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23:08So the whole thing is now a mess. Because just to give the zoom out comments here, it was a not-for-profit. At some point, it became obvious to the management team around 2017 that the costs to build what OpenAI was to become was such that you couldn't keep going as a nonprofit. You have to become a for-profit entity. During the period when that started to happen, Elon had his demands on how he wanted that to happen. Sam and Greg Brockman had their perspective on how they wanted it to happen. They ended up, as it were, breaking up. Elon resigned from the organization. Fast forward past the drama of 22.

23:42In late 25, the conversion to a for-profit took place, finally, and it was approved by California and Delaware. Now, OpenAI, the for-profit corporation with the largest individual shareholder, is the foundation. The argument Sam and Greg would make is, hey, you invested money in a charity, and that charity now owns 30 % plus of one of the most profitable, one of the largest companies on the planet. So you kind of got what you paid for. That's the argument they're making. And therefore, you're entitled to nothing. You made a$30 million donation. You created a 300, well, probably 150 billion foundation.

24:19Congratulations, you've helped humanity. You got what you paid for. And Elon's comment, which is going to be tricky to prove, but it's going to be messy, is all along, you guys were planning to cheat me, and planning to make it a for-profit company, because his ask is not just, hey, I want my 30 million back. That's Trump change in the back of his couch. He's saying, hey, you guys planned this all along, and therefore, my damages claim is not just give me my 30 million back, and it's not stop the conversion to a for-profit, because that's already happened now. That can't be stopped. It's like, you guys took my 30 million under false pretenses, therefore, I'm owed roughly what$30 million would own out of that company now, which is$100 billion of value.

25:00He's basically saying, if we're going to go for profit here, guys, and you guys rely on me all along, then I want my share of that now. So you're all going to have to take dilution such that I get my$100 million. The damages claim is$70 to$130 billion, which would come in the form of extra shares of OpenAI to Elon, and everyone else would have to take the dilution. That's the ask. That's what's going on here. In the end, it's an economic argument on the basis of fraudulent intent from day one. Is Elon doing this to slow them down? Is he doing this for the... I don't think he's doing this for the 70 to 100 billion dollars.

25:32I think in the great words, yeah, I think he's doing it because he can and it's fun. Billionaires going to billionaire and near trillionaires are going to near trillionaire. I mean, it's a win-win. He feels shafted and you're right, it's good for Grok if it slows it down and you might win 100 billion and there's not a ton a downside other than a bunch of legal fees because they've got no claim on you. It's an asymmetric win situation for him, provided you have the couple hundred million dollars of legal fees it's going to consume here, right? Because we are litigating over$100 billion. And then the other thing that happens is, and he's lived through this on the Twitter litigation, deposition and discovery is a sucky process because you write down stuff in your email, in your diary, and then And it suddenly comes out and it's always embarrassing.

26:22Right. There's all like the truth is that if I spewed out your last 10 years of emails, I'd find some embarrassing stuff. It happened, Elon, in the Twitter litigation. I mean, some of that, those texts just look juvenile. You just, oh, wow, you're the richest man in the world. You sound like an idiot. That sucks. In this case, they were able to, I mean, if you look at already what they've got on the record, they've got poor Greg Brockman who kept the diary in 2017, you know, writes in this diary, as one does, what does it take for me to get to a billion dollars? And now that's come out. and now they're going some version of, hey, you were cheating me all along.

26:50You wanted to do a for-profit. I mean, can you imagine, Harry, having to get your diary from eight years ago? And then you had Ilya, who had to do a 10-hour depot. And this comes back to the whole mirror thing, right? He had to do a 10-hour depot on the 2022 CEO, it was 23, CEO drama, which is not really relevant to this because the quote-unquote alleged fraud happened in 2017 or 18. But again, it's just a fun chance to get all the mess out there. So they depot Ilya for 10 hours, and we finally got to hear what he thought about the great fiasco. And it's kind of embarrassing for everyone. Everyone looks like an idiot.

27:24In 2023, the board looks stupid. Ilya looks a bit naive because he relied on Mira. She looks a little naive because she was... It just looks like amateur hour everywhere. So if you're Ilya and you're like, I can torture these folks and look stupid. If there's any kind of credible case, and remember, a judge was asked, because what you call it, OpenAI did go for summary dismissal, which is what you do. You say, hey, there's no case to answer here. Just dismiss the charges. And the case, I should say, they're not charges. And the judge said, no, there is a case to answer here. I'm not saying it's right.

27:53I'm not saying it's wrong, but there's a credible discussion here. So now they've got to go to a trial. And I don't know how that impacts fundraising, but for the next one, two years, there's the potential of every financing of OpenAI now has, you might have to take 10, 15, 20 % dilution if they lose a jury trial. Now, for what it's worth, I think the intent of the other founders, Sam and Greg Altman, wasn't day one to court. I think Elon's case is built on a slender conspiracy thread, but it'll sound compelling to a jury when you also have all this dirt about, you know. Roy, what happens? And Jason, what happens?

28:28It drags on a long time and it gets in the way. And who wins? Elon wins no matter what. Yes, that's the right answer. This is a jury trial. A jury trial is unpredictable. And there are bad facts on both sides. Like this is the social network, the movie, The Social Network. I know they're making another sequel at Meta. This should be the next social network. This is a sequel. You're so right. There are bad facts on both sides. And if Elon was not the richest man in the world, he would settle for 30 billion or five, whatever that Winklevai got, he would do the same deal. Give me 5%. They would settle on the eve of trial for 5 % to Elon.

29:02They would say, we're just doing it to move beyond. they'd give him 5 % or 4%. And if it was about money, he'd move on. Just like the Winklevai got their 4 % or 5 % of meta at Facebook. That's what would happen if it was about money. The fun thing about the sequel to the social network is they ain't going to settle for that. He's going to go to trial and he's going to win. And Elon has bad facts, but this man has already been bad facted the last couple of years in public. His worst fact, forget about that it's in Oakland. Now, Oakland is very liberal. Elon's worst fact was that Trump hated him for about six months.

