20VC: Dario and Anthropic Declare War on Open-Source | Coinbase Slash AI Spend by 50% | Kalshi's $40BN Valuation and Impending IPO | Bending Spoons: Smartest IPO of 2026 and the Year for SaaS Roll-Ups

21:34Harry Stebbings:Going back to the Coinbase comment, what happens if in return for Mythos kind of complying with U.S. government restrictions on overseas access, the quid pro quo in the next piece of legislation is no Chinese model that has been proven in a U.S. court of law to distill using U.S. foundation model technology can be used by a U.S. company. It's not crazy. So you can see where they want to go. I mean, they're not just kind of crying because it's unfair. In my view, they're laying the pipe for a set of trades to push back on this open store stuff if they're, in fact, doing distillation. So that's, I think, what's going on here.

22:12To Harry's point, whether he's no longer become a successful communicator at this point, whether the Spite startup vibe of where the safe guys has expired and led to conflict with Trump, putting that aside, I think he wants the models banned for use by US companies. I think he wants Chinese models banned for use by US companies. And I think in an era where SBF may get pardoned, the founder of Binance already got pardoned, this is pretty imaginable. I think it might be perfectly logical for them to get around the table, especially when we're jostling on geopolitical level and say, listen, we're just going to ban it or we're going to do some weird tariff on any US startup that uses a Chinese model.

22:51They have to pay 100 % tariff tax. That's beyond my skillset. But clearly, they just want US company. You can't stop China from doing what China's doing. I just got back. You ain't going to stop China from doing it for a million reasons, but just put an end to what Cursor and Harvey are doing. No more. You guys can't do it anymore. You guys have to, on grounds of national security. This is theft of our IP. This is theft of our data. We can't trust them. And hey, Cursor and Harvey, your models are just destroyed, your business models. Thank God you sold for 60 billion because Chinese open source is banned.

23:19I don't think it's implausible. Is it on Kalshi? It seems to be more than a 10 % chance it's going to happen.

23:24Harry Stebbings:Would you not say it's actually almost inevitable, not plausible? When you look at both Sam and Dario advocating for it and the people around the administration advocating for it too, you don't exactly have an opposing side. Well, you should have because this is, and Bill Gurley's great on this, this is regulatory capture in the extreme. The truth is, because there's two separate issues that they're brilliantly conflating. One is, should they be quote-unquote banned because they distilled our prompts and as such got a leg up on that? Naughty them if they did, just like naughty Entropic and naughty OpenAI for stealing your 1.5 million books to leverage your property three years ago.

24:02Harry Stebbings:So pay the naughty fine and move on. No one's banning open AI and Anthropic because they were naughty. So logically, the distillation thing shouldn't result in banning. Separate thing is, and conflating the two, is are you really trying to find a motivation from the government that says ban not because of the naughtiness, but because Chinese open source running USAI sounds scary? And I can imagine that. There are products that in the interest of national security like Huawei are banned in the US. So it's not crazy that if we believe frontier models are equivalent, that you could see that kind of thing.

24:34Harry Stebbings:Now, the argument that every tech CEO will and should be making is these are open source models that are sourced and running in the US on US inference. There's literally nothing going. Yeah, the code is open to inspection. There's no backdoor here. There's zero risk involved. But to make that argument implies that you have on the other side of the table a government entity willing to listen and do nuance. And that's hard. So I think that you could imagine in the absence of a sensible regulatory function, you know, that you conflate the naughty tax for stealing the intellectual property, the security risk because it's China.

25:12Harry Stebbings:And then the deep, dark secret is the frontier models are actually just trying to defend their vast CapEx spend by eliminating a low-cost competitor. And it all comes together in a big kind of policy mismatch in return for some of these restrictions on, you know, security and our usage. There's also a middle ground too, or a partial win for Anthropic and OpenAI is just, listen, we can't stop Cursor, which they could. We can't stop Cursor and Harvey, but you know what we can do? We can make every single Fortune 500 company uncomfortable banning open source. Like they're not comfortable from security and security.

25:47There's enough ambiguity out there that it's just not worth it, right? Whether a startup can take, Startups can cut corners that enterprises are not comfortable cutting, right? All you have to do is make it look dangerous to enterprises, and they can just ban any open source use in their company.

26:02Harry Stebbings:And again, to be clear, I'm going to distinguish something. They wouldn't say ban open source. They would say ban non-U.S. Chinese-based companies distilled on U.S. models because, you know, they're not going to ban reflection or poolside. Because, look, one of the interesting things here is clearly, I mean, all these U.S. companies don't want Chinese open source. they want open source. And at some point, there's going to be an interesting opportunity for a US open source company like Reflection, like Poolside, to take some of this revenue. But you're right, Jason, some version of banning these companies that have been found, quote unquote, guilty of distillation that are based ex-US in China is plausible.

26:39Harry Stebbings:Stepping back, one thing I noticed here, that Anthropic wrote to the Senate Banking Committee, obviously the minority head of the Senate Banking Committee is Liz Warren. You really have to want to get something done when there's a tech company, you say, what I'm going to do is pull in Liz Warren on my side. Very few tech companies say, that's what I really need here today. And it just shows that you're trying to get something interesting done here. Guys, personally, and you don't have to answer, but I'm just intrigued. Do you think we should ban them? No, because I think you have to be very pragmatic in terms of what you, and again, I'm willing to be correct, there's two separate issues.

27:12Harry Stebbings:If they've done the naughty, then they should pay the naughty tax. They should pay exactly as much as Entropic had to pay to the book guys and they should have paid to Entropic. It's easily priced. And we could use the argument. And that would make things, quote unquote, fair. So from a distillation perspective, no. Separate comment from a national security perspective. Again, as I understand it, if you are downloading the model, the code is open for inspection, the weights are available, and there's nothing running and no telemetry back to China, then I don't think there's any danger. So I think you probably shouldn't ban them.

27:43That would be my take. I think that AI is going to be like the oil situation in the Persian Gulf today. We are so, as an economy in the US, we are so addicted to this. Our 401ks, our stock market, everything we do, every bet, every reelection for every politician, we are so tied to the AI boom. I'm not going to, whether we can debate whether it's a bubble, right? I mean, at some level, it has to be a bubble. We are all so, we're all on this journey together. 40 % of the S &P 500 is tied to this bubble. I think we have to protect it. you know, Sarah Fryer, whatever, a year ago saying that the U.S.

