Microsoft and the Future of AI

But the one thing we know about Elon for the last thirty years is when he hears the word morisks 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. 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 contemptuous 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 becomes the the next hot thing, I mean these guys are fucking geniuses. Anyone who hasn't churned from AOL now ain't churned until they die. We are back, the favorite show of the week, the two OGs of SAS and a posh British podcaster. It's Rory O'Driscoll, Jason Lemkin, and me analyzing the biggest news in tech this week. So what do we have on the cards? We have the largest IPO in history. SpaceX begins their $75 billion IPO roadshow at a whopping $1.77 trillion valuation. Is the future of AI always on as Sam Altman thinks? OpenAI ships Dreaming V3 , Apple rebuild 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 dollars. This and so much more, this was a great show to do. But before we dive into the show today, are you a founder working nonstop to raise your next round? Are you an investor doing all you can for your portfolio companies to help them stand out. Funding and scaling a vision is challenging. Banking should not be. HSBC Innovation Banking caters to tech and healthcare founders all over the world who need a really great banking partner that matches their pace, offering fast onboarding, product packages designed for your business, and capital solutions built for high-growth startups and the VCs investing in them. 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And the funny thing is, unlike 99% of IPOs, the first question's already been answered. Elon has decided that instead of doing price discovery where the bankers build a 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 that the number should be I think a hundred and thirty five bucks a share. So um which values the company one point eight trillion. In other words, he's kind of short circuited 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, Harvey. 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 broad come moving markets, and then putting you in a precarious position. It feels unwise, but Elon is a master, so I'm I'm not gonna Yeah, I mean calling someone unwise who's about two days away from becoming a trillionaire is a big call, Harry. But I I think what it is, is you know, it it it it it's no surprise given Eli 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 and you've left money on the table, maybe I But the one thing we know about Elon for the last thirty 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. It's like I'm telling you the answer in advance and I'm taking the risk. That's how he became a trillionaire. Is it wise? We'll see in the day. It's really only two X subscribed or over. I'm not even sure over subscribed is the right word if it's only two X, right? Plus Elon picking the price. That suggests to me it th this one won't pop. Yeah, I do believe the day traders will drive it up ultimately, but uh it doesn't feel like there's an excessive demand at two X. In most IPOs, it would be in s almost insufficient to to to close the IPO. 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 are I mean traditionally you want eight to ten X 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 oversubscribed on 75 billion. 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 look at those circumstances and you say there's a non-trivial chance that it pops to the downside. Is it thirty percent? 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 ten, fifteen percent pop, and you know 90% plus of the time it pops, but still 10% of the time it breaks IPO, they get it wrong. Even trying to fix the game, they get it wrong. In this case, they're not even trying to fix the game, and you know, time will tell on Thursday night, or they too high or too low. But there is obviously by definition some probably l higher than 10% chance that 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 ninety percent of the time and now you'd use a mechanism that doesn't have the information to allow you to make a pop because you've done a s 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 I do think every time there's great news, more satellites in space for space , more things, it will it will begin an inexorable 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 just don't think it's gonna pop that first week. I think not enough buyers out there in in this universe, or at least in this galaxy at this price at 2x. I'm gonna 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 because zoom out a million miles here. This is amazing. This is an amazing technical company. It's the iconic company of its generation. It's going to go public this week. It's a huge moment. What do you say to Elon? Congratulations. What do you say, you know, every involve, congratulations. I mean, it's just an awfully impressive company. I mean look, I I'm skeptical of the valuation, but step back. I mean, you know, I've watched some of the launches on you know my little zip on little YouTube and I'm like, they're just so impr the whole thing so impressive. You know, at the risk of sounding a little sorry, Harry, I risk of sounding a little partisan American. This really is an only an American 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? And frankly, also to have a big enough capital market to fund it, a big enough end addressable market to sell to it. 