The Daily Deal Ep.1 - LIVE with Harry Stebbings, Jason Lemkin, Bhavin Shah & Andrew Feldman

Sa.

Sa.

Jason. I am so excited for this. Dude. Listen, the first daily deal that we've done. Thank you so much for agreeing to do it with me.

Dude.

I remember cold DMing you when I was at university and so it was a long time ago. I want to start though. We are looking today. Tech stocks are getting hammered late trading today in response to Trump's administration. Between 10% and 49% on imported goods with the tariffs. Apple shares falling more than 6%. Can you help me understand how we should be looking at this and analyzing this today given the really sizable drops?

This is the world's strongest economy. AI is a revival in tech. I think you got to go a little bit long. I think you got to go a little bit long and I think you just got to ignore it. As VCs are. As VCs are. And just push on and check your stocks. Six months. That's the best answer I have is check your stocks in six months. Dude.

Did you see Thoma Bravo's kind of analysis that said we're going to see tax bend go from 2% to 4% of GDP? I'm intrigued to hear what you thought of that.

I think we are now entering the golden age of software and technology. It's the golden age. This is the golden age. And I think we delusionally thought 2021 was the golden age. Right? And 2021, Harry, let's look back. 2021 was small compared today, but it was also crazy. The average public B2B stock was growing 70% in 2021. Public. I'm not talking about cursor or I'm talking about moldy oldies. The moldy oldies of SaaS were growing 70% in 2021. We'll never see that again. Okay? That was a pandemic bubble that we all thought we were geniuses. But the revenue was real. No question the revenue was real. In 2021. The oldest companies in the world were reborn. GoToMeeting was on fire. WebEx was on fire. We hadn't heard from these guys since the 60s, okay? They were on fire in 2021. Now this tomo Bravo thing is what we're feeling, which is that this is. I don't know. I'm not sure. I'm sure that like every knowledge worker is going to be replaced with software. But I do believe if this trend of software going from 2% to 4% of. Of GDP that they point out that that's gonna birth 100 decacorns. 100 or more. And it is the golden age of software. It's just there's going to be a lot of stress in the golden age. A lot. It's not all freebie.

What do you mean when you say a lot of stress? And why does that show itself most?

Look, I'm not the smartest guy at the Prince of Crystal Ball, but what we're seeing today, and you tweet a lot about it, or X a lot about it, is it X or tweet? I don't know what it is.

I still say tweet. Still say tweet.

There is. And we were briefly chatting about this before we started what I, what I think's really the stress today. And the stress will change next year, in the year after. The stress today is a lot of revenue is not as durable as we thought. You tweeted about how there's. Every VC has five or 10 unicorns that aren't that are growing single digits or in the teens now. Right. And, and you know, I heard that when we were in London last year for SAS Europe, a bunch of the VCs in the, in the green room were talking about the same thing. But it's everywhere. Right. And we could talk about the root cause. Some of it, they didn't go multi product. Some of them, they were too slow for AI. Right. Those are two of the big causes. But it's endemic. And what it really means is in the old days, and I'm talking about through 2022, if you got to scale, especially in B2B, if you got to 50 million, 100 million, as long as your team was decent, you were set. You were set because revenue was so durable. Now would you grow, would you grow at the, you know, would you go from 1 to 4 million in a year like Zoom did? Right. Maybe not right, but Zoom isn't. Zoom is growing 0% now. Right. So all of our assumptions about durability were wrong.

Ish.

And that is just super stressful. So even if software Overall, because of AI, goes from 2 to 4% of GDP and births thousands of new winners, we also are constantly looking over our shoulder now because we don't get to relax. There's no durability in our revenue anymore.

Well, I think, I think this is what's concerning, which is there is this whole generation of companies that's growing mid teens in growth, barely profitable or just profitable, and there's a whole load of people waiting on them to go out. They're not good enough to go out. They're not good enough for P.E. bluntly they don't have the growth rates and they don't have the profitability. And I look at that cohort and I go, I'm not sure what happens to that. Is it consolidation? That's a big task to do. I don't know what happens to that generation and where that liquidity comes from.

Well, look, stepping back from it, I think, I think it is a huge issue which is fun to talk about, but I think it's going to get worse because of this lack of durability. Like you could like take a, take us, we don't need to name names, but you can take a stalled unicorn in your portfolio. Everyone has one or two. Okay. And you can say, oh, it's because Jason wasn't a good enough CEO or Jason was too slow or Jason worked from home. Right. And that'll probably be true for that company. I don't think in 2026 we're going to be saying that in 2026 we're going to be, we're going to be saying, look, we have to reset our expectations of revenue durability and that the idea that companies will, might radically slow down at later stages is going to become commonplace. And that hasn't been commonplace, not just in venture, but for employees joining. Right. It was a safe bet to join these late stage companies because they were set, Asana was set and Twilio was set and all of it. But it's, this assumption is going to fade away by next year. We will no longer think any revenue is durable and it actually I think will impact the value of these failed unicorns because they'll be less attractive to buy. They'll be less attractive to buy.

When we think about the durability of these unicorns with respect, the one that we consistently see is Windsurf and Cursor and, and when we look at durability of revenues that, you know, cursive obviously just raised, I think it was a $9.6 billion valuation. When we think about that. How do we think about durability of revenue in that case? And it obviously hasn't impacted value when you look at that.

Well, look, my view today is, and I'm looking at my own portfolio, I think we have VCs at least have given up caring about durability. They only care about growth. We only cared about growth in 2021. And look, you can say Cursor and Windsurf and others or even open AI, you can say how could they be worth this much? Or even scale, right. And you could criticize scale margins. Is it software? But actually if you step back and think of them as a multiple of next year's revenue, they're usually, they're often not that expensive. Right. What is cursor predicting? And this isn't, this isn't making up. This is a slope. Right? You're predict, you're taking, you're just taking a Google sheet and dragging out 99% monthly growth over the next couple years. And it's. And I think a lot of these anchor at around 20x revenues now. Maybe 20x 26 revenues or 20x 25, you know, ending 25 revenues. But I think on paper VCs outside of froth. Froth is a huge issue. It's back. Right. But I think they're making these 20x bets. It's just of what. And is the revenue really are, is it really recurring? And is it, is it, is it durable? But in some ways these crazy AI deals once they take off are, are the cheapest from a revenue multiple perspective compared to like see day deals. Those are insane multiple revenue multiples. Right.

You said that was the best place to play in venture in a tweet recently. Why do you think it's the best place to play inventure in these kind of growth AI rounds moving large amounts of money?

Well, first of all, Harry, honestly, it's what a lot of folks we've known for years are doing. I know several leading VCs who about a year ago they said they're only doing AI investing. We're not going to even do any software investing now. There's, there's a, there's a high overlap. Right. I'm not saying this, but I didn't get it at first. Right. Is it. And you know, is SAS dead and all of that but you know, when times are good like today and this is, times are. They're weird with you know, with the stock market down today and public multiples being crappy. But they're also really good. Like you gotta. If you want to make easy money and have the best beach home and the best biggest plane and not have to fly first class but fly private, you know, you probably want to be a momentum investor. There's. It was such a good play in 2021 and it's such a good play right now. Such everyone that, you know, throw some chips into the deal if you can. If you have 100 million of chips, why do a seed deal, throw it into any hot AI deal and watch it grow 5x. Right? We could debate whether you'll get that money back. What will happen at the IPO? Right. But no matter what anyone says on Twitter, VCs are still graded on markups.

They are and also are still graded up.

And LPs are fine with it no matter what they say on 20 DC because LPs are graded on markups, at least a subset of them. And we're in a markup world. And when markups are crazy, like hysteria sets into venture, hysteria sets in adventure when markups are easy.

I totally agree with you. It also does help with the problem of duration. When you think about the duration problem for pre seed or seed investors where it's 15 year hold periods often now if you're coming in three, five, seven years in or at 200 million, a lot of that has been de, risked or removed in terms of timeline. And so your time to liquidity is just much less.

