20VC: Anthropic Raises $30BN from Microsoft and NVIDIA | NVIDIA Core Business Threatened by TPU | Sam Altman's "War Mode" Analysed | Sierra Hits $100M ARR: Justifies $10BN Price? | Lovable Hits $200M ARR & Rumoured $6BN Round

24:19You can call it war mode, but nothing happens when you're not in hyper aggressive mode. It seems like it happens, but just keeping up with the release, with the TPU schedule, with the bug fixes, with the patches. I mean, if you've ever worked in a tech company, especially a software company, fixing the bugs could take all year. We can't do it, Rory. I know you want to launch that feature, but we have 12 years of technical debt. What about the OAuth doesn't work? You get endless excuses from the team, okay? Because it's true. Because you have decades of technical debt and 100 features, and you just promised a big customer you'd have this feature that still doesn't come out.

24:51and now NumNuts, Lemkin or Stebbins wants us to do even more. So you can't get anything done unless you're in hyper-aggressive mode, like mobile for Facebook. I just don't know if telling the troops works. I've never seen it work, but you do got to go into hyper-aggressive mode because I think what he's saying is if we evolve at our current pace, we're going to fall behind. It's just that simple. That's what he's saying. We're going to fall behind. And when I meet with startups, especially when you invest later because your money's already in, right? When they're not in hyper-aggressive mode, I don't want to say I lose confidence in case anyone's watching, but I lose confidence because you're just not going to get anywhere.

25:27I need to see, especially today when folks are falling behind in AI, right? When you have companies at scale falling behind, I don't care about your talk. I don't want to hear about your pilot. I want to smell that your team is in hyper-aggressive mode. If it is, I think you can come back. If I don't smell it, you have no chance. What are signs or smells that suggest hyper-aggressive to you? Founders will be listening to this. You feel the management team, there's a tension in the management team to move faster. Every single person in the management team says, we are shipping product faster. I am selling harder.

25:59I'm getting on the road more. I am generating more leads. Every single person on your management team is sweating it and they're executing faster. You can just see they come to your board meeting, they come to whatever, and there is velocity in every area. We just don't, how many times do you truly see velocity increase in a board meeting? Not that common, right? That's hyper-aggressive mode. Everyone is aligned on this somehow. This makes a great CO. This is very hard for a CO to do. Everything is anti-inertia. Everything slows down, even in an early stage startup, right? And then when you come in and everyone's sweating and they're like, you know, we shipped twice the story points, twice the software as last quarter, and we're still falling behind and I'm pissed.

26:38These days in the area of great job, I just don't see it enough. And that's what you need. You need to make your team hyper-aggressive. It is an unnatural state. It is unnatural. If I push you both, who will win the consumer? Is it OpenAI and the app rollout that they are clearly going to do over the next few years? Or will Google retain the consumer, the search layer, and the app layer that they have today? I think Sergey brought back hyper-aggressiveness to Google. He's clear in the interviews. He just said, I came in, we weren't even allowed to use our own tools. We weren't allowed to use our own coding tools.

27:12We weren't allowed to use our own chips. He's like, I got rid of that in a week. I heard arguments. I got rid of in a week. That's what you need. Sergey had to come, as great as the leadership is, I think Sergey had to come back and make it hyper-aggressive. I don't think it was the only point, but you need that. You need that. And I just, most of the startups that I see that aren't founder-run are unable to get back to hyper-aggressive mode. They're just, it is impossible for them. I'm not saying it hasn't happened with Satya, but look at our portfolio. How many folks in your portfolio without a founder can switch into hyper-aggressive mode?

27:40So you're saying Google? Over, I have to, this is a 20 VC I have to pick between the two. Will Google retain the consumer? with the app suite that they have, or will OpenAI continue to eat more and more and more of Google's core business, and we will see a much more shared landscape? Well, listen, I think the same thing most people on X do. I think the Google products are great. I use it every day. I use AI. In fact, I don't even care whether I use AI overviews or ChatGB or Anthropic, but I actually prefer AI overviews because I don't have to leave Google. That's a great product. So is Gemini 3 Pro.

28:10These are great products. You're not giving me any reason to leave. They're truly great software. I'll answer this question. I actually do want to come back to the leadership thing because I want to chat a little bit about that and maybe learn something. But going back to the first question, the Google question, if you listen to the overwrought stuff a while ago, Google six, nine months ago, it's like, oh, my God, Google's dead. I was all overwrought, obviously executed really well in cloud and the model. And fundamentally, the core search business has not declined nearly as much. There was an interview with, I think, the head of search in the Wall Street Journal, and she talked about how search, yes, some clicks are going, but search volume is going up as people ask more questions.

28:48So it's clear that the decline of search isn't going to be precipitous. That's my clear takeaway from that. We got that one wrong. Exactly. I got that one wrong, and they're going to be able to get some search. At the same time, I do believe there has emerged a new and separate consumer category of paid subscription for advanced AI. And I think ChatGPD is a good position in that place. I mean, they have 800 million users, 5 % of them are paying. I don't see all those users, quote unquote, going back to Google. I think they've carved their niche, big niche in the attention economy. I don't see it as an either or, even if the search business slows down growth.

29:24I think ChatGP can charge, can build a defensible, large, enormously large consumer business to a minor extent to the extent of Google and to a more macro extent to the, you know, a few dollars from everyone, right? I mean, I do think the advertising dollars, you know, we're getting close to the point where the digital advertising spend across Google, Facebook, and Amazon, even before ChatGPT exists, is becoming a super high percentage of the total ad spend. So if ChatGPT is going to get their share of that, either we're going to have to grow the pie overall, or, you know, someone's going to have to lose a little bit.

30:01Net-net, I don't think it's an either R. I think Google's proven, you know, reports of their debt are greatly exaggerated. I saw in the memo, leaked in the memo, that Altman made a reference to growth falling to 5 % in a year or two. And obviously, the therapists call that catastrophizing. When you postulate something that's so awful, like this company is growing, you know, north of 500 % year on year. If it went to 5 % year on year, that would be the single most catastrophic growth decline in history. But in terms of likely outcomes, independent of the human dynamic, the likely outcome for me is ChatGP continues to build this compelling consumer product, can command differentiated market, while at the same time Google search does not, quote unquote, go to zero.

30:46The pie expands. The great American tech Mag7 suck more of the world's profit dollars out of the rest of humanity. Go team. Okay. Well, speaking of expanding pies, do you want to add anything? No, no. Let's hit pie.

31:02Speaking of expanding. I'm going to go back. The leadership thing is, for me, because I'm not a good rah-rah type leader, I was interested in Jason's comment. And I'm reflecting on it because I tend to be more the step back person, which I think is why I'd be a mediocre CEO and I'm okay as an investor. It was a great question. What are the signs you know? As an investor, when do I look at my companies and go, God, this guy's running hot, right? And I've been thinking about it. It's a super question. And it's generally when at least once or twice a year, I think to myself, Mr. CEO, and I have one or two in mind, are you pushing your team too hard?

31:39Even though I don't love the war metaphor mode, you are correct. It's only the wildly intense ones, the wildly driven ones that really have excellence. And I'm reflecting on my very best excellent companies. and every once in a while, the CEO would just lose his shit. He or she would be just so exasperated by the lack of progress and the drive they felt to win that you'd have that tension. And the bigger the team, the more people you have, the more simply you have to communicate. And therefore you probably use simpler metaphors and therefore you probably have to go for some kind of, it's a war, we got to win, because that's what it takes to motivate 5 ,000 people and point them in the one direction.