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 ninety prediction. I actually think it's 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 slut. But just to to l I 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. One third it just goes down just because there's weird pricing mechanisms, so they don't have demand. One third it's flat, cause whatever. And then one third, 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 twelve months, I doubt it will retain this price. There, I will make that state. I disagree with you. I think fundamental value here reasserts itself. I mean there's 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 ten X forward sales, even more dip. The base rate on IPO is at seventy times forward sales. There hasn't been any, but you gotta 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 twelve 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 wort one trillion instead of one point seven. And it's still a huge win. Two thoughts. I don't I don't know what you guys think. One is um listen, there are many great IPOs like Facebook and Google that IPO'd uh with a whimper, right? It would not be surprised me if this IPO is with a whimper at the end of the day. It doesn't matter for SpaceX. We will have multiple layers of generational wealth created. Elon will get his liquidity, right? It'll all be great, whether it's a nothing burger IP or not. I guess it might hurt 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's just they they need so much capital too that it just could be uh it it could take some of the wind of the sales out of out of open ai. 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 lots of cash here, got cash in Cerebus, getting cash and all these other deals. It does kind of tie to a conversation we had before, just the the expectations are so high now for performance. And I think that will permeate through the ecosystem. And I do think it's a minor negative, 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 seven to eight X 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. As this LP said to me, I don't know that little five to eight billion dollar IPOs really make it make this math work anym And so we've talked about it. But to hear it from the large LP, 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 you in life you should take this as the once-in-a-decade. But there's like four or five of these once in a decade events. There's gonna be anthropic opening analysis. It's interesting yet you say that, but of course 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. So for that kind of huge return, I mean, yes, there's been a 10x when was the Mercer C check written again? Remind me? The Mercer C check three years ago, yes. So maybe they do happen more than once a decade. There they seem to be these those these decades seem to be shrinking. I think you're gonna 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 probably can't assume ten. 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. So I think eight billion dollar outcomes will make everyone perfectly bloody happy. Obviously unless you have a ten billion dollar fund, in which case it doesn't. Fund size dictates the amount of market cap it takes. It's a Josh Toppelman thing from ages ago, you know, the venture arrogance index, whatever, right? The bigger the fund, the bigger the deal that has to be to make it work. There's nothing surprising here. Aaron Powell 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 uh will make I think over ten billion dollars from their SpaceX. To Clairef, I know you think the entire Midwest is the same, Harry, but I think it's Ontario teachers, right? Um fair enough. But now at this point you're conflating Canada and America, which is an easy mistake to make 'cause 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 to the case a big fallout player too. But the bottom line is yes, Ontario, Ontario pension nailed it. I mean, they're gonna make a magnificent return. And there's a bunch of others. It's great. University of Washington, they have an extremely savvy CIO who and by the way, Washington Harry, just to confuse you further, is not in either Washington State or Washington City, but we'll keep that for now. But yeah, look, by definition, these are going to be the best co-investments ever, because it's the best deal ever. I mean there's nothing surprising in it. I know some of them R L P is gonna come back and go those that will get liquidity from this go, Hey, we're gonna reinvest m more and will all that brethren be like, hey, we're gonna join this 'cause we want the next generation Yes, because everyone's just gonna go, wow, that looks amazing. As I say again, it's back to the extrapolation from the unique event. Of course they are. this morning, not University of Washington, Washington University, what has again, I'm not gonna confuse. Like it's ten or fifteen percent of their endowment. It's awesome. It's also this is the best venture capital deal ever in terms of absolute return. And yeah, anyone involved is gonna do really well. Speaking of a once in a lifetime or once in a decade moment, as Rory very articulately put, another once in a decade moment is obviously open AI filing to go public. 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 'cause I don't get it. Other than the Captain Obvious element, 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? Yeah. I only half get this. 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. Which is I read that as we're fun 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 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 ago, is everyone's suddenly gunning for the door. At some point you need the capital markets, the public capital markets, because the scale involved is such that that's where you gotta go. And if everyone's just hit that point and they're going for it. I think going back to your comment earlier on this basics. I mean it feels like the market is very risk on. 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 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. And worth pointing out by the way , the SpaceX S1 went through the SEC very quickly. And normally that's a 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. This may all process through real quickly. In which case, brace yourself for a fun fall. Rory's on fire this morning, eh? Gosh. I I really want to touch on on something kind of beneath on the product layer for open AI, which is you know Sam Altman's been driving towards kind of persistent and always on AI. 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. I mean we can make fun of Apple this week, basically uh repackaging Gemini and giving up on AI, right? If that's the way we want to view it. But that's a little piece of wanting ultimately AI to be persistent twenty four seven. We we we do want this. 