What will be OpenAI’s IPO price? Place ya bets! | E2202

28:12This is where a lot of producers spend most of their time, even when they're, you know, whenever they're recording, they're typically recording into something like this. So you can see each channel. You can connect a guitar, a bass, percussion. There's a ton of different knobs. Here you can see you have all your plugins, effects, and you also have all the different... Here you can have a MIDI scale. Here you have your different effects. So this is the timeline. I got it. So that's kind of what Suno was looking to implement here as producers are familiar with the style. So here you can insert all of the...

28:51How cool is that? Now you can isolate just the guitar and play me just the guitar. Is that correct? Yep. So we'll do it. Let me just get the guitar here. Now, can I just change just that with a prompt, the guitar? Can I like give it a prompt and say, do a little more finger picking? Yes, you can. So that's something that's really cool. So let's try it out. Okay. So we can style. I would say a little more finger picking and slower finger picking on the electric guitar. That sounds like a Stratocaster. Or perhaps sire drapes. Don't do that. You highlight this section and then you can just click replace.

29:26So I'll actually highlight the whole intro here. You want to make sure that you're selecting guitar and then click replace. And it'll start to download that. But we can listen to the soloed vocals here as well. Okay, so let's do one on there too. Let's do for the vocals, just pick the entire track if you can. I don't know if you can highlight the entire track. And then say less country, more raspy, less country. Let's see. Ooh, and I should have said English too, but yeah. I did try and add a accent to a track that I was working on and it didn't really work. So hopefully that's coming soon. This is unbelievable.

30:08I'm kind of blown away. Yeah, I want to play with this immediately. The world's greatest moderator and the world's greatest angel investor needs the world's greatest solution for managing his funds. So I want to tell you about PaperOS and why we use it here at our own companies, Launch and the Syndicate. PaperOS has helped over 10 ,000 founders and investors, including me, automate their workflows. Their tools will help take you through handling the operational details I don't want to worry about because I'm busy meeting founders and looking for great companies. PaperOS has made the onboarding process so seamless for limited partners.

30:41Their investor intake forms, automated subscriptions, it just takes all the busy work out of managing our syndicate and it automates capital calls, investor accreditation, tax filings. These are the chores of running a fund or a syndicate. And they have saved me and my team hundreds, actually now it's probably thousands of hours. Our friends at PaperOS want to give you a complimentary$10 ,000 credit. Just go to paperos.com slash twist. And if you prefer price discrimination, you can go to paperos.com slash disgraziad. What do you have to pay Oliver to to get access to this. What does Suno charge you?

31:16Yeah, so this is, you have to have this premiere plan. It is$30 per month. You get 10 ,000 credits. I've been playing with Suno basically all week and I've already, I'm only 1 ,500 credits through. So you really have to be abusing Suno. So it's basically free. Let's call it what it is. I mean, it's free. A dollar a day is free. If it costs, let me just explain to people. If it costs more than Sweet Greens, it's free of course less than sweet greens it's also known as free anybody can an uber driver a door dasher who's delivering sweet greens can afford to eat at sweet greens if something costs less than your average sweet greens order which i think is about 25 bucks if you get a lemonade um okay so let's hear this guitar

32:01oh my god did it right i was what i was looking for either i'm a master prompter or this is really smart so you can it was more raspy too wait did it do the raspy did it did it update the vocals it is a bit more raspy perfect sounds more auto-tuned actually yeah anyway whatever this is it's super fantastic um can you upload a person's voice and say i want it to be in this person's voice without like telling it. So if we, like I was talking about in the previous example for IP with. Higgsfield. Higgsfield. One word. Higgsfield. So with Higgsfield, you know, if you do it, it's like not their problem.

32:46You're just using the tool. So with this tool, could I upload Sultans of Swing, you know, and Mark Knopfler track, especially if I found an isolated one and say, make it sound like this guy. So from what I've experienced, if you upload a version of yourself singing and then you kind of mess with it in suno it'll have the same style but it won't sound exactly like you yet i think that will be a feature that is definitely going to come um so one thing i can show you here is a project that i kind of been working on and okay kind of give you a little more details on ways that you can use suno so one thing that's really cool is i this is the track i was working on it's kind more EDM.

33:30This is the one I use. Come on, Alex. Let's get into it. Alex, we just dropped some MDMA on the dance. Go ahead. Sorry. I'm trying to do the... You know what Dan's this is. I know what that is. That's the Donald Trump. Totally inappropriate. I know, but I'm imitating the president. Two-fisted dance. Get your mind out of the gutter, Mr. Calacanis. I'm just saying. It's a little bit graphic that did, but keep going here. So I used one prompt and it gave me these two different tracks. And so I used one of them, but the other one was still, I still like some components of it. So what I did is I extracted the stems of the other one that I didn't use.

34:13And I really liked the drums. So I actually brought the drums into the other song and I was able to take this part.

