SpaceX估值8000亿美元、Harvey融资1.6亿美元后估值80亿美元、Netflix收购Warner Brothers

Jason Lemkin

I think it’s VC-condescending to tell the CEO how they’re going to work it out. It is beyond condescending. The great CEOs will figure it out.

Rory O’Driscoll

I’m going to push back hard on that. Hard.

Jason Lemkin

Okay. But people are going to see you as condescending, Rory. I wouldn’t push back.

Rory O’Driscoll

I disagree. And they’re—

Jason Lemkin

They like you a lot now. Don’t make them think of you as condescending. It doesn’t help at the end of the year. Don’t push back. Take a mulligan and delete this section.

Rory O’Driscoll

No, I won’t.

Jason Lemkin

This is not your place to tell them how to do it.

Rory O’Driscoll

Disagree entirely.

It is so good to be back. Jason, I am loving this 20VC swag that we’ve got going on here. I mean, it looks fantastic. Rory, a reminder to bloggers and others out there: swag works.

Rory O’Driscoll

Swag works.

It works. It’s a good investment. It’s a good investment.

Jason Lemkin

Quality swag works. It’s got to be good enough that you want to wear it. That’s the test.

Or play with it, in the case of a paddle bat. Hey, Rory, we see yours behind you. Oh, yeah.

Rory O’Driscoll

1. SpaceX's $800 Billion Valuation: A Deep Dive

Yeah. The others are paddle batters.

Okay, okay. We’re starting with number 1: SpaceX pursuing an $800 billion valuation through a secondary sale. This is obviously not the first time we’ve seen SpaceX do large secondaries in recent times. It’s the first time, obviously, that it’s been $800 billion. How do we think about this news? I’d love to hand over to you guys.

Jason Lemkin

It’s an amazing company. Let’s start with that. It’s actually 2 amazing companies: an amazing rocket company and an amazing communications and Starlink company. It’s doing $15 billion, growing plus or minus 30% this year. That’s a pretty hefty valuation. That’s north of 40 times run rate for a company this year going 30%.

Now, you could argue maybe there’s some extra Starlink growth buried in there, but I remember thinking, “Hmm, I’m not sure I’d be a buyer at that price.” And if I owned some, I might be looking to be a seller. So, I think there’s a huge amount of Elon magic overlay. So far, that magic has worked, but it’s definitely a lot of non-obvious math baked into the price.

It may segue into the IPOs of 2026 and 2027. I think our jaws are going to drop with the IPOs, right? One question, I guess it’s a minor question, is: There are so many brands that will IPO. In 2025, we had no brands IPO. We had some good IPOs. We had some IPOs that traded weak, like Figma, but it’s not like folks on the street knew who Figma or CoreWeave was, right?

Who knows what retail will do to SpaceX, Stripe, and street names like Databricks, which everyone talks about? A little facetious there, but what is the retail premium for a hot name? I don’t know, but it could be significant. It’s boosted Tesla over the years, for sure.

But I’ll push back, Jason. Does this secondary sale not actually just show the lack of need for these names to IPO? The fact that you’re doing it at $800 billion furthers the discussion that we had with Tom Tunguz about the lack of need for these companies to IPO. I actually think it’s not going to be a good 2026 because of secondary sales like these at these prices.

Jason Lemkin

But, if Anthropic really IPOs at the end of next year, it will just change the conversation, the amount of liquidity, and the scale. We haven’t had an IPO like that almost ever. It will just change the conversation and the amount of liquidity, the scale. Who knows if it’s worth $800 billion or whatever it trades at? These are just not like the VC deals we used to do.

Even just 2 of them—you’re right. Maybe Harry’s right. Maybe these guys never IPO. But eventually, they will want the capital, I think, and I don’t think Databricks and Anthropic are hiding from an IPO. I don’t think they’re doing a Stripe. I think they’ve been very clear that they’re on a path to an IPO. We just don’t know when Databricks and Anthropic will IPO.

Rory O’Driscoll

Some of these are destined to go public in a way that maybe Stripe chooses not to. I think the question will be: If you get locked into a high price on secondary, even if it doesn’t have an IPO pop, even if it’s entirely secondary shares, will you get into this weird dynamic where it doesn’t feel like a win if the public markets don’t think you’re worth $800 billion? They only think you’re worth $400 billion.

I think that’s one of the weird things about these private rounds providing a high-water mark. Does it make IPOs, for lack of a better word, emotionally unattractive because it’s not going to feel like the way you wanted it to be? I mean, it’s worth pointing out—

Does anyone care anymore, Rory, if it’s a down round? I think we’ve given up caring about a down IPO.

Rory O’Driscoll

Let’s talk about that. First of all, you’re right. I think almost every IPO this year, 2025, was a down round on the prior private round, right? So, as I say to people, every time that private-market valuations came into contact with public-market valuations, private-market valuations were found wanting, right?

From a do-you-care perspective, yeah, you survive it and move on. It’s not like it’s—you’re right—it’s not like the end of the world. The person who obviously does care is the person who bought in the private markets at a price that’s not now available in the public markets. And this is back to the—

I don’t know if they care, though.

Rory O’Driscoll

No, what I mean is, seriously, going into 2026, of course they care, right? Especially without a ratchet. My sense is it’s baked into the business model, right? For Harry, on the off chance Airwallex is worth less than he paid, okay, I don’t think Harry’s going to quit the business, right? I don’t think he has a 3x ratchet on his investment.

I’m just saying I think it’s much like coming out of a hot accelerator, raising at $60 million post with trivial revenue. I think even seed investors have internalized this, right? You’re right: It is in the business model.

If you think about late-stage investing—and obviously I think we can stipulate that an $800 billion pre-money valuation is definitely late stage by any man’s definition—you’re not running any other kind of meaningful risk except valuation risk. So you can’t cry like a baby when valuation risk bites you in the ass.

On 1 level, you’re right: Not only is it baked into the business model, it arguably is the business model. Just like investing in stocks, the business model is that some go up and some go down, right? So, yeah, I agree. It’s not going to be, “Oh my God, we’ll never do that again.” But what it will lead to is perhaps less capital or more circumspection in the private markets.

If you continually price something at a high price and you’re continually wrong, and it goes public at a lower price, at some point some adult in the room will say, “Maybe we should stop doing that and wait and buy them when they’re cheaper.”

You’re right, it’s not the end of the world, but that’s the point in time at which either there’s less capital or more circumspection in the private markets. As I look at an $800 billion pre-money valuation for a $15 billion revenue business, in the absence of the Elon premium, I think that price would look pretty sick in the public markets.

Now, because of the Elon premium, I freely admit it’s just not knowable to me in the short term. I think in the long term, everything, as we said, is a weighing machine, and the cash flows will dominate. So they’re going to have to do a lot of growing to get to that price.

I think the meta-point for me—the change to venture and founders—is that even today on X, Harry’s probably given this advice as well. He gives a lot of advice on X. You’ll have advice saying, “Don’t raise a round at too high a price. You’ll come to regret it. Do a fair price. Don’t take the highest price,” and so on.

I think that advice is as sound as it ever was, but I think it has an audience of n equals 0. I don’t think anyone cares. No one cares if they come out of a hot accelerator and raise at $50 million to $60 million on a bunch of SAFEs with no rights, then do a round at $30 million later. They don’t care.

They don’t care if—I mean, listen, if I need the capital at $800 billion and the IPO’s at $500 billion, I don’t think most folks really have the angst we used to have. I think the angst is gone around mispriced rounds and overpriced rounds. And, good or bad, I think that advice has no audience.

2. IPO Market Predictions for 2026

I want to expand this discussion to the broader IPO market because we’ve seen not a huge amount of liquidity come back. It hasn’t been as exciting or as exuberant as we thought it would be in 2025.

2 questions, as direct as can be: Will 2026 be the year of the IPOs? And, if so, what will be the catalyst to drive that excitement? When you sent out the note, you said, “What happens if SpaceX, Anthropic, and Databricks go public?” Doing the math here, I did it: It’s $800 billion for SpaceX, $400 billion for Anthropic, and $200 billion for Databricks. That’s $1.4 trillion of market cap. Let’s say VCs own, on average, a little under half of that, plus or minus.

Rory O’Driscoll

That’s $700 billion of money returned to VC. That would obviously, to state the banal, be a pretty darn good year right now. Sobering to realize it’s only about 20% of the total private FMV, because the total private FMV of venture is something like $2.8–2.9 trillion. So it’s a big dent in the deficit. It’s not all the deficit, but it would be a great year, right? And that’s plausible.

I mean, the weird thing about power-law economics math is that it only takes 1 or 2 of the top of the power law to dwarf 10 little $2 billion pre-IPOs. It’s all lost in the noise of the banker fee. If SpaceX goes public at anywhere from $400–600 billion one of these years, it’ll be a bumper year for IPOs. The thing that will make it a bumper year is just like 2012. You don’t remember, but 2012 was a quote-unquote bumper year for IPOs. Why? Because Facebook went public, right?

And I can’t remember, 2014 was a bumper year for IPOs because Alibaba went public. Both of them were huge and ginormous. If you look at the little bar graphs, it’s like, “Oh yeah, that was the year of Alibaba.” What is the Facebook or Alibaba bar of ’26? Is it SpaceX, Anthropic or Databricks?

At $200 billion, I can’t remember Alibaba, but SpaceX and Anthropic would be bigger than both. I mean, I want to say Facebook was around $70 or $80 billion. I remember Alibaba being bigger, a couple hundred billion, but yes, any of these would be bigger. At some point, in 1 year, 2 or 3 of these will go out at the same time, and it’ll be like the mother of all years.

Do we not feel pretty good actually looking at this? When you add in OpenAI on top of that, into H1 ’27, which is kind of where people are projecting it to be, you’re looking at 18 months of pretty phenomenal funnel and liquidity. If the markets stay strong and that happens, the overall return to equity will be extreme.

Rory O’Driscoll

Yeah, return to venture will be extremely good. Just to say it out there, because I am Mr. Debbie Downer, right? Markets are at an all-time high, both in index terms—which is meaningless because they’re often at an all-time high—but just in terms of valuation on a P/E, any kind of Shiller P/E basis.