If someone had told me really what time to liquidity meant when I started investing, I don't know that I would have done it.

What do you wish you'd known about time to liquidity that, you know, now.

It'S just, I mean, I'm being a little, it just, you know, when I started, you know, outcomes were smaller. You know, Shopify, HubSpot, all IPO did a billion, right? So you could get there faster because the outcomes were smaller. The reality is to get to 10 billion or 20 billion value for most, it's going to take five more years to get to this phase. And so it's really 20 years. It's not just 15. It's 15 and then you have to IPO and then it's three years to distribute. Right. After six months. So we're talking about 20 years to real liquidity, to a real fund. There's nothing wrong with it because again, if you've done well, you can ski and hang out at the beach house and go to events and stuff like that. But 20 years is so far. I don't know. As a human being, you process getting all your money back in 20 years, right? I don't know.

As depressed as depressing to think I'll be 48.

Yeah. I mean there are, I mean, you know, I mean, in 2021, Bill Gurley made the point, or 2020, maybe it was after. But looking back, he's like, you have to take advantage of these windows, right? So all as an investor, all my liquidity was basically in 2021.

I mean, there's a brilliant LP that we both know basically who has analyzed different kind of return profiles and liquidity windows across the last few decades and realized that venture is a very poor asset class unless you take advantage of these very minute liquidity windows where there's six to 12 months where you actively are a very strong seller.

Strong seller. And, and I do think as part of this golden age it's, it's going, you know, we are seeing more deals. I mean ServiceNow which has been conservative in M and A. We'll talk about it. They just did it. They just did their biggest deal ever for move works 2 point something billion and then they bought Logic IO today for probably 5, 6, 700 billion dollars. So there's going to be a wave of more M and A. Right? Especially if you know, pros and cons look into the stock market. But if Trump remains pro M and A, you know, as long as your pesky Europe doesn't get in the way, this, this is going to be a golden age of M and A. Like just a golden age of M and A.

We were talking about this like generation of companies that are much more mature but have low growth. If we look at actually a generation of companies which have ins 1 to 100 million, you know McCor just joined the 100 million ARR club I think it was announced today. But you've got several others who are moving at unbelievable speed. Lovable and bolt obviously two very well known ones. Is triple, triple double double misleading for founders in a world of AI?

Well look there are, it's a great, it's a great if niche question. What I can tell you is just this for, for like B2B investors that you and I know. Well, I mean you know everybody Harry. But I would say 80% of them won't touch a, a triple, triple double double deal today. 80%. 80%. And this is the message to founders. In fact I just, you know, you know the, you know Sequoia sends these memos every once in a while. There was the old doom memo. I sent my first memo ever to the founders I invested in ever in my history.

What did it say?

It said that don't misread the market. Triple, triple, double double is good for 20% of VCs but only 20%. So if you're doing great, if you're growing 100% at double digits in revenue and you deserve every kudo on the planet, you deserve it. You will build an iconic company if that revenue is durable. Right. Expect 80% of VCs will say no. 80% today. It's a gold rush. And in gold rush I mean okay, there's a, I don't even know where this gold, but there must be an expression, a gold rush. No one's mining silver. No one's mining silver. No one's, no one's, no one's firing up the old copper mine during the gold rush because it's just so easy to pull gold out of the river. Right. And so that's the reason. It's not that VCs don't think you can make money in triple, triple, double, double. They're looking at the public markets and they're like, I don't want to be stuck with a $3 billion IPO in 10 years. I want to put the money into anthropic.

So, Jason, what do I do?

I want to put 100 million into Anthropic and turn it into 5 million in eight months. I don't want to invest 10 million in your startup and wait 20 years for a $2 billion exit. I just don't want to be, just don't want to do it right. And so yes, it is, it is just like durability. We're changing it for now in this gold rush top one, you know, that's still top point 1%, triple, triple, double, double. I think most of them are, you're not unfundable, but you're unfundable by 80% of the folks we know, 80% don't want to touch it. They don't want to touch it.

I spoke to one friend who's an investor in one of the large LLMs today, and he said, listen, you know, our price was X and it's now Y. We've had a 12x increase in price. We're actually 3.8x up in actual real returns because of the insane dilution levels that we've seen. I mean, that is something that one doesn't see and that's been really, really damaging for a lot of the LLM investors. Just because the level of cash that's required is so seismically different.

Well, yeah, I mean, OpenAI new round is double digit dilution. Right.

Totally complete.

And the employee dilution is high. Right. So that's probably approaching 10 a year in some of these companies. So do it's got. Because I don't have the data, but if you're paying your, if the best LM companies are paying their engineers 600k to a million a year. Okay. If it's double or triple market, doesn't the equity have to be like, you can argue the equity is lower because it's so Valued, Right. I'm sure they give you a black Scholes analysis, but net net the dilution has to be higher. So if a typical startup's doing 5 to 6% dilution a year, what is a hot AI startup that has more than three? If it's one employee, there's no dilution. Right. But I bet the dilution at some of these folks is 10% a year too. Right?

So, so what do we do when we think about respectively how we package up traditional enterprise software companies or SaaS companies better for a fundraising market. We both have existing portfolios. There's a lot of SaaS founders who will be listening. What do they do to make themselves more attractive or packaged more correctly? In a world of your macaws and your scales where just insane growth is so inherent in investors minds.

I think this is, I think that what's going to come for folks doing really well that aren't at the agrowth levels but are still point 1% I think there's going to be a vibe like the old precede vibe, which is it only takes one. And so what it means is I think you need to build relationships over a year and do that great monthly update to everybody and build it and get excited and do it for real. And I think that folks that have that believe in you, especially folks that are confident, that have a good hands. When you cross a moment that may be when they haven't gotten a deal done this quarter or this year, there will be a moment in time and if you get to know 50 investors and believe in you, then over a year, I think your odds go way up. Right. If you're trying to. I hate this term, Harry. I hate it because it's a great advice for 0.1%. I hate this run a process term. I think it's some of the worst advice founders get and I love Y Combinator, but I think it's some of the worst advice Y Combinator gives their founders too, which is run a tight process. Run a tight process. Because when you can run a tight process it's great. But most founders can't. They need to run a loose process. I can't tell you how many founders I know who are like, well, here's our data room. Why do you need a data room? You're a series seed founder. Series A. What's your data room? Just give me, give me your deck. Here's our data room and most of the round is full and you have until Friday and you open up the data room. Well, we're growing 82% at 4 million in revenue. I'm like, maybe you played that one a little too hard.

But they're trying to put some form of time constraints around.

So my advice is don't, don't put time constraints if there is no time constraint. Okay, everyone, as an investor and as a founder, if you, if you do this proven playbook of every month, get a list of 10 or 20 VCs that you know them personally, that you've met, that believe in you and give them an update every month and they see it every month. And this month you're growing 8% and they're like, that's good, good job, Harry. Right? And then 6% and then 8% and then 10%, 12% and you've seen it for five months. So you're, you're, you're, you have more confidence. It's not fraud and there's a lot of fraud in AI today. We can talk about that. And it's five months of this. Eventually you're going to reach back out and say, Harry, hey, you want to catch up? Now that may not lead to 20 term sheets and it may lead to a non optimal valuation, but I think that's a higher chance for real of getting a deal, of getting a deal than not, right? Because if you run the hysteria froth playbook, you better deliver, you better have the numbers, you better have the numbers to back it up, right? And literally one of our friends, I just did actually a company that we're both investors in, but they haven't announced around, okay. They just did around at 500 million.

Okay.

And one of our friends, investors said don't even send it to me because I want more than one hour. I want more than one hour. One of our old friends just said, don't. Like I followed this company because they're an LP in my fund. So they followed it since $30 a month in revenue, okay. Since I was the first investor in 2018, they said don't even send me the deal because I won't have time.

Okay?

