20VC: Why Seed is for Suckers | a16z's $20BN Fund & Founders Fund's $4.6BN: What Makes Them So Good | Why Josh Kushner Is the Master of Venture Capital Strategy | Why Extended Private Markets Screw US Citizens with Jason Lemkin and Rory O'Driscoll

24:28They're focused on a much smaller number of much larger exits. Right? And that's the bad thing. They're not sharp. If you're going to make those kind of numbers work, you either have to do a lot. I mean, you have to get like vast numbers of billion to five billion dollar exits. Are you in? As I said, you're playing for the 10 billion or the 100 billion exit. The question is how many of those there are. Typically, anyone who raises one of these funds has proven they can already find at least one. By definition, they found Databricks. And they've done amazing well. They own a huge slug of that. It could, it's not just a fund return, or it's a multi -fund returner.

25:03No one gets given $10 billion or $20 billion because they're idiots. They got given $20 billion because they earned it by, you know, 10 or 15 years of track record, with no bad funds, by the way. That back to that kind of the comment you made on the part. you demonstrate, and then typically most things in finance when things goes wrong is when people lean into a trend just a bit too far. And the judgment here is, isn't this that point? And that's really what you ask again. I don't know. I mean, I think the biggest thing they have in their favor is the fact that so many companies are staying private for longer, which by definition means more need for capital, which by definition means if you have that capital, you should be able to make an acceptable return.

25:43So the venture market that I knew 20 years ago couldn't digest 20 billion dollars. It wouldn't even be close. There would be no possibility of return because you know, typically IPOs were 1 billion to maybe 5 billion and there was one bigger than that every year at most. You know, in a world where things are staying private for 15 plus years, where there's massive secondaries to deal with employee issues, it may well be that there's the place to put all that money. The returns might be 3X venture returns, but the competition is the small cap return of 11%. If you're delivering high mid -high teens, it may be that the LPs think that's great.

26:23And that's the bet they're taking. Jason, how did you analyze that? There's some LP on Twitter that made this tweet literally this last week that I'm a little slow. When Rory made the old 1 -10 -5 % less, this one opened my eyes too. It's like these funds seem crazy and they are crazy, but the size of the funds should be tied to the amount of winners you can deploy X amount of capital into. So if you're in Dresan, a beauty to an end Dresan at this point, certainly it's been true of Sequoia since we started is they see every deal. And Dresan sees every deal, okay? And so they can put this on a spreadsheet and they're like, you know, data bricks was 27 billion in 2021.

26:59What if we'd done the whole round? Forget about that they were in the A, right? What if they just put in three billion in 2021? They would have already two and a half extra money, right? when they put it on a spreadsheet and they add it up and they're like, yeah, we can deploy 20 billion in 24 months, right? I think that's the way it works. And I think it's that simple. And there's so much capital to Roy's point, especially in these later stage deals and AI deals, they can easily deploy the 20 on that spreadsheet if you see every deal. I do think there's a sensitivity analysis and the model supports it.

27:27That's what you want to adventure. When you raise too much for the fees or whatever, you run out of deals, most folks run out of great deals to see. If you see every S tier deal, like here would be my Andreessen math. If what if we see every S tier deal there is adventure? 100, we see 100 % of all the best deals. 100 % of that we've seen them all and we've passed on 90%. Then you could go back in time and just do an analysis, right? This is what we should have done when we passed on all the deck of horns because you're in every one and it maybe solves to 20 billion. I think it probably does. But that's what they should have done.

28:00I would hard push back that they see every deal Hard but but folks get fired my limit experiences Evan Dreson If you're not marker Ben you get fired if you didn't bring in every deal, don't you worry? Isn't I mean there's not the way ventures you get you get you You can stipulate they seem most right? I don't think I how he genuine comment of all the things that could go wrong with 20 billion other funds tragedy not seeing every deal is not a car three issue the two issues with deploying 20 billion dollars So first of all, yes, you see every good deal, but remember the X -Sense, you see every deal, which means you see every bad deal.

28:33And there are 99 shit deals for every one good deal. The more deal for you see, the more important picking is. Now relative picking is easier than absolute picking. In other words, if we are comparison sharpers at heart, most, sometimes in the abstract, when I look at the deal, I get kind of cut up, but it maybe it's good, maybe it's not. But most of the time, if I see a good deal and five bad deals, my little IQ can go, I think that one's better than the other five. I should do that one. So seeing all the deals is a huge advantage But you still have to piece piece through them. So that's kind of issue one You're gonna see every good deal if you're into our at -round every good deal But you also gonna see every bad deal.

29:08So picking still matters I think they can figure that out because they're wireless smart dudes I think the real question in the end comes is there just room in as Privates for all that money and if there is this will continue and if there's not then at some point And it won't stop because venture guys will be mature. It won't stop because the founders will kind of be more careful to cap. I won't even stop because the LPs will stop. It will stop because the LPs bosses, the overall CIOs, will stop allocating capital to venture. Until that happens, this game goes on. And by the way, if it happens the day after they close $20 billion, they win the best.

29:43Because they have $20 billion and no one else has any. So this whole little ecosystem in venture is going to keep going as long as there are enough new LPs to fund it and keep it fueled up. Almost clearly independent of the wider market. It's been stunning that the 2022 crash didn't cause much more than the pause to breath. It was just a pause for breath. It was crazy. When you look at OpenAI raising $30 billion and when you look at anthropocultibillion dollar fundraiser, I don't know if there's any question on whether this ecosystem can actually absorb it. I think the subsequent question is, is it fundamentally a venture game?

30:16I know, and we both know, many investors in some of the model providers who came in at 4 billion, it's now 60 billion, and they're three and a half acts up because employee stock dilution was so heavy and the funding rounds coming in were so heavy. The mold for the shit even with great returns. My observation on my own thinking is I'm sometimes too conservative so I push against myself. I think one of the big advantages some of these newer entrants had was that they weren't in the business a long time because when you've been in a long time, I remember 99 to 2002. I remember the crash after dot com and all the capital getting withdrawn.

30:53So it made me naturally cautious. And you write the idea of riding a check at four billion. You know, I did this instinctive. Well, that's not really venture. But the truth is this venture we're paid to make money. And some of those rounds have made decent money. Perhaps not as money as they thought because of the delusion. But I mean, if you look at one of the common characteristics of the folks who entered this market and have been successful has been newer entrance like injuries and like founders unencumbered by quote is adventure and who have just said to us, how do I make the most amount of money and hack the system and they've made a drive drive drive drive I think you're a great example bet no proof by the way and I'll tell you why five word because a real estate investor knows only one thing by the best downhouse on every block.

31:37So he bought the best downhouse on the CPET block strike tick. He bought the best Van Hauss on the open AI block tick and then he bought the best Van Hauss on the infrastructure block Databricks tick. Then you just go home when you're done and you wait for the checks to ball in. It's genius and you write every little fiber of my being would instead don't do that. That's not venture. But I'm not living in three houses in Miami. He wins. So I've learned to say to myself, don't just say it's not venture. Just saying is that the right strategy for this game? And it clearly is the right strategy for this market at this point in time.