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 so dated that we still use browsers. I mean, who would have we gotta get Mark Andrea? I mean, the fact that we still live in the era of Netscape in so many ways. So I do think it's exciting. I do think as this show continues, you know, the whatever we would want to call it, the tokenopolit op token apocal token po pocalypse, I think it will morph into just standard business practice, right? At some point there's only uh IT budgets can only be so large, there's only so much even if we lay off half of the unemployment, I mean employment keeps grow ing. We're gonna have to manage spend. So there is a conflict, but I do think we're gonna look back in two years and think of this non-persistent AI as as almost archaic, right? As almost sort of desktop like. Yeah. I I mean, yeah, because you you threw in a lot there. We Rory, you pulled several faces there for for the audience listening. Rory's facial . No, no, no. It's just that uh Jason, as he often does, covered a lot of different things and I'm just processing through it more slowly. Is that on on the the memory thing and kind of with 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. And the impact of that and I think why Jake Jason went to the token ec 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. I mean I think a lot of the trend on this harnesses will be adding stuff to minimize your cost 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 fifty-eight, twenty VC podcasts. I'm probably here to look at my twenty VC podcast researcher guys. So it just makes a ton of sense. Roy, 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 and Sorakoui did a really good piece on it this morning I was reading. Is that to some extent they're giving in the sense that they're 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 billion, I used to know the number, 20 billion dollars to be the default search engine. So it's 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 a 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 Harry'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 price. I don't think they're giving up. I actually think they're pragmatically saying we kind of screwed up and out of 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 consum So I think actually trying to fix it is just awful. So I I give them credit for step in the right direction is my takeaway from it. So the opposite. I don't think they've given up. I think they're doing what it needs to win coming from behind. And they have a great position. I mean, 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 anthropic, because anthropic has made the enterprise bet, and open AI in part has made the consumer bet. And you know, I like my open A I subscription, because you know 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 let anyone say it clearly. 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 research or kind of using AI for productivity. They just want, you know, delightful experiences because they want to relax and attain. So I think actually the consumer space is gonna be a tougher space for open. The enterprise space has really been validated, because in enterprise is all about automation efficiency. In a consumer space, it's about experiences. Apple's well placed to do that. OpenAI's gotta compete with that and compete with Google. And it's a tough space, especially if Apple's getting their shit together. Well speaking of consumers not wanting to work, soon they won't have to. Uber cuts 23% of HR . It's just to make Jason happy. We can now have Jason. I'm so sorry. Obviously, it's people losing jobs. It's terribly sad. But I'm the one who fucking 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 rescinded, three-day in-office 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 the easiest things to cut. You always see any any any big tech leader stumble a little bit and they lay off thirty percent of the recruiting department. Well, you're gonna you you often want them back. I always wonder, I always think this is uh I mean it makes sense on paper, right? 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. But I do think HR is one of these areas that 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 than a biased human. I think there are advantages to having an uh 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 an AI VP of HR 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. Maybe it really maybe that really is the problem. It's not it's not you. An AI VP of HR can find out a lot of things and process of ass. So I don't I think it's a an a it's under disgust 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 gut it it felt 23% . I doubt everyone is automating and saving twenty-three percent 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 th 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 percentage 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 ten, is it fifty, as Dario has said. Twenty-three percent felt like a lot, but whatever. Again, you what you don't know is how much of it is just too many folks there and they're just party rationalizing. So it's a data point. I mean I think the other data point from Uber is far more interesting, which is not the AI for HR, but the AI for autonomous driving, that they continue to make progress on autonomous driving. They're actually rolling out some more autonomous driving experience in Europe, in Madrid, I think, right? So partnering with I think it's a we ride or some of the technology providers. But 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 Robotaxi in Europe, you know it's something obviously to keep an eye on. It's all w it's worth pointing out this stuff is still moving way slower than I think people anticipated. It hasn't been, you know, Waymo in San Francisco resulting in, you know, Waymo's everywhere within six months. It's been a long, steady progress for Waymo. And U Uber's doing what it should do. The Travis Kalnik devotees would say the failure cutting of the autonomous project in two thousand sixteen or seventeen was a fatal error for Uber. I'm not sure. I think ten years later they can pick up the th read and which is what they're doing and catch up on that because it's not like the technology tip like a domino . But I think they're smart to now start pushing Robo Taxis and partnering with technology providers. And this is the 'cause you know the the the the question on Uber stock is always, oh my God, is Robotaxi existential? Which