In a much more normalized market, if all these companies went public and every one of them was significantly down on the last round, let’s just say instead of being worth $1.4 trillion, they’re just worth $700–800 billion, it would still be the best year ever. Still 3 amazing companies going out. You could still have a weird feeling of, “Maybe I shouldn’t have bought at $800 billion pre, or even $400 billion pre.” That’s the dilemma here, right?

I think net-net it would be good overall. The capital would come back; all the prior rounds would make money. You might just have this odd phenomenon of people going, “Ooh, that last price was a little reachier than the public market,” but you’re still in good shape.

Jason, do you want to lose some more money? Do you remember?

Jason Lemkin

I’m already out. I already thought this was going to happen at the end of ’24. I already owe you $50 grand plus interest.

Wow.

Jason Lemkin

I was too optimistic. I really thought that we would have a blip in ’23. In ’24, all the B2B leaders would come roaring back because growth stayed high for a while, right, through early 2023. So I thought 2024 was going to—I thought we were going to have an IPO a day again because of the unicorn backlog. Little did I know they would all stop growing, except the AI ones. Hopefully, the interest rates are like 1%, like Elon’s loans. We’ll have to figure it out. I’m good for it.

Rory O’Driscoll

I wouldn’t if your plan involves assuming we ever get to 1% interest rates again. I’d abandon that plan because—

Jason Lemkin

I can double down on the bet. But my bet is now it has to happen by the end of 2026. It is tight, right? Because it’s the end of 2025, right? I think I’ll take that bet. I’ll double down on it. I think Anthropic and Databricks have an incentive to IPO. As best I understand it, they have an incentive. As Rory said, times are great, and so I think they’ll do it unless the market crashes for some reason. I think they’re going to do it when the timing is perfect. I think they’re both going to IPO in the back half of ’26.

And if you double down and, worst case, we’re even, right? Best case, I get $100 grand and you can pay for it out of fees. So it’s really pre-tax. You can just write a direct check to me from 20VC Management LLC.

Rory O’Driscoll

I do agree with you because I think, oddly, Anthropic has been obviously very different in terms of its founding story, effective altruism and angst about AI, but remarkably sober-minded and sensible, and kind of mainstream in terms of the financial plan. All along, they’ve stated they’re going to be more efficient and burn less. They’ve talked about converging early. It feels like they will very sensibly go public when they can because, in this kind of capital-intensive business, I think at some point there will be a strategic advantage to going public.

So logically, it would be the right thing to do, and they’ve been pleasantly more logical than the other player in this space and more small-c conservative, which is ironic, as I say, given the philosophical approach there. But in terms of finance, they’ve been conservative and sensible. Conventional, maybe, is a better word than conservative. The conventional thing to do when you’re valued at $400 billion and you need to raise a lot of money would be to go out and access the public markets at scale. So, yeah.

Jason, I’m keeping my bet, no deal. I think you’re right. I think 2026 is when they go out. So I agree with you there. Harry’s pocketing his $50 grand and moving on. I love it.

I’m pocketing my $50, baby.

Jason Lemkin

But also remember, I saw it in one of the chart guys I follow: from April 15, when we had the tariffs and the implosion, this has been the strongest bounce-back from a bear market since 1982. It’s been the biggest jump, right? So where everyone’s head was in April versus where everyone’s head is today.

And you should remember it can go the other way just as quickly. You’re right. Everyone can think they’re flying, and then something can go wrong. So you’re right: when equities are at an all-time high, the window is open, and you know you’re going to need more money, maybe you should think about grabbing the moment.

But if Anthropic’s predicting their revenue is going to triple next year, it’s difficult to imagine, even in an amazing market like today, that you’re going to get a much better multiple than in early 2026, right? Will it triple from ’26 to ’27, to almost $80 billion? Maybe, but the fact that you’ve got a 3x at that scale kind of in the bag, that’s a good time to IPO.

Jason, baby, I’ve got a new bet for you before we do the BFD. The new bet is Anthropic going out. What price does it go out at? And Rory, you’re involved in this bet.

Rory O’Driscoll

Look, again, I think there’s talk about a private round at $300–350 billion. Looking at public information, when you look at the growth rate, when they were doing the $170 million run rate, you can see the math working. So you could easily justify a $350 billion-type valuation in the public markets. That doesn’t seem crazy. I mean, it’s amazing as a result.

But Jason’s right: 1 more year of 3x growth. The thing that would derail all this stuff, as you all said, is sustained deceleration. But if the acceleration we’re seeing attenuates but doesn’t collapse, then that kind of number is totally plausible. I’m going to say $500 billion, which I think ties to the round.

I’m writing this down, Jason: $500.

Jason Lemkin

And I’ll tell you why. Listen, I think you’ve got to be careful to use ARR math when it’s really forward growth, most likely, right? But if they do hit $25–26 billion next year, if it’s in the bag, I’m doing simple math: 20x is what Databricks does. I mean, it’s not even that high for a public multiple—20x, right, for the top 10%.

So 20x times $26 billion is $520 billion. I’m going to guess a $500 billion IPO, right? And it ties to a mediocre deal in this round, right? But still a good IRR, right? If they raise it at $300–350 billion, they IPO at $500 billion, that’s still a pretty good IRR.

It is funny. If you think about the 2 conversations we’ve had—and I’m disappointed because I had all my homework done on SpaceX and we blew past it—if you think about it, 1 company, we’re basically saying 1 company is going to get roughly 20x, growing 20–25%, growing at 300% next year, up from 110, up from 10, growing 3x next year, down from 10x this year. 10x and 3x.

And the other is going to get 40x revenues, growing at—you know, it grew mid-20s this year, but probably a little more next year because of Starlink, at 40%. So it’s just interesting. We talk about these things in isolation, but when you zoom out and look across, would you prefer to buy the thing at 20x, growing 300%, or the thing growing at 20–30% at 40x?

Hmm. It’s just anomalous. Maybe it does speak to some kind of—hey, to be fair to SpaceX, it’s an n of 1. It is profitable. It doesn’t have a direct competitor. Huge market. But I think a lot of that is just the great-leader premium. Rory gave me a price.

Rory O’Driscoll

I’d say $350. I don’t know. Anthropic, $350–400 billion. I’m not spending a ton of time on it.

Okay, we’re going to put $350 down for Rory. I’m going to go for $420.

Jason Lemkin

Great. Great, Harry. Great. I’m going to go $500.

Raaz Herzberg

Or Harry’s 340. I might go—I’m either going to go 500 or 339. I can’t decide which, but I’m going 500. I’m going 500.

Let’s not consume other people’s time trying to figure out basic game theory.

3. Netflix's Bold Move: Acquiring Warner Brothers

Okay, the big deal: Netflix acquiring Warner Bros. Discovery for $82.7 billion. One of the biggest deals. First question is, how did we analyze this? Second question is, will it even go through? How did we think about this?

First of all, you’re right. You say “Netflix acquiring”; Netflix is hoping to acquire, but with a lot of opposition from a hostile Paramount. I think the big zoom-out venture comment is: Netflix won. They ate the media industry. Their market cap is $470 billion. The biggest studio is sub-$200 billion, and Comcast is worth $100 billion.

Netflix won, right? They can ingest this, buy it, and it’s less than 20% dilution, so they can keep powering through. That’s the zoom-out outcome. They come to the table here, and it’s just so interesting how outmatched the other player is.

I mean, Netflix is, call it, a $470 billion market-cap company putting just under $100 billion bucks on the table. Paramount is a sub-$20 billion company putting $100 billion on the table, relying on debt plus private-equity investors like the Kushner fund and a bunch of other funds to bridge the difference. Those are very outmatched competitors in this hostile bid.

And again, as I say, back to the big picture: the outsider, the tech-backed, venture-backed company has basically a far better business model than any of the studios and is eventually going to, as you’re seeing here, start to eat them. That’s the big picture.

Do you think it will go through?

That involves knowing—I mean, there are so many dimensions of “going through.” First of all, it’s clear. What’s clear? It’s clear the board of Warner Bros. Discovery, whose ticker is WBD, wants to do this deal.

Paramount had put the thing into play, but the board’s dynamic is, you know, what do you do as a public board? You say, “What’s the certainty of close?” The person who has $500 billion, plus or minus, is more likely to close than the person who has $20 billion, plus or minus. I’ll go with him. So, they want to get that deal done.

But you have a whole bunch of regular regulators, and then you have political overtones. We also should put in the Hollywood artists, because they’re fun, too. From a regulatory perspective, Netflix is much more a concern for the FTC because of monopoly power—alleged monopoly power—because HBO is a streamer and Netflix is a streamer.

Paramount is much more of a concern to the FCC from a broadcasting-license perspective. Both of them have to go to everyone, but there’s a different institutional and regulatory pushback for each of the 2.

All other things being equal, you’d say it would go through. It’s the classic thing: if you do the narrow analysis—“Oh my God, if you just focus on streaming, then Netflix is big, HBO puts them a little bigger, they’re over 30%”—everyone wrings their hands and says it’s over.

Netflix will say, “Zoom out. Call this entertainment. Take into account YouTube. Take into account broadcast TV. We’re still teeny-tiny. Push it through.” That’s a known regulatory issue, and it’ll get debated and litigated.

The 2 other things we haven’t talked about are both fun in different ways. One is that, more than ever, you have political overtones here. Obviously, the investor base—even leaving aside Kushner—you obviously have the Ellisons appearing to be pretty tight with the White House. You have Trump already commenting a little bit on the Netflix side.

So, you do have the thumbprint of the executive office probably coming in on this one, he said gently. And then the really fun one is that Hollywood hates the Netflix deal. You have to ask yourself why. It wasn’t obvious to me until I did some reading, and I thought, “Yeah, Hollywood is all about the creators.”

It’s not monopoly power screwing the consumers. It’s monopsony power, right? If Netflix becomes the biggest single buyer of content, then if you’re making content—which is what Hollywood does, right—you have to sell to the media buyer for Netflix. That becomes the most important person in your life and your biggest customer, and they correctly hate that.

They’ll say it’s because it’ll be bland and boring content, and it will be, because corporations are more boring with content than individuals. But it’s also, let’s get real, because Netflix will exert its power not to overpay.

