OpenAI Restructuring: Who Wins and Who Loses & Mercor Raises $350M at a $10BN Valuation

I just can't think of a retail IPO that would be more popular than OpenAI. To

me, going from 23 billion to 30 billion, I don't even consider it an up round.

It's not enough.

>> If they really have gone from 100 to 150 in less than 6 months, then I can make this conversation really quick. There's

no way they should sell. Andre Herds is the red army of the venture industry.

What you're basically saying is, worry, you can win a deal. Not cuz I've grafted for 30 years and returned, you know, frankly, billions of dollars to my investors, but because I'm on a P. If

that sentence is true, If that sentence isn't true, then 100% Mark Andre was right all along. I think Bezos would lay off half his company in a Fortnite. It

was the right thing. I don't think you even care. Ready to go.

even care. Ready to go.

[Music] We have so much to discuss this week.

It's my favorite show of the week. Um,

and we were talking about >> It's in the top two each week, isn't it?

At a minimum, >> I I would say it's a top two show for sure right?

>> Yeah. Always a top two. Does that Does that make you feel special now? Yeah.

>> They say the silver medal is the toughest one in the Olympics, but I don't know about Rory. I'm good with it here. I'm good with it.

here. I'm good with it.

>> I'll take a silver.

>> Okay. So, we were talking about where we were going to start, Rory, before this, and you were like, I think we should start with Open AI given the news today.

And so learning from the feedback that we get, I would love to start with you just explaining a little bit about the news that's just come out about OpenAI and their structure and we can start there.

>> Sure. I mean the big news today is OpenAI cut their deal. They cut their deal with Microsoft and they cut their deal with the attorneys general, the plural of attorney general, um, of

Delaware and California, which means they have been able to implement the restructuring, which means they can raise their capital, which means they're they are out of the messy complex trap

they had put themselves in all those years ago in terms of their structure and they've gotten it done. That's the

big picture news. There's lots of information one level down about who won, who lost, who got what economics, but that's where we're at. And you know, it's still got some opposition. Elon can

still litigate and say, "I don't think you should do that because I gave this money to a charity." But possession is 9/10en of the law. And once the attorneys general have allowed it and they've actually converted,

you know, it's a lot harder to unwind.

So as of now as of this morning as I understand it open AAI there is the charity the charitable foundation which is now one of the well most well capitalized charitable foundations on

the planet underneath that there is the company itself open AI which is a it's a PBC I can never remember the initials basically a a for-profit company but

also has to take into account um more than just shareholder maximization I'm I'm sorry I'm having my dyslexia there right so that's the entity that's created And that's the entity into which you can invest. There are other

companies like that. I think Patagonia, for example, has the same status. This

is not a crazy thing now. This is not some weird like the old open AI used to have this disclosure. You should regard this as a donation. It can all go to zero. This is a real honest honest to

zero. This is a real honest honest to goodness American corporation, a different kind of American corporation, but they can go public with this.

They've gotten out of the straight jacket. So that's the big and it's big

jacket. So that's the big and it's big news. It means, you know, what, for

news. It means, you know, what, for example, it means an open AI IPO is one enormous step closer. Not saying they have to, not saying they will, but big news today. I'll just throw one thing

news today. I'll just throw one thing that jumped out at me on the deal. Um,

the overall structure, Microsoft owning 27%, the employees owning 20ome%, uh, the, uh, the nonprofit owning 20ome%. Those are all roughly what we

20ome%. Those are all roughly what we all expected, right? There's there's

some nuances on uh how AGI worked that are a little interesting. But the

craziest thing in this deal because it's unprecedented I think in our lifetimes is OpenAI said that Sam Alman will still have no shares. No shares in the combined entity. And we've ne we at the

combined entity. And we've ne we at the same time we've got Elon Musk arguing he deserves a trillion dollar pay package so the robots don't kill us which I I think he deserves. Okay, I think his VCs

will say he deserves it. Okay, there is something unimaginable to 99 to almost all of us any of the world say he should have a trillion dollar pay package but the scale has to be relevant to the to the outputs right I don't believe it

will ensure the robots don't kill us it's a little crazy but on the other hand Elon wants a trillion and everyone was saying show Sam the money when he was fired as CEO over a very long weekend right the night of knives or

whatever was fired fired by this crazy nonprofit um everyone had to revolt to bring him back fast forward to today that that same nonprofit It's in charge still the

same. Now listen, there's been turnover,

same. Now listen, there's been turnover, but it's still sort of charged and he has no shares. Um I I we could hypothesize why he's pretty transparent.

