20VC: Anthropic Raises $13BN | Why Canva Will Not Direct List | OpenAI Buys Statsig for $1.1BN All Stock | Lovable Raising at $4BN + Vercel at $9BN: Justified or Not | Quarterly Results from SNOW, Mongo, ZOOM and more

24:03This is a long path. Canva's been doing this for, I don't know, 20 years, right? Something like that. But it's time has gone by a more nuanced. Sometimes you know, maybe you need mercenaries and sometimes there's cultures where it's okay and sometimes there's a tool for the job, but I just think this is, we can pick at this, and I think the criticism, but it's shit, I think Zach knows this is a bunch of mercenaries. Some of them are gonna fall in battle, some of them are gonna quit. And he's given 20, 30 billion to a pack of mercenaries. Cliff, canva seems anti -mercenary from the outside, right?

24:34But maybe there are times when you've had to hire a pack of them to go into battle. Can I ask a question on that, sorry, how I, because genuine and interested. We look at kind of big classical SaaS companies. We're trying to figure out their role in the AI world. How much of your re -acceleration would you attribute to the stuff you did in AI versus getting through 2022 and finding your sea legs again and executing? COVID, for us, we're growing faster than ever. So you've got a decouple valuation and company agreement. Decoupling valuation. Just to be honest, it was a massive discovery event. Everyone was sitting on their ass on their computer all day.

25:14It was great for Kenva. So what was the question? It was, um, I didn't post, I wasn't clear about post, like 22, 23, you deaccelerated. Right. And now you leave valuation out of entirely. Just talk revenue. And now you're obviously reaccelerating at huge scale. And you're doing what every SaaS company, pre the AI company wants to do. And that's the only way they're going to be back to being relevant, being exciting. and obviously every one of us owns lots of them and we're trying to figure this out. So for you, do you think that AI was the re -ignitor of growth in 2425? Do you think it was just execution?

25:48How much of a deal tribute to the AI initiatives you guys took in the last year and a half? I would probably say 20%. I think one thing you need to buck the trend of as you become a larger company is inchilla thinking and treating your user base like a wet detail that you need to ring out. 90 % of our user acquisition is organic and so we just needed to re -accelerate all our core flywheels and AI enhanced that, going really heavy on international enhanced that. We spoke about paying up for the team. There's companies that are being paid up for, Rory, I'm not shilling. So before you get me for shilling, I'm not shilling.

26:26But one of them is is lovable and is in the FT and there's like, hey, new $4 billion around. By the way, Cliff noticed what I'm about to do here. I'm about to neutralize my argument for sale. Another company in the similar space has got a $9 billion around a partner in the works. Question being, do these markups very rapidly, literally within a month or two, really make sense? Or is it excess capital supply that is exuberant, desperately trying to find a home in an AI company. I'll jump in. Definitely the latter is the there's the phoema of missing out and that that's real and people throwing cash and realizing that we're on a curve here with this AI boom and I mean most people are thinking we're not at the top of the curve it's not going to fall off where where a lot closer to the top than we probably were maybe a year 18 months ago but it still feels like there's money to be made and Rory I heard you the last time saying, you're still investing, this gravy chain doesn't, isn't probably going to end immediately.

27:30We'll sort of start cooling off at some point. And I think investors that is realizing they need a good chunk of their portfolio in this category. I do worry, as I mentioned before, about some of these companies crossing the chasm to the mainstream and turning that 100 million in revenue to billions in revenue. But companies like Lovable, they're definitely well positioned to do that if they keep executing at the rate they are. The multiples can't make any sense because we knew this when we did the round. You knew, I mean, Anthropics revenue has tripled in four months. And no question, there was some risk it wouldn't make the plan.

28:03Of course there's some risk. But it wasn't that high. Like we didn't de -risk. We're all investing on forward multiples. Anthrop, lovable worth 1 .8 billion 60 days ago, 4 billion today. I know the error growth has been tremendous, but it's probably exactly as predicted. I mean, listen, if it's if either of these out accelerated their plans, it'd be one thing, but I'm not blaming this one. This is why I'm getting super trouble, but fuck it. It's late at night and none of them London and fuck it. They're out accelerating plan. Like they are 125 to 130 now, give or take a plant and the year 175, they'll be above that.

28:42I think 185 to 200. If you're 185 to 100 and next year, say what it would say, they do it two hours to two and a half ice. So they're at 4 ,500. Is it that? Not to be paying. I'm not saying it's not Terry what I'm saying. And your data is more valid than mine. What I am saying is most VC should have had that in the model 47 days ago. I'm not saying that they didn't achieve the progress. You know, in the public markets, your Monday, you miss by 1 % and you get your head cut off, right? You're down 30, 40%. Even though the range of variations quite tiny, right? These were always valuing future growth.

29:16I just, it's not that I'm not saying it's lovable really in 30 days blew out the highest plan any VC had that then I'm with you but I don't believe inthropic did I believe inthropic set a crazy number as did open AI right these numbers blew our minds when they put them out there and they hit them or exceeded them the VCs couldn't put that in the spreadsheet I'm gonna come in because the the Monday comment put a pen on that I actually I think I actually proves the opposite point so stepping back because I need a really interesting subject Like the second round, two months after the first, I've been thinking about it a lot, right?

