20VC: Are Burn Multiples BS in an AI World | Sam Altman Needs $1TRN of Energy | Klarna, Figma, Stubhub, all Down: Are Public Markets Turning? | FiveTran and DBT: Is the Wave of Consolidation About to Begin?

23:24They want to buy a Harvey in legal, or they want to do something like clay, which is powerful, but they may not even know what it does, but they know they're under the gun in GTM. And being number one is so powerful when people know they want to do something in legal. They've got to do an LLM for legal. They've got to do this AI research for their clients and tell me who the hell to buy, Harry. And that will calm down in a couple of years because the leaders will settle down. Right. And it's why lovable and replet are in a death match. And it's very powerful. They're both at nine figures in revenue.

23:53They won't kill each other. Right. And other folks like you want to be that brand that nervous folks don't know who to buy. And I was just talking with someone at Bolt that closed a massive deal against lovable the other day. And they'd heard of both of them, but no one at lovable called them back. And so Bolt became trusted. So they bought Bolt because they were kind of equal on the discovery. But who do I trust? Do I trust the ones where the humans are in the deal and helping me? Or do I trust the one where it's 90 days to get an appointment? Like when I was at Adobe, we waited five years to implement Salesforce.

24:20It's just not happening with AI, right? Two comments on that. One is, if we're actually going to be responsive to Harry's question, you have to separate being number one, which I agree with you. In the end, when the money is made, the number one makes, in a business market, 67 % of the market, the number two makes 20, 30, the number three makes 10, and anything after that doesn't even matter. And in a consumer market, it's even more skewed. So I agree. In the end, when the total is written, you want to be in the number one in a segment, and you'd be better off in a sub-segment and being number one than being number four in a bigger segment.

24:50I totally agree with that. Look, if nothing else, if you're not number one, don't spend like you're number one. That's true. Even if you're growing pretty quickly, like Harry said, if you're the clear number two or number three, and 80 % of VCs are going to drive by, if you burn 100K a month, you actually may have the best exit for founders, dilution and time-adjusted, but don't be burning$2 million a month. Which actually triggered something else that I should have actually said because I glossed over this and I think Harry hinted at it. But just to call it out, you know, if two companies have$20 million, one from great VC, one from less well-known VC, it helps at the margin.

25:22But what I didn't say and Harry mentioned, I want to go back to this. The thing we're seeing now is because that first company got$20 million from Awesome VC, like three months later, they get another$60 million from a bunch of people who want to follow Awesome VC. Now it's not a lot of fair fight anymore because now they got 80 million. So we're definitely seeing some of that where it's not so much the money itself that's creating the momentum. It's the fact that the money sucks in more money. In the end, SoftBank proved to everyone's complete satisfaction that money alone cannot make winners, right?

25:53And we're very kind of them to run that economic experiment and prove the negative. So it's not in the end a positive, but there's no doubt in my mind. And I think that's what you're referring to, Harry. you are seeing some cases where you go, wow, not only are they got a great firm, they got Sequoia, they got Kleiner, they got whatever, but oh my God, there is another 80 million bucks on top of that from other people. Now you got to say, not just, I do this, put this 20 million in this other company, but do I think this other company is nuanced enough and clever enough and has a differentiated enough strategy to beat the wall of money?

26:22And if they've not, then it does cause a pause. So this is one of those examples, Harry, where, and I do this a bit, during the course of the conversation, I end up going, hmm, I get that point. I should nuance what I'm saying a little bit. It ain't as easy. The wall of money makes me trying to be pure and saying it's just about the company perhaps a little unrealistic in today's market. Do you think we are near peak madness, guys? Or do you think we'll look back and laugh at ourselves for having this conversation, given the might and the size of the markets that we're entering? You mean that it'll be so much better?

26:49I mean, it's like, what's his name? Alan Greenspan talked about irrational exuberance. I never remembers that, but, you know, worth pointing out the markets kept going for three more years and never went back to 96 level. So is that what you're saying? Is that going to keep going? Or do you think we'll be laughing because it's gone backwards? I'm saying, are we just so fucking peak that we've got 25 million ARR companies being valued at 5 billion, 10 billion, Iliad's being valued at 30 billion, Mirror's being valued at 10 billion with nothing? Are we going to actually look back and go, what morons?

27:17We're about to see the biggest transition in spend from software to human labor budgets and actually how small thinking we are. One of those two things has to be true, because that's actually the interesting insight back. If that massive transfer of labor doesn't happen, then all these valuations are wrong by an order of magnitude. One of two things is going to happen in the next five or seven years, right? Either A, you are going to see pretty profound productivity changes. You're going to see companies like OpenAI literally being$200 billion to$300 billion in revenue super quickly. Option B, AI is still going to be wonderful, but you're going to have a readjustment period that's going to make your head hurt and you're going to go, what were we thinking?

27:56Without speculating yet that we can in a minute on which of them it'll be, one of them is going to happen soon. We're just getting started on what we're going to do in AI in B2B. It is so early. So much like so many of these other waves, the direction's correct. We're early. I feel it. I live it to ours vibe coding. I live it that we've replaced 11 people on our team with AI agents. I can see the future. I think pretty clearly we're just starting. For venture and for investment though, not only am I worried about, I mean, We've never had$20 billion pre-revenue seed rounds before, right? This has never happened, right?

28:29But what I'm even more worried about that than now we're back to the era where if you have a billion dollar round, you can't even get in TechCrunch. You certainly can't get on 20 VC. There's no way Harry's going to slot you just because you're the 14th company this week to raise at a billion dollars for your AI vertical SaaS company. You're not getting on 20 VC. But when I met Harry, of course, you'd get on the next week, right? I mean, if you raise a 200 million, you'd get on one of the first 50 episodes. My point, what I wonder is, are our loss ratios correct? If as VC firms, especially with larger funds, but actually I'm just as worried about seed funds because they're paying such high prices for such low valuations.