28:18government should back all of our data centers. That was, you know, I think it was her that was flamed for saying that, right? She's probably, it was true. And she probably shouldn't have said it the way she said it off. I think it was offhanded in a comment. I mean, everything, I think what I mean is everything's going to be circular because it's like, we can say we don't need that oil because we make plenty of it from fracking, but look at the impacts, right? Even if gas prices go up a dollar a gallon, people are freaking out. And if their 401ks go down 20%, if Nvidia stops selling chips, if all of this moves to, I don't know.

28:52I think we're going to end up doing everything we can as a society to prop this up. I think we're all going to be, and I think it may even be more important than the other issues. We just don't want unemployment. We don't want these things to happen. And we're all in on this, whether we realize it or not. I think we're all tied to the AI economy. It's all about me. I care about unemployment. I care about it. But my 401k, don't touch it, man. You think I'm kidding? I think we're all in just like the price of gas. Yeah, I feel a little bad about, but don't raise the price of my gas. Don't touch my 401k.

29:25Don't touch it.

29:26Harry Stebbings:What you're saying might be true, Jason. I'm not sure it is, but it might be true. But if it is true, what's implicit in that statement is really very negative. In other words, what you're saying is keep up the price of AI as an input to the rest of the economy by protecting these foundation models pricing structure so that they can get a trillion dollars in revenue. And the loser, as always is the case with trade restrictions, is the rest of the economy who won't get cheap intelligence. They'll get dear intelligence. So what it means is the stocks in your 401k that are making AI will continue to make money.

30:01Harry Stebbings:And the stocks in your 401k that should be getting the lift from AI are going to lose money. It would be like as if in 1981 or 82, the government's, I give you IBM, IBM licensed MS-DOS and they should have protected it. And instead, everyone was able to clone it like Compaq. It would be like the US government coming in and says, no Compaq, no Dell, you can't make clones of the IBM. We've got to keep IBM stock price up. And therefore, we're going to ban the clones and we're going to keep the PC industry a small, tiny profitable industry for IBM. It could happen in this case because the dynamic of overseas national security makes it happen, but it would be for the record so freaking dumb.

30:44Well, look, here's the counter argument. I'm not saying you might be right. It might be dumb, right? I think if you step back for a minute. To be clear, dumb things happen all the time,

30:51Harry Stebbings:especially when governments are involved. I have high confidence in dumb. See Harry for details. I'm in the UK. Sorry, Harry. I thought you were going to stop and see harry for details and i was really hurt that roar no no no if you look at the history of llms on this show since it started right what has really changed and coinbase is just one example of this we are probably leaving the oligopical age right and we had an oligopical when we started the show actually you could argue there were two monopolies okay anthropic owned coding elon musk when we started this said those anthropic guys have something special i can't compete in coding OpenAI owned consumer, right?

31:26They both had sort of weird pricing they made up and were losing lots of money, but it was, and they had these sort of dominant. Now, then we, as we began to begin this year, we entered an oligopolical era where we had two leaders, okay? And for a while, what happens in oligopolies traditionally is you compete aggressively on features and not on price. You essentially soft collude on price and the models were somewhat similarly priced. OpenAI would be like, oh, we're half the price for codex, but not really we're as competitive, right? And then typically, I mean, Harry's the master here. When you leave oligopolical stages, there's massive price erosion because you're no longer competing on features.

32:02You're competing on price. And that's exactly what we're seeing. And governments do support oligopolies all the time. And the number one example in ECK is medical device companies and Medicare. You fix pricing so you can get innovation. And I just wouldn't...

32:15Harry Stebbings:No, you fix pricing because of regulatory capture. I agree with what you're saying is oligopolies are great for the people involved because, yeah, you can have a price. And sometimes for innovation. If you look at this study, when you have folks that are brutally, like we're still competing, but if we agree that basically, listen, we're 200 bucks each for our max program and we're going to charge this much per token. How do you win? You win because Anthropa comes in and builds this disruptive coding model and takes all that revenue, right? That's how you win in an oligopical market when pricing doesn't matter and features do.

32:49And it actually can be great for innovation in the short term, but maybe not in the long term.

32:54Harry Stebbings:I mean, include me out on that. Competition works. I mean, again, going back, I think any number of examples say you just got to let competition rip. You got to let the open source providers rip. I mean, again, it's the Coinbase example. counterfactual is if those open source products didn't exist, the Brian Armstrong quote would have tweet would have been, we were paying$10 million six months ago for our AI intelligence. Now we're paying 60. What the frick do I do? It wouldn't have been as good a tweet. We need competition to make this shit happen. So I hear you, Jason. It might, by the way, it might happen.

33:27Harry Stebbings:You might see some pressure, but I think it would be a bummer. Move on. Hard to predict at least, right? Hard to predict as of this date, I think. Hard to predict. We're going to jump around a little bit here, but few companies have had the competitive tussle when it comes to regulation and government intervention or trying to than Microsoft. Microsoft is in a pretty poor state. It's the worst month since 2000, I found. And I mean, they're down 16 percent, 16.5 percent as of today. What is going on? I'm a holder of Microsoft. And just when I think it can't go lower, it does. Guys, can you help me out here?

34:02Harry Stebbings:So, Microsoft. I mean, look, I don't have a theory of the case of why this month it suddenly kind of dawned on everyone that its strategic position was weak. Ironically, just when they had one of their big announcements and Satya made all this conversation about their direction on AI, maybe it suddenly opened people's eyes. Because we've been saying for the last year, look, they don't have the standalone model. Their AI story really is we spent a lot of money on CapEx, which we do to support open AI. We have a good investment in open AI, which is looking pretty good, but perhaps not as good as it was a year ago.

34:34Harry Stebbings:But our core software business doesn't have a compelling AI product. And let's get real. Co-Work and Claude Code are eating the two core parts of the Microsoft franchise back in the day, which was offers for the individual knowledge worker, which is what Co-Work is becoming, and developers, developers, as Steve Ballmer used to say, which is what Claude Code is becoming. So when you zoom out a million miles, Microsoft, which isn't a software business, unlike Apple, and therefore can't afford to stay apart from the great AI wars, other than its equity ownership in open AI doesn't have anything compelling.