is the bad scenario. Oh the good scenario is lots of people build robotoxi technology and Uber is in a wonderful position to be the coordin ating thing because it's the app we use and if they just add you know ten thousand robotaxis to the fleet, then things continue just fine. It frankly it's good to see the Europeans do something. I mean I say disrespectfully Howie, but typically you know, Europe is the slow technical laggard, especially on stuff like that. So go Madrid. Should we discuss the revolute 1 15 billion? Amazing. Yeah, thank you. And I I think you're doing that I'm gonna push 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, because the incumbent European banks were fat, dumb, and happy and making margin off their customers That's also why New Bank is such a valuable business. Because the swi the the Brazilian banks were inefficient. I think all these fintechs, I mean, it really is a f I mean it's proven markets. It's a function of how egregiously priced the incumbents are. You know, Europe, especially when it had non-single currency, you had all this foreign exchange. Of course, you guys aren't in the euro You had you know the FX chargers, you had all this transport of bullshit, and Revolute just blew a hole for that. So I I think it's amazing. And I know you're a big fan of the CEO and I I wish him all the best and pound those old school European banks into the dirt. I mean at some point we're gonna 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 because the whole point is of banking is to recycle savings into lending and right now you know Revolut's not a long term lender, but that's that's by the by. They're killing it. 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 venture fundraise. It led to hundreds and hundreds and hundreds of founders sharing horror stories , including the Cloudflare CEO, who said about his experience with Kosler and Vinor Kosler. 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. First of all, I have when I was in the most intense phases of founder, I had those stories too. I I really we forget how how deep some of these things cut, these slights. Folks that are friends of ours now that we co-invest with, I I thought terrible things of at the time. Literally, uh one that we both know really well would constantly use me just to do diligence on another investment. Constantly. 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. So 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 missed the deal, you gotta find another bus, right? Having said all that, get over it because it's it's sales. The only thing that to really have a gr a true grudge on is if you got fired. 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 the fundraising, get over it, it. It's sales. 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 gonna close and it didn't? Have you ever not talked to a prospect where they told you, Rory, of course we're gonna buy by the end of the quarter and then you just t send them twenty eight emails and eighty seven text 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 learn to sell, man. Grow some. In one sense you're right. But I think the difference for the founder and I think l 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. And there's no doubt. Even under my side, I remember a 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 deal a lot. You're selling yourself. And when you get turned down, it hurts. So I totally with you, Jason. Is that you do have to grow up hair, 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. And And as yet so that's the founder side. And I thought you y 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 ninety-nine out of a hundred deals that we look at. So rejection is our default MO. And that'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 the default is a no, and it's really hard to h igh high customer sat when 99 times out of a hundred you're gonna tell the customer no. It's why no one ever loves the bank that they apply to the lending money because a well-run bank turns down five out of six customers. No one likes that experience. Rejection sucks. So it's set up for failure out of the gate. Sometimes, you know, in the course of turning down two, three hundred people a year, you get some stuff wrong. What was interesting is Matthew was really upset that Vinaud asked him to consider getting rid of Michelle, who we know who is great and his CTO, and giving him the shares, not stealing his shares, which I think was misinterpreted. He made it a suggestion and 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 am I Vinode? And would I say it that way? No, but you might know me well enough. I almost would. You know any different situation? I almost would say that to a founder. I just wouldn't do it during the pitch. I would just say it's not a fit for me. But uh I find myself constantly post investing the only one that would say things like, What are you gonna do with your co founder? Rory's just not committed enough. He's not getting it done. I think his directness uh it is interesting that it bothered um C of Cloudflare so much, but I in a way it was just hit h his read of the team. I think it was wrong, at least for for one of them, but it the read of the team. And by wrong you mean i incorrect relative to the subsequent outcome. I well I would keep I know Michelle I don't know Michelle that well. I think she's a she's she's a great a founder so I would keep her but the fact that BCs go in and you see that the founders are not equal in turn not in terms of their commitment and skill set, right? Done common and this because look, it's clear given the superb outcome that whatever Cloudflow had, it shouldn't have 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 raise 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 yeah, that that's a really tricky conversation. As well as 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 happened. 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 Venod is nothing if not direct. So stuff happens. I mean, as someone pointed out, he was on the Midas list the first time for Juniper and he's on the Midas list this year for open AI. Others thirty years between those two events. So we must be doing something right overall. 