29:06As long as we get it, as long as we're cool of 80 % of our unicorns implode or blow up or make no money, more importantly, just don't make money for venture. As long as we've got it all right, even if those are at 100 or 2X ARR and we modeled it properly. but I'm pretty sure we didn't model it right in 2020, 2021, those unicorns. The B2B unicorns, we did not model them correctly in terms of our loss ratio and expectations. As long as we have them cool with the party. It feels almost risk-free again, like it did in 2021. It feels risk-free. Yeah, I actually think you need to, again, distinguish a little.

29:37I don't, but the valuation and loss ratios both matter, but maybe just distinguishing them just a little bit more, right? Because I think of the loss ratio as the time you just picked wrong, right? And remember, it's worth pointing out that the number of times you picked wrong versus picked right. There was a product that got product market fit versus it didn't, right? And if you get that wrong, there's nothing you can help. Your valuations don't matter. It's just, you know, you wipe out. And that would be true if all your positive deals were pleasantly priced and if all your positive deals were highly priced.

30:09Valuation separate, which is, okay, you got the picking right, but you can also make a second mistake. You paid up so much that you didn't make a return on those deals enough in itself or enough to cover your loss. So you've got to break it down. You can imagine people failing because their picking ratio was bad and they just put too much of the money in bad companies. Or you can also imagine people failing where all their companies were great, but the prices were so bad that they only made a subpar return, even though they only had a 30 % loss ratio. Sure. So, I mean, both things can happen. I mean, the sad thing about venture is you actually have to get both things right to make money because, again, it turns out to be a hard thing to do to make money.

30:48The question today, I mean, it's funny because Jason said the loss ratios. I think the question how he was leading it was the valuations. Even if all these companies are amazing, will you make money in all these companies that are billion dollars? That's one question. And I think the jury's out because there's an implied assumption there. If on top of that, your loss ratio starts going up, then you have a tough fund. because you have both things going on at the same time. I also think, by the way, that Alex Wang's acquisition created this very dangerous precedent in venture investors' minds where they're like, well, if Alex is worth 14, Brett Taylor's worth 30, and then Iliad's worth 30, and then Mira's worth 10 or 15 or 20 or whatever it is.

31:26And it creates this kind of tidal wave of justifications for why we should pay entry prices where they are rather than accepting that Alex Wang's just an anomalous event that may be seen in isolation. Irving Fisher, the big American, Economist at the time famously said in summer 1929, stocks have entered, quote, a permanently higher plateau. Well, it turns out he was wrong by 90%. So whenever I hear the word permanent, I'm like, have valuations permanently changed? No. But talking about permanency of value creation or sustainability, Figma is down 63 % since IPO day at peak. Now$53 a share. There's VCs who are still locked up.

32:07Maybe times haven't changed that much. No surprises here. It turns out stocks that open 250 % above their IPO pricing probably will go down from there. Look, you can't be critical about anything about Figma, but it's still trading at 26 times revenue. The bigger issue is I think actually you could argue that the markets are too generous today, right? The top group of public B2B companies trades at 20 times ARR, only averaging 30 % growth rate. Like the bars actually, we're lucky. Like on the one hand, we have this AI boom. On the other hand, you could argue because it's profitability or whatever, the markets are fairly generous today in ascribing relatively generous multiples to growth that seems fairly modest based on our historical standards.

32:50The bar is not that high on AR growth to have a decent public multiple. If Figma was trading at 8x revenues, I'd be like, let's all quit. Let's just go golf and live off the fees like$2 ,000. Let's not invest at all because the world has been destroyed. But Figma is still at 26 times revenues. Embedded in what Jason said, there's a meta worry here, which is this. Because whenever you're pricing a deal, you're always going, this is the way I think of it, you're always saying to yourself, how much extra do you pay for how much extra growth? And if it's doubling, can you pay 20 times? If it's troubling, can you pay?

33:25Whatever, right? I'm just throwing out the numbers here, right? And you're doing that. And you mentally have a benchmark. And I always think the 10-year treasury is the benchmark for the financial interest rate world. In my mental model of SaaS for the last 20 years, kind of the public company median was the equivalent of the 10-year treasury. And the public company, as Jason said, up until about 2019 was 30 % growth, roughly six or seven times revenues, right? NTM revenues, right? And then you said, okay, if that's worth 30%, then maybe 60 % growth is worth twice that in multiple. And you could kind of build your little valuation ladder in your head from there.

34:02And you're right, Jason. Today, that 30 % growth stock in the public markets is trading at 20 times or 15 times, twice the long-term average. And therefore, you say one of two things is true. Either it is different, and because it's more cash flow positive now, or there's some good reason, or even the core bedrock price is wrong. And when that goes down, everything drifts down with it. It's just like when the 10-year treasury trades, everything that's linked to the 10-year treasury goes up and down with it, right? if the bedrock, if top tier SaaS 30 % growth reverts to eight, seven or eight times, which was where they were happily for a decade and a half, and everything else goes down accordingly, it's going to be a tough day.

34:44Go team. That gnaws at me every once in a while. We have seen Klarna as well be hit. Dips below IPO price. The StubHub was hit massively. Hard. Absolutely bombed. Do you think there's going to be an impact here in terms of people being less willing to go public with the more recent IPOs facing a harsher pricing environment. Somewhere, Bill Gurley is lighting a candle and saying, I told you so, right? In many respects, this is good, actually, from the banker's perspective. Actually, cancel, I've not even been, it's like the banker's perspective. They're like, because their argument is always, you got to pay them on the upside, because sometimes they go wrong.

35:19And this is what going wrong looks like. If you bought some of these at the IPO, you're a hurting puppy, right? If you bought stop up, I think you've been down pretty consistently, a lot. Klarna traded up and then is down. So what it says is, what's the rational buyer of IPO stocks going to do? He's going to say, I actually want a little more kind of give in the valuation to make sure I can get this done. I'm probably going to want a wider spread because they all price off the public comps and they say, look, I can already buy one of 10 names at 10 times NTM revenues that are already public. If you're going to be making my some new shit that I haven't seen before, that hasn't traded before, I'm going to pay you eight times so I can make a pop.