32:11You know, Will it be the right strategy across the cycle when there's an equity downturn? Maybe not because the only risk you're taking is price risk, but that's typically a correlated risk. So if it does go wrong, maybe it's only a one -in -three chance, it will go wrong and everything, because your equity values will tumble. But, absent that, the right strategy was brilliant by the best property on every blog. It's like monopoly. You got all the little blue ones that don't people are going to land in it. You're going to make a lot of money. I'm profoundly jealous of that insight. If someone had given me $5 billion, I'd probably hope I didn't smart enough to do that myself.

32:46The criteria is not adventure or not venture. There's only one criteria. Is it going to make you money and is it going to make you money across the cycle? And the answer to the first part of that question looks like it's yes. And the answer to the second part of the question across the cycle is call me in a year, or ten years. Why struggle to pretend you can do eight acts over 20 years on a seed fund when you can just write one big check into a winner and call it a day and achieve liquidity in a quarter of the time. The multiple will be lower, but the absolute return will be higher. The carry will be higher.

33:15Why would you do the stupid seed investing? Wait 20 years so that everyone on Twitter can say you had an 8X or 10X fund, hooray. Split with four partners on your tiny little fund after 20 years making nothing. Just write the big fucking check and call it a day. It's so stupid. When outcomes are a billion seed is great. When outcomes are north of a 20 hundred billion, it's for seedless for suckers or eight seedless for suckers, I think. I love that. I just that by the way is about to be I'm going to steal that. I'm not even going to give you credit. I love it. I mean all joking aside, you're exactly right, Jason.

33:49We're saying the same thing, which is in this was a compellingly great way to make a lot of money, provided someone was willing to give you that kind of capital for that risk. And what I don't know is it's a part of something that's a really good risk. You should make sense to do it. And partly thinks it's a very risky strategy in terms of correlations. And if it goes wrong, it'll be how it's now what we do. So I don't spend a lot of time thinking about it. But right now, it looks pretty good. Can I just ask, what could go wrong when you say about that correlated risk? They feel relatively uncorrelated to it.

34:25They're uncorrelated in terms of individual financial performance are picking. And easy to do with picking. You've picked the best asset in three diverse markers. You right, they're not correlated that way. What is correlated is fundamentally equity values. We live in a world where high -goat tech companies get 30, 35 PEs. If hypothetically, a president were to destroy the economy, like in the 70s, just saying, and PEs went to 9 or 10 or 11, and even group stocks went to 12 or 13, like look what happened in the nifty 50 between 68 and 82. In a world where the growth stock premium goes away, If you start valuing all those assets of six or seven times reviews, which is still pretty healthy, you're just in a very different place So that's the only risk.

35:08You've bought the best assets The only risk is that the world decides that equity isn't work as much and in that case to be clear Astrology that would get a three X will get a one and a half X could you haven't taken a ton of valuation risk? If you're doing the kind of things we do as strategy that's entirely Predicated on buying marquee assets of high prices could get a point five or point seven X And so what you are there is like time sensitive because you don't want to have to liquidate in a time where you have that compression or multiple, which is why if you have 20 billion Kuching I can pay that price by the best house on the block And if I want to sell that house and there's a market crash Kaboom I can put an even more money at a reduced price and wait for the multiples to expand again Again, with the one in place of this you've bought me yes, but there's one implicit assumption in that which is that the company will continue to compound.

35:59And the problem here we're dealing with is expulse factor or vision. Like there are five or six technology companies worth a trillion dollars. So it's clearly doable. You can truly compound from 300 billion, which is where open AI is to date, which trillion because five other companies did. What you forget is most tech companies don't. And every time you hold for longer, think of it as a process of distillation. Your best ones get better and your worst ones go down. So provided you've got the right ones you can tough it out forever But be a bit of a bummer to discover you'd invested in Blackberry and it was still private and they just launched the iPhone And you decide screw it we can take these guys I'll put in another billion and you know and then you just march your thing down the hard truth is most tech companies in the end get acquired rolled up Unstakecephal so the longer you push the more premium there is on the Absolutely right under start picking and having a winner not a crazy bet I'm just saying it typically any financial bet has an embedded risk somewhere in it.

36:57There's no such thing as free money And when stuff looks like those free money It just typically means that the risk isn't fully recognized This has been a great business. It's all shallate stage. I mean you send a tweet Jason I saw it there about that. It looks like the easiest way to make money imaginable Which makes you go, hey, I wish I do that But then what's the buried risk? And here I don't want to discuss the company Okay, don't push you can push me anything except this one thing But I just have have a company that's just becoming unicorn a late stage fund just put in almost nine figures Okay, and they own as much as me.

37:28They're all listed. I'm lucky to be a part of the company But like like okay listen if the company's only sold for the basis they make nothing right but they're underwriting a 10 billion dollar outcome Right they for all intensive purposes will make just as much money as me right in fact they can support the company more They skip years of work and stress and it has to be a big outcome. But if it does, why would you do this seed stuff? Like it's the same ownership, skip all the years, right? And yeah, if it, you know, and you've got your what X worst case, you're a wonderful one X. But there is a, I'm going to argue against, I understand it because I go to the same, you know, angst and machinations, right?

38:06Good deals in my portfolio, but we've made good money and what later stage investors us haven't. And that's just a nation and number. But if it's really good money, you make the same. Yes, agree. If this is an outlier game, right? Who cares about those little $800 million dollar outcomes? Who cares? Can you talk about one way you've made money, others haven, and just what you learn. You don't have to name it, but just to put it in. It just, it just beats the higher the price you pay going in, the higher the price you have to be on the edge of the make money. It's just as simple as that. Because we put on both sides of that, we had to say recently, well, we got a 1x and the early investors got 3x right and it all comes back to this idea of a Congratid even the access to capital if you have access to capital that's large and forgiving which is what these mega funds have then you should play the big balls game because you're inside your right don't do it you have to do less work if it works great you make out the same as Jason who did the seed for soccer as a worry who did the a and if it doesn't work out you're gonna get it one x but you get forgiven and you start again if you have access to that that kind of money, that's the game you should play.

39:10Remind me, the reason you and I don't play a different game is I was wondering around in 2009 and no one offered me a billion dollars and said, hey, have a go and if it doesn't work, we're giving another billion in 2030. When you have a small of ground, you want to have a higher probability of the upside. And logically, even though you don't want to hear this, the higher you're going in price is just the less likely it is you are in that one deal that can transcend price and be there, not the billion dollar outcome but the 10 billion dollar outcome. You're just upping the bar on getting it just right.

