Jason Lemkin: Why Pricing is Worse Than Ever and There is More Funding Than Ever | E1157

Seed investing is systemically broken. Today there's just as much capital chasing fewer and fewer folks that can grow at triple digit rates. The best investments go 1 to 10 million in five quarters or less. The very best ones, the one you can't IPO unless you triple, triple, double, double. As you approach 10% market share in your core ICP, your core market, you got to expand. If the churn is anything more than 3 or 4% a month, it's not even software anymore. Ready to go.

Jason, I always love our chats. This is such a joy to do and our shows always do so well. I always get notes from founders being like whenever Jason's on I literally get pen and paper out and these are the ones that I have to listen to. So I'm so glad to have you back man.

So very exciting Harry. So, so great to be here and so proud of everything that's happened with 20 VC empire. It's great to have been been there on the sidelines since being guest number 50.

Dude, I remember when I was at university and you were like should we do the Sasta podcast? And I was like yeah, this is great. I don't know if you still have it but you had that picture of you is it in a helicopter with the like.

Oh yeah, that one. Yes, that one.

I thought that was so cool as an 18 year old but I want to dive in. This is a new type of show so I'm calling it 20 VC the review which is like analyzing the best and maybe the less well performing deals or worst in other words and then highlighting hey lessons and the story behind them. If we start on the best, Jason, what is the best deal that you've done and what did you learn?

Yeah, you know I'll answer that but I broke. I made two best lists for you. One was the best by cash by cash back which we all thought was no big deal in 2021. But the last couple years cash has looked scarce. It's two IPOs in B2B in two and a half years. And by nav, which is what we report to our LPs on paper, what are the best three and so far for me, I'm 10 years in. I had a little bit of a break for a year. Right. Maybe I should have invested faster. But it's interesting is answer your question. My best by cash and best by nav are not. There's no overlap yet. Maybe hopefully in three to four years they will, they will flip and the ones that on paper are worth the most will Become the most in cash. But the best three for cash I've, I've done and we can take conversation we want. The number one was Sales Loft, which was the last big deal of the 2021 era. It closed, I think December 23, 2021. HashiCorp was the last IPO and sales off sold for two and a half billion of cash and about 100 million in ARR. The second one was Pipedrive, which I don't know what that one would be worth today. That was a billion and a half in cash as well. And the third one, ironically was smaller Harry, which was a company that got sold logical for 300 million. But I learned a lot from being multiple times the largest investor because we all brag on Twitter and X how much, how or how we were early and this and that, but if you own a tenth of a percent in a fund, it's not going to get you that far, is it?

How much did you own of Logical when it was bought?

I mean, all the entities own 20 some odd percent and it's cash. So that gets you a good, you know, it's a distant number three on the list. But for me at this career, it still gets you a material return, right?

Yeah, totally. That's a good 60 million.

And dilution and dilute. You know, I'm learning a. It's taken me a decade to understand what. Folks have been doing it a little bit longer say about dilution. It also helped that they stopped fundraising.

Would you have predicted those companies would be the three top cash returns?

No, I didn't. That's interesting. The, the Navy ones, I predicted two out of the three. The Cash ones. You know, it's funny because, you know, VCs, all they say some variant of like, you know, you got to go long, you don't know how they'll perform, you know, at the end of their later in life. And I don't really believe that. But when I put this list together, I realize it's true. I didn't think any of these things would sales off with Kyle. You know, he was one of the most determined founders I ever met in the early days. Right. And it was a fun one for me because I co led the seed. But then I brought in emergence and insight and so almost the whole cap table I was able to kind of assemble, which is harder to do today, but it was fun then. There's certain founders, they can't lose. They can't lose, right. But sometimes you just don't know where the hell it's Going to go. And Kyle never quit. But you know, right after we invested they had an $8 million product they dumped. So it went from 8 to almost 0 million in revenue. And it was a totally the right idea. Like so today in my career actually would, it would, it would startle me more than it did back then. Back then it was early. I'm like that's cool man. Okay. If that's the right decision. I mean I challenged him on it, but he was right. But to go through so many things to expand the platform to go more enterprise and also I had not been in. Now it's very common. But back then they and outreach were so competitive. I didn't think both could win. I didn't think both could even survive. That wasn't my life experience in SaaS. It was more like only one could capture that 60 to 80% market share VCs always talk about. I didn't think you could have two folks with 40% market share. I didn't think it was possible.

So what did you learn from that investment? When you look back and you look back at it going in the early days from 8 to 0, the bumps, the highs, what are the takeaways?

The number one thing is, and this is when I look at my three worst ones, this is going to be. The theme of the three worst ones is just it's not enough Harry. But that ultra insane commitment to success is so important. And then having a binary team. So what Sales off didn't have sales off Chief Product Officer, this guy Rob Forman. They were, they were the pair, you know, the pair, the binary pair. And sometimes it's more the CTO and the CEO sometimes. But you, but if you have a binary pair that is 110% committed and they can build pretty decent software and sell, that's rare to have both. Right. And would you know. And so those, the magic. The other thing though that is, you know, the thing that has changed radically. You know, things are move so much faster today. So in the old days, so I met Kyle who is CEO of sales very early but then I started hanging around the offices of a lot of startups and their first product like every sales team was using their first product. Like you used to get to spend a couple of months watching something in the field making a decision. Now you got to make, you got to pay 25 pre a demo day in one hour, right? So the world has changed. So in a way like some of these early deals that we all that VCs brag about, it was A different world. And there are some different worlds of time. Of time. Right. Of literally getting months in some cases to make a decision. But finding what I will never sacrifice again is two great co founders. Two great co founders. And not great numbers are great, but insane level commitment, like, commitment better than me. Like, you're even more committed than me, I think, Harry. And I'm a pretty committed guy. So anything less than that, Harry, or just don't as an investor. This takes too long. Now we're like 14 years to IPO. People are quitting left and right. They're quitting left and right or they're quiet quitting or they're settling in for 5% growth. Right. It's just not worth it as a. You can't make any money in vc, can you?

You absolutely can't.

It's impossible.

Can I ask, given the changing times, how does that impact how you invest today?

I don't know. I'm still learning. I think that if you have less time to get to know people, it's. It's harder to catch the cynics, it's harder to catch the bullshit artists and. But the main thing I just do is I almost immediately do another zoom with the cto. That's actually the way it's changed. In the old days, I would do it late in the process. I would. I would get to know the CEO, would talk to the customers, right? I would go deep. And then at the very end, I'd be like, okay, I got to talk to your cto, Harry, to make sure that this is real. Now I immediately skip everything else. And the second call I want to have is with the cto. That's how it's changed for me. That's how it changed for me.

What do you want to dig in on with the cto?

Well, one thing, you have a lot. You've done a lot that already here in your career. That I am. But I have built software that's done hundreds of millions in revenue and I've created an industry and rebuilt a product. So one thing I do know is the difference between great and good software. Okay? And so I can talk with this. And I know the best CTROs I know, and I know someone that is better than the best cto. So I want to know, is the CTO as is, are they a 10 or a 5 on our old logarithm scale? Are they amazing? Can they build software faster than anyone else in their competitive industry? Better software, more quickly? And it's so easy when you talk to the best CTOs to hear it and learn it, it takes seven minutes.

What do those great CTOs show you in those seven minutes that distinguish them as world class versus the five or sixes out of tens?

Well, first, I do give them an hour, not seven minutes. Right? But what do I do? First, I ask them to do their own demo. Even if the CEO did the demo, I want to see how they think about their product and what they're excited about. I want to see surprise and delight. I want to see them show me the things they love. I want to show me. Listen, this is this badass thing I just did with AI that. You know what? You know what? OpenAI can't even do this. Let me show you. Harry. Like these guys at Anthropic, they don't even know how to do this right. This is so cool. Let me show you something I know how to do that the rest of the world doesn't even know how to do yet. That's magical.

Do you say, show me your surprise and delight moment? How do you.

No, I don't even have to do that. The best ones are so proud of their product, their code, their work. They'll show you in the demo. They can't help themselves. I'm just like, okay, show them what's your favorite feature and what do you like? What are you most excited about and what frustrates you the most in the product? They can show you why they're bothered and why I can't afford it. And the open AI API is too expensive or this is broken, or the stripe API doesn't do what I want and you just want to hear this magical insight, right? And just get them going from there. Have them show you and they'll show you what they're proud of. The best ones, they'll show you what's badass. And the really good ones, just like the best business, the best CEOs are very. Asking them about competition is so telling. Asking the CTO what frustrates them in their product is very telling. The great CTOS answer in 60 seconds. I'm just super frustrated that I can't get this next level, this next thing out in the API or this next workflow out. I'm really frustrated that we're behind on our web hook platform, whatever it is, they'll tell you instantly in the mediocre CTOs will be like, it's pretty good. Let me, let me straighten my tie and get my blazer in the right order and you know, I'm off to. I'M off to another meetup. Everything's great.

Do you find that they do reveal their frustrations, given the fact you're an investor and you could be writing them a large check?

I have never met a great CTO that isn't at the edge of hypertransparent. Never met one. If I did, I would run, run, run for the door. The best CTOs, that's the environment they're in. They're challenging everybody. They surround themselves with people better than them, engineers better than them. And there's a couple secrets they'll hide. They're going to hide some secrets, right? Don't get me wrong, there's two or three secrets a CTO might hide, but they're so technical, I can't understand them. They're not going to hide anything that someone can't figure out. Playing with your product for two hours. Why would you hide something that your competition could figure out? Because your competition is using your product, aren't they? They sure better be.

