One thing we know about Elon for the last 30 years is when he hears the word more risks, he says, "Yes, please. I'll have two." I think the IPO nominally will be a dud. I don't think it will trade up dramatically. So, what do we have on the cards? SpaceX begins their $75 billion IPO road show at a whopping $1.77 trillion valuation. Next, is the future of AI always on as Sam Alman thinks? Open AI ships Dreaming V3? Next, Apple rebuilds Siri on Google. Thank god Siri being what it is is a disgrace as it turns on on my device. And then finally, we have RAMP raising their latest round at $44 billion. There's always money when people aren't afraid. When things get scary, it's not that money runs out, it's that money gets scared. I'm kind of contentious of startups that need to be fat. I'm like, what's your excuse? In any business, there's only two things that happen. People are either making stuff or selling stuff. If AOL becomes the next hot thing, I mean, these guys are [bleep] geniuses. Anyone who hasn't churned from AOL now ain't churn until they die. Okay, we are back and what a week it is. We have the largest IPO road show in history. We have to start with SpaceX. Um, we're speaking and this is important to say Rory's going to have a fit because we're speaking on Tuesday and obviously SpaceX is going out on Thursday and so there is going to be some time discrepancy there and so what we say will be able to be scrutinized in intense detail by the time you're probably listening. True. [laughter] Ado to start with the interesting point. One of the things is there's usually two questions you're asking at this point. what's it going to price at and what it going to trade at. And the funny thing is unlike 99% of IPOs, the first questions already been answered, Elon has decided that instead of doing price discovery where the bankers build the book and then they pick the price and they announce the price, you know, right at the end the night before, the IPO pricing typically takes place the night before the trade opens. So then everybody gets to buy who participates in the IPO at that price and then it opens next day at whatever price up or down from that. In this case, Elon has decided in advance of getting anyone's input um that the number should be I think 135 um bucks a share. So um which values the company at 1.8 trillion. In other words, he's kind of shortcircuited the price discovery process and instead we're not doing price discovery. I'm telling you the answer and the only question is how much of it do you want to buy at that price? So one thing we can't get wrong is that how
is that a wise move? He's leaving a lot of room for markets to move in between that. That's why you normally leave it obviously as close as you can because you don't want an Iran Israel a Broadcom moving markets and then putting you in a precarious position. It feels unwise but Elon is a master. So I'm I'm not going to Yeah. I mean calling someone unwise is about two days away from becoming a trillionaire is a big call, Harry. But I I think what [laughter] it is is, you know, it it it's no surprise given a it's ballsy. You've got just way more error creep in. You could be wrong to the high, you could be wrong to the low, you could leave, you know, maybe all the orders flood in. You've left money on the table. Maybe on the other hand, you're struggling to get the orders in and it feels very high and it opens down. It's more risk. But the one thing we know about Elon for the last 30 years is when he hears the word more risks, he says, "Yes, please. I'll have two." Right? And this kind of must appeal to him. So, I'm telling you the answer in advance and I'm taking the risk and that's how he became a trillionaire. Is it wise? We'll see. Well, obviously it's it's a it's a huge amount of capital, Rory. But if it if it's really only 2x subscribed or over I'm not even sure over subscribed is the right word. If it's only 2x, right? Um, plus Elon picking the price that that suggests to me it it you know, we'll see. That suggests to me this this one won't pop. there's just not there, you know, I do believe the day traders will drive it up ultimately, but uh it doesn't feel like there's a there's there's a there's a there's there's an excessive demand at two 2x is in most IPOs, it would be uh would be ins almost insufficient to to to close the IPO. Agree. And but there's two separate things in that Jason, you're right. I mean one is the decision to pick a fixed price logically reduces the probability of a pop with no other information because the whole point of the banker process is to pick the price the night before that allows the pop next day and you simply aren't doing that because you don't have the information. You're right. But then the second thing you added is some information that's come out which is you know to date the book is two times covered and your comment is that feels low compared to normal IPOs. I mean I mean traditionally you want 8 to 10x to to get the deal that you want but you're not raising the vast amounts of capital Elon's raising either.
Yeah. No, it's hard to get 10x overs subscribed on 10 billion on 75 billion. I mean just [laughter] so yeah what you're saying is I mean to to be really direct what you're saying is you're pricing something on a fixed price that's not taking into account demand where you're looking for a very large amount of money such that you only have a small amount of coverage. You're right. You look at those circumstances and you say there's a non-trivial chance that it pops to the downside. Is it 30%? I don't know. But if you think about it, normally bankers bend over backwards to try and have the damn thing pop, right? So they're trying to get a 105% pop and near 90% plus of the time it pops. But still 10% of the time it breaks IPO, they get it wrong, right? Even trying to fix the game, they get it wrong. In this case, they're not even trying to fix the game, right? And you know, time will tell on Thursday night, are they too high or too low? There is obviously by definition some probably higher than 10% chance that the on the day people go everyone who put in for it put in for it and it's not impossible to trade something. It's just if you use mechanism A that's designed to create a pop and it works 90% of the time and now you use a mechanism that's designed to be in that doesn't have the information to allow you to make a pop because you've done a a fixed price then by definition the probability of it going wrong goes up. That's all I think what will happen if that's accurate and 30% to retail I think the IPO nominally will be a dud. I don't think it will trade up dramatically, but but I do think I do think every time there's great news, more satellites in space for SpaceX, more things, it will it will begin an inexurable rise up. Uh people will will be excited, especially if if the upside is tied to potentially significant revenue, right, as the last announcements have been with Anthropic and Google. I think I just don't think it's going to pop that first week. I think there's just uh there's just not enough not enough buyers out there in in this universe or at least in this galaxy uh at this price at 2x. Um we'll see. I I haven't read anything that says those 2x are all 100% binding. I guess if they're all binding uh every single order then I guess I guess it would lead to a pop. But uh typically it's not right. It is. I mean when you submit an order you know you typically Yeah. Maybe they'll all get filled. Yeah. They'll get filled.