35:57Sometimes it goes wrong and they get a huge pop, but that's the thinking. You've got to give me a discount to buy the new thing. Now they might say, hmm, I've been thinking, there's more risk here than I thought. Seven. You're going to see that. I agree. You're going to see some reflection in the capital availability. It will impact pricing at the margin. I don't think it's the end of the world. I think the trend is open given the markets, but there's definitely going to be a little more wariness and a little more focus on price from the buyers. And then the question to your point is what happens on the seller side?

36:28Do people say, I'm not going to go out because I'm not going to get my price? Speaking of what happens on the seller side, EA going take private at a$55 billion, largest take private of this kind, Jared Kushner behind it. I'm just like, wow, that's impressive, Jared. Really, well done for being the broker behind this. How did you analyze that? It's a momentous deal. It's the largest LBO in history. It's 18 billion of leverage, which feels like a lot for a venture-backed deal. But, you know, if this was an industrial manufacturing company, those dudes leveraged those things kind of six times EBITDA.

37:05So it's not a lot of leverage if you're a recurring revenue, you know, boring business, but it's a lot of leverage for a hits-driven games business. So interesting at that level. So yeah, biggest deal ever. But, you know, I got to say Silver Lake are part of this and they've been astonishingly smart at the decisions they've made, you know, from Airbnb to I think the real killer is the Dell EMC acquisition where the Dell take private was a worker genius and has made Michael Dell one of the richest men in the world. So I look at it and I go, pretty smart money at the helm, quite a big ass deal. And speaking of size that blows you away, I mean, as we said, largest deal there.

37:40One of the things that blew me away this week is the sheer size of data center requirements and energy capacity that Sam Altman needs with OpenAI. He would need more energy supply than India's capacity today in eight years. OpenAI planning to 125x energy capacity in eight years. Is this sustainable? Is this within his I need hundreds of billions of dollars more to make what I plan to do? How do you analyze this unwaveringly infinite insatiable demand for energy? Well, first of all, you're right. The energy demand is a outgrowth of the compute demand and the compute demand is an outgrowth of their ambition.

38:20And as long as the revenue keeps growing like it is and the capital keeps coming like it has, they're going to be allowed to make that bet. And as we said last week, it's pretty clear that he and the other five or six people making that bet, and it is only five or six people, are all going to make it until some unequivocal feedback comes back to say, dude, this ain't working and you have to stop. That hasn't happened today. Will it stop on the road between roughly a$12 billion run rate now and a$200 billion run rate in 2030? I mean, my gut is somewhere along the line it will, but the way life works is if someone's rolled the dice and won six, seven times in a row, he gets to keep rolling.

38:59And that's all you can say, really. I've really internalized this whole debate of like, you can step and stare back in wonder. And I actually find myself saying, what actually do you do with this discussion? I mean, do you want like in the end? It's fun to talk about. And each week, I mean, as we talk about it, you know, you do what a good little forecaster does. You update your priors based on new information. And that's what I'm doing literally every week because we have some version discussion every week. And the weird thing is every week there's, you know, some hints that say, oh, my God, this thing can work forever.

39:27It's typically, and this is my construct. It's typically in the technology. New things like, I'm sure Jason thought, Claude can now cope busily for 30 hours with no human intervention. It's like amazing shit on the technical side. I did three hours. I did three hours myself. Yeah, keep going. It's a big change. So it's huge. So the technology keeps moving forward, right? So if you look at this, my biggest heart is if you look through a science lens, this is all doable and possible. I think if you look to a finance and economics lens, at some point in the next two, three years, the scale of the ambitions becomes too hard to fund.

40:01And you can find evidence of that. And then you pay your money and you take your choice. And in the end, you manifest that bet by deciding, do you want to buy your puts or calls on NVIDIA? You ask about power for data centers. Here's just a weird thing I'm thinking about for what it's, I'm not an expert, right? I believe that Sam's going to solve this problem. But I believe like a lot of things, it's hard for us to appreciate the scale of the problem. So just the little hundred billion that he's doing with NVIDIA, just the one where they just announced, right? Needs more power than all of New York City.

40:30It will only be a couple years where the cities of the future don't even have humans in them. The next New York will all be GPUs and like 20 people managing an entire city, a New York City of data of GPUs. They will be producing. It's not just that it's a data center. It's the output of AI. Like an entire New York will have 20 people in it. We will be in this weird future where how many major cities do we have in the US? 20 or something like that. Half of them now will be just AI cities full of GPUs. Just this 10 gigawatts is more than New York. That's the weird thing. I'm like, what are they going to look like?

41:08Our country will be dotted with these Stargates that are larger than New York City with only hundreds of people working in them and the equivalent of billions of digital minds. I think Sam will figure out fusion and the trivial things on the way to get there. But Jesus Christ, half our cities in the United States may all be just these massive stargates with no humans. I'm going to zoom back out to the kind of wider concept and the thing I said earlier, but the technology says it's going to be exponential. I think the economics will grab hold of it. I think what Jason said was a microcosm of what will happen.

41:43I don't think the level of growth, I think the growth rates will slow more quickly. I think all the practical realities required to make that much power, to roll out that much data, to sell that much software, to get enterprises to adopt that quickly. I personally think that the rate of adoption forecast over the next four or five that's implicit in all these data center assumptions will, in retrospect, prove to be too optimistic. So there, I've crept out on the limb and said it. We'll be revising those forecasts down over the next five years. I feel very stupid, honestly, because I look at a trillion dollars required to fund data centers for OpenAI alone.

42:18I'm like, I don't know where that money comes from. I know we said, oh, there's 5x the demand for Anthropics round. That's cute. That's like 50 billion. This is a trillion dollars for data centers alone for OpenAI alone. Where is the money? Sovereigns don't have that. Well, actually, funny enough, they do. I mean, they'd have to put it all in. Yeah, agreed. That's well, that was just being precise. Right. Maybe the better point, Harry, is you're dealing with numbers at that scale. A trillion dollars is a lot of money. I mean, the joke used to be Everett Dixon, quote was, a billion here, a billion there, and pretty soon you're talking real money.

