Anthropic's $10B Round, Klarna's IPO, Inside a16z's 72 Deal Seed Investment Machine ft. Marc Benioff

Amazon’s AGI head said there are just 1,000 AI engineers that matter. Marc, I wanted to start with you on that one and ask what you think.

Marc Benioff

AGI head sounds like an oxymoron. You’re talking to somebody who is extremely suspect if anybody uses those initials, AGI. I think that we’ve all been sold a lot of hypnosis around what’s about to happen with AI. Not that it couldn’t happen one day—we’ve all seen those movies.

Peter Schwartz, who worked on “Minority Report” and “WarGames,” works for me; he’s our chief futurist. But I need you to realize that isn’t the state of technology today. So, how about that?

What made you realize that? What was the penny-dropping moment there?

Marc Benioff

When you look at large language models, which are the state of the art in AI today, prompt engineering—which, by the way, came out of our Salesforce AI research team—large language models are 2 things. They are a finite set of algorithms, which have gotten a lot better, for sure, but incrementally better over the last 5 years, and a relatively finite set of data that has come off the internet. Those 2 things together really have provided the state of the art in large language models today.

When you work with these LLMs, it’s very cool because you’re going, “Oh my gosh, it feels very intelligent.” It felt that way when I was using ELIZA when I was 16 years old on my TRS-80 Model I also. It was like, “Oh yeah, this was pretty accurate.”

Yeah. It was like, “Oh, this is like a person.”

Marc Benioff

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, and I think that there is some hypnosis around the state of the art around AI and what is currently possible or what is about to happen. I’m extremely suspect of that, and I’m trying to bring people back to the reality of here’s the current state of the art of AI, which is amazing—it is amazing—but let’s actually use it for what it can be used for and also realize some of the major issues with it.

I tweeted about this, I guess, about a week ago, where I read these 2 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. I think that is a huge warning sign for all of us around AI.

1. Does Benioff Feel The Need to Buy AI Talent Like Zuck Is?

Back to the AGI head: if we separate the finite from the infinite, the thing that everyone feels is finite is talent. Zuck is paying up for talent like no one’s seen before. You’re seeing your peers getting offers at $1 billion, with, bluntly, very little to show for it. No disrespect to her, but other than the team, there’s very little to show for it.

Do you feel the pressure to enter this talent-buying frenzy in a way that we’re seeing other large incumbents?

Marc Benioff

No, and we’re not. I’ll say that we’re very focused on defining what the next generation of the enterprise is, really looking at what is working and what is not working, and how we go forward. Tactics must dictate strategy over time in enterprise software.

The first thing that we’ve been talking about now for only about 8 or 9 months is that we have Agentforce, and Agentforce is our agentic layer around our support. This agentic service means that there is an omnichannel supervisor that is paying attention to the interaction between my human support agents and my digital agents. To that point, I’ve been able to reduce the number of human agents I have in support from about 9,000 to about 5,000.

Why that’s important is I’ve been able to take that headcount and rebalance it into other parts of my company where I need more help and support, because we’re still growing. I think that this is very exciting. It’s a huge change in how our company is structured and how our technology is built and delivered to our customers. We’re customer zero.

Let me give you one other crazy story to that point, and you’ll be the first ones to hear this story. This is a little bit—forgive me—part of the story. Over the last 26 years, Salesforce has had more than 100 million people contact us that we’ve 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. It’s this funny thing.

We have these people—we call them SDRs, sales development representatives—and we just haven’t had that many of them. We have 15,000 salespeople, but we don’t have that many SDRs. Well, we have agentic sales now. Not only are we doing support, but this agentic sales is calling everyone back and having conversations with them, and then deeply integrating it through the omnichannel 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 1 to 5 years. Is that the summary message here?

Marc Benioff

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-prem again in 2000, you’re pretty much saying it’s never non-AI agentic in 2025?

Marc Benioff

When you get to Dreamforce, you’ll see that our promise is 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?

Marc Benioff

It’s so untrue, and that’s the funny thing. Here’s the thing. Number 1, our AI is part and parcel with our Data Cloud. Our Data Cloud—love it or hate it—the idea is that you need a Data Cloud that’s federated to all of the data sources in your company, and why that is so important is so that you can get all your data harmonized in 1 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 at 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?

The Data Cloud and AI together now is more than $1 billion in revenue. We talked about that on our last earnings call. It’s our fastest-growing cloud product ever in 26 years, and we’ve talked about how we have thousands—I won’t go through the exact numbers—of customers now on Agentforce, 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 customers are still getting their heads around it. What software in the history of enterprise software has ever grown at that level of scale? I would cite to you, Harry: none.

I will say that this is incredible. You can talk about any other new company or existing company. We can go through whatever it is, but this is a product that’s breached $1 billion. Even when you look at other data clouds, like Snowflake or Databricks or even Palantir Foundry, they’re all in the $3 billion to $4 billion revenue level. They’re in my sights.

2. What Salesforce has Learned From Palantir on Forward Deployed Engineers?

I am on it. I am like the guy in “Star Wars”—my favorite movie—in my TIE fighter: stay on target. I see where I’m going, and data and AI—this is 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? 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? It was growing 15% or something in 2013, right? It's crazy.

Marc Benioff

Oh, it's very cool and amazing, and very inspiring to me, this idea that a data cloud, which is called Foundry, integrated with analytics can be very exciting for a company. I would say that our Data Cloud plus a new agentic Tableau, plus Informatica, plus looking at a product like MuleSoft together, is our data foundation.