35:09Harry Stebbings:to bring to the table. And I think the market's looking at that and going, you're not going to zero, Harry, don't panic. You've had your hit. I mean, you don't get the lift that you get from the growth story. It's Jason's comment. Do you really have an, I mean, they'll say they have an AI growth story, but if you break it out in the numbers, which they don't do, a lot of that is just, hey, we're selling inference to open AI. So we have a growth story, but what they don't have is a compelling end customer growth story here that they own themselves. So I think the market's finally caught up with the bullshit?

35:38Look, I don't know the answer either, right? It's a very complex business model, Microsoft, right? It's a conglomerate with, it's got Xbox, which I'm not a total expert on, and a whole bunch of pieces. Stepping back for a minute, I think what is troubling is Microsoft guiding that Azure growth is decelerating. And I think anytime you see deceleration at all, right? And Rory can say, Jesus Christ, how can you keep growing 40 % at this at this size right law of gargantuan numbers right sort of massive but i think i think just as a student the only way you can your stock price is going to trade up is if you if is if you beat raise and grow you have to accelerate in this market and you can be an oldie like octa and twilio and just your stock can blow up or even nivon if you re-accelerate but the market's expectations are so high that guiding to 37 from 40 growth is a fail it's a fail for a zero and And it's just, this is why maybe that regulation is coming for those Chinese open source models, because we just can't afford the deceleration.

36:37We just can't afford it. But it's not the only, Azure is not the only factor, right? But it's so important. And it's almost a canary in the coal mine that if there's any issue in Azure, we should at least reflect on why it is, right? If there's any slowdown in this era where we're claiming we're all going to be running 20 agents 24-7, Azure should be, shouldn't it be accelerating even at this scale? Yes.

36:58Harry Stebbings:I mean, again, I cited developers and knowledge workers, but you're talking about the separate aspect of the business, which is the cloud business. And you're right. Yeah, the Azure cloud business deaccelerates. But I think more fundamentally, a huge slug of the Azure cloud business is simply just inference for other providers like OpenAI. So yes, I agree. But it should accelerate, right? That should accelerate. right? Yes. If you recollect, and this is a harsh comment, three years ago, Satya did, they were going to make, you know, a Google dance comment. And the truth is since then, Google's massively outperformed.

37:32Harry Stebbings:And for all their faults, and I still think they have significant issues and risks, they at least have their standalone model and a product to sell. The truth is today, Microsoft has a 30 % ownership interest in open AI and doesn't have a state-of-the-art frontier model themselves. That's a big difference. You know, it'd be interesting if If Anthropic really does IPO in the coming months, right? If it stays on track, I have to imagine it's going to be one of those volatile stocks out there, right? Even a hint of news will send it up and down math. I mean, even service is massively volatile, right?

38:00But if Microsoft has this level of volatility, you know, we're going to be reading every every Teevleaf once Anthropic. Anthropic looks perfectly linear. I mean, well, I guess it's, I guess it's, it all looks perfect and up to the right today while it's private, right? All these rounds, but man, I wonder how the volatility in that stock price, a hint of bad news.

38:19Harry Stebbings:boom well the experts in volatility are calci and calci are apparently raising a new round at 40 billion dollars they raised their last round in may at 22 billion dollars is this just the ultimate sign of kind of the casinoization of society and risk on mentality from consumers they recently announced being at 2 billion in revenue how do we feel about this people like to bet and u.s had a prohibition and we talked about this last week they had a prohibition on gambling and sports for longest time poor pete rose never got into the hall of fame because he bet on himself and now we have you know a couple hundred billion dollar a year industry doing exactly the same so they're just riding that trend and they've you know they got other products it's not all sports betting but it's about i think 70 plus sports betting it's killing it in revenue so it's makes it totally Will Kalshi be a$100 billion company in 12 months' time?

39:14Harry Stebbings:I doubt it. I mean, look, you get there one of two ways. Either sports betting continue to expand, and they can take disproportionate market share. That's one option. Or the other at-bat is the whole crypto perpetuals business, which I just really started to learn about, which is effectively kind of futures on crypto, which is gambling to the end, right? Either that business turns out to be much bigger than we realize, which is not impossible, right? I mean, look, ICE, not the ICE, but ICE as in the owners of NASDAQ, the Intercontinental Exchange, has a big ownership stake in Polymarket. Why that's relevant is that's a company that runs ICE, that runs stock trading and, you know, real financial markets taking a significant, I think, around 20 % ownership interest in the other big kind of online betting prediction market player, Polymarket.

40:02Harry Stebbings:And they're clearly saying this is a huge thing that can have 50 or 100 billion dollar kind of valuation. So it's not crazy. But it happens one of two ways. Either a sports betting gets ultra huge and they don't get tied up by regulation and the whole issues around that. Or be the non sports betting side of prediction markets, in particular, the financial products becomes huge. I don't think predicting who's the next, who's going to win the general election in the UK or who's going to be the next president in the US is a huge, enormous, ginormous business. I love it. I find it fun. It's actually the most interesting part of Polymarket and Calci, but that's not going to get you to 100 billion bucks because the number of people who actually really want to bet on the next president is actually pretty low.

40:45Harry Stebbings:It's either sports betting, which works because we all love sports. Good luck tomorrow, Harry. And then or it's financial betting, which we all love betting because we all love money. and i'm sure if you you know you've got sports you've got money if you could bet on sex you'd have the trifecta it's the human desires it's the big to get a big ass company you need to cater big markets and predictions on politicians is a small market betting is a big market on sports people love sports betting on money is a big market that's my point dude i totally agree i did a deal into fomo which just got their new round on my index and usv and their new product is perps which obviously allows you to do much simpler up or down on stock prices for consumers i should try that product guys i look super incredible it's amazing dude no i mean you know poor warren buffett is like it's time for me to die because you people have lost the plot but if you want action if you want action on the table then perps is your boy you know right if you have a strong feeling on where the market's going the next hour then go for it also also like when you look at tam expansion perps is a brilliant way to expand to a mega, mega market.

