Anatomy of a Win-Win Acquisition: Synergy, Growth, AI, and the Future of SaaS | E2047

27:15Okay, great. The thing they have been able to do in Amplitude is let me go fix that straight from the product. It's okay, I'll go back to engineering and I'll instrument something. Now with our thing, they can just immediately fix it. And so just connecting, like we're almost finishing the feedback loop of the thing that starts in Amplitude. And that logic is what ultimately led us to think it was a great tie-up. Okay, so to put this into relatively prosaic terms for everyone listening, people use products. Amplitude keeps track of what they do and how they do it. And then with Command AI, you can then go, okay, here's a bottleneck we've discovered and we're not going to go apply one of our tools to help unstick people or help them get more done or more value out of it.

27:56So it's kind of a, you're on top of the stack, if you will. Exactly. Like we kind of think of it as like, you've got a kind of relatively fixed rigid layer, which like is the product. We're not trying to replace like a website or the app or whatever, but then you've got this kind of more liquid layer that you can experiment with and can be more personalized. And that's what we're attaching onto all of our customers. I kind of like that. But again, I'm kind of shocked, Spencer, you haven't had this before because you mentioned in your notes that people were asking for this. I'm kind of shocked that AmpliJity didn't build kind of a quickie version of it just to have something in place before this deal came to be.

28:31Is that just you guys being focused? Yeah. So we've always been focused on being the best in class in digital analytics. It's only more recently in the last few years that we've started to branch out to experimentation, session replay, and other things. And so this was one of the things that we were looking at, And it was really clear to us that we'd much rather partner with a talented team because that, again, it would take us a bunch of years to figure out how to do this ourselves. There's a bunch of expertise that James just showed in the demo that we didn't have. How do you create an interface where a pop-up looks natural and in context of what's already on the screen?

29:07How do you think about the management interface for tens or hundreds of these nudges and guides? It's how do you think about creating all the right templates for service? So many of these interactions that we just didn't have expertise on. And so we're not as big as we may seem as a company. We're not that big. And one of the superpowers that we've honed over time is how to stay focused. And so it made a ton more sense to partner with the Command AI team. The other thing I want to say on that is that acquisitions are incredibly risky. There's a stat where 90 % of acquisitions fail. And so this is something, you know, it's not like that was the obvious path either for Amplitude or for Command AI.

29:50That's funny because it feels from where I'm sitting, based on what you've told me, it does feel relatively natural because people want, you know, platforms, not point solutions. Your customers were asking for this specific capability. All right. Take a second and picture the ultimate all-star team for your startup. Okay. You got that mental image, maybe the Avengers, maybe even X-Men, Wolverine, Cyclops, pick your favorite superhero team. And let's be realistic, until you've raised your Series A or your Series B, you might need some help building that dream team and finding top-tier talent, managing all the timelines you've got, and maintaining quality.

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31:10There's no long-term commitment. It's just seamless collaboration. So if you want a GSD, if you want to get stuff done and you're ready to squad up, head to devsquad.com slash twist for 10 % off your first engagement. That's devsquad.com slash twist and transform your startup with the all-star team it deserves. I know you guys had, if not customer overlap, some information that I know comendi i was seeing customers to amplitude and vice versa so to me it actually it doesn't seem that risky on the surface spencer so tell me you know what is the risk that you're going to be managing now that this deal is done just overpaying or lack of integration i mean that that like you know that i think you have all this overhead where it costs a bunch of work and effort and change on both sides.

32:01And so you're kind of, it's a high barrier to say, okay, hey, it makes sense to do this. But the incredible benefit is that you have this combined vision. So we strongly believe in a world where products no longer are frustrating. Everyone has had a frustrating experience in their life with technology. And it's because you have to adapt your brain to how the technology works. And we believe with data, you can actually make technology adapt to your brain much, much better than it does today. And so we want to partner with other great teams that have that vision as well. And so it wasn't just, okay, the Command AI team had this fantastic product and expertise.