39:41So that's the argument for it. Is that? If I build in and I can get 20 billion, I'd play, but Mark and Jason those two. I get that, Roy, but you have a pretty great track. You're proving yourself to be a phenomenal investor across cycles with respect. You could probably get a lot more now. Why do you not? I think actually we're all products of our experience. I think I'm a very conservative invest, someone could serve to invest. I think I am branded a little bit by remembering surviving 99 to 2010. I don't want to take a lot of money at the end of my career, manage it badly and then fail. I don't want to make that bet.

40:17Because I see what it looks like when it goes wrong. I remember what 99 to 2005 was like and it was miserable. And it's kind of you to say about my track record. I'd say it's solidly good rather than spectacularly amazing. I'm a solid, good investor. And I would say this, I am most proud of the fact that I made small amounts of money from 2000 to 2010, then I am about much larger returns than 2010 on. I've lived through a downturn and survived. When you know, 70 % of the people I knew in 1999, 2000 were out of the business four years later. So probably the way we went out business, the way you went out investing strategies, I always wanted to survive that downturn.

40:55And that probably be constrained you upside a little bit, but it increases the probability of not going horribly. I mean, I remember how horribly wrong things can go. I mean, the big momentum, the two biggest momentum players of the last decade, Tiger and Softband already out of the game, huge credit to someone like Insight who were putting out a lot of money, but managed to survive because of savvy. But the bigger the dollars you're playing with, the more risk there is, are just getting crunched at, you know, when the top, when the time goes out. What did insight do to survive more than Tiger?

41:29I think they had a much broader spot. They were doing deals at much earlier, lower prices. I mean them only because logically if you just ranked the dollars raised, they were third on the list. And you know, South meant gone, Tiger effectively gone. I think they were just better investors. I think they had a better job. Tell you, doing a few wizards is going to help, isn't it, Harry? Absolutely. That's my point. I mean, you can do the last round. I mean, yes and no Jason, if you actually looked to the returns. I mean, yes, 100 and amazing, but it was a 2 .6 billion dollar reported return to them in an eight and a half billion dollar fund, which is like that.

42:02Matt Stowe still is hard. Yeah, I mean, Teddy did one of the best investments of all time and it returns a third of the fund. A third of the fund. That would drive me nuts. I would probably quit Benchery if I did Wiz. And it was only a third of the fund. I would probably tell them to go talk to Harry and Rory. If you are pulling down the fees on an eight billion out of fun that don't think it quit. I'm very quick because the game wouldn't be fun enough. The game wouldn't be fun enough. But I do think the bigger you are, but genuine comment on that, the whole 2 .6 billion only returns up. The bigger you are, the more you're undertaking to be competent and find not just one of those, but multiple those.

42:39It's the same point over and over again. You've embarked on a strategy that only works if you have a really strong level of execution and you get in large significant numbers of the very best deals. And in all credit to when side looked like they've done that, and without paying over the odds, less credit to vision fund and tiger, they kind of went over the top of the curve and just kept going a little too long, like, you know, roadblock. You degrees of freedom. And you know, and recent will wrestle with the same thing. I think that widely savvy investors, but when you've got 20 billion, the impetus on being disciplined just, the degrees of freedom you have are tight.

43:16For the old school like emergence just raised a billion. Okay. They were one of my investors I didn't ask them but I think I know I think there's probably two reasons they raised a billion right one is because there's a new generation Right who's maybe less risk doesn't have those scars, but I think the second reason is because the checks are bigger Emergence just did like 50 billion or 60 million into like volt or something like that right back in the day That'd be a 15 million dollar check So what about funds like you having to have a fun size to play the game today? I agree because yeah, I know and respect those guys enormously and you know We've done roughly the same thing but probably for over five or six fund you've gone from 300 to 600 and 900 and then it's in the fund hasn't changed all that much because the average check size has gone out And let's talk about that for a second.

44:02I just checked it nominal GDP Growth in other words the value paper value of money. It's 3x from 99 in other words GDP in 99 was 10 trillion and it's 30 trillion today. So in that way, if your front size was 100 in 99, you've got to be 300 to day just to be the same thing. And you know, in particular in the last four or five years, nominal GDP growth in the COVID periods were huge. If you not up 50%, you're falling behind. Some element of fund expansion is almost inevitable because the check size has gone up. And if the check size has gone up appropriately, then on top of that, there's probably some extra increase in the check size that maybe isn't appropriate, it might not be the right word, but it's less driven by pure economics, the economics of just inflation and more driven by people are playing to win.

44:49And what you see in that is if you don't go, are we wrestle with this? If you don't grow the fund size, we were finding a deal that we were thought were the scale sweet spot, we just were irrelevant. You'd come into a deal with your little $20 million check and they'd laugh at you and you go up to 25 and you'd call an LP and they'd get five and then you'd be up the 30 million. And you've got to size the fund for the strategy because fund size is the strategy. And I think for the kind of A, B stage with those guys play, we pay it. You probably are riding $20 million initial checks. You're probably riding $30 million total checks, including reserves without even hogging for those late stage rounds.

45:26And you probably want more than 20 deals per fund because as we discussed half an hour ago, with product market fixed variance to replicate the same overall fund return and this is where I do the disagree with the podcast of a bench clock. I want to make sure I have enough deals in every fund that the fund has a good probably success. So you're closer to 25 deals per fund. You've at 7, 800 before you black. But this is why $50 million seed funds drive me nuts. Because actually when you take away fees you've got 40 of investible and when you think about the average seed round stay being three to five million dollars, if you want to lead it and take real ownership like they say they do.

46:02There's no way that you're getting at least even 20 companies. You're not. You're taking concentration. That's what I always do. I'm concentrating. I'm concentrating. I'm concentrating. Yeah, but I'm concentrating. I'm concentrating. I mean, Jason, this is nuts. Well, if you don't want to, if you want to play that game and you don't want to raise a massive fund, you've got to take concentration risk, right? Or pretend. Okay. So, so found as fundraise, $4 .6 billion, $1 .6 billion, over supply. I have so many alps, he's cool me, asking which funds I like, which reference well from the show, I've never had such institutional demand for any single fund asset that I have for Founders Fund.

46:39Every single LP wanted Founders Fund and wanted Founders Fund Gross, which is even more rare. Will we have more and more money go into the asset cross? Will we have more and more money concentrate into just the top players and it'll be shit for everyone else? How do we think about that? I'm trying to relate the facts to the question because it wasn't obvious how you got to the question from the facts Because the correct response to the facts you outlined about founders is they may be to a rounding error the best fun So no surprise to get the most amount. I mean yeah, it was great to see the link now They're astonishingly good.

47:14I mean, I don't like this conclusion But I've realized that my Bayesian prior on financial matters in Ventura should be checking in what Peter tealed us because he's been right on a lot of things They've played, they have a very clever high IQ strategy that they've made work and you can see it in What they've done and how they've done it we can come back to that in a second, right? So it's kind of like we're all playing this game and they're just playing it really really well and cleverly So they should get the most money you should just because you give the money to the smart guy doesn't mean from an L people Specter that you should do with the ten other people you could argue I mean that's why I said I couldn't connect the facts to the question you could argue that this is an idiot your synchroactically brilliant, perform track record, because it obviously leaked.