So.

And your competition can actually pretty much expose anything that you can see in the browser. You got. There's only so much you can hide, right? You can find out your st. Anything you can expose in the browser and what the product does. So you've got to be a pretty weak CTO to hide that stuff, right?

Yeah, totally do. God, dude, I'm loving this. I'm also just terrible.

This is my. So I skip all the. I used to do the CTO like two or three weeks into an investment. Now it's literally. Can I talk to Jane tomorrow? Can I talk to her tomorrow? I don't even need to do all the rest. I don't even need to do all the rest. I need this binary pair, okay, what.

Percent of the time is the CEO great and the cto, and what do you do in that situation?

Overall, I would say 80% of the time, the CEO is better than the CTO, especially at the seed or early seed stage, because there's different ways to, like, get up 10 customers and 20 customers. And the real reason is, you know, almost any. At least in B2B, almost every startup that gets to like a million, like we're talking about, they have what I call a 10x feature. There's something, there's something they do better than everybody else. Like, most of the product sucks, right? Because they've only been around 18 months and they, they, they haven't been doing it for 10 years, but they do something that the leader doesn't do well or at all, right? And so the fact that it's a 10x feature sometimes can mask the fact that the soft. Not that good. Right. Especially if you get into more vertical SaaS or areas with more bounded competition. And those ones tend to get swamped as you scale. Growth decelerates at 10 or 20 million as like a cool 10x feature, but not the ability to iterate faster than the competition. The competition swamps you three to four years down the road. So I don't know if that answers the question, but so, so, so up until a million or 2 million, a 10x feature plus a CEO can win. And sometimes that CTO is okay or not that committed or might quit or whatever, and that 10x feature never becomes a 10x platform.

But will you still invest if the CTO.

No, no. Because listen, this took us a while to figure out, Harry. Like, you know, we can't even make money on a billion dollar exit unless you own 20 something million. Like logical. If you, if you like. Dilution's so high. As a seed investor, let's put aside an opportunity fund or SPVs or other things. Let's take a traditional seed fund, okay? Really, in today's world, you're going to suffer 50% dilution on the way to IPO. That core seed fund that you struggled to get 12% of, you know, it could be 6 by the IPO. 6% of a billion dollar M&A is only 60 million. So this is where I'm, you know, it's funny, I'm coming around after 11 years of investing, Harry, I'm coming around. When I started, I didn't believe you could make money in venture. Even though my first five investments, all worth a billion or more for real, real billions. I didn't believe it. I believe that they could each do 5x okay, which I thought was enough, but I didn't believe the funds could make money. Then we go into 2018, 2010, I start to believe, hey, these funds can make money. And then 2021, I'm like, this is easy now. I'm kind of in a mode now where I'm like, I got some decent investments, but it's hard to, it's hard to make money in venture again, right? So you got to have two, three billion dollar exits. Especially if you've had some success in this world. If you want to make a little bit of money and, and drive a, you know, whatever, a Mercedes with your fees and enjoy the high life. Yeah, yeah. There's a lot of ways to make money in venture. But do you want to make 100 million or more. There's only a handful of ways to do it.

There absolutely is. I do just want to go back to this process because I'm loving this. Okay, so we have those CTO interviews as part of the process. Do you meet other parts of the exact team we spend time with? The head of sales, head of cs, or is it found?

I used to. I used to. I remember the very, very first investment I ever wanted to make. I had known the founder from the old days, right? And it was one of these ones that when you start investing, you want to do. They were like, even though I was doing seed, they were like at 3 million, growing pretty quickly, not burning a lot. It seemed like low risk kind of investment. Sometimes when you start, you want to do it and I go up and I go up to San Francisco to the office, and the first time I sit down with the VP of sales, I'm like, how are sales going? He's like, actually this is my first time I've ever done sales. I've traditionally done product. I'm new to sales. The last two sales folks quit like, okay, that's a good sign. He's like, how's the pipeline? He's like, terrible. So. So I quickly learned to interview the whole management team. Having said that, fast forward to, you know, a few more investments in even. Even though I want to do late seed, which I think is what you would prefer. That's maybe where the overlap of our investment styles these days, they don't have a management team. So I don't care anymore. I don't care anymore. I just care about the CEO and the CTO and me. The CTO is great and the CEO is great. I really don't care if the one sales guy they have is good or if the marketer they have that just does clips is great. I used to care from that story, but if I'm investing In someone with 10 employees or less, I don't care anymore what the management is. But I do care what the CTO is. The one I care about. That's just me. That's my changes over time.

Just one final thing on that. Does it. Will it take me a while to build a benchmark of what great CTOs look like or will I quickly be able to tell, do you think?

I think it may take you 20 of these zooms to learn. You know, I didn't know there. There's a guy named Chris Dean who now runs a banking as a service platform called Treasury Prime, a YC company that I Invested in, they started in our old offices actually. And in the old days when we were, when we were at our first startup together, we were young and new. We actually got acquired for, on paper, $1 billion. My first startup. And when they acquired us, they made him their VP of engineering. The acquirer made Chris their VP of engineering. I'm like, okay, I don't know much, but I know he's got to be pretty good if you acquire a company in a different city and you make their one their number two guy, your VP of engineering. So I stuck with him. He interviewed all of my original engineers and executives back at the early Adobe Sunday. We still stay in touch. And so I had a bar. I was lucky that I had a bar from him, right. And we triangulated, so I skipped some steps. But you know, when you interview 20 and you see the lights go on in the magic and then show you the demo and show you how they built it and you just listen. And the other key is if you haven't done, you haven't built the software before, Harry, just, just ask Columbo style questions. Just ask open ended questions. I mean, you're good at, you're, you know, you've done 1384 podcasts, so you're pretty good at the open ended questions. Just ask, you know, just ask those basic questions, you know, show me a demo, you know, what do you love? And then the other great question, you know, take your 20 is just, what are the couple of G, what are your, what are the top feature gaps? Is the next question asked, what are the top few feature gaps you have? Just ask what are the feature gaps? If they tell you none, you got a pretty crummy cto. If they're like, you know, Toast has this and whoever has this and we got to do this and our, and our POS is terrible and I've got to integrate this. You just want to hear that. You'll, you'll, you'll see the same magic you see in any executive once you've done 15 or 20. And you'll see, you'll see it tomorrow to start. You'll see it tomorrow to start. Don't, just don't lower the bar. That's the mistake so many founders make when they go out to interview a functional area they've never done before. I've never hired a VP of Andrew Sales or marketing. They get excited that they worked somewhere great, that they worked at Datadog, throw it out and just listen. You've interviewed almost 2,000 folks, Harry. You know, when you talk to the best of anything. That's great. The best plastic bag manufacturer, the best mug manufacturer, they're the best. And it's the same is going to be true with the cto. Just let them delight you, right? Let them show you. And you just want your jaw to drop. Ten minutes in, you're like, wow. And the other thing related to that, I'll give you the last tip is this took me a while to figure out, even though it's obviously true, is, yes, even at, even by demo days, certainly by a millionaire revenue, the best CTOs have built great software. So I'm looking for. I'm looking for signs of crappiness. I'm looking for corners cut. I'm looking for software that's too slow at a million in revenue. If the dashboards take 20 seconds to resolve at a million revenue, what's going to happen when you have 10,000 times more customers if it breaks during the demo, if things don't work, anything. And I know people get. People kind of light me up or. And I actually kind of got hazed on Hacker News the other day for this on the business side. But when I see these signs that the software isn't good at a million, it rarely gets better at 10, it gets worse. The load goes up, the workflows go up. So I'm looking for. I'm not expecting this to be jaw dropping, but I'm looking for one little bit of beauty. And if that's broken or has tons of issues, I'm just out, right? Slow. I'm definitely out for slow.

Final one on sales loft, but you mentioned that outreach as well. I'm just really interested. You also mentioned Opus before when we were chatting. I hate investing in competitive markets. I really hate it. How do you feel about investing in competitive markets given those two, which are intensely competitive markets?

Yeah, you know, I hate it too, for the reasons I think you hate it, but two things. First of all, I believe, and I know probably 90% of investors either don't believe this or say differently. I believe the best opportunities find you. At the end of the day, it's not that you don't find them okay, but they also find you by the same token. And if you're going to pass on an amazing binary set of founders, an amazing CEO, cto, just because they're in a competitive space, you're going to lose. You're going to lose the ripplings and the gustos and the deals and the date. You're going to lose Datadog because you're going to say new relic owns the market. Market. You're going to lose these deals, even though there's some logic to it. Right. So that's my first thing. Deals like yes, at the margin, I'm out. Okay. And we just talked about a sales productivity tool you invested in with jaw dropping numbers. Okay. I'm out on that whole category because there's 200 vendors. But that's probably an error. You invested in a great company. See, so I'm with you. I don't even want to take those meetings because there's too many vendors. But if you meet the bind, you just got to take them where you find them. That's one. And secondly, and this is just annoying VC math, but it's true. You know, big markets often, not always, but often have more competitors. If you get too obsessed with having one competitor, you can end up investing in something that's just a small market. It's not always the case for sure. Right. But you got to be careful you don't take that too far. Right. It's just there's the. There is. You gotta bet. And then the last point is this took me a few years to see even though I knew this was true from the beginning of investing. For hyper agile teams. Hyper. If you have the best engineering product team in the industry, having a lot of competitors is a positive because they help grow a large market. And you keep. Each quarter you pull away. Each quarter you pull away, right? Each quarter you pull away and it becomes a net positive that everyone's investing so much money to educate the market, to grow the market. But if four years down the road your product is 40 times better than theirs are, you pull away. So there. And it's complicated, right? But I don't think it's as simple as running from competition. When I've done that, I kind of regret it. Right? I kind of regret it a little bit. And the other thing that happens if you run from competition, especially sometimes in vertical SaaS, because you can find a lot of categories in vertical SaaS where the competition is SAP or Excel or paper or like some DOS application from the 50s or something like that, there's plenty of good ones there today. But sometimes those hide a mediocre cto or sometimes there isn't even a CTO at all. And I don't want to do those investments, right? I don't want, I want to do the ones I just those. I've done few deals where the competition was SAP or Excel and they get to millions in revenue, but they Got there with a product that was clever but you know, did three things and four years later it does six things. I want four years later doing 3,000 things. I want this, this, this, this exponential compounding of software functionality.

