Well, I'm excited because just like 2008 at the moment, I'm 0% cash.
Founder-friendly has become bullshit.
Any hot AI deal, there is no diligence provided, nor is any done, right?
It's just done on Saturday.
Why would you do diligence?
All you can lose is one extra money.
Why would you do diligence?
Having an early success is highly correlated with future success.
Partly you get the referral effect, but partly I think it's that you just have the stomach to roll the dice and you get braver.
This is 20VC with me, Harry Stebbings, and it's my favorite show of the week.
Jason Lemkin, Rory O'Driscoll, and the biggest news items of the week.
We have OpenAI getting a $100 billion investment from NVIDIA.
Is triple, triple, double, double dead?
Have growth expectations changed forever?
Then we touch on a lot of other topics, including Notion hitting 500 million in ARR, and many, many more.
This is a fantastic show.
Let me know what you think.
Harry at 20VC.com.
I really want to hear your feedback.
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Guys, I am so excited for this.
We have a lot to get through.
I even have graphs this week.
I mean, this is like, you see this?
This is intense.
I don't know what they are.
That's how many GPUs you're buying from NVIDIA?
What's 20 VCs commit?
It's up and to the right.
That's all I see from this graph.
Now, what else do we start on?
NVIDIA invests $100 billion into OpenAI.
I wanted to start on this.
Is this an infinite money printing machine where we have NVIDIA, invest in OpenAI, who commit 300 billion to Oracle, who then buy more NVIDIA chips?
Is this just a way to print money these days?
First of all, it's not an infinite money machine because it will end.
What it means is that Sam's going to get to make the bet he wants to make, which is, apply infinite amount of capital and see how long these scaling laws last.
And no one's going to call timeout until you actually hit a wall.
Because what this says is NVIDIA is going to get rewarded for... Everyone's going to book gains.
And if it all works, it'll all be good.
It's like any aggressive financing strategy if the underlying business works, everyone looks smart.
The debt gets paid back, the equity goes up in value, and everyone's a hero.
And if it doesn't work, it all comes back and bites in the ass.
What this means is if it turns out that those set of open AI projections of 100 billion plus of revenue, or whatever the numbers are, are real, then we're going to get to find out.
Because no one's going to call time out along the way, at least for another year or two based on this.
Because everyone's getting you know, the capital is being made available and everyone involved is getting kind of mentally marked up.
That's my takeaway.
They're going to get to find out here.
I have to intersect.
You said that Sam gets to see if scaling laws do continue.
I thought we all agreed that they didn't continue.
And that's why GPT-5 was focused on efficiency.
And that's why we actually didn't see improvements in the way that we thought they would.
I thought we were already reaching that.
I think you got to listen.
The one thing I've learned over the course of the show is to really listen to what Sam Altman says.
Elon Musk will say something and it happens.
He's just like a couple of years off.
Right.
But it always happens.
The self-driving cars and the rockets.
Right.
Sam says something, and it happens like kind of soon.
And he says it off the cuff.
And he's sitting there with Jensen and Brockman this week saying, this is just a start.
We need three orders of magnitude more compute than this.
Not 10 times as much.
Three orders of magnitude more, he says.
And then he writes today calmly just with this first slug, the 100 billion, hopefully we'll cure cancer and educate all students.
Right?
There's a lot going on there.
Then he said Stargate and we didn't understand it.
Now he didn't just say $100 billion.
We could talk about the round trip revenue.
Is it really round trip revenue?
There's some interesting questions, right?
But he and the president said they need three orders of magnitude more than this to achieve what they're predicting today their goals.
This is not Sony baloney.
This is what they have on a whiteboard in a spreadsheet.
To be clear, I didn't say it was correct, Harry.
I just simply said we'll get to find out.
I'm not sure I believe that the marginal $300 billion will earn a return on capital at all.
But my point is simply yeah, there's some aggressive business projects where you go.
I wonder can we invest that?
And you're just not able to make those investments, so you don't get to find out.
And then there's deals where the market says, here, you can have the capital, have a go.
This is one of those deals.
We will find out.
I mean, as the cliche goes, that's why they play the game.
I'm somewhat more skeptical because I think the level of heroic assumptions you have to start making to make these investments all work is high.
But the truth is, we're human beings and we tend to.
When someone is as astonishingly right as OpenAI has been over the last six years, it's just human nature to say I'm going to continue backing this bet as long as it works.
The consequence of that is it goes on until it stops.
In other words, you got someone who's clearly going to keep doubling down.
So the doubling down is going to keep taking place until the return on the double down isn't there.
Is that now?
Is that already happened?
Is that going to happen three years from now?
I don't know.
I can speculate why I think no, but the market has said, have a go.
Here's a hundred billion.
If you are Dario today, Are you thinking wow, we are in a significantly disadvantaged position as a result of this?
And does this $100 billion move the needle significantly more in favor of OpenAI?
The question is, what is it giving you?
It's giving you capital and access to chips.
So do you feel constrained by those?
You probably aren't constrained by a lack of capital.
My understanding is they were beating people off with a stick on the recent entropic round and if they decided they want another 10 billion, it'll be there tomorrow morning.
So they're not capital constrained.
So maybe you'd say it gives you some preferential access to GPU that OpenAI now has.
So I mean yes, in the oh my God, their capital is bigger than my capital war's, I think you'll feel the need to respond and do something.
But it'd be interesting to actually pencil out what exactly, other than momentum and bigness, what problem you're trying to solve.
Well, I mean, Anthropic's not going to be able to build its own GPU like ChatGPT is.
It's not going to be able to lease, create hundreds of gigawatts of compute without that capital.
It's not going to be able to build its own GPU.
Another thing I thought through all this news, which didn't really come up in any analysis, I saw I was thinking about this a little bit.
I'm thinking another thing that Sam is very clever on is towing the line on being a monopolist.
OpenAI does not want to be a monopolist, nor does NVIDIA.
They both want to be very careful in how they position themselves.
I think Nvidia has an existential risk, which is everyone is trying to take their share.
Google has its own TPUs.
Amazon's trying.
OpenAI is building their own to take away market share.
But they both need to be careful.
But OpenAI, I don't think they want 99.9% market share.
They've already been through enough drama and trauma with Microsoft and throwing Sam Altman out of the company and bringing him back.
They need their number two, possibly, or they're at risk, right?
Because they might be a monopolist in some ways today at a consumer level.
Open AI.
I use Claude every day.
But you're weird if you use Claude.
On the consumer level, they border on Google Chrome levels of market share.
And Sam is very careful to not denigrate others other than a few jabs at Elon, because he needs a little bit of this so that he's not ripped apart as a monopolist over time.
This is an epic monopoly. like we've never seen.
Think how much chat GPT already dominates our lives.
It's the standard oil of tech.
I feel the need to cynically say that the objection to monopoly is the extortionate excess profits monopoly extorts from the consumer.
Never have there, in that basis, been a less successful monopoly than chat GPT, because they're subsidizing.
I saw we'll talk about it later an estimate of the consumer surplus delivered by chat GPT in the tens of billions of dollars.
To some extent, Jason, that was glib.
I hear what you're saying.
It's obviously not a cash extraction monopoly at the moment, but you're right.
They have commanding market share in the consumer market, though I think between Gemini and perplexity I think they would argue, not a monopoly.
I think NVIDIA frankly, is far closer to being a monopoly in terms of market share than Chachi PT, which is why I thought you were going there.
I do think it's interesting that there's a whole bunch of people talking about building processors to try and take away that revenue.
I'm sure they're hyper-aware of that.
It would be fun to know what if any agreement was made on OpenAI making their own chips as part of this deal.
It's hard to imagine giving equity to someone who's literally building a company when they're one of your six largest customers and they're building a competitive product.
That's a little something that would be interesting to know, but That, on the other hand, is a detail that probably will not be highlighted, just given the dynamics.
Well, NVIDIA's weird too, because it has elements of a monopoly, but it has elements of a monosophy too.
It only has two customers.
I mean, it has a long tail of customers, but it has to make sure it doesn't only have one customer.
It has a risk of only having one customer.
I think you're right.
First of all, let's step back.
That's astonishing.
Look at the market cap.
The $4 trillion market cap.