34:24and like you said Oliver is providing value like working in a DAW I was able to kind of just chop it up and one thing that I think a lot of people don't realize is music is super repetitive so I can just click command D and I think that that will kind of do what I want it to do so I wanted to looping it essentially looping it so originally there was no drums in the intro

34:51and I kind of wanted to get a little more energy in the beginning the song so wow it's a banger oliver what about uh what about key changes and uh time signature and tempo changes like how nerdy can we get in music theory terms so we can get pretty nerdy i think that in terms of the beats per minute and kind of you know staying on the same time grid throughout the whole song, you do have an option to select a track and control the BPMs down here. So for those of you who aren't familiar with music, every song is at a certain kind of beats per minute. So like it usually follows the kick. So in this song, most house songs are at 120 to 130 BPM.

35:39So Suno understood that this is a EDM track and they made it at this tempo and every single stem and when i added um the stems from the other song it always lines up which is a great feature to have here but that's why i was asking because what if it one was in seven eight and the other one was in i don't know three nine right i don't think that things that i'm assuming that suno's kind of sticked with four four time signature which is kind of you know one two three four one two three which is yeah very the common one three four and other time signatures are way less common, especially in kind of pop music.

36:13So I think Suna was definitely focused on that originally. And one thing that I do want to point out here is I was actually able to create a section using my voice. So we can give this a listen.

36:30So this is a guitar idea I had, and I kind of had this empty section in the middle of the song. You can hear it here.

36:47So I was able to prompt my voice to become a guitar. And this is a little more complicated than it seems. You can't just kind of say, hey, make my voice a guitar in this section. You kind of have to do a little more digging, which you can see, which I do on my demo, which you can watch later today. and but yeah you can see it really did a great job kind of copying what i envisioned

37:20all right so oliver given your music background given that you've been in bands like i have been what do you think about this how impressed are you on a scale of one to ten and are you going to keep paying for it even after you're done testing it out for twist i think i'll definitely keep paying for it. I think that this is just V1.00 beta of this tool. So I do think that they will start incorporating other aspects of a tool like Ableton or Logic, where you have more ability to really play with the track. And I think that something to point out here is for non-musicians, a tool like this really allows, opens up the world of creating music to millions of people.

37:56And that's why we've seen crazy ARR numbers in revenue from Suno. And I know they're raising a higher valuation. So I think that not only is it great for non-musicians to play with, to be able to create music for the first time. Producers can also use this to help them with their ideas. And now I can kind of take ideas and make them into full songs and show my friends, hey, do you like this idea? I'm thinking about working on this more. And maybe they'll say, yeah, go keep going. But I do think that there's definitely some things that are lacking. So I think that I'm going to rate this tool a seven at the moment.

38:30I think that there's still a lot of room for improvement. But I think this is really the first great tool that I've messed around with in terms of AI and music. I think something to think about is where will the biggest impact be at first. I think obviously it's kind of the fun factor. But I think if you think about score composers, that's a huge market. at buying a song for your TV show or commercial, that process usually takes a couple of weeks, even a couple of months. You're going back and forth with the, usually it's like a freelance artist who you hire one time for that gig. You have to go back and forth.

39:09Yeah, this clearly is the huge win. If you need stock music, you want to make a song for somebody's wedding, like a parody song, or you're doing music for your event and you don't want to have to pay for live event music, it, license it. You know, like if you do a conference and you were to use somebody else's song in your conference, they might ask you to pay a fee for it. So yeah, it's just absolutely incredible. Great job, producer Oliver. Okay. Go back to work. Get out of here. Get that kid back to work. We got a little bit more on the docket we need to get through. So let's rocket docket.

39:41It's rocket docket time. We were talking about cloud earnings this week. Curious if the AI world to spending too much money on compute? The answer, Jason, is at least not yet. Three big numbers for everybody. Growth at Azure for Microsoft was 40 % in the most recent quarter. Google Cloud, 34%. Amazon, 20.2%, the best in 11 quarters over at Amazon. Each of the companies also said they're going to spend even more money than they thought. For example, Google said, we now expect CapEx to be in the range of 91 to 93 billion, up from our previous estimate of 85. That's for this year. So in other words, people are still spending, they're still growing, and everyone said we are compute constrained.

40:23So Jason, I'm curious, does this mean the party is gonna keep going for longer? Absolutely. If these firms can make the investment from cashflow without taking loans or taking additional investing and diluting their cap table, what a great use of cash on the balance sheet to build up your infrastructure and have customers willing to take the excess, which is to say, when we had Elon on All In, which will come out at the same time you're listening to this, you can jump from This Week in Startups and All In and get tons of JCal. We were talking about Grokipedia. Now, Grokipedia, my Grokipedia page, if you pull it up, is five times longer than my Wikipedia page.

41:06It's also more accurate. It's also more up to date. My Grokipedia in point one, I would say is five times or 10 times better than my Wikipedia page. And I'll have editorial director Lon come in and talk about this a bit. One of the things you'll notice if you go to the bottom of my page is the number of citations. So how many citations do I have on that page? And then tell me how many I have on my Wikipedia page. I think it's like triple. It's 177 on the longer crockopedia. Jason Caldian is on Wikipedia, as I frantically type as we do this live under 50 yeah uh 54 okay and then what happens is on my wikipedia page anybody who i fired anybody who i competed with in the marketplace anybody who's mentally ill they go crazy on my page if you're part of the jeffrey epstein like you know a cult of people the pizzagate people you're obsessed with me because i appear in jeffrey epstein's black book I never went to the island.