So, it’s always interesting because the regulators’ approach kind of really focuses on the damage to the consumer, and that’s not the case here. But if you’re a producer of content—if you’re, name me a famous movie star—you hate this. You’re like, “I do not want Netflix to have all that leverage on me, or they’ll have me grinding out rom-coms on a low budget somewhere in Romania, and I’m not going to like that. It’s not going to be fun.”

I’m sure Leonardo DiCaprio is terrified about that.

Raaz Herzberg

Absolutely. You might have to go down into single-digit millions for those $20 million movies.

Yeah, so many ways to pile on on that one. But, yeah, interesting. A small thing that’s interesting to me is the CEO, Zaslav—is that how you pronounce his name?

Raaz Herzberg

David Zaslav.

Clearly, he does not want to do the Paramount deal.

Raaz Herzberg

Yep.

It is interesting. And for folks, if you’ve gone through M&A, you really want to have 2 real offers: 1 backup. You want to have 1 real and 1 fake offer. At least 1 fake offer—you can tell corporate development you have another offer.

But if you’ve ever had 2 as a founder—and I’ve done both, had 2 and had a pseudo-offer—when you really have 2, you really think about what you want to do with your life more. The interesting dynamic is, I just really don’t think he wants to go work for Larry Jr. at Paramount.

It’s confusing whether he’ll make more money under that deal or less, versus a deal where he gets to control more of his destiny and some of the assets stay on as a separate company. As a founder—and he’s not a founder—as a founder, I would take the Netflix deal in a heartbeat.

And I do think that some of this “Hey, go away, Paramount” is because management doesn’t want to do the deal. Management just doesn’t want to. So, it’ll be interesting when they do a tender on the hostile offer, right? If 51% of the shareholders take it, there may be a divergence of interest at the margin between the 2.

I don’t think management wants to do this Paramount deal. I thought it was interesting David Ellison said the board had not even responded to Paramount’s offer—no response at all—to Rory’s point earlier in terms of where the appetite is from WBD.

It’s clear they were talking earlier. It’s clear, as Paramount said, they put the deal into play. And again, that’s the problem when a small company puts a deal into play: the company that you’re trying to acquire kind of mentally gets its head around selling itself, and then it can just decide to sell itself to someone else.

Again, going back to the big picture here, someone else has a $480 billion market cap and you don’t. That’s what’s happening here.

And at the margin, I don’t know how important it is, but at the margin, Netflix also has a revenue arbitrage. It trades at a much higher multiple.

Raaz Herzberg

Yeah. That can come under a little pressure when you buy a large asset, but it still remains true. Netflix’s equity is cheap—relatively cheap—to buy this asset.

They may be able to revalue all the assets to a 10x multiple of revenue. If they do that, this is an incredibly accretive deal for them versus the most expensive deal Paramount could do, even if it’s do or die. The revenue arbitrage is not to be understated in a deal like this.

Yeah. Though it is interesting: Netflix stock ticked down slightly, but I think that’s a little short-termist. I think, even aside from the revenue arbitrage, the beauty of Netflix is, again, zooming out: because you have global distribution, you can monetize content better than anyone else.

The value of that is you can pay more for content because you’ve got more people to sell the content to. It’s just that simple, right? The business model won. I think one of the questions you put in here was super, because I’m not going to lie and say I spend my time agonizing about the entertainment-industry M&A, though I will—I’ve got to say, in passing—poor HBO.

HBO was so good. It’s been owned by so many dreadful people. It was founded and incubated in Time, then it was Time Warner, then AOL Time Warner, and then, dear God, AT&T. Then they finally got out to become Warner Bros. Discovery, and they’re kind of on their own doing their thing. Now they’re the subject of a hostile takeover.

The AT&T idiots made them change their name to Max and have you reload the app, and it’s all—I mean, yeah, they’ve taken the best high-end TV product in history and just thrashed it through 5 different corporate owners. Whoever gets this thing, please be nice to HBO. It was great once. I have an emotional connection.

But I actually think that the fun question you asked, Harry, was what other examples of this will there be? This is the digital world. The zoom-out comment here is that this is the digital world taking over old-school industries. Yet another old-school industry has rolled over and died, right?

I think that’s a super question, and I thought it was a good one. I was thinking about it a lot because—

What other industries, if you extrapolate that out, do you see?

Raaz Herzberg

I think there’s a bunch, and that’s the interesting thing, because when I started in the ’90s, yeah, it was exactly that.

It was information technology, and most of it was sold to corporations. You had computers to count people, to count money, to count—that’s all it did, hence the name. I mean, information systems—those boring names—and that’s still the bulk of core IT investing. You have software to run B2B, right?

The amazing thing—and this is to your point—is how, in only the last 25 years, digitization ate a couple of industries. The obvious big one it ate is advertising. Facebook and Google have 70% of not just all digital advertising, but all advertising. Thanks for playing, newspapers. Thanks for playing, broadcast TV. They won.

So, from 1995 on, venture-backed Silicon Valley startups ate the advertising industry and took all the money. Now you’re seeing the second big one. I mean, in Mad Men, it looked like it was fun to be in advertising in New York, and now little tech weenies in Silicon Valley—we just did it to Hollywood. Thanks for playing, guys. I know you have these cute studio businesses, but we’ve got distribution on the internet. We’ve got our algorithms for predicting which shows work. We’re going to take over your sexy Hollywood business, too.

And so, you’re right, Harry. What’s next? I was thinking—it was a great question. You actually talked about it last time. To me, the next one is fintech. At what point does someone like Revolut say, “Oh, I woke up and realized I’m the largest market-cap bank in Europe. Maybe I’ll buy one of your branch-based baby thingies”? Amazon bought Whole Foods, right? Because that’s the third one that got swallowed.

Retail got swallowed. I mean, if you think about it, they swallowed advertising completely. They swallowed a lot of entertainment, not all of it. They swallowed a good slug of retail. Probably banking is going to go that way, and at some point maybe auto.

It’s just amazing, over an elongated period of time, the power of digital, software-enabled technology, in conjunction with the internet, to just eat, entirely destroy, and consume other businesses.

4. Tiger's New Fund Strategy

Before we move to some of the biggest AI deals that we’ve seen go down, there are a couple of things that I thought were super interesting, and you can choose. Tiger’s new $2.2 billion fund is downsizing. I know it sounds crazy—$2.2 billion is a huge amount of money—but from the lofty heights of 2021, it’s a big change. Anything of note that we should think about here?

I thought the most—I should have copied down the exact number. I thought the most interesting thing in the reporting was that they did raise a prior fund of about $2.2 billion, right? In 2023, they only did 9 deals this year versus 100 and some odd in 2021. I think what’s just interesting is this is a super-smart group of folks.

I think both strategies are of the moment. I actually think the Tiger strategy in 2021, when we had an IPO a day and every recurring-revenue company could IPO at a couple hundred million in revenue, growing 50%, with 140% NRR, was the strategy of the day. Now Tiger itself reinflated with OpenAI and others, right? It has seen everything we’ve talked about—the huge growth, the unlimited growth for the winners—and now they’ve tilted to that strategy. I think growth investors probably should tilt to the strategy of the day.

We’ll see what the 2029 fund does, but doing 9 deals at that scale is pretty tight, right? It’s a pretty concentrated focus, isn’t it?

It is. I give him credit. Look, the guy running that has got billions of dollars. He doesn’t need the grief, right? It speaks to a love of the game that he says, “I’m going to swallow my pride,” because I don’t think he’s going to say the 2021 fund was a success or the right idea.

You might get bailed out by some of your big investments, like OpenAI, but you don’t look back. We all have periods as investors that we look back on without pride, where you go, “I got that wrong.” I’m sure as smart a team as theirs looks back on 2021 and says, “That was hubris, and I was wrong.”

I give them huge credit for not going, “Now I’m just going to take my $2 billion, $5 billion and stay in my house in Palm Beach or whatever.” They’re going to get back in the game, raise a smaller fund, take the little bit of knocks from the knockers that say they’re wrong, and just do their job and do it well.

All credit to them. What you’re seeing, which is always true, is that the original strategy they had—doing the very best deals, doing them late, doing them with concentration—was the right strategy. It worked with JD.com in 2012, or whatever it was, when they did that in China. It worked early on in internet land. They got carried away, they made some mistakes, and now they’re sobering up, flying right, and staying in the game. All credit to them.

Raaz Herzberg

And a 20% GP commit is not small.

No, I mean, 20% is at the limit where it’s almost not worth doing. You might as well just direct-invest. You’re just not getting enough leverage on your money. I’ve always thought 20% was a weird number, right? Assuming you have 20% carry, you’re not making enough money. All the grief of having LPs isn’t worth it at a 20% GP commit, is it?

Well, it is because you need the bigger check size. The point is, at $400 million, you wouldn’t be a late-stage fund.

Yeah, you get to write bigger checks, but you don’t make so much more money versus investing. In theory, you don’t make enough money for the grief.

I understand what you’re saying because the math is easy. You can do it in your head. It roughly doubles it. You have 20% of your money, and then you have 20% carry. So, if you 2x the fund, half your gains come from your capital and half your gains come from your carry. It’s easy math, ignoring fees, but in theory.

Now, you’re right. This breaks down on late-stage funds. For early-stage investing, I actually think it’s worse because it’s harder to get into the deal, right? It may be the opposite for growth.

Raaz, you’re exactly right. If you were running a $400 million early-stage fund with $400 million of your own, becoming an $800 million fund to take other people’s money is silly. You’re exactly right. I would argue, though, that in the late-stage business there’s a critical point: you can’t show up at a $200 million round with a $30 million check and say, “Pick me.” That’s just not a thing.

So, he’s sizing for the business at hand. I agree. I think every LP probably draws a huge amount of comfort from that check. I personally think, especially when you’re dealing with wealthy people, where they put their money is what you want to know. I actually think LPs don’t focus on that enough.

I find it enormously reassuring that someone cared enough to write 20%. When things get tough, or when you’re trying to, God forbid, get your capital back versus play to win, that $400 million will keep these guys focused. I think it’s great. Again, I think everything about that is good. I hadn’t picked up on the 20%, but that’s awesome.

For folks who might be founders or others, that’s a lot for a fund, right? I think the average growth fund is about 1%. Even that can be manipulated depending on where you come up with 1%, right? Maybe one or two of the richer partners are putting the money in. It can be from loans. It can be from cashless things.