47:57And what you saw is exactly what they advertised, which is long holding periods, strong IRRs, though not amazingly stupidly stellar, but holding periods of 10, 15 years, like they bought SpaceX, I think in 0708. So they have compounding after cut. And it turns out if you compound at 30, 40 % gross, not for eight years, but for 15 years, because you don't give a damn about given the LPs money back early, you're just going to compound the thing to make money. Then you went up with an AIDR time act fund. They did exactly what they said they do, but two things at a, they held for long periods of time in highly differentiated companies.

48:33And the second thing they did was they were at one early point. They were absolutely willing to take on massive concentration in their winners. Again, arms by the one fact that you kind of become, they didn't have to give a damn about anyone being afraid of the rest because their perspective was if you don't like the worst taking money and go home, they were able to push. So you take those two facts and add to the fact that they're very good pickers. You've the best dealer, right? It's the best. It's a money making machine and they have to do the best. Brian Singerman said to me in a show once the enemy of great venture returns is capital concentration limits on a per fund basis.

49:08We have 30 % of a fund in certain assets. We know what great companies look like. Yes, and it is the end and is exactly right. But now again, to take both sides of that, it is the enemy of greatness and it is the protector of massive whitebots. And it just boils down to the personal choice of where in that dimension you want to be. I think for example, I mean, Brian, I've heard and speak once I thought very articulate, very clear strategy. They had that big wind. They had the stones to put 300 million in a biotech company. I can't remember them, but I should do. Stem centuries. Stem centuries.

49:41Exactly right. Got a 5X. Took money off the table. Word pointing out three years later, the acquire council to program. Huge amount of risk. Made it work, but never forget the risk was there. But those guys, they built a product that said, we're comfortable with the risk because we like risk. We are, and we think we're smart enough to underwrite risk. And they were. It's a very high IQ, high conviction strategy. And I think, and I'll be saying, I'll do founders fund because they got these returns. and 10 other funds, they'll be just like Founders Fund. That sentence doesn't make sense. They won't be just like Founders Funds, because they're not the same people with the same approach.

50:16You're right, but I have two LPs a week managing between 350 and 500 to come into our offices in London and say, Harry, you've got all the data from the shows. Walk me through how I should do this. I've got 100 million going to index Excel, Founders Funds Sequoia, 25 each. And now I've got, let's take the low end of the budget, 350. 150, 100 going to the best assets like you found as fun as we said there. Now I've got 250 left. Where do I put that? I smile, your budget for venture, how you need to spend that. As go to light speed, let's go to GC, let's go to red point, let's go to, it's an interesting point.

50:52You have to accept the fact that you probably are going to do deals. It's going to sound really obvious when I say it, but it might not. That will be as good as the best deal you do, but they still can pass your IRR threshold. At the end of the day, let's assume there's a force ranking and let's agree for arbitrary sex that we put founders, I don't know, I haven't seen a number so I can't comment on it, but based on observed data at scale, in other words, not including seed funds, but in terms of turning industrial quantity of money into 8 and 9 X's, let's put finally fund at the top. You pull what you can in there and then you got two choices, you can stop and go home, but the problem is, any money not allocated to that has to go in small cap public companies and gets 11%.

51:30Or you can decide on what you know you just have to pick a portfolio of folks and you know go down You know and hope that they all perform as well But you're just looking at you build a portfolio of companies whose strategy says not that they can replicate the best number But that they can comfortably outperform the public markets with a strategy that's repeatable and differentiable And many of the names that you just said had that can I ask one question about founders for not interrupt period before we go on Just because it starts competition What do you think about Rory and Harry? What do you think about the fact that Founders Fund doesn't do B2B intentionally?

52:03They make exceptions, but they don't believe in B2B. They don't believe the outcomes justify it. It's explicitly, they don't do it. I think I should mix the point, which is a lot of different ways to make money. It's the intellectual conviction of wanting singularity deals. It's wanting deals that are end of one where there's a high, typically a high technological component to winning. But then once you kind of have that done, you have low competition, you know, you get the prize. It's a totally realistic way of playing the game. The interesting thing is, there's not as many of those deals. This actually goes back to the point.

52:35Conversely, B2B, they are right, which is that very few companies in B2 have the same level of on -traumeled competitor free space, the something like SpaceX does. That's the negative on B2B, but the positive on B2B is there's been two to three hundred SaaS winners, and there's a lot of different ways to make money in B2B. So it's a different strategy. I mean, I'm sitting here going, would I prefer to have put 20 million bucks in SpaceX gone home and compounded to 360 million? Yeah, of course. That's one way to make money. But I'm pretty damn happy. But the way we choose to make money in a whole bunch of B2B software companies, each one of which doesn't have the same investment multiple as you might get on a SpaceX 10 year turn.

53:13But nonetheless provides a very extractive adjusted risk return profile. For the way that I want to admire them, for the way they look at the world, they basically said, we are smart enough to look at a whole series of holy different markets and have the whole IQ to recognize greatness in biotech space, etc. That's all and we can do that. We can see those deals and we can pick them. Whereas, conversely, you know, by focusing on bit -to -bit, little ol' us, we're saying we're just going to focus in this space. We're going to try and see all the deals. But competitive said in each one won't be as compelling in terms of white space as doing rockets.

53:48But there's going to be a lot of winners We can pick by market. We can have a nuanced way of picking the winners and make it work. It's a gift to gage. Good luck to them. They're amazing. I would also just say to companies that they are most excited by our Riplin and round. That's true. Well, I don't think Harry, my limited because I talked with, you know, Sam Blan was, was a pounders one for a while, right? A good friend. They told them they don't do be to be investing. Then that viewed ramp as a fintech. That's how they think. They'll listen. I just thought it was, you can, you can do it, but I'm saying from the inside, This is not a criticism.

54:18I found it eye opening and Ripley's good, but they did that deal with Sam. It's only so large and it's the saying it's it's it's it's minor, right? I think even if those if one's a FinTech and one's an exception It doesn't mean the point isn't true that that they don't generally do be to be it doesn't work for their model, right? You like I think kind of the refined verse from that statement is look We're not going to industry focus and do 50 B2B software companies like you're doing worry or you're doing Jason and we don't believe that's the way the greatest. We're gonna do everything. And if some percentage of them three, five, 10s, it turn out to be B2B, that's fine.

54:51But we didn't back into it with a somatic market focused. We backed into it saying, I only wanna do greatness, amazing greatness. If I wanted to be the big guy who has amazing greatness, I'll do it if I don't owe out. But you think the fact it's like a 50 % capital commit and run by rich people informs that too? I certainly hope so. Because I have a pretty large capital equipment myself, but it's like if I had that much, I wouldn't want to be going for triples either. I'd be wanting to hold for 20 years because I'm plenty rich and I'm certainly not in it for the fees if I have if my capital come in like exceeds anything in the fund No, I mean it's exactly what they should be doing.

