20VC: Nat Friedman and Daniel Gross Bought with Zuck's $100BN AI Budget | Navan Files to Go Public and Canva Pulls the Brakes: Why and What Happens | Why Larry Ellison is the Smartest Man in Tech | Substance or Sizzle: What is Real and What is BS in AI

Rory O’Driscoll

Here’s what nobody wants to admit. When LLMs finally work at something, the implementation will be boring as fuck. Harvey isn’t a breakthrough in legal AI; it’s ChatGPT with a law costume. Lovable isn’t revolutionizing code; it’s Claude with pretty buttons.

So you have 2 choices. Option 1: wait until the LLM actually works, then scramble to build your ChatGPT wrapper along with everybody else who just realized the same thing. Option 2: start now while the tech is garbage, lie about how good it is, burn money on marketing, and claim the territory while everyone else is still laughing at you. The companies winning at leverage beta aren’t the ones building better products. They’re the ones who understood this dynamic first. They’re either lying about the present—11x or Icon—or arbitraging the obvious: Harvey or Lovable.

I was looking at where we’re going to start. Rory and I were texting, saying that this was a good place to start when it was coming out. It was about Daniel Gross and Nat Friedman potentially being acquired by Facebook, or Meta. How did we think about this following the Scale AI acquisition, and how did you guys analyze it?

1. Meta Fights for AI Attention

Rory O’Driscoll

Well, I think there’s a lot in it, and we should spend a little time on it. My mental model, zooming out, is: why is Facebook doing this? Why are they buying? The second question is why these people are selling, and what does that say? The third, and I think also very interesting, question is why is it going down this way? In other words, why are people able to extract this kind of value for their labor, and how does, for example, California—and us being a non-compete state—impact that?

There’s a lot to unpack, but maybe let’s start with the first one. Why is it existential to Facebook? And just to state what it’s not: the idea that they need to do Llama, have an open-source offering, and, quote-unquote, “compete with Anthropic,” for example—that’s not a thing. It’s not going to be a business commensurate with the kind of dollars they’re putting out here. The only logical thing you can be afraid of is some kind of Meta model that basically becomes your primary interaction with the internet, with the web, has all your memory about you—which is obviously where ChatGPT is going—and just basically sucks attention minutes away from Facebook.

In other words, if they don’t build something like that, I’m interacting with Facebook, I’m interacting with the news, and I’m also interacting with whatever their version of ChatGPT is. The fear is that precious minutes of attention, which means precious minutes of money, go to ChatGPT. Maybe that’s obvious to all the listeners, but it’s just worth stepping back and saying that’s what it is. It’s not that they want to open-source Llama and make money off it. They won’t. It’s not that they even want to have an API offering of Llama, something like an Anthropic offering. That just won’t be big.

The only thing that makes sense here is if you think that the minutes that people spend on Facebook will become minutes they spend on ChatGPT, and you can’t let that happen as Facebook. Once you perceive it like that, you go, “Kind of, maybe.” And if that’s going to happen, you’ve got to do something about it. So that’s the first thing.

Then the second thing is you just look at it and go, in one cynical sense, the Oculus acquisition was awful. It was like you spent $2 billion, which wasn’t that bad, and then you spent another $60 billion on top of it, which is pretty dreadful, and you didn’t get much. But it just indicates this is someone who’s going to make damn sure that he is not deplatformed or irrelevant on the next platform.

So they bought $60 billion of insurance with virtual reality. It covered them for 2 or 3 years, and they didn’t need it because the flood didn’t come. They’re buying another $60 billion worth of insurance by doing what they’re doing in LLMs. Maybe the flood doesn’t come, and it never matters. Maybe the flood comes, and they can ride it out. When you look at it like that, in the context of, as I said, the $60 billion VR spend, it’s like, yeah, I get it.

Jason Lemkin

I’ll tell you my rough guess. Meta, as we do this, has a $1.8 trillion market cap. My guess is it’s fairly simple: Zuck has put $100 billion into this—to catch up and maintain AI dominance—and that’s the budget. The budget probably can’t be $1.8 trillion. I mean, it is possible to sustain that dilution. There are deals like that.

But in all seriousness, when you look at Scale, when you look at Meta looking to buy everybody for $20 billion—right, Perplexity—it kind of ties to having a $100 billion quick M&A budget to get back on track. It’s 8%, I think, if I’m doing my math right. It doesn’t seem outrageous when you think about spending $100 billion—a quick $100 billion, 8%—to get back on track.

Rory O’Driscoll

And just to say around that, I can simultaneously believe it’s totally a bad idea and it won’t work, and it’s totally a good idea to do it just in case it might, which is the really zany thing about it. I didn’t buy into Oculus, and I’m definitely not as convinced you need to spend this money and that the way you’re spending it will be successful, but I totally get it.

When there’s a limited number of buttons to press, and you know you want to press a button, and the only kind of button that a CEO of a $1 trillion company presses is big buttons, you don’t go to Mark and say, “We’ve got an existential risk. Let’s spend $2 million,” because that’s just not what CEOs do. So there are only a few buttons you can press at that level. There are only a few places you can buy this kind of talent. There you go.

Jason Lemkin

Sam Altman quote-tweeted this Similarweb data today on App Store downloads. The App Store obviously is not all of AI in all the world, but it was interesting. Over the last 28 days, ChatGPT had 29.5 million downloads. That’s just mobile.

Rory O’Driscoll

Yeah.

Jason Lemkin

TikTok, Facebook, Instagram, and X had 32 million.

Rory O’Driscoll

Ooh.

Jason Lemkin

So ChatGPT’s mobile downloads are just about equal to all the social media guys combined.

Jason Lemkin

It's probably half the answer right there.

Rory O’Driscoll

Yes. The first rule of owning a $1.7 trillion business that spews off $100 billion a year is: don't blow the $100 billion. Don't kill the golden goose.

2. California Monetizes AI Talent

Taking the conversation in another direction, I was thinking about what all these acquisitions have in common and what makes them interesting and different. Right? If you think back to what happened here, everyone who's getting $1 billion was in the room when the magic happened, and that's the sound bite. Let me tell you what I mean by that.

A whole bunch of people tried to build these LLMs, and the early OpenAI team did it. Everyone who was in that room and knew how to do it went on to build some version of this kind of outcome. You either stayed at OpenAI, peeled off and went to Anthropic, peeled off and went to Safe Superintelligence, or peeled off and went to Mira Murati's new company.

For the record, with the exception of Scale AI, which was selling to them, no one who was in any of the other rooms where the magic didn't happen is ever going to get that kind of money. I respect people like Cohere, Adept, and Inflection, but none of them have magic-moment money. It's really interesting.

If you think about it, that kind of thing happens occasionally in industrial history, where someone figures something out that's so damn important that everyone who was in the room when it happened has value just because they know. What's interesting is how that shapes out into money. I'll give 3 examples, or maybe 4.

When the Chinese figured out how to make silk, they basically executed anyone who tried to tell anyone else. Problem solved. Actually, let's do Bessemer first—the Bessemer steel process. When people tried to leave, they litigated their ass out of it.

The great thing about California is that we're in a no-compete state. If this had happened in a state that allowed massive 5-year non-competes, all those guys would be sitting at home getting their $300,000-a-year salary, thinking, “I can do this in 2 years.”

One of the amazing things about California, and one of its strengths, is that since the 1870s it's been really hard—and in fact, it just got even harder—to enforce non-competes. All these people were able to leave, rely on the doctrine of inevitable disclosure, and set up their new company.

Again, they're not copying the past, but they know how to make the magic. That's the aha here. It's super interesting that if you were in that room, one of those 20 or 30 people in California, you can go away, and effectively you're selling the knowledge that you have that no one else does.

Jason Lemkin

Does that not lead to the commoditization of magic, then?

Rory O’Driscoll

Some relative commoditization—you're exactly right. It would be better if there were only one. But it doesn't lead to everybody having it, because it turns out the price of buying it is a couple of billion bucks.

Yes, there's no doubt there's a leaching of knowledge out. If you look at all those examples—William Shockley and the transistor, the Bessemer steel process—everyone's always trying to stop the magic from getting out so they can extract monopoly profits. But over time, it gets out.

Jason Lemkin

There are layers of talent-acquisition value—

Rory O’Driscoll

Yes.