To Harry’s point, you’ve got to love the game if you’re that rich. Even if you had a rough couple of funds, you’ve got to believe this is worth it. This is so much of the fund, and money is a great truth serum. Don’t tell me what you think; tell me what you do.

At the end of the day, “Do you love money?” is one question. “Do you love the game?” is one question. “Do you love it at $400 million?” is a very different damn question. Clearly, they do. At $400 million, you’re exactly right: you’re in because you’re in.

I also think it pains him greatly that their brand has been tarnished in the LP community, and he will do everything possible to make other people money again. I think he is a wounded and incredible dude. Actually, I’m a big fan of Chase.

5. Databricks' Head of AI $500 Million Seed Round

Totally. I’ve never met the guy, but that’s how I read it. Absolutely. There’s a point at which you’re not doing this for the marginal money. You’re doing this because you like it and you like to do it well. You take money from LPs; you value that relationship. I totally agree. I think they’ll be a highly disciplined, highly focused machine.

Next, Naveen Rao, Databricks’ head of AI, announces his $500 million seed round at a $5 billion price. We actually discussed this months ago. I don’t know if you remember it, but well before it was announced this week. It was just announced this week and caused a stir at the $500 million seed. Anything to discuss, if we haven’t?

Sure. I think it’s—I can’t remember who wrote the book about another entrepreneur where perhaps it didn’t apply as much, but the title was Once You’re Lucky, Twice You’re Good: The Rebirth of Silicon Valley and the Rise of Web 2.0. Naveen’s done it twice. You just look at that and go, at this point, you can draw a line, and once you can draw a line, the VCs are going to show up en masse.

It totally makes sense now, and everyone’s doing their “I’m delighted to back Naveen” tweet. This was yesterday morning.

Yeah. It is true to some extent: once there's such a lot of data on someone who's been successful twice, you just have to look at it. I can totally see how you can extrapolate from that. Whether the math of what kind of seed deal at $5 billion can give you a 3–5x return, I don't have clarity on that. It's a lot of enterprise value to be created.

But I don't know if I know how I'd write that investment memo if I was writing it for my colleagues. It would be: “Once you're lucky, twice you're good. This guy's done it twice. Back him.” That's different from saying, “I see a $25 billion outcome here.” I just don't know it.

The one lesson that I've learned from a lot of these deals, whether it's Thinking Machines or this or some others, is that although it's $5 billion on the sticker price when it's announced, there are actually several rounds before that that Sequoia and Andreessen Horowitz have done that are considerably cheaper. The $5 billion sticker seed is actually very different from the first 2 rounds before that that no one's picked up on.

Raaz Herzberg

I don't know if that's the case in this case, and you might know better than me, but you're right. We're seeing a lot of that. It's just so weird. If it's the same—and, just for listeners, what you're seeing is that it can either be different investors doing early rounds that don't get announced, or, even weirder, you see 1 investor commit, and they commit some money to you at $300 million, some money at $500 million, and some money at $1 billion.

From the investor perspective, they make the commitment and even the checks at the same time. So their blended cost is $500 million or $600 million. So that's their economics, and that's the facts. But you, the entrepreneur, can then announce a headline billion-dollar raise, right? It feels a little FOMO-y, and obviously the idea is both that you get attention and maybe that the next-round investor is foolish enough not to realize what actually happened here.

Maybe it works, but it's another sign—when professional economists make lists of things that you see in bubbles, this is widely up there on the weird stuff you see at the top of markets. But it does work in my limited experience, because even if you do 3 rounds on the same day at $300 million, $600 million, and $900 million, or whatever it is, when you're oversubscribed, it's just a message to the new investors: the price is $900 million.

The price might even go to $1.2 billion—I've seen it too. It's just a step function, and investors that are struggling to get into the round accept it. They acquiesce to it because it just is what it is. As long as there's a ration, I think sometimes in venture, when deals are hot, you just have to pay the price that it is. In hot deals, you just have to walk away or pay the price that it is.

So, if you can stair-step a round even in a matter of hours so that the outcome is logical, then investors can either opt in or opt out. It is a little douchey, but it actually leads to a very efficient process for folks to opt in or opt out, right? I mean, YC's been doing this for over a decade. Even in the old days, you got in before YC Demo Day, you paid 6 pre; you got in after YC Demo Day, it was always 9. There was always a 50% step-up.

Now the step-ups are even higher before and after Demo Day. So this has been going on since I started investing in YC companies, right? In 2014, the first one I did, everyone had a step-up after Demo Day. It just didn't used to be up to 60% or 100%.

6. Harvey Raises $160M at an $8BN Valuation

Listen, it's not 3 rounds in a day, but it is 3 rounds in a year. Our favorite, Harvey, is back, announcing a $160 million round led by Andreessen Horowitz at an $8 billion valuation. Just to give the metrics: $15 million in ARR, growing 300% year on year, 98% GDR, 168% NDR.

Good numbers, small raise in comparison: $160 million led by Andreessen Horowitz at $8 billion. So, like, less than 2% dilution. Thoughts?

Raaz Herzberg

You know, it's funny. First of all, I've joked about this. When you can get around this for 3% or less dilution, I'm super in favor as an early investor, right? It's a great deal, especially if we no longer care about the downside risk, if we no longer care if it's worthless. I think it's an amazing deal.

The funny thing is, when I started investing, I was taught—and, in fact, I was told by one of my anchor LPs—that these kinds of deals, you can't recognize the markup. It's too small. I had a deal like this during the 2021 boom. It quickly got marked up to $3 billion by a good investor, but it was 2% of the company, right, to get into the company. I never recognized the round or marked it up. My LP said, “You can't do it.” I guess here it's $160 million. That's not chump change, is it?

No.

Raaz Herzberg

But it's so small. It's so small. Is it a real valuation? I don't know. Just to push on that, right: $160 million over $8 billion is 2%. I mean, let's do the math here. At $800 billion in SpaceX, 2% is $16 billion. They're not doing a $16 billion secondary. We just took that valuation seriously half an hour ago.

And the interesting thing is, again, we said it a million times. So there's no legal software company that's been worth more than $2 billion ever. So it's 10x that. The data companies, Westlaw and LexisNexis, are worth more than $2 billion—what, $5 billion and $10 billion? So still less than this.

This implies huge TAM expansion into labor, and then, if you go on the website, huge TAM expansion. I'm sure beyond just legal into other professional services.

That's what you have to believe if you're going to see this being attractive from the—

You do. You really do.

And you also have to see market dominance. I think you've also got—

Oh, yeah. You have to be the winner. Number 2—yeah, this is not the prize for number 2.

Not only the winner, though, Raaz. I think market dominance in a way that Uber and Lyft is. You can't have a cloud composition there where 4 players take—but there are so many, and there are so many fragmentations of this. You did GC AI. I mean, so—

I think you need to win the whole market.

Yeah, that's actually a good comment. What you're saying, to paraphrase, is not the typical app oligopoly, but almost like the way Netflix, to go back to it, dominates streaming. It's like, not only did I win; I have 80% market share of streaming, or whatever it is. I'm the winner. I'm the Uber. Yeah, no, you're right, because, yeah, you've got to extract a lot of money.

Raaz Herzberg

But also not the unbundling, right? As I said, we're seeing this vertical unbundle into lots of different niches that we are both in and invested in. I think you have to believe they subsume all of those and be able to expand broader.

And, yeah, the theory would be: first, marquee customers in the law firm in particular. That's the investment thesis. Top of class. The challenge to that, though, is Legora at $40 million—so, a lot less, but they're doing 10x year-on-year growth on a smaller base, admittedly.

Raaz Herzberg

Yeah.

But they are doing very well in Europe. Legora's European progress can't be underestimated. And really, the analysis from investors today is that Harvey won the US and Legora is winning Europe.

Raaz Herzberg

I think we're making it too dramatic for VCs. Here's my analysis, okay? If Harvey went from $50 million to $150 million this year, and $10 million to $150 million in 2 years, I would just draw the line—I would just do some classic math and draw the chart out. My entire life in B2B, as a founder or investor, every time we try to be too negative on TAM, it bites us.

Now, we talked about—what did we talk about live in London? The something TAM, what did we call it?

The TAM trap, dude.

Raaz Herzberg

The TAM trap. I believe in it. I'm living it with my portfolio. But—

But we agreed that those were older companies. I agree.

Raaz Herzberg

Yeah. When you go from $50 million to $150 million in 1 year, and if the last quarter—last 4 months—if the growth's consistent, so you can see a path to $400 million next year, this is the same multiple we just talked about for Anthropic: 20x.

But, dude, you could shop for infinity.

Raaz Herzberg

But that's our job as investors: to find outliers. And if this growth is—here's my point. Listen, I'm a simple man, okay? I'm a simple B2B guy. If this growth is durable, if we're seeing signs that it's durable, if it really has 170% NDR and 98% logo retention and it's accelerating at $150 million, this is just the bet you do.

You don't pull your hair out or have to have lengthy dinners about supplanting labor with AI and whether it'll be $10 trillion tokens. You just do the deal if the revenue is durable and it triples from $50 million to $150 million in 1 year. You just do. And the guys that got in at $3 billion at the beginning of the year got an insane deal. It's just not that complicated, Raaz. I can go back to old SaaS spreadsheets and justify this deal.

Dude, you cannot assume that it will grow ad infinitum at the same growth rate.

Great. Then step out of venture and return your last fund to your LPs.

Yeah, you guys, as usual, are doing the extremes, which loses the—

This is pretty simple math.

But your point is a fair big-picture point, a fair one, but let's just talk about the numbers behind it, right? Because, Harry, he's not saying the same. I mean, what we're basically saying is it grew 10x last year, it grew 3x this year. This is amazing growth. Lean in. That's the thought for what Jason Lemkin's saying.

And the only argument against it is that 3x this year is slower than 10x last year. So probably next year's 2x. I mean, it all boils down to the same thing: these growth rates, these kinds of multiple companies doing 10x growth rates, are not something you saw in SaaS.

Raaz Herzberg

So, one of 2 things is true. Either they'll have that kind of 10x growth rate and then decline with the same rate of decline as SaaS companies, in which case they'll continue to grow for a long period of time, or they'll grow fast and slow down fast. If it goes 10x to 2x, if it goes 10x to 3x to 50% growth, then you might have been wrong. That's the gnawing fear.