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 reassessed: Where are we selling? Because the U.S. federal government is already my largest customer, right? We run the Veterans Administration, the GSA, and we just won—you probably read—we just won a huge U.S. Army contract. We beat Palantir.

But in some of the areas that they sell to and some of the people that they sell to—and I won't go through all the details because it's not appropriate—we have not traditionally sold into those groups. So it got our attention: Where are they closing these deals? And their products are so expensive. Have you seen their price list? It's out there online. Whoa, these prices.

I'm like, whoa, my prices are too low. I'm actually delivering—I'm automating the whole VA at this price. What would they be charging? My prices are low compared to theirs, and our products are much easier to use.

Yeah. So, no, he's not ignoring that $300 billion.

How do you think about it?

Marc Benioff

Yeah. Why would that catch my attention? I'm like, how do I get that 100x revenue multiple? That's awesome. It's $4 billion in revenue. Let's keep it in perspective. It's not—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 2 different companies.

Can I ask you 1 related question? I don't mean to hijack, Harry—you take the agenda—but related to Palantir, one of the things Palantir has gotten everyone's attention with is forward-deployed engineers. Do you think that's a new concept? Are these the same people at Salesforce deploying software for the last 20 years? Is it different? How do you think about this FDE concept?

Oh, what a great question. I think that it's both. At 1 level, we've always had and always gone to the customer to try to solve their problem, listen to them, and do our best. We have a large sales organization and a large solution engineering organization. You know what that means? We're out there talking to them, working, and building the prototype. We also have professional services, and we have partners, too, and all of us are in there.

But we don't have that kind of branding: These are our forward-deployed engineers, and now we're going to start building your product before we've really signed a deal. I think that idea is very cool, that all of a sudden you're in there kind of saying, “Yeah, we're going to make a bet that we're going to start doing business together, so we're going to start building now.”

I think that's something that we can all embrace and adopt and say, “Yeah, let's have more of that engineering resource start right at the beginning with the customer.” Fantastic. Let's do that.

I want to 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. But I think it's the law of large numbers. What you're saying is, look, when you're doing $40 billion—you said, Harry, it's “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—

Thank you. I didn't miss that last part, Rory. I'm very hard of hearing in my left ear. Can you repeat it again?

I speak quickly with an Irish accent. My comment is: When you're doing $40 billion, Harry's giving you grief for growing at 10%, but I'm making the point that when you're doing $40 billion, 10% growth is adding $4 billion, which is an entire Palantir every year, right?

So, the compound growth—which is mathematically true, Harry, you're right—the 10% growth is what these guys are now. You're just dealing with scale. I think it speaks to 1 interesting thing, which is, I saw a number, and you may comment whether it's correct or not, that you have 9-figure revenue already in ARR. You added 9 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? You're just up against the law of scale here, which speaks to—even if AI is amazing—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.

Well, we know that we are always overestimating, especially in our industry, what can happen in a year and underestimating a decade. But at the same time, it's different running a $4 million company to a $40 million company to a $400 million company to a $4 billion company to a $40 billion company.

Each step change is an order of magnitude, and it's a completely different company. We've all seen that, and all of a sudden it's like, I have a different set of products, a different set of challenges, and a different set of customers.

But we can be inspired by everyone, can't we? I think the biggest mistake is to go, “Oh,” or to be dismissive. We're not being dismissive, are we? We're just being in awe and being inspired and being energized by this. I think it's really cool.

3. Will SaaS apps disappear in an AI world? Why Satya is Chatting S

Can I ask another one? When we think about MCP and how it changes how we engage with different products, do you think we'll want to log into SaaS apps in the future, or do we just want our data inside of ChatGPT and it's just going to keep coming at you?

No, I like—I’ll open my heart here and just say I think this is 1 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.

Certain executives, who will not be named, have said that 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. That is crazy talk. That is not how it works.

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. Maybe the whole world changes, 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 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.

That is why I think it was a huge disservice to the industry and got everyone anxious, because certain people—they'll remain nameless—have a lot of credibility because they are great people, actually, and great executives. But to say these things is nonsensical. Why does Microsoft have 3% CRM market share? Because of nonsense.

But I do want to disaggregate 2 things, because it's worth it. 1, even the sentence, “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 with vibe coding. Let's 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? As Jason said, there's a bunch of startups we've all funded—God forgive us—for assuming Salesforce as a given. You are the infrastructure, not this [bleep] comment of, “You're going to be replaced.” Ignore that entirely, but assume Salesforce is the infrastructure.

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 customer-facing real estate on top of the Salesforce data? Do you allow other people in the ecosystem? How do you make those choices?

Marc Benioff

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. They operate in the flow of work in sales and service and marketing, and all the examples that we've done.

Then, at the 3rd level, there is going to be an agentic layer that's going to interoperate with those applications and that data. Yes, there will also be an ecosystem that's going to fuel all of these things as well, and the connectivity is going to happen. It's going to be open, and 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. 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 with me on the sales call. It's listening; it's coaching me,” and that was very inspiring to me. And now you're like, “And I have a dozen agents.”

4. Are SDRs really screwed by AI… or just evolving?

There is going to be a radical explosion of small and medium-sized businesses like yours because entrepreneurs like you can do more than ever. So while the enterprises are trying to figure out whether they're going to DIY it and whether they're going to do this or that, look at you and all the entrepreneurs like you who can boom, boom, boom, go right into the future. We're going to see an order of magnitude more SMBs because SMBs can do more than ever.

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 don't have a future. You have said before in this conversation, “A human and an agent,” and very much suggested a pairing between the 2.

Jason has presented an idea that in the next 12 to 24 months, we'll actually see this mass exodus of the SDR class. Do you think Jason's wrong?