29:49And I got to do big buckets and then go down each. There's only three reasons, largely this happens. One is it was priced right two months ago. New information has occurred. Or something has changed such that the new prices work more. And that's kind of what we're talking about now. Is that happening? If that's not happening, that's option one. If that's not happening, then the second thing is somebody on the price the first round, and now someone else is figuring that out. There's been some kind of misprice out of the second price. If there's not net new information, either the second round is too high or the first round is too low.

30:20And the third and the most zany one, but I think is a non -trivial thing is, there's this validation concept, which is, oh my god, Sequoia were willing to do 2 billion. I would never have offered 2 billion or 2 .2 billion before, but now I want to get in and so they're going to offer 4 billion. So you get this kind of, the last round provides the validation for the next round. And those are three different things. and I think they're all going on to some extent, right? There's another point as well. It's like, if this company is going to be a 20, 40, 50, billion dollar company, who gives a shit, whether it's two or four, right?

30:53So if you can write the thesis that this company is going to compound some level of growth over the next five years, it's going to be one of the major players in a new category. But who gives a shit? You like Cliff, but largely, I'm just going to be that painful person. If that's correct, then the people who did the first round on the paid and the company. Let's just say if a company says, be just be logical. If the companies did exactly what it said to do and they raised money at two billion, two months ago and can raise money at six billion now, they should have raised money at 5 .5 billion two months ago.

31:23They underpriced the first round. By the way, it's why it's quite like that whole IPO weirdness discussion. Oh my God, you priced your IPO at 38 bucks in the stock open at 76, you left money on the table. It's actually the private version of the same thing. I think it's the Harry, I think it's the Harry effect. I haven't listened to a Harry Potter cast for years and drum. He can talk about the stuff. I think you've had a two billion of market cap to his company single -handedly. But the single -handedly, you can't do a share. Tell me, but let's go back to the first one. Because I think the first one's interesting, because it's actually a fact -based common, is there net new information now they work more?

31:56Because you'd like to think the whole world lives in the first area. And if it doesn't, because then you went to weirdo shit. The second thing is misprice again. And the third thing is just kind of psychological, dog hierarchy, high school hierarchy phenomenon of I can invest in 8 ,000. So go back to the first. Jason, your point, you said the Monday thing about you miss by 2 % and the stock goes down by 30. But my comment is that's actually proof why you can in fact see these step -ups. If you're underwriting 30 % in the next two months and you get 35, by the same logic that if you miss by 5, you go down by 30%.

32:30If you achieve, outachieve by 5, you can justify via higher price. And I think on top of that, the beta is off the charts, right? Yeah, and on top of it, it's off. Somebody on tropic thing could go down as that first example is the performance to see I think they'd rex and I'm willing to bet it's actually it gets the first point. I'm willing to bet no matter how hard you tried, no one had, they went from 100 to a billion last year, they're going to reaccelerate in Q1 or Q2 of this year. And it's obviously with the curse of Claude code, et cetera. So there is new data I would argue. That's an example of where you have a 3X step up from the early round, I think, with lightspeed earlier this year to today.

33:09And at least some of that is justified based on new information, which is they have reaccelerated at a scale that probably no one imagined they could do it at. So I think sometimes that follow -on round two or three months later might be based on new information. I don't think it's majority of them, but some of them. I'll tell you one, just on this point, one to me shows the inefficiencies in this, right? Do the shoot from the hip -edness. Itches that lovable closes Harry's favorite company, closes at 1 .8 billion in July 17th, 2005. 13 days later, the exact same company called Replet. That's the one I use.

33:45Same company closes at 3 billion. Basically the same ARR, basically the same company. Yeah, I can tell you my views of security and Rogai agents, but come on. I mean, most people can't tell the difference. And in the revenues, basically the same, 100 -ish, right? One's worth three billion because it's marked up by Andreessen, one's two billion because Excel wants the deal. I don't think either of those deals were perfectly efficient. Is this fundamentally bad for companies, Rory? If these companies are getting hundreds of millions of dollars, four -grout down their throws a month or 45 days after they've just taken a couple of hundred million dollars more, do you believe that is fundamentally bad for the company?

34:22Did it change your values cliff having an extra billion on the balance sheet or did not really change the company? Well, we've had a billion sitting on a balance sheet for ages and it's a bad round. That's a flex people. That just I've had a billion night around for ages. What have you guys been doing this week? Okay, flex a week, lift big guy. Okay, you want to sound all wise, Aalish and say don't take too much capital, but the truth is it's a rocky journey. There's probably some bumps ahead. Most founders will be happier with a bigger balance sheet. The really great ones are the guys who can take the capital and then have the discipline not to use it foolishly.

34:55Sometime in the next two years, in many of these markets, there will be a shakeout and if you've pested all the way in performance marketing, shame on you, but if you have that capital ready to move decisively, you might find a good opportunity for it. It all comes down to confidence in your ability to execute and capture time in market share. With Canva, we took a very different approach. which we were so bullish on where we were going, we wanted to minimise dilution. So we raised as little as possible at every stage to get us, this is a high risk maneuver and I don't recommend this to founders anymore.