29:31He fixed that issue. Now he's back in the inner circle. Get a couple MAGA folks, Republicans on the jury, we don't know. Sam Altman fired by OpenAI board for reasons not fully disclosed. Greg Brockman, and you know what I think really happened with Greg that I think maybe people missed? This is my theory. The guy really partially regretted leaving Stripe as the CTO and the fourth employee. He leaves, Sam recruits him from Stripe when it's worth$3 billion and says, don't worry, we'll make it up for you at our nonprofit. Come do this thing. we're going to change the world to Greg. And it's very exciting.

30:05And Greg really doesn't want to work on the Stripe API anymore. He's already gotten payments to work. It's kind of boring. And he leaves it just, he leaves it in 2015, Rory, when the world seemed very flat and simple, right? And he left and he turns around and he's like, my God, I left billions behind. How would you feel as a human being that didn't make the money Sam had already made? Sam's already become, he wasn't a billionaire then, but he's on the path, right? He's raised hundreds of millions at his own venture fund to invest in YC startups. He personally owns 2 % of Stripe. How would 99 % of humans feel when you're like, if I just stayed at Stripe and just played Minesweeper, I could be worth 10 billion.

30:42And I think that haunted him. And I think that's where these journal entries come from. It's not him being douchey and saying, man, I want to, it's him haunted by Sam getting him to leave Stripe at 3 billion, haunted by it. We've all, I've been haunted by some mistakes I've made too. I think he's haunted by it. And I think that creates, going to create a whole bunch of bad facts the deeper we deal that greg was haunted by leaving the the money at stripe first of all i'd be haunted too i'm not going to speculate even he would be haunted if he left a couple billion behind yeah yeah no i mean one of the things that that's also sucky about this when you're in litigation is suddenly everyone including royer driscoll who i think has never put eyes on you has a fucking opinion about you that's the really sucky thing and the great i think i'm not sure i agree you on elon in terms of the jury i I want to come back to that in a second.

31:29But I do agree on one thing is he is post-pain when it comes to public shame and uploquy. There's nothing left to do for him, man, right? So basically, everyone else is going to have to get down in the muck. And he is already so far in the muck that, you know, on various different parts of the last three years, 40 % of the country have hated him and it's been a different 40 % each time. There's nothing left for him to do, which actually gets to the, how do you think, you asked how hard I think it ends. I think, Jason, you're right. If it was normal people, they'd settle. If it goes to jury, I think two comments I will make.

32:00From a facts perspective, I think in the end, Elon has to prove his case, and it's a high bar to prove. You've got to prove that all along, it's a very hard, you've got to prove right when they were raising the money charitably, they were all along intending to swipe it and build a for-profit. And I think that's very hard to do because Altman's money went in as a for-profit, a not-for-profit too. So I think it's fundamentally, I think Elon's wrong on the core assertion. I don't think this was a cunning device to cheat everyone, because if they wanted to do that, they could have just done what Antropic did, which is the totally sensible interim stage of a public benefit corporation, and saved all this freaking drama.

32:37So I think, stripping aside all the bad facts, I think the core assertion Elon is making, which is they misled me into giving them$30 million for this thing which was never going to be a charity, and therefore I gave my money back, I think that's wrong. But to your point, you've still got to prove it to a jury. Now, the other kind of thing is, remember, he has to prevail. so as long as there's one person on the jury who hates him more than he hates Sam he ain't gonna win it's going to be hard first of all it's going to be a very unattractive cast of characters an Oakland courtroom you get Sam to come in and say you know hey talk about how you said this is going to make everyone unemployed then you get Elon to come in they're going to hate the whole being on the stand thing which everyone's going to have to go on right I think the jury will get If they get into that room, they're going to go, wow, I don't like any of these people.

33:25Why should, you know, right? But the problem is this. For Elon to win, he has to get them to all vote for him. And a kind of hung jury is fine for the prevailing wisdom. Unless Elon prevails, he doesn't get it. So I think way down the line, two, three years from now, at the end of a long and bloody trial, the probability is he doesn't win the case. But Jason, you're right. He's already won the case. If what he wants to do is get kind of psychic revenge, this is going to be the best to it. This is like Peter Thiel's spend on Gawker. Sometimes a billionaire just wants to spend a couple of hundred million bucks in this case to grind the other guy and make him sorry.

33:59I think he wants every bad fact about Sam to come out. Every bad fact in this trial. We haven't even heard why the board fired him, right? If someone sequestered my diary for the last 10 years, and if you keep notes on days when you're feeling like shit, you know, you're like, oh, that's not great. That's the problem with litigation. That's the problem with convoluted structures. You end up in litigation. That's why keeping it simple was step one. And once you didn't keep it simple, trying to keep Evan in the tent. When you don't do that, you end up being sued by the richest person on the planet who's angry and mad at you.

34:33It's a tough place to be. If you're Sam, do you not go, hey, I'd rather have the dilution, not go through three years of distractions and actually get him off my case, bring the enemy inside. I don't have a stock anyway. So in other words, don't settle at five, settle at 100. to jay yeah and it was given i didn't have stock anyway this is true sort of i i think that was that was dishonest but you're right actually how are you writing the big question it's like if this is getting in the way of the next financing and it's been seen as a credible risk then would you be better off even if it's extortion to cough up which again is why again elon's in an asymmetric win-win situation and open ai is not the only way it doesn't matter is if every, and I don't know, if every investor looks at this and says, I'm not worried about the risk, in the end, Elon will lose.

35:21So therefore, we can ignore it. And - Well, isn't that what they said? They said our exposure is capped at Elon's donation of 30 some odd million. That was the public announcement, right? Or pseudo public leaked. And that's why his aggressive claim is on the facts very contestable. I mean, it's a real reach. The claim is a reach to say it's not just my 30 million back. Basically, what Elon is saying is, It was a for-profit all along. You guys just didn't tell me. And if it's a for-profit all along, and I put in, if I was the 30 million seed in what was a for-profit company, then I want what a 30 million seed would get.

35:54It's a stretchy claim. You're right, Jason. And OpenAI are going to say there's simply no way, from a point of law perspective, we're going to concede that. And even if we lose a jury trial, we'll go in on appeal. And they're just going to say they're going to litigate it the whole way down. But you're right. That's fine. And this actually ties, funnily enough, to the ads come and everything else. The key question that I don't know is how will the investors look at it? If you're writing a check right now, do you think, if I'm paying$600 billion pre or$800 billion pre, do I need to say it could be a trillion?

