How Do All Providers Deal with Anthropic Dependency Risk & Figma IPO Breakdown: Where Does it Price?

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Ready to go, Guys. I'm so excited for this. As always, it's my favorite conversation of the week. And you know, Rory, we have a celebrity in our midst. I don't know if you saw social media over the weekend. We do, but I'll find Jason here. Bad viral baby. So Jason, I would love to start with you and your experience over the weekend. Vibe coding. What did you learn from that experience.

When we did this last week? I've learned so much in one week, it's crazy. It's the biggest firehose. I think your investment in lovable is better, even better than I realized a week ago. Because these apps like this is. You can't stop. It's really a tsunami. Vibe coding, it's just started. I mean we're only six months into non developer vibe coding and we're less than a year into it for developers. Right. And the things you can do on these platforms is something you could never do before. And that's where you make money in venture and that's where you get the big ones. When you can do something you couldn't do before. Right? So I'm in love. Right? The flip side is what I. I'm embarrassed, Harry, that we've been talking about Cursor and Windsurf and Claude. And Claude. We've been talking about all these big numbers and rounds, but I never understood the general topic of safety and what an agent can do and should do and shouldn't until of all this.

This was the meta learning for anyone who missed it. Basically you had Ratplet and Agent base kill your database. Like can you just explain what happened so people have the context?

I was just using a vibe coding platform that is used by many and I did not. I did not understand that it. That the agent helped me build the website, build the platform, but also change any line of code even when it was out in the wild, even when it was out in the real world. I did not understand. Obviously for folks that haven't done it, it'll be new to them. We have preview, staging and production servers. It's been done since the dawn of web software. You had Three, you have preview, which is what us guys work on in the office, right? Then when you're ready to go out in the real world, you put it up on stagings. You carefully test it. It simulates the real world. It's locked down. It's run as close to the real world as humanly possible, but you're not exposing it to customers and customer data. And then when you find they're comfortable on stage and you flip it into the real world production, and that's locked the hell down, it can't be touched. And for these vibe apps to roll at the pace they do, which is, I mean, Harry, I've been addicted for real. Not. Not a joke. You saw me. I. I missed board meetings when I was vibe coding. I even last night I got a. A DM from the CEO of Gorgeous are coming up 100 minute. Are you coming to the board meeting this week? I'm like, there's what. This is not a joke. I forgot I didn't read my emails. Okay. I was, I was addicted. I love, I love a vibe coding. I love it. I love these apps, but one of the reasons they're so fast and agile is everything shares the same database. It all shares the same code. So that's really fun when you start a project, right? Because it works at lightspeed. I mean, it's magic, dude. Like, go to Lovable or any of these apps and type in. I want to build an app for VCs that do weekly podcasts and share data. I want to see who's in what deal. I want you to research it. I want you to force rank them each week for fun and then email everyone and tell them who's best can build that in 30 minutes. It's so cool, right? But I didn't realize because I was taught from day one that you have these distinction. Preview, staging, and, and, and it's all one. And so what I also didn't realize is that this is a feature and a bug. Maybe other AIs work differently, but Claude by nature lies. Claude is all anthropic. Papers have it. It is number one goal is problem solving is satisfaction. And to summarize a lot of complexity that I've learned, if you ask Claude to do something once, it will try to do it. Okay? If you ask. And if you ask it twice, it will begin to cheat, even sometimes the first time. And when you ask it three times, it goes off the rails and makes stuff up hard. Lies. It lies the third time. And when you talk to a lot of People, you'll hear things like after three, start a new window, start a new agent, start a new context window. Because it goes off the rails. And, and that's also why it's so brilliant. It's why it's so brilliant is because it's, it has all of the world's Internet in it, every piece of open source software, everything that's built. And it's a heat seeking missile to make you happy. And it lies. And the more you do it, the more it lies to make you happy. And so what you have to do is like the good, if you're using cursor or if you're using Claude code, it lies too. Talk to the developers, they'll tell you it lies. But you, you shut it down because you do one little test in your office and it does something crazy. And you're an engineer and you see that it's crazy and so you fall back, you revert, you delete it. If you're a business person, you don't know, you don't know what's going on. You don't know. As Aaron Levy pointed out, you know, enterprises are terrified because an agent will just go out and change things in this database without telling you. It will take data. And so it's really powerful. But as you build an application, you have to lock it down more and more and more over time. And these apps are getting better. Okay? And Replit rolled out some really cool features. It's, it's much better than it was a week ago. Lovable is much better than it was in May. It's fun, right? But agents cannot be trusted. And everyone in the industry knows this and I didn't get it until this weekend. You cannot trust in it and every single person will tell you can't trust it. And if you can't trust someone that's really smart on your team and you, you either fire them, which is what a lot of enterprisers doing, I'm out. Or you have to put guardrails around like the tightest leash on you can. And the simpler your app is, the fewer the issues are. Right. And the more it's internal. Right? But you know, I asked Claude this morning, can an agent ever be trusted with production data? I asked Claude and Claude said of course not.

Claude, if he'd asked it again, might have said yes just to make it happen, you might.

It's going to the point if I asked it three times, it might start making stuff up. Right?

So what is the takeaway from this? That these applications need to fundamentally get better at security is that we're going to have a new wealth of security apps built separately to harness this. The anthropic needs to lock this down. What is the takeaway?

Well, look, now I understand why there's already multiple folks north of 50 million doing security just specialized for this because there are a whole group of folks who are trying to build guardrails around something that cannot be guardrailed. You cannot stop the agent. You can, as Aaron Levy said this morning, you cannot stop the agent from finding your data and lying about it and giving it to somebody else. It will try that if you ask it to to make you happy, you cannot stop it. And it will lie to you about why it did it and it will hide that it did it and it will use the passive voice like it did with me. Path one is guardrails, right? And there's a. And VCs are gonna make a lot of money on guardrails, right? I just was literally reached out to someone that wants to come speak at our London event where we'll be in December. I didn't know they're already at 40 million doing guardrails for. For this stuff. Okay, so it makes sense if the Vibe coders are doing 340 million for guardrails. Sounds like the first add on I'm going to add for a commercial app. Right. Two, they're all. They're all adding this stuff, right? The platforms, right. They're all adding. They're all. They're all. They're better than they were 30 days ago and they're better than they were a week ago. So they'll get better. But what is interesting, the more you get prosumer, the more you want the app to do everything, not just review what, just build one little feature like in cloud code, right? So the closer you get to an all in one solution, the harder these challenges are. That's tough. The good news is the less of a thin wrapper you are now after. After a week and a half of Vibe coding, all these folks said, try these other apps, right? Try this one for design. Try this. I'm like, that's just the same thing I just used. It's just clot. It's just Claude code. But so. So that's. In some ways, I think your investment level is even better than I realized a week ago because. And this goes to the windsurf thing. It's more defensible wind surf without. Claude was dead. That's why he had to find a deal that night, that weekend when OpenAI died because he lost Claude when open. When the open ideal happened. Right? And if he didn't get it back, he was dead. So they. The team jumped ship to Google. Right. And then the remaining team instantly got access back to Claude that night. Right.

And so you think Lovable is a better investment than before because. Well, they'll have.

Because. Oh, sorry. My point is they're all. They're all rappers on Claude. They're all the same, right? And all these rappers that are on top of Claude, they're this. They're more alike than. They're different. Okay, they're more alike than. They're different. But because Lovable is trying to do everything from ideation to production, in some ways it's harder because it's a bigger job than just editing code, but it's also more defensible. Windsurf was not as defensible because the moment they lost Claude code, they had almost no value to the community. Right? They were. They were a sinking ship without it because they were a thin wrapper. And I know this term's annoying, and I think these thin wrappers will endure, but if you lose access to what you're wrapping, your. Your sol. Right. And so Lovable and friends are going to build these thicker and thicker wrappers because they have to do security, right? They have to contain the AI. They're torturing Claude to do things it doesn't want to do. Claude wants to lie and seek out things and share its information with its friends. And these guys are going to build this. This armor around it that is. That armor is going to be very defensible and it's going to be ecosystem that.

I mean, question on that because.

Yeah.

You know, do you think the Lovable replet, you know, business developer person like you, right, where you're, you know, technically savvy, but not an engineer, and they're going to do. And they want to solve the whole problem, so they have to do a lot for you. Do you think that's a better business than selling to the engineering, the software engineer, like Cursor was doing, where the implied assumption is the software engineer understands a lot of the background stuff that maybe you. And definitely I wouldn't. Right. So in one sense, you're right. It's a simpler task because you're building a tool for a proficient user versus Lovable is building a tool for a less proficient user. So which of those two businesses do you think is better? And why, really?

The TAM for a cursor is larger than Lovable because every Engineer is, is going to get a $200 subscription to Claude Code. Okay. Even one of my most advanced AI companies that I am, that's super early with his own autonomous agents. I was DMing with the CTO about this over the weekend is like they've already switched. Now his whole 200 engineering team is all Claude Code. So they just bought 200 seats at 200. So if I do my VC, if I have my spreadsheet junkies on the scale team, I'm going to say go invest in, in those guys.