—which is your Scale with your $14 billion, your Nats and Daniels, and your Miras. But Sam was on Jack's podcast, and he said that OpenAI's talent has been offered several $100 million offers by Meta several times. I guess that's the next layer of talent: maybe they haven't seen the magic, but they've been in the building when the magic was there.

Rory O’Driscoll

I saw something very cynical that said—and if it is, it's even more impressive—someone made the point that this could be total jujitsu. If you're not getting offered $100 million now, and Meta calls you while you're down the hall at OpenAI and offers you a lousy $30 million, now you're insulted. Maybe he's just messing with their heads.

The other thing is, it's going to be really hard to be the VP of HR in charge of the Meta LLM project. If you're sitting there on your $2 million a year, thinking you're killing it, and then suddenly you discover the new guy's getting $50 million, your head's going to hurt.

I don't know how much of that is just very clever disinformation, but at some level, you're right. It gets back to the same thing: if you know how to cook this stuff, if you know how to make this magic, you have value. In California, it's very hard to stop you from monetizing that value.

Jason Lemkin

Harry, how much money would it take for you to dump all your 20VC LPs and your listeners and go join Meta? How much would it take?

That's a great question. I really wouldn't. I wouldn't know what to do. I hate working for someone else. I get great discomfort from being in large companies.

I have enough money now that I can do what I want. I'm really happy, for one of the first times in my life, honestly, without being soppy. I'm in a really good place. I would be miserable doing that.

Just give me a number.

A billion.

Rory O’Driscoll

I just love that.

Jason Lemkin

Done. Email your LPs. Tell them, “Tough, tough, tough malarkey.” They just gave you the latest $450 million.

Rory O’Driscoll

Dude.

Jason Lemkin

And show up. You do have to spend 4 days a week in the Meta office in Menlo Park, but there's great running on the trail on the Peninsula. You haven't done these runs. They're great. It's a billion, vested over 5 years, and we'll just give your LPs their money back. Have a nice holiday.

Spoiler alert, which no one knows: I was offered $75 million for the 20VC media company last year. I own 100% of it, and I went for a walk with my mother and said, “What should I do?” She said, “What would you do tomorrow if you sold?”

I said, “I'd start the 19-Minute VC.” She looked at me and said, “I don't think you should sell if that's what you'd choose to do the next day.”

Rory O’Driscoll

She's exactly right.

Jason Lemkin

Now, moms are always wrong in this. They give you this great advice from the heart and the soul, but sometimes they miss how the stitching works together in the venture industry and the LPs and the holdbacks, and whether you have to work for Meta for 4 years. Moms are directionally correct in the heart, but sometimes they miss the details in these deals.

Rory O’Driscoll

It depends on how much you have. The marginal utility of the first dollar versus the $75 million is very different, so a lot of it depends on your personal position.

But, to be fair, I would imagine that, in some cases, part of the attraction has to be—because none of these folks need that kind of money—the ability—

Jason Lemkin

That's why I asked the question—

Yeah.

—in part, right?

Rory O’Driscoll

Yeah. I don't think it would be more fun running 20VC for Rupert Murdoch. It might be more fun running an AI project for Meta when you're literally told, “Spend $100 billion to make it happen.”

Whenever we sell companies and their CEOs join a bigger company for a year—and Jason can smile at this—I put a little note in my calendar for about 3 months later to check in, because they'll need some therapy. I remember one of the guys said to me, “I've accomplished my day at 9:07, and then the rest of my morning is just about not getting into trouble by saying stuff.”

It's just a very different gig, but that depends on what you need to do.

3. Loyalty Leaves Silicon Valley

Jason Lemkin

With all these people leaving, is there any loyalty left in Silicon Valley? This does bother me. Where's the loyalty to your LPs when you're dumping your LPs?

I can think of a lot of folks in tech that we look up to who dump their LPs, who quit their unicorn to go into venture or other deals. I get the rationality of it. They quit their fund to go work for Meta.

At least Alexander Wang from Scale gave his VCs back $15 billion. At least he did that.

Rory O’Driscoll

He did very well.

Jason Lemkin

He did it right, right? But people are just leaving the ship; there's no loyalty. That's what I find a little gross about all this, and maybe loyalty's dead.

It's great that everyone at OpenAI who was a founder—except, I guess, Greg and Sam—is gone, running their own competitors, but there's also something about it. Maybe it's Sam's fault, but I don't like it. I don't like everyone dropping everything and leaving.

Rory O’Driscoll

Now you're sounding like William Shockley, or whoever it was running Fairchild.

Jason Lemkin

Yeah, the Mr. Fairchild guy.

Rory O’Driscoll

I do hear you. Taking the counterargument, yes, maybe that's meant to work. But if Alexander Wang's highest and best use is as a senior employee at Meta, then isn't it wonderful that the free-market system was able to pay everyone else $15 billion?

All power to Accel, which probably booked a $2 billion gain here. If that's disloyalty, any of my CEOs who want to be disloyal to me and give me $2 billion, I'm in, baby.

Rory O’Driscoll

So I think the system works. Yeah, right, it's different sometimes, but—

Jason Lemkin

I hear you. It's just when the—

Rory O’Driscoll

Yeah.

Jason Lemkin

Lots of money goes through the system—

Rory O’Driscoll

Stuff happens.

Jason Lemkin

Relationships become hyper-transactional, and maybe that's okay. Maybe it's okay. It just creates really interesting expectations between VCs and founders, and founders and management. There's very much a vibe of, “Just take $5 million, $10 million, $15 million, $20 million from my investors. It doesn't work out—goodbye, here's the keys.”

If I grew up that way as a founder, my investors would've made nothing. If I could've left the keys on the table, there would've been 2 or 3 times I would've just said, “Here you go,” to my VCs. “Enjoy running my e-signature company.”

Rory O’Driscoll

Years ago, someone sent me an old quote from a VC who was one of the founders of Charles River. He said something like, “You always gotta play the game by the current rules.” There was a time when money, capital, was scarce. It paid you to have an obligation to your investors because you weren't going to get more, and it was get-rich-slow anyway. SaaS is a compounding business.

The truth now is we're in the exact opposite of that. I think a lot of these things, once it starts to work, you make a lot, and if it's not working, you don't. When people are making lots of money, the institutional glue gets a lot weaker. It's just the nature of the beast. There's no point in getting frustrated about it; just play the current game.

4. Harvey Raises Five Billion Dollars

Guys, speaking of playing the current game, Harvey raised $300 million at a $5 billion valuation. This really stood out to me as a round. How did you guys analyze it? How did you guys break it down? There are different reports of where revenues are for them, but I mean, it's a—

Jason Lemkin

Well, I don't know what the revenues are, actually. What's our best guess based on scuttlebutt?

I think they're at $100 million by the end of this year.

Jason Lemkin

By the end of this year?

Rory O’Driscoll

Yes, coming.

Jason Lemkin

Yeah, I guess the growth rate is more important, right?

Rory O’Driscoll

Yeah.

Jason Lemkin

But they're—

Rory O’Driscoll

4X.

Jason Lemkin

They're approaching $50 million or something?

Rory O’Driscoll

Yeah.

Jason Lemkin

So, 100X ARR, growing—not quite at Replit rates, though.

Rory O’Driscoll

No, but pretty fast.

Jason Lemkin

Cooley says $30 million.

Rory O’Driscoll

Oh, right, yeah, he's got his cheat sheet up. I love it.

Jason Lemkin

I'll tell you why, to me, it's super impressive in a way. I know a little bit about the space. I know a little bit about the legal needs. I know about the legacy players. I never met the Harvey team, but I talked with a lot of founders doing similar things, and my problem was that all the apps were great.

If you run a set of legal documents through OpenAI and then ask it to analyze the terms and conditions of a 300-page legal document, or ask it to research the current status of California's no-auto-renewal law, whatever that law is, it's great. Every legal AI app that pitched, I saw a demo of, and I was like, “They're all great. They're all curing cancer.” Kudos to the VCs, because if I'd met Harvey at the seed stage, I would've said, “This is great,” but I don't know that I could've told the difference from the 11 other ones that were doing this amazingly as—essentially, I hate the term—as wrappers.

Rory O’Driscoll

I think they did some things really well, and I think the thing they did really well is, yes, there were a bunch of people doing it, but they started off by grabbing hold of OpenAI. They became the de facto winner in terms of Silicon Valley presence and in terms of lawyer perception, frankly, long before the product was there.