55:27I'm as I say I think it's an what I admire most about it is is that the practical steps They taking are in sync with a stated strategy Which is ambitious hard to do and nonetheless to be able to do it go team Will we have more or less LP money going into venture in the next three to five years? There's a lot of macro uncertainty. We have endowment funds facing large fines, more uncertainty there. We've got the denominator effect impacting their public books, but then Venturer is powered by AI again, and now's the best time ever. Will there be more money going in or less over the next three to five years?

56:06My gut would say at some point you'll see less. It was down to this private for long rich rent is like the thing is there's an up to amount of money relative to the opportunity set. The tricky thing is this does an up to amount of money relative to the opportunity set. The opportunity set has massively expanded because of this whole state private for longer which consume vast amounts of capital in the labor stage. So it makes sense that the money money going in has also expanded. So you look at that and you can really make a modest, an optimistic scenario that says the capital has only expanded proportionate to the opportunity.

56:41But on the other hand, the cynic in me says, in financial markets, things tend to overshoot, especially when the indicators of success are lagging. And venture is the most lagging market. So what's probably in my view going to happen is LPs are going to steer on the trailing 10 year returns and overshoot on capital in. And then at some point those returns will go the other way. And then it'll take a while for the shooting drop. And then they'll start that we're drawing capital probably just at the point when they should be investing. So if I was to guess, sometimes in the next five years, you'll see a significant change in availability of capital.

57:15Like I'm in 2010, people saying literally, what I tell people is this, it would not be a great time to invest in venture until people spit at you when you mention the word. And in 2009, 10, they were like, literally get out of my office. None of you have done anything for me for 10 years, but last good fun you have was in 96, why the hell would I even do venture? And it turns out that was the time you should have done nothing to venture. So if that's true and it is, the inverse is probably true when it's obvious to do venture, whenever it wants to do venture, it's probably a tough time to do venture.

57:45When does that turn back hard to tell, but in two of you at some point, I think it will overshoot and then start to pivot back. And it'll be a better time to invest and a tougher time to raise. Rory, let me ask you this here, if you take a window of time and maybe elongate it to seven years, Okay. The amount of exits and IPOs and M &A, roughly speaking, all the exits should be how much venture comes in, right? New venture comes in roughly, right? Roughly. So, I mean, I think LPs are pretty, I mean, they get scared and smart, but if those exits keep going, it should happen, right? But it's been a while for IPOs.

58:23It's been a hot minute for IPOs, right? Maybe the Windows seven years, I don't know how long it is. Yes. I mean, I think at some point, the money has to come back because in general my observation is people don't stop doing stupid shit because the intellectually figure out they stopped doing stupid shit. They generally stop doing stupid shit when there's no money to do stupid shit. And the answer is if the money doesn't come back, then eventually the money won't be given to us. And that's simplistic. There's a famous Ben Stein quote. If something in economics is something can't go on forever, it will stop.

58:53Famous quote from bit, but I think the Corollary is also true until idiocy has to stop, it will go on. So the real question is does a stripe, a data breaks, an open AI IPO, does the cavalry come back quickly enough to keep the money flowing at roughly the same level, which would be an indicator that probably the amount of money in the system was roughly about right. I mean, individual funds might do better or worse, but the system was about right. If on the other hand, if those keep pushing out, then at some point it becomes really hard to have all this money in private illiquid assets when you have pressures on your endowment and all that.

59:28And then at that point, you would see the money go down. So on that, you know, we've seen, you know, your cloner, which was gonna go out, push back. You've seen several others push back in the wake of Macaron, certain stuff, a stub hub, you've seen, you know, stripe, stripe don't want to go out for a long time, right? You know, if you know the Colorsons, they're like, why would I do that? I don't need, they said on a show recently, why do I need some analysts at a bank tell me about my margins, agreed, and it can step back from that. First of all, they're correct, and it's a massive public policy failure because what's happened here is this.

1:00:03It is more attractive for companies to stay private and access capital from GPs who are paid 2 and 20 plus to make those investments. Then it is for those same companies to go public and access capital from Fidelity grow fund where fidelity only gets paid 70 bits to make the same investment. If you think about it, we have defaulted to the higher priced capital alternatives, which is absurd. So you have to say to yourself, why has that happened? Because remember, one of the rules is the company doesn't care if it's public -applied. Stripe is going to be an amazing company. All other things been equal.

1:00:37Public are private. So the only thing that's changed is instead of being public and compounding nicely and as I say getting funded by low -cost public neutral funds, it's private and getting funded by high -cost venture funds. That's a weird outcome. Why is it, and you have to say to yourself, why does it happen? Why would you also say that it's not high -cost but venture funds in a lot of the latest rounds? These are very, very large pension funds. Actually, you're going with me not disagreeing. I didn't say high -cost to the investor. It's the other way around. It's not high -cost to the company.

1:01:08You're exactly right. That's one of the key points to the investor. If I was a pension fund in New York, 20 years ago, I gave my money to Fideli growth and I got Scrip at 70 bits. Now I have to give my money to thrive and get Scrip at 2 and 20. That's why I said it's a public policy failure. The ordinary investors of America are either not getting the good assets, or getting the good assets at massively higher fees. And if you believe, as we said a few minutes ago, that the performance of Scrip is not impacted by whether it's public or private, what it means is the return to the investors is instead of a safe stretch complining at 15%.

1:01:45If I owned it in fidelity growth, as an investor, I got a 50 % growth return 70 bits 14 .3 net IOR. If I owned the same asset in privately held ventricle, 15 % gross 10 % net after fees and carry. So my return as an investor, an ordinary saving American who's trying to put money aside for their future has been reduced massively because all these companies are staying private and it's got to be public. And that's a monstrously stupid outcome. So why is it happening? That's the question. And I think it's a combination of things. I think the public is a pain in the past, which is something you need to fix.

1:02:23And I think being private is cheap and easy money, which my god is if something would eventually be fixed. Those two things together have to change for it to be rational for late stage big private companies to want to go past. I was one of the most successful founders of all time in the other day and he said, literally there is no really significant reason for any great company to go public today. For the not so great but still very good, yes. But if you can raise endless money at great prices with private investors with no scrutiny, agree. And that's sentence is why it will eventually stop. It only stops, go back to the thing, is that those poor investors, they have two choices.

1:03:03There's public companies where they can get 15 % growth, 14 .7 net, or there's private companies where they can get 15 % growth, 10 % net. At some point, they will reallocate capital away from those private investors to the public investors. Then what will happen is, private companies will not be able to access effectively free capital. It's absurd that the free capital is at a higher cost in terms of total cost to produce the capital. It's absurd that it is cheaper to get money as a private company from a provider who has a 500 basis points cost structure than to get money from a public company, public mutual fund that has a 70 bips cost structure.