32:39That was obviously kind of a part of it. And that was a great proof point of their capabilities. But it really was, hey, we have the same view of how great software should be built. And we want to allow every single company out there to use that. So you had vision alignment, essentially. Yeah. And the other thing I'll say on that is I think the biggest mistake a lot of companies make in these is they're not clear about what the end state you're going towards. And so we were really clear from the start that, hey, it's going to be one platform together. And that's what we're going towards. A lot of times companies will leave it ambiguous.

33:13They'll be like, well, we'll let you run standalone, but then we'll kind of integrate you. And that's like the worst of all worlds. You either leave something fully alone and let it run. Or if the point is, hey, we have a combined vision to create this product that's better together, then you want to rebuild it as part of one platform. And so one of the things we're very deliberate in talking with James and Binet from the start was, hey, it's got to be one company and one platform and one product and one brand at the end. Okay. So James, I want to ask this to you because you're the company being purchased and I have known Spencer for years now.

33:46He seems very affable. I've always enjoyed talking to him, but I don't see him behind closed doors with something goes wrong. So how did you know that joining his company and his culture was going to be the right fit for your team and its own unique culture and so forth? Yeah. The first thing I'll say is it's always a risk. You can only do so much of that diligence outside in and you're never going to get to 100 % comfort. And that is one of the things that definitely weighed on me and Vinay was today we're in total control of decisions, but also culture. And we know that's not going to be the case as we're acquired.

34:22And so honestly, I don't have a great answer for you other than spencer and i just like hung out a good amount before the deal and i just got comfortable that from a product and like strategy perspective we had alignment and from a culture perspective like actually it's funny there was i think amplitude has three values we have five values and there's overlap in two of them and so we felt like there was you know we were we were gonna be part of like a team with relatively similar you know and just everyone knows that the company with more stated values is more virtuous by definition that we were and we are we are diluting our virtuousness by entering a company with fewer values than us yes what were the two that overlapped ownership and growth mindset we had slightly different words for them but yeah yeah but the same concepts that's very interesting so i want to go back to the start of this going from partnership to transaction which of you was the first to say hey what if we just did this as one company?

35:22Some folks on the product side had a tremendous respect for what the Command AI team had built, and we had reached out to them. And James and Manet were incredibly friendly and were willing to share what they had built. I think the thing that both the product experience and the fact that we had a lot of overlap in customers, that was kind of the initial signal that it would be worthwhile to have a conversation as we got more serious about considering buying a company that was able to do nudges and guides and surveys. Yeah. And then James, how fast was the company growing before the deal came to be?

35:55So I don't know, how fast did you guys grow year over year in the first half of 24? We were growing about 3X year on year. So that's real quick. I mean, even for a series A startup, that's kind of the triple, triple, double, double, double everyone talks about. So given your growth and the fact that you raised a good amount of venture capital. How much work was it to get to your investors and get them comfortable with the transaction terms and taking an exit for an asset that had potentially more room to run? Yeah. I mean, totally. That's like the fundamental thing that is what kept us up at night, frankly, was determining you being really confident that this was actually the outcome we wanted.

36:36Starting with that kind of LinkedIn DM, that's been a mission that kicked off the whole process but it was a linkedin dm and that is the most nba thing i've ever heard you gotta do this a twitter dm you gotta keep it casual come on yeah thank god i saw it yeah no i was about to joke that i never actually read my linkedin dms no me neither i wonder now i wonder what's in there yeah yeah maybe someone's trying to acquire you who knows oh god please not anyway so spencer reaches out and then you have a decision to make on your end with your board and your backers Yeah. I've heard like for stories where, you know, founders have one view and investors have another view.

37:12And like, that just wasn't the case with us. Like our investors were, were super supportive, like helped us reason through, you know, how could this fail? What's like, what path? What's the path to glory standalone? But like, ultimately, their, their vibe was like, we're gonna help you make this decision, but like, it's your decision to make. And if you think this is the right for the company, it's probably the right fit for us as investors. So we, it was a very like, um, high stakes, but, uh, but you know, well-reasoned and kind of non-emotional conversation. I got to give James tremendous credit for how he navigated and handled it.