They established what I think of as intellectual mindshare as being the lawyer's choice super early, when the product was still mediocre. We looked at some other companies in the space, and we did references with Harvey customers. One reference was some version of the following: “My partnership has said we need to do something in AI. These guys have a big story. I'm giving them $1 million. It's not doing that much for me now, but I have to have an answer, and I have faith that they're on the right journey.”

They marketed this thing as having a limited number of customers. They made it scarce, and they signed some early customers, including Allen & Overy and, I think, one of the accounting firms. They got this kind of stampede effect going, which was brilliant.

I think the product frankly lagged that, but over the last couple of years they have filled in behind it. In classic Crossing the Chasm mode—you know, like that old Geoffrey Moore analogy of the tornado—they claimed the space, followed up with the engineering, and now they have a compelling product. They claim to have 300 of the, I think, Law 500 or Law 1000.

But they did it early. They thought bigger than some of the other people in the space who thought it was just, you know, knock down deal by deal, do good work, be earnest, make a good product. Those guys were like, “No, make noise. Freeze the market. Declare yourself the winner. Details to follow.”

If you're doing this at $5 billion, what are you underwriting this to on an outcome scenario plan?

Rory O'Driscoll

I mean, obviously everyone's going to give you the bland answer: “At least a 3X with upside to 5X,” because that's the correct answer. But obviously your real question is, can this be that kind of outcome? Most legal software doesn't have outcomes anything like that, because there's roughly 1 million lawyers, and we joke, but 1 million is actually not a lot of anything. If they spend $1,000, that gives you a $1 billion TAM. $2,000 gets you to—

Jason Lemkin

It's not a huge market traditionally—

Rory O'Driscoll

It's not a huge—

Jason Lemkin

Outside of litigation—

Rory O'Driscoll

Exactly.

Jason Lemkin

Outside of litigation, it's not a huge market.

Rory O'Driscoll

So it's not a huge market if you're selling kind of software-like stuff. But fun fact: There are 2 escalators of value. The first is that for every dollar lawyers spend on software, they spend $5 on Westlaw or Thomson Reuters for actual legal information. It used to be those old books you saw lawyers using in the 1960s; now it's obviously online. But info, data, and information is 5X the spend of software, right? That's the first argument.

The second argument for an even bigger TAM is obviously you make some kind of arm-wavy argument: “We can charge a lot more even than Westlaw because we literally eat the work. We replace the lawyer, so you can get paid as if you're a lawyer.”

All that is to say, you can't get the kind of outcome you need to make this work if you see it as just another piece of legal software. The math doesn't work. If you see it as an adjunct to your research tool, that gets you closer, but you probably literally have to believe it's doing some of the work to make the TAM math work.

I agree, and I think it goes back to a question that you said before, Rory, which I think was one of the best statements that we've said in the last few episodes: Are we going to see AI software providers be able to eat human labor budgets? If so, then we have the Holy Grail and we're all going to do very well. If not, then we're overpaying.

Rory O'Driscoll

Yeah.

Jason Lemkin

You know, it's interesting. Just on the Harvey story, it was interesting hearing Rory's thoughts. I did meet a little while ago with a legal startup doing something very different, but essentially tapping into—same buyers, right? And they quickly got to $20 million in ARR on very little funding.

The ROI was super high. What they were doing with AI was super high. But it didn't really do all that much AI. Lawyers are—the IQ is probably the second highest behind engineers—but the sophistication of the purchase was not particularly high, right? It was to improve lawyer productivity. It worked, but the quality of the AI was limited.

Some of these, when we look at Replit versus all these tools versus Lovable, there's a lot of quality war there. I don't know if it's possible to have a quality war in the Harvey space. I just don't know. I don't know if lawyers have enough time to switch between 11 tools, dig in, and see which one analyzed state-law conflicts between Georgia and Alabama properly. Maybe they do, but I don't think so.

Rory O'Driscoll

I think you're right. At a high level, for the case-law stuff, it's the same for everybody, so it is the best tool. I think part of the value proposition from someone like Harvey is they'll say, “We'll integrate with your internal information.”

So, Cooley, picking just as an example, it's not just the case law that they bring to the table, but obviously we RAG and we crawl through all your internal stuff, and we can bring that to the table as well. And my—

Jason Lemkin

But that's so easy, Rory.

Rory O'Driscoll

Agreed, but it's still—

Jason Lemkin

Our AI has RAGged 20 million—

Rory O'Driscoll

Agreed.

Jason Lemkin

Pieces of SaaStr content. It took a day.

Rory O'Driscoll

Agreed.

Jason Lemkin

It literally took 6 hours to input 20 million—to RAG 20 million words of content.

Rory O'Driscoll

But you haven't lived the dream of having sold that software to a law firm where, if you look at the typical document-management software that these firms have, it's 20 years old. It's a company like iManage. So there does appear to be a high propensity to stick with even mediocre software. So my guess is getting in the door here.

Rory O'Driscoll

You're frankly a ruthless trier of new software, Jason. You will dump yesterday for today, and you'll dump today for tomorrow in a heartbeat. And you're one person running your own business.

Jason Lemkin

Yeah.

Rory O'Driscoll

If you're selling to a partnership where, remember, everyone's your boss and no one's your boss. You have 200 high-attitude, pain-in-the-ass lawyers. You get them up—

Jason Lemkin

Imagine a VC firm like that.

Rory O'Driscoll

I can't imagine. And you get them up and running on this system. Two years later, there's a better product. You don't need the heartache. You talk to them about their use of Westlaw. They've been using that thing for 40 years, and they're like, "I'm dying with this Boolean search here."

So I think getting in the door and locking in those customers has value, so it's clearly going to be a valuable company. I think the question, to Harry's point earlier, the only question left on Harvey is market size.

Jason Lemkin

Market size and market composition shakeout.

Yeah. Agree.

Jason Lemkin

There's Lagora as well, who's doing phenomenally well.

Mm.

Jason Lemkin

I mean, they're the European counterpart.

Agree.

Jason Lemkin

But I did references on them. They're beating Harvey in a lot of cases.

Yeah.

Jason Lemkin

A lot of cases.

Agree.

Jason Lemkin

And then, you know, we invested in Solve, which is a—

Yes.

Jason Lemkin

—vertical application—

Facts.

Jason Lemkin

—for patent creation, editing, submission, I think. And Crosby, which is next on our list. Crosby Law Firm, backed by Sequoia. By Sequoia.

Exactly.

Jason Lemkin

The ones who did Harvey.

Yes, the TAM, but the TAM is getting unbundled and unbundled and unbundled, so that it's actually not the TAM you think it is. I know you're moving on. I do think the meta question for Harvey—I mean, Harvey's still a B2B application at the end of the day—

Mm-hmm.

Jason Lemkin

Will there be enough $50 billion to $100 billion-plus B2B companies in the age of AI to justify these investments? And maybe the math ties to it, but there aren't enough $50 billion to $100 billion-plus B2B public companies today to justify these deals, right?

Rory O'Driscoll

I agree. If it is software, even—give, let's just go for a simple, humble 3x—$15 billion. If it's just software, it probably doesn't—and trades at 7 times in the end, when things get normalized. It's a $2 billion thing. You don't get there on the TAM.

So you're right. If it's all just legal software, you don't get there on the TAM. If it's legal, eat the work, then it's two orders of magnitude larger. So that's the question: does it eat the work? And then do you get paid when it eats the work?

When we last did this, Harry, we didn't talk about that. There's 2 separate things. Does your software automate what people used to do? And if it does, then at least value is being created. But then the second problem you have is, if there's 3 people competing for the same, making the same kind of software, then the law firm gets the value.

Excel doesn't charge $60,000 a year because it replaced an analyst. It charges $60, because that's what you get for Excel. Can they replace labor and keep the value? And that's the question for Harvey.

And then the interesting thing, segueing to Crosby, is obviously, just for everyone, that's a company that, as you say, Sequoia, one of the successful backers of Harvey, also backed. That's a company that is effectively using AI to offer, quote, "a better, more efficient law firm." They are, as it were, using technology to eat their own work, and obviously the value prop is they'll offer a better product to their customers while at the same time presumably being more efficient. That's the bet, at least.

Jason Lemkin

I love it. I've already done this.

Rory O'Driscoll

Oh, good. Tell me more.