I have it backwards. All the orders will get filled unlike a normal. I kind of hate I'm going to step back. I kind of hate that we got and I I caused it so I apologize. Got into the technicalities of the of the IPO cuz zoom out a million miles here. This is amazing. This is an amazing technical company. It's, you know, the iconic company of its generation. It's going to go public this week. It's a huge moment, you know. Yeah. I mean, what do you say to Elon? Congratulations. What do you say, you know, everyone involved? Congratulations. I mean, it's just an wildly impressive company. I mean, look, I am skeptical of the valuation, but step back. I mean, you know, I've watched some of the launches on, you know, on my little on little YouTube and I'm like, they're just so the whole thing's so impressive and it's, you know, at the risk of sounding a little Sorry, Harry, at the risk of sounding a little partisan American, this really is an only America moment, right? where you could, yeah, I can see your little face, Harry, but you know, who else is going to find the capital to take that kind of risk to go for it, right? And and frankly, also to have a big enough capital market to fund it, a big enough addressable market to sell to. It's it's a great outcome. It's an amazing company. It's a real asset to America. End of day one prediction and end of day 90 prediction. I actually think it's an end of day. I don't. So, you really are determined not to let him have his great moment. You just want to See, you're like those commentators in politics who won't talk policies. All they want to talk is the horse race. All you want to do is talk the horse race here, Harry, because you know that's what sells. You're such a little media [bleep] Um, [laughter] but just to to I I'll I'll answer. I don't think it's knowable end of day one. I think all three scenarios are equally likely. You know, oneird it just goes down just because there's weird pricing mechanism. So, they don't have demand. One third it's flat because whatever and then one/ird to your point retail enthusiasm it goes up. There's no information here. Now I will make a call though I think over the next 12 months I doubt it will retain this price there. I will make that step. I disagree with you. I think fundamental value here reasserts itself. I mean was two reasons I say that. One is again I always go back to the base rate. The base rate on IPOs in general is you know you do see quite a lot dip. The base rate on IPO is more than 10x forward sales. Even more dip. The base rate on IPO is at 70 times forward sales. There hasn't been any, but you got to believe there's a dip. So I think valuation reasserts itself over the medium term and the probability of it being higher than the IPO price 12 months in my gut is lower significantly lower. So I would say I haven't a clue day one. It'll it's a tactical thing based on the mechanisms. And I think over the medium term, this amazing company might shock horror only be worth one shirly instead of 1.7 and it's still a huge win. That's what I think. I'll tell you maybe just two thoughts. I don't I don't know what you guys think. One is um it would listen, there are many great IPOs like Facebook and Google that IPOed with a whimper, right? It would not surprise me if this IPOs with a whimper at the end of the day. It doesn't matter for SpaceX. We will have gen multiple layers of generational wealth created. Elon will get his liquidity, right? It'll all be great whether it whether it's a whether it's a nothing burger IP or not. I guess it might uh hurt hurt um OpenAI the most because they've been so aggressive on their valuations and so aggressive on their capital raise. If that means they have to cut back their aspirations for the amount of capital raise, valuation maybe doesn't matter as much, but they are they are related. That could be the biggest negative effect. it just they they need so much capital too um that it just could be uh it it could take some of the wind of the sales out of out of open AI. Um, the other thing I'll just say briefly, I was before I I'm I'm in Hong Kong as we record this, but before I got on a plane, I I spoke to one of my LPs who's who's getting getting lots of getting lots of cash here, got cash in Sarabus, getting cash in all these other deals. And um it does kind of tie to a conversation we had before, which is the the expectations are so high now for performance and I think that will permeate through the ecosystem. And um again I I think I do think it's a minor negative um but but I do think it's something for founders and others to understand that the it's not a free lunch right the bar the bar will continue to go up after these events when when LPs are looking for 7 to 8x routinely from GPS which is hard to do right outside of anomalous periods of time the expectations that GPS will have from founders continues to go up um and uh you know uh you Well, as this as this LP said to me, I don't know that little 5 to8 billion dollar IPOs really make it make this math work anymore, right? And so, we've talked about it, but to hear it from a large LP did did sort of it it echoed in my years of of how this how how the bar goes up.
I don't think you can take a once in a decade event and start extrapolating it as a norm. I think in life you should take this as the once in a decade. There's like four or five of these once in a decade events. There's going to be anthropic open air back. It's interesting that you say that, but because the opportunity, the once in a decade, I mean, SpaceX was once in a decade. It was last decade. Reminder here, founders wrote that check in 2008, right? It's now 2006. It's 18 years ago, right? So, for that kind of huge return, I mean, yes, there's been a 10x. When was the Merced check written again? Remind me. Four years ago.
The Merc 3 years ago. Yes. Yeah. So, maybe they do happen more than once a decade. There they decade seem to be shrinking. I think you're going to have one trillion dollar outcome from the last decade and two it looks like from this decade if it all happens according to plan. But my point is yes, you you you probably can't assume 10. You don't run your business on the expectation that every check you write is going to be a trillion dollar outcome. If you're really smart and you get one, you should say yay. Right? So I think $8 billion outcomes will make everyone perfectly bloody happy. Right? Obviously unless you have a $10 billion fund, in which case it doesn't. I mean, that's why fund size, the amount of Yeah, fund size dictates the level at the amount of market cap it takes. It's a Josh Coupleman thing from ages ago. You know, the venture arrogance index, whatever, right? Um, the bigger the fund, the bigger the deal there has to be to make it work. There's nothing surprising here. Will this have knock-on effects in terms of LPs direct investing more and see an increase in fund investments from LPS? You've got Ohio teachers who will make I think over $10 million from their SpaceX. To clarify, I know you think the entire Midwest is the same, Harry, but I think it's Ontario teachers,
right? Um, fair enough. But no, at this point, you're conflating Canada and America, which is an easy mistake to make because we're making it ourselves, starting with the president, and it does begin with O, and it's kind of in the middle. So, I understand your ignorance, but let's go back. He's just a big Fallout player, too. Who knows?
Easy. But the bottom line is yes, Ontario Ontario Pension nailed it. I mean, they're going to make, you know, a magnificent V and there's a bunch of others. It's great. University of Washington, they have a extremely savvy CIO who, and by the way, Washington, Harry, just to confuse you further, is not in either Washington state or Washington um city, but we'll keep that for now. But yeah, look, by definition, these are going to be the best co-investments ever cuz it's the best deal ever. I mean, there's nothing surprising in it. I know some of RLP RLP is going to come back and go those that will get liquidity from this go hey we're going to reinvest more and more of course they are and and will all their brethren be like hey we're going to join this cuz we want the next generation even if we didn't have them
yes [clears throat] cuz everyone's just going to go wow that looks amazing as I say again it's back to the the extrapolation from the unique event of course they are cuz it is going to be amazing I saw I think in a journal this morning I think this is um the not University of Washington Washington University what has again I'm not going to confuse like it's 10 or 15% of their endowment it's awesome it's awesome right yes this is the best venture capital deal ever in terms of absolute return and yeah anyone involved is going to do really well and even if you know even if it has in price they're going to do extraordinarily well speaking of a once in a lifetime or once in a decade moment as Rory very articulate put another once in a decade moment is obviously open AI filing to go public um uh not so confidentially. Anything to say here that we haven't covered? The only thing I don't understand is maybe it's a question for Rory. I cuz I don't get it. What What I other than the Captain Obvious element, uh what's the point of hedging your bet on the timing, but filing? I I mostly get it, but I don't totally get it. Right. U yeah, oh, we may we may want to stay private. We want flexibility, but we're going public. I think it's actually all they're doing is being smart a little bit and managing expectation finally, right? Which is I read that as we're fine to go public. In a perfect world, we'd love to go public as quickly as we can, but if it's delayed for whatever reason, we don't want to have a whole bunch of negative stories then that says see it's slipping. So if you preemptively say manage expectations and say we're filing but we're not committing to a timeline. We're not all going to be sitting here in late October going they said they'd be going public in early November. WTF is going on. The big aha here and we said it two weeks. Everyone's suddenly gunning for the door. At some point you need the capital markets, the public capital markets cuz the scale involved is such that that's where you got to go and everyone's just hit that point and they're going for it. I think going back to your comment earlier on does SpaceX it feels like the market is very riskone. I mean we had that little dip last week and then everyone got over it in two days. So it's as good a time as any you know it there's no obvious you keep cranking while you can and see if you can get it done. I mean I'm sure that they made that caveat of we'll take our time but they made that statement in the press department. My guess is in finance and legal the mandate is get this puppy done as quickly as possible so we have maximum optionality right and so there with the SEC and worth pointing out by the way the SpaceX S1 went through the SEC very quickly and normally that's I mean I remember when that used to be a painful process with multiple iterations and it seemed to happen here extraordinarily quickly probably because we don't regulate anything anymore so go team so you know this may all process through real quickly In which case, brace yourself for a fun fall. Rory's on
fire this morning. Hey, gosh. I really want to touch on on something kind of beneath on the product layer for OpenAI, which is, you know, Sam Orman's been driving towards kind of persistent and always on AI. Um, they shipped Dreaming V3, biggest memory architecture upgrade since launch. I'm just intrigued, Jason, in particular, to hear your thoughts on this. Is the future of AI continuous persistent 24 hours a day fabric of life always on in your mind? And how how do you see this and that? I think we all believe it. Um I think that um and um I mean we can make fun of Apple this week basically uh uh repackaging Gemini and giving up on AI, right? If that's the way we want to view it. But but that's a little piece of wanting ultimately AI to be persistent 24/7. We we we do want this. We already we already live little hints of it. And um it it's pretty silly that AI for the most part lives lives in our browser, right? This which is if you think about it very dated very I mean it's so dated that we still use browsers. I mean who would have we got to get Mark Andre I mean the fact that we still live in the era of Netscape in so many ways. So I do think it's exciting. Um I do think as this show continues the you know the whatever we would want to call it the tokconop token apocal token apocalypse um I think it will morph into just standard business practice right at some point there's it budgets can only be so large there's only so much even if we lay off half of the you know unemployment I mean employment keeps growing we're going to have to manage spend so there is a conflict but um I do I do think we're going to look back in two years and think of this non-persistent AI as is almost archaic, right? As almost sort of desktop like Yeah. I mean, yeah, because you you threw in a lot there. We several faces there for for the audience listening. Rory's facial.
