And even when you look at other data clouds, you know, like a Snowflake or a Databricks or even a Palantir Foundry, they're all in the 3 to 4 billion revenue level.
They're in my sights.
So, you know, I'm on it.
Saku is a game played by 22 people.
In the end, the Germans win.
In the same way, Venture is a game played by 6,000 people.
And in the end, Sequoia wins.
They won here again.
This is 20VC with me, Harry Stebbings.
Now, it is my favorite show of the week.
I am joined by Jason Lemkin and Rory O'Driscoll.
Now, this show started out as three friends sitting down to discuss the latest and greatest tech news without the politics.
We were bored of hearing politics interspersed in tech news and we thought that we could provide some interesting commentary and analysis alongside it.
Since we've now been hitting millions of downloads with every episode, and today we're joined by one of the greatest founders of the last 20 years, Mark Benioff from Salesforce.
Next week we have Cliff, the founder of Canva, and the week after that we have Jeff Lawson, the founder of Twilio.
This show is going from strength to strength.
The show today is better than ever, and I want your feedback.
What can I do to make it better?
Let me know, harry at 20vc.com.
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You have now arrived at your destination.
Guys, I am so excited for this.
And we have a special guest today.
The SaaS OGs are joined by the OG of SaaS, Mr. Mark Benioff.
So I'm so thrilled that we could make this happen.
And I want to start with a really interesting one, I thought, which was Amazon's AGI head said there are just a thousand AI engineers that matter.
And Mark, I wanted to start with you on that one and say when you think about- AGI head, that sounds like an oxymoron.
So you're talking to somebody who is extremely suspect if anybody uses those initials, AGI, and-
I think that we have all been sold a lot of hypnosis around what's about to happen with AI.
And not that it couldn't happen one day.
We've all seen those movies.
Peter Schwartz, who wrote Minority Report and War Games, works for me.
He's our chief futurist.
But just realize that isn't the state of technology today.
So how about that?
What made you realize that?
What was the penny dropping there?
Well, I mean, I think that when you look at large language models, which is kind of the state of the art of AI today prompt engineering, which came out of our Salesforce AI research team large language models are two things.
They are a finite set of algorithms which have gotten a lot better for sure, incrementally better over the last five years.
And two, a relatively finite set of data that has come off the internet.
Those two things together really have provide the state-of-the-art of large language models today.
When you work with these LLMs, it's very cool because you're like going oh my gosh, it feels very intelligent.
Well, it felt that way when I was using ELISA when I was 16 years old on my TRS-80 Model 1 also.
It was like, oh, yeah.
It was pretty accurate.
Yeah, it was like, oh, this is like a person.
But it's not a person.
And it's not intelligent.
And it's not conscious.
And it doesn't have a childhood.
And it hasn't suffered.
It doesn't have compassion.
It's not a being anymore.
And I think that there is some, you know, hypnosis around kind of the state of the art around AI and what is currently possible or what is about to happen.
And I'm extremely suspect around that.
And I try to bring people back to the reality of here's the current state of the art of AI, which is amazing.
But let's actually use it for what it can be used for and also realize the major issues with it.
And I thought I tweeted about this yesterday, where I read these two articles about doctors who are using AI and they're so over-reliant on an AI that's inaccurate that all of a sudden they are giving their patients bad advice and becoming intellectually lazy at the same time.
And I think that is a huge warning sign for all of us around AI.
If we separate the finite from the infinite, the thing that everyone feels is finite is talent.
And Zuck is paying up for talent like no one's seen before.
You're seeing your mirrors getting offers at a billion dollars with very little to show for it.
No disrespect to her, but other than the team.
Do you feel the pressure to enter this talent buying frenzy in a way that we're seeing other large incumbents?
No, and we're not.
And I'll say that we're very focused on really defining what is the next generation of the enterprise.
Tactics must dictate strategy over time in enterprise software.
I'll just say like the first thing that we've been talking about now for only about eight or nine months, is that we have helpsalesforcecom.
And help.salesforce.com is our agentic layer around our support.
And this agentic service means that there is an omni-channel supervisor that is paying tension between my human support agents and my digital agents.
And to that point I've been able to reduce the number of human agents I have in support from about 9000 to about 5000.
Why that's important is I've been able to take that headcount and then rebalance it into other parts of my company where I need more help and need more support because we're still growing.
So it's a huge change in how our company is structured, how our technology is built and delivered to our customers.
And we're customer zero.
And let me give you one other crazy story to that point.
And you'll be the first ones to hear this story.
Over the last 26 years, Salesforce has had more than 100 million people contact us that we have not been able to call back.
They're just leads we've not been able to call back.
We just have not had the people.
That's just all there is to it.
And it's kind of this funny thing.
And, you know, we have these people, we call them SDRs, you know, sales development representatives.
And we just don't have that many of them.
You know, we have like 15,000 salespeople.
We don't have that many SDRs.
Well, we have this agentic sales now.
And not only are we doing support, but this agentic sales is calling everyone back and having conversations with and then deeply integrating it through the omni-channel supervisor, into our new agentic sales product, which you're going to see at Dreamforce.
In your body language you're saying you think you're going to sell a lot of software powered by agentic AI in the next one to five years.
Is that the summary message here?
Well, I don't think that there will be a piece of software that we sell that will not be agentic.
You're willing to say, just as it was never on Pramagan in 2000, you're pretty much saying it's never non-AI agentic in 2025.
When you get to Dreamforce, you'll see that our promise that humans and agents will work together, it's not just in our sales cloud, it's not just in our service cloud, it's not just in Slack.
If we look at the impact of AI today on the business, it hasn't maybe led to the lift that one would think so far.
Do you think that's fair?
And how do you think that changes over the next year?
It's so untrue.
And that's the funny thing.
Number one, our AI is part and parcel with our data cloud.
So our data cloud love it or hate it, the idea that you need a data cloud that's federated to all of the data sources in your company, and why that is so important so that you can get all your data harmonized in one place, which is why we bought Informatica also so that everything is together and now the AI can be more accurate.
Go to the front of my website and you'll see AgentForce now in the front of our website.
It has done as many customer interactions as our support agent.
Why is that?
Because we put our whole website into our data cloud and now people are just using this agent at the front of our website instead of clicking all the way through the website.
It makes total sense, right?
So that idea this is really important.
The data cloud and AI together now is more than a billion in revenue.
We talked about that on our last earnings call.
It's our fastest growing cloud product, whatever, ever, you know, in 26 years.
And we've talked about that.
We have thousands.
I won't go through the exact numbers of customers now on agent force and the number of deployments and all of these pieces.
This is a product that a year ago we hadn't even announced.
This is a product that wasn't even shipped until November of last year and that customers are still getting their head around.
What software in the history of enterprise software has ever grown at that level of scale?
I would cite to you, okay, Harry, none.
And I will say that this is incredible.
Now you can talk about Any other new company, whatever, existing, we can go through whatever it is.
But this is a product that's breached a billion.
And even when you look at other data clouds you know, like a Snowflake or a Databricks or even a Palantir Foundry, they're all in the three to four billion dollar revenue level.
They're in my sights.
So, you know, I'm on it.
You know I am like the guy in Star Wars.
You know my favorite movie in my TIE fighter.
Stay on target.
I see where I'm going and data and AI.