36:27Because it could be 20 % dilution. I don't know. You said last week there was no existential risk to OpenAI. I said there might be some structural economic risk. But this isn't existential to Harry's point. In the end, you can fold and give the man what he wants. if you can't right if it's hard i don't think it'll this will make it any harder for them to raise capital because greed trump's fear but if it did it could create some risk right if it made it harder to raise capital i think you have to fold because the winner in this case i know i know it's ridiculous to say but the winner in this case and the guy laughing with popcorn is dario yes going great but you can't fold i don't think he'll let them fold i could be wrong but there's no chance that there wasn't some lawyer discussion talking about what would it take to resolve this right in a quiet room off the you know there's just no way that open open air is a fiduciary obligation to find out what it would take to settle it right arguably they have to so i mean has no didn't want to take it he just he wants his day in court that's why you have to settle if you're sam because the worst you can't settle he doesn't want to settle no i mean to be fair you don't have to i mean because i as i think about as an investor what would you say you'd say here, let's just say this is around at 700 million pre, there is a probability of an additional 15 % dilution, but it's not 100%, maybe it's only 10%.

37:45So really risk adjusted, you add a 1.5%. So you don't assume, you're assigning a probability to a capped large and uncertain event, which is there is some chance that I take 15 % or 20 % extra dilution, but it's not 100%. So it doesn't drag the financing down to zero. It merely means there's an asterisk risk on it. And to be fair, anyone who's financed OpenAI today, if you look, the funny thing about OpenAI is it has, even though this looks very risky, OpenAI from a structure perspective, it's less risky now than it's ever been. If you look at all the rest, the first money went in, it was, hey, it's for profit, not for profit.

38:25And then you had that disclosure, hey, we're never going to make money, so what can you do? And then in the last year, they've been able to convert to a for-profit company. So a huge step took place last October, November of 2025, when OpenAI, the real danger would have been if they hadn't been able to convert to the for-profit company, because at that point, the whole thing was at risk. When they got that done, they took a big step function decrement down in risk. So even though this feels very risky, it is less risky than the risk under which they were able to raise$200 billion plus or minus.

38:59So it'll be fine. It's just a risk. It's going to be a monster's pain. And it's going to be popcorn time for everyone else. I think you're being way too nice. Like at a time for open AI, where you have Gemini killing you on consumer, Anthropic killing you on enterprise. But you're just lumping everything in together. Because you have to. Yeah, but I mean, look, the litigation. I can't isolate things. But actually, funnily enough, you have to. in the sense of whenever you have that kind of litigation, I've been to companies occasionally have it. What you have to do is to say, the really dangerous thing about litigation is if it kind of subsumes the whole company.

39:37Because the thing about litigation, it gets your blood up and you start trying to win and you just get emotionally vested in it. If they're smart, they'll have a great GC who says, other than depositions, none of you talk about this ever again. We will deal with it. And our$100 million worth of lawyers, right? Because you can't let that get in the way. So let's assume you do that. Now you're still running a wildly successful business with a whole bunch of competition. And you're right. You've got to deal with Gemini. You've got to do Entropic. You've got to get ads out the door. You've got to start having a convergence plan on profitability, which is, I think, why the ads are coming out.

40:08Yeah, you've still got lots to do. With the exception of the litigation from the world's richest man, nothing's changed from two weeks ago. Is ads coming at just the wrong time? Is Gemini's killing a young consumer and producing better and better models, and Google are really feeling tailwinds, to come out with something that does deprecate the product, even in a small way? Is it coming at just the wrong time? But I think you do. I mean, I think it actually speaks to something. Why do you introduce ads? There's three big ads. The two biggest ad businesses was Google and Facebook. And both of them agonized for about a year before introducing ads.

40:43Google in 2002, 2001, 2002-ish, and Facebook in 05, 06. And then everyone goes to the following logic. There's no other way to monetize. There's simply no other way to monetize. the cost to serve a free chat GPT customer is higher than either Facebook or Google. And the conversion rate to paid, because Facebook and Google, so what are you going to do for a business model? Facebook and Google didn't have a paid tier. So one argument could have been a certain percentage of the free people will just convert to paid, and that will be enough to make the business work. But the truth is consumer conversion tends to run well under 5, Yeah, 10%, probably 5 % or less.

41:25You just don't get enough conversions to serve the free tier. You've got no choice. Once you recognize you've got no choice in the end, Facebook hated ads, Google hated ads. You can hate ads till you're blue in the face, but America wants free shit. And the only way consumers get free stuff is if you want ads. So there's no choice. So I think it's kind of a, it's inevitable. So rip the bandage off, especially if capital is going to get more expensive. You just got to go do it. I think the ads will be great. Yeah. I genuinely think they'll add value to ChatGBT because I don't have the numbers on it.

41:57I know for myself, I do my vendor discovery using LLMs. I do my vendor discovery on Claude and a little bit on Google. When I want to find a new tool or a new product, that's where I start. I start with LLMs, especially if I'm the free product. If I get my rich response of which OAuth product to use in Founderscape, And at the end, there's a little ad from WorkOS and I choose to click on WorkOS instead of the one I chose. And that was a great option, too. That's a win-win. Agreed. And I think I actually think they're going to I don't. So one, I think it's a win-win for free people. Two, I suspect in the beginning, unlike the we wanted to blow our minds out with Google because it was 11 ,000 pages of blue links before the one natural thing.

42:39And then like it's just it's so polluted with ads. We can't even figure out what's an ad. If the ratio is, say, 10 to 1, like a lengthy analysis of what's best for you and a little ad in a different color, I think it's a win-win for everybody. It makes the product more profitable, better margins, and we get some value. Advertising is not valueless to consumers when it's perfectly executed. It's not valueless. I think that's a great point, Jason. I really do. And there was a period of time, Jason, to your point, when the Google ads were awesome. You know, early on when there was only a few paid links, you remember on the side.