I actually think it gives him in some ways more power as well as less power.

Um you can't assail the man for for capitalism when his other billion dollar entities are the ones that let him finish off the McLaren collection. But

we've never seen someone own nothing, have we? Like this. Have we ever seen

have we? Like this. Have we ever seen anybody own nothing? It's crazy.

>> If we just drill down on on winners and losers from this structuring change, who who are the winners and losers here? I

think the lesson here is lesson that every attorney knows, which is you often hear this expression when litigators, what's the case worth? In other words, they look at the filings and both sides and experienced litigators look and go,

"Okay, we got these three points. They

got those five points. In the end, we're going to win on the three, they're going to win on the five. This is the way it's going to come out." And then there's a whole lot of human drama because humans are like that and we yell and we scream and we have juries and all and then

typically things settle out for what there were. Right? This settled out for

there were. Right? This settled out for the where the cases worked. Let me tell what I mean by that. Right? Is when you look at the thing and Jason said not only no surprise but you know no surprise for a long time. Microsoft had

a fair amount of leverage. They used it.

They got a great deal right they put in 13 million$1 13 billion. They got a 10x on their money as of today. They got a lot of AI leverage. They got some going

forward AI property rights. They got

some a significant going forward contract for Azure business if they want it, which we can come back to. Overall,

they didn't push it to the point of breaking, but they got pretty much what they were going and they still have some rev share, which surprised me. So, they

got a great deal. Again, I go back to my comment. Microsoft corporate development

comment. Microsoft corporate development and lawyers deserve a gold star for from their shareholders in a way that frankly Microsoft R&D does not. And the proof of this is this morning Microsoft stock is

up nicely. They're like, "Thank you for

up nicely. They're like, "Thank you for the hundred billion. We're up." There's

three big winners. The second big winner is just to step back, the charitable foundation, right? You know, there are

foundation, right? You know, there are some people again even today griping and saying, "We did this all for charity. It

feels wrong that there's any capitalists involved." And I I I get that especially

involved." And I I I get that especially if I'd given the seed money. But

stepping back somehow in the midst of this we've ended up funding a wonderful $135 billion charitable foundation. If

you know that's a significant contribution to whatever good they hopefully will do with that money and they already made some announcements about AI for medicine. So there's $135 billion out there that's not going into

someone's pockets to you know buy yachts uh boats and football teams. It's actually going to try and solve world's problems. Now whether they can or not TBD but yay cuz I would have laughed in

2016 but the people who started open AI saying we want to do good for the world have at a big picture level succeeded they built something what $130 billion

which is a foundation that they can be proud of. So it's a win for them.

proud of. So it's a win for them.

Obviously the employees own a third and now it can get liquid. Yay them. And

then um you know the remaining the investors can kind of exhale get a sigh of relief. Soft bank can put in their 22

of relief. Soft bank can put in their 22 billion and the investors as a group I mean Soft Bank will own about 10% and everyone else will loan low single digits and everyone won and everyone got roughly what the leverage would make

them get. And then the final winner I

them get. And then the final winner I just got to say and I know this a lot but Brett Taylor just wins the best board chairman of the year award again for the second time in the last five

years. He totally wanted as board

years. He totally wanted as board chairman of Twitter where he jammed that down Elon's throat for $44 billion despite his opposition and he won here

today cuz he unraveled the mess and set it all up for a win. So I it's a really good settlement.

>> There's no known losers.

