I'm going to call [ __ ] start to

finish on this whole discussion.

>> So, what do we have on the agenda this

week? Open AAI reboots management team.

Open AAI buys TBPN.

>> I thought the acquisition was just

insane. Owning a media asset invariably

takes way more time than you think for

way less money than you expect. See Jeff

Bezos for details.

>> There's no way that deal is going to

happen today. Like, it's dead because of

management change. Anthropic hits a

whopping $30 billion in revenue,

surpassing Open AI.

>> Their training costs are a quarter of

Open AI. It really feels like the

investors in Open AI got a much worse

deal in the last round than the

anthropic ones did.

>> And then SpaceX finally confidentially

files for IPO targeting a $2 trillion

valuation.

>> The big three, SpaceX plus OpenAI plus

Enthropic, their value at IPO will

exceed every other IPO for the last 20

years combined. Ready to go,

boys. Welcome back. I've been looking

forward to this one. I was doing this

schedule over the weekend and last night

and I was like, "Wow, this this week we

really have a lot of meat to get into."

So, I want to start with OpenAI and

Anthropic. So, Anthropic now have 30

billion in revenue. uh obviously

surpassing Open AI, it's all intertwined

with the subsequent things that we will

discuss with Open AI, but as Jason put

in an email to us all, holy cow, Jason,

holy cow indeed. What did you think?

>> Even Even in an era where we're getting

annured and anesthesized to crazy

numbers, this one I did fall out of my

chair, right? Uh getting to 30 billion

up from 9 billion at the start of the

year. I mean, uh, I think it took I

mean, Salesforce is the largest software

company, right? Uh, at least Cloud One,

and it it took them 25 years to get

there. Anthropic got there in five, but

maybe they really got there in three,

depending on how you count. But you just

uh, you know, we we it was it was

incredible to see where they were uh, in

February. We couldn't believe it. And

then essentially adding 10 million of

net AR. Let's let's not debate whether

it's how many RS there are and whether

it's recurring at this level of growth.

It really doesn't matter.

It doesn't matter. So, uh and that

there's still capacity constrained and

that Claude still shows us when we're in

there that it can't finish chats and

that uh you know every engineer in tech

has been told to consume more tokens and

move faster, right? The crazy thing is

what will it be at this rate at the end

of next year, right? Um it's uh crazy,

right? If it's it grew 3.3x in four

months, we need Rory's math help to

figure out what anthropics run rate will

be at the end of 27.

>> It the estimates that we were just

looking at two months ago just look

incredibly wrong at this stage.

>> Yeah.

>> So, yeah. No, these are these are all

amazing numbers, right?

>> Yeah.

>> And I think a bunch of other interesting

things start to happen here. One is you

kind of munching in some stuff. One is

their announcement on open claw and not

allowing that to be in the base plan. I

think it kind of gets back to they're in

a massively interesting situation now.

The revenue is exploding. Despite the

revenue explosion, they're still compute

constrained. In other words, they could

sell more if they had more, right? And

what do you do when you can sell more if

you had more, but you can't make more,

right? You can't magically make data

centers, though obviously they have that

big announcement to do that. What you

start doing is allocating capacity based

on money, right? And one of the first

things they figured out is these folks

using these open claw type agents are

consuming vast amounts of tokens on you

know fixed on fixed price plans and they

probably want to stop that which is what

they've done. So you're going to see

them do exactly what anyone in economics

would say do which is try and find a way

to maximize and extract even more

revenue. And you know, we saw it even

with OpenAI last week where you

deemphasize things like video which

consumes huge amounts of compute for

small amounts of revenue. In Entropics's

case, obviously they have much less of

that pure slop, but you deemphasize

things like open law access where it

consumes a lot of your compute and

doesn't make you a ton of money. And I

think you're just going to see a

continued trend to pricing tokens

pricing closer to the value, right? not

a huge trend because you want to get

people I mean you don't want to

overcompensate because you want to get

people addicted on the product because

the truth is the thing you have in your

favor with any digital good is the

complete certainty that prices per token

go down over time but you do at least

want to start allocating it a little

more sensibly while you're constrained.

So that's kind of I think the trend

here,

>> you know, the the we could talk a little

bit about the open claw stuff. Um just

on the on the but before we get there on

the growth and enthropic, the other

interesting thing was the Wall Street

Journal today had a bunch of leaks on

the financials for Anthropic and OpenAI.

And the one that jumped out at me when I

contrast it with the fact that Anthropic

has caught OpenAI, right, in half the

time is that their training costs are a

quarter of OpenAI. Their training costs

for models are a quarter of the Open AI.

Now maybe that's because they're

focused. They don't have to do video.

They don't have to do images. They don't

have to do a lot of consumer stuff. But

if you just think about it for a moment,

the compounding effects of catching Open

AI in half the time, right? At at

roughly the same revenue or more, 30

billion in 5 years, and having training

costs that for now are a quarter of it,

you know, that's a double code red.

It's one thing if if if if if you have

two classic startups where one is bled

money and it's artificial or there's

other things, but if you have a dramatic

cost benefit and you're out accelerating

your competitors, um and there's

management team turmoil at your

competitor, uh it really feels like the

investors in OpenAI got a much worse

deal in the last round than the

anthropic ones did. Just crazy just

having both. You usually don't have both

together with your competitor. you're

out accelerating your competitor and

your and your training costs are a

fraction of your competitor. Good god,

it that that just compounds.

>> That's actually a good point because you

take the Uber lift struggle, right? You

Uber had the oh my god, we're out

accelerating. Oh, but by God, we're

spending every dollar we have to to do

it and we and we show no fear, right? In

this case, you're out accelerating the

opposition while being more efficient on

a bunch of interesting measures. No,

you're right, Jason. That's a scary fact

pattern. If you're, you know, if you're

running the game theory and you're the

other guy, it's like, hm, that's not

good, right? They're growing faster than

us. The gross margin economics are

roughly the same/ slightly better and

their cost below the line and to a

rounding error costs are compute and

scientists to run the compute uh for

training are better. And that's that's a

bad fact pattern.

>> Have we ever seen a bigger seeming chasm

between where they're at? I mean, with

the greatest of respects, it seems like

anthropics is accelerating faster than

ever, and Open AI is having more

challenges than ever all at once. I'll

tell you the one I think about uh the

word I I I didn't realize when we did

this show the last because the press is

always focused on uh the headline stuff,

right? Yeah. The open air was barely

real.

>> Yeah, you said Yeah, you said

>> barely real. And Dre's money appears to

be real. It came in out front, right?

Good. The the 13 the you know, the 134

billion, whatever they put in, that's

real. 11 billion. Um, you know, all they

have to do is get 20% carry and double

that and it's it's it's a nice side bet

in an SPV, but that was real. The soft

bank money comes in tanches. They have

to borrow money to pay it. The Amazon

money is trunched in part on IPO or AGI,

right? And the Nvidia money is almost

all not money. It's almost all offsets

in compute. So,

you know, I thought about it, but then

in context of anthropics growth, like,

you know, that's I think Open I would

have rather have all the cash. Like,

it's not a sign of strength where the

majority of the round is not cash up

front. Like, that's not I don't think

that's a sign of strength. That's a sign

of like classically at least barely

getting the round done. Barely getting

the round done. Um, versus getting

because why wouldn't you want all cash

up front? Why wouldn't you want 140

billion up front? bit harsh on the

barely because I thought they tacked on

another I can't believe I said the

sentence. They tacked on another 10

billion. Think about that sentence

sometime that I think was cold hard

cash. So I think it I I agree your

comment is correct, Jason. The vast bulk

of the dollars weren't cash, but enough

money changed hands that it represented

a bonafide price at the time. But yeah,

you are right.

