20VC：Navan IPO：赢家、输家，以及如今VC里45亿美元退出够不够 | Harvey以80亿美元估值融资1.5亿美元 | 为什么该买Google、该卖Amazon | Meta跌10%，Zuck陷入困境了吗？

Jason Lemkin

For me, it’s like I don’t even want to take meetings with mortal founders.

Rory O’Driscoll

This actually shows that sometimes Bill Gurley is wrong, because his idea is that these IPO share allocations are, quote, “free money.”

Jason Lemkin

The amount of wealth in Silicon Valley is just unprecedented in our lifetimes. It’s gone up so dramatically over the last 18 months. Maybe not to spend it all at the same time, but the horrible question in venture and startups—it is horrible—is this a $4.5 billion exit good enough today?

Rory O’Driscoll

A founder’s optimized fundraising is a VC’s below-ownership target. The health of the entire US economy depends on the answer to this question. It turns out “fuck off and sell your shares” is not an acceptable answer. There’s a little part of me that’s sorry for Sam Altman because of where he’s put himself.

Boys, we are back. We have some big news this week, and we’re going to start with some liquidity, baby. We’re going to start with Navan’s IPO. Navan obviously IPO’d this week. Oren Zeev invested $150 million and returned $1 billion. Then it slightly cratered 20%. I’d love to start with this. How did we analyze it? Take me through your thoughts.

Jason Lemkin

This and Dev stepping down from MongoDB made me wistful. It just feels like the very end of an era—the end of the SaaS 2.0 era. Dev stepped down after an incredible run at MongoDB. The company dipped to around 13% growth, and it’s now back well into the 20s. It’s a good run, handing off the baton.

I posted on Twitter that it was the end of the era, and Brian Halligan was like, “Yeah, a lot more are going to retire soon,” right? So that’s that. And then for me, Navan was just kind of a bummer. Ariel is such a tenacious CEO. It’s a great IPO. You know, Rory’s going to tell us it doesn’t really matter if it was down or up. You got it done. Bill Gurley won.

But it’s just a bummer that a company at $700-plus million in revenue, growing 32%, struggles in its IPO at $5 billion. All of our portfolio companies have to do much better. They’ve all got to be Harvey or better. I felt wistful that the combination of Dev retiring and Navan’s stumble in its IPO felt like some of the last pieces of the last era to me. And so be it, right? We’re in the age of AI. So be it. But it’s time to move on to the new era, boys.

Rory O’Driscoll

Yeah. Wistful, huh? I didn’t have you down as a wistful guy, but I think there was actually a lot to unpack in this. First of all, let’s start with the basics. It’s a great company. It survived a near-death experience. It’s a travel company, and that’s a tough place to be when COVID happens. It came back from that. The investor stepped up and financed the company, the CEO stepped up and kept the company alive, and now they have—

You know what? Zooming out a million miles, it’s a great outcome. On the day of the IPO, it was a $6 billion outcome; now it’s a high-$4.8 billion, $4.9 billion market-cap outcome. Big picture, it’s great. And Jason’s right: I am going to say that 2 years from now, this stuff will all be in the noise, and it’ll be seen as a really solid outcome. So that’s the big picture. It’s a good company.

It’s operating in composite terms, even though the financials look a bit messy. That’s the thing that counts. I’d probably pause there. But if you want to talk about the specifics of the IPO, look, what happened is they priced an IPO in the middle of the range, and it traded down a little on the first day, and then, I think, on the third day, quite a lot.

It’s at $17 a share right now, so it’s been a pretty tough debut from its IPO to today. And you said something, Jason, that I actually disagree with. You said Bill Gurley would be right. This actually shows that sometimes Bill Gurley is wrong, because his idea is that these IPO share allocations are, quote, “free money.” You get your IPO, it always goes up, and they’re leaving value on the table.

This is an example of an IPO where, if you look at it from the perspective of the issuer of stock, not only did they not leave money on the table, they actually priced at what now looks like a high. So it’s actually proof that Bill Gurley is wrong, and that the buyers of IPO stock are correctly saying, “I want a discount on the good ones because every once in a while—and you don’t know when—this shit goes wrong, and the stock goes down. So I want the 20% pop” on Figma, which obviously became a much higher pop, “in return for the risk of a 20% drop on Navan.”

It’s almost antithetical to what Bill’s saying, which is that it’s free money. It shows that sometimes—most of the time, it is. It skews positive. The day-one pop, on average, makes you money, but it does show that every once in a while, for circumstances that we’ll talk about in a second and that are hard to predict, things just go wrong and it blows up in your face. That’s what happened here.

Can we touch on something that people don’t talk about often but that’s often reported? There are the winners and the losers, and their stakes are always reported very loudly in the media. Oren Zeev: $150 million to $1 billion. Lightspeed: $257 million to $1 billion. Andreessen’s stake is worth $635 million.

A lot of people take that at face value and think that is cash in the bank today for these firms. Rory and Jason, you’ve been through IPOs. That’s not the case. For people who aren’t aware, what does the lock-up period look like? When does that turn into cash in the bank? Can you share some insight on that?

Rory O’Driscoll

Sure. The typical lock-up period will be 6 months, which means the minimum time when you can start selling, other than in a registered secondary, is 6 months from now. At that point, investors can start to sell, and maybe they’ll either sell or distribute their stock.

It’s highly likely that it takes at least 18 months to get out of your position in a company like this. If you have normal appreciation, on average, you can actually end up doing better than you would have if you’d priced at the IPO.

But if you have, for example, the Figma situation, where you have the pricing and then a huge first-day pop to $140, and everyone reports, “Oh my God, XYZ investor made $4 billion,” then you fast-forward a year and a half, and they very happily make $2 billion. But maybe it feels like a bit of a disappointment if you’re mentally spending that $4 billion you thought you had for 24 hours.

So you’re right. The IPO is significant, but the economic significance is limited. In fact, when we used to track exits every year—which we do—we used to track them as of the IPO, and then we used to call it the locked-in value 18 months later. Our mental model was that when you want to figure out how much money people actually made, you look at the market cap of the IPO 18 months later, and that’s probably a much closer estimate. In some cases, it goes up massively, and obviously, in some cases, it goes down.

Jason Lemkin

Yeah, I don’t know what Scale’s policy is, Rory. I’d be interested to learn. When I entered venture, what I was taught back in the day was: base case, distribute for 24 months ratably after the IPO. If you didn’t believe in the company, you might pull it forward. If you thought you had a Veeva in your pocket or a Shopify—maybe Bessemer didn’t—maybe you hold longer. But for sanity’s sake, and also to manage flow, because you can only sell so much if you own a large stake, that was a rough rule.

I figured it would take you 6 months to lock up and 24 months to distribute. That’s 30 months total after the IPO before you’re getting most of your carry and your LPs are getting their distribution, right? So it could well be into 2028 or 2029. Now, there was almost $200 million of secondary, but I don’t think the big guys sold any, as near as I can tell. The founders took out $50 million, which I like.

I like that much better than in the seed round, by the way. I’d rather see them take $50 million in the IPO than after Demo Day. I think it’s a better time. But it looked like, for the most part, it was just the smaller guys that sold. I could be wrong there, but that’s what it looks like.

Does this impact your price sensitivity today when investing? When you see $700 million in revenue, 30% growth, positive economics, a $5 billion market cap, and then you see some of the prices that we’re paying?

Rory O’Driscoll

But the problem is, the prices you’re paying are for things going at a very different rate from where they should be. So let’s unpick that. At a minimum, your operating assumption should be that for mature companies—SaaS, transaction-type companies, whatever, right? It’s not just SaaS; it can also be non-recurring-revenue companies with a decent margin profile and 30% growth—we are back to 6 to 7 times NTM. That’s kind of the 10-year Treasury equivalent of SaaS. That’s what they’re worth.

If you own one of these things, that’s how you should think about what it’s worth, right? And that impacts how you think about your late-stage portfolio and how you think about what a little extra growth is worth. But that’s not directly applicable to some company doing $50 million and 5xing or doing $10 million and 10xing, because those different growth rates mean it’s not a like-for-like comparison.