41:50Harry Stebbings:Very exciting. Okay. SpaceX. Has SpaceX IPO frozen the AI IPO market for now, given the size, magnitude, weight of it? Does it put barriers up to subsequent IPOs? I mean, we're pointing out that the anti-AI IPO is about to happen today. Lily, we're recording this on Tuesday, I think June 30th. Bending Spoons is going to go public tomorrow. July 1st, and this will come out on July 2nd. And literally, Bending Spoons is the anti-IPO. It's by company, and they own AOL for God's sake, right? Which, by the way, I remember, has killed their AOL email product, but still is an ad network. They own Evernote.

42:32Harry Stebbings:They own a bunch of stuff like that. So that's a company that it literally is 20-year-old software companies going public at$20 billion. So it's not like the IPO market is shut, right? Which is what I thought you were basically saying. What you're basically saying is, is the hidden question here, Harry, has the volatility around SpaceX made OpenAI and Anthropic nervous about going out? Is that really your question? Yeah. I thought this was more interesting when I added it to the list, but as I reflect on it, I think as long as the IPO remains up, right, I think they'll be fine. The volatility has been high and extreme.

43:04As we record this, greed will still trump fear, right? But the volatility has been sufficiently high enough you could imagine that changing, right, before now and the day Anthropic IPO. So I'm sure the bankers who have less to do are monitoring this every day. And I think the board and Dario will think about it weekly, right? Just making sure it is the right time. It definitely shows there's risk it isn't the right time. It shows there is some risk that Anthropic might delay its IPO. The volatility says it's not a slam dunk, but up is up. Except for the poor Korean bank that forgot to put in their orders, most folks that at least bought in the IPO are up.

43:39Harry Stebbings:Rory, you brought up bending spoons. When we look at multiples attached to IPOs, bending spoons are going to go out at$20 billion, which will be a pretty hefty multiple. I think it's about a 12 to 14x given revenues of one and a half. Yeah, one and a half is trailing, but$600 million in Q1. Yeah, so probably, yeah, eight, ninex forward revenue. Yeah, healthy multiple. For the antithesis of AI company, is that not an extremely juiced up multiple? It is funny because you're exactly right. It's like you have a whole bunch of single product crap, you know, B2B SaaS companies that have slowed out to 10 % growth and are trading at three times revenues.

44:18Harry Stebbings:And then you have this company, which is an agglomeration of a whole bunch of tired consumer products that were growing at 10 % until these guys took them over. And when you read the S1, you realize they don't get organic growth. They don't get new users. They just raise prices, cut costs. And suddenly that's being valued at eight, nine, 10 times revenue. So it definitely feels kind of a little weird. It would be like as if all the SaaS, it's not quite the same. It would be like all the SaaS companies that were slow growth were trading at two times revenues. And Constellation Software, which is a roll-up of SaaS companies, was trading at nine times.

44:50Harry Stebbings:It definitely feels like, wow, that was a clever way to make money. And you do kind of, you know, it's a well-executed strategy maybe. And it's worked clearly. There's clearly value being created. You do wonder, is it a little faulty? But, you know, good luck to them. I think it's going to do well. I think over the medium term, here's why. I mean, listen, good God, don't take risk factors in a prospectus seriously, right? Or whatever a prospectus said. But there's a grain of truth. They said there's at least 1 ,000 businesses they've already identified that our material can move the needle. I think if they're this good at buying, repackaging these companies, and there's 1 ,000 targets, they can maintain outlier growth rates for longer than we would be in the stock, right?

45:27So can they, I guess the meta question is, going back to the Microsoft issue, I know Rory's going to think it's an odd tie, but can they maintain this outlier growth for five plus years, right, to justify some sort of premium? We can debate whether the premium is too high, but outlier growth gets a premium. I think for without question, if they can execute at the level they have, it's justified for five years because there's a thousand targets. And I think there's also going to be another bending spoons in B2B that's going to nail this. They're going to buy these horrific products like Marketo and others, put a few smart people in it and just boost the NRR.

46:02They're just going to boost the NRR and a few other things. And so I think there's a chance for several bending spoons to take the struggling software companies and do a revenue arbitrage because they can package them together into something high growth. I think there's five good years here.

46:15Harry Stebbings:I think that's smart, Jason, because you're exactly right. Because if you're one of those thousand privately held companies, and let's assume they're all consuming, there's nowhere else to go. And that's the big attraction. These guys are the only way out. So they can lock it, at least until someone else comes along, they can lock in some kind of rev arbitrage. Yeah, that's interesting. And yeah, you should be looking at it for B2B. Jason, you are the new CEO of Banding Spoons Goes B2B, and you are able to choose three targets for your opening quarter. Which three targets would you choose? I mean, Banding Spoons has one trick, which is it uses a lot of folks in Italy that are lower cost for engineering, right?

46:50But I assume the other trick it has is it's able to incent GMs to do a decent job on these, like find kids, and these kids may be 60 and not 16, but 26, but find kids to run these Eventbrights and AOLs. Let's assume you have a steady enough flow of these kids. They give a shit. Okay. Then I would start to buy up almost any B2B company with nine figures in revenue with a sticky customer base. Because I mean, literally our, I know I talk about our worst and the worst product that we use today is our most expensive product. It's Marquetta. Rory will remember it. And they threaten us. They threaten us.

47:22The API doesn't work. It breaks every day. They just told us they're raising prices 20 % next year, like betting spoons, but without any features or functionality. The site went down for a full day the other day. You put a kid in here that gives a crap, okay? And you say, I just want you to take whatever Marketo still has at Adobe, 300 million of revenue left, right? It's probably decaying. Take that 300 million and give a crap. Don't threaten your customers. Actually launch some features, remove the rate limits on the API, like do something so that to retain your base, it would work. Like we even our worst software, we would stay.

47:55It's not that hard. So I would take all these ones that have a sticky base and buy. And listen, then you take 10 folks at 200 million, you got a$2 billion business growing 30, 40 % and stack it. You got something pretty nice. But the problem is they're just putting mediocre people in charge of these. Like the non-bending spoons are having PE firms put these recycled mediocre executives in charge of it that are going on learning tours for 90 days and coming up with no ideas. That's just not going to work.

48:21Harry Stebbings:Can you buy these assets for a reasonable price? I think you can buy some, yeah. What's funny about this is the minute you ask, you can tell Jason that I'm going to do it too. You have this hot button of these are markets that's been bugging you and companies where you're like, for God's sake, will you do something? And yeah, I think the Marketo marketing automation space is one we both know and there's something to be done there. You know, there's other, I mean, I think, I'll give you two examples, one of which is traded already. I mean, I know Jason Hayes, the first market, I said it before, SEMrush.