And and again I mean look Antropic does

some of the same stuff in the sense of

given that your biggest expenses are you

know compute and then distribution you

know from Microsoft on with open AI to

all the recent entropic deals there's a

lot of this roundtpping business but in

both ca I mean I'd say make two comments

perhaps in both cases there was enough

hard dollars changed hands to represent

both of them represent price estimates

but to your point would based on what

you know now given the revenue venue

equivalents, rough revenue equivalents.

Shouldn't assume until Open AI releases

their numbers, maybe they've exploded,

too. But definitely

Anthropic at 370 billion feels a little

more comfortable, let's just say, than

um Open AI at 820 or 840 or whatever the

final closing was, right?

>> Well, OpenAI did say 2 billion last

month. I think that's why Anthropic

rushed out the 30,

>> right? That they're at a $2 billion run

>> rate. And look, we have the whole gross

net thing, but the bottom line is this.

When you look at those two graphs, you

definitely don't say to yourself, I

mean, I think what you if this was a

public stock, let me put it this way. If

this was a public, if both of these

companies were public, there would be a

bunch of those Yeah. New York hedge

funds shorting Open AI, longing on

Tropic and saying they have the perfect

AI bet, right? At you know, would you

would you go would you short Open AAI at

870 and go long on Tropic at 372? I'm

not a risky guy, but even I would

contemplate doing that. It feels like a

no-brainer bet. You have roughly the

same revenue, a better trajectory in a

management team for half the price. Hm.

And if you short the one and long the

other, you're kind of you're

diversifying away the AI overall risk,

and you're just making a relative

performance bet. That's probably Yeah,

that would be an interesting one. What

would you say to an OpenAI employee who

is now looking at their incredible stock

price appreciation with tens of millions

of dollars in equity that they now have

at the 820 price? Sell it all at 820 the

minute a tender comes. What would you

say to them?

>> I think I I wouldn't pile on. I in

general, look in I have some things in

opening I want to pile on this time. And

if you recollect in the last couple of

weeks, I've tried to avoid the pile on

when someone's down. And I think you'd

always want to be more tempered. But I

always say to everyone in any um

private, you know, in any private

company, I say when the liquidity window

opens, take it seriously because it

might open again for a while, right? So

yeah, when the liquidity window opens at

$.8 trillion,

the alert reader should say, you know,

if you're planning to buy that house in

San Francisco, you might need an extra

few million just based on what I'm

seeing in the market now in terms of

house prices. So take advantage of this

thing cuz all your brethren have right

you know I wouldn't yeah as I said I I

think the people I don't want to pile on

the individual employ I mean the

company's still doing a lot of great

stuff you got a lot of turmoil we got a

lot of drama at the top we'll talk about

that but you know I think you take

advantage of liquidity just because you

should always take some advantage of

liquidity

>> let's knock it on the head let's talk

about the drama at the top I mean talk

about a management team turnover you

have Brad the COO who's been moved to

special projects. Um,

>> my dream sign being moved to special

projects.

>> I'm going to be the SVP of special

projects for 20 VC in my next phase of

life.

>> Jason, I would love you to be the SVP of

special projects.

>> Just special projects. Yes, special

projects.

>> Um, we we have the CMO stepping down due

to health reasons. Um, we have the CRO

out. We have Fiji um who's head of apps

taking a short leave of absence um with

health problems. Um,

how do we read this very significant

multitude of changes at the management

layer?

>> If we step back a minute, it it ties to

anthropic passing them.

You don't you don't just sit there and

make no changes on the team when your

competitor uh over the last 6 months has

radically changed the competitive

posture. So, look, I don't think any of

us like that amount of change in any

management team, right? It feels almost

a wholesale change at some level. But um

and it's risky, but you you got to you

know the calling code red four three

months ago didn't magically change the

trajectory here. So it ties you got you

got you got to try to mix things up in

some fashion. Hopefully you can do it

with the team you have. But in in the

context of of of

anthropic now out accelerating OpenAI,

it just makes sense to to reboot the

team. It just makes sense.

>> Yeah. There's some rebooting some I mean

the act to use your phrase the reboot. I

mean who's been hired? Who's the what's

the re what's the additive reboot? Well,

the dramatic one, which is always risky

for like any startup, is you take Denise

Dresser, who was CEO of Slack, who came

from Salesforce just a couple months

ago, and you put her in charge of

basically everything go to market and

related, right? That's a good bet on a

seasoned executive, but that's the type

of change that we've all seen as

investors is like super risky, right?

You bring in the one the person with the

perfect LinkedIn, right? And the perfect

background that's still getting to know

the product. They're still on a get to

know you tour. they haven't quite been

to the uh to the New York office yet.

They're getting to know the product and

all of a sudden you give them this

massive portfolio because they're proven

executive. In my experience, I I don't

know what you guys think. In my

experience, that has about a 30% chance

of success just just roughly that

bringing in the big the perfect LinkedIn

giving them a massive portfolio and

either attaching them to and attaching

to something in tumult if it's executing

to perfection, it always seems to work

bringing in Mr. Mr. LinkedIn miss like

but but when you're in Tumult there's

not a lot of time to learn everything

right there's not a lot of time for the

get to know you tour so it's just risky

but it's it's a but it's a play like it

it is a play I get where you're going

there Rory which is like for the

replacements to be additive there needs

to be great talent added and there seems

to be a lack of people coming on the

field when they're coming off agreed and

you know I'm I'm all as I say I have a

couple of comments one is I'm always low

to comment on um yeah because the

illness related is because you just

don't know what's going on in people's

lives and that's tough and people have

challenges and you know you wish people

all the best especially in these kind of

chronic diseases and hope they can get

back to full health right let's just

start with that cuz that sucks right you

know at the same time you know you have

a lot going on here right you have a lot

going on and you know I I I to me even

all these people change you know I I'm

tempted to make that you know the famous

Oscar Wild quote um in the importance of

being earnest you

to lose one parent might be an accident

when he was talking to this woman was

talking to the orphan, but to lose both

parents smacks of carelessness, right?

Well, you know, you you you are getting

to the stage of carelessness here,

right? But I actually don't think that's

the real issue. It's fun to say. I think

two I'll tell you, we haven't mentioned

the two most surprising things in the

last week on Open AI. One is I'm just

going to say it. I thought the

acquisition of a TPBN was just insane.

Not on its on the in in in in the

particular it doesn't matter but you

don't

launch an ecode red edict and a focus

edict and and you know no more side

projects edict and then within the space

of a week do something that's so

obviously a side project

to me no matter what you get I mean we

can discuss whether it's stupid on its

face and whether you know buying media

assets is the way to go and I I

acknowledge the unreason articulated

thesis that you know you have to control

the media story though doesn't seem to

be Antropic has any need to do that. But

stepping back one level, you're running

a $25 billion company, the most exciting

company on the planet. If the number and

you just told your entire internal team

that you need to focus and then buying

there's nothing that's more of a vanity

project than buying a media company,

right? I mean, look, you know,

>> just one thing we could talk about it

more or less. The one thing just to add

when you look at the press, this is

interesting. that deal the hands the the

outreach was in January that's a lot of

time in open AI and AI time right Viji

was new thought this would be a great

thing to elevate open AI in January now

it now it's April and maybe the deal

seems a lot different but in January it

was a different world right

>> at some point I mean I remember yes

>> I don't think it h it didn't happen last

week is my only point it happened in

January it took some time to close right

and I will say one thing I'm 90% sure it

wouldn't happen today. To your point,

priority if nothing else, prior like

priorities change, right? It probably

wouldn't happen today.