32:18Well, I don't know if it's the fact, thinking on it, you know, I actually don't think, You said you sometimes advise your CEOs to go easier on your team. I don't think you have to go easier on anyone great ever. Everyone great, every great leader, every great VP, executive, and they're rare. They're rare. They're going just as hard or in some ways harder than the CEO. The CEO's job is harder. A lot of executives don't get how hard it is to be at the top. But in their own domain, right, CTO, CRO, they are going harder than the CEO. And so if this was 2021, everyone would say I'm being toxic saying this.

32:50It's not. Okay, we're going to 2026. I do not think you can push your team too hard. I think you should push them as hard as the business needs to go. And if they leave, it's great. It's terrific because they're not going to get you there. And maybe that's what Sam's doing. He's saying to us, there is complacency is set in. Everyone's getting to sell 20 million at a time. Turnover is high and it worked for a while. And now the competition is up. And maybe he's talking to 20 people and he's saying, I need you guys to go even harder. and maybe half will leave and half will do it. I think that may be the whole message.

33:23But I honestly think the founders, my number one bit of advice is do not go easy on your team. Love them, back them up. Don't pick at them. Don't back where they're good. Let them run where they're good, but push them even harder. The best ones will always step. They might cry or lose it for a couple of days, but they will step up. Or they'll go. And you're right, Jason. Generally in your best companies, you're exactly right. Some people crash out because they just can't take it. My point is, how do you know the motor is running at full speed? The answer is you hear an occasional gear grind. And your job as a board member is to check in on the gear grind and go, oh, okay, I can live with that gear grind.

33:56It's okay. They're doing the right thing. Let them all go for 2026. Let them go. Because they're not going to get you anywhere. They're not going to get you anywhere, the folks that it's too hard. The job's too hard, right? I mean, literally, my fastest growing portfolio company now, at the last board meeting, the CRO stood up and said, I want to do more than the stretch plan next year. Calmly. Not in front of me. I want to do more than that. And he gave a data-driven reason why. No one asked him to do it. You want that out of your team in the age of AI, or you're just going to fail? I wonder.

34:24I'm going to disagree. You can't push to the point of delusional. You can push to just one level just below that. I actually think that's the technique to just really drive the team to the point where this is not realistic, and then just take it down one notch. Because look, it doesn't work if you lose your entire team. And actually, it could segue off. You made this discussion on the war thing. As you point out, in the last two years since the OpenAI board change, you have lost an entire team at OpenAI. Well, not all of them. You kept Greg. Yeah. You don't want to lose your entire team. So the question is, how hard can you push while not blowing the whole thing up?

34:56You'd rather not create an anthropic when your team leaves, too, let alone thinking machines and all of that. You don't want to force two of your best people out and they build your top competitor. We said about warm mode. There is no category more competitive today, it would seem, than the customer service, customer support market. Brett Taylor, formerly co-CEO of Salesforce, started Sierra, reached 100 million ARR within two years, it announced over the last week. The last round was at$10 billion. It raised$350 by Green Oaks in September. It's 100X ARR as of today. How did we analyze this very fast scaling to 100 in ARR?

35:34Does it justify the price paid? And does it show that customer support is going to be so much of a bigger market than any of us previously thought? Well, I'll tell you what I can tell you from the street, having a lot of investment in this space. It's not a criticism of Sierra or Dekacon or others. But the whole category, the enterprise side of it, is massively overselling what they can deliver today. Now, so did Replit and Lovable at the start of this year. Replit, Lovable, Microsoft, everyone said, give us one line and we will build you Salesforce, okay? that is closer, much closer to truth today.

36:09And there the year it bordered on fraud. Now it's becoming reality. So many folks I know have bought next generation AI support tools and have not deployed them at all or barely deployed them or there's no AI working. And so it's not that it can't happen. Like it will, like I believe in it. And there's few categories AI can disrupt more than support. But I will tell you, if you dig deeper, you'll find a lot of deployments haven't even happened or are half there or untrained or broken. And so it's a lot of getting CAOs and others excited. And this is as oversold today as Vibe Coding was earlier this year.

36:41But I'm not saying it won't catch up. I'm not being cynical. I've just, man, it's oversold. It is clear that, you know, support alongside coding is one of the two largest and most obvious markets for LLM. So this is kind of a big, huge category that can totally work. So you start with that. Brett Taylor is obviously wildly talented. and then Sierra has a great name, especially at the high end. I actually think the category is working. And, you know, I literally did a reference call with someone and they said, look, we evaluated Sierra, we evaluated all these other names. And, you know, before LLMs, and I had an investment in a company that was pre-LLM customer support.

37:20Our resolution rate was around 23%. In other words, we can solve 23 % of calls, maybe up to 30. with LLMs, with these new modern things, you can sell 60%, which means on a number of call bases, you can significantly reduce your customer support. So I think there is some meaningful value there. I'm sure at times it's overstated, but if this isn't the market for LLMs in the enterprise, then nothing is. So let's leave that to one side. The real question, I think, is how does the math work from here? It's 100 million and it's trading at 10 billion, and what would it take? And I just kind of laid it out in my head.

37:52It's like you went from 10 million to 100 billion in the last year. So you're 10x'd. So say you're 5x next year, that's 500. 3x the year after, 1.5 billion. 2x the year after, 3 billion. Wait, when do we have to get to 3 billion AR again to slow down? And then you go 4.5 billion and then 5. So over the next five years, you've got a 10x, 5x, 3x, 2x, 50 % growth, and then slow down a little to 20 % growth. And you're at 5 billion in five years. For context, service cloud today, which is the largest cloud within Salesforce, is eight billion. You're getting five billion out of that marketplace. At that point, if you're valued at the Salesforce multiple of five or six times, you're worth 25 billion.

38:36So it's a two and a half X. What it highlights is the amount of growth you have to underwrite to make the math work. So then you zoom out a level. It's something we said last week that I believe. When you're dealing with hyper growth markets, it's all about the TAM. The crude math I just did, which is if this company goes faster than any other enterprise software companies, in five years, it's doing$5 billion, which passes the sanity test of Service Cloud doing eight today. What that says to me is if all you are is a next generation software play, you're probably not going to get that growth because that would have to come dollar for dollar from Service Cloud.

39:10It goes back to what Jason and says, the only way this math works is if you eat a huge slug of the labor. And because you eat the labor, instead of the$20 billion software market for services, you eat the$200 billion a year services market for customer support agents. It's got to go from$100 million to a billion to justify the valuation on its face, right? It's got to go$100 billion a year. Can you even deploy in the enterprise at that pace, right, versus self-serve? We'll see. We'll see if they go from 100 now to a billion at the end of next year? We can make a cal sheet back. Has any company done 100 million to a billion?

39:47Well, I think yes. Anthropic, easy. Cursor and Anthropic. But how much of that revenue is self-serve too? There's a certain amount of human capital you also need to deliver this amount of revenue in the enterprise, right? Yeah, agreed. Because let me tell you, if Brett Taylor walks into a Fortune 500 company and says, give me$10 million and I can replace half your support team, trust me, he will leave the building with a$10 million contract. Mark Benioff was great at this too. He would go in back in the day when enterprise ask was booming. He would go to big company. He would say, what's your number one problem, Harry?