42:54Now that feels laughable because the real truth is in OpenAI land, a billion here, a billion there, pretty soon you're not talking about that much. We're talking about a trillion. But a trillion, you're talking about real money. The trillion. Again, I've said it many times. I have more and more respect with the way Sam communicates, right? simple things said a little bit ahead of time said more clearly than we realize right including the beginning of stargate which i didn't understand and why the hell larry ellison was there with donald trump i didn't get any of it i think he is willing the trillion into existence i don't think the answer is clear right i don't think you can get every sovereign wealth dollar but whatever it is i think is sufficient here's my view of someone just that lives in the in ai today 12 agents vibe coding two hours a day.

43:35If I had to stop, if I had to only use GPT-5 and Cloud 4.5, and I couldn't get any more GPUs, and I couldn't run any longer contacts, and I couldn't do anything else, it'd be okay. It would be a bummer. And what I mean is it wouldn't have to stop, but let's say it had to slow down because there wasn't a trillion. So I think Sam is just willing as much of this into existence as possible because of the future. And if we come up short, if it's 400 billion or 600. Like we don't have to buy all the GPUs. Like the world, it would be okay if they had to last six years instead of three years or whatever the depreciation schedule is.

44:10So I think he's willing it into existence without it being a certainty because we can't stop at 700 billion. I think that's actually right and quite insightful. And it allows us to make a really important distinction. And you see this a lot with the very best entrepreneurs, right? The sheer act of willing something into existence like this is just amazing. And the broad direction they took in 2016 on has been entirely vindicated, and it's entirely probable that the same broad direction is correct for the next eight years. And what that means is as long as OpenAI stays ahead of that train and on top of that train, they're going to be the winner.

44:46Whatever the prize is for being the best company in AI, OpenAI is going to get that prize. And that's his job, and he's doing it better than any other CEO of this decade. It is also equally true, as any CFO who's had an ambitious CEO knows, is just because the CEO says we're going to treble next year doesn't mean we should buy real estate and hire people as if we're going to treble. Maybe we should plan for a double and be ready to hire more if it starts to happen. The problem is not big visions from the most visionary CEO of our decade. The interesting thing is if you start valuing NVIDIA like as if all that's going to happen and more.

45:21if you start valuing oracle as if all that debt's going to be paid off and more. Maybe we'll look back and say, we saw this visionary person leading us to the promised land with big metaphors like trillion, and we foolishly thought it wasn't a metaphor. We thought it was a PO, right? And we literally borrowed money against the PO, right? And I think five years from now, that's where you could be. We said, oh, I get it. OpenAI is still the best company on the planet for AI. Its growth rate has slowed to a shockingly small 50%, 60%. It's freaking amazing. It's doing$30 billion going at 50%. It's astonishing.

45:56But maybe they don't need a trillion dollars of CapEx this week. The ripple effects of that will be where the fun starts. And to me, that's at least as likely a scenario as we achieve the full kind of thing, which gets to the metaphor of the CEO and the CFO. We've all been on those boards where you have the wildly aggressive CEO, and you don't want to trample them. You don't want to say, don't be aggressive because their aggression is what made you all this money. But you do want to say, please get an experienced CFO who quietly will make sure that we don't run out of cash, that we don't actually spend that until we see the revenue coming in.

46:26And, you know, that's obviously what the economy as a whole perhaps should be doing here. Maybe we shouldn't be borrowing every dime on the assumption it's all going to happen. Every time I do this, I say to myself, how much should I have in the S &P this year? But it's been up. No cash. I'm thinking less and less right now. I'm looking at it thinking I can't be this good. This has to be a peak. This has to be a peak, baby. we said there about like sam you know you earn the right to do the next thing and he continuously does yes and then you also said about revisiting your prize i always thought that zuck earned the right to do the next thing he earned the right to the next thing and i have to say my faith in meta's ai strategy has just dwindled and dwindled and dwindled and i hold that in stark contrast to them being my largest public position being very open and i sympathize you just never bet against zuck but i'm looking at it i'm looking at alex wang i'm looking at the treatment of yan lecun i'm looking at how they structure teams and i'm going this is not well run open ai anthropic are coming for you microsoft and satya are fucking great sundal's got google am i wrong to have such unwavering allegiance well it doesn't sound like you do it doesn't sound like you do you're voicing this loyalty here if yes well one thing's clear listen he is not the communicator that Sam Altman is getting up there with the thick glasses and I'm going to buy them saying things that just, if I don't understand where the hell he's going and Harry doesn't understand it, not saying he's not getting there, but good God, we don't understand.

47:57If we don't understand, he's not one of the great communicators at the moment, Mark Zuckerberg. He might be a great connector with technology because this, this Facebook engine is unkillable, but man, he's a crappy communicator, right? Because none of us, I'm not saying his AI strategy is an S tier, but I don't think any of us understand it. Not for the life of us, where the hell it's going. I think you can say it isn't S tier. It's a desperate attempt to throw money at a problem and bring in dream talent and try and throw it together in a way that hasn't worked very clearly, very quickly. Yeah, but he was clear just this week.

48:30He'd rather burn the 20 billion in operating income and fail than become irrelevant. That was ultimate level of clarity, but maybe not in the way I wanted to hear it. But it makes total sense. Like he'll burn every bill, 20 billion of operating income to be in play rather than not be at the game. Right. Agreed. I mean, and I think there's a lot to unpack in that. That statement is the most important statement. The man who owns with untrammeled power, the 200 billion revenue, whatever it is, 70 billion free cash flow business is totally willing to spend the money. So the bet's going to happen. The bet's going to happen because that's his evaluation of the risk return.