>> You know, if you only noticed in the

last week, if you only noticed in the

last week that you need to focus, then

yes, I'll give you that, right? But you

didn't just notice in the last week you

need to focus, right? And if you did,

maybe you need to focus and see fire

comment, right? If you haven't realized

you're in code red for the last two or

three months, and if you have realized

this is the kind of thing you don't do

when you're in code red, then you're

just not paying attention. So, I

challenge that. I think it's a vanity

project and absurd. And then the other

kind of weird

>> Can we actually Can we just pause on on

that?

>> And I know you want to because you want

like where's your 200 million, Harry?

But yeah, let's pause in your lack of

200.

>> No, I know. I I just want to actually

articulate a bull and a bear case

rationally for an audience for how this

acquisition could be seed from both

sides because it is very confusing. So,

if we were to start with a bullcase,

Rory, and Jason, please chime in, too,

because you're you're the master also of

kind of media and venture as well. Um,

what is the bullcase first?

>> I'll give you the the bullcase. There's

there's two. The the strategic one's

more interesting, but let me hit the

tactical one because Rory because Rory

made a good point. If you there this is,

look, this is not going to make or break

the company, right? There are certain

acquisitions that can, right? There's

certain actors this like stipulate that

but there are some things you acquire

where it it they run almost on

autopilot. They are not massive

distractions and if the price is small

relative to what you hope to get out of

it that does factor into the equation.

If you have to rebuild your whole team

it's a total distraction. You're going

to rip out your guts. That's a big deal.

when once in a while on one it's pretty

rare you can acquire something that

isn't massively distracting to some

management team level. So even if it's

not the perfect acquisition I don't

think it's a huge it's not going to

require a huge amount of senior

executive time. So it's just it's just

important general to the calculation.

The one point I'll make and I wrote a

post that every every profitable public

company should do a deal like this of

which OpenAI is neither right it is

clearly not profitable. is clearly not

public. But but other than that, let me

tell you why, Rory, and you might end up

agreeing with me on this. Um because,

and this is why the bar stool deal

almost worked but failed, right? If you

are a profitable B2B company,

especially,

you are under insane pressure to get

more profitable. Like we c I actually

can't overstate how how intense the

pressure is. Like they're looking at

every headcount, every sales efficiency,

everything. Now it is brutal, right? and

your cash is trapped on your balance

sheet and so it is very difficult to

increase marketing spend. It is very

difficult to spend another hundred

million this year on marketing. But at

least in the short term if you can buy a

marketing asset that is at scale that is

at scale you can turn your balance sheet

into marketing which is hard to do. It's

hard to do and I think maybe TBN is not

the most successful way to get OpenAI's

brand out there. We could debate that

but it but it is a way to turn a balance

sheet into a marketing asset.

>> I'm going to call [ __ ] on start to

finish on this whole discussion. This

Open AI is the most known company on the

planet perhaps other than Apple. Right?

Within the last two years, the CEO of

OpenAI has been able to meet every world

leader he wants, right? He's gone on

world tours. He's met Macron, he's met

the president, he's met every single

prime minister of India, whatever,

right? They get constant attention,

constant. The AI story has been, you

know, the entire zeitgeist for the last

3 years and they're the leader of the AI

story, right? So, in terms of media

minutes, there's nothing left to get.

Right now, if what you're saying is, I

don't like what they're saying about me.

Oh, they were mean to me, then yeah,

maybe you can pay these guys to say

nicer things about you than on average.

But you don't need more. It's not like

you're making [ __ ] widgets in the

Heartland here, right? You are the most

exciting tech story on the planet. You

don't need a little bit of help and to

just get out and and get covered. I

mean, literally everything Sam does gets

covered, right? So I hear you Jason most

of the time but not for these guys. If

you were to pick the one company who

doesn't need media attention and does

need to focus it would be open AI and

this is nonfocused and getting media

attention. So I'm like just from a

signaling perspective we're 100%

aligned. The only thing I would come

back to you with saying is they have

consistently shown an inability with how

to respond on social to negative

moments. Whether it's lemonade stand,

whether it's anthropic adverts, they've

consistently messed up crisis PR and

crisis communications and made

themselves not look great. The only way

I could justify this is by saying they

are vibe maintenance for those [ __ ]

times to make us better, cooler, better

responders to bad things because they

have no editorial control. Like this is

the most important thing. Andrees are

right the importance of owning media but

they have no ability to own the content

to influence it to impact it in any way.

It is editorially completely impartial.

So they have zero benefits. This is the

only reason this does not make any

sense. If they had the ability to own

the media properly, it would make sense,

but they have zero impact on it.

>> History is riddled with people who, you

know, buy media assets to try and change

outcomes. And you know it it it

generally results it generally my

observation is owning a media asset

invariably takes way more time than you

think for way less money than you expect

right see Jeff Bezos for details right

and you know you end up getting abuse

you yeah it just is a sinkhole right and

Harry if you can't control the story

then hire a better storyteller you know

hire a better comms person hire a better

marketing person think before you speak

and before you hit on your [ __ ] about

lemonade stands But and look in ter it's

in the noise it and Jason you are right

they're not going to spend a lot of time

managing in this case at least in the

short term. My comment is more

it's just really silly when you say

we've really got to focus nothing else

matters but these two or three big

things. Oh but by the way here's here's

here's one last play thing project. The

one thing I will at a meta level just to

founders especially have listened to

this honestly this is why you should

default yes to a good deal. Let me let

me be clear. I'm pretty sure this is

this deal. I just read the press. This

things things at open. There was stress

in January, but it's not like today.

Okay. It was not like today. Um Fidgety

comes in. She has an idea. This is not

the biggest bet the company's going to

make, but they have a team meeting.

She's like, I love TBN. What if we

brought them in for for a little bit of

good promotion? And everyone around the

corner is like, whatever. Yeah, we let's

go talk about buying some open claws or

something. But but but they say fine and

things are good and they kind of shake

hands on a deal. It takes a little while

to happen and it closes last week.

There's no way that deal is going to

happen today. Like it's dead because of

management change. And I can't I can't

tell you how many times I've seen this

for portfolio companies and even it's

happened to me twice where time it's not

just time is the enemy of deals. It's

management turnover, right? Priority

turnover. So the metal lesson is I just

don't think this deal would have

happened today. It has nothing to do

with with with the team at TBN. Just so

so when you say no to a to an attractive

deal, just be sure you're okay if it's

no never because the odds that VP that

wants to do the deal is there in 12

months and that their priorities have

not changed approaches single digits.

>> Yeah, it's back to the liquidity window

comment. You're exactly right, Jess.

>> Yeah, but my god, I think it's worse for

M&A because so many times in M&A that

guy just isn't there next year. But I'll

tell you, one of the things about being

the big boss is that even when you're a

long way down, if you don't think it

suits what you're doing now, you should

stop it. I remember fun story to 25

years ago, we were selling a company to

GE. I'm not going to name the company,

right? And it was a mediocre company and

we were darn lucky to get the bid,

right? And it was going all the way

through and it went every level at GE,

right? And then it came to the CEO and

you know, he's not perfect Jack Welch,

but he's willing to take a tough

decision. We were a long way down.

Everyone was about to sign and be all

happy happy. He looked at the numbers

and said, "No." And I remember thinking,

"Damn, I thought we get away with it,

but he's right. I should have, you know,

right?" And at some point, I remember

thinking, "Oh, that's impressive. All

these people were in. He was a long way

down with the process." And he just

said, "I'm thinking no." Right? And if

you could, this is one where you say,

"I'm thinking no."