40:16And Harry would say, well, I can't get this website and this e-commerce. And Mark would say, just give me$10 million and I will get this for you. That was the price. And he was magical at it. And Brett's going to be even better, even though Mark's the best there ever is, because he was the CTO of Facebook and the co-CEO of Salesforce. There's no one got a better package than Brett. So he can get$10 million checks, but can he get 100 next year and deliver training and FDEs? It'll just be interesting to watch, right? It's a lot to deliver. I think, Jason, you're exactly right. Going from$100 to$1 billion in an API business is very different than going from$100 million to$1 billion in a business where each$10 million contract is a huge amount of change management in a large corporation in America.

40:55And I think the physics of diffusing this technology into the enterprise will be the rate limiter on how fast this company can grow. It won't be raw demand. It won't be the talent of the CEO. It won't be the product. It will literally be, can you really roll out, you know, what is it,$110 million customers or$1 ,001 million customers in a year where each one of them has their own special sauce, their own dynamics, their own integrations. I think there's a physics to how fast you can grow in enterprise software, even with huge demand when this amount of change management has to happen. So I think that will be the rate limiter here.

41:34Yeah, if people haven't sold to the enterprise, they might not realize how true. I mean, literally, I think if Brett Taylor could sell$10 million to anybody. I agree. It's not just that he's so smart or charismatic. It's that literally enterprises are complex to change. They're looking for the best person in the world that can solve their problems. Like, what's my big problem? And if you can dramatically increase the KPIs and support for me, and Brett is the guy, I will give you the$10 million. For you and me, it'd be hard to get$10 million. You and I might have to start with a$10K contract or$100K.

42:04But literally, I'm not being facetious. Brett can get multiple$10 million checks. So as goofy as this sounds, the$100 million almost to me isn't impressive. It's not impressive because I think he can will it out of the ether with his background. A billion next year with 1 ,000 FDEs, somehow he's got to go higher and deploy. That to me was magic. Like that will be magic because they will give him$100 million. He might even be able to walk into one of the biggest Fortune 50 companies and get a $100 million contract from one like Palantir. If he promised the moon, they would give him$100 million.

42:34The zoom out comment you're right about, and it's something you kind of learn as you see a lot of enterprise software over time, is this. Big companies and big leaders have big problems, and there's only a small number of people they can take their problems to. And if you look at large technology companies over the last 40 or 50 years, the ones that become dominant in an enterprise wave are the ones who, one way or the other, project to the CEOs and CIOs of the largest companies in America. If you have a problem in the sector, we will make it go away. Like Cisco, they started off with routers.

43:06But over the next 10 or 15 years, they bought pretty much anything you needed for the network. And I think when Chambers was running this thing, the big picture value proposition was, hey, Mr. CIO, if you have any networking problems, we'll just buy whatever we need and make it go away. Therefore, you can safely give me 50 or 100 million bucks. IBM, back in the day, same thing. And you're right, Jason. I think someone as talented as Brett Taylor in the new world of AI can do what I think C3 tried to do and failed. Palantir is doing, which is walk into a CEO and say, dude, you told your board that a top two initiative for 2026 is make XYZ Corporation AI enabled.

43:46And I can help you with that. Give me a$20 million check. I absolutely agree. I think that is a thing. And it's frustrating because all the little companies who are run by ordinary folks can't do that. But that's the magic of being a successful, proven enterprise leader for 20 years. So I agree. I think you can access that kind of business. And it's a very powerful positioning. I think it's all about the physics. To me, the assumption you have to make as an investor with this goes back to the very wise statement that you said, Rory, many shows ago, which I think do literally every single day, which is the bet within AI is will we see the transition from human labor to software spend?

44:21And if we see that and we see call centers go and all of the call center costs go, then it will go to these players. And then we have$100 billion Sierra. The question is, as is always the case, when something is obviously true, valuation expands to recreate risk. In other words, there's a point at which you do any of these deals all day, every day. The real question is, at 100 times run rate revenues, can you make the math work? And that, I think, is a lot harder. Are you ready for an uncomfortable question for Rory? and he can throw it back on me when we move to Lovable. Okay. You mentioned Intercom there.

44:55Intercom doing, say, 300, 400 million in revenue at two and a half. You don't need to comment on these numbers, but two and a half billion, three billion in price versus Sierra doing 100 million at a$10 billion price. But the gross rates are wildly different. How do you think about which one you'd rather be in? I think Bort can make a ton of money. And I think I'm very happy with my bet on that company. I think they've done an amazing job in a way that very few SaaS companies have of transitioning to an AI-first world. And the growth rate of their AI product is frankly comparable to Sierras without kind of revealing details that the company should choose to reveal.

45:33So I'm not sitting here. In fact, I feel, broadly speaking, pretty smart as having got some very nice AI growth rate alongside an existing SaaS business at a very attractive price. So I feel pretty damn good here. Thank you. But there will be more than one winner as this market segments. I will say at a higher level, nothing against this bet, but man, today having to support an installed base versus getting to invest just in AI native customers, it's a drag. It is a drag. And I was literally with a portfolio company. It's got 45 million of AI revenue growing about 100%. Okay. Now, listen, that's not a level, but it's pretty good.

46:09Okay. And then it's got 50 million of pre-AI revenue growing zero. So what do you, and the problem is they are, and I think this is probably true at Fin and Intercom, they are inexorably linked, but they're not the same product. It kind of sucks. We may change our mind in a year and say, my God, that install base was the greatest thing ever to leverage for AI. But right now, man, it feels like a drag to have to have a couple thousand pre-AI customers to make happy. It feels like a drag. Recording my profound opposition to that, I disagree. I actually think every incumbent of these markets has one huge advantage and one huge disadvantage.

46:43And I'm going to say it clearly here. I think the advantage is the customer base and the data structures and the access to the data on your existing, what the company is doing. Because I think for something like sales or customer support, the truth is it's going to be a combo package for a long time to come. Some automation and then some human agents and being able to move seamlessly between them both has huge advantages. I think the disadvantage that every large existing incumbent has is they can't get out of their own freaking way. And therefore, they can't leverage the asset they have while at the same time embracing the AI technology.

47:17And I think that's frankly something that Intercom did really well. Well, I think it's more subtle than that. I hear your point. In theory, it's an asset, right? In theory, it's great to have an install base, all of its data, rather than an AI company, new AI company hoping to have that data in theory. The problem isn't that. That is an asset. And that's why I might change my mind in 12 months. The problem is all All the technical debt, all the feature debt, all the features you've promised those thousand customers, those 5 ,000 customers that don't give a rat's ass about your shiny new AI feature.

47:44The fact you have to keep them happy, okay, and not let them deteriorate, that can consume the majority of your engineering development time. It really can. I'd love to hear Owen's, I'd like to hear his honest thoughts. I suspect what they did at Intercom, you would know better than me. I suspect they did what you have to do, which is they don't get so much because there's only so many engineers, 100, 500, 1 ,050. Your existing customers can consume all of your story points and all of your engineering time. All of it. You have 10 years of debt. And if you're a new AI company, you don't have the data.