Jason Lemkin

All the legal work I do, both for the fund and for SaaStr, Inc., everything, I run through my AI and Claude, and then I run it by my counsel to see if it's correct.

Rory O'Driscoll

How many times is it not correct versus correct?

Jason Lemkin

Never. It's always right. I never read my LP agreements. They're 1,000 pages long. But for the first time ever, I had an LP that wanted to transfer to a third party. I didn't know how it worked.

I had 2 options. I could send it to my old counsel, who charges $3,000 an hour and would give me a grumpy answer in 3 weeks. And then I'd say, "Well, can we get on the phone and talk about it?" And he wouldn't get on the phone. Okay, I have new counsel now.

Or I just threw it into Claude, and Claude analyzed all the documents, and it gave me all the correct answers. I talked about different scenarios, how the LP would want to transfer. I said, "Write this up in a short memo for me." I shared it with my counsel. A couple of days later, he read the docs. He's like, "That's absolutely correct."

So what I need is a law firm. I work at the pace of AI today. I'm not working at the 2021 pace, where we worked 18 hours a week and had 3 jobs. I need my legal answer in seconds, and then my law firm after that can confirm it, right?

I'm at the bleeding edge, but I just love it. These are the lawyers I have today. I've rebooted my legal team for folks that can review my AI answers rather than the other way around.

Rory O'Driscoll

I buy that, right? In the sense of—

Jason Lemkin

Yeah.

Rory O'Driscoll

—there's a whole bunch of things like vendor management contracts, NDAs, where—

Jason Lemkin

Yeah.

Rory O'Driscoll

—review should be 90% AI, 10% human check if there are exceptions, and therefore it can be instantaneous unless there's an exception.

And therefore—and the next sentence is, therefore you'll be damned if you're paying $1,000 for it. I totally think that's a thing, right? And I think there are law firms—we've seen not just Crosby, but other firms specializing in NDA review and very typical documents.

In a way, interestingly, that wasn't doable, to state the obvious, 10 years before. We looked at LawGeex 10 years ago. They were way ahead of their time, and the technology didn't support it, so they weren't able to build a compelling business at the time.

But today, NDAs should be at the margin free. Now, the interesting question is, how does that manifest itself? Because if all the existing law firms are dumb enough not to get with the program, they'll lose Jason's business, because he's going to say, "I want the flat-fee, $50 review and turnaround time of 15 minutes."

And if those firms resist that, then you're right. Maybe Jason will do it himself, but typically there'll be Crosby—firms like Crosby will be wildly successful because they'll take the business away from the older law firms.

I have to believe, though, enough of them are just going to get with the program. Because remember, they all now, in our new world, already have Harvey. They've got the guns too. They've got the tools.

It'll be interesting to see, fast-forward 5 years, where the incumbents have Harvey or Lagora, but all the incumbents have brand-new technology that could allow them to do things super fast. But they have business-model inertia, and all the new Crosbys are competing for Jason's business, and they say, "Dude, it's $10 for an NDA, $20 for a vendor agreement, and we only charge real money when you have to do a complex transfer."

My gut is some of the old guys will be slow, but enough of them will adapt. I don't know. It'd be interesting to see how much the new guys can build in this space.

Jason Lemkin

But this is exactly my point, though, which is venture is defined by 2 types of outcomes. One, where you drastically underestimate the size of the market—

Yeah.

Jason Lemkin

—and it's so much bigger than you thought it could be. Or 2, when you actually overestimate the market size—

Yes.

Jason Lemkin

—and you see it fragmented and unbundled into so many—

Totally.

Jason Lemkin

—different composite parts that it's actually not as valuable as you thought it was.

And I think that is exactly the case here. When you look at the—you know, when I was doing the diligence for Solve, patent creation, there were like—

Rory O'Driscoll

15 competitors. In every different legal adjacent area, there is the same, and I think it is as fragmented and unbundled as it is, which will actually make it a smaller market than people give credit to.

I think it will. I do think there's about 5 or 6 legal process-specific processes, like patents and immigration, that stand on their own. And then I think there would be the general corporate solution for general corporate law, which would be Harvey and the Guras.

But yes, you peel off 50,000 patent lawyers, that's gone. You peel off another 50,000 immigration lawyers, and then you have even up to 50,000 personal-injury lawyers, of whom 40,000 live in Texas. And pretty soon that trillion-dollar legal market is down to a half-trillion-dollar kind of core corporate litigators and contract writers.

So you're right. You start unbundling it. I mean, we did the math on lawyers, and look, the truth is, if you're doing plaintiff law, you don't need Harvey. If you're doing patents, you don't need Harvey. But if you're Wilson Sonsini, you need Harvey. If you're Latham, you need Harvey. If you're a mid-tier law firm in Phoenix and you're a 400-person local firm, you need it.

But probably half the market—which is why the math only works if you start to eat that work, baby. Yeah.

Jason Lemkin

You know what the triggering thing is about the Crosby thing? How much human labor is going to be replaced by AI? We're still learning. The truth is, we're still learning. But what things like Crosby show is it just highlights the mediocre—

With a blinding spotlight.

Rory O'Driscoll

Yeah.

Jason Lemkin

Forget about the senior partner. I'm willing to pay the senior partner because there are only 2 ways to win in services: you have to be the best of the best or hyper-responsive. Everything else is almost worthless. When that mediocre associate takes a week to get back to me and it's wrong, while Claude told me the exact answer from my LPAC, those folks are all going to be out of a job. The mediocre at everything—there's no need.

It's not just NDAs, Rory. Claude alone can review very detailed commercial agreements. “Okay, I want to get out of my Salesforce contract. It's 1,000 friggin' pages long. What are my options?” Claude can give you that answer in 5 minutes, right?

Rory O'Driscoll

Yes, and it's just a big no. You cannot get out of your Salesforce contract. That's the rules.

Jason Lemkin

Well, okay, but then what if they sue me? What are the odds they'll sue me? What happens if they sue me?

Rory O'Driscoll

Joking aside, you're exactly right. I think AI is just going to pound on efficiency. I remember 30 years ago someone saying—

Jason Lemkin

The mediocre…

Rory O'Driscoll

Yeah. The internet. The internet ground out commercial inefficiency. They ground out—

Jason Lemkin

Yeah.

Rory O'Driscoll

Middlemen, travel agents, anyone who was connecting buyers and sellers—that was their only thing. The internet exposed that. This is going to grind down knowledge-work mediocrity—anyone who's just recycling stuff that's easily known and is just slow and unresponsive. You're exactly right. It's pretty impressive, and that's the way capitalism works.

Rory, when you ask me next time why I'm responding at 1:30 a.m. within a minute's notice, I'll remind you that to win, you either have to be the best or hyper-responsive.

Rory O'Driscoll

And I am the latter.

Yes. And we know you can't do the former, so you've got no choice, baby.

Rory O'Driscoll

They both work.

Jason Lemkin

Listen, humility is—

Rory O'Driscoll

They both work.

Jason Lemkin

Crucial to everything.

Rory O'Driscoll

Yeah.

Jason Lemkin

They both work.

Rory O'Driscoll

They both work.

Jason Lemkin

I mean, even if you think venture is a service business—which most people think it is, between 10% and 99% a service business—it holds true, right?

Rory O'Driscoll

Yeah.

Jason Lemkin

I mean, there's someone in your investor syndicate who speaks from the top of Sinai and knows everything, and then there's the one who responds to you in 60 seconds. I don't care about anyone else on my cap table.

Rory O'Driscoll

Totally. Yes.

5. Navan Tests the IPO Window

Guys, there's so much doom and gloom. Every week we also have new IPOs. This week, Navan filed for its IPO. This is going to be a big one. I think their last valuation, Jason, you'll be able to tell me, but it was in the $10 billion range. There will be several venture firms here who make a lot of money from this. How did you guys analyze this one going out and filing now?

Jason Lemkin

IPOs by number are up 62.5% this year, apparently, based on data I saw today, right? Just about every IPO is up, and everyone's ready to go today, right? Everyone other than Canva doing its tertiary at $40 billion or whatever, or Stripe, is now planning its IPO. They are just planning it today. This is just too good a start to the year. Anyone that's got the numbers is going to go public. In the next 12 months, they're all going to go public.

Is there a limit to how much the public markets can take so quickly? With the stampede that's coming on the supply side, is there a limit to how much the demand side can ingest?

