VCs Would Bet on Open-Source AI Over OpenAI and Anthropic | E2341

28:34And boom, suddenly you're dead. And so I don't know what's going to happen to instinct. But if I'm them, I'm really worried about news. Yeah, I'd say like, they're like, we shouldn't, you know, the audience shouldn't confuse, you know, a fast funding round with like a real business or a signal around that, right? Just because there's a markup, it doesn't really tell you much about the business, right? So it does tell you about the competitive, you know, tension among a small number of funds, right? Who believe that agent products are kind of, you know, the next platform shift and they want to get in it.

29:06So I think that's, you know, what the message is. And that was kind of your question, Jason. And we haven't seen anything sort of super interesting in like consumer for a while. and so I think it's just that when you add FOMO, fear of missing out and the fact that for once there is something which seems to be so interesting and the founder seems to be very compelling. They're just pulling a bunch of money and Clubhouse is a great analogy, right? They got to 1 billion in valuation, then 4 billion in valuation and then Crickets, right? I think this is different. I mean, I think we were all around for like Clubhouse and Meerkat was another one that was in this category of like super big flash in the pan.

29:45But the valuation for NSYNC, I think people are underwriting a major acquisition. It happens to every business at some point. You're nearing the end of the month or maybe it's the quarter and your sales team is at risk of missing their quota. You could waste days pulling together data from across the entire organization or you could just ask Rippling AI. Rippling's already built on your real-time people and business data, obviously. So Rippling AI can pull metrics from both Rippling and your CRM into a meeting-ready dashboard. See exactly how close you are to hitting that quota. Break down your revenue by region or sales rep or more, all in just seconds with Rippling AI.

30:22Look, you're running a company, you're busy, you have critical questions that you need immediate answers to, and you can't just file a ticket and wait a week for your team to get around to sending you a report. And you don't wanna sit around waiting for reports. We need an actionable insight right now. So if you're ready to rule your business, head to rippling.ai slash twist to get the only AI bill to give you full visibility and let you take complex actions across your startup. Is that a good way to be an investor is to invest at an incredibly high valuation hoping for, I don't want to say greater fool, but a desperate acquirer?

30:57No, no. In this particular scenario, yes, as long as you believe that instinct is a real product because the competitive options there are ones that are already owned by major distribution platforms like OpenAI, Anthropic, or... So OpenAI doesn't need to buy this. Meta doesn't need to buy this. Grok doesn't need to buy this. Anthropic doesn't need to buy this. So we're leaving Apple, Google, Amazon. Microsoft. Microsoft, Google, and I would say Apple. But at what price? If you're coming in at a 10 billion valuation, I mean, do you think they're going to buy it? You pay as a percentage of your own distribution, if it's good enough.

31:38Well, as long as there's one other buyer out there, then you have a competitive option. See, I think, Jenny, you're making a very important point here. Give it to me one more time and explain your thinking behind this acquisition price and the distance between these two things. I mean, everyone's squinting when the market's like this and says, well, the exit opportunities are just that much bigger. But we haven't really seen that. So if you come in at a$10 billion - Wait a second. Yes, we have. We've just seen a couple of examples. Cursor. Cursor had$2 or$3 billion. And they got valued at 60. This has zero and is at 10.

32:12Again, you're going to be basing this on the acquirer's distribution and ability to monetize. And I think you can see that Meta's already got a shit ton of usage. And it's a pretty decent product right out of the gate. Jenny does Muse's success and Zuckerberg's unique ability with his giant ad network to monetize this with advertising and never have to charge for it. What does that say about the business model for instinct here? I mean, to Jeff's point, I would be worried, right? I mean, threads, aren't there like 500 million people that use threads? And that's not, you know, a great product, I would say.

32:53It's a derivative product. Yeah, exactly. So I think, you know, just the ability to reach eyeballs is pretty strong here. So I would be worried about the long term if I was going in at a 10 billion valuation. See, I think the way I would like this. The other worrying thing that we heard is that they are burning so much cash on compute. And you wonder why, because the product is fairly simple. They are burning so much cash on compute that they need to raise, you know, on this next round. Almost like a few weeks after closing the previous round, right? And they're stage gating and they're limiting the number of people who can use it.

33:27And so I don't know whether it's an engineering issue or it's a really complex set of complex tasks that they're getting the agents to perform. But it's really surprising that they're leaving money on fire the way they do. Well, I think the founder came out and said that he just didn't want to charge people. So I guess that leaves advertising down the road. That's the issue with consumer internet. It's very hard to get people to pay. I don't think anybody's worried about getting money out of this right now. I mean, WhatsApp was acquired 10 years ago. Is it monetizing yet? They did actually have.

33:59They were advertising a dollar per user and had 600 million at one point, right? They had a really clever use thing there. Here's what I think. When you look at this, a couple of things can be true. And looking in the history, it does rhyme. This is a smart move by the founder to make hay while the sun shines. If you can take a billion dollars and put it in your bank account, then you will be the consolidator of the people who run out of money. And you have, what, three pivots in you, two or three major pivots in you, or brand extensions. So you can play the long game, even if you're burning a lot of compute.

34:37But number two, when a price gets this high, to Jenny's point, if Instinct is at$10 billion now and you have Muse in the market, then you're going to push the potential acquiring folks to say build or buy. And Twitter offered$4 billion for Clubhouse, I believe was the rumor. They did not take it. Huge mistake in the history of Silicon Valley. Like one of the biggest mistakes ever. It was an 18-month-old company at the time or 12 months. Friendster acquisition by Yahoo. Okay, listen. We got really old people on this podcast. So Dave's got 30-year-old opinions here. He's got the receipts from 30 years ago.