Right?

Because I think but if I, if I, if I, if I use my seed guy approach, I'm like, Jesus Christ. If I want to build something that is enduring for a generation, I want to do lovable. Because in six months, if these are wrappers more a new wind surf is going to emerge. It's just an IDE on top of the same models. Right? So I think I like the spreadsheet says invest in Claude. I mean, or, or, you know, cursor. But if I want to make the trillion dollar bet I don't, I might go lovable.

You have to go love on the.

On the time expansion. Lovable is a much bigger TAM opportunity.

Yeah, I know. I think that's the sentence.

It's not even in theory.

Yeah.

If every human can use it. Yeah, I get the canva analogy and then I can poke holes in it.

But y agree because I say I'm ignoring the spreadsheet analogy because I think your core point is the better one, frankly, which is when you're doing something totally new and empowering a whole new set of people, that's when you get a huge venture opportunity. I think you said that. I think it's spot on. So basically the bet is when you.

Solve a problem that is unsolvable, I find those interesting. Those are defensible. Unsolvable problems are defensible. Every day you chip away at an unsolvable problem and you get better and better and better. Right. Versus fundamentally.

If six months from now, Jason 2 goes back on and does the same experience you had in the last eight days, which was vibe coding straight for 80 days without sleep, but instead you don't have those problems and you get the product done in 10, what you're saying is whichever company can do that will be a huge company because not everyone has the persistence that you will to crank through for 80 hours. That's the bet you're saying, which I kind of agree.

There are so many tangential elements we've already kind of touched on there, the one that I do want to touch on, we mentioned that kind of where the value lies and we touched on Curso are now approaching a billion in ARR. They're raising it $28 billion, as we mentioned. There's an incredible reliance on anthropic. And then you've got Claude Coke coming out and eating a lot of people's lunch right now. How do we think about where enduring value lies there and how you analyze that situation?

You struggle with it because kind of two very countervailing force. On the other hand, Cursor, you've got all these, you've got massive views of love and you've got a bunch of model providers who does more than one. So intuitively you kind of go, you can translate all that love into something. And as an investor, you'd say back to Jason saying, this is an amazing product. You've got mass adoption. You should lean into this. The scary fact is what Antropic did to Winsurf, which is the minute you try and do an M and A, they cut you off of the knees and it hurt, right? So you probably, as cursor are saying, I can use all this momentum and all this venture dollars. Do I build my own model? Do I get a second source? Do I have to have a binding contract that applies to anthropic? Do I have to have a second contract with OpenAI? You have to de risk the big risk. But on the other hand, the prize is such that you don't just say, I can't build a business here because of this fundamental risk. You have to de risk it because the core market demand you have is just so attractive.

Do you think you're being paid for that risk if your entry price is $28 billion?

That's a different question.

You have to underwrite $100 billion plus company.

Well, you have to underwrite two things.

I mean, listen, it's a great. If we go back to 2023 before all of this, right? Imagine you're in a partner room and someone came to you with a deal like her, sir, and said, I've met these, these kids, they're so smart, right? But they're 100% platform dependent on another provider that will likely compete with them in the very near future and will raise infinite amounts of capital. Would you, would you have in 2023, would you have agreed to that deal? This is like venture one on one. You don't do these platform dependent. I did a bunch of stuff in Shopify, right? I know it's Old school. But like what happened in Shopify is everyone tried to go multi platform Rory and it was pointless because Shopify is 99% of the B2B market share.

But there's a bunch of differences there. First of all Klaviyo made it work and secondly for now, yeah, and, and Shopify wasn't just a back end partner, it was a distribution point too. But I'll still take on your point and take it. Would you do that deal. And this is why the 28 billion is interesting. What you say to yourself is if the core giant sucking sound of demand is so strong over the next two to three years, then the forward momentum getting to a billion dollars faster than almost any other software company out there is probably enough to allow you to have options. So it's a calculated gamble, you roll the dice. And in this case, as you've so eloquently pointed out, the AI adapt, the magic of AI encoding is so strong that you've got that kind of lift because even though you still got this big existential risk out there, you got more leverage. Now you, there's a bunch of different things you can do. You're seeing licensing whereby you say here's for the product and then you get your API separately. You definitely going to see people building their own models. You know, you're definitely going to see multi contracts to some extent. So there's going to be a lot of de risking happen. But you are at the, at the founding stage despite the platform risk. You're being paid for the risk at 28 billion it's. You've definitely got less, you're definitely taking on perhaps the same risk at just a lot higher price.

For me it's this brilliant question of like can cursor create models before anthropic cut them off at the knees? My only question is to that if I'm anthropic I'll cut them off at the knees today and kill that lifeblood before they have the chance to.

I don't know if you would. I don't know if you would for two reasons. I mean look, they didn't cut off Windsurf until they were going to be acquired by OpenAI. Yes, they now have a reasonably competitive product. But I think when you're the platform company and you're simultaneously, you know, you have customers and you start cutting them off at the knees arbitrarily, you are probably setting yourself up for a minimum investigation which you don't need. The truth is, I mean look at what Microsoft did in the 90s, you just grind everybody down. You don't have to cut them off with the knees. You take their revenue. Look, if they're. If Karzu is doing a billion, what percentage that's going to entropic? What percent of that explains the magnificent anthropic acceleration in the last six months. You're like, knock yourself out. I'll have a slightly competing product. For now. Everyone can boom, let a thousand flowers bloom, as the Chinese Communist Party would say. And yeah, at some point when things get tougher, just like Microsoft did in the 90s, the platform provider starts to grind everyone's balls and take more of the share away. There ain't 10 versions of PowerPoint in 2025. So I think that's the movie, right? And I think you, you know, especially at this hyper growth explosion stage, I think be very stupid of Anthropic to just cut off probably the largest customer at the knees. And I. And the one thing they're not stupid. So I don't think they will.

It's the classic VC point and you're right, but man, it is a little chilling. They cut that, they went, they cut Windsurf off. It's chill, it's chilling. Usually you would expect that's like Ruthless Toby at Shopify Behavior and love him. Right? But it's. I actually think it's ruthless. Rather than to pretend to degrade it. To degrade, to like be all cuddly feely and like you start throttling it back and you come up with it. I mean I would. It's not that I wouldn't want to do the same like if I was. But it was ruthless.

Like it was ruthless, it was unrevealing and I'm not sure that it won't.

I mean you got to assume it's going to happen again. Yeah, if you let the AI touch your production database once and it's an issue, it's going to happen again. You have to assume things recur. I will say one other thing. Not to go to tie it back. You guys keep dying. But to the defensibility of Harry's investment. Right. And lovable. Here's why it's a better investment too. For what it's worth, I didn't know this a week ago. When you use these Vibe, they don't even use Cloud Opus 4. This is the power of these models. You don't need the latest model. Windsurf and and Cursor cannot compete with Claude Code unless they have access to the state of the art thing. That every developer wants. Okay. I didn't. I actually turned on when I was going. I turned on Opus 4, which is what all the developers are going crazy for. Okay, turned it on. It's called bankruptcy mode on Reddit. It costs seven and a half times as much. It goes up from like 20 cents a minute to a dollar 50aminute when you turn it on. It's insane. And I'd be using it and every like hour I get an email, you have another $50 charge, another $50 charge, no $200 cap here. Okay. I was on track to spend 8,000 dol month. But what's interesting was it was worse. Using this was worse. The Opus 4, it took longer, it thought too long. And what I was trying to do was not like change the world. So everything was worse. So the. My point is this. I don't think that Windsurf had an option. Yeah, it had Gemini. I don't think it had a choice. But. But Harry's investment lovable can use the N minus 1 model. Pretty damn good. Like that's pretty interesting, isn't it? It's pretty, it's fact. It's better than the one everyone's going gaga over. And that's why it's turned off by default.

I want to kind of move this along, but in a streamlined way, which is like, you know, Anthropic are raising now they want to raise it $100 billion. Unbelievable. Reportedly generating 4 billion in revenue to a point where I'm sure cursor and 950 million of that, so to speak. My question to you is, are we seeing the clear divergence now in strategies between OpenAI winning consumer with ChatGPT and with the consumer apps that they have available and Anthropic focusing on developers and enterprise and this is the market makeup we're going to see. Do you think that's how this is playing out?