Rory O'Driscoll

You know, Jason reminded me a while back that in 2021 there was an IPO a day. The ability of the U.S. investment banking business to shovel shit out the door is unparalleled.

When someone does Circle, we're all very Pavlovian. When you do Circle at the IPO and you buy at $31 and, 3 weeks later, it's trading at 7 times that amount, let me tell you what your little Pavlovian reptile brain says: “Do more of that.” The next one won't be quite as good, and the one after that won't be quite as good again, but as long as it still feels good, those rats will keep pressing the button.

So, no, it's going to happen. There isn't a practical cash limit. As long as this stuff keeps working and nothing exogenous happens, they'll be able to get deals done.

Jason Lemkin

Navan is clearly a top 0.1% startup. But, even objectively, is it better than, say, Ramp? I know it's not a direct competitor, but my meta point is just this. My only question is: when you have a top 0.1% company but you're not sure it's a generational company, how do you know when to push all the chips in?

To Harry's point, it's fun to do it. I've done it twice, and I don't know if it's going to work—not to that level. It's fun to push all the chips in, but you've got to make sure it's at the edge of generational, don't you? That's the Roblox point that Altos always makes, right? You've got to wait for that Roblox and then push all your chips in, right?

Is Navan as good as Roblox? I mean, it's generational. I mean, it's great. Is it as good as Roblox, though?

Rory O'Driscoll

The fundamental point you're saying is your concentration without absolute excellence will beget subpar returns. You've got to be right relative to price. The trick is not just that you've got to concentrate, but that you've got to concentrate while the price is still attractive.

Because remember, the other thing that's worth stating is that on the last 5 or 6 IPOs, there's been at least 1 round on the private side that was clearly priced wrong. We've seen it in a bunch of them. Obviously, we've seen it in Chime; we've seen it in Hinge. I doubt there was a Circle round that was priced as high as it's currently trading, so everyone is golden there.

But, in general, it's hard to concentrate, and it's even harder to concentrate and get the price right. So when you do it and pull it off, you obviously get a stellar return and, more power to him.

Circle today is a $68 billion business, which makes it more valuable than Robinhood and New Bank.

Rory O'Driscoll

Yes.

Just to set some parameters.

Rory O'Driscoll

And, even more compellingly, more valuable than Coinbase, to which it gives half of its gross revenue.

Will it survive falling interest rates? And is this peak meme stock?

Rory O'Driscoll

Too extreme on both sides. Of course, it will, quote, “survive” falling interest rates. It won't go bankrupt, but there's no doubt that its current model is all about, as someone succinctly described it, letting people give you their money and getting to keep the interest. So if the interest is less, they keep less. It's a far worse business at a 2% money-market fund than at a 4% or 5% money-market fund.

To the extent rates go down, obviously it won't be as compelling, but it will survive. I think there's definitely some element of right deal, right time with all the crypto reform in the House and Senate. It just feels perfectly on point. There's probably a fairly thin-ish, probably reasonable float, actually, because there was some secondary.

But it's the kind of stock that can run. It's an N of 1, the story makes sense, and it's obviously gotten carried away. I don't think anyone believes that it's worth 50 times run-rate revenue. I don't think anyone thinks that.

Jason Lemkin

But here's the question I struggle with, Rory. You've got more experience here than me. I do believe it's a meme stock, and maybe that's the answer to this question, but how do you go from June 5th at $83 a share to $231 a share in 2 weeks with no news?

I would get it if a quarter or 2 goes by. I would get it if you have a beat or 2. I would get it if something radically changed in the crypto market. This is the same company that IPOed, isn't it? Is there any difference between this company that IPOed just a fortnight or 2 ago?

Rory O'Driscoll

So, first of all, agreed: it's the same company. One mitigating comment to the bankers—I think this is the old Hollywood quote: “No one knows anything.”

We give people a lot of grief. “Oh my God, you priced it at $31 and it opened at $67. You must be dumb, Mr. Banker.” Well, we saw it open at $67, Jason. You did, I did, and Harry did. And now it's $270. Did any of us buy at the end of that first day? We left a 5X on the table. No, we didn't.

So I think one of the things you have to conclude is that some parts of what happened in this kind of thing are fundamentally fairly unknowable. And so, to your point, Jason, nothing's changed. You do have to say, then, at some level, you probably have some—I hate the word bubble because you're making a call—but you're definitely seeing something where people aren't buying it because they think it's worth 57 times revenues. They're buying it because they think somewhere out there someone else thinks it's worth 58 times revenues, and maybe they can flip it to the next guy.

That kind of thing always ends badly. So do I think there'll be a significant correction? Yeah, but it's still a great company and a great win.

Jason Lemkin

We could argue whether the IPO was mispriced, and someone could play the role of grouchy Bill Gurley, who's definitely smarter and more successful than me.

Rory O'Driscoll

Totally. Me too.

Jason Lemkin

But the last 5 days, it's up 46.4%.

What, Rory, what changed in the last 5 days?

Rory O'Driscoll

Nothing. Nothing.

Jason Lemkin

Forget about making 5X. Harry and I could have just taken our funds and stuck them all—

Rory O'Driscoll

Totally.

Jason Lemkin

Five days ago, we could have made 46.9%. What’s the IRR? I can’t do the IRR math well, Rory. If we did 46.9% in 5 days, what’s the IRR annualized for that deal?

Rory O'Driscoll

It’s awesome.

Jason Lemkin

Yeah.

Rory O'Driscoll

No, you’re exactly right. There’s no logic to it. It’s a trading asset. It’s all the symptoms of what you see in speculative bubble behavior, which is vast price movements in short periods of time for no information.

The efficient-market-hypothesis people get all mad and say there are no bubbles. I mean, Fama will say there are no bubbles, and you’ll go, “Hmm, this looks pretty bubbly to me.” Large numbers of small-volume, ill-informed traders in a stock where, relative to the float, there’s not a lot. I have no doubt in my mind that when the other 80% of the stock comes off in 6 months, I don’t think it’ll be trading at 57 times revenues.

6. Canva Delays Its IPO

If you’re looking at this as the Canva exec team, can you genuinely help me understand why you delay an IPO? You’re looking at Circle being priced where it is, but everyone else is enjoying the fruits of public markets treating them well. Why do you delay?

Rory O'Driscoll

It’s a great question because it’s actually the only reason to pose the question. Let me tell you what I mean by that. When you have all these things—“Should you stay or should you go,” to coin a music phrase, on the IPO—and you have “the private is great,” the real question is: Is the cost of capital cheaper in the public than in the private markets?

For a long time, the private has been cheaper. We’ve had a wonderful cost of capital. We give you money, provided we get a preference; we leave you alone, we don’t bug you. You don’t have to do analyst day. We’re not really that mean. Some people think we’re mean, but compared to the guys in New York who run hedge funds and various kinds of funds like that—activist funds, that’s the word I couldn’t think of—yeah, we’re nice. So it’s been really nice being private.

The only thing that’s going to change that is not some kind of— I was thinking about it because you’d asked the question 2 or 3 weeks back: What would you change in the public markets? I hadn’t had a good answer. You know what I realized? It’s kind of the wrong question. Price is the lever for 90% of economic transactions. If you can get a stupid price in the public market that’s higher than the stupid price you’re getting in the private markets, then at the margin, mostly you should go.

And I think you’re right: maybe not Canva, maybe people have ideological reasons not to. But let me tell you, if you’re owning a Bitcoin trading operation or a stablecoin operation, you are IPO-ing as fast as your little fingers will let you. There are bankers locked in rooms as we speak doing that, because price is how the public market sends a signal to the private market: “Hey, come on in.”

Would you not argue that’s a relatively naive way to think about going public, based on a transitory moment in time of what public markets will price you at? I was at a dinner with a $10 billion public CEO last night who is a friend of mine, and he was just moaning about being public. Very simply, it’s a transitory moment in time. You will appreciate, depreciate. Who gives a fuck what you went out at?

Rory O'Driscoll

First of all, I’d say it’s less naive than reductionist. Look, you’re right: there are all the other negatives and positives of being public that are hard to change. My point was at the margin. If you get all the grief of being public and, on top of that, you get a lower price than on the private side—and a consistently lower price—then you never bother.