35:27I say, be a bit over capitalised, but we would run it kind of to the bones in order to take as little money as possible. We'd go for the highest valuation possible just to back ourselves to hit that next level and get as minimal dilution as possible, which worked out well for us, but was a riskier than probably is recommended manoeuvre. Guys, I want to cross the chasm, so to speak, and move from the world of privates to the world of publics. This will be a fun one, because we had a quite a big week in public. Crushed for B2B. Jason, baby, B2B publics his back. Snowflake, Mongo, Box, Elastic, Octa, Zoom.

36:05I mean, Zoom. B. I mean, that's like Madonna coming back from the dead. I mean, that is like... Yeah. Yeah. Sorry, Roy. Didn't want to say that. I said it. Not you. Jason, is this just like the return of the good old days for sauce, baby? How did you analyze uniform great results from everyone? I mean, I don't know if it was quite uniform, but it is interesting that some folks, I mean, let's spitball it is half of the public B2B leaders are finally getting an AI tailwind, right? Or they finally are getting one. And not everybody, you know, we love Salesforce, we had Mark on, they haven't seen it yet, they have the demand.

36:45It hasn't hit yet. But Box Zoom, Mongo should be crushing it because every time I spin up a new vibe app, I need like two or three databases, right? I mean, that's just one corner of the world, but Mongo should be crushing it. And so it's exciting to see. It's not even, I mean, the Atlassians from down under the Dropboxes aren't all of the Asanas aren't seen yet. Like Cliff said, you just got to be smart. You're not building our own LOMs. If you have a billion dollar install base, you have a distribution channel, the Cliff's point, right? It's kind of sinful if you haven't re -accelerated by the end of 2025.

37:17You kind of failed as a founder because yeah, you may miss some of the cool kids, right? They may not, they may be using, but you have a billion plus of distribution. You have no excuse. You had 18 months. So thank God we're seeing it, right? Because it would be almost catastrophic if none of the leaders were getting an AI tailwind boost. And it's good, but it's not a dead cat bounce, but we're not outside of Mongo and snowflake. We're seeing modest, modest re -exceleration, but it's great to see them have it. Otherwise, we have to give up on all the public guys and bet on the canvas and data bricks in the, and drop X and give up on the last generation.

37:55Taking Mongo, because that was the one that jumped 40, 45 % of the stock price. It's back to the point Jason made earlier, which is the year -on -year gap growth rate is back up to 24%. I think it's higher Q on Q, so I think they guided a little more forward aggressively. But they were at that rate two years ago. So it's not like they're 10X -ing or something like that. I think what happened here is everyone got into the, oh my god, Sassy's dead, everyone's sad, none of these guys are going to make it. And even small, and this is back to the Monday comment, because these markets are trying to It's not just about fundamentals, but it's about how you perform relative to expectations.

38:34If you're expectations are low, and you just do moderately well, you can have a 45 % jump in the stock price in a week. It's back to, and if you look at the absolute stock price, if you look at the revenue multiple, it's just back to where it was two years ago. It's a great core company. It's the Mark Twain. Reports of my death were greatly exaggerated. Well, it turns out reports of the death of Sassan Software were greatly exaggerated. If you are a good CEO on devils and an extraordinary good CEO, just like the cliff story there, because he did, I mean, I noticed Cliff, he didn't say, oh, it was all just AI.

39:04We got our shit together. We did a whole bunch of things. We raised our expectations. We said, hey, we're the leader in a big market. Let's make stuff happen. And if at that point you value it at seven times and then you beat plenty from by a little bit, you get that kind of bounce. That's what happened here. Cliff, when you see this Monday getting hit for being, you know, a couple of percentage points off, again, I would never ask on time. I mean, quite that ludicrous, but you go like, yeah, that's an arena I want to be in. Or do you sit and watch cheeky pint with the colesons and go, that's the fucking arena I want to be in, sitting drinking in on our call it beer with the founder of Cognition doing a hamstand with Vlad, enjoying the wonderful splendor of the private market.

39:45That's too a lot of my beers alcoholic. I haven't never followed that trend, but I love it. I think it comes. I mean, yeah, yeah, there's a lot less scrutiny as a private company, but as a late stage private company with the likes of all the big cats that are playing in public markets, already invested in us and continuing to do so. Our reporting obligations and our expectations to Beaton Ray are pretty much the same. So it does get me thinking, like, what is the real difference? And then I think to your point that you've made on previous podcasts, the public markets So valuing companies a lot higher.

40:21So when the public markets were valuing companies lower than the private markets, you were kind of like, well, whatever, whenever. But now, now at a lot higher marks, it's sort of, it is appealing. It is becoming more appealing. In the show, we actually mentioned you, probably heard it, sorry. Where we were like, you know, Figma goes out, Jason's like, Figma goes out, sees the pub. If I were you, I'd be going back to the team, going like, that's Forest Gump, this one. We should go out now. That's right. I mean, we're gearing up to be ready to IPO. We want to be an IPO ready company. We recently, you mentioned Zoom, we brought in Kelly who led their IPO and she's been fantastic addition to the team.