>> I'm going to give you a hard one before

we move to SpaceX. You have the chance

to buy Anthropic at 850 or Open AAI at

380. Which would you rather buy?

>> You may have that opportunity in the

secondary market as we speak.

I'm

>> I wouldn't be surprised.

I think I'd mean having said I'd do

Antropic last time at I mean six months

ago at the 300 something thing I think

I'd go the other way this time because

again if you if the choices were

entropic at at the last OpenAI price of

850 post or whatever it is 820 something

post or

OpenAI at the last entropic price of 370

post or 380 post I would argue that you

would buy open AAI on one proviso you

could sit down with the board and say

what are you going to do about this

because it doesn't take a lot to fix

this thing, right? To just stop screwing

around and focus, right? And you know,

>> no, no, no, no. Because you've got to

stop then a machine that is anthropic

that is now picking up more and more

pace with every day that goes by and

being first of all, you still have the

consumer asset where you are by far the

dominant thing. Again, this goes back to

what we said last week. You have to do

two things. You have to figure out a

consumer monetization model and you just

have to get a Codeex, the Codeex

competitor to Claude out there. It's

pretty mission clarity is pretty simple.

You do have one big advantage we didn't

talk about though it's changing a little

bit and give Sam he was more aggressive

on compute purchases and I'll admit I

was someone thinking from the peanut

gallery hm is that a bit aggressive but

now it looks like compute constraint is

a real thing in 26 and early 27. You

have that asset maybe you figure out how

to deploy that aggressively with codecs.

So there there's buttons you can press

there's things you can do if you focus

and do them.

Jason, you've got that same choice.

>> I'd say buy both at if you can invert if

you can invert the valuations.

>> Yeah, that's actually

>> that's what all the the growth VCs are

doing if they can get away with it

anyway. So, let's invert.

>> That's amazing. But you can only buy

one.

>> Um, yeah, but conflicts aren't important

in our firm anymore. We they don't

matter at at pre and they don't matter

at growth.

>> Jason, you only have one check left.

>> Well, look, I mean, I've said the same

thing on the show. I'm just not into

the the the tumult at OpenAI. I'm not

into the drama. I'm not into a non- tech

non-deical

founder leadership. It's just not my

vibe. Like I wouldn't invest in anything

like OpenAI at a high price. It doesn't

matter what it is cuz it's just I just I

just find it so risky that that the

turnover and not being led by a deeply

technical CEO that's just I in my life

at investing I I ain't doing those risks

anymore, right? and and maybe I'll miss

a lot of opportunities. It's just, you

know, I want someone Dario or smarter

technically running these companies or I

just it's just too it's too much change.

You get you get too lost on the on the

on the on the on the pen and and the

TBPN's

although I don't think Sam had anything

to do with TBNN in all fairness. I think

he said fine in a meeting and moved on.

No, because and related to that just for

folks I don't know how M&A works at

OpenAI. It's not that sophisticated.

Okay. But I will tell you when I was at

Adobe a long time ago for M&A, basically

every every senior executive got a big

chip and a small chip. Okay, the big

chip was a big deal. Back then it was

maybe a billion dollar deal. Okay, that

would move the needle. If it doesn't

work, you get fired. It's that simple,

right? And everyone got a small chip

could could be like 50 to 200 million

deal. And you had to justify it and you

didn't get five. as a forcing function.

You got one, but you really weren't

challenged that much to to do the

smaller chip. You picked one a year and

you didn't get fired if it didn't work

out. There was there was a there was an

idea that maybe 20% of them would work

out. And so I bet he spent five this was

a small chip deal and he spent 5 minutes

on it. This is the one. Is this the one

that you really want to do this year,

Fiji? Then just do it. Let's move on. We

got bigger fish to fry. That's why I

don't think it's that big of a deal. It

was a small chip deal, right? And no one

loses their job at Adobe over the small

chip deal. Otherwise, it would never

happen. No one would take any risk in

buying an emerging company, right? They

just wouldn't do it.

>> Okay, we've got to move on. Other things

did happen. SpaceX finally finally

confidentially files for IPO targeting a

$2 trillion valuation. Um, it would be

the largest IPO in history, surpassing

Saudi Aramco. They could raise up to $75

billion. This obviously includes XAI

otherwise known as Twitter um which

obviously incorporated earlier this

year. 2025 revenue 15 to 16 billion 8

billion of EBIT uh at 2 trillion it's

125x revenue so coming in punchy um

to say the least feels like a series A

these days Rory uh how do we feel when

we hear this? Well, I'll just tell you

one one one insight. I I think to say

that at least venture is different or

remade is an understatement. Like the

big three, SpaceX plus OpenAI plus

Enthropic, assuming they all IPO, I mean

certainly SpaceX will in the next 12

months. Uh their value at IPO will

exceed every other IPO for the last 20

years combined. All of them. All of the

last 25 years. These the big three,

every other little every other little

deal. I mean, Rory's had some great

IPOs. There's been tons of them out

there. Um, but this exceeds all of them

combined, right? So, so it almost makes

I I I found it almost depressing in a

way when I thought about this way

because it was like, what's the guy we

had earlier in the show from Slow

Ventures who kind of bothered me a

little bit,

>> Tom Les.

>> Yeah. And he kept saying box doesn't

matter. And then he said, "Open AI

doesn't even matter. It's not that

important." He was very triggering. I

tried not to get triggered directly, but

he kind of rattled in my head. I was

like, "Maybe the guy's right. Maybe

nothing we're doing matters because the

big three dwarf the last 25 years

combined. Like what are we doing guys?

What are we what are we doing here?

First of all, I I think that is a real

phenomen and what you're simply saying

is, you know, especially in SpaceX's

case, the longer the holding period, the

more dispersion which sets in, which is

more the bigger be the big become bigger

and the little ones fade out. And you

know, and you're exactly right at the

tail end of a power law, it does mess

with your head because the combined

value of the top three privately held

companies are larger than everything

else. In much as the same way, it's even

more concentrated than the public

markets which are more concentrated than

they've ever been where the market cap

of, you know, the top four or five,

Nvidia, Apple, Microsoft, um, Alphabet

and what and I think Meta is, you know,

approximately 30% of the total S&P,

right? Which is everything for the last,

you know, xund years, right? And you're

right. The psychologically

the thing about a power law they don't

tell you is you can have the third best

outcome in venture history and be only

onetenth as large as the largest outcome

in venture history. And if you're going

to let that in your head, it's going to

be it's just going to be very tough

business psychologically for you because

you can have a life-changing event

that's you down in the noise of 10 or 20

billion dollar outcomes, which can be

enormously great for you and your family

and for your co- investors and for

everyone involved. And if you're going

to let it in your head that it's not $2

trillion, then you're doomed and you're

just going to need therapy. I wrestle

with these things all the time. I mean,

it is the thing that your mama told you,

right? is right. You just have to not

let other people define you. I mean, you

said it really. It is a psychologically

weird thing, right? You're going to have

these three deals go public and um

they're going to be worth literally

everything else that's happened in the

last 20 years if they trade anything

like their current prices. Will SpaceX

rip and hit the two trillion when it

does go out?

>> I try and not spend time talking down,

you know, an amazing company, right? Not

least because I'm going to be a buyer of

SpaceX 15 days from the IP. I surprised

you because 15 days from the IPO, it's

coming in QQQ. I have a big QQQ holding,

right? If you're an index fund, you're

getting this thing in 15 days, right?