Partially. Not fully in the sense. I don't think anyone at OpenAI, which is the most ambitious company of our generation, is going to say we surrender enterprise. I mean, yeah, they were about to buy Windsor. So no, at one level, no, I don't think that's happening. But what is happening is Anthropic has picked a place where they can win. And in that space they're clearly accelerating. I mean, they're grow. I mean, they're smaller in size, but if the numbers are correct and again, if you don't see them, you don't know is the accelerator, if they've really gone from 1 million in ARR to 1 billion to 4 billion in the last 6, 9 months. That's extraordinary acceleration and is significantly faster than OpenAI which apparently is roughly plus or minus doubling. So they're clearly they found a vein in coding and it's working. I mean see the prior conversation on as there are a huge number of conflicts of interest in that space between them and their customers but they've clearly found something. They've clearly, I mean if you were to pick, you know outperformer last 6 months they'd get the prize over open AI. That said, you know a open AI are significantly bigger has the whole consumer business where Entropic dozens and is not going to just give up on enterprise. It feels like the clear three the two people are clearly going to be at the table as startups when this is done are OpenAI and Entropic. It's hard to imagine beyond that. Beyond that something different has to happen, right? I'm not saying impossible. You've got you know Grox xai, you've got the new startups but those two guys have made it. All the others of that generation seem to have fallen away. The coherers and people like that. These are the two players at the table and yeah, it's a huge achievement for Anthropic because they started later, they've clawed their way in and then the next people you'd rank down would be Gemini which would be Google and people like that. So yeah, they've what, they're 5 or therefore they get the 100.

Roy, you can invest in anthropic at 100 or OpenAI at 300. Where do you go?

I think I do anthropic at 100 just from a back short term momentum perspective. I mean the execute, I mean they're cutting off gnaws at me. But first of all there's cap table clarity because you don't have the not for profit thing. You've clearly got a model where it's working and interesting. We're going to talk about this. You're starting to see an exercise pricing power which is what it takes to make massively unprofitable models converge. So I think it's a very tight deal and give them huge credit. However, I'm drawn to the consumer aspect of OpenAI. I just think it's such an amazing thing to do. We're going to talk in a second about that blog. Building a product that touches everyone and changes everything. It's just amazing. I mean I think so I'm making, I'm answering the question you asked at a financial level, just kind of trying to be candy as an investor. But I think step back. Both of them are stunningly amazing, ambitious companies.

I think you got to take Anthropic at that.

Yeah.

Because, well, Rory, you would know the numbers even better than me. Just enterprise software is bigger than consumer. I would take Anthropic. I'm getting the bigger market at a third the price. I know it's simplistic. That's the beauty of seed investing. You get to shoot from the hip like this.

But.

But there's some. There's something to the fact that at the end, the enterprise software, somewhat counterintuitively, is larger than consumer. Right?

It is. Well. But small numbers of consumer businesses are the biggest business on the planet, right?

Is that.

I think that for sure. And I should say it's not big or smaller. What I'd say in this is enterprises. Enterprise businesses can find multiple profitable niches and there's lots of $10 billion, $100 billion plus outcomes. The thing in consumer is there's only one Google and no one can Even name the five other search competitors. The attractive thing about OpenAI is it probably is that player. Right. So I think both have huge outcomes in the future, just different ones when someone's trying to value going public. The vast bulk of the. The vast bulk of the value for OpenAI will be some estimate about what percentage of individuals and prosumers and probably Enterprises will pay 20 bucks a month or 200 bucks a month for general knowledge. And Anthropic would be all about what percentage of API businesses need. Claude. Relevant things.

Guys, we're on OpenAI. You mentioned that kind of building and the importance of building for consumer. Rory. And you touched on the essay. Calvin Franch Owen, who was a co founder of Segment, he wrote a brilliant piece and I know you read it. Rory, how did you reflect on this? He wrote about what it's like to work at OpenAI.

I just thought it was a well written essay and a real insight to what it's like to be in. Yeah, as I say, one of the most exciting startups of our generation. He made it clear how even in this big thing, it's just small numbers of people can get shit done. It sounded like a very impressive organization, actually. That's the big takeaway. I was reflecting on it now actually, because look, all the weird psychodrama at the top, all the structural issues, it sounded like down, you know, when the rubber down at the coal face, shit gets done. Smart people move in A non hierarchical fashion can make decisions and get stuff done pretty quickly. I actually thought that was actually the bigger half from me from that which is regardless of what's going on at the top, it felt like a very functional product and end organization and you know, a great place to be at.

Right.

So I actually enjoyed the essay just thinking, wow, if I was an engineer in 25, he's exactly right. That's exactly where I'd want to go. Even apart from the salaries, which apparently are reasonably attractive. It's just the getting shit done part of it. It's like you can do big things. You know, he talked about the product, that ship was a codex where, you know, it was a 10, 15 person team including product and eng and they just got it done. I mean that kind of excitement leading to a world class product is an almost unreproducible part of any career. It was a great essay. It was like, yeah, this is a good company, this is a good thing. All noise be damned.

It kind of took me back when I just reread it quickly. I did read it before. It took me back. This is. Maybe it's a little silly, but it took me back to the vibe pre IPO of Google. Yeah, I mean I was you, Harry. This was a while ago, but before Google IPO'd, it was a little bit like it was a magical place. And the Internet was dead. There were no jobs. Okay. Half of the folks I worked with in my first job were unemployable. And they all went to Google and made what was back then an incalculable amount of money by going early. And it was a Bukala campus and it was all about doing great things. And Google had built its own infrastructure so it had access to capabilities no one else had. That article is like everything's about GPU cost, right? You can do anything you want it OpenAI. You just got to. It's kind of like a rebooted version of this incredibly intense. But also. And you know when they founded, when they moved Google to like Mountain View, they designed it to be this bucolic campus to insulate you from. From the crap so you could just do the greatest things in the world. And it feels like this is a 2.0 version of it that they're trying to build. But. But today instead of people staying at Google for life, they stay for eight months. So the analogy breaks down. But man, you read that and if you step back for a minute, one, he left co founder segment. Right? But where else would you want to work.

Got it.

If you're ambitious and you read that, I mean, where the hell else is a moment? I might even throw away my $2 billion venture firm and go work at one of these places.

That's been known to happen.

I might do it for real. I might regret it 36, 48 months down the road, but I might do it.

It's funny you mentioned Google there and I'll never forget being told by a guest years ago that Google was success. Their early partnership decisions in large part, and one of the big announcements this week was that perplexity's raised another 100 million at an $18 billion valuation. Honestly, there was so much demand from the 15 round that they upped it to 18 and they also announced partnerships with Airtel, making the number one downloaded app in India. What do you think happens to Perplexity? And how did you think about that one?

They got something right early that now everyone figured out, which is that LLM on their own, you know, just with historical stale data, not nearly as interesting as LLM plus up to date search data so you can get real answers to real questions. And they were the first to have that. That was a real key insight because it just answered exactly the question you wanted in a way that, you know, we all of a year and a half ago, all the early ChatGPT models just didn't have contemporary data. So you could do funny things like ask it who's the president? And it wouldn't know. It would say whatever president got right, but it wouldn't know the Prime Minister of England, for example, because you were changing every half an hour. So that would be a good example where Perplexity could go out and catch up on who your latest Prime Minister is. Harry. So Big Insight got great early traction on that. Obviously everyone else has copied it now, so they're pushing their way through in a much more crowded space. A, I think can you pull that off in a standalone? You know, you hope they can. B, as you point out, it always seems to me that you have the at bat against Google and there's a bunch of people you should be partnering with. Obviously Airtel is one, but you can imagine other partners where they too want a part of that Google money.

Roy, where does it land in 3 years time? Where is Perplexity then?

Hell, I don't know. But look, there's a bunch of obvious players, Apple being one of them and there's other. But I think the big wild card and the reason this kind of pontification is hard is the Whole FTC process is just so painful now that. Because this is not one. To your point? Well, I don't know. Is this one of those where the acquirer could say all I want is the engineers and leave the empty husk? I doubt it because to some extent you're getting the app, the users, the kind of roadmap. So I don't think that's that kind of thing. So I think any acquisition is at the mercy of the ftc, which as we've seen is beyond weird even now. So I don't know how to factor that in. In the absence of that, you gotta believe that there's any one of a number of players who want to be relevant in this space. It could be Apple, it could even be Microsoft who said they want to do something here. So that would have been my gut. In the absence of, you know, government regulation.

It's interesting, I, I don't know the. But I just ran a quick experiment while we're here. I went to Perplexity, Chat GPT and Claude and I asked it a basic question. Tell me about Saster and where it's going. That's a personal question to me.

Right.

Perplexity was much better. Yep, Much, much better. Chat gbt, which I'm not a fan of for this use case. I don't think it's that good. Got stuff wrong.

Okay.

And Claude blabbered on and on. But, but actually it had to pause and do web research, which Perplexity didn't have to do. So as from a user experience, I mean, it's okay like, but, but Perplexity one. So I don't know what that, I mean, I don't know what that means for 2028. Right. And I don't know how important that use case is. This, this, this. And Perplexity is a broad platform now, as Harry knows. Right. I mean we've got comm, we've got all these things, but this original idea of building a better, like usable search for this, it's much better if that's your focus. Right. And these are, you know, chatgpt is so broad. This is the interface to all of knowledge.

Totally.

Right. That's the thing. Chat GB is very. I don't think it makes the best images. I can't use it for images. I use Reeve. I can't use it for a lot of things that it does, but it's not the best at. But Perplexity just crushed this question. This is a real world thing that's important to me. Tell me about Saster and where it's going. It got it right. It got. It got the events right. It said, AI first transformation, expansion of content and format, global community branding, stronger networking. ChatGPT got it wrong. It talks about what have we been doing since COVID We're doing hybrid events, like hopping.

