OpenAI, SBF & Perplexity: What VCs Know That You Don’t

The fact that Sam invested early in Entropic and Curse is astonishing.

I think the weirdest thing in this is that for OpenAI, you have a CEO and now another CEO that are both not technical. Microsoft laid off 3% of their company today. It's not enough. I'm not sure. I need 80% of my team today. So I would armor up if I were Clay. I would hire everybody, I would raise another hundred million and I would just scorch earth everyone in the space.

What perplexity is selling from an investor perspective is an at bat, a credible 1 in 3, not equally weighted. To be clear, OpenAI is clearly going to win, but maybe you can be third and that's worth a downside. If the prize is a trillion bucks, that's what they're selling. Ready to go.

Guys? It is so good to do this. I always say this. This is my favorite show to do.

But you say that to all the girls, Harry.

You know what, clearly you don't listen to the show, my friend, because I don't. I actually just thank them cordially and pretend, you know, that I'm thrilled. But I would love to start with some big news, which is owner's new round. Jason, you led the seed here. Yeah, it's 90 million at 900 million, I think it is.

You know, I don't even read the document. Honestly, I don't read the doc. I just found out 120 million. When I read it today, I didn't even know. I didn't even read the document. All I care about is my ownership. I don't really. The other numbers, you know, they don't really. I've been a little facetious, but actually no 120 million. The learning is. Look, yeah, they're at 40 million, growing 10% a month, sometimes faster, sometimes slower. But the, but the, the trailing is there, right?

So.

And definitely there. They have done a lot in sort of AI infused marketing, but in some ways it's also a pre AI. It's really good software. We could talk about that. But it's not, it's not open AI. Right. But. Well, the interesting thing was that the, the narrative is, right, this is just my learning with those metrics, right? With the growth and the thing. Adam did a great job doing what you're supposed to do, getting to know all the VCs over time. Right. Socializing it. But then the classic thing, which actually I get a little some hives around, which is open the data room on Monday, get two term sheets that afternoon and get all of the term sheets by Wednesday. Right. And so that, that process still makes me nervous to this day. Right. For a variety of reasons. But the meta lesson is going to our conversation. Look, triple, triple, double, double, still good enough. Right. And so owner is growing faster than that. Okay. Objectively. But if you are, then it feels like there's unlimited. This is learning. There's like friggin unlimited capital. I mean even just from the insiders could have filled out 150 million in this round. And that's just the thing, like seed is hard, blah, blah, blah. But if you're in wherever this zone is today, this is the endless struggle for me of the. This is my learning from this. If you're in the zone, and I think it's harder than ever, I think, but if you're in it, there is just unlimited effing capital. Right. But you got to be in that box. So that's my learning the box, right? That's, that's the meta learning from it.

Rory, what you do in those cases. I have this now with the team where they say Harry Gray found a great founder. We need to decide by Wednesday and it's Monday. And I go, I can't write a $15 million check by Wednesday. When it's Monday, I just can't.

The framing of the question says why it's wrong. If it's Monday and you're hearing it for the first time and you got it right, Wednesday, you're just way behind. Because even if you crank and write the term sheet, you're also going to be up against someone who's met them before in the last round and is ready to write another term sheet now and has done some work the prior Monday to Friday. And for them Monday is just confirmatory. And then you've got two days. So yeah, look, it's. I mean the speed at which things are moving make it really hard. But there's no use crying and saying, shit, I Wish it was 2010. You just gotta, as I say, play the game in the field. It's really hard to go from zero to the side in two days. It's almost, you know, maybe you can assimilate the data, maybe you can, but it's very hard to assimilate the person. In other words, it's very hard to know enough about that person in two interactions spaced one day apart or two days apart to pull the trigger here. So that's the hard part. So you know, we have internalized, you know, you've just gotta be tracking them, you've gotta You've gotta put a lot of effort into seeing the ones that you want to see in advance to know in advance what you want and the consequences of that means the second order problem is, what it means is you can't be looking at everything equally because you can't. You can woo 10 people, you can't woo 200 people, right? So upfront, picking your shots on where you want to do the wooing becomes part of the struggle, right? And you know, I'm criticizing myself. My rule of thumb is if I don't have a list in our salesforce of 10 to 20 names that I know I want to see that I could imagine investing in in the next 12 months, I'm probably not doing my job right? And you know, we talk about it internally, everyone has their hot list, and if you can't name those companies, you know, and you're just wandering around hoping shit's going to turn up on Monday, that will make you money on Wednesday, you know it's not going to be successful.

Totally get you. And understand the question that I'm finding series A investors and our series A team asking is like, how quickly after the seed can we preempt? Because it's so, so freaking competitive that they're like, the seed was done a month ago. Can we just bid it up now? Because when we don't lightspeed GC Sequoia do.

Well, look, if you bid it, I mean, as silly as these things sometimes see when they're bid up in two or three months, right? Sounds silly at first, right? But going to Rory's point, let's say you met them and you really like the deal, it didn't work out for whatever reason. You get two more investor updates and the company's grown 50% in two months. I mean, and you've already done the diligence, you already met the founder, right? I mean, why wouldn't you do that deal? I mean, if. If you believe the price made sense, right? Because you already got you. You get a second chance, right? Isn't Sequoia seems to be really good at these second and third and fourth chances, right? So what, Sequoia did this round at Seed in the. This round, and then it does clay at 1.5 billion. To me it seems chaotic, but I don't think it's chaot, right? It's win when you can win, isn't it, Rory?

Yeah, I mean, I do struggle with this. Should we do it three months later? Because, you know, there's a little party that says, oh my God, that just feels wrong. Right. So I admit my biases are that way, but I think, and you know.

They don't need it. Like, you know, that this is solving for your problem, not for theirs. Fundamentally.

Yes, true and that. But then some of them do, some of them don't. I mean, you know, and if they don't need it, well, they're big boys. It's up to them to say they don't want it. Right. You know, I don't have to solve everyone else's problems. It's hard enough to solve my own. So I do agree that's an issue. But the bigger issue is can I really stomach pain? You know, I mean, and there's a couple of things. Can you stomach pain, you know, twice as much as someone three months ago? We've never done that. I struggle with that. But then, as you know, as a theme with me, I always think, am I getting that right? I mean, for example, there's no doubt some of the best companies in these high growth markets have the highest velocity of raising. You know, you look at some companies in the last two years because they've just found, I mean, it's at some zoom out level. It's, you know, Adam Smith giving a signal to everyone. These guys have found a place to put capital. Give them more capital, you fools.

Right?

I mean, OpenAI being the classic example, we put in 100 million, the model got smart shit, let's do a billion got Smarter, let's do 10. I mean, you know, you're going to double down until it doesn't work. So that's the signal that says we need to get money into this thing. So I'm wrestling with exactly that. How soon after that should you do it? I mean, you don't want to get to the point where, you know, if you're paying, you don't want to be paying twice the price of someone else for the same risk. That feels like an idiot, which is why we haven't done it. But at the same time, as Jason said, six, nine months later, if, probably, if it's a good deal, that's when he should be engaging.