This is like a huge focus of the entire company and our products and the fundamental aspect of humans and agents working together.
That's how I look at that.
So thank you for letting me address that directly.
When you're looking from the TIE fighter, what do you think of Palantir's growth?
Like, what do you think, just how do you think about it from the Salesforce perspective?
We can all look at the numbers.
The numbers are great, right?
We can talk about defense and who knows who's spending these contracts, but how do you process that?
Because it was growing 15% or something in 2013, right?
It's crazy.
Oh, it's very cool and amazing.
Very inspiring to me that this idea that a data cloud, which is called Foundry, integrated with analytics can be very exciting for a company.
So I will say that our data cloud plus a new agentic tableau, plus Informatica, plus looking at a product like MuleSoft together is our data foundation.
And that idea.
We need to have all of the government certifications and they sell into parts of the market we don't sell into.
So we really have reassessed, hey, where are we selling?
Because the U.S. federal government is already my largest customer, right?
That's our, you know, we run Veterans Administration, the GSA, and we just won a huge U.S.
Army contract.
We beat Palantir.
You know, we have not traditionally sold into those groups.
So it got our attention whether they're closing these deals and their products are so expensive.
Have you seen their price list?
It's out there online.
It's like, whoa, these prices.
I'm like, whoa, my prices are too low.
I'm actually delivering like, I'm automating the whole VA at this price.
Like, what would they be charging?
I mean, my prices are low compared to theirs.
And my products are much easier to use.
That's how I think about it.
Yeah, so no, he's not ignoring that $300 billion.
How do you think about it?
Yeah, well, that got my attention.
I'm like, how do I get that 100 times revenue multiple?
It's $4 billion in revenue.
Let's keep it into perspective.
It's an order of magnitude smaller than we are.
But I just realized that, as someone who was 4 billion in revenue once and is now 41 billion, it's two different companies.
Can I ask you one related question?
I don't mean to go, Harry, you take the agenda, but related to Palantir.
One of the things Palantir's gotten everyone's attention with is forward deploy engineers.
Do you think that's a new concept?
Are they the same people at Salesforce deploying software for the last 20 years?
And is it different?
How do you think about this FDE concept?
Oh, what a great question.
I think that it's both.
I think at one level.
You know we've always had and always gone to the customer and trying to solve their problem and listen to them and do our best.
And we have a large sales organization and we have a large systems engineer organization.
You know what that means.
And we're out there talking to them and working and building the prototype.
And then we also have professional services and then we have partners also.
And all of us are in there.
But we don't have that kind of branding of.
These are our four deployed engineers where now we're going to start building your product now, before we've really signed a deal.
And I think that idea is very cool, that all of a sudden you're like in there kind of saying yeah, we're going to, we're gonna make a bet that we're gonna start doing business together, so we're gonna start building now.
And I think that that is something that we can all embrace and adopt and say yeah well, let's have more of that engineering resource.
Start right at the beginning, in the customer.
Fantastic, let's do that.
Come back to Palantir in a minute, but just going back to the first comment, because the truth is mathematically, Harry's right on the growth showing up thing, which is, but I think it's the law of large numbers.
I mean what you're saying.
Look when you're doing 40 billion.
You know you said Harry, it's quote not showing up in the growth numbers.
When you're doing 40 billion, 10% is 4 billion, which is the entire revenue of Palantir.
The problem with this poor guy is-
I speak quickly with an Irish accent.
My comment is, when you're doing 40 billion, how is giving you grief for growing at 10%?
But I'm making the point.
When you're doing 40 billion, 10 growth is adding 4 billion, which is an entire Palantir every year.
So the comment on growth which is mathematically true Harry, you're right.
The 10 growth is what these guys are now.
You're just dealing with scale.
And I think it speaks to one interesting thing, which is you added nine figures of revenue on the AI deals in the last quarter.
I mean, it's a 400 million AI-only startup which would be freaking amazing if we all owned it, right.
It's just.
I mean, you're just up against the law of scale here, which speaks to even if AI is amazing.
It's what I liked about where you started being grounded.
Even if AI is amazing, I think some of these people who think it's going to transform 100 billion market caps in a week are just way overestimating what it takes.
Can I ask another one?
Which is when we think about MCP and we think about how it changes how we engage with different products.
Do you think we'll want to log into SaaS apps in the future?
Or will we just want our data inside of ChatGPT?
I'm just going to keep coming at you.
I'll just open my heart here and just say I think this is like one of the greatest disservices that has been done to our whole industry and to all CIOs and all CEOs of software companies in the last 12 months is that certain executives, who will not be named CEOs, have said that you know oh, SaaS apps are just going to be CRUD databases.
And CRUD means create, read, update, delete.
And it's like, really?
Do you really think that?
Because if you really think that, wow, you are really wrong.
And that is crazy talk.
That is not how it works.
And I don't know what software we're talking about or what applications, or if you use computers anymore or if you use a phone.
But right now, in the current world, the world that I'm in here in 2025, I'm just saying that I need apps and I need agents and I need them to work together.
And yes, if you can make my job easier and better through AI, then give it to me.
But to say that all of a sudden whoosh, All of those apps are no longer relevant and that humans don't need apps.
Like that's what we just said.
Humans don't need apps.
That's not true for any of us on this call.
And it's not true for anyone on planet earth.
And so that is why I think it was a huge disservice to the industry and got everyone anxious, because certain people that were made nameless have a lot of credibility, because they are great people actually and great executives.
But to say these things is nonsensical. why Microsoft has 3% CRM market share because of nonsense.
But I do want to disaggregate two things because it's worth it.
One, it's going to be a crud app and we're going to vibe code it.
Take it apart.
We agree.
No one's going to build a big, sophisticated app vibe coding.
Let's just discard that discussion entirely.
I think the interesting question is how much of the real estate on top of Salesforce do you guys own?
How much do you allow other people to own?
You know, as Jason said, there's a bunch of startups.
We've all funded one, God forgive us.
Assuming Salesforce as a given.
You are the infrastructure, not this bullshit comment of you're going to be replaced.
Ignore that entirely but assume Salesforce is the infrastructure.
But maybe the sales rep in their daily toil can have a better tool than Salesforce to do some of the work, or maybe even an agent that's not owned by Salesforce can be doing the work and coordinating with Salesforce on the back end.
To me, that world is much more realistic.
Do you want all that front-facing real estate on top of the Salesforce data?
Do you allow other people in the ecosystem?
How do you make those choices.
There is going to be a level of application functionality that is going to be required.
And there's no question that these apps that our users are on today are still going to be very much a part of how they get their work done and that they operate in the flow of work in sales and service and marketing and all the examples.
And then at the third level, that there is gonna be an agentic layer that's gonna interoperate with those applications and that data.
And yes, there will also be an ecosystem that is going to fuel all of these things as well, and that the connectivity is going to happen and that it's going to be open, and that you look at the Slack ecosystem or the Salesforce AppExchange the agentic layer is a huge investment opportunity for the whole SaaS ecosystem.
And I hope that it's going to be built on Salesforce.
Now we have several agents that give daily updates in Slack.
I need a demo of everything you're doing, because the first time we were talking you're like yeah, I have this agent is with me on the sales calls listening.
It's coaching me, you know, and that was very inspiring to me.