So when that 10x year-on-year growth rate decelerates to a 30% growth rate, then you’ll probably trade at the same valuation multiple as the companies that are already trading at a 30% growth rate, which is 7x. In the end, if the growth rates of the new companies become much closer to the growth rates of the existing companies, they’ll trade at the same rate. There’s no magic there, right? But right now they’re not. Right now, AI growth rates for these companies are in a very different place, as you know well, Harry.

Jason Lemkin

That’s why I feel wistful. Listen, of course, it’s very interesting to see Navan at the same time as OpenAI and Anthropic raise their estimates, right? OpenAI raised it to $100 billion-plus in 2027, right? I forget what it was for Anthropic, which just raised its estimates by a lot. So when we see these, let alone the Harveys, Harry, for me, it’s like I don’t even want to take meetings with mortal founders. I don’t even want to take them.

And it’s terrible, right? Literally, I just did a deal with some founders I love, and it was very expensive for me. I did a deal at $50 million post, with everything else in it. That’s a lot for me. For me to make 100x on that deal with dilution—and dilution in many cases is higher these days for a lot of reasons—it has to be better than Navan, for sure.

It has to be way better than Navan for me to make enough money on that seed deal, right? Late seed. But do I really believe this deal I just did is for sure going to be worth more than Navan? I don’t know. And I’m not being curmudgeonly or anything, but realistically, when they were easier to see—actually, maybe it was always hard—but now, you have to see these $10 billion exits. If they’re not utterly breaking the mold, it’s hard to really believe it’s going to be worth north of $10 billion, is it?

So, Jason, I get you, but I’ve actually adopted this mindset from spending so much more time with you. And I bring it to the IC, and people on my team are like, “You have to turn the next card to see sometimes.” It’s not obviously a $10 billion company on day 1, and actually, value can accrue in increments over time, and you could miss some great ones by being flippant and being like, “Oh, it’s not a $10 billion company.”

Jason Lemkin

Depends on your fund size. If you’re doing more second- and third-checks and the first check is smaller, you have a lot more flexibility. Literally, you can. If your first check for me is a very large percentage of the fund, I don’t have a lot of margin for error. If I’m writing 4% to 5% of my fund as a first check, I don’t have the other $145 million that he had in TripActions and Navan. I just don’t have the other $145 million.

I should, I guess, have developed more SPVs and opportunity funds, but for me, that first one has to work. If it doesn’t have to work, you want to play more cards today. I do think it’s a good idea.

Rory O'Driscoll

I recoil from the “I don’t do mortal humans” line because I think it sounds a little judgy, dare I say it, Jason. But what I do think the sobering fact here is is that you now have to assume that $400 million, $500 million is the threshold for an IPO. And if you say to yourself that you only want to do deals where you at least have the upside of an IPO or the IPO potential, then the bar to what a doable, successful venture-backed deal with upside has gone up, right?

I mean, it’s what we discussed. We talked about it in our fewer but bigger winners. At any stage, if you’re keeping the stage the same—if you were doing seed before and you’re doing seed now—before this, seed was an 8-year journey where 20% of them get to the end of the line, and now it’s a 12-year journey, maybe only 10% of them get to the end of the line. And that’s just mathematically true.

Now the real question is, what do you do with that information? As Harry says, you can have one of two approaches. You can either say a priori, “I’m only going to do the $10 billion ones,” which is one approach. And the other, Harry’s approach, is more: you never know up front which are going to be the $10 billion ones, so you do them and you look at the next card and you play it out.

If you have optionality, you can afford to do it the Harry way. If you’re picking and most of your dollars are going in when you’re going in, Jason, then you’re exactly right. At some level, even though I don’t like it, I’m coming back around to now your comment is correct.

I don’t like the description of mere market, but you do have to go into these deals looking for a higher, believable exit story, given that the exit bar’s gone up. You can’t do clever little small markets that are going to top out because you’re probably only looking at an M&A outcome, and then you’ve just intrinsically eliminated the magic pixie-dust part of the alternative.

Fuck, this business has got harder.

Jason Lemkin

It has. It has.

Rory O'Driscoll

And the other interesting thing to note—

Jason Lemkin

Well, yeah, but also, people are getting richer at the same time. The amount of wealth in Silicon Valley is just unprecedented in our lifetimes. It’s just gone up dramatically in the last 18 months.

Rory O'Driscoll

And I think the other interesting thing, just about Navan—well, really interesting—you cited the amazing numbers for Lightspeed, Oren, and all those guys. The other thing that brought home to me is the amount of dollars that went in. If you look at it, I think you said Lightspeed maybe 5 or 6x—don’t quote me. They did the seed and some of the seed and the A and the B.

I’m willing to bet, to Jason’s point, the multiple on those rounds must be 20-plus, right? At least, maybe 30-plus, right? But what you’re seeing is, instead of being a $20 million investment getting diluted down but still getting a magnificent 30x return, you’re following that $20 million up front with $200 million more on the mid- and late-stage rounds.

Your overall blended return is a 6x, but it’s a 6x on a lot of money, and you probably have some early-stage dollars that are 20x and some late-stage dollars that might even be a loss, given the last round priced at $9 billion. So overall, obviously, it’s a wildly successful strategy.

It just brings home again: you’re diluting your early return, but you’re doing that because it goes back to what we said last week. When you have one of those winners from your early fund and, given the amount of dollars these folks are managing, you just have to put every dollar you can into your winner.

Jason Lemkin

And they did it here, and it worked successfully. Even more impressive is that Oren Zeev did it as a smaller solo fund and ended up with $150 million via, I assume, a bunch of SPVs into his biggest deal. Good on him.

And across many different vehicles—

Jason Lemkin

I love it, yeah.

Which is awesome to see for Oren. I mean, Lightspeed was $257 million to $1 billion, so it’s just under a 4X blended.

Jason Lemkin

Maybe not to spend all the time on it, but the horrible question in venture and startups—it is horrible—is: is a $4.5 billion exit good enough today?

Rory O'Driscoll

It is. It is. It is.

I mean, no, it’s not if your fund size is $1.5 billion or $2 billion. It’s a third of the fund.

Rory O'Driscoll

No. Yeah, it’s still a third of the fund, though. I mean, look, you’re not going to have—guys, just think—

Jason Lemkin

So much work. I only got a third of the way to 1X, Rory.

Rory O'Driscoll

Yeah, but the point is, those are different businesses.

Jason Lemkin

Good God. I spent 12 years with these amazing founders. We had a $4.5 billion exit, and I only got a third of the way to 1X? Look, you never told me this was such a bad job when I joined the fund. This is the worst job ever. I mean, the perks are great. The dinners are fabulous. Tech Week was so fun. But a third of 1X? This is the worst job ever.

Rory O'Driscoll

Yeah, because you’re looking at it through your lens of a seed-stage investor, where you want your best deal to return the fund. Look, we just said it: the early-stage round, let’s say your first dollars in on a deal like this were probably a 20X-plus. Your first round probably did return the early-stage fund.

But then, instead of just stopping there, you decided—you being whomever you are—to raise a late-stage growth fund. Without doing massive deal concentration, you’re not going to get a late-stage investment “returning the fund.” It’s not a thing. Because if you’re doing 20 deals evenly, that’s 5% each. Unless you get a 20X, which you typically don’t get on a late-stage deal, you’re not going to return the fund.

So these guys aren’t sitting there going, “I’m raising…” They might be saying, “On my $300 million or $500 million early-stage fund, one deal can make it happen.” But on the late-stage fund, they’re saying, “We got $4 billion. We’re going to put it to work. The average good deal will be a 3 to 5X. We’ll have a low loss ratio, and over time we’ll get our 2 to 2.5X net.” It’s not their small-numbers-of-big-hits business. It’s a very different business. It’s moving money at scale—

Right.

Rory O'Driscoll

—and the example of Navan is that they’re doing it successfully. The embedded risk in that business is price compression, and you’re seeing a little bit of it here. That $9 billion round lost money. Some of the people who bought at the IPO lost money.

The risk you’re running is not catastrophic wipeout as much as just underwriting a 6X, and now the thing is trading at a 5X, and suddenly your return is down 30%.

So for those that came in at the $9 billion price, are they down 50%?

Rory O'Driscoll

I believe so, because I think it boils down to—I read it as they convert 1-to-1. Remember, that’s only the price today. I’m going to say this again: that’s only the price today.

