20VC: Nat Friedman and Daniel Gross Bought with Zuck's $100BN AI Budget | Navan Files to Go Public and Canva Pulls the Brakes: Why and What Happens | Why Larry Ellison is the Smartest Man in Tech | Substance or Sizzle: What is Real and What is BS in AI

24:00It was to improve lawyer productivity, right? It worked, but the quality of the AI was limited. You know, some of these, when we look at the Repplet versus all these wars versus lovable, there's a lot of a quality war there. I don't know if it's possible to have a quality war in the Harvey space. I just don't know. I don't know if lawyers have enough time to switch between 11 tools, dig in, and see which one analyzed state law conflicts between Georgia and Alabama properly, right? Maybe they do, but I don't think so. I think you're right. At a high level, for the case law stuff, it's the same for everybody.

24:32So it is the best tool. I think part of the value of propositions from someone like Aharves, they'll say we'll integrate with your internal information. So, cool -y picking just as example lawyer. It's not just, you know, the fact the case law that they bring to the table, but obviously we rag and we call to all you internal stuff and we can bring that to the table as well. And that's so easy, Rory. Agreed, but it's that. R .A .I. is racked 20 million pieces of sass for content. It took a day. Agreed. It took six hours to input 20 million to rack 20 million words of content. But you haven't lived the dream of having sold that software to a law firm where if you look at the typical document management software that these firms have, it's 20 years old, it's coming like I manage.

25:16So that just does appear to be a high propensely to stick with even mediocre software So my guess is getting in the door here like you're frankly a ruthless Trier of new software Jason you will dump yesterday for today and you'll dump today for tomorrow in a heartbeat And you're one person running your own business if you're selling to a partnership where remember everyone's your boss and no one's your boss You have 200, you know high attitude pain in the ass lawyers. You get them all of EC firm like that. I can't imagine. And you get them up and running on this system. You know, two years later, there's a better product.

25:50You don't need the heartache. You know, you talk to them about their use of West Law. They've been using that thing for 40 years and they're like, I'm dying with this Boolean search here. So I think getting in the door and locking in those customers has value. So it's clearly going to be a valuable company. I think the question, how is point early, the only question left on Harvey is market size. Market size and market composition. Yeah. account. There's LaGoura as well who's doing phenomenally well. I mean, they're the European counterpart. I did references on them that they're beating Harvey in a lot of cases.

26:21A lot of cases. And then we invested in Solve, which is a vertical application for patent creation editing submission. I think and Crosby, which is next on our list, Crosby Law Firm backed by Sequoia. By Sequoia. Exactly. The ones who did Harvey. Yes, the time, but the time is getting unbundled and unbundled and unbundled that actually is not the time you think it is. I know you're moving on. I do think the meta question for Harvey. I mean, Harvey still have B2B application at the end of the day. Will there be enough 50 billion to 100 billion plus B2B companies in the age of AI to justify these investments?

26:58And maybe the math ties to it, but there aren't enough 50 to 100 billion plus B2B public companies today to justify these deals, right? I agree. If it is software, even I mean give let's just go for a simple humble 3x 15 billion. If it's just software it probably doesn't and you know when trades at seven times in the end you know when things get normalized it's a two billion dollar thing. You don't get there on the time. So you write. If it's all just illegal software you don't get there on the time. If it's legal eat the work then you know it's two orders of magnitude larger. So that's the question.

27:29Does it eat the work and then does do you get paid when it eats the work. When we last did this, how it didn't talk about that, there's two separate things. Does your software automate what people used to do? And if it does, then at least value has been created. But then the second problem you have is if there's three people competing for the same, making the same kind of software, then the law firm gets the value. Excel doesn't charge 60 grand a year because it replaced an analyst. It charged 60 bucks because that's what you get for Excel. Can they replace labor and keep the value? And that's the question for Harvey.

28:00And then the interesting thing segue into cross -b is, obviously, just for everyone, that's a company that, as you say, Sequoia, one of the successful backers of Harvey, also backed, that's a company that is effectively using AI to offer, quote, a better, more efficient law firm. They are as it were using technology to eat their own work. And obviously, the value prop is they'll offer a better product to their customers while at the same time presumably be more efficient. That's the better at least. I've already done this. Oh, good. Tell me more. All the legal work I do, both for the fund and for saster ink, everything.

28:34I run through my AI and Claude, and then I run it by my council to see if it's correct. How many times is it not correct versus correct? Never. It's always right. I never read my LP agreements. I mean, they're like a thousand pages long. But for the first time ever, I had an LP that wanted to transfer to a third party. I didn't know how it worked. I had two options. I could send it to my old council who charges $3 ,000 an hour and would give me a grumpy answer in three weeks. And then I'd say, well, can we get on a phone and talk about it and he wouldn't get on the phone? Okay, I have new counsel now.

29:03Or I just stood in the clod and clod analyzed all the documents and it gave me all the correct answers. I talked about different scenarios, how the LP would want to transfer. I said, write this up in a short memo for me. I shared it with my counsel. A couple days later, he read the docs, he's like, that's absolutely correct. So when I need his law firm, I work at the pace of AI today. I'm not working at the 2021 pace where we worked 18 hours a week can have three jobs. I need the answer, my legal answer in seconds. And then my law firm after that can confirm it, right? I'm at the bleeding edge, but I just love these are the lawyers I have today.