And now you're like, and I have a dozen agents.
There is going to be a radical explosion of small and medium businesses like yours, because entrepreneurs like you can do more than ever.
So, while the enterprises are kind of trying to figure out, are they going to DIY it and are they going to do this or are they going to do that?
Look at you and look at all the entrepreneurs like you who can boom boom boom, go right into the future.
And like, we're going to see an order of magnitude more SMBs because SMBs can do more than ever.
Mark, every week we hear from Jason that SDRs are screwed.
That if you're 23 to 35, à la poubelle, in European terms, to the trash.
You know, you don't have a future.
You have said before in this conversation oh, human and agent, and very much suggested a pairing between the two.
Jason has presented an idea that in the next 12 to 24 months actually we'll see this mass exodus of the SDR class.
Do you think Jason's wrong?
Well, like I said, I think that we have all these leads that we just systemically have not called back, and now we are.
That gives me the ability now to rebalance my headcount and to really say hey, I want to take all these folks and make them sales folks.
And I think that in all of the segments of the business that we do business in not just government, that was one segment not just the enterprise, the high-end enterprise, the 5000 plus world, but the mid-market and the small business we're a company that's going after all of those segments.
Us right?
We don't.
So you're saying the sdrs will remain and it'll just allow you to cater to the ones that you couldn't cater with before.
Because jason, just to be annoying and british, but it's no, i think mark might be saying.
Mark said his support team went from 8 000 to 3 000 and he redeployed him into other areas.
I think about that number.
I think the same thing.
That's exactly right.
Yeah, I think we'll redeploy.
I think Salesforce I don't know how many like entry level SDR Salesforce has, but I bet you redeploy 70 of that headcount into enterprise reps or forward deployed engineers.
That headcount just becomes more valued with agent for sales.
I bet you don't need 60% of that.
What you're saying is so important Jason, because what you're saying is that the fundamental architecture of an enterprise software company in the future is not exactly as it was in the past, that the fundamental architecture of the company will be different.
And all of us grew up in SaaS and the applications and all this over the last 25 years.
And so we saw how the applications have changed and evolved.
But now we're saying is it's not just that, it's also the companies as well.
And that is different.
So, Harry, did you get the answer to your question? yeah redeployment yeah no i don't think it's bullshit though i mean it's because we have this discussion every week mark it's the jason is basically the grim reaper and thinks not a single 25 year old will ever work in this town again and you know i think it's grossly overly optimistic to think that you can redeploy 25 year olds who aren't that passionate don't have that many skills on this one again and No, but when you're at Salesforce's scale, it's about headcount.
Mark's budget's fixed.
He's got 80,000 heads on a spreadsheet.
I don't know, when I was at Adobe, it was 20,000, right?
And so if you can move those heads up the value chain, Salesforce can be a much more efficient company.
Yes, it's a more optimistic.
That is exactly right, Jason.
It's a more optimistic view A than Jason's taken in the past, which is why he's contradicting, but it's a good view.
Because I actually noticed time and time again Mark's I won't say spin, but approach on it is when Jason did his thing about he only has three people in his company.
Mark's take on that was there'll be lots more entrepreneurs because of that.
It's super additive, which is entirely the only way you're going to sell this AI revolution.
Otherwise, there'll be another freaking revolution if we keep pushing on this.
So I like the kind of upside-related focus.
As we've discussed over and over again, if they're not any damn good, they're on their own.
But it's at least a vaguely upside-y approach, Harry, versus Armageddon here.
You can go to our website and see who we're hiring.
And also this narrative around that we're not going to hire any more kids out of college.
This is also bullshit.
Mark, I'm aware that you're going to have to run.
I do want to ask one final thing, which is just in terms of unfair questions.
Rory loves me for this.
You're such a digger about this.
No, I'm not.
You just always comment.
You have OpenAI at 300 and you have Anthropic at 170.
Which would you prefer to buy?
Well, I think both are actually great companies.
Salesforce owns 1% of Anthropic.
So I'll just, you know, it's obviously a great company, very focused on the enterprise.
OpenAI also is, you know, a great company.
I'm a big fan of, you know, their leadership and what they've done.
I don't know what you're paying your media training person, but you should pay them more.
That was a masterclass in how to handle Harry being annoying.
Basically, Harry...
Thank you for your question.
I've complimented everyone.
I love it.
He just won.
You should just fold, Harry.
I'll be practicing that next time.
It's the nice, nice about everyone.
And shut up, Harry.
Good job.
Mark, you are a hero.
Thank you so much for this.
And thank you for putting up with my pressing questions.
Jason's free to present at Dreamforce about how he's changed.
I'll be there.
I'm even going to Metallica this time.
Mark, thank you so much.
You're a star.
Thanks, guys.
Great to see you.
Bye-bye now.
All right, we're ready.
Now I'm excited because these I want to dive into.
Nat Friedman reporting to Alex Wang after not a huge amount of time.
How did we analyze, interpret this news of the new structure that's come to be in Meta's AI division?
I thought the consensus when we talked about this deal at least 10 days ago, 14 days ago was it's fine to give up billions of potential carry and funds to be in the game, to be a player, rather than to be on the sidelines.
I don't want to be critical, but man, then essentially getting undermoted in a reorg.
Maybe it doesn't feel that way, but hiring freeze and a total reorg within 30 days, it's a lot to process.
I might rather be running my own fund.
At least it seems like a vaguely sensible org structure where you have one person in charge and then the four divisions.
You have pure science.
You have LLM foundation models.
You have AI applications, which I think is where Nat's running.
And you have infrastructure.
You read the org structure and go, yeah, that's probably how you should run it.
And you got one guy in charge.
It's the same thing.
Stupid examples.
When you get these soccer teams where they just have so much money, you hire all these people in on the transfer market and then you've got a bunch of drama.
And then someone's got to be the manager and figure out who's going to play what position.
I don't know what promises are made.
I don't know who's bent out of shape.
But it seemed like a sensible thing to do.
You spent $20 billion on talent.
You now need to tell them what position to play and who's going to play forward, who's going to play striker and who's going to play fullback.
I just don't get it.
I feel naive here.
I don't understand if you're Nat, why you do it.
I understand you want to be in the room.
I get that.
But then reporting to someone else who's not Zach.
For anyone that knew Nat and knew Microsoft, he was really in the grooming position to be the next CEO of Microsoft.
Many understood.
And now it's like to then report to someone who's not Zuck in this structure.
You've got, you know, Yann LeCun also reporting to Alex Wang as well.
Daniel is reportedly not really there day to day.
I'm just confused by the whole structure and it just feels like wow, you gave up on probably one of the best funds.
I've got to push.
Just be logical, Howard.
You're not confused on the structure.
Actually, the structure is pretty well understood.
You're confused on why he'd do it, which is a different thing.
You're confused on why someone who was highly autonomous would sign up to report to someone who reports to the CEO.
That's what you're confused about.
And the rationale around that, for me, would be like, well, actually, guess what?
Elon goes to Zuck when he wants to buy OpenAI and Sam Altman.
It's pretty cool being in that room, which Nat would be with Alex to have that discussion.
And you're not if you're just another fund.
That would be the reason why you'd do it.
I think being in the room for that a couple times is fun, and then I'd rather run my own shop.
You know, there's only so many rooms I need to be in.
