question is like, how hard do you want to look? And I don't think that many VCs I know are actively being misled. I think they're choosing to say, look, there's a chance that this isn't all recurring. There's a chance that this is a little bit funny, but the growth is good. And like, Everybody's got a little bit of this funny on the books. And so as long as we're not in investing in fraud, it's probably okay.
Yeah.
That, that is a position to take.
I was at a breakfast yesterday and it was a mix of like LPs and GPs and one person was at a CVC of a large Fortune 500 company. I'm not gonna name which one. And he mentioned that in the past year alone, their company signed off for 263 pilots for new AI tools. 2 of them went through to contract. It was Adobe and another company that was not any of the fancy AI companies, because I would have remembered it. It was not that. And so that really does also reinforce young companies that you see that state a lot of really exciting ARR numbers. You have to really hammer in of like, how much of this is pilot? And I asked him too, I said like, how long are the timelines for the pilots? And he said, all range. It could be a month, it could be a year. They're all different types. We had them simultaneously running, but only 2 of them went through. Do you think 2026 and maybe even the beginning of 2027 will illuminate any reckonings between what's real and what's elaborated? Or do you think we've got still a little bit more to go here?
I do for a very different reason. It's a small thing, but a lot of people I know noticed, you know, Anthropic took Claude code out of the Pro plan. I use Mac, so it's fine. I do think one thing that's gonna happen is we're definitely in the $5 get across town in San Francisco Uber era of tokens. And I do think as that gap between true cost and cost to the consumer begins to close, some things right now that are not worth paying attention to because they're little experiments, people are going to say, wait a minute, how much are we spending on that thing? Are we really getting anything out of it? And I think prices will go up to consumers, to business consumers, and scrutiny will go up. I think the other thing is many of these things have been running long enough that people ought to be seeing some ROI from them. And so I think there's going to be a combination of factors that are going to make it harder to sell the AI dream without some reality in the back half of this year and all of next year.
Yeah, I assume that founders will have to be able to show the ROI much quicker than you would be able to kind of like show a little AI dance before and buy like 6 or 7 months to just kind of win people over. Our last piece this week is a post on X from Tuesday night from SpaceX announcing a new partnership with Cursor Ventures to build what they're calling the world's most useful models for coding and knowledge work. Cursor Ventures brings leading product and distribution to expert software engineers and SpaceX brings Colossus, their 1 million H100 equivalent training supercomputer, to the table. What makes this one really worth discussing is the deal structure attached to it that we really only know surface level on of, of what's been shared. SpaceX has been granted the right to acquire Cursor later this year at a $60 billion valuation, or alternatively pay $10 billion for the work produced through the collaboration. For context, Cursor Ventures only recently crossed $500 million in ARR, making a $60 billion acquisition price a jaw-dropping multiple and a signal of just how aggressively the market is pricing AI infrastructure and distribution right now. That deal structure obviously is, is what caught my eye here. SpaceX essentially has an option to buy it at $60 billion or pay $10 billion for the output of the partnership. What does that structure tell you about how companies are thinking about locking in AI capability before the window, quote unquote, closes?
It reminds me of a very convoluted Microsoft-OpenAI deal back in the day where they're going to buy some compute. The person who sent me this right before it got announced, I was like, oh wow, are you sure? I, but immediately I was like, Are you sure this is from a reputable source or were you spending too much time? He's like, no, no, no, it's going to come from SpaceX. And it did a couple of minutes later. And I asked him, I said, who's, who's saving who? And he's like, what do you mean? I go, is this Cursor helping Groq remain relevant and get more value out of Colossus? Or is this Groq helping Cursor remain relevant by giving them a bunch of compute for their new, for the KIMI base, their, their new set of models. And he said, could it be both? I'm like, yeah, actually, It could be both. And so I think there's like a whole nother layer, which is like, if you believe SpaceX will go public and that the company's valuation will hold even in remotely the $1 to $2 trillion range, $10 billion means nothing. I thought about this a lot. I was like, it's actually for me fairly interesting that in the end, the smartest thing to do might have been to sell Cursor Ventures at $30 or $40 or $50 if you had the chance. In the grand scheme of like how this all plays out. But if it trades out at $10 and, you know, I don't know all of the conditions that have to be met for that $10 billion payout to be made. These things are, it's never that simple, but it might turn out that a company that we once thought was worth nothing and then thought would be the dominant coding player might end up being a very valuable company, but nowhere near as valuable as we had once thought. Or it could turn out to be an incredibly valuable company. We were all wrong to be skeptical or doubtful at all. But a lot of this is contingent on SpaceX's IPO. And the question I keep coming up with is, where do you find that much demand? Even in Robinhood, the irony is a lot of the big institutions that you would go to for the IPO, they're already on the books on the private side. So this is a, this is an enormous amount of money to raise in the context of an IPO. But I just immediately thought like, well, what's $10 billion or even $60 billion to a $2 trillion company? It's actually not very much money in the grand scheme of things. And it gives them the ability to have, and again, if Cursor Ventures really deteriorates, look, I assume that Grok is probably building their own coding agent too, or wants to have some ability to do that. So I think this is a very interesting tie-up. I'll be curious to see whether the, the end price ends up being closer to $10 billion or $60 billion.
It is interesting too, because the deal terms that we'll never see likely are what will be interesting to parse out because right now Cursor Ventures is trained on Anthropic, OpenAI's models. And so I wonder like, is this, they have to kind of like co-locate all of their training on what SpaceX XAI Groq is doing, or they're really just like cruising and, and sharing distribution. I don't, I don't know.
My take is like, you know, the, the last one they released, they used the QMIMI model. They're, they're using, I think wisely, trying to find good open source models so that they're not dependent on their competitors for infrared models. And I don't use Cursor anymore. I've sort of gone all in on Cloud Code. But I have friends who use Cursor Ventures who've been very happy with the new models, and obviously they're open source. They're much cheaper to serve. And if you had, you know, to me, the logic of the deal actually makes sense. If you're Cursor Ventures, you're like, I gotta find a lot of compute somewhere.
Yeah.
But like our cost to compute on these models is much lower than it would've been if we were using one of our former partners. And if you're Groq, you're like, I got all these, I got all this compute, I gotta find somebody to use it.
Sure.
So it kind of makes sense.
We are all out of time. Thank you, Charles, for jumping in. Thank you to our listeners for listening in as well. Please like and subscribe, and we will talk with you all next week. Thank you, bye!