48:14It's a huge negative. Don't get me wrong. But the ability to run. When VCs talk endlessly about how native AI customers are better, I want to gag with a spoon. Sometimes they're better because they're four really smart people. Sometimes they're just better because they don't have a thousand complaining customers to support. I'm just saying right now I feel like it's a liability. But in a year I may think it's the greatest thing. like looking at agent force right now it's early right but salesforce could be the next google it could be in 18 to 24 months we could be like oh my god agent force crushed it we all these startups we didn't need them because agent force is so good i know it sounds crazy right i may change my mind but right now my the startups i've invested in with large install bases i feel like it's a friggin cement shoes i understand what you're saying but again i would disagree i think that the great advantage like you made a comment on you have a company that's 45 million dollars of AI revenue and then a whole bunch of customers who don't care about the AI revenue at all.

49:07And that was the revealing sentence. I don't think that's the experience you're seeing in some of these cases where when you have an obvious, anyone who is running a customer support organization knows they're going to be embracing AI, right? And a successful company goes in and says, we're going to help you on that journey. It's unimaginable to me to think of a customer support executive who's running their business and saying, no, I'm not going to do any of this AI stuff. I just really like paying people in the Philippines to answer phones. But the debt is real, right? And how much you can do for them is real.

49:35I mean, I did an interview for G2 with the CEO of Zendesk. And every customer has AI at Zendesk. I'm not an expert in Zendesk, but he was very direct because they're private now, he's right. But the base version of Zendesk, which you get with AI, it's about 20 % automated. That's about as well as you can do without training. And to get this fin level of experience or better or Decagon or Sierra, you've got to train the thing for a month or three weeks with FDEs and the rest. And so it's not that they both don't benefit. It's just, I think it's an asset and a hindrance. I think if we look at some of our fastest growing companies, they don't have cement shoes.

50:09I'm not saying Intercom is the exception of the world, but they just don't have cement shoes, right? I agree. I think it takes, frankly, I think really excellent management and a certain, going back to the, oh God, I can't believe it. Going back to the war mode comment, which again, I didn't love, but I'm changing my mind. It takes a lot of product leadership and clarity of vision to make it happen. And I think you're seeing Benny off trying to figure out how to do that. But it's the bigger the organization, the harder it is. I think the team at Intercom has done a really nice job of doing that.

50:35It's hard. Well, let me put it differently. Intercom did it. Let's stipulate Owen did it. And it's great. This is why I think most of our unicorns will fail. Because you've got to be as good or better than Owen to make this transition. Most of them are going to fail. When I look at so many of these B2B unicorns, it's so hard to do both. It's so hard. I've got 200 million Rory. I'm growing 20%. I know I have to do AI, but I just, I can barely get the team to do what I'm doing. Unless you have this aggressiveness, war mode, great CO, there's just no way you can do both. There's no, your typical PE company can barely get a release out a year.

51:10I agree. I think there's two things that stop you. And I think as is usual, when you and I talk, Jason, you emphasize one and I emphasize the other, which is okay. The two challenges you typically have is what I call the management challenge, which is what you emphasize. Oh, you got all this old stuff. You got to do this news. It's hard to do. It's hard to do both. So you just got to be a good manager. But then the second thing I would argue, the predecessor thing is there's got to be some obvious linkage between the two. But if you've got this SaaS company in the old world that does X, and there's no obvious X plus AI equivalent, you're just on an island and then deciding, oh, I'm going to do something new in SaaS, you're screwed.

51:42If all you have is I have customers who might want to buy AI in the future and they buy SaaS today, you're screwed. The only time you have even a chance to do it is when both kind of organically go together. I'll give you another example of that. I think Gong is a very interesting company that was pre-GPT AI, right, call recording, and I think they're doing a decent job of navigating that terrain and adding all the LLM stuff on top. But it's not because they're management geniuses, maybe they are. It's more fundamentally because there was an obvious path from here to there. In some other areas where the SaaS thing doesn't have an AI equivalent, you're on an island and And then you're right.

52:19There's nothing you can do. You could be God's gift to management and you're screwed. And, you know, I'm trying to think of examples of that without throwing anyone under the bus. But there are deals where you look and you just go, hmm, I'm not sure we need you in this AI first world, baby. And that's not good. You said the fastest growing companies and how it's tied to kind of AI native customers. One that's really tied to this, like Sierra hit revenue milestone. Does it justify price? Lovable hit$200 million in ARR, 2x what it was in just four months, rumored$6.3 billion around in terms of new price valuation being$6.3 billion.

52:55Is that justified when you see the growth rate hitting$200 million in ARR for Lovable? I don't know, but I will tell you for folks that are critics, this is like an old Sastra lesson I really think we have to do in the age of AI. You've got to segment your customer base. So what I mean is I assume at the low end, the churn approaches 50 % or higher. Okay. The one Menlo just did in music. What's it called? We use it. Suno, right? They just said they have, they only retain 20 % of their customers in a year at the level. But I just did a presentation of Replit that showed all my apps at all hands.

53:24And when I was there, they closed a pretty large seven figure deal when I was there. So the point is, there's no way that's going to churn as a multi-year seven figure deal. Anything less than a couple of years mathematically, is it? What I would almost want to do is take Lovable and repl it and segment them and say, listen, there's a high end here that's probably got 140 to 160 % RR. I'm pretty confident of it. There's a classic mid pack that my guess is with upsells and stuff is approaching 100 % retention. And then there's a, the part of the bottom is worse than we're used to. It may have 40 % retention or 30%, but that's not unprecedented.

53:58Like almost every mobile subscription app has like, we know from revenue cat is like 20 or 30 % retention. So I just think I would almost want to put a, not only set bar chart mine, but almost draw a black line through the bottom if I already... and just call that marketing spent. Like that bottom is just marketers. They're just folks to get the word out and they're all over social media. And I'm betting in the next two, right? The 100 % and the 160 % in NRR. And even if that's half of lovables, it's... I think it's a decent bet, right? As these guys grow, their NRR will go up and the churn will go down just because for classic enterprise reasons, those big customers are going to be stickier.

54:31They're just going to be stickier. I'm just always thinking about the opportunity cost of cash and where I put my money to make the most money. Oh, you're a traitor. To Rory's brilliant point on, Harry. That's great, but what about me? It's now worth more than Wix. $2 billion in ARR. Admittedly, the growth rate for Wix is 14 % year on year, but they have base 44, which is growing very, very fast. Just announced it hit$50 million in ARR. So you have to believe that either Wix is very undervalued or Lovable is very overvalued. It's a tough one. You know what the tough part is for all public company leaders?

55:03It shows you're not getting credit for checking the AI box. Hooray to Wix. You went from nothing to 50 million in Vibe Coding. If that means you're this percent of Wix or, I mean, of Replit level, you should be worth a couple extra billion. The market's saying, no, it's not enough. As a public company, you're being judged as a public company. You're not being judged as Sierra. It's tough because every public company is out there hustling their AI story. I'm not sure it's working at all. I think it's necessary but not sufficient. You need to be Palantir. That's what the public markets want. And they're saying Wix ain't Palantir.

55:32$50 million is not enough. Show me$500 million. But I would caveat that all you can conclude is right now, the public markets aren't giving it full credit, which is different than saying the strategy is right or wrong. I mean, as we just discussed, everyone's dumping on Google nine months ago, and now the stock's up 2 point something X, right? Markets are fickle things. They change their mind. I mean, the question is, is it the right strategy for Wix? If you're in the website building business, which is what they have been, And it seems almost inevitable you have to add this, otherwise you're not relevant.

