Best Crypto to AI Pivot Ever

0:28Hi, I'm Eric Newcomer. Unlike traditional business banking solutions, Brex has no minimums and no transaction fees, and you can get 20x the standard FDIC protection. Even better, you can earn industry-leading yield from your first dollar while still being able to access your funds anytime. Get the business account trusted by one in three U.S. startups at brex.com forward slash banking dash solutions. That's brex.com forward slash banking dash solutions. Welcome to the show. I spent my week in crypto land talking to a lot of VCs about the Bitcoin strategic reserve. Thanks, Trump and David Sachs.

1:12Thanks, crypto czar. I've got even the crypto skeptics in the crypto weeds this week. We're recording this on Thursday, but on Friday, there will be a crypto summit at the White House where hopefully we'll get a little more details about the Bitcoin strategic reserve. But as of right now, it's a little muddied because Trump kind of blew up a lot of people's spots on Truth Social, saying that we should add all these other altcoins into the crypto strategic reserve. It all feels very thrown at the wind to please some people and holders. And it just makes the whole thing seem even more self-enriching.

1:44What? The consensus from people you talk to is it shouldn't just be Bitcoin, right? Yes. The investors I talk to who are even holders of Solana and all these coins say adding other coins to this is a bad idea. Anthony Pompliano had a talk. He even said adding other coins is a bad idea. Investors I spoke to who are more reputable, I'd say, were also in agreement that it just makes the whole deal look even more self-enriching. And it serves no purpose except to pay back coin holders, which I think has been a theme of this administration's approach to crypto and how it kind of complicates things for these founders and VCs who, on the one hand, are super happy about all this boosterism and deregulation in the space, but it's being used to do Trump and Melania meme coins and self-enriching and makes the space look shady.

2:38With Bitcoin, there's this sense, I think maybe this was Naval, but it's immaculately conceived. Bitcoin doesn't have a founder. There isn't a clear person that's going to make a bunch of money off of it and therefore it's sort of not playing favorites to raise it up with the government. I don't, I mean, it's true, but you are just sort of playing favorites to people who wildly speculated outside of the U S government interests and now sort of reward them with a currency that could be competitive with the U S dollar, which doesn't make any sense, but putting that aside. Yeah. The idea that like ripple, which I think some huge percentage is controlled by like the creators or the company behind it.

3:21And Solana, yeah. I mean, it's very clear that you are just picking favorites. I think Matt Iglesias or somebody joked like, oh yeah, next the government's going to buy like GameStop. It's just sort of like, what's the buzzy stock we can hand out to our crew and pump it? It's just crazy. It hasn't even been that good for the price of Bitcoin, right? No, the price of Bitcoin has actually been falling this week. And it really peaked in December and has been not able to reach that high since. I think people thought, oh, man, you know, there are expectations. Like if Trump and the government get behind it, then this thing will really take off.

3:59You know, it didn't seem to move the needle that much. So it'll be interesting. I think it comes down to this tension between the legitimization of the space, like and people and actors in the crypto industry who want that. and to be more in the financial markets and the scammer parts of the space that the others kind of feel are bringing down and hurting the value of their assets with these kind of self-enrichment schemes, which I feel like is frankly a common theme throughout crypto's rise, candidly. And, you know, I, the self-enrichment piece, you know, I have thought it's, you know, the SEC made a mistake, clearly, in retrospect, the Democrats, by trying to sort of govern through prosecution, you know, or lawsuits, you know, because now Trump is dropping them all.

4:48I think they just dropped the one against, is it Yugo Labs, the NFT creator? Yeah, the maker of Bored Apes. Yeah, they dropped that. They dropped a couple other NFT suits. Yeah. Right. And obviously they dropped the Coinbase one pretty early on. I think about, we talked about that here. So it's just, you know, they didn't succeed. And also, instead of having clear, bright line rules that everybody could operate around, they just created this mess. And now Trump's undoing it. And we, the public, don't really have a sense of which of these lawsuits or cases was about enforcing some rule interpretation versus which ones seem to be sort of sketchy and somehow, you know, breaking sort of more classic laws and rules.