No, no, no. It's just that Jason as he often does covered a lot of different things and I'm just processing through it more slowly is that on the on the memory thing and kind of what Jason is that it it just totally makes sense, right? And the question, yeah, if you step back, you know, you have the core models and then you have what people are calling all the harness, which is all the stuff around it to make those models effective. And part of that and it can either be in the it should be in the model or it could in theory be in the harness is just understanding memory so that you could and the impact of that and I think why Jake Jason went to the token e token economics part of it is part of the thing should be you should get better answers with memory and part of the thing it should be more cost effective in terms of token because you're not passing through all the context all the time you can perhaps it's part of a I mean I think a lot of the trend on this harnesses will be adding stuff to minimize your past on frontier models and part of that will be having memory, right? It also leads to a better experience, right? I think that I actually just went in and tried to see um have it has it been switched on in mine yet because it just makes ton of sense. You should know who I am after I after I look up 58 20 VC podcast, you know, I'm probably here to look at my 20 VC podcast research here, guys. So, it just makes a ton of sense. Most people know who you are now. No, no, I'm saying but but but but my open AI sometimes does them. So yeah, it's a really it's absolutely it's one of the necessary to-dos and they're doing it and it's great. I just want you pulled a face when Jason said about Apple giving up on AI with Gemini. You're right. You're moving on to that. That was an interesting one. Ben Thompson, he did a really good piece on it this morning. I was reading is that I think to some extent they're give in the sense of they're paying Google a billion dollars to use their model as the default model but reminder Google pays them I think 12 or 20 I used to know the number $20 billion to be the default search engine so it's a minor offset I give them credit I actually think that they're making some yes it would be better if they had their own model but they're making progress on the use cases that just make a ton of sense for the consumer and I think it was you I think the amount of context you have when you're on someone's phone is such that they can they should be able to deliver a unique and compelling consumer experience for the kind of things they demoed on the thing about knowing context on which Rory it's like it's like to your memory comment Jason it's like you knowing which Rory how he's talking about knowing your calendar knowing everything and deliver a much better experience now should they have been able to do it with their own model yeah but the bottom line is They control the handset and for the consumer it's a pretty powerful product. So I think they're in a good position to make products. I don't think they're giving up. I actually think they're pragmatically saying we kind of screw it up and not have our own model. But that's actually not what matters for us for Apple. What matters for us Apple is delivering an amazing experience to our consumers because if we do that they'll keep buying handsets and if keep buying handsets we can probably afford to give someone a billion bucks a year, right? So I give them credit for getting their [bleep] together. I mean, yeah, it is stunning that Syria is so bad for so long. So, I think actually trying to fix it is just awesome. So, I I give them credit for step in the right direction, right? Is my take away from it. So, the opposite. I don't think they're giving up. I think they're doing what it needs to win coming from behind. And they have a great position. I think it's interesting. The person you have to think about this a lot with obviously is if you're Open AI versus if you're Entropic because Entropic has made the enterprise bet and Open AI in part has made the consumer bet and you know I like my OpenAI subscription cuz you I sit at my desk and I do research but for a lot I mean it was a great line and give Ben Thompson credit. He said very clear I've thought it but he hadn't read anyone say it clear. He said consumers don't want to work. There's not a big market for consumers in their non-working life to do a whole bunch of, you know, complex, you know, research or kind of using AI for productivity. They just want, you know, delightful experiences cuz they want to relax and entertain. So, I think actually, you know, the the consumer space is going to be a tougher space for open the the enterprise space has really been validated because in enterprise is all about automation, efficiency, and the consumer space, it's about experiences. Apple's well placed to do that. Open AI's got to compete with that and compete with Google. And you know, it's a it's it's a tough space, especially if Apple's getting their [bleep] together. Well, speaking of consumers not wanting to work, soon they won't have to. Uh
Uber cuts 23% of HR. [laughter] Make Jason happy. We can now I I I'm so sorry. Obviously, it's people losing jobs. It's terribly sad. But I'm the one who [bleep] said no great CEO likes HR and everyone got angry at me and then everyone starts cutting HR. Anything of note here from Uber cutting 23% of HR remote work rescended 3-day inoff mandate. Company denies AI played a role despite 95% of engineers using it daily. Anything of note there? Well, look, a HR and um recruiting, right, which let's consider them different are are the easiest things to cut, right? They're the they're they're recruiting is, you know, you always you always see any any any any big tech leader stumble a little bit and they lay off 30% of the recruiting department. Well, you're going to you often want them back. I always wonder I always think this is I mean, it makes sense on paper, right? Um the HR one will be interesting. I mean, we've we've put out a call for someone to report to our AI VP of marketing, and I've gotten my head cut off a lot on social media for that by people not it's okay not really listening to what I'm saying about that. Um, but I do think HR is one of these areas that in many parts of it will be better managed by AI. I think an AI can be a better VP of HR for certain parts of the job uh than a biased human. I think there are advantages to having an AI VP of HR. Not not not I don't want to get rid of all of the humans or even lay people off, but um it's it's an AI VP of HR can can evaluate every single thing you've ever done, every little bit of your work, all of your issues, whether an AI VP of HR can figure out, hey, maybe it really is your your idiot boss, Jason. You know, may maybe it really maybe that really is the problem. It's not it's not you. An AIVP of HR can find out a lot of things and process of ass. So I don't I think it's a an it's under discussed versus area other areas but um it should be massively disrupted. The big picture question in all these areas is you know how much efficiency do you get? My go it it felt 23% I doubt everyone is automating and saving 23% using AI in the non-engineering departments because adoption there isn't as strong as engineering. Do I think there's some? Of course I do. So my bottom line is I my guess is some portion of this is quote unquote AI automation. I doubt it's 20% because I'm always calibrating off you know what is I mean it's what percent it's the Dario number what percentage of quote unquote knowledge work is going to be automated and it's knowledge work tasks and then knowledge jobs is it five is it 10 is it 50 as Dario has said 23% felt like a lot but whatever again what you don't know is how much of it is just too many folks there and they're just partly rationalizing so it's a data point. I mean, I think the other data point from Uber is far more interesting, right? Which is not the AI for HR, but the AI for autonomous driving that they continue to make progress on autonomous driving.