56:06Agreed? That's kind of step one. And then the question is, so directionally they're doing the right thing. Let's start with that. And then you can measure how well they're doing it in terms of adoption. What percentage of their customers are using this product? Is it out on the side and just a game or is it a core part of their product? You know, measuring kind of with industrial logic, not financial logic, how well they're doing. And then you can start saying, how do you compare that bet to the lovable bet? Right? And that's the way you have to do it. It's a$2 billion business versus a$200 million business.

56:35It's probably got better churn retention, but only a small percentage of it is AI. And then on the other hand, you have lovable. It's all AI, but you have massive churn. It could well be that the public markets are undervaluing one and the private markets are overvaluing the other. In the short term, it's the old cliche, in the short term, markets are a voting machine. And in the long term, they're a weighing machine. If Wix pulls off their strategy, they'll get valued for it in the end. did or lovable. If they don't, if you can't overcome the inertia, if you just tick the AI box, but don't actually make it core to what you're doing, then you're right.

57:09Fast forward five years and it'll be lovable as the king of website generation and who was Wix. They didn't make it through the turn. It's just a reminder to founders and everybody, 2 billion ARR growing 14 percent. As we do this, Harry and I, the market cap 5.24 billion. For Wix. Yeah. So generally, once you descend into low growth, and that's different for public companies and private companies. I mean, if you're worth anything, you might be worth nothing as a startup. You're worth in the three to five X AR range. And this isn't even that. This is less than three. I just got back before this.

57:40I was over at one of our joint LPs at Horsley Bridge and we were talking about the pulse. And I'm like, man, it's the best of time and ever in startups, but man, go in public and it's tough out there. And this is two and a half times revenue for Wix. It's just, I'm not saying it's worth more on a DCF basis or whatever. Rory can help me there, but it's brutal to be worth less than 3X ARR, right? And SCM Rush, you look, oh my God, it got acquired for Adobe for 1.9. Yeah, that was three times revenue with a 50 % premium or 100 % premium. I think 100 % premium, right? It doubled. That's with a massive premium because Adobe paid up.

58:15It's now as a bootstrap company, so that's a fun story, but it's a reminder to founders that are hiding or they got the 2023 message that all that matters is getting profitable. Like it's just a brutal world when growth slows. It's a brutal world. And even if you inject AI and even if you add base 44, Rory's right. It may be a great story in 2027, right? You can draw the math, but it's not a magical solution today. It's brutal. And it's brutal across our portfolios that have a little bit of AI that hasn't led to lovable growth. It's brutal. What are they doing? I mean, Wix is doing about 2 billion a year and it's 50 million of...

58:49BASE 44. BASE 44, thank you very much. So yeah, it's 2 % of revenue. At 2 % of revenue, it's to a rounding error, because the odd thing is, at that point you discard. Now, the interesting thing is, if they could upsell 10, 15 % of their business to that, where they're adding 200, 300 million, you're right, Jason, the multiple for companies doing 10 or 15 % is pitiful. The multiple for public companies doing north of 25 is compelling. Yeah, it could double if they do 250 next year, right? It could double their market cap. Yeah, more than double their market cap. They have to be saying to themselves, can I drive 15 % penetration of this AI product across my customer base?

59:23And if I can make that happen, it's great. Let's be clear to our public traders, Harry. If Base44 really can ape, lovable, and replant, everyone should pile into Wix because all things being equal, the multiple should radically inflate. If it can do 250 million, and this is ARR, I guess this isn't Gap, but if it can do 250 million of ARR next year, that's massive over growing 14 % of 2 billion, right? It's massive. You should pile, you should put as much of the 401k into Wix as you can. This is the great undiscovered public company. It is unless the public markets continue to not give you credit for it, as they've not given you credit for the 0 to 50 in base 44 that you've just done.

1:00:01No, no. We're always making the point that you go into the interim tier. Okay. If you look at multiples, you go from the 3 to 4x tier. And then actually in the public companies, you get a really good deal if you're in the middle tier. And if you're in the top tier like Rubik and Palantir, you get the deal that Cliff from Canva wanted. He wanted that deal because it's better than the private market. But I think that middle one is still around 8 to 12x ARR, this middle group of like in the 20s. So getting above 20 as a public company, it's easier said than done, but it's so worth it. Like you should buy anything you can to get yourself into the 20s.

1:00:30I agree. Because Harry, I just reject the whole give you credit. I mean, in the short term, maybe the public markets, quote unquote, don't give you credit. But I dislike that expression because it implies that it's some merit thing. In the end, everyone's just a set of discounted future cash flows. if you point the revenue line up and the P &L line goes up with it, in the end, the market will re-rate you and give you value because that's just the way capitalism works. But sorry, if you look at something like Palantir, which is detached from rationality and detached from a DCF model, then it proves you wrong.

1:01:00In the short term, things can be wildly wrong. And one of two things will happen. It'll grow at 70 % for the next 15 years and grow into its market cap or the price will correct. Right. No, in the short term, prices are often wildly wrong in capitalism. But in the end, it trues out. My point is this. You can't chase the pricing. You have to run your business. And in the end, you know, the markets will catch up with what you're doing. Well, I think I think to go to Harry's point, Rory, I think you'd agree. I just don't think the market believes base 44 is going to accelerate Wix. Right. In my little tier on Sassard AI, if you're growing less than 20 percent of a cherry pick basket, 5.1 XAR.

1:01:38Wix is lower. It's not in my basket. 20 to 30, 11.8X ARR. And then the 30 % plus, which is Rubrik, Palantir, and Figma, average 23.7X ARR. But Palantir and Rubrik push that up. You want to go from 5X to 11.8X. But the markets are saying we don't buy it or possibly they don't care. Like, show me the money. I don't care. Look at NVIDIA. Are they just saying, when you do, call me and we'll give it to you? Yeah, call me when I see it. Yeah, call me next year. I totally agree. I think markets pay up for growth. And it's why all these people who in 2022 were like, just get profitable, they're wrong.

1:02:12It's a necessary but not sufficient condition. In the end, we're in the growth business and you got to be growing. So the question gets back to, can they make that happen? And it's funny, you mentioned SEMrush there, which for the listeners is a company that does search engine optimization. It's a bootstrap company, been around a long time, was public and pretty much a sleepy company. and Adobe just recently bought them for, you know, what was it about? 2 billion, Jason, right? Yeah, 1.9 billion. My guess is, and it's funny, it's top of mind. My guess is that was because there's this whole new emerging market now for LLM, you know, answer engine.

1:02:50Oh, GEO, yeah, that's the reason they bought it. Yeah, yeah, exactly. And basically optimizing your equivalent of your search results, but on LLMs, which I think is a great market and one we've looked at. And clearly Adobe said, let's buy the old school player you know, maybe allow us to parlay entry into that new market, which was just super interesting. I remember thinking that because I'd been looking at that market and hadn't ultimately been able to get an investment done. And I remember thinking, hmm, if I was a public investor, I'd look at SEM Rush, I'd buy one of those geo products, and I'd try and do the same trick of jamming it through the channel.

1:03:23And at two times run rate revenues, it wouldn't take a lot to make a pop. But lo and behold, Adobe got there first and said, no, we'll take that. Well, the interesting thing is what they said was publicly, they didn't buy it to jam it through the channel. They bought it because it was the number one thing the customers were asking them for. Yes, agreed. Obviously, I'm dating myself. But when I was at a VP at Adobe, remember the marketing cloud is a huge amount of revenue and their typical customer is not a 20 VC portfolio company startup. It's a pretty mature CMO that is trusting Adobe to execute their marketing strategy.