5:36So it allows for this perception of corruption that is unfortunate. I think also another key debate that sparked in all of this that's related, but not directly tied to policy. The Wall Street Journal had a really good piece about the sort of disparity between the stable coins, tether and circle. There's Tether, the Wild West, no centralization. And then there's Circle. We want to work with government. This is USDC and we're the good guys. They just found that leaders of Tether are claiming that, you know, Circle has been badmouthing Tether to politicians and whipping up enforcement actions and been accusing them of doing this to, you know, further enrich themselves by becoming the friend of regulators and bringing Tether down with them.

6:19And so it's kind of sparked this feud between the two leaders, but also paints this picture of where they stand in the game right now and where the crypto's future is really tied to this ultimately super decentralized idea or of stable coins in backing by the U.S. dollar is the move going forward. And I mean, separate from this piece, in my conversation with investors this week, they were all bullish on stable coins, especially ones tied to the U.S. dollar. That is one thing that they say has clear value. Stripe's acquisition of Bridge really proved that. That was a major deal and a huge crypto exit for a lot of these folks.

6:54And it showed more traditional finance, even within fintech, taking this space very seriously. And that could be one area for a lot of value acquisition in the future. But it's wonky payments reason to like crypto, not the fun reason that all your favorite Twitter accounts put laser eyes or whatever, not the wild speculation piece that people find so endearing. We're in this moment where every investment is now under suspicion. I mean, this is the problem. It's not just that you don't want corruption. You don't want the perception of corruption. And I think hopefully even Trump partisans can admit he's not doing a good job of avoiding the perception of corruption in that David Sachs is on Twitter being like, I don't have conflicts of interest about my holdings.

7:41Maybe. But he's like, wait till we have the whole report. And we haven't disclosed it yet. And obviously, Trump himself feels like he loves conflicts of interest. I mean, there was a report he's getting paid to meet with people. Anyway, so that plays into Silicon Valley investments. I mean, it was interesting that Harry Stebbins of 20 Minute VC tweeted out that Founders Fund, Peter Thiel's firm's current growth fund is the most sought after from limited partners that he's ever seen. And that is probably partially based on performance. I mean, it's a good firm, heavily invested in Anderil, was an investor in Airbnb, had a good return with StemCentrics, has done a lot of great investing.

8:26But you have to read it as Peter Thiel and the Founders Fund guys get Trump World. They're deep in government contract. I mean, obviously, Anderil is contracting with the government, the Department of Defense very actively and growing. And that's Trey Stevens' company. So, yeah, now it feels like, ooh, you have it in with Trump, like you're going to do great. And, you know, that's that's sort of a sad state of affairs. In more serious traditional finance business news, the IPO window appears to be opening up finally in 2025. Biggest one up, CoreWeave dropped its S1. And there were lots of juicy details in that filing.

9:05Growth is the story. I think it's, you know, what, 1 ,346 % revenue growth. And then that was 22 to 23. And then it's 737 % into 2024, which gets it to$1.9 billion. So it is growing a lot. It's not making money. I mean, it's losing money and it's in a fair amount of debt, I believe. But yeah, CoreWeave, you know, this is a moment in time where stock investors desperately have wanted AI stocks to bet on besides NVIDIA and Microsoft to some degree. And a lesser extent, the general Magnificent Seven tech stocks. Yeah, exactly. And, you know, CoreWeave is going to give them one. It is heavily exposed to everything going in AI.

10:01One thing that really stood out to me in the S1 is CoreWeave's severe customer concentration that has led to this rapid growth. 77 % of its revenue has come from its top two customers in 2024, and Microsoft alone accounted for 62 % of that. So it is heavily tied to big tech's success and bets on generative AI. And suppliers, you know, yeah, the customers and also it's been able to get access to NVIDIA chips when everybody wanted them. And so you have this sort of scarce product. So it's not just your technology. It's people are desperate to find a way to get GPUs in the first place. So they're willing.

10:39They want to contract with you. That said, they're in the right place at the right time. We're talking about crypto. I mean, this was a company that got its start in crypto world and leaned heavily into AI at the right time. Mike, the CEO, was speaking at our Cerebral Valley event in November. They get it. They're on the right topic. They're working with the right partners. They're growing insanely fast. So if you just say those things, it's great. It's just like, there's competition. Can they be a hyperscaler? Can they do this profitably? And how do these relationships last? And the final piece, the information out reporting that three of the founders together had sold nearly 500 million collectively.