Which stat was that, Rory? No, there's the one you you'd mentioned. I'm sorry. You you'd you'd made a point there that they're they're actually rolling out some more autonomous driving experience in Europe in Madrid, I think. Right. So, you know, and they're kind of partnering with I think it's a we ride or some of the technology providers, but you know, it's the the big I mean, you know, if you want to talk automation, driving is one of the biggest targets in terms of the number of humans that do that job. And you know, when you see Uber making experimental progress on robo taxi in Europe, you know, it's something obviously to keep an eye on. It's all it's worth pointing out this stuff is still moving way slower than I think people anticipated. It hasn't been you know Whimo in San Francisco resulting in you know wayos everywhere within 6 months. It's been a long steady progress for Whimo and Uber's doing what it should do which is it obviously this is exist I mean the Travis Kalnik devotees would say the failure the the cutting of their autonomous project in 2016 or 17 was a fatal error for Uber. I'm not sure. I think 10 years later they can pick up the thread and which is what they're doing and catch up on that because it's not like the technology tipped like a domino. But I think they're smart to now start, you know, pushing robo taxis and partnering with technology providers. And this is the because, you know, the the question on the Uber stock is always, oh my god, is robo taxi existential, which is the bad scenario or the good scenario is lots of people build robo taxi technology and Uber is in a wonderful position to be the coordinating thing because it's the app we use and if they just add you 10,000 robo taxis to the fleet, then things continue just fine. Frankly, it's good to see the Europeans do something. I mean, I said this respectfully, Harry, but typically, you know, Europe is the slow technical lagard, especially on stuff like that. So, go Madrid. Should we discuss the revolute 115 billion 115 billion, you know? Amazing.
Yeah. Thank you. I I think you're doing that I'm going to push it. I think you're doing that defensively. You felt I was dissing on you in Europe and you're you're basically implicitly saying, "Oh, look at Revolute. It's amazing. Correct. Correct. And it is amazing. And you know why it exists? Because the European banks, unlike the American banks in general, are so crappy. There's a reason that revolutes worth 115 billion. Cuz the incumbent European banks were fat, dumb, and happy and making margin off their customers. And there's a reason why Chime is worth 5 billion. Still a great outcome, by the way. That's because the US banks on average a little more efficient. That's also why New Bank is such a valuable business because the Brazilian banks were inefficient. I think all these fintexs they can be I mean it really is a I mean it's proven markets it's a function of how egregiously priced the incumbents are and you know Europe especially when it had non-s single currency you had all this foreign exch because you guys aren't into Euro you had you know the FX chargers you had all this transporter [bleep] and Revolute just blew a hole through that so I I think it's amazing and I know you're big fan of the CEO and I I think it's I I wish them all the best and pound those old school European banks into the dirt. I mean, at some point we're going to have to deal with the fact that the largest bank by market cap doesn't do much lending. And that's actually going to be a real problem in the aggregate. Um because the whole point is of banking is to recycle savings into lending. And right now, Revolute is not a long-term lender, but that's that's by the buy. They're killing us.
I'm fascinated to hear Jason's thoughts on this one. What's dominated my Twitter over the last week is Greg Eisenberg's original tweet about a horror story of uh venture fundra. It led to a slew I mean hundreds and hundreds and hundreds of founders sharing horror stories uh including the Cloudflare CEO um who said about you his experience with Koser and Vinol Kler. Jason, I'm really intrigued to hear your thoughts on this one. I'm sure you have some. How did you feel about this slew of founders bluntly saying how terrible a VC experience they had in certain cases? Well, I'd say a couple things. Um first of all I have I you know as when I was in the most intense phases of founder I had those stories too. Uh I I really uh we forget how how deep some of these things cut these slights. Um the the folks that are friends of ours now that we co-invest with I I thought terrible things of at the time literally. um uh one that we both know really well would constantly use me just to do diligence on another investment constantly and at and now I'm pretty zen about that crap the founder is I'm like just take the meeting and do reverse intel like if you're just being used for a competitor then sit down with him and just find out about your competitor you know get get the exact information but man that stuff really it really burned me um and founders whole you know so a couple things first of all the the whole thing with um the co of cloudflare just Remember, founders hold grudges. I still do. I'm just getting over them now. I'm just getting over my founder grudges. So, founders hold grudges in a way that VCs actually, I think, don't because VCs, you miss the deal, you got to find another bus, right? Having said all that, um, get over it because it's it's sales. The only thing that to really have a grud a true grudge on is if you got fired. Okay, that one that one I think I think the folks that hate Benchmark uh from Uber, I think they deserve to hate Benchmark. I think there there's others. But if you were treated poorly during a fundraising, get over it. It's sales. Have Have you never sold This is what I say to people. Have you never sold anything? Have you ever never thought a customer deal was going to close and it didn't? Have you ever not talked to a prospect where they told you, "Rory, of course, we're going to buy by the end of the quarter." and then you just send them 28 emails and 87 texts and the deal never closes. How is it any different selling stock um than anything else? So there's a bunch of issues to separate the grudge, the firing which is a niche issue and learn to sell man grow some. In one sense you're right, Jason, but I think the difference for the founder and I think ton of what you said super insightful. The difference is the founder in this case isn't selling their product. They're selling themselves. So I think you're right about one thing. The rejections cut deeper. Right. And there's no doubt. Even under my side, I remember an old VCR 30 years ago said to me, you never forget the LP turndowns. And 30 years later, he's so right. You remember those people who turned it. It's just a personal thing because you're not just selling your product. You're not selling Ford cars on the dealer lot. you're selling yourself and when you get turned down it hurts. So I totally await you Jason is that you do have to grow a pair. You do have to get a thick skin but I totally get the way founders even if it's something doesn't go wrong in the process. I totally get rejection sucks, right? And and as yet, so that's the founder side and I thought you you were super sympathetic there. And then just to put the other side of the table, every venture person is in a business where we turn down 99 out of 100 deals that we look at. So rejection is our default ML. It's why I always wrestle with these ratings businesses, right? You know, the kind of rating VCs. It's doable and I think there actually is appropriate ways to do it. But you do have to remember that the default is a no. And it's really hard to h high customer sat when 99 times out of 100 you're going to tell the customer no. It's why no one ever loves the bank that they apply to the lending money cuz a well-run bank turns down, you know, five out of six customers. No one likes that experience. Rejection sucks, right? So it's set up for failure out of the gate. Sometimes, you know, in the course of turning down two 300 people a year, you get some stuff wrong. What was interesting is Matthew was really upset that Venode asked him to consider uh getting rid of Michelle, who we know who was great, and his CTO and giving him the shares, not stealing his shares, which I think was misinterpreted. He made in a suggestion in a pitch and um listen, I I'm a super fan of Michelle. I would not make that suggestion. But let's step back for a minute. We've all had those meetings with founders where the team is very unbalanced. And would I am I venode the and would I say it that way? No. But you might know me well enough. I almost would, you know, in a different situation. I almost would say that to a founder. I just wouldn't do it during a pitch. I would just say it's not a fit for me. But uh I find myself constantly postinvesting the only one that would say things like you know what are you going to do with your co-founder? You know what? She's just Rory's just not committed enough. He's not getting it done.