41:04She was there, CFO. So our goal is to be ready when we actually go out is another question, but yeah, we're gearing up to be an IPO ready company. Can I ask a question we've talked about on this show a bit? that you have a billion in cash, you're profitable or cash -low -positive, I don't care which one, probably both. You're able to do tender offers for your employees and provide liquidity. And whatever, whoever of your early stage investors want out, you can probably flip their shares. Why I don't have, I'd love them to sell more shares because it has helped solve my problem right now of not having enough sales on it.

41:39Yeah, so why, why, at a meta level, why IPO, right? You have and you and even MNA probably isn't a reason on its own right unless you want to buy something for $10 billion Why would you IPO? Yeah, I mean, that's the question we've always asked ourselves and I think there's three key points There's availability to capital which we we have access to I think it's probably liquidity and there are Restrictions particularly around employee liquidity and what you can do in the US and whatnot around that piece and so So we do believe in where 13 years old as a company, our employees should have liquidity.

42:16They've created all this value. How can we make it easy for them to access that wealth that's built up? And while secondaries, annual secondaries are a mechanism for that, it's pretty janky and particularly in some jurisdictions, it's downright impossible. That's probably the biggest one. Yeah, as you'll get a bit more publicity, personally, we don't want to be more in the public car we're happy just being in Australia working away building great products. But yeah. I mean, I'm not going to be too nice to get clear because after last week Harry gave me grief for being too nice to our guest, Mr.

42:51Benny. Oh, he'd give it to me. I love it. But I don't have to go to be nice this time because I totally agree and you mentioned the other one in passing and I just want to put it back on the table because you said it, oh, and by the way, the public markets now are giving me cheaper capital than the private markets because if you're, if all the numbers are as reported, you're getting roughly 10 tax revenues and the fine folks at Figma are getting between 17 and 30 depending on how available you think the current price is. I think that's the byproduct of these large, large crossover funds probably have 80 % of their capacity allocated to public and 10 to 20 to private.

43:26And so you're chasing a smaller pool of capital, even though we're wearing a good position. Yeah. Ultimately, the volume of capital dictates that multiple and there's such immense amount capital being deployed in public markets that just is driving up those values. Great. In this conversation which we have rolling all the week, I'm a huge company that's scale like yours should be public. If for no other reason it is bizarre that we've evolved the system whereby to allow ordinary people to invest in you instead of paying 50 bips to fidelity we have to pay two and 20 now and enrich the middleman like us and you know God bless it but it doesn't seem a mission driven company would make that their mission but call me cynical on that.

44:05Right? It's just the whole structure's absurd of, you know, these high, and it's exactly what you said. Having to get permission from your employer to get liquidity as a second away after 13 years, it's better than no liquidity, but it's a little bit surf -like. And you really, when you're public, you can do it, you make your own choices. So I'm totally with that answer in terms of companies at scale when they're ready should go public. And it feels like the better way to want a business at scale. Yeah, I mean people deserve liquidity and having our customer base we got 240 million monthly active users A lot of them want to invest in Canva and and you see Figma had a huge retail demand We want people that have helped create our success to share in that success and we really want to deliver for them So it very much works into our mental world.

44:51So yeah, we're not anti -IPO. I love it. You're not the perfect contender for a direct listing Oh, I've looked into this and while I've looked into it in depth, it just, you've got a great consumer brand, you've got 240 million consumers that would love to buy in. They're at listing all the way, baby. Yeah, it is an option. I'm not sure it's going to be the option for us. We'll look at all options when the time comes. You can still get all those dynamics. You're not really getting much out of it. If you look at all the historic direct listings and how they've gone over time, I believe the data proves that none of them have been great, at least successful.

45:29A lot of them have been really successful companies over a long period of time, but that period post direct listing, none of them have really kind of nailed it over that short term. You are right in one sense, but it's always worth pointing out that the definition of success is weird because you wait. They didn't nail it in the short term. In other words, the stock didn't go up a lot after the direct listing, but a little part of mine wants to say, that's the frickin' point, right? You know, no one wants to say it, but if you get the direct listing totally successful, the people buying don't make any money, right?

46:02And people like their pop. So, I mean, you've mentioned this in a prior podcast, it is about getting the right long -term inquisitive. So you want people that are gonna hold your stock if you deliver, if you deliver being a key point, you need to deliver for five, 10 years and compound that position. And so yes, from a sort of logic perspective, it makes sense, supply and demand match that key. And you definitely don't want a huge, huge pop. And I think you can sort of manage that through how you stagger the lock up periods, et cetera, et cetera. There's ways to manage that. So it isn't everyone locked up for six months.

46:38And then it drops. And there's better ways to kind of manage that. But yeah, I think you're ultimately optimizing for the large, long shareholders that are probably going to hold 50 % of your stock for an enduring period of time. And the relationship you build with those investors, incredibly important and there from what I understand, pretty anti -direct listing. And that answer, that very coach and answer is how, why everyone in theory will argue this. And then when you're the guy and point with your life's work on the line, just like halogen and you're like, do I want to be an experimental baby on the biggest day of my life?

47:12I do I just want to land this frickin' plane. There you go, baby. And, I think your point on Figma was totally right, the Roy Wishes, that everyone was, oh, here's the test case for why we need to have a direct listing and you were like, well, it hadn't been a direct listing, it would not have listed anywhere near the price that it went, it would have been three to four bucks higher, maybe it's 36 to 40, but it would be ridiculous to assume it would have been a 75 starting price. I think I was really well articulated. I was listening to Jensen on an earnings call. This is also great clip about doing these shows.