>> Well, if I mean the losers would be the Elon feels he didn't want any of this to happen, so he's miffed. And the people who think um oh my god it should all have stayed not for profit. They they

they feel they're losing. There's a lot of that Twitter verse comments today.

But pragmatically speaking I mean if you think about it Microsoft put 134 billion dollars in here right and they've made a 10x which is a good return but we'll

talk about returns. It's not like it's it's not like it's rapacious relative to the risk they took. No one else was writing OpenAI a billion dollar check in 2019. Microsoft did and I got that

2019. Microsoft did and I got that return >> and the IP for for an >> Absolutely. No. So

>> Absolutely. No. So

>> yeah. So I I don't think there's any losers at all.

>> I don't think anyone got much more than they deserved for the risks they took and the work they did.

>> So I can tell my LPs that the little 6% stake deal I'm doing today is okay because here's look at Open AI. I don't

need to get double digits. Point point

to this one. Don't don't beat me up on the double digits.

>> Totally. No, exactly. And you're right, Jason. It just shows rules of thumb are

Jason. It just shows rules of thumb are made to be broken. 90% of the time your ownership target is a really meaningful metric and it should run your business on it. And you know, 10% 1% of the time,

on it. And you know, 10% 1% of the time, who the hell cares? 1% of the biggest company on the planet is $5 billion.

>> There you go. The one micro thought I just thought was it's very conf you know there's so all the circular financing who who Nvidia giving them money AMD giving them 10% of the company Oracle

raising a a an unprecedented amount of debt. Yeah. So what I mean is I don't

debt. Yeah. So what I mean is I don't know how much equity OpenAI needs, but it seems to me if they're coming up on being the first trillion dollar startup and more, if they could IPO at two

trillion, which is crazy by any historic, so is a co with no stock, maybe they can raise another 200 billion, right? I mean, at least in

billion, right? I mean, at least in theory, that's a lot of capital to access. But my point is this unlocks

access. But my point is this unlocks maybe f four times more equity for them potentially if the public markets are different than the private because of the potential valuation they could IPO.

They may need that they may need an extra 200 billion to go the distance.

>> I I think that's an excellent point Jason and you exact it means that there's one more set of winners here.

All those people whose stock popped because they have a [ __ ] promise from OpenAI to buy a whole bunch of their stuff in the future with money OpenAI didn't didn't have now at least can say they can go get that money. You

know the prob I mean as you know I'm skeptical that Oracle will collect the last dollar of that cloud contract. But

at least you can now say hand on heart the customer open AI now has a sensible corporate structure. They obviously have

corporate structure. They obviously have an amazing business and if they need to raise another hundred billion it's not like crazy anymore. It's just it's just banking and math. So you're exactly right. This thing may fail for you.

right. This thing may fail for you.

There may be business issues around you know return on thing but we're out of the stupid corporate structure getting in the way of everything stage of business.

>> I just can't think of a of a retail IPO that would be more popular than open AI, right? just bringing everyone out of the

right? just bringing everyone out of the woodwork to put a little bit of their life savings to do it to ignore the even if the valuation makes no sense. I just

this would have to be the most popular retail IPO of all time, right? I think

you're exactly I think yes, you're exactly and it's now it's doable. Yeah.

I mean, people aren't going to be reading the perspectus and saying maybe we won't make profits. They're not going to be reading the thing about $250 billion of cloud commits to third parties. They're just going to be let me

parties. They're just going to be let me get some of that open AI, right? I I

think it would be interesting actually to your point I'd be interesting to check on the secondary valuation pop today for open AI trades. I mean because right now the weird thing right now is

Soft Bank is closing two separate deals right now. They're closing their roughly

right now. They're closing their roughly 300 billion pre direct investment and they're also doing a share buyback from exist from some existing employees of 500 billion. So well I mean literally

500 billion. So well I mean literally you have the same security trading at two different prices and I think that's true for other investors too. They've

locked in the earlier price. When the

other investors, I think driver is in this, too. When they committed to Open

this, too. When they committed to Open AI a while back, they said, "Hey, we'll give you