So just make sure if you run this like hyper aggressive playbook, realize and I'll opt out of it 99% of the time. Like I'm just, I'm a quirky investor. But 99% of the time, if you send me this exploding timeframe, I'll say, more power to you, Harry. Go, go close it, man. It's not for me. But even that folks that can't work at that pace or just did a deal, what if you did A deal last week, right. You go from hungry to full. You go to hungry to full. Right. So anyhow, that's why I just. You got to be care. And if you're not cursor, codium lovable. And friends, maybe be a little humble. Just a hint. Humble. Confident, but humble in your process. Right. Maybe it's okay to have a valuation 30% lower if the deal happens.

Listen, when. When things go faster, cracks appear. You mentioned more frauds taking place in AI. What? What are you seeing before we have Barvin join in 5 minutes?

I've seen it. I've seen several AI startups over the last couple months with 0 to multi million in revenue in a couple months. 0 to 8 figures in less than a year. Okay. Where the founders quite honestly showed me under the hood the AI was barely there. It was often humans running a prompt and then shipping that prompt to an ignorant customer. It was often humans running a report in a bi tool with a little bit of AI and shipping it to customers that are unable to do this type of analysis. Right. There's so much demand for increased efficiency increased from AI that sometimes the definition of AI has been stretched implausibility. Right. I mean there's a couple founders I love. They're sup saster super fans. These guys are great.

Okay.

And they went from zero to 2 million in 60 days. Okay. And I asked them show me a demo and they're like, we got to be honest, there's really nothing to demo. I mean, what do you mean there's no demo and they just opened it up and they just built a nice little wrapper around ChatGPT and they just write content for ignorant big customers. I'm not saying that's not real revenue. It's earned. Right? But there's just. When you move this fast, you might not even know. You might not even know.

Do you think VCs are doing their diligence like they should do? Do you think we learned from no.

One of these deals? I just decided raised at an insane valuation. But the I think we are become addicted to. We don't care about gross margins. We don't care. I mean OpenAI said they're not going to be profitable until 127 billion in revenue. 127 billion. Okay. So we don't care about margins. We don't care about profitability. Right? I mean a handful of folks care. And even when we care, then the deal gets hot and we all want to do super pro rata like we cared yesterday. And then when we have to give up our pro rata in the deal. Now we don't care about burn rates or gross margins or anything. Right. We're just addicted to top line growth.

I was walking in the park with a founder this morning. He said hey, if you can't get your company profitable in an age of AI after the seed round, honestly, you're running your business wrong. Do you think we actually see a reduced role for VCs in a more efficient company run world with AI?

No, I don't think. I think very few people believe that other than a circular group of folks in the SF area. And I think there will be a few of these. One there's way too much competition. You can't stand still. There's no question that I mean revenue cat where we're both an investor did an analysis recently and they got about 52 extra productivity using AI tools. About 2x the productivity using cursor and code. That's huge. At their scale they're 40% of all mobile apps running revenue again and they're lean and mean. They're cash flow positive. It's a tiny team for their scale. Okay, they got 2x productivity but the space is competitive. What do they do with the 2x? I'm like okay Jacob, can I talk about how you got 2x productivity? He's like well sort of. But we plowed it all into new hiring. So they took the productivity and they didn't keep the headcount flat. They just hiring twice as many people that are twice as productive. So I don't know whether that's 4x or whether it cubes out to 8x or 16x. But how can you sit still with your little two person company in San Francisco when the best of the best are reinvesting those gains? They're reinvesting those gains which is stressful because the bar has gone up and that's so I'm like okay, like that's a good nuanced point. Right? So yeah, twice as productive but we're reinvesting all those gains so you're not gonna, you can't keep up. What. And there's, this is an agent AI where there's no moats. So if there's no moat, you better run faster. This one guy, one person with lovable is great if there's no competition and a huge moat and, and, and no bugs to fix too and other issues. But dude, I literally yesterday I was at a board meeting with, with a company I invested in 2019. That's at about 20 million now, okay, so great. Love the founders. Not a rocket ship, but great, right? Had two competitors I know of, one of, one of which got acquired and one of which wound down pretty good, right? I mean, not perfect, but like, you know, yesterday the board slide, it couldn't fit on the slide. He had like 11 columns with different categories because of AI. He's like, this is the world today. This is the world today.

What does the board say?

1 to a hundred competitors.

What does the board say to that? How do you respond?

It was divergent. I think one of the board members was very concerned. They're like, my God, you got to sell your company. Right? One was neutral. And the folks that have been around the longest and honestly, Harry, the funds, the ones where it's already in a fund that's way up being one other VC were like, dude, you're hyper committed. You know, the market cold, right? The customers love you. Reboot the company. We all have to reboot our companies in 2025. Reboot it however you want to.

What does that mean, reboot the company?

You gotta, whether you're AI native or AI whatever, like you gotta, you gotta be part of the future, right? Because the cus. That's where the customer poll is, right? That's why Moveworks is acquired for two and a half to something billion dollars. It's where the market pull is, right?

Totally is. I completely agree with you there. Was the founder receptive to that?

Yeah, yeah, yeah, yeah, yeah, I think so. Yeah, for sure. Yeah. It helps that they're cash flow positive too, right? At 20 million.

Super helpful. I think we've got, I think we've got Bob in joining us.

Yeah, he's right here.

Amazing. There we go. I mean, perfect timing.

We said perfect. Perfect timing.

We segmented that one perfectly. Bovin, it is great to have you, man. Thank you so much for joining us.

Hey man, congratulations. So like you don't have to after you're acquired, you just get to ski, right? You don't have to do any work. How does that work again? I mean, I've been through it a couple times. I don't know that they were quite honest with me. By two acquisitions. Yeah.

This employee facing front end agentic platform to the entire world. And so I think now we're super energized, super motivated. You won't see me unfortunately on the slopes, but you will see me as I've always been a grinder. Just continuing to do what I think is important work.

Can I ask Bhavin, how does it come to Be how does that acquisition come into existence? Does Bill McDermott call you up and say, hey, let's make this happen? What does that look like?

Well, there's a saying, I think you guys have referenced this in the past. Great companies are not sold, they're bought. And so I think that we've been building this company for about eight years, really with the idea of using AI to transform the workplace. And as you guys know, I started with it transformation and then moved across the entire enterprise, especially in this new agentic era where we got really good at providing this agentic reasoner. And long story short, over that period of time, about 250 of our 300 customers were also ServiceNow customers. And we could see ourselves working really well together.

That's often a big part of the story, right?

Yeah, I mean, customers were sort of like, hey, you guys work super well together. We love both products. ServiceNow has this agentic platform. They've got a lot of work orchestration, you know, systems of record databases and the like. And you guys have this great employee layer. So, you know, Harry, I think it was sort of one of these things where, you know, if I was probably honest, it was a. It was a conversation that naturally would have happened at some point, and it did. And I think that I've been watching the market. We've seen tons of enterprise interest across the globe, especially in the last, call it like nine months, I'd say in the fall, something happened and we started to see a lot of demand for our product. And you know, we talk about growth rates in venture and you know, startups at board meetings of 100% or 200%, but that's still not fast enough. I mean, I think if you look at the appetite of the world out There, I've got 350 customers, Bill, and the team over there have 8,400 large enterprise prizes on their platform. So how do we actually go from where we are to that scale? And I think this opportunity is one in which just felt so right that, you know, I, I decided it was the right move at this time.

Did you guys have that overlap? I think you said 30% of your customers were on ServiceNow or something like that. Maybe I misunderstood. Did you have a joint go to market motion that kind of drove awareness of the deal? Or how did that. Or was it. Maybe it was competitive in some ways. Right? I don't, I don't know. But how did, how did that joint that overlap drive the deal?