1:03:53And they're worried about LMs and GM. They don't know what to do. I actually, I know Harry's investing in it and I love Harry. I actually think this is a horrible category. But the demand at this moment, it's just like a lot of things. I need an SDR. I need a GEO solution. So the demand is off the chart. So Adobe needed a solution today and they bought what they could get, right? But I think it's a horrible category. Okay, you agree with me? I am actually totally with you. My bet is that this company, Peak, is a complete founder bet. To be fair, the traction is insane. I mean, it's like 15x in three or four months.

1:04:25Yeah, the demand is off the charts, right? The demand is off the charts. But what you're seeing is like the commoditization of the pure discovery and analysis segment. Because there's really two segments. There's discovery and analysis, where you rank. And then there's like, hey, what you should do as a result, how you can improve it, and then we'll do that for you. And you're seeing the commoditization where you've seen Spencer at Amplitude release their product, which now is the same. Yeah, they vibed it. And so my question to you actually, Rory, which is weird given that I'm an investor in this, but me and Jason are agreed.

1:04:52Why do you not think we're going to see the commoditization of this category? and why do you like it? I'll tell you why. I think commoditization is, with all due respect, not a useful word because it's an implied statement of wrong badness, of economic badness about it. And as I remind people, oil is a commodity, but as the film series Landmine tells me, we make$3 billion a profit every damn day making oil, right? So I don't think commoditization conveys something. I like that market because I think what you see in markets that really work are a wedge product that has high urgency to spend, which means in the near term, you get explosive growth.

1:05:29And then over the medium term, there's a set of expansion opportunities beyond the original point product that allows you to grow with your customers and expand. And I think that's exactly the case here. Discovery up front is the core need. And you've got a bunch of companies like Profound and Evertune and all those guys doing that. And then you're going to add on over time, content generation, and all it takes to make sure you show up. And I think this is a lot to be built on top. Well, I'll tell you, listen, for what it's worth, and what, sorry, what's your portfolio company called? Peak.ai.

1:05:58Okay, Peak I love. It's an exception to the rule. There is a category of snake oil AI of which GEO is one of them. And I'll tell you why it's snake oil, and it's going to die in 26 or 27. I'll tell you why it's snake oil. Just bear with me, okay? So listen, Sastr itself, we're multi, we're not as big as 20BC, but we're multi-channel. We have a 5 million to our blog, okay, about 5 million views a year from SEO. Traffic is up 50 % this year, and our SEO is down 8%. So I've tried all the tools. I don't have time. I don't have a team like Harry's. My team is all agents now, like it's shrunk, okay?

1:06:30But I care enough about SEO that I'll try the tools, especially the self-serve. Nothing's frigging actionable. Nothing's useful to me. Now, when I was at Adobe and I would sit in these meetings and the marketers would come in and they'd be like, well, let me tell you how we did this week at Adobe. We had 7 trillion impressions on Facebook. When it was just like performative metrics, I get why everyone's going to buy a G tool. Okay, I get why you can sell 50 million, 100 million of this because you need to walk into the meeting and show what's going on. I cannot find a single thing that is actionable.

1:07:00Put more things on Reddit doesn't help me. An AI tool to write content. I have 10 ,000 pieces of content. Your crappy AI content is not going to help. And I know maybe I'm an extreme example, but I literally, I've tried all the tools that let me. I literally cannot find one thing that's actionable. I'll tell you the really bad sign with this category, with AI, if you have to put in your credit card immediately. This is a bad sign. A terrible sign today. If your AI is good, okay, and you don't need FDEs and like a massive army, give me a few credits. What's the music one again? Sona? Sona. We use it all at Saster.

1:07:32I forgot. So I went to use it again today. I forgot I used it. They gave me another 50 credits and I upgraded, but I did three songs for free. How come I can't GEO for free if it's so great? How come I can't GO for free? This is a terrible sign if I can't try your AI app for free. You're a fraud. You're trying to get my credit card before you can provide any value. And if you look at all the ones that are exploding, half of them, not the Mercurial, half of the ones we talk about are massive PLG plays, right? And you can't take their credit card in 60 seconds and grow this weight. You can't. You got to let them do a couple of lovable prompts.

1:08:03You got to let me do a song. You got to let me try ChatGBT free. And so I think all these scams are going to make a lot of revenue. It's like the old SDRs pre-Claud4. They're all terrible too, as you know. They didn't work. And so we're going to see a bunch of things that have massive budget and don't work, and they're just going to churn. I think Geo's a scam. I'm going to make a bet here, Roy. I'm going to put a$5 ,000 bet on that Peak is going to be his one. Okay? Five grand. I'll believe you. I'll even help them if I can help them. I'll help them, and I want to learn. But there might be one.

1:08:33I have introduced them to the biggest CMOs, the biggest, the hardest companies. They fucking love Peak. Yeah. They love Peak. Do they even know what they're talking about? I find a lot of females don't even know what they're talking about in AI. I disagree, Jason. I actually, genuine comment here. I understand your point about how actionable is the information. But look, you were at Adobe Marketing, stepping back another decade before you were there. I was an investor in Omniture, which is the company that became the Adobe Marketing Cloud when they bought it in 08 or 09, right? Yeah. And there's some snake oil there too.

1:09:04But you call it snake oil. Let me encapsulate the point you're making because there's some truth to it. but then let me make the counter argument. What you're basically saying is at some level, these tools just tell you how you're showing up on the LLMs, just like way back in the day, analytics told you what was going on in your website. You're like, what do I do with this information? The thing is you have to know the information, especially in a larger corporation, even if initially you can't do anything with it. Step one is if you're the VP of marketing at a large corporation, and your CEO comes in and says, I typed in L 'Oreal into ChatGPT last night, and they said 10 mean things about us.

1:09:44What the fuck? You better have an answer to that. And initially for that first year, just giving that high price VP of marketing an answer is worth 30 grand. Because it's hard to explain, but the one thing I've internalized about all these media types is every marketeer knows in the end, you just have to go where the people are And you have to show up where the people are. And when the people went to Yahoo from TV, you had to show up there. Or when they went to Google from Yahoo, they had to go there. When they went to Facebook, you had to go there, right? And the people are going to use, they're using answer engines, they're using LLMs, and you have to know how you show up there.

1:10:21And it's different. It's not like you can advertise. So there's going to be a market for the - But they're still selling snake oil when it's unactionable. But you're right. I have no doubt you can do 50 million here very quickly. But you're right. What's going to have to happen, and all these companies are going to do it, and I think the opportunity is that you have to then figure out what do you do with that information? How do you make it actionable? Because let me tell you what they're not going to do, Jason. No marketeer on the planet is going to say, I now know I show up shitty on LLMs, but it's not actionable, Mr.

1:10:50CEO, so we're just fucked. Settle in and die. No, because the CEO is going to come in and he's going to say, I don't give a damn how you do it. You figure out how to get us on the front page of ChatGPT saying, L 'Oreal or whatever product it is, whatever it is, is awesome. Are you going to lose your job? I agree with you. Maybe just one point. I think there is a billion dollar AR opportunity here. I think there's a billion dollar opportunity in AI sales. In marketing, I haven't seen it yet, in an 8GO. If you do all of this for real, I'll give you a hundred grand and you actually increase the number of qualified visitors to my website by 50%, everyone in the world will give you a hundred grand.