29:35I've rebooted my legal team for folks that can review my AI answers rather than the other way around. I buy that, right? In a sense of there's a whole bunch of things like Vendom Management Contracts, NDAs, where review should be 90 % AI, 10 % human check if those exceptions and therefore it can be instantaneous unless there's an exception and therefore in the next sentences and therefore you'll be damned if you're paying a thousand bucks for it. And I totally think that's a thing, right? And I think they're all lawful. We've seen not just them cause me, but other firms specializing in NDA review and, you know, very typical documents.

30:08In a way, interest me that wasn't doable to state the obvious 10 years before we looked at law geeks 10 years ago, they were way ahead of their time and, you know, the technology didn't support it. So they weren't able to build a compelling business at the time. but today, NDA should be at the margin free. Now, the interesting question is how does that manifest itself? Because if all the existing law firms are dumb enough, not to get with the program, they'll lose Jason's business. Because he's going to say, I want the flat fee 50 -barc review and turn around time of 15 minutes. And if those firms resist that, then you're right.

30:42There's going to be, maybe Jason will do it himself, but typically there'll be firms like Crosby will be wildly successful, because they'll take the business away from the older law firms. I got it believed or enough of them I'm just gonna get with the program because remember they all now in our new world already have Harvey They've got the guns too. They've got the tools. It'll be interesting to see fast forward five years where the incumbents have Harvey Our LaGora, but they all the incumbents have brand new technology that could allow them to do things super fast But they have business model inertia and all the new crossbees are competing for Jason's business and they say, dude, it's 10 bucks for an NDA, 20 bucks for vendor agreement, and we only charge real money when you have to do a complex transfer.

31:25My God is, some of the old guys will be slow, but enough of them will adapt. I don't know. It would be interesting to see how much the new guys can build in this space. But this is exactly my point, though, which is Ventures defined by two types of outcomes. One, why you drastically underestimate the size of the market, and it's so much bigger than you thought it could be, or two, when you actually overestimate the market size, and you see it fragmented and undundled, and so many different composite parts that it's actually not as valuable as you thought it was. And I think that is exactly the case here.

31:50When you look at the, you know, when I was doing the diligence for solve, patent creation, there were like 15 competitors in every different legal adjacent. There is the same. And I think it is as fragmented and unbundled as it is, which will actually make it a smaller market than people give credit to. I think it will. I do think there's about five or six legal process, specific processes like patent that immigration that stand on the own. And then I think there will be the general corporate solution for general corporate law, which would be the Harvard and the Goris. But yes, you know, you peel off 50 ,000 patent lawyers.

32:23That's gone. You peel off another 50 ,000 immigration lawyers. And then you have even up, you know, 50 ,000 personal injury lawyers of whom 40 ,000 live in Texas. And, you know, pretty soon that million dollar legal market is down to half a million dollar, kind of core corporate litigators and contract writers. So you're right. You start on bundling it. I mean, we did the math on lawyers and look, the truth is, if you're doing plaintiff law, you don't need Harvey. If you're doing patents, you don't need Harvey. But if you're Wilsonson Sinney, you need Harvey. If you're Latham, you need Harvey.

32:54If you're a mid -tier law firm and, you know, Phoenix and you're a 400 person local firm, you need it. But probably have the market, which is why the math only works if you start to eat that work, baby. You know, the triggering thing is about the crossbething. How much human labor is going and be replaced by AI, we're still learning, the truth is we're still learning. But what things like Crosby Show is, it just highlights the mediocre, with like a blinding spotlight. Because if that associate, forget about the senior partner. I'm willing to pay the senior partner, because there's only two ways to win in services.

33:25You have to be the best of the best or hyper responsive. Everything else is almost worthless. And when that mediocre associate takes a week to get back to me and it's wrong, and Claude told me the exact answer from my LPAC, Like those folks are all going to be out of a job. Like the mediocre, the mediocre and everything, there's no need. It's not just NDAs, Roy. Just cloth alone can review very detailed commercial agreements. Like, okay, I want to get out of my Salesforce contract. It's a thousand friggin' pages long. What are my options? Claude can give you that answer in five minutes, right?

33:56Yes, and it's just a big no. You cannot get out of your Salesforce contract. It's the rules. Well, okay, but then what if they, will they sue me? What are the odds they'll sue me? What happens if they sue me? Joaquin inside, you exactly right. I mean, I think the AI is just going to pound on the efficiency. I remember 30 years ago someone saying, The internet. Yeah, the internet, the internet ground out commercial inefficiency. They ground out middlemen, travel agents, anyone who's connecting buyers and sellers, and that was the only thing, the internet exposed that. This is going to grind down knowledge work mediocrity, anyone who's just really recycling stuff that's easily known and is just slowing on response of your exactly right.

34:34And you know, it's pretty impressive. And that's the way capitalism works. Rory, when you ask me next time why I'm responding at 1 .30 a .m. within a minute's notice, I'll remind you that to win, you either have to be the best or hyper -responsive. And we know I am the last. Yes, and we know you can't do the former, so you've got no choice, maybe. There's a humility as creatures to everything. They both work. I mean, if you think venture is a service business, which most people think it either is between 10 and 99 % of service business, it holds true, right? I mean, there's someone in your investor syndicate that like speaks from the top of sign I knows everything And then there's the one that responds to you in 60 seconds, and then I don't care about anyone else on my cap table Guys, you know, we there's so much doom and groom every week We also have new IPOs this week Navan filed for their IPO.