Like, it's pretty fun.
It's like the first IPO you're a part of.
Like, it's great.
But I'm not sure what it's like as a VC to have 20 IPOs.
I might rather have more carry than show up to ringing the bell.
I don't know.
Honest comment is I totally get why someone who's a great operator would choose not to be a VC.
Because I think if you are a good operator, I always tell great operators who talk about coming into venture, don't be crazy.
Your highest and best use is operating.
If you had the ability to be the next CEO of Microsoft, or be a VC, my strong advice is go be the next CEO of Microsoft.
I get the transition from venture to operator.
The question you're raising is the level at which you make the transition.
It's giving up autonomy.
But again, as I say, I don't know what was promised.
How did you think about Matter more broadly being hit hard?
I mean, they were down 6%.
They've had a pretty meteoric, continuous rise.
This was a blip.
The big picture here is their core business is doing extraordinarily well.
They have a very tenuous link between their core business and their AI initiative.
They talk about how AI is optimizing their core business.
But even I think from the discussions they said that's much more old school AI than any of the LLM stuff.
So you've got this core business that's kicking off cash.
And then you've got the CEO, with untrammeled power, decided to invest all this cash in this new business.
So if you're trying to value the stock, your entire day is spent thinking WTF, is this new business worked?
And is it going to eat all the cash flow?
It's like criminology.
You know, when you're looking at who lines up in Red Square and trying to figure out who's in charge, you just looked at this announcement and said I don't know what this means, but maybe it means bad.
So maybe I should sell the stock off.
There's just no data and there's no way of knowing.
At some point someone's going to have to explain what they're doing with this 60, 70 billion and how it's going to change their business.
If Zuckerberg is right, like he was about Instagram and WhatsApp, everyone will go, yay.
If he's wrong, like he was about the metaverse, everyone will go, oh my God, what were we thinking?
You don't think this is the beginning of a cooling of the excitement of the AI market and a dampening of market caps and a dampening of public markets in a way like some people are worried about?
How the hell would I know?
I mean, I don't think implies I'm a know.
It's just not knowable.
Let me tell you, you'll know when it's happened because it'll hurt.
All you know now is things are pretty lofty.
When things are trading at 15 times earnings, you don't have to agonize all that much, because if earnings blip 10, the stock blips 5 and no one cares.
When things are trading at a very pricey level, then everything that goes wrong, no matter how tiny, gets magnified through the stock price.
Things are trading at a high price now.
You don't know, is that going to change in a week, a month, a year?
It's going to be an angsty time until either the growth comes to fill the earnings gap or the stocks go down to reflect that.
And when that happens, who the hell knows?
Listen, I'm not an expert, but Meta has a 1.59 beta.
It's a volatile stock.
So I don't think we can read anything into these ups and downs because the beta is so high.
I mean, NVIDIA, 2.3.
These are insane numbers, right?
And so...
Abstract away from that, when you look at the amount of volatility Figma's had since the IPO, it hasn't even had a quarter, hasn't even gone out.
These high beta stocks, I don't know.
You got to be smarter than me to figure out what even a 7%, 8% movement means.
The beta is too high.
Aligned to what I just said, which is like the cooling or the lack of cooling, Anthropic goes from a 5 to a 10 billion raise.
Is demand just completely inexhaustible for this?
I heard it was 4x oversubscribed.
How did you guys react to the 5 to 10 and the 4x oversubscribed reportedly?
Good for them.
Demand appears to be pretty damn high.
It looks like you can raise $10 billion-plus in a single financing in the private markets.
Your open AI is $40 billion.
As you say, appetite for the AI story is extraordinarily strong.
Most of the public comps aren't a pure AI story.
They've got kind of AI blended into something else.
Your Facebook, Google, Microsoft have at least something there.
Apple has nothing there.
Amazon has little there.
So there's got to be.
If you're a fidelity type manager, you're like, how do I get me some AI action?
There's two obvious at-scale candidates.
And yeah, you probably can sell a lot of that stock right now.
And they're going to sell it.
And the good news is they know what to do with the money.
They can buy GPUs.
But is this, and Harry, you would know this better than me.
Maybe Rory knows it.
Iconic is a lead for this round and Lightspeed led the last round.
Yeah.
I mean, maybe the underlying LPs and money is from sovereign wealth funds or other.
These are the standard cast of characters who can tap into vast amount of money, right?
And charge, keep a vast amount of economics on top of it.
Of course, they're going to go from 5% to 10%.
If I can deploy, why don't I deploy another five if I'm Lightspeed or Iconic, right?
Why wouldn't you?
Instead of Lightspeed putting 2 billion in, if it's LPs, we'll give them six.
Why not?
At a GP level, it's the same amount of risk, isn't it?
I lose 2 billion, 6 billion.
What's the difference?
But I mean, I can make so much more money.
And they could also be right in that call that it is going to work from here.
It's an interesting exercise to try and take the entropic numbers and say why do you have to believe?
To believe in a 3x from here?
And it's frankly not impossible.
A lot has to go right, but a lot is going right.
I kind of did the thought experiment a while back.
The growth rate over the last year or two is so fast that one of two unprecedented things is going to happen in the next year.
Either a de-accelerates at quite normal rate relative to its current growth rate, it's going to hit 50 billion dollars in revenue plus because things that go from one to nine or ten probably go next year.
I don't know.
That's a 10x growth.
Do they go 5x?
Do they go 3x?
Yeah, it could end next year at 40 billion in revenue.
It's possible could, if it goes, ends this year at nine, from one to nine.
You're much better than me, rory.
What is what?
If you just do your, your trailing velocity?
What does that end up?
You want to put an enormous number and you go wow, that's not crazy.
Either that happens, which would be unprecedented because the amount of revenue would just be so big, or they slow down faster than anything slowed down ever.
If you go from 10x growth to 2x growth and once there's 2x growth it's amazing at that scale, but it would be such a deacceleration.
When you look at the stock and you look at the price they're paying.
As I say, it's not crazy to say If the growth only slows, even 50, it's still got a kind of a trajectory and a throw path to tens of billions of dollars in revenue.
And that gets you into the valuation.
So processing through that, you say to yourself, at some point, it's a market size question.
If there's enough revenue out there, these two guys are going to get it.
And thus, in the end, as highly priced stocks do, that are really leaning into growth.
It boils down to your assessment of is there?
50 billion of demand for foundation model APIs.
Are 500 billion of demand for foundation model APIs?
And if it's the latter, they're probably going to get 40% of it, and it gets them $200 million.
And if it's the former, they're going to get 20 million and a lot of these people are going to be sad.
What do you think it is, Rory?
Because it's a really hard question.
I mean, you...
I think it slows down more than people are.
I mean, it's something Jason said three or four shows ago where, if you start running out the numbers on what I mean, let's talk about 100 billion of revenue.
Salesforce is doing 40 billion.
So at 100 billion you're saying it's kind of two and a half times the size of Salesforce, which effectively has dominant market share in the CRM space.
Coders have to get what Jason said a couple of weeks ago.
These agents have to be worth 10 or 20 grand ahead for that market size to get to that scale.
If all it is is $2,000 an engineer, I don't know if you get there.
That was my big aha when I did the math.
You actually need these things to take vast chunks out of the labor budget and be worth 20000 30000 40000, almost ahead to the enterprise.