1:11:28Like if you can do the cursor, I know we all hate the cursor of whatever pitch. A lot of folks say they built the cursor of marketing. I will buy it. I have not seen it. As soon as they do, this will be a billion dollar ARR opportunity in 36 months, but the snake oil isn't going to do it. Little tiny point solutions that get you 5 % of the way there that Amplitude clones isn't going to do. But there is a bill, like there is so much money for actually making it actionable. There is so much money. Everyone is, their SEO is down. There's going to be, in my opinion, two levels of actionable. There'll be actionable right now where it's like, oh my gosh, this is what the LLMs are saying about you figure out where they're deriving that information, which is typically via the search that the LLM does, and then figure out how to get nice things said there.

1:12:11That's kind of the actionable today. And you're right, that's loosely coupled at best. But look, the big shoe that's going to drop, and it goes back to the first conversation is when ChatGPT starts allowing advertising, then, you know, the dynamics of this business change a lot, right? And if there's going to be advertising, there's going to be monitoring of advertising. And then you're right, then the wall of money is going to hit here. And then people are going to want to know how to measure it and how to track it and how to influence it. So I think that's the big picture bet here. And again, I like the space.

1:12:40I take on board your comments on the product, but go. When ChatGPT allows advertising, Rory, what happens to the players in this market? Are they hurt or are they helped? Look, you can imagine a world where you could go either way. I mean, if you look at one of the interesting things, we talked about SEMrush. The outcomes in search engine optimizations haven't been amazing. SEMrush is actually the biggest outcome at 2 billion in a way that all the other stuff like website analytics and email analytics all had much bigger outcomes. So you could argue that if the ChatGPT version of advertising is similar to Google, then the platform gets all the money and doesn't allow a ton of ancillary products to thrive, and maybe it's only a so-so outcome.

1:13:26Maybe that's the case. A lot depends on whatever ChatGP implements between advertising and commerce, how much of a role is left for ancillary players. You're right. You don't quite know that at this stage. You can argue that the midterm question on these companies is, there's some element of platform risk. Will they allow enough cash? But on the other hand, it's a complex enough problem that if you're a large corporation spending a lot of money to improve how you, quote unquote, show up in AI, intuitively, there's going to be spend there. Will it be$200 ,000 per company or$2 million per large corporate?

1:14:01I don't know. That's the risk in the deal. Obviously, you can tell from the way I'm muttering. I don't have clarity on that. But intuitively, I go back to my first principles. If all the people are showing up in the LLMs, then all the advertisers are going to want to show up in the LLMs. And if you can help them get there, you can probably clip some of that money. That's the very unsubtle thesis. Final one before we do a would you rather, Roy, because I know you love that. Where do we want to go? We've got Figma, obviously IPO price and where they are now. Oracle down 40%. We can do Calci's new round.

1:14:34Any preference there? We can talk about, Figma's definitely, maybe we should talk about, I just feel like it's a Debbie Downer. I mean, it was, Figma IPO was so exciting, right? It was just, everyone was captivated by it, almost beyond what it deserved, right? Almost at a consumer level, almost at a Google or Facebook level. And to be a broken IPO, at least for a while, it's just, it's just a bummer for, I know we talked about a little bit last week, for just the feeling that liquidity was back and IPO was back. It's just a bummer. Maybe Bill Gurley thinks it's great because they got a good deal, but a super active IPO market is great for everyone from VC down to founder.

1:15:08It's just a big plus. Having a meh IPO market is not going to help any of us. I don't think it's meh. I mean, I think, look, I would argue that it goes back to what I said earlier, voting versus a weighing machine, right? The professionals all looked at the stock and said, we should transact at 35, which is roughly the same valuation Adobe offered two years ago, which totally makes sense. You generally bid forward a year or two in an M &A. And then all the retail madness took over and it was valued at 100 and something. And now over time, the voting stops and the weighing begins. And now it's pretty much priced exactly what they thought it was worth six months ago.

1:15:42I would argue it's, you know, in the end, the markets are efficient and it's a great outcome. Lighten up everybody. It's$17, $18 billion market cap for an awesome company. Yeah, you're right. The process has been a bit of a Debbie Downer to your point, Jason, but the intrinsic, again, intrinsic valuation wins out in the end. Capitalism works. It is a reminder though, if you turn down a deal, you better want it. to go public because it's not just down from Adobe. You've got to take in dilution and time value of money, right? I tried to write it up on Saster. I think it's like 30 or 40 % lower than Adobe deal adjusted for time dilution and risk, 30 to 40 % lower.

1:16:17So you better, when you say no, you better, and granted, they didn't say no, they said yes. They said yes and yes and yes. So who knows what really is going through everybody's minds, but it's just tough to not be above that number. And, you know, we've already forgotten about Wiz, it seems like three generations ago, right? And it seems, you know, it seems almost quaint compared to Cursor, but maybe it ends up being one of the greatest deals, smartest deals of all time. To be clear, you're talking about the Wiz decision to sell for$32 billion, which deal is still pending, but it's got U.S. Still pending, yeah.

1:16:51It's got U.S. regulatory clearance now, unlike poor Figma, who didn't. Our, indeed, much worse, poor little iRobots, a Roomba who didn't get clearance and then pretty much went bankrupt because they couldn't sell their company. So yes, antitrust has had an invidious influence. It just would be nice if everyone could IPO next year that needs to IPO. And I'm not being facetious. It would be nice if the market was overheated, if it didn't quite make sense, if Figma was trading at twice its IPO price, and it could actually lift some folks that were a layer below Figma. It would be nice if folks at 200 growing 30 % that are still in that second tier nominally, right, that we talked about, right?

1:17:28It'd be nice if they could calmly IPO next year with over-demand IPOs, over-subscribed IPOs, and just free up liquidity in our portfolios. I'm not being facetious. It would be great if we just had a little more froth in the market. Do you think we are going to see any opening of the IPO markets next year? I don't think we earned it this year. I don't think we earned it. I don't think we have so many. You're better than Figma. You're better than Netscope? It's a high bar. In IPOs, it tends to be Pavlovian. People do things when the last thing they did felt good. And Jason's right, is that these IPOs don't feel good, so it won't be easy to have more.

1:18:02Now, the way you make things easy is price. I mean, price is one way to make things easy. The other is the kind of companies that go public. So, you know, if the overall equity markets stay roughly okay, then there's lots of companies that can choose to go public if they want to, because they're above the bar. The question is, will they want to? And that's more a function of individual company decisions on whether they want to or not. But I'm with you, Jason. It would be great. A more wide open window would be good for many, on many different dimensions. I just feel like in venture, we're acting as if these liquidity windows are way open.

1:18:37And I get challenged, but I don't see it. I don't see the IPO market way open. I don't see billion dollar M &A deals from PE firms and everyone happening every week. The limited visibility I have on billion dollar M &A in my portfolio or with friends, it's happening, but it's stressful. No one's sitting there just writing, throwing billion dollar chips into the middle of the table because it's the age of AI, like in some ways they did in 2021. So there is more stress in liquidity in the system than we think with these open AI and Stripe secondaries. I think there's, and it's just a bummer we didn't de-stress it this year, but that's our job.