35:19Greatest non-acquisitions. Like fab.com was a, I remember Shervin or somebody was like, I own 7 % of fab. It's worth$2 billion. We got$140 million position, if my memory serves me correct, back in the day. Went to zero, I believe. it was like part of the fast fashion, fast commerce category. So the issue here is at 10 billion, you have to be purchased for 20 billion at a minimum. That would then lead Apple's board, Microsoft, Satya Nadella. They would just say, well, wait a second, what can we build for that amount of money? Let's offer, you know, people$10 million, you know, salaries,$25 million salaries and let's just build this ourselves and go long on it if we actually believe in this.

36:05It's not, entry price matters and this is now breaking entry price metrics, but I wish them well. Anybody can think of a big miss? I gave Fab, you gave Friendster and I also gave Clubhouse. I mean, Fab never had an acquisition offer. Google, Google itself. It just had a crazy valuation. Were you also an investor? Yeah, I was, you know, I was in the seed round. So they went from zero to a billion in like a couple of years and it was the darling. But the problem is that the economics just didn't work, right? They never had. And if you had sold that, what impact would that have on Cork? I mean, it would have been great.

36:40Two or three, whatever it was in. It would have been great. But like we never got to that position because investors just looked at the numbers and they said, this is just not sustainable. That's the issue when you actually have numbers to look at. In the case of Instinct, they don't have any revenue. They barely have any users, the 100 ,000. And therefore, it's all about dreams, right? And if they're raising like three weeks after they raised before, you don't really get the retention data either on those 100 ,000, right? So I'd say that's an issue as well. Yeah. I'm a skeptic on this one. I think there's real value on the table here.

37:18And it's just based on the monetization or potential of the acquirers. And acquirers are substantial. Like Apple, Amazon, Google, Microsoft are all potential acquirers. and they definitely need the product. The rumor I'm hearing with Google is big Frontier Model News coming and some other consumer products coming. They've been kind of laying back because they're conservative. They don't want to release broken products given lawsuits that they get from large governments and just their reputation. They're kind of moving slow, but there could be significant things dropping. And if you think about the Muse opportunity, they have it sitting right there in our data.

37:55Yeah, Gmail, Calendar, Docs. They have it sitting right there. Google might be able to build it themselves. Google might be able to build it themselves or modify Gemini. But I think Apple and Amazon are definitely, you know, they have to have an agent product. And they don't right now. I had an opportunity to invest in Fab.com, Jeff, when it was a gay social man's dating site. Oh, okay. I was waiting for that one. I said to Jason, got Jason's last name. I said to him. Jason Goldberg. Jason Goldberg. I said, Jason, I'm on your gay dating social network. I created an account and a profile. This thing is the best designed social network I've ever seen.

38:36That was why it was interesting. That was why it was interesting. This is incredible. And I'm getting a lot of pings here. And I am gay kryptonite, according to one of my gay friends who dubbed me as gay kryptonite. Gay guys would be like they would lose their gay power if they were in proximity to me. I thought that was the funniest line ever. I said, if I can do this well on a thing, and then I offer him 50 K, you know, whatever, $10 million,$20 million. I actually comes back to me. Jake, I got a better idea. And he gives me this idea. And I said, yeah, I don't want to do e-commerce, not my wheelhouse, but I wish you well.

39:09And I transitioned from gay dating site to fashion design marketplace. Actually, not, not quite a stretch. Yeah. Not, not as much as a stretch. they had an amazing taste, that's for sure. And the website was stunning. Unfortunately, it's the business which wasn't sustainable. It wasn't the concept. They just had to sort of figure out a way to make this venture work. What were the other ones? Vente Privé was the French one. Vente Privé was the big one. Jacques-Antoine Conjon was extremely successful. I don't know where they are now, but they became like a monster. And then there were two or three others in the United States that were in this fast fashion flash shells.

39:51What were the other flash shell ones? They all went to a billion. Guilt. Yes, guilt. There were other flash shell ones. Incredible. Jason was always a snappy dresser. No, I wasn't always. My wife sat me down. Oh, no, no, no. We need to be. Jason Goldberg. I meant, sorry, the fab.com founder. Oh, okay. Not for you, Jason. Sorry. Not gay kryptonite. You know what my wife did? she said to me, Jenny, we need to get you a look here. You're out in New York, black t-shirt, black jeans, black blazer. It's a little bit repetitive. I said, okay. She said, you got to find a style icon in somebody. I said, yeah, I found my style icon.

40:31She said, who's that? I said, Daniel Craig. She goes, yeah, perfect match. That's it. Then I went and got Tom Ford and I literally found every single thing he wears in the James Bond. I just bought all of them. And did you also hit the gym? Shaken, not stirred. Yes. I lost 40 pounds and I gained 10 pounds of muscle. And yeah, I mean, I'm not. Listen, I'm not coming out of the ocean in like mankini like him with a knife on my side. Yet, yet. But next summer, I may be in Saint-Tropez with Jeff Clavion. Wow. And there we go. And we might come out in our dueling. Yeah, do not make. I'm just going to warn my super fans.

41:07I don't want to see an AI video of me on Daniel Craig's body coming out of the ocean. I think that's great. I actually have a question for you, Jason. You're a big OpenClaw guy. So are you guys going to move to Muse? I mean, isn't - We gave up on OpenClaw. Oh, okay. We gave up on it. Well, what happened was we had four people, three or four people in the organization who were technical enough to do it. And then all of a sudden, Claude, co-work, perplexity, computer. We started having other options, and those were easier to use. They were delivering faster, and we went from three people in the organization using them to, you know, I have like 20, 25 people here, you know.

41:47So all of a sudden it went to like eight or nine people. So the ease of use took over, and now nobody's even thinking about OpenClaw anymore. I have three or four people who are addicted to GrokBot, and the restaurant clawed code. I use Perplexity as well. And then now Lovable, we're actually building intranet software. So we've built what was the, Jeff, do you remember what was the VC SaaS software? I think Joe Lonsdale created it. Adapar maybe? Adapar, was that it? There was a bunch of VC software. Yeah. For fund management. Which is the reporting. Adapar was reporting, and I thought he had another one, which was like deal flow management, all that kind of stuff.