For the math to work.
And Jason said, in some cases, it will.
There will be some use cases where an enterprise will part with 20000, but there'll be lots where it don't.
So you can tell my lack of certainty here.
I don't know if I get to that 100 billion plus in revenue, because I just run the math and I can't find the time.
But I could be wrong and underestimating it.
My guess is no, and it slows more than you think.
But it's not a crazy call.
I can't shoot from the hip and do the math, right?
Because it's so much money.
It is so much money.
I mean listen, we just had Mark Benioff here who's saying in Dreamforce they're going to launch an AISDR.
That I guarantee you.
It's going to take like six to nine months to scale up.
But it's going to be bonkers.
Everyone's going to turn it on.
That will tap into a vast amount of budget, a vast amount of cycles, a vast amount.
Now, maybe some of it will be their own LLMs, but it doesn't really matter for purposes of this.
We were just starting this cycle, right?
And it's hard to predict how much human replacement, how much new applications.
But let's do that exercise though.
You exactly right.
Listen, Salesforce is doing $40 billion a year.
I think $12 billion of that is Sales Cloud.
Let's say they turn this on and it's a 30 uplift AISDR on top of the core Sales Cloud, which is 12 billion.
So it's 36 billion of extra revenue which, as you point out, only gives the poor man another year of 10 growth.
But $3.6 billion in revenue.
Let's just say LLM costs as a percent of revenue are expensive, 20%.
So that's $720 million.
So you've just had the second largest software company on the planet turn on the most labor-saving device for their core marquee product.
And when it filters down to LLM revenue at $720 million, round it up to a billion.
That's when you kind of go, you have to sell a lot of labor replacement to get to 100 billion.
Now, maybe I'm underestimating.
Maybe the 30% is wrong.
Could you see yourself Jason, paying four times what you pay for Salesforce for an AI SDR on top of that Salesforce?
Listen, we're a tiny group, right?
But we have four seats of Salesforce.
So what do we pay?
300 bucks a month, 20 grand a year for Salesforce?
Nominally, we're paying $500,000 for 11 AI agents.
So what's the ratio?
I don't know whether that makes sense long-term.
I don't know if it scales.
If a portion of that ratio were to hold, then it's a pretty cheap round.
Yeah.
Well, again, again, pushing it.
But it's a crazy ratio, isn't it?
Because let's just even do two to one.
Let's just say for every dollar you spend in Salesforce, you spend another dollar on top.
That's 12 billion.
Let's assume 20% to the LLM.
That's 2.4 billion.
It's real money, but it's only 2.4 billion.
I just... Yeah, but I'm spending 500K versus 20K is more than 20X more, right?
To be clear...
If 20x is the ratio, then you're right.
I think the problem and Harry was teasing at this, but we have to go gently with the CEO of a 40 billion run rate company.
The tough part just is that, I mean, you're doing the right thing, Rory.
Salesforce may not capture that incremental $120 billion.
That's the challenge.
Workday may not capture it.
Palantir appears to be capturing it.
That was why Mark was impressed with them.
If the big guys mostly don't seem to be capturing this agent dollar, if they do, great.
But today, when we're recording this, it happens. hasn't happened yet, right?
They're not capturing much.
And I'm saying, and even if they do and I think they will I think they're well poised to capture some of it.
I think, as I say, when you apply the 20 ratio and you get back down to how much revenue it is for the LLM, you struggle to add it all up.
And then I'm going to make the argument against myself.
And then you look at the explosion in revenue in the last year.
I've never seen something grow nine X from a billion in one year.
I always joke that Newton's law of motion applies to companies.
Things in motion stay in motion.
I can never remember anything going even 1 million to 9 million and then flattening out to 12, let alone 1 billion to 9 billion.
Just the trajectory alone, it implies 30-something the following year, which would be a significant slowdown.
You'd have gone from a 9x year to a 3x year.
I'm just worried that the MAG7 today have so much concentration of value in the public markets, driven by AI hype and excitement.
It's very valid as we see with anthropic revenue growth like you're talking about there.
But I don't feel like we've ever had the concentration of value tied to AI in seven companies as we have today.
And I am looking at it now going like, oh, I really hope there's not a blip here.
Dear Lord.
So basically, you've done all your analysis just like everyone else.
And then the last sentence says it all.
I don't have the stomach to sell, crystallize my gains and move it all to value stocks.
Instead, I'm just going to let it ride and pray a little.
Nice, Harry.
I'm not going to argue with it.
It's what I'm doing too.
Yeah, and ask you.
Where the rubber hits the road is.
When you do that analysis and you have to say to yourself it's unprecedented.
Do you want to make a trade?
Do you want to sell down?
Do you believe that it's going to revert to the norm?
And you don't now.
I do.
I do believe it's going to revert to norm.
I'm more pessimistic than some, right?
I do believe it's going to revert to the norm.
So you're crystallizing your gains now?
I'm actually looking at it right now.
In fact, I had a long conversation with someone about just given all the other dynamics about what's the best ETF for core commodities, which are the only things that survive the 70s.
But it's a 5% play.
I'm not going to go down that rat hole.
But I think something can be amazing and still overpriced.
That's perhaps the sentiment.
So I'm looking at this going, all these companies and these opportunities are amazing.
I don't want to down on them because any growth from here will be just astonishing.
I mean, I didn't plan to come here and talk about stock prices, but you asked about the Mag7.
Eventually you get reversion to the mean and we're at the highest point we've ever been in terms of concentration.
I mean, it hit us hard in 2022, right?
Reverting to the mean hit everyone hard.
Yeah.
Hit everyone hard, right?
2023 was worse, but the precipitous drop in 2022, we've already half forgot.
I mean, not everyone's.
I mean, it was brutal.
And 2022 was even worse because the revenue growth was still there.
Like the cloud, companies were still growing at a decent percent of 2021, but the valuations fell 66.
It was brutal.
Okay, so we have this realization.
We understand that actually good times sometimes end.
And then when you look at Mongo, up 27% today on amazing numbers.
We have Box up.
We have Octa up.
Jason, can you turn up the volume where the party's going?
I'm ready to put on my DJ set here.
I need a little time to process it.
But I think, thank God, because we were just talking.
You were just asking Mark Benioff why they weren't getting the lift right from AI.
I'm glad to see that just literally this week we're seeing Mongo, even Okta, which had been struggling Box, the other day Zoom, which is not exactly a rocket ship anywhere, but seeing growth reaccelerate because of AI.
It's like, thank God, like the cavalry is coming just in time to help.
The public guys need it.
So I think it's heartening.
But to your point, this is not anthropic growth.
It is re-acceleration.
Like re-acceleration at scale, to Rory's point, is always epic.
Like we owe everyone a kudos when they re-accelerate at scale because it's so rare.
Now we're seeing it at multiple.
It's just not like Palantir re-acceleration.
Exactly right.
And maybe actually the thing that two things have in common, it's just to remind yourself is...
Changes in stock prices are when you get a difference between the expectation and what actually happens.
And what you're seeing in some of these, like Mongo bounces when people have the SaaS, is dead story and the markets buy into it and these things start trading at five and a half times revenue.
And suddenly, it's not like you grow 9x, but you beat expectations by a couple of percentage points.
And suddenly, you can get a nice bounce in your stock.