I love that. Okay, so with number two we have Pipedrive. Pipedrive sold for 1.5 billion in cash.

Yeah.

Fucking get out of it. What was the revenue when it sold?

They're also doing about 100 million.

100 million also. Okay, that's super interesting. How much did you earn on Pipedrive.

Altogether was almost 10%. Five co founders is too many, is one learning. Okay, now you can have 12, but I think five making decisions is too many. The other interesting thing was, you know they did, they had a lot of changes and there was a lot of co changes and a lot of cap table changes. That one today, you know, it's tough. I mean they owned a segment that now HubSpot has just taken over. And this is what happens if you get extreme product market fit. Extreme and interesting. When I invested in Pipedrive was my first investment ever in 2013. And even in 2013 I remember going on, I don't know what website I was trying to learn, there were 20 like SMB CRMs that all looked the same as Pipedrive. They were all Trello clones with Kanban cards and they all looked the same. Okay, they all look the same now. Pipedrive was slicker, it was faster, it was slicker, it worked. But most importantly, even though it was at a million, when I invested it was already breaking away. It was a double digit growth. Right. It was growing more than 100. So it wasn't that complicated an investment at the time. Right. And the product market fit remained insane. But I don't think the product has changed much in 11 years. And then HubSpot comes in and you know, I met the HubSpot founders early because they were wanted to get into CRM and they knew I had invested in pipedrive. So that's actually how I met Dharmesh at first was talking about Pipedrive and you know, were there synergies with, with HubSpot back in the day and all that and they decided to build themselves and a clone and you know, for two years it was free. Right. Their product wasn't even that great and now it is the biggest source of growth at HubSpot. Right. CRM is at 700 million I think and it's growing faster than marketing automation. So they, they, they won this, this thing but they didn't, they weren't able to get to that next level. And it is very interesting that HubSpot won that market in the end.

Market in the end.

Not the Pipe Drive. Vista won't make some money off of it, but it is a, it's a. So there's some timing stuff in these Best Buy cash. Right? There's timing and that's what makes ventures stressful. Right. We all want to hold forever, but one lesson from this one is maybe don't hold forever if the founders are gone. And this is the other thing. I'm, I'm, I'm, I, I believe Harry and I know many most VCs disagree with me, but when the founders leave, I'm pretty much out. Not, I'm not, it's not that I'm not a fan. I'm a fan. I'm going to be there. But I would like to sell when the founders leave. I would like to sell always. That's my learning. What's that?

Always, always.

Because I know everyone thinks Frank Slupin was so great, but he left, he left when times got tougher, didn't he? He did.

He did.

He did. He went. You know what happened when growth finally slowed at Snowflake? He stepped down. But a founder wouldn't have stepped down. The founders never leave. You're a founder forever. So I just, I, I know a lot of people like the professional CEOs and believe in this and some companies need that. You need it. Right. And maybe if you bring in a professional CEO and the founders are still running the company, that, that you have that DNA. But what I learned from Pipedrive is, you know, you do when the founders are not there, you lose this, you lose this, this competitive agility when it's being run with knobs and dials. Right. So that's the venture learning, which is for now for me, right or wrong. If the founders leave, I will liquidate my position as soon as it's significant. Right. There's no point in selling early. Right. It's another life lesson. Right.

I've got question for you. I don't think these PE guys are going to make money on. Sorry. So I'm maybe going to die, but on Pipe Drive I think it's harder HubSpot accountable cannibalizing the out of them Zendesk or the buy price that Zendesk was. You think you're gonna make money? Yeah. On that, on that growth rate and that decay rate and churn rate of customers. I don't think you're gonna make money. You're not innovating at all on both, sorry to say. Are they gonna lose that money given.

Today'S multiples in today's world? Yeah, I think they'll lose money on these deals. Right? The question, the question. Well, there's a micro question and a macro question. The micro question is just like LPs are coming around to giving VCs mulligans for their 2021 funds. Are they going to give PE funds a partial mulligan, right. Are they going to give P funds? And okay, if they, they do a 1x on some of these deals, right, Even, even, even together, right. I don't know if P gets a mulligan for these, for these bubble deals, right, Then, then it doesn't really matter, right, if they, if they have to sell all these deals for 50 of what they paid, but the LPs have moved on. We'll all kind of quietly, quietly forget about it. Because that's what's happening in venture. Everyone's getting a mulligan. Everyone is getting. The LPs have decided they just. There's no point in being a critic for your, for your 100x deals in 2021. We're going to more be a critic for your 100x AI deals in 2024. But the 2021 deals are, are behind us. So I don't know if they're held to the same standard. It's going to be brutal. And it also shows, you know, I'm going to mangle the quote. But there was that thing that Bill Gurley said about how important timing is for exits and how important 2021 was for exits and Slack selling for 27 billion. At a billion in revenue, what would Slack be worth today at 2 billion in revenue? Maybe it would be worth 12 billion at twice the revenue. And so there's timing here. And when you hold on to your Nvidia shares for 37 years, these are interesting questions. Now they're all competitors. A different, a different like.

Yeah, but gong are like trading it not far off that on secondary markets.

Yeah, they raised at 7 billion their last round.

I, I know this is my point there, which is like God, what a great exit for Salesloft. And like well done to them.

Well, you know, it's, it's, you know the, you know what the other learning from that one is what this is a VC ism that it turns out it's true. If the founders say to sell, sell. So Kyle was sure there was actually this was 2.5 billion at the end of 2021. The now I was, I, you know, that was an early investment. I wasn't on the board at this point or anything, but I was on the sidelines. It was, it was mixed whether folks wanted to sell or not. It was mixed. It seemed like everyone wanted to play the. The goal in 2021 was to play another card, wasn't it? Why. Why sell at 2 1/2 when 5 billion seemed easy? Right. That's where you make money in venture, is that last card. It's that last card because that's, that's where you get the big multiple in your fund. Right. So Kyle had to push it through. He had to push the sale through. Not, not. He's the, he's the kindest founder I've ever invested in. And it's a reminder that you can be kind and win. But he pushed it through. He said, listen, there is no argument that this is not the right thing to do for the company. Like to get here post dilution, post ipo, post everything, this is the thing to do. And so when founders say that, just like when the founders leave, I'd like to quietly exit my positions. When the founders say this, I've changed. When the founders say to sell, I'm no longer going to talk them out of it or even play devil's advocate. I'm just going to tell them. I'm sure you're right. Right. I'll play a little devil's advocate if they ask me to, but if they don't ask me to, I'm. You're right. Let's do it.

What is HubSpot's Pipedrive competitor product at 700 million CRM. Yeah, but what does that teach you when you look at them getting to 700 million.

Yeah.

So fast. And pipedrive being at an amazing but much smaller 100 or 150. What does that teach you? Distribution is everything. Brand.

It's not even distribution helped them. But it's very interesting if you listen to Dharmesh and Brian, they had some distribution. But remember back in the day, it was a single product company selling to marketers. The distribution to sales professionals was very adjacent. It was attenuated at best. Right. And I had a long conversation with them just on this point. I remember at Sasser Annual when they came together and they're like, yeah, like people thought it was crazy. Like it's not the same buyer, it's not the same icp. But here's the. A bunch of learnings. One of it. And this is how I met them early. Like if you have a Founder led company. And they this is, and a bigger company is going to do this. Like this is a top, like this was their top priority beyond marketing was to do CRM. It might have, might have been a dumb idea because it was a different buyer, it was a different time. But they were willing to invest multi years in a free version a decade in doing this because they knew it was the right decision. If it's founder led, be wary, be wary. That's what Olivier has done at Datadog of decimated multiple categories because this is a founder led company company. And he comes in and says we're going to own these categories, we're going to keep owning a product after a product. Then they don't win in everything. But that's why you know, a huge percent of data dog company customers buy eight products now those are the ones to be wary of in the competition. You think that the big companies are slow and agile, I mean and disagile. But it's not always true, especially if they're founder led. It's not, it's not always true.

You say about founders expanding their product lines there and kind of moving away from core focus and adding to it. So often founders want to do that and boards and investors say no, no, no, don't, don't. We need to focus and we need to make sure that we nail the core market. Sometimes they're right, sometimes they're wrong. How do you think about when's the right time to nail the core market versus when's the right time to have the founder aspiration and expand product?