48:49Harry Stebbings:SEMrush is the old SEO optimization. It's so obvious that every one of those customers is going to need GEO, you know, AI optimization. You should buy SEMrush, buy some other little tool and just bundle them together and sell them. You can't do that now because Adobe bought SEMrush for under two times revenues. Great deal, right? You could have turned that thing into something. And then another example, which, you know, the world continues to poke at is PagerDuty, which is a company that's been out there. It has commanding market share and it's never added AI enabled incident resolution. Yeah.

49:20Yeah, if you can buy PagerDuty for what it's to put a kit on it that's really motivated, it could work. I totally agree.

49:26Harry Stebbings:A business-oriented executive who maybe picks up a YC failed SWE kind of software, incident automation software product, and put it together and just, as Jason says, if you're not re-accelerating, you're dying. But if you can get re-acceleration to 20 % by just upselling a slug at the install base, Yeah, at 2x revenues, you could be Jason Lemkin's B, B, Bending Swoons, B2B, BS, B2B. I think what folks don't realize is it's so many of these companies we're talking about, right? I can tell you because we interact with these people. They've given up. The entire team, their customer success team has become a force of evil, right?

50:04They threaten you with lawsuits. They threaten you with everything. You can smell that their culture is, it's not that we're not in terminal. Like I used to have a guy on my sales team whose last job was working for the Yellow Pages, okay? And his job, he got a huge bonus if his patch shrunk less than 20 % each year. He was one of the top performers, right? His patch shrunk like 16%, okay, every year. I mean, at some point you got to move on from that job. I feel like this is working with the Marketo team and other teams we work with. The knives are out, okay? So my point is, it is not hard to turn around a team that has completely given up if they have a sticky customer base.

50:38This is not, but you got to find people that want it and the cultures are just broken. It's not just Marketo, they're broken everywhere, right? These cultures have given up. So I like this model and I like the thousand, I think there's a thousand targets for bending spoons. And I almost wonder if Constellation needs, listen, they've been wildly successful. I wonder if their model needs to be rebooted so they can get it up. I don't know if these kids wanna work for Constellation or not. In the portfolio company where I've watched PE take them over, right? They're not running the right model. Because I've sold a lot of companies to PE, right?

51:09And I'm not close to them, but I watch them. They're still bringing in 2021 managers. they're bringing in folks that yeah they're never a ceo before they were never really a great success on their own but they have a good set of logos on their account and they're a people person jason's really a people person he's going on a speaking tour he's going around the world for 90 days to just meet with the team and then i want to meet back with the board in three or four months and come up with my ideas like that don't work today boys okay that was great when you bought when tomo bravo bought you in 2021 right we need the bending i bet at bending spoons when you buy that thing, man, crap happens the first 30 days.

51:45People are moved out. People are moved in. Products are shut down. We need that level of action, man.

51:50Harry Stebbings:Pushing on that, it may be in part because, and I could be wrong, but what Benningspoon is trying to do is similar to what Constellation PE was doing five, 10 years ago in B2B SaaS. In other words, don't change the business all that much, but just optimize it. And you're right. So that's an easier task. I think what you're saying, Jason, I think it's true is if you buy a B2B software company today, it's pre-AI, it is highly unlikely that simply optimizing and pressing the buttons will be enough. In other words, you can play the Vista moves from 2021, you can cut the cost, you can move headcount overseas, et cetera, et cetera.

52:26Harry Stebbings:But I think what you're saying is unless you're kind of generating new revenue from AI and significantly re-engineering the company, which is a bigger ask than just optimize the existing thing, It won't be successful. So to that extent, I think that Jason's B2B, B2B dot, Bending Spoon's B2B run by Jason will be actually a harder managerial task than Bending Spoons, because I think all Bending Spoons had to do was take Evernote, take AOL, and just ruthlessly raise prices and optimize. There was a little less innovation required than I think would be required in B2B now. Just thinking aloud here, I hadn't thought about that until now.

53:04Harry Stebbings:But I think the upside could be bigger you also need a monster checkbook i mean you know pager duty's market cap says 750 you buy it at 2x you're a billion five on one asset we times that no no you buy it at 760. no one no one's buying pager duty for 2x the board would have to take that deal in six six seconds from a fiduciary obligation right 760. i think any public company today i mean rory's lived this more than i have i think any public company in decline today that gets an offer a premium of even 15 15%, they have a fiduciary duty to take that very seriously. They have to come back and say, we genuinely believe this thing.

53:39We got to go hire an investment bank and say it's underpriced at a 15 % premium to market. And then management with their earn out, they're going to take that deal in a heartbeat. I get to leave. I get to bail out of this, this sinking rat hole. I'll take this, like management is going to be so aligned to take any deal where, I mean, some of them, they just get fired. They're not going to be excited about that. Right.

53:56Harry Stebbings:They just had a good day and are up a few, but yes, I mean, it's seven,$800 million. You're Right. I mean, but that's because Jason wanted to start at the$100 million level. I mean, you could do the bending spoons thing and start with smaller deals and roll up to it. Well, that's what they did. I mean, it's a very long journey. This company is, I think, 15 years old. The point is, I think the meta point Jason's making is correct, is that especially in a world where standalone IPOs, you need$500 million and 30 % growth. There are a whole lot of companies that aren't that, right, that are sub that scale.

54:26Harry Stebbings:that, you know, this is going to sound stupid when I say, but aren't family businesses you leave to your kids? They're venture-backed things with a CEO. And at some point, everyone gets old. Everyone wants to do something else. And all those businesses have to find a home. So yeah, I don't think it's great. I think I'd love to see the Bending Spoons consumer list of a thousand names, but I believe it would be there. You know, good digital assets that are just like, yeah, that matters enough. Jason, I push you. You've got Mercado, one. What are the other two targets we're going for? Patriot-y was a good one, right?