But if you get all the grief of being public, and it’s still a pain in the ass, but in return you get a liquid stock and a 50% or 80% consistently higher price, then the argument is hard to resist. Now, you’re right: if it’s a flash in the pan and it’s gone in 2 months, then it would be a naive reason to go public. But if, on average, the capital is cheaper in the public markets, then over time it’ll pan out.

Jason Lemkin

If we just go back to Canva, though, I just don’t get it. It’s a very strong consumer brand, very well known, with incredibly strong financials that we know of. It’s north of $3 billion in ARR. Why would it not go out?

Rory O'Driscoll

They don’t have to sell securities. They’re kicking off cash, which means that they’re net buyers of their security through buybacks, not sellers. So they don’t need to raise money. Fundamentally, you go public to raise capital. What’s odd about some of these companies is they’ve been private so long and have done so well that they’re past needing capital. They’re just kicking off cash. So it’s just not an imperative.

Jason Lemkin

If Canva generated enough cash, you could imagine Canva generating $1 billion of free cash flow or more a year. Maybe $1.5 billion. It’s easy to see, right? They could have 40% free-cash-flow margins, right? If you have enough secondary interest, too, you could just buy everybody out. There’s enough cash at $1.5 billion a year. You could buy out just about everybody.

No one listens to the guys that bought a few shares in the late rounds anymore. But forget about that—the Blackbird and everybody got as much liquidity as they want, right? Return the fund. If you generate enough cash and the founders have given most of their shares away to charity, I don’t think they’re trying to buy the biggest yachts.

If you could generate $20 billion to $30 billion of free cash flow over the next decade, why go? Maybe you don’t need to go public at all. Just buy everybody out and pay dividends to founders. Just pay $1 billion out as common-stock dividends a year. If the founders own 80% of the common, most of us could live on $600 million or $700 million a year in dividends, couldn’t we?

Rory O'Driscoll

I think even you could manage it, Jason. And look, you’re right.

Jason Lemkin

Seriously.

Rory O'Driscoll

There hasn’t been so much cash. I’m trying to figure out exactly how much has gone in in real time, but it’s not so much that they can’t buy them out.

Jason Lemkin

They’ve raised less than $1 billion, I think.

Rory O'Driscoll

I don’t think they could buy it all out, or it would take too long, but I get your mental model.

Jason Lemkin

It’s possible.

Rory O'Driscoll

Yeah.

Jason Lemkin

That’s the thing: unlike a lot of these startups, it is possible—

Rory O'Driscoll

Agreed.

Jason Lemkin

—to buy them out, right?

Rory O'Driscoll

Yeah. If you’ve got low capital raised and high cash flow margins, you could. I don’t think that’s the reason. I think a lot of what they’ve said is they’re really trying to focus technically on their AI development, because they’ve got a lot of new stuff to build, and they just don’t need the grief and the distraction. They don’t need to do it, which is a perfectly rational reason.

Jason Lemkin

All I’m saying is, if the 3 of us were running Canva, and let’s say we’re still growing north of 30% or 40% like they are, and we sat around: “Listen, guys, we could buy out our last investors at 3X. It may take a few years to get there. They’ll make the 3X. Blackbird made 50,000—500,000X, and friends. Let’s just chill. Let’s just pay ourselves $1 billion a year in dividends, like the Basecamp guys do on steroids, and let’s buy out our guys at 3X when the time comes.”

Why would we want to deal with it? I don’t know a single public CEO who’s happy. Going to Harry’s point, I literally don’t know. Even the most successful ones—you know, Palantir and Cloudflare are the 2 most successful public companies. They’re great, but they don’t seem happy, do they? They don’t seem like the happiest people on planet Earth. They’re driven. Mad respect, but I would have that discussion with the 3 of us.

Why don’t we buy them out? We’ve raised less than $1 billion, right? We can get to $10 billion, generating $4 billion to $5 billion of free cash flow a year.

Rory O'Driscoll

It’s a legitimate question. If you are post-cash, strongly cash-flow positive, such that you don’t need to sell shares—in fact, you’re a net buyer, as you point out, either because you’re doing buybacks for employees or because you’re doing buybacks for founders—then in fact you’re not trying to optimize valuation, so going public might not make sense. I think you end up doing it for other reasons: mass liquidity, including your own.

7. Ellison Builds Ownership Through Buybacks

Jason Lemkin

But isn’t Larry Ellison kind of doing that in a way? I mean, they just reported he’s at 41% ownership of Oracle now.

Rory O'Driscoll

Yes, he is.

Jason Lemkin

He’s buying out his shareholders every year with cash flow like we’ve never seen before. Why don’t we learn that lesson and not even bother to IPO?

Rory O'Driscoll

I mean, first of all, you’re right. Let’s talk about that now. It’s been interesting because at IPO, I think Larry Ellison owned something like 23% of Oracle.

Typically, that goes down over time. He now owns 41% of Oracle. What’s he done? Every year, he’s run that business superbly. It’s got 43% operating margins, and he’s used that cash to buy back shares. He hasn’t sold any, so his ownership has just gone up over time.

It's exactly what Jason said. It's a beautiful thing.

Now, really interestingly, 2 things happened this year. One is the stock really popped 40%, and he got a lot of cloud cred. But interestingly, this is the year he actually abandoned the buyback strategy. This is the first year where, instead of taking all that cash and buying shares back, he's taken all that money and put it in CapEx. Oracle was not free-cash-flow positive this year.

Jason Lemkin

His own money, really.

Rory O'Driscoll

Yes, he put his own money in, and he said, “No, we're gonna take this lovely, mature, cash-flow-positive software business and join the other crazy people in this CapEx-crazy hyperscaler land.”

So I think the CapEx budget was—I'm winging it here—something like $30-something billion, and effectively you were free-cash-flow negative. The trick that he used to get to this point is now not happening, but luckily—not luckily for him—it's so clever. He bought when it's cheap for 10 or 15 years, then invests in AI, and then gets a 40% stock pop from that investment in AI just when he owns most of the company.

It's a thing of beauty, and puts him firmly at number 2 richest man in the world, I think, for a period of time. You gotta love it.

Jason Lemkin

What a strategic mind. Also, he looks phenomenal for his age. I don't know what he's doing, but someone needs to give him more credit. Whoever his people are—

I just need all of them.

Rory O'Driscoll

I haven't told you, I'm actually his blood boy. That's why I didn't sell the company. He pays me much more.

Yeah, there you go. I totally agree with you guys.

Jason Lemkin

Yeah, $30 billion in 2024 into CapEx alone—

Rory O'Driscoll

Yeah.

Jason Lemkin

Instead of buybacks, right?

Rory O'Driscoll

Yes.

Jason Lemkin

Clearly agrees.

Rory O'Driscoll

It's just a totally—What's fascinating about it is it's such a different bet at a time when most people in their 80s are getting conservative. It's like he took the Warren Buffett Bible for 15 years and did the cash buyback like Buffett did at the Washington Post, and then last year he said, “Fuck it, I'm 80. I'm just gonna double down here and just switch strategies.”

It's just fascinating. If it works, it'll be a legend.

Jason Lemkin

Plus, once you buy a couple of Hawaiian islands, honestly, you've really run out of things to buy, right?

Rory O'Driscoll

Yeah.

Jason Lemkin

You gotta buy a planet. We talk about yachts. I mean, Larry Ellison owns a big chunk of Hawaii. There's not much left to buy.

Rory O'Driscoll

Actually, a very famous billionaire told me that once you conquer Earth, there's only one place to go, and it's space, and that's why we have Elon and Bezos.

8. Leveraged Beta Wins AI

Jason, you've mentioned Cluley a couple of times.

Jason Lemkin

Yeah.

Rory O'Driscoll

We have to talk about this company. Jason, why are you a fanboy? I have thoughts, but I wanna hear yours first.

Jason Lemkin

I'm a fanboy. If we look at AI for coding, okay, if we look at Replit, $10 million to $100 million in 5.5 months, right? Announced yesterday. Crazy, right? If we look at Lovable, not far behind. On and on and on, right?

What bums me out is that on the GTM side, on the sales side, I know everyone's made investments in there. They're not as good. They're slow to release features. They don't work that well. The sales tools for AI are just not as good as the developer tools for AI.

So what I'm looking for is who's approaching this from a consumer level, with a consumer-grade experience that could work for GTM? Listen, I love my old sales team. Everyone I worked with is great, but overall, the sales reps I talk to for all the products I buy, they're terrible. They don't know their product. They know nothing. They add no value.