49:04And then to the point you decked back for me, when you're successful, you earn the right to roll again. I said that, and I stand by that statement, but there's two different statements. You weren't the right to roll again, which doesn't mean you were right. If there was a Calci bet, and maybe I should check it, that some version of this AI strategy will not produce meaningful revenue despite a$20 billion burn and will look more like meta VR and less like Instagram and WhatsApp, two of the most brilliant acquisitions of the last two decades, I'd take that bet. I'd also be glad to have backed a leader who got too—remember, you get too right, you get too wrong.

49:38the two right more than swamp the two wrong. If he was just building a venture portfolio, he'd have a 50 % hit rate and he'd have a wild DPI. I don't get it for this deal, but there you go. Agreed. You do, but it doesn't mean that you rate the quality of their decisions in the way that you used to. Well, you're right. It's a harder bet. And that's why people are obviously vitally important, especially CEOs around Sharmel Power. But to some extent, the wider comment is the bet for the last 15 years was writing this brilliant invention that you had in 2003 and just optimizing it. That's hard, but it's a lot easier than now you've got to invent a whole new thing a second time.

50:17With the exception of Mr. Jobs, very few people have ever built a whole new thing differently, right? Because Jason's right. The zoom out comment here on risk on AI is not the The AI is going to help us target ads better. That's in the noise. The big picture comment is if you spend two hours a day on ChatGPT, that's two hours a day that you are not spending on Facebook and we live and die on our attention. So we're just going to make shit until somehow we get people to come back and play with us. We're going to have characters whisper sweet nothings in their ear, whatever it takes. How significant do you think it is that ChatGPT now enables like a buy in ChatGPT feature?

50:54totally opening up commerce so users can absolutely buy following recommendations and suggestions. It's clearly a trend they're all exploring. I mean, Google, there's two different kind of even syndicate, whatever, protocols on this, one from Google, one from ChatGPT on how to do this. All companies that are involved in e-commerce are kind of looking at this. There's clearly going to have to be some monetization of all these free users because as we just discussed, this stuff is$1 trillion worth of expenses and$1 trillion isn't going to cover itself. There's only two or three things you can do with free users.

51:26You can sell them shit or you can sell advertising to them. So they're going to press this button. This is obviously going to happen. I'm sure the other shoe to drop at some point is advertising. So it all makes sense because it's one of only two ways to monetize the free users. So it's going to happen. I just think it's an experiment. Yeah, exactly. I think we'll see a lot of these and it'll be confusing to us because they'll all get a lot of PR. They'll drag out the Collision Brothers or Toby and they'll all do joint PR. But whether for OpenAI, this is a top five initiative or whether this is just another integration at the end of the day, I'm just not sure.

51:56I'm just not sure. I mean, is this the future of e-commerce on ChatGPT? We'll see. There's a lot of arguments it isn't. There's a lot of arguments that's not how people buy the hottest shoes or the hottest watch today. There's a lot of data from Instagram and Pinterest talking about how people purchase. So you got to do like$2 billion of revenue to move the needle at OpenAI for next year, right? Will this math add up? Maybe, but if it's not material, it's just an experiment or a feature, right? I think what you said, Jason, actually that reminded me, and you're exactly right, is they tried versions of this in Facebook and Instagram as well.

52:29And what they discover is, for whatever reason, people are really comfortable with advertising on these platforms and just less comfortable with purchasing on these platforms. And I don't know if the metaphor applies one-to-one, but it's hard not to imagine that if you were to pick the thing to do, that would be more easy. It would be some version of advertising, but we'll see. I like your comment. We're growing so fast, we're burning so much that if you're not actually stemming the tide at the billion dollar level, you may not even matter here. You got to think in billions to have a new product, right?

52:57You've got a CEO of apps. I think that's a tough job. This is coming in like, you know, when it took a little while for Google Cloud and Google Apps to figure out its footing because the numbers were so big, right? It used to be Google internally almost made fun of Google Cloud for years because in the old Diane Green days, it wasn't even a rounding error, right? It was a distraction. Now, obviously, it's a force of nature, right? It's a tough job because if I'm the CEO of apps, I've got to come up with a couple multi-billion dollar revenue streams that get there in like two to three years. Like that's non-trivial.

53:25And then just for context, just to say it because I can't stop myself, there's a thousand billions in a trillion. And if you're going to spend a trillion in trapex, you're implying that you have a thousand billion dollars. It brings into scale, you're exactly right, which in my view, it exposes the absurdity of a trillion dollars of capex. It's going to be really hard to cover that nut. I do want to discuss one very, I think, important one, which is 5Tran in talks to buy DBT. Both were super hot companies. DBT was really super hot. 5Tran reported last time 400 million of ARR. DBT said before it was 100 million.

54:00Taking them together, given growth rates, there'd be over 500 million if they were to combine. How did you guys analyze 5Tran buying DBT in this combination coming together? Smart. And I'll tell you why. Because the products seem to be adjacent. So they make kind of better together story. There's always puts and takes one level down, you know, how well the customers overlap and that kind of stuff. But at a zoom out level, this is the kind of thing that simply has to happen over and over again in everyone's venture portfolio. Because we have six, 700 unicorns. We've processed five, 15 out the IPO gate year to date.

54:37So 20 for the year. That implies we got 30 years of this stuff to get through. And every time two companies combine, we have the unicorn list. You know, it takes two midsize companies. I mean, 400 was nearly there. This is part of the job venture is going to have to do to whip their portfolios into shape to be IPO-able, right? And it'll be noisy. It'll be hassle. I'm sure all the drama of private to private. Do the DBT investors do OK in this transaction? How do you expect this to play out? I thought when I saw it, right, because I tried to do one of these myself recently, but I'm not Andreessen Horowitz.