43:11It was like, okay, that was exactly right. That was marginally additive, right? Now, obviously, they've swamped it, and you can barely find out what's going on. And all these things tend to that wonderful word, end shitification at scale. But you're right. This could be the period where one or two ads at the bottom of that are additive in terms of information, especially when you auction. The beauty about the auction process for the ad placement is that because they run this kind of, because Google has run, Facebook runs these very efficient auctions, you actually end up selling the ad to the person who values that real estate the most, which usually is someone who's got something very precise to sell you.

43:49So to your example, Jason, you're exactly right. If you write this long query on some kind of OAuth, at least the ad you're going to see is someone who says it's worth spending 20 bucks to get in front of Jason and say, dude, you should buy my OAuth instead of that one. There's net information added here, right? Which won't be true when they have 40 of them, but that's 10 years from now. Plus, I think we're, we're forget, we're underestimating how much better LLMs are for discovery of what to buy. I mean, I find Google unusable for discovery, unusable today. It is all random. I can't, it's great to see vendors.

44:23I can't figure out which product to use or buy. Google's useless. Amazon is frankly more valuable, but it only works for the goods Amazon is selling. It's still exhausting, right? and llms are going to are a gift if you use properly for discovery i think we tried to listen instagram's full of ads tiktok's full of ads but it's pretty mediocre for discovery it's just well targeted this is brilliant i think and um bring it on bring it on do you think it will be an unbelievable massively significant needle mover in terms of revenue very quickly i think listen first of all there's a lot of products we've talked about like open Gemini's web browser, we've never discussed again.

45:02We may never discuss even Claude Cowork again. I don't know. They try stuff, okay? I think we are way under discussing the power of discovery in LLMs. I think this is the way we will buy everything in the future as we are embedded in LLMs. I don't know why I would use anything else other than the best of ChatGBT or Claude or Gemini to find a product to buy. Why would I use anything else? It's so powerful. And so the ads will be great. And you think in a quarter this will be a billion-dollar-plus revenue business? I'm not, I haven't run the math. You'd have to give me a moment to run the math, but it's why, why can't a billion dollars go to it?

45:35If there's any ROI, it only has to be like 1 % of ad spend going to TikTok and Instagram to move over there. Like marketers will just have to try it. Like the first billion may not be impressive because you got to try it. You've got to try it. Agreed. And a couple of comments on that. There's just a ton in this. So first of all, yeah, it's hard not to imagine it's a billion dollars very quickly. And Jason's right. Remember, It's only 5%. They're doing around$20 billion in revenue. It's only 5%. It won't be a needle mover. I mean, what are the differences between this? When Google and Facebook added ads, each of them at the appropriate time for them, 2002-ish and 2005-ish, they had significant but manageable cost structures, no other revenue source, and very quickly they became profitable, right?

46:19Profitable in the CapEx. Even$1 billion is a drop in the bucket compared to the spend here. So it better do a billion dollars pretty damn quick. Because if it doesn't do a billion dollars pretty damn quick, it's not going to do$20 billion, you know, reasonably quickly. My gut is it is because they're just going to find a way to make it work. And I think Jason's right. It is prime real estate. And it's worth pointing out on that, Jason's comment is that, you know, we've all been in this, you know, everyone kind of went through that Google is doomed a year ago. And then Google executed company and a bunch of things.

46:50And now we've all gone to, oh, Google's amazing. and Koto was so stupid for leaving Google out of their amazing AI companies. And I think they are amazing in terms of their AI. But Jason's comment is really significant. He doesn't go to Google anymore for search. And that's the mother load. So the - For discovery, for what to buy. For discovery. You're exactly right. For discovery. For search, I do not for discovery. Search real estate, right? So even though Google's doing amazing, it is worth pointing out that their cash cow, which kicks off$240 billion a year of revenue, which is the ads business, isn't the best product on the market anymore.

47:22And some of those dollars will go to OpenAI because it's better real estate. It's not all one-dimensionally good for Google today, just like it wasn't all one-dimensionally bad for Google 12 months ago, right? They've done an amazing job of getting relevant in all the spaces and winning some of the product wars, but they're still faced a core problem, which is search is not the best place for discovery anymore, like Jason said. Just for fun, I asked Gemini so that we're not biased in here. For OpenAI to do$25 billion in search revenue, which is really Rory's point, like to open the floodgates at a$50 CPM, which I think is possible because it's about discovery.

47:55They just need 0.22 ads per prompt. They don't need 11 million blue links where you can't find it. 0.22 ads paid per prompt to do 25 billion at their scale. Does that sound implausible? Every one in five chat GPT's interactions has to be a discovery ad monetized. No, it does not sound implausible. At a$50 CPM, so it has to work. This can't be garbage ads. I think it's very plausible. and going to, we may be upside surprised. This may turn into Facebook or Google back in the day. Like within a year, our jaws might drop. This clip will be used, I think, in three years' time when they are at$100 billion in revenue and you'll look back and go, wow, we underestimated the size.

48:35No, I'd push back and say, I don't underestimate it, right? I actually think that this is the money. Facebook isn't about intent because it's about consumer knowledge, right? But Google was about intent. Amazon ads, which has exploded from, you know, we don't talk about it because it's buried in the bigger business, but all the gross margin now comes from ads. The retail business is just an excuse to sell ads that makes all the margin, right, on the retail side, to be clear, not the cloud side. And that's exploded. I can't remember the numbers, and I should have it. You know, tens of billions of dollars.

49:06It's sub 100, but tens of billions of dollars because they have intent. And you're right, Jason. At least one time, I mean, I'm just looking at my search. I'm not my chat history. At least one time in five, I'm going, I bought a TV. I hate buying a TV. I just did chat GPT, five or six queries. What's the best TV? Why is it the best TV? How should I paint it on the wall? How big should it be? Here's my room size. I got a name. I remember the name. I went into Best Buy and I said, do you have this thing? And they said, yes. And I bought it. If they'd given me a click, I'd have probably said, can you deliver it?