Marc Benioff

Like I said, I'll tell you what I'm doing. We have all these leads that we just systematically have not called back, and now we are. That gives me the ability to rebalance my headcount and to really say, “Hey, I want to take all these folks and make them sales folks.”

I think that in all of the segments of the business that we do business in—not just government, which was one segment, and not just the enterprise, the high-end enterprise, the 5,000-plus world, but the mid-market and the small business—we're a company that's going after all of those segments.

So you're saying the SDRs will remain, and it'll just allow you to cater to the ones that you couldn't cater to before?

Well, I think Marc might be saying—Marc said his support team went from 8,000 to 3,000, and he redeployed them into other areas. I think about that number. I think the same thing happened to 5,000.

Marc Benioff

That's exactly right. Yeah, I think we'll redeploy. I don't know how many entry-level SDRs 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 Agentforce. I bet you—I bet you don't need—

What you're saying is so important, Marc, 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. The fundamental architecture of the company will be different.

All of us grew up in SaaS, applications, and all this over the last 25 years, and so we saw how the applications have changed and evolved. But now what we're saying is, it's not just that; it's also the companies as well. And that is different.

Marc Benioff

So, Harry, did you get the answer to your question?

Yeah.

No, I don't think it's bullshit, though. I mean, it's because we have this discussion every week, Marc. Jason is basically the grim reaper and thinks not a single 25-year-old will ever work in this town again. And I think it's grossly overly optimistic to think that you can redeploy 25-year-olds who aren't that passionate and don't have that many—

Marc Benioff

But when you're at Salesforce's scale, it's about headcount. My budget's fixed. I mean, I've 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.

That is exactly right, Marc.

It's a more optimistic view than Jason's taken in the past, which is why he's contradicting himself, but it's a good view, because I actually notice time and time again Marc's—I won't say spin, but approach on it. When Jason did his thing about only having 3 people in his company, Marc's take on that was, “There'll be lots more entrepreneurs because of that.”

It's very—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 upside-related focus, as we've discussed over and over again. If they're not any damn good, they're on their own.

Marc Benioff

But it's at least a vaguely upside-y approach, Harry, versus, you know, Armageddon here. You can go to our website and see who we're hiring.

And this narrative around us not hiring any more kids out of college is also bullshit.

5. Benioff on Who Wins: OpenAI or Anthropic?

Marc, 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.

Marc Benioff

He's such a dick about this.

You have OpenAI at $300 billion and Anthropic at $170 billion. Which would you prefer to buy?

Marc Benioff

Well, I think both are actually great companies. Salesforce owns 1% of Anthropic, so I'll just say it's obviously a great company, very focused on the enterprise. OpenAI also is a great company. I'm a big fan of 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 master class 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 thing about everyone. And shut up, Harry. Good job.

Marc, thank you so much. You're—

Marc Benioff

Thanks, guys. Great to see you. Bye-bye.

6. Nat Friedman reports to Alex Wang: Genius move or career downgrade?

And now I'm excited because these are the things I want to dive into with you. Nat Friedman reporting to Alexandr Wang after not a huge amount of time: how do we analyze and 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 that it was fine to give up billions of potential carry and funds to be in the game, right? To be a player rather than to be on the sidelines.

I don't want to be critical, but, man, then essentially getting demoted in a reorg—maybe it doesn't feel that way—but a hiring freeze in a total reorg within 30 days is 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 1 person in charge and then the 4 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 chart and go, “Yeah, that's probably how you should run it.” You've got 1 guy in charge.

And actually, the core issue is the same thing. A stupid example is 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 players. Someone's got to be the manager and figure out who's going to play what position. So it's—I don't know what promises were made, 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. But why? I don't understand 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 Zuck—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 Yann LeCun also reporting to Alexandr Wang as well. Daniel Gross 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—

You're not—I'm going to push you. Just be logical: you're not confused about the structure. The structure is pretty well understood. You're confused about why he'd do it, which is a different thing. Just be precise, right? You're confused about 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.

Yeah.

Okay, I don't know. And the rationale around that, for me, would be, well, actually, you know 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 Alexandr to have that discussion, and you're not if you're just another fund. That would be the reason why you'd do it. That's the only rationale I can come through.

I think being in the room for that a couple of times is fun. And then I'd rather run my own shop. There's only so many rooms I need to be in. It's pretty fun. It's like the first IPO you're a part of. It's great, right?

I'm not sure what it's like as a VC to have 20 IPOs, but I might rather have more carry than show up to ringing the bell. I don't know. 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.”

So, even though it's great being a VC, 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.

Rory O’Driscoll

So, I get the operating. I get the transition from venture to operator. It's what you said, Harry: 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 Meta more broadly being hit hard? They were down 6%. They've had a pretty meteoric, continuous rise, so this was a blip. How did you guys take that?

Rory O’Driscoll

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 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 unilateral power deciding to invest all this cash in this new business.

If you're trying to value the stock, your entire day is spent thinking, “WTF is this new business worth, and is it going to eat all the cash flow?” It's like Kremlinology, 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 it becomes obvious. 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.” And if he's wrong, like he was about the metaverse, everyone will go, “Oh my God, what were we thinking?” Until then, we're guessing.

So, you don't think this is the beginning of a cooling of the excitement in the AI market, a dampening of market caps, and a dampening of public markets in a way that some people are worried about?

Rory O’Driscoll

How the hell would I know? I mean, I don't think that implies I'm a know-it-all. Let me tell you: you'll know when it's happened, because it'll hurt, right?