1:03:44It's like intellectually madness, but it's where we are now and are correct until that stops. And intuitively, when you say it like that, you say to yourself, at some point what logically what happened is the late -stage private investments will underperform equivalent public investments by the amount of the fees. And then it will switch. I guess that's the, I've been the efficient market thesis, right? Can I throw one out there? We've said about their enormous funding rounds. Super intelligence, $32 billion, $2 billion in, supposedly no product. What did we think? I have some thoughts. I'm intrigued.

1:04:17I think go team, I think look. I think that the argument is compelling algorithms in favor, open AI invented all this and as an investor, you can say to yourself, I ought to do open AI or I can do one of six or seven other foundation model companies. If you fast forward three years, all the foundation model companies that weren't populated by people who were at open AI, haven't done great and ontropic that was populated by people that came from open AI has done pretty well. So what it says to me is, hmm, they crack the magic code in open AI. They have the secret recipe. Fun people who have the secret recipe and it works.

1:04:55Fun to anyone else and you kind of get a me too outcome. In retrospect, that was the larger for doing anthropic. They have the secret recipe. They snuck away from the magic kingdom with the secret recipe, back them, and don't back all these other dudes who are trying to figure it out. Using the same logic, you got the guy who invented the secret recipe. Why not? At least you know he'll probably crack it. So, you risk level not being able to figure it out is pretty low, and remember the risk level for people who didn't have the secret recipe, I'm not figuring out, with the exception of Groch, which is astonishing, is quite high.

1:05:26So it makes sense because you can buy something that can crack the code. Now, what that model is worked once the code's been cracked is a totally separate discussion. I don't have an insight on that, but I totally get what I'm making the player. I cannot see why one would not do this deal. I think this is that people look to this and they're like, what? And that's not so. With a lake craft, there is zero chance this does not get bored for at least lake craft. It's it's fucking Ilya. Like he is a Microsoft buy him for 10 billion tomorrow. Provided the government lets them buy him, but yes, agreed.

1:05:58No, you'll talk. Look, more marginal foundation model outcomes have yielded returns beyond a one X with exactly that mechanism. So yes, that's your eyes. You exactly right. Where can we really count on the liquidation preference in these types of deals? Do we really count that it's going to be honored or we're going to get our money back? Is it really is that really that's real? That's a real comment and you're quite correct. It's always stunning. When you get done into the alcania of Delaware low on what can actually happen the day of a transaction, someone decided to actively not honor the press.

1:06:29There's a bunch of ways you can do it. So yes, I hear you. That's the risk. Or if you acquire most of the team for 10 billion and you leave the liquidation preference over in the C Corp, doesn't that work? Yes, that works too. Just listen, my limited visibility recently in M &A is that every acquire is looking for ways to get around all the VC preference stacks. It's aggressive. Like it was always true, but now it's super aggressive. It's like we just don't even give a rat's ass in Corp dev. How the certificate of incorporation starts with what the documents say, we'll do side deals back deals, we just want nothing going to the VC.

1:07:05in bigger, in nine figure deals, right? So why would you honor this liquidation preference when I want that going to the engineers? Why would I want it going to the VCs? And why does Ilia even care about them? I'd think founders care less about their VCs today than they used to. I think they care less. I would love to have been in the room on some of these marginal sales where Google did one, Amazon did one, where in fact, they did take care of the VCs to some extent and do the founders. Because you write JSON, I'm not gonna come in on those, Because in smaller bills that we're in, but when we're a seller and when we're a buyer, you exactly write anyone buying the company says, especially if it's a business where you want the customers, you pay down the cap table because you want the whole damn thing.

1:07:45If it's an aqua hire, every dollar you give to the venture guys is wasted. So you exactly write you do small headline deal and then large earn out contracts and you sit there. And you know, I can pretend that I'm a call by it, but perfectly honestly, when I'm on the other side of the table and my late stage companies are trying to buy early stage companies, I do exactly the same thing. I'm gonna give a shit about Jason and his bloody preference. I want to hire those five great engineers Let's just give him a contract the question. I mean Respectfully is that not a bit sure so I said maybe I have a grudge But if you did that to me, I'd be pretty pissed off and I wouldn't be that willing to give you my next Grande happens every day I think if I'm a corporate acquireer Let's leave these big deals out if I'm a corporate acquireer and I come again up against warrior and Jason this time I don't sit I think I'm gonna come up against him next time I push as hard as I can and if I don't push totally brutally it's not because I'm worried about a multi -period game It's just like at some point I'm just not paid enough as the VP corporate development to waste enough time and take litigation Rescue fucking over worry in Jason.

1:08:46It's just easy to get into 30 -month inbox and call the day now as Jason points out when it's two billion dollars Who nuts? But it's so far the observed fact is even in these transactions investments that have made money in a side with sale and have been able to rely on their preference. Whether this happens in the future, I can't speak to idle no, but that's all you know. And in the meantime, you're getting an app batch with a guy who figured it out and made the magic recipe at OpenAI. So that's what they're doing. It's again, one of the things that everyone of these discussions today have in common is in almost every item we're realizing we're all taking a lot more risk than 10 or 15 years ago.

1:09:27We're all playing a high -stakes game. I mean, it can be the price high -stakes game, it can be the pre -money, two -billion -round high -stakes game, it can be the concentrate, the fund, the smaller number of investments. But the one thing all this stuff has in common is we're way out there on the blue on the yield code, on the risk of. Except for one thing, which is we're seeing this increased trend again of founders taking secondaries more and more early in the journey. I sort of tweet, yes, they were, it was like, hey, you know, founder secondaries at A again is completely the new norm. Are you finding founder secondaries at A really back and back in Vogue one?

1:10:03And have we just shifted risk to founders taking money off the table earlier, which may or may not be a good thing? Well, I can tell you what I've seen for what it's worth, but in all of my hotter companies, the last whatever months, I've seen the later stage investors put everything into the term cheap possible to win. Does no more waiting for rev, the maximum secondary, the maximum refresh the maximum even crammed down the prior investors because they don't care. They just don't care as long as the founders get their their post money their equity and their seconder. So what I'm seeing is straight out of the gate all the boxes you can check in hot rounds are all checked like there's no more games.

1:10:37There's no more is it too much secondary don't care is it too much just don't just I just want to win the deal. So I'm not gonna and someone else is going to do it. So I see it all like every box checked in the term sheet today in the hot deals every box check to the maximum to the maximum. I haven't seen it in A's. I've always seen someone A's, but after that every but every win every deal. Just I just want to win it. Don't care. Like I want you to be capital efficient. I want you to be stingy. But here's an extra 100 million and 30 million of secondary and extra stock. But but I like capital efficient companies, but I got to win the deal.