If you want to go back to 2012, you can find a whole bunch of dumb articles about how Facebook is a crap company because the IPO and the stock price went down. Turns out it was a 10X company from there at least, right? So it’s a point in time.

But you’re right: as of now, the last private round and buyers who bought the IPO are down on the month. It’s a horrible short-term IRR.

Jason, sometimes I think Rory just sits back and thinks, “I’m so lucky to do this show with Harry and Jason.”

Rory O'Driscoll

I think that all the time for so many reasons.

Listen, Jason, you mentioned Harvey. Harvey raises $150 million at an $8 billion valuation, led by our dear friends at Andreessen. I actually tweeted about this. An insider at Harvey, a not-so-quiet investor, shared with me that they’re at $150 million in ARR. Their DAU-to-MAU ratio is 40%, which I thought was astounding. Usage-wise, phenomenal.

Rory O'Driscoll

I don’t think it’s outstanding, but keep going.

GRR—

Rory O'Driscoll

Mm-hmm.

—98%, NRR 170%.

Rory O'Driscoll

Let’s go. $150 million in revenue. Outstanding NRR. People are really buying more, 170%. No one’s leaving, GRR of 98%. And DAUs and MAUs—you’re impressed, but it just means they’re logging in every day to use a legal tool. That’s table stakes to me. They use it every day. But it’d be a flag if they didn’t, right?

Let me put it in the SaaStr AI. $8 billion, the SaaStr AI valuation calculator says. What did it go out at?

Rory O’Driscoll

$8 billion.

Jason Lemkin

If it’s $400 million in forward revenue—

Rory O’Driscoll

Yeah.

Jason Lemkin

—then it’s 20X. That’s exactly what it is: $400 million next year. Their $400 million ARR—that’s what they’re predicting. $400 million ARR, not GAAP; $400 million ARR.

And a $150 million raise. For Andreessen coming in, this is, dilution-wise, very small for the company.

Jason Lemkin

I love these rounds of getting 9 figures for 1% or 2% of the company, honestly. It sounds like I’m being facetious. I do love these as a seed investor. They’re great. There’s no effective dilution to these rounds, to Harry’s point. They’re great, right? Now, there may be a little pressure on the exit, but there’s no dilution.

Rory O’Driscoll

I think they’ve executed really well in a core domain where LLMs were going to have a profound impact. What’s fun about it is that, up until now, legal had been a pretty barren place in terms of software sales. You have companies like Filevine and Clio that have built decent-sized businesses but haven’t yet gone public, and not a lot happened in legal.

I think LLMs, by virtue of the fact that they manipulate language—which arguably is exactly the definition of what a lawyer does—are a perfect fit. I think they’ve done a great job. They’ve established market presence in Am Law very quickly. They established a brand quickly. They’ve executed well. The growth is clearly there.

When you start thinking—when you’re really asking, does “$8 billion” make sense?—what that really boils down to is a TAM question. They’re clearly in the lead. Lago is clearly second, focused on lawyers in corporate law practices.

The constraint there will be the TAM size. How big is the TAM? How many law firms? How much spend per lawyer? There’s 1 million lawyers in America, half roughly in-house, half roughly external. Does the math support a $24 billion, 3X-from-here company?

Going back to what we said earlier, let’s assume that in the end it’s a 30% growth company like everyone else and it’s a 7X multiple. That implies a $3 billion revenue line. Is there a $3 billion software business selling to lawyers, to corporate law? Not crazy. Westlaw is bigger, selling information, but that’s the kind of scale you have to have.

You basically have to be such a big automation tool for these lawyers that they’re willing to spend equivalent dollars—thousands of dollars per year in subscription—to make the math work. So it’s a TAM question. They’re clearly going to be number 1 in that market, and the only question, if you were underwriting that at $8 billion, is: is this a $1 billion-a-year spend or a $3 billion-a-year spend? If it’s a $3 billion-a-year spend, maybe you get there. But it’s a lot.

It goes back to your statement from episodes ago, which is that the core determinant of our success in venture with the AI transition is: will we see the transition from human labor spend to software spend? I think that’s the TAM question in a nutshell.

Rory O’Driscoll

You’re totally right. Selling software to lawyers is a particularly shitty business. It’s a more constrained business. You’ve got to do more, you’ve got to help more, and you’ve got to speed them up.

And it’s not all or nothing, by the way. I’ve been seeing a lot of good literature on how it’s not about automating people; it’s about automating tasks. You’ve got to make them a lot more efficient, and they’ve got to be able to track that. If that happens, then it all makes sense.

We mentioned liking these rounds for their low-dilutive characteristic—or nature. There was a good piece from The Information this week about Benchmark lowering their ownership requirements, with Mercor being the example. They only have 10%, where they normally always needed 20%. We always knew this with Benchmark. Has AI seen a reduction in ownership across the board for this generation of venture?

Jason Lemkin

Every deal I’ve been in—my God—ownership is attacked at a level I’ve never seen. That’s my conceit in investing today: giving up on that, right? For me, I feel like I can only make money if I own double digits of 2 winners per fund. I feel like, mathematically, that’s the only way I can make money. And the last 3 investments I’ve done are in the 6% to 8% range, even though that’s my rule.

But what am I going to do? Not do the deal? We also know that's the dumbest thing of all time, right? I'm literally going to write my LP report up in a couple of weeks. I'm going to say, “My resolution for 2026 is to get my ownership up.” We'll see how I do against my resolution, but that's my main resolution.

You can do it a few times, but if you do it every time, it's tough. But I don't know what you do in this world if the companies are capital-efficient and they don't need you. In a hot company, you don't really control the deal, to use lame VC terminology. You don't control the deal.

Jason, why didn't you raise 125 and then you could have more ownership?

Jason Lemkin

Maybe that's a different mistake, but this is really just—this is all there is.

Tomasz Tunguz

Agreed.

Jason Lemkin

If there's a co-investor, I guess you could be a total jerk and say, “It's me or nothing.” I've tried that once in my whole career. Just not my vibe. It backfired on me. Of course, that company wasn't that successful.

But if you want to be somewhat founder-centric, the best thing I know how to do is say, “Listen, I just need to be the largest investor, and let me invest the maximum I can in the round,” and that's as far as I go. If you're not willing to put the extra dollar into the deal, don't do it, for sure. But if they're selling 10%, it's hard to buy more than 8%.

Tomasz Tunguz

Multi-causation. Breaking apart your question, Harry, the one question is: Are VCs getting less on average in these deals? And then the second part of your question was, “Could it be because of AI?” which we're going to agree is a meaningless phrase and try to fix it later.

On the first, I think they probably are. There's no doubt in my mind. I think it is harder to get 20% ownership for the super-early-stage funds. It's harder at our stage. Our target would be 10% to 11% on average, probably late A or B. Some earlier, some later than that. It's harder across the board. There's no doubt that that's the case, right?

Take Merck or Benchmark as a premier firm. I will be validated again. As I said, reports of their death were greatly exaggerated. That sounds like an amazing ’21 fund they've reported. But yeah, that's an amazing firm courting a great company and only able to get 10%.

What, as Jason said, are you going to do? If they only need to sell 10% of the company to fund their needs, then you're only going to get a maximum of 10%. You can either decide not to play, which would have been a very dumb decision, or you can decide to take 10% and keep going.

Now, it's interesting. Why is this happening? There are a bunch of different reasons. You can't say it's because they're capital-efficient, because, let's be frank, some of these AI companies are the least capital-efficient companies in the history of humanity. Merck are pretty capital efficient. OpenAI is planning to spend more money than we thought existed in entire continents, and they're not stopping yet.

So it's not capital efficiency, right? On the capital-efficient ones, if you're so capital-efficient that you don't need to raise a lot, then you become hot very quickly, and you've got leverage as a founder. On the other extreme, if you're so capital-inefficient that you need to raise $13 billion, then it turns out that no matter how much you put in at a time—if you put in $100 million, you still only have a couple of points.

Both of those, interestingly enough, will be pretty good deals. Which, and I'm doing this in real time, makes you realize that your mental rules of thumb have been smashed to pieces. There's a situation where you're going to get 10% because it's capital-efficient, and there's a situation where you only get 1% because it's capital-inefficient, and both of them have amazing returns. So that's just the way it is.