I agree. You lean into the things that are working because I think the alternative, which is trying to be clever and do things that aren't working that might work in the future, is just too hard.

So, help me just understand this. 10x to 3x, totally get it. Then, let's say it does 2x. Okay, so 150 turns into 300. Fantastic. Then, let's say it goes to 80%. Okay, that 300 is now—

Jason Lemkin

Harry, that's exactly the right math to do.

Okay, great. But then why would you pay $8 billion? Because you are paying 3 years ahead of time for a public company multiple that would be. So, Jason, you say do the deal. I don't understand. I'm really naive here. I'm not arguing; I'm trying to understand. You're paying 3 years ahead of time for what that would be in a public market.

Jason Lemkin

If we go from 150 to 450 next year.

Yep.

Jason Lemkin

Then we're paying 20x revenue at the end of next year. So we're paying a year ahead. We're paying a year ahead if it triples next year. If they can peg the growth, we're all saying the same thing. If the growth stays the same at 3x, even then you earn your way out very quickly. If it declines even to 2x, which is still amazing growth, then you could be a little ahead of yourself here. That's what we're saying. It's as simple as that, right?

I go back to—I think we published on this 10 or 15 years ago in SaaS. You could use the following rule of thumb with a high degree of accuracy: the growth rate for any year was roughly 85% of the prior year's growth. If it's growing at 100%, it would probably grow at 85%. If it's growing at 85%, it would probably grow in the high 60s. It was just a rough rule of thumb. It was roughly right, right?

The thing here is, instead of seeing that best-in-class 3x growth, you're seeing best-in-class 10x growth. As I say, if that only declines slowly—if it goes 10x to 6x to 3x—these are amazing companies, and any price can be paid. If it goes 10x to 3x to 2x, then good prices can be paid, but you could get ahead of yourself. And if it ever slows down to sub-100% growth before you hit this, if any of these things go down, then you're just way wrong.

Which is why you do understand that it is possible to step back. It is possible to lose money on a great company. That's the only—because it's the only risk you're running when you're paying $8 billion, right? There's not going to be a risk that Harvey's not one of the greatest companies. It's a given. It's clearly the biggest risk you're running. There's only 1 risk you're running.

It gets back to where we started, actually, about price. You have no operational risk. You have no business-market risk. You have no time risk. The only risk you're running is you're paying $8 billion for something that might be worth $4 billion. And if it's worth $4 billion, you're wrong, right? So you can be wrong on price.

So far, no one has been wrong in AI. The stuff that's worked has been marked up and marked up again. And right now, that's the right bet to take.

Jason, to your point, you go back to the short version. What you're saying is it has been the right bet to take so far. It could turn, and if it does, everyone will be over their skis. But so far, as you say, the person who was agonizing about his $3 billion bet and biting his nails at the start of the year is like, “Oh my God, I'm so smart. I'm so smart. I have a 2.5x in 6 months,” because the momentum kept coming.

I think Harry's got an important point going back to 2021. I think in 2021, we kind of reached the peak of people paying 3 years ahead. Yeah.

Jason Lemkin

Right, in terms of multiples. Maybe we're back to that. Maybe—and that would be logical, right? Maybe 3 years ahead is the limit of what VC can do. You've got to have it tie to something when you put together the investment memo, right?

In the old days it was 1x, like Box and others when Rory was there. Their growth rounds were often at a modest discount, right? You weren't paying years ahead. You were actually paying a discount. And I think it peaked around 3 years ahead, right? The classic 100x ARR in 2021 were really 3 years ahead, between 2 and 3 years ahead.

Raaz Herzberg

Jason, that's right. So, if Harry's asking, is that crazy? Time will tell. It might be peak, peak AI bubble, at least.

Jason Lemkin

It was crazy in 2021 because 2 bad things happened, not 1 but 2. One is you had a recession, and then on top of that, a lot of those companies became functionally obsolete in terms of where the excitement was with ChatGPT. So paying up in 2021 was a horrible decision.

I do believe in this case the big advantage you have is, as I say, I think that the direction of travel is pretty clear here. I don't think we'll wake up in 2 years and go, “Oh my God, we're not using AI for legal.” That's not a thing.

So you can see—I can see why people are leaning in, which is why I go back to my comment. The only remaining risk is some kind of TAM and competitive dynamics. Can you get enough of that market, and is it big enough? And if it is, which is why the leaders are getting this premium, you can just say, “I'm going to be the leader.” It might take time, but it's a big TAM. I got it.

Raaz Herzberg

Yeah. Well, it might be that we're underestimating a risk that a lot of apps can be Jaspered.

Jason Lemkin

Agreed. We might be underestimating—there might be a GPT-6, GPT-7, Anthropic 5 risk, where we thought we had a stable place in AI. So, of course, Harvey and others are going to win, right? Because they control the customer; they can swap LLMs out.

But the Jaspers of the world and multiple others thought they had winners, and then AI changed and they became of very limited value. So I'm not smart enough to know, but I don't think we should assume AI is stable. And I think that's why there's a code red at OpenAI, because Sam said it's not stable.

Raaz Herzberg

I think that's fair. I think I actually saw a good piece—I can't remember the gentleman's name—and he was very skeptical about most software app companies in the age of AI. His comment was, “Models will do most.” So you either help make the models, which is building the AI, or you have to do very different apps that were only possible in the age of AI.

But the comment he was making is exactly that: whenever you do an AI app, one of the nonnegotiable disciplines before you do it is you should go and try to use the core models to do the same thing. You should try and build a functional version of that as simply as you can. And if you can get even vaguely close to it, you need to pause.

Because I don't think every app goes away. I don't think someone wants to maintain their own Salesforce. But I do think, Jason, you're right: one of the known risks in all these investments is model improvement. We're seeing it in coding, where the models are clearly trying to eat the apps.

Jason Lemkin

I think this actually goes back to our discussion about Sierra's implementation within enterprise, which I've seen with Solve [?]. A lot of the defensibility—the moat, the skill—is in the GTM and the implementation. And so I don't think it's quite as simple as, “Oh, well, a new model will happen.” I think that's a really, respectfully, Silicon Valley—

No, but, Jason, I disagree. I think that if you could take a Sierra example with Macy's, or wherever else the customer has, and if you could ingest all their data, do massive deep reasoning with a different model, and solve customer problems in milliseconds, none of these products work in milliseconds. They all still have some set of issues around them, right?

People would immediately move to a vendor that could be 10 times better than all of them. Sierra, Fin, Schmid [?], and Denwin [?]—these are 10 times better than what we had 2 years ago. If you've used these products in the field, you can see, on the one hand, they're amazing. On the other hand, they are slow. On the other hand, they are complicated to set up and ingest data.

On the other hand, hallucinations are a minor issue, but they're not a non-issue, especially when the answer has to be correct. So I'm just—if, as investors, we have to imagine a world where that all goes away in the next 2 years, okay, and it's not stable, all of our investments could go to zero.

Jason Lemkin

But I'm pushing back on you. I'm saying—

All go to zero?

Jason Lemkin

Dude, I'm saying Wilson Sonsini, Cooley, the biggest law firms in the world, have all been piloting and building relationships, building implementation pathways, integrating them into their workflows for the last year.

And just because Anthropic comes out with a new model that is 3% to 5% better—

Raaz Herzberg

You're not listening to me. I'm not saying 3% to 5% better. I'm talking about a step function that could well be coming.

But we benefit.

How much time do you spend coding with deep reasoning?

We benefit. We benefit from—

Raaz Herzberg

You don't even know what you're talking about here, Harry.

I know what I'm talking about.

Raaz Herzberg

Complete crap. You have a hubristic VC argument that you think because Wilson Sonsini invested in Harvey, they're not going to switch in 5 years. We sit on top of them. Harvey sits on top of it. It benefits from it getting better.

Okay. Literally today, for example, this isn't even what I'm talking about with deep reasoning. Replit changed today. I don't want to overtalk about Replit; I just spend so much time in it.

Now with Replit, you don't pick your model anymore. It's all dynamic. You don't pick a model with high reasoning. You don't pick short reasoning. You don't pick anything. It just rotates among Google and others. That, in a way, plays to your point, but it's so much change. It's so much change.

You're right, but I don't think you use the deep reasoning enough. I mean, 15 minutes, 10 minutes to get an answer, or—I'll tell you, let's find a real implementation, because I've tried with Decagon and all the rest. They make plenty of mistakes today. So does Fin, and these are great products, but they're not 100% right. They're like 90% right.

I do believe that domain focus, the workflows, and customer demands give you some kind of lock-in. If the models move slowly or you stay on top of them, I think the app companies should be fine. But I do think it's fair if you snooze, if either of those things happens.

I can imagine if, instead of the next generation of either Anthropic or OpenAI being another incremental turn of the crank, there was some kind of reasoning step function—or AGI step function. I can't even say that without snickering, but you could imagine another turn of the crank that made everything you've done so far not be the way you do it anymore.

As long as that risk is there, at the bare minimum, what I would say is that I haven't seen any of my companies at the app level totally go, “Oh my God, we used to do this; now we don't.” They haven't, to use your phrase about Jasper, right? But I have seen a lot of them have to wrestle with their offering quite significantly, because some things you thought you could do economically, and other things that you couldn't do 6 months ago, are now way more compelling.

As I say, product-market fit is a rolling feast at the moment, right? It's a moving target, which is why, if you look at all your good app companies, one of the things you see is that when the new model comes out, they're on it that afternoon. It's pizzas and late nights. You have to know what's in the box pretty damn quickly, right? Because until this pace normalizes, you can be displaced.

Raaz Herzberg

I guess here's my point. We'll just see. I'm just talking about B2B apps. Sorry, Harry, maybe I wasn't being clear. I was making 2 seemingly conflicting points, or making 2 points at the same time.

I think we haven't even begun to see deep reasoning in B2B apps. We haven't even started. We haven't even started. We are doing relatively simple prompts that can get answers back in a second or 2, or less. You can't wait 5 minutes for Sierra or Decagon or Fin to give you an answer. No one's going to wait 5 minutes for that answer.

This is part of the code red at OpenAI: they want to move away from reasoning. But I think when that goes from 5 minutes to 5 seconds, or better yet, a second, just like we thought Jasper was amazing, we haven't even begun to imagine what B2B will do to AI when it can do deep reasoning in a second.