37:51It took us a little bit longer to get there. We were dealing with a few things on our end, including a CFO transition. Um, but, uh, you know, he saw the vision of what could be, we saw the vision of, of what could be combined. And they were actually, command AI was in the middle of fundraising process and they were good to go. That explains a lot. Okay. Yeah. So they were in good shape to build a very successful standalone SaaS business and continue that path alone. And so it took us quite a bunch of back and forth to figure out, okay, I have conviction that the equity of these two companies combined is much more valuable together than separately.

38:28So how can we create a construct? And so we negotiated quite a bit and James is a James is a, I'll give him a lot of credit. Very good negotiating. It helps. I think it comes back to like, do you, are you like, have you decided you're selling your company? And that's just like a totally different style of conversation and like thought process versus you're excited about the company. You're, you know, you're going to make it, if the deal falls apart overnight, it's fine. You just keep going. And that's very much how we approached the conversation was like, Hey guys, we're happy. We don't have to do this deal, but we were really excited about the potential of doing it.

39:06And here's what we care about. And it just made it really clear. We described the deal that was interesting to us. And we were like, hey, no worries. If this isn't the deal that's interesting to you, like you mentioned earlier, Amplitude could try to build the functionality. It wasn't like we had to make it work. I think that made it much more of a conversation versus just like, you know, a really intense, you know, zero sum style discussion. Okay. So from the first LinkedIn DM to the deal being closed, what was the timeline like? And I ask because we have a lot of founders that watch the show and I think the timelines of M &A transactions are pretty opaque.

39:43So I'm just kind of, I want to get as much detail as I can to help those folks understand how these things actually happen. The first conversation was sort of like late spring, early summer, like I think, I think April or May. Okay. But I wouldn't say it was like, you know, we weren't like negotiating an acquisition since April or May. It was more of like an exploratory, like, Hey, maybe it makes sense to partner. Like maybe it's a go to market partnership. We already had a product integration, maybe it's a deeper product integration. So I don't think we really started like focusing on the, you know, Hey, let's try to make an acquisition happen until like middle of the summer.

40:16Okay. Now, Spencer, I know you have a new CFO and I was reading their early commentary and they said, I believe this is a direct quote. first, we are not a growth at all cost company. We are investing appropriately to drive accelerating growth while generating positive free cash flow. And then of course, when it comes to leverage, you'll make decisions. How hard was it to get your C-suite and board on board with purchasing an asset that just given what I've learned about the company probably wasn't cheap? And I say that not as a diss, but more of a, it was growing fast. No, look, I mean, James had this path, you know, he was already growing very fast.

40:49Command AI was already growing very fast. They They were very successful. They could definitely be incredibly successful as an independent company. And so we needed to make it worthwhile for them to do so. I was very lucky to have an incredible board of directors that's seen the good, bad, and ugly on transactions like this and to get their guidance through this process. And so we had done a few smaller ones earlier a few years back in both ClearBrain as well as iteratively. And so we had a little bit of experience. I think this was by far the largest one that we had ever done. And it came back to my conviction and the conviction of the team that this was a really valuable combination for Amplitude and that this was something our customers were asking for and that we could sell a lot of.

41:34And so we put that case together and they were very supportive of what we were doing. So I want to ask about the public company perspective, because one thing I've heard from some founders and I'll say some VCs is that the government has so heavily slammed the door on acquisitions because of essentially antitrust concerns that no one can do a deal, transactions are kaput, and so forth. But then I'm sitting here talking to you guys, and not once this far, and I don't know, talking for half an hour or so, have you guys mentioned concerns about regulatory oversight? So did that come into concerns, conversations at all?

42:08Now, this sort of acquisition is small enough that it's not something that's on the radar of the FTC. But they are definitely cracking down for much larger companies and much larger transactions. Right, but I mean not everyone is meta, right? And so to me, hearing you guys talk about the deal, I'm almost surprised I don't see more of this stuff happening because there are so many cool companies out there building neat software and not all of them are going to go public. Maybe James and the Command AI team could have, but I guess the complaint that I hear, and I'm mostly talking to myself right now, but the complaint that i hear about it's all lena kong's fault doesn't match the reality of talking to you guys about this transaction because it doesn't sound like you were terrified of the fcc kicking the door and saying absolutely not for stuff of this scale you know this is this is you know ultimately this is better for amplitude customers it's just not a there's not it's not like the market that we're in digital analytics nudges assistance it's so early like nobody knows what's going to happen and so you know we're way this is many many years before anyone has any regulatory concerns about this market.