Look at the two other $4 trillion market cap companies, Apple and Microsoft.
Apple has 2 billion customers, everyone on the planet.
Microsoft has probably a couple of 500,000 plus meaningful enterprise customers.
These guys have six.
When you say it like that, it makes you realize frankly and again I don't want to be the Debbie Downer how single-threaded the market cap of the largest company on the planet is on the spending decisions of six or seven people.
Now the good news for NVIDIA, and this is why I go back to the consequences here.
None of those six or seven people look like they're blinking.
You know opening, I end blinking.
Google's made it clear multiple times.
I saw a good quote.
Is it from Boco Capital that you know?
Just reminding us Google has said over and over again I end blinking.
Obviously, Facebook meta has indicated an absolute willingness to tear up the book and do anything it takes to win.
So, an oracle ain't blinking.
So, It's just this really weird dynamic.
You've got this company worth four and a half trillion with only six customers.
That's bad news.
But the good news is, all six of them are determined to spend themselves into oblivion to win the prize.
It's a fascinating game.
What's interesting for me is the revenue concentration expands just from these providers in this space to the data labelers as well.
We just have McCore on the show.
Two McCore customers make up 55% of the revenue.
I spoke to the other four main providers.
It's exactly the same, and it's the same two customers across them all.
It's fascinating.
They are incredibly promiscuous with their data labeling providers and they just use all of them and they are the two same for every one of them.
Yes, because that's the only people who want to buy the shed at scale.
I mean, I always like to distinguish the AI revolution, but there's the AI CapEx boom.
I mean, there is an AI boom at the apps level.
In other words, yes, adoption is taking place.
The real wow in the last three years has been just the fact that the CapEx boom, that the markets and these six deciders have been willing to let the CapEx get so far ahead of the revenue that they've been willing to say let's spend in aggregate 600 billion of CapEx per year on a market that today, depending on how you add up all the revenues, is yielding 30 to 40 billion in revenue.
It's amazing.
And anything co-attached to that CapEx boom has just killed it.
And, you're right, the data labeling which, I'll be honest, we looked at some of those in 16 and 17 and we're like ugh.
Is this a really great business?
In theory, no.
If you have a services business and you're only selling to six customers, you can make this intellectual MBA case that, oh my God, they'll get ground down on price.
That case is totally wrong because those six customers don't have time to optimize.
No one of those six customers is trying to optimize their cost basis.
They're just trying to build as fast as they can.
If you're Merkur, if you're Surge, if you're anyone in the line of that, you're just picking up your dollars and stuffing them in your bucket as fast as you can.
It feels so nuts to me seeing $100 billion go into an open AI and that as a headline.
When you compare it to any other time that you've been investing.
Does this match any other time in terms of what?
Holy cow.
Shock.
It's a good question.
I think these analogies fall apart because the scale is so many orders of magnitude larger.
The only thing that's different, that's similar, is the sense that it's unlimited, that it's unbounded.
And we actually have more skepticism today than we probably did back then.
We're already skeptical of the limits here.
I totally agree.
I think I'm not skeptical of the long-term trend.
Does it feel like 99?
Not complete analogy.
History doesn't repeat.
It rhymes.
But it's more like 99 than anything else I've seen in the last 20 years, right?
I remember Nortel and Lucent making big vendor financing commitments to their big bandwidth customers to sell equipment, just as NVIDIA is doing today.
Interestingly, NVIDIA is doing it as equity, not debt.
I do remember that sense.
Jason, you said it.
Unlimited possibility, endless belief.
I remember it also collapsing very quickly in 2000.
I mean, I think Harry's got a good point.
This limitless potential, this is the first time we've seen it back then, right?
It's not like other booms, this limitless potential.
It's not the cloud boom when we were all locked up in our homes.
This is a feeling that could be limitless.
What's so different, though, in the web 1.0 days is there just wasn't enough money.
I mean, Amazon almost ran out of money after its IPO.
Bless their souls.
We've got all the leaders running around guaranteeing each other stuff.
CoreWeave can now not go out of business.
Like in 2000, CoreWeave would have imploded in months because it would have run out of money.
Now NVIDIA has agreed to buy 300 years of its capacity.
Everyone's guaranteeing everyone.
So this unlimited capital, of course, maybe it ends, but that's nothing like the Web 1.0.
There was just no money.
Listen to this for just a second here.
Okay, NVIDIA.
Fiscal year 2023, $3.8 billion in free cash flow.
Fiscal 2023, pretty good, right?
3.8 billion.
Fiscal 2024, 27 billion.
Fiscal 2025, 60 billion, 100 billion or something in the next fiscal year.
That's a lot of cash to reinvest from your balance sheet.
Funny.
You should say that because I actually looked at the same number this morning and yes, the free cash flow is 60 billion.
So that's obviously, to state the obvious, a lot of money.
Again, the bear case.
That's a lot of money, and a lot more than it was two or three years ago.
In that context, I was surprised they have a buyback program.
They've been buying back.
They bought 9 billion of stock back last quarter, which is just interesting at this period in the cycle.
And they've authorized a $60 billion buyback program.
So, in other words, there's a buyback program equal to the free cash flow for the last year, which is just interesting and aggressive.
Cash on the balance sheet hadn't looked forever.
It's $60 billion, which is a lot, but it's only 1.5%, 2% of the market cap.
You kind of go and say here is that if this amazing market doesn't keep going just the way it's going now forever, then you could find yourself going hmm, maybe I shouldn't have bought back 9 billion worth of stock at, whatever it is 180 a share.
And I'll look back on that and say that might have been a mistake.
And again, I feel like I'm the doomer here.
I'm not a doomer.
I think the trends are great, but it's just a very faulty time.
I wish I'd done the math ahead of time.
What I saw when I was at Adobe, which I think NVIDIA is doing the same.
It's not a brand new company NVIDIA, right.
Boom aside, they do try to buy back equal to the option dilution, the RSU dilution.
It was almost 1 to 1 when I was at Adobe.
This is how you maintain your EPS at Adobe was by buying back everything equal to the dilution you give out in RSUs, which was, just frankly, a cash equivalent until the market boomed.
It's almost a 1 to 1.
And flagging vigorously my opinion on that, as I've done when I've been on boards.
I think the buyback, the same as you're diluted, is as dumb as rocks right.
You should buy back when your stock is cheap and you should sit on your cash when the stock is dear right.
I think the idea of linking it to your equity dilution, Again reminding us we said we'd level up, remind the listeners lots of public companies obviously the issue stock to their employees.
And there's this ostensible rule that maybe you buy back in the market around the same number of shares as you've issued to stock to keep the share count constant.
And you're right, Jason, loads of people do that.
I think it's absurd.
But what can you do?
It at least keeps your stock-based expense honest.
A lot of folks losing money are pretending it's not an expense.
If you're profitable and you buy it back, it's like, look, this is the same as cash.
It's just a little bit of financial engineering.
Yeah, they're not going to pay on the P&L.
Yeah, for sure.
Look, again, it's back to the...
The zoom out comment is the same.
In a bull market, no one focuses on balance sheets.
We only talk income statements.
And when things get tough, you're like, oh, I wouldn't mind having some extra money around.
And stock prices that were high can be low.
Typically, corporations historically have a terrible record in terms of they typically buy back stock at peaks and don't buy back when it's cheap.
I see no reason why humans will change this time.
Ladies and gentlemen, study Larry Allison, the master of this.
The master who, exactly when it was cheap, bought it all back and then used the capital to totally change the game to the current game of capex and investment and has made it work.
Rory, that's great.
But what about me?
Your favorite thing about chatting to me?
I'm looking at my public book and I've got 28 holdings and 27 are green and I'm in the money.
And I'm thinking I'm humble enough to know I'm not that good.
And I'm looking at the S&P going, really?
It looks like it's going to hit 7,000.
You think it's going to hit 7,000 pretty soon, guys?
And would you be selling now?
And how do you think about when to catch the falling knife?
Well, I'm excited because just like 2008 at the moment, I'm 0% cash.
You're 0% cash?
Nothing.
I have no cash whatsoever.
I had some cash.
Just like 2008.
I remember feeling it was so great when the market crashed and I literally did not have enough cash to fix the roof on my house.
I mean, I had enough stock, right?