On the flip side of this, we've just seen literally just before this, and sorry, Rory, then we'll get to bits that you have prep for, because I promise I won't throw in everything. But Carter, Carter just announced that Series A's are down 81%. Yes, I agree with this. Our Series A team is scratching their head going, what the has happened to the Series A market? Are you guys Seeing the same thing. How did you reflect? Think about this 81% drop in Series A's.

I saw the data. The seed and the pre seed are the believe in the team round and the A is to show me the traction round. And you know, belief is easy to manufacture and traction is hard. So once you get to the traction round, you either, you know, it's either you have it or you don't. Right. And if you don't, I think the smart thing people are doing is not trying to raise, they're just trying to, you know, figure I will talk about a company that in a, in a minute that did an amazing job of that. Not calling, never, you know, it's kind of like the law, like a barrister. Never call a question unless you know the answer. Don't go out and try and raise money unless you're pretty certain you got what it takes.

Series 8 conversions are down. Who care? You're start like go make your startup S tier. The whole point of venture is to invest in S tier startups. And if you built a B tier startup and it's hard, or you built an eight year startup that could get funded in 2021 and it can't today, cry me a river. I mean the thing is, anyone that's been a founder, I don't know. I know, look, there are a few exceptions, but I was there with owner years. It couldn't get funded, I couldn't get funded. Multiple. I went through sequential years as a founder. Easy to get funded, impossible. Easy to get funded, impossible, right? Crying about it because, because it's hard to raise a series A is, it's a B tier way to look at it. Like be the best of breed, you'll get five term sheets. You really will.

This is a totally weird analogy, Jason, but I get what you're saying. It's like years ago I actually had stunningly bad cancer. And you get the numbers and you get the statistical survival rates and they're miserable. And what we internalized at one point, my wife and I, is that the statistics are actually interesting to the doctors because they have lots of patients and they want to keep a rough eye on things. Right? But to the patient it's 0 or 1. You either make it or you don't. And it's the same thing here for the startup. You're exactly right. Either you have something that's worth funding, in which yay, you and the statistics don't matter, or you don't. And the fact, you know, at the margin, it's interesting that it's slightly easier to get money, right? But fundamentally, I think you are right, is that you want to get money because you have a good thing, right? And having a good thing is the hard part. And you know, and you're right. The money is the easier part. I mean, Venture is pretty much on tap if you have the kind of metrics that you guys got at owner. Look, I was, I was telling Harry before we started here, you know, whenever there's a good deal announced, I go to a salesforce, I look at the chatter notes and I look at why we passed on that round four or five years ago and what idiots we are. Right? And you know, that's just the nature of the thing at time. It didn't look obvious. You guys hung in there, you made it work. And you know, all power to you.

The cancer you talked about.

Yeah.

Why did you come back to Venture? Although, why don't you throw in the fucking towel and say, I've had enough of chasing these deals. Seriously, I. You do. We are. We've talked about how folks are leaving Venture, right. Some are certainly not elective, Right. But we've also seen a lot of folks that made a lot of money that stepped out of Venture the last couple. Like, why did you come back?

So I did not make this mean to make this a personal thing. It was just kind of came in my head. But I have no problem talking about it because I internalized at the time. I was just on the 40 and I got stage four colon cancer and my bigger heart going through it when I was doing chemo for about a year and a half and, you know, I kept on working. And, you know, some people say I had this thing, I had this near death experience. I want to, you know, travel around the world, live in a yurt, I don't know, climb the Mount Everest. And what I realized is I like my work and I just like to keep doing it and you just do it until you can't. So I've kind of processed through the whole existential what are you doing? Thing and come straight out to, it's a good job, we get pretty well paid, and it's quite interesting. I have no desire to do anything else. And that definitely brought it home for me. It's like, you know, it was like, if you're not gonna change, I mean, sometimes it irks my nearest and dearest when she'll say, you know, really? You couldn't even change? And I'm like, yeah, that's what you got.

Jason, do you know, I Love so much how cancer changed Rory. I just want to find another enterprise storage company. Give me another hour. I don't want to see Everest. I just want another data storage company with high nrr.

Hey, you know, there's a lot to.

Be said sitting there in the hospital.

Just give me a guy. I actually used to take calls when I was on the chemo. I used to lie on the floor because it hurt. But I don't mean to make this a personal thing, you know, actually as a random comment on the Yay Venture, I was one of the first people to get Avastin, which is the Genentech drug, which was funded by venture capital way back in the day. Kleiner funded Genentech, and, you know, before that, you'd have been toast. And after that, you know, literally it was a week after was FDA approved. And, you know, at the risk of getting political just for a second, I don't know what my health care provider paid for that drug, but I'm damn glad they did.

Yeah.

So go team.

So you said yay Venture there. Yay Venture. One of the villains or criminals of Venture, so to speak, of the last few years has been Tiger. People criticize, obviously, deal, volume, deal, count dollars out the door. It's definitely been seen with some skepticism, for sure. But positions with OpenAI and scale actually is proving to make some of their fun performance not look so bad. And if we project out forward, this could really save them. How do we think about this, chaps?

First of all, it's not a morality play, so there's no right or wrong. Look, they had a very aggressive Strategy. They did 300 odd deals in 2021. Obviously, in retrospect, total mistake, you know, time diversification, if they had enough time diversification, I think is in tiger 15, or pfp, whatever they call it, 15 to get some OpenAI in, and they had the guts to do a lot of it, then. Yeah. Can you pull it back? Totally.

I think.

I don't know. But at the very least, you can kind of salvage something from what looked like a very tough fund. So it's entirely plausible, right, that that one deal has a significant impact now, given the size of the fund. 12 billion. Given that 350 as in 2021, this gets to something we've talked about earlier. The only way it works is bet sizing. In other words, if they did 1,350th in OpenAI, it's not going to bail them out. Even if it's a 10x or 20x or 30x if, on the other hand, they had the guts and the foresight and the courage to put 10 or 15% of the fund in something that could 7 or 8x, then yeah, maybe they've, you know, snatched victory from the jaws of the feet and, you know, more power to them. Right. I don't know the amount they put in, but that's the key fact.

Wait, let's go back in time. Help me, Rory, because you're so good at this. They did 350 Series A's basically in the year.

I don't know what A's deals. I think.

So help me. Just think. But 2021 was good times, especially in B2B because everything was working right. What would it have to work out in B2B for that fund to do 3X. Like how many? Help me think through the math because.

I think you shouldn't conflate the two. Because the truth, any 21 exit.

Yeah.

Is a 2018 late stage deal. Right. So which is why, by the way, if you look at it, a lot of the late stage funds are going to have a very excellent 2018 vintage, where, interestingly, the earlier guys won't, because they won't have had it all the way through the system by the time the window shut. Right. You know, the later stage funds are going to post a very nice 18 fund.

Makes sense.

So. And probably Tiger as the definitive late stage firm, probably has a great 18 fund. I haven't checked with PfP 14 or whatever it is. Right. Because if you were buying stuff at 2 billion in 2018, you were probably selling stuff at 6 billion in 2021.