47:41I actually have to do some work and really listen to earnings calls again. Okay? He said over the next five years, we're going to scale into it with Blackwell and with Ruben into effectively a $3 to $4 trillion AI infrastructure opportunity. $3 to $4 trillion. Can that level of CapEx be supported by enough AI -driven revenues? Yeah, I mean, look at it. That's to $4 billion. You want a 20 % return on equity. you got to be generating 800 billion of profit a year. That's not a profit when Facebook met, all these guys make a couple hundred billion a year. So you've got to believe in you're gonna create another four Microsoft, another four Facebooks to justify that kind of spend.

48:25So it feels deeply lofty to me and not grounded in kind of the macro. On the other hand, it's hard to argue as the guy who built the company, the most valuable company on the planet. So you can get them credit for the specifics. I don't see where the macro works, but whatever. If you want to make that bad, Harry, there are Nvidia puts that I keep my eye on that you're more than welcome to plow into anytime you want. Tell me when you do, Roy. I will. Look, I don't know. I mean, Roy's math is hard to argue with. All I do know is, you know, I know it's a small percent of the economy, but when you listen to what Cliff's saying now, when you listen to what Mark Benioff said last week, I mean, basically Mark said, we're like 0 .1 % AI penetrated in the Salesforce space, right?

49:05So Salesforce is coming up on 50 billion. They alone are gonna have 200 billion of AI attached to their model. I'm not saying Mark's gonna get all of it, but the attach is gonna happen. It's just so, it's so early. It's hard not to see everything easily being 100x bigger than it is today. We just started. We just started. It feels like 100x. Now does 100x get us to that? Number I don't know, but I do think that Jensen and Sam Altman have a pretty good sense of it, so I'm not betting against it. We can ask Cliff how much, how deeply AI is penetrated there? Yeah, we have billions of AI usages in our product per month and that's accelerating a clip.

49:42So it is just beginning and the amount of calls and inference we're gonna rely on is just gonna grow exponentially as these products evolve. Let's try and quantify it. They're all gonna get it run on device a lot more. So there are optimizations that are coming. Thank you. Take on that because you'd mentioned the notion common to spending 10 % of the revenue on GPUs and in front of the model training. I mean, so turning back, they've gone from a 90 % gross margin to an 80 % gross margin. Which is effectively way of saying, to deliver their AI magic, they have to part with roughly 10 % of their revenue to the big AI companies, just as maybe they probably did roughly the same to AWS.

50:26Turning back to Cliff, do you envisage spending 10 % of $4 billion, $400 million on NVIDIA chips and our third party models and GPU acceleration. Does that feel wildly too much? It's 10 % yes, 100%. So we do our own foundational model training, which requires a huge amount of compute. But then there is a lot of expenses and I think this is where the notions and Mondays and all the other companies of the world are flowing through revenue to the model companies. but those costs are coming down exponentially. You want to have the best model in your customer's hands. But do you think 10%, I mean, you're spending like a, do you think it could get to 10%.

51:10Yeah, definitely, there it is. Wow, yeah, that's it. But especially in the short term, it will be probably less than that overtake. So you got to separate training your own models versus serving AI. So currently yes, I mean, if you look at loveable, What are they? What is their pass -through in regards to what they're paying Amphropica, whoever the model providers are? It will be a lot. It will be way more than 10%. But over time, they're betting on distilling these models down, understanding user queries, and where I need the foremost frontier best model first, where I can deploy the model that's on device, or the model that we're self -hosting and running.

51:49You'll get a lot better. Companies will get a lot better picking the right model for the right job, and only using the expensive models connected through an API to open AI or anthropic or whoever, for the most premium queries where you need that answer, but 90 % of it will be run on device or be self -hosted. And we know that over time we'll use the best models. And that, so take image for example, if there's the latest and greatest image model that has additional capabilities, it may cost us four cents an image. We know we can get that cost down to 0 .02 cents an image. And we're banking on that over a six month period.

52:25So we view some of those upfront costs that are having a big eating a chunk into our margin as more of a marketing cost than a long -term enduring cost of goods. Got it. And that's a huge difference. I mean, the assumption of getting 10 % from every software vendor is crucial to the idea that you can expand three trillion dollars. And if clear for all the other cliffs optimize and that 10 % becomes 5%, I mean, which is still a hefty tax to pay from your revenue. But I don't want to speak for Cliff, but like creating a static image such as it is today you could bring it down to a room of magnitude.

52:59But like, let's, what Canva adds everything that gametes. I mean, Gamma's consuming a lot of tokens to build dynamic presentations for every single person at my little team on the fly. This is not a noting yet. Yeah, coding every presentation from scratch. Yeah, that's a lot of time. And it's not, and it's only pretty good. Imagine when it's great and they redo every presentation three times and run it through multiple models. And then, and then Canva does it and Canva has a higher bar because you have 240 million users. We don't need to code it, right? So that's why we're building our own foundational model to generate a presentation.