43:11I will say the reason that this doesn't happen and that you see this go down is because I think there's a mismatch in valuations. So if you're a public company or recently public company, valuation multiples are actually quite low. If you look at revenue or ARR multiples, a lot of times you'll get like 2, 3, 4x ARR, whereas private markets are still actually very high. A lot of times, I mean, you see some of the AI companies, they'll get like 200x ARR. But even for mid-stage stuff, you'll often be 10, 20, or more ARR. And so what that means is those companies can run independently for a long period of time.

43:50And that means a lot of the natural acquirers, larger companies, aren't going to be able to pay that much because they don't have... The stock isn't worth that much. And so you actually... It's a much higher hurdle to clear. You have to have conviction. There's a huge amount of value combined. You can't just say, okay, these companies are 10 % more valuable together, because then, you know, the private company might as well continue running because its valuation is already pretty high. You need to be able to say, hey, we can create five or 10 times more value together than we would separately.

44:20Yeah, it's funny you mentioned the AI companies. I had a question in here that I didn't have to get to because we talked about that Command AI could have raised more. But I was going to ask, given AI excitement in Command AI's copiles, I would think you could have raised more. And the answer is, yeah, because everyone wants to pour money into AI. Totally. I think people simplify, or I think, at least speaking from the founder perspective, I think people simplify the decision as, oh, well, if we can raise at a better valuation. Say you're deciding between raising at a valuation and selling your company for less than that valuation.

44:56Oh, well, of course, we would take a higher valuation. In some cases, that's totally correct. If you're growing 10x year on year and your path to IPO is like two years, and by all means, I'm not suggesting that everyone sell their company or sell it for less than it's worth. But that comparison isn't as straightforward as I think a lot of founders think it is. And I think a lot of founders don't entertain the idea that just think of a simple thought experiment. What's more likely? That we get sold for 3x what we got sold for or that we can 3x the value of the combined entity? that's predicated on being purchased in equity versus cash because if you get purchased an equity and then you have even more upside i i meant to ask this earlier but have you guys shared what the deal was done in there was you know dollars shares monopoly money and small shells we did a small amount in cash uh for some of the existing investors uh but for james and for the whole existing team it's all amplitude equity because we want them to share in the combined upside as well right and then their owners for day one right like we wanted to participate in that in the upside well no it makes a lot of sense to me there's one i want to get to um ai and also a little bit about the enterprise in a second but there's a tension between what you guys are telling me that i want to unpack a little bit spencer big on offering a platform attach rates you know multi-product customers i think you said something like 23 percent of current customers have more than one product today and then you know i have james and command ai which was more pointy solution versus broad and they were growing at 3x so those seem to be statements that go in different directions i you know need to be more platform but also points doing well so what am i not understanding there to harmonize those two different data points alice i just want to make sure i understand your question you're saying that the command ai independently is growing you know at this great rate but does it make sense to have as part of this platform versus run independently.

46:53Well, no, it's that you're emphasizing the importance at Amplitude of having a suite of products that work together so you can offer a non-point solution. But the point solution that Command AI was selling in the market was doing well. And so I'm just confused between why you're telling me this, but I'm also seeing this over here. And I presume that I'm just missing something in between. So the whole reason that we do this is because it's that that 3x can be a lot faster with amplitudes customer base because we have thousands of customers whereas command ai is much much earlier and so by getting the product into the amplitude customer base instead of growing 3x a year you're more like growing 20x or 30x or even more in terms of the growth rate because it's part of that platform that so many other people are using and how many of your existing customers do you think will be using Command AI software via Amplitude in, let's say, 12 months post-closing?

47:48Is it half? Is it 25 %? That's a good question. We actually haven't looked at it from that lens. I think we want to be really aggressive in getting it out early next year and then getting it out first. It'll probably be 10-ish percent in the first year is a good rate. But then, yeah, eventually you want to get it to 50 and then 100. James, 10 % in the first year feels like crap numbers to me. Can you get 25 %? I don't think I'm allowed to make forward looking statements is one of the things. Oh, right. That's a good point. But I think just to go back to your question around like point solution versus platform, I think there's sort of like a misconception in the space that like, if you have a platform, if you have a bundle, your products, the bundled products are like kind of shit, but like collectively they make sense because platform and because one buyer and because like discounted pricing, it's not like we're taking our product that was selling well, independently differentiated and making it worse so that it can fit into a bundle.