Right?

Yeah, they were the gems.

That was beautiful. And then of course, everybody does the same thing. You start thinking you're smart because you're making money and then you do 315 more deals in 2021. Right. The math of those, Jason. I mean, look, it's a 12 billion fund, so you got to return. Let's just do 24 billion to get a 2X. My assumption is you're not going to have the hit rate. The calculation you're asking isn't worth doing because this isn't going to work. Because 20% or 30% of the 315 deals become solid deals. Right. There's not going to be enough deals. It's going to work, if it works at all, because they put 20% in OpenAI and 10% in scale and then they get a couple of dribs and drabs and that's a couple of decent 21 deals that become okay, but not much. It's just hard to dig out of a $12 billion hole in $100 million increments.

I have to say I think they are unfairly criticized. I completely agree that the deal volume was off the charts. I don't think the strategy was that wise, all of this. That said, if I was an LP in those funds, if they hold on to OpenAI scale and I'm actually in some of the back catalog with them, and the good and the bad. The bad, they will 1x there's lick press. They haven't raised crazy amounts. They will want us. They won't lose money on them. And there's actually quite a few that are really fucking good.

Totally. I think that's fair. People have strategies. Yeah. They either it's not a quick. They either work or they don't. The facts come in. The great thing about this business is in the end, we don't have to say what we think of each other. The numbers tell. Right. And I think if they were able to put a lot in those two big deals, they win. And they should win, because that's a very shrewd move when you're in trouble and you have a lot of trouble deals in 21. And you say to yourself, objectively speaking, what's the only strategy that can save this fund? The correct answer is shove the remaining 40% of the fund in one of the only two or threes that can go to the moon. It's a total morphing of the strategy. There's an implicit statement in there that the strategy was wrong because otherwise you wouldn't be in the hole. Right. But at the same time, getting out of the hole counts for points too. It's a little like pushing around, you know, like it was a mistake to go in. But at least in 2006, he surged his way out. This could be the tiger surge.

Right.

You know, made a big hole, then fixed it.

I have to say, I think the thing that's fascinating is actually when you look at Anthropic. Yeah. When you look at ftx, their positions in Anthropic and Cursor actually would have saved them if they had the time to prove that out and they hadn't done the co mingling, they. That would have saved their financial performance with those two investments alone.

Well, well, that's why I tell founders, just only do like a little fraud. Like you got to know where the line is of too much fraud. Right. And that was too much. That was the problem. You poke the bear too much. Yeah, he just. Yeah. I mean, you know, a little commingling, you know, using. Using the funds to buy a compound in Baha in the Bahamas. That's okay. But, like, you know, I feel the.

Need to state for the record that Jason once again is merely being ironical. And we will not be leading the promotion for this show with a picture of Jason and me with someone saying only a little fraud is fine. Okay, but.

But I think all of crypto is a little fraud. He just took it too far. Don't be stupid.

We couldn't fit that much on a thumbnail. We'd just have only a little fraud.

Exactly. No mitigation. Okay, got it. I mean, there's a lot in that, for what it's worth. First of all, just to observe. Yeah. The fact that Sam invested early in Entropic and Cursor is astonishing. What a talent. You know, what a willingness to look at new stuff in 21 before the ChatGPT moment when it was just crazy stuff that people were saying this might work. Who knows? It might have been early 22. I wouldn't swear by it, but astonishing to pick two of the most important companies in the post. 21 crash and nail it. You're clearly a very smart mat. Right. But your point to your. That's. Yay. Second thing is your comment on that could have quote unquote, have saved him. It's worth pointing out the core business he also had was a pretty impressive and good business. I mean, the core exchange worked fine too. It was all the weird shit on top, it was all the commingling. So, yeah, he had an excellent business, blew it with fraud and did some great venture. That's a quite a polymath.

Do you think he deserves. Do you think he deserves another startup if he gets out on time, if he gets pardoned. Do you think he deserves it? Like, you know, Theranos got another one, right? The SYNAPSE guy. Do you think. Do you think a top fund will give him a couple hundred million to get his next venture going?

That's a good question. Would you. Would you fund him?

I don't think Rory or I would. I'll defer to Rory, but I think someone will fund him. He's smart, as Roy Roy said, like he showed the upside as well as the downside. I don't know. There's a lot of morality in the business. I think someone will give them just like 100 to start. I don't mean this isn't like an open air spin out, just a little 100 at a billion post to hire a team and just kind of get things going and see where it goes. It's not a lot out of the new $5 billion fund, is it? It's 2%, I think.

I mean, it's all cute and look, there's lots.

I mean it though. What I think will fund them.

I don't know if I agree in the sense of. Look, at the risk of sounding like a stick in the mud, I think there's a big point spread between dodgy, aggressive performance, acute failure, wework being the most obvious example of major failure. Hubris, grandiosity, implosion of money on a large scale, but no convicted crime. And on the other hand, being convicted of a whole bunch of fraudulent related offenses and being convicted, found guilty of them.

Right.

I just think that's a bigger lift in terms of attracting capital. So no, my gut, at the risk of being serious, is once you pass the convicted criminal stage, the bar goes way up. And fairly or unfairly, you can argue your toss, you can argue it's brilliant or not. But I think once you've been sentenced to 25 years by a jury of your peer. Yeah, a judge. And a judge guilty by a jury of peers, there's a big, you know, it's a long way back.

He might get pardoned, though. Stranger. I mean, this is. Stranger things happen today. You might get pardoned.

I thought, I thought you said he might get partner. I was like, andreessen aren't hiring, are they? Oh, wait, that could happen.

Hey, given some credit, they didn't do that deal. They'll be the first to say it too. They did not invest in that company. So you can't tag them with that problem.

That's totally true. Many, many did that deal, but you can't tag them with it. On the, the, you know, you said, yay, venture saving venture. So think it really stood out to me was the essentially CO2's marketing of the new fund as being open to anyone with 50k. You know, Philippe Lafont went on all in and really showed this kind of democratization in access to venture and a new model where you could kind of redeem. There was kind of liquidity built in. How do we think about this?

Well, you know, I want to hear things, but I watch a lot of YouTube and they have. And they have movies and boy, the room came up. It was the story, Vin Diesel. It's just the story. Let's just rip off the retail investor.

You really are the cynic here.

I I'm the most, I'm not a cynic. I just think people are, are, are cynical. I'm not a cynic. I think this is cynical. Ripping people off for 50 grand that don't know what they're getting themselves into.