And so I think his directness is interesting that it bothered um uh co of Clive Flair so much. But I in a way it was just his read of the team. I think it was wrong at least for for one of them. But the read of the team and [snorts] by wrong you mean incorrect relative to the subse outcome by I well I would I know Michelle I don't know Michelle that well I think she's a she she's a great a founder so I would keep her but but the fact that BC's go in and you you see that the founders are not equal in not in terms of their commitment right don't I mean look don't comment on this because look it's clear given the superb outcome that whatever Cloudflare had it shouldn't have been touched one little bit it should have just been let do exactly what it did it's a great outcome So, but you're right. I think again Jason, you rais a good point. You go in, you know, you see things and especially at the earliest stages, if you think the team is wrong, but you want to do the deal, then you know that that's a really tricky conversation, right? And you should be wary of having and I think just I suppose when you're as successful as the node, you're like, I could take three meetings and slowly and delicately get to this point or maybe I'll just say it. Now, it's also worth pointing out he said very clearly he doesn't believe that happens. So I think you know I think stepping back I don't know if it's a useful way to rehash. I mean the more successful you are the more meetings you'll have. The more meetings you have the more likely some of them go wrong especially if you're direct and venode is nothing if not direct. So stuff happens. I mean as someone pointed out he was on the Juniper list for the first he was on the Midas list the first time for Juniper and he's on the Midas list this year for open AAI and there's 30 years between those two events. So he must be doing something right overall. Right. which is still not to say that on an individual day you can piss people off. And look, I'm sure I look back across 300 400 turndowns a year for 30 years. I know there's been some where I wish I'd handled it differently. There's been one or two where Lily at the term sheet level I wish I'd handled it differently. It happens. It's not ideal. You know, if if you're aware of it, you apologize later and say, "Look, I got that wrong." And you just have to move on. It's some element of breakage is inevitable. I have to admit, Rory, I I disagree with you.
What? I've I've been turned down by lots of LPs. The best way to have revenge is that you forget they even existed. And most I'm being a dick here, but like a lot of them ping me now like wow. You when they turn me down was 21 like whoa. And you're like, who are you? Yeah, you maybe early on you early on you remember. You're right. Over time, to Jason's point, you developed a thick skin. And you're right. I I remember much less the turndowns on Fun Seven than Unferned. Yeah. The first first independent fund was fund three. I do remember on fund three, our first independent fund which we foolishly timed literally for the week of the great financial crisis in November08 getting turned down three times in the space of an hour. So I do remember that pretty vividly but life goes on. Okay, so I again big milestones for
Lovable and Cursor this week. Lovable literally just before we came on, Lovable hit 500 million of AR. The number number was wrong. Um, so 500 million of error with 146 employees. Cursor has hit 4 billion and it's targeting 6 billion at the end of the year. Jason, you're you're you're the man of the hour for this. Any thoughts on this? This was unpre Listen, I I I think there's two different things you said. one was about the scale, right, of of these companies, right, which we've talked I I do I do think the headcount thing is something that we're still learning about, right? And so I think when we started this show, um, we were in an area where where folks were very lean and growing very quickly, but the question was, does this normalize over time? As you approach scale, as you approach 100 million, 200 million, 500 million, a billion of revenue, will will will startups get fat again, right? Do you just need do you just need these layers? And I can think of a number of hot AI startups that are getting pretty fat, especially on go to market teams and others, but we're we're seeing more and more examples to the contrary. Um, and it is disruptive on many levels if you can stay as efficient as as these guys are. It is disruptive to investing. It disruptive to employees because it it will shrink the number of these great roles and it will increase comp compensation. Right? To the clickup point to Zeb's point. I'm doing layoffs to give million dollars to a handful of folks. Uh Lovable can pay its team whatever it wants. Right? With 100 less than 200 employees, it can pay whatever it wants. But man, if this becomes the the steady state for startups, uh and maybe it was in the old days, maybe in the old days of Microsoft, it was true. Um, but it's just so different if they're not going to reflate is what I think about. Um, and uh, cuz it's not a lot of people, man. And it's [snorts] not a lot. And what people get don't understand. I know Replet a little bit of lovable, but they're the same. They're they're pushing out a lot of code. What like one thing you could say is, oh, it's easy because they only have one product, right? That would be a comeback that I think a little bit like you don't have to have 22 products like data dog or 7,000 like Salesforce. Well, maybe, but these are pretty complicated products. Okay, you've got database, you've got hosting, you've got management, um you've got SEO you're running, you've got so the these guys are push because it's the most brutally competitive space it is. They're pushing out more features than any of us did our entire lifetimes a generation ago. So I I don't think we're these folks are working they're they're incredibly hard and they're incredibly productive. So it and it almost it it and and if and if you want to be you want to have some contempt with for VCs tying this together. I'm kind of contentress of startups that need to be fat. I'm like what's your excuse? What do you need another 200 people for? And when I when I'm at a board meeting and a VP says or they're all C levels now, right? A C of something. There's no VPs anymore in startups. They're all C's. And they say, "Well, I could do that, but I need another 50 or 100 heads. I need another 10 or 20 or 40 million. I I just think that person should go.
The the only comment on and first of all broadly agree, but the only push back I'll make is this, right? You know, we're having the oh, they're amazing that, you know, they can do this with only 146 heads. But remember, if you're spending 50 to 70% of your revenue on intelligence from entropic or open AI, you you you don't have the I mean, it's a different business, right? you don't have the option to also have 50 to 70% of your revenue on employees because there just not enough room in the percentages, right? So there's some they're just different businesses with different business models, right? They you know, but you have the choice of who you invest in or who you work for, right? We we have we have our we have our legs in pocket books, right? Look, of course you would pref and this is actually one of the core challenges many of these other companies are going to have. If you are one of if you can be one of the 146 employees that is I agree with you Jason 100% that is getting levered from this AI such that your economics are compelling because you're one of a small group of people making a lot of money in a business that's leveraging technology to have a very high revenue per headcount. It means we can pay you a lot. That's a far better place to be as an employee. You're right. Than, you know, one of Yeah. 18 whatever it is 90,000 employees at Salforce. You're exactly right because you're not getting levered from the you're not getting leverage from the models and intelligence, right? And this is the how much will be labor and how much will be um intelligence. This is the kind of what's the split and what you're seeing to your point. I'm sorry I'm rambling on this but it's it's clear in my head. I want to get it across in businesses that are using a lot of intelligence and that I'm using tokens as a proxy for that. then small numbers of people can achieve a lot and make a lot. And those are better places to be as an employee and often as an investor, right? Than to be, you know, slogging it out with 10 times the employees, not a ton of new leverage from AI. And yeah, you you're stuck in 2010's ground game,
which sucks. That's what you'd want to do if you could as a founder, as an employee, as an investor. You'd want that all if you could. That's the model you'd want. That's where I'd want to go work. I want to go work somewhere where I'm empowered, where I I'm one of 172 people at 500 million in revenue. I imagine Jason, I do think and I want to call it out. I do think as you start to develop an enterprise motion and you implicitly said it, you're probably talking about the foundation models who are building big go to market machines because they have to we are going to see way more buyers. I don't buy there's not going to be an infinite number. I hate that it's not just I mean it's lore it's hobby it's your what you're selling to enterprise this idea that 157 people can do it on their own is not going to be true right I think for products cuz remember in the end of the day someone watch hang on agree in any business there's only two things that happen people are either making stuff or selling stuff and if they're not doing any of those two things they're just you know there's just overhead and to your point if you're selling stuff via PLG then you only need people to make stuff, right? So, you can be pretty lean. Once you start selling to to, as you say, to law firms, once you start selling to corporates, then you do end up with a big ass salesforce. And one of my theories is that that doesn't change from cycle to cycle. The entropic salesforce in 5 years will look like the Oracle Salesforce, the Microsoft Salesforce, and the IBM Salesforce 50 years ago because
but but here's the thing. I don't know that that's going to be true, Rory. And first of all, there's I'll give you like if I don't mean to go back to if we compare Replet and Loveable, I know Replet's hiring 250 sales reps this year. So that's going to look very much like a traditional organization. Lovable isn't. Okay? And it's different DNA and different goals. But uh you know, and the majority of of of anthropics, enterprise sales are not allowed to talk to a human. And so my point from that, we're not we can't all be anthropic. founders are choosing. They are choosing to have leaner go to market teams, leaner sale. They just don't want this crap. They just don't want 250 people running around and they're willing to trade off some marginal revenue. I mean, Anthropic has less than 5,000 employees, right, at at at So, they're just saying culturally and and so I don't think that they're all going to I thought they would all look like SAP and Oracle and Salesforce. I'm we're not we're not seeing that. It's it's it's we're not seeing that. We're seeing something in the middle where they still want to be lean. It's not going to be 147 people doing 500 million when it's enterprise sales. But what you might see is is three to two to five times the level of efficiency. And it just changes the the culture, the headcounts where people are. That's the difference, right? It doesn't really matter whether it's zero or 4x, right? [snorts] Agreed. It will be better. No matter what happens, when you start with a clean slate and leveraging intelligence, you just become way more efficient. I agree. These companies on average will be way more efficient.