48:46It's the same product, but now when you create a cohort in Amplitude, you just immediately get to use it in Command A. Or you can view the sessions where users have impressions of your assistant stuff in Amplitude. So it's getting better, but it's not like it's losing the ability to stand alone compete against other products. And frankly, that's one of the most exciting things about this deal. And one of the reasons why I think it can make sense for companies to buy instead of build, because you're getting that like standalone differentiation out of the box. Okay. So given the endorsement there, Spencer, of buying versus build, I'm just curious, and I know public company and I know you just did deals.

49:21This is a slightly brat question, but how attractive is doing more acquisitions in the next pick a timeframe for Amplitude? And I'm asking this because I want to understand what other public company CEOs might be thinking about the market, what's available in prices. So first on our end, we're absolutely going to be doing more. I think there's lots of great technology in the space out there with people who are just as smart as the folks that we have here at Amplitude that we would love to partner with. So we're going to be doing more. We're also going to be building more internally. It's going to be both.

49:52I think that the great companies are able to do both. One of the things I talk a lot about is that we are so early in our space that product, to James's point, product, it's not like the innovation is done. It's like we're actually at the really early days of innovation. What you guys saw, that is the bleeding edge from the Command AI demo of what great user assistance and great nudges looks like. And there's so many other similar adjacent spaces that I think that make a lot of sense with the digital analytics and with the platform. And so we're absolutely going to be talking to more teams and going to be doing more acquisitions in the future.

50:28The one other thing I did want to say is part of what made this so exciting from my standpoint as Amplitude CEO is the thing we're always behind on as we grow and scale is great leaders. So just great leadership. As you grow as a company, the ability, it's like you're always at a deficit for... If you grow 10 % in a year, you need 10 % more leadership. If you grow 30%, you need 30 % more leadership. And so we're always behind on that. You're always trying to play cash up in a technology organization. And so being able to work with James and Binet are a really important part. They're not just, oh, the command AI founders, they're actually, I think a lot about how do we get great product and engineering leaders here at Amplitude to own bigger parts of the stack and of the platform and of the future things that we're building.

51:18That's very interesting because there was a meme, and I said that very politely, in the startup world in the last six months about founder mode. And instead of federating out responsibility to individual leaders at a company who were subsidiary to the CEO, the founder, instead kind of constraining that authority and decision-making to some degree inside the singular executive. But it sounds, Spencer, like you're comfortable with having some distributed leadership and perhaps more than the founder mode meme said was correct. I want to give a little more new, I was actually at Brian's talk and it was crazy.

51:56You were at the YC thing? Yeah, he was basically, it had just come out the other side of a religious experience and to to hear that directly the level of passion and intensity and just like yeah you know religiousness that he had about what it meant to run a great organization he had this great thing where it's like yeah it takes 12 years to make a good ceo you know because he felt he was a bad one for the for the first 12 years of airbnb the thing that the thing that i think the it's fun and he actually wasn't the one that came up with founder mode that was paul graham who's just an incredible marketer.

52:28The thing that the point, it's actually not either of the scenarios you talked about, Alex. It's not delegation and it's not, hey, I'm deciding all this stuff myself. It's actually the point Brian made was that you are in the details of what is critical path for your company. And so for Airbnb, that's the great product experience. For Amplitude, that is also the great product as well as how do you sell this product? and you can't delegate those. And what I'm looking for is fantastic leaders who I can partner with in those details. And so as an example, one of the things I've had for the last year is I do a two hour a week product review of how do we make the platform easier to use.