Because You're trading at a value where once the upside shifts, the stock's only going to one way.
And it's almost like the mirror opposite of what happens to these super high-priced things.
When all the good news is priced in, when even one piece of good news goes out of the deal, you fall fast.
If Salesforce had a 13 Q1Q gap revenue quarter, you would see that stock bounce like you haven't seen it.
Because it would be, oh, we priced in 10.
We're suddenly getting 13.
We're getting 13 at scale.
Oh, my god.
But this three let's call it three or 400 million of ARR already this year, plus everybody else right.
But the Levelable and Replible is every time someone is using the app, they're spooling up multiple Neon or Supabase databases.
The load on both of them is massive.
They've never seen demand like this, like it's massive.
That's great for them.
I mean, Neon got bought by Databricks for a billion, right?
I didn't even understand why at the time.
Now I get it, right?
Supabase is probably worth much more, right?
It's kind of a bummer, and air quotes, if Mongo doesn't benefit from that.
Like if it's all the Harveys and the Supabases and like...
I guess it's good for VC, but it's also a terrible stability point if none of the incumbents benefit right.
Where is Atlassian benefiting from this AI wave, right?
Where is Monday benefiting?
So it's heartening at a meta level to see Mongo benefiting from AI deployments.
It's heartening because it means maybe the revenue is a little more durable.
Maybe Harry's Replit investment level will go 10x rather than crash and burn next year, because all this stuff's enduring.
Right now, it still feels so fragile, doesn't it?
All this revenue feels fragile.
No, it feels very durable.
Thank you very much.
It does?
Well, if you can go from 0 to 106, I mean, did you see what Wix said with, what did they buy?
Base44, what's it called, the one they bought?
Yeah, yeah, for $80 million, yeah.
Yeah, now they did $1.2 million last week.
Probably a good deal then.
Oh my, deal of the century.
And I tried it.
I tried it.
I actually took my site and had it rebuild it.
It looks like clod, but not as good.
I get it.
But they're working on all the issues.
But it's just interesting.
If Wix can buy an eight-person startup and then achieve that revenue velocity, it's impressive.
But it also makes you think about durability.
Totally does.
Rory, you said if Salesforce grew 13%, not 10%, it bounced like never before.
We had Klarna filed, say, to go public between the $13 and $15 billion range.
It was lower than people thought.
And it was lower, I think, largely because of the 20% year-on-year growth, which isn't great.
It's good, but it's not great.
Jason, how did you interpret Klarna finally going out?
We know they had a 45 billion price round before SoftBank led, then a repricing to six and a half and now going public at 13 to 15.
If they were growing 24 last year and now they're filing and they're growing 20?
What's the inverse of the Mendoza line Rory, the opposite.
When you fall below you can't file.
Did the Mendoza line of triple triple double, double or better?
But there's also this hard.
It's the hard deck.
You can't fall below the hard deck for IPO and it's 20% growth.
And I could be wrong.
Like, I don't know.
It might be the Klarna's filing just in time in the midst of this IPO way, because 24 to 420 is not the reacceleration that we're seeing.
In some of the folks that I mean even you know, Netscope just filed modest reacceleration to from 30 to 33.
30 to 32 may sound modest but it's a lot of work.
24 to 20, you know, Mav's hitting the hard deck again.
Like you bet you pull up, pull up, pull up, pull up.
File, file, file.
Pull up, pull up.
There is a level of growth below which it's hard to find.
But just to be clear, the bigger you are, the lower that growth threshold.
It's simply there's a transaction level below which the Wall Street math doesn't work.
So you know silly example if you're doing 10 billion in revenue, they'll happily take you public with a 7 growth rate, because you're just big enough to matter, right.
But you're right.
For the typical venture deal somewhere around 20.
You're starting to get to the multiples.
Don't get there.
But clearly at $14 billion, It's a perfectly doable deal.
So I don't think it's a question of you're going too low to matter.
I think at $14 billion, it's a valid transaction.
I mean, it's just a very different business than Netscope.
It's very much a financial business.
If you recollect, they had that whole issue on Interesting.
They did that little bit of overstatement on AI and they're going to automate everything and then backed off of that.
But that was interesting, but not important.
I think the more interesting fact was some of the early comments on lending losses.
I think it was earlier on this year.
So it's a financial services business and it lives and dies in financial services metrics.
And once you start to lend, you got to be good at lending.
I mean, we talked about NewBank last week, which appears to be bloody good at lending, right?
Clown will be just fine.
It'll trade, it'll go public, whatever.
It'll be valued like a relatively mature financial services business.
I haven't studied the S1 yet, but the guys who priced it at 6 billion were right, which is Sequoia, and the guys who priced it at 45 billion were wrong, which is SoftBank.
You'll recognize this, Harry.
There's a saying.
Gary Lineker used to say that soccer is a game played by 22 people, and in the end, the Germans win.
Well, in the same way, venture is a game played by 6,000 people, and in the end, Sequoia wins.
They won here again.
Still 24 to 20% growth at less than $4 billion in revenue.
Still incredible, right?
But deceleration.
Hyping as they're going public, they're a million in revenue per employee.
That's implicitly saying we're finding our rule of 40 in the bottom line, not in the top line, isn't it?
I mean that coded message of a million per employee as growth decelerates is fairly clear to Wall Street right.
We're mature.
And it sounds...
Yeah, sure.
But also, your financial services company, it's not the same metric.
I mean, you know, I shudder to think what Jane Street or Citadel's revenue per employee would be.
It's in the tens of millions, right?
This is the classic fintech company trying to make software... noises.
But let me give you a clue.
You're a fintech company.
It's all fine.
It's a totally wordy thing.
You're a fintech company at huge scale.
Well done.
You built the category.
You'll get the medium growth fintech valuation, and everyone with the last round will make money.
Does SoftBank just get washed?
First of all, no.
And it boils down to the details in the documents.
So two comments.
One is.
At the time of the last round.
I remember thinking people are going oh my God, you paid 45 and now you're raising money at six.
Yeah, you look like an idiot, but you only took 10% dilution.
If you were an investor at 45, yeah, you know, it sucks to take that dilution.
But a down round at six billion didn't kill the economic value of their investment.
In fact, it preserved it by keeping the company alive.
Now fast forward to today, you're still overpaid.
As we've discussed before, it boils down to what's in the docs.
My guess is they don't have a block because Sequoia are not dumb people and wouldn't have left it in.
So yeah, they just overpaid and they're going to get converted and they're going to trade at 30 40 cents on what they originally paid.
And the just hope is that it bounces up from there.
So they don't get washed.
They just do what's called losing money.
It turns out when you buy a stock at 45 and it trades at 15, you're down.
I totally get you.
I love that also in terms of the 6,000 players and in the end Sequoia win.
That's the intro for sure.
And I mean, they're going to pay you for that one, Rory.
I mean, I know the head of marketing there, she's going to be like, Rory, go.
Look, I mean, I started here in 31 years ago, and they were doing great.
And you fast forward 31 years, they're still doing great.
There's something in that.
You got to hand it to them.
I remember thinking when the clown around went down and obviously it was a bunch of drama after that with Sequoia that we just leave out for now.
I remember thinking that was a shrewd call.
You just let them raise money at 45 billion a year and a half ago, and now you're stepping in at six.