35:22This is gonna be a big one I mean, I think their last valuation Jason you'll be able to tell me but it was like in the 10 billion dollar range That would be several venture firms here who make a lot of money from this. How did you guys analyze this one going out and filing now at this time? IPOs by number are up 62 .5 % this year, apparently, based on data I saw today, right? And just about every IPO is up and everyone's ready to go today, right? Even when we did this a couple of like, we're in each, everyone other than Canva doing its tertiary at 40 billion or whatever, or stripe, everyone else is now planning their IPO.

35:58They are just planning it today. This is just too good to start to the air. Anyone that's got the numbers, anyone that's got the number is going to go public right in the next 12 months. They're all going to go public. Is there a limit to how much the public markets can take so quickly with the stampede that is coming on the supply side? Is there a limit to how much the demand side can ingest? You know, Jason reminded me a while back in the 2021 there was an IPO a day. The ability of the US investment banking business to shovel shit out the door is unpowered. When someone One does circle. We're all very Pavlovian.

36:30When you do circle at the IPA, when you buy a 31 and you know, three weeks later, it's trading at seven times that amount. Let me tell you what your little Pavlovian reptile brain says. Do more of that. And the next one will be quite as good and the one after that will be quite as good again, but as long as it still feels good, you know, those rats will keep pressing the button. So no, it's going to happen. There's not a practical, there's not a cash limit. But as long as this stuff keeps working, another exogenous happens, they'll be able to get deal stuff. Navon is clearly a top 0 .1 % startup, but even say being objective, is it better than say ramp, right?

37:05I mean, I know not a direct competitor, but my meta point is just this, but my only am we're question, when you have a 0 .1%, but it's not, you're not sure it is the generational company. How do you know when you, to push all the chips in to Harry's point, right? It's fun to do it, right? I've done it twice and I don't know, it's not to that level. Well, it's fun to push all the chips in, but you gotta make sure it's at the edge of generational, don't you? That's the Roblox point that Alto's always makes, right? You gotta wait for that Roblox and then push all your chips in. Is Nevan as good as Roblox?

37:35I mean, it's generational, but I mean, it's great. Is it as good as Roblox though? I mean, the fundamental point you're saying is a concentration without absolute excellence will be get some power returns. You gotta be right relative to price. Because the trick is not just you gotta concentrate, but you gotta concentrate while the price is still attractive. Because remember, the other thing it just worked stating is on the last five or six IPOs, there's been at least one round that was in the private side that was clearly priced raw. Now, you know, we've seen a bunch of them. I mean, obviously, you've seen a chime, you've seen it on a hinge.

38:06I doubt there was a circle round that was priced as high as it's currently trading. So everyone is golden there. But in general, it's hard to concentrate and it's even harder to concentrate and get the price right. So yeah, when you do it and you pull it off, you obviously get a stellar return and you know, more power to him. Circle today is a $68 billion business, which makes it more valuable than Robinhood and New Bank to set some parameters. And even more compellingly, more valuable than Coinbase to whom it gives half of its gross revenue. Will it survive fooling interest rates and is this peak meme stock?

38:41To extreme on both sides, of course it will quote, survives falling interest rates. It won't go bankrupt, but there's no doubt that its current model is all about as someone succinctly described it, letting people give you their money and getting to keep the interest. So if the interest is less, they keep less. It's a far worse business at 2 % money market fund than 4 % money market fund. So to the extent rates go down, obviously it won't be as compelling, but it will survive. And then the second thing is as a peak meme. So I mean, I think there's definitely some element of right deal, right time, with all the crypto reform in the house and senate.

39:18it just feels perfectly unpoint. There's probably a fairly, probably a reason for float actually, because it was some secondary. But it's the kind of stop that can run. It's an N of one, the story makes sense. And yeah, it's obviously gotten carried away. I don't for a second. I don't think anyone believes that it's word 57 times one rate revenue. I don't think anyone thinks that. But here's the question I struggle with, where you've got more experience than here than me. I do believe it's a meme stock, and maybe that's the answer to this question. But how do you go from June 5th to $83 a share to $231 a share in two weeks with no news?

39:56I would get of a quarter or two goes by. I would get if you have a beat or two. I would get if something radically changed in the crypto market. This is the same company that IPO'd, isn't it? Is there any difference between this company that IPO'd just a fortnight or two ago? So first of all, I agree. It's the same company. So therefore, one mitigation comment to the bankers. I think this is the old Hollywood quote, no one knows nothing. You know, no one knows anything. Is that, you know, we give people a lot of grief, oh my god, you priced at a 31 and open at 67. You must be dumb, Mr. banker.

40:26Well, we saw it open at 67, Jason. You did. I did. And Harry did. And now it's 270. Did Enneva spy at the end of that first day? We left a 5x on the table. No, we didn't. So I think one of the things you have to conclude is some parts of what happened in this kind of thing are fundamentally fairly unknowable. And so to your point, you had just nothing's changed. And you do have to say that at some level, you probably have some, I hate the word bubble because you're making a call, but you're definitely having something where people aren't buying it because they think it's worth 57 times revenues.

40:56They're buying it because they think somewhere out there, someone else thinks it's worth 58 times revenues. And maybe they can flip it to the next guy. And that kind of thing always ends badly. So do I think there'll be a significant correction? Yeah, but it's still a great company and a great win. We could argue whether the IPO is mispriced and someone could play the role of Grouchy Bill Gurley who's definitely smarter and more successful than me. Totally. But the last five days, it's up 46 .4%. What, what changed the last five? Nothing. Five. Forget about making five X Harry and I could have just taken our funds.