But nothing was more fun than selling my stock at a 70 loss or 60, whatever.
The worst of the crash was to fix that roof.
I remember feeling like such an idiot.
And I don't have a cent of cash right now.
It's by definition hard to know.
That's what the data says.
So you can throw out two factoids, one either way.
The correlation on valuation and short-term return is pretty low.
In other words, you can say stocks are expensive and the correlation on predicting one-year returns is pretty crap.
The correlation on picking 10-year returns is pretty good.
At this current valuation, your likely 10-year return on the public markets is significantly lower than average because it's more expensive going in.
Now, that's the long-term message, and that's a pretty grim message.
And the short-term message is, oh, my God, the Fed's cutting rates, blah, blah, blah.
Things are going up.
What I do with that information.
Since you ask is I accept that the cost of sleeping at night and having some portion of cash is accepting a level of underperformance?
But you make an asset allocation decision based on what you want over the medium term, not what's going to optimize just in a bull market.
I'll tell you what the frothiest sign is.
Well, one, we're all invested in NVIDIA, right?
To Harry's point in the public markets, all our 401ks are in NVIDIA.
We're all on this ride together.
But the frothiest sign is now LPs are bragging about their returns on LinkedIn.
LPs.
When LPs start bragging about their returns.
To me, that's the most 2021 moment I've seen when LPs who are usually hide behind the Wizard of Oz curtain are bragging about their returns.
I have everyone in my Twitter being like Hemant, saying triple triple double, double is dead is the top.
So like there are many signs that people think are.
I disagree with that.
I do want to discuss 75% of VC dollars in 2025 went to 19 companies.
Is this just an extension of Mag7 and concentration of capital?
Is venture itself changing, where we're all doing a Kleiner Perkins and moving late stage to get into the surefire winner?
First of all, it's obviously a stunning fact.
But a better way, if I may say, of thinking of it is not, has venture capital changed?
It's that the 25% that's remaining is, in fact, the same venture that's always existed.
It's roughly, I mean, I think in our space, 1,000-something odd Series A's every year.
Certain percent will go to B's.
And that business has stayed the same.
You know plus or minus 10, 20 for the last 10 or 15 years.
You know, with fluctuations.
What's really happened is, on top of that business has emerged this totally separate business called, as you say, ultra late stage, private public style investing.
And I just think of that extra 50 billion a year, whatever it is added on top.
It didn't change my business.
It just means there's another business that you can choose to be in or not.
That exists one layer up, maybe two orders of magnitude above you in the valuation world.
And it's still private.
It's still, quote unquote, reported as VC.
It's just a different business.
It makes sense that that's way more concentrated.
You have.
You know, A is more concentrated than C, B is more concentrated than A, C is more concentrated than B, because at every step some people fall out of the game.
So the longer you hold private, the more concentrated it gets.
In the limit.
Maybe we're just left with two foundation models and Databricks and Stripe raising a Sirius N or G, you know X or whatever it is right.
But it all makes quote-unquote sense.
It's a different business than Sirius ABC Venture Capital.
It just gets reported in the same bucket.
You guys have taught me so much, but one thing that jason's always taught me is like, try not to predict out several rounds and just predict out the next round.
And can you see a 3x there?
And i really like that framing.
We as a team do it.
The hardest thing i find is honestly, we are getting it wrong.
A lot of our businesses now are growing nicely and i cannot predict what the next round wants because it seems to be moving so much.
And I'm having a real problem predicting financing markets.
Jason, can you predict which of your companies will be hot?
I think it's always been easy when something is super hot to know it's super hot, right?
When you have top...
Now, maybe Hemant's right.
Maybe the top 1% has changed or the top 0.1%.
Maybe we could be analytical about that.
And you can fall out of it, as we all know, right?
But when you're in it, you know, like there's no doubt, right?
What's weird today is that level just below it, where it's unpredictable.
Like someone may see this as an outlier and preempt at a very high price.
And others may see the risk beneath the surface.
Be concerned about margins, be concerned about churn.
Like it's very easy to criticize a lot of these companies on churn and margin. right?
And so if you're just below that, whatever that S tier is, that's where I find my ability to predict very, very murky.
And then the one I disagree with you on but I agree with you from Twitter is, I think, the one's one layer above that.
If they are triple triple double, double and you meet with enough people and you're not burning a lot, I do think you get funded.
Like that's where I quote disagree with you, but it's a lot more frigging work.
It's a 20 million or 110 percent of 10 million than it was 24 months ago.
It's just a lot more work because you can't get the meeting i would.
I would just add one nuance if you are in a slightly weird space that is traditionally unloved, like restaurants or like no one likes selling to restaurants, then where they would have taken a bet on you before with triple triple double, double.
Now they're not.
Now triple triple double, doubles growth and you're in a space they won't, Or maybe I think it's.
I would say the opposite, looking at owner right.
Which we know, right?
Which is as they dominated.
Triple, triple, double, double.
It's faster.
But then what my learning is these models like?
If you're growing at outlier rates, you're an outlier.
Like I don't really care if it's tagging or at some, I mean, we all want it to be AI native, right?
But if you are hitting those numbers, people don't even dig beneath the surface, do they?
They don't even care if it's a lot of forward deployed agents or this or that.
But listen, if you're the 11th undifferentiated restaurant SaaS struggling to build a point of sale at a million in revenue, people don't want to take that meeting, do they?
At 50 million, 100 million growing triple digits, they'll take the meeting.
There's only so many of those.
There's only so many folks growing beyond triple triple double, double at 50 to 100 million they'll take it.
I agree.
I think that whole meme is a little overdone.
3-3-2-2 is not good enough.
Of course, there are examples of companies doing better than that.
A small number, but a meaningful number of companies doing better than that.
But that's not the only game in town.
And I think that if you really have clarity on that kind of traction, especially at any kind you know, and some reasonable scale, I totally think you're getting funded.
I mean, I think you raise a separate question.
Is what's really going on a story belief?
People don't believe that the growth will happen in the future.
But look, I mean, you just had a couple of IPOs where companies are growing 30%.
Obviously, that's at scale.
So, as long as you're on that kind of trajectory, I don't believe it's as sharp a line as some of the kind of Twitter trend, the Harry Twitter trend, whatever that makes it right.
Yes, there's a small number of companies growing significantly better, especially early on in the foundation models.
But I don't think it's the only game in town.
For sure.
Look, it's sensational, right?
We could break it down.
There's a version of it I saw this week that was less dramatic, which was iconic, right?
And iconic had $2 billion exits this week, iconic growth, OK?
It had Netscope, which no one talked about, $8.5 billion exit.
And they congratulated themselves on DX, which Atlassian bought for a billion, which I don't know how much they put in because they described themselves as essentially bootstrapped right.
So I kind of couldn't have owned a third of the company, right?
But are even those rounding arrows compared to Anthropic, right?
It's just they equally congratulated.
But with the fund sizes and expectations, do those meet the bar?
Do DX and Netscope meet the bar in 2025 is a different version of Harry's question, isn't it?
Well, as an absolute number, it's a great return.
Let's start with that.
I mean, again, you know, if you have a $10 billion fund, you don't care.
But most funds, those are excellent exits.
I mean, you know, like Netscope, superlative company, did a great job, built a big business.
Superlative.
Yeah, they are.
Well, they are.
But do they count in 2025?
Yes, of course they count because they go on your bank account.
And that's the mission, right?
If you own 10% of Netscope, you have a $700 million equity position in a freely traded public stock.
Maybe you paid $100 million for it.
You have a 7x.
It's great.
It's a great outcome.
It is.
I don't think of this every day, but I do think about me and Emergence2 back in the day.
And Emergence2 was an incredible fund, right?
So many winners in cloud, right?
The vivas and all those.
I was an asterisk at the bottom of that outcome.
I was an asterisk.
The returns were so gigantic.
I mean, that was a whatever, a 10x plus fund.
I was just a rounding error in other exits, right?
I just kind of think about who gets to be in the asterisk at the bottom of the DPI table in 2026, because I was in the asterisk back then.
And it's cool, but it didn't feel great to find out I was in the asterisk.
Interesting.
But I understand what you're saying.
But let's talk about multiple, and then let's talk about absolute amounts.