Yeah, I've thought about this a lot. At least in B2B I think, I think it's actually fairly straightforward. It seems complicated. This is like, well, you got to be careful with a lot of knee jerk VC advice, right. As you approach 10% market share in your core ICP, your core market, you got to expand because growth at some level, growth slows as you cross 10% market share. Like you can't get to 200% market share now. Now here's the thing, here's the disagreement now going from 10 to 20 may happen relatively quickly. So you won't, you only see it in some of the metrics, you'll only see it in some in, in some in like deals taking longer to close because you already got all the easy ones. Right. You may only see it in other. But you've, but I always see something as folks cost 10% in their core ICB. I always see something getting harder and you have enough time at 10 to be implementing your second act calmly. To be implementing it calmly. And so that's why. And founders don't see this. This is a tiny way I try to help them. When I see this happening, I'm like, okay, let's break it down. Who's your core buyer? Well, you know, it's. It's restaurants in the south coast of France, but between two and four tables outside. Okay. Okay, great. I get why you got that. How many of them are there? 3,000. Okay. How many customers do you have? 250. Okay. Okay, guys, we gotta. We actually have a risk that we. Our growth slows in 24 months because we own this market. What are we doing? And there's the Parker Conrad's that solved this problem on day zero. Right. Albeit with hundreds of millions. But I find more founders these days. It sneaks up on them. They're so focused on the minutia and scaling and building that management team that they, they skate, they. They don't have that second act as they cross 10 market share. Now, it doesn't always have to be a second product at that. It's at the early days, it could just be growing your ICP much broader. Right. It could be going more enterprise. Might, might just quadruple your market size right there. Right. Going. Going to another country, going to the US So it's not always second product, but you need another act as you get to 10 market share.

Yeah, right. Okay. Any other big takeaways from pipedrive?

You know, I'll tell you, the funny one is almost all the investors that I saw in the early days, they didn't listen. They all invested, including Shaquille o' Neal and a bunch of others, all invested because they wanted to invest in the next Salesforce. And the founders kept being like, that's not us. We are a PLG freemium self service company. We've barely ever used Salesforce. We are not building Salesforce. And everyone's investor memo, everyone was like, we're building the next Salesforce. That's a learning that a lot of investors create these narratives in their minds to simplify investments. And sometimes they're not even, they're not even listening to the founders. They're not even listening to the founders. And maybe Pipedrive to be a $10 billion company, maybe it had to be the next Salesforce. Right? Maybe it had to be the next Salesforce. And it's not what the founders wanted. And even once as they transitioned out, it's not what ended up getting built. Right. It stayed primarily An SMB company. So listen to the. If the founders have a very specific a goal and it's rigid, listen to it because that may be all they want to build.

Before we discuss a winner in nav, can we talk about one that didn't work and a miss. And what were the big lessons from that?

My worst loss is 5 million. Then I have another one where I'm going to lose 3 million. But then my worstest loss I realized was a company where I made 5x that sold for 100 million. Right. When lockdown happened, you may remember the world change maybe less in the UK than in the Bay Area. Yeah.

Did you say. Did you say it could have sold for 100 million?

No, it sold for 100 million. It should have sold for much more. That's not worst. I made 5x the money. But you know, lockdown just accentuated a lot of challenges we were already seeing. Right. Pan. A lot of folks panicked a bit and what was happening with this company, my learning is why did they sell at 100 million? Well, he was making a mistake that I see so many unicorns made the last 24 months. But. But was harder to make in then is he got himself into a pickle. He hired a terrible CEO who hired 25 terrible sales reps. Terrible, terrible. We went from five reps and a VP of Sales who he immediately fired the CEO and brought in 20 people plus himself. And they did half the sales of the VP of sales + five.

Okay.

And not only did sales go down, but what happened to the cap? The burn rate. It obviously went way up. And so. So rather than deal with it, he let it go for 4/4, 5/4, 6/4 because he'd raised a bunch of money. And then you're just in this pickle. Right. How do you get out of this pickle, this high burn rate pickle. And sold the company. But it was not much smaller than a competitor which has since IPO'd and today is worth. They were really pretty close for a while and today is worth 20 billion. So you look at those ones where you were winning in the market, where you had competition. You're like from a venture. What's the lesson learned? I don't know if that's the worst because you made money, but that's one where I wish the founder had not been so stubborn. And I see this a lot even with and this is a very. I see this a lot with smart founders that are too stubborn though is they just stick to these bad executives and bad decisions for too long. They just stick to them for too long.

Did you say you lost 5 million on one?

Yes.

Okay, talk to me about that one. What did you get wrong?

Well, okay, here's a really interesting. I reflected a lot on it. This is a mistake. I think a lot of us, a lot of folks are quiet, are quietly making even now, which is, and I know you, you wouldn't make this mistake. I don't think, Harry. Although maybe as you raise bigger funds, you might. I lost it on the third check. So this is a company. What, what actually happened? This was my one where the, the signal was that the CEO misrepresented some, some of the financials. Not, not Sam Rankman flea level or Theranos level, but just enough that it crossed the bullshit line. Just enough that across the bullshit line and I ended up still writing a third check into the company. The first check was small, Right. The second check was a supporting check. Right? And the third check, they just started to grow like a weed in 2021, like everybody did, right. It exploded. Right. In 2021. But there are a lot of issues with the company even as it started growing double digits each month. Month. And from a venture perspective, the right thing to do is just not have written the third check. We were all geniuses in 2021 and we all had extra money to invest and it all made sense to allocate a certain amount of capital per investment. But I should have lost a million and a half and not written that third check. Or 2 million instead of 5 million.

And so for this 5 million, you doubled down when you shouldn't have doubled down, correct?

Yeah. Or possibly tripled down, depending how you look at it. That was the mistake. Yeah. So I'm agreeing with your life learnings. But, but, and I did it intentionally, but I did it reflexively. The learning is, you know, I, I, what the. I think the mistake, I probably made a lot of mistakes, but I think the mistake a lot of folks I've seen in venture in my own portfolio is there's zero diligence for these checks. None for these follow on checks. Right. As long as the top line looks good. No one ever checks anything below the top line. There's no, there's no diligence, no customer calls, no nothing. Right. That's the, that's the conundrum with the follow on checks is if you treat them as seriously as the initial checks, then I think that's the right way to do it. Right. But VCs don't.

Okay, well, let's just unpack That a little bit in terms of the diligence process then that you have today. We mentioned that spending time with obviously the CEO and the cto. What else do we do? Do we do customer references? How many, how do we document them? Just walk me through the diligence process.

My third one is the bank account. I used to do all these customer references before when I had three months, two months it sells off or three weeks with talk desk. I used to leisurely get on the phone and do. I just saw you said you did 15 in one day. I'm, I'm proud of you, Harry. But I can't do 15 in a day. And it takes me a while to do customer diligence the way I do it. So I've resequenced it in order right now I assume the diligence will be tolerable. Right. And I'm up front in the timing. Right. And now I'm quickly after my losses now instead of doing financial diligence at the very end. Right. Just, you know, just to check the box before I wire the buddy. Now I do it in the beginning because I want to just make sure there's no shenanigans. I want my, I want my financial term, my fin. My. The. The accounting firm, the auditing firm I've worked with for over a decade to make sure that the financials and the bank of statements are close enough to accurate. I want about 80, 90 accurate. I don't, I don't need it. I'm not expecting you to have a CFO or a CPA or CFA or. I, I'm fine if it's wrong, but what I'm looking for is. I am. If you, if I look at the investments I'm most stressed about and, and frustrated with, it's where there's anti in them. The best founders don't, I don't think the best founders. I don't think I, I think you can build a unicorn. Bullshitting. But I don't think the best founders.

Do you think you have any frauds in your portfolio today?

I don't think I have heavy fraud. Right. But I think this 5 million dollar loss when you, when you take 12 months of revenue and you recognize it all in one month, that's at the edge of fraud, isn't it? It. That's why I like this, this quick bank statement check like, okay, just go through it and just make sure that the expenses and everything M. It sounds silly because it doesn't really matter when you're making a seed investment. Whether there's 200k in the bank or a million, it doesn't. But what does matter, I find is it's just. I don't want there to be any. When we're investing faster, Harry, and we're investing broader, I just don't want any shenanigans. I just don't want it. Life is too short. I don't want any. I don't want any. I don't want any manipulated metrics. I don't want. And the problem with these artists, Harry, is their artists. For years it'd be one thing. It was one and done if they just you and the financing. But then every investor updates and every board meeting is. It's just an endless stream of. And you can't make. It's not worth it.

I get you. My challenge is in a world where other people don't do it and move so fast when you're the one being like, hey, can I have your bank statement? Yeah, Anna's like off, mate.

I don't think so. I think it's. If a founder can get you something in five minutes by just logging in online and shooting it to you, I think it's a low. It's, It's a, That's a lower lift than other things. I feel guilty too early about asking for customer references. If I'm not like 90, sure I want to invest. I still feel guilty about that. I still feel guilty about burning and the VC don't care. But I feel I, I know having been a fact, I feel, felt, I felt uncomfortable as a founder. I only raised a couple times burning those, you know, oh, you want to talk to Dell and Comcast and LinkedIn again. The third guy that then doesn't invest, it's just like. So I try to actually do things that are quick and then I view those customer calls as, as, as a real ask, as a favor and for real. And so I'm hoping they mostly confirm what I believe to be true. Right. I'm not looking, I'm not looking for a customer call to turn a frown upside down. I'm not looking at, to take a marginal investment. This is, I think, what VCS used to do in the old days is they'd hope, right. I'm looking only for confirmation with customers. If you're at a million growing 10amonth and your churn is low, I'm gonna assume your customers are mostly happy. And I'm going to gripe about a bunch of things too. Right?

Okay, so we're at a million. What Monthly growth rate is good enough to really pique your interest. And what monthly churn rate is like acceptable.