Right now, all you know is things are pretty lofty. When things are trading at 15 times earnings, you don't have to agonize all that much, because you know 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, right? You don't know—is that going to change in a week, a month, or a year? But 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?

7. Anthropic’s $10B round: Have we hit peak AI hype?

Meta has a 1.59 beta. It's a volatile stock. I don't think we can read anything into these ups and downs because the beta is so high, right? I mean, Nvidia is 2.3, right? These are insane numbers. Even if you 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've got to be smarter than me to figure out what even a 7%–8% movement means.

The beta's too high in light of what I just said, which is the cooling—or the lack of cooling. Anthropic goes from a $5 billion to a $10 billion raise. Is demand just completely inexhaustible for this? I heard it was 4× oversubscribed. How did you guys react to the $5 billion to $10 billion and the 4× oversubscribed, reportedly?

Rory O’Driscoll

I mean, yes, 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.

OpenAI, $40 billion.

Rory O’Driscoll

Yeah. I mean, right now, 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 AI blended into something else. Facebook, Google, and Microsoft have at least something there. Apple has nothing there. Amazon has little there. So, if you're a Fidelity-type manager, you're like, “How do I get me some AI action?”

There are 2 obvious at-scale candidates, and, yeah, you probably can sell a lot of that stock right now, and they're going to sell it. The good news is they know what to do with the money. They can buy GPUs.

Harry, you would know this better than me. Maybe Rory knows it. ICONIQ is a lead for this round, and Lightspeed led the last round.

Yeah.

Okay, these are not—I mean, maybe the underlying LPs and money are from sovereign wealth funds or others. These are the standard cast of characters who can tap into vast amounts of money, right, and charge a vast amount of economics and keep a vast amount of economics on top of it.

Of course, they're going to go from $5 billion to $10 billion. If I can deploy, why don't I deploy another $5 billion if I'm Lightspeed or ICONIQ? Why wouldn't you? It's the same amount of risk. Instead of Lightspeed putting $2 billion in, if it's LPs, we'll give them $6 billion. Why not? Literally, at a GP level, it's the same amount of risk, isn't it? I lose $2 billion or $6 billion. What's the difference? But I can make so much more money.

They could also be right in that call—that it is going to work from here.

Rory O’Driscoll

You know, it's an interesting exercise to try to take the Anthropic numbers and say, what do you have to believe to believe in a 3× from here? It's frankly not impossible. A lot has to go right, but a lot is going right.

If you do that exercise—I kind of did the thought experiment a while back—you simply have the growth rate over the last year or 2 is so fast that 1 of 2 unprecedented things is going to happen in the next year. Either they're going to—if it decelerates at quite a normal rate relative to its current growth rate, it's going to hit $50 billion in revenue-plus, because things that go from $1 billion to $9 billion or $10 billion probably go next year. I don't know: do they go 5×? Do they go 3×?

Either it grows.

Rory O’Driscoll

It could end next year at $40 billion, right? And it's possible. If it ends this year at $9 billion, from $1 billion to $9 billion, that's extraordinary.

You're much better than me, Rory. What if you just do your trailing velocity? What does that end up?

Rory O’Driscoll

That's exactly it. You end up with 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 10× growth to 2× growth, and 2× growth is amazing at that scale, it would still be such a deceleration.

So, when you look at the stock and you look at the price they're paying, as I say, it's not crazy to say that if the growth only slows even 50%, it's still got a kind of a trajectory and a growth path to tens of billions of dollars in revenue, and that gets you into the valuation.

Ultimately, processing through that, you say to yourself, at some point it's a market-size question. If there's enough revenue out there, these 2 guys are going to get it. And thus, in the end, as all highly priced stocks do that are really leaning into growth, it boils down to your assessment: is there $50 billion of demand for foundation-model APIs or $500 billion of demand for foundation-model APIs?

If it's the latter, they're probably going to get 40% of it, and it gets them $200 billion. And if it's the former, they're going to get $20 billion. A lot of these people are going to be sad.

What do you think it is, Rory?

Rory O’Driscoll

It's something Jason said 3 or 4 shows ago. If you start running out the numbers on what—I mean, let's talk about market size: $200 billion of revenue. Salesforce is doing $40 billion. So, at $100 billion, you're saying it's kind of 2.5 times the size of Salesforce, which effectively has dominant market share in the CRM space.

Coders have to get to what Jason said a couple of weeks ago: $10,000–$20,000. These agents have to work $10,000 or $20,000 per head 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 $20,000, $30,000, or $40,000 per head to the enterprise for the math to work.

And, you know, Jason said in some cases it will. There will be some use cases where an enterprise will part with $20,000, but there'll be lots where they won't. So, 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 TAM. 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. But listen, we just had Marc Benioff here, who's saying at Dreamforce they're going to launch an AI SDR that I guarantee you is going to take 6 to 9 months to scale up, but it's going to be bonkers. Everyone's going to turn it on, and that will tap into a vast amount of budget and a vast amount of cycles.

Maybe some of it will be their own LLM, but it doesn't really matter for the purpose of this. We're just starting this cycle, right? And it's hard to predict how much human replacement and how many new applications.

Rory O’Driscoll

But let's do that exercise, though.

You're exactly right. Listen, Salesforce is doing $40 billion a year. Say $10 billion—I think $12 billion of that is Sales Cloud, right? Let's say they turn this on and it's a 30% uplift from an AI SDR on top of the core Sales Cloud, which is $12 billion. So that's $3.6 billion of extra revenue, right? Let's just say that, which, as you point out, only gives the poor man another year of 10% growth.