It's just not accessible to B2B apps today. We just can't wait 5 minutes for Fin to tell us an answer. We just can't wait. We don't have that time. I need to find out what happened with my sweater.

It's what I find so funny when people compare the LLM market to the cloud market, though, because the thing that you don't have in the cloud market is the promiscuity that you do in the LLM market. I've spoken to 2 companies today, and they're like, “The upgrades in Anthropic recently have meant a full shift to Anthropic away from OpenAI, and improvements in our product that we really didn't expect.”

It's amazing. We're so grateful to Anthropic, but this was a real shift overnight for them.

Agreed. And actually, that segues to—you've clearly not been capable of keeping us on track anymore, Harry, so I'll just cover the agenda from my side. You were going to ask us about the Marc Benioff comment on LLMs being a commodity, which is exactly where you're going here.

It's a super interesting comment, and let's start with the point you made. Yes, I've been struggling to find—because you always try and think in analogies as an investor—how sticky, commoditized, and profitable all of these are. They're related terms, but they're not the same. How sticky and profitable are the models?

You're right. You start with the basic comment: in cloud land, there was an oligopoly of Amazon, Microsoft, and Google, but you couldn't easily switch between them. People muttered clichés about how, “I want to be multicloud,” but no one's really multicloud.

Many of my companies moved from cloud A to cloud B. It's 2 years, it's millions of dollars, and it's a pain in the ass. Here, you're right: these are APIs, and most companies have multiple providers on the same system and switch between them. In fact, Sierra did an interesting piece on how a lot of their application is a constellation of models. In real time, you're always looking at multiple things.

You're right; it's way more fluid in terms of your ability to shift between than anything you've seen before. So, yes, I do think that's true. The question is, what does that mean?

Of course, Marc is right. Just like Replit today, models can auto-rotate without you knowing it. Salesforce is, and should be, doing the same, and they have their own LLMs, as he talked about. That's great today, and I think it's an interesting topic for 2026.

Just going back—not to push it—but we use Agentforce ourselves. It is great. I can talk to you about how it really works. It takes about 30 days to train and deploy, and then you've got to keep going and upgrading. It's great, and it works just as well as the other agents.

In one way, it works better than all the rest—just one way, and it's Captain Obvious: it is native to Salesforce data. So it actually works better than all our other agents in sales. We can show you that. Okay, so it's great—use it. It's going to be a multibillion-dollar business.

No, but imagine when, instead of taking a month to train and a couple of other months to iterate, it can happen in minutes. This will be nothing like the AI we have today. We're just starting, and not only will that probably make Salesforce a better company, it may disrupt all these incumbents when all of this can be done instantly—when the Harvey that we used in 2025 seems just quaint in 2 years.

What a joke that we had to spend all this time training it and ingesting it, with all the mistakes it made. I don't know. I think it's very exciting, but I think it makes our investments even less stable. This is going to change, and it's going to be very exciting to go from months to train an agent to minutes. It's going to come.

I think the interesting question from the Marc comment was that there was an implication that, because they're swappable—which is true—the LLMs themselves are bad businesses, right? That was the implied statement that I read.

It's interesting to say why that's not the case, because I don't think it is. I think Marc actually used the analogy of hard disk drives, right? If you read Clayton Christensen, it's the prototypical example of a wildly competitive, commoditized market where there were 30 providers.

I think the analogy breaks down because, if you look at what happened in the hard-disk market, capitalism works. If you have 30 commodity providers and you don't invoke antitrust, 27 will go bust. You end up with 2 or 3 providers—the survivors—and that's what it takes so they can extract enough profits to survive.

Thirty people don't get to make it. So I think if you look at the hard-disk market, it was a commodity. It was brutally competitive for a while. It remained a commodity even after it consolidated to 3, but they were able to extract enough profits from it.

The implication of Marc's sentence—“Oh my God, this is a commodity market like hard disks”—might be true at the start, but there's an embedded comment there that isn't true. I think it's totally plausible that, even though there is a fair degree of switching possible between models, you still evolve to an industry structure where those model companies make decent money.

Noah Smith had a good piece on this, even though he was negative on the comment. He made the comment that the model companies could be a little like the airlines: super-high fixed costs, easy to switch, right? His implied comment is that that's a bad business. It's not an awful business if you consolidate.

If the antitrust people would let them, we'd only have United in San Francisco, and then they'd just charge through the nose. So I think you would see consolidation. How do you think about the volatility of revenues that's inherent in a business where the quality drives so much of the switching? For example, Anthropic will suddenly have massive usage that will drive revenues, and then others will lose it very quickly. If you're going to be a surviving business, you can't live like that in the long term. It's just too hard. So the economics—microeconomics—will make it happen.

Jason Lemkin

I think it's probably 2 things. One is, as the cost to enter gets higher—the fixed-cost barriers—I don't know if there are going to be 10 of these. There might be 3 or 4, but I doubt there'll be 10, right? If it really does cost a lot to make these, if it doesn't cost a lot to make these models, then you're right: all bets are off. That's one way.

And then, obviously, the second way—and you're seeing it right now—is you say, “Hey, if at the API level I'm a commodity, and there's me, OpenAI, and Gemini, and the swap in between us—I've got to grab the apps.” That's what you're seeing. Anthropic is grabbing the coding app, and obviously OpenAI is grabbing the ChatGPT consumer app, right? Because you're basically saying, “I can't be sitting in the back here getting swapped out by some rotational round-robin AI. I've got to own the end user here,” right? So those are the 2 things.

7. Chinese Open Source Models in US Startups

I don't see the volatility of revenue on the consumer side because you have memory. I don't know about you guys, but I'm seeing this so much in the LLMs that I'm using, where memory drives so much of the actual end product that I get, and that's incredibly sticky and will drive a lot of value. But on the B2B side, where you can have companies switching so easily, there isn't that stickiness.

Jason Lemkin

Well, just 2 thoughts on the B2B side. We talk about a couple of LLMs, but so many of the hot companies use their own LLMs—and they're Chinese models. Cursor's own model is a Chinese model; Windsurf's, too. So all of our portfolio companies that are using their own LLMs—they're not really using their own LLMs. They're using cheap, open-source models, or, if they could, they would use Chinese-hosted models, and sometimes they do because they're a fraction of the cost.

Where exactly this all goes, we don't know, but all of these startups that have their own models are using Chinese open-source models. They all are, including Cursor, right? So there's a whole other group that is competitive because they're not raising massive venture capital, and maybe they're inferior in some ways. But if Cursor is using its own model 30% to 40% of the time, it's not that inferior because Cursor is doing pretty good, right? So, comment number 1: Chinese models are already being used by our hot startups. It is a real threat.

Idea number 2: you think, Harry, you think memory is a moat and permanent, and it absolutely is. But I think this is why Sam Altman called a code red. Imagine today, when we're doing this, if ChatGPT went away tomorrow.

Okay, here's what's changed. Google's AI Mode is pretty good. Now, it's not going to be our therapist. It's not going to have as much memory, but AI Mode is pretty good. The Google stack is pretty good. And if OpenAI—for some reason, if ChatGPT—went away tomorrow, we would survive. We would complain, Keith Rabois would have some good comments, you'd have some comments, Twitter would explode, and in a week we'd be like, “Whatever, we've moved on.”

Some folks would go to Claude, even though we've forgotten about Claude, but Google's pretty good. This is why I think Sam Altman called a code red, right? Because OpenAI is a consumer company and even said, “Listen, we're going to do even more on ChatGPT. We're going to do less on apps. We're going to do less on imaging and video. We've got to make it good,” because we would be in a tough spot for a while if Anthropic went away, because all our apps wouldn't work. That would suck.

But if ChatGPT went away tomorrow, we'd be fine in a couple of days. We'd lose a little memory. We'd have to rebuild it in Google, but we use Google every day. It would not be the end of the world.

I don't know if I buy that. I mean, yeah, it's not the end of the world because nothing is the end of the world unless it's the end of the world.

Jason Lemkin

It'd be worse to lose Netflix. That has more proprietary use cases than ChatGPT.

That's a more interesting comment, actually. Genuinely, it's like I paid $20. It's not not true, but could you apply that to all of them, including Anthropic? I'm genuinely asking here, Jason. You're the coder here, and I submit to you on this one. You could switch Anthropic out, and it would get like 90% efficiency on other models.

Jason Lemkin

Well, there aren't that many. Yeah, I do think—look, Anthropic is more enterprise-focused. In my experience, it is stickier because of that. There's more work than just moving in a day. That's why I slightly challenged your point that you're saying consumer was stickier. And I do think memory is a big deal, right? It's getting really, really, really good—at the edge of creepy—but we would just—it'd be like a TV show. We would just shrug and switch the next day. Life would go on. It's the greatest consumer app of all time so far. We'd be fine.

Put me down for Stranger Things. I think, obviously, we would get on with life because 3 years ago, apparently, we were without this and we were fine. But I think it would leave a significant gap. I think there's no doubt that it's a superior product and you'd miss it. So I disagree.

Let's test you on this. When we were looking at consumer hardware once, one of my colleagues gave me a mental test that I actually think was one of the most insightful things I heard about consumer products ever. He said, “The only test you need to run on this one is this: if you lost it today, would you go out and buy another one tomorrow morning?”

It's a very good test. If you lose your phone, you instantly go out and get one in the morning, right? If I lost our coffee maker at home, I would be down to the store in an hour, right? Then there are other things where you go, “Yeah, I'd take a week. I might get around to it. Maybe I wouldn't bother,” right? And it's just a really good test.

Using that test for ChatGPT, if I lost ChatGPT now, I'd be like, “I've got to go find something.” And I don't think Gemini is quite there. So I think it would leave a void, which I think speaks to their strength, because maybe it's not an “I would die” void, but it's 800 million people who use it. I think there's a lot of gravity in those individual consumer users and the habit involved. I think it's their biggest asset.

Jason Lemkin

But it could be just as sticky as Yahoo Mail. We survived and moved to Gmail. It was okay.

It was, but it took a sustained 5 years of under-execution by Yahoo to get that done, right? And I think Yahoo Mail and Gmail were more similar. I would argue even today, despite all the progress in Gemini, the ChatGPT experience, I think, is still better. Controversial take, perhaps.