42:36My guys, in like three weeks, we had 20 ,000 applications for funding. We have everything organized now, Jenny. We have AI, so we can go into it and say, what are the companies in defense tech that we met with, didn't invest in, who subsequently raised a series B? And please put them on a list. I'm going to email them and talk to them about the syndicate and try to make up for the missed investment we did. Give me the notes of who met with them in the firm. No, I'm seriously doing this. We're doing the misses. So we missed Zipline 10 years ago. That's a great use case. That's a great use case.

43:10We missed Zipline. Keller came on the podcast multiple times. I was absolutely enamored with him. And then I have the syndicate and we invested in their last round. It was a couple of billion dollars. Look for all the emails that I didn't respond to where there was an institutional round that happened after I got the email. So that would just be like the most painful like analysis. Oh my God. Wouldn't it be? So many companies that I go back and like, oh yeah, that founder emailed me and I didn't reply. All right. Let's go. Let's keep moving here. The docket. OpenAI and Anthropic both shipped new models yesterday.

43:42They did it hours apart. But here's the important part, Jeff. We always talk about profitability. Is there a business there vis-a-vis our discussion on fab.com? We're going to build on that. They both cut prices meaningfully at the same time. OpenAI is GPT-6, Sol, and Luna came in about 50 % cheaper, with Sol at$2 per million tokens. Anthropics Claude Opus 5.5 matches Fable 5.1 while costing 40 % less to run than Opus 5. Neither a big capability jump, but both of these are massive price cuts. And what are your thoughts here, Jeff, on selling tokens, the token-selling business in the age of open-source models?

44:23well it's a race to the bottom that's sort of the issue so you have all the funding that they raise that essentially is sponsoring all those all this usage right and they basically sort of predicate their future to their ability to raise the next round so that they can continue sustaining like the fact that they're losing a bunch of money as soon as someone uses their product and unfortunately like they're getting to a point of The cash needs that they have are such that you wonder if they're going to be able to raise more capital. I'm sure they will, but it's just insane. So it's a race to the bottom.

45:04At some point, you wonder what token price is going to be. And that enables our startups to basically sort of use their compute at a much lower, artificially low kind of price. but we try and figure out, okay, when we invest in something, what is the true cost of compute? Because you can't find yourself sort of upside down because if ever for some reason your compute costs are increasing by, you know, two, three, four, five, you may have a product which was actually generating margins and made sense that no longer makes sense. Well, your margins go up temporarily, but your competition goes up as well.

45:43So I think that's the problem with this. I mean, it sounds like a great thing, but ultimately your barrier to entry, other barrier to entry, goes down as the costs come down as well. What are your thoughts on this business, Dave? Is it a great business, a good business, a TBD business here with all this headwinds? One of the routing companies, I won't say which. I don't like to give these plugs for all these people now doing data and then pitching my people constantly, producers, to get free ads on the program. So now I just abstracted one of these web providers. 80 % of tokens being tracked by this one web players, routing companies, open source now, Dave.

46:27So you want to be in this business or not? All right. So here's your open versus closed token volume. Open weights, open models, 78%. Closed weights, 21%. Dave, tell me what you think about open source and the impact on frontier models. And let me ask it to you in a very direct way, with your own family office money, with your own money, would you put a bet, if I had to put a gun to your head, you know,$2 billion frontier model company like Anthropic, let's say, you know, 20, 30 times revenue, or you could just put the money into an index of NVIDIA, AWS, you know, and the infrastructure companies.

47:11Where would you put your money? Which is a way to say open source, open tokens, infrastructure versus frontier models. Where would you want to put your entire net worth if I put a gun to your head? Probably 50 % index on open weight models and then split my closed models, a third, a third, a third between Anthropic OpenAI. If you could only pick one side of the bet, I put a gun to your head. Dude, I don't have to fucking play by your rules. I'm a venture capitalist. I could make diversified bets. Way to kill the momentum of the show. Jenny, let's see if Jenny goes. Okay. I go all open source. Jenny goes open source.

47:44I go open source too. I go open source. Infrastructure open source. I think they're going to get crushed. Say more, Jenny. Here we go. Well, there's no rules around open source. You can, you know, the existing models can say they want to slow down. They can change their pricing. The open source guys can do whatever they want. And they're just going to be at the end of the day, consumers don't care. They just care about price and quality. And they're so close to catching up that we're going to go all open source. Most applications don't need the latest and greatest features of those latest models.

48:16And so when you have and the problem is that the model has to figure out, well, is this a complex task and I need to actually send it to like this model, expensive tokens and so on and so forth. or can I send it to a lower cost, easier, you know, kind of routine? I don't know how they do that because I'm sure that it's a genuine issue for them. Like, not that many people need those kind of latest models. They need it to compete against themselves, but most applications are fairly benign. Okay, Dave, you're my cleanup hitter here. I always put you right there in the fourth slot there. Does my, no, I'm seriously a home run hitter.

48:52You have lots of bangers. So you heard all of our positions. I would go 100 % into the hardware stack. I think the frontier models are trouble because I'm basing it on what I see on the field vis-a-vis my startups are all going open source, do not want to invest in the frontier models anymore. And then I talked to 11 Labs. I talked to Lovable. Those CEOs indicated to me that they are also following suit, Figma as well. They don't trust the frontier models. They think they're going to be competitors. What do you think? Closed this conversation up for me. I think you're right that there's going to be growing revenue coming from open-wave models.