And bringing a couple of things together. One in, in defense of the thing, a lot of the big private equity firms are making the same move. They're trying to tap additional sources of wealth. I mean we've just discussed it. A lot of the endowments are under pressure for capital. You just got to get money where you can. And it's one more vehicle. I think if you look at people like Blackstone and people like that, a significant and expanding portion of their capital is coming from high net worth individuals. I don't know if the bar is as low as 50k but there's no doubt that all the wealth managers have these PE type products where they've constructed some element of liquidity similar to what the cortu is doing. So it's not like it's out there, way out there in the blue. And then I think the other comment I'd make is going back to, I think is now a bit of a hobby horse for me. But just to say it, here we are, I mean we just, this is the complete round trip. Everything used to go public early and then they stopped going public early. They stayed private for longer and all the institutions could do it. And now we've had to, now we've recreated this vehicle to allow public investors to invest in these companies. And in fairness to Coattu as well, I want to say at better economic terms than the traditional 2 and 20, right. But when you zoom out a million miles here, this is all madness. These companies should be public and then Fidelity Growth Fund could do them at 70, 50bps instead of cartoon doing them. So the core problem here is that all these companies want to remain private for longer. And, and you got to ask yourselves, why is it such a shitty experience being in the public markets? Because it clearly is, right? This is a workaround for a problem that would be better solved some other way.

Is it a workaround that others adopt? Is it a workaround that lightspeed GC others go, hey, this is something that we should be doing as well. Or is it unique to go to, do you think?

I think anything that works in finance gets copied immediately. It's just one of those life rules, right?

Do you think, do you think, do you think it will work? Respectfully, he's on all in because he wants people to invest and he's marketing a product type.

I think that they're very smart people. One thing I didn't understand by the way is the concept of was a Dell and Bezos as anchor tenants. I don't know if you saw that part of the announcement where they said I think it was Michael Dell. I didn't understand that because I would have assumed that they can get all the liquid or liquidity they can get whatever asset they want. They don't they pass the 50k threshold, let's put it that way. Jeff Bezos and Michael dell make the 50k sophisticated investor threshold. So I didn't understand that. But do I think it'll work and raise capital? Probably it will because the facts are there. The other, the other PE vehicles have worked and then let's get real. You know at the end it'll be packaged as some version of this is the only way you can get access to OpenAI and Tropic and all the hot new startups that are changing AI sign here and people will sign. Right. Because it's true. It is the only way you can get access to those assets. So yeah, I think it'll sell.

Listen, I'm not a real retail guy but based on my limited experience I always write if you tell folks they can get access to these hot names they won't even understand what the carrier economics are. They won't even process what it is. Right. In fact I think the way they're doing whatever the carry is 12.5% and 1.6842% fees. It's almost too insider basebally. Right. I don't think the average retailer investor even knows what that means. Right. And it's actually arguably very high. Right. Although it's low compared to traditional venture. Right. Depends how you whether it look let it a crossover, you know is this Fidelity or is this vc?

But I said you're right. I didn't take into account 50% of the assets are public. So you. That's actually how they probably. You're exactly right. That's probably how they got it. Half of my assets are public stocks which should be 50bps and half of my assets are venture which should be 2 and 20. So you blend. You're exactly right. Good point. So it's not cheap, it's market.

There just is a line where this could rip retail investors off and I just hope it doesn't cross it.

There's really only two things that go wrong with an investment. Not like this but either you have the wrong manager or it's just the wrong asset class. Or maybe the third is the wrong structure. So let's take it apart. You're getting an Excellent manager. CO2 is a top tier public private manager. So if you look at the three things that go wrong when a retail investor puts his money in dumb stuff, mistake one's not going to happen. You've got a top tier manager.

Sorry, can I just. If we just going sequentially, are they a top tier private manager?

Like honestly at least put it this way, I would say for the kind of later stage things they are, they're clearly very sophisticated. They're in some good deals, you know, like are they as good at series A as pick a name benchmark or Kleiner? No, but they've established a meaningful scale franchise and thoughtful and you know, compared to a lot of ill thinking people that are thoughtful investors, they're in the flow, they have access. It's not like a billion coming in where they have no access. Because one of the things that goes wrong is when these weird outside vehicles come in and they haven't a pre existing business, you know, you just don't get the good deals. They're already in the flow. They'll be able to get good deals. I think the real question, Archer, the other two issues, one is the just the timing adventure is that if the next five years are tough, no one can save you. And then obviously a lot of retail investors will think, oh my God, that was dreadful. Right? So I mean to me that's the bigger question. And then lastly, the structure thing is interesting. The whole can you give people enough liquidity? Will people internalize that? There are limits to liquidity and this is not spy, your friendly local ETF that's fully liquid at one minute's notice. There are redemption gaps, redemption blocks. What are gates? That's what they call redemption gates. And if you remember back a couple of years back, I think it's either one of the Blackstone or blackrocks. I get those two mixed up. But they had a real estate fund where they had to put up the gates on liquidity because they just couldn't meet demand. So those to me are the questions much more than will they? I don't think they'll do bad investments. They're shrewd guys. The question is, does the retail investor who thinks they want it today really want it when it's cyclical and illiquid and then they discover that if I.

Step back, I do worry it's being oversold. But any single individual I know that wants to LP into, into venture funds, right? Anybody's, including mine. I tell them don't do it because no one understands the illiquidity. It's not worth it. It's not worth it. It's not worth it for a large amount of your income because the liquidity will stretch it out. It's not even worth it. Like put a little bit of money. I'm going to put 50k into 20 VC and then it does 8x but it's 17 years later until I. It's just not worth it for the stress. And I don't know how all the gates will play out, but a lot of folks maybe get stressed that this investment is. And I think 99% of folks should only be in liquid investments, including people in tech. You should be as liquid as possible. It's just too stressful for the. Like VTI is the perfect product for 99 of people. It's the perfect product. You cannot beat it. One of the things that I just hate about venture as a founder is when I smell too much greed. Now a little bit of greed is okay, okay, we're aligned, we're. We're on the cap table together. Like there's a good greed, but there's a lot of VC today and in 2021 that's like super greedy. Like, you know, there is a super greedy element to spacs. That's why I hate them. You can tell me there's some good ones, but it's super greedy. Okay. There's types of SPVs that and opportunity funds that are super greedy. And it just, I just don't like the smell of it. I just don't like the smell of it. And, and then when times are good, this super greedy, maybe it's the right playbook inventure like grab the billions, grab the billions. But there's a, there's, I don't know, some of it smells too greedy.

There's always that feeling when you go to the retail investor that you've exhausted anywhere else. And so I get it, I get the cynicism. But I would again, I go back to what I said earlier. I think the weird thing that's happening is, and it is weird, is that as privates become more and more of the economy, it just makes sense that the big private houses find more and more, have to access more and more of the public capital to kind of feed the beast. Right?

I get you. But a 1.2 billion fund doth butter no parsnips on that extension of private markets. You need $10 billion to be playing.

The way you get 10 billion is you start with 1 billion. So, yeah, look, I hear you again. I would say it again. Just look at what the PE firms are doing where private is a significant portion of their total raise. My guess is, if you're running one of these big firms, and I'm sure there's a PowerPoint on the desk at Andreessen, at General Catalyst and on Lightspeed on this, right, if you're running and you want to make sure that you're matching whatever it is that those guys, the other people are doing that you perceive as your scale peers, small S, not us, then you're going to do what they're going to do. And they're all copying the PE guys. So the movie's inevitable. There's no point getting all moralistic about it. It's the game they're playing.