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 handle 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. Some element of break age is inevitable. But I I have I have to admit, Rory, I I disagree with you. What? I I've I've been turned down by lots of LPs. Uh 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 and like, wow, you know, when they tell me down I was 21, like, whoa. And you're like, who are you? Yeah, you don't maybe maybe early on, you'd early on you remember, you're right over time. To Jason's point, you develop a thick skin. And you're right. I I remember much less the turn downs on fund seven than on furniture. Yeah, the first independent fund was fund three. I do remember in fund three, our first independent fund, which we foolishly timed literally for the week of the great financial crisis in November oh eight, 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'm again big milestones for Lovable and Cursor this week. Lovable saw literally just before we came on. Lovable hit five hundred million of error. So five hundred million of error with a hundred and forty six employees. Cursor has hit four billion and it's targeting six billion at the end of the year. Jason, you're you're you're the man of the hour for this. You're the coder. Any thoughts on this? 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, we were in an area 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 a hundred million, two hundred million, five hundred million, a billion in revenue, will startups get fat again. Do you just need uh do you just need these layers? And I can think of s 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. And it is disruptive on many levels if you can stay as efficient as as these guys are. It is disruptive to investing. It is disruptive to employees because it it will shrink the number of these great roles and it will increase compensation, right? To the click up point to Zeb's point. I'm doing layoffs to give million dollars to a handful of folks. Lovable can pay its team whatever it wants. With a hundred less than two hundred 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, but it's just so different if they're not going to reflate, is what I think about. And uh, because it's not a lot of people, man. And it's 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 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 twenty-two products like Datadog 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, you've got SEO you're running, you've got so they these guys are pushed 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 don't think we're these folks are working they're incredibly hard and they're incredibly productive. And if you want to be you want to have some contempt with for VCs tying this together I'm kind of contemptuous of startups that need to be fat. I'm like what's your excuse? What do you need an other 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 only comment on and first of all broadly agree, but the only pushback I'll make is this. 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 seventy percent of your revenue on intelligence from Anthropic or Open AI, you you you don't have the I mean, it's a different business. You don't have the option to also have fifty to seventy percent of your revenue on employees because it is So there's some I'm they're just different businesses with different business models. They are, but you have the choice of who you invest in or who you work for, right? We have our we have our legs in pocketbooks, right? No, of course. You would prefer, and this is actually one of the core challenges many of these other companies are going to have. If you can be one of the hundred and forty-six employees, that is I agree with you, Jason, 100%. That is getting levered from this AI such that your economics are comp elling 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 head count. It means we can pay you a lot. That's a far better place to be as an employee. You're right. Then, you know, one of yeah, eighteen, whatever it is, ninety thousand employees at Silforce. You're exactly right. Because you you're not getting leverage from the modern as an intelligence, right? And this is the how much will be labor and how much will be 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 I'm 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 than to be, you know, slogging it out with ten times the employees, not a ton of new leverage from AI and you you're stuck in twenty ten's ground game. Which sucks. 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'm one of hundred and seventy two people at five hundred million in revenue. I imagine. And then y you implicitly said it. You're probably talking about the foundation models who are building big go to market machines 'cause they have to. We are gonna see way more buyers. I don't buy there's not going to be a an infinite number of it's not just f I mean it's Lagore, it's hobby, it's your Sierra. I think for products, because remember, in the end of the day, someone wants to turn it on. 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. So you can be pretty lean. Once you start selling to law firms, once you start selling to corporates, then you do end up with a big ass sales force. And one of my theories is that that doesn't change from cycle to cycle. The entrop ic Salesforce in five 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 gonna be true, Rory. Uh and first of all, there's I'll give like if I don't mean to go back to if we compare Replit and Level Rep I know Replit'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's and different goals. But the majority 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 sales. 