53:14What I'm looking for in that meeting is who are folks that I can go back and forth with as peers to say, hey, what does a great experience look like and it's not just me saying hey do this do this do this do this it's saying okay hey here's what i think and then they'll say hey here's what i think and it's that back and forth that leads to that combined great outcome so it's not a delegation but it's also not a micromanagement it's about i want to get people at amplitude that i can have that interaction with and that's what we're always at a deficit for okay so turning this into a world war one analogy because that's where my brain went first you're not back at headquarters 20 miles behind the front line nor are you the only person aiming down a rifle you're instead in the trenches yeah and and very involved with the strategy okay that makes a lot of sense to me the key point on the founder mode is there is you have to be in the details for whatever is important your company you cannot delegate that that's not to say you don't work with other people you absolutely do and that's not to say you micromanage them but you're working with peers in the trenches with them yeah it's the opposite of what boeing did which was abstract leadership way totally disempower the engineers and turn it into um i'm just going to keep making private equity jokes because james is here turn it into kind of like the private equity you know platonic ideal of a management team dude i sorry i was going to rant on private equity for a second i love that they make so much fun they make tremendous amounts of money you know one of the great players in modern capitalism.

54:46But one of my rules is never be on the other side of a transaction for private equity, because they have a spreadsheet about how to take all of your surplus away during that transaction. So you can either do a transaction and get no surplus or not do a transaction. So you might as well not do a transaction. But I love them. I love them. They're great. They're great capitalists. So I have tremendous respect. Just don't do transactions. I think you can be a capitalist as I am and have one or two disagreements with standard private equity approaches to personnel and staffing. Dude, if you want to talk about where the FTC should regulate, regulate the hell out of private equity.

55:22Like that would be my first order thing, because like if you look at their playbooks, most of their playbooks are, hey, consolidate market share to create monopolies or pseudo monopolies and raise prices on consumers. And if you look at US antitrust legislation, that actually the test of are you behaving anti-competitively is do prices go up for consumers or down for consumers? And like the private equity playbook 101. So Lena Kotn, if you're listening to this, or whoever the next person in the Trump administration is, take a hammer to private equity. I'm all for it. You know, I really think that if you were hoping for private equity, you take a whacking, we have elected the wrong next president because I don't suspect that's going to be a 47 goal.

56:04All right. We've gotten a little bit off the rails here. I want to bring it back to Spencer, what you're building at Amplitude. You said something very interesting about your near-term goals and your near-term focus. And you said that there's two things you're working on right now. The first is automated insights, which you can use to surface two customers practically without human intervention. and then automated actions where Amplitude can quote, recommend and take actions that we know will improve the end customer experience. Now, the first one seems to be digital analytics. And also I would say what Command AI does.

56:36The second smells quite a lot like AI agents. And people have been making a lot of noise about AI agents. Brett Taylor over at Sierra, OpenAI and so forth. And so I'm just kind of curious, is that the direction that you're pointing at here with that comment? And if so, what does that look like in an amplitude content? Yes, absolutely. That's the exciting part. So you saw that great interaction that James just demoed where you're asking the chatbot, hey, how do I create a new project? And then instead of just giving you a list, it actually shows you. It says, hey, here's, I'm going to create a tutorial just for you.

57:12And I'll walk you through this process. That is the future of software. and so one of the things i'm really excited about is how can we automatically create right now it's a very manual process to create those experiences how can you automatically create them so we can every single person can get a custom guide to the software so the guide to software is custom for me or for you alex or for james or for anyone else but more than just guides though because you're talking about where amplitude can take recommend we recommend and take actions that will improve the end experience. That's more than just nudges.

57:45That's more than just... So nudges is kind of a very, you know, like that's like the first step towards doing a bunch of this. I think there's a whole bunch else. Like one of the areas we're really excited about is starting to recommend different text or images on your website based on what we think will convert better or resonate with a particular user, or even change the layout of a website or break down and create functionality. That's where this is ultimately going. And that's what when I think about the Envision, we want to create a world where products are always improving, they're self-improving all the time.

58:19Okay. And then this will all rest on an ocean of data. And one thing that you said that one of the quote, really exciting things about Amplitude is that you have this enormous repository of data, of customer behavior, one of the largest in the world. So does that mean that there will eventually be, I don't know, like an in-house amplitude LLM or similar that you guys then deploy against your data set for your customers? Yes, absolutely. Absolutely. So are you going to raise another billion dollars to train it? We haven't gotten to that point yet. I think we're, we're doing a bunch of different things with AI internally.