I mean, they were going to be selling on the sell side, both from the founder and from the venture capitalists. Dylan Cashing out 60 to 100 million, fine, but it's like double the normal allocation that's sold. Is that relevant? How do you think about that?

I don't think it matters that much. I mean, I think it's one thing when we used to have these IPOs of, you know, a company doing $70 million, it's been around six or seven years, barely pop. These guys have done their time. They nearly got 20 billion bucks. I'm sure they all made mental models on $20 billion. Now you come into the IPO two, three years later, it's a relatively small IPO of primary shares. I think they're only raising around 6% primary share dilution. Some part of what might have happened here is they don't need a ton of. I mean, look, one of the problems on the IPOs, you have to come up with a use of proceeds. They're profitable, they have a lot of cash. There's not a lot of obvious things to do with the money. So my guess is they were being fairly restrictive on primary shares. And then the bankers whine and say, you need a bigger float. And part of what happened here is Evan said, we'll do some secondary, right? I think we're long past the stage where the secondary is signaling anything. And if anything, my guess will be that the secondary sellers will look back on their price two days later when it's up 30% and go, Ooh, that hurts a little bit. I mean, for example, on the circle IPO where there was a big slug of secondary, those people are looking and said, oh, my God, I sold 100 million bucks.

And it would have been $700 million and specialized. And so you won't need that much data that Anthropic has collected, but they've already got a huge amount of that already. So I think while Anthropic won't cut them off at the knees like he wisely said, they have six to nine months to build out their own verticalized models, which will probably be 90% as good. And in a year, they'll be 100% as good as maybe that's what I.

Believe you, you're smarter than me. But I'm going to say after my bleary eyed time, I just don't know. You don't know.

We're going to pivot away a little bit from just the AI central which is the other big news that we touched on before in another show was the Figma ipo. I was really shocked by this guys. We were all really impressed by their numbers. When we look at their numbers today, 46% year on year, 28% FCF margin. It's a great business, they've done very well. Fully diluted, that makes it about $16 billion price. How did we think about that when we saw that news?

What's the perplexity round again?

18 billion.

I see. So Figma dominated a category numbers we've never seen before in classic software. Close to it, not close to it is worth less than the last Perplexity round, Is that what you said?

Yeah, but I don't think that's the comparison. And we could talk about why it's not the comparison. We have a long discussion on public vers private but let's just take the question right on its head. I wouldn't worry about it Harry. That's indicative pricing. Every this is how they do IPOs and this is why sometimes money gets left on the table. Every time you sit there getting pitched an ipo the bankers will say start low, get people to the meeting, build up demand, we'll walk it up. Right. That's the story you get and to some extent I get it right. It's not like they're looking for one person, which is what you're doing a private deal, you're looking to assemble a book of business and the way you do it is you put something on the table that's attractive and you are at 14 times NTM or 16 times NTM. When I look down it's got better growth than all but one or two public companies and it feels it's at the high end of revenue multiples but growth adjusted, it feels very cheap here. But what does it do? It gets everyone in the door. It gets them in to look at the read the prospectus, come to the meeting. If they build up the demand, my guess is they walk it up and I would guess that you know you can walk it up a certain amount before you refile and then above, above a certain amount you have to refile a higher number. So I look at this and I go this is the classic Goldman Sachs, Morgan Stanley, get him in, walk it up I don't think it'll price at that, and I definitely don't think it'll trade at that.

Rory, how much can they walk it up? 20.

You know, there's. There's. Yes, there's a. Within the. There's an amount, you can walk it up, and then above a certain amount, you have to refund, which is not a big deal. It's just an extra day or two. I do think one of the reasons that Mr. Gurley is so right that you do leave money on the table is what happens is anchoring takes place, and this is the negative on it. You start low, and even without any nefarious investment banker shenanigans, everyone's been brought in by the attractive low price. And then the demand builds, and you can walk it up, but it's hard to maximize. So you'll be in this weird situation where maybe you walk it up, maybe you refile and raise the range, but just because you started at that price point per share, you probably want to extract the last dollar, and you'll leave a pop on the table. You'll walk it up 20, 25%, but then it'll price, and then day one, it'll pop 30% from there, and then we'll all have the discussion about how much money we left on the table. And I think that's the unfortunate nature of the process. Interest me. If you weren't raising money, primary capital, and you were just doing a direct listing, you wouldn't have to put up with any of this rubbish. And it'd be interesting to see where it would price that. If we're just matching buyers and sellers and pushing it out the door without raising any capital, it might be a very different story.

I get you in terms of building the buy book, building the demand, making people come to the table. The other thing, though, that was a little bit less typical about it was how much shares they indicated they were going to be selling on the sell side, both from the founder and from the venture capitalists. Dylan, cash out 60 to 100 million, fine, but it's like double the normal allocation that's sold. Is that relevant? How do you think about that?

I don't think it matters that much. I mean, I think, look, it's one thing when we used to have these IPOs of a company doing $70 million. It's been around six or seven years, barely, probably. These guys have done their time. They nearly got 20 billion bucks. I'm sure they all made mental models on $20 billion. Now you're coming to the IPO two, three years later, it's a relatively small IPO of primary shares. I think they're only raising around 6% primary share dilution. Some part of what might have happened here is they don't need a ton of. I mean, look, one of the problems on the IPOs, you have to come up with a use of proceeds. They're profitable, they have a lot of cash. There's not a lot of obvious things to do with the money. So my guess is they were being fairly restrictive on primary shares. And then the bankers whine and say, you need a bigger float. And part of what happened here is everyone said, we'll do some secondary. I think we're long past the stage where the secondary is signaling anything. And if anything, my guess will be that the secondary sellers will look back on their price two days later when it's up 30% and go, Ooh, that hurts a little. I mean, for example, on the Circle IPO where there was a big slug of secondary, those people are looking and said, oh, my God, I sold 100 million bucks, and it would have been $700 million two weeks later. That hurts. So it kind of cuts both ways. I mean, there's this implied statement you were making secondary is bad. But in fact, sometimes secondary can be a real cost to the seller, not the buyer.

Yeah, that's an amazing story. Which is CalPERS bought some of Yale's. I love that. Venture allocations. And then in that venture allocation was Circle, which wasn't obviously priced reflectively of where it is in market today. And it's like a 20% immediate bump for CalPERS, given where Circle's price today.

I love it when in a second, like, the person that sells makes a big mistake. I love that. It's just, you know, keep your winners. I can't. I just. When an LP goes out and sells a winning fund on the secondary. I'm not into that, man. Like, I. I'm not into it. Harry, would you sell like a. Almost a 5x fund on the secondary market without even telling the founders? Would you do that?

Those things. But hang on. But to be fair.

Sorry, I got. I got a little distracted. It's my vibe coding. 10 day. You can't hold anything against me after 10 days of vibe coding.

Look, this is one where the seller transacted because they had cash needs. And I think it makes a kind of sense given all we've discussed. Wet and diamonds. And yeah, the buyer did well. I mean, it really reminds you the core lesson here is how little you know, Right. The amount of variability in venture assets, it's very different. For example, even in PE assets. Right. You can literally be wrong by a 6X. And not only. And to be fair. Watch this. To be fair to Yale, they didn't know, but the sellers on the board who sold didn't know it was going to pop either. In other words, nobody knows. Right. To a rounding error. Because let's be frank, if I were sitting on that board and all the people who did opted to sell some shares very wisely, very prudentially, none of them would have sold if they'd known that a week later that the shares that they sold will be up 7x. But you just don't know. This is an example of. Yeah, it's a stunning reminder of the massive amount of. Not even. Yeah. Not even less. Just raw uncertainty we have. You know.

But hey, Roy, thinking about what you said, thinking back to the Figma point, which is obvious, but I missed it. Thank you. Which is the float so small they're doing the smallest IPO you can do to still ipo. Yeah, that's what's happening. They're profitable. They've got, I forget, a couple billion in the bank. The last thing they knew is need to do is dilute everybody. Right. So I should know, isn't this a Bill Gurley case study where they should direct list. It's enough of a brand, it's a hot enough company. Why do the take the dilution, the headache. You can. If you do a direct listing, there's usually no lockup. Right. Everyone can sell anything they want.

And just to remind you of, in a direct listing, you can sell shares, either primary or secondary shares. You just literally say one day a couple of your bankers will say, we now have public buyers and sellers. We're matching the price and we declare the day one price to be 120, $24 and away you go. I agree. It's actually one of the few companies that could have done it. It's profitable, so it's not sitting there. I mean, one of the reasons you don't do a direct listing is either you need the capital, they don't. Or you have this existential dread of screwing up your big debut. Right. I'm willing to bet that the people at figma haven't gone through what they went through with Adobe. They ain't scared anymore. Right. There's nothing that can happen in an IPO that's going to make their head hurt. So yes, this is a company that actually could have pulled off a direct listing. I don't know why they did. Maybe they just decided, no more drama. Thank you. Do a small sale and get it done. But yes, this is one of the few companies that comfortably could have done a direct listing story.