49:27Right now, open-wave models have taken over a majority of token usage. That's been clear since earlier this, I think, second quarter, but definitely - Yeah, 74 %-ish. Yeah. But I don't necessarily feel like OpenAI and Anthropic are going to slow down and generate revenue. They might have margin issues. they might, you know, in particular, I wonder if OpenAI's, you know, bets on, you know, their spending in the future, which is a lot of debt, they do have to worry about who's going to be able to pay that debt, even if, you know, Papa Jensen is backing them up. But I think, you know, if you're making a bet on OpenWay, you're probably just making a bet on NVIDIA, right?

50:07There's not a single bet that you're able to make right now in a company that's like, hey, let me play the field. So I still think, you know, and actually, actually, I might even wonder if, you know, SpaceX becomes, you know, that platform for open weight models. So maybe your picks and shovels, you have two bets. You could bet on NVIDIA because they're dominating the market, but you could also bet on SpaceX being, you know, a little bit of a step up the ladder from just Jensen's play, if you believe in open weight. But I still think that both OpenAI and Anthropic are going to do fine. They're going to be growing revenue.

50:40They're both going to go public for, my guess is, Anthropic at least$2,$2.5 trillion and probably, opening eye,$1.5 trillion. Whether they keep growing at that rate and whether the growth in the future, I do wonder maybe the growth of market cap slows down. See, this is interesting, Jenny, because we do have a corollary here, which is SpaceX's IPO, which had a major bump, a pullback, and then it came back. So it's kind of was priced to perfection, I think would be, you know, what Bill Gurley. Only because he pulled a rabbit out of his ass there. Well, you're talking about the cursor acquisition, perhaps.

51:18And no, well, yes, right. Services, EWS, where he's got 20, 30, 40 billion dollars in compute. Whatever you want to call that. That business did not exist nine months ago. Like that is the most fucking crazy shit is that a 23 year old company does a massive pivot. And in less than a year, you know, a business that didn't exist becomes the majority, a portion of their revenue. Like that would be like insane. It would be as if Amazon in one year added AWS or something, you know, right. They were just selling books and cables, Jenny, and then all of a sudden just fell in their lap, the AWS, which, you know, it took them a decade to build up that AWS revenue.

51:57But in all seriousness, these valuations are 20 to 30 times top line revenue, Jenny. These things will be priced to perfection. They won't be a very good bargain for public market investors. How many years will it take them to fill in that valuation if they go out at that 20 times top line revenue in your mind? And would you advise family members who might be calling you, like, should I buy Anthropic and OpenAI? Like, what's your instruction to them? I'm a seed stage investor. I'm a pre-seed investor. What do I know about the public markets, Jason? No, it seems crazy to me. Gotta get in early, right?

52:31So I would not advise people to buy right now, even though I do think there is potential there. I think we're going to see ups and downs. Jeff, what are your thoughts here? You're in the family office stage of your life as well, having done particularly well over the course of 30 years in venture. So what are your thoughts here in terms of owning these incredible companies with incredible leadership, with incredible products, with incredible growth? But man, they are pricing certain public stocks, whether it's Palantir, Tesla, SpaceX, OpenAI, and now Anthropic. They're pricing them like venture investors would, but as public markets.

53:14I'm still looking for my entry price in SpaceX. So I haven't bought SpaceX. I want to own SpaceX, but it's too expensive right now. Like I don't know what my buying price was. It was like probably$1 trillion. I would buy like 2 trillion. Nah, it's probably ridiculous. But like the goal of the family office is not to make bets that are potentially many losers. The goal of the family office is to not lose whatever we've made so far, right? Preservation. So that's why we have a financial advisor who goes into like these days invest in energy. Like energy is interesting, right? We invest in things which are a bit more sort of peasant and predictable because everything I do at Uncork is still sort of pretty insane because we have to deal with this environment where every valuation we look at is absolutely insane.

54:07Interesting chart from a company that tracks cap tables. I'll leave it at that. I won't tell you which one. No free ads for these guys anymore. Enough. But here's seed valuation according to a source. It's a limited data set, but it is a data set nonetheless. Man, 2017, you had seed round valuations, you know, 50th percentile was 8 million. 50th percentile is now 28. And then you get into the, you know, 75th percentile, we are going from roughly 12 to 54x. And in this elite, 95th percentile going from 25 to 209x or 8x exactly sorry uh so is it possible jeff in your experience to make money in this environment as a seed stage investor and if so what do you have to do in terms of discipline to not overpay and wind up being 1x as a fund which is death The way we have adjusted to this environment is basically continue investing at higher and higher valuations.

55:18And we don't want that, but that's what we have to do in order to win those deals. When there is a company that we believe is interesting, that the founders are exceptional, that the product is very differentiated, and we think there is an opportunity to build an iconic company, then we're going to say, well, we want to own 10 % or 12 % of that business. And I'm going to write the check that allows us to do that. And the good news is having been around for so long, we rarely sort of lose deals. The only few times we've lost deals recently is when a multi-stage fund, so someone who has, you know, multi-billion dollar kind of pockets that can invest at seed stage, series A, series B, and so on and so forth, come in and write a$10 or$15 million seed check at$100 million or more valuation.

56:09And in that case, we just go out, right? Because as you said, the big issue is, in order for us and our economics to work, we need to be able to return, you know, ideally the entire fund or half of the fund, our fund is$300 million,$150 million on that one single investment, which means that if we plow$5 or$6 million into it, we need to make a 30x. And 30x on the valuation, which is already pretty high, means, oh, this is a multi-billion dollar outcome. Like right now, unless you sell something for$10 billion, you barely sort of make money, which is insane, right? Yeah, at the seed stage. So if you come in at a 24 million post, which I think was the new number for seed, like you're expecting Decacorn exits.

56:55So that seems like if you do the math, That's pretty shocking. I think we also have to consider time frame here. It's not just multiple, but what time frame does it take to get that multiple? This is a very, I think, challenging time. And I look at my investments during that SaaS peak ZERP, and we tried to be net sellers during that period. And we had a couple of great exits. We were able to sell in secondary to the TPG, Tiger Cubs, whatever, the people who dipped down. But man, if I could replay that, I would have pushed harder to sell more at that unreasonable peak. Which means if you were to fast forward that to today, Dave, you would want to do that at this moment in time based on your new business, which is your, as I jokingly said, the last time you were on a strip minor, you like to pull the strips out of our previous - I prefer used cars.