49:36And I'd have paid the extra money. It's prime real estate because it is the best way to interact for complex purchases. And it's not because it's inventing anything. It's just synthesizing the shitty internet into the actual answer. Now, sometimes the answer is wrong, which is a little bit terrifying. But most, it was right on the TV. I think this is a great business for them. And I think you're right. They're going to go at it. Jason's excited. By the way, Jason, I got to give you a little push here. It is why the deals that you hate, you know, Harry and I kind of like this market. He's got to play in it with Peak.

50:05I don't because last time one of the deals were profound, all my sadness. But answer engine optimization is going to be a vitally important business. All those companies are going to matter. I agree with you that someone is going to build a massive business making, connecting these ads to the LMs. I'm not convinced it's from the snake oil that I have seen in the geo products that I've used today. I believe there's snake oil. They're telling you, they're telling you to do very basic things that, that, that maybe work. I tell you what we should do. Let's all, this is, and this is risky. Let's all put a bunch of money into Apple oven and the trade desk right now.

50:40That's what we should do. I don't know whether they will. listen i'm not a total ad tech i don't know if they will be fully open to open ai but if they are if they are open for ads if you can run your ads across these platforms especially the trade desk maybe you make a lot of money i got it you're talking about the trade just beaten down i i i don't know if i buy that just to be clear because i think just do your thing you're saying they have access to open ai so they're able to do effective routine across open and if they're allowed to i need to i need to think about it for the next week but that's a bet you might be able to like who if you step back and maybe I'm wrong, maybe you're always right.

51:12Who can, if the, if the open AI platform ends up being somewhat open for ads, okay. And it does 25 billion or a hundred billion, who could we bet on today that ideally is public because we're all traders where we make money on it because they're beaten down by the start of the show, by, by the SAS, the SAS of 2026. The bet just vanished and Adobe did something smart. Cause so zooming out, hang on. There's two ways to make money when you're selling software to people doing ads, right? And it's the same as Google. There is helping them show up in the free part, which is about optimizing how you appear, which is what the AEO guys do.

51:48And then there's helping buy the paid part, which is what app loving and trade does do. And I'm going to say something. I don't think you'll need app loving to help buy ads on ChatGPT, just as you don't need app loving for Google or Facebook. You need app loving and all that for everything else, mainly. Maybe not app loving, but Trade Desk in particular. ChatGPT, OpenAI will make it very easy to buy ads on OpenAI because everyone knows exactly how that's done. You have this auction process and you auction against Jason's intent. And if Jason is online talking about OAuth, you run an auction process, a real-time auction process, and whoever wants OAuth the most is going to advertise against you.

52:27So I think for the paid ads, all the value that's going to be captured is going to be captured by OpenAI, and there's not going to be an optimization engine. And then you have the free content. In other words, how do you make sure that the LLMs say nice things about you? And I think that is an interesting business. And as I say, I think in the US, the Profounds, the Aerobs, the Evertunes, all those guys are super interesting. Harry's got peak in Europe. But to your point on the trade, we missed the great trade because Adobe took it up. SEMrush, which is the king of search engine optimization for Google, got acquired recently by Adobe.

53:04And I think that acquisition only makes sense if their plan is as quickly as is humanly possible to introduce an answer engine optimization product because they bought that thing for four times. That's why they bought it. And that's why if it's not what they bought it, that's why they bought it. And I will admit when I was looking at this - Why is that a better decision than genuinely buying a Peek with a much smaller, more concentrated team that's much more focused and better for a new AI world that you could buy it 50 years ago? Why would Adobe buy SEM rush over peak? I can tell you why. Yeah.

53:35Why? Well, I've worked. It's a long time ago, but I worked there because listen, when you have a conservative company like Adobe getting, getting 15 or 20 million, whatever SEM rush they had, they said of geo revenue at a four X revenue overall is the kind of a creative deal that makes people comfortable. They could buy a peak for 20, 50 million or 40 million or 80 million, but I don't know if that returns your fund, Harry. They're not going to spend that kind of like Adobe's done very few deals. where they're spending billions of dollars on something with a token amount of revenue for technology in the future.

54:06It's just not the DNA, right? Other folks might do it. It's just not going to be Adobe. I'm just saying Sam Rauch is not best positioned to win GEO. Best position is an interesting word. I agree with Jason. This is an odd comment, an odd in that you have two guests on your show, Harry, both of whom have sold something to Adobe. Jason, as a CEO, I mean, because I was on the board of Omniture back in the day, which was the first cloud company that Adobe ever bought. They were all about on-desktop graphic tools, and they didn't even have a marketing cloud, and they effectively bought Omniture as that.

54:36And I think when people were like, why are they doing it? I thought at a very zoom-out level, when you want to make a big move, like as a big company, if you buy something small, you'll just smother it. You'll stomp on it, right? You want to buy something with enough critical mass and heft that it can go do its thing and not get swallowed by the machine. If I was Adobe buying SEMrush, provided SEMrush had some story around what they're doing in AEO is more likely to be successful than buying Harry's little startup company and hoping that somehow it gets rolled out in the system. Because Jason knows so much better than me.

55:09If you don't have the customers already, it'll just get lost in the big company. Yeah, it's great. They just walk it around to their CMOs, Adobe does, and say, we bought SEMrush. It's now been rebranded Adobe Marketing GEO SEM Cloud. We know this is one of your top issues. They drop by. We have a solution. It's$20 ,000 a month and it just works and it delivers a report every day that is then forwarded to their team. That is insanely valuable for 99 % of the world versus buying some crazy Lemkin guy startup that could blow up on you. Like there's just, it's just not, it's so much risk for a non-founder led company.

55:45Toby could buy a company like that. You need somebody like Toby or maybe even, I mean, Asatcha or something like that that can take some crazy bets, but most, most companies don't want to take that bet. Jason, I'm waiting for the day when Rory goes, you know, I remember being on the board of the East India Company. Well, there's a lot of learnings. We need to study it more. It isn't even that long ago. It's not the pen space, but it's pretty good, this East India Company. Okay, this East India Company. They had a great 50, 100-year run, dude. They did. They really built a monopoly. You're right.

56:15There's a couple of big rounds that went down that I do want to hear your thoughts on. There's ClickHouse at$15 billion. There's Ratplit raising at$9 billion. And there's Cerebris raising at$22 billion. Which one do we want to focus on? I wish I was a total ClickHouse expert, but I tell you what is kind of interesting about it. It's an extreme example of how do folks take advantage of AI tailwinds. ClickHouse is basically an in-house open source product built at Yandex, which is now Nibius, built in Russia, just like everyone has an open source product that has gotten scale, LinkedIn and others.