42:08I met him at the TED conference. I've talked about it a thousand times. I give him my business card. He puts it in his black book along with 5 ,000 other people. So now those people come to my page and like, we have to make this a big part of Jason Calacanis' script. I met the guy like a half dozen times. He was donating to Marvin Minsky and Daniel Dennett. I don't know who. He was like literally surrounded by scientists and giving them donations. This is long before all this craziness. I'm talking about like the late 90s, early 2000s before he was ever, you know, accused of anything or went to jail.

42:40Anyway, the point is, they're relentlessly focused on these weird things that happened in my life, not like the balance of my life and what's important. So Grokopedia 0.1, powered by Grok, any LLM could rebuild Grokopedia. but he was saying that I think he said that he thinks that they use 10 ,000 H100s to like build this or something. And then he said they were using a similar number to do the new Grok algorithm. And he said the Grok algorithm on Twitter now, the new one, is reading 10 % of like the 100 million tweets every day, and then making sense of them in real time with like 10 ,000 or 20 ,000 of these things.

43:22That's something that like Twitter would never have done before AI. What that means is you're going to be able to do a very natural language search on Twitter soon. If you're Google, if you're Apple, if you're Amazon, Oracle, any of these companies, and you got cash laying around, why not build an AWS competitor or coexister? I think the power move for Elon, for Claude, for OpenAI, for Apple, and for Meta would be to launch a cloud service so that they could offer it to their developers. Apple having an AWS competitor would be mind-blowing because they have all these app developers. What if they said, if you're an app developer, you get$10 ,000 a month in free credits at Apple Web Services, AWS?

44:07Is that, that's legal, right? You could say, it would cause confusion, so they would not do that. They would say Apple API Services or something, AA. Yeah, they'd have to. Apple Cloud Services, ACS. The acronym being the same would not be a big deal unless they marketed the acronym. That would be the big deal. But if they just market - Oh, no, I meant offering free credits for their in-house service to compete with AWS because, well, they've gotten in some trouble with the regulars daily. Yeah, if you were to look at antitrust, they would have 1 % of the cloud market. Therefore, are they in some way using their dominance in smartphones to do it?

44:49No. If they said you could only have apps in the app store if you were a customer and spent at least$10 ,000 with Apple Cloud Services, ACS, yes. So it's a great question though. I'll be very curious to see it, but I think Meta is the obvious candidate, Jason, because Meta is getting all this money and they're not offering that much. And Elon, look what he's doing with Colossus. I mean, he knows how to build a lot of these things. A crazy performance from Amazon. and I think Amazon is my pick for the stock of the next five years. Because of the headcount reductions, reacceleration of growth at Azure and the ads business, I presume?

45:27Well, Azure is Microsoft. I'm saying AWS, yeah. Friday brain, everyone. Don't worry about it. I just want to make sure we're talking about the same company. So with Amazon, I think they have the most to gain from AI that they have not yet realized, which is to say they're behind. So the growth hasn't shown up now. They're the worst performing of the Mag 7. So sometimes you're behind and you got to like catch up. Dropping 10 % of the headcount in a quarter where you smashed it. And then they need to have their own language model. I think they need to try to buy XAI or Claude or Mistral. They need to buy one of those teams.

46:05Perplexity or just, you know, maybe become the open source champion of the world. Yeah. And they have work to do because people will have their services on AWS, but they'll use a language model directly with XAI, with quad, you know, an anthropic. So you can, you know, be multi-cloud and do your AI one place, but they have to catch up on that. It's going to, I think if we're sitting here, I think Amazon will be the number one performer in the, it will be the number one, two, or three performer in the Mac seven over the next five years. Next up on the docket, speaking of AI models, do you know who's making them, Jason?

46:46Startups, surprisingly enough. Yeah. So this week, Cursor launched an update to their experience, also including a new model called Composer that they say is roughly performant with existing state-of-the-art models, but is a lot faster. Then Canva launched their Canva design model this week, what they claim is, quote, the first AI model trained to understand the full complexity of design. And then Windsurf, which, of course, is now part of Cognition, launched an update to their first model called SWE1, now SWE1.5. And these are all pretty cool for two reasons. One, it's fun to see startups not want to pay Anthropics margins for them.

47:21But also the thought here, and this is also confirmed by Didi Das over at Minlo, is that these are basically re-skinned and retrained Chinese open source models, perhaps from Minimax, perhaps from whoever made the GLM family. But in a world where you can kind of roll your own model, Jason, pretty quickly, that's pretty damn near close to the state of the art. Why would you go pay, you know, XAI's Anthropics or OpenAI's gross margins for them? Well, especially if, you know, because Cursor was an anthropic partner for the first couple of years, I believe. And so this is the natural tension between platforms and the application layer.