Yeah, so we were integration partners for last seven of the last Eight years. So we had, you know, a ability to work very well within their system just for the sake of numbers. It's 250 out of 350 customers that are servicenow customers. So quite a bit of that's pretty high. Yeah, and let's call most. But what we, what we found is that, you know, we were sort of continuing to focus on our trade, which is this agentic employee experience layer that could do search, that could do deep automations. We even had to figure out a whole new architecture around how do you build automations in the agentic era? How do you think about this translation from ambiguous language to precise APIs, which is not easy. In fact you have to build separate reasoners and slot filler models and what we call manifest generator, figure out what plugins to select. There's a lot of detail there that goes into this. But as we did, I think we started to find ourselves especially at some of the largest companies like Paloton Networks or CVS or Siemens or Unilever or Hearst or Honeywell. I mean the list goes on and on. And I think that we started to get very good at the top end of the market to solve not just like employee productivity, which is sort of what I call weak roi. It's like you say, Bob, in three hours a week, who cares, you're still going to pay my salary. But the real strong ROI is where you can actually transform core business processes. And so everyone's talking about MCP servers and all this stuff right now, but we had to figure out how do you actually integrate with an SAP Workday, SuccessFactor, ServiceNow, Salesforce, Concur, Jira, all of these systems, fresh service and do it well and actually be able to trigger deep core business processes. That's where you get the strong roi. And I think that was sort of why this partnership felt so right for both parties.

Can I ask with the 250 of 350 in terms of the overlap there, I actually have a company where they have a partner who is much, much larger than them. And, and frankly they will and do have the opportunity to be acquired by them. And their fear is if we don't say yes to the acquisition, then they could go with someone else, one of our competitors, as the partner. And so we're almost strong armed into an acquisition because we are so reliant on that partnership. I guess respectfully, was that the case here? And what would you advise me advising this founder on how they should approach it given they are very nervous if they don't say yes, that partnership could go.

Yeah. So slightly different scenario for us. I mean, you all know my last company, Refresh, was acquired by LinkedIn because we were using a lot of data from LinkedIn and Facebook and these sorts of deep web databases. Right. And so that was sort of probably more like what you're describing, where, you know, you sort of have to, you know, it's an IQ test of what decision to make. So for us, though, we have been building this platform as an independent service across all these different systems. We've been supporting ServiceNow, but we're also supporting Jira. We're supporting a fresh service reporting, Microsoft, supporting all these other services. Even though we have customers that use ServiceNow, they're also using all those other products, too. We will continue to support and expand the reach of our platform with this, even, you know, past this acquisition, because that is where the gap is in the market. That's where people want something that interoperates with everything. So, you know, in your scenario, I don't know the details, but, you know, sometimes there is a situation where that is very true. But in our case, you know, ServiceNow was one of many deep partnerships that we had across the enterprise ecosystem. They, they were just a company that I admired a lot. I mean, what Bill McDermott has done, they're one of the most underrated companies, I think. Doesn't get discussed very much on podcasts, doesn't get brought up very much in the circles that we all spend time in. And When I started Moveworks, I didn't even know ServiceNow. And I was, we don't talk enough.

We don't talk enough about the deep enterprise. It's just not interest area of most folks. Right.

I mean, I felt the same. That's why I bought them a month ago. And Now I'm down 25%. I'm like, oh. But yes, I totally agree. Bill is incredible. Can I ask, how was Bill as a negotiator, when you're discussing the deal with him, what was that like? He is a generational leader. How was that discourse into play? And how does one come up with a price today?

Well, I mean, obviously private conversations I won't share what shouldn't be. But I will say this. Bill is someone who is exactly like you see him. He is very warm, very generous, very honest. And what he says, he sticks with. And I think that I've learned a lot from just know, being around him and watching him over the years, but now more closely and, you know, I think it's. It was a Very welcomed and warm conversation. If you want some color around how these things got done for us. I don't think all of these types of conversations happen that way, you know, across the industry, but. But for us, the partnership was already kind of there in many ways. And so I think that we could both speak each other's language on the first conversation. What he says is often stuff that I've said and vice versa. And so I think that it was a real treat to spend more time with him. And then of course there's Amit Zaveri, who's now leading. He's their president and chief operating officer who worked very closely with us on this as well. Really thinking about how to bring this agentic layer to every corner of the business. So I think the two of them have really had a strong thesis around where they can take ServiceNow and what we can do together. And this isn't the last you'll hear from me. I think, as I said, we're going to continue to build this future together with Service Dao and Moveworks will continue to proceed forward. And my team, when this all gets closed with regulatory approvals, we'll be pushing really hard and aggressively towards this vision.

Was there any concern for you about the regulatory approvals? We've seen obviously quite a stringent regulatory environment. I'm just intrigued when we look forward out over the next 12 to 24 to 36 months whether that plays into founders mindsets as to a willingness whether to engage in processes or not. Did you think about that? Were you concerned about that? How did that play into your mindset?

It was the first time I've been through kind of something like this where that factored in. So I took the counsel of our experts and folks involved. But I think we do see it as a very beneficial thing for the market and we've already seen the benefits. A lot of times you don't know because there is no prior, but we have a lot of customers who have been very excited about working with both of us who've proven that. And I think that, you know, obviously I've got to let the regulators do what they do and they'll, they'll make that, that final decision. But look, I think, you know, with any sizable deal, all these factors go into it. But you know, ultimately as a founder, you have to do what makes natural sense. And for us, I think Moveworks can become a worldwide phenomenon. And I think this was the best path to get there. So we'll trust that the regulators also will do what they need to do to ensure that this is configured the right way. But it isn't the primary thing that we, you know, start with.

Can I ask one question, Harry, if I'm just curious. I remember when right after Appdynamics got bought for Cisco for 3.7 billion, Jody Bonsal came to Sastor and he was very specific about this, very tactical. He's like, well, we did the math at 3.7 billion versus 3 more years to IPO with dilution in time. The IPO equivalent was 6 billion. The IPO equivalent of 3.7 given time risk and dilution was 6 billion. And I don't remember when that was. I mean, I'm dating myself was probably 2017 and that was a big deal back then. Appetite for three. And he's like, we couldn't pass up the deal because of the, I suspect whiz went through that. Did you guys with your investors go through that analysis, say, holy, holy co. It's not just 2.85 billion the headline price, right. But compared to what, like what would you. Did you have this logical distance discussion? Because that's even more money than it sounds from a founder perspective. Right? Because of time dilution and everything else, right. Got to raise another round, you know, three more rounds, hiring another thousand employees, that's another 25 dilution, 10 from the IPO. Did you guys do that kind of trade off to the future?

I think that, you know, everyone does those calculations continuously as you're, you know, building the business and, you know, deciding to raise more capital and what it's going to take. As I said before, I think ServiceNow is underrated. And I think that what I felt strongly about is joining them to go do this and to create this vision, I think was going to be more accretive for all my employees than perhaps going at this stubbornly alone and continue on the path. And don't get me wrong, I think founders start companies with strong, strong conviction of what they want to see eventually. But this sort of as the market has evolved and I've seen just the appetite increase so dramatically and the number of large companies that have come onto our platform just in the last six months has been so insane that I just realized we couldn't catch up to the speed at which everything was moving. And so this made the most sense. And of course you do all that calculation, so does everyone and you think about what is the opportunity cost. And so look, I think. Can I ask you a. Opportunities for startups. But I think that in this AI world, we do have distribution modes that are very important, that exist, and that I think will still be important to think about as you want to build your brand and your vision.

So I always worry that we drastically overestimate adoption in the short term and underestimate it in the long term. Do you think we are overestimating adoption in the short term for some of the largest companies in the world? You mentioned some names earlier. I'm thinking European incumbents who still don't know what slack and notion is, let alone are adopting AI first principles. Do you think we are overestimating adoption in large enterprises or not, given what you just said there about the speed of those customers joining?