1:11:09All right. All that you can just got to do it to make these big money and growth. You've got to win it, right? Yes. Because there's only one thing worse than this. I can go both ways on the second, I really don't like the, here's a secondary for 5 % of your position and here is a pre -approved increase to your equity ownership. Per seven. That's the play in the growth today. Cell five will give you seven. That way it's not even a dividend you come out of head, right? Well, dividend might be better because you're up to sell, right? The refresher always exceeds the sale. I'm going to be sympathetic to the investor now.

1:11:40I've lost a deal of should not doing that because again, it sticks back to my comment I tend to be perhaps stuck in the mud on history. I think that's just nauseating because you effectively replacing the Com Committee of the company investing in. But you might just, you see it, especially in later stage rounds, not at the A, but at the A, but at the A, and you're like, hmm, if you're gonna lose the deal, bad money dries out good, and bad habits drive out good habits. And, you know, if you've got to win the deal, maybe you do it. I mean, I've had two deals that were done in one day, like Hot Deals, and how do you get a deal done in one day, right?

1:12:11How do you guarantee you win? You check all the boxes. If you check so many boxes, there's even an argument the valuation doesn't even matter, right? Because you've checked all the other boxes. This is what worries me so much. So it was gross fun to say is they assume that the outcomes are aqua probable in size. And what I mean by that is they're going, okay, I know X company is great and only worth two billion. But if I pay three billion and I put in 200 million, I know it's a 10 billion company. So I'll get a little bit of a compression on my outcome size in terms of multiple, but it's a 10 billion Well, they don't understand is that if I stuff Rory with 200 million before Rory's ready for 200 million that 10 billion Outcome size will be a 4 billion outcome size.

1:12:53I want to point out that I'm always ready for you to stuff me with 200 million dollars to start to be no ambiguity on that stuff, but But yes, no, I want to kind of throw out one final one before before we wrap But one that is, we said there about like, hey, play the long game, maybe being nice, something that is just getting kind of more and more Hollywood movie popcorn salivating is dip deal and rippling. Jason, you were messaging about it last night like, hey, is this just going to turn into a shit show? What happens from here? Can you be nice and win? There's a big gap between being nice and committing, well, there's at least some level of civil having some civil issues and potentially I don't know criminal issues, right?

1:13:40You know, you can be pretty driven without actually planting spies and if in planting those spies you actually steal secrets. I'm winging it without, you know, my wife was a criminal lawyer so she hit me on the head for practicing law without a license. But there is a point at which this is kind of industrial espionage and you get caught and you get criminal proceedings. and no CEO and no company can provide that. So I think it is possible to go too far. You can be aggressive, you can be driven, and I'm not talking about the facts of the specific case A, because I have to use the word alleged, and I don't know.

1:14:14B, I have a company broad in the same space, so I'm not on bias, papaya. But if what's alleged is true, it's very troubling, and you would be struggling as a board member to figure out what to do, but even more importantly than that, as a customer of this company, if you're relying on them to manage your paywall, to move money on your behalf, you possibly can provide them having some kind of civil liability, but if it trends over into criminal liability, you probably have to find a new paywall provider. So I think that was way beyond the norm if the allegations are true, which others are can't speak to.

1:14:51But while the entertaining are complete, The growth rounds we discussed are part of it in general because they encourage that there are fewer and fewer boundaries in these massive growth rounds with no diligence and all the tertiary and quadrionary and secondary you want and all the deals at 8 billion and 10 million 12 billion there's no boundaries you don't ever have to go public. Harry and Rory it's cool take our money and whatever terms you want just get us our target and anything goes and I whatever exactly exactly happened here. I mean, some of the stuff started arguing. Okay, clearly this guy went into the toilet and flushed his, it was pay that we can't argue with that.

1:15:29Like we can't argue it's like, okay, but I think it's a hundred cents to a version of this. $5 ,000 a month. Well, that's because he's got ten of them. That's because he's got ten of them. That's because he's got an inton for $5 ,000 a month these days. I know, but I think you're going to hear a hundred just like, just like fraud. Like every day now we pull up the media and there's another founder that stole 30 million from the investors and we shrug it off, right? There's going to be a hundred of these in this environment, right? It's where we get revealed when the tide goes out. You had Galbrae, don't get a Galbrae.

1:15:59It is, you know, he wrote the great crash. It's just a great small book about financial euphoria. And it's worth rereading every couple of years. But one of the things he has is this concept of the bezel, which is at every point in time, there was an amount of embezzlement that's taken place. And you know, in a boom time, the bezel just increases because nobody knows. And the minute the tide goes out, all the shit comes to the surface. And I think you're exactly right. In this kid, typically, in a boom time, you see erosion of quote unquote good behavior, erosion of standards, erosion of do -it -care and do -diligence.

1:16:30Then things turn bad, and then everyone start focusing real fast. Everyone looks at the numbers real fast, and it's interesting you had one other thing in your pre -shore prep. You made a common an ARR versus GAP. I mean, we started really focusing on GAP revenue now, because ARR is a made -up number, and GAP numbers are fact. And when the tide goes out there'll be a whole bunch of this kind of stuff surfacing and people go, hmm, miss that. Sorry, for anyone that doesn't know, why is ARR not so important and Gap is more important? ARR is a really good leading indicator and I used to lean on it because it's better than Gap because it's a forward looking metric.

1:17:06But the beauty of Gap is there are rules on how it's produced. If you break them, you've lied and, you know, there's no ambiguity that was AR is an experimental, is an actual, it's just more Lucigusy. It's, as I say, you're trading a battle -forward -looking metric. AR has more signal about the future, but more variance about the correctness. AR gap is a trailing indicator, but it's pretty dumb, accurate usually. In today's market, where there's a lot of experimental AR, leaning into that AR, it gets back to where we started this conversation. and leaning into that AOR and thinking that's repeatable, scalable, therefore ever AOR, like a SaaS multi -year contract from Salesforce, it's just not the same thing.

1:17:47Yeah, most of the AORs aren't real. It's not really annual. There's a really recurrent, what's the third one? Webadue. Yeah, and bear may not be revenue. Definitely doesn't recur a no way it's annual if everyone you got out after a month or two. So it's neither AOR nor R. Can I share one number just for fun before I just pulling up a saster survey going back to real and deploying Rip real and deploying Yeah, I Apps 2000 folks in saster how many folks lie in deals to in deals 93 % said they lied over 2000 to wind deals I've 93 % of 2000 B2B folks are lying to wind deals lying about features lying down feature gaps Okay, and you've had just been handed billions how much would you get it?

1:18:31Would you throw someone into your competitor to get in? Yes. You really think of those 2000 people if they could get someone working at a competitor feeding? Forget this happened to the CO level. What if just VPs of sales could do it? Right? 93 % say they lie in deals, 93%. I think there's a big difference about lying about a product runway and sorry, a product road map. And when a feature is going to come, though, is I'm going to orchestrate a spy in Rory because he wasn't paid 200 million, sorry buddy. and I'm gonna plant him in the dust. I like to think of myself as fairly ethical. I'm not sure the line is as black and white as you think.