48:04If you built a 99 cent flashlight in the app store in the first couple of years or a calculator, you woke up one day and Apple had released a calculator or flashlight and yours was. Yeah, there it is. It's not necessary. So that's what's going to happen in the LLM space. They're going to say, you know what? We should really have the cursor business. We should really have the co-pilot business. We're going to just make it one of our business lines at OpenAI, at Anthropic, et cetera. So there you have it. They have no choice but to do it. It's existential. Yes. And if they have an open source model, well, then they could be making progress.

48:45And for consumers, there's no difference between paying$10,$20, or$30 for business consumers for these products. In fact, if they gave you but 1 % more efficiency as a developer, you'd buy all three and spend$300 a month. Who cares? $100 each because a developer's time is so valuable. And so it is the absolute right thing to do for Cursor. They're going to accrue a lot of value. And what Cursor should actually be doing is they should be selling this to anybody who wants it. So they should have an API and they should allow anybody building developer tools to use their Cursor API. And then they would be monetizing it on top of that.

49:30In other words, let their competitors use it too. Who cares? So to be clear, what we have here is state subsidized data centers in China being used by venture-backed Chinese startups to make open source models for American tech companies to retrain to offer to other developers to offer to their customers. This is the modern economy. Jason, just to back up what you're saying about the risk of being taken over by OpenAI or a similar company, here's a news item that we're not going to talk about in detail from yesterday. Introducing Aardvark, OpenAI's agentic security researcher. That's the feature.

50:05They're coming for the app later. So maybe you don't want to be dependent on them. If I was a developer of any kind, I would never work with Sam Altman and OpenAI. Let me say that. This is a warning. People can clip this. This is a warning for anybody dumb enough to use Sam Altman's OpenAI API. They are studying you. Remember, Sam Altman's been around the block. I've known him since Loop. He's an incredibly savvy person, and he wants every bit of revenue from the ecosystem. He isn't taking no prisoners. He's going to study how you're using the API, which he has the right to do. Sam Altman comes from the Zuckerberg School of Business, which is give dumb people access to your tools, study them, and like the Borg, steal every innovation they have.

50:57And Zuckerberg got it from Bill Gates and Microsoft. Microsoft had a platform, an operating system. They let people build, Lotus 1-2-3. Then they did Microsoft Excel. They let people build a product called WordPerfect and WordStar. And then they built Microsoft Word. RIP. RIP. They were more than happy to have everybody at their developer conferences showing off their work, giving them awards. I'm talking about Microsoft now. Zuckerberg did the same thing at Facebook with their platform. Oh, Zynga is their big partner. And then they shivved them. I guarantee you, if you're using and you're trusting Sam Altman from OpenAI and their API, they're studying your data.

51:39They're studying your usage patterns. I guarantee it. And they're allowed to do it. Now, they're not going to study your data, but they're going to see how much of the API you use. That's all they need to know. There's, do you remember they gave an award at that developer conference and they gave everybody a plaque for how much they spent with OpenAI? Yes. Somebody can pull up the image here and show them giving out. And all these people, these idiots were like, oh my God, I got an award from Sam Altman for giving him my money. Here's one from McKinsey, the consulting company, Jason. Okay, well, that's a slightly different situation.

52:15McKinsey should be using it. 100 million tokens. Look at that. Okay, great. Right. So but now if you were building Cursor and you're like, I bought a billion tokens. And they know the list of who's using the most tokens. As somebody moves up the list, that's their roadmap. So if Cursor was number one and I don't know, what's another tool that could be using it? Suno is like in the top 20. I guarantee you if Suno is feeding their information in there and it goes into the top 100, there's a business development product manager saying, oh, we should do a music platform. And then they will just go step by step and steal, you know, I don't want to say steal, copy, liberate every innovation you have.

52:56And they have the platform. So they're going to roll over you. Do not use their API. It's a trap. It's a trap. Insert into the post here, Admiral Ackbar saying, it's a trap. And then take me in the facial thing and make me into Admiral Ackbar saying, it's a trap and make a meme out of it, producer Marcus. and release it over the weekend. That's your weekend homework. First of all, I mean, it's Ackbar. Ackbar, thank you. I'll just say that it was going to be very interesting to see who wins between OpenAI and Anthropic and similar eating more and more of the app layer. And on the other hand, open source Chinese models.

53:36Anthropic's not trying to take the whole app layer. They're very cognizant of that. They want to, yeah, they're very rarely dipping down to compete with their customers. So it's just something to think about. Here's a chart of OpenAI customers that have used more than a trillion tokens. Sorry for the quality here, folks. It's not the best, but Duolingo, OpenRouter, Indeed, Salesforce, CodeRabbit, iSolutions, AI. No idea what that is. Tiger Analytics, Ramp, Abridge. Let's see who else we know here. Shopify, Notion, Whoop, HubSpot. Of course, there's JetBrains, T-Mobile, Zendesk, Harvey, Canva, Cognition, et cetera.