When you when you do a comparison, it's over 3 million per head versus and I'm not but like a Salesforce which is 350K per head. It's it's nine times more efficient. Yeah. But again, I'm just going to say it here. Yes, you're true. But Salesforce enterpriseheavy, R&Dheavy, no intelligence costs, right? Remember, they have 300 million of they just sell it of tokens, which let's just do it here. We did the math. That's roughly 10 or 15 grand per engineer. And engineers are about only 1/5if of what they have. So remember that 300,000 AR probably only 1% of that is tokens. Do you understand me, Harry? In other words, they have 300 Salesforce has $300,000 of revenue per head, which means if they're going to make money, they can't pay anyone more than 200,000, right? And they're probably spending 1% of revenue per head on tokens. Contrast that with, you know, your example of Whiplet. They're getting 2.3 million per head, but they're probably spending 70% of dollars on tokens. It's just vastly different businesses. and one of them is more aggressively leveraging the new enabling technology. So to Jason's point, it's probably a sweeter spot to be one of the 147 people in that gig than one of the I used to know the headcount, now I don't. I probably could do it by the 20 30,000 people in a much larger organization where you don't know leverage. They're just different businesses. But this is to me this is this is much more interesting than layoffs and these stories. I think everybody, every founder, forget about older companies, every founder today wants to run a startup that's at least a million in revenue per employee or more. They they're targeting 2 million. They want to be in a million and they want it because they want great teams. They want lean teams. They want the best people. They they want to work this way. They want to go to work with people they look up to and respect. They don't want bloat. And so I my my sense is that roughly a over the coming years startups will be half the size that they used to be for revenue including enterprise. This is this is very much B2B focused and that's a big that's a much bigger change than whether this company does a 10 or 15% lab if everyone's half the size they used to be. It's a much bigger change by definition. If you invent something that's meant to augment humans and make them more efficient and that thing is called AI and it does a trillion in revenue by definition you need to see a trillion of efficiencies and the way efficiencies show up is less humans per per unit of task. You're exactly right that's the bet. If it wasn't happening the entire thesis of the case would be [bleep] So you're right, Jason. It's got to be happening. If the people who sell AI can't be efficient with AI, then what chance is there for the rest of them? Do I agree with you?
Did Elon have the acquisition of the year buying cursor for what will be 10 times end of year revenue? Looks a pretty preient buy if they're going to hit target. [snorts] It looks a pretty clever I mean I think what we talked about it was a clever deal on every dimension. I mean when I was thinking about this cuz I'm always skeptical on the valuation but Elon did such an amazing job of meeting the AI moment and let me tell I mean by that it's like you know you look back and you go he obviously founded open AI and then all the drama happened blah blah blah but in the last 24 months he moved from ground zero to building Colossus building Colossus 2 failing with his model, but just because he had the guts to show up and spend that kind of money, cuz to be fair, he does have the cheapest cost of capital on the planet, he found himself with, you know, gigawatts of capacity just when everyone needed it. Was able to sell it to them and then did the cursor deal also to kind of backfill the space, right? And everything stems from the fact that he had the big picture conviction that AI mattered and he was willing to put 30 I mean it's astonishing 20 to30 billion of capital in the ground in advance of revenue because he felt this was the trend to back and at least right now it looks like a great trend. You're right pressing is exactly the right word. He found two of his biggest competitors who want to buy from him. You know he's getting two billion a month 1.25 25 from Antropic and 950 from No, the other way around. 950 from Entropic, 1.25 from Google or the other way around. 2 billion a month. 2 billion a month. 24 billion a year um in terms of compute revenue. And then on top of that, he has cursor coming in at the back end to fill those servers. So he is the most efficient core weave with the lowest cost of capital. Now separate comment, it doesn't mean you have a foundation model. It means you're just a better coreeave. But oh my god, did he make did he turn a loss into a win in the space of three months? I mean, in January 1st, you could have said, "Look at all those data centers and you don't have a foundation model. You're screwed." Here we are, June 9th, and he can say, "I have a $24 billion um outsource business, and I have this other business that's coming in that's going to be doing $6 billion that'll run on my servers." I Wayne, a great Yeah, great move. only Elon. Incredible transition. Um, two private rounds that
were large. RAMP raises 750 at 44. We've discussed RAMP a lot. Um, tripled in a year, cross a billion in ARR, positive free cash flow. And then also Sunno, uh, the AI music creator company, uh, raised 400 million at a 5.4 billion, um, teasing the first license model. Bond led that one. It was double the previous valuation just six months ago. Um, anything on either of those? I mean, RAMP, we've said it before, it's it's kind of gets to the re they'll trade like financial companies, financial services companies, but they will be adjusted for growth. And, you know, we always have we we kind of do the you when Brexed down to I can't remember what it was, 30 40%, they sold for 6x and here we have ramp I've heard they're actually as much as 1.25 billion. So, they're trading at 30 to 40 times, right? whatever the number is, right, of that order. And it's all it's a growth bet, right? And if the growth keeps up, this will be a smart round. And if the growth goes down to anything like quote unquote normalized growth, it won't be. And it's the same bet with Revolute. They raising atund and something. They're doing what 4.5 billion in revenue, you know, 1.5 billion in operating income, which is freaking amazing. These companies are great. And you know, banks don't trade at 40 times 50 times earnings. they traded 12 times. So on board of them, it's really just I mean people always say you know will this trade like a tech company or like a a financial services company and I was it'll trade like a financial currency but it will be adjusted for growth and you know ramp is getting the growth and they just seem to do a very good job of riding the zeitgeist and you know their AI story their adoption story they just seem to do a good job on all that. So for now they got the growth and as long as they got the growth the math works and it's a big town. So we'll see. Jason, you trying the music AI company. You having for your personal office just playing AI music? I do like SNO. I do I do I do I do pay for SNO. Um it's one of those ones that if I were more costsensitive, I would cancel my subscription because I think I pay 15 or 20 bucks a month for three songs. Um and so there is um there there are certain apps that I think they're fragile for certain users because um I'll I'll pay to continue to pay them but but barely that but the utility is there but barely. Um but um you know it it is amazing. I I don't um I'm not maybe even though I'm a customer for a while um and user I I you know the the rate at which that valuation doubled and you know the the the 20 billion outcome for it. I'm not smart enough to see it yet. So it it it it feels a little bit to me like risk on, right? because the revenue justifies it, the growth justifies it, the stickiness justifies it, the brand justifies it. It nothing nothing you can't lose in AI. Um, but I don't know. We'll see. We'll see. We'll see. We'll see at the IPO. I just don't know where all this money is coming from. No, I'm I'm saying with all the IPOs and then re you mentioned Revolute again, Rory, they're targeting 750 million with the secondary sale um that they're doing at the 115 and then all the IPOs be should know where all this money is coming from. There's always money when people aren't afraid, man. There's no money. And you know when when it gets scary, I say I always say in because the converse I actually came to my point. I always say the converse is important. When things get scary, it's not that money runs out. It's that money gets scared. Right? And in the same thing in a bull market, it's not that more money's been made. It's that people are brave. There will always be money when people are brave and there'll be nothing but treasuries when they're not.