Also, credit, Jason to you for potentially the fastest bet to go south in a long time. I mean, you very confidently last week were like, you know what? I bet you 100k that AI is going to replace jobs very quickly. And then this week, Seb from Klarna, the biggest proponent of replacing people in Klarna with AI, goes, yeah, seems I went a bit far. And we're going to be hiring back a load of people to walk back a lot of that AI transition process that we made. How did we think about that?

Well, look, I'm still going to listen. I'm often. Few things, actually. I enjoy more than being wrong. I enjoy it. Right. I'm happy to admit it. I have no ego in it. I genuinely enjoy being wrong. And I'm. Believe it or not, I'm thoughtful when I speak up because I, I'm going to win this bet because. For a bunch of reasons, but one thing, this Klarna thing was misunderstood in the beginning and it was misunderstood today, right? It was yesterday, the other day. It's misunderstood. What K, look, first of all, there's some drama in what the CEO is trying to do to get attention for whatever reason, right? Drama with the sale. But here's the point. This is what's happening. There's in. In. In every. In everyone that's in AI in B2B, there's a slider, okay? There's either literally or figuratively slider. If you go into an app like Gorgeous, where I'm on the board, where there's 20,000 customers using AI for S& B support, there's literally a slider and you can dial how much support AI you want from 0 to 100, okay. No matter what anybody says on X and LinkedIn, the average across their SMBs is 20%. Okay folks that put the energy in get to that 40 number that everyone talks about. That's for but you have to invest time and out of 20,000 they have a handful of folks that are at 100. Like Klarna. Do you know how many it is? Out of 20,000 are at 100. But literally you can move the slider. What's your guess? At a 20,000, how many went to 100?

A thousand?

What's your guess, Rory?

Probably less than 100 people, maybe even five or ten. Two.

Yeah, two. One, 200. And these were folks who absolutely knew the trade offs and knew what the issues were. And this is what Karna did. They moved the slider to 100 and they did not move it back to 100 humans. He did not say that. What he said is I'm bringing back some humans. So that's, he just, he did what two out of 20,000 customers did at Gorgeous is he moved the whole thing all over to 100 to learn to be dramatic and it went too far and he moved the slider back. But you know what's going to happen? Every three months that slider is going to move closer to 100. It's going to move closer and, and I believe in most cases it will never get to 100. But, but what will happen as we go into next year is folks will be like I'm, I'll deal with the downside of 100. It's only two today. But more and more folks will say, listen, like some orders are going to be wrong, some answers are going to be wrong, but I'd rather have no humans in my new cool five person billion dollar startup. And these five person billion dollar startups are still going to move the slider to 100. So I just think it's misunderstood the fact that he bounced back so far a bit. He did not say I'm rehiring everybody. He did not say I'm rehiring the thousand people that I laid off in support. He's probably going to rehire 200 and 800 will still be aid. So I think I'm going to win the bet. But if I'm wrong, like it's cool, like it's possible. But I, I, I just, I, I literally, I see all the data across 20,000 AIs and this slider and the two, once I realized it was only two that did 100, then I had my aha moment.

Right.

That's too far. Right. But they talked them through it and they told them what the downsize was. They walked through it and they did extra training and they're like, we're still going for it. Like we're still going for it. And those were products that were simpler, et cetera, et cetera.

First of all, Jason, you're not going to win the bet because we're calling it now. You've been margin called. We're closing the book. We're catching you up now. Send the money. But actually, having disagreed with you last week, I 100% agree with the way you outlined it this week. Because frankly, it was more rational. Right. Because you're right. You know, stylistically you're an entrepreneur, Seb's an entrepreneur. You got to move big org. And one of the way you move a big organization is you create these big ass goals. You violently shift the thing one way and if you have to correct back a little, you know, you do it right. It's very elon y. Right. And we can talk about his automation in the Tesla plant as an example of that. So I think you're exactly right. I think, I don't know if the CEO of Klarna believed it and thought maybe we can do it if he didn't believe it. But he thought we'll get to 80. The only way to get to 80 is to try for 100. But it's unfolding exactly the way I would have said last week. And I agree with what you're saying this now, which is pre LLM your customer support, B2B, R B2C. You could chip away 20, 25% of the number of tickets and unfortunately they were the easy tickets because it was, you know, how to fix my password. So you actually didn't save all that much at headcount. You know, depending on where you are on LLMs, you can get to 50, 60, 70%. Right. Without any deterioration in service. And in fact, based on some references, we did an improvement in nps. Right?

Improvement in nps, yeah, for sure.

So it's going to unfold. That's what's going to happen. As the base case, some people are trying going to try and do 100 and then probably back off a little. My guess is in a year or two, you're right. Maybe it won't be Klarna because they're big and they're doing money. But if you were running a small DTC company with a fairly simple product and you would just really focus on. I can see in a year or two saying we just don't do support. We answer all the questions. So the direction of travel is clear. Right. It's just going to be. It's going to take longer than people thought a year ago. But it's not going backwards. So I'm violent agreement today. This is just a five year trend, not a one year moment.

So I love Seb. I think he's fantastic. Had him on the show. Friend investor in Project Europe. So this is all Seb with love. I'm surprised by the lack of strategic analysis around the timing of how he bluntly presented this. Public markets. I had the founder of Duolingo on the show recently very clearly said hey, public markets take a very binary approach to AI. You're either an AI winner or you're an AI loser. Very simple. When we started we were an AI loser. You saw that in the stock price chat. GPT is coming for language. We changed our positioning around how we use AI. Content creation is powered by AI. Now we're an AI winner reflected in pricing. Okay, I'm summarizing but really I think very well articulated there. When he was going public he was singing the song of we're AI first. AI, AI, AI. Now he's no longer going public, he is able to say actually went a bit far. I don't need to project that AI progressiveness right now and I can save that for the next day when I do want to go public. I think it's a very clear strategic message from a CEO who was about to go public needing an AI story. Very wise and quite right of him. And it's just the walk back of that.

You're probably right. You would know. You would know best. I think in general though, when I see a lot of these statements from public company CEOs and I wonder if it works. But they're really also telling their team it's time to change now. Yeah, it's enough. Like and honestly a lot of big company CEOs I talk to, they're honestly like I'm not sure I need 80% of my team today. They're just the wrong people. It's not 3%. Microsoft laid off 3, 3, 3% of their company today. It's not enough. It's not enough. The people running the 2018 playbooks are going to become almost useless going forward. So you always see These comments about CEOs like public saying we got to go harder guys. I'm not sure who listens to those statements but saying but drop pushing the dial to 100. People are going to listen. Right? They're going to roll. I think that's what it is. Because every, you know, the Fiverr guys, like, my job is at risk. The Fiverr CEO. Right. And, and it looked dramatic, but I think he's right. So CEOs are trying to give folks shock therapy and I don't know that anyone's listening, but hey, at least, at least he said it ahead of time. Your job is at risk. The Fiverr said everyone's job at the company's at risk, including mine with AI. Right. I think Toby at Shopify kind of implied that too, that everyone's job is at risk. And I believe it with my bet. I don't think it's five years to Rory said. I think it's, I think by the middle of next year in tech, almost every single person's job will have changed by the middle of next year. It doesn't mean there'll be mass unemployment, but their job will have. It's not going to change in five years. It's going to change by next year. Right. And so CEOs are at least trying to tell people before you get fired or lay off, you got to step it up.