54:08Okay, here's what's going to happen. I guarantee you Duolingo will be built into OpenAI. Guaranteed. 100%. Indeed and job search, 100%. They'll do open AI. They'll do chat GPT jobs. Boom. He's going to do every single business. Why? He wants to spend$1.4 trillion. In order to spend $1.4 trillion, you can't just be providing tokens in an API that go down 90 % a year. It's not possible. So how is he going to do it? He has to own your business. If you're using them, you're enabling your own demise. Do you feel the same way about all companies, like XAI, Anthropic as well, I mean, Straw and so forth?

54:51No, because if you just look at the amount of product on the application layer that OpenAI is producing, they want to produce a device and compete with Apple. They want to produce, they have a browser competing with Chrome. They have a code thing. They released Sora to compete with Instagram and TikTok. They're going after every single vertical. Wake up, people. You're going to see them go after every single vertical. They'll go after Craigslist. They'll go after the travel sites Expedia. They're going to go after Apple. They're going to build. They're building a social network with Sora. They're going after everyone.

55:34Wake up. Wake up. If you use their API, you're educating them. as to how many tokens you use. And while you might have it set to not train their algorithm, this was all the arguments that people made when Facebook double-crossed everybody and took away the social graph. Remember that? Oh, vividly. They were going to give everybody access to the social graph. Everybody built all these amazing tools. And then Zuckerberg was like, we need to make more money. F this. And they got rid of the social graph. You couldn't use a social graph. you couldn't post to people's pages you couldn't post your latest harvest from you know whatever mafia game you were playing or your hand from poker and they just took the entire business away from everybody and if you wanted to do anything like zynga you had to buy zuckerberg dollars zucker bucks zucker bucks and literally use their currency which then cost you 30 which then killed your margins and zynga literally after having a deep partnership with zuckerberg got stabbed in the back.

56:37No, I think they got stabbed in the front. Sure. Yeah. And OpenAI is going to go public. That's so clear what's happening here, if they're allowed to, because even though they flipped, and I guess this is the next story on the docket, even though they flipped, remember the Elon lawsuit is still hanging out there. That was carved out of the settlement. So they still have to get that resolved. I don't have any insight into it, but we talked about it on All In, so you go after you listen to this episode we talked about over there. I thought we could do a little bet, a little bet for fun. We love to do bets here at Twist.

57:08And so Reuters reports that OpenAI is talking to bankers, thinking about maybe a late 26, early 27 IPO. I found a poly market, 46 % of folks over there think the company will go public before the end of next year. So less than half think it's 26 IPO, Jason. So for fun, I thought you and I could do a little bet on when they go public. Well, I think we both agree it's going to happen before the end of 26. Am I right? Dang it. Okay. I was hoping you were on the other side of that. So now we're just down to what month. So would you like to propose a month and we go over under, or would you like to propose a valuation bet over under?

57:45What would you like to propose? Let's do valuation then because I think we're too aligned on time to get in too much trouble there. So Reuters again reports that they're thinking - You pick a number, I pick over under. A trillion. Okay. And so this is the price it goes out at, not the end of day trading. Yes. This is their IPO price based on their per share IPO price. And you say a trillion. A trillion to keep it simple. Okay. And so you're setting the line and I'm picking the over under and you'll take the other one. I'll take the other one for fun. Yeah. This is a normal$100 bet. Right. But I mean, this is why you set the line.

58:20You don't have to set the line at just, you know, in terms of like being a sharp here and like really getting into wagering. You can set whatever line you want. Oh, okay. Let's do 1.25 trillion. I'll take the under. I'll take the over. Okay. Got it. Okay. For$100. And so here's what I want you to do, Marcus. I want you to make a calendar item for 30 days out and for that date. or a calendar item with a 30 day out notice with me, you and Alex on it and Lon on it. So make a calendar item and then put it on thisweekinstartups.com slash bets. And I think we have a calendar there. If we don't, let's make a Google calendar so people can add the bets to the calendar.

59:02We see it on our calendars. I'm always building systems. I'm always thinking in systems. When we make a bet live on the air, we make a calendar item immediately. Great bet. I'm going to say it happens in September, October. Exactly. Not over the summer. You get the summer. They're going out on the road in the summer for sure. And then they just have this like right after Labor Day. So yeah, it's Memorial Day, then Labor Day. Yeah. So I would say, you know, September, October is the right timeline for that IPO. The question is just price. Jason, can we just do one tiny thing just to wrap us up today about an IPO that I think is pretty important?

59:35Okay, so Navon, formerly known as Trip Actions, priced its IPO at$25 a share, right in the middle. Between six and$7 billion valuation, depending on how you count shares there. So a little bit down from its peak valuation, but most people that backed the company did very, very well. And then it kind of flopped. It lost 20 % on its first day. And the question I just wanted to ask you, and I wanted to get this in before we go, is how bad is this? Because you and I both wanted to see more IPOs, more liquidity, more deals. But to see Navon, a well-known company with 30 % growth, falling losses, improving gross margins, really stumble out the gate surprised me.

1:00:11So how bad is it? Well, usually when this happens, it's because either people fundamentally are not excited about the core business. I think it's being dumped on retail or it was mispriced, right? So is there hair on the dog is the first thing we have to ask. And then the second thing is, did they just price it wrong? So we can go in reverse order. In terms of the price, what's the price sales ratio here? What's the market cap? What's the price sales ratio? It's valued at$6,$7 billion, right? and they went out at$25 a share. And what's their revenue right now? So if we get their revenue for the year, then we can divide the revenue into the valuation.