56:49and it's a very clever way to mine massive amounts of data and make conclusions from it. And they built their own for their own. I mean, Yandex was, you know, whatever the Yahoo or Google of Russia, they built their own and it sort of works. And then timing's perfect. They spin this thing out in 2021, right? They take an open source product. They turn it into essentially a proprietary cloud product and then boom, AI blows up and folks are already using it. Tesla already figures out this works because they're early in AI. Everyone's already figured out this is best of breed, but they nail the conversion from free open source to closed source hosting and then fast order today, Anthropic, and everybody needs it.

57:28But this is not a product that was born at the start of this year. I'm not a total expert, but man, just go find your click house. I mean, it's easier said than done, but this is not a brand new product. Replit's 10 years old too. These are old products that found their AI tailwinds and blew up. I think it was only doing 50 million a year ago, right? Clickhouse or something like that or less. Jason, when you're doing Clickhouse at 15, it does feel pretty expansive when you compare it to a Snowflake or even a Databricks. What are you underwriting it to? I don't know, but I guess Databricks is your comp, right?

57:59Which is, I guess, is a large assumption that it's even better because everyone, everyone in AI is going to use Clickhouse. You're assuming one way or another, you're going to get like a hundred percent, almost a hundred percent market share. And some will be directly competitive with the Databricks or even Elastic, where I think the CO was in others. Others will be quite complimentary. It's not. But you're just assuming, I think the bet is, I don't know, I didn't see the deal at$15 billion. Maybe Rory did. I think you're just assuming everyone uses it, which maybe is a rational bet. Once in a while, these products come into market where just every single person uses the product.

58:30And open source, it's actually common. It's just hard as heck to monetize it the way ClickHouse does. That's the clever part, right? Is that, and I'm not even an open source expert, but it's brutal if everyone just goes around and hosts it yourself and builds their own version and florked it, right? They nailed this, they nailed it. I agree. Whenever you pay up for these high growth companies, I can use three different words to say the same thing. You're effectively saying in math terms, you're saying the most recent growth rate is going to continue for a long time. Duh, right? Because you're paying an absurd revenue multiple, but it's not an absurd revenue multiple if the growth rate continues for two or three years.

59:03So you're basically underwriting growth persistence. So next level down from that, what does that mean? What you're basically saying is this is a category, they're the winner, and it's a big enough category to keep going for two or three more years, at least at this growth rate, and then deaccelerate slowly. Yeah, two to three years at three to four X growth at 350, it pencils out, right? And again, you know, we have examples of this absolutely happening. If you look at the anthropics of this world, then we have examples in SaaS of people, you know, where you want to write a growth rate and then suddenly that growth rate deteriorates and you're high and dry.

59:32It's just that simple. There's no one to imagine this. What I always say to, as you say to our investors, and I probably said this on the show before, is that first of all, you have technical and founder risk. Then you have business go-to-market execution risk, which is typically where we invest. And then at the end, you have valuation risk, right? And valuation risk expands to fill the gap. Once the other risks are taken out of the deal, you're left with valuation risk, which is all about growth persistence and market size. And the good thing for ClickHouse is it is a category, right? Because step one, what you don't want to do is find you the third best random database.

1:00:00But if you look at one level deeper, what they do OLAP, which is, and this category has existed in prior generations to right back to the East India company, Harry, right? In every database, like way back in the 2000s, when Oracle is the relational database king, then there's kind of some of these obscure AI type databases, even back then, that would be equivalent to say Databricks today, which is obviously a bigger category. But then you have these analytical processing databases like Teradata. And think about that, like it's not about writing transactions to a database. It's all about you have a million and now maybe a billion or 10 billion data elements there.

1:00:34And you want to quickly scan down a column and add them all up. How many clicks? How many people traversed your website? Large amounts of typically read-only data. And if you use a standard Snowflake database, it's fairly inefficient because that's written to be able to write transactions where you write in a transaction. Like here's my typically, you know, a debit or a credit. So Snowflake's optimized for that. And columnist databases like ClickHouse are optimized for analytics processing. It's a different category of database. And data warehouses back in the 90s and 2000s, same thing. You have your production database where you run your system, your banking system, your ERP, your PIC, whatever it is.

1:01:13And then you have this analytical place where you put off all the transactions. Because some analyst is going to wake up and say, I have a really obscure question. How many people bought this product in this district two days after they did this online on the website? I need to know how many people did that because I want to do attribution, some weird corner case like that. In AI, the number of those queries has gone to infinity because if you have that information in AI, you can use it to predict things. Jason's exactly right. You have this optimized special tool for a very clear use case that's different enough from Snowflake and from Databricks that you have the separate category.

1:01:48It's become important because AI eats that shit up. So you have this explosive growth. So then the only question is, can the OLAP market support a 30,$40 billion outcome? You know, you squint and you look at Snowflake at 80 for transactional database, you look at Databricks, 100, 110, maybe it can. I mean, it's typically, if you look back in the prior generation, the data warehouse category was smaller, significantly smaller than the relational database, than the transaction processing part of the marketplace. Because concrete example, you're running your airline reservation system. That's a transaction processing system.

1:02:26That can't go down for a single minute because you lose billions of dollars. The analysis at the back of that, American Airlines wants to run an analysis of how many premium customers flew last week on thing. That could be a little less performant and therefore not as big a market. So these markets have existed before. It's typically not a multiple of the snowflake type marketplace, but a, what's the word for below one? A fraction of it, but a pretty appreciable fraction. So if Databricks and Snowflake are worth 100 to 200, maybe you get a 30 to$40 billion outcome here. And that's the bet. Sorry, long-winded answer, but it's a category.

1:03:00They're the leader. Demand has gone up because of AI. You squint one way and you say two or three more years of growth, you feel like a hero. If it turns out to be a smaller market than you think, then you're high and dry. Welcome to late stage investing. Would you rather be in Databricks at 130 or Clickhouse at 15? Basically, what you're saying is, is the OLAP category more or less than 10 % of the core? Well, Databricks isn't really relational. It's much more about AI-enabled data manipulation. When you look at it like that, you say it's not crazy that the subcategory is more than 10%. It might be 20 or 30.