And maybe an interesting distinction here that I'm just internalizing, Jason, is this because we come slightly different places on this, but I think we're saying the same thing is if you're in charge of driving change, in other words, if you're the CEO of a large organization, you have to take these hyperbolic statements because otherwise it's just so hard to move 10,000 people. Right. You have to put stakes in the ground. It's a management technique. Right. Look, I'm sitting back, frankly, as a small vc, an analyst type person, I'm saying, I'm trying to be very precise what percentage will be automated in the next 12 months so I can build my five year kind of expectations on revenue growth. It's a very different thing. I'm trying to find the right answer. The CEO is trying to find the right answer for his organization to make progress. And by definition, that's a much more oomphy, lifty kind of statement. And I'm looking at my best CEOs as they're driving change here and they're doing stuff like this. I mean, I'm thinking of one in particular. I got the missive at the start of the year. You know, by God, we're going to drive this. And I was like, wow, that's. What is that's? What it takes to get true to people. And I think that's what's going on here. So I don't think it's some mysterious. I'm in and maybe there's some public market messaging in the cloud thing, I don't know. But I think it's just a CEO of a big organization trying to drive change and the only way you can drive change is just push, push until something breaks and then throttle back a little.

I think it's even harder today for, I mean literally a CEO of a company just crossed 100 million. Asked me, not that I'm any savant, how do I create more urgency in this AI age? I don't think it's about. I think it's out as a CEO, how the hell. We've had this level of urgency for years. I need to double our level of urgency because everything else is urgent today.

Agree.

How the hell do I do that with 10,000 people? How the hell do I create even 5% more urgency? Like how do you. It's almost impossible to create more urgency at scale. It's literally we talk about these issues that it's not that the incumbents don't know about AI, look at HubSpot, look at box. They know about everything. Right. But how do you create urgency is like man, that's the problem with big codes is urgency.

What did you say?

The only advice I gave to this particular CEO is immediate. Like he was hybrid. So I said to force 100% of people return to office in 30 days and let everyone go except your S tier engineers. Letting them all go because you don't need them if you're there from six in the morning, like 20 BC till midnight, like Harry is. Harry posted on Twitter last night. My whole team's here. I get that the BST and that PST confused but there is a multiple messages in that tweet that Harry sent out. He's like, don't work for me if you don't want to be here at night. Right?

100%.

We are all in person and we work late and we believe that the harder you work, the lucky you get 100%.

So. But I don't know that you can do it for a 10,000. I mean maybe you can. I mean Amazon's trying but this is my only half decent idea to create urgency is force everyone to come into the office. And to be honest, we have a beautiful office in Palo Alto. I only go two days a week, so I represent acknowledge it's hypocritical. I'm not willing to go back, but it's the only idea I have.

Speaking of driving change, I mean the single biggest change in 20 BC and how we do what we do is simply chat GPT across everything. This week, a couple of big bits of news. New CEO of Apps Fiji.

Sumo.

I love Fiji. I had her on the show when she was at Instacart. Fantastic operator. How did we evaluate this kind of layered CEO beneath Sam, now CEO of Apps for OpenAI. What did we think?

They weren't going to start being normal now? Dude, we are 10 years into the least normal startup in the planet. Why stop now? You know?

Well, listen, is it really that weird? I mean Salesforce has had CEOs of AI and co. Salesforce has had at their scale, right? 40 billionaire. They've had CEOs of divisions for years and co CEOs but they've had CEOs of it. So I don't know that that is so uncommon. It's just in this title inflation is the. Is the name of every VP of sales is a CRO today. So every CCO or even CEO or President wants to be a CEO of something. Right?

And you remember obvious. To state the obvious, even though it's implicit, is that you were hiring someone who was a CEO of a significant public company, you know, and you're hiring them to not be the single CEO of a much bigger private company. I'm sure there was a dynamic around that as well. I don't know. But I don't think it's that particularly crazy to give that title in this circumstance.

I'll tell you what I think is weirder. Sorry to interrupt.

Yeah.

And listen, I mean open. I mean Chachi BT has like 85 market share, right. And growing. Right. I love, I, I love using Claude. We could talk about it but I can already see how far it's fallen behind. Right. It for me it has some niche advantages. So it's one. Right. I think the weirdest thing in this is that for OpenAI you have a CEO and now another CEO that are both not technical. I think it's really weird. And listen, Sam, I don't. Sam is obviously off the charts genius level, right? No question. And can recruit. Even though he's lost a lot of people, he can recruit like no one on planet Earth and may. That's all that matters as a CEO. But I, my. My life experience is non technical CEOs now we have two of them. They can't win at companies like OpenAI yet they are Winning. Right. But my experience is they almost all fail.

Why?

Because all you. Your CO is now someone with the sales background.

Fiji built our naps ecosystem at Facebook unlike any other. Why? Why does it need to be technical? I'm naive. Help me understand.

Because, because the rate of. Listen, I'm just. These are my biases in venture and my life experience. The rate of change is so fast that I find non technical CEOs just can't understand it that now they're really great at sales and marketing and they're really great at knobs and dials and spreadsheets and price increases. But literally. Honestly Harry, no matter how many times you talk to me about rag and vectorizing my content, I'm never gonna understand how it works works. There's. I could spend 100 hours with the smartest people in the world. I will never understand how, how, how open AI works. Never. Right now she's smarter than me. But my point is all the non technical CEOs that I've seen especially take over my investments as outside CEOs they never understand the product. They never. And Sam is S tier. Like I mean S S tier. Right. And she's S tier. But it's still weird to me that one of the greatest technological innovations of our lifetimes is now run by two non tech companies, technical people. I just still think it's weird.

Rory, does it impact how you think about their expansion into the app ecosystem? You mentioned before, very wisely, I think chat, coding and customer support, does it impact how you think about that?

A little. Not a ton. Going back to that comment I made, actually one of the things you told me, Harry, is that doing this would make me up my own game on thinking. And you've been very right by the way. I decided after that that comment was wrong. I think they will do. Obviously they've done coding, they've done the app. I don't know if they'll do customer success because it's so idiosyncratic. Right. So I think the apps that they'll do will be very broadly horizontal in a way that coding is and the way obviously that chat is. And you can envisage a huge amount more on the consumer side as they shopping in particular.

Absolutely.