1:00:53So the revenue, Jason, in the most recent six-month periods, we can kind of multiply that by two, was a total of$330 million, let's say. So call it 660 run rate. All right, so we'll go to 700. If it's at a$7 billion valuation, It's only 10 times, nine times price to sales ratio. Okay. So that's not insane. It's 30 % growth. So if it grows 30%, you know, that price to sales ratio would come down a bit, but it's not cheap. So it was priced high for the growth. So that's part of it. So people aren't excited about the price. Now let's look at the core business. Are they losing money or making money?

1:01:32Are there earnings or are they losing money is the next thing we have to guess. Because I am not familiar with Navi, Navon. Okay, I'll just pull up the income statement here for everybody. The gist is they're still unprofitable, but as you can see right here, Jason, their operating losses have fallen by about 50 % over the last year. So I would say pretty positive direction there. Elsewhere in this S1A filing, their gross margins are improving. Elsewhere in this filing, they talk about using AI to control their customer support costs, keeping their G &A costs growth slow. And I thought that was a pretty compelling story.

1:02:09Reasonable growth for an IPO over the$500 million run rate mark, improving profitability, improving revenue quality, and an AI story. It seemed like something that would at least stay flat at its IPO price. So with six or 700, yeah. So if you're losing 180 million on 600 million and it's going down. Okay. They only lost a hundred million in the first half. Can they get that to go down even more? Hopefully. Um, but I think it's just not as attractive as other options. So then it becomes, what else can I buy? Where else can I put my money? And if you see Google, which was supposed to remember a year ago, I was telling us like, Oh my God, the search franchise is over.

1:02:53And I was like, no, I think the pie gets bigger. The pie got bigger, right? Like search was up again. The number of searches is going up. Why? People are searching and then they're seeing the AI summary and they're like, oh, this is dope. Let me do more searches. Yes. I tried to explain this to people. If the product gets better, consumption goes up. And so are people going to just automatically forget about Google or change it from Google to chat GPT in their browser settings? I mean, I might, you might, but we're the Vanguard. Yeah. We're the Vanguard. We're the top 10%. Search and research is going to grow 10%.

1:03:31I'm sorry, 10x in the coming years. Why is it going to go 10x, the number of searches? Because the results are so much better. They're so much more helpful. If you could do a search and figure out what's wrong with your dishwasher, I always love to use a dishwasher one, and not have to call the plumber, you're like, this is an incredible experience. You know what? People haven't had that experience yet. But this winter, when people's HVACs go off or their pipes freeze and they take a picture of it, where they do a search on Google and it says, oh, you have this HVAC unit. It's known to do this.

1:04:03Here's how you reset it and relight the pilot. And you don't have to call the person. You fixed it. Or, you know, your housekeeper was able to clear the dishwasher thing because suddenly they know how to, you know, take a picture of it and put the model number and say, what is Eris 72? and it's like however 72 is something's blocking you take out this thing and clear the blockage how many times have you had somebody come to your house and they were like fix it in five minutes and you paid 150 bucks or 300 bucks uh more times than i want to admit including some very embarrassing situations but i just didn't understand something they came and flipped switch i literally had this happen they called i come into the kitchen you know i'm in my robe and there's a guy there and he's like yeah what's wrong with the refrigerator i'm like i don't fuck i know i just live here man I just live here and pay the bills.

1:04:46I go over and he's like, um, yeah, you have to press this button to turn on your freezer. Your freezer was off. And I'm like, oh, I was like, uh, how much does that cost me? He's like, oh, it's 150 bucks. I'm like, oh, it took you five minutes. Can I pay you 50 in cash? And the guy was like, I'm sorry, I work for a business. That's 150 is like my time to drive over. It took me half an hour to drive here. I got another half hour to drive back to the office. I was like, all right. He has a little bit 20 in his hand out the way at the door. That's what I was trying to do. I was like, hey, if I give you a 50 in cash, he's like, ah, it wasn't his business.

1:05:17Yeah, I understand. But I tried. So anyway, it's all going to go up. So why would I put my money into this company when I could put it into Amazon, which I just said is going to be tremendous. You know Amazon and Google are going to make crazy runs. Now, are they fully valued? Yes, they're fully valued for a reason. I think the optimism you see in Palantir and Tesla is the optimism we should see in Uber and Google, which we're starting to, and Amazon. There are other companies that are leveraging massively AI, and they're going to have an incredible outcome. But the sentiment has to change over time, and the sentiment takes a little time to change.

1:06:00The sentiment in Amazon changed. The sentiment in Google just changed. sentiment is going the other way with facebook which is hey maybe you're spending too much here and not enough product so they just gotta you know and they just made all those purchases so it's going to be wild for founders you know the lesson in all of this is there's so much money to be raised right now i am seeing people and i talked about this on um twitter maybe and it's a good place for us to end for the weekend and it'll be a little stump speech here but somebody was complaining that there were three startups they had heard of that had raised money, kept the money on convertible notes, and the founders didn't build anything.