55:08The fact that Andreessen is the leader close to it in both deals makes it much simpler on many levels. Not only does it make it easier to get people together in the conference room, right? Not only does it mean you already know each other, but just on paper, if Andreessen owns 20 % of 5Tran and 20 % of DBT and you combine them, it does kind of suck when you own 20 % of a portfolio company. Combine it with another leader. Totally makes sense on the spreadsheet. Great outcome. And now I own 8 % after the deal. I go from 20 to 8 because I combined them and there's dilution and all this. It may make sense in the real world, but if I own 20 and 20 and I got 20 together, these deals, there's a million reasons you should mash your own portfolio together.

55:47It just makes it easier. It does make it easier, but I understand what you're saying. And just to be clear, what you're saying is if I had ownership in one company but not the other, I have 20 % ownership, so I have 20 % of upside. And now you merge. It's a 50-50 deal. There's some dilution. Now you're down to 8%. And that is fundamentally the reason why these deals are hard. The preference stack makes it even harder. but even on an ownership basis, there's a little part of you thinks, I have this little at-bat, and if this company takes off, I'll get 20 % of the upside. And when you do this deal, you're saying, if this combined company takes off, I'll only get 8 % of the upside.

56:19So your leverage of your bet has diminished markedly. So I get it. And I remember thinking that when we'd look at some of these deals. But what you've got to internalize, and I think these guys have done a really good job internalizing it, is 20 % of something that's not going public is not nearly as interesting as 8 % of something that is going public. And if you believe that it's not a continuum of value, you know, a sliding scale of value, but rather it's like electron states, there's just a gap. And then you got to go to the next state. If you're above critical mass and you can get public, you get the cheese.

56:49If you're below critical mass, then your only option is Toma Brava and whatever pain that that involves. And, you know, we've had these discussions in some of our companies. Would I prefer to have 20 % of my bet? Yeah, but I'd prefer to have a bet that's worth something. And I don't mean worth it in the sense that a hundred million dollar company is not worth it. But if you want to get to the IPO and the IPO windows, four, three, $400 million, you got to do what you got to do. Of course. But if you believe the upside is not bounded per se, right? If you're optimistic, it's so much better to combine two portfolio companies and own 20 % together.

57:21I understand you can't argue the intellectual argument, but it's tough. VC firms are a collection of GPs and it's a collection of interest. And if my one winner goes from 20 to eight, that's tough enough as it is. But owning 20 % of something that is accretive, it's hard to argue against that intellectually or emotionally, isn't it? Emotionally, yes. But intellectually, no. You're right. I get it. I do the anchoring. And, you know, something you guys asked about last week or two weeks ago about, you know, individual portfolios. Again, I often do this. I sleep on my answer and revise it. Individual portfolios should be less diversified than group portfolios because there's some value to the firm.

57:57And this is another one of the values. The firm has to be able to, we have to talk as a partnership and say, yeah, even though you're going to go from 20 to eight, this is something we need to do as we think about liquidity. So it's not ideal, but there's no point hanging on to a dream that's not going to happen when you can get a reality that is. And look, the fatal mistake that always scares me is not the dilution. The thing that scares me is you go from a decent deal that's well run, where you know everything about it, to merging with something else, and then the combined entity screws it up.

58:26That, to me, is the really shitty outcome, where you took your 20 % bet and turned it into 8 % of a disaster, which is why picking the partner and having it make industrial sense is key. And that's why I think this deal felt to me from a distance. I'm not the infrastructure guy at scale, but it felt to me from a distance like that's a damn smart, obvious combo that will get critical mass. I mean, you won't be looking at the S1 going, why are these companies together? You'll be going, oh, yeah, I get it. There was a deal superficially similar to this, right? To the numbers that I tried to work on.

58:55There's the A investor, the seed and the pre-seed. And the A investor wanted to jam two of his companies together. You were just telling him to. The pre-seed investor had another company that I thought was mid from his portfolio that he wanted to jam together. But I get it. It was almost as big, but mid. And then I had this idea. I'm like, listen, I have a third company, a fourth company to combine. I have no shares in this other company. OK, I'm going to go through 50 percent dilution. But I know the CEO and he's the best in the industry. And the AID and the PCID were both fine, but both would maintain ownership and their own thing and their own properties.

59:34And nothing's happened. And that's why you need to be an active investor. That's why you need to be a board member. Because it is tempting to try and take care of yourself at the same time. But you can't. Because the whole point of this, because remember, the bad thing about doing that is you actually will create the situation I just talked about. If the CEO isn't saying these companies obviously belong together, then it's probably a dumb idea. Yeah. When the CEO doesn't drive it, it's weird too, right? Totally. No. Yeah. This is what happened with Clary though, no? And this one's easy to be critical of, right?

1:00:03It's easy to be a critic. It's just combining a series of some properties that Vista has under-invested in with another one that has scale but isn't growing. I mean, it's easy. This is the bad version of Rory's story. Rory's saying we got to combine 800 B2B unicorns or whatever it is, right? But mashing together a bunch that are growing single digits is the suboptimal strategy, right? If that's the case here. I mean, drift is probably shrinking based on just looking at how the deal happened, right? It's probably shrinking and leaking all the Salesforce tokens for cloud, leaking everybody's data too.

1:00:32Yeah, I mean, they obviously have that drift. Because yeah, to take it on the chin and push back, but agree in a way, the combination of a sales loft type company and a Clary type company makes a ton of sense. You have a sales engagement platform and then you have a forecast. It intuitively makes sense. I wonder if TechP now question their business model a little bit more. When they see the multiples that you can get on the money that's being moved by your Kush and your big firms, combined by the increased loss ratio that will happen from an increasingly volatile new AI world, are you suddenly going, shit, I'm not getting paid for the risk that I'm taking on the multiple on the upside, given the displacement on the downside?

1:01:12To be explicit, because you didn't make it up, is what you're saying, are the tech PE people looking at their business model that looks so secure for so long of buying SaaS companies and just running them, paying down the debt and optimizing? And are they saying this might have more risk than we thought and less upside than the other game? 100%. buying your pipe drives or your Coopers or your you name it. It's harder than ever. Because as we said, opportunity cost wise, you can move more money with better multiples elsewhere. And then secondarily, displacement wise, there's more and more ways in which they're getting attacked through better and better startups.