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 is less than 5,000 employees, right? So they're just saying culturally, so I don't think that they're all gonna I thought they would all look like SAP and Oracle in Salesforce. I'm we're not s we're not seeing that. It's not going to be a hundred and forty seven people doing five hundred million when it's enterprise sales. Nope, but what you might see is two to five times the level of efficiency. And it just changes the the culture, the head counts where people are. That's the difference, right? It doesn't really matter whether it's zero or four X, right? I 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 do a comparison, it's over three million hours per head versus and I'm not but like a sales force which is three hundred and fifty K per head. It's it's nine times more efficient. Yeah, but again, I'm just gonna say it here. Yes, you're true, but Salesforce enterprise heavy, R and D heavy, no intelligence costs.. Right Remember, they have 300 million of they just set out 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 one fifth of what they have. So then remember that 300,000 ARR, probably only one percent of that is tokens. Do you understand me, Harry? In other words, 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. And they're probably spending 1% of revenue per head on tokens. Contrast that with you know your example of Replet. They're getting 2.3 million per head, but they're probab ly 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 via Matt that 20, 30,000 people in a much larger organization where you don't have a leverage. They're just different businesses. But this is to me, this is this is much more interesting than layoffs in these stories. I think everybody, every founder, for 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 two 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. My sense is that roughly 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. That's a much bigger change than whether this company does a ten or fifteen percent laugh if everyone's half the size they used to be. It's a much bigger change. Can I make a comment here? 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 u unit of task. You're exactly right. That's the bet. If it wasn't happening, the entire thesis of the case would be bullshit. So you're right, Jason. It's gotta 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 ten times end of year revenue? Looks a pretty prescient buy if they're gonna hit target. It was a clever deal in every dimension. I mean, what I was thinking about this, because I'm always skeptical on evaluation, but Elon did such an amazing job of meeting the AI moment. You know, you look back and you go, he obviously founded open AI and then the whole drama happened, blah blah blah. But in the last twenty four months, he moved from ground zero to building Colossus, building Colossus II, failing with his model, but just because he had the guts to show up and spend that kind of money, 'cause 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. 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 to 30 billion dollars 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 at press in 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, one point two five from Anthropic and nine fifty from no the other way around. Nine fifty from Anthropic and one point two five from Google or the other way around. Two billion a month. Two billion a month. Twenty-four billion a year 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 common, it doesn't mean you have a foundation model. It means you' justre a better core weave. 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 screw ed. Here we are, June 9th, and he can say I have a $24 billion outsource business and I have this other business that's coming in that's going to be doing six billion dollars that'll run on my servers. I went. Great move. Incredible transition. Two private rounds that were large. Ramp raises $7.50 at 44. We've discussed ramp a lot. Tripled in a year, cross a billion in ARR, positive free cash flow. And then also Suno, uh, the AI music creator company raised 400 million and a 5.4 billion teasing first license model, bond led that one. It was double the previous valuation just six months ago. Anything on either of those? I mean ramp, we've said it before. It's it's kinda gets to the revolute. They'll trade like financial companies, financial services companies, but they will be adjusted for growth. And you know, we always have we we kinda do them, you know, when Brex slowed down to our I can't remember what it was, thirty, forty percent, they sold for six X and here we have ramp I've heard they're actually as much as one point two five billion, so they're trading at thirty to forty times, right? Whatever the number is, right? Of that order. It's a growth bet . 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 at a hundred and something, they're doing what, four and a half billion in revenue, you know, one point five billion in operating income, which is freaking amazing. These companies are great. Banks don't trade at 40 times, 50 times earnings, they trade at twelve 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 always say it'll trade like a financial service currency, but it will be adjusted for growth. And Ramp is getting the growth, and they just seem to do a very good job of writing 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 Suno the music AI company? You having for your personless office Sunno just playing AI music. I do like Suno. I pay for Suno . It's one of those ones that if I are more cost sensitive, I would cancel my subscrip tion because I think I pay 15 or 20 bucks a month for three songs. There are certain apps that I think they're fragile for certain users because I'll pay to continue to pay them but but barely. The utilities there, but barely . You know, it's it is amazing. I I don't um I'm not maybe even though I'm a customer for a while and user I the rate at which that valuation doubled and you know the the twenty billion dollar outcome for it, I'm not smart enough to see it yet. So 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. You can't lose an AI, but I don't know. We'll see. We'll see at the IPO. I just don't know where all this money's coming from. No, I'm I'm saying with all the IPOs and then you mentioned Revolute again, Rory. They're targeting seven hundred and fifty million with the secondary sale that they're doing at the one fifteen and then all the IPOs be say, should we all this money's coming from? There's always money when people aren't afraid. I always say the converse is important. When things get scary, it's not that money runs out, it's that money gets scared. 