54:54I mean, Rory's right. That's a very good one because, I mean, you've got the right customer base, right? Datadog's extremely expensive. They have cheaper competitors. I mean, Patriot got crushed from all sides and across its whole suite, right? But its customer count is flat, but it's real. It's still got 15 ,000 customers or so paying for this product constantly. That was a good one. Asana? Boy, I have too much scar tissue attempting to use that product. But probably, yeah. I mean, listen, you have a company literally where the billionaire founder just up and quit a year and a half ago. I mean, that's one that you got to be able, it's got to be some way to turn this thing around in a, in a space that listen, that, that has existential challenges, right?

55:35Do agents need a sauna? Agents don't need a sauna, but I think you can make it more agent friendly. I think you can do better, probably do better. This is easy for me to, I don't want to be too much of an armchair quarterback from a product that feels terminal, but it's probably a good one. I think it's a good candidate, right? It is, it is, it's a good candidate. Without all the pressure too, right?

55:53Harry Stebbings:Okay, I feel like there's a private company fundraising that we need to touch on before we do a rage paper reel. Chamath Palihapitiya raises$135 million for his AI startup, 8090 or 8090, whatever he calls it. But he also is now CEO. For people that don't know, what do they do? It's a software factory platform that lets teams collaborate with AI to handle the full software development cycle from new builds to code refactoring, complete with governance. What did we think about this one team? I just love the fact that you had Shamat Nath in the rage bait category. I mean, that in and of itself was progress, right?

56:28Harry Stebbings:All credit to him. I mean, at the risk of making the cliche, you know, he used that quote a long time ago, but give him credit. You know, he did the man in the arena quote and he got slammed for it. Well, now he is the man in the arena and all credit to him for trying. Good luck, right? It's a super interesting market. It was obviously a ton, a ton of competition. but as he said in his tweet, it's the most exciting space you've seen in decades. You know, how is all of software going to be remade? So I just give him huge credit for going for it and good luck. One of the things I'm trying to do, Harry, is like, I don't have to be a snark all the time.

57:01Harry Stebbings:If, you know, because it's easy to be snarky at someone like Tremant who just lends himself so well to snarkiness, given his stuff, but let's just kind of take the high ground and say, well done, good luck, you know, go team. I don't mean to be snarky. I will say one thing just in general, right? This is abstracting away from Chamath. And there are counterexamples. I can give a few counterexamples. But I, my scar tissue, I don't believe he's working 100 % on this. I don't believe every waking hour is on this. I believe he's got a team, right, at this point in life. And I just, when wealthy folks, especially VCs, want to be a CEO, but they're not working at the insane rate of a traditional founder CEO, I just find those run out of energy.

57:42And I'm not saying he's not the exception to the rule, right? I know the Spotify guy that Harry's close with runs the scanning company too. We have a lot of CEOs running side companies that are very successful, right? Listen, anyone that started a startup, it's all fun and games in the early days if you have any money. You pull together a team, there's a lot of whiteboard talking, use your brand to get Accenture, whoever's backing you. It's all kind of fun until the S hits the fan. But do you want to be running this services, the AI business forever, 100 hours a week? or do you want to like be hosting$25 million fundraisers in your palatial home?

58:16I mean, I don't know that you can do both successfully. I know there are examples. I just wouldn't like, I just wouldn't invest. There's certain things for me personally, I have scar tissue. I've written small checks into successful founders doing multiple things just for fun. And they're all zeros. Right. And I, and I remember one of them, I asked this successful and I'm like, I don't really need to know what, I don't care about the valuation. I don't just, are you telling me this is the only thing you're going to be doing? He's like, yeah, This is the only thing I'm going to do in 30 days later.

58:41I see him working on another startup, right? So I'm, I'm out. If literally Chamath drops everything, but 80, 90, everything. And I see the sweat from his brow and I see that because the dude's fit and he's looking good, right? He, uh, he just had a massive, the massive largest win of his career as an investor. I want to see the, I want to see the punchy middle, the hair loss, the, his right hand person quitting on him. Then I'll invest. Not until then. i too much scar tissue here it's too it's too easy to start up today whether you're whether you launch into yc and raise it 30 pre when you started three weeks ago it's not easy but it's too easy it's just too easy to start up today seeds for suckers boys it's for suckers it's

59:23Harry Stebbings:for suckers we're making the t-shirts i really raised the internet again this week why um turned down a founder this week why they were finishing the year at one and a half million error finishing next year at 5 million ARR. Today, brutal as it is, this isn't good enough to raise a good Series A. Opportunity cost of cash is real. Now, I deleted it because honestly, no one engaged. It got 30 likes after an hour, which is not very much for our tweets. And so I took it down because no one cared. And it looks bad on my timeline. And then they took it back up and it became a thing. Do you think I was wrong?

1:00:01Harry Stebbings:I think you, I can answer. Yes. I think that the factual statement you made is correct in the kind of growth rates you're seeing now, the bar, the opportunity cost of doing something with a lower, it's not impossible. We have done deals with those kinds of growth rates, which would have been very top quartile in the age of SaaS, but isn't in the age of AI. I can imagine doing some of those deals, but it's the exception and you'd need some other extenuating factor. So as a matter of pure truth, it was a correct reflection of the current venture market. Were you correct to put it up? If you're not careful, I find as a VC, when you're saying your one and a half to five million deal isn't quote good enough, you really have to phrase it carefully so you don't sound like an obnoxious prick telling people their life's work is not good enough.

1:00:49Harry Stebbings:And that's tricky, Harry. Well, I'm really sorry. If that's going to ruin your day, don't be a fucking founder. life's harder than a vc tweeting and it ruining your day agreed but but but i think life is up but it's precisely because the rest of your life is so hard that a little bit of compassion from the capital wouldn't hurt but your message is correct and i had loads of fun and vcs be like oh class suit child it's like dude lagora lovable macaw no i know you could just i'm just pushing look yes you a lot of people say you're mean but what you're saying is correct but again you want of this look we've discussed this before you think rage is still engagement so you're all happy okay now i'm going to say my important i definitely don't think you should have taken it down because that looked like you were blinking and you know yeah that was a mistake you blinked dude that's the bad part can i can i break it down just a little bit on the on the tweet first of all i think listen i'm supportive if i would have retweeted it and i'll also be supportive here i think the problem with the and i want to share a story the problem with the tweet is there's two things going on right the first part of the tweet is the state of the series a market the second part, which is more triggering, although people might not miss it, is opportunity cost of cash is real, because those are different points, okay?