41:27Totally. Stuck them all four days, five days ago and made 46 point. What's the IRR? I can't do the IRM, math good worry. If we did 46 .95 days, what's the IRR annualized? It's awesome. It's awesome. Now you exactly like there's no logic to it. It's a trading asset and it's all the, I mean, again, it's all the symptoms of what you see in, you know, speculative bubble behavior, which is vast price movements and short periods of time for no information. The efficient market hypothesis people get all mad and say they're really, I mean, you know, family, they'll say there are no bubbles and you'll go, hmm, this looks pretty bubbly to me.

41:58Large numbers of small volume ill -informed traders in a stop where relative to the float There's not a lot and I've no doubt in my mind that when the other 80 % of the stock comes off in six months I don't think it'll be trading at 57 tons revenues. If you're looking at this as the canvac exacting Can you genuinely help me understand why do you delay an IPO? You're looking at circle -being price of it is But everyone else everyone enjoying the fruits of public markets treating them well. Why do you delay? It's a great question because it's actually the only reason to post a question Let me tell you what I mean by that.

42:32When you have all these things, should you stay or should you go to coin a music phrase on the IPO and you have all the private is great. The real question is, is the cost of capital cheaper in the public than the private and for a long time, the private has been cheaper. We've been wonderful cost of capital. We give you money. Pavadi, you get a preference. We leave you alone. We don't bug you. You don't have to do amalous day. We're not really that mean. I mean, some people think we're mean, but compared to, you know, the guys in New York who are on hedge funds and and there's kinds of funds like that, activists, that's the word I couldn't think of.

43:04Yeah, we're nice. So it's been really nice being private. The only thing that's going to change that is not some kind of, I was thinking about it because you'd asked the question two or three weeks back, what would you change in the public markets? And I had a good answer, you know why I realized, it's kind of the wrong question. Price is the lever for 90 % of economic transactions. If you can get a stupid price in the public market that's higher than the stupid price or getting in the private market, then at the margin, mostly you should go. And I think you're right, maybe not tan, but maybe people have ideological reasons not to.

43:34But let me tell you, if you're owning a Bitcoin trading operation, a stablecoin operation, you are typing as fast as your little fingers will let you. And there are bankers locked in rooms as we speak doing that because price is how the public market sends a signal to the private market, hey, come on in. Would you not argue that's a relatively naive way to think about going public based on a transitory moment in time of what public markets will price you at I was with a dinner with a $10 billion public CEO last night who's a friend of mine and he was just moaning about being public And very simply it's a transitory moment in time you will appreciate to appreciate who gives a fuck what you want out at First of all, I'd say it's less naive than reductionist and look you right though all the other negatives and positives of being public that are hard to change My point was at the margin.

44:25If you get all the grief of being public, and on top of that, you get a lower price than the private side and a consistently lower price than you never bought. But if you get all the grief of being public and it's still a pain in the ass, but in return, you get a liquid stock and a 50, 80 % consistently higher price, then the argument is hard to resist. Now you're right, if it's a flash in the pan and it's gone in two months, then it would be a naive reason to go public. But if on average the capital is cheaper in the public markets than over time it'll pan out. If we just go back to Canva though, I just don't get it.

44:58It's a very strong consumer brand, very well known, with incredibly strong financials that we know of. It's north of three billion in ARR. Why would it not go out? They don't have to sell securities. They're kicking off cash, which means that their net buyers of the security from boys, not sellers. So they don't need to raise money. I mean, fundamentally you got public to raise capital. What's odd about some of these companies that've been private so long and has done so well that they're post -nated capital. They're just kicking off cash. So it's just not an imperative. If Canvas generated enough cash, like you could imagine Canvas generating a billion dollars of free cash flow or more a year, maybe a billion and a half.

45:36It's easy to see, right? They could have 40 % free cash flow margins, right? If you have enough secondary interest, so you could just buy everybody out. There's enough cash at a billion and a half a year. You could buy out even all the growth just about everybody And no one listens to the guys that bought a few shares at the late rounds anymore But forget about that the blackbirds and everybody got as much liquidity as they want right return the fund If you generate enough cash and the founders have given most of their shares away to charity I don't think they're trying to buy the biggest yachts If you could generate 20 30 billion a free cash show the next decade Why go do maybe you don't need to go public at all just buy everybody out and pay dividends as founders or just pay a billion dollars out as common stock dividends a year.

46:15If the founder's own 80 % of the common, most of us could live on 600, 700 million a year in dividends, couldn't we? I think even you could manage a JSON and you know, you look, you're right. Is that seriously? I mean, it's not, there hasn't been so much. I'm trying to figure out exactly how much has gone in in real time, but it's not so much. They can't buy the buy it. The buy it all out would take too long, but I get you. I think it raised less than a billion, I think, but they might own, if they own 30 % than any 10 billion, but yeah, it's not crazy. When we talk about Oracle, when we talk about Oracle, I'm like a lot of these startups, it is possible to buy them out, right?

46:47If you've got low capital raised and high capital margins, you could. I don't think that's the reason. I think a lot of what they said is they're really trying to focus technically on the AI development because they got a lot of new stuff to build and they just don't need the grief and the distraction and they don't need to do it, which is a perfect irrational reason. All I'm saying is that the three of us were running Canva and let's say we're still growing north of 30 % or 40 % like they are and we sat around, listen guys, we could buy out our last investors at 3x and they take a few years to get there.