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'll 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, Rory? If I knew that, Harry, I wouldn't be sitting there talking to you. I'd be trading 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. But we've all convinced ourselves the rules have changed now, right? You can go one to a hundred in a year and so many other things have changed. 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 one to a hundred in a year. You should one to twenty in a year is pretty good today. You want to be doing five 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. It's the whole Minsky analysis of, you know, you're gonna do what you're gonna 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 the narrative was, you know, the 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. But that's not going to be how this thing ends. Right. Well it was because of chip guidance to be clear. It was you know chip guidance of sixteen billion missed the seventeen point two nine. Yeah you're talking about broadcom. Yeah. Which triggered it. It was some of that. And then it was just some. Yeah. But yes, they they got definitely got guy. I mean, I think what that if we'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, this semiconductor index is up a hundred percent year to date. So it turns out it's pretty vulnerable to correction. Oh well. One that's amazing, which we may not have comand on, but it is amazing. It's bending spoons. This is kind of a roll-up play on traditionally kind of consumer companies. You know, some of their properties are very well known, but you know, Evernote, Vimeo, Wii Transfer, AOL, Avent brite , very massively executed roll up strategy, a billion three in revenue, and they're filing to go public at twenty billion dollars in the US. From Italy, I hasten to add, one of few large Italian success stories to be very blunt. I thought it was amazing. I don't know if you guys have a comment on it, but I thought fantastic c success story. Well to me the part I didn't I didn't appreciate and I do appreciate it, is that they turned around these effing companies. I mean, Evernote was dead and they re-accelerated the growth of Evernote with a fifth of the employees. I mean, it sure makes you think a lot of management teams are pretty suspect if friggin' Bendin's spoons from Italy can turn Vimeo around, Evernote around. Good God. You know, if if AOL becomes the becomes the next hot thing, I mean these guys are fucking geniuses. I I did read it in detail because I was super interested, right? Turned around there's an interest ing expression. And so we exal I mean what they do, their MO is they buy these things, 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 in enterprise because they got a 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 had I ha I'm trying to find my notes here. I had the growth rate left. It was stellar, like something like 90%, but most of it's acquisition. So you're trying to piece true, Jason, and 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. 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 individual product. 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 they take out, you know eighty percent of the market ing spend, you know, focus the team on features, raise the prices 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. So they raise prices and the people who really want it stay. 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. So you can raise money on them. You know, you've had a whole two decades, people. I mean it is twenty-six years since the AOL time warner acquisition. You've had twenty-six years to churn off this thing, you're going nowhere. So they have very sticky inertia customers and they stick it to them. It's an excellent business. I mean, you know, uh the big three properties are AOL, Eventbrite, and I want to say Vimeo was interesting in the top 10 or about eighty percent. I think, Evernote which I use, is in the top ten, 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 I'm not using it. I I'm using ChatGPT, but I gotta get all my shit into one place. It's a lamb . Let's focus on the business. So yeah, I I looked at and I go, the odd thing is this is a consumer internet version of early Vista toma brava. Buy those companies, cut the costs, raise the prices, and probably tap them out. So the question is: is it a great business? Absolutely. Should it go public at twenty times revenues or fifteen 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 twenty 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 gonna change their car dealer accounting system because they put prices up twenty percent. In the same way, you know, the default consumer is going to say it. So it's totally sensible and orthogonal plate, what everyone else was doing. So they deserve the prize. Should the prize be ten or twenty, that's a different question. But yeah, great story. Does it diminish what we've previously said about the ball to go 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 bifurcation and you need to be huge No, you you said it. I haven't said it, so I I But they're growing what seventy or eighty percent? What what are Bennington's growing? 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. We don't even think about a lot of these products as inorganic organic. I mean, does anybody r really care? I mean it as long as it works, if they can keep finding these targets for the right price, if they can do what they did with Evernote, which is raise the pricing from seventy five to two hundred and fifty dollars a year on average, if they can find enough of these without just running out of affordable targets, going to the founder's letter, it sounds better to me than starting something from scratch. Just go there's got there's gotta be eight hundred unicorns to buy. Just go buy those ones. I really liked his letter. He said we're 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 the the the constellation version was two a one to two X revenues, right? I don't know what bending spoon's blended m price they have and maybe it's not revenue based. I just don't know. Yeah. It this is constellation for consumer with a much higher valuation 'cause 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 no. We're gonna do another round. 