53:30That's like phenomenal. It doesn't need to code every line of a presentation. So there, that's a heavy compute cost to create a presentation. That will be looking at, we don't need to essentially go to Anthropic and write a whole thing, a whole essentially website every time we want to create a presentation. It's a lot, there's a lot easier ways to create presentations at a lot lower costs. So, that'll be thinking about that just like we've thought about it. But if you were doing the Gamma approach, which you're not, you might not go into Rory's point. Let's compare it. Oh, we've got the Gamma approach.

54:00We've got Gamma code, which you can code a presentation, you can go to website. That is a high compute cost. So, we've got the equivalent of loveable where it's more for creating widgets and for education purposes, et cetera, et cetera. It's got 20 million active users already. It's going really, really well. But you could roll that up. I like it is cool, like I use it today, but you could do much more. Like you have it pretty locked down. Like what you can do with it is create assets and overviews. It's great, right? But you could you could spend a month and this could be lovable prime if you wanted to.

54:29Right. But you use 50 times the tokens. Yeah. Totally, totally. Yeah. And that is an expensive product to serve our customers. That is the most expensive product to serve our customers. I mean, the macro, this sounds really arcane, but it's actually going to really kind of drive a huge amount of downstream. stream implications on the whole discussion we're having and it's the ROI there, right? Because like, big picture, the cloud business pre -AI, AWS, Microsoft Azure and Google, plus or minus $152 ,200 ,000 of total revenue. If every software company spends as much on AI inference and AI training and the whole enchilada, as they did on cloud compute, that's a $200 ,000 a year business.

55:10Just as I say, rough analysis, there's probably some double counting there, right? That's pretty damn impressive and it's still going to be hard. That's the minimum they need. $200 billion top line revenue. $100 billion of profits. Going back to that, you wouldn't want to spend $4 trillion to make $100 billion of profits. It's that for 3 trillion of CapEx to have a return, people like Cliff, one in business like that, are going to have to yield a lot of cost over to the hyperscalos, the model providers. And I don't think a large number of software exactly are going to do that at least easily. So it will be interesting to see how that math actually shapes out and if you can in fact, your command to return on that level.

55:50My gut is something over and above what we've seen now is required. And Jason, you're pushing and you always do. Maybe that is there. Maybe it is instead of optimizing compute, you try to compute it at everything and then use as a woman to pay for it. But it's something more than what we got now. I just think we're underst, I mean, Cliff made the point. We're underestimating. The processes This is a run today. We'll figure out how to use on less tokens or our own models or other things. If the world doesn't change, it will come down in order of magnitude a year or possibly faster. But our ability to use orders of magnitude more tokens can be could turn this on tomorrow.

56:24And we could consume massive amounts of to they already have the product. It's already cool. It's just it's here. We genuinely have to we just says this is an interesting point. We genuinely have to think about this deeply because we've got 240 million users. We've just about to launch in October a whole slew of new AI products deeply integrating it into every part of the workflow. We need to seriously run the maths on, hey, if 20 % of our users, 50, 80 % of our users use this 10 times a month, what are the costs going to be? And they can look pretty big and eat into margins very significantly.

57:00So we need to be sort of double adding. And you can still come to a shifting pricing accordingly. No, no, so we are doing that actually. where we're moving to a unified credit model around AI, so your premium subscription, free gets a certain amount, premium subscription gets you a certain amount. And then if you're a super active user, and so that means it can't eat into our margins too much. So you need to maintain that margin and we'll have sort of that scaled usage base pricing beyond a certain point. Claire, if I need to look at usage within the company itself, Jason said something I think very apt, a couple of shows ago.

57:34Jason, you can remind me specifically what you said, you said about basically equipping developers with, I can't remember the number, was it $10 ,000 a month in terms of assistance through coding tools? And that's where it's coming from. And a Shopify was pushing it, like up to $10 ,000 a month. If you can prove the ROI, that's the budget. When you think of equipping your engineers at Canvard's Day, would you feel comfortable in a future world equipping them with $10 ,000 a month of coding agents? We haven't done that down to an individual level because I don't believe we've got over 2000 engineers doing that at scale would be the right approach.

58:08But from an engineering leadership perspective and we encourage all engineers to use the best security certified coding tools that can increase their efficiency and we're not price sensitive around that at all. We know that ultimately the playing field levels out and there'll be competition. But yeah, so we're very open with whatever tools they want to use but it has, There's always the two or three great ones and it is already consolidating. Push on that because and you probably have guys at the 20 -buck level a month as a given the 200 -buck level because Jason's visualizing a world where you can go one X order of magnitude beyond that to not the 200 -buck a month but the 2000 -buck a month level and even beyond that.

58:52We need to rethink our seat -based pricing model because some of the tools particularly around marketing tools we're creating enable a single marketer deploy tens of thousands of pieces of content. So one person can create so much content, be feeding that into all the social platforms and wherever their marketing visual content ends up and then getting the feedback from how that's performing in the wild and feeding it back into the creation loop. So one person can do inordinate amounts of work and that's using a huge amount of compute and you can't charge 20 bucks a seat for that level of So then it hits a certain, you give that functionality for a per seat price, but then over that it needs to be based on consumption.