Maybe that's the aha. I mean, logically, you'd say to yourself, if it's a continuum, there must be some sweet spot in the middle where they needed to get 20%, but then they were capital-efficient enough that you make out like a bandit. I'm sure those companies exist too, but I think that's the aha. It's a continuum here. It's a wider continuum than we've seen—perhaps, maybe not in the early internet, as I think about it aloud—but definitely wider than we've seen in the SaaS era in the last 10 years, right?

Companies, as you say, being able to get to hundreds of millions of dollars on $10 million or $20 million, and then other companies needing $2 billion or $3 billion just to get a model out the door. Neither of them results in a standard venture ownership position.

Jason Lemkin

But I do think, when I was reading ICONIQ's latest report, what they said is, when you look at all the top-quartile companies in their extended portfolio, not all that they surveyed, yes, they burn a lot of cash, but the burn multiples of their top companies are much lower because they're generating sales and they're growing so quickly.

Even if you ultimately raise a lot, if your burn multiple is low, you're able to sequence capital differently. You could raise—listen, hold off. I'm going to do just 10% now, and then I'll do 5%, and then at $8 billion, I'll do $1.2 billion. You may raise a lot, but if your burn multiple is low, it lets you optimize how you sequence fundraising.

Tomasz Tunguz

Agreed.

Jason Lemkin

Right?

Rory O’Driscoll

And remember, the words “optimize how you sequence fundraising” as an entrepreneur—the inverse of that is, “Thou shalt not be optimized as a VC.” A founder's optimized fundraising is a VC's below-ownership target. You're exactly right.

Jason Lemkin

I think that's right.

David Sacks

If Mercar had needed 40 million to get rolling, then Benchrock would own 20%. If they only needed $20 million, then there you are. And you're right, they can incrementally raise another 2 rounds.

Even the extraordinarily ambitious—the other extreme—the extraordinarily ambitious foundation models, not the new ones today, but early Anthropic and early OpenAI, were able to do incremental fundraisings in a way that, as you say, avoided significant dilution.

Jason Lemkin

And I say it with huge respect: Even Y Combinator is structured this way, right? Y Combinator's advice for most companies is to raise a maximum of 10% around Demo Day—before, during, and after. It's very thoughtful advice. It's very structured.

Yeah, it's biased toward helping YC, but it's also saying, “Listen, we've run the numbers. Most of you will do better selling 10% at Demo Day and another 10% at 3 to 5 times the valuation.” Not just in terms of overall capital raised. It's not just valuation. It's effectiveness.

They've institutionalized this low ownership, right? It's always been true, but I think it's been productized over the last couple of years. 10% at Demo Day, right? And if you want to do 4% from angels and friends, that's 6% left for a VC. Maybe you get 5% or 6%, unless you way overbid and basically do 2 rounds at once. That's how you get more ownership in YC: You do 2 rounds at once.

I absolutely agree with you. I see 3 on 30 instituted so well by YC—

Jason Lemkin

Yeah.

—as the de facto round, and again, huge respect to them. It's good for them, and it can be good for founders, but it's a challenge for us to navigate.

Jason Lemkin

Yeah, I'm not even criticizing. It's just institutionalized. You asked about low ownership. This is institutionalizing low ownership. YC's always been about low ownership with VCs, and I get it. No criticism—but now it's been institutionalized very effectively.

3 on 30, 4 on 40, 2.5 on 25. That just—eh, you've got to get single digits.

This is where I think, just do a world of Roger Ehrenberg there. We had him on the show. The world of high ownership: Go where others aren't, get 20% in actually reasonably priced assets. Let's not do AI dictation tools from YC and get 4%.

Jason Lemkin

If you like. Harry, did you see that Anthropic is now projecting $70 billion of revenue in 2028?

Pretty good.

Jason Lemkin

I'd rather have a piece of that.

Pretty good.

Jason Lemkin

I'd rather have a little piece of that.

Did you guys see Sam Altman's response to Brad Gerstner? What did you think of that? I was intrigued because it was quite a retort publicly.

David Sacks

It's a totally legitimate and entirely obvious question: “Hey, you're doing $12 billion in revenue. How are you going to fund $1 trillion in CapEx over the next 5 years?”

I'm sure there's an articulate answer he could have made. You're right. The answer, if you want to sell your shares, is: Sell your shares. It was a little snarky, probably because you're tired. You're halfway through a 1-hour interview. You do a million of these all the time. I believe you just have a baby in the house. You're tired, you're grumpy, and you just make a snarky answer.

The question is substantively important. You didn't learn anything about the plan to fund the $1 trillion from the answer. You learned a little bit about the persona of the person in a bad moment, but everyone has bad moments, right?

If you want to know more about Sam Altman, there are 53 pages of testimony now on the internet. You can figure out—you can all come to your own judgment on that. I think the question itself is totally legitimate. It's going to be asked increasingly. There's a story that can justify it. It's all about revenue traction. If you get to $100 billion, you can support $60 billion or $70 billion of CapEx.

But it's a totally legitimate question.

Jason Lemkin

Didn't he say to Sam, “If you want to sell your shares, I'll find someone for you in 60 seconds”? A founder only said that to me once in my career. I never said a critical word ever again. But it was said to me, and that was a teaching moment for me. I thought, “Okay, I crossed the line. I didn't mean—I didn't realize I did.” I never said a critical word ever again when I was told, “There's a market for your shares. Just let me know how much you want to sell, Lemkin.”

Again, I'm not doing the “Oh, damn you for saying that.” We all have bad moments, right? But it is a bullshit answer. If that happened to me in a board meeting, if I were a board member and the CEO said that, I might say to myself, “Oh, I want to find...” If it's a legitimate, company-ending question, you have to have an answer to it. I'll step back to it: not just the health of your company, but bizarrely enough, the health of the entire US economy depends on the answer to this question.

It turns out “fuck off and sell your shares” is not an acceptable answer, it seems. If I'd been a board member at this, I'd have said to myself, “Okay, maybe I shouldn't ambush him in public. Maybe I should have said, ‘Hey, look, I just want to spend some time...’” You give your CEO the courtesy of not feeling ambushed. You maybe don't do it in a visible place.

But if you're on the board of a company that's planning to spend $1 trillion, whatever it is—I can never keep up now—and you only have $12 billion in revenue, it's a totally appropriate board-level question to say, “How are we going to do this?”

Jason Lemkin

I don't know anymore. As silly as it sounds.

It is beyond silly. I think there is so much fear among VCs of getting out of step with the most successful founders. There's so much fear, and you guys are going to disagree with me, but I see it all across my portfolio. The better the company is doing, the more everyone's a grin fucker. There's just never a critical word said.

David Sacks

No, no. Now you've poked the bear. I have a company that's going to shit, and it's going to shit. The board members will not intervene in any way to protect the shareholders because of the bad press that will come from damaging that founder relationship. That, to me, is one of the most egregious escapes from fiduciary duty, and this is some of the most reputable investors.

But you're agreeing with me, right?

David Sacks

I'm agreeing with you 100%.

Yeah.

David Sacks

It's a disgrace.

Yeah, you've seen the same behavior, right? Listen, OpenAI has had an interesting history, but if it were a normal startup with the VCs we work with, and they had to come up with $1.2 trillion, I think everyone would be saying, “Sounds good, Sam. Sounds good, Sam. Keep going. Good, good, good month.”

Fortunately, and again, I don't know the man, but I've just been very impressed with Bret Taylor. I don't get the impression that Bret Taylor is a yes-man. At one point, I'm not sure if he's still on the board, but Larry Summers was on the board, and Larry Summers is many things, but not a yes-man. He might be off now, which would be a shame, because he would be worth being on the board with just to hear him speak, right? I think he's a very smart man.

Stepping back a level, I've been thinking about this. There's a little part of me that's kind of a bit sorry for Sam Altman because of where he's put himself. Basically, every public analyst will say he did what he had to do to raise this kind of money, but everyone covering the public markets will say the only thing between us and a 30% promote is the AI CapEx boom, and he is the poster child of the AI CapEx boom.