Jason Lemkin

Well, play on it some more. Let's talk about it in January. I think you're going to come around to my position, which is the same one that Sam Altman has: it's pretty good now. I don't think it's going to stop OpenAI's future, but everything's just unstable, including Harvey.

I think what you're seeing with OpenAI is the awareness that they've been massively diversified, way too much. They need to consolidate. They need to concentrate. They're absolutely aware that they've fumbled the ball over the last 12 months, and they need to massively reduce the portfolio of products that they have. There's a focus on healthcare. There's a focus on Codex, and there's a focus, obviously, on the consumer product. And that is the BFD for them. I think Brad Lightcap feels the pressure. I think Sam Altman feels the pressure, and it's game time.

Jason Lemkin

I just think the way markets work is there's this formative period where there's a lot of change, and then it locks in, and then change is much harder to happen. Remember we were talking to Tomasz Tunguz? He had some congealed-grease thing, right?

My mental model is always that it's like the Big Bang. Early on in the Big Bang, everything happens, and from then on, nothing—it's just expansion and nothing changes, right? This is one of those moments in time where how you end up ranking by the end of 2026 or 2027, probably, I think, will determine the trajectory for 10 years, and I think the variance, the high fluctuations we're seeing now, will steady out.

I can't prove that. You could have a world where it remains constantly changing, but in my gut, I think economics tends to force that kind of stability. So you really want to be sure that when things start to lock down, you lock down in the number-one position.

Well, just as a reminder—I know we'll move on—but Marc Andreessen said a couple of months ago that 80% of its startups use the Chinese open-source models for AI.

That's not a correct quote. Martin Casado then tweeted and said, “That's not quite a correct quote.” I think it was something like, “Only 20% of the time, my companies are using open source, and when they are using open source, 80% of that open source is Chinese open source,” which is a very different thing, but still a significant thing, right?

What it says is that there is a demand, no surprise, for a quote-unquote cheap open-source model. Given that both of these ideologically formerly idealistic, now highly commercial corporate entities have stopped providing state-of-the-art open-source models, there is a latent demand for that, which, for their own good reasons—we can speculate about that in a second—the Chinese tech industry appears willing to fill.

I mean, even though the market tells him to stop doing it, it was kind of nice when Zuckerberg was willing to fund R&D development and keep churning out excellent Llama models for everyone to leverage.

Jason, should US startups be able to leverage Chinese models?

Jason Lemkin

Listen, assuming there are no security issues, I don't care. Right? I think the issue that I don't fully understand is inference, because, for most cases, if you're running a Chinese open-source model on Amazon, it's really not any cheaper. You're not saving that much. You save a little bit of money; you don't have to pay for the model, but inference is where most of the cost is. So I think there's still this gray area where obviously it works for Cursor at scale. Whether exactly where it works, I don't know.

Look, as long as we're not sending data back in the way we shouldn't, I could. More importantly, listen, I just want to make money like everyone. It's 2025 going into 2026. Harry, don't tell me about it as an investor. This is an area of unlimited greed. I don't want to hear about it. We're going to forget about it in a week anyway. We already forgot about Replit and DeepSeek. We forgot about all of it. I just want to make money and be quiet. Okay? Just don't talk about it. I just want to make money.

Rory O'Driscoll

The question—Harry's question—is: should we use Chinese open-source models? You have to break it into 2. Are there national security issues or regulatory issues? It's the job of the government to figure that out, and we should take our lead from that. If the government says no, you should abide by the law. If the government says yes, you should at least take that into account. You can say there are no national security issues, frankly, and then separately from that, you have the business issues: is it good value, is it cost-effective, and all that stuff.

I think the interesting thing is, because, Harry, I've watched your little dispute with Keith Rabois on Airwallex on Twitter—but hang on, let me finish—the odd thing is I can't quite figure out what the national-security guidance on China is. It's quite confusing because, obviously, we're now back to selling them advanced NVIDIA processors. I think the logic is some version of, “They're going to figure it out anyway, so we sell them to them.” So it's not clear to me where we can say we can do it and where we cannot.

8. Airwallex Raises $330M at an $8BN Valuation

And then separately, if you can do it legally, after that it's just practical and functional: if the models work, you do what you can. Sorry, that was a little long and convoluted. So I'm getting into a very dangerous zone because Keith Rabois is a friend and an LP of mine, and Airwallex is a $7 million investment of mine. I'm screwed both ways on whoever wins and loses in this one. But Airwallex raised $330 million at an $8 billion valuation, led by Lee Fixel at Addition, who was a big investor in Stripe. And then, in the last few days, Keith Rabois has been very public in stating that there is a data concern about the data flows that will go back from Airwallex to potential Chinese officials, government—you name it—whatever institution that is. And that is the news.

Based on the conversations we had: $1 billion in ARR, $8 billion in valuation. Why is it so cheap?

Jason Lemkin

Because it's an excellent, excellent payments company, and it'll be valued like a payments company. I mean, an excellent growth rate, an excellent payments company, with an Asia discount. It's cheap in the context that it's not the AI magic pixie dust, so you probably would have a higher multiple, and on top of that you have the Asia discount. You're exactly right.

No, but yeah, Rory, it's doing the same revenue that Ramp does. It has more integrations and more underlying infrastructure. It is absolutely the Asia discount.

Rory O'Driscoll

Okay.

Jason Lemkin

Yeah. Let's assume it's growing the same as Ramp and has the same gross margins, right? It's the same ARR. Let's assume maybe the margins are different, but let's assume it's the same for the sake of argument. It's trading at a quarter of the price, right? I get why it's dual-headquartered in San Francisco, but maybe that's the answer. I literally don't know. It just seems a quarter of the price. It seems that—

Rory O'Driscoll

I completely agree with you, which is kind of why it's such an obvious—

I'm not sure.

Jason Lemkin

I mean, okay. I think some portion of it—the significant portion—is the Asia discount. I also think—

What is it if it's not that, Rory? I would love your—

Rory O'Driscoll

I think it's a slight—I mean, one is, I think Ramp has, versus the median fintech, you're taking the other extreme. Ramp has an extraordinary revenue multiple. I think my wider comment is fintech multiples tend to be significantly more bounded than open-ended AI multiples. Ramp, you're right, is the most extreme.

Jason Lemkin

No, but I would actually push back and say, look at Brex at $13 or $14 billion, with a much worse growth rate, much less profitability, and $400 million less in ARR.

Rory O'Driscoll

You know, I agree with that. Between that median one and where you come out, that is some kind of Asia discount. You're exactly right.

Jason Lemkin

My point is, between that and Ramp, I would argue—because, look, there's obviously a difference between Ramp and Brex, and I think that's the high-end execution, et cetera, et cetera, market. So there are 2 things in the discount, is all I'm saying. But yes, let's stipulate, to advance the conversation, that there's a significant Asia discount in here. And then the question for me is, how much?

Rory O'Driscoll

Yeah, it's a huge amount. The question for me becomes, actually, when is that shed? Because in the case of ByteDance, it's never shed. You know, ByteDance is still massively discounted versus Meta, despite it being a phenomenal business, both in margin and revenue scale.

Jason Lemkin

First of all, I think the ByteDance situation is trickier because, one, ByteDance itself is clearly a Chinese company. And then what you're really talking about—are you talking about ByteDance? Are they talking about the fact that you have the whole TikTok dynamic? Because that's an immediate company present in the phones of millions of Americans, which has an end owner that is ultimately based in China. So that's that discount, and I think—

Rory O'Driscoll

I'm saying ByteDance, just the overall company, was discounted.

Jason Lemkin

Well, there should be a China discount, not just because of the US. Because, you know, for all the problems of our government, the Chinese government—the dictator of China—said about 5 years ago, “You shouldn't be doing social media; you should be making hardware,” and he has complete and total power. So there's a reason there's a discount. The reason there's a discount is the one-party dictatorship that runs the country doesn't think those are good businesses. So it's not like it's a China discount for nothing. Now, the question is, is it too much?

Can we just appreciate, sorry, Airwallex is not a Chinese business?

Jason Lemkin

I know, but you mentioned ByteDance, so I went down that rabbit hole. What you're really talking about, in the context of Airwallex and many other companies, is something like the following: these are absolutely not companies that were headquartered in China, nor are they owned by Chinese investors. They are US or international companies—in the case of Airwallex, I think originally based in Australia—that are headquartered in Australia, subject to Australian law, et cetera, et cetera.

So the idea that, when someone says something like “a Chinese company,” that's grossly incorrect. What is true, however, is that if you have a significant number of engineers or data centers based in China, then you are also subject to Chinese law. Just as when you have data centers in Europe, you get the Europeans on your case, and when you have, if you're a European company based in America, you get the Americans on your case. All the superpowers—if you lump Europe kindly into that—any of those countries or entities, in the case of Europe, have regulatory authority to the extent you're operating in those countries.

So my legitimate question back to you is, if Zoom has more engineers there than Airwallex does, why are we not holding them to the same account? Microsoft and Apple do too.

Rory O'Driscoll

I think it's a great question, and I think every one of those, to the extent that these kinds of issues start to crop up, I think it's going to be a thing. Once you start doubting the other side's bona fides, things just get worse. And it's probably true to say, if you have a critical mass of engineers and, in particular, a service center based in China, you should assume, just based on standard Chinese law, that Chinese government entities have the right of inspection, just as—in a similar, not quite the same, way—when you're based over here, you have all the rights of inspection the US government would have and access to information.

I think we're a more rule-of-law country, but I still think all 3 of the big entities, including, as I say, Europe as the other, have some version of that. So if you choose to put your backend data center or backend employees in China, you're taking on that risk, and you're vulnerable to this kind of statement where someone says, “Oh my God, your key information is flowing through a Chinese data center, flowing through Chinese employees. Maybe it shouldn't be.”

The further apart the countries grow, the more this kind of thing gets problematic. If you were trying to sell one of these companies, the embedded risk in China would be a key consideration. A US-domiciled company buying one of these companies would be thinking about that. You probably will struggle to get some US government contracts.

Jason Lemkin

It's just going to be a thing more and more. So I think you're just going to see a gradual separation. You'll examine the risks and go, “Why would I? I can get great engineers; I can save 20–30%, but in return I get embroiled in arguments on Twitter. More importantly, I probably get precluded from government contracts. I have an extra layer of due diligence. It's just too hard.”