As the OpenAI cap table, quote unquote crystallizes, I think some of the early investors in 2019 and I'm doing this from memory, based on their ownership versus the original capital in it's around a 7 or 8x right.
So it's a magnificent company.
It's the most important company of the last decade.
But the actual multiples earned are really good.
So someone who did the Series A at Netscope also made a 7 or 8x.
Now, maybe the absolute sums might be different.
You could put more money to work.
But it's just worth pointing out on the basis on which, as an investor, if you made those two bets, one of them being OpenAI from 2019 to today and one of them being Netscope from 2017 to today, your IRRs might be different.
But in both cases, you made a 7x.
And all 7Xs are exactly the same because money is fungible.
That's why we invented it.
There's very few ways to make a good return on a large amount of money, which is why the bigger the fund size, the more you have to be in only five or seven deals.
But there's quite a lot of ways to make meaningful equity returns on good outcomes.
$5 billion plus IPOs can result in a perfectly great 10x.
And everyone's going to cash the check.
So I'm here in defense of none of those are boring.
There's more ways.
I find that scary listening to you, Rory.
Sorry, a $5 billion IPO does a 10x.
Well again, by the way, it's not a 10x on the Series A.
I'm actually just doing it because I calculated.
I'm not going to name the investor.
I calculated one of the investors because a lot of them very wisely in my opinion have piled into the follow-on rounds.
So your return on your first money is a 25x.
Your return on the last round is a 3x.
Blended across everything, you have a 7x.
But as a 7x, I'm 100, 150.
If you want to talk about the return on the Series A, my guess is it's 25, 30x at least.
It's a great return.
But it is also a company where 10% of the world's adult population is a weekly active user.
Oh, we're now going back to OpenAI, the other 7X, yes.
10% of the world's population is a weekly active user.
Yes, so we're now switching from, as it were, the 7X in the mid-sized tech-centric IPO to the 7X that you get, investing in OpenAI.
Yes, your return might be only the same, but obviously it's a company of far more stature and significance overall.
If you had a large position in OpenAI in the fund now, would you be selling?
I think you'd have to think about it, wouldn't you?
I mean, if you're not thinking about it at $500 million, you're probably just not thinking.
I completely agree with you.
I don't think anyone's going to sell.
Iconic was saying they never got more calls than they got trying to get into the Anthropic round.
This last one.
They never got more calls in the history of Iconic than from their own LPs wanting to get in right.
So I'm not saying you shouldn't sell.
I'm just saying boy, it's hard to be sitting at the fund and sell when you've never felt more strongly.
There's another card to play, right.
I mean, the easiest thing in venture in the world is if OpenAI goes from 500 billion to a trillion and you don't have to take a single meeting, you don't have to show up to anything.
All you have to do is open an email and your position doubles.
I mean, it's so hard to say no.
I mean, what, 80% of IPOs trade down, right?
So that's a tough bar as it is, right?
But when you've got one like that in a frothy market, how do you sell?
On paper, you can, but in the real, like, good God.
I mean, the three of us are each gonna make 50 million now, but if we just wait six months we can make 100.
And I gotta pay taxes?
I mean, I'd rather let it ride and defer the taxes.
I mean I can't even again.
There's really only so much I can get on the Yellowstone Club for 50 million.
I mean after taxes.
I'm not.
I'm sort of mid-hill and I'm probably under 3000 square feet and I don't even know about the radiant heating.
So let's play another card.
I think you're right, Jason.
I just think the level of money you have going in dictates your willingness to sell.
We're very candid and we're friends now, which is great.
I don't have 50 million bucks.
I would absolutely take it off the table, because it's really meaningful when it's your first big hit.
Agreed.
It absolutely is.
But there's also weird dynamics, too.
Rory could educate us the most.
This is what I think about is turns of the fund, right?
If you have a smaller fund and you have a fund returner, it's a weird dynamic.
Because all the internet advice says a fund returner is what you want to do, right?
But turning a fund returner into a 2x fund returner is a BFD.
It's such a big deal for carry, for performance, right?
That's a nice but stressful position to have is a 1x fund returner with liquidity options.
What do you do?
I like the layout.
It's a two-step thing process.
First of all, you have to come to some kind of opinion on fair value and upside for the stock.
I mean, you have to have some level of fun.
It can't just be it's going to double because it's always doubled.
You have to have some grasp of the fundamentals and say what do you think this is going to be worth?
You know, half a trillion makes it the 15th largest market cap company on the planet.
It can go from here, whatever.
But then I think the interesting thing you're saying is then you have to overlay on that the institutional or personal imperatives that come on top of of the just the raw expected return and plugging a book i recently reread, actually a book called the missing billionaires, which was written by in part by victor hagani, who was the youngest partner at long-term capital when they went spectacularly burst in 97.
He's gone on to a career in wealth management.
Truly excellent book, one of the best books i've read on portfolio management.
The comment at the start is you know, Cornelius Vanderbilt died, the richest man in the world and if all his heirs had done is stuck it in the SP and lived on the dividends, there would be 15, 20 of them, each worth a billion today, and there's none.
Because he says people screw up bet sizing, they screw up portfolio management and it's not about.
Stock selection, as much as it's about the things you just mentioned, the institutional decisions.
How much of your wealth should you have in one stock?
What should you do with a 1x fund that's liquid where you might see potential to a 2x?
How certain do you have to be that it could double again before you should leave all your net worth in that stock actually ended up?
Convincing me of it's what Harry effectively mentioned the marginal utility analysis.
You do have to take into account your risk aversion.
And we're not all just trying to maximize expected return.
You should have some level of risk aversion.
And the question is, how much?
And, as Harry said, when your risk aversion relative to the bet size changes with your net worth, if you don't have 5 million and you have a liquid 5 million, you probably should take that 5 million.
And then how that changes over time.
Super well-written book, quite quant at times, but...
You end up, the meta conclusion I have is that most of us have a risk aversion of about, as you quantify, about two.
In other words, you're not going to let the bet ride for equal expected return.
And that's most normal human behavior.
And then the second conclusion I have is some people I lump Elon in that are just totally maximizing expected return.
There's literally no risk, zero risk aversion in the system.
They just want to make the bet.
SPF had the same thing.
He would do a 51-49 bet.
It's like some people just have super high risk tolerance to the point arguably of insanity.
And those are the people that make great entrepreneurs.
Most money people will take some money off the table.
Do you think investors are like founders then?
Where as we say, hey, take secondaries, take all that stress off the table.
Do you think richer investors make for more high upside investors?
Because they're like, let it ride.
Sequoia aren't here to make a half a fund return.
Whereas an emerging manager, oh shit, I need a half a fund return in DPI.
I need DPI.
I think at the margin, it's almost certainly true.
I wouldn't want the emerging fund manager to behave irrationally or just over-optimize on the thing, but there's no doubt that a significant part of the advantage of a firm like Sequoia has is just the innate belief that something else will turn up tomorrow.
I don't have to fiddle around with this at the margin.
And there's a bunch of stories about that, I believe.
And again, this is apocryphal.
I wasn't in the room.
I believe the early offers on YouTube were significantly lower.
And the Sequoia guys were like, no, we're not just taking that.
And the offer went up in retrospect, given they sold for a billion and there's probably now what 100 billion?
You wonder.
But yes, there's no doubt that success begets success, not just for all the referral effects that we could talk about, like you get to see good deals because you've been successful, but there's also this very intangible effort thing Harry, that you mentioned, which is people who've been successful are more willing to take risk.
And the only way you get success is by taking risk.
It's hard to correlate venture success with a whole bunch of things, right?
You know, education, stage, blah, blah, blah.
But it turns out having an early success is highly correlated with future success.
Partly you get the referral effect, but partly I think it's that you just have the stomach to roll the dice and you get braver.
Now you can over extrapolate that and screw up, but there is no doubt that it's a lot harder early on to have the big cojones to roll the dice.
And if you're Sequoia, it's probably a lot easier.
We say about risk-return analysis, concentration of assets.
I hope he doesn't mind me saying this, but Orange Eve has a lot of concentration across funds in Navan.
And at points, that has looked very, very nerve-wracking. point being when it went to zero in COVID.
They announced, obviously, they're filing their S1.