If the AI CapEx boom unravels and the world and media are looking for a villain to throw rocks at, it isn't going to be a big search. Genuine comment here: if this thing starts to slow down, it'll just get real hard, real fast. I think if you're a board member, you actually owe it to your CEO to say, “Hey, dude, how are we thinking about this? Do we have good answers?” We can't just be glib.

I hope that in the boardroom, Bret Taylor and those guys are sitting down and saying, “Okay, what are the cash-flow numbers that say we can honor all our commitments? What are the cash-flow numbers that say maybe we can't honor 2029 and 2030, but we can do the others? How are we going to do all this?”

When someone invents numbers at the $5 million or $10 million level and they're wrong, they disappear without a trace. When you invent numbers that are wildly overoptimistic at the trillion-dollar level, and if it unravels, you just become the poster child in every economic history for the next 200 years of the great AI crash of 2026. It's a pretty shitty place to be.

One of the things we've talked about in the past is that the job of the board, to your point, guys, is not to be a cheerleader. It's actually to help the CEO avoid things. I often look back on some of these young founders, and we talked about this. They were wrong, but the older board members who should've had more experience were even more culpable. In one sense, they're less legally culpable, but morally they're culpable for not saying, “Hey, dude, are you thinking this through? Do we really have an audit, Sam Bankman-Fried? Do we really know where the money is? Do we really know where the customers are, Charlie Javice, or whatever her name is?”

You, as a board member, are meant to provide the guardrails. So when I look at this one, I go, “Hmm, I hope someone's providing really good guardrails.” If it hits, it'll hit hard.

A lot of founders feel like VCs should just be their allies, period. That's your job: to support me. That's your effing job. Some like the critical feedback, but I think it's far fewer today than you might think. Your job—and if you're not supportive, you're a problem for me. You're not on my side; you're making my job harder. I think that's how founders feel, and I think that's how Sam felt, is my guess.

The second thing that's interesting to watch, because I do think Sam's pretty transparent, is I think it did show there's some stress around raising $1.1 trillion. I mean, not around raising it—he's raised it, he's committed to it—it's about generating it. If there was no stress, he wouldn't have poked the bear, right? So I don't think it's actually a big deal. I do think they'll work around it and scale it back.

But it did show there's some stress around hitting $1.1 trillion. It's not even revenue, right? It's got to be gross profit at 50% margins, so they've got to do $2.2 trillion or more to pay for it. Maybe I'm getting it wrong, but they've got to certainly do more than $1.1 trillion to pay off their capital commitments.

Jason Lemkin

I mean, it's—

They've got to do more than $1.1 trillion to pay off their capital commitments.

Jason Lemkin

Yeah. I can't believe I'm saying this. It's only cumulative, so it might be a little less, but yes. It's in the many hundreds of billions of dollars a year. In a world where today, you know, there are a couple of companies—Google does $100 billion in a quarter, so does Amazon—you've got to be at that scale. $300–400 billion a year, yeah, you're somebody. You can pay for these things. It's a real number.

Yeah.

You mentioned Amazon. Amazon crushed this quarter: up 20%, with AI shopping assistant Rufus adding an additional $10 billion in sales. Things are looking up for them. They obviously have their ownership in Anthropic, which I think is at 7.5%. How do we feel about the state of Amazon today, where they sit considering last quarter? How do we feel?

The overall growth rate was, I think, 11% or something, but the real point is Amazon Web Services—their cloud business—grew at 20%. The story had been that they were the dominant provider pre-AI, but they felt they'd slipped versus Google and Microsoft in the AI world. In fact, in terms of growth rate, they still have. Google and Microsoft were both in the mid-to-high 30s, but AWS came back from, I want to say, 13% to 20%.

So the story was, “Oh, we're relevant too. We're not irrelevant in the land of AI,” and the stock popped. I think the real takeaway from here is the counterargument to all the cynical “it's a bubble” people: it would appear, and Microsoft said the same thing, that demand for these products is still exploding. If you have it, you can sell it. At some point, maybe that won't be the case. I have my concerns, but right now the objective facts on the ground are that Microsoft was saying, “My biggest problem is I can't build data centers, so I'm capacity-constrained,” and Amazon was saying, “My growth rate is up.”

Interestingly, Amazon just signed a deal with OpenAI, because everybody signs a deal with OpenAI, to sell them more compute, so they clearly found some capacity for that. But overall, the story was continued high demand for compute, and if you're selling compute, stocks go up. That was the takeaway. The compute story was strong, and the compute story was strong across the board. That was the aha, right?

The people who want to articulate an “it's all going to go wrong” story right now still have to make that story prospectively and say it'll go well in the future. What you can say is that it's going well now because the demand was still there.

Jason Lemkin

But to me, making a press release that says you're now the number-five or number-six partner to OpenAI for NVIDIA GPUs is not that impressive.

It’s just that you’re behind Microsoft, you’re behind Oracle, and you’re behind Google. And so it’s interesting that they found some GPUs in a closet. I’m not speaking literally, but I don’t actually think it means much to be late to the party.

It may mean a lot over time, don’t get me wrong, but I think today there is a lot of AI performance theater. There’s real, incredible growth. There’s growth in our retirement funds across the country, but there’s still a lot of theater. There are a lot of folks who are doing a lot of work in AI and not seeing huge benefits.

So this felt partly theatrical to me, but it’s okay. I’m in favor of keeping the ball moving when you don’t have all the answers.

Rory O'Driscoll

That’s very cynical, Jason.

Jason Lemkin

It doesn’t rank them. Literally, they’re like, “Okay, we called the CoreWeave guys, we called AWS, we called Microsoft, Google, and Oracle. We even called Benioff in case he had some GPUs or TPUs hanging around.” Oh, Amazon found some.

Rory O'Driscoll

Yeah. I think the stock popped more because of the objective fact that the actual revenue growth grew than because of the OpenAI deal. But while you are right that it’s not huge compared to the $250 billion for Microsoft, the $300 billion from Oracle, or the $400 billion for Broadcom, it is still better than not having one, because now at least we can say they don’t have one. So, tick, done.

Jason Lemkin

It is, but it’s tough for AWS, having really created the category of cloud providers and being what we all grew up on. It’s a major comedown not even to be above the fold on the leaderboard.

Rory O'Driscoll

I think that’s a different statement and totally correct. You’re exactly right. 5 years ago, AWS dominated cloud compute. Now they don’t, because cloud compute evolved from being simple compute to being AI-centric computing, and they didn’t evolve fast enough with it. They let a whole bunch of people into their little oligopoly.

So zoom out a million miles: that’s a bummer. If they knew then what they know now, I think in 2019 they would’ve bought a lot more GPUs and been a lot more aggressive.

Jason Lemkin

And, yeah, 20% growth is also a lot at this scale. Absolutely. But Shopify, which is a competitor on the other side of the house, blew it out: 32% revenue growth this quarter and 32% GMV growth, which is a close analog to Amazon.

I mean, Shopify is reaccelerating at 8 digits of revenue, which is pretty crazy. So kudos to Amazon, but it’s also lucky that both of its core product lines are getting a general boost. There are a lot of tailwinds going on here.

Jason, I know Rory won’t answer this one. Given what you just said about them not being above the fold and losing market share in one of their core markets, which they used to own, and then considering the 20% pop, how do they sit in terms of being underpriced versus overpriced?

Jason Lemkin

For the moment, Google is underappreciated and Amazon is overappreciated. Google was slow to AI. Google had to bring Sergey Brin out of jet skiing and windsurfing and retirement to whip the troops into shape. But Google’s really good now at all levels. It’s really good at consumer AI. Its search is back. Search is growing for Google again. The TPUs are good. It’s a good partner, and it’s the only one other than NVIDIA making real money.

So I feel like Google is underappreciated, and it has the application layer. It has all the applications—not that we use so many of them. Amazon has none of the application layer. It has very little at the hardware layer. It has a niche search product, which is incredibly powerful, but only used for e-commerce. In a way, it just doesn’t have as much going for it.

Rory O'Driscoll

To be fair to Google, you used the word underappreciated. I think the stock has appreciated very nicely. The catastrophists at the start of the year were saying, “Oh my God, it’s awful,” and I think it’s up 53% from there.