Let's say LLM costs as a percentage of revenue are expensive—20%. So that's $720 million, right? You've just had the 2nd-largest software company on the planet turn on the most labor-saving device for its core marquee product, and when it filters down to LLM revenue at $720 million—round it up to $1 billion—that's when you kind of go, you have to sell a lot of labor replacement to get to $100 billion. Maybe I'm underestimating. Maybe the 30% is wrong. Could you see yourself, Jason, paying 4 times what you pay for Salesforce for an AI SDR on top of that Salesforce? Because that's what you need to—

Well, listen, we're a tiny group, right? But we have 4 seats of Salesforce. So what do we pay? $300 a month.

Yeah, okay. Sorry—tell me, do the math. I get a little tired in the afternoon.

So we're paying $10,000—$12,000 a year for Salesforce. Nominally, we're paying $500,000 for 11 AI agents.

Okay. So what's the ratio?

So you're right. No, in your case, you get that, and then—

I don't know whether that makes sense long-term. I don't know if it scales, but if a portion of that ratio were to hold, then the model—it's a pretty cheap round.

Well, again, pushing it, but it's a crazy ratio, isn't it?

It is, because let's just even do 2:1. Let's say for every dollar you spend on Salesforce, you spend another dollar on top. That's $12 billion. Let's assume 20% goes to the LLM. That's $2.4 billion. It's real money, but it's only $2.4 billion.

Yeah, but I'm spending $500,000 versus $20,000. That's more than 20 times more, right? To be clear, if 20 times is the ratio, then you're right. The problem—and Harry was teasing at this—is that we have to go gently with the CEO of a $40 billion run-rate company.

The tough part is that you're doing the right thing, Harry. Salesforce may not capture that incremental $12 billion. That's the challenge. Workday may not capture it. Palantir appears to be capturing it. That was why Marc was impressed with them. 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 hasn't happened yet, right? They're not capturing much. That was Harry's point.

Yeah. And even if they do—and I think they will—I think they're well poised to capture some of it. As I say, when you apply the 20% ratio and get back down to how much revenue it is for the LLM, you struggle to add it all up. Then I'm going to make the argument against myself, and you look at the explosion in revenue in the last year.

I've never seen something grow 9 times from $1 billion in 1 year. It almost defies— I always joke that Newton's laws of motion apply to companies: things in motion stay in motion. I can never remember anything going from $1 billion—even $1 million to $9 million—and then flattening out to $12 million, right? Let alone $1 billion to $9 billion. The trajectory alone implies $30-something billion the following year, which would be a significant slowdown. You'd have gone from a 9-times year to a 3-times year.

I'm just worried that the Mag 7 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's 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 7 companies as we have today. I'm looking at it now going, "I really hope there's not a blip here. Dear Lord."

Yeah, got it. 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.

But where the rubber hits the road is when you do that analysis, 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 intuitively—

I don't—

What?

And you don't.

Now—

I do. I do believe it's going to revert to the norm. I'm more pessimistic than some, right? I do believe—

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, given all the other dynamics, what's the best ETF for core commodities, which are the only things that survive the '70s, right? But it's a 5% play, not a—I'm not going to go down that rabbit hole.

Again, 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 bet against them, because any growth from here will be just astonishing. It's just a question of, is it? I mean, you asked about—I didn't plan to come here and talk about stock prices, but you asked about the Mag 7. 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? Reversion to the mean hit everyone hard.

Yeah.

Hit everyone hard, right? 2023 was worse, but the precipitous drop in 2022—we've already half forgotten. I mean, not everyone—I mean, it was brutal. And 2022 was even worse because the revenue growth was still there. The cloud companies were still growing at a decent percentage from 2021, but the valuations fell 66%. It was brutal. It was reversion to the mean.

Okay. So we have this realization, and we understand that good times sometimes end. Then we look at [company name unclear] up 27% today on amazing numbers. We have Box up. We have Okta up. Jason, can you turn up the volume where the party is going? I'm ready to put on my DJ set here.

Well, actually, I need a little time to process, but thank God. You were just asking Mark Benioff why they weren't getting a lift from AI. I'm glad to see that just literally this week we were seeing Samsara—even Okta, which had been struggling, and Box; the other day, Zoom, which is not exactly a rocket ship anywhere, but seeing growth reaccelerate because of AI. Thank God. The cavalry is coming just in time to help, because the public guys need it. The public guys need it.

I think it's heartening, but to your point, this is not Anthropic growth, but it is reacceleration. Reacceleration at scale, to Harry's point, is always epic. We owe everyone a hell of a kudos when they reaccelerate at scale because it's so rare. Right now, we're seeing it at multiple companies. It's just not like Palantir's reacceleration.

Exactly right. Maybe the 2 things have in common, just to remind yourself, are stock prices. Changes in stock prices happen when you get a difference between the expectation and what actually happens.

What you're seeing in some of these SaaS bounces is that people have the "SaaS is dead" story, the markets buy into it, and these things start trading at 5.5 times revenue. Suddenly, it's not like you, Jason, grow 9 times, 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 go 1 way.

It's almost the mirror opposite of what happens to these super-high things. When all the good news is priced in, when even 1 piece of good news goes out of the deal, you fall fast. Well, when all the bad news is priced in—for example, if Salesforce had 13% quarter-on-quarter revenue growth—you would see that stock bounce like you haven't seen it, right? Because it would be, "Oh, we priced in 10; we're suddenly getting 13. We're getting 13 at scale. Oh, my God."

Yeah. It's also good to see—and maybe I'm not a total public-markets expert—but when you look at companies like Lovable and Replit, there's $300 million or $400 million of ARR already this year, plus everybody else. Every time someone is using an app in Replit, they're spinning up multiple Neon or Supabase databases. The load on both of them is massive. They've never seen demand like this. It's massive, and that's great for them.