11:21So it's a huge exit ahead of the IPO, which makes you feel like they're not as financially exposed to this thing in the long term as maybe you'd want. It's kind of the first big IPO post this massive secondary sale wave that we've had because liquidity has been so locked up. You're getting these IPOs where founders don't have as much control and ownership over what they've built because they wanted to cash out early. And CoreWeave, you know, a notable just purchased Weights and Biasis for$1.7 billion. CoreWeave is expected, according to the Financial Times, to raise$4 billion and value it at more than$35 billion.

12:00That's a hefty win in this market. And something that investors are probably looking at as, you know, a really hopeful sign as, you know, we talk about will generative AI produce these big exits. And this looks like a positive tell, like, yes, it will. And there's been some non-AI IPO chatter this week. There's reporting that Klarna is going to file for a$1 billion IPO as soon as next week. And then Discord is also in talks with bankers to go public as well, which are two non-AI companies on the face of it, but ones that people have been waiting in the wings to hit the market. So maybe they're taking this chance right now.

12:39And what Chime has been rumored for a while will be interesting to see if they go. So Discord, I mean, that'll be a fun one to read. It's like we don't see many consumer companies these days. I feel like they've been sort of out of the headlines. So yeah, interested to see how they're monetizing. Yeah, the last big consumer one, I think, was Reddit last year during that tiny window we had last year. Windows. I'm sick of Windows. I don't believe in Windows. I don't know. Good businesses can go. There are people talk about them, but I feel like overhyped. The companies need to be good. I think that's often more the challenge.

13:12It's like there's not a pool of companies that have figured out how to operate profitably while maintaining growth. And they need to figure that out to go public. Moving on to our deal of the week, Anthropic finally closed its mega round that had been long reported. But now they confirmed it. A$3.5 billion Series E round, which raised its valuation to$61.5 billion. And it was led by Lightspeed. A bunch of other new and existing investors also participated, including Bessemer, Cisco Investments, D1 Capital Partners, Fidelity, General Catalyst, Jane Street, Menlo Ventures. They've been back in since the beginning.

13:52And Salesforce Ventures were also in this round. So lots of kind of tier one firms and then more strategic growthy people in a growth round. But valuation is a lot smaller than OpenAI's valuation for a similar frontier lab kind of company. They're both still very frothy. I mean, Anthropic, you know, obviously has smart models. You know, they're one of the top three model providers, probably with OpenAI and XAI. And then they're dominating this code space for now. You know, I think that's been key. I think Cursor is heavily dependent on Anthropic and Anthropic is coming out with its own coding tools.

14:36So, you know, of course, there's one of the buzziest startups in the world. That certainly accrues to Anthropic as well. So I think, you know, yeah, it makes sense. But there's also just the dynamic. Not quite Uber and Lyft because Anthropic to me is much more serious than Lyft was relative to Uber. But, you know, all the VCs are looking for their horse in the foundation model race. I think the Anthropic bet might be Lightspeed's biggest holding now that they've done it. It was already one of their biggest investments. What it doesn't have is consumer penetration to the degree that OpenAI does.

15:13They don't have the ChatGPT killer consumer product. They are much more tied up with enterprise sales and sales to developers with these coding assistant tools. And some of the investors in OpenAI, I think the whole thing is ChatGPT and the fact that they have a customer relationship and it's one of the most downloaded apps. So if that ends up being true, Anthropics valuation is insane. If it's intelligence and B2B and coders, and maybe they end up both specializing in different things. And, you know, it's possible in five years, you know, they're both going public and OpenAI is a consumer company with an API business.

15:48And Anthropic is coding genius. Or maybe AGI is here. On Thursday, Anthropic reiterated the idea that they expect powerful AI systems will emerge in late 2026 or early 2027. So, you know, we are limited to thinking of it as being good at coding, but maybe investors are betting that, you know, in a year or two, we will be thinking about as a fundamentally different company. I'm super mixed on this one, by the way. I guess I want to take a second on this like AGI update. I mean, you know, Ezra Klein wrote, I think did a podcast and it ran as a piece in New York Times, basically saying everybody he talks to thinks AGI is right on the horizon.