1:01:51They might be saying that just like sometimes we say, oh my god, PE looks so easy. They just have these big sums of money and they do it. I think it'd be a mistake. Generally, the record of people trying to transition to a totally different sector is pretty mediocre. To my view, going from what they do to making non-controlled late-stage investments just because, you know, pick a name, Thrive do that well would be, in my view, stupid, because Thrive are really good at that, and they're not. They should be saying, any deal we underwrite today, you better have a clear understanding of the AI downside risk, to Jason's point.

1:02:23And if you have a lot of downside risk, maybe you shouldn't be doing this, because I do agree there is that it'd be fun to speculate on how, I don't know, actually, Jason. It's like how embedded would a non-AI app have to be for you to say this thing is good for five more years of revenues? The problem is, I think PE thinks about this maybe from a slightly different perspective, but I think this is the concern. Anyone that like us has been doing B2B for a while, these products didn't change from about 2008 until 2023. They're the same products. And the Brian Halligans will agree. And I said this with Henry Shuck and he's like, yeah, I didn't, And looking back on it, none of our products changed for a decade, right?

1:03:04And so it wasn't just that we had high NRR, which was the spreadsheet glue for the PE model. I led the seed round and pipe drive. And that product didn't change for, it took them four years to launch a mobile app. You used to have four years to launch a mobile app. That was my first venture investment. It was a billion dollar cash exit, billion and a half, my first investment. Could you imagine today waiting four years to launch your AI co-pilot? Like you're dead in the water, right? And so that was the part that was underappreciated, underdiscussed. Yes, 140 % NRR meant we could buy Marketo and fire everybody, but the products can't be static.

1:03:36And AI is the accelerant there, right? But that's why I worry. I worry there aren't enough buyers for any of this stuff, right? Because it's the rate of change. It's unprecedented in business software. I just want to kind of double whatever the cliche is on that. That is such a big insight, right? And there's two consequences of that. You're right. There was 15 years where we made the same product, and you didn't have to think that much about product direction at the macro level. It was roughly the same form factor. I mean, you look at Salesforce 2002 and 2022, it's the same thing. And that's now changed.

1:04:09That's huge. And it's huge. So there's two consequences, though, for both sides of the table. On the PE side, you're exactly right. You look at that and you go, I mightn't get away with next 10 years making the same thing and not changing it. And so maybe I'm entering into some kind of tech risk that I've never before internalized. And the weird thing is, even on our side of the table for these new post-LLM startups, I'm finding that, I think we talked about this before, is that product market fit, when you locked into it in SaaS land, you just didn't unlock for 10 years. Whereas here, you can lock in and out of product market fit as the models change.

1:04:42And you look back on the product a year ago and you feel, oh my God, it feels totally obsolete. So there's more risk on our side of the table too, I think. That's why it's good the growth is higher because the risk, it's less stable. I think to your point, Maurice, what makes our job hard never, and I'm not asking for sympathy. I know it's not easy making money, but that's what makes it hard on that. The predictability of markets in old days was easier. Yeah, absolutely. A lot of things Jeff Lawson said, I'm still processing. It was a good show, even if people didn't, they should go watch that one if they didn't.

1:05:09You know, his point was that if he were running Twilio today, it would be probably thriving because he sold at the API level and could benefit from the AI boom, right? I've seen that with RevenueCat and others in my portfolio and that the seat model is under risk, right? And I got burned out of LinkedIn people saying the seat is dead because it's obviously not true at some level. Seats are growing. But good God, now that we're running 12 AI agents, you know, we only need two seats of Salesforce. Because you don't have the people. We just don't. And yeah, and if Salesforce, if Agent Force can do all 12 of those agents, then we'll actually end up paying more to Salesforce.

1:05:43It hasn't happened yet. But this change of not needing as many seats, we thought it was a layoff thing in 2022, 2023. Oh, my God. We're laying off people. Like smaller headcount is an issue, but ultimately if the economy grows, you get past it, right? You get past the layoffs and the companies re-accelerate. It's a transitory thing, like a global pandemic. But the agents taking over humans and less seats in software, my God, it makes the PE model worse and our jobs harder. It just, because now we have like six agents that plug into Salesforce. They're like six human equivalents, but Salesforce may change their API pricing, but they sure don't need a seat.

1:06:17It just makes it even tougher for PE to buy these seat models. Not only the products not last a decade, but the AIs don't need as many seats. Two things on that. One is you're exactly right. Seats don't have to go to zero to be a lot more variable than it used to be. But then the second is I was thinking of you, Jason, because you are always, if I may say it so pleasantly, so brutal about the impact of AI in terms of employment and the consequences. And I always recoil because you're feels a little mean. But I prefer the way you talk about it to this version of corporate speak. Let me give you corporate speak.

1:06:50I saw it, and I'm not dumping on it, but the CEO of Accenture, the quote when they said they're laying off a bunch of people, right? We are exiting on a compressed timeline. People were re-skilling based on our experience is not a viable path for the skills we need. Now, that's just a brutal corporate speak epitaph. We think you're no good in the AI world. You're out. I just thought it's entirely correct. There's nothing objectionable about it. It was just such a wonderful mix of corporate speak plus finality. I just had to laugh and print that out today and look at it. Wow, there you go. We are exiting on an expedited timeline, on a compressed timeline.

1:07:25All you people who are no good, have a great day. I'm going to finish on my wild card, which I'm not naming names and it is not political, but we always stick to advice for founders. And as we move into a more and more political world, do founders have a primary fiduciary role to team members, investors, shareholders, to do what's best for the company over freedom of political expression? It would trouble me to say yes, in the sense that it would trouble me to think that just because you're the CEO of a company, you're not entitled to your personal opinion separately from that. It's a reflection of the times that you'd have to even say that, because you should be able to dissociate the two most of the time.