Just like all those Chinese companies that went public in the US, right? Let me give you the counterexample, because we all see it from our perspective, and I do think we are the good guys, but it's also interesting to step into the other party's shoes. A lot of Chinese companies went public in the US, and the SEC said, “As part of being public in the US, we want to have access to your audit papers, including the audit papers for your Chinese auditors.” They said, “No.” As a result of that, we pushed a lot of them off being listed in the US.

You're going to see this kind of thing happening more and more. I mean, look, we're not even friends with Europe anymore after our national security policy, so you're probably going to see some of the same thing. We're dealing with a gradual unwinding of globalization, and this is what it looks like. And to your point, right, no one except Keith is yelling at you.

The competitors are going to be the people who use it first, because if I was an all-American fintech company, I'd have my all-American flag out there and say, “These guys are a bunch of commies. They have commies looking at your data. Our stuff is in Texas. We win.” And that's going to happen.

Rory O'Driscoll

I think the thing I would say to Jason's point of, like, no one cares—no one cares. You know what? I know Alex very well at Deel. I'm not commenting on what happened there, but zero churn. I know Jack, and I know our zero churn.

Well, I suspect—listen, a couple of things. First of all, I suspect this won't lead to churn. I think this is probably an offensive to dent progress, right? Let's be clear: I believe you that it helped. I do think the goal is to impede, right, whether it worked or not.

I would just say 2 things. One, the company seems ultra-impressive from afar, not just from the recent press, but from following it for a while on social media. When this happens, you have to not only say, “No US data is sent to China”; you have to make it unimpeachable. You just have to remove the objection. An objection has been added to a sale.

Let's just step back for a minute. Maybe it's to derail a financing, maybe to limit the size of the round. Who knows? It's probably linked to the timing of the round. So, it's an objection. Is there maybe a racist element to it that I don't like? It feels like it. It feels racist to me. I don't like it. But my point is, from a sales perspective, it's an objection. A lot of objections are going to come up, right? Maybe Ramp has a security issue next week they have to deal with, for example. Okay, you've got to deal with it.

If I know my data isn't going to China 100%, I think outside of the US government, the objections are over. I do think, to Rory's point, in my experience, you're never going to get a government contract. But so what? The world's big. You're just never going to get a government contract. So what? That's just life.

Rory O'Driscoll

The only thing I would add—I actually got to say a sentence I never thought I'd say: defending Keith. Well, I don't think it's racism. I genuinely don't.

Jason Lemkin

I don't think Keith is racist, but I think there could be an element of racism here. It's very easy to pick on someone who, my understanding is, is not Chinese—he's Chinese Australian. And they did it with Eric Yuan at Zoom. It was very racist for a while. It was very racist when people wanted to make it a Chinese company. And Harry's right: they do have a large Chinese presence. It was a vulnerability for Zoom, right?

Rory O'Driscoll

I'll disagree. I don't want to devolve down to it. I think there are legitimate security questions because when you read the laws of the relevant countries, just like our laws can seem very... Look, let's give another example. When the Europeans get all bent out of shape about our lack of privacy laws and they put up their own weird laws to stop you because they're worried about us, that's just the mirror image of this, right?

I don't think this phenomenon is driven by anything other than large country blocs with very different perspectives increasingly being uncomfortable with how the other countries' systems are governed and wanting to exert power in a world where they can't. It was great when we were the dominant power. Everybody did what we wanted, and it was freaking awesome, and everybody did what we wanted because they wanted to be in our game.

9. Prediction Markets and Insider Trading

Right now, for whatever reason, we've convinced ourselves that that was bad. And now we're going to have a world where people don't want to do what we want. Then we're going to find it's a bigger pain in the ass. Anyway.

All right, boys. This has been fantastic. I'm going to push you to 3 companies, and you've got to pick 1.

Jason Lemkin

Yeah, I know. I know. Rory, you love it. I almost do it because I know that you really do it to humiliate.

No, no, not to humiliate—to force great thinking. Airwallex at $8 billion or Ramp at $32 billion—which would you rather own?

Rory O'Driscoll

Let's assume the revenue and the growth rates are the same, and I don't think they are. I don't have the time for... I think Ramp is a more enterprisey product and Airwallex is more money movement, so I think that's a significant point. But just to give you an interesting discussion versus a boring one, if I was on the Airwallex board—because I don't think it's, quote-unquote, a Chinese company; I think it's a perfectly normal Australian company—I would put it in at $8 billion, and part of my closing condition would be: within 24 hours, we do not have a single paid employee in China, and we relocate the entire services organization to some other jurisdiction. Get out. Then I would do it at $8 billion if they are equivalent, because I think that's something you can do.

I'm going to give him credit. I think Madrona did a great job on that. I think it's very much not a... I think Benchmark did a great job of making it very much a company from people who used to live in China, right? I'm not saying that; I'm just saying that would be a value-add moment. I've had that with another company, where I'm not going to mention names, where we had a significant Russia presence. This was before 2014, and I was like, “Let's just hire people somewhere else. It's not worth the extra 20%.”

So I think the same thing here. I would do Airwallex at $8 or $9 billion. I would go on that board and say, “Figure out your location strategy and get relocated out of China within the next 12 months.”

Jason Lemkin

I wouldn't make that a condition at all. I would just trust Jack to figure it out. Obviously, he's well aware of the issues. He's well aware of the trade-offs. He's well aware that engineers are global.

I think it's very condescending to tell the CEO how they're going to work it out. I think it's the kind of VC—I think it's beyond condescending. The great CEOs will figure it out.

Rory O'Driscoll

I'm going to push back hard on that.

Okay, but people are going to see you as condescending, Rory. I wouldn't push back. They like you a lot now. Don't make them think of you as condescending. It doesn't help at the end of the year. Don't push back. Take a mulligan and delete this section.

Rory O'Driscoll

No, I won't. There are few things where it is a board's place to say something, and this is one of them, where you're like, “Strategic fatal-error risk is exactly what a board has to do,” right? The ability to sell the company is something a board has to work on.

I remember this other case. I said, “CEO, look, you will limit your pool of buyers dramatically if you have this significant exposure to this thing.” You know how you get rid of that? You can talk about it as a CEO, but it is one of the few things where you, as a board member, might have a little more perspective than someone because when you're down in it, you can go, “That's silly. It's wrong. I know these people; they're trustworthy. It's not really an issue. They don't have access to the data.” One of the roles of board members is to say, “Step back, dude. Everything you're saying is true, but when it goes to no one will care, why pay the tax? How much extra would it cost?”

So I disagree. That would be one where I would think that would be something you should say. But this is good because we're meant to have disagreements.

Okay. I think you just do the deal at Airwallex and trust him to figure it out. I think it's that simple. I think $8 billion is a good deal. You trust great founders to figure it out. I think it's a fine deal. It sounds like a dislocation in the market, and you could do worse than invest in a dislocation in the market.

Jason Lemkin

Kalshi raised $1 billion at $11 billion.

That doesn't seem like a dislocation in the market. That seems like a location in the market—a very precise, heat-seeking missile, just like Maverick and his team of Tomcats hit that right in the movie. It seems...

Rory O'Driscoll

Prediction markets—it's a thing. You can have Kalshi at $11 billion, or you can have Polymarket at $13 billion. I want whichever one is better for insider trading. I'm going to do it, right? Because that's really the exciting part, right? Either betting illegally on sports, or, even better, betting legally on confidential Google information and Meta information like they're doing, right?

This is a great time to be an engineer. You don't have to be Nancy Pelosi to make money legally out of confidential information anymore.

You could just be a senior engineer at Meta or Google and make millions on the side. It's a great time to be alive.

Raaz Herzberg

It's been a great time to be alive.

And just in case anyone doesn't know this, these comments are driven by an anonymous prediction-market person who made literally millions of dollars betting on things like what the number-one query term on Google would be that day and getting it right for consecutive days in a row, leading the suspicious mind to assume that they have, in fact, access to that data. Correct, Raaz?

Raaz Herzberg

You're exactly right.

Also, Pony's bet on OpenAI news—he's doing great. Just being able to sell $20 million every 2 years isn't enough; now he can day-trade on the information. These are great days.

Raaz Herzberg

No, I think you're exactly right.

These are great days.

It is quite a phenomenon that will probably result in some level of regulation, because you have both insider trading on this kind of arcane information, and you're beginning to increasingly see concerns on the sports-gambling side, especially when you can do these micro-bets. It's one thing to say, “Am I going to throw the game for my bet on the side?” But if you can actually bet that, in the third quarter, an XYZ athlete will score—will only score 1 basket or whatever—you can have these micro-bets that don't change the thing. You really are very vulnerable to a person betting on something that they can control, either themselves or through someone else.

I think these are really interesting. As I said before, these are super-interesting bets. God, I wish I was in one, because it's interesting. But there's a cesspit of issues coming here, and if there was ever a turn to regulation, there's going to be a bunch of congressional hearings in about 3 or 4 years. Just like the quiz shows in the ’50s, there's going to be a bunch of congressional hearings where someone's going to be asking the Polymarket CEO, “How did this guy get that right 27 days in a row? Do you know your customer?” And he's going to go, “It's all crypto-based. I don't know.” And they're going to say, “Maybe that's not how we're going to roll anymore.”

It's good times.

Raaz Herzberg

It is. It is. But it's super interesting because you can also assume that the people betting on these arcane things really strongly almost certainly have inside information. So, in fact, you get to know, right? I mean, that's the whole way prediction markets are meant to function.

I mean, because there's 2 levels of it. There's the, “I know the information, so I'm just betting with inside information.” And the good thing about that is it's actually why insider information used to be legal. It's actually contributing to the information in the system because it's a fact; it's correct.

And then you have the even more invidious thing, where the person betting not only knows the information but can manipulate the information. That's where you go from merely insider trading, which is illegal, to something worse than that, where you're actually changing the outcome by virtue of betting on it. That's the point at which the thing stops working.

And that's where we have Pakistan play cricket. By the way, someone remind me: how are you guys doing in the Ashes at the moment?

Boys, this has been so much fun. As always, Raaz, you brought some spice today. I loved it. The R1 is condescending, and I need to go and learn code and do Replit.

You were saying, “Spend more time on reasoning.” That's all.