57:49We buy used cars in good condition. They just happen to be startups or folks. You buy collections of used cars. Let's be clear. You find the rich old guy who's got a barn collection of Ferraris and Corvettes. You go to his widow and you try to get them to give you a really good deal knowing there's like a Ferrari from 1965 in there. That's the big winner. And the rest might be just one X or two Xs. I don't think we're trying to take money from widows. That's not our general game plan. But I would say – but the point is well taken that there are assets. It's, again, the top 30 names, it's a seller's market for those assets.

58:26If you have positions in Anthropic or any of those companies, even not Anthropics, let's just say, you know, Andurals and, you know, Stripes and Databricks and all those companies, they can set the price, right? If you go outside the top 30 names, there's not necessarily a market for the names. And some of those companies are doing a couple hundred million in revenue, growing 40, 50%, profitable. There should be a market price, but there's no data on that company for the average retail investor, and there's not people going to buy those companies. So it's a buyer's market for a lot of the names that are outside the top 30, if you know what you're doing.

59:03How do we get companies 31 through 250 to get on the radar? Because the opportunity is probably in that group, is it not, Dave? It is, but the challenge again is transparency and liquidity because most of those companies are not publishing their numbers. Should they? Should they create a market? Well, that's a really interesting question. Yes, there's an interesting question there. Theoretically, cost of capital would be lower if they were more transparent, but you have to play that against the cost of being public and that's expensive. And so that's why companies aren't going public until they have half a billion dollars in revenue.

59:43I talked to a CEO the other day who, you know, I won't name the company, but they're doing more than half a billion in revenue. And I said, when do you think you would consider going public? He said, not until they're doing$10 billion in revenue. And I was like, wait, did you mean$10 billion in market cap? And he said, no,$10 billion in revenue. And, you know, I actually think he's not being insane because he probably can get there. But he was basically suggesting it be another five years, you know, before he goes public. For a company already doing half a billion in revenue profitable. So that's the market conditions we have is all these companies, we talked about this last time, all these companies would have gone public 10 years ago at 50 to 100 million in revenue.

1:00:22Now they're not even going public until they have at least a half a billion to a billion in revenue. You have all these now private companies, which like you said, are great opportunities, but there's no reporting. There's no disclosure in reporting unless you can get access to their numbers. And so that's the arbitrage is, yeah, there's a lot of bargains out there as long as you know what you're buying. And the problem is that because the market is not ready to get anything below half a billion dollars in revenue and, you know, even that question of whether they would actually go public today, then you have thousands of companies which are kind of stuck in the middle, as you call it.

1:01:01and unless you're lucky and someone sees the potential and comes and acquires you for like 10x revenue that's what happened to us with drone deploy which is a company i invested in 13 years ago and we had like a great exit return have the fund to investors that that's how we make money as as venture investors right but like for one that we managed to exit at a great multiple you look at Bending Spoon's average 2x revenue multiple that they pay when they buy something which is making$4 to$500 million in revenue. It's a disaster for the investors who are involved. Those companies are getting written down by 80 % to 90 % from their last round mark.

1:01:41But do you guys think this is going to change when Anthropik and OpenAI go public? Do you think the floodgates are going to open? What do you mean? For other secondary startup purchases? Well, you take the top two out. The top two represent 50 % of the demand. I'm picking a number out of the air here. No, you're right, Jason. It's pretty big. Half the market is five companies. Remember that SpaceX, Anthropic, and OpenAI will essentially raise in the public market more than all tech companies have raised in the last 45 years. More than 5 trillion. More than 5 trillion. The numbers are just insane.

1:02:17Insane. And what's really interesting... But there's still going to be three to five trillion of other assets that are private. It won't be concentrated in as many companies. There will be more. But I still don't think we're going to see everybody start buying company number 140. They're going to be looking at Andrel and Stripe and Databricks next. Maybe they'll expand their aperture to like 20 or 30 companies. But again, there's no disclosure of information. the average retail buyer is not going to be looking past, you know, company number 30, maybe number 40. And that's where the buyer's market is if you know what you're doing.

1:02:58We've started a process here. If you go to Twist 100 to try to address this. So I'm having my team just make our take on the top 100 companies here. and we're going to keep editing this as a list and come up with some ways for the community to participate in them and try to find the latest prices and have discussions. So if anybody has any ideas, we vibe-coded Twist 100. We're also using that for our topics as a way to get the topics going. I love that idea, Jason. We did a very similar exercise as well. Oh, did you really? And that's at Practical? We used Augment's numbers, but yeah, we re-host the top, I think, 40 companies.

1:03:44Got it. Okay, there you go. But it's interesting. It depends on how you do that rating. And, you know, it could be based on revenue. It could be based on growth. Revenue, valuation, total amount raised, likelihood to go public. Demand in the market. Oh, demand. Action in the market. That's a good one, yeah. Secondary is... I think right now what the key question is, will they be sort of acquired? What will be sort of the potential multiple? we've seen quite a few early stage acquisitions. And for the old parts on the podcast, that sort of reminds us the early days of Web 2.0. Because I mean, Jason, you were acquired early, right?

1:04:23By OL. Weblogs Inc, 30 million, which at the time was a lot of freaking money. Back in the day, like 2004 to 2008, 2009, we saw a ton of companies being acquired for like really good multiples didn't have much revenue but those those acquisitions the the 30 million dollar for user plane or for weblogs inc or the 50 million dollars delicious flicker delicious flicker all those you know at that time because we're ambassadors tripped down memory lane yeah in in the early days at low valuations we made a bunch of money right yeah and 20 30x Yeah, you didn't come in at 24 posts. Mark Cuban invested$300K for 15 % of the company.