Totally. It's a thing. I mean. Yeah. So I do agree it is astonishing that the most compelling technical product in the last 10 or 15 years has been created with the CEO of the head who's not technical. And it just speaks to some shrewdness by him and a strong, just empowering that technical team and feeding them money and providing them leadership. It's a stunning achievement. We'll look back and go, wow. So it doesn't impact. It would be presumptuous of me to change the weighting on, you know, how likely it's going to work or not. But I think it is going to work. I mean, at the margin, it doesn't matter, I suppose, is what I'm saying. They have one, they have just huge. And there's just so much more to do on the coding and on the consumer side. And you're right. ChatGPT is going to suck in all your brain. It's going to suck in all your phone calls. It's going to know everything about you. And, you know, it's going to be like, remember way back when you thought Evernote would know everything about you? You ain't seen nothing yet. It's just going to take it all in and you're just going to be able to defer to it. So I think that there's just a ton to be done. You're right. Web traffic and shopping is just going to be a huge thing. So, yeah, I think there's a ton to be done there. It takes someone who's not focused on the pure technical stuff and not focused on raising $500 billion and it looks like this is that person. Makes sense.

Should we just all chuck in our funds into OpenAI? At this point, it seems like the easiest way to get a 3X, you.

Know.

The shortened window to liquidity. I'm just like, I am so sure that OpenAI is going to be a 1 1/2 to 2 trillion dollar company right now.

You should put.

Listen, I don't. I remember. I might have this a little bit wrong, but I remember I was around when David raised Craft Ventures one, right? And I think the next week he put a third of the fund into Space X. And I had just a little bit of overlap with lp and they're like, they're like, David's crazy. I'm like, listen, I only know David as a founder. We were founders together. I don't know his investor. This is one of the smartest guys I know. If he wants to put a third of his fund into Space X, I think it's going to work. Right? I think he did it like the first. I think he just called up Elon. Any extra share? I don't know what the story was, but. And I might have this a little wrong, but I think it's mostly correct and it obviously worked right A third of the fund. Fund one. And it seemed like a, you know, a nutty move, but it was highly concentrated. Can't lose.

Agreed. And we just discussed Tiger half an hour ago, where it may well be that the saving move was doing exactly that. Yeah, yeah. No, it's not a crazy comment. I think that you. Look, I mean, look, it's not what my LPs are paying me to do, but in an open canvas, you say to yourself, that's a compelling company of one that does have just a huge, enormous market opportunity ahead of it. Obviously, it's got to sort out its entire messy legal structure.

A question for you, Rory. You mentioned that it's not what your LPs pay you to do. What would you do if you didn't have LPs in that respect? If they just gave you blank canvas completely?

I mean, look, we've discussed this a number of times. The kind of single bet variance, making one exception without making an exception across the team on everything. I don't know.

But you could split the fund and put 25% into Andrew or 25% into Rippling, 25 into OpenAI and 25 into. I don't know, you name your other breakout. It's not what your LPs pay you to do, but you're like, strategically, that is how I think we will have the most value created in a good time window.

I do believe we are in a world of fewer bigger winners, and that rolls up and down the entire venture ecosystem. If you thought your portfolio count had to be 30, a seed fund that had to have 30 deals, you need 45. You know, we typically our target portfolio is 20 deals in our fund. I believe at this stage we need 25 to 27, 28. Why? Because instead of exiting at 150, we're going to exit, best case at 300, which is two or three more years when one in three of these companies will fuck up. Right? So by definition, if you want to end with three or four winners, you just have to have more at bats. So everyone's. The moving out of the bar has had consequences that I think ripple up and down the ecosystem. Right? And it will be instead of us having 20 deals and having four great outcomes, we might need 27 deals, but only have three great outcomes. But they will be bigger because they will have compound. The good ones will have compounded on from 150 to 300, and the bad ones will have failed. So if you take that to extreme, you're at your point, Harry. Fewer, bigger winners, all the way up the stack to one huge winner by OpenAI staying private for longer. It might get to Facebook type valuation before it ever goes public. Facebook today, not Facebook when it went public. So yes, what you're saying makes sense at some directional level. The hard thing then to assess is at the same time you can still overpay for growth assets and be wrong by five or six years. Right. And history is replete with examples of that. I mean, you look at the nifty 50 in 68, they didn't come back for 10 or 15 years. You look at 2000, the NASDAQ didn't come back for 14. It is possible to take a good idea and push it to such extremes that you end up wrong. And I just don't know. I haven't seen those numbers. To say look is 27 times forward revenues for something that can't at the right number is what's it. They're doing four. Let's take OpenAI doing four. Last year, 12ish. This year, 360 million. What's that? Is that we say 12? I mean. Yeah. What kind of revenue multiple are you looking at? What kind of compound are you embedding there? I don't know. I looked at it side by side with Google and it had tracked virtually the same to now. But if you look at their forecast for the next three or four years and in fact the leaked forecasts are showing higher growth than Google. So at some point you're over extrapolating into the future. And when is that point? I don't know. It's not a stupid idea, but obviously you haven't done it.

Why did he thinking about it? He's thinking about it.

If you were just about making as much money in the most efficient way possible, would you do it the way you're doing it?

I think the problem in private markets, you put all your effort into being able to do one thing well and the cost of that is you don't focus. You're not equipped to do something else. Right. So it's not been something I focused on. So I don't think starting from here it would be. I would, I don't know if it'd be easy to be successful at it. For starters, let's start with the basic comment because let's push on. This very basic comment is that OpenAI said in the last round you either show up with 250 million or don't show up at all. Right. Remember that. And that's a good example of the. Yeah, the markets that's an example of basically to play in that space. You have to be equipped to play and you have to set out to make that be your objective. And you have to equip yourself as a fund with the ability to write four $250 million checks. Otherwise you're going to get to see the deals. So, you know, so I just think sitting here with my $30 million check size, I mean, I can make a phone call, but I don't think they'll get back to me. You know, I'll leave a voicemail. Jason's AI will, like at 100% will just look at my customer support ticket and say, not worth replying to.

It always replies. But you're right.

Yeah. It replies and says, Dear Mr. O', Driscoll, you do not meet the accredited investor at 250 million bucks.

Moving this on because I could press here for a while.

You really are dear Carrie.

No, I'm not a dick. I'm not. The question that we brought up there was the nonprofit versus the for profit. And this was a big point. Now that's gone back. They're still a not for profit. I thought the whole point was they were moving for a for profit.

Jason, you know, the only. I don't know. I mean, it is interesting. The most interesting thing of all of it for me is that, you know, when Microsoft did this deal, it seemed like a crazy, weird get around M and a antitrust game and Microsoft was just going to lose billions subsidizing a backup bet. Now it looks like Microsoft got a great deal. I mean, that's the way venture works. But getting everything they get plus 10% of all revenue until there's AG, CGI, plus the returns. I mean, I see why Sacha was sitting pretty and wasn't really concerned about all this. He got. Not only could he afford to lose it, but in the end, what looked like a weird backdoor license. And M and A is like an epic investment. Right? Not that I think Microsoft cares about it as an, as a financial investment. It can't care. Right. But that, that's the irony. But I guess they have to work it out is the answer. Right? At some point it's, it's. They just ha. It's like us and China, like at some point, like it's going to be messy, but they just, they just got to work. They just got to work it.

Sometimes things don't work out, I think, but kind of staying with this one.

And leaving the U.S. that was a murky intrusion sometimes.