I thought interesting elements 613 million revenues, growing 32 year on year, 10000 customers, 110 NDR, which is good.
Not best in class, but good.
How did you guys think about this S1 announcement?
Before we talk about the S1, let's go back to Oren Zeff.
Well done, Oren.
Good guy.
Think about it.
You made a very non-diversified bet.
It's terrifying.
You then, let's all remind ourselves, you then had COVID and you're a travel company.
Your revenue probably went to zero in March of 2020.
And to go from there in a non-diversified bet to having an S1 on file for a perfectly doable nice IPO.
I can imagine the exhale when this puppy prices.
So well done him and his investors.
I mean, you guys are better experts than me.
Is it really as concentrated as it sounds?
I mean, if these are SBVs and opportunity funds and other things this is, is this him really putting 80 of a main fund into Navon, or is this stacking a whole bunch of vehicles?
I have no idea.
I mean, it just may not be as constant.
Like.
It may be a lot of his book, but it may not be as concentrated for his early stage fund as it sounds right.
20% of a fund dude is a lot and 20% across multiple funds.
I think you got to put, if you have a small, like what's how big was his core fund in that, right?
Do you have 20% of your fund in any company?
Yeah.
I'm a pretty concentrated investor.
So I'm going to get to 10% almost in two checks into any deal.
Listen, if you have a hundred bets, it makes sense.
But if you have a breakout winner, this, you should put 20% into your winner.
I think a hundred is risky.
Because Rory can help me do the math.
Once your fund is up 4 or 5x, 20% of the initial principal is not that much of your NAV.
Yeah, once you're up.
Yeah, once you're up.
I mean, look, again, these are all traders.
Concentration can result in increased outperformance at significantly more risk, right?
And the question is, again, are you getting paid for that extra risk?
Look, I don't know if I'd have the stomach to put 20% in one deal.
And I want to honor the fact that Jason clearly and Founders Fund in my view one of the most successful firms have the stomach for that.
And maybe it's just a risk tolerance perspective.
I'd find 20% hard.
So I do think not all but most investing vehicles have some element of risk diversification in them.
There's not a huge appetite in most markets for undiversified single stock risk which, of course, interestingly enough, there is right now in, as you say, the antropics and opening eyes of this world.
I always remember Brian Singerman teaching me that capital concentration limits are the enemy of great venture returns.
And that's why they have 33% of their fund in Airbnb.
I don't have the balls that he does, sadly.
Otherwise, I'd be much richer, I'm sure.
But I always remember that.
On the van, point taken, Jason, in terms of level of concentrations.
And I'm just going to, before you go on to Nevada, I'm just going to make a comment back on that.
Citing the book again that I read.
It was really interesting because it made you run the exercise of what level of confidence would you have to have in the excess return from an individual stock to put all or half or a quarter of your network in it, versus having it in the SP as a whole?
It quantifies your certainty level.
And one of the exercises it did was to say how certain would you have to be that Tesla is an outperformer to be 100 Tesla from the 2010 IPO?
On.
And the answer is you have to believe.
It's about a 70 outperformer on the SP which interestingly, is about where it ended up.
So you can quantify these things.
So instead of just saying oh, I'm going to take risk, you say how certain are you that this stock is going to do 20 better than any other stock in my venture portfolio?
And if you have a high degree of certainty on that Then yeah, you skew your concentration, but you have to have some rule of thumb like that rather than just you know, I feel brave, let's do this.
Sorry, now back to Navan.
It's a meaningful company.
It's been a very prominent startup for the last few years.
Anything notable that you thought about the IPO?
Well, can I ask both of you, maybe Rory first, a question on it?
Maybe this is a little mean, and I'm a big fan of RL and everything they've done, right?
But it feels like to me, and sometimes this is a good IPO strategy, is they're going first.
Because look, Brex just announced, and Brex had its slowdown, right?
But it just announced it's growing 50% at 700 million, right?
Hard to take everything at ramp.
It's a little confusing, but let's assume they're growing that fast or faster at a billion, okay?
They have to be mathematically.
So if you see them as peers and we could argue they're not, but I think the markets will.
It's number three.
So there is an argument that number three should go out now before number one and number two are out and the public markets lose interest.
I don't know whether it's true today, but when I've been on the other side of IPOs, there's a strong desire to get if number three is good, right.
Or number two is good to get it out before number one.
Two things.
One is.
I think they would say and I might have you correctly that while they're in adjacent spaces, Navant is very much trip and travel focused, with a small amount of software.
Brex is very much card with a small amount of software and payments.
Same with Ramp.
And then Bill, which I was on the board of for years, is very much accounts payable with cards.
So they get lumped in the same thing, but they're actually quite different.
And most of Navant's revenue comes from business.
The other guys aren't in.
Which is travel booking, as this thing from travel pay.
Almost all of it.
Right.
Travel book.
So in other words, when I book my flight on the Navan system and I book United, that's Navan money.
Now, if all I do is pay for a flight on the United Airlines with my Brex card, that's Brex money.
But their adjacent space is not the same, just to put that out there.
But at the same time, yeah, but I can see you right when you zoom out a million miles.
And when you read their S1, they're clearly trying to claim more than just travel, because they're truly trying to claim payments.
They're trying to claim software.
So based on their claims, which are a little in advance of their reality, you're right.
They are in the same market as those other two.
And if they are, it's pretty damn smart to get out early.
I think that expansion across the horizontal product suite I think is actually behind the rebrand from Trip Actions to Navant, going from vertical specific to horizontal.
And I agree that Travel Perk, I think, are obviously a very direct comparable for them.
And they are bigger than Travel Perk.
I think it's perfect.
If I was the board, I'm like, perfect timing.
Let's go, go, go.
Completely agree with you.
But this isn't the best time for Nivon to IPO.
They're not profitable.
This isn't the best time.
I think they're doing it because of, listen, I could be wrong and I'm a fan, right?
But I think they're doing it because of the competition for IPOs.
Otherwise, why not wait another few quarters and get profitable?
Because it's not the perfect, I don't think it's the perfect time to IPO.
I don't know though, dude.
If we were sitting on the board together, I would argue with you that Ramp and Brex are not going to go out anytime in the next six months.
But my experience is create that gap, right?
I mean you could argue that at the lay level Netscope didn't get much attention because Rubrik is the same, but better.
Now it's not the same, okay?
But if you're just comparing security IPOs, Rubrik is growing faster, with better economics than Netscope.
Why, you know, wake me up when you have something better than Rubrik.
Wake me up.
But you're still getting $7 billion of liquidity.
I mean, first of all, let's consider this.
On a standalone basis, getting liquidity, and then we'll do the game theory of the other guys, because those are different questions.
On the standalone basis, yeah, you're right.
Probably, I mean, I can see the pro and the con.
It'll probably take more than another year to get profitable because if you actually look in the PL at Navan, they really held OPEX flat to, in fact, slightly down this year versus the prior year.
And you know you do that as a board when you're like you want to throttle the damn thing and make it profitable.
So, you really push.
Remember, inflation is 5% or 4%.
So, if you're running negative OPEX, in real terms, you're really reducing.
So, this is a company that's clearly straining might and main to get profitable, right?
And you're going 30%.
So you could probably work out based on that.
Is it one year or two more years to get profitable?
You know, based on 30.
But it's too long, right?
It's just too long.
Yeah.
You say to yourself, I could wait, but this is a pretty damn good market.
Do I take a little haircut for not being profitable yet, but am I done now?
Am I public?
It's off the to-do list.
You survived the near-debt experience four years ago.
As we've discussed, we think at the margin, public security is just an easier place to be in terms of access to capital on an ongoing basis.
I think it's smart of them.
You're right.
You have that in the abstract.
And then you have the game theory side of it, which is it's good to be first maybe, but you definitely don't want to be last.
I mean because the other side of the thing is really hard, where two other companies get out roughly in your space and you're the third.
At that point, unless you are demonstrably better than them, it becomes troubling to get out because every public investor says I already have Brex and Rapp.
Now you're Brex and Rapp, but not quite as good.
Why would I buy you?
Right.
So you don't want to be the last player and the last one out.
When people perceive it as a direct comp, even if it isn't.
If Brexit and REMP are already public and they're better, I'll just go buy those shares today on E-Trade or whatever.