Neon got bought by Databricks for $1 billion. I didn't even understand why at the time; now I get it, right? Supabase is probably worth much more, right? But it's kind of a bummer, in air quotes, if SaaS doesn't benefit from that. If it's all the Harveys and the Supabases—and 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? Where is Monday benefiting? So it's heartening at a meta level to see [company name unclear] benefiting from AI deployments.

It's heartening because it means maybe our revenue is a little more durable, right? Maybe Ari's Replit investment, Lovable, will go 10x rather than crash and burn next year because all this stuff is enduring. It still feels so fragile right now, doesn't it? All this revenue feels fragile.

Rory O’Driscoll

No, it feels very durable. Thank you very much.

It does. Well, if you can go from 0 to $1.2 million, I mean, did you see what Wix said about what they bought? Base44. What's it called, the one they bought?

Yeah, for $80 million.

Rory O’Driscoll

Probably a good deal then.

8. Klarna’s wild ride: From $45B to $6B to IPO at $15B

Oh, my deal of the century, right? I tried it. I took my site and had it rebuild it. It looks like Claude, but not as good. I get it, right? But they're working on all the issues. It's just interesting: if Wix can buy an 8-person startup and then achieve that revenue velocity, it's impressive. But it also makes you think about durability, doesn't it?

Rory O’Driscoll

It totally does.

Rory, you said if Salesforce grew 13%, not 10%, it bounced like never before. We had Klarna file today to go public in the $13 billion to $15 billion range. It was lower than people thought, largely, I think, 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 that it had a $45 billion priced round before, led by SoftBank, then repriced to $6.5 billion, and now it's going public at $13 billion to $15 billion. If they were growing 24% last year and now they're filing and growing 20%, what's the reverse of the Mendoza line, Rory? The opposite—when you fall below, you can't file, right? You said the Mendoza line was triple-triple-double-double or better, but there's also this hard deck. You can't fall below the hard deck for an IPO, and it's 20% growth.

I could be wrong. It might be that Klarna is filing just in time, in the midst of this IPO wave, because 24% to 20% is not the reacceleration that we're seeing from some of the others. I mean, even Netskope just filed with a modest reacceleration, from 30% to 33%. Thirty percent to 32% may sound modest, but it's a lot of work, right? Twenty-four percent to 20%—Klarna's hitting the hard deck again. You bet: pull up, pull up, pull up, pull up.

I file, file, pull up, pull up.

Rory O’Driscoll

There is a level of growth below which it's hard to file. But just to be clear, the bigger you are, the lower that growth threshold, because it's not a hard number. It's simply that there's a transaction level below which the Wall Street math doesn't work. So, 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.

For the typical venture deal, somewhere around 20%, you're starting to get to the point where the multiples don't get there. But look, clearly, at $14 billion, it's big enough to get the deal. It's a perfectly doable deal. It's a very different business from Netskope. It's very much a financial business.

If you recall, it had that whole issue where they overstated AI—they were going to automate everything—and then backed off on that. That was interesting but not important. I think the more interesting fact was some of the early comments on lending losses, I think earlier this year. It's a financial services business, and it lives and dies on financial services metrics. Once you start to lend, you've got to be good at lending.

I mean, we talked about Nubank last week, which appears to be bloody good at lending. Klarna 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 S-1 yet, but the guys who priced it at $6 billion were right, and the guys who priced it at $45 billion were wrong—which is Sequoia and SoftBank, respectively.

As usual, you'll recognize this, Harry: Gary Lineker used to say that soccer is a game played by 22 people and, 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. They had the big win.

Still, 24% to 20% growth at less than $4 billion in revenue is incredible, right? But with deceleration, and hyping as they're going public, they're doing $1 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? That coded message of $1 million per employee as growth decelerates is fairly clear to Wall Street, right? We're mature. We're mature.

Rory O’Driscoll

Yeah, we're mature. But also, you're a financial services company. It's not even the same metric. 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 worthy 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?

Rory O’Driscoll

First of all, no. It boils down to the details in the documents. There are 2 questions where that could have happened. At the time of the last round, I remember thinking, people are going, “Oh my God, you raised and paid $45 billion, and now you're raising money at $6 billion. You look like an idiot, but you only took 10% dilution.”

So, if you were an investor at $45 billion, it sucks to take that dilution, but the down round at $6 billion didn't kill the economic value of your investment. In fact, it preserved it by keeping the company alive. Now, fast-forward to today: you still overpaid.

As we've discussed before, it boils down to what's in the docs. Do they have a block? My guess is they don't have a block because Sequoia aren't dumb people and wouldn't have left it in. So, yeah, they just overpaid, they're going to get converted, and they're going to trade at 30 or 40 cents of what they originally paid. They just hope 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 wins. That's the intro for sure. They're going to pay you for that one, Rory. I know their marketing team is going to be like, “Rory, go.” Woo!

Rory O’Driscoll

You know, look, I started here 31 years ago and they were doing great. You fast-forward 31 years, and they're still doing great. There's something in that. You've got to hand it to them.

I remember thinking when the Klarna round went down—and obviously there was a bunch of drama after that with Sequoia that we'll just leave out for now—but I remember thinking that was a shrewd call. 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 $6 billion. I remember thinking, good investment, and it's going to turn out to be that.

It's too fast because it happened. SoftBank did have a ratchet, and WeWork—this deal was not that far off at a similar valuation. They could have a ratchet here. I just don't know. We need 1 more day to find out, right? You don't think so?