And if I don't know when it'll be for

the S&P, but it'll be fairly s soon

thereafter, right? So, we're all going

to be buyers of this thing, right? So,

in terms of the valuation, I I you know,

you don't know. Look, you do any kind of

meaningful analysis some of the parts

and you come up with a lot lower number

and then as we we've discussed this

before and then the gap between what you

think the assets are worth on any kind

of normal basis and $2 trillion is huge

and it's all Elon premium and what

you're really asking therefore is how

big is the elon premium sometime in June

and I don't know I think that you're

definitely seeing the Elon premium come

off on Tesla which has been worth

pointing out and you know it's it it's

it's it's down significantly year to

days and there's definite and you know I

was interesting to see JP Morgan put an

actual sell on Tesla with a prediction

of a 60% price decline. So

really what you're asking me Harry is

what is the Elon premium in June and I

hell I don't know.

>> Well I'm asking actually do you think it

will materialize in public markets and

they hit that two trillion. Well, Rory,

here's what your your thought.

Obviously, I don't think either of us

have worked on an IPO quite of this

scale, right? But

>> no, by definition, no one has in the

[ __ ] universe because the first time

it's ever happened,

>> right? So, the process is going to be

different. But here's my point. At some

level, if the company ha there is a

there is a a tough negotiation sometimes

between the company and the underwriters

on valuation, right? Um, and often times

some cos are like whatever the whatever

the lord brings and some are extremely

aggressive on the number they want,

right? And depending on the situation,

sometimes the co wins those debates,

gets out with the valuation, the

underwriters are very uncomfortable with

and sometimes it works and sometimes

they stumble because of it. I think

Elon, what Elon said publicly on X, it

ain't going to be two trillion. Now

maybe he'll change his mind. He said two

trillion was too high. So whatever his

number is, I think he's going to get it

on IPO day. He's going to will it into

existence. the underwriters are not

going to be able to argue with him for

more than 5 minutes and there'll be

enough demand between retail 30% of the

IPO. It's a lot, right? There'll be

enough whipped up demand, I think, to

support it for one day. He will will it

into existence. Whether that evaluation

is there in 30 days uh or possibly even

in one day um I don't know but I do

think the sheer force of will the lack

of power of underwriters and the 30%

retail will will his 1.75 into existence

for one day at least one day

>> I think that's quite correct it's worth

pointing out I think less than 12 months

ago there was a meaningful transaction

in SpaceX at 400 billion right then

there was this much smaller I don't have

even happened in the end secondary at

800 billion

Then in conjunction with the merger with

um come on X yeah X// Twitter it SpaceX

was valued at a billion to value the

other asset with its negative 12 billion

in cash flow at 250 billion. So they

added that in to get to 1.25 and now you

know you're at um you're talking about

1718 and it's all been walked up in a

very interesting way. It is worth

remembering that the last time the

useful asset was valued on a standalone

basis, it was worth $400 billion. So I

think if the deal went public at 1.5 1.6

less than the whisper number, I still

think they'd have done a magnificent job

of walking the value of the asset up

because it's not clear to me that the X

AI asset has a positive NPV in anything

like the near-term. We just had a long

conversation on entropic versus open AI

and they're kind of number one and two

in this space and Gemini Google is

almost certainly number three. So X.AI

is number four in the kind of model LLM

space at best burning $12 billion a

year. So I don't know what that's worth

but I but I I would argue that they

won't be talking about that in page one

two or three of the slide deck at the

IPO. they'll be talking about SpaceX

which means the entire addition of that

probably was net negative. So I go back

to my comment is I think you're right

Jason they'll will something amazing

into existence for a short period of

time because you know this has all the

leverage and the drive and I think you

know only in the long term are markets

weighing machines in the short term

they're voting machines and we'll see

over time how it settles as you know

people just look at the dynamics of a

you know 20 billion plus or minus

business cash flow positive apparently

well EBDA positive capex not

excluding X.AI and then add an X.AI and

it'll settle into a long-term value over

time. What happens on the day? I think

you're right. It'll be much more a

function of the will and it's a small

float. So, and people will push.

>> I'm switching it up here. We're going to

go to PI we're going to go to private

market.

>> And we we we had big news from Seoia

this week for context. Always like to

contact set. Doug Leone had taken a step

back from the firm, back from dayto-day,

back from investing and um you know Pat

and Alfred had recently taken over the

leadership from Rolof and now Doug is

back in an investing capacity, not in a

leadership capacity. That's still very

much with Pat and with Alfred, but

Doug's back in the firm investing. Um

which is very big news given he is one

of the OGs. How do we read Doug back and

back in the trenches? Well, look, I

don't know. Rory may have more thoughts.

I I don't know, but um from from from a

distance, it feels like something to

calm the LPS. I mean, everyone is

raising so much capital, so much change

there. Um that uh you know, I I think I

mean, you guys have even more experience

than I do. LPS are uncomfortable with

change. LPS say that they're looking at

the new generation and the vanguard, but

they are comfortable when the old

leadership is still actively involved in

the fund. It does make LPS more

comfortable. Um whe whether they're

writing investing half the fund or a few

deals. So it struck me as that simple is

you you you bring back someone that

makes the LPS comfortable and you get

through this crazy amount of fundraising

everybody's doing. But I could be wrong.

I could be wrong. But I don't think it's

just to get somebody on your slack and

get a little wisdom. you you don't need

to bring them back to just to to get an

hour or two of of of insights on on

deals that you already have.

>> I think it was a sensible move. I don't

think it's an earthshaking move. I mean,

they've made the changes they've made

already as a firm and it all made sense.

I think at the margin, you're right, it

helps a bunch of different things. It

just provides some continuity.

Absolutely. Which is important, I think,

for LPs, for the firm, even for

entrepreneurs. Also, let's not lose

sight of the fact he's a damn good

investor, right? I mean, one of the ch

questions we always ask when we're

hiring someone and thinking about it, in

this case, you are effectively hiring

someone, is do you think the next check

that they'll write will be better than a

check that one of us will write? And I

think Doug Leone's proven that he can

write pretty good checks. So, I think

even at the margin from a check writing

perspective kind of makes sense. The

transition having made one transition to

Rolof and having had to make another

transition abruptly means the first

transition wasn't that successful. I'm

sure there's an element of scratching

the itch. Yeah. want to come back and

make it work. You know, they've put a

lot of his life into this firm. They've

done an amazing job and it just felt a

little janky late last year when that

transition happened. So, if a couple

more years can help manage that

transition and send a continuity

message, why not do it?

>> With the greatest respect, I spend a lot

of time with LPS a lot. Um, the

insatiable appetite from LPS for Sequoia

has never been more prominent still. Um,

and so I I don't respectfully I don't

think it's LPS. I think it's actually

just like in the face of increasing

competition from a founders fund who've

got an Andreel and a SpaceX at their

tailwind wins for founder brand and and

which are more attractive than ever for

founders. You ask the question, how can

we be more competitive? And Doug is the

ultimate winner of deals. He is the

>> You telling me the kids at YC have heard

of Doug Leone or even know how to spell

his last name? I doubt it. I'm telling

you, when Doug Leone goes to that

meeting with them, whether it's

Christian Hacker at Trade Republic in

Germany or whether it's the team at

Whiz, he [ __ ] closes the deal. Yeah,

cuz maybe not the YC founder who's 24,

but you're right. Across, look, let's be

get real here. Across the venture and

tech ecosystem, this is someone who's

had wild success and even in a meeting

can bring knowledge to bear that would

move the needle on a close. I I agree. I

mean it's look as I say don't make

>> well let's call it gravitas whether it's

the founders or the LPs it is adding

gravitas back into sequoia in a time of

a lot of change right and

>> that's that's exactly

>> it says they needed more gravitas that's

just what we need a little more gravitas

guys who can we bring in

>> yeah one of the things I admire about

sequoia to be I've always said this is

like literally even if they're winning

on every round but one they'd be like

well how do we win on that round as well

right and you as you say Harry it's

never been more competitive of there are

wildly talented similarsized firms. Why

not, you know, even even if you have 10

great players, why not get an 11?