1:05:09And he gave us$300K. And under 18 months later, we gave him back$5 million. So he was pretty excited about that. Didn't move the needle for him. But I went to him and I was like, we just got a$30 million offer. He said, take it. He said, how much money did you have in the bank? I was like, negative$30 ,000. I just bought my wife a$20 ,000 engagement ring. and I've been floating the sales guy's salary for WebLogs Inc. on my corporate card. And he's like, what is the question again? I'm like, can we sell? He's like, what's our revenue? I was like,$125 ,000. And we have like two other contracts coming in for another$125 ,000.

1:05:47And so they paid 300 times revenue. And there were all kinds of headlines at the time. AOL is the stupidest company in the world for buying 95 blocks. from JCal. Take the money, buddy. And I was like, you know what? I'm negative 30. I said to my wife, okay, I'm taking this money. It was me, Brian Alvin, and Peter Rojas had a piece and we splashed some cash around for the rest of the group just as like a mitzvah kind of situation. We had some great deals. Slideshare, Mashery, and Mint.com were all great. Only$100 million, $200 million exits, but they happened within five years. We're starting to see those kinds of early acquisitions again in an era.

1:06:28The valuations aren't the same because the entry price is higher. We don't always sort of make the same money. But at least we've seen more acquisitions. We've sold about$1.5 billion worth of stuff in the last three, four months, which hasn't happened for a while. Three, four months? Yeah. A billion dollars in the last three months? And it's been a pause for five years. Yeah. No wonder Jeff is starting a new wine company. It has nothing to do with it, but... I'll tell you what it has to do. Oh, yeah, right. Sure, sure it doesn't. Sure it doesn't. Jeff is now in his 50s. He's got a certain amount of time left.

1:07:03And he says, hey, third act. I want to be able to have my own side quest. And that's wine. And I think it's fantastic, Jeff. Tell us a little bit about it. Cheers, bitch. Well, it's not exactly that. But basically, after 21 years running Uncork, I've asked my awesome co-managing partner, Andy McLaughlin, to take over the firm. so i'm no longer running uncork he is i'm now the founding partner which means nothing which means i can do whatever the i want um and that means i continue investing in deep tech which is awesome i'm heading you know an absolute blast but my wife and i decided to leave california uh which we did five months ago and we moved to a small town called walla walla washington which is an incredible place.

1:07:52Lots of wineries, awesome people. They don't care about tech. And we've opened a small winery called Clos Clavier, after our name. I didn't name the firm, you know, us, but we named the winery after us. And we just put our first couple of wines on the market. And they're absolutely fucking delicious. I'm super proud of what we've done. So great. Well, tell us which bottle we should buy. Oh, so go to wines and you will see we have, so we named our wines after terms of the VC industry. So we have Series B, our red wine. Hey, you want some liquidity? Jeff's got liquidity. And wait for it, the next one is called carried interest.

1:08:40So you'll be able to buy our carried interest later and it will be an exceptional wine. On the left, we have, you're big fans of Spanish wines, and you decided to recreate that flavor profile. Is this a Cabernet? It's a Grenache, Cabernet Sauvignon, and 12 % Syrah. Typically, it's Carignan, but Syrah is what we decided to use. What's the flavor profile? What am I going to get on the tongue there? and then what would I pair it with? It's very Grenache-y, so lots of red fruits, sort of a lighter, very easy to drink, awesome sort of wine, very, very pleased with the work. You put that with some chicken or something, or roast chicken, or a steak?

1:09:24Yeah, chicken or pork. No, steak, I would still use something heavier, like Cabernet Sauvignon, typically our carried interest will be perfect for that. And then the inspiration for the white wine, which is 100 % Duonier, is French Convrier. Absolutely. Wow, fantastic. This one is slightly acidic, extremely pleasing again. We just started to ship the bottles to our customers, and I'm starting to see on social people enjoying our wines. It's really awesome. But to be clear, 95 % of my time is deep tech for Uncork. Got it. Okay, well, to my team, I want a case of each, please, to my team, order it immediately.

1:10:09And then I want everybody on the staff to get to take a bottle, okay, from the office. Thank you. Thank you. I'm ordering this for the staff. And when we have our staff dinner on Wednesdays, we have our management team meeting. Maybe we'll crack one of these open, do a little taste test there. So do me a favor, just decant the Series B for at least an hour so that it opens up because it's still very, very young. So you will enjoy it a lot more if it's decanted. Love it. This week in Wine is now, it's a first episode here. All right, as we wrap here, I want to talk about investing. I'm going to dovetail two things, investing in unpopular categories here.

1:10:44Maybe, you know, people are obsessed with agents right now. They're obsessed with on-prem models. We have a great investment in GoAI, et cetera. Training data, got a great investment in Micro One. We got some great investments there, but they were made three years ago. So, but today, Dave and Jenny, where are you looking where there's not a lot of people looking that are not the obvious categories, Dave? Is it possible to invest in 2026 into 2027, the year of our Lord, my brother in Christ? Whether you believe in Christ or not, we are still brothers in Christ. That could be a lowercase c if you like.

1:11:24But my brother, where can we find value going into 2027? Well, Dave just told me that fintech and healthcare were no-goes. These are not sexy categories. That was news to me as a fintech and healthcare investor. They're not no-goes for us. I'm just saying that other people don't seem to care about them. I know. It's insane. How could they not care about fintech when my Robinhood investment, I wake up as a... I own more Robinhood shares now than I did when it was a private company because when it hit like eight or nine dollars, Jenny, I was like, wait a second. This stock is mispriced. I'm going to back up the truck.