Rory O’Driscoll

No, no, I don't think so.

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.

Rory O’Driscoll

You're exactly right. It is knowable. When I get off here, we'll feed the S-1 into ChatGPT and we'll know in an hour.

I love that. What will Netskope go out at? $700 million in revenue, growing 33%? The last valuation was—I can't remember what it was.

It was around $7.4 billion in 2021, and after that they raised some kind of weird convertible that's harder to track. So, yeah, it's hard not to—I mean, I think it—I don't know if there was indicative pricing, but it's a good company. It's not making money like Figma. It's losing money, but it'll be at or close to it, is my guess, or maybe even up from it.

I think the 2021 round can hold there. It's 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 reacceleration, it doesn't take more than a squint to see a $7 billion flat round to 2021 as being doable.

Good for them. Great company, around since 2012. Congrats to Lightspeed, who own a big chunk of this, along with Accel. They built a great company. Where are you guessing the valuation would be?

I mean, the point is this: it's really hard to get—

Rory, he's putting it into his calculator and he's going to tell you where he thinks it's going to be. This is like the PLG for SaaS. AI—everyone says AI for more value. Your thoughts? Yeah, Rory, what do you think it is, and then we can compare it to Jason's? I'm not going to tell you where it's going to trade on day 1 because, as we've proven with Figma, that's not knowable.

Rory O’Driscoll

What we were right about on Figma was the step-up in the process. The process is this: they'll file at 5 or 6, they'll get the demand, and they'll walk it up. My gut would be 7–8-ish where it trades on the first day. Who the hell knows?

Do you think it could be a bounce like Figma?

Rory O’Driscoll

The answer, of course, is no, because I believe, as I said earlier, in reversion to the mean. Figma had the largest bounce of any large-cap IPO since, I think, 2000, so I sincerely doubt they'll copy that.

9. Inside a16z’s seed machine: 72 bets vs Sequoia’s 27

It was funny, actually. I got an email from one of the many millions of bankers—you know, those marketing emails they all send out the next day saying, “We priced XYZ IPO.” The headline was, “We successfully priced the Figma IPO,” and I just 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 mega funds and boutique funds. The number-one mega-fund seed investor was Andreessen Horowitz, with 72 seed deals, compared to number 2, which was 27. Exactly. Rory, how did you analyze that? Andreessen is just playing a totally different game. How do you think about that?

Rory O’Driscoll

You have to say they're playing a different game. 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.

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 Insight is obviously slightly more later-stage in the 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, and so far successfully.

Do you think it will work out when you look at some of the companies we've mentioned, like Databricks, and how much that will return? It is astonishing.

Rory O’Driscoll

The truth is, if it does or doesn't work out, it probably won't be because of their seed program. That's the big aha: the seed program could get lost in the noise. It will work out if, by virtue of their seed program, they get the small number of absolute outliers—and they stated this right back in 2009, to give them credit for wild consistency.

As long as they get those few 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 is basically like cheap milk in the supermarket. It brings in the crowds, right? It's the loss leader.

Seed is for suckers, apparently. No, no, no—we said that. Jason said that last time.

Yes.

Rory O’Driscoll

I think that's consistent. I think it's consistent.

I've got a friend who's a complete [__], and he's going to make a huge amount of money from a $100 million SPV into OpenAI at a $200 billion valuation.

Rory O’Driscoll

He may be a [__], but he's got good sales skills because he got into sales. There are different ways to win in this business, and sales is part of it.

There you go.

Rory O’Driscoll

Sometimes you just have to sit on their steps. Just sit outside OpenAI's office all day long. Grab Sam Altman 11 times. The classic Sequoia playbook: sit on your steps until you get the meeting. Don't leave without the term sheet.

10. Martìn Casado: Is consensus investing dangerous - or the only game?

Now, guys, do we have any other news items before I do a tweet of the week? I just want to talk about one tweet that I thought was particularly interesting, that grabbed the zeitgeist, and I want to hear your thoughts on it. Okay, okay.

Marc Benioff

What's the tweet?

Martin Casado

“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, right?

I saw that tweet. He also did a really good piece on gross margins and the way people are misunderstanding them. If we had more time, we'd talk about that. I thought the gross-margin piece was very thoughtful, and I thought that tweet wasn't crazy.

Let me tell you: people then cited the consensus, and yes, there are always outliers that are non-consensus. In 2016, the non-consensus bet would have been to do OpenAI, true, but it's also probably true that 90% of non-consensus bets would have failed entirely. At that stage, SaaS was probably consensus, and only about 50% of SaaS bets would have failed entirely, right?

When you're on this megatrend of an architectural replatforming, a goodly amount of the correct investments to make are fairly consensus in terms of the broad macro themes. I remember—I think it was IVP, years ago, around 20 years ago—they had this concept of 70% of the bets being very much on track: faster, better, cheaper. Then I remember 30% being “brave new world” bets.

I don't think you could build your entire business on waiting for OpenAI. I actually think his comment was more spot-on than people give it credit for. If you look honestly at what you're doing, you don't want to be 100% consensus. You don't want to be caught just doing AI. You want to be looking at new stuff.

At any rate, it's like the exploit-explore thing. I think 70% of the time, being consensus is good. You are betting on 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. 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 being on point with where the industry is going.

He responded back to my reaction too. One of the implicit points he was making—and he agreed—was that we've talked about this throughout the series: putting money into consensus bets. Half of this AI stuff is—

Marc Benioff

Part of this is just: if you're going to make bets today, the 10 deals consuming 40% of venture capital—everyone we knew who used to do B2B deals only does AI. My point back, which he agreed with, was that if you're going to make bets outside of that, you better not count on follow-on capital.