59:32So it's a hybrid seat and consumption based model. We saw Monday got hit because a lot of that growth relies on SEO. You're seeing SEO really reduces a customer position channel for a lot of companies. I know you've only got 10 % which is paid cliff, but given 10 % being paid, are you moving forward with the assumption that SEO is going to be a much smaller part of your at customer acquisition funnel moving forwards. I think SEO is about 15 % of the 90 % organic to date. So it used to be our number one channel, but now our user flywheel, word of mouth, and people sharing designs are our biggest.

1:00:08No, I mean, we're seeing a lot of some of the SEOs growing for us, but also we're the number one productivity up on chat GPT and we're the fifth highest domain that chat GPT refers to. So out of all the websites, it's like Google, Meta, but we're number five in regards to essentially it's SEO for LL. Because we've invested a lot over the years, they're obviously taking a lot of the same signals that Google's taking and anything we're losing on the SEO front is translating to LLM SEO, which is a huge tailwind for us. So to give you an example, a year and a half ago, 0 .02 % I think it was of the images uploaded to Canva were from chat GPT, that's now over 5%.

1:00:54So the fuel and content being generated in these LLMs are being propagated into Canva for that editing, for how they're using it in designs and for that collaboration storage deployment, that whole visual communication workflow that we excel at. I know what Harry's fishing for, trying to figure out how his investments are doing. Have you proactively tried to win in terms of how you show up on Shaq GPT in the same way you did on SEO or has it just happened organically just by virtue of being who you are? I would say 100 % we have won. As soon as these LLM started taking off, we had the conversation, is that SEO team working on LLM optimization and there's definitely a team at Canva working on that?

1:01:38Cliff also, yeah. Yeah, this whole thing about SEO being dead is stupid. It's dead for folks that don't have a brand, don't add value and don't ever reach. I mean, I just popped it into Claude and best overall Canva. What best design product to make YouTube sound? What best design product to make YouTube sound? Best overall Canva. I mean, it's just... In fairness, kind of, the SEO, I think you have to distinguish between people like Canva whether they have a product to sell and they're totally happy to celebrate Chatchy PT. And then media companies, where the only part of the have is their content, where if Google or Chatchy PT serves up the answer and no one clicks on the website, then they're toast.

1:02:18For kind of, this is not existential. You guys are fine. But if you're a mid -tier review site, you just get scraped and summarized. Well, thanks for playing. Cliff, you've got Open AI at 500. You've got Anthropica 183 and you've got Groc at 100. Why do you put your money? All of them. I'm going to have big hands more of those companies. I'm not going to do that. We're still a constitutional company. Country, you have the right to remain silent. Yeah, yeah, yeah. They're all doing great work. Mutual. He doesn't fall for your traps, Harry. Not like me who foolishly feels they need to answer these questions again to trouble.

1:02:56I generally believe they're all companies that are going to be the foundations of our AR future that are going to feed pretty much every single product. So it's like betting on Amazon and betting on power. You know, it's in every sort of and that come and the power question is an interesting one because every big revolution when it comes to technology shift has largely been power based. And I think one thing that's interesting is the amount of energy that Jensen's $4 trillion investment is going to take is just insane. And I think it's akin to really what Tesla have done with the electric cars.

1:03:34And so while I see AI pessimists and environmental pessimists saying, oh, so much more energy, it's going to be bad for the environment. I actually think it's going to rapidly accelerate our shift to green energy, particularly nuclear, which we're just going to have to solve. And once we have solved it, and it's way more economically viable than burning fossil fuels, it's going to kick start the entire shift to renewable, or zero emission energy sources, which I think is ultimately going to be huge for the environment, like midterm. Before we wrap, there's one interesting topic that we said about before, you said, oh, you should invest in Riverside, and I was like, oh, no, I saw it at seed, and I missed it.

1:04:16And then I've seen it every round since, and I didn't want to do it. You said it was an interesting thing about kind of the VC regret pathway and not engaging later on, I had it again, stay with the Revolut when people asked me why I'm investing in Revolut and I was like, well, it's been embarrassing as an early stage ambassador to buy Revolut off Goldman's ice. My plan. That's when you really fucked up as an early stage ambassador. Brory, Jason, I'm just intrigued to your thoughts on the ones that you've missed and the regret pathway on investing later. I think you should do it. It's a short answer.

1:04:48And this for the viewers just happened before the conference, before we kind of went live, Cliff was talking about folks who looked at Canva early on past and then really struggled later on to pony up and pay obviously much higher prices. I am the exact opposite. Many of my most successful deals I've passed on prior and I've just learned if you pass on something and then you get another data point like a year or two later and they've done what they say they'll do you literally don't need any more information. It's so much more telling because with a new deal you're starting off and all you're seeing is one data point.

1:05:21The difference in information content between two data points over time, border witcher positive, and one data point and where you have no calibration is almost infinite. I can think of two or three deals way back in the day. I passed. I didn't get amateur in 2003 and a year later I saw it at twice the price and I bought all I could. Same thing on box, passed at the start of 2010. I ran it and even get done. And nine months later, I literally woke up and said, what's the dumbest thing I did all year? I didn't that deal and I went down and did it. And I think I'm trying to discipline myself to do it even more because when you go back, let me just repeat it again, when you see the company, when they sell they'll do A, B and C and you pass, you don't believe they'll do A, B and C and then they do A, B and even if they do C prime, a little less than C, you have what you need to know.