So it's actually a good question because there is nuance there. We're seeing a lot of large Enterprises now, after two years since ChatGPT came out, finally say, okay, we gotta do something and we want to do something. But I think that there is still a very long journey in terms of the true change management and the integrations and the leveraging of these capabilities throughout their entire business workflows. So, you know, I was on a panel the other day and someone asked, you know, what do you think we're gonna be talking about in two years? And I said, from the enterprise standpoint, exactly what we're talking about right now, which is, you know, the adoption curve and getting things in and moving things along Again, we've seen this where customers absolutely are ready to go, but just their own internal processes may take six, nine months. You get the approval, you then start the implementation, you roll it out to a subgroup, and then it goes from there and there. So I think that we are seeing that transformation. It's just happening slower, not because of the technology, to your point. I think technology is there, but it's a people problem. I think change management is a very real thing that I think we underestimate. And I think it's where startups and companies like ours have really focused our attention in trying to help these organizations really figure this out and support them. I think that we did a lot of work over the years to really perfect this large enterprise motion. We just got FedRAMP authorization two months ago, the first agentic platform to get that because we had to build a lot of the security measures, the protocols, the infrastructure on GovCloud and this and that. That it just takes time. And I think that's where people underestimate, you know, the work that's required.

You mentioned distribution. If I were to push you into one camp or another, does AI benefit incumbents with incredible distribution to huge companies existing or startups with speed, with agility, with ability to just move much faster and think much quicker. Which one does AI favor more in the next two to three years?

Well, I think on the bleeding edge startups are always the first to sort of bring out the newest capabilities. We saw this with you know, deep Sea can we see this with you know, search, moving into research and some of these capabilities that are now possible. But I would say that as that technology gets absorbed quickly into the markets zeitgeist, the larger companies will continue to play a very big role at titrating the cadence at which the stuff really gets into the hands of millions of users. Right. We have a 5 million users on our platform. ServiceNow has 150 million plus. So if you think about just the reach that these organizations have, I think the incumbents of previous generations are different than the ones today because I think they're very innovative. I think, you know, all of the hyperscalers are very innovative. I think all of the large SaaS companies are very innovative. And so I think that there is going to be winners on both sides of it. And sometimes like Wiz, like Moveworks, we combine forces. But I still think there's going to be a healthy opportunity for new companies to emerge and if they choose to stay independent, can do so.

Harry, can I ask just one meta question that I think Moveworks might be very helpful around AI, which is where the money comes from. Where are you, is the budget budgets, budgets for AI? What percent are you seeing is budget? Are you stealing from other, other, other sources of budget in the enterprise? Right. Maybe, maybe more dated workflows or systems. Right. And how much is new AI budget that CIOs and others are giving to whether it's innovation or just new budget? Like how much of your revenue if is new budget versus stealing it from other systems, dated vendors, et cetera?

I don't think there's one answer because I think every company is sort of doing their budgets differently. I will say that at the start of 24 we started to see solid numbers inside of budgets for people to deploy AI systems, Agentix systems to help their employees to drive business transformation. It wasn't just coming out of a slush fund or you know, kind of a one off type of situation. These things are now in the budget. I've seen a lot of analyst reports where they think where some of that's coming from and how it's sort of being repositioned. But I'll give you an example Broadcom started off on Moveworks. Six years ago. They had 10,000 employees. Today they have 50,000 after buying CA, Symantec VMware. And they have the same size support team across it, HR and a bunch of other functions with the help of Moveworks. And so when you think about the budget, oftentimes the budget doesn't have to be looking backwards. It can be looking forward at how do we have, how do we reduce our cost of growth while the business will grow? Does everything have to grow linearly with it or can it be sublinear? Can it give us more leverage? And that's what we're seeing a lot with our customer bases. They are able to do more with their budgets because we're able to keep certain costs lower and have the efficiency of computers doing it where I think in other cases it was. It was more labor intensive.

Maybe that's good. Just to summarize, I think that is interesting that about a year ago you started to see CIO's budget agentic AI as essentially as a line item in the CIO stack, right? That, that I'm not. That. That is. However you define it. That's growth, right? That is growth in the overall spend, whether it's coming out of the. Not growing the headcount or coming out of getting rid of half of the support team. Forget about where that's a separate issue. But it's budgeted, right? That is incremental. I think that's the, that's the profound question there. We get an incremental budget, right? Because that's what's got to fuel this growth, right? Not just for hyperscalers, but at the application level, right? Is there more budget? Right. Otherwise it's just moving chess pieces around the board, right? If it's incremental, that's why it's the gold rush. That's the gold rush. Is this incremental budget, right?

Bob and dude, listen, I want to say thank you so much for agreeing to hop on. Thank you so much for providing liquidity to this ecosystem. What we forget is that when you, when you sell LPs, get money back and they reinvested in managers like me and Jason and listen, it's been an incredible journey. So thank you so much and well done again.

Awesome. Thank you both. Great to see you.

Congratulations.

Amazing. Love that. As I said, dude, I think people forget the kind of multiplier effect on liquidity and how LPs getting that back and the recycling that comes from it. Just so, so important. It actually goes to one of My questions that I wanted to ask you, dude, which is like, I think we're going to see a drastic reduction in the number of IPOs when you look at Stripe, when you look at data.

I owe you 50 grand, but keep going.

Yeah, you do. I think it's actually 75, but you.

Know.

But my question is like, are we going to see a drastic reduction in the number of IPOs with these case studies of bluntly the extension of private markets favoring founders in very effective ways?

I think we don't know, Harry. I think that. Look, first of all, IPOs are tough to pull off. No matter what it looks like in the media, there's not that many buyers. It's a very niche thing to buy in the IPO when anyone can buy the next day. Most tech IPOs are flat two years out. So why would you buy in the IPO? Right. It's a very. You think venture is a niche asset class. So is whatever people buy in IPOs. Okay. So there has a lot of stars have to align for it to be worth people's time. Right. Overall, having said that, I think it's a gold rush. I think whatever we feel today. Stripe, Figma chime the list of folks north of 500 million. Okay. Canva 3 billion that are going to IPO in the next 18 months. It may not be at the pace of 2021 like we. I need someone smarter than me to put it in a spreadsheet, right. To look at the number of IPOs in 2021. Will it be? Intuitively, I actually think it should be higher just because of the scale today. But it's going to be a gold rush. And these concerns we have around liquidity in the ecosystem I think will remain. I think it's a huge issue. But we're going to forget about it starting next year. We're going to get so drunk. We're going to get so drunk on the. On getting our move works and whiz cash back. We're going to forget about that. Our cash is stuck in 300 unicorns. We're going to forget about it because no one wants to. You can't make money as a Debbie Downer in venture, can you? There's no money to be. There's so many folks we know after a decade and a half in venture become Debbie Downers, don't they? Oh, everything sucks. Seeds overpriced, ownership is down, founders quit. There's too much fraud. I fall into that trap once in a while. Right. But you can't make money in that trap.

Sure. My question is, do you really think Canva and Figma will go public in the next 18 months? When you look at them, they have incredibly strong both investor and consumer brands.

Yes.

They can continue to run in the private. So you can see the maturation of secondary markets mean early. Employees get liquidity, investors get liquidity. Do you think they really.

I live. I don't know. But I can tell you just one insight. It's a small one. One of these top folks that we talk about going public, but that might not need to. Right. One of these folks recently tried to acquire one of my investments for relatively high price. Okay. And they. They shared that they're quite plainly their goal was to IPO in the coming teens of months. Okay. So if they're telling that to a target just so they can understand the trade off of cash and stock in the deal. Right. I think that. Listen, I'm not on every board. You need to get everyone on and ask them the same question. All the leaders, your Sequoias and your Mamoons. But I think that cos are. There are some exceptions. I could give you another story in a minute, but I think there's that in the next 18 months. It's just time. And yes, you can do endless tender offers, but a lot of that is driven by taxes in the U.S. it's not really driven by liquidity for investors. It's driven by this brutal tax situation of RSU is expiring, they're expiring on employees and they're. And they're becoming taxable events before the ipo. That's what's that. That. And that issue lurks like taxes and headaches for employees. It's not. Anyhow, I don't know. But this was just one story of them saying, listen, it's going to come in the next 18 months. And if they say 18 months, that means it's on, it's being planned. Right.