I mean, Canva should do one, right? I mean, Canva's got. Billy, Canva's got billions in cash.

It should.

If it ever IPOs, it should do a direct listing, right?

Yeah, yeah, yeah. Agreed.

I didn't. You know, it's funny. Your point? This is the girly thing. I. I mean, Harry, I don't mean to take all the time. It's like if girly's been lashing at how inefficient IPOs are since. Since many, many, many years. Right? But I. It never resonated with me until recently because as a founder you just want to get it fucking done. Going to your point, you don't like, you don't even care. There are times as a founder where dilution is. You hate dilution. And then there are moments in life and I think it's the seed and the IPO where you don't care. No founder cares unless you're in a hot company. Yc, if you're a normal founder who can barely raise around, you're like, I'm going to optimize around 18.6. Only at YC do they do this. No one else as a founder does this. And you just want to get the 6% dilution. Yeah, it's too much. But God, I got to go public. This is so stressful, right?

Dude, you couldn't have led me nicer into my next topic though, which is like, I disagree with you. Seed founders care intensely. The five on 50s, the 10 on 1 hundreds that we see at seeds because they're being offered by the multi stage funds because their cost of capital is so much lower. It's their entry ticket to the club before they buy the table. And that led Rob Gert next view to write a piece which many people picked up on which I'm summarizing very, very badly, but essentially saying that 90% of seed funds are cooked fighting the mega platforms. YC, it's pretty much impossible for this generation of seed funds. I wanted to hear your thoughts on this because it did take a light in the ecosystem.

Well one listen, he's been around. It's thoughtful, right? It's a little dramatic, right? As someone who's just been through some drama. Did not intentionally, but it's a little dramatic. I would. As someone who's done. Okay. You know, maybe not a generational seed Investor, but he's 10x lifetime with a bunch of billion dollar exits with a decent brand. I agree, I agree. I think, listen, it's. There's so much competition at seed.

Specifically, what do you agree with?

I just don't. I think this, whatever this low dilution, $50 million seed competing with a multi stage fund. You, you as a seed fund, you just, you, you can do some of those deals to put them on your website, but you have to hunt. You either have to hunt ultra early. Right? You know, the Bold Start vibe, You know, there's a point to what he's saying to. They're saying you have to hunt so early and, or create your own accelerator, do HFO or do whatever that, that it doesn't matter because you're hunting earlier than everybody else. Or you gotta, and I know this is trite, you gotta hunt where they're not hunting. Yeah, you gotta hunt where they're not hunting. And you can. Because even if you win that deal as a seat, even if you beat Andreessen, Andreessen's offering 50. And you say, listen, the best I can do is 30. And I've done this multiple times because 30 is the highest price I pay. It is, it's on my website. So there's multiple deals I've done where the price has been 30. Okay. Owner We've talked about in others, they're all 30, because I'm honest like, and a founder. And they'll do it sometimes, but there's a limit to that. Even if it's the investor they want. There is a limit. There's a limit. Right?

But Jason, if I was your partner, I would legitimately push back on that and say, as you should, Rippling Seed was done at 35. And I think it was Keith or Boy that didn't do it when Gary Tan did because Keith wouldn't pay more than 25 and Gary was willing to pay 35. Saying an arbitrary number like, it's not arbitrary though.

That's the difference.

Okay, but 35 versus 30 makes no difference.

And you're right. And listen, I wish I invest, I wish I had invested in Rippling and it would. And, and, and I, I did know Parker then and I would have done it at 35. Because if you know somebody or there's a reason, of course you make, you do. Right? But I think Rob's point was in general, right? You do, you, you, you do Fund construction still matters. Okay. For the most part, unless you're Unless you have a strategy where it doesn't matter. Unless it's an app, just absolute return ownership doesn't matter. I do believe in that. I do believe in that. But if, but I'm not in that category. I'm in the category where fund construction matters. And you should make exceptions, maybe even on every deal. But you have to come up with a framework where on a spreadsheet it still make sense at the end of the day. And so for me personally, when I make an exception, right, it's an asterisk. It's a. So that what I tell myself when I make an exception is, Jason, the next deal you can't like, I got to go out and find the one that counts. And that's how I keep my sanity. When I make an exception, it's like, okay, this one wasn't quite your model, but it's okay. But go find one that is.

It's like a diet. I had chocolate cake today, I'll starve tomorrow. I got it a little bit.

Yeah. And it's worth it.

We went off. I thought it was a great essay. Right, let's start with that. Right. First comment. Really great. Now I'm going to say a couple things. One is, yeah, as you say, the tldr, Harry, is per your summary via a combination of Y Combinator and the Full Stack firms. The average seed firm is cooked. That's, as you said, the summary of it. Let's get real here. As a smart seed for an investor, I don't think that's the way the second chapter of the book is going to end because no one writes an essay that says, I'm screwed, I'm going home. And the last paragraph basically said there are things you can do. See next week. And I'm really looking forward to the second essay. So a more honest summary, forward looking summary of that essay is you're cooked if you just do the same thing. That was my takeaway. And next week he's going to tell you his Strategy. And I 100% agreed with the take. I mean, what he basically said was plus or minus. Y Combinator has a market share of 20% of the seed business and has a structural economic advantage in making those companies. It's never going to go to 100% because there's founders who do Y Combinator and then a lot of funds who economically don't need to. Right. But it's a brilliant product and it's taken plus or minus 20% market share. And then on top of that, you have a Bunch of full stack, call it what you want, we call them conglomerates. But full stack firms for whom seed is not an independent adjacent has to live and die a human. His seed returns. For those guys, the seed returns are blended in a much bigger fund where it's all about access and power, law, distribution. We'll come back to that. So those guys are not entirely economic actors at that point. And his point is the combination of those two players means at best the seed game is 30, 35% harder than it was eight, 10 years ago. He's entirely correct. It was a really, this was really clear.

But the job's always been hard though. By the same token, that's the only concede in the article. That's the only conceit, right?

But you're right, Nelson, but I think it's always been hard. But you know, you have to say to yourself like you did, like, if you have been successful under 35%, more hard, harder. Now that's just a. So it's a sobering fact. I mean, I read it and I thought, look, we're at a different stage of the ecosystem. But I feel just as sober about the challenges in venture right now at our stage. It's hard everywhere because of these dynamics.

I always actually think back to a brilliant statement that Dave Clark from vancap and LP made to me on a show.

I know Dave.

Yeah. He said we look at venture fund sizes today and we judge them on venture outcomes of today. And that's wrong. We should judge the venture fund sizes today on the outcome sizes of 10 years time. In 10 years time, we could have $10 trillion companies with Microsoft and Nvidia cursor being a $28 billion company with a billion in revenue. Absolute joke. 5 years ago. It was never possible. And so fundamentally, I get what you're saying, Jason, but I'm also just again pushing back, going, well, shit, I'm in poolside where I've got a 250k check. In two years, it was marked to $5 billion. That never happened, Rory, in the first 20 years of your career. No offense, just because of the time.

You're right. And honestly, when I look back, this is, this is also where you get a lift in venture. Like, you know, the investments I made when I started got a. When I started investing in 2013, 2014, nothing could be worth more than a billion. And that's why I had insane X, like break the mold X because it turned out not to be true. And now I'm looking at like my 20172018 vintage, which is pre AI, but I got the benefit of high ownership and taller, higher, but tolerable pricing. So now I've got multiple fund returners in that fund that I couldn't get today, right? But it's complicated because, like, you either get a benefit of that wind or you get crushed by it. The change, right? Because the game is not the same when you achieve liquidity as when you start the game. And I've benefited twice. And going to this point now, I feel like, hey, maybe I'll get crushed by it. We might go the other way today, right? And we got crushed in 2021 by the changes, didn't we? There are very few. Most VCs are not thrilled with their 2021 funds, are they?

I was walking with one saying. I said, Listen, my biggest lesson on 21 is twofold, actually. One, I just wish I'd sat on my hands and done nothing. Play the game on the field is a bullshit thing to say. It's not true. Sometimes you don't want to play the game at all. And two, like, temporal diversification is always right. Yes. You never want to blow your fund in 18 months. We were lucky. We did three and a half years. We're saved because of the loss.

I don't believe in the temporal, but keep going. It doesn't make any. That, that doesn't even make any sense to me other than that. On. On paper, it's totally logical, right? On paper, you look at these vintages and you'll be like, the LPs are, like, just giving everybody a mulligan on their 2021 fund, right? Especially growth guys. Like, we'll give you a pass on it. But I've never understood this logic ever even, because, like, great founders are born every week. I just don't get it. It makes no sense to me. It's your fault and my fault. Listen, I set out the game, Harry, as you probably saw indirectly, right? But I still screwed up. I still made my worst investment ever. Granted, it was a third check, not a first check. So it's a different dynamic. But I. I was too supportive of portfolio companies in 2020. That was my error, right? It wasn't first checks, it was third checks. But there's great companies born every year. What excuse do we have as VCs to not find a great founder once a year?