1:06:40They just took the money. So show the original tweet, not mine. I am. Okay. Here's the original tweet. It's from, oh, it's from my friend, Jason Lemkin. I love Jason. Jason's great. One of the many Jasons in my life. One of four. All right. Here is our guy. So far, I've watched three VCC deals this year where the founders just decided to keep the money for themselves and not build the product. All were on safes and they took the position they owed investors nothing. And that, in fact, they were not even investors, just safe holders. One eventually returned cash after keeping a large chunk for themselves.

1:07:11Another hired an attorney who said plainly nothing was owed to the investors and the founders could pay themselves whatever they wanted. I did not personally invest in these deals, but I might have. They had a lot going for them, or so it seemed. This is going to happen in the age of AI. It's the flip side of so many things also exploding so quickly and growing at insane rates. It's just a risk to be more aware of, perhaps, than in the past. I didn't know you could do that. I thought when someone gave you money, you had to be responsible with it, Jason. What's this? So we live in a trust-based system.

1:07:39Venture capital and startups are a trust-based system. There are protective provisions in the documents. Hey, you got to send us information. We have information rights. You got to let us know if you're going to raise more money and dilute us. We have these protective provisions against dilution of corporate governance, of board seats. But, you know, in YC's infinite wisdom, They decided to create this safe device, which was quick to help people fund. And in fact, a lot of founders just signed these and investors signed it without ever talking to an attorney, without ever changing them with like an expiration date or interest, like a convertible note.

1:08:17Because we went off the convertible note, which had more protective provisions, the safe is so in favor of founders that, you know, with no expiration date on it, it can just go on forever. And I have seen myself, founders sign a term sheet with a firm at, you know, X valuation. Which is a contract, right? It is. So you would have some honor and you'd have some ethics around that. Then get another offer within 10 days. Then say the other contract's not valid. I'll give you your money back. Lie to the investors. Say we're shutting the company down. All kinds of hand gestures. Oh, and then they would go to the investor and say, you're not being founder friendly.

1:09:03These three can claim that. Now, if you were Jason Lemkin and one of these founders did it to you, you're like, okay, I put 150K and I put 250K and they screwed me. Am I going to sue them for it? Okay, that's going to cost a million dollars. Or am I going to write a legal letter? Then they're going to say, I'm suing a founder. So founders now know this. And there are bad actors in the system. Every system has bad actors. In a peak market, you see bad behavior go up. whether it's VCs on a board ousting the CEO, which was the pendulum the old way. Now the pendulum can go the new way, which is the founders can abuse the trust in the system.

1:09:41This is a message to those founders who are doing this. And I've had countless messages to the VCs and investors. I'll save that for another time. But just for founders, play the long game. If somebody believed in you and they were your first investor, I've seen this situation. I've been in this situation. You're the first investor in the startup. You help them get it off the ground. They use your name. The fact that you were an investor in Uber and Robinhood, they put your face in the deck. They ask you for introductions to 50 people. They get 20 meetings. They get more investors. Then they try to take away your rights.

1:10:15They try to take away your board seat. And then I have to have this discussion with the founders. Hey, by the way, if your new investors want to screw your earliest investors, then they will keep trying to do that. But once you've screwed your early investors, the next people to get screwed, and the only people left are the founders. So what you want to do is you want to cherish your early investors, you want to say, Oh, my God, Paul Graham, and, you know, Gary 10 were back to me first at YC, or I backed you first or Angelus, Naval backed you. Wow, those are the really those are the good guys and gals.

1:10:48I am Bannister. Okay, I'm doing another round. These new investors who come in three years later when the business is on fire and they say you should screw your existing investors and get rid of their pro rata and tell them if we invest in your company, they have to all give up their pro rata in their winner. But they weren't here for the last three years and helped you. And they didn't write you a check when nobody believed in you. And then you're willing to screw them because they said to you, oh, we're not going to do this deal. We'll give you a great valuation. We'll let you take some secondary, but you have to screw those people and take away their board state, take away their information rights, take away their pro rata, whatever it is.

1:11:20But what? Ethics. Karma. Well, what happens is the investors who come later try to like, what's the character in Lord of the Rings? Worm ear? Worm tongue. Worm tongue? Grima worm tongue. Long for all future Lord of the Rings references. I got them. Okay. But this character was speaking into the king's ear poison, right? And he was making bad decisions. And the Rohan Riders were like the most ethical and greatest people. And they poison the king's brain. This happens to founders, actually. Some new investors like F your early investors. Okay. They got too good of a deal. We're willing to pay you$50 million for this company.

1:12:04YC paid 2 million. Yeah. YC paid 2 million when it was just two people and an idea. When it was literally worth zero, by the way. When it was worth zero. Yes. And you loved it and you loved them for it. and you signed the deal and you were well-informed and they got 7%, so who cares? This new person's gonna get 15 and there's still plenty left. Cherish the early investors, act with honor, and then you will be in a situation like I am with, say, Raul, where I got to invest in his first company, Reportive, and we got to collaborate on Superhuman or with Jonathan from Thumbtack, where I got to participate and he valued my contribution with Athena.