1:08:11And I have been on boards where we've wrestled with that. You have a particularly outspoken CEO. And I've come to the conclusion that if they're expressing their personal political beliefs on a personal basis, I would be actively resistant to stopping them. Even if it had an impact on the company? I think the recent trend at the company level of saying less has been smart. You know, I think a lot of companies took a lot more positions three, four years ago. And it's been almost fun to watch. Just like universities. they've realized that speaking as a corporation, you probably should stick to the mission of the corporation.

1:08:45In the university language, the University of Chicago principles have been proven to be so much cleverer than anything else that all those other people, all those other colleges are scrambling for that safety. And I think as a company, you probably want some version of the same thing. You just want to stay out of the culture wars, especially when they're so vehement. So as a company, I think companies should stay out. And I think think long and hard before getting into anything else. I think what's hard, and I'm just struggling with a little, is when you're the CEO, do you really give up all personal right to have a political opinion?

1:09:16It's worth pointing out that there are a lot of roles in society where the job does involve exactly what you said, Harry, not having a political opinion. It used to be, for example, people in the military were scrupulous about not declaring their political opinion. When Eisenhower was solicited for candidate for president of the United States in 1952. They didn't know if he was a Democrat or a Republican, and both sides asked him to do the job. I wish that wasn't the case, but actually the wisdom from some of those old learnings of staying out of it is making me tweak my opinion a little. Do you understand what I'm saying?

1:09:47I want everyone to be able to help because I think everyone in this country should be able to speak. It's why this country is so freaking amazing, right, and say their opinion, and we've got to get a lot better at not trashing other people for it. But I do recognize, in some cases, institutions. There are other examples of institutions that don't. It would seem a shame that that needs to extend, but I understand the point. Well, I'll give you a tactical answer, especially for folks that are active on social media. Once in a while, you'll say something that either you shouldn't, or maybe you should, but you went too far or you said it the wrong way, right?

1:10:17And there's folks like Harry, I have known each other for a long time. I can't think of very many times, but I think a couple of times, one of us has DMed the other and said, Hey, here's a tweet. Maybe you didn't really mean it. And we've deleted it or modified it. It happens not, it doesn't happen all the time, but it's happened multiple times. There's a level of trust. And Harry and I have done this, and I've done this maybe with 10 CEOs that I know a little bit, okay? Like I would do it with Jeff Lawson, who I barely know. I would do it with Brian Halle. I'm not saying I have, but I would do it with folks like we've had on the show, right?

1:10:42And I've done that multiple times. I've said, listen, you be you, but just to let you know, this tweet may not have landed the way you thought, or it might bother some folks on your team, or it might bother some folks, right? I can only think of one public company executive who responded positively to that. Not that no one was negative. No, because no, I don't do this all the time. I'm not, I don't think I'm preachy. It's always a quiet thing. I try to be, but, but I only do it when it's, when I know the impact was more than they thought, but I can think of one that all three of us know well, where he was like, holy crap, I didn't, I did like, thank you.

1:11:17Sort of thank you. Like it took a beat to be thank you. It wasn't an instant thank you. At first it was like, you're wrong, but it was a thank, but every other time, And not only what I've been told by all the other nine is, you might be right, Jason, but I don't care. I feel so strongly about this. If I alienate 40 % of my customer base, if I upset some of the less represented folks on my team, if I do whatever, I feel so strongly, I don't care. I just don't care. And so I've become much more reluctant to do that. And it's rare, right? I only do it the time where I think I can really be helpful.

1:11:50The moment I see what I think is a mistake, I do it maybe once every four or five months, but I can only think of one where it was well-received. And so what I learned from that is that like a lot of things in venture, and these aren't companies I invested in, but these are public company executives I know. It doesn't really matter what I think. And I will provide some feedbacks at times, and I'll provide it multiple times. And at some point, it's your company, it's your keys. It's an interesting theoretical question. I think I 100 % agree with Harry's point, which is this is bad for business.

1:12:18How important is it to post that? There was no need to post that. We agree. But what does it matter what you and I think? My learning is some folks who have been on your show, some folks who have very strong opinions that are very, I've talked to just a handful and they're cognizant of the risks. They're cognizant of the downside. It's not a mistake. Every once in a while, someone makes a mistake. They're cognizant of what they're doing. I'd love to ask someone like Brian Armstrong their opinion on this. Because remember, there is a distinction between bringing politics to work and not having that, which I think has been validated as the correct strategy.

1:12:49And I think that's almost, I wouldn't say fully a given now, but I think that would be a good concern. Because everyone tried the other theory and tested it to destruction and it failed. As a board member, I would struggle to attribute some business blame to someone having a personal opinion that's clearly their personal opinion. Because we have free speech in this country. It shouldn't be. And then you could say to yourself, let's just, I mean, you have to play out the other extreme. What happens if that personal opinion alienated 50 % of the country such that they literally canceled all your business?

1:13:16Then you could argue at some point, maybe you aren't the right person to run that company. Or your team left. 10 great engineers leave. But my learning is 9 out of 10 of the executives are fine with that. Let them go. I think Brian Armstrong was fine with it, wasn't he? And I didn't agree with Brian, but I think he said, go. There's the door. The one thing I do think is the attention economy is also more fickle than ever. And just like Deal and Rippling was such a big deal, actually, everyone forgets it. This story, whatever story. do you remember that Elon and Donald Trump broke up in the most blazing of rows?

1:13:47I think that's actually very insightful, Harry. Just keep moving forward. You know, people move on. So the rear view mirror, it vanishes so quickly. Guys, thank you so much. As always, this has been wonderful. But before we leave you today, let's talk about agents, specifically Piper, the AISDR agent brought to you by Qualified. The agentic marketing era has arrived. And if you're a B2B marketing leader looking to scale a pipeline generation, Piper the AI SDR agent, wow, it is here to help. Piper is the number one AI SDR agent on the market, according to G2. And hundreds of companies like Box, Asana, and Brex have hired Piper to autonomously grow inbound pipeline.

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