1:19:08I think of 93 folks are living in deal. How many sales reps have gone to a competitor sales pitch, wasted a reps time for an hour to learn their thing? Does that cross the line? Does it blind? And how many of them, if they could make a million dollars a year as an AE, wouldn't have their buddy sending them information? How many reps have taken the role of the decks with him? How many folks take the role of the decks with him when they leave, which violates many laws, all of them. Yeah, I remember in 2003, a company who shot a man named us, did something like this. The only difference is the FBI pulled up at the company next day.

1:19:38They were accused of stealing trade secrets and they just basically empty out of every desk and the process grinds on. I think a lot of this stuff, people will experiment and figure out where the line is. They'll discover by going over it and getting caught. Is it a little bit coincidental that playing it going to go out and raise money now at $18 billion? $1 ,000. If only for his cunning and acumen you'd want to give him money. That was an anti -coincidence. Yeah, guy. I don't think it's intentional. It was pretty smart. I mean, catch that. Not by the way, timing. I don't think it's anything at the timing.

1:20:11I just want to say that was very clever of the rippling team to figure out what was going on and track the person involved. I looked out and I thought, you win, dude. That was good. And then the way you reported it through your pocket, like it was. I'm just saying it's crazy. These people, you know, George John Lakaway, you know, a double agent. Now we've got a double agent. They probably could have won him as a double agent for a while, feeding false information. I mean, it's just great. It's the story is the story got worse, like most good stories. Act two was worse. Yeah. At first it went out and the one Parker's first tweets went out, right?

1:20:45I remember someone asking me, it can't be this bad, can it? And I was like, no, no, I guarantee you, I don't know what, but I've known Parker for years. It's got to be worse. He would not given fun raising given other things he would not do this. There's no way he would waste his time He has a complicated company. It has to be much worse than the first step Otherwise you can't do it too. This is this stuff is so distracting isn't it where you've seen it on boards? It's so distracting right? It's this a case where it can take down the company They were actually new cycles are so fast these days.

1:21:15I honestly believe that Trump does something crazy Elon does something crazy we move on. No one has. To be to be trusted is really give a shit. Probably not because in the, I mean, in the end, you can always make a change. You know, you can do whatever whatever this, I don't know the dynamics of this company. What would happen in a public company? Yeah, the rest of the board will do the unsharked and uphold. The attorneys would come in and explain the FJUCY obligations and they would basically say, you suck the sky right now and you can burn this liability off. You stay in this thing, you were down with the ship and you're going to get sued by everyone.

1:21:47They would be drawing up the forecalls termination before the attorney stops speaking. The person in question would be out They'd hire an interim CEO or crisis PR manager and they'd say as it say shocked and appalled to discover this is going on New day fresh broom pick your cliche higher scadden. Yeah, some X SEC lawyer to go on the board and do the whitewash and Power right through you'd lose a year. That's what you do for building them Maybe if these guys have board control, they don't do that But if I was on the board, that's be where I'd come and fun. Companies are bigger than any one person, sacrifice them and move on.

1:22:19I don't think many customers are going to leave. Where it might hurt you is at the margin. It's going to hurt you for new customers. It's a weapon for the sales team to use. I say 2%. Even just churn, how much work it is to change payroll providers? I'm outraged, but not that outraged to do any work. When it gets company and danger in you fold. But I don't think it will be because there's a lot you can do. So we're gonna play a game and then we're gonna wrap up, okay? The game is called buy or sell. I'm gonna say an asset. I'm gonna say a price and you can say whether you buy it or not Not sell because it's not like a negative.

1:22:52So that's a really important. That's a really important addition It's not a negative. It's just like a I wouldn't advance to that price open AI at 300 buy or not buy Not buy I recently took a look at my investments I just I can't make any decision well north of 100 so I'm out all my decisions are bad north of 100 They're just all bad for a variety of reasons. I'm the opposite of you to I would buy the shit out of this escape velocity reached cursor It's 10 billion the irony is the air multiples for some of these if their air are pretty low Relatively speaking if you're really paying 10x forward revenue on some of these deals.

1:23:28We've all done worse By the time I did lovable it was like 10x revenue the whole reason this business is awesome is there a singly amazing companies in every generation and maybe these are they and when you do those companies everything works and you just saw you blad you bought it at any price. That's why this gain is fun. All the things being equally should be doing private equity. The reason it works is because you have those singularities. I just don't know enough on the day that to know if this price gets it at that point. You know the thing is I know you want a one word answer but going back to the beginning if If you want to tie a bow on it, right?

1:24:00The problem, if it's a SaaS company with highly durable revenue, then curse or any share of 10 billion is a good deal. It's not like a great deal, but it's a good deal if this is a classic high -end or are coming up on a billion, 140. It's probably got 140 or 200 % in our own paper, right? So if you treat this as a B2B company with a massive moat that has destroyed its competitors, it's pretty good deal. Now, if you look at everyone I talked to in a week's, which they're like, oh, wind surf is cool. You know, my portfolio company switched back and forth. They're trying, they're switching IDs, which seems crazy to me.

1:24:33My sum is switching. It's like then at this door built, this is the question of the ages for us is is this revenue durable? Because if it's SaaS, then I take my money a cursor, right? I just wish I had 500 million. But if it's not, I, you know, this is the risk to Rory's point, right? Because as a SaaS company, they don't get any better, right? There's nothing better than those metrics. And you can back to the opening eye comment. You can say, it's Google. It takes the entire market cap. that gives you plus or minus little of extra and so 34X from here if you would place all of Google in three or four years, you know, is that the best three or four X you could do?

1:25:07I don't know. Guys, listen, I love doing this. Rory, it has been so fantastic to have you with us. Thank you for joining us. This has been amazing and I really appreciate it. Here, I think you need a four billion dollar fun for the next ones my big takeaway from your bet. The way you like to bet, I would go for 4 .5 billion. I would start there. I would do a hard cap around five or six because It's gonna be hard to deploy in 24 months, but I do 4 .5 for the just remember we like to stay small Yeah, small farms for small and small and powerful partners and we all work on all deals together So we definitely remember is what at the end that we got to stay on message That was really touching how you right and now of course you have editorial control So he can just nuke all his crazy shit leave us in and at the end how he's doing says I really think we need to stay focused and keep our decent small no one that you are fundraising genius Howie and why is he you?

1:25:58Oh, you know you know me so well, right? Good for you My word I so enjoyed that show now if you want more shows like this Please let me know I want your feedback I think Rory was such a great addition to me and Jason, but let me know what you think of that show And I would love your thoughts and feedback 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. Wow, second, Kajabi's users keep 100 % of their earnings with the average Kajabi creator bringing in over $30 ,000 per year.

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