1:03:34So yeah, if they were both public, you could have a fun kind of macro trade of short one, go along the other, but that's not the way the world is now. Final one. Let's do a quick fire and just cram a couple in one. Oh, God. Oh, it'll be fine, Rory. Don't worry. Sequoia are going big into Anthropic. They're also in OpenAI. Are we seeing the end of competitive investing? No one gives a fuck about competitive investing anymore in 2026. Well, didn't we talk about this last week when I said Andreessen should target 50 % market share, not 10 % to Rory's insight? I said they can get past the competitive issues.

1:04:09But yes. Sequoia's passed it. Different partners, different funds. I don't buy any of that. But I think the truth is, when you're piling in a 350 billion pre, you're not on the board. You don't have meaningful information rights. It doesn't matter. Again, going back to the first principles, this is really Fidelity mid-cap growth, well, actually, large cap growth now, but just in the private markets, which, again, I repeat, is absurd that we're in this place, but whatever. Given that, Fidelity growth is always going to buy, if they believe in a category, they can totally buy two or three different things with no conflict because they're not in the room when decisions are happening.

1:04:40And I think these late stage investments, if you're not in the room, it doesn't matter because you don't have meaningful information rights. You're not getting the board deck. You're not there for the strategic stuff. You couldn't do the Series A of OpenAI and do the Series A of Anthropic. That would be stupid. I would assume one of the CEOs would stop you. But getting at$350 billion pre where your billion dollars, it's just worth saying this, where your billion dollars gets you 0.3 % of the company, which is about what you'd hire a director for at Series B. No information rights, no nothing. It doesn't matter.

1:05:11You know nothing. You get one email, a quarter from each of the two companies. You know where they are. And as I say, you are just public market investor in private assets. Jason, I'm intrigued for your thoughts on this one. Rapplet,$9 billion. Lovable is$6.5 as a last vantage point. I think they're neck and neck in terms of revenue, really. I mean, so let's imagine they're at$300 million this year and when they did the round before they're at 100 or 100 something, you can justify the step up based on that. You can also challenge it using Rory's math. What I think people might not get, this product's like 50 times better than at the$2.5 billion round.

1:05:46It's not a little bit better. Like when we started doing the show, I was trying to use the V1 of Replit. I could not finish an application. It almost blew up on social media, you might remember, right? It was unfinishable and it just wasn't there. And one of the founders of a competitor called me up and said, none of us are there in the industry. None of us are there. over the holidays for fun i built an incredibly complicated game i've never built a game in my life i built a startup simulator that simulates everything from going through yc to ipoing to controlling all the global power and gpus and tokens in the world people love this game and what's interesting isn't that i built it it's that it works nothing worked at two billion two and a billion whatever the round was nothing worked and the joke was all over the internet everyone's got a project they 80 finished in lovable the replet everybody did they couldn't finish it and it was a joke because they thought they 80 % finished it, but there was no chance to go from 80 to 100.

1:06:38Literally, I built this thing over the holidays and I probably put 100 hours into it because it was over the holidays, right? This was not a one-shot deal, but it's magic. And so if the revenue growth justifies it and the product is literally more than an order of magnitude better, I would argue, I know this is the math that we're gonna look back of and make fun of ourselves, but I would argue this is a much less risky investment today, whatever it is, within reason, than it was at two and a half billion where I didn't even think this was a stable product. Like I thought it was cool, but it didn't work.

1:07:08And by the end of this year, man, it's gonna be even better, right? So we're just getting so much benefits of these improvements. Like we're, and everyone that's like, oh, you know, if you watch the Ben Affleck, Matt Damon one on Joe Rogan, pretty fun. And Ben's like, well, nothing's really improving anymore in LLMs. And maybe it isn't in Hollywood, although I doubt it. We've just started with agents and it's just so much better. So I think Replit's a hundred times, I know the math, venture math doesn't work this way, But if it's 100 or 1 ,000 times better product, it's probably worth two to three times more if the revenue is growing at outlier rates.

1:07:37Well, I mean, they'll be at 250 million an hour now. And then if you assume given their growth rates, they'll realistically be at 700 to 900 by the end of the year. Sounds like a better deal than a lot of other portfolio companies. If it hits the number, if it hits the number, it sounds like a pretty good deal, right? Yes. Implicit is a huge amount of belief in growth persistence. But yes, agreed. I too replicated over the holidays. I'm inspired by your example, honestly, right? And it was fun. And what I did find, though, is I used to use it when I was doing my Python lessons. They're very much driven now to a much higher level.

1:08:12It's all agent-based. It's basically, you don't even need to see the code, Mr. Designer. It's all about, you know, you're interacting with the chat. I'm actually trying to get down to the developer level and understand the code base. And it's like, it's almost hard to find and it almost resists. The interesting thing about it is you have to embrace a world of, you don't need to know the code, Mr. Rory. and once you do that just describe what you want it's a whole new scale is my it's almost like it's not almost different than because it's not programming at the programming level it's describing at the describing level and if you and if once you embrace that you get stuff done but it's really hard to go back to first principles and say how does it work yeah you can view but you're right you can view the code and some folks use it that way but it's it's basically abstracted away it's hidden right great and you can find it but it resists the more you do it the better you'll get at understanding how the agent thinks and works, right?

1:08:59And this may be like a dude when spreadsheets were invented saying, I like to add the numbers myself to know they're right. And maybe I just need to let go and say the spreadsheet's right and just stop worrying, don't be an idiot. But yes, it was super interesting and extraordinarily powerful once you use it. The final just comment, because you had it in the Sequoia doing Anthropic and Sequoia doing 11 Labs. I just was reflecting on this, obviously, given the changes they had, clearly the mission of the new management in charge is we're going to execute an AI. New management of Sequoia, you mean?