One thing I think that we overestimate in venture is PE coming in and saving the day, so to speak. I think a lot of venture investors like P is going to be the savior. And it's like actually Salesloft was a great deal and that was kind of one of you where actually P really paid up. But generally it doesn't actually work out that well for actual venture investors.

I find I'm more worried. So, yeah, Salesloft, I was one of the first investors. That was like the last deal of the last era. Right.

Well done. That was awesome.

Last one.

What was the Multiple on that.

I don't know that the seed was at 8 and then like what was an A but really would be C today was at 29. Kyle tells that story a lot. Right. I forget after that. But that I don't think it was 100x. Right. So it's probably 40x or something. I don't know. It come back. Right. But it's still a lot of work to get. It is interesting. It's not. You know, we talk about 100x but even that doesn't deliver with dilution and time. It doesn't really deliver it. So it's probably 40x. Right. The a lot of learnings. But my worry, Harry, I'll tell you I'm what I'm really wor on this topic. I'm bullish on the golden age. Okay. But I have of my investments. Yeah there was sales off at at two and a half billion. But last year like one of the last of that group of investments was a company called Logical. They got bought for almost 300 million by PE. Okay. So there's a better examples. There was my first investment was Pipe PipeDrive. That was PE for 1.4 billion. In my portfolio I have ones that are north of 20 million that are cash flow positive, that have strong assets and strong NRR. I haven't gotten any offers, haven't heard any offers. 50 million, 100 million. No offers. So I know there's 400 private equity firms. I know Vista and Tomo Bravo have raised new funds. You have all these and I'd love to get you to get them on your shows and ask this question because I'm not seeing the type of just tire kicking that I saw a year ago. I'm not seeing it. Maybe other people with broader portfolios will tell you different. That's what worries me. I don't know. We're waiting for P to bail us out. Right? Forget about the multiples and the waterfall. I'm not sure they have the appetite. I'm not sure they want to be stuck with these assets that they're like, you know, Salesloft was a rocket ship. It's none of my business how it's doing today, but I don't think it's growing. Right. And they merged it with Drift and Gainsight just merged with Skill Jar yesterday. Like all these P firms are mashing up these things to produce these Frankensteins to go public. And I think it will work. But does that mean you want to buy another one?

I don't know if you're seeing it in the us but in Europe, the hottest thing in kind of this kind of weird intersection of PE and venture is this services play with AI bolt on and it's how do we buy services, businesses and then juice up margins with an AI technology player around it? That is like the hottest thing in PE today.

Yeah, but are they buying unicorns that are growing 11%? I'm just not even seeing the tires being kicked. That's my worry. I'm not even seeing the tires being kicked.

Yeah, no, listen, I totally agree. I think we've got Andrew joining us.

Now. We can find out the truth about everything here.

There we go. I had Andrew on the show recently. He's fantastic.

It was a great one.

Honestly, I got so many messages about this show. It's also one of those shows where. There we go. Andrew. It's great to see you, man. How are you? Andrew? Can you hear me?

We're working on it.

There. Can you hear me.

There?

There we go. We got you.

Can you guys hear me?

Perfect. We got you. Thank you so much for joining.

Can't hear you.

Now.

Can you hear me now?

We got you.

We can hear you. All right.

I got you.

Good.

There we go. Andrew.

A new ThinkPad. You never know what it does. It always messes doing up. Doing a podcast with a new ThinkPad is always tough.

I've never had a ThinkPad. These red buttons in the middle just make me feel queasy.

I was just.

You don't use that button that. That. I don't know whose little fingers. Right. Lilliputian fingers are designed for that. That's not. That makes no sense at all.

Little skinny European fingers. I think it is. I don't think it's American fingers. I think it's like date fingers, Swedish fingers or something like that. Or like French. French fingers that smoke a lot.

Can use that nub on the unfiltered cigarettes. They're designed for Dunhill tobacco fingers. That's exactly.

Well, I'm glad we started with some good Euro bashing. Thanks for that, chaps. I was saying to Jason, I love doing our show. I got so many comments off the back of it. Andrew. I honestly just asked everything that I needed to know. And then I feel there's so much more that I wanted to ask you. And I'm looking at a lot of financings that I'm seeing today. And when we chatted before, I asked you where is value in this ever changing world? And you said compute and hardware, and I know I'm looking at all of My friends who are putting a lot of money into compute and hardware and compute and hardware startups and I wanted to ask you should I be following them? What should I be looking for in them? I'm seeing some incredibly young founders. I was with a 19 year old founder trying to take on Nvidia this morning raising $20 million for a pre seed. How should I be thinking about this Andrew?

Right. If you don't know a lot about hardware, I wouldn't invest in hardware. I think Harry, it's probably the same in many things is that I think hardware is not an easy place to make money. It's a place that has historically rewarded experience both from investors and from entrepreneurs. I think the number of different technologies involved in designing a chip is extraordinary. Not just the, the logic which is what most people think about when you think about chip design that's just the front end part that, that that's writing in very low level software but the, the selection of tools, right? We pay millions of dollars a year in tools. Selection of geometry, right? Which fab and having a relationship with a fab you're going to pay 20 or 30 million in NRE and if you have a bug in your, in your chip you got paid again, right? The, the back end design and the time enclosure is an entirely different skill that companies like Google outsourced brought to, to, to Broadcom. It. It is an extremely complicated and difficult place to be and it hasn't historically rewarded 19 and 20 year olds where, where, where the market has rewarded extreme inexperience is where they look like the customer. Right? The reason social networking was phenomenal for them as you and I discussed last time was they were selling to their friends and this is something that the experience actually might have negative value on. Right. We don't understand what is top of mind for the 18 to 24 year old, 1624, whatever that category is extremely difficult to reach unless you're in it, unless you understand it. And historically when graduate students write tools for their friends, right they go through the roof when, when people in college write, write tools and write things that their friends want to use. VCs all take that very, very seriously. When there hasn't been a history of success in the same way in infrastructure software, in databases, for example. They haven't come from very young entrepreneurs. You know, sort of sales false. Salesforce automation has come historically from salesmen. It's not a, it's that, that if you look at the history of Salesforce back to Siebel back to right These were people who knew their audience. And I think that's where young entrepreneurs have a tremendous advantage and perhaps in these extraordinarily complicated domains such as chips and enterprise infrastructure, those of us with a little gray hair and who are maybe a step slower in our 40 yard dash time, where we have some accumulated wisdom and that, that pays some dividends.

Jason, I'm happy to dive in. Can I ask you, does core weave open up a wave of excitement, a wave of investor excitement from here? Does it open up a wave of net new M and A ipos? How does that going public change sentiment, change investor appetites, change the ecosystem?

Whoops. Might have a little bit of a bump.

Can you hear me?

Yeah, yeah.

I was just saying, how does a core weave IPO and a company of this ilk going public change public sentiment, investor sentiment and the ecosystem around it?

Well, I have my thoughts.

I'm sorry, are you asking me?

Are you asking?

No, I was asking you.

Oh, all right. Everybody's being polite. Look, I think, you know, core weaves, Core weaves was, it wasn't an easy path to ipo. They are an unusual business. They are creative business. Many of their innovations are in the financing structure. They were among the first to use the type of debt that they're using to recognize that you could borrow against GPUs and use their access to leverage advantage. I think for them, for their team, what an enormous success to get out the door. I mean, this is hard. And the number of people who tell you you can't do it, the number of parasites that jump on to try and nibble a little bit, you know, you, you tell somebody, I want a great, I want a great slide deck. And they say $40,000. You say it's for an IPO road show, they say 125. And there's just this nibbling away at you, trying to tell you you've got to do it their way or you got to be sure that their clients get the big part of, of the, the first day bump. And I think as entrepreneurs, we got to be focused on, on the people who, who are behind us, the teams that we built, who've invested careers behind us, and our investors who've been with us long periods of time. And we got to be focused on them. And I, I think to, to a person, the entrepreneurs inside of Core Weaver extremely happy at, at the outcome and yesterday's performance was phenomenal. The short sellers got squashed and I think their long standing investors are extremely happy as well. I think after that, Harry the proof's in the pudding. What you need to do is you need to go out and execute. And what you did on the first day doesn't really matter. I think what matters is where you are in six or eight months and where you are in two or three years. And are you able to build the business, use your new capital structure to generate value? I mean, I don't know what you guys think, but seems to me that, that we make a big deal at day one. I think we should make a big deal of day 180 and day 365 and day 450, right? We should see does this new money, does the new capital structure, are we, are entrepreneurs able to execute in this new environment? I think those are the things that matter. I think whether your banks made money, whether it was hard to get out the door, I don't think entrepreneurs should care very much about that.