Yeah. This is if the, on, on the, the mistakes. You know, it's painful to say it because you want to believe it. Otherwise when I've let the growth bar go down just a little bit. Always regretted it.

Now what is that? Is that from.

It's got to be. At the end of the day, the best investments still and this is a brutal. The best investments go 1 to 10 million in five quarters or less. The very best ones, the one you can't IPO unless you triple, triple, double dollar double. You can't IPO unless you triple, triple, double, go. This is now. And we all we knew. You know, when I started investing, I remember putting on the whiteboard, tried to figure this out and I invested in Pipe Drive and I'm like okay, they're Invest. They're growing 8% a month at just over a million in revenue. And I'm like. And I was asking the other VCS I was working with like is this good enough? I actually didn't. It's a long time ago in sess. I didn't know. No one actually knew. But I'm like, I'm like okay, 8% is my new bar. At a million, it's got to be 8% a month because I just one, that I was growing 6%. So I'm like, okay, it'll be, it's better than me. And two, I don't see how they'll ever get to 100 million before I'm in a retirement home if we're not hitting these numbers. And that 8% ultimately, you know, we, we really want 10, which is what I, where you fall out of your chair is when you, you know, you see that double digit growth at single digit millions, right? That's when you fall out of your chair. But this basic VC math of triple, triple, double, double is annoy as much as it annoys founders. And they say, well it's harder now and oh, and I don't have enough. How could I do triple, triple, triple. Harry, I only raised 6 million or I can't raise a series G or series Q. The IPL markets don't care. They actually don't care whether you raise nothing right in primary like Atlassian, or whether you raised a crapload like Rubric or whether you raised almost nothing like Klaviyo and then a bunch and then all and then burn nothing. The IPO markets don't care. They care if you're efficient the weak uipo like the two quarters. They don't care about the past, do they? You've got a triple, triple, double, double. You got to do it.

Has expectation on revenue trajectory changed in the wake of deal scaling to a monstrous 5 or 600 million ARR. Where they are today in the wake of whiz being monstrous. Whatever they are today, half a billion ARR. In crazy times has what we expected in terms of revenue scaling changed for venture.

I think people are full of s. I think everyone wants a whiz. Right now we know it's possible. Right now we know it's possible that a wiz is possible. But the truth is if you're in the zone today, if your growth is good enough, you. What has happened is like there was, you know, in 2021 there was. If we had a pyramid this many folks could all get funded. Right. For I don't know, half the pyramid could get funded because everyone was growing to triple digit rates. Right now it's a much smaller segment of the startup community growing a triple digit. So actually what I'm seeing is they're flooded with even more capital. They're flooded with even more capital, the outliers because there aren't enough of them. There's just as much capital, almost as much capital as there was. Maybe there's less, there's almost as much chasing fewer and fewer folks that can grow at triple digit rates. The way I'm seeing in my personal portfolio is. And this is so different than 2020 is going, talking about pro rata. Anyone in my portfolio that is growing quickly, the insiders flood it with capital. Flood it with, flood it with capital in a way I've never seen in my whole career. Flood. Everyone used to be risk averse and then they wanted Tiger to do it and they wanted Softbank to do it. Now the, the big funds, the $10 billion, they just want to, they, they won't. They don't want to share to leave the cap table.

In any cases, did it turn out for the better for the company? To what?

To all take all this insider money?

Yeah. To get flooded with cash?

No, it's a, it's a complete negative. It's a. Because they do less work and they have a different bar. Right? Because if you're managing 10 billion and you've got a $5 million stake or $10 million and that company is just, it's just in the top decile of your portfolio. It's not wiz, but it's in your top decile. What are you going to do with the other 9 billion you haven't deployed? You're going to put it into that company and you're going to, and, and as you see that other people want to do it, you're going to get, your elbows are going to get sharper and then you're going to realize you got to do it with secondary. And then you realize, you know what, the deal is only worth 200. But if I offer 300, like I wouldn't do it for a new investment at 300, Harry. But I already invested at 20. So what's the difference on a blended basis? Like it's, it's like I'm going to make money, aren't I? Because this is a billion dollar company. This is going to be a $3 billion company. And so it inflates valuations and it puts. Companies are getting overfunded at inflated valuations by insiders today. I see it left and right.

I agree with you. I also see people doing structured rounds as a way of preventing the world from knowing how bad a company is or flat rounds just to prevent the world from knowing how bad a company is or from realistically marking it differently in their books.

I only have a certain narrow bit of experience. I haven't, I'm sure there's examples, there's nothing wrong. Like so many companies had a bridge round, right? A true bridge round. Like you just get it wrong. I had, I had one as a founder. I needed an extra 500k. But these sort of taking a company that's struggling and putting tons of money in through safes or debt or whatever. How many of these have turned around and been $10 billion companies? How many of you, how many of the leaders in cloud had like a year and a half or two years of 8% growth and then investors put another 60 million with safes and they turned it around and people made money. I mean, I feel like they should be written off.

What happens to these kind of zombie public companies, Jason? It sounds awful, so I'm going to just get in so much trouble for this. But like your Dropbox, your box, your Twilios with low growth, kind of unexciting roadmaps, kind of single digit, single digit market caps, what happens to them? Are they kind of like zombie public companies?

I don't think so. I would have thought that if you asked me 18 months ago or even 12 months ago, two things. First of all, like, I'll take a very recent example like Model N, which was growing like nothing. Okay. It's a Public company in revenue optimization for pharma. Okay. It had. The problem is it never expanded its niche. Okay. It's kind of like contract revenue management for pharma. And it grew pretty nicely. And now it's not growing at all. It just got bought out by our friends at vista again for 1.25 billion billion. So is that like a great outcome or something? I don't know. But like, first of all, all of these companies as, as things swing back even a little bit, they're all targets for PE, right? They're all. Whether it's Zendesk before a 10 billion or Model N, and what. This is a good price for Model.

N. What does PE expect to do? Do they expect to just like margin efficiency the shit out of it, cut all excess and then reinvigorate growth? I mean, if they're the ones to reinvigorate growth, they must be pretty optimistic.

I don't know. Certainly you can see, like, I mean, we started the conversation with Salesloft. I mean, Vista combined them with Drift, right? So I don't know what Drift was doing. It was doing 100 million when they got acquired. Even if they're struggled a bit, let's assume you bolt on another hundred million. I know we make fun of these bolt on combination things, but, you know, I mean, maybe they work. It doesn't have to be perfect, right? Maybe this financial. Maybe there's a lot of financial engineering. I don't know for sure. You could talk to them. I just don't, I don't, I don't think there's any dummies here. I don't think there's any dummies. And the other point. So I don't know the answer. The other point I will say, you know, you talk about zombies, but some of these Zombies are approaching 40% operating margins. And look, it's not fun. I don't think it's fun to be running Dropbox today. Okay? I don't, I don't think it's fun. I don't think it's anything like when Drew started. But they're approaching 40% margins. And if they want, if, if they decide they want to run this as a cash engine for a while and then slowly reignite growth. Growth. You know, it's not. It's so profitable at scale. I don't know. I don't know. I mean, Squarespace just went private at 7.5 billion, right? At 20% growth, it was in the middle. Will they come back out at 15? I don't know. I don't know. It's easy to be cynical about this stuff. Going to our early conversation, like, I didn't believe you could make venture in 20 money in 2013. I'm starting to get nervous again in 2024. But I think there's logic to this. And it doesn't take much multiple expansion in the public markets. It doesn't take much growth reflation, right, for these deals all of a sudden to be great deals. If multiples go from 6x to 8x and everyone, you know, we keep what's clear. If you look at what Yamini said from HubSpot just a couple weeks ago for this quarter, she said it is not any easier. Even though they're growing 23% at 2.5 billion, she said, listen, it was briefly easier in December. Q1 was brutal. It is as hard as it's ever been. Like, we sell the small businesses and we got to sell to the CFO and do demos. We didn't use staff to do demos. Like, it's hard out there even at their rate, right? But when it does turn, like all these deals may be decent deals, like they may be 20%, that's what you got to do is 20% net IRR, right? Is the goal here, right. They may be decent deals. And I just remember, I know I'm doing a while, but when things were really crappy in the 2016 downturn, I might be getting my timing off. And LinkedIn panicked and sold to Microsoft cheap, right? And then Marketo sold the Vista for 1 billion. And everyone said they, they never could make money, right? And they ended up selling for four and a half billion and all of that, that. It took some market reflation from that brief downturn. Now, we've been in this. If you're in a segment of SaaS that's in a downturn. We're going into the third year. 2016 was one year. This is three years. So it's tough. But if you, if you make the right bets and things just go up 20%, you can make a lot. That's a lot of leverage. That's a lot of leverage. Of multiples go up 20% and growth grows up 20% more. It's. You make a lot of money. You can make a lot of money.

I. I get you. There are two other elements there which I want to discuss. You can see my hands are just getting destroyed.

I love new note taking. I'm not familiar with this.

Very, very advanced. Number one was churn rate. What is an acceptable versus unacceptable level of churn rate for a million dollar ARR company. And how does that differ between SMB and enterprise?

It's tough. Well look, let's break it up into two for enterprise. I think if your NRR isn't north of 110% by that point, don't invest. You have to have triple digit nrr. It's just the way it works. You know, it's hard enough enough. It's, you know, it's even harder to break into the enterprise than the S and B in some ways just because sales cycles are longer and it's more complicated. If you've somehow gotten to a million in revenue, you've solved a, a niche but big problem in the enterprise.

Right.