In Q1, we talked a little bit about the companies, and I was positive on Google. I admit it. Harry knows this. In retrospect, I thought about it, and it felt so contrarian that I even said, “Please don’t lead with that on the highlights,” because I felt a little stupid. You fast-forward 2 quarters, and it’s turned out to be broadly correct that they have the key ingredients, a place to put them, and the ability to monetize them. Facebook is missing that last key element.

I still think, to your point about AWS, that at some macro zoom-out level, if you had a monopoly in search and now you’ve gone to having ChatGPT as a de facto competitor, you’re still better off if it hadn’t happened. It was a really good gig when you had this monopoly. You wish it hadn’t happened, but once it has happened, what you’ve got to give them credit for is getting almost everything done to be able to play in the new world.

They had the key ingredients. It took them a while to put it together, but now they have all the boxes. You’d still prefer not to have to do any of this shit and just optimize your 10 links from now until the end of human time versus having to compete, but they’re competing well.

In terms of playing in the new world, it was a bad week for Meta. I’m one big-ass Meta shareholder. Don’t doubt Zuck. But wow—the $15 billion fine, and then the reaction to their commitment to CapEx moving into 2026, along with the enormous spend that they continue to do and will continue to do. They’re down double digits. How do we think about how they fare in the new world?

Rory O'Driscoll

I think it’s easy because their core business performed really well. Let’s start with that. The core business, I think, grew 20%. Despite some usage being down, it’s kicking off cash. It’s a great business, right?

The market is just entirely correct. We said this 6 months ago, entirely correctly: “Dude, you have this wonderful business, and then you’re taking the entire cash flow and building this AI stuff. And unlike Google, Microsoft, or Amazon, you don’t have an enterprise business to sell this shit to. And unlike ChatGPT, you don’t yet have an obvious AI-forward app that gives you a lot more consumer engagement. So you’re basically spending $70 billion a year, but with no revenue attached. What the hell?”

And you know that Mr. Zuckerberg’s answer appears to be, “I think it’s relevant to be in this space. Thank you for your opinion. I refer you to the articles of incorporation. I control this company. Have a nice day.”

So the market’s just saying, “Hey, you’re doing the thing you did in 2021 and 2022, putting a whole bunch of CapEx into something that might not work.” That’s why the shares are slightly down despite objectively pretty good performance. It’s entirely rational. They’re saying, “I don’t know why you’re making this bet,” and he’s saying, “That’s why I’m a founder.”

Jason Lemkin

I personally don’t get it either, but I didn’t build Facebook. If he’s got a plan for it, we’ll see. It doesn’t appear to be the most efficient way to spend $70 billion, as judged from the amount of infighting, but we’ll see.

One that made me happy was Twilio. Twilio bounced 20% after beating expectations. The question is, when you look at that and you look at that generation of companies—your Dropboxes, your Boxes, maybe your underloved, underappreciated companies—do we think we’re going to see a series of bounce-backs on better-than-expected results?

Rory O’Driscoll

If you’re undervalued, then you perform reasonably well. I mean, what happened here? Let’s start with Twilio: a $20 billion company doing $4 or $5 billion a year, valued at 4 or 5 times revenue. As you say, it had a decent quarter. Revenue growth was up 15%, and it had a nice stock bounce. It’s still in a bounded universe.

The zoom-out point is this: they’re in a much more bounded world now. They might grow 15%, they might grow 5%, they might trade at 6 times revenue, or they might trade at 4 times revenue. If you look at the stock chart, the area of magic is gone, and now they’re just perfectly good $20 billion market-cap companies kicking off cash, with really strong cash performance. That’s what successful, mature companies look like. They’ll be valued accordingly.

The good news is that they’re cash-flow-positive businesses trading at 4 or 5 times revenue. The bad news is that, as you look at the AI-first universe that exists, they’re not really playing in it to any significant degree. In a world where you’re cash-flow-positive and trading at 4 or 5 times revenue, you can feel really good about yourself, and then you look up and realize, “Oh my God, Palantir is trading at 123 times revenue and is cash-flow-positive.” They’re not in that ballpark. They’re not in that game. So that’s what a mature business with mid-level growth prospects looks like.

Jason Lemkin

My take was a little bit different. Twilio goes from single-digit growth to 15%. That’s still significant reacceleration. We talked about Dev stepping down at MongoDB. It went from 13% growth 5 quarters ago to 24%. 13% to 24%—that’s almost doubling your growth rate.

Here’s my point from both of these: heading into 2026, you better have gotten a few nickels out of the AI expenditures, all the AI dollars. This is not new, guys. This is, what, 60% of the growth of our GDP? You can’t miss AI.

Twilio said its voice-AI customers are a huge part of that reacceleration. It says voice AI is up 60%. We all know a million companies using voice AI, right? It said its top 10 voice-AI startups are up 10x. AI is fueling the number of databases we use.

Sometimes we use Supabase or Neon if we’re vibing, but a lot of folks use MongoDB. Not to be the only guy in the board meeting that says something, but going into next year, you sure better have seen reacceleration because of AI, because there’s so much money there.

You got none of it, guys? You had 18 months and didn’t launch a single feature or tap into a single trend to re-accelerate. I’m not expecting you to go from 30% to 300% this quarter, but if you’re not growing faster at the end of 2025 than at the start, as a founder, I give you an F-minus.

There’s so much money, and you don’t have to be Harvey to get a little piece of it. Twilio, MongoDB, Cloudflare, and tons of folks have a little piece of it—a little piece of that massive pie.

Rory O’Driscoll

I think that’s totally fair, and that was well put, because I would almost amend what I said exactly as you did. They’re not the AI-native companies exploding at 2X year on year. But what you’re saying is correct: there’s a big point spread between having no AI magic pixie dust and getting taken private for 3 times run-rate revenues, only to be destroyed by their PE machine, and getting just enough AI pixie dust and lift to get that growth rate into the mid-20s or higher, like MongoDB, and see some re-acceleration.

We’ve just agreed, from the Navan comp, you’re still only going to trade at 7 times revenues, but it’s a damn sight better. 6 or 7 times revenues and some kind of forward story is a big point spread from 3 times revenues and being sold to PE. That’s the story we’re actually articulating to a lot of our private companies.

You can’t go from $100 million in revenue to just being Harvey. You’re not. But you better find a way to be relevant in—I like your expression—the age of AI. You better find a way to matter in this world and co-attach to the spend. Even if it only takes you 10 basis points up from 15 to 25, that’s a night-and-day difference in terms of your relevance and viability.

I always like to come back from the public companies, where I think we have opinions but maybe it’s not our day job, to the deals we all work with, where it is our day job. I think you’re exactly right, Jason. That is the message for any of your companies that were pre-2021, that are pre-GPT companies.

Maybe you can’t make yourself into the next Harvey or the next OpenAI, but by God, you better co-attach to that spend, because it’s the only game in town. I think you’re totally right, and you should be preaching that to all your guys as we come into the end of the year and start looking at 2026.

Jason Lemkin

And look, sometimes it’s luck. The CEO of WorkOS, Michael Granic, was posting that they went from—I’m going to get these numbers wrong—something like 20 to 40 in 5 months. He’s been working hard for years on WorkOS to be an OAuth and authentication layer, but all the AI guys used them, so they’re seeing insane growth.

We’ve all seen portfolio companies, and sometimes you have to make your own luck, but we’ve had 18 months. Get a little bit of the Harvey. You’ve got to find it. It’s at the edge of too late—not because there’s not time. I actually think there’s plenty of time for startups. It’s because your team isn’t good enough.

If you haven’t gotten a boost this year from AI, fire half your team right before the holidays. Give them a turkey and 3 months of severance, but they failed. Your team is not good enough. They had 18 months to ship a product that mattered in this world. Where’s your agent? Where’s your re-acceleration? F. F. No more excuses after Thanksgiving.

But the irony is that it’s early. At the same time, with all the stuff we talked about—the Cursors, Replets, Levels, and Sierras—we feel like it’s late, but it’s actually so early in so many categories, right?

Rory O’Driscoll

It’s just 3 years since ChatGPT shipped.

Jason Lemkin

Yeah, but you got nothing? You did not re-accelerate this year? Fire yourself or half your team. Take your choice. Don’t keep those folks around who don’t have the answers. You’re better off with just not having them.