1:19:09We, you know, I mean, we still have our fees to get us through these rough patches, right? But I'm not going to let that happened no i don't take fees you don't take it's good it's good it's success only at 20 bc right it's we're a zero 30 fund we go big on the carry rory's the same rory told rory told me they don't do fees either so i just it seems dated doesn't it yeah no fees i mean look in the end for most normal fund size despite the cynicism the truth is you make your big money on carry a for all the obvious reasons and b it's taxed advantage so yes it would be really great if the window opened And the scary thing, going back to linking it to the AI thing, is with every year that goes by, the probability is that the next crop of IPOs will be AI-first companies from 2022 or pre-22 companies that have clawed their way into AI land.

1:19:59And the probability goes down that those 300, 400 companies that are unicorns pre-2022 that aren't making the transition will ever get out. And every year that goes by, as the tech debt mounts, as the new world order becomes clearer, the probability of most of those companies getting out has to decline. And that's the scary thing. Do you think you can maintain a 2021 mark if you haven't seen massive AI progress? How are you thinking as we come to the end of the year at scale? It's very hard to imagine any 2021 mark that's been maintained that hasn't been validated or anywhere close to it, and we wouldn't and haven't.

1:20:32Do you think they've all been marked down? I think they have. I mean, I can't imagine. Look, I regularly, for my bedtime reading, I eyeball the list of unicorns by year. And you just look at it and you go, oh, that's good, that's good. Oh, no, no, no, no. You just look at it, yeah, I'm not even close. I mean, I think there's enough data that says the various surveys, the secondaries mightn't be representative. But yeah, if you have a 21 mark that hasn't been validated since then, if you're trading at six times revenues and you've grown into it, then yay you. If you're still trading at 20 times revenues, you might want to think about it.

1:21:04Do you think 6x is okay if you've grown into a 5 or 6x? It's growth adjusted. It's all the things you talk about. Look, the truth is, if you're in a boring, I mean, we've seen it in SEMrush three or four times. You cited Wix at three or four times. On the other hand, with 25 % growth, you get to 12. I mean, the interesting thing is how fine-grained it is. Small percentage points of revenue growth here between 15 and 25 have massive consequences in terms of value, which actually is a whole theme for some of, as you talk to CEOs, how easy it is to move from not great to awesome with just a little bit of reacceleration.

1:21:39You're right, but you know why it's so much harder than it looks? Because if you're growing 15 % or so, or in the teens, probably the majority is from price increases in today. It's fake growth. It is price increases or stuff jammed down the channel and maybe it's a couple percent from new logos, but if you're increasing effective pricing eight to 9 % a year, even with some retention issues, the truth is it could be half the growth, right? It's not that that doesn't count. It just makes it much harder to get into the 20s. No, in the end, exactly. You're not going to get into 20s on price increases.

1:22:10You're not even going to get into 20s probably on NDR. You're going to get into 20s because new people want your product, which is why you're going right back to Grove and all. If you cut R &D in the downturn, you're probably screwed. If you don't have that compelling second product that you built in 22, 23, 24, you're just in a tough place. Okay, we're going to do a quick fire. Roy, this is your favorite. Would you rather, yeah? Would you rather be in Wix or would you rather be in Lovable? That's a good question. This is from a make money perspective. Oh, just to clear, but not from an, yeah.

1:22:44I'll go with Lovable at the margin. Board companies, interesting. I don't have clarity on how Wix's VibeCode product does roll out across the rest of the organization. If I had clarity on that, I would take Wix all day, every day, because I think you could make a four or five X that would be liquid. but I don't have a thesis on it. I mean, you saw it in my intercom investment. I had a clear thesis there. I don't have in Wix. If I spent the time, maybe I would. But in the absence of data, you know, it's the presumed guilty, presumed innocent. In the absence of data to the contrary, the prior is that the AI first company has the edge in terms of growth.

1:23:19So I'll go at lovable at the margin, but I'm a bit nervous at 6 billion, just to be clear. A bit. Well, my, so listen, I watched your interview with the Base44 guy. He's pretty good. I mean, we knew he was good, right? Did you think it was good? Yeah, he's pretty good. Yeah, I feel like I know this space pretty well now. Listen, of course, he's a founder. I mean, he should know all this stuff, but his fluidity in the space and his knowledge of where it's going to go and how to play it, like pretty impressive. So here's my question, Harry, to you. Is he going to stay? If he's going to stay for, because it felt like he's going to stay, okay?

1:23:50But if he's really going to stay 24 months, I'm going Wix just on financial engineering. Nothing against lovable. If he's going to stay, if he's going to leave, I'm putting my money in lovable if I have to pick. Unwavering that Mayer will stay. Yeah, so I'm not sure I'm going to do it. But if you promise me he'll stay for 24 months, because that arbitrage to that second bucket is so palpable, but he's got to stay. He's really good. I didn't know when they bought it. I've used Base44, but he's... If I was on his comp committed, I've done this with some of my existing companies. I would have that guy on an accelerated equity grant program based on upsell of the new AI product across the existing customer base that would make him wildly wealthy, double or treble he's already hit if he got that penetration up to 20%.

1:24:35And if he's as good as you say, because that's the mission here. If you can get penetration of his product up to 20%, you probably jumped two buckets, Jason. You probably jumped to the 25 bucket. The problem is he could probably raise it a billion now on a new startup. That's the problem. So you've got to compete with that. Now, that's not liquid, right? But how do you, if you're running Wix, how do you compete with the fact that, in a sense, he sold really cheap, right? Looking back on it. At the time, it seemed like an internet time. At the end of the time, it seemed like a fair deal, right?

1:24:59It did. The only thing I'll say, and I'm not sharing anything because I don't know anything. I do know from him directly that there is a variable package. Yeah. And so he unwaveringly has upside if he hits. But instead of starting over in the old days, like 24 months ago, a guy like him would start over. and instead of raising it 10 pre, he'd raise it 50 pre for his next company or 60. Now he can raise it a billion pre for his next startup. And I'm not saying it's liquid, but it's a siren call for an aggressive. He's aggressive. A billion? And we'll give you 150 to start from Andreessen. It's a tough one to say no to if you're ambitious.

1:25:33It's a tough one to say no to. 150 million to start base 45. I just want to say, I don't know a lot about a lot, but I know how to design compliance. You could give that guy a package at Wix that makes it worth his while. Absolutely. You can. Because there's only one thing that matters in that damn thing. It's like, get that damn penetration to 20 % or 30%, and you have a thing. And if not, you have a 2x revenue growth, 4x revenue growth thing. So it's pretty, going back to where we started this, mission clarity. I mean, call it warm mode. Call it what you like. Mission clarity is worth a lot.

1:26:01The mission clarity for that company is take this existing customer base who should be using Vibe coding to build their stuff. You have the product. You've bought the product. You have the founder. Make it happen. But here's a question. If they're worth$2 billion today, and if he does$250 next year, then let's say they're worth$5 billion because of multiple inflation, which it's worth, right? You got to pay him$300 million because he's added$3 billion in your market cap. You got to give him an Elon package to stay. You got to give him 10 % of it. I'm not going to devolve down to numbers that I would get thrown back in my face by every one of my CEOs.

1:26:33Honestly, I would quit if you didn't give me$300 million. Rory, we miss you in London, my friend. You need to make it out here next year. In fact, there's still time. There's still time for next week. Next week, there's still time. There's still time. Okay, guys. We'll fly you out on our nickel. God, I will join early next week so we can make sure this stuff works. It'll be crazy. You're a star, dude. Hasta la pasta. But before we leave you today, now most people who get scammed never talk about it. And if it can happen to tech savvy professionals, CEOs and investors, it can happen to anyone. But the problem isn't just losing money.

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