They're going to buy more of it from you if you solve more of their problems. I've never not seen triple digit NRR at that scale. I've never not seen it never in my, in my career, my own experience as a founder or any company I've invested. It's always triple digits in the enterprise. Just it's not something's fundamentally broken if it's not triple digits at a million. Now SMB is the tougher one and I know that. You know then sometimes when Dharmesh and Brian talk about HubSpot and they're really is there a little. I know they, I know they're and, and Dharmesh is in here. I hear a little bit of confusion on what the monthly churn was. Was it 3 or 4% or 7%? 3 or 4% is what we see with a lot of very small businesses will churn 3 or 4%. Credit cards expire, they go out of business, they change things. If HubSpot really was 7 to 8% and then got to 100 NRR, that's 110 at the peak. That's, that's mighty impressive. But if the churn is anything more than 3 or 4% a month, it's not even software anymore. It's some sort of consumer like thing that does not have recurring revenue. There's a fundamental question Harry, which is do we even have recurring revenue here for companies? Right. And at the end of the day you've got to get to 100%. Right. Dharmesh and Brian agree. Everyone agrees you've got to get to 100. The question for SMBs is can you tolerate 3 to 4% a month churn which is endemic for small businesses for a couple of years. Years. That's the venture question. And I've passed 100%. If you want to tie it together. I have no regrets here. I have passed on every single company that had for their segment abnormally high churn, 100%. I've gone back to so many founders that were at a million with 7 to 8% churn. I'm like, you have something, but it ain't SaaS. It's not SaaS. Right? It may be something that maybe consumer maybe that works in a, in a, in a bento box to your house company, but it's not, it's not, it's not. Our whole fundamental model in software is like, it all breaks if you don't have 100% retention.

I'm looking at this literally growth model for this company now. 2.6% churn rate in August, okay, that's.

What I would expect. It's SMB.

And then in December, it's a 5.6.

That's what I would expect. And that's the risk. And that's, that's the risk.

And so how do we think about that? When there's a variation that is doubling or halving, but is highly volatile, it's not really got any form of predictability where I can hang my hat on and go, well, it's three.

Well, I do think a couple things for the, for the comp. First of all, I do think that even for startups, an L4M model is great. Take the last four months and average almost any metric, even for as long as you're. Even as you're approaching a million. I find it highly predictive. I find if you take the last four months of growth and average it, that's going to be your growth the next eight to nine months. I find if you take the churn, that's going to be your. Just take the last four months and average it. I find it, it's incredibly predictive and, and burn, burn, churn and growth. It's highly predictive. And that's why, you know, when I started investing, I would, I would, I do love their model. I would take their, their historicals and I would just build my own. Doing an L4M model was always right. It's always been right. Doing an L4M model. So that churn is high that you're describing. But for the industry you're talking about for very. And there is a difference between small businesses and very small businesses. Very small businesses do churn 3 to 4% a month. They do. And you've got two choices in that environment. You can either do what like Ben Chestnut did at Mailchimp and And just be hyper efficient and say it is what it is. If you're profitable, if you have, if your CAC is zero, you can survive a 4% a month churn. If your CAC is zero, right. If you have a sales LED model, it is unsustainable. It is unsustainable in a sales LED model. That's the line. And so, so can you bet that a Mark Robert Bears will come in like at HubSpot and help you go mid SMB and figure it out? The best founders will figure it out, Harry, they will figure it out. But anyone but the best gets stuck in this 3 to 4 to 5% churn. They never dig themselves out and even worse sometimes they obscure it with capital. Here's where VCs can make it worse. They obscure it with capital. Because the other thing that happened with SMBs is actually you can grow faster in the early days in enterprise because you acquire the customers in a week or a day instead of in a year. So sometimes the growth, top line growth rate is faster with S and B in the early days and it can obscure that churn. That's, that's the ones I think you either have to pass on or truly believe the founders have a strategy to get into that 100% NRR.

What are your lessons from that observation.

That not every, a lot of founders talk about getting that first the deals I regret or the worst deals, the one that was only 5x for 100 million. We also never fully solved the S&B TR there. We brute forced it with capital, right? It was, it was very SMB and it had like 2% churn a month. And when the team was efficient and we were burning 100k a month, it was no big deal. Like it really at some level there's always time, right to go up market. The question is, is there enough time and is there a plan? And it's, it's tough. And it was tough at HubSpot and it was very tough at Toast. If you read Toast, it was brutal for them to get to 100% NRR. And, and you know the truth is, here's the other truth Harry is one, in some ways you probably have to be better at SMB than enterprise because the margin for error is lower because you sign an enterprise three year deal and they don't even deploy for a year because there's business process change. You get like a whole nother year to fix it and then you're going to work on the renewal in year three. These SMBs, the smallest ones are brutal. They'll look at their credit card statement and they'll cancel everything the day that the 15th or the 30th of the month, it doesn't make the money, they'll cancel everything. It's brutal. And for the best founders it makes you even better. And that's actually why I think the best software in the world are, are the canvas and the squarespaces. Right. Even if maybe Canva has better metrics and squarespace, but they have to be great or I'm just going to churn tomorrow. I'm just going to turn tomorrow. It's almost impossible to turn out of most enterprise products. It's all, it's almost impossible. Right?

Right.

So SMB software has to be better, it has to be self serve, it has to be plg. It's not a choice, it's a requirement. And do you believe, do you believe they'll get to 100%? What's their strategy? And if they don't? If the burn is low, I would take the risk. If the burn is high, I would assume the burn will increase linearly with that churn because it's just going to suck up more and more capital.

What's high burn as a percent of revenue? Like if you're looking at a company that's a millionaire or that's doing largely SMB, what would be like an acceptable burn?

You know, it's funny, I, you know there's the burn ratio, right, that David Sacks popularized. And I've watched different companies, I don't know how often you get in your investor updates. I probably get half my investor updates. Get the burn ratio. Okay. And I, then I started to see its flaw. The burn ratio. David Sachs is basically one or one or less is really efficient. Right. If you burn less than your revenue, your bookings, it's super efficient. That's great. If you're clear, the next round's coming in in and you have like 120% NRR and 80% margins. If you're not clear, the next round's coming in. Your NRR is SMB. So it's 60% or 70% and maybe your gross margins are lower. If you have a hardware component or other cogs, your, your burn ratio may need to be much shorter, you know, because when you look at our friends in B2C, right, they talk about going profitable on a customer in 60 days, 90 days, 30 days. You know, we had Jacob from Revenue Cat do our, you should do it sometimes. We had him do our little workshop Wednesday and You know, I think their churn rate, they have 10,000 consumer SaaS companies on their platform, right? I think that it's that they have a 60 annual churn rate. He's like our customers have to go profitable in like 40 days. That's the B2C world that you and I are less familiar with. But if you're going to do very small business SaaS, you start to overlap B2C a little bit, don't you? There's an overlap here, overlap. And the last point I'll make is the big danger you can make. And this is why that company ended up up having a mediocre outcome. You can't put enterprise or mid market people into these S and P models. Just the toolkit, the type of people they hire, the way they spend in marketing, the, the customer lifetime. None of their metric. It just doesn't work. It doesn't work. If you come out of ServiceNow where the average customer lasts 118 years and GRR is 99% at ServiceNow, the GRR is 99. They keep 99% of their customers over three years. You can't put that person in, forget about the, the, the, the other issue. Just can't put that person into an SMB environment. They don't even know what to do.

We were speaking about revenues. I just want two questions on revenue. One, do you ever have it where they're not actually presenting ambitious enough revenues?

I think it's almost certainly a pass. But if you think the founders are great, but here's where you have to check yourself if you truly think the founder like your job. I think everyone, everyone in life has to pass a 20 minute test by minute 20 of the meeting. Do you think this founder is so great that you have to invest? If they pass a 20 minute test, but they have a crazy metric, just share it with them. Just say, listen Harry, I love everything I've heard today. I just want to let you like 8 million. We're at 6 today. So 8 million 2025 seems a little modest. And maybe he'll laugh like I've never raised money before. Arie, you know I want to do 60, but I thought if I put 60 in, you know I read this thing on Reddit, it said don't do that every once in a while with a first time founder. They get back, you know, everyone gets bad advice. So you gotta, if you love them, give them a chance. Chance to self correct on that mistake.

Okay, second question on the revenue and kind of growth assumptions in a lot of AI tools today, especially the PLG AI tools. We mentioned some of the sales rep productivity AI tools. You mentioned opusclip. The revenue growth is just like. My question too is like, how do you think about that and how do we know experimental budgets versus sustainable budgets and what you think is real revenue versus AI hype cycle revenue?

I don't think we know and I think it's fine not to. No, I think that's called venture. I think we invest in things that are exploding. And so I think if we're trying to overanalyze some of these AI explosions, we're missing the fact that we can make 20 investments per fund. I think the bigger issue is when the burn rates are vast, then we're making just. That's a bet that I. It's just a crazy bet. It's one thing if you go, if you go from 1 to 12 in a year and you're cash flow positive like Opus, that's okay. If you go from 1 to 12 in a year and you're burning 50 million of some big funds money, that might be a great, I mean, you know, great investment, like an open API, but that's the kind of bet I don't know how to make. I don't know how to do that. It's. It needs so much capital. Do you just throw a chip in and walk out the door and tell them, let me know if you need a tweet or to be on the podcast. I'm not, I'm not sure what you do if they're going to burn 50 because we haven't seen some of these a. We haven't seen the way we invest. We haven't seen these types of burn rates either. Even when we've seen some that burned a lot, like a rippling or something. It was very intentional. It was like, here, Parker, here's why it was, you know, decent early, then it's really high. But you know, if they're coming up on 400 million and there's a very specific reason why, and there's a plan and it's pretty consistent with the plan. It makes sense. This, this, you know, I know costs are coming down, but just these massive. I just, we don't know. So I don't, I don't have the answer. But you got them. If the founders are great and they have an answer, you got to make. Some of. You got to make the bed. If they're great, you got to make the best that.