1:09:29Yeah. I mean, you know, they had a transition. I think part of the reason was - Oh yeah. Add Excel too. Just all in. Just do all the winners. My point is this. If I was a late stage company looking to raise capital right now with a very compelling AI story, it's clear there's an open to buy there too. We've talked about it before, but I think the thing that people haven't discussed enough is the promiscuity of traditional early stage firms across rounds. But I think, yeah, in general, you have these multi-stage firms and you make a multi-stage bet. And the whole point of the late stage is to clean up when your early stage misses.

1:09:56And they're doing that. I mean, I give them credit. Everyone's executing the mission that they said they'd do. Everything's staying private longer. Get into good deals. It's best to get them in at the A. But if you have access to infinite capital, getting in at the F is okay too. Or in the case of Databricks, DL, stuff the money in the good companies. I mean, it obviously, as a trend, it will only stop when it reaches success because that's the nature of economic behavior. But people going to do this until it doesn't work. I mean, Harry, you had the, you had Alex Rample from Andreessen the other day on the pod, right?

1:10:26And he made the point, listen, we, this is how you win at Andreessen. You do want to, I mean, it's, it's captain obvious, but it's still helpful. You either own a lot early or you invest whatever you can get into. If it's, if it's a guaranteed winner, it's like, it's that simple as the playbook. And so if today, if in today's world, you have LPs, especially if they're in SBVs or annex funds or something, if they'll give you billions and billions for access to these things you could argue whether you want to do that or whether you you don't like it but it's it's almost free money and remember this is where you're going to hate me for this and just going off on a tangent but fuck it at the end of the conversation you do this is where like the game has moved to like pre-seed and pre-ipo where it's like you know what the dummies game i think right now is playing the super competitive series a b's in venture where we're paying up super early for little signs of product market fit in intensely competitive markets, 100X ARR, I'd way rather have 15, 20 % of a pitch deck and two people or be piling into air wallets, as I did at 5 billion, and have a little bit of something that's really fucking working.

1:11:30But I disagree. I hear what you're saying. I mean... Risk adjusted. Why do you think that AB where you're getting 10, 12 % because you're not even getting 15 now in these competitive rounds? Firstly, anecdotally, you might be right. But in the end, over the long term, markets have to tend to rational equilibrium, which means as you take less risk, you get less return. There can't be bad stages. I've heard this for 30 years. Oh, X stage is really bad. Y stage is really good. It doesn't make sense, right? In the medium term, you have to assume that as you go down the risk curve, which is what stage is going down the risk curve, you slightly go down the return curve.

1:12:06There are interim anomalies at various points in time. You're exactly right. It's like, oh, you're anecdotally, oh, my God, serious Bs are really hard now, blah, blah, blah. But you're building a firm over an extended period of time. You've got to be cognizant of where the market is at any point in time. But saying it's very hard to say, I'm doing serious A's and B's. I'm getting 10 % to 20 % ownership. Oh, I'm going to wake up this morning. And that whole sector is, quote, bad. What does that mean? It's just a weird comment. It means risk adjusted. My dollars are better suited elsewhere. And if you believe that disequilibrium is going to persist longer than, you know.

1:12:39I'm not saying that, but I'm saying play the game on the field. And right now the field is showing you, to Alex Rampal and Jason's point, own a lot of something. If you say play the game on the field, but what happens if you're playing soccer and suddenly you start playing golf? I mean, it just gets a little weird at some point in time. It is a little weird to say, I'm not going to do ultra late. I mean, so yes, there's got to be some tacking and adjusting. But for example, if a late stage firm said, let's just say if someone was doing, take the other extreme. Someone's just doing ultra late. They're putting money in 10 companies at 0 to 50 billion pre, because there are 10 companies, not a 50 billion pre.

1:13:14And that's their thing. They're basically saying it's pre-IPO last round. And that's what we underwrite. And then they came to you as an LP and said, right now, those pre-IPO deals are priced wrongly. I'm going to do seed. You'd say to yourself, it's too far from what you're doing. You can't get there from here. They might come to you and say, hey, these late stage privates are not priced right. I'm actually going to do cheap publics. It kind of makes sense. It's adjacent. So you can duck around in the box, but you can't do violent switches. Not with most of your money. Do you really think that?

1:13:46I'm sorry. I think Thrive have proven that to be wildly wrong. I disagree on the two. I think Thrive have proven it to be wildly wrong. I think Thrive have executed that really well about, I think excellently. They probably 60, 70 % of their dollars at high late stage, but at the same time, excellent early stage. Yes, they've pulled that off. You're exactly right. Give them credit for that. I think some people, for example, in the AI boom have done really well by stuffing a bunch of money into Antropic, all the way up. And that's been a brilliant decision. Look, I do think where you're right is the new space that didn't exist before was this late and ultra late.

1:14:15And people have found a way to profitably fill that. And if you found a way to profitably fill that by hiring the right growth folks, that's been a good opportunity too. Because the zoom out comment is this. The public markets ceded another three to five years of growth to the private markets, which meant market expansion for venture and market contraction for small cap publics. Not the best decision in the world, but that's why everyone's allocation to private's gone up. And that's why LPs, to Jason's point, are giving money to these big mega firms to say, I can't get me that anthropic in the public markets.

1:14:45Go get me some. As I say, I'm not sure why the world has decided to give even more money on a two and 20 basis when it could be giving on a 50 bips basis, but that's the world we live in. Is Mark and Ben needed, okay? Why would you? Everyone has needs. Just simple, humble billionaires. All right, team. I love that. Rock and roll. Rock and roll. Okay. But before we leave you today, I run the 20 VC fund and I get this question from founders all the time. Oh, Harry, I can't find a good.com. Do you have a good hookup? Well, let me tell you now, the answer is always going to be no. I don't have a guy or a gal for that.

1:15:22I do have a recommendation though. If you're building a tech startup, get a.tech domain. Tech startup,.tech domain. It could not be more obvious. As an investor, I appreciate founders who put thought into their branding. When I see.tech in your name, it tells me right away that tech is at the core of your build. It'll say that to your customers, too. A clean and sharp domain like.tech pays off in the long run. You know, nothing.tech, 1x.tech, Aurora.tech, all of these great tech companies, they all use.tech as their domain. These are my two cents. If you're building a tech startup, don't overthink it.

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