Why do I need to do your IPO and listen to your roadshow?
Unless there's a mass, there has to be a massive discount, or why do it?
Which would argue for exact, which argue what you're saying, Jason, is it might be smart to go now.
It might be smart to get the novelty value.
It might be smart to take the ground.
Maybe you can go public.
Maybe you can I don't know acquire a second string card payment company and add that hour to your quiver.
Much easier to do as a public company.
So yeah, I think it's smart.
Rory, I haven't had IPOs like you, IPOs period.
So I have to ask you always get these newspaper articles that are like oh index, make 5 billion and big numbers thrown out, but you've got a lockup period.
And then as a major investor, you can't sell all in one.
How does it actually work?
Genuinely, when you are a large shareholder, they IPO, what's that timeline to liquidity?
Sure.
And first of all, yes, it is.
It's a totally funny thing because the other thing just to put it out there, just say it is is that you know you tend to report as an investor, your holdings.
You're the named person on the thing.
So in SEC filings it looks as if you own not just your shares but your partner shares and the LP shares.
So suddenly, I mean, let's take the index example at Figma.
You can probably Google the partner and index and they'll say network and Figma stock three billion.
It's totally misleading.
And it results in a whole bunch of charities calling you and saying please give me some of your 3 billion.
And you're like, I don't have $3 billion.
You know, I got 20% of $3 billion divided five ways, and it's like six months before the lockup.
So yes, you do get that effect at times.
Yeah, it just, look, it's just a process of time.
I mean, you have a lockup most of the time.
One of the attractions of direct listing is you don't.
The lockup is typically six months, and it can be waived earlier.
Sometimes you see these performance triggers where, if the stock trades above a certain amount, you can waive the lockup early, which is nice.
So, after that happens, the next thing is.
The other thing that sometimes happens is in the lockup period, if the stock performs well and by performing well it means trading well above the IPO price, which gets back to this whole thing of IPO pricing.
If the stock quote-unquote trades well, you can probably get a secondary done, which means that you can sell more of your shares in the lock-up period via a registered offering.
That's attractive because it's liquidity in a structured deal where you just get your capital.
It's one of the reasons why at the margin, a 10% or 15% pop on the stock isn't, quote, the worst thing in the world.
Because everybody who buys at the IPO is happy.
And then, six months from now, if there's going to be a secondary.
You can't get a secondary done if the stocks trade down.
If you go public at 14 a share and six months later you're trading at 12 or 10 or 9, it's extremely hard to get a secondary done.
Whereas if you were public at 14 and it trades up to 18 or 19 and you make your first quarter, then you can easily get a secondary done.
That's the second way out.
So the end of the lockup win.
And then other than a structured secondary.
Your choice is distribute the shares to your limited partners or sell.
And the truth is, it takes a lot of time, especially if you're on the board.
You have reporting obligations.
You have quiet periods where you're not able to sell.
And it takes a long time to get out of a position.
Typically 18 months from the IPO, plus or minus maybe 24.
Is it not just better to sell before in a pre-ipo secondary?
No, probably not all the time again you have to have.
It gets back to the same two criteria.
You have to inform the opinion on the value of the stock and then you have to figure out your risk tolerance and institutional kind of issues on top of that.
To the extent that the median stock pops and then trades up, you'd probably be leaving some money on the table, but there's been times when that's been the right call.
I asked him on the show, like you know do you believe that you are fundamentally a better manager of public stocks than your LPs?
And he said, no.
No.
But we do understand that there's some who have this rule that they have to systematically sell the minute that they're distributed to.
In that situation we will deliberately hold on because we're not saying we're arrogantly better.
But they have this systematic rule in certain cases, or ineffective in a lot of cases, where actually they need to hold on.
I thought that was interesting.
And he's broadly correct.
Some LPs choose to automatically sell.
And the logic is, look, they're inheriting a stock they don't know anything about.
The person who knows most about it, which is the GP, has elected to distribute it.
So there's some signal in that.
And it's just not the asset they want to hold.
So I get the logic of the distribution.
I get the logic of the rule.
Hold is your best time to legally trade on inside information, though.
If you're on the board or close to it, it's your best time to trade on that illegal information by not trading.
By not trading.
Yeah, you can hold legally with inside information.
It's a privileged position.
You can sit on that board and know what's coming next quarter and tell no one and hold.
Now, you got to be careful if you distribute or sell.
You have to be a little thoughtful about your timing.
But you have this special thing where you can hold on inside information.
Yeah, you're right.
There's no securities law violation on holding.
Equally, just to say it, though, if you have negative information, you absolutely can sell.
So it's not a one-way win street.
But you're right.
One of the interesting examples, I remember one case of that where...
On a public company I was on, those were on six or nine months where we were in active M&A talks.
And, you know, you'd have your LPs ask you, you know, why don't you sell this stock?
It seems very fully appreciated.
And, you know, you can't say a word.
You just have to say we're taking everything under advisement.
And you're sitting there knowing we're about to get a 30% or 40% premium once this deal closes.
It's a great point Jason, because sometimes LPs ask in my view correctly what's the advantage of being on the board once you're public?
And there are disadvantages, but it's not a one-way street.
The disadvantage is limited trading windows.
But the advantages are you do have an inside seat on something like driving to an MA or an upside outcome and you have a better sense of the company's performance.
So it's a toughie.
I find you earn the side of getting off reasonably quickly, because you do want to get on to the next business.
But I don't, on the other hand, believe in just bailing day one.
So I've generally found you get off within 12 to 18 months of the IPO most of the time.
And at that point, you know, you're distributed.
You've done your job.
That said, it is worth pointing out that the two...
Venture investors in the NVIDIA IPO in 1997.
Mark Stevens and Tench Cox of Sequoia, I know, have stayed on that public board to this day.
And I believe the board package, the equity you get as a board member, has been extraordinarily, extraordinarily worth their time.
Let's just go with that.
And there's one I totally can't remember, so I'm not even going to try, but who's never sold a share?
Yeah, I think it's Mark Stevens who never sold a share.
Yes, that's good.
No, you're probably looking at a billion dollars plus, maybe many billions of dollars.
Being early in the largest market cap company on the planet and never selling any shares turns out to be a remarkably good way to make money.
I think it's impressive.
Just like... the concentration in Navon is just a hint less impressive than it sounds.
It's very impressive, right?
But when you're up enough personally, it makes sense to hold all your winners in the public markets.
For taxes and other.
There's just no reason, if you're personally up enough to sell any winner right with all reasons.
You might as well let it ride, right?
If you know it's going down, sell it, right?
Yeah.
But you want to hold on to an asset that will continue to appreciate essentially tax free.
There's a lot of advantages to it, right?
Pointing out that portfolio theory would say something different.
Emotionally, I'm with you.
I liked holding on to the companies I'm involved with.
Portfolio theory would say something different.
I'm not breaking the rules here, but it's a very significant part of our ecosystem.
I mean it directly applied to tech.
I'm not going into politics.
But H-1B visas was announced in terms of the 100000 fee or payment that's needed now for new H-1B visas to be granted.
So I'm not going into Trump or politics really.
Do you think this will have a material impact on startups, early stage companies and the teams they build?
It will have an impact.
It will obviously, at the margin, be negative because at the margin, immigration has obviously been extremely good for the tech ecosystem.
So you can make that as a definitive statement.
Materials are a harder thing to assess.
Well, there were 440,000 applications in the last year.
They generated between $19 and $120 billion of GDP for the U.S., Yeah, 70,000 accepted.
I think there's 70,000, 75,000 a year, one or the other.
I think, at the margin, if you were to have any rational immigration strategy and you were to rank all of the people you want to let into your country, STEM graduates who found companies that employ thousands of Americans would be top of that list.
You could argue that some program, like the exceptional program we have, which is separate all the H-1Bs, kind of make sense.
You could argue that some increased fee might mitigate some of the arguments against the H-1B which is, you know, some folks would make, which is that you, you know.
Some of the applicants are at least doing much simpler work that could be done by folks in the country.
And therefore, hey, maybe it should be charged more than that.
I think the way this has been implemented, the absolute sum, all those things aren't great.