If we want to be critical, HubSpot and Salesforce have to deliver in 2026 because they’re in play. They have the AI things. They built and shipped the products, but they haven’t seen the bump that Datadog, Twilio, and MongoDB have. Maybe that’s okay. They’re not at the infrastructure layer. Maybe it takes longer.

But if I were Marc Benioff, I would fire half my team if I didn’t see real growth from that by the middle of next year. I’d just fire half of them. You’ve got the wrong people. There are 2,000 people building Agentforce, and we’ve deployed it. It’s quite good. It’s very competitive with any other agent you’re going to buy.

Time to monetize it in 2026. It works. It’s a good product. It’s not just smoke and mirrors. It’s really good. Some of those folks who have been hanging around for a decade maybe aren’t the right people going forward. I don’t know.

Rory O’Driscoll

Sometimes when Jason is cruel and harsh, I disagree, and then sometimes I listen and go, “He’s absolutely right.” This is one of the latter ones. I might not say it as harshly, but I think you’re exactly right, Jason.

If you’re not on this train now, you’re just not going to be relevant, and you will be sold for 3 times run-rate revenues to a PE firm that will smush you in with something else, never to be seen again. You have your chance. It’s raining money in this space, and you need to navigate your product toward it.

I think that’s probably pretty common advice across our portfolio. As I think about all those companies—we talk about them a lot—that’s why the Navan thing was so good. All these companies that are doing $100 million to $200 million to $300 million with sluggish 20%-plus or minus growth rates need to figure out how to co-attach and re-accelerate, or eventually you’re going to get tired, the VCs are going to get tired, your team’s going to get tired, and something’s just not going to work out.

Jason Lemkin

Yeah. There’s just so much. The other thing—I get a lot of things wrong, right? It took me a while to see the data and believe that software companies could really capture dollars from replacing humans for real. It’s not that I didn’t believe it; it’s just that so much of the stuff was VCs talking out of their rears, making stuff up, talking about how every human was going to be replaced with an agent when the software wasn’t very good. It just wasn’t good. It was hard.

It was a great dream, and when Vinod says it, I believe it, but when most of the rest of the VCs say it, I think it’s just watercooler talk. But now we’re really seeing it. Agents are better than mediocre humans, so you better be tapping into that revenue too. They’re better than mediocre humans, so get going, guys.

The age of the copilot is behind us. How are you replacing humans? This is your job in B2B software: genuinely replace humans. I’m not a Harvey expert, but I do believe Harvey is partially replacing associates, right? That’s a lot of money there.

Whatever Harvey is today, it’s going to get better. I guarantee you it’s a better piece of software next year than it is at $8 billion, right? And it will replace more mediocre associates who don’t want to do it, who want to go home at 4:00 p.m. and don’t want to work on the IPO prospectus. It will just replace them. Find that money, and you can grow 50% faster. Harry is with me on this.

I am, but the trend I’m finding across shows is that Jason is becoming more and more right with his assertions. Have you seen this in the more recent episodes? And you’re agreeing more and more with him.

David Friedberg

One comment here: I think the conviction that he brings from his use of the product is really valuable. I have a number of colleagues who are engineers, and it’s just really great when you can say, you know, when you actually touch and use the product. If it’s an app, I try to use it. If it’s Cursor or something like that, my colleagues will be using it. I don’t want opinions from people who just saw it on PowerPoint.

When you use the product, it all becomes clear. He’s running a business where he’s literally had people and now he has machines. That’s what this is all about. It doesn’t mean that humans go away entirely. It means they find other uses. It means they find other roles. But when you see it happen, you believe, because if you want to be a good investor, I have this concept: you can tell when people are saying something that they actually understand. It’s a very good habit to have.

I’m listening to him, and sometimes on other stuff I’m like, “Jason, you’re just talking out of your ass. I don’t believe it.” When he’s talking about this stuff, you can tell he has built these products, he has automated this process, he has transitioned out those employees, and he’s getting a better product. And I’m like, yes.

I don’t know if I believe in all the claims for AI that the maximalists make, but I totally believe what you’re saying. There are areas where, right here and right now, you can replace a $40,000 worker with a $10,000-a-year agent and be better off. That’s why it’s not all just hype.

I think the million-dollar question is how fast that diffuses into the whole economy, but there are places here and now where you should just be using AI, and Jason is living that. He probably is right on the pointy edge. But he’s right.

If he’s the most pointy-edge Salesforce customer, in the next 2 years they’ve got to get 20% of their customer base, plus maybe 30%, onto being as pointy-edge as Jason in terms of automation. Otherwise, these guys are going to go somewhere else to get their automation, and that’s what it’s going to take.

Jason Lemkin

This is what I’ve learned: if they don’t buy it from you and you have a market position, they’re going to buy it from somebody else. That’s why I think Agentforce is so important, because we have this thing on SaaS.ai.agents where we share all the agents we use.

It came out of nowhere. It now gets 12,000 views a month out of nowhere. It’s not even highlighted, so that’s a lot of traction. But we have tracked it. We’ve sent millions in revenue to 2 vendors, Artisan and Qualified, that we use—millions in a couple of months of deals. And we send it to Agentforce now too, because we use it.

If other folks are building these agents and you’re not building them, or they’re not on your platform, they’re gonna find them somewhere else. The demand in some of these categories is insatiable. Vendors, if you really can replace humans with software for real—not for pretend, not for San Francisco, but for real—and you have even a mini-brand, you will find you have more demand today than you can actually service. You can’t even onboard the number of customers that want to replace their sales team with AI. There were blowups, like X11s and the blowups of last year, but the demand is like something we’ve never seen. It’s insatiable to replace humans with software.

I saw—it’s kind of tied to this—but it was speaking about the adoption of OpenEvidence. OpenEvidence grew to $300,000 in 1 year, which is 1/10th of the amount of time it took Doximity. I thought that was interesting just in terms of market pull and adoption rate, going back to what we said last week, which was just everyone being in market at the same time.

It is super interesting. You’re exactly right. The fascinating thing is that OpenEvidence got there in 1 year, compared with the 10 years it took Doximity. It speaks to this latent demand for AI. You just gotta put the negative in—the gnawing worry—which is, you just gotta face the following fact, though: there aren’t any more doctors as a result. This is something Jason said last time.

Everyone’s in the market right now. You could have a world whereby you get every doctor on the platform in 3 years and have saturated TAM more quickly, right? That’s why one of the things, when you look at these hyper-growth rates, and they’re so compelling, I think you just gotta say to yourself, “You’ve gotta be sure that once you get all the names, you have enough follow-on stories for those names.” You don’t wanna be 1 and done, right? Doximity’s a really good company. It has a finite TAM associated with the number of doctors and the amount of advertising and stuff you can sell to them.

OpenEvidence plays in roughly the same market. Probably at its current privately held valuation, it will need to expand that market substantively to offer a return from here. Totally doable, but it’s not just going to be getting there quickly and then stopping. One of the things we started to do is, for all these tools, you should know for each of the tools how many of that profession exist: how many lawyers, how many doctors, how many bankers, how many wealth advisors, because that’s your TAM, you know? Right, and tracking that.

So it’s really the number of people times the amount of their work you can automate. Because in the end, these are finite money piles. Let’s put the positive out there. OpenEvidence seizes the moment, and if you come along, to Jason’s point, 1 year from now with a slightly better version of OpenEvidence, to a rounding error, no one will care because you missed the moment when 90% of the people who are ever gonna adopt a tool like this are probably in the market now, or in the last 2 years or the next 1 year. They’re all gonna make their initial decision pretty damn quickly. You’ve shot up the S-curve super fast, and if you’ve missed your moment, you’ve missed your moment.

Jason Lemkin

Having said that, going to Mark Benioff’s point, which I think was a good one from before when he was on the show, there are categories where you’ll miss your moment. If you are a little slow, maybe find the areas that are slower. Mark’s point was that only a couple of percent of his customer base is fully ready for AI today, right? Maybe play to your strengths. If you’re a little slow, maybe go into retail or manufacturing or areas where it’s not that the AI isn’t there, but it hasn’t changed overnight, right? Play to your strengths.