16:32And I think I've said on this podcast that it could very well be the case that we look back on all this Trump stuff. And what really mattered right now is actually the rise of AI and AGI and like Trump is going to oversee this insane trend. And what does that all mean? That will be the most significant thing. So hard to forecast out. I lived through self-driving cars and I was like, no way, this is bullshit, it's going to take way longer. And it was really a case where all the companies and all the engineers sort of had a vested interest in saying, any day now. And then you get a lot of money and you get a lot of excitement.

17:06And so it's good for them. And they keep saying it. And reporters, we sort of have an incentive to say it too because you make these bold declarations and we're like, oh my God, any day now. And people like to read it. And so on the one hand, you know, that whole system would point to this being overhyped. The thing that has been different is that you can see how smart it is yourself by interacting with the chatbots. It has a level of consumer familiarity that we haven't had with a lot of these technology waves before. You can talk to it as if it is a person and you can feel that near human equivalent in a way that we've never felt.

17:43Feel the AGI like Sam is always saying. Are you feeling it? no, you know, I I've been using 4.5, you know, it's good, but until AI, like, I mean, I'm not a coder, so I think coders do feel somewhat differently though. Maybe it turns out coding is a lot more copying pasting than we ever appreciated, but until it has like an innovation develops a drug, comes up with an idea, you know, writes a book, like that's new. I think the difference between new and a better and better regurgitator is, you know, really different. And if the standard for AGI is that it does most things better than a human being, I don't know.

18:28To me, there has to be some novel capacity there. Anyway, yeah. I mean, with self-driving cars, you know, it was pretty impressive, but you could at least see humans intervene. So you're sort of like, how much are the edge cases going to matter? And my belief then was a lot. And now with AGI, I think there's a similar like, will they continue scaling and that benefit? Or have we basically learned everything we can from the Internet? Will they come up with new techniques? I don't know. What's your take? Do you have a prediction? 2026, 2027? Believe it or not. I mean, maybe it's the skeptical reporter in me, but I think that it depends on what you classify as AGI.

19:08And I think, like, to your point, becoming a better regurgitator is different than coming up with something novel. And when I see something novel created, maybe that's the threshold I'm waiting for. Yeah. I mean, I think what AI can do now, what these models can do is insane. And tons of companies will be built directing consumers to figure out how to use it. So regurgitator, my word, but I don't want to super downplay what they're capable of. You refuse to slander the AGI. I appreciate that. Yeah. For my own longevity, you know, Boco's Basilisk, et cetera. I think in 2027, we will not have something where we're like running around.

19:51Oh, my God. It's like out on the streets. Like it's this new being has been invented. Like it's possible that, yeah, like it beats a Ph.D. on most tests or whatever. But the fact is we're looking for like the Ph.D. that comes up with the novel research. And can you really claim that you're like smarter than a Ph.D. if you can't like deliver, you know, some percentage of them have novel papers. And if it's not coming up with something novel, just because it tests better on existing information. Yeah. So I guess on this sort of ability to do have novel intelligence, I'm skeptical by 2027. Will it take better tests than a typical PhD student in 2027?

20:35Yeah, sure. Honorable mention to our deal list. We have to say something about Ramp's killer secondary sale that raised its valuation to 13 billion. They sold$150 million in secondaries to a bunch of buyers like Stripes, GIC, Avenir Growth, Thrive Capital, Coastal Ventures, General Catalyst, Lux, 137 Ventures, and Definition Capital. If you see a high valuation deal, you'll see Thrive Capital. I mean, they're doubling down on the winners. As we've reported, it seems to be a good strategy so far. I've heard from investors who are envious of their investments. And they're also they're getting in good companies early.

21:13But yeah, there are a lot of these high flying deals. I think Logan Barlow was joking that, you know, he'd invested in Ramp at, I don't know, six or 6.5 billion during the pandemic. And it was like one of those wild pandemic deals. And at least here, that's getting validated with a 13 billion dollar valuation. Excited for the Ramp deal rippling inevitable like collision, right? They've got to, these companies are so valuable. They're going to continue to sort of go after one each other. That's our show. Yep. Thanks for listening. See you next week.