Agree.

Marc Benioff

They're not interested. They're not interested. I've done several B2B-plus-AI deals in the last 18 months that I love, and they'll do great. The advice I give to all those founders is: don't expect any money.

Yeah.

Marc Benioff

Don't expect any money. Just know that 80% of the folks I can refer you to are not going to take your meeting. It's a reality.

We had an IC today for a fintech business. They scaled to $5 million in a year, and the founder was great. I said, “Guys, why is this not moving fast? What's wrong with it?” One of my team said, “Oh, it's not AI.” 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 are a couple of different things, but that's a classic example where you should do it. 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.

Rory, what you're saying is the price should reflect that it's not AI. With that in mind, then—

Marc Benioff

Yeah, basically. It will and should be valued on fundamentals. But if it's—

That's different from what it was in the last few years.

Marc Benioff

If it's non-consensus only because it's doing something different, then by all means do it, provided you understand what's different and 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—is that it's one thing to say, “I'm going to do a deal that's not, in this case, the ultimate consensus bet, AI.” But you've got to question it if you're doing something that is effectively a bet against the megatrend. It's a little like doing a client-server deal in 2002.

I think knowing what the consensus is has quite a lot of value, because it also speaks to where the industry as a whole is going—the technical consensus, as distinct from the financial valuation consensus. Going back to what Ben 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? That's probably where the industry is going, and that's again where I think Martin was right about that.

I just think, more tactically, if Harry's going to do this fintech deal at 3× what he said—$5 million ARR with good numbers—one issue is: are you paying an AI premium that you shouldn't? That's important, and we built this AI calculator.

I live-coded it. It’s pretty cool on SaaS AI, and it shows how the premiums work for the types of companies. It’s very interesting. But, valuation aside, I think the bigger issue for venture is that when times are good, we take follow-on capital for granted. No one’s worried about the follow-on round for Anthropic, where they’re throwing $10 billion, and there’s not a single investor who’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, that capital in B2B was scarce until as late as 2018. It was very, very scarce. It was very, very scarce.

So that’s just where the hell you are. Doing Harry’s bet might be great, but not if you’re burning $2 million or $1 million a month, right? Then it’s like, who the hell’s going to—Harry’s fund isn’t big enough. He doesn’t have billions yet, and he doesn’t like to carry his investments through 3 or 4 rounds. So you’ve got to pass on that one. Unless the burn rate’s zero, then I would do it.

Because it’s funny—I agree, because I’m having this experience right now. When I look back at my mistakes in the last 3 or 4 years in terms of investing, I actually have both kinds. I wish I had made more consensus bets because it’s such a negative one. I wish I had 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 equally, I have 3 or 4 utterly non-consensus deals that I looked at, was intrigued by, and probably should have pulled the trigger on and regret. I just saw one of them today. I’m like, “Wow, I really missed that one.” But what you don’t remember is the 90 non-consensus bets that you didn’t do that just haven’t worked out, right? I mean, both statements are true. It’s just a lot more forgiving in the consensus marketplace because, as you say, you get buoyed up by other people’s capital, right? And it’s easier in the short term to survive long enough to get the feedback.

Two of the best investments I have today—and I’m a seed investor, right? I have the smallest amount of money of these 3 people—are investments where I had to create a round out of nothing, when there was no capital. I had to create a round. I didn’t have enough money; I had to create it.

I don’t want to do that too many times. This isn’t as hard as creating Snowflake from scratch, man. But it’s hard. Okay, it’s hard.

Yeah. Going back to the consensus comment, I’m trying to formulate 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 want to be in AI, because that’s what we’ve wrestled with a lot: these quote-unquote consensus AI bets, and we’re not doing them because we can’t make the prices work. You still have to be paid for it. You have to assess the risk accurately, and all the quote-unquote consensus statement says is that it’s more likely than not that this is the direction the technology is moving.

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, to your point. 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 versus non-consensus. The consensus-bet risk is that you’re probably right on direction, but you might ludicrously overpay. With the non-consensus bet, you could be way-ass wrong about whether it’s 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, N-of-1 outcome.

Again, as always, it turns out investing is hard, and you can’t just paint the numbers and collect $100 million.

Final one: What consensus bets do you wish you’d done more of, Rory?

Marc Benioff

I think I underestimated the impact of, A, the scaling laws in AI, and, B, the ability of primarily Sam 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 AI trend has just had a wall of money for the last 5 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 being spent making AI, and right now we have 28% or so—whatever it is, according to the recent survey—of apps using AI, most of which use OpenAI and Anthropic.

I underestimated it. I did not think that we would be able to find $600 billion a year to spend in this space. 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 that, at the time, it wasn’t consensus, which maybe is the actual counterargument, as I process it in real time. But, yeah, I regret that. That’s the trend that you just almost could not have had too much of 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—Rory, my favorite question—how were you so prescient to think about this agenda?

Guest

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 me. I barely know him, but he doesn’t know me. Rory was a little tough on the growth. He was just nice about it. But I think you’re going to like me better.

You know what I find so funny, guys? Who the fuck am I? I’m a kid from London.

Guest

Harry, you’ve got to try harder, you young sir. Those are the companies I’ve advised at $41 billion in revenue that have committed a little earlier to the AI trends.

I mean, I’m kind of embracing your advice. We’re not trying to make people feel like there’s no point taking on a guy who’s just going to be tough. You want your guests to come back, right?

No, I know. I want him to buy my companies. And, actually, I’m going to say it again: I thought he was more on point and balanced, admittedly salesy, 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.”