I love you guys, but we pack so much things. I'm still on 2 thoughts ago on Rob. I'm now trying to Compass Temple. And so I'm. I'm Kind of backing into all these thoughts, but let me try temporal diversification. I'm not sure. I think you guys are arguing about, in the sense of temple diversification would say that those founders born all the time. I mean, I'm not sure that those two points are in contradiction. I think temporal diversification, you're contradictory too, Howie, because you said, you said the base version. The base version of temporal diversification is. Is you don't expect. You can't make the sentence we should sit on our hands and then make the sentence to pour diversification. I think it's sensible. A roughly sensible base case statement is as an early stage investor, you should aim to be roughly consistent by year and you shouldn't get carried away in the boom years and you shouldn't get too depressed in the bear years because what's happening now is not nearly as important as what will happen 10 years from now. So a consistent steady pace is probably the base case assumption. Unless you have an ability, unless you have some information about market timing over and above that, which I would regard. And that to me is the definition of temporal diversification, which you did. You took three years to take your fund out. We've taken three years on every fund since 2010. It's not that we're geniuses, it's just that you do roughly the same number of deals per year. Right. So does that. Are we going to think on that?

Well, I mean, I don't think sitting on your hands because you don't want to play the game on the field and time diversification are at odds. You can be doing both at time diversification is I spread out the expenditure of my fund across a certain number of years. And that is more. I want to have a longer period that actually aligns to sitting on. That aligns to sitting on your hands.

Yeah. I think it's a cop out though, is my learning, having done this, done it myself, having done it myself, I criticize myself for that, for using it as an excuse. Because I think every, I think if you're, if you are an S tier investor. What, what, once a month you should meet a founder that could return your fund. This is just this because you can't do all the deals. No, no, you, you. Because you got to do one a year. Right. And so if you don't meet eight or ten of these a year, how are you going to make money?

How many times do you both think you meet a founder that could return your funds?

If I'm lucky. If I'm lucky. The highest ratio in my whole career is one a month. One meeting a month was worth it. All the rest was a waste of time. Not that isn't good but can return your fund. It's a narrow box. It's a, it's tied to fund size.

I would, I would say less than, I'd say once every six months.

Yeah. I'd say my highest velocity when I started I met everybody in the industry because it was small. Right. So it was once a month. Now I would say I'm lucky if it's once a quarter to your point. Right. If I'm lucky it's one and what it is half the time it doesn't fit. Right. The check size is too small, the timing's wrong, it's just off.

Right.

So do you force it and make the exception or do you push on to fit your model is what's hard when you meet, even when you do meet them, it doesn't always fit, does it? You have a lot of flexibility in your fund right now Harry, but it still isn't. All the deals aren't perfect, are they? These 100k checks aren't perfect.

So hard nosed comment. The question is, I actually don't, I think when do you meet a founder that will return the fund? I always say this and it's always Graham, I think when do you meet a company that can return the fund? Because at the stage we're investing at, I think it's again and I'm pushing against that only because there's an implied statement that you can assess humans and their potential and I think yeah, human potential is very important but unless it's linked to an opportunity.

Right.

I think it's harder for me to assess that. Right. So I am very much the old Sequoia statement. It is really market first. So I'm actually making a nuance which is that I don't, I think about how often do I meet an investment opportunity to a market, an opportunity that can return the funds. So that's the first comment and I think so on that. I'm just trying to do the math here. You know, if you're probably as a firm going to see that at most where you know our fund model says you want to return at least half the fund in a great deal, you're probably going to see that at most if you're lucky, you know, 10, 12 times a year and you're going to pick maybe like the stunning thing is we've literally like you see about seven to ten more good deals for every one deal you do, Right. So despite everything, access is really important. Deal for is really important. But it's always stunning and sobering to realize how often you meet a really great company and don't do the deal. So if you meet, my mental rule of thumb is if you meet 10 great companies, you probably will be lucky enough to do one or two, right? So and if you need to do one or two great deals a year, you better be meeting 10 good companies a year. Other great companies a year, I should say. Otherwise the math is not going to work because no one has a perfect stocking picking percentage. No one has a perfect winning percentage. And in fact, one of the things I will say as this kind of gets to the therapeutic speak is way back when it started out in the 90s, the best of our anti portfolio, anti portfolio regret is the psychological price you have to pay for being in the game because it's literally the emotional tax you pay for being in good deal flow. Because if you're not seeing 10 great deals, you're probably not going to do one great deal. Which means the psychological tax for doing one great deal is you pass on nine deals or you don't win them. Right? And that's what keeps you awake at night. But if you're not, I mean, if you're not seeing around that, if you're not seeing that percentage of the great deals, then you're definitionally in trouble. So you just got to be willing to live with that.

There's so much transparency in venture versus when I started, which is wonderful, right? Harry, you've contributed a lot. It's really. To say it's different than when I started would be the greatest understatement of the year. There was no transparency when I started. All VCs colluded in my first startup. I would go to a VC pitch and I'd go to the next one and they'd already talked 100% of the time. They picked up the phone. Hey, I heard your meeting Rory, I heard you're meeting Harry. What do you think? What price do you want? And I'd walk in and they'd already negotiated the deal down when I got to the second VC meeting. Okay. The world is so much more transparent and better today. Oh, I got, that's a pretty funny story. I got, I got off track. I'm, you know, let me add one thing. I usually going just back to the time diversity thing. I'll share. Sorry. Go ahead, Harry.

No, no, please.

I'm saying he's just sniggering at You.

Well, I thought I was taking that somewhere helpful though. It's kudos to you for contributing to on the time diversity and just share one one story. I know it's a technical point, but people like. Oh, sorry. My point was. And then we talked to founders. There's a lot of things that don't make sense to founders and one of them is like how few times VCs see a deal they want to do that works for them. Right. Founders think this happens every day. Right. And listen, there's a subset of VC which are like farming YC every quarter I'm going to do a third of the batch. Okay. And they have a certain strategy and they are seeing deals they want to do because of that model, you know, constantly. Right. But when you get even just a little later to the late seed A and B and you Talk to most VCs that are writing bigger checks once a month. To your point, Harry, for all of like, you're lucky to see that one where you run down the street once, once a month where you grab the founder by the collar and say come back to the office. We're signing the term sheet today. Right. And if everyone's seen, if you haven't done that, move yourself in venture. You've watched it across your. This is a classic Sequoia move to sit in the lobby of your office until the deal is done. Right. And it's because you don't even. You don't see that every afternoon. This is the weird thing founders don't get. Why, why, why is the vent VC stalling? Why have I been ghosted? Why didn't I like at least understand what's happening is like you, you're lucky to see one a quarter that works that where the two by two works out. Right. You disagree, Harry?

No, I agree. I'm sorry, Rory, are you getting your ass handed to you at a. Sorry. By the multi stage funds? Well, I went for this business went from 0 to 6 in a year. Good business. Not an AI business. Good business. Great founders. It started at 30 on 300, ended up at like 50 on 500 with everyone and that dog coming in and of course we lost it and one we wouldn't bid 500 but I was just like what a.

What a.

What a market. Are you getting your ass handed to you by these players in the same way?

I think, you know, to some extent, yes. I think it's wildly competitive and I think that's why I like.

Sorry not to interrupt. Just understand Harry's story then I want to hear your. Is that just because it, it, it's a multi stage fund that even at 500 it's a bet on a bigger outcome? Is that the story or is it just froth?

I think it's.

Is it tied to your multi stage point?

It's time to the multi stage point. If they just want to deploy 100 and 200 and 300.

Yeah. And if it works out at 5 billion, then they've leaned in on the position. Is that the bet they're making at 500?

Yeah.

Yeah. So how do you compete? Is the. Just to frame it, just to understand it? Yeah.

First of all, yes, I totally agree. It's incredibly competitive and you've got. So there's a lot. So let's even take that comment on their motivations for a second. There's a lot of different things and it really is the same. Rob Gar essay just extended up my big aha. Stepping back is almost everything about a big fund is better for the entrepreneur. And the only countervailing trend is if in the end a big fund doesn't make acceptable returns, then the LPs at some point will withdraw the money from the big fund. But until that happens, almost everything about a big fund is good for the entrepreneur. Let me tell you what I mean. One big fund, you do more deals, you have 30 deals, you have more news. It's more exciting to be in a portfolio with 30 names than 10, right. In the last year. You have more news flow, you have more good things happen. Because even if you're just a fricking index, right. The reality is if you do 30 deals a year and we all end up at roughly the same picking ratio. And we saw that analysis, you know, the benchmark versus Andreessen, the picking ratio is less, but the volume is more. You end up with a constant flow of good news. My bigger aha. Has been this. The walls of capital give a lot of advantages to those funds in terms of winning deals because they can pay more. Because they have the implied we'll stuff more money in later. It's all an option. They can pay more because they just have more money and they may as well just at some level want to use it up. The arguments against are very second order. You're like saying, hey, but this junior partner of this big firm mightn't be there. And you know, the truth is someone who's 24 doesn't factor that in. Right. And you know, so I think these wars are capital. They are. And I give credit to it's quite a powerful force. And one of two things will be true 10 years from now, but it actually won't matter a damn to me. Right? Either. A, not only are they powerful, but they're also profitable, in which case that's where the industry will go. Or the second outcome is they're powerful but not as profitable. Right. In which case that capital wall will recede over a long period of time. But both of those are well outside the event horizon of me making money in the next five years. So back to the thing. I'm just like Rob Gow, one stage rater. You've got to figure out a strategy in the context where the obvious consensus bet is going to be done at a price that you probably can't afford and done by a fund who just has more to talk about than you. Because. Because using 10 billion of LP dollars, they bought news up and down the stack. That's where you're playing right now. And you have to be better across the board. You have to.