1:06:07And then then Cliffs Common applies is now you're seeing a category leader, you know you can lean into their execution, you really should say to yourself, unless you think there's a time problem, Unless you did a time problem, you should say to yourself, I was wrong, how do I kind of change my waiting and lean in here? Does that leaning in apply in an AI world where sustainability of revenue is a question? Because a lot will say, oh, I'm gonna do 10 million in a year. I think the two separate issues, because you are right about one thing, sustainability is a lot harder in AI. I was seeing a lot of people drift in and out of product market fit, but that's gonna be true in the new deals as well.

1:06:44You know, the new deal that you see, where you have no context from two years ago, and it looks golden today. That can drift out of product market fit too. So it's a separate factor. And I do think even in an AI world, so taking it one step beyond, I think the really positive sign in an AI world would be you find the find whatever reason you passed two years ago, the best of all signs is this. The product has evolved three times because that's what's happening in AI land and the founders been able to evolve it. And then you're like, oh my god, this guy has a survivor gene. Run, don't walk because I think that's one of the identifying characteristics of the people we see figuring it out, which is the damn thing keeps changing, but they just keep changing faster than the other guy.

1:07:24So again, I think there's always signal because the hardest thing, the thing you can't change in this business is time. You can't compress time. You can't fast forward. You can't rewind. So when you have two data points over time, that's just so frickin powerful. And I totally get it. Because I wrestle with you get hung up. Oh my god, I could have done it for 10 million or 100 million or whatever. Now I got to pay 500 million and you just got to look yourself in the mirror and say, that is the tax you pay for being stupid, pay the tax and just get off the stupid train. Does the same apply for follow -on rounds as well?

1:07:56Because it's amazing to me when I've seen investors have the inside lane on all the company data and the company is performing like crazy. They've got a big chunk very early call it seed A or B. And the best investors that have done best out of Canva, like they were early stage funds, but they realized holy shit were on to some of you here. So they raised SVB, SPVs or additional vehicles to move further up the value chain, like going later and later stage and compounded their position or at least didn't get diluted over time. They've done the best. First, there's a lot of early stage investors being like they call themselves being disciplined, oh, we only stuck here.

1:08:33But if you're on a winner, keep betting on that winner is my approach, but it's amazing to see how different investors kind of treat follow on investors as investments as well? It's a great point and I think two separate issues. You have the individual, the investment is are you making the right investment? In other words, did you really think that the third follow -on round was overpriced because you thought the market was smaller? Were you wrong on the investment? So that's one factor and we can talk about that. But then separate from that, you know, you have the institutional thing. Are you set up to do those big rounds?

1:09:03Do you have to raise an SPV. Are you able to raise an SPV? And I would say cliff. One thing I've internalized is I think especially being scarred by the public three decades doesn't help sometimes. And you write in a company like yours the correct responses, piling at every level and find some way to do it. So there's two separate things. One is do you think it's still think it's a good deal? And to your point, one of the things we've observed is the round after the round we do, if it gets a quick outside lead up around and you have positive data, it always feels expensive. going back to, oh my god, it's too much.

1:09:35That's the round you should do every dime, because it's roughly in the same strike zone as your sweet spot. It's not like we typically invest, your plus or minus 100 million per day. The 20 billion round is hard to get your head around. But if you do the round at 100 and then at 12 months later, there are three or 400 and everything's working, that's a signal that we have constantly underestimated and are constantly corrected and have been validated on. Or actually, or not, or actually, there's been a price inflation point but there hasn't been a company inflation and so you're actually paying up for little company growth.

1:10:08I'd rather pay up to the $800 to a billion where there's real company inflation and the price inflation matches that. Well, there's two things. One, if it's price only and you're not... Yes, if you believe your inside information pushes to the negative and you know something then yes, but I give Peter Thiel said it is that the outside... The data on and out is a good and maybe not in this market and I haven't processed that yet but he's very courtable as saying, you around the follow -on on the outside, led up around was the strongest positive signal and they consistently underestimated the value of that.

1:10:39And I do believe that to your point, Cliff, is the case. I do admit sometimes that, you know, if you're doing, if your business is relatively early stage, it is hard to think, how do you go at 20 billion and what do you do and how much do you put into it? But there's no doubt we've talked about this before that concentrate, being willing to massively concentrate on a small number of deals, get you the last absolute dollar of our performance. Yeah, you do have to, as you said, the key thing is to be able to distinguish the Canva. From the 10 other companies you've had that got a billion pre -evaluations in 2021 that aren't worth a billion.

1:11:11Sure, sure, sure. In the end, you still have to be vaguely good at picking. Guys, listen, I can't thank you enough for this. You've been fantastic. Cliff, I so appreciate you joining so early in the morning. It's so great of you to join, and I really appreciate it, man. Thank you so much for having us. I appreciate it. It's great chat. Rock and roll. Awesome. I think you can just tell how much fun we have as a group. I want it to be the best show though for you. So let me know any feedback that you have. Harry at 20vc .com. I want to know what we can do to make it the best show of the week for you.

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