David Friedberg

I agree, Jason. It’s interesting because OpenEvidence, just like ChatGPT, is an individual-adoption product. I think the velocity of individual adoption—you see it in Lovable—is explosive. The pace of corporate adoption is much slower. So you’re exactly right. I don’t think everyone’s gonna buy Agentforce or its equivalent in 1 year. It might be 5 years, not 10 like SaaS. It might be half the time of SaaS, but it still could be 5 or 6 years.

The fascinating thing is that the consumer has shown they’re gonna adopt in 1 year, right? That’s what you saw with OpenEvidence. It was interesting: if you looked at some of the general AI search and AI science tools, the number 1 user was doctors using general research tools to look up very specific medical questions, presumably meeting some patient with an odd disease. OpenEvidence caters directly to that need. It was a perfect product, and the adoption’s been enormous and super quick.

I think that’s what you’re seeing in all the individual users. We can talk about the pace of adoption in corporate law of people like Harvey, but I can tell you every individual associate is legally or illegally using ChatGPT to help them format the masses of writing. Every time you do any kind of market research, you confirm that. Even if they don’t have a corporate use case, they just have their laptop open and are cranking along.

Okay, fantastic. It has never been harder to do Series A investing than today. Agree or disagree?

Jason Lemkin

I completely disagree. Ignore some of the stress around price and otherwise. This is the best of times to be a Series A investor because there is just an explosion of seed AI startups. There are so many, and they can’t all get funded. I know it’s stressful, I know it’s hard, but it is a gift that thousands of founders are in San Francisco raising seed funds from multiple accelerators now.

YC, Neo, South Park Commons—all these folks are creating very smart, good candidates. It’s hard, and you gotta hunt, and it’s competitive, but the funnel is better. The top of the funnel is the best it’s ever been, so even if it is hard, this should be the best of times to be Series A because the funnel’s the best. The 1 layer up on your funnel is the best, and I think it’s the worst for seed because everyone each year wants to be a seed investor even more.

You know, Jake Paul, Logan Paul, whatever, which of the Jakes. It’s not just the Chainsmokers anymore and Jared Leto—it’s everybody playing at that hot seed startup level.

That’s 1 for all of you.

Jason Lemkin

Yeah, everyone’s in. So it should be a gift to be in A. It should be the best stage, stressors and price aside.

Rory O’Driscoll

I think the stressors and the price are the issue. But yes, I actually do agree. The other thing that’s helpful is the direction of travel is now clear. In the last couple of years before ChatGPT, we were at the end of the SaaS era. It wasn’t obvious what was going on. A lot of the deals you did then turned out to be evolutionary dead ends.

I do at least feel now, since ChatGPT, that the architectural direction in enterprise B2B for the next 10 years is pretty much obvious and a given. It’s some form of agentic software—I hate that word. It conveys a lot. But some form of re-architecting the enterprise stack to enable AI to do more of the work. That’s the mission. The task has been assigned, and the only question now is which verticals first, which tasks first, who will be an early adopter, and who will be late?

So the direction of travel is pretty clear. That’s the good news. Unfortunately, I think the bad news is there’s just a lot of capital doing it, and we’re finding that, from raw competition, speed, and the need for speed of execution, it’s a lot. But that’s life. It should never be easy to make a lot of money.

The most recent person I lost to was Andreessen Horowitz. Who was the most recent person you lost to?

Rory O’Driscoll

I would say earlier this year, a very talented senior investor, Tatiana Perkins. Great name, can’t argue with it, you know? Right. I think the relevant point there is I would maybe expand on that versus just having it be a litany of shame.

5 years ago, I would’ve said some firms would be earlier-stage, and we’d run into a slightly different peer set. But what’s happened now is that we typically do in-revenue Series A and Series B companies, so it’s kind of early product-market fit and on. Given the fund size, all the large firms that were typically seed and A are doing all those deals.

The competition set has stiffened. You’re up against tougher, better firms, and you’ve gotta bring your A game, right? There’s no doubt that if I was to list things that worry me, it would be that. In the face of that, you’ve gotta do all the things you gotta do. You gotta work on your relationships with the entrepreneur earlier. You’ve gotta see the deal earlier. You’ve gotta be more decisive. You’ve gotta play to win when you want it, which means you gotta know what you wanna win.

I share with my LPs that the talent of the people we are competing against has gone up markedly. The good news about this is we’re fishing in the same ponds as some of the smartest investors on the planet, and the bad news is you’re competing against some of the best investors on the planet. You just gotta find a way to win.

Final one. I would rather be in Kalshi at $5 billion than Polymarket at $9 billion. Agree or disagree?

Rory O’Driscoll

I'm a Kalshi user, not a Polymarket user. I actually think my comment would be this: I wish I was in one of them, and I don't mean that just glibly because they're good, right? Typically, consumer isn't our focus, but I really like that space. I really like the idea of prediction markets. I think it's a very clever and good idea.

I think there's going to be a lot of issues around the sports gambling side of that. You can get troubled by that. I know in the States we can be. Coming from Europe, we bet on sports all the time. Paddy Power is an Irish company, and there's a lot of great sports betting that goes on.

I do think the fascinating thing about Kalshi and Polymarket is the whole Brian Armstrong trend, where you have these prediction markets and then a person can put their finger on the scales of who wins. In this case, Brian Armstrong, by using a certain set of phrases during his earnings call, basically dictated a Kalshi bet one way or the other. There's going to be a lot of weird stuff that happens as a result of this.

Some of these policy bets, where you just know an insider's making a trade—one hour before the administration announced something, you see it hit on Kalshi and Polymarket. So there's a lot of fun stuff. But as a deal to be invested in, they would be fun, and at some level, that's worth having.

So, Kalshi?

Rory O’Driscoll

Well, as I'm a customer, yes.

Jason?

Jason Lemkin

If it is accurate to say that Kalshi is fully U.S.-compliant in all 50 states today, and Polymarket is still in an ambiguous position, even with ICE's investment, if that's true—I don't know if that's true.

Rory O’Driscoll

I think it's changed now. I think under the current administration, pretty much everything is legal.

Jason Green

Yeah. So what I was going to say is, politics aside, there is a chance there will be a new administration that will be less sympathetic to this category. Based on my limited knowledge, I'm going Kalshi because I feel like it is a safer long-term bet than someone that is riding the current political vibes, which are all in favor of everything here.

It just could be a lot different in a couple of years, and it could be a lot different in a couple of years to come. If I could slightly de-risk the regulatory side because it's CFTC-approved or DCM-approved, I would take that bet just because I don't know who the heck's going to be president next. I don't know.

But the first act could be to undo everything that Sax and buddies have done. That could be January 1, whatever. These edicts—it's all going. Crypto's out. Polymarket's out. Everything's out could be the next administration. It's all gone.

Rory O’Driscoll

Just to make a prediction, which is in keeping with the idea here, I predict that any re-regulation won't happen because of any new administration. I think the real challenge to sports betting like this will actually be the leagues themselves wrestling with the fact that when you have sports betting, you have sports cheating. If it becomes endemic, like in some of the European soccer leagues, it'll be a problem.

So I actually think a fun problem for the next baseball commissioner, basketball commissioner, or NFL commissioner will be: What the hell do you do about this thing when you have these very particularized bets? Not, “Will the Cowboys win by 7?” but, “In the 3rd quarter, will the quarterback throw a throw that misses?” The possibility for cheating just becomes high.

So I actually think that problem—the next administration will have plenty of other things to deal with. That particular problem will be the purview of, as I say, the sports folks.

I hope you Americans don't watch any Pakistani cricket, because that'll really show you the way to do it. But—

Rory O’Driscoll

Harry, no American spends a single second watching cricket, you know. It's just torture. But we respect that you guys love it, even though you're not good at it anymore.

Do you know what, Rory? I would love to take you to Lord's. Come to London. We'll sit and watch a 5-day game, and we'll watch every day, and then it's going to be a draw at the end.

Rory O’Driscoll

No. No, absolutely. Yes. A product that—

That would be great.

Rory O’Driscoll

…not been designed by an American TV executive. The one thing you know about cricket: It was not designed by an American TV executive.

Jason Green

Hopefully mobile phones are collected outdoors too. That's my hope. You have to put it in a basket so that nobody—

Oh, yeah, yeah.

Jason Green

…nobody can be on their phones.