Remember thinking good investment, and it's going to turn out to be that.
Not that it helped them.
SoftBank did have a ratchet in WeWork.
This deal was not that far off at a similar valuation.
They could have a ratchet here.
I just don't.
I need one more day to find out, right?
You don't think so?
I don't.
I mean if they got one in another deal at about the same price at about the same time.
At least it was discussed.
At least it was discussed.
You're exactly right.
It is knowable.
And when I get off here, and we will feed the S1 into chat GPT, and we'll know in an hour.
Yeah.
What will Netscope go out at?
$700 million ARR growing 33%.
Last valuation was?
It was around $7.4 billion in 2021.
And after that, they raised some kind of weird convert that's harder to track.
It's a good company.
It's not making money like figma.
It's losing money, but it's got.
It'll be at or close to it, is my guess, or maybe even up from it.
So yeah, i think the 2021 round connects hill there.
Not quite out of the woods yet, but if you've got a company at 700 million growing north of 30 with a little bit of re-acceleration, it doesn't take more than a squint to see a seven billion dollar, you know, flat round to 21 and as being doable, Good for them.
Great company.
Around since 2012.
All congrats to Lightspeed, who own a big chunk of this, along with Excel.
And yeah, I'm not going to tell you where it's going to trade day one because, as we've proven with Figma, that's not knowable.
What we were right about on Figma was the step up in the process, the process of this.
They'll file at five or six.
They'll get demand.
They'll walk it up.
My gut would be seven, eight-ish.
Where it trades on the first day, who the hell knows?
Do you think it could be a bounce like Figma?
The answer, of course, is no, because I believe, as I said earlier, in reversion to the mean, and Figma had the largest bound of any large cap IPO since, I think, 2000.
So I sincerely doubt they'll copy that.
It was funny, actually, I got an email from one of the many millions of bankers.
You notice marketing emails next day, they all send out saying, you know, we priced XYZ IPO.
And the headline was, we successfully priced the Figma IPO.
And I just so wanted to email back and say you priced it.
But it's not clear.
You priced it right, my friend.
Successfully might be a reach here.
Going to the other end of the spectrum.
Guys, I don't know if you saw this, but it was astonishing for me.
It was a mapping of seed rounds segmented between megafunds and boutique funds.
Number one megafund seed investor was Andreessen, with 72 seed deals compared to number two was 27 with Sequoia.
Exactly.
Rory, how did you analyze that?
Was Andreessen just playing a totally different game or?
I mean, you have to say they're playing a different game.
I mean, the words ipso facto, the words speak for themselves.
If everybody else is doing 27 or less and you're doing 72, then by definition it's a different game.
Yeah.
I mean, we saw it again in the other interesting analysis that someone did on the Series A rounds.
They are the successful quantity provider at every stage in the thing.
They're the largest capital raiser, I think, other than Insight.
But Inside, obviously, it's slightly more later stage.
In their pure Silicon Valley universe, they're the largest capital raiser at every stage.
So by definition, they're doing the most deals and being the most aggressive.
Do you think it will work out?
When you look at some of them.
We've mentioned the Databricks of the world and how much that will return.
The truth is this.
If it does or it doesn't work out, it won't be because of their seed program.
And that's the big aha.
The seed program could get lost in the noise.
It will work out if, by virtue of their seed in a program, they get the small number of absolute outliers.
And they stated this right back in 2009.
So give them credit for wild, wild consistency.
As long as they get Those few number of companies that are absolutely outrageous upside performers and they stuff a billion dollars into them, like they did at Databricks, and they do it at the right price, it'll work out fine.
Everything else is a loss leader.
The seed program, it's basically like cheap milk in the supermarket.
It brings in the crowds, right?
It's the loss leader.
See this for suckers.
Apparently no no, we said that, jason said that last time and then we all got no.
I mean yes, i think it's consistent.
I think it's consistent.
I've got a friend who's a complete dipshit and he's gonna make a huge amount of money from 100 million dollar spv into open ai at 200 million.
Well, he may be a dipshit but he's got good sales skills because he got in.
There's different ways to win in this business.
And sales is part of it.
There you go.
Yeah.
Sometimes you just got to sit on their steps to sit outside of OpenAI's office all day long.
Grab Sam 11 times, a classic Sequoia playbook.
Sit on your steps until you get the meeting.
Don't leave without the term sheet.
Now guys, do we have any other news items before I do a tweet of the week where I just want to talk about one tweet.
I thought it was particularly interesting.
Grab the zeitgeist and I want to hear your thoughts on.
What's the tweet?
The idea that non-consensus investing is where the alpha is is actually quite dangerous in the early stage.
Follow on capital tends to be more and more consensus aligned.
I thought it was a better tweet than he got credit for in the Twitterverse.
I saw that tweet, and I'm going to work in.
He also did a really good piece on gross margins and the way people are misunderstanding that that if we had more time we'd talk about.
And I thought that that tweet wasn't crazy.
And I think people then cited the cons.
And yes, there are always outliers that are not consensus.
Like in 2016, the non-consensus bet would have been to do open AI.
True.
But it's also probably true that 90% of non-consensus bets would have failed entirely.
And at that stage, SaaS was probably consensus.
And only about 50% of SaaS bets would have failed entirely.
When you're on this mega trend of an architectural replatforming, a goodly amount of the correct investments to do are fairly consensus in terms of the broad macro themes.
And I remember I think it was IVP years ago, I mean 20 years ago they had this concept of 70 of the bets being very much on track faster better, cheaper.
And then I remember 30% kind of brave new world bets.
I don't think you could build your entire business on waiting for open AI.
So I actually think his comment was more spot on than people give credit for.
I think if you look honestly about what you're doing, you don't want to be 100% consensus.
You don't want to be just doing AI.
You want to be looking at new stuff.
But it's like the explore thing.
You are betting the megatrend that's probably going to last 20 years.
It could be AI.
20 years ago, it was SaaS.
15 years ago, it was public cloud.
And that's a consensus bet that paid off for 15 years.
I'm rambling a little, but I think his comment was more correct than the 140 or 280 character comments made out.
You don't want to just be consensus, but consensus is a bad word for on point where the industry is going.
My reaction.
He responded back to my reaction too, which was that I thought one of the implicit points and we've talked about this entire series of the show has been putting money into consensus bets, right.
I mean, half this AI stuff is.
I thought one of the points he was making and he agreed was that today 10 deals are consuming 40 of venture capital.
Yep.
Everyone we knew that used to do B2B deals only does AI.
My point back, which he agreed, was like if you're going to do bets outside of that, you better not count on much follow-on capital.
Agreed.
Because they're not interested.
They're not interested.
And so I've done several B2B plus AI deals in the last 18 months that I love that will do great.
And the advice I give to all those founders is don't expect any money.
Yep.
80% of the folks I can refer you to are not going to take your meeting.
And it's a reality.
And so I don't know that.
I mean, he was like, that's exactly part of the issue, right?
And so there may be several layers, but if the whole industry is consensus, the capital is concentrated.
It's not just your buddy that put 100 million in the SPV.
Everything's concentrating here, right?
We had an IC today for a fintech business, and they scaled to 5 million an hour in a year.
And the founder was great.
And I said, guys, why is this not moving fast?
What's wrong with it?