1:12:01I bought a bunch at eight or nine dollars, now at over a hundred dollars a share. I, without getting into details here, but I'm making a significant percentage of my gains in Robinhood as a public market investor now, like double digits on my returns. And I invested before it was released as a product. So maybe talk to us about why people are missing fintech specifically? Well, get this. I talked to one of our portfolio companies today at the intersection of fintech and healthcare. They raised like a 2 million pre-seed and they've been just crushing it. They're doing about 3 million ARR. And they kind of tested the waters on a Series A and that was like no-go.

1:12:41Everyone said they didn't like the margins, the categories, there was a million reasons. And so now they're going to kind of raise like a 3 million seed. And actually, I mean, they just started that, but they don't think it's going to be as easy as they thought. So that's pretty surprising, right? A company that's done really well in the last two and a half years has gotten to like a pretty significant run rate. So it hasn't been like an endless amount of time in a category that, I mean, may not be sexy now. But I think, you know, we all agree these are massive markets, fintech and healthcare.

1:13:12And great founders, technical founders. I mean, literally check every box. and no one was interested because they weren't growing at, you know, 500X, right? And they weren't in a category that everyone loved. And I mean, I was surprising. I think the founder even said 18 months ago, I would have gotten a Series A done. And now, you know, they're kind of just like, oh, we'll raise 3 million and then, you know, we'll get to a real city. So bridge, they're just bridging it, internal team, internal investors doing the majority. They'll get one new investor, but that's pretty shocking to me to be doing, you know, 3 million ARR in great category.

1:13:47What's the lesson for founders? What's the lesson for founders here? The lesson is timing. They should have raised 18 months ago, honestly, because they were kind of the darling and people wanted to give them money and they thought, okay, we want to get from 1 million to 3. Obviously, that juices the valuation and that was a personal milestone that they wanted to hit. But timing is everything in this business. So that was the learning. In this environment, if someone wants to give you money, take it. Take it. Take it. the lesson and if you're not raising then you know sort of figure out how to raise whether it's a it's a safe whether it's whatever but the issue that we have is as the people who help founders figure out their fundraising strategy it's never been harder for us to figure out when and how much to raise because of what Jenny just described we have we've had a lot of fundraising happen at Series A and Series B, but it's sort of unpredictable, meaning like it happened, awesome, but could we have sort of had the foresight of saying, yes, this will happen?

1:14:53It's easier when the companies sort of raise a growth round, like today Numeral, one of our companies is announcing a hundred million dollar kind of Series C from Insight. I mean, it was clear to us that they were going to raise, we just didn't know the valuation and the actual size. But given the company's progress, which is very, very quickly sort of growing to tens of millions of dollars in revenue, like it's predictable. The issue for most founders is if you show up with a triple, triple, double, double, double, which guaranteed you financing three, four years ago, right now, nobody cares.

1:15:31Nobody cares. It's kind of pushing founders to teeter on the edge of profitability, or at least being able to get there. And so that also isn't great. These are seed stage companies. is we want them to invest and grow and they feel nervous because the ground is so shaky. Here's my best advice to founders. I always tell this to founders, Jenny. Are these good terms? Is this a good investor? I'm sorry. Is this a good valuation? Is this a good investor? And are these clean terms? Take these three circles and overlap them. And in the middle, I write these three words, just do it. Good valuation, good investor, clean terms, just effing do it.

1:16:13What are we talking about here? What are we optimizing for? And I would like to thank Gemini for making me graphics that I would have paid an illustrator$300 for and waited six weeks. I mean, it's crazy, right? Like I just made that while you were talking, Jenny. I was like, I need to like write a blog post on this or explain this to founders. I literally had this with my friend Ali at Micro One, who's been on This Week in AI a couple times, one of our, you know, like literally it's my next Uber here in terms of we were able to invest in a$12 million valuation. He gets hundreds of millions of dollars in revenue.

1:16:46He's been public about this. He's massively profitable. He's like, yeah, people want to put more money in, but we're not going to take it because we're profitable. And I was like, good terms? He's like, great terms. I'm like, good investor? He's like, great investor. I'm like, good valuation? He's like, yeah, great valuation. Good investor? No, great investor. Okay. And the term screen is like, yeah, they'll do whatever, you know, like standard paperwork. And if you look in the news, you'll see a news story. He just, I think, announced he raised$100 million at$4 billion, which is unbelievable and absolutely fantastic.

1:17:19Congratulations to them. And they were like, had more money potentially coming in and I'm like, hey, son. Hey, son. Hey, son. Make hay when the sun is shining. But Ali is young and a force of nature. 25-year-old. There he is. Wow. Nice. Congratulations. I mean, we own 6 % of the company. It's going to be a fun returner and the syndicate's going to be quite happy. if things keep going according to this. All right, we've got to wrap, guys. You have been amazing. Jenny, you've got a favorite company right now you want to give a little pluggy poo to, and how can founders reach you? You can reach me over email, jay at everywhere.vc.

1:18:08Pretty easy. I love it. And what should they include in their email in terms of a chart, short, long, deal memo? I just want companies that fit our thesis. So we do all pre-seed. We're one of the last surviving 250K. I think what Jeff did back in 2007 is what we do. 250K pre-seed rounds are usually like a million. All B2B across categories. So if you send me something like that that's focused, I'm happy to chat. So you're the last lady standing in this very important pre-seed space. I mean, it's pretty, yeah. I mean, there's like 10 of us left. Trust me, I'm on the boat. I'm on the raft. I'm like, why doesn't anybody like this boat?

1:18:53It's incredible. They hate the boat. They hate this boat. The boat's not moving fast enough. It's not big enough. I'm like, but the fish, look at the view. It's great. Jeff, you got a favorite company you want to give a little pluggy poo to? Yeah, I'm going to. How can people reach out to you with their deep tech? Deep tech. I mean, Uncork does pretty much everything. So happy to get people's email, jeff at uncorkcapital.com. and I'm happy to route to all my partners because as a firm, I invest in deep tech, but we invest in a bunch of different categories. So if you have exceptional founders building something really interesting, new, different in a market which is going to become monstrous, send it to me and I will get back to you.