And I think the real truth is rational immigration policy, for something like this gets caught up in, as you say, a whole swirl of other emotions around wider immigration issues.
And what it means.
It seems to effectively preclude any sensible, rational policy for this kind of highly skilled immigration, when it's pretty obvious that a rational program like this would be extremely good for the US.
Anyone that has been doing this for a while.
That isn't just three kids working 996 and SF has had H-1B folks on their team.
I have.
I've had great folks on my team, especially my first startup, which was hard.
It had a material science component.
It wouldn't have been possible without H-1B. at least on its surface.
Okay.
I had H1B.
I ate two folks with H1Bs on my, they were transfers, right?
I didn't, I didn't sponsor them.
I had on my first team of 10.
I had two wouldn't have had my first exit, or my first startup, or save hundreds of more of lives from my first startup.
So for sure.
Right.
And what we wanted a meta level is everyone great coming to the U S that's what I selfishly want.
Every single talented person that can help keep our Nvidia shares high flying coming to this country.
I want it selfishly and ethically and personally, but at a very tactical level, we find ways.
Okay.
The O1, like if you look at the companies you've invested in, they're all O1s now.
Okay.
Everyone finds a way to get a note.
At least all the founders get O1s and O1s have a lot of cons, right?
And you've got to keep them going and it's stressful, but There's ways.
And so I do think the impact will be modest.
And the big tech companies will just pay up.
But I think it's terrible.
But I think the impact will be modest at the moment if it doesn't expand.
But we've all had great H1Bs on our team.
It sucks.
Exactly the pragmatic point.
I appreciate you saying that, Jane.
If you see the strong positives that the program brings in aggregate you can say there's a little bit of abuse but it's worth the tax.
If you're on the outside and you're incensed by immigration in general, then you ignore the great people who've been enabled by H1Bs and you focus on the abuse and you say this is awful, pick a company.
Microsoft is using H1Bs while laying off Americans.
It's easy to give that speech, right?
There's no accident that the countries that have the most skills-based point system are the countries that have least angst about immigration.
$100,000 is kind of a rough American proxy for skills-based.
In a rational world?
You do.
Let's just remind ourselves what Trump, at one point, said he'd do, which is attach it to every STEM degree.
You're trying to find some proxy for letting the people who are best for America, right?
That seems to be a reasonable rule because let's be frank, everyone wants to get to America.
God knows I did.
So you have to have some rule that isn't everybody.
So a logical rule is what's good for us.
And you could imagine a point system, all that kind of stuff.
The money thing is just a very, I think it's trying to be a very crude proxy for that.
And I think you know, with people being more cooperative you could probably come up with a better scheme than pick a dollar sum and make that the deciding factor.
A final one before we do a Kaoshi quickfire.
It's just Notion hitting 500 million of error, I thought was really impressive.
And accelerating.
So, okay, I'm going to say it then.
They're not treble, treble, double, doubling, right?
Is it impressive?
I mean, I think it's impressive, but this is almost a counterpoint to the only thing that matters.
Are things growing faster than SaaS?
This is a mid-sized SaaS company.
We excel probably, I don't know, 30%.
Why did I think it was impressive?
I think it's to Jason's point.
It's hard to get a re-acceleration at scale.
I think treble, treble, double, double is absolutely dead early stages.
Agreed.
Treble, treble, double, double at hundreds of millions in revenue is phenomenally impressive to me.
And at 500 million in revenue, you could actually squint and see my 10 billion stock, which I have since it acquired some of my companies reasonably being finally up to the watermark of 10 billion.
I'm like, eh, 20x.
It's a bit punchy, but it's a bit punchy with that growth rate.
Those pesky 2021 valuations.
Oh, Jason, $10 billion.
I think, you know what it says.
It doesn't even talk about it anymore.
What it points to is reports of their death have been greatly exaggerated, as Mr. Twain would say.
It turns out, these mid-tier, significant-scale SaaS companies don't have to just become something totally different, but they have to embrace and lean into the AI trends while still being fundamentally the thing they are, not trying to be a totally different company.
And you can get, you know, reacceleration.
And I agree, I was giving you shit, but you're exactly right.
30% acceleration at $10 million isn't what the paper is written on.
But if you're at critical scale within striking distance of an IPO and you can use kind of an AI-enabled story to get you back over 30 plus 40 growth, you know you have an IPO in your future.
They IPO today, where do they price?
Crudely estimating.
I don't know if the growth rate, but let's assume it's 30%, 40%.
I doubt it's really doubling.
I could be wrong, but just looking at the headcount, they have 1200-odd people, which doesn't get you to doubling based on the growth rate.
A 30% grower, I mean, Netscope and Navan, well, Netscope has priced already.
You know, it's seven, eight, nine times NTM.
So something like that four or five billion, maybe more if the forward growth rate is a little better or if I'm underestimating the revenue.
But yeah, a long way from 20 billion.
And it'll be interesting to see how they digest their preference issues.
But a great outcome.
I mean, $5 billion, $7, $8 billion is real money.
No, I know.
I got in at $10 billion.
I don't know if I was.
That's your problem, not theirs.
It's not my fucking problem.
They bought my company.
I didn't have a choice.
Well, it's a little bit.
I mean, it does hang over the heads of most founders, the high valuations.
They've compartmentalized it, but it's not.
It's a little bit their problem.
It is their problem.
And as I said, the real question then is how does it get playing that out?
How does it get unwound?
And we talked about this in the context of a couple of the prior IPOs.
I don't think you should stay private just to earn your way back into $20 billion.
I think you can go public.
And then I think it will boil down to you might go public and either the stock gets converted or, as we've discussed, the preference remains outstanding until it grows into it.
But yeah, I don't think you can hold the rest of the company up just because 5 of the company paid 20 billion pre.
Final one, and then promise.
Do you think Airtable will make it back?
I got a ton of Airtable from them buying a load of my companies again.
Just help me out.
Just like help me with my planning.
All these companies are going to be priced on the fundamentals.
This does go back to.
Maybe a more prosaic version of the Hamad comment, which is, stories at the forefront can be priced on sizzle.
Stories that are 10 years old are going to be priced on fundamentals.
If they have $200 million in revenues growing at 20%, they'll be priced at five or six times.
If they have 300 or 400 million growing at 30 or 40, they'll get a decent seven or eight multiple.
It's hard to get to scale in these markets.
You know you have the dynamic of microsoft at all times.
There was a period of time when all those companies felt euphoric right, and you know it felt unbounded for notion, it felt unbounded for air table.
And then a little bit the tide went out of the productivity tools market.
A little bit, microsoft just started grinding away at everybody, as they've done in so many other markets, and then the world's moved on to ai.
So now these are perfectly good companies that are just going to have to find fundamental value based on revenue multiples and even God forbid free cash flow.
Just like there was a time when you weren't allowed to talk about Web 1.0 anymore.
It just didn't matter.
I think we can't talk about 2021 valuations anymore.
It's time to just flush them down the toilet.
I wrote down everything, I guess, a year and a half ago, whatever.
Everything that had a hint of froth.
I have one deal I'm still carrying myself, right?
Because it's over $300 million in revenue and growing.
I'm holding it as 2020, but I'm marking it down this year.
And it's time to just forget about those valuations.
It's just, just forget.
Just pretend they, you know, maybe you can't pretend.
Mark them down, even if they're personal, and just forget about them because it's too far in the past now, four years, like it's time to move on from those decacorns of 2021.
I mean clarna was what?
40 billion time to move on?
Time to time to move on.
Its peak was 45.
Yeah, south bank did sequoia brilliantly, did the round at five or six and obviously two or three x that and i think overall seven x the overall investment.
I think we're not allowed to talk about these rounds anymore.
I think we're getting it.
But we're getting it at the end of this year.
You've got 90 days left to kvetch and complain about your 2021 valuations.
And on January 1, 2026, no one is allowed to talk about their 2021 valuations any longer.
The only problem with not talking about your 21 valuations Jason, is that we seem to be determined to make exactly the same mistakes in 2025.
Yeah, we need the runway to make them again, Rory.
We need to focus on making the same mistakes again and not be hampered by them in the past.
I'm seeing less diligence now than I did in 21.
On any hot AI deal, there is no diligence provided, nor is any done, right?
It's just done on Saturday.