So they all need to cheat. All sales reps need to cheat because they don't know anything, and they all need something like Cluely. There's a limited number of tools in sales that do this, but they're either not real-time, or they have an enterprise niche, or they're glorified note-takers. This is what every sales team needs.

And now, will it be Cluely? Maybe not, but once in a while, like a Slack or something, you need something to come up from the bottom to disrupt a market instead of coming from the enterprise, and I just don't see sales tools. We can look at crazy successful things like Clay and others, but Clay is a multi-month deployment period with an agency that you pay $50,000 to, right?

I want tools that you can use in 5 minutes. I'm not saying Cluely does all of it today, but I can already see hints of it. If it could do 2 things today, it would be the cheating tool for sales reps. It needs 2 features they could build in a month.

Rory O'Driscoll

Okay.

Jason Lemkin

I may be an intern. I was invited to be an intern this week. It may take me a week to get up there, but you think I'm kidding. When I joke, there's always seriousness in it, right?

Jason, you're taking a way too academic approach to this, because the right tactic—or the real question is, are they going too far in their bid to get attention? Posting pictures with strippers on sofas, police cars arresting people outside of parties.

Jason Lemkin

I thought that at first, and when that initial stuff went out, I didn't even know what Cluely was. It seemed crazy, right? And if you look at that Social Network thing he did along with Andreessen's fundraising, the other stuff went to other folks. Going back to The Social Network, it went to me. It went to maturing the company just slightly because there's a whole generation of us in B2B.

Harry, this is where I am a couple clicks older than you. I can't tell you what it was like when I took my team to see that movie. It was generational. You don't know what it was like when everyone was piling on Zuck, saying this was a terrible company, hoping it might be worth $1 billion today. What is it worth? We started this episode at $1.8 trillion.

And his point when he did the interview was like, “Listen, you guys on Twitter and LinkedIn are 2 or 3 years behind what's going on on TikTok and Insta.” You're in the middle, Harry. And he's like, “I'm gonna bring some of that knowledge to the Twitter-LinkedIn generation.”

I thought the Social Network thing you did was a 10. You know I can laugh.

Rory O'Driscoll

Can I come in, Harry? I wanna come in on this because I don't even know who wrote it, because Notion's got such a shitty UI I can't figure out who the author is. But I got a piece sent around internally called “Leveraged Beta Is All You Need: The LLM Business.” It was so clever.

And it gets back to this, because there are 2 separate questions at stake here. One is how much should be steak and how much should be sizzle? In other words, how much should be core product versus marketing, which is a general question. And then the second question is, are there certain forms of marketing that just go too far, which is Cluely? And you could argue the Harvey comment I made was, you know, they did marketing.

This was such a good piece. I'm gonna read out a couple of lines from it.

“The brutal truth about the LLM business. Here's what nobody wants to admit. When LLMs finally work at something, the implementation will be boring as fuck. Harvey isn't some breakthrough in legal AI. It's ChatGPT with a law costume. Lovable isn't revolutionizing code. It's Claude with pretty buttons.

“So you have 2 choices. Option 1: wait until the LLM actually works, then scramble to build your ChatGPT wrapper along with everybody else who just realized the same thing. Option 2: start now while the tech is garbage, lie about how good it is, burn money on marketing, claim the territory while everyone else is still laughing at you.

“The companies winning at leveraged beta aren't the ones building better products. They're the ones who understood this dynamic first. They're either lying about the present, 11x or Icon, or arbitraging the obvious, Harvey or Lovable.”

It's a great piece. What he's basically saying is the models are getting better so fast that even if you can't do it now, you will be able to do it a year from now. So your choices are to wait for a year and just compete, of course, along with everyone else, or lie, compete now, establish this kind of mental perception of the winner, and then collect the check when the time comes.

Harvey did that in a high-class way, because I don't think you sell to law firms by hiring strippers. I don't just—

Jason Lemkin

You never know, actually.

Rory O'Driscoll

I'm not gonna speculate. I'm gonna keep this thing highfalutin, right? And you could argue—

We can discuss reputationally whether that kind of marketing works. But the meta-comment—claim the ground with marketing and let the product follow on because it's gonna get there, because the models always get better—it was a wildly insightful piece. The point was right there.

I would give the author credit if I could just figure out in Notion who the writer is, but there you go.

Jason Lemkin

Cluely might know.

Rory O'Driscoll

What? What?

Jason, why didn't you invest in this company?

Jason Lemkin

I didn't get a chance. I would've. I wouldn't have invested in the company 3 weeks ago, or whenever Sousa did, but I would invest in it right now that I get it, right? I'm not always that fast, Harry.

Actually, to be fair, my partner Paul picked this guy out when he was kicked out of Columbia—

Rory O'Driscoll

Yeah.

But Jason, would you do this? 15 on 100, would you do it?

Jason Lemkin

Cluley says the author is not named.

Rory O'Driscoll

Rory doesn't know, and he doesn't have enough data in Notion, right? Show me the—

Right.

Rory O'Driscoll

If you can show your transcript to Cluley, though, Cluley can look it up.

Jason, would you do Cluely 15 on 100?

Jason Lemkin

I could do 5. I don't think I could get to the other 15. That's too much risk. I might do—

You might do 5 from your fund?

Rory O'Driscoll

I get excited about companies in general, and then sometimes you meet the founders and it's not what you thought, right? We're all on our own journeys. There's probably a good chance that what I see in Cluely is not what the team wants to build, right? I mean, it started off as a cheating app. But if it is, I just think all the B2B people are so sub-Cursor-grade. Look, this is all I want. I'll take the risk. If someone can pull together an S-tier team in GTM, I'm in on it for real. They all claim they do, and they're just pretty good.

Yeah. We mentioned—well, I'll tell you afterwards—we mentioned buying islands, being in Hawaii. The thing I just can't get, and a lot of my companies are really perplexed by it, is the Slack lockdown, cutting access to it. Can you just help me understand: will it work? How do we think about what this actually means for Slack moving forward?

9. B2B Platforms Lock Down

Jason Lemkin

All the leaders in B2B—I think most of them are going to close ranks, circle the wagons, and become more locked down. They have to be. They have to be. When you're sitting around the table, especially with the CRO and others who are under stress, what does the CRO want to do? Lock it down, move to multi-decade contracts, and raise prices. That's the strategy when things are stressful.

I think we could argue whether this is a mistake, but I think MCP is an existential threat within 12 months to every B2B company. Folks are going to lock that stuff down more because you can lock down your API, but when your MCP server's open, it's rough. I love what Zapier's running—1,000 times faster now to become Zapier Prime—because of this. They get it. HubSpot is figuring it out, but they were first, right? And Salesforce, I think most people do what Salesforce does, which is lock this down.

Rory O'Driscoll

That was helpful context, Jason, because my instinctive reaction is, no, you can't do this. I'm a Salesforce customer. If you were telling me I can't integrate in and out and access my data, I'd be miffed. And then what you did nicely, Jason, is remind me of the duplicitous and sly ways that, especially the closer you are to having a monopoly, the easier it is to start locking stuff down, and you're exactly right.

LinkedIn, obviously. I mean, think Epic in the medical record space: it's notoriously difficult to integrate with. You have to pay fees and all that. So it is interesting that as you get big and defensive, you're right, there is this instinct to lock it down.

Part of me says they won't be able to get away with it, that the customers will say, “Look, if you're going to do that, then the value of Slack goes down so much to me that you can't do that.” So my gut—and I think you said this to me, Jason—is that this probably reverses to some kind of fee-based thing: MCP access to my Slack information is a priced API call.

I don't know if you can get away forever in a horizontal app like Salesforce with a channel like Slack denying the customer access to their own content over the medium term. I don't think it stands intuitively. I could be wrong, and you did well to remind me of other areas where they do it, but I just think it's a sign of a decaying empire. It's a sign that you can't compete on the merits. It's a little bit of a danger sign. It's one of the signs that says, “This would be a good time for you, Mr. Customer, to consider your options,” right? It's like when PE moves in. Price rises are coming.

Jason Lemkin

That's why I have the most respect for HubSpot, and especially Dharmesh, for being No. 1 here. Launch day: MCP, OpenAI partner, ChatGPT partner—launch day. I think it's a threat to HubSpot. I think it's an opportunity. Of course, it's an opportunity, which is why they're doing it, but to embrace the threat—that's badass. That's the way you do it.