1 6 5 billion price up from 134 billion earlier this year. But 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 model providers are going public are they have a huge capital need. And you know, I actually think I was might have been diamond or someone who said I mean 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 Databricks, 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 Anthropic was 30 billion, and the last private round at OpenAI was 122 billion. So this is less than, oh my God, it's 0.1% 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 Databricks private. So they can do it for longer because it's just not the same eat. It's a software company, it's not a m they don't quote unquote have to. 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. Databricks can get capital at a higher revenue multiple because of a higher growth rate than Snowflake can, and on hassle free terms. I also think the other argument he did make, which is m 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 SpaceX by Friday, you've got the two big uh 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 hub was they don't need it 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. To the top. SAS now trades at a discount to the SP 500 for the first time in history. Wow, that's sad. Meta weighing tens of billions more for CapEx spend, following in the suit of Google. Zuck. At a boy. I'll tell you by but the one what small one I'll pick just for fun if we're breaking. Um 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 it would they were clear there. I don't know what terms they use.ry, S Ior'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 it's interesting to me that you would launch a model that can't extend its knowledge its knowledge by searching It's a flashback to when this show started when uh basically, you know, ever every you chat talk to chat GPT and everything was uh nine months ago, right? I don't remember. I d uh my memory's only through September twenty twenty four. The only thing that says to me is um h hard to predict whether anyone can r can really we think everyone can catch up, we think o Microsoft can catch up, we think op deep sea can open source can catch up. But if Microsoft launches these models and it and it doesn't even search the web. Can can we really keep up with the pace at anthropic? I mean the pace of change is so rapid. It's so impressive. Like so much progress. I just can't predict. I can't predict where it will we'll play out over the rest of the year next year But you are right, Jason. It it did matter because it was the final recognition that frankly wages is you can't for Microsoft to have such a core foundational technology and the the uh 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 but 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 it 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 it's 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, though 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 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, onwards from here my guess is they'll yeah, 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. It's an interesting question. Can they do the Microsoft thing and grind their way to good enough over three 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 two to three years whereby they're not gonna be as good as Entropic of OpenAI, but they're good enough for the bulk of low-end intelli gence work. I don't know. They never caught up in search. They did catch up in cloud compute with Azure and you know, who knows here. But you're right, it is the one that matters. 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 spinning distance of the frontier models because that matters a lot from a pricing perspective. There's a lot of open source models today that are within spinning distance, no? Yeah, there are, but mainly Chinese. And yeah, the question then is, you know, is that sustainable? And a lot of our companies are using them and they is that sustainable, even though it's open source, is that sustainable over the medium term? If your only plan is you can download Kimmy or Deep Seek and you can fine-tune it, that's great. But A, some of those Chinese companies are themselves going closed source. I think what happens in terms of an open source competitor in 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 to Jason's point. Sometimes you get caught up in the stories and you you're the worst for that, Harry, 'cause you just love the gossip. But Jason's right. What really matters is is this going to be an oligopoly 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 is consolidation of models. If we have concentration of model winning, we are in a tough space and we want an ecosystem not a monopoly. There's a reason, yes, that everyone other than Anthropic and OpenAI is shoving money furiously at anyone else who can help a road that competitive advantage. I just did a show with Aaron to Perplexy 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 fifty texts from people being like that is the quote of the century. I gotta tell you, I think it's not in direct format, but there's a version of that either in Fred Schwed's Where Are the Customers Yachts from the nineteen sixties or in Reminiscence of a Stock Operator from the Nineteen Twenties. One of those two investing books hinted at that, but I always remembered it. So I I'm not the original author. But but the books are kind of three to five times older than you are, Harry. So it's kinda like the Bible as far as you're concerned. But before we leave you today, are you a founder working non-stop to raise your next round? Are you an investor doing all you can for your portfolio companies to help them stand out? Funding and scaling a vision is challenging. Banking should not be. HSBC Innovation Banking caters to tech and healthcare founders all over the world who need a really great banking partner that matches their pace, offering fast onboarding, product packages designed for your business, and capital solutions built for high growth startups and the VCs investing in them. With HSBC Innovation Banking's rapid onboarding, you can get access to your new accounts and facilities quickly so your team can stay focused on building and scaling what's next. 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