47:13They'll make the 3x Blackbird made 50 ,500 ,000 X in friends. Let's just chill. Let's just pay ourselves a billion dollars here in dividends, like the base camp guys do on steroids. Let's buy out our guys at 3x when the time comes. And why would we want to do with... I don't know a single public CEO that's happy. Going to Harry's point, I literally don't know... I mean, even the most successful ones, you know, Palantir and Cloudflare, the two most successful public... I mean, they're great, but they don't seem happy, do they? Do Matthew and Alex seem, they don't just seem like the happiest people on planet Earth.

47:45They're driven, like mad respect, but I would have that discussion with three of us. Why don't we buy them out? We've raised less than a billion, right? We can get to 10 billion generating four to five billion of free cash a little year. It's a legitimate question. If you are a post -calf strongly careful positive, such that you don't need to sell shares, in fact, you're a net buyer as you point out, because you're doing buyback for employees or because you're doing buybacks of founders. Then inside, you're not trying to optimize valuation, so going public might make sense. I think you end up doing it for other reasons, massed liquidity, including your own.

48:17But isn't like Larry Ellison kind of doing that in a way? I mean, they just supported his 41 % ownership of Oracle now. No, that's really funny. That's buying out his shareholders every year with Casula like we've never seen before. Why don't we learn that lesson and do it before not even bother to IPO? First of all, you're right. Let's talk about that now. I mean, I think that because it's been interesting because at IPO, I think Larry Ellis has known something like 23 % of Oracle Tipety that goes down over time. He now owns 41 % of Oracle What's he done every year? He's run that business superbly.

48:48It's got 43 % operating margins And he's used that cash to buy back shares He hasn't sold any so his ownership has just gone up over time. It's exactly what Jason said It's a beautiful thing now really interestingly two things happened this year The one is the stock really popped 40%. He got a lot of cloud credit, but the interesting thing is, this is the year he actually abandoned the buyback strategy, because this is the first year where instead of taking all that cash and buying shares back, he's taken all that money and put it in CapEx. Oracle was not free cash for a positive this year. He's so money, really.

49:19Yes, he put his own money and he said, no, we're going to take this lovely, mature, cash for a positive software business and join the other crazy people in this CapEx crazy He hyperscaler land, so I think the CapEx budget was, I'm winging it here, something like 30 something billion, and the effect of the free cash flow negative. The trick that he used to get to this point is now not happening, but luckily, not luckily for him, it's so clever. He bought when it's cheap for 10 or 15 years, then invests in AI and then gets a 40 % stock pop from that investment in AI just when he owns most of the company.

49:54It's a thing of beauty. and put some firmly number two richest man in the world, I think, for a period of time. You got to love it. What a strategic mind. Also, he looks phenomenal for his age. Totally. I don't know what he's doing, but someone needs to give him more. Whoever his people are, I just, I need all of them. I haven't told you, I'm actually his blood boy. That's why I didn't sell the company. He pays me much more. No. Yeah, there you go. I totally agree with you guys. Yeah, 30 billion in 2024 into CapEx alone instead of buybacks, right? Totally agrees. It's just a totally, what's fascinating about it is, It's such a different bet at a time when most people, you're in the 80s, are getting conservative.

50:30It's like he took the Warren Buffett Bible for 15 years and did the cash buyback like Buffett did at the Washington Post. And then last year he said, fuck it on 80, I'm just gonna double down here and just switch strategies. It's just fascinating. If it works, it'll be a legend. Once you buy a couple Hawaiian islands, I mean, honestly, there's really ran out of things to buy, right? You gotta buy a planet. We talk about yachts. I mean, Larry Ellison owns a big chunk of Hawaii. I mean, there's not much left to buy. Actually, a very famous billionaire told me that once you conquer Earth, there's only one place to go in space, and that's why we have Elon and Bezos.

51:04Jason, you've mentioned clearly a couple of times. We have to talk about this company. Jason, why are you a fan, boy? I have thoughts, but I want to hear yours first. I'm a fan, boy. If we look at AI for coding, okay? If we look at Repplet, 10 to 100 million, and 5 .5 months, right? It announced yesterday. Crazy, right? If we look at Lovable, not far behind, on and on and on, right? cursor and what kind of bums me out is that on the GTM side, on the sales side, I know everyone's made investments in there, they're not as good. They're slow to release features, they don't work that well. They're just not like the sales tools for AI are not as good as the developer tools for AI.

51:39So what I'm looking for is who's approaching this from a consumer level that has a consumer grade experience that could work for GTM. Listen, I love my old sales team. Everyone going to work with this great. But overall, the sales reps I talked to for all the products I buy, they're terrible. They don't know their product, they know nothing, they add no value. So they all need to cheat. All sales reps need to cheat because they don't know anything. And they all need something like Cluelie. And I've used, there's a limited number of tools that do this in sales, but they're either not real time, right?

52:10Like I'm using Cluelie right now. Or they have an enterprise niche or they're glorified note takers. This is what every sales team needs. And that will it be clearly maybe not, but once in a while like a slack or something, you need something to come up from the bottom to disrupt a market instead of coming from the enterprise. And I just don't see sales tools. We can look at great things that are crazy, successful like clay and others, but clay is like a multi -month deployment period with an agency that you pay 50 grand to, right? I want tools that you can use in five minutes. And I'm not saying clearly does all of it today, but I can already see hints of, if it could do like two things today, It would be the cheating tool for sales reps.