Rory O'Driscoll

Totally.

Jason Lemkin

It is a sign of deteriorating everything, right? And as Slack deteriorates more and more, it becomes less and less our neural network. It's going to get locked down even more, isn't it?

Rory O'Driscoll

Yeah. It's hard to imagine a world where you say, “This is the means by which we all communicate with each other, but no one can access that information for the use of AI.” That's just not a thing in 2025. It's not a sentence that survives.

10. Salesforce Agents Face Competition

I have dinner with Benioff in London in a couple of weeks. What question should I ask him?

Rory O'Driscoll

Taking Jason's theme, this idea of agents, I would say: How do you measure the efficacy of Salesforce agents running on the Salesforce stack, and how does that compare to third-party agents running on the Salesforce stack? Are you better because you have the data? Are you worse because you're a little behind? Do you even objectively measure it? Do you understand, if you're using your sales agent, how you measure success?

We have Reggie in the AI SDR space; there's a bunch of others. How do you compare to them? If you're in Service Cloud, how does your agent compare to all the independent agents? To Jason's point, what would make it go faster? It's really simple. If the resolution rate on Service Cloud was 20%, so you could only, let's be honest, eliminate 20% of your service center personnel, and the resolution rate with some third-party product—Decagon, Fin, Sierra—is 50% or 60%, then you're going to lose business pretty quickly. Are you measuring that? That's the question I'd ask him.

Do you want to come to dinner instead, mate? I'll have dinner with Jason.

Jason Lemkin

No, I'd be scared.

That's a really interesting question.

Jason Lemkin

I'd be too scared. He might get mad at me, and then he'd cut off access to my Slack, and then I'd be screwed.

Will OpenAI accuse Microsoft of antitrust violations this year? Yes or no?

Rory O'Driscoll

I think yes. “Accuse,” by the way, is a wonderfully vague word. Will they file a lawsuit and prevail? Maybe not, but will Sam throw words out? Absolutely. So, yeah, I'd take that bet.

Jason Lemkin

No chance. In my opinion, 0%. I'll tell you why.

Jason Lemkin

You think?

Rory O'Driscoll

I think he already did—there he is.

Rory O'Driscoll

Yes. So, I win. Yeah, I think that's right.

Jason Lemkin

They already accused Microsoft of antitrust.

Rory O'Driscoll

They floated it internally; they didn't have it.

Rory O'Driscoll

Yeah.

Jason Lemkin

Everything Sam says that seems off the cuff or on the side or a little futuristic, he's very clearly telling you what's going to happen. He's very direct, and when you hear him say that they're thinking about it, he's done it. It's the same as filing. I'm not saying literally. So I already think he's threatened it in a pleasant way.

The question is, does he have to go through on this threat, which has already been made? I think it's enough to have said it. I don't think Microsoft wants to be sued for antitrust, so I think it's going to get worked out.

By the way, I completely agree. I think he's one of the most strategic communicators. The interview he did with Jack, who I love—Jack's great—but what brilliant timing for the message he wanted to land. He knows the message, which is Meta's poaching for $100 million. He's just put a dagger in the heart of Zuck's recruiting campaign to take OpenAI. Brilliant.

Jason Lemkin

It makes it feel like he's just sharing things with you, which he is, right?

With his brother.

Jason Lemkin

But I didn't get how clever it is. I didn't get how clever his communication strategy is, right? It's the best of anybody, isn't it?

Beautiful. Beautiful.

Rory O'Driscoll

Yeah.

Will the U.S. government take control of any AI company or project in 2025?

Rory O'Driscoll

I still think no. The push from the folks on the tech side has been very much AI for good, not AI to control it. I think all the very active tech people, from David Sacks to Andreessen Horowitz, their approach has not been, “AI is dangerous.” It is entirely correct, by the way, in my opinion: AI is wonderful, and we should make lots of it right here in America. While it's pretty clear that the tech bros don't run the administration, it's pretty clear that the big guy runs the administration.

Rory O'Driscoll

My guess is this is just not important enough for the big guy to give a shit. So, thanks for the money, guys. In this, you can do what you want. So no, I don't think there's any impetus to say, “Let's seize control of Anthropic,” or something like that. No. Even though I only get $25 more than I put in, I'd take a no.

Jason Lemkin

I don't know. Watching what David says—which I think is very careful on the government side, right? Very, very careful—kudos to him, but I haven't even seen a hint of this, right, from our AI crypto czar. Now, if he knew it, he wouldn't say it, right? Here's where having an ex-lawyer, very briefly a long time ago, in one of these roles instead of Elon probably helps. Sacks knows exactly what to say. But I feel like there'd be a hint if this were true, given that we're halfway through the year.

Rory O'Driscoll

Agreed. It's far more likely to see some kind of regulation of Chinese AI companies—not obviously taking control, but some kind of pushback there. I think that's highly likely, but not in the U.S.

Short detour before the final one. Sacks had to divest a load of assets, including a load of crypto and also late-stage companies. Do you think he was hurt or helped by divesting? He divested in a pretty good period to divest, at a pretty buoyant part of the market.

Rory O'Driscoll

The markets since then have been down, but then back up. Just facts: The overall S&P was roughly flat, so no, not a gain, not a loss, but crypto was up. So it probably cost him money, and again, credit to him. You don't have to like a ton about it to say he's doing public service. He's sold his assets to do that, and there probably has been a cost to it. He's putting his money where his mouth is.

There are famous occasions of people having to divest to join public service, and then taking part in administrations that totally shank things up. As a result, the divestment looks like genius, but I don't think that's the case here. I think it cost him money. Look at crypto alone: I think since the election we've gone up a little bit, then we dipped down a lot for Liberation Day, then we're back to roughly flat. It's been kind of a no-up.

Final one, boys. Trump Mobile smartphone: Will it be released before September? The odds are—pfft—$100 gets you $716 back on a yes. $100 only gets you $108 on a no. The man moves at speed, boys. What do we think?

Jason Lemkin

It's impossible. There's no supply-chain evidence of any phone in production. There haven't been any leaks of an actual phone in production, and there haven't been any leaks or signs of true product development other than a mock-up of a golden phone.

I thought he was doing a product partnership with AT&T, and he was basically just sticking a Trump sticker on top of a different phone.

Jason Lemkin

Well, listen, maybe I'm dated, right? The press I saw said he was launching a phone. So Cluley quickly researched it for me while we're here in terms of all the supply-chain evidence. There's no notice of anything happening. If they're going to put a sticker on the phone, I'm sure he could do that yesterday.

Rory O'Driscoll

Okay, Jason's actually making money.

He's put money in, Rory.

Rory O'Driscoll

Yeah.

He's put money in already.

Rory O'Driscoll

But I will say, that was pretty impressive. Because it's sitting there, it's doing its recording.

Jason Lemkin

What did he say?

Rory O'Driscoll

No, no, I gotcha. I have to actually understand what's going on. Jason just has to be able to read.

Jason Lemkin

Exactly.

Rory O'Driscoll

It's really lowering the bar for competence here, people.

Jason Lemkin

I barely have to read. He just listens.

Rory O'Driscoll

Cluley just listens and watches a screen.

No. Yeah, and as long as you can read it back. That was a win. That was a win.

As to the phone, look, I'm with Jason. If it ships, it's meaningless. It's not a thing. There are a lot of initiatives in the administration that come and go. It's been a while since we've talked about Greenland, for example. Look, this is a week when the administration had a big win. Let's just take it at that. I don't think the phone is going to be the biggest win.

I'll make a different comment. If I were Tim Cook at Apple, I would move heaven and earth to even make some kind of phone here just to do enough to say, “We're trying.” That's a company whose business model, and a big share of it, is so exposed to China risk. If the solution on the making side is we don't make it in China, we do make it in India, that makes logical sense, but I just worry you could find yourself in the political crosshairs. So even trying to make some phones in America, even just one, would in my view be a shrewd thing.

I agree with you. Make one, get Trump there, get the picture, get the marketing message: “Made in America—Trump did it.” Please him.

Rory O'Driscoll

That's exactly right. Make a little lot of 10,000. You'll sell them for twice the normal price, and you'll discover that Americans won't buy them, and you'll have tried. Make a good-faith effort, get them off your back.