>> Jason, you mentioned the youngest

founders from YC.

Some very young founders from YC

obviously founded Delve, a top two

compliance business. Um, sorry Rory,

don't look pissed at me, but it is.

>> Okay, good. Um, very young, 21 year

olds. Um, and

as everyone knows, uh, Delve has been in

the news for not providing a product in

the Sock 2 compliance space that they

said they were. A lot of problems around

that. Uh, YC have since kicked them out

of the YC community, which was announced

this week or leaked this week from

Bookface, YC's internal product, which

obviously wasn't meant to be leaked. Um,

is this the ultimate sign of their

guilt? Um, inside invested 32 million

bucks into the company uh, you know,

within the last year. Um, should there

have been more diligence from an

investor perspective? How did we think

about this?

>> My guess is you know they they listen

obviously a lot of things went wrong,

right? One one one was making up a lot

of audits with AI. We're going to find

more more portfolio companies did that.

Uh, the second one was stealing from a

fellow company, stealing IP, forking a

fellow company. And I think, listen, I

don't know how you manage it with YC

with thousands of companies, but there's

a limit where you cross the the the the

the bro code or the girl code or the

founder code with other folks at weon

portfolio companies. And you there's a

line you just can't cross. And whether

they see it as open code theft or what

happened, whether you're manipulating,

you you can't allow that within the core

portfolio. And I think they were ejected

for the combination. And it wasn't just

some young kids misusing AI. I think it

was the second. I think it was breaking

the code and that's why they were just

there was no need to comment more. You

broke the code, you're out. You're out

of you're out of the team. I I totally

agree, Jason. I mean, look, these things

are going to happen. I mean, I was just

running the math in my head. You know,

why see 200 companies a quarter. So

that's 8 900 a year, right? Step back.

United States, we have 300 million

people here. We have approximately 3

million people incarcerated at any one

point in time. So we run rough 1% you

know between felons and misdemeanors

right across the whole population. So if

you just index to that that means out of

the 800 YC founders a year statistically

if they're just no better or no worse

than the rest of the country there's

eight eight of them that are you know

will in the course of their life commit

some kind of crime. It's going to

happen. You're going to have fraud. And

you know at the end of it, you know,

when you have a portfolio of 30

companies or 40 companies as we do, then

most VCs avoid it and every once in a

while one VC gets unlucky. If you have

200 companies a year, it's going to

happen to you a lot, right? So first of

all, no drama there. No, I mean, I saw

all this, oh YC is bad cuz this guy is a

fraud. But dude, when you have this

number of companies statistically, it's

just going to happen. So that's the

first comment. And then the second

comment, Jason, I love what you said.

You're exactly right. What do you do if

you're running YC? can't stop this [ __ ]

up front, right? And especially when a

lot of your value ad to entrepreneurs is

um you know the community, right? That

is what you're selling and you get you

do business with each other. Anyone who

did business with these guys was at the

very least discombobulated and

embarrassed because you rely on this for

sock 2 compliance and then it wasn't

true and then on top of that you stole

from another YC bro. You're exactly

right. It's like in the Old West when

there wasn't, you know, much law. Um,

you know, you have to take the law on

your own hands and hang the cattle

thieves, right? This is the same thing,

right? Dude, you broke the code of the

West, you're out. And I think from a

enforcement perspective,

you know, I can totally see why they did

it. You know, now you can talk about

should other people have known? Should

you really buy compliance software from

21s? That's an interesting comment. But

fundamentally, I I I think you're

exactly right, Jason. You're going to

have this thing and the only way you can

deal with is not a priori policing but

especially when you break the bro and

whatever the non sex loaded term of bro

is. When you break the that code, you

just got to be pretty ruthless about it.

So yeah,

>> I really think it was the part two that

did it. you know, there was a

>> stealing, you know, taking a customer

Sim Studio that is also a YC company,

maybe even a batchmate. Taking their

open source software, not attributing it

back and claiming it's your own software

to like your own batchmate or your own

customer. That's, you know, we we've all

thrown a few things into Claude and

pretended we did the work. Like all

three of us have done that, but this one

breaks the code. You you you took the

open source code from your batch mate

and said it was your own software. I

mean, and they were your customer.

That's you can't you can't you can't

handwave that one away.

>> Move on. Exactly.

>> You can't handwave.

>> Moving on. Open router, very well-known

company for those that don't know, a

marketplace for LLM, so to speak. Uh at

1.3 billion price at 50 million of AR,

up from 10 million in October. Um so

obviously 10 to 50 in whatever that's

been 6 to 7 months feels quite cheap for

an AI leader. Jason, I'm intrigued to

hear your thoughts specifically on this

one.

Uh, I I love Open Router. I mean, I use

it. Um, and it's just very interesting.

You know, it's a very simple way to to

dynamically pick which LLM to use,

right? And going to our conversation

from last week, sometimes it doesn't

matter if you're not price sensitive for

certain workloads. Sometimes, not only

does it matter, but it's incredibly

helpful to not have to do all this work

yourself. Oh my god, which model should

I pick? How should I do it? an open

router let you do it dynamically or you

can pick different LLMs for different

use cases and it just makes it elegant

and uh what I love and it's also really

cheap right it it it's quite cheap um I

suspect the cheapness is why it's not

worth 10 billion right when you have

such a low take rate from such high GMV

do you do naturally get a little nervous

about the address the true TAM even

though we've given up on TAM that would

be my guess But um you know they they

they've become the market leader in this

space. It's cheap and it works and adds

a lot of value. You you got to love it,

right? Um it's just when the flip side

is you know you one of the reasons

anthropic I mean god 20 billion right is

a really good anthropic call at the API

level is a buck. It's a buck. Okay

here's my simplification. You can do so

much on your $20 a month cloud

subscription or $200 but I can tell you

on all the apps I've built the complex

stuff it's a dollar. So that scales

massively if you're taking uh 1 to 5% of

a subset of that um you could you you

know there is in theory a ceiling if you

don't expand it. What I like is if you

get market leadership in this kind of

thing and you're not that expensive

there's no reason to switch. It's not

worth switching for a for a tiny amount

more basis points. It ain't worth it.

Right. And just for listeners context,

what the company does is acts as if

you're building an application, this

product open router acts as an interface

between you, the builder of whatever

software product you're building, and 50

to 60 different LLMs such that it can

dynamically pick in real time which LLM

is the right one for whichever call

you're making. And it charges around 5%

5.5% of the money you pay the ultimate

model provider. So, if you're building

this app and you're spending, you know,

$100,000 a year on LLM calls

using these guys, you pay 5% to them,

but in return, instead of having to

access each separate LLM se each LLM

separately, you get access to them all

in one kind of API call. And so, it kind

of just totally makes sense to me. It's

kind of in that Stripe Twilio business

model of an interface. Twilio was an

interface between um an app builder and

all the complexities of telco. And these

guys are an interface between an app

builder and all the complexities of

LLMs. And you know Twillio's gross

margins cuz they accounted for growth

were 20 30 40% plus. They were pretty

darn good. Whereas in this case they're

only booking the net revenue at 5%. So

maybe there is actually room for margin

expansion there over time you know. So I

so it's an interesting business kind of

the world needs it. The other thing

that's interesting about it which gets

to the wider question is a number of

folks have backed into figuring out what

are the most common models and you see a

lot of the Chinese open source models

now right which gets to so I always

think I'd love to spend time thinking

about and I just haven't is they must

have open must have a pretty good sense

of what things do you need

state-of-the-art models and what things

can you do easily on you know much

cheaper um open source models right

>> well they can even turn it on for you

that's one of the reasons I think open

router So clever. If you want, they will

just decide which router which which

model to use for workflow.