52:49It's like two features they could build in a month. That's why it may be an intern. I was invited to be an intern this week. I may take me a week to get up there, but you think I'm kidding, but when I joke, there's always seriousness in it. Jason, you're taking away two academic approach to this because the right tact or the right tact or the real question is, are they going too far in that bid to get attention? Posting pictures with strippers on sofas, police cars arresting people outside of parties. I thought that at first and when that initial stuff went out, I didn't even know what it clearly was.

53:21It seemed crazy, right? And if you look at that social network thing he did along with Andres and fundraising, the other stuff went to other folks. Cueing back to the social network went to me. It went to maturing the company just slightly because there's a whole generation of us in B2B. Harry, this is where I am. A couple clicks older than you. I can't tell you what it was like when I took my team to see that movie. It was generational. You don't know what it was like when everyone was piling on Zuck telling it saying this was a terrible company Hoping it might be worth one billion dollars today.

53:52What is it worth? We started this episode one point eight trillion and his point when he did the interview was like listen You guys on Twitter and LinkedIn are like two or three years behind what's going on on TikTok and instead you're in the middle Harry And he's like I'm gonna bring some of that knowledge to the Twitter LinkedIn And I thought that was the social network thing you did I thought it was a 10 I know you can laugh Can I come in here? I want to come in at this because I don't even know who wrote it because notions got such a shitty UI I can't figure out the read. But a piece sent around internally called leveraged beta is all you need, the LLM business.

54:25It was so clever. And it gets back to this because there's two separate questions at stake here. One is how much should be stake and how much should be sizzle. And how much should be core product versus marketing, which is a general question. And then the second question is are there certain forms of marketing that are just go too far, which is cluely. And you could argue the Harvey common I made was, you know, they did marketing. This was such a good piece. I'm going to read out a couple of lines from it. The brutal truth about the LLM business. Here's what nobody wants to admit. When LLMs finally work at something, the implementation will be boring as fuck.

54:59Harvey isn't some breakthrough in legal AI. It's chatchy PT with a law costume. Lovable isn't revolutionizing code. It's clawed with pretty buttons. options. So you have two choices. Option one, wait until the LLM actually works, then scramble to build your chat GPT wrapper along with everybody else who just relies the same thing. Option two, start now while the tech is garbage, lie about how good it is, burn money on marketing, claim the territory while everyone else is still laughing at you. The company is winning at leverage beta aren't the ones building better products, they're the ones who understood this dynamic first, the reader lying about the present, 11X or icon of arbitraging the obvious.

55:39Harvey are lovable. It's a great piece. What he's basically saying is the models are getting better so fast that even if you can't do it now, you will be able to do it in a year from now. So your choices are wait for a year and just complete the course along with everyone else. Our lie complete the course now, establish this kind of mental perception of the winner and then collect the check when the time comes. Harvey did that in a high class way because I don't take you sell to law firms by hiring strippers. I don't just write. And you could argue that you never know, I'm not going to speculate.

56:11I'm going to keep this thing high flutin, right? Clearly, it's doing it in a different kind of way. We can discuss reputation. It does that kind of marketing work. But the net are comment of claim the ground with marketing and let the product follow on because it's going to get there because the models always get better. It was a widely inside for peace and point. I would give him a her credit if I could just figure go out and notion where the right is, but there you go. Clearly, I know. What? What? Well, I'm going to add, I like, Jason, why didn't you invest in this company? I didn't get a chance.

56:43I wouldn't have invested in the company three weeks ago, like, or whenever Susan did, but I would invest in it right now that I get it, right? I'm not always that fast, Harry. So actually, to be fair, my partner pool, actually picked this guy out when he was like, kicked out of Columbia, and called the amtim. But with Jason, would you do this 15 on 100, would you do it? Clueley says author is not named, Rory doesn't know, and he doesn't have an update in Notion, right? Show me. If you can show your transcript to Clueley though, truly, Clueley can look it up. Jason, would you do Clueley 15 on 100?

57:12I could do like five. I don't think I could get to the other 15. That's too much risk. You might do five from your fund. I get excited about companies in general, and then sometimes you meet the founders, and it's not what you thought, right? We're all on our own journeys, and there's a probably good chance what I see in Clueley is not what the team wants to build, right? I mean, it is started off as a cheating app, but if it is, I just think all the B2B people are so sub -cursor grade that I'm looking, this is all I want, I'll take the risk if someone can pull together an S to your team in GTM.

57:43I'm in on it for real. They all claim they do and they're just pretty good. Yeah. We mentioned, and I'll tell you afterwards, we mentioned buying islands, being being in Hawaii, the thing I can't get in a lot of my companies, a really perplexed part, is the slack lockdown, cutting access to it. Can you just help me understand like, will it work? How do we think about what this actually means for slack moving forward? You know, all the leaders in B2B, I think most of them are gonna close circle the wagons and become more locked down. They have to be. They have to be. And when you're sitting around the table, especially with the So, you know, I want to do lock it down, move to multi -decade contracts and raise prices.

58:27Like, that's the strategy when things are stressful. And I think we can argue whether this is a mistake, but I think MCP is an existential threat within 12 months to every B2B company. And so, folks are going to lock that stuff down more because you can lock down your API, but when your MCP servers open, it's rough. And I love what like, Zapier is running like a thousand times faster now to become like Zapier Prime because of this. as they get it, HubSpot is figuring it out, but they were first, right? And Salesforce, I think most people do with Salesforce's, which is lock the S down, lock this down.