1:01:59I'll tell you something that I think is subtly toxic that all these nice VCs are doing. It's subtly toxic. I've watched two portfolio companies I have recently that were growing at great rates, okay? They're going to compound to huge winners, okay? That are capital efficient, but they're not quite at Harry's level. They're not at the A, at the B or the C, okay? I've watched all the VCs say, good luck, guys. Go do your round. I do this thing where I built an AI pitch deck generator that uses all the benchmarks from iconic and benchmark. It tells you honestly your odds. It told all of them that for around, they're a B.

1:02:28Okay. It will tell you, go to Sastrad AI, use pitch, just upload your pitch deck. It will tell you not a single VC in either of these companies would be honest with the founders. I've tried in the past. I get my head cut off. In both of these cases now I said, well, why don't you back? Here's my new thing. I'm like the hot companies in your space are basically their later stage, right? They're getting funded at like 30 X ARR. Okay. Back solve into what numbers you would need to get to raise at 30 X ARR, right? This is me trying to be, to guide founders there. It's too subtle. They don't listen.

1:02:59And then two months later, they're like, Hey, I'm growing, you know, at this still top 10 % rate, but not enough. And no one's honest. So the honesty of Harry's thing was very helpful. The opportunity of cash is a little more for people in the process, right?

1:03:16Harry Stebbings:What it's worth, I do agree, and maybe I don't think I'm changing my mind, but I like what you said, Jason, because I'm playing the pattern back. And I've seen the same thing where you look at these companies and you're like, they're planning to raise. Everyone around the table knows that that's not a deal they do, but they say to the company, have a go. And they're looking at the growth rate and they're saying, that's not compelling compared to the other things I'm seeing, just have a go. And perhaps the better advice might be, if you're only growing at 50%, should you converge on profitability?

1:03:46Harry Stebbings:Should you raise a lower amount? But you're right. Sending people out to get a harsh message from the market, just because you're too big a wuss to give it in the boardroom, is actually a pretty pathetic act. And I do agree with you, Jason. And so to some extent, I'm backing into Harry's, maybe people... No, do you know what? I told this founder, which is why I actually tweeted it. I told this founder exactly this no bullshit he said you know that's really helpful i had no idea that wasn't good enough and so he was super receptive he was like honestly dude i didn't know that that's really helpful and i'll change how i project future revenues to dig deeper maybe harry doesn't want to go this deep i do think there's a logic here's that what's wrong in harry's tweet okay harry's tweet is turn down a founder 1.5 finishing finishing next year at five that's not good enough to raise a series a if this was a long tweet it might be or maybe it is but you might have to meet 150 VCs.

1:04:37That's what I would kind of add. And so I think if people are honest, I think they should be like, listen, you're at the edge. There's nothing wrong with one five to five. Like you did better than I did back in the day. There's nothing. And put it on a spreadsheet. If your burn is low and you don't quit, you can build a generational company with those numbers. But what it means is, I mean, literally frigging, you know, Higgsfield, where I invested in seed and Harry invested, you know, they're just crossing 500 million in revenue in less than 18 months. Okay. And when I, when I thought about that this day is I, I look back at my email, I'm like, why didn't I invest even more?

1:05:11And so then I get another email from a portfolio company growing at decent rates. It's hard to even pay attention, right? It's hard to even pay attention. And so you have to realize just getting the attention's hard in this crazy world and you've got to hunt Higgs field or better. That's your job. Right. And the fact that when I started talking about Higgs field in the show, no one even heard of it. You know, you know why that's interesting. That means go find it, go find it and stop worrying about the 1.5 to 5. But if you talk to 150 investors, you're going to find someone that believes in you and says, because the 1.5 to 5 doesn't really matter, does it?

1:05:42It's where it's going to go over the next decade, right? And someone may take that bet, but don't run a process. Don't build a data room, give people one week to look at it and ask for checks, right? Give it time.

1:05:55Harry Stebbings:You're on a fast process. I think, yes, some versions of what you're saying, you're right. If you're the one and a half to five, it has to be the, if you want to raise money, just understand the facts, which are the deals that people, the deals that are getting swept off are going one and a half to 15. You're not that. So that has consequences. It has consequences in terms of the number of people you'll have to talk to, the range of people you have to talk to, the amount of capital you can realistically raise, et cetera. I don't discount the fact, but I just want to say this because founders listening, I do agree with you, Jason.

1:06:24Harry Stebbings:You can be one and a half to five and still end up with an amazing generational company because, yeah, we've seen that data. I can't remember when, but there is a correlation, but it's modest between initial growth rate and overall outcomes. And companies that have grown slowly at the start have been huge at the end. Procore was a slow grower and then became a huge outcome. So I do agree. What you don't want to be saying to a founder is your dream is impossible. Go away and die because that's just not productive, especially when they're growing 1 million, 1.5 to 5. What you do want to say is if this is your reality, you better think about how to cut your cloth accordingly and how you plan your rates.

1:06:57Harry Stebbings:And maybe you're not a venture asset anymore in a new world of venture. And that's totally fine, too. But like, that's OK. You might be. I still think, listen, I just think I think there's two different tweets in your tweet. Right. To Rory's point, the reality is 95 percent investors you're going to meet today are going to say the opportunity cost of cash is too high here. Right. They're going to believe that. And even if they don't believe it, their job's on the line. They have to find a high fly. Like, even if they'd be happy to do this deal, they might get fired, right, if they don't run the place, right?

1:07:23So they've got to find, everyone's got to have one of these lighthouse investments in their portfolio, or you just might not be part of the next fund, right? This is a reality issue, right? So that's a different tweet than what are the odds if you're at 1.5 going to 5 that you're going to raise funding today? They're just different tweets. And listen, I've got your back, but you gave people two different reasons to get triggered, and you saw the reaction, right? It doesn't mean any of it was, it was all correct, though. It's all correct.

1:07:47Harry Stebbings:Yeah, you should just run the Jack Nicholson, you can't handle the truth quote. You know, the little film of Jack, you know, doing the, in the movie. That's what you're saying, Harry. They just can't handle the truth. I agree. But you are a little bit punky. You are a little bit punky. It's going to work in my favour, isn't it? Really win them back with that one, Rory. Yeah, you're really going to win them back. You're really going to win them back. Is there anything else? Yeah, one thing. I would be curious to get people's thoughts on the whole, you mentioned here, Claude Tag and Claude Tag in Slack.