Jason, there's nothing weirder than the being an employee the day after the ipo, right? Because you go back to work, like if you turn on your computer and actually you have a lockup, usually you're not liquid, right? Even if you are, you're vesting, right? It's just. And everyone's like, go back to work. And it kind of feel weird. You don't know, should I be doing my normal job? Is it over? Is it just beginning? It's just, it's a weird. The day after the ipo as an employee, employee weird day. Weird day.

I think that, that, you know, that that's exactly right. I, I think that it is not the end, it's the beginning. It's the beginning of adulthood in a company's life, right? In a particular form of adulthood. And it, you now have to execute you, you have traded lower cost capital for a different level of discipline and oversight brought on by both the markets and the regulatory infrastructure. And what you need to do is go back to work and crush it every day. And nobody talks about that. What they talk about is, oh, look, Goldman did this or Citi did that. And you know, what matters is did you manage to keep your engineers from being defocused? If your stock goes up a lot or goes down a lot, do you keep them from emotional whipsaw? Right? I mean, I remember when we took a company public way back in the day at Riverstone. I mean, there was a day our stock was down and, you know, individual engineers lost more than their fathers made any in their entire life. And it is extremely difficult. It is extremely difficult to work through that and not Be affected.

Yeah.

And so you, you have to prepare, prepare your team, you have to prepare yourself. I mean guys used to tell me we, we know what our stock's doing based on the look on our CFO's face. That's a bad place to be. Guys wrote little scripts and so the, the, their net worth was streaming across their, their monitor as each trade happened, as their stock went up or down. I mean you got to get past that. None of that is helpful.

Jason, how did you, what is helpful? I mean Jason, how did you analyze it? The cool weave.

Well, listen, I love what Andrew's saying is they've done a very creative and clever way of using debt in other ways to monetize a gap in the marketplace. Right. Being able to Write cutting edge GPUs and making it accessible and affordable. I mean I have to say I'm very confused by the financial engineering. I'm very confused by the debt loads being sort of off balance sheet. I'm very confused if they will have the cash flow to pay it off. I'm very confused. I'm very confused if they all have the cash. And what I really don't like going back to kind of some of these old days stories. Andrew said, I'm nervous about this put option that the last round investors have coat to put back almost 2 billion of stock. Right. I'm worried about because I lived through that once as an employee and it created a death spiral at a company. Right.

Once you can't hit what does that mean for everyone listening, just a put option.

Well look, I understand having read it, it's discussed but under discussed is the last round investors, obviously they weren't fully aligned on the price. Right. And so there's structure and I don't think this is a bad thing. It's okay for late stage investors to be more conservative on price than founders like. And so they agreed on a deal. Look, if we don't trade up 70% from the IPO in two years, you have to buy all our stock back. You have to buy all our stock back. And on paper that might make sense to a late stage investor. It's not like they're making a profit. Right. It's not like getting your money back is any profit for the vc. But the problem is what tends to happen if the company isn't generating mass cash flow, where are they going to get 2 billion? And Coreweb doesn't have the 2 billion per se. Right. I think they'll probably get it. I would imagine OpenAI or Microsoft would give it to them. But if it doesn't, what happens is and Andrew, I think it puts massive pressure on the stock price when people don't think it's going to happen. It puts, set you up to have your head cut off in two years. Right? Because the shorts come in hard. They come in hard. I just worry about it. It's stressful.

I'm not a public market investor and my comments weren't sort of about the deal structure and I, I think there is a lot of complexity in their deal structure.

A lot of complexity.

And I, I think for me I, I've tried to avoid complexity. I, I think if you can get a term sheet in a page or two, that, that's really good. But if you can describe very simply what both sides are getting, right, you're getting, if you invest behind me, you're getting our passion and our drive and our innovation and you're getting everyday drive. And in return I'm trying to deliver a return for you in line with, with the risk you're taking. You got to be able to make that very, very clear, clear and simple. Now there are other people who've made a great deal of money and do really well, very complicated transactions. That's, that's not historically where, where I've chosen to, to participate and I, I think I'm not an expert in the debt. I know the guys at CO2 did some of that debt and they're investors behind us and I know some of the guys at Altimeter did some of the equity and their investors behind us and so they're extremely sophisticated investors. I'm sure they did their diligence and were very careful. But I think in general, I think for entrepreneurs who I think are Harry's audience, getting out the door is extraordinarily hard and kudos to them for doing it, kudos to them for being creative. And now the ball's entirely in their court to execute. They got to deliver. I mean my fear with the put option is that it puts such pressure on that it, you no longer have a long term, you have a two year horizon, you have a date that you have to deliver to and that, that, that can, can create bad incentives but I'm sure they'll manage that. And the only question on the table here is can they move from being what they are today, which is interesting financial engineering, good execution, to something bigger and better? You know, they bought weights and biases. I thought that's a step in the right direction to build a comprehensive sort of software layer to provide some new value. But I think as an entrepreneur, you see people doing creative things, getting out the door and you say Godspeed and we wish you well. I think now go and execute. Even though you guys deliver primarily Nvidia gear, we're 100% behind entrepreneurs doing interesting things.

Andrew, before, can I ask a different question? You might want to do more on core weave, but just because we have Andrew, you know it is. I can't believe I'm going to say this is trendy, but it is certainly trendy in a sense to try to sell to defense. Nay. Right. All of a sudden entrepreneurs are excited. I'm sure. Harry met with a 16 year old entrepreneur yesterday that wants to sell to defense. You've just closed a deal with darpa, right?

Yeah.

My limited life experiences. Entrepreneurs, this stuff is hard. It takes a long time. The money's there, the money is there there. Right. But the qualification times, the times to market. I mean, my God, maybe the world's changed, but what have you learned? Is this a great place for VCs and founders to go? What have you learned selling to this DARPA deal into defense?

I think one of the real challenges in for our Department of Defense is their procurement structure is designed for them to buy without trust from Lockheed Martin.

Yeah.

And huge primes. And when small innovative companies come, they're both parts of the Department of Defense that you bolt onto neatly. Right, Right. When you go to sell to an enterprise, you say, I'm looking for the senior VP who's responsible for AI and analytics. That guy's responsible. Or that woman's responsible for this, this, this and this. Who's responsible in the Air Force for innovative solutions using AI across X? There's not a person. Right. It's extremely difficult to find. So the sales process is really, really hard.

Yeah.

And then the contracting is mind numbing. And the contracting is something that, you know, if Elon and the Trump administration could do something to change the contracting, I mean, what happens is when you contract with zero trust, you end up with bible size contracts. Right. If you don't trust the other side to do anything. Well, yeah. To have any integrity to do anything. You end up trying to specify every case. Right. And you tack on that all these policy dimensions and you end up with contracts that are literally this big. And it is a very difficult place to sell. It is a place that, that once you. There's a reason why, you know, for, for many of these, we, we partner, we're doing a, a project right now with the Canadian military And we partnered with Dell. That's why sort of HP Federal, Dell Federal. The big integrators often are the vehicle in. But they help you overcome this one piece which is just the contracting is, is extraordinarily difficult. Finding the right people who are bold and innovative and are looking for new technologies, it's not, it's not easy. And I, I think it, it's not an accident that the people who've had success have done it before.

Yeah.

Right.