How long will they be brave for? Roy, if I knew that, Harry, I wouldn't be sitting there talking to you. I'd be I trade in QQQ. I don't know. I mean, at some point they won't get brave, but right now, right now, it feels everyone's risk on. So, yeah, I think people are brave. Well, we've all convinced ourselves the rules have changed now, right? You can go one to 100 in a year and so many other things have change. We we throw these number these growth numbers out as if it doesn't require a massive change in externalities to justify them. like, oh, every everyone all the best startups go from 1 to 100 in a year. Um, you should 1 to 20 in a year is pretty good today. Uh, you want to be doing 5 to eight by the time you get out of YC. The rules have changed and they have changed, but there's a limit to how much the rules can change, right? There there is a it's called GDP. Yes. And it's also called human nature. I think that the rules have changed what's doable. But what we do is in the face of these increased opportunities, we all get more aggressive. And we keep on getting aggressive until the only thing that stops us being aggressive is someone gets burnt, right? It's the whole Minsky analysis of, you know, you're going to do what you're going to do and it's going to continue and the only thing that will stop it is overreaching and the skill is to figure out when you're at that point. Like it was funny last Friday there was a little dip and you never know why stocks go down when things were overpriced but you know the the the narrative was you know the um employment numbers were good so therefore rates won't go down and therefore stocks went down and you know intellectually yeah I I generally find things don't go to hell in a hand basket because employment is good right that's not going to be how this thing ends right well it was because of chip it was because of chip guidance to be clear it was you know chip guidance of 16 billion and missed the 17.
You're talking about Broadcom. I go, "Yeah, it was some of that and then it was just some Yeah. Again, but yes, they they got definitely got I mean, I think what that if you're going to talk about that, all that said is when you're priced for perfection, which is always true. When you're priced for perfection, even a small miss to expectations, you know, filters through very quickly." And that's all that happened there. You know, the semiconductor index is up 100% year to date. Um, so turns out if pretty vulnerable to correction. Oh well. One that's amazing which we may not have comment on but it is amazing is bending spoons. This is kind of a rollup play on traditionally kind of consumer companies. Um, you know, some of their properties are very wellnown, but you know, Evernote, Vimeo, we transfer, AOL, Eventbrite, very massively executed rollup strategy, a billion3 in revenue, and they're filing to go public at $20 billion on in the US um from Italy, I hasten to add. Uh, one of the few large Italian success stories to be very blunt. Um, I thought it was amazing. I don't know if you guys have a comment on it, but I thought fantastic success story. Well, to me, the part I didn't I didn't uh appreciate and I do appreciate it is that they turned around these effing companies. I mean, Evernote reacelerate Evernote was dead and they reacelerated the growth of Evernote, right? Uh with a with a a fifth of the employees. Um, I mean it sure it sure it sure makes it sure makes you think a lot of management teams are pretty suspect if freaking Bend and Spoons from Italy can turn Vimeo around, Evernote around, good god, you know, if AOL becomes the becomes the the the next hot thing. Um, I mean, these guys are [bleep] geniuses.
I think I I did read it in detail because I was super interested, right? And turned around is an interesting expression and so it works out. I mean what they do their MMO is they buy these things right they cut all extraneous expenditure including a lot of the acquisition expenditure it's very like a little ironic like the Vista playbook in enterprise and then they raise prices massively so if you look at I actually tried to figure out the organic growth rate of each enterprise because they got they're growing nicely overall but a large part of the reason they're growing is they're adding new companies so by definition revenue go up right I think they I I'm trying to find my notes here. I had the growth rate last, you know, stellar like something like 90%. But most of it's acquisition. So you're trying to piece through Jason, you're trying to find out what did they do in terms of growth by entity. That's the next level down. And even then they get pretty good growth rate to your point out of the gate, right? But then you go one level below that. How do they do that? It's mainly price rising. It's very hard to get any sense of unit growth by c by individual. So in other words, what they're doing is they're taking Evernote as an example. It's doing 200 million in revenue. They just cut all the marketing initiatives other than high ROI stuff. So [snorts] they take out, you know, 80% of the marketing spend. You know, focus the team on features, raise the prices, you know, 80% over the course of two years, 10% of the existing users go maybe 20%. Their net retention is reasonably decent. It's below 100, but it's reasonably decent. that they raise prices and the people who really want it stay right and and it's really hard to grow new businesses but what it means is it kicks off cash and you know let's get real here anyone who hasn't churned from AOL now ain't churn until they die right so you can raise money on that I mean you know you've had a whole two decades people I mean it is 26 years since the AOL Time Warner acquisition right you've had 26 years to churn off this thing you're going nowhere where right so they have very sticky inertia customers and they stick it to them right it's an excellent business I mean you know the big three properties are AOL Eventbrite and I want to say Vimeo was interesting in the top 10 are about 80% I think Evernote which I use is in the top 10 but not top three you still use Evernote I don't use it but I have a bunch of stuff in it so I paid for another year I need to get it out and figure out where I'm going it's a long story but you know I'm not using it I'm chat GPT, but I got to get all my [bleep] into one place. It's a long discussion. It's not Well, they they've increased pricing from Rory. What was the last supper like? Sure. Shut up. Um, let's let's focus on the business. So, yeah, I I I looked at my go. The odd thing is this is a consumer internet version of early Vista to Brava. buy those companies, cut the cost, raise the prices and um just you know probably tap them out. So the question is it a great business absolutely. Should it go public at 20 times revenues or 15 times revenues? Maybe not because you are relying on the acquisition for organ. I mean you're not getting organic growth. You're getting a profitable business and you know you probably have to look at the sustainable profit but it's hard to value it on a growth multiple and you might be leaning in a little 20 billion but I think it's it's a great story because everyone was playing in the enterprise space. What these guys realize is there's similar opportunity in the consumer side which simp you know just as you know the whole idea was in these verticals no one's going to change their car dealer accounting system because they put prices up 20%. In the same way you know the default consumer is going to stay. So it's totally sensible an orthogonal plate to what everyone else was doing. So they deserve the prize. Should the prize be 10 or 20? That's a different question. But yeah great story. Does it diminish what we've previously said about the bar to go with public today? You know, they don't get me wrong, they're they're fantastic scale. It's a billion three in revenue, which is awesome. But we have said that we're seeing this kind of bifocation and you need to be huge.
No, you you've said it. I haven't said it. So I I But they're growing what 70 or 80% what what are growing. I mean for acquisition. Yes. I mean Rory would know better than me. I'm not even convinced the markets care as much as we think whether it's organic or inorganic. Salesforce itself is is the balance of it is inorganic at some point and then it becomes organic. [laughter] We don't even think about a lot of these products as inorganic organ. I mean does anybody really care? I mean, uh, as long as it works, if they can keep finding these targets for the right price, if they can do what they if they can do what they did with Evernote, which is raise the pricing from $75 to $250 a year on average, right? Um, if they can find enough of these without just running out of affordable targets, go into the founders uh letter. It sounds better to me than starting something from scratch. Just go there's got to there's got to be 800 unicorns to buy. Just go buy those ones.