58:59That was helpful context, Jason, because my instinctive reaction is no, you can't do this. I'm a Salesforce customer. If you were telling me I can't integrate in and out, and you know, access my data, I'd be miffed. And then what you did nicely, Jason, is remind me of the duplicitous and sly ways that especially the closer you are to having a monopoly, the easier it is to start locking stuff down and you're exactly right linked in obviously. I mean, I think epic in the medical record space is notoriously difficult to integrate to. You have to pay fees and all that. So it is interesting that as you get big and defensive, you're right.

59:36There is this instinct to lock it down. I mean, part of me says they won't be able to get away with it that the customers will say, look, if you're going to do that, then the value of slack goes down so much to me that you can't do that. So my god, I think you said this to me, And I've started someone is that probably this reverses to some kind of fee based thing, which is MCP access to my Slack information is a priced API call. I don't know if you can get away forever in a horizontal app like Salesforce with a channel like Slack denying the customer access to their own content over the medium to my don't think it stands intuitively.

1:00:14I could be wrong and you did well to remind me of other areas where they do it. But I just think it's a sign of a decaying empire. It's a sign that you can compete on the merits. It's a little bit of a dangerous sign. It's one of the signs that says, this would be a good time for you, Mr. Customer, to consider your options. Right. It's like when PE moves in. Price rises are common. That's why I have the most respect for HubSpot and especially Darmesh for being number one here, like Launch Day MCP OpenAI Partner, Chatchee Beeper Launch Day, because I think it's a threat to HubSpot. I think it's an opportunity, of course, it's an opportunity, right, which is why they're doing it.

1:00:48But to embrace the threat, I mean, it's that's bad ours. That's the way you do it. Totally. It is a sign of deteriorating everything, right? Yeah. And, you know, it's and it's slack to cheer rates more and more. Like, it becomes less and less this our neural network. It's going to get locked down even more, isn't it? Yeah. It's hard to imagine a world where you say, this is the means by which we all communicate with each other, but no one can access that information for the use of AI. That's just not a thing into it. It's not a sentence that survives. I don't know. I have dinner with Benny off in London in a couple of weeks.

1:01:19Yeah. Oh, questions should I ask him? Taking Jason's team, this idea of agents, I would say, kind of, I try to get some data and dialogue around it. How do you measure the efficacy of Salesforce agents running on the Salesforce stack? And how does that compare to third -party agents running on the Salesforce stack? Are you better because you have the data? Are you worse? because you're a little behind, do you even objectively measure it? Do you understand if you're using your sales agent how you measure success? Do you understand, you know, we haven't read you in the AISDR of space, there's a bunch of others, how do you compare to them?

1:01:56If you're in service cloud, how do you compare to all, how does your agent compare to all the independent agents? Because to Jason's point, what would make it go faster? It's really simple. So, if the resolution rate on Service Cloud was 20%, so you can only, let's be honest, eliminate 20 % of your service center personnel. And the resolution rate with some third party product, Decagon, Thin, Sierra is 50 or 60%, then you're going to lose business pretty quickly. And are you measuring that? That's the question I'd ask them. Joining comes to dinner instead, man. I'll have dinner with Jason. No, I'll be really interesting.

1:02:32I'd be too scared. I'd be too, he might get mad at me. and then he cut off access to my slack and then I'd be screwed. Right, we're going to do a cowshoe quickfire. As you know, this is like an incredible bedding platform which does predictive bets on world outcomes. So we have, will open AI accuse Microsoft of antitrust violations this year? Yes or no? And the odds are 36%. You always have to state the odds. Otherwise, it's just a meaning. This cut 36%, which means if you bet only 30 % probably, which means if you bet a hundred bucks and it turns out to happen, you get 246 bucks back. That's what it means.

1:03:11So I take that bet. Yes. Accused by the way is a wonderfully vague word. Will they file a lawsuit and prevail? Maybe not, but will some true words out? Yeah. Two and a half X on a yes. I take that chance. No chance. You think? I'll tell you, in my opinion, zero percent. I'll tell you why. Why? I think he already did. Yes. So I win. Yeah. I think that's right. They already accused Microsoft of any trust. They floated it internally. They didn't have it. Yeah, of saying everything, Sam, you know, I'm a little slow, Harry. I'm not as quick as you with Cluelie and some of the others. It took me a while to figure out that everything Sam says that seems off the cuff or like on the side or little futuristic.

1:03:49He's very clearly telling you what's going on. He's very direct. And when he says when you hear that they're thinking about it, he's done it. Okay. It's the same as filing. I'm not saying literally. So I already think he's threatened it in a pleasant way. The question is, is he have to go through on this threat, which has already been made? And I think it will, I think it's enough to have said it. I don't think Microsoft wants to be sued by any trust. So I think it's going to get worked out. By the way, I completely agree. I think he's one of the most strategic communicators. The interview he did with Jack, who I love Jack's great.

1:04:18But like, what brilliant time, man. For the message he wanted to land, he knows the message, which is matters poaching for a hundred million. He's just put a staga in the heart of the recruiting campaign of Zuck to take him open and I, brilliant. It makes me feel like he's just sharing things with you, which he is, right? But I didn't get how clever it is. I didn't get how clever his communication strategy is, right? It's as good as it's the best of anybody, isn't it? Beautiful. Beautiful. Okay, so the next one is, will the US government take control of any AI company or project in the year of 2025?