>> And my point is

>> you don't even have to figure it out.

>> Yeah. At some point the people spending

$30 billion a year on entropic um

corporate IT is going to wake up and say

do I have to spend all this money on

entropic or can I pass some of these

calls to a cheaper model and something

like you know just given the size of

spend that openai and entropic are

getting there is at least the

opportunity for corporate purchasing to

think about is any of this doable on a

cheaper model

>> I'm a super fan right super fan of open

like great software super easy to deploy

everything. It's like 11 Labs just like

super easy to use, super easy to deploy.

I give it a 10 out of 10. What I've

learned from another investment we can

chat about is okay, so they're at 50

million AR, they said. Um, and the

nominal take rate's 5%. But I but some

folks probably pay less, right? And in

some cases, you don't have to pay

anything. So they might be needing to

manage 2 billion in inference just to

get to 50 million in revenue. So how do

you build easy to see how you get to a

couple hundred million in revenue right

in today's world what I worry about

companies like open router is how do you

get to a billion in revenue right and do

you just wave your hands and say these

are great founders they're at the heart

of AI or do you say oh my god like even

if anthropic keeps growing and some

folks won't use it because they'll get

big enough they'll do their own things

how the hell does this get 20x bigger

when it's already managing two billion

of inference

>> I I'm going to give you the argument

which I'm not sure I believe but look if

you believe in a world where look you

just look at the open AI and entropic

projections which cumulatively add up to

north of in 2029 on the code estimates

$4500 billion plus let's call it $500

billion in API across both companies

right as you take out chat GPT consumer

business maybe 3400 billion of

enterprise API calls across um

open AI and entropic I don't know if 10

or 20% of that went open source That's

40 to 80 billion and 40 billion to 5% is

pleasing eat 2 billion, right? So if you

could and now that's 100% of the market.

So you're right.

>> 100% of the market.

>> That's fair. That's fair. You got to get

100%. I mean maybe there's maybe there's

40 to 80 billion of kind of value going

to open-source LLMs and maybe you can

get 5% of that. Now the other question

to your point Jason is right now

amazingly all these open- source models

are primarily Chinese open source models

and you know until some until either LMA

until if if Meta reintroduces an

up-to-ate open source model or someone

like reflection ships one there'll be a

US equivalent but right now the low

ironically the Chinese Communist Party

is effectively subsidizing you know the

American small independent software

vendor by providing cheap open source

models. God bless them. Right? And

because if you look at the the the kind

of winner list on open router, it's all

Quen Kimmy and all the other open source

products.

>> What I think about open router just for

investing right the news is I do really

think about you know small takes of

large TAMs is intellectually confusing.

So Harry and I are both investors in a

company called Revenue Cat. I was the

first investor and they have about 50%

market share in managing mobile

subscriptions. If you have a mobile app

that is paid, 50% chance they have

revenue cap deployed. Okay, it is it is

it's competitive and their net take rate

is like half a percent up to 1%. Right?

Even with all of that, they're only so

much bigger than Open Router. Now, they

grew 40% last month because of AI. Like

it's great, but like and I love the

company. I love it. They have a clear

path to a billion in revenue now. But my

learning from that is sometimes it's

hard to do the math intuitively. If your

if your product is very cheap in a in a

in aish market, but you don't get all of

it, you open router could be one of the

greatest 200 millionaire AR companies,

right? It's just a risk that I think

about more than I used to. Um that

that's fair, but I will give you the

counterpoint, which is the two best

financial businesses on the planet are

Visa and Mastercard. I sit literally 30

yards away from the Visa headquarters.

They don't even get 2 and 12% because

most of that goes to the banks. They

get, you know, 15 20 bips, but on every

dollar every human spends on the planet,

it turns out to be a remarkable

>> No, I'm with you. I'm just I guess my

personal intellectual limitation is that

the notional BIPS map doesn't always

translate to the real world BIPS map,

right? That's the thing that the

Revolute and Visas sound great, but

niche sometimes products that seem mass

scale are more niche in practice. And if

your product, if your product is

$200,000 a year or $100,000 a year, who

cares, right? You'll figure it out

later. If your product is dirt cheap,

you really really got to like own

everything. Own everything when it's

dirt cheap. And I think we're we're

we're all making a lot of AI mistakes

here. And we're be our investments are

being flattered by high ACVs right now.

like the ones that have high ACVs all

seem to be doing great because they're

50 to 100k per check doing getting to

where 11 Labs got from the early days is

much harder than a lot of a a lot of

Loras and Harveys are just because the

large ACV flatters flatters the the the

inputs and the outputs to achieve that

scale.

>> Agreed. Not sure I could trace it back

to open router but I agree with what

>> well I'm just nervous I'm personally as

an investor and this may be one of my

many flaws. It's a long list. I'm

nervous about exciting AI investors that

have very low ACVs right now. I think

their actual TAMs may end up being

smaller than they look despite the epic

numbers when we started this

conversation. Despite, you know,

Anthropa getting to 30 billion in 5

years, the little tiny crumbs we get out

of this 30 billion may not be may not

make a whole loaf of bread sometimes.

Like a bad analogy, but some truth to

that. That's just so rather than shoot

from the hip when it's a 7 million post

back in the old days, if I've got to

shoot from the hip at a 100 million post

in the preede, maybe I got to really

believe that that small that small ACV

will scale up.

>> Do you think Open Route will be a 10

billion dollar company?

>> It's always a weird question because if

I knew for certain I'd go do the deal

and not sit here talk to you, right? You

know, because that's what they're paying

me to do. I think we're in a world right

now where everyone is just doing the

buildout as quickly as possible. And

what that means is everyone on that

journey can attract some capital right

and get some revenue because if you're

solving a problem that's in the rate

that's a rate limiting step in terms of

getting the AI buildout done you can get

revenue you can grow quickly and I think

open route is an example of that right

and you know you can put on your

intellectual MBA hat and say in the end

when things settle out maybe a lot of

these businesses get commoditized and

you can you can worry about that and a

certain amount of that worry is legit

legitimate and there's a whole bunch of

markets like I'll give them all there's

kind of the labeling marketplace there's

the inference marketplace there's

products like this open router where you

say oh when things settle down and

people starting getting more efficient

then all these businesses will get

scrunched a little bit and that's true

intellectually but my advice and I say

it internally is please don't overthink

it because while that is true at the

same time in the short term this

explosive lift in demand gives you a

chance to be relevant and It's your job

to add products on top of that such that

when the great crunch does come and it

will come in a couple of years, you've

just delivered enough value. You I mean

like in other words, so do I think open

router will get to 10 billion in value

on just what they do today? No. And and

if they just keep doing what they're

doing today, no more than the inference

guys, no more than the labeling guys,

when things slow down, all these

businesses will get crunched, right?

When people start to optimize, but

you're you have a chance to parlay. You

have you're building you're building

relationships with a whole bunch of apps

developers in Open Router's case, right?