I really liked his letter. He said where kind of finding product market fit is just a continuous mission of luck in some ways and then the execution machine built after that requires no luck at all. Totally. Absolutely. It's just traditionally you bought that the the constellation version was two one to 2x revenues right um I don't know what bending spoons blended uh maybe it's not I just don't know yeah it this is constellation for consumer with you know a much higher valuation cuz right now software is under pressure and this stuff isn't
speaking of big enough to go public guys data bricks come out today no big We're going to do another round. We're going to do another round. 165 billion price up from 134 billion earlier this year. Obviously not going public with that announcement anytime soon. How do we think about that? I mean, look, the argument we said for why the big um model providers are going public are they have a huge capital need, right? And you know I actually think I was might have been diamond or someone who settled maybe the Goldman guy said recently there's three reasons to go public you want capital you want currency to buy other things you want to get liquidity for your shareholders right if you don't have one of those three things then you know do you want the hassle so I think data bricks unlike these guys for now at least may well be in the position where their capital needs are still manageable. I mean for context reminder the last private round at Entropic was 30 billion and the last private round at um Open AAI was 122 billion right so this is less than oh my god it's.1% of the last open AI private round so what that says is if there's money to fund open AI there was money to fund data bricks private so they can do it for longer because it's just not the same need it's a software company it's not a they don't quote unquote have Now I personally think you should at four or five billion in revenue at the margin. I think in the end you'll find logically in the end the cost of capital should be cheaper in the public markets but right now it's not. Data bricks can get capital at a higher revenue multiple because a higher growth rate than Snowflake can and on hassle-free terms. I also think the other argument he did make, which is does resonate a little with me, is the idea that this is just going to be a noisy year. I mean, you've got, you know, you've you've got, you know, SpaceX by Friday, you've got the two big model companies by the end of the year. There's just a lot going on. It may well be next year's a clean deal. But yeah, I mean, the bigger hob was they don't need it's just the amount of money that you need to build a foundation model is two or three orders of magnitude more than anything else. So, the imperative for those guys to go public is just different.
All right, boys. Is there anything that I've missed that you think we should discuss? Other things that made it to to the top? SAS now trades at a discount to the S&P 500 for the first time in history. Wow, that's sad. Um, Meta weighing tens of billions more for capex spend following in the suit of Google. [sighs and gasps] Zuck at a boy. I'll tell you the only I'll tell you about but the one small one I'll pick just for fun if we're breaking. Um yeah I I think it's actually a more important story but maybe it takes time to to track it is you know Microsoft's new models that it launches right which I think it said they were clear there I don't know what terms they use sorry I'm traveling it's in beta I found it very interesting that the models can't even search the web so there are certainly use cases where that's not important but um uh it's interesting to me that you would launch a model that can't that can't extend its know it it its knowledge by searching the web. It's it's it's a flashback to when this show started when uh basically you know every you chat talked to chat GBT and everything was nine months ago right I don't remember I don't my memor is only through September 2024 so um the only thing that says to me is um hard to predict whether anyone can can really we we we think everyone can catch up we think Microsoft can catch up we think deep can open source can catch up but if Microsoft launches these models and it and it doesn't even search the Um, can can we really keep up with the pace at Anthropic? I mean, uh, the pace of change is so rapid. It's so impressive. Like so much progress. I just don't I just can't predict. I can't predict where it will will play out over the rest of the year, next year. I can't predict. But you are right, Jason. And it it did matter because it was the final recognition that frankly for ages is you can't for Microsoft to have such a core foundational technology and the the where they don't control. It just wasn't a long-term sustainable state and you know they and Open AI are somewhere between an open relationship and actually divorced. I can't quite figure it out. Well, they're allowed other partners but they're still together. I can't quite but whatever Microsoft needs its own control and they needed to do this and you're right Jason is you know the reviews I haven't used it yet the reviews are like good but not even as good as the best open source but my takeaway on you know well done because you needed to do something and you it's hard to imagine not playing here and they tell a story about you know local use and you know range of models and which I read all as some version of we don't have to be the very best because we know we're not the very best. In general, in life, you need to be the very best, but at least you need to be playing. It's a step. It's a step to the goal. And that's why Google is so much further ahead. They're at least in the game. But yeah, this was the end of the period where you could fool yourself even slightly that your plan for uh your plan for AI is to partner with Open AI. That's just not the answer anymore and it hasn't been for a couple of years for
Microsoft. So yeah, I mean onwards from here my guess is they'll yeah you know they will become the next sucking sound for talent and money and you're right they need to add the stuff that the other guys added two years ago you know can they hadn't thought it's an interesting question can they do the Microsoft thing and grind their way to good enough over 3 to four years like Azure was never as good as AWS but it was good enough for most of their corporates can they grind to something that's good enough in this space over the next 2 or 3 years whereby they're not going to be as good as entropic open AI, but they're good enough for the bulk of low-end intelligence work. I don't know. It's a it's an interesting question. I mean, they never caught up in mobile. They never caught up in search. They did catch up in uh cloud compute with Azer and you know, who knows here, but you're right. It is the one that matters. I mean that and the you know where are the I mean one of the big questions is between Microsoft and then the open source vendors are the open source vendors especially is it going to be a non-Chinese US open source vendor that's kind of even within the spitting distance of the frontier models cuz that matters a lot from a pricing perspective I think there there's there's a lot of open- source models today that are within spitting distance. Right. Either are but mainly Chinese and yeah the question and I yeah the question then is you know is that sustainable and a lot of our companies are using them and is that sustainable even though it's open source is that sustainable over the medium term is if your only plan is you can download Kimmy or DeepSeek and you can you know fine-tune it that's great but a some of those Chinese companies are themselves going closed source I think what happens to a US what happens in terms of an open source competitor the US matters and obviously you've got I think it's recursive and Poolside a couple of reflection in Poolside doing that but that's that's to Jason's point sometimes you get caught up in the stories and you you're the worst for that Harry cuz you just love the gossip but Jason's right what really matters is is this going to be an igopoly or is it going to be four or five players in foundation model and two years from now which is why what Microsoft did matters I just did a show with the founder of Nabius and he said the single biggest threat to Nabius This is consolidation of models. Yes,
if we have concentration of model kind of winning, we are in a tough space and we want an ecosystem not a monopoly. Yes, there's a reason yes that everyone other than anthropic and open AI shoving money furiously at anyone else who can help erode that competitive advantage. Yeah, I just did a show with Arend Plexi and he said that export controls have actually hurt the US in many ways because it's meant that they've innovated on architecture that they wouldn't have needed to and really built muscle that they wouldn't have had to and combined with the open source model capability that they have, it's now a competitive threat that's even stronger. It was an interesting discussion. Rory, I have to say uh we'll wrap my mother text me after our last episode and said that your quote on making money is like sex was the favorite moment of any trio show that she's heard. And I got about 50 texts from people being like that is the quote of the century. [laughter] I got to tell you, I think it's not in direct format, but there's a version like there's a version of that either in Fred Schwed's [snorts] Where Are the Customers Yachts from the 1960s or in Reminiscence of a Stock Operator from the 1920s. One of those two investing books hinted at that, but I always remembered it. So, I I'm not the original author, but I but but the books are kind of three to five times older than you are, Harry. So, it's kind of like the Bible as far as you're concerned.