1:04:52And so the odds 100 bucks gets you 297 back if it's a yes and 100 bucks only gets you 125 back of its unknown. It still think no. I think just the push from the folks on the tech side has been very much AI for good, not AI to control it. I think all the very active tech people from David Sacks to Andreessen Horowitz, their approach has not been AI is dangerous. It is entirely correct you by the way, being in my opinion. AI is wonderful and we should make lots of it right here in America. While it's pretty clear that the tech bros don't run the administration, it's pretty clear that the big guy runs the administration.

1:05:33My guess is this is just not important enough for the big guy to give a shit. So thanks for the money guys. In this you can do what you want. So no, I don't think there's any impetus to say let's seize control of un -tropic or something like that. No. Even though I only get 25 bucks more than I put in, I would take a note. I don't know, but I haven't seen watching what David says, which I think is very careful on the government side, right? Very, very careful what he's scootos to him. But I haven't even seen a hint of this, right, from our AI cryptozar. Now if he knew it, he wouldn't say it, right?

1:06:04I mean, here's where having an ex -lawyer very briefly a long time ago, and one of these roles instead of Elon probably helps. Sax knows exactly what to say, but I feel like there'd be a hint, this were true, given that we're halfway through the year. Agreed, it's far more likely to see some kind of regulation of Chinese AI companies, not obviously taking control, but some kind of pushback there, I think that's highly likely, but not US. Short detour before the final one, Saks had to divest a load of assets, including a load of crypto and also late stage companies. Do you think he was hurt or helped by divesting?

1:06:38He divested in a pretty good period of time, a pretty buoyant part of the market. The market since then have been down but then back up. I mean, just facts. The overall S &P roughly flapped. And so, not again, our last, but crypto up. So it probably cost him money. And again, credit to him. You don't have to like a ton about it to say, you know, he's doing public service. He's sold his assets to do that. And there probably has been a cost to it. Yeah, putting his money away is not it. I mean, there are famous occasions of people having to divest, to join public service and then take you part in the administrations that totally shankings up.

1:07:14That has the result. The divestment looks like genius, but I don't think that's the case here. I think it costs him money. Because look, a look at crypto alone. I think since the election we've went up a little bit, then we dip down a lot for liberation. They then move back to roughly flat. It's been kind of a no -up. Final one, boys. Trump mobile smartphone. Will it be released before September? The odds are $100 gets you $716 back on a yes. A hundred only gets you $108 on a no. the man moves at speed boys, what do we think? It's impossible. There's no supply chain evidence of any phone and production.

1:07:49There haven't been any leaks of an actual phone and production. And there haven't been any leaks to sites of true product development other than a markup of a golden phone. I thought he was doing a product partnership with AT &T and he was basically just sticking a Trump sticker on top of a different phone. Well listen, maybe I'm dated, right? The press I saw was launching a phone. So, clearly, quickly researched it for me while we're here, in terms of all the supply chain evidence, there's no notice of anything happening. If they're going to put a sticker on the phone, I'm sure you could do that yesterday.

1:08:17It's pretty clear that Jason has... I mean, Jason's actually... He's put money in Rory. He's put money in Rory. He's got five million in, he's talking to stuff. But I will say, that was pretty impressive. Because, you know, it's sitting there, it's doing its recording. What did he say? No, no, I gotcha. I have to actually understand what's going on. Jason just has to be able to read. It's really lowering the bar for confidence here people. I barely have to read. You just listen, you just listen and watch it screen. No, as long as you can read it back. No, that was a win. That was a win. As to the phone, look, I'm way Jason, there's no, and if it ships its meaningless, it's not a thing.

1:08:51I'm not going to dunk on, you know, the attention span. I mean, there's a lot of initiatives in the administration that come and go. It's been a while since we've talked about Greenland, for example. Look, this is a week when the administration had a big win. Let's just take it at that. I don't think the phone is going to be the biggest win. I'll make a different comment. If I were Tim Cook and Apple I would move heaven and earth to even make some kind of phone here. Just to do enough to say we're trying That's a company whose business model of a big show is so exposed to China risk. If the solution on the making side is We don't make it in China.

1:09:24We do make it in India. That makes logical sense But I just worry you could find yourself in the political crosshair So just even trying to mix and phones in America, even just one wouldn't life you'd be a shrewd thing. I agree. You make one get Trump there, get the picture, get the marketing message made in America. Trump did it. Absolutely. That's exactly why I make a little lot of 10 ,000. You'll sell them for twice the normal price and you'll discover that Americans won't buy them and you'll have tried. Make a good fade effort, get them off your back. Boys, thank you so much for doing this.

1:09:56This episode was brought to you by Cluley. I'm not really. Jason, actually won't be here. It's Harry's house. We're not alone. I won't be. Let's let the record. Actually, let's just do it at the 20 VC office because we can spill out onto the streets and behind it. That's a great place to have a party, isn't it? Yeah. There are two floors. What's the rules on spilling the party out into the streets? Is that cool? It is a private road, baby. I'm, yeah. I'm, guys, given the clearly context, let's start. It's a party. party no rules is not how I would suggest we end this movie here guys. I mean if you can't tell we just have so much funding those shows it really is special when you do it with two people you respect and like as much as I do Rory and Jason I so hope you like the show let me know what you think on Harry at 20vc .com I always love to hear your thoughts but before we leave you today here are two fun facts about our newest brand sponsor Kajabi first their customers just crossed a collective $8 billion in total revenue.

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