And, and you don't have to be the founder who's done it before, but your co founder could, or your head of sales needs to, or your COO needs to, you need to find people who have built a career in that community. And that takes a tremendous amount of effort and work. And they aren't hanging out at, at sort of coffee shops in Palo Alto. Right.

That's not having the Rolodex really like transformational.

Transformational important in D.C. hugely important. And I, I think. And it's not just the Rolodex. It's a, a mindset of this is how the, this is how the military procures or this is how commerce procures or this is how the FBI or the CIA or the NSA or the National Nuclear Security Agency. This is how they go about doing business. That is, it looks very different. The sales cycle is very long. The contract's very complicated located. It is unclear. Often they will make requests. You know, we are in the process of meeting some of these requests. But they might make requests that you have cleared people. Right. How are you going to support your equipment if it's on site at a, at a secure facility? So either you need partners that are cleared or you need to get cleared people. Sometimes they want your manufacturing site to be clear, be cleared, or they want your building to be cleared. What if you have Persian employees? Sometimes you have to put them in a building next door. The, the complexity of selling to the military, not just the US Military, I, I think the five eyes, so you know, the Canadian, the Australian, the English as well. This is hard.

Do you have a consideration when you're selling then given Cost plus and their bluntly willingness to pay traditional prices and operate in traditional pricing structures, given that and your ability to sell to any customer on the planet, that there's a real opportunity cost of your time and resources for something that might not actually be worth it given the sales cycle, the procurement process and then the cost plus structure at the end of it?

Yeah, I think, look, Cost plus is. It sounds like a, a good Path. But it, it is a, a terrible way to do business. It's, it's a way of business says we, we, we don't trust you and you're going to slam as much cost as you can into the cost side and we're, we're going to try and run around and make rules about what goes in and what doesn't. You know, we, we, we have a system for this called accounting. We have a generally accepted accounting principles and while they're not perfect, they're not bad. We, we, it is a, a mechanism that says nobody in this process trusts anybody. And so what we're going to do is pretend that it's Cost Plus. Now if you've ever built a home and your contractor runs Cost plus, you know exactly what happens, right? The contractor doesn't, doesn't negotiate with his window guy at all because he's making 17 on top of whatever the window guy charges so that the incentives are dead wrong. Right? It is exactly the same. You know, what you want is innovative people. You want a structure that can take a little bit of risk where if they buy innovative technology or invest behind innovative technology, they're not fired if it doesn't work. Right. What innovative technology means is the probability of failure is higher. That's what it means. That's why VCs need higher rates of return to earlier stages. You guys are taking more risk. And if you want to do truly innovative things then you, your, your procurement arm needs to be able to withstand some false starts. They need to reward big wins rather than reward not getting burned. You need to have a mechanism for smart people to participate. Right? I mean it, it is a, a real challenge for the military to hire and retain world class AI scientists. Right?

They aren't, I honestly don't know how the military or their NSA or stuff does. I don't know how they recruit them. Right. I don't know, I don't know how.

It's hard. And so I, I think these are all challenges. Now what Andrel has shown and I think what some of the war in the Ukraine has shown is that commercial technology can really have an impact in a way that was unexpected. The drone behavior using basically drones you could buy at Costco. I mean these aren't heavyweight military drones, but they're drones that were designed for hobbyists and 16 year old kids are playing a meaningful role against Russian tanks. I think that is a wake up call call to the military where interesting technology could come from. It doesn't have to come through the traditional primes the traditional Lockheed Martin or Leidos or these other guys that are so entrenched in, in building weapon systems they can come from other places and that some creativity and innovation can, can meaningfully impact ground warfare.

I mean, there's a big push in the UK that when you look at the defence budget spending that I can't remember what the number is, but it's 20%. I think we're pushing towards that. That goes outside of primes. So it goes to net new providers to encourage this kind of diversification of supply from different providers.

You know, I'll tell you a funny story that happened to us there. There is a mechanism in the US government's contracting designed for smaller companies and it's, it's called an ota, an alternative something or other. And it was designed for. To simplify the contracts to make it easier to contract with us. And we have a big project with government, the procurement agent. It was agreed that this would be an ota. The procurement agent took the standard contract cut and pasted into the ota. So we had the exact same contract as we would have without the ota. There needs to be a sort of a cultural change, right? And I think that takes real time and I hope that the success of Android pushes that. I hope sort of elon success in showing the world that you don't need to be NASA to build rockets. Turns out that really smart engineers in Silicon Valley and in Seattle and in LA build rockets too. It turns out that creative people under tremendous pressure in the Ukraine can use commercial things that are just above toys to have a meaningful impact in war. I think all of these ought to be in the new calculus of how we organize the acquisition of innovation and the procurement of acquisition by the government and particularly the military.

Andrew, listen, did I cannot thank you enough for jumping on with us. I so appreciate hearing your thoughts. It's great to have you here.

Well, I'm, I enjoy, I, I enjoy talking to you guys. I really appreciate you making a few minutes to chat. I'm. Anytime you want, I'm happy to jump on and talk about technology at any depth. We, we love it.

You're a star, dude. Thank you so much, man. Awesome.

Be well. My friends say. Well, cheers.

Awesome, my friend. Listen, before we wrap up, I just want to finish with a bet. You can have a bet with me. We've done bets before. I'm up whatever it is, 50 or 75 grand.

I got it. I got to whittle it down.

You got to whittle it down, baby. What's your bet going to be?

What's my bet?

Yeah, like what do you think we should bet on?

How many deal executives leave in the next 90 days? Okay, you want me to come up with another one? I'm not as. I can come up with more.

You can do it. You go for it. What do you think it's going to be?

Three. I say three executives and I'll, I'll, I'll let you define executive loosely so that you come out ahead on this bet. I'm going to say three executives leave.

In the next 90 days. I think, I think it's going to be one.

Oh, you're gonna lose. I'm gonna do 50 grand on this. You're gonna say one. Exactly.

I'm not betting 50 grand, I'm betting about a hundred dollars.

Fifty. Fifty. How about 50, 50, 000 pounds instead of dollars?

Then we got to do another back because I'm not gonna. This is a sacrificial lamb.

I see. Okay. The one thing, the one thing I.

Think happens though now, and this is a new phenomenon that we've seen in the last year is, is that news cycles move faster than ever and that so fast. With the rise of Trump, with the rise of Elon, with the rise of Sam Altman and AI Bluntly, this is super hot today. It will not be super hot tomorrow. Or when I say tomorrow, I mean even next week, next week it'll become stale. Very.

It's a weird world.

It becomes stale.

People don't care.

Yeah. And so that's the only thing that I think. It's like this too shall pass. I don't say that's acceptable. I'm not passing comment on it, but cycles move so fast. I think to your point, on how many leave, given the speed of cycles, less than people think.

I'm still going for three. And I mean, I have thoughts, but this is just, I'm just, just being practical. I think, I think, I think it's just for the shareholders. I think it's going to be a very successful company going forward. Right. Founder led. But I think three folks got to go. I think three folks got to go. And, but the new site, I mean, I'll tell you, we could break. I mean, you know what I mean, you're a news expert. You know, I can't believe we don't even talk about the fact that two people tried to assassinate Trump. We forgot about that in like a week. I mean, if this was like five years ago, we'd be talking about this for four years. Right? We talked about President Monica Lewinsky for a decade. We're not even. Politics aside, we're not even talking about multiple assassination attempts against the president.

Right?

I mean, we forget in an hour today. We forget in an hour, dude, your.

President'S flogging Teslas on his front Lawn. And then J.D. vance is, you know, trashing the European leaders of the world, saying, hey, you know, you need to defend yourself.

And everyone's forgetting a day. We're going to forget in a day when these tariffs end. We're going to forget we had them. We're. We're not. It's not. We're not even talk about them the day the tariff ends. The next week. We're not going to talk about tariffs. Are we all. We're going to talk about this week.

Jason, thank you for doing the daily deal with me, my friend. I've loved doing it. You, you're a star. And I look forward to the next one.

All right, man. You're the best. Talk to you soon, Harry.

Stay well, brother.