The your job is to find the add-on

products on top of this that over the

next two or three years, you know, give

you value or do the adjacent

acquisitions that give you value. Maybe

you start doing inference, maybe you

start hosting stuff on top that allows

you to extract more value from those

customers such that when the thing slows

down, you're the survivor. I mean, we

saw

>> Yeah, I think that's the challenge with

these investments. I mean, the one that

if I'm running it, it's a dream. 50

people, right, at 50 million in revenue

at the center of this. Like it's I I if

I was a founder, I'd be there's a dream

job, right? Um but I think my learning

is Rory's point. You the reality is you

have to go truly multi-product earlier

in this type of situation. Not not just

a little feature, right? Not just a

little enhancement. Um but you literally

probably have to build five distinct

products to get to that billion. And not

um you know, not all founders are

actually up for that. They say they are

but not but you need a very distinctive

founder to run the AI rippling playbook

and say hey I want to break something up

in some ways that's crushing it with 50

people if they have it. I mean again my

dream job and say we're going to do five

of these and we're not going to wait 2

years. We're not going to we're not

going to like just focus focus focus

focus and um I think if they're up for

it I would hold my stock. Harry you

probably have no choice. If you see this

sort of Stuart Butterfieldesque

reluctance to go multi-product, which

was very rational at at that time and

place, then uh I would be less excited

to hold stock. I think you've got to run

these businesses right now like you're

in this insane

kind of period of time when money is

just raining down on everyone and all

the time you should be saying to

yourself at some point the music will

stop and twothirds of the people will be

will will have to go how do I make sure

I'm the one-third that make it right and

that's what you know the smart inference

providers are doing that's what the

smart up and down the stack should be

doing how do I lock in because look the

truth even when the crunch comes, the

foundational model companies make it

because they they're on top of the heap.

They have the high intellectual property

asset, right? They're going to make it.

Everyone else one level down has got to

be saying to themselves when people

sober up, they're going to say, "Oh my

god, this is a commodity. There's a

bunch of adjacencies. How do I make sure

I win in that world?" Speaking of, "Will

this become a commodity in a future

world?" We've seen you the need and the

explosion of databases. Um, we've seen

some people like your lovables and your

raplets incorporate them, build it

themselves. Some people um outsource to

Superbase. Superbase at $10 billion.

Jason, you're the man for this. The man

who's used more replet instances than

anyone else. Is Superbase at $10 billion

a good buy?

How do

>> I think it might I think I like it. I

mean, I do think it's it's an

interesting buy. Um, first of all, you

know, huge credit to the team. I mean

this is one this is one I call an AI an

AI tailwind to the maximum. Superbase

founded I think in 2020 right this is

pre AAI and they're like oh well we'll

do another fork of Postgress which is

open source and free and we'll make it e

easier to use and easier to deploy. I

mean, who the hell I mean, I know it was

it was a hot YC company, which kind of

uh you know, a lot of folks want to say

it's the unhot ones that take off, but

you know, sometimes it is the hot ones,

but I don't know that that I I don't

know that certainly wouldn't have been

obvious to me in 2020 that we needed

another a forked version of an open

source database process. I mean,

everyone was having issues with

Postgress at the low end and the high

end. Folks were having to shard it and

it got complicated for big and it was it

was reasonably difficult to deploy at

the low end. So their idea but then that

just worked with agents like they built

a product that could basically

self-deploy a Postgress database and

it's what every agentic product needed

right they needed to spool up a database

without humans and they leaned the hell

into it right they let um uh they didn't

get replet with neon which data bricks

bought but everyone else standardized on

superbase right they they supported them

and then they let everyone lovable and

emergent and all these other ones white

label it a couple months ago um and Now

I don't have the exact numbers but I

know more databases are being created by

agents and humans. So that is the trend

you're betting on. All right. Database

is a fundamental category of software.

It always has been right now. The number

of databases we're creating I mean it's

it's it's it's an order of magnitude

more than it's been 12 months ago. So

why the hell wouldn't you want to bet on

the leader in that trend? Right? Every

app needs a database. like every and

even the ones and what's interesting now

is I'm not sure if this is true of

lovable v 0ero but replet changed it a

little while ago where every single app

has a database whether you use it or not

they found that enough of them are using

databases no matter what they build

right that it's not worth adding a

database later so whether you even

realize you have a database all the

millions and millions and millions of

vioded apps have a database in the

background so um and with superbase they

get to monetize them all like they're

charging these guys for every single

database. So I I do like this one. I I

do like it. This is one where the agents

are so far ahead of humans now. There

are categories where the agents are

doing like venode and everyone's talking

about what the world will be like in

four years, right? Database is a world

where already the agents are creating

more databases than humans. We've

already we've already crossed that line

and so why wouldn't you want to invest

in the leader?

>> Agree. And I think it is Lily

an excellent example of two things we've

talked about. One is that kind of thing

I just mentioned which is you start with

something and you have to parlay and

then the other thing is Jason that

you've talked about a lot is being a

preAI company that you know brilliantly

finds a way to co-attach. These guys

co-attached to the trend as you say did

the deals with many of the vibe coding

things and now their job in the next two

years is before the music stops be

perceived just as MongoDB was the the

right database for the kind of SAS era

and for cloud you want to be the right

database for vibe coded and agent apps

in 2026 27 or 28 and at some point when

when the when things slow down enough

for the lovers and the replets and the

other folks to say, "Hey, maybe we

should just back in and do this

ourselves." You want to superbase be in

a position to say, "No, every developer

on the planet uses us. Every agent

framework supports us. Why would you do

this? Your users will rebel." Right? The

playbook is super clear. As I say, it's

literally it's like it is just like the

SAS and Cloud Spade playbook, but on

super fast speed. you know this is all

going to happen in two or three years

and make make sure that you know before

things slow down you are a lot more than

you are today in the eyes of your users

think about how hard it classically has

been to deploy a database I mean Oracle

is still ma massive right I mean I've

never deployed Oracle but I can only

imagine how difficult it is to deploy

Oracle database right [ __ ] is work

these product and that was disruptive

these things are work I even [ __ ] has a

a vector data based product and I I

deployed it for one of our apps and it

it only took a few hours but it took

head scratching and headaches and not

everyone could do it. Superbase you

could do in 5 seconds. I mean it's so

disruptive.

>> All these databases start being easier

than the prior alternative. I mean I

don't shock hor relational started

because it was in the 70s but I remember

even in the early 90s

>> Arthur Rock used to talk about it

though. I remember the relational

database days

>> and then I but I do remember when

MongoDB started and it was just the drop

deadad simple cloud-based alternative to

a lot of these you know to some of the

other alternatives at the time not so

much directly competitive relational

databases but for some of the newer use

cases and then they get more complex

>> or a DBA for someone that could spend a

month configuring it and getting it

going is disruptive right

>> yeah because it it didn't take a month

it took a few hours it was easy it was

JSON it was whatever and you're right

now It's 5 minutes. So, it's just now

I've no doubt

>> or actually it's invisible. You don't

even know. Here's what's interesting.

You don't even know you have a database

until you need it. It's lurking in the

background now. You build an app without

a developer and you didn't even know you

needed a database because you're not a

developer and it's already there and

configured and has all your data. It's

pretty cool.

>> That's true. But the odd point I was

trying to make is the tragedy is that's

great, but over the medium term, a white

label business to five or six vibe

coders won't be enough. So they're going

to have to expand beyond that. And

ironically, over the next 5 years, that

will mean adding complexity, adding

functionality. And in 10 years time,

someone, and it won't be me at that

point, will be saying, "Oh my god, those

legacy Superbased products, they're

almost as bad as MongoDB, and there'll

be a new alternative at that point." But

that's just the movie. And this is

Superbase's time to crank. Good for

them.

>> I think it's also a reminder just that

we've given up on worrying too much

about intellectual durability in these

in these investments, right? It's a

winner. The growth is is exciting. The

MPS is high. We're not the fact that

everyone else may build their own

Postgress databases or other things may

change. We're not we don't even care

anymore.

>> I mean, I'd say differently, by the way,

just to be clear, it's not that we don't

care. It's that you just don't have the

luxury of f there are very few things