Yeah. But stay with This, I mean, look, I think, Jason, you are. I think it's funny, these things come. You know, there was probably. There's a bunch of great reasons for doing it at the time, both the original not for profit and then the Microsoft structure around that. But now you're left with this interesting conundrum, right? I think that it's clear they're not, I mean, to be fair, they're not going back, I think you said, Harry, to a not for profit. They're not doing that. That's not what's happening. What's happening is they're not going to just convert the underlying company to a classic for profit. They're going to convert it. Oh, it's a public benefit corporation, people like Patagonia, where basically it's just like every other company, but you have in your articles of incorporation a specific obligation to look out for interests other than the shareholders. So the good thing about that, that actually strikes me as a decent solution at that level, because what it says is we're going to be trying to make money, but at the same time, we don't have this binding obligation just to maximize shareholder value. So when you're public, you won't get pounded by the Delaware lawyers and told, you can't do this, you can't do that because it's not in the shareholders interest. It's a useful. And it's a useful legal structure. As I say Patagonia use it. So it's a thing. It's not something they pull out of thin air. Right. So the idea is you drop the assets into that thing and then at the holding company level, you have the not for profit, which has a significant, the foundation, I think it's a foundation, not for profit. You have a significant board control and you have a significant economic stake. So that structure makes sense. And maybe it'll be a little less contentious in one sense than the pure. The subsidiary being a for profit. Right. So it's a nuance. It's not like it's totally failed. It's like trying to do this. But to your point, the hard part is everyone has a veto. To Jason's point, the Microsoft deal, it's so weird and so, quote, clever that unwinding it. I mean, you're basically told, how do you value what percentage of a company? Imagine if Jason did a deal in one of these companies and said, you've got to give me 13 million, you've got to give me all your profits until I get my 20 million investment back, then I got to get a Rev share. Then I got to get something else with a cap. And now you got to convert that to a percentage ownership in a simple deal, right? I don't know. That's an interesting one because you do get into this. Two people have to agree and I'm not sure where the leverage is. And I think Microsoft ledgers might be pretty strong because the current deal is pretty interesting and attractive for them. So I think you're unwinding something that was a little. Maybe made sense at the time. It feels a little clever now. And they have a block and then separately you have the whole risk of litigation for me. And even under this structure, is it still not. Not for profit enough to do it? So there's a lot of wood to chop yet and a lot of Delaware lawyers and California lawyers and New York lawyers who are going to put their kids through college on, you know, the litigation.

A lot of kids gonna get put through college on this stuff. A lot of kids, a legion of children are going to go into college on this one. I don't know what the legal. The legal bills are probably 20 million a month. They're 10 million. They could be 10 million a month. 20 million sounds. So it could be 10 million a month of illegal bills. Right.

But in the end, I mean, the interesting thing is, and you prompted me to read about it in the end, that kind of the public PPC structure is actually what Entropic did from day one. They got it right. It's interesting. But OpenAI is basically saying we're going to go for something like what the structure Anthropic already has. So it's obvious that that's the end point that just about works. So somehow they get there, but God knows how.

We're gonna speed through a couple of companies where there were notable announcements, slash news. And then Jason's got Sasta. Big wheat Rory for Jason. Go Sasta.

Honored he even came.

That's. I mean, honored. Honestly, what a freaking hero. Perplexity staying on the kind of theme of, you know, chat and LLMs. Perplexity. $500 million rumored round at a $14 billion price rumored to be led by Excel. Any thoughts?

Well, listen, I don't. I'm not.

What.

I just think it's interesting. I mean, I'm not a total expert, but I do like Perplexity. Perplexity of the. Of the leaders is the closest to like Google on steroids, right? I mean, they announced they were at 100 million ARR recently, right? So let's say they're at 200 today, which is still generous growth, right? Does it justify this or is this a distant number three getting a massive premium. I don't even know if the anthropic valuation is just. They may be getting too like. They may help me what the term is, Roy, but they may be getting too much of a valuation premium compared to open A. And I just don't know if it deserves it in a world where we.

Have a rational M and a strategy and it's tbd, if we will, under this administration. The big picture here is this is an at bat, a one in three at bat and a trillion dollar company because Google's a trillion dollar company and this is a one in three. You know, there's only three people that are going to be relevant here. It's OpenAI anthropic perplexity, right? The mere fact that you're in the arena, use a phrase, and you've got users, you've got revenue growth. You were first with the idea of web search plus LLM combined. You got that done, you got that out the door. That gives you the right to play the game and maybe you can build a standalone thing and get public in a world where IPOs happened like they happened in 96. Four search engines went public in 96. You don't remember any of them except Yahoo, but it was Lycos Excite. It wasn't ultimate. I can't even remember the fourth proof, right? But because it was a big obvious market, it was happening fast and all of them had a chance to be big. So going back to that upside junkie comment I made last week, what perplexity is selling from an investor perspective is an at bat, a credible 1 in 3, not equally weighted. To be clear, OpenAI is clearly going to win, but maybe you can be third and that's worth a downside. If the prize is a trillion bucks, that's what they're selling.

So I am actually an investor in perplexity. I think I have to announce that otherwise my CFO will fucking kill me. But that was exactly my thinking, which is how many companies have a credible chance of being a trillion dollar company where it is still very small. Very, very, very small. Very small, but still a credible chance.

And just to put out, that's why I mentioned you're exactly right. And then. But to put the other side here, the credible M and A policy in a world where you can do M and A, which may not be today, there's also a whole bunch of big companies who need to be credible in this space too. So plan B shouldn't be awful. Now as I said, the weirdness of M and A in tech for the last five years is headbangingly depressing. Right? But there's no doubt in my mind, you know, there's a couple of trillion dollar companies who like shit. Maybe I'd like to mess with Google's head. I need to have this 100% agree.

Incredible team around them to be fair. And then also one thing that no one also sees is that distribution strategy has been very, very smart in terms of large partnerships. They've done quite a few in Europe with big telecoms providers which enables them kind of default access to consumers phones. That is very smart. And if you look at Google in the same way, in the early days they did exactly the same. It was distribution through partnerships. Very small.

You know, I realized that investment centered investment should be updated. The first paragraph should be odds of trillion dollar outcome. Like I've just, I'm using an old, I mean you think I'm being physician, but I'm using an old template. Like what I remember the first, the first deal I ever did was pipedrive. We talked about it years ago, right? I remember when I wrote up the investment memo it was the odds were getting to 100 million dollar exit. That's, that was the old structure and I had to put, I was forced by the big, by the traditional VC firm to fill out the numbers and I said 5% chance of $100 million exit. Right. It did sell for 1.25 billion but I'm just using my 2013 first investment ever lens and I did 5% now instead of 100 million. I mean then it should have been a billion and then 10 billion but maybe there needs to be another row which is 1 trillion. What are the odds in the IM of 1 trillion and if it's north of 2% we do the deal. If it's north of 2% odds for 2, we do the deal.

I think some, I mean I might say, but some version of that is true. I mean the way I'd say the opposite is if you're looking at a deal that has all the risks of a classic private company but doesn't have embedded upside beyond the base case, you probably shouldn't do the deal. As I said, we're all upside junk. It's the pixie fairy D.