Listen, I do agree, I do think the deal has to be right you can have a great founder, but if you hate a lot about it and it's 150 million price, there is a line where a great founder but a bad deal, you don't do the deal.

I think, I think the other hubris that a whole generation of folks on 20 VC and otherwise we're all going to slowly regret over the next decade and this tough one to solve is just these low ownership stakes. Who was it? Was it Silver Lake? They just said they regret every deal they did in 2021 that was small. Didn't they just say that?

Yeah, they did.

Yeah. It's like, okay, we're only going to make any money on our big positions. We regret everything. And the problem isn't that this AI deals at 150 million pre in the seed round. I mean that sucks. But if you have a $50 million seed, even $100 million seed fund, how much can you put into it without creating systemic risk in your fundamental. Founders don't get this, nor should they. But this is why I actually Harry, believe that a lot of seed investing is systemically broken today. Because let's just do the math. When I started a typical, you know, I did pipe Drive at 16 at a million in revenue.

Okay?

So now your typical YC deals at 25, right? And you can't buy much, right? So even if you could, like if you want to, like, so you got to do a 3 or 4 million dollar seed check and you have a 50 million dollar fund. How does the math work? You either have to take systemic risk, right. And do like six investments or eight investments. Or you have to buy tiny stakes, right? Or you have to find pre. Pre. Pre seed stuff, right?

Or you have a hundred million dollar.

Funds and you run even 100's barely enough at 20 at a $25 million to own a true 10%. A true 10% or 12%. 12% because you're going to get diluted. So you need to write a $3 million check. Pre revenue at 10k mrr. 2k mrr. And I think everyone that complains about YC is missing the point that it's not for them. YC doesn't owe it to anybody to create rounds that make certain VC funds happy. I mean we would. It's okay, it's okay. It's a feature. Not, I hate this expression, but it's a feature, not a bug. How many folks are there per batch at YC now? Now?

150.

I mean it's smaller than it was at the peak. It's 150. Right. So Gary and team's job is to get 140 of them funded, most as quickly and as possible and the next week they're on to the next batch. Okay. This is not getting just one or two funded because even if it's stripe, you don't know for sure. Right. So the most efficient way with their brand is to get. Have everyone sell up these really slices, create a lot of FOMO and get it done. And it doesn't make sense to. To accommodate different structures of seed funds. It's a bad business model for them to, to make folks like you and me happy.

No, no, listen, I, I do get you. Okay.

No criticism at all. They have a very effective. It's just. It only works for them. It doesn't work for anybody else. It doesn't even work for EF or certainly anybody else. It only works for them.

So you've got Revenue Cat and you have talk desk. Yeah, we only have time for one more. Which one do you have more learnings from and what are the biggest learnings from them?

Revenue Cat's a fun one that, that I was. I'm usually not the first investor like literally the first dollar in the door. I'm usually the first institutional. This is the first time I've been the first investor at like $30 a month in revenue. I misunderstood. I confused their, their basically their GMV with their ARR. I got it wrong. So I thought they were doing like $10,000 a month in MRR but they were doing managing $10,000 a month in subscriptions and making like $30. So I took a little more risk than I usually did. That was an easy risk to take because the co founders already knew the space cold.

What was the price and what check did you do?

The first check was for about 10% and it was pre YC. So I think it was 7 or 8 million pre. But that would be 25 today. Right? That was in 2018. Okay, that's a tough structural issue. Right. And it was before demo day and all that kind of stuff and they did only have $30 a month in revenue. So maybe it was a good price but today they would just wait and get 25.

So what are the big lessons from that?

When you have founders that are truly committed to a multi decade journey and Noah Space cold, maybe that's the most important thing of all. Right, so Revenuecat is on 30% of all mobile US mobile devices managing subscriptions and so that they've crushed developers love them. The product is great. Have they been too slow to develop the sales led side of the business? Yes. I think Jacob and Miguel would admit that they're a little slow to go. They lean too much onto the plg, too much onto the brand. But it's okay. They're at many tens of millions of revenue. They can do more there today they've just closed their first million dollar deal. Okay, maybe they could have done it a year earlier but it doesn't really matter at some level. And so there are times. What's fun about a company like revenuecat is there are times when a company or sometimes an executive comes into their own. Right. Not everyone can see it and now everyone can see that this is like the right team for the right problem at the right time and and just back them. I never had one second of lack of. As you probably we've chatted just for a few times about this company of yours for fun. I've never had one second where I doubted the team. Right. I questioned them a few times on different things. Never one second because they understood a problem and were committed to it for 20 years. Right. And don't want to get acquired and have a plan to IPO and for all the right reasons. And maybe that's a rambly answer to the question but those are the investments where I just don't think you can lose. And when I. I've my losses to tie this all into the theme, my losses are when the founders weren't that way. This $5 million loss I had, they were woe as me. They're like I tried really hard. This company started the same time as revenue cat and for a while they, they were growing just as quickly. And then they're like oh, it got so hard and like I had churn and I lost my customers and. And then this $5 million company one day they came into work and they fired their entire sales and marketing team with $15 million in the bank. They fired everyone just like Elon. But Elon's a better founder. Fired a supercharger team. He came and told nobody. And because growth got harder they person in sales and marketing. So my mistake of 2021 when everything was great was fall was moving following somebody else. It was. I don't. It was a waste. It was just a waste of energy. That's the main lesson. The slightly second lesson which you probably agree with is like there's no good deals. If a deal seems good, don't do it.

I agree with you. I've definitely made a mistake before. It's like a good deal does not make a great investment, you know.

And the funny thing is, and also that was the last deal of that fund. Right. So there's also some micro learnings about managing the end of the fund because you know, I've never thought I was that good investor but everyone was kind of a genius in 2021. And I'm like, well you can't lose money so I might as well make some extra money in the fund because we'll be so far into carry. Every extra dollar is just profit. It's kind of like recycling, right. If you can recycle just right and and this is the classic argument for recycling, hey, maybe you'll only make 3x on your recycled investment. But if you can invest another 10 million out of your fund and 3 exit, that's 20 extra million to the LPs and you know, 4 to 6 extra million to the GPS, you can't lose. So this was an end of fund thinking. And I will never approach an end of fund investment treating it any differently than a start to fund investment. I will never do that again.

Any other lessons? You mentioned the micro learnings on end of fund investments. Any others there?

The only lesson that's actionable is, you know we talked about the company where we exited at 100 million during lockdown. Right. I should have recycled all that money instead of distribute was impactful to a seed fund. Right. Because it was a significant return. But it was so it was early in the life cycle of the fund and now I wish I had those tens of millions to put into the portfolio. I think I will learn how recycling really works just after I retire from investing. I don't think I'll truly understand it. How I mean I get it but like there's so much you have to manage so many funds, so much money to get it right. But. But just recycle everything I think is the learning. Right. And that's a related list. I just wish I had those extra $20 million to put into that portfolio today. Because that's another way to get an extra X out of the fund.

Your investors say you don't invest fast enough.

Yes.

So like they're correct. Do you worry about that?

I do worry about it. I do worry about it. I don't think think I do like lots of investing but I don't know that there are downsides to not working for other people. Right. Like you and I aren't. There are downsides to it and there's other pieces. So it's a Great question. I do, I do worry about it. I do think I need to invest more quickly. I feel like I've made enough investments that the financial returns from the existing portfolio will be, be. Are going to be good enough. Like, I think I will, I think I will achieve my investing goals from the investments I've made in 10 years. But I, I would like to play two more cards. I'd like to do two more funds. I'd like to have 10 more, six more big winners. And that, that, that would be enough, but I'd like to have six more fund returners.

Okay, we're going to do a quick firearm, my friend. Does that sound okay?

Yeah.

Who's the most underrated SaaS CEO today?

When we talked about SMBs, I think when service Titan does IPO soon, I think we're going to see that era is one of the most underrated folks coming out of Pasadena, doing it his own way, selling to plumbers and folks always committed to this mission. Right. I think we're going to see that, that this is one of those. I think him and Andrew from Klaviyo were just missed because they're out of the circle. Klaviyo was missed because it didn't really raise or do other things. Maybe, I mean, maybe they're neck and neck. I mean, if you're in, if you're outside of the, the Shopify ecosystem, you're like, what the Heck's Klaviyo? They IPO'd if you're in the Shopify, like if you have any investments in it. I mean, Andrew and Klaviyo are like God level coming up on a billion, right? Dominating this thing. Kicked mailchimp out of Shopify on a billion of revenue. They will be soon be doing more marketing revenue than HubSpot. They will cross. They will be doing more SaaS revenue than Shopify in a couple years. This is a force of nature and there's been a little bit of grumblings when they raise prices this year. But I would say until recently I couldn't, I couldn't, I couldn't even meet anyone on the planet earth that didn't love this product. Right. That is next level stuff, isn't it?

Market cap today is six and a half billion.

And I think he started at 23 or something like that too.

It's 24 today.