58:55And I think what's interesting is that you have so many dollars going to Google and meta and Microsoft and open AI, where they're spending crazy amounts of money to create these phenomenal models. And so our thing is not to get into the model built business ourselves, our thing is to leverage those. And then okay, we're what we're experts is putting them to work for this particular application. So how do we know how to train the model to recognize the right types of text that is going to lead to an engaging great user experience or create the right type of nudges or what have you? Okay, so then the question then becomes and again, thinking about founders that are watching this, just helping them kind of learn how you think there's two approaches to using off the shelf AI technology, there is closed source models and open source models.

59:39Open AI, of course, closed source, Meta's llama family, medium open source, if you will. So where does the amplitude direction lie? Which way are you going? Oh, we're using a lot of the open AI models, but there's no reason you can't use the open source models with amplitude as well. Okay. So you're not, you're agnostic, but currently giving Sam Altman money. Okay. That's right. That helps. He's losing money on every transaction. That's the crazy part. open ai is losing money on every every time you uh you submit a query to it which is bananas well that's why the best way to take big ai down is to use lots of big ai that's why i use gpt01 or whatever the hell it's called all the time because that's the fact i'm joking sam allman i've only met him once uh but gross margin negative is a weird place to be for any business it is it is a weird it is a weird spot it's going to be interesting to see how these start The other problem is a lot of the AI businesses have much worse retention characteristics.

1:00:35And so it's not sustainable at current levels. So it'll be interesting to see where it ends up a few years from now. Well, I'm just glad that Amplitude is not going to get involved in the great CapEx race. We're in SaaS, which I think back in 2021, a few people figured out that this was the best business model of all time. And it still is the best business model of all time. So we're just happy away creating a great product and continuing to sell it to more and more companies and we're going to be building a great business that way. I want to say that that is a contrarian statement in late 2024, that SaaS is still the best business model out there.

1:01:08Oh, it is. It's the best business model of all time. It's taking lumps. But that's also a beautiful segue to my last question for you, Spencer. You guys talked about how you thought that the majority of overbought optimization contracts has kind of gone through, but the macro environment is still choppy, quote, buyer scrutiny remains high. So I'm just kind of curious from where you sit, what is the state of the B2B software buyer today? And how quickly is it improving or getting more healthy or not? So I think you had a lot of software buying back in 2020 and 2021 that frankly just didn't get any scrutiny at all.

1:01:43So as long as you justify it, you could spend crazy amounts of dollars on it. I think what has changed is that people now want ROI for their software. They want to make sure it's addressing their top priorities and they're not going to spend anything on whatever it is that's out there. And so I think that's going to continue. People want to make sure that they're getting a real return for what they're doing. Now, the great thing is data analytics and understanding the user journey. That is a top priority of almost every single company we talk to out there. And so whether times have been good or whether times have been bad or wherever in between, there's going to be a lot of demand for what it is that we do.

1:02:24And so we're going to be out there selling it. I just realized something, though, about what you just said, which is that in a higher scrutiny software buying environment, the fact that Command AI was growing as fast as it was is actually more impressive because they're not growing that fast in 2021 when everyone was just taking bricks of cash and going, whee, sass. Let me tell you one of the most impressive things, actually. So Command AI was the number one rated on G2 against much, much larger companies because that experience you saw, you can't get that experience if you're using the top guides product or the top service product or someone else out there.

1:02:59So it's just, yeah, what they have done is incredibly impressive and we're excited to work with them. All right. James, how much money did you guys have to pay G2 to get that top of the pyramid ranking? It's a beautiful grid. I look at it every day and I hope the whole software market does too and that's what we call a very polite dodge by GeoFriends anyways Spencer James thank you so much for coming on and Spencer just drop for people Amplitude's website socials Amplitude.com or follow me on Twitter at Spencer Skates critically Spencer with an S S yes if you try to see you will not find him because Twitter search is garbage but guys thank you so much congrats on the deal and Spencer I will be tuned in to all your earnings reports as always.

1:03:40And I'll talk to you in early January. Sounds great, Alex. Thank you so much. Awesome. Appreciate y 'all. Bye, everybody. Bye.