1:19:38Plug to Loft Orbital, which just announced a billion dollar investment from Abu Dhabi in a constellation that they're building, which will be the largest AI compute constellation in space. They already have more compute in space than any other company that manage missions for others. I've invested in the company and been on the board for about seven years now. Loftorbital.com, super exciting. Did they start in computing space or did they start in another area? Because this has become a new opportunity, I believe. They started as shared missions. So they basically sort of get a bunch of sensors on satellites that are shared across a bunch of customers.

1:20:21And so as opposed to forcing you to launch your own satellites, you just give them your sensor, your camera, your infrared sensor, and they sort of launch it and manage it for you. So they make space look like a data stream. They hide the complexity of space. And they basically plopped GPUs up there. And that gives them the ability to take an image, run the AI models, and send you down the information, the action that you have to take, as opposed to waiting for a multi -gigabyte image to actually stream down to the planet. Okay. Very good. And Dave, what's exciting in your world? How can venture capitalists who need to raise their fifth fund and would like to clear some positions in fund one, two, and three?

1:21:14Not that I'm thinking of anybody with the initials JC, but I'm raising my fifth fund next year. That's not Jeff Clavier, by the way, to be clear. It's not Jeff Clavier, nor is it Jesus Christ, nor is it Julius Caesar. It could be another JC. But Jeff understands what we're talking about here. We get put into these short lists all the time. Jason, both you and I are going to be at the Sidecar SPV Summit in New York next Tuesday. And I'm going to be speaking about liquidity vehicles for fund managers, what I call a single asset continuity SPV. Okay. The basic concept is just selling a piece of some of your winners into the SPVs that you might be using to raise Parada so that you can generate DPI for your own fund and for your LPs.

1:22:02Interesting. And you would manage that or you would be the LP in that? Well, we might be helping to price those, but I would say that a simple way to do this is after a Series B or after a Series C within three to six months, you can use the post-money price on that round as a legitimate objective transfer price for the asset from your initiating fund to an SPV. If your LPs want liquidity, they can keep that. If they want to roll with the position, they can roll into the new vehicle. but it's a way for fund managers to generate DPI probably in years five to eight. And the important part of this is they're not necessarily selling to somebody else and maybe having a disadvantageous price or missing out on the upside.

1:22:43They can lock in some of the gains in their initiating fund to generate DPI, but they can still manage the position in the SPV going forward. We'll talk more about that at the Sidecar Summit coming up on Tuesday. I will be there. I'll be going from on stage to then talking to you. Talking. Well, no, I'm going to be in the audience for this. I want to, yeah, I want to ask some questions. And Dave had to explain it to me like three times for me to like understand it. So I will also be in the audience trying to absorb it again. But it is a very smart idea. So the other thing I want to be pitching to people, especially for anybody who has 2026 taxable events is donor advised funds.

1:23:23And Jacob, if you could show practicalvc.com slash DAF or DAF. We're actually going to be doing two education webinars on this, one tomorrow morning and one Monday morning, which you can sign up for on our site. And this is really about how to donate illiquid assets, which could be stock in a startup company or GP or LP interest in a fund, even carried interest in a fund. Instead of donating your cash, you should really be donating the assets that you haven't already been taxed on. And not all donor advised funds accept these assets, but UI Charitable, which we work with out of Utah, does. So you can get a third-party fair market value assessment for assets that you're holding, whether those are startup company equity or fund interests.

1:24:12You can donate them to your own donor advised fund and you get a tax deduction immediately upon donating, whether or not they're liquid or could be liquid in the future. And you can use that to deduct against your taxes for this year and up to five years in the future. This is really important when you have a liquidity event. So for any employees who are selling secondary, instead of selling a million dollars worth of stock and paying three to five hundred thousand dollars in taxes, you can donate a portion to your DAF and instead of sending money to the IRS, you're sending it to your own philanthropic pocket.

1:24:44You can also do that with assets that are illiquid. And let's not say that any of us are sitting on busted unicorns from five years ago, but you might be able to get a favorable valuation for that asset, which is highly illiquid. Donate that to your own donor advice fund and cut your tax bill, even if you don't have a liquidity event in the current year. But important to get that stuff started and do it now. You need to get that stuff done by December. It'll probably take you about 30 days to get a fair market value opinion and do the donation process. Amazing. I just want to give a shout out to

1:25:18TaxGPT. This is a surging company from our pre-accelerate. We call it Founder University. We now do Founder University in the US and globally twice a year. We do it twice a year in Saudi. We'll be doing our next edition in November and twice a year in Japan. Founder University is pre-accelerate. You just need to have a team. You don't have to be even incorporated yet. Hopefully you get incorporated while in the program. And Founding University is a 12-week course just helping you get your product finished to market. We invest in some of the graduates, and one of them was tax GPT. They went on to our accelerator.

1:25:54We invested, and we invested. Then they got into Y Combinator. So they went to Founding University launch, and then Y Combinator, all in like the same 12, 18-month period. and they've now hit tens of millions of dollars in revenue, thousands of tax and accounting firms using it, and it is a fantastic startup that I am enamored with. So check out TaxGPT if you're an accountant. And yeah, if you want to angel invest alongside of our firm, our best companies will sometimes syndicate at thesyndicate.com. You have to apply and you have to do an onboarding call now. We have too many members. I say this with peace and love.

1:26:38There are too many members. So you cannot invest with the syndicate out of the gate. You have to do an onboarding call. Then you put on a wait list. And then we invite you to join. So we get that process started now. We have over 4 ,000 active members and thesyndicate.com. We do early stage and we do late stage barbell strategy. This has been This Week in Venture Capital. We'll see you all next time. Bye-bye.