24, I think it's. And I think that is one of the reasons I have some, some malaise and worry adventure. It should be, it should be 10, 11, 12 in my mind. There's not, there's not much better than Klaviyo. There's not much better than Klaviyo out there. There's. You could, you could give it a discount for. For having a platform risk. But based on what? I follow the company pretty closely because of Gorgeous. I don't think anyone gives it a discount for platform risk. This is why almost every SaaS company is overpriced in the venture markets because of Klaviyo. If Klaviyo was worth 20 billion, then all these deals we're doing make sense. I think almost, I'm hopeful that Almost everything in SaaS is undervalued. There are folks where. Sometimes I wonder why a Klaviyo is trading at.

At.

What are we coming up on a billion? So we're trading at basically 6x ARR. Right. Sometimes I wonder why in Atlassian, which is an iconic company, could never say anything but positive at Atlassian. Sometimes I wonder why it's trading at twice the revenue. Why is that a 12x company? Sometimes I don't know. Right. It's growing 20% which is great, but it's not, it's not 40%. It's has great cash flow. Some of the, some of these mark these just multiple dislocations. I just, I'm not, I'm not a smart enough podcast public guy to get. But exactly why that's true, I don't know. The Klaviyo to at last Atlassian gap and multiples is remains a mystery to me.

Tell me what happens to Anaplan like respectfully terrible product getting eaten alive by pigment, bought by P. All innovation. Like what happens there?

I don't. Going back, I don't know what happens to these P companies that invest less after they, after. After they do. I don't, I don't know. I. I mean we are, you know, our little team at Saster, we are accidentally stuck on Marketo. We would be on HubSpot if we could be. We have huge data issues for migration but we're stuck on Marketo. And so, but it's kind of fun as a case study. I mean literally, I don't think they've launched a feature in six years or whatever. I mean I guess it's under a P and then Adobe nothing. It's the same, same clunky app. A lot of people still swear by it because it is powerful in the enterprise. Right. What happens when companies stop innovating? I don't know. I guess the meta question is can they grow in the Teens. This is the Dropbox question. Can you grow in the teens? Right. And sure. Pigment. Maybe pigment's on fire. But again, I can't segment the market. Maybe anaplan is stronger in the true enterprise, for example, or maybe they have. Maybe they're impossible to rip out. It could be the case in the place. I don't know. I think if you can grow in the teens, you're still going to hit the rule of 40. I think if we look at our public companies, you still have a lot of enterprise value. If you hit the rule of 40, 40 doesn't get. There's no point in venture. But in the public markets there's still a point. So maybe that's the bullish version is that these companies have. Even though we can be critical because we're so focused on the upstarts, they may have a decade to run. If the growth is in the teens, even 15% growth over a decade, that plus maybe 35% margins, those compound to a lot. 15% a year is better than most VC funds make in the single digits.

What's the biggest thing about the world of LPs? You wish you'd known when you started it.

Listen, I don't have any great learnings. I basically have two anchors and they've been the same my whole career. I have horsely and transpose together with their affiliates and friends. People would say it's about it. I think they're 80% of all the funds I've done. Okay. People would say that's a bad idea, it's too concentrated. But everything I've asked for direct, indirect follow on whatever, they've done it one way or the other. So for me, for what, for my gig, it's. It's worked out pretty well. So what's my. My learning from that may be radically different than like 99% of. Of people. My learning is. But maybe not. If you can find a couple LPs, ideally four or five, that truly believe in you, right. And you don't put up too many mulligans and you have and you deliver with some regularity, it's a gift because you can kind of do your thing. Even if you're a little criticized for investing slowly, like we talked about, you can kind of do your thing. And I. I've worked in environments where it was very transactional with LPs. Right. And I've worked with. In environments where you're more supportive. It is better to be more supportive and maybe it's better. Better to not be aggro. Maybe it's better to leave a few nickels on the table. Maybe it's better to go the extra yard. I don't have the answers, but I've been able to, I've been able, let me put it differently. I've been able to work with my lps like I worked with my vcs, which is a good framework for me, rather than to work with them, which maybe, you know, maybe another kind of mistake. Rather than work like, you know, everyone's just a number on a sheet, right?

Final one for you. You can invest in a seed fund, a series A fund and a growth fund. Which one do you put money into for each?

Well, first, my advice to everyone out there that like emails me, hey, can I invest in Saster fund? Don't put money into any of them. Is my advice. To individuals. To individuals. Because I don't even think everyone's full of shit. I think even making three, if you do a seed X, a seed fund and you make 3x net after 16 years as an individual, that's put the money into, into, to, to into S&P 500, put it into VTI. It's not worth the, the, the, the extra gains for the illiquidity. And people don't put enough, they don't write a large enough check into funds as individuals, right? If you put half your net worth into it, I would get it. But if you're putting 100 grand or 50 grand and that triples to 150 grand after 16 years and it's illiquid, it ain't, it ain't worth it.

If I said to you, here's a B pension fund, you are the cio. Go put money in the seed fund, a series A fund and a growth fund. And this is absolute returns, focused. I want money back.

The little bit I know, the little bit I know. I've been doing this just long enough that I see all these funds decaying. I see partners leaving. I see old playbooks not working. I see folks struggling. I even see pretty good investors investing more slowly. You see folks quietly stepping back or they're not investing themselves. Their teams are doing all the investments now, now. So I have the same issue that I think is the existential challenge for LPs is, you know, you're looking backwards, you're looking backwards. And I, a lot of these funds that we all look up to, a lot of those managers aren't even active anymore or they're not fully active, right? Or they're not as active. And so I don't know, I, I don't. And a lot of folks returns, you have access to a thousand times more data. A lot of it is not as impressive as you might think. Not that you need me, but the handful of times I've been able to help you, I've recommended you. I'm still saying I can't predict the future perfectly, but here's someone that has the right drive, that has enough of a tracker put together. I think you got to make the Harry Stebbins type bets because I don't know how to make the rest. I don't know. I don't know how to make the rest. When the, when the, you know, I mean, look at, look at like Open View. Right? So, made so much money on Data Dog. How much money did they make on Data Dog? They owned almost 20% of Datadog.

I mean what, 3, 4 billion?

So what's, and then if you, and then you're done, then you're one guy owns the whole fund. Right?

Right.

So like what. Even that shows how like, like people, people don't misunderstand what's going, you know.

What happened there though, that there was something funky there.

My general assumption in all these situations is the most logical thing happened, which is, look, one prob, you know, if you have one guy getting, owning the management company in like 50 or 80% of the carry and you have a Datadog exit, and then it gets harder, everything gets harder. Why would you keep doing it? I mean, you got to really love it. So like if they made 4 or 5 billion off a couple hundred million dollar fund fund, let's have some fun for the audience. We should do the math better. But let's say they made 3 billion in carry. Okay. And let's say it was just 20%. So that's 600 million to the partners. But the one guy owned, got 60%. So let's say he made 350, 400 million. And now you're in your new fund and it's hard. Harry, we're sitting at 1x. I got a hustle and my valuations suck. Datadog. Every investor that got into Datadog until the late one got in cheap. Right? I mean we did a fun one together with IA Ventures and others. I think they invested like 4 or 5 million in Datadog in the early days. Right. Open View I think did it in the teens. Right now they're like the next datadogs at 400 pre. And I'm like, would you. Okay. And you're running the fund, you're like, okay, listen, I got to sign up for 14 years and I'm going to make like nothing in carry or a couple million. I made 300 million off Datadog. What would you do if you didn't see 3 billion coming? Like you would. You'd hang up your hat? I'm assuming that's the answer. I could be wrong. No offense to anybody, but I just think my limited understanding is they made so much, they have some good investments, but there's no way they're going to make 400 million. As GPS off calendly is great. I mean, it's such an iconic company. But owning 8% of Calendly at 3, at a 3 billion entry price is not the same as owning 20% of Data Dog at 16 million entry price, is it?

I love that.

It's so much work, right? So Calendly, we all love calendar. Let's say IPO is at 6 billion and they invested 60 million. So maybe it might not. Probably doesn't return the fund, does it? Does it? You blow your brains out, right? And I think about you ask why I invest more slowly. There's a lot of reasons, but one is, listen, I don't want smaller ownership stakes. I don't want single digit ownership stakes. I don't want anything that doesn't return the fund. For real, not for fake, not to raise the next fund, right? You realize like there are, there's, there's a lot of fake bravado on Twitter and a lot of folks, and a lot of folks making personally very little money on very high profile investments, right? So that's my might. May not be what happened at Open View, but when you have one of these outlier events, right? Even the guys at Emergence, who I love, you know, they, they had a gentle transition when they made. So they made so much money at Emergence between Bill, Viva. They own 30% of Viva and they held it, right? So let's have some fun. I, I'm not going to look it up, but what Viva's worth, what, 35 billion today? Y. I know they kept it at the fun level until eight figures. So let's say, let's say they had 25% carry and distributed at 20 billion. So the partners, okay, let's say they had say 6 billion. The partners had a billion to divide up between themselves and that fund. Plus they had Yammer, plus they had Bill. This was an epic fund, this fund. They had little old echo sign, didn't even get above the line. And so how would you keep going? I mean, Gordon's still there. It's a great fund. Right. But when you have those moments in timing, it's just. It's so, so much money. I remember I was on a board with John Doerr when I started investing, and I asked him why he kept doing it. And the only thing I saw was he still had the sparkle in his eye. You know, back then, this was 2014, he still had the sparkle. But if you've made that much money in. The sparkle's gone. You got. I mean, this. This dealing with this is not worth it.

I love that. Listen, Jason, I've loved doing this. Thank you so much. As always, this has been fantastic. And you are my hero. My man. I look forward to lots of London.

It's going to be fun. It'll be good.