And one of my team were like, oh, it's not AI.
And that's an example of where I think, Jason, you were spot on.
It's not that you shouldn't do non-consensus bets.
There's a couple of different things.
But that's a classic example of what you should do.
You should buy it at the right price because you're not going to get the magic pixie dust next round.
And you should run it capital efficiently, because you're not going to get people throwing 4 billion at you.
So, Roy, what you're saying is the price should reflect that it's not AI.
It will and should be valued on fundamentals.
That's different to what it was in the last years.
Yeah.
If it's non-consensus only because it's doing something different, then by all means do it, provide you understand what's different and you understand what you're getting into.
I think, the really true thing.
For example, that didn't quite come out.
We talk about this when we think about our megatrends.
It's one thing to say, I'm going to do a deal that's not the ultimate consensus bet AI, but it's really something kind of you've got to question if you're doing something that effectively is a bet against the megatrend.
Knowing what the consensus is has quite a lot of value, because it also speaks to where the industry as a whole is going technically.
Let's call it the technical consensus as distinct from the financial valuation consensus.
Going back to what Benioff said, the technical consensus is that most software is going to be agentic for the next 20 years.
Do you really want to take a bet against that?
Because that's probably where the industry is going.
That's, again, where I think Martin was right about that.
But valuation aside, I think the bigger issue for venture when times are good, we take follow-on capital for granted.
No one's worried about the follow-on round for Anthropic that they're throwing 10 billion in.
There's not a single investor that's worried about the next round, is there?
It's just greed, okay?
But most of our careers, we've worried about follow-on capital.
I worried as a founder, a capital in B2B was scarce until as late as 2018.
It was very, very scarce.
It was very, very scarce.
So that's just...
Doing Harry's bet might be great, but not burning 2 million, a million bucks a month.
Then it's like who the hell's gonna like?
I mean, Harry's fund isn't big enough.
He doesn't have billions yet, yet.
And he doesn't like to carry his investments through three or four rounds.
So you got to pass on that one unless the burn rate zero, then I would do it.
Because I'm having this experience right now.
When I look back at my mistakes in the last three or four years in terms of investing, I have actually both kinds.
I wish I'd made more consensus bets because consensus is such a negative word.
I wish I made more on-trend AI bets.
We made a lot.
I wish we'd made more because the megatrend was bigger and more dominant.
But then equally, I have three or four utterly non-consensus deals that I looked at, was intrigued by, and and should have pulled the trigger on and regret.
And I just saw one of them today and I'm like, wow, I really missed that one.
But I'll say it what you don't remember is the 90 non-consensus bets that you didn't do, that just haven't worked out.
I mean, both statements are true.
It's a lot more forgiving in the consensus marketplace because, as you say, you get washed away by.
You get buoyed up by other people's capital right.
And it's easier in the short term to A, survive long enough to get the feedback.
I've done two of my best investments I have today.
And I'm a seed investor, right?
I have the smallest amount of money of these three people, right?
Two of my best investments today, I had to create around out of nothing when there was no capital.
I had to create around.
I didn't have enough money.
I had to create it.
I don't want to do that too many times.
It's like, this isn't as hard as creating Snowflake from scratch, man, but it's hard, okay?
It's hard.
Going back to the consensus comment, it's okay.
I'm trying to formulate it here.
Maybe it was.
It's okay to do the consensus bet, but you don't want to do the consensus bet where the odds on the consensus are lower than the accuracy of the consensus.
In other words-
You don't want to be.
You want to be an AI.
Because that's what?
Because we've wrestled with this, a lot of these quote consensus, AI and we're not doing them and we can't make the prices work.
You still have to be paid for, you have to assess the risk accurately.
And all the quote consensus statement says is it's more likely than not that this is the direction that technology is moving.
So therefore, you probably don't have that.
Oh my God, are you totally wrong dimension to your business, which is why you can lean in a little into this AI consensus bet versus some of the others.
But you still have to get all the other shit right.
And on top of that, if you overpay beyond the dreams of man, then there's nothing you can do to save yourself.
So like everything in investing, it ends up being way more nuanced than consensus, non-consensus.
The consensus bet risk, you're probably right on direction.
You might ludicrously overpay.
The non-consensus bet, you could be way ass wrong on, is it even going to work?
You probably won't have any follow-on capital.
But if you get it right, you will have a beautiful thing.
You'll have a high ownership, low capital, end of one outcome.
Again, as always, it turns out investing is hard and you can't just paint the numbers and collect 100 million bucks.
Final one.
What consensus shit do you wish you'd done more of, Rory?
Or do you wish you'd done?
I think I underestimated the impact of A the scaling laws in AI and, B the ability of primarily Altman and some other folks to inspire belief in those scaling laws and unlock 600 billion of CapEx spend a year.
Anything that was attached to that making AI trend has just had a wall of money for the last five years.
It includes the foundation models.
It includes NVIDIA and the public markets.
It includes the inference companies.
Literally anything.
My mental model is we have $600 billion of people, $600 billion has been spent making AI.
And right now we have...
28 or so, whatever it is, the recent survey of apps using AI, most of which is open AI and entropic.
I did not think that we would be able to find $600 billion a year to spend in this space.
And if you knew that was going to happen, I think you'd have looked at the inference companies.
I think you'd have looked at the model companies at prices you thought were super high.
I think you'd have broken glass on your financial model to try and get some of what is now the scaling law consensus.
So I suppose you could argue at the time it wasn't consensus, which maybe is the actual counter argument, as I process in real time.
But yeah, that's the trend that you just almost could not have had too much on in the last year.
Boys, Jason, anything to add, my man?
No, we can edit in Mark's AI and be tougher on him if you like.
We can build one together.
We'll build this clone for him and we'll be tougher.
Sorry if we weren't tough enough.
Tell me, Mark, why are you so brilliant?
How did you, Rory?
My favorite question how were you so prescient to think about this agentic change?
Okay, listen, let me be clear.
I think Rory was a suck up.
I don't think I was.
I think you're going to look back at mine and you're going to say, I had some pretty good stuff.
I honestly think this.
I think Rory was a suck up, but he doesn't know Mark.
I barely know him, but he doesn't know him.
So he, and Rory was a little tough on the, on the growth.
He was just nice about it, but I think you're going to like me better.
Do you know what I find so funny, guys?
It's like, you know, who the fuck am I?
I'm a kid from London.
Mark, you've got to try harder.
Most of the companies I've advised at 41 billion in revenue have committed a little earlier to the AI trends.
I'm kind of embracing your advice.
You know, we're not trying to make people feel, you know, you want your guests to come back.
And actually, I genuinely, I'm going to say it again.
I actually thought he was more on point and balanced than the other AI gurus who are saying it's AGI.
I mean, he was just like we're going to sell some of this shit to our customers and they're going to buy it and it'll be good.
You know what I freaking love about those shows?
This is three great mates shooting the shit about tech news.
And today we have one of the OGs of sass, Mark Benioff, join.
Next week we have Cliff, the co-founder of Canva, on the show.
And the week after that, we have Jeff Lawson, the founder of Twilio.
This show is going from strength to strength, and I want you to help me make it better.
Let me know what we can do, harry at 20vc.com.
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As always, I so appreciate all your support and stay tuned for a fantastic 20 product episode tomorrow on Spotify.