1:12:41Go to athenawow.com and get like two to four weeks for free because I'm a spokesperson for that company. I use my platform to build Athena Wow. Wow, Athena, wow. Even Christopher Walken wants to use it. It's not a celebrity endorsement, but I'm doing endorsements for Athena because I love Jonathan and the team so much. I wanna see them. And he's loyal to me. I'm loyal to him. I'm an investor in Cloud Kitchens. I was an investor in Uber. and I'm going to help Travis with his XG Gammon because we both love backgammon and I've been crushing him in backgammon games heads up and we're going to collaborate on doing a backgammon.

1:13:23This is the best part of life, people, is when you can build a 10, 20, 30-year friendship where you just collaborate on everything and you win and sometimes you lose, but if you lose, you learn something and you just get up. Don't fuck that up. by trying to be petty between rounds and like this person signed and wired and you want to rip that up because the next person offered you more and then they worm-eared you. Worm-tongued. Worm-tongued you. Don't do it, folks. And for these people who are worm-tonguing, I'm on to you. I think it would be more tongue-worming. I'm on to you. No, literally somebody was like, oh my God, J-Cow is screwing founders.

1:14:05Somebody said this and I was like, wait, what? You come to my accelerator. This is a rumor. Somebody said this to me. I said, that's not, wait, what? You come every, and I called the person up and I was like, do we have a problem or something? And he's like, no, it's not true. And I'm like, okay, that's interesting. But like, we have tremendous relationships with all the other accelerators, all the seed funds, because we find companies that they are too busy because they like to invest at a$10 million valuation, they don't want to do Founder University$1 million valuation. They don't want to do an Accelerator Y Combinator$2 million valuation.

1:14:42They don't even want to do the$5 million valuation when you get to$10K a month in revenue. They want to get on the train when it's$10 million valuation and you have$500 ,000 or a million in revenue. And we know that. Well, 50%, I would say. 50%, yeah. And I get on when it's 0 % de-risked. And then I make a second bet when it's 20 % de-risked. They get on at 50 % de-risked. In the Series A, it's 60 % de-risked. The Series B is 80 % de-risked. It's 90 % de-risked after that. Great. But let's not screw up a trust-based system. And I really applaud Jason, who we got to have him back on the pod. It's been too long.

1:15:24But, you know, Jason's amazing. And, you know, he's taking a little risk by putting that information out there. There's bad behavior all over the ecosystem. Just play nice. Words of Michael Dell, win but play nice. And, you know, I told this to a founder. I was like, can I be candid with you? The only way for my investment in your company, like if we own 7 % of the company and I get 20 % of the gain on that 7%. So if that, if our 7 % became worth 70 million, our firm gets like 20 % of that, it's$14 million. And then I give some of that to my team and then I pay taxes on it. It literally would not change my net worth.

1:16:06It'd be a couple million bucks. It doesn't do anything for me in 2025. You know, I'm past doing something for me. You would need to be a$100 billion company, a$200 billion company for me to notice it. So all the work I'm doing is because I love founders and I love you and I want to see you succeed. I'm not doing it for money, folks. This is an important thing to understand. The best investors, when I saw Doug Leone and Michael Moritz at 8am doing meetings at Sequoia after Google, after Apple, after Cisco, after Airbnb, after Zappos, and then I came back at the end of the day one time to meet with Ruloff and it was like 4.35 and they're still in meetings with different founders in the same conference rooms.

1:16:51They're doing back-to-back meetings, trying to help their portfolio companies. Like there are some people who are in it for the right reason. Align yourself with those folks. And you can tell because they're just, they're working hard. They're working hard to try to make things happen for their partners. Win, but play nice and you go further together. If you wanna go fast, go along, sure. If you wanna go far, go together, folks. It's been another amazing week of This Week in Startups. He's Alex Wilhelm. Cautious Optimism is where you're going to take your$100 and get$1 ,000 in value. You're going to go read his daily newsletter.

1:17:23Throw him the hundy. He's got kids to feed and you've got knowledge you need to gain. He's at Alex on Twitter. I'm at Jason and Lon Harris is at Lon's and producer Oliver. Maybe in a year, if you do as good as you did today, we'll shout you out and get you a couple of followers. But for now, heads down. Everybody twiai.substack.com. T-W-A-I.substack.com. Everybody go visit twiai.substack.com. This week in AI.substack.com. Just five letters, twiai.substack.com. I'm gonna put it in the notes. Coming next year, all demos all the time with a round table every week. So it'll be kind of like the all-in round table or the liquidity round table we do here when we have like four investors on a little round table.

1:18:09And I'm recruiting AI experts to be part of that. I'm looking for like, you know, Chamath, Saks level people, like really high end folks to do that roundtable for me. And then we're going to have demos between the weekly episodes. I just like my guy, Producer Oliver, that credible demo he did today. Imagine a couple of those in between the roundtables coming to you, coming at you in the new year. Have a great weekend, everybody. Enjoy your Halloween. Stay safe. Bye-bye.