1:08:15Harry Stebbings:Jason, I'd love to get your thoughts on that. Can we just provide some context? What is Claude Tag for those that don't know? Just context that here. It's basically the ability to have Claude as a fully present member of a Slack channel, focused just on whatever that is. If you look at the announcement, be it your legal team, it's a Claude agent that's legal, that's just focused on legal, that just has access to that sort of information, but is a fully present member of your channel. Yeah, and in theory, it's autonomous. Yes. Right. That's, that's the, that it's not just that it has, well, listen, first of all, I don't know, because I tried to deploy tag.

1:08:49Right. But you have, I'm not, you have to be the banalist. You might have to, I think we're just, I'm just not on the right enterprise plan. And Claude is the biggest issue. So I haven't used it. Right. I tried to use it for the show. Right. So a lot of things like Claude design before the internet and information says the world has ended. Let's give it, let's actually see how important this product is to Anthropic. if this product is existentially important to Anthropic, this could be the biggest deal for traditional software there ever is, right? It runs across, it runs crop platform, it runs on Salesforce, it runs on HubSpot, it runs on all the other things.

1:09:22If the agent can run 24 seven autonomously, take all your data and build all the analytics, build all the dashboards, run autonomously out of it, then your data can flow between apps and you won't even care where it lives and all the fears about headless become true because Claude is your head and you don't need, and Salesforce and HubSpot really do become dumb databases. is like there is a version of this where Anthropic puts its best people on and doesn't quit, where it is existential to everything. Let's give it a week, right? Or is this Zapier on steroids? Or is it even very good? Because Slack has a Slack bot, which is pretty good, right?

1:09:53So one of the things that press was like, why is Salesforce supporting this when they launched their own version of this a couple months ago? Well, what choice do you have, right? At some level. But I wouldn't be surprised if this vector does not maintain so much energy that Slack bot isn't better, right? That'd be the most logical thing, but we could be wrong. Like enterprise is the big battlefield. And as much as tag created some anxiety at Salesforce, it might be the Trojan Orson in six months. It's like, it's a big effing deal, but we have no evidence of that, right? We have no evidence design is going to kill Figma in any way, shape or form at this point.

1:10:24We have no evidence. There's a long-term commitment to that. So I'm, I'm skeptical, but existentially, man, could disrupt everything in software, in business software.

1:10:33Harry Stebbings:That is good, Simon, Jason. I agree. I think someone did the wider Salesforce, let it happen. They have no choice. They own Slack. They have their Slack bot. But you can't be the cross-platform comms, communications platform for your company, and then not allow access to an agent that's enabling you to do better work, because that just pushes people away from you. I think the interesting thing here, look, is if you're lurking on a Slack channel as an AI, you really just do get a very good handle on how people do the context part of work, that lovely post from J.I. on Foundation Capital talking about capturing contests, basically, which is a fancy word for capturing all the weird shit people do on top of the actual apps, which reflects how they actually do their work and how they configure their work to suit the SaaS apps, which is what happened in the prior generation of software.

1:11:21Harry Stebbings:And capturing that context is really useful because it allows an AI to automate that work. And the truth is a lot of that context exists in Slack. So if you're watching people interact on Slack, and if you watch it autonomously for weeks and months on end, you probably will get a pretty good handle on how people do work. And how does Jason and Rory handle whatever exception we're dealing with when we're talking about it on Slack? So I think it's an interesting entry point. You're right. It's only an entry point. It's not the end of the world. But I think Salesforce is right to say, okay, you're in there now and we're going to make sure that the Slack bot is better and remains better.

1:11:55Harry Stebbings:So yeah, I agree with your assessment. Super interesting. Watch this space, but definitely an interesting entry point into capturing what's going on at the context graph level. I mean, by the end of this year, Anthropical will have more revenue than every public software company combined. Unless Brian Armstrong has his way and cuts it in half. It may be, but it's just for predictive, we just have to wonder, is some of the stuff that we think is very in the media and acts like it just may not be material to Anthropic and nobody it's just not like as these guys cross a hundred billion in revenue 200 billion in revenue they just may it may be like the early day when when I started in b2b as a founder and when I first met Rory most folks thought it was just too small it just wasn't worth anybody's time these markets were just too small now they're they got big but AI got so much bigger and they may not it just may not be worth Dario's time to worry about whether he's disrupting Salesforce it's just it's not even the sales force is 42 billion.

1:12:46He may be looking at the net new bookings. What is sales force adding at 10 %? 8 billion. He's like, because you know, materiality has always been 10%, right? So if I can't make 10 billion plus, I don't know if Anthropi can get out of bed for something that's not, doesn't generate 10 billion of revenue. It's not, that's always been the definition of materiality in my experience. I think it was even the SECs, right? 10%, you got to disclose it in the old days. I don't know if Anthropi can get out of bed for less than 10 billion of revenue by the end of the year. It's just not enough. It's just not enough.

1:13:12Now it's one thing to just do an experiment or build something that makes Claude better, right? That's an integration. Like we'll make Claude better. They want to integrate more with every single app and take in the data, but I don't think they may not care about that revenue that the leaders are terrified of losing. That's probably why there was that crazy disconnect with the guy from leaving the Figma board, right? And like, it was such drama to Dylan, to Anthropic. They're like, oh, we didn't know you'd care.

1:13:36Harry Stebbings:Gotcha. Like this isn't even important. Like, sorry. Sorry. Genuinely sorry. We didn't even it wasn't even it's we don't even talk about this each week at the it's the you know when elephant stands the little people get trampled exactly you didn't even know sorry genuinely sorry yeah whoopsie next time we'll be more careful boys it's a wrap from the british beach thank you so much for this rory always a killer line at the end there what is it when elephants dance the little people get trampled i think it's something about mice get trampled or something whatever yeah no well harry we've got a time when by the time this comes out we'll know how us and england have done and by the time i see you next week hopefully you'll we'll both be progressing to let me see it around us yeah i'm going i'm going i'm going down pub for the game but before we leave you today let me tell you about omni it's an ai analytics platform and it solves a problem every scaling company hits your team needs insights not just data lookups the stuff that really matters, and it's critical to get it right, like CAC payback periods and net dollar retention.

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