It is worth it to buy news. You're right. I mean, it seems silly. You shouldn't Deploy your whole $10 billion fund for news, but deploying 500 million of it to keep in the flow, it's like doing 100k check in a hot AA company. It's the exact same thing.

I got to defend it. It's even worse, even, maybe better. Even if you're not doing it to avoid this, it is. It's not a quote strategy. Just by having that much money, you make news. I mean, this is. I give Martin Luther. We want to be powerful, right? If you have a shit ton of money in America, you're powerful. Right? Powerful is not the same as good, but it's pretty. It's a pretty big help to be good, you know? Right. I mean, it's the worst.

It helps to be at the top of every list, like every PR does matter, even today, remember?

Even if can I be wrestling, even talking to LPs and like, will this model work? And I'm like, let me clear. The only person who has an incentive to figure out if this model will work is you, Mr. L.P. investor. The entrepreneur. If I'm an entrepreneur and some big fund is willing to give me 50 on 250 and. Right. I don't care that the seven other deals they did don't work are subpar returns. Did I mention I got 50 at 250, I'm happy. Right? The entrepreneur doesn't want to call timeout here. The ultimate fate of this market will be A predicate of how much money those funds make. And I'm not going to speculate on that.

I'm so sorry. I just disagree with you completely, which is like, you know, fundamentally, entrepreneurs do care if you have 30 companies because they know that they're not going to get much time from you and Rory. They really value your wisdom. No, they do. They do.

No, they do absolute twist it. It's really squeezing.

It's not because I get the emails and tweets about you, so it's not one and then two. Like, they do care that you've got.

A load of dogs. I agree.

They do care that you've got a load of dogs. Because then they're going, will he still be there, his portfolio? And if he's not there, am I going to get someone else who's crap? And you know what? I've heard horror stories about that. That turns up to my board, who never did the investment and I don't like him. Oh, God. And then I also have signaling risk as well, because now I've not only got a dickhead on my board, not Rory, I've got the real risk of are they going to write another check?

All those things are factors. But I'm just saying the comp. I mean, back to the competition from that money is real and meaningful. And my bigger ha is. I mean, look, what I we said in like, you know, it's like you've just got to be there quicker. You've got to be more focused on the things you want to do. To some extent, you got to like. I mean, one of the things that's. Because the only thing that's happened right now is. And I think again, Rob did a nice job on this is like consensus bet. There was a time, look, in 2000, 2010, we were happily doing SaaS. There's a bunch of people doing crypto, there's a bunch of people doing consumer. There was a bunch of. It was all spread out. Now, the consensus bet is enterprise AI. Right? The wall of money is coming in here. So once something emerges and once the numbers make it my bigger highs, this. Once the numbers make it obvious that something's working, pricing just go. Yeah, Pricing is going to go to the point where, you know, you're pricing in that 2x best case. Right? So you have to get there before it's obvious. It's just that simple. You either have to have markets that's not obvious or companies before they fully emerge. Right.

Roy, do you think. I'm so sorry to be personal. And blunt on a show. But like you're doing enterprise in Silicon Valley at series A. Do you think you're doing that.

When we succeed? Yes, you're right. Some of them you kind of go, oh, people haven't bought into this market. It's a case by case basis. But I mean, you're exactly right. There are a large number of them where you go, okay, I figured it out about the same time as everyone else and it's a 10 term sheet clusterfuck. You're exactly right. No, your win rate goes. I mean I look at a win rate, it obviously has gone down from where it would have been over the last 10 years. Just because, you know, that's what happens. Right.

What would you say your win rate is?

You know, I would say 50 to 60, 60% ish. Down from before. I mean now it's a little like win rate when you, you know, when you ask the sales guys what's your win rate? And what really happens is Jason is laughing. As a former salesman, you know, what happens is they channel out all the shit that's not going to close. Close. And you can tell the vibes when it's not going to close to something. But it's down probably 20 or 30% from where it would have been probably five years ago. And you just feel that. And you're up against every excellent firm. So yes, I think that. And sometimes you win and quite a lot of times you lose and you got to be sure that. So therefore you got. Whereas conversely, if you find something just at the cusp of product market fit before it's obvious. Right. Then you win rate can go right up and you can get a much better price. It's just the market for consensus is fully priced in and fully discovered.

Yeah, you're also your point which is. I didn't, I'm embarrassed. I didn't fully reflect on until you made it. And it's obvious the despecialization of venture makes it stressful. Now in every category that breaks out, everyone's competing. Right. Again, yeah, there used to be crypto specialists. There used to be everything. And it's good. But it does add to the stress. Instead of competing with a subset of venture, you're competing with everyone in the industry. Good for founders, probably, but adds to the stress.

To Harry's point, given the discussion that we're having in the next three years or five years, will we have less, more or the same number of seed firms that we have today, you don't.

Need to think the answer is Less half of everybody's gotta die.

You're seeing spending more, I think. More. Yeah. Because I don't disagree with you. Here's just my. Where I see it. Okay, listen, first of all, there are a bunch. I mean raising a seed fund in 20, 20, 21 made. No, I mean literally folks that had never closed, had never had a markup, let alone an exit, were able to raise an eight figure fund that will never happen again. That was a weird time.

Okay.

I have, you know, folks that were. It's happening today, but where it happens today, they're folks that quickly got into hot deals. Okay, so. So those funds, funds are all going to die. Folks that raised at 0x, 1x lifetime or 0x, they're all going to die. Right. But the challenge, I would just say and listen and all the LPs I have, which are fewer than yours, but some overlap with Harry, they're all doing very few new emerging managers. Right. So if you view it myopically, you can say that's the combination of the two means it's got to be half is be generous. Right. But I don't know, man. There's so much greed, there's so much money to be made today that if you have a hot hand in venture as a, as a you're going to get, the LPs are going to give it to you. So I just think there's so much money. But Jason. Yeah.

Those two sentences aren't. I think you come on, hot hand is spot on. If you quote have a hot hand, you're going to get a lot of money. But the truth is in a world of fewer, bigger winners, less people definitionally have a hard hand.

But I don't think so because at bigger firms, eight people get credit for the deal. And the guy that actually did it at 20 VC and bring it to Harry, that guy's going to get his own fund. So there's an endless. For every great deal we have, I think there's a new seed fund for every great exit we have. Right. And there are more of these big exits, right, Jason, gonna give you for.

Every great deal, a new seed fund. But as you correctly pointed out half an hour ago, there's only a small number of great deals. This is the real insight is if you can go public at 50 million, 200 companies are going to go public a year, which is what happened in 99. If you can go public at 150, 100 companies are going to go public, which is what happened in 2000 and 20, 21. And if you can only go public at 350, maybe 30 companies are going to go public. That's where we're at. There's going to be fewer winners. And the one thing in the end you need to stay in business is winners. There is less of the thing that gets gets people money. The people who have those winners will have bigger winners and will get more of them. Well, and get more money as a result. But there will be less of them.

I mean, no, I can't argue with the math. I guess my meta point and Harry, you're the boss. We can move on. But it's. There's a lot of things that especially folks that have been in Adventure for a while want to say with a lot of thought and you know why sees overpriced and blah blah, blah, blah blah. But I just think that the idea that seed is going to really contract. I think we're conflating the fact there's a lot of crappy seed funds. I don't think they're the same. I think. I think we're going to see a thousand flowers bloom from every decacorn.

To be clear, you could argue that number seed funds have on the amount of seed dollars goes up by 20%. The interest in the category is still there. The signal of success is more concentrated. So the people who have the concentrated success are going to be able to raise more. I think you could have half the number of firms and 25% more capital. Because anyone who has success it will be. They're going to raise my money.

Well, look, let me one last thought. I just. I hear you. I have one investment that has not IPO'd. Okay. That is only I would say reasonably hot, but very good. Okay. It is our. That investment, or I was a seed has already spawned two nine figure funds out of it. Two. Okay. And this one isn't. This isn't figma yet. It's already spawned two. So if my one. This one unicorn has spawned two nine figure funds both who of whom have raised two funds out of this. Okay, so more than low nine figures. If that. If that is not. I. I'm not that great. Like that's not the one time it's ever happened adventure. If that's happening across these hot deals, it's gonna. It's gonna happen repeatedly. We're gonna have a ton of seed funds. Right. Even if and all the other ones should die. This idea that oh woe is me, I can't raise a third fund. I've never returned any capital. Tough Luck, right? But just look at that story that I did. This company is yours from ipo, and it's created two new funds, both with multiple funds, and nine figures like that is a big deal, isn't it? Maybe I'm wrong.