Why would you do diligence?
All you can lose is one extra money.
Why would you do diligence?
Again, you can say what you like.
As long as you don't put this quote out under my name, Harry, I'm happy.
Again to be the boring guy here.
We're finding that what you have to do is you have to do your due diligence prior right.
You have to come to the table with an informed opinion which you can either pull out of your ass or try and do some pre-work.
One of my companies had a term sheet pulled.
This is a large company doing a lot of revenue from a tier one firm.
And what I found more and more is just to kind of get the exclusivity and to lock the deal down.
They'll term sheet it.
And then for deep work, they're like, I'll do it after in the 30 day closing period.
And then they pull.
This is a really bad trait of an increasingly competitive market.
But I'm less critical of it now than I was all the prior years of my career.
I'm less critical of it today.
That's pretty fucking bad, no?
I know, but here's my view, Harry.
If you're only giving me a Saturday afternoon to make a decision, if you're giving me one hour, you won't share any data.
A lot of these contracts are paid pilots.
You're not disclosing anything.
And you want me to make a decision in five minutes.
Either it better be effing solid.
Okay.
And if, immediately after that term sheet, I see 10 things that aren't true and you want me to not rescind my term sheet, you better let me dig in here, because the level of trust that you have to have to do a deal on a Saturday is it's under discussed.
It is mocked by many, including leading accelerators, but there is a high degree of trust involved in this.
So again, if you want people to make a decision in five minutes, You better be on the up and up.
And so I used to be critical of it here.
I used to think it was holding my place.
And it still happens.
Like, that's your point.
It happens.
It's bad practice.
But I have a lot more empathy than I've done the last decade.
I have a lot more empathy in 2025.
Or just do what we do, which is say if you want that decision timeline, that's not our type of deal.
Sorry, we're not going to engage.
Yeah, but I think many of the best companies don't provide that flexibility today.
Now, the best founders wind them up, right?
Give them breadcrumbs and give them data ahead of time, right?
If you want a big check, you got to do that.
But when they're ready, it's one day, dude.
You can say no, Harry, but you're an aggressive investor.
You're going to say yes to a couple.
I'll bet you that Sasser tattoo, you're going to break your rule a couple of times.
But it's the right response, right?
Dude, I'll get a Sasser tattoo if Rory gets one.
Well, then you're fine.
I plan to die with my body unblemished with tattoos.
It's not just being founder friendly.
Anyone that's been a founder wants to be founder friendly, right?
I want it to be an extreme, but not allowing diligence for all intents and purposes, you're running a risk.
Jason, have you got less founder friendly?
Less founder friendly?
I am more founder friendly, but it is less appreciated.
By far.
I am the most founder friendly I've ever been in my career.
And it is, I get less, I catch more crap for it.
Everyone says great job and everyone's jostling behind the table and everyone's manipulative, and I'm the only, and yeah.
Poor Jason.
No, you asked the question.
Founder-friendly is as bullshitty as pulling the term sheets in 2025.
Founder-friendly has become bullshit, but it's table stakes.
It's table stakes to get into the deal.
You got to be founder-friendly, right?
Founder-friendly is writing the check when no one else does.
That's founder-friendly.
Founder, friendly is when no one else is there at the board meeting anymore, and you're there and you still have a W on the other side of it.
That's founder friendly.
Founder, friendly is when you actually recruit the executive for the role, not just say who are you looking for.
I'll send it to my talent person and do nothing.
These are things that are founder friendly, right?
Not saying great job, no matter how you do.
I find myself oddly agreeing with much of that.
I mean, what I've internalized is in the game of founder friendly, it's not a winnable game.
So what I say, I'm trying to be a founder honest.
I want to be founder honest, which is I want to tell you exactly what I think.
Which I think is more useful than great job if it's not doing a great job?
And I think you're right, Jason.
The only way to a judge who really is founder friendly is how they behave in a tough deal.
There's no information on how you do in a good time.
Right.
And I've just internalized that most people don't check that.
And that's just the way it is right now.
So it just becomes this mean you end up with this meaningless trying to prove something in a bull market that you really only will demonstrate in a bear.
But that's OK.
I am just going to say this before we do a Kaoshi quickfire, because Jason won't.
But I always remember the revenue cat founders telling me about Jason, like wiring the money from like his personal account.
Totally.
Totally.
I remember that.
It was the SVB weekend.
We were literally on Sunday, having a partnership call, doing a whip around to say who could cover which companies, when yes, when the recap came in and the US government stepped up.
But yeah, it was interesting who, you only know what people are like in a tough deal.
It's also true, by the way, on VCs.
We're going to do a Kaoshi quickfire.
So, bet us on, when will a final TikTok deal be reached between the US and China?
Come on, Rory, you love this round.
I hate this round, as you know, but I'm going to vote for never, because it's just so much fun for the big guy to keep dangling it.
This is the.
I mean I'm being slightly glib here, but planning to do the TikTok deal has been the most fun anyone's ever had, because you have favors to throw people, et cetera, et cetera.
Look, I'm sure it'll get done at some point, but it's not knowable by me.
Jason?
Look, obviously, there's a lot of complexity here, right?
But I'm going to say the next 60 days.
The definitely somewhat toxic H-1B stuff.
This is a lot of tariff posturing too, to get these deals with China and India just done.
And I think they're going to get done.
And so whatever this crazy deal is, it's going to get signed in the next 60.
I think these deals are going to get done this calendar year, and I think it's going to get signed.
And I think hopefully this H-1B thing kind of diffuses too, because now it's not for existing.
Everyone had to frigging fly back in 24 hours, right?
Now you don't have to do that.
And a lot of these things may kind of evaporate as the tariffs get resolved.
So I'm betting 60 days.
Meta Smart Glasses, another fail for VR or mega success?
0% chance they're a success.
What's the bet?
Wow, why?
Because I own like eight pairs of the existing ones.
Because we just don't need to play Tron in our eyes.
We just don't need a seventh screen.
It's another solution in search of a problem, in my opinion.
We just don't.
There's just only so many times I need to be on the podcast with Harry looking at my notes in the size of my like 11-inch thick.
Gen 1 new ones.
It's not a huge problem in the real world.
I'm having fun.
I'm watching what Johnny Ives, from his new 70 million Tiburon Pinoterie, just bought with his shares to add to all of Jackson Square.
Because I think he's going to come up with something disruptive.
And I think it's fascinating because it's such a hard problem.
We just don't need an, only so many of us want to wear two smartwatches.
Like there's just certain, it was hard enough to get the smartwatch.
Like changing this paradigm has been tough in tech.
So, and a lot of venture dollars will go into it per Harry.
In the real world, we leave them on the shelf.
Final one, will Atlassian's buying spree pay off?
They've got DX, they've got smaller ones, Cycle Born, they're just going and going and going on the MA.
Will it pay off and make them an AI leader again or not?
It'll help.
Look, it's not going to make them, quote, an AI leader.
They don't have to claim AI dominance.
All they have to do is move their existing customers into a AI engineering management world.
Then the browser base thinks separately and just try and stay vaguely relevant and defend the market cap and, you know, grow the business 20 percent.
If that's what leading is, then maybe, if it's do, I think it's going to make them the AI dominant coding agent.
No.
But just trying to move the needle on a $4 billion revenue, $40 billion market cap company.
No, it's not enough.
You got to put chips into play.
And I think it's just baby steps.
I also thought, you know, I look for these signs like what Sam Altman's saying, right?
The other thing.
On the DX one I looked.
These are not easy jobs, like Michael Cannon Brooks has right.
These are not easy jobs.
And the PR pictures of him on the deal were him just alone.
It wasn't even with the DX founder.
This is lonely picture of michael and i just thought man, this is a tough job in the.
I mean, he has one of the great iconic properties of all time.
All right and and sort of you know, somewhat developer focused b2b software, but it ain't it just the lonely mike in these pictures.
I'm like man, this stuff's hard.
So if this was going to change, atlassian they'd be.
They'd be together toasting, rather than the wartime mike picture.
So i think it's a start and um, dilution aside, or i don't know.
I should know whether they did it with cash or stock.
You know to make the bets.
I don't think this is going to change the face of the company.
Guys listen, thank you so much for doing this.
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