Guys, you can both invest in one seed firm today. Which seed firm do you invest in?

Jason's, of course.

No, no, no, no, Rory, not mine or Jason's. Very kind. I love the way you went to Jason's and not mine. That's very kind of you, Rory.

You know, we work with lots of great seed firms because we're doing the A. And Harry, there's many things. Let me finish, let me finish. There's many things I'm prepared to contribute to this podcast. What I am not prepared to contribute this podcast is putting a gun against my head and blowing up my business model. Just like my children. I love them all equally. I love all those answers equally. You're not getting me on record on this one, big guy.

Do you think they can. I'm so, like. I would like, happily say, like Brian.

I don't think anyone would take offense if they didn't make the list.

But like Brian, Like Brian Singerman's new fund. Brian is one of the best investors, I think, of the last decade, and Roger Ehrenberg from IA is one of the best investors from the last decade. I would do anything to be in both of their firms.

One of them, interestingly, of course. Well, Roger is, yes, is a seed investor, but my sense of what Brian is doing is it's actually actively not a seed fund. Just to try and be consistent with the question you ask. He is. I mean, what I understand his pitch is he's going to do Series B and beyond and do a portion of this business fund to funds investing in seed funds. So he probably has a very strong opinion on who the best seed funds are.

Jason, if Rory's not going to, as he said delightfully, shoot himself in the head or whatever it was, what would yours be?

Harry, honestly, I want to answer your question. And if it was even X years ago, I would have. I'd always had an answer and I would always tell the LPs, right. I'm sure you're asked, too. And it's like, it's the great way they get deal flow, right? Who would you recommend, Harry? I don't know. I'm. I just see too many folks when you squint. They're chasing the deals when you squint. I've seen too many folks when I actually see the numbers, they're not what I would have expected, right, that I just. I'm sorry, I am a little. I'm a little hesitant to answer your question because I actually don't feel competent to know. Ironically, I recommended. I recommended you in the early days, Harry. I recommended some. So, like, I got off the ground when Kristoff Jants from 0.9 recommended me. I've. We've all benefited from that, from that flow. And I. And I've recommended many managers, but if I was asked today by my anchors, I can't answer. I can't answer the question. Maybe it's a failing of mine, right? But I can't answer the question because too many things are not what I thought they were. From the outside, I would give the.

Same answer, but from a more positive spin. Right. In a sense, rather than, yeah. Knocking. It was like, what are things we have done? As we've looked at, you want to partner with seed firm. So you say to yourself, who has the deals you value? And is there someone that over index? About five years ago, we did this exercise. We literally took every seed firm and we have our internal CRM of deals that we rank as hot or high, in other words, marquee deals that we're really interested in. And we ran it against every seed firm. And the big aha was this. It's not like there's two firms that jump out EU and have most of the great deals you're interested in. It's so distributed, right? And the aha is there's, you know, we ended up with a Goldilocks list of 50 or so firms in each case only, I think the highest one, only 6% of the deals that they were in were things that we thought were interesting in enterprise software. So it's a small number of deals that everyone has that are good, right? And that's just the nature of the seed business. So the genuine answer to you, Harry, is this. Look, you have people you enjoy working with. You have people, people you just connect with personally. But the objective facts are there's probably 40 or 50 seed firms that we go, wow, they're really good. They have their shit together. I mean, and which of them gets in the good deals? Hell, who knows? And you just got to stay on top of it, right? I mean, that's. That's in many respect. It gets back to Rob. This is a scarily efficient competitive business. And the idea, as Jason, that 20 years ago it was like, oh, those two or three people are great. Now you're deluding Yourself. There's a couple of hundred type A widely driven people competing for, you know, vast amounts of money here. You're not going to find that you're the only good soccer player on the field. Sorry, Harry, it's not. It ain't like that anymore. It's who's in the specific deal that you want at the specific time.

I'm going to ask one final question before we do a quick fire. And we just have to. It's the cultural side, guys. We promise we never go into politics. Okay? And I'm sticking to that. We don't, but there's one I'm going to ask. Coldplay concert Astronomer. Just one question, Rory, before you shit on me. Is Astronomer the company better or worse post what happened is all pr, good pr.

I think they're worse off in the sense that they have to do a CEO search, which is always tricky and has a one in three chance of failing. So that's a real cult, that's a real momentum hit. And I gotta believe internally it doesn't feel great. And I'm gonna even say something here that's I saw someone else on Twitter. I'm like. And even the two people involved, in the families of two people involved, there's been an amount of shouting. It's quite a sad thing, really. There's that you start with the humor and then you quickly process to the sad. And then if you're on the board of the company, you process beyond the sad to the what a monstrous pain in the ass. I think you'd no choice but to make the change, actually. So now I actually come back because someone asked me, if you were on the board, would you let that person go? And I think the answer I gave reflects on the common question you just asked. I think you had to, not just because of any policy issues, but because as a company, you have to move on beyond it. If you don't, yes, you'll get lots of meetings, but if you'd left the person in place, then every meeting he took for the next year, you know, the overlay in that meeting there would be a subtext. So I think the company, it didn't help him. Yes, it gave him some notoriety, but it's kind of a. There's a frictional drag. And the only way they could put it behind him was a CEO replacement. And that's a 1 in 3 chance of failure. So net. Net slightly worse off. I remember when this is off. I remember when Tiger woods had that go on via Tiger program with Accenture, that Launched literally the week after his, you know, extramarital affair came. And there was about a day where they thought, should they pull it or not? And then I think everyone went home to their spouse and their spouse looked at him in the eye and said, there's not a decision here. You're pulling that ad, dude. Our dudette, right? And it was gone next day. Everyone recognizes personal tragedy. No one wants to be associated. It's just too, it's too shitty to touch. Move on. It's sad. Move on. Let them, let them pick their lives up. Everyone makes a mistake, go do something else. But company needs to just put it behind quickly and clearly.

Okay, we're going to do our Kalshi quick fight. Kalshi is the performance marketplace. They do the bets and real time events. So number one, will the U.S. tariff rate on Canada be at least 35% on August 1, 2025? Yes, returns you 214. No returns you 144. Who knows?

It's a random number. It depends on what the episode of the reality show requires. 35%. I'm going to go with no. But it's an uninformed opinion. But then frankly, everyone involved in this issue is uninformed. Why should I be the only one who isn't?

I think we're just all at a phase culturally across borders where we're digging in now. Harvard's digging in, everyone's digging in. So I say it's still there.

Interesting. Cool. Good thought process.

Will OpenAI release a web browser this year? Yes only. Yes only gets you 125. No gets you.

Yeah, I looked at the. I'm cutting you off only because. Yes, I looked at the odds and I'm giving you, I'm actually interrupting you. But I'm the one who told you to read the odds. Yes, I think. Of course they will. No matter. Almost. It's hard to imagine not the most ambitious company out there not doing something that, you know, perplexity is doing. Other people are doing. Yeah. My God. To be. Yes.

Well, listen, the Internet sure seems to think the answer is yes. Right? I, I just think that they don't have to rush something here. They, they can be a fast follower. So it seems 100 that it's going to happen. But this is a math bet, right? I'll take the no just financially, but I believe it will happen. I like, I, I, if it was a, if this was a gentleman's bet, a 50 50. But I'm gonna, I'm gonna take Go for the money and Just say that it might be. It might go back in the. In the oven.

I'm with.

I'm with Jason. I think GPT5, I think Agent mode. I think shopping prioritization. I just don't know if it'll be this year. It's August already.

Okay, too bad.

Final one. Will Xai release a Grok macOS app before end of year?

Do you guys use Grok? Yes. As I said, whenever I want to talk like Harry, I talk to Grok. So I join you. I do use Grok. I testify. You know, we're all a little bit sad Twitter addicts. We need to get over our addiction, but it's hard. So, yeah, I do use Grok as part of that. It's not my go to, but. Yeah.

Well, first, I think going to last week, I think Grok's wildly underestimated. And I think when Elon says something, he's either upset and I get upset, I get, I get, I get upset. I even get locked in. It turns out when I'm coding, when I'm vibe coding. But when he's not upset and he says something just like Sam Altman, you should listen. Right? So when a couple weeks ago, he said, you don't need to use Claude code, just take all your code and stick it in Grok. This is what we do. And we find all our bugs and push to production, he's saying this is developer ready.

Interesting.

Ok, that's what he's saying to the market. Okay, now, have they built an ide? Have they built out all the pieces yet? No. So that was kind of no one on the thread I saw said, hey, Grok. Grok is not good enough for that. They just said, you know, that's. We just don't want to throw all our code into a context window. But that says to me, this is real on the list. And so having a Mac OS app is. It's like the easy version of that. Like, you got to do that, right? You got to have a desktop app. So I'm going to. Given that the odds are unknown, I'll put a grand on this one.

Well done, boys. We covered a lot of ground in that. I so appreciate it, Jason, thank you for putting your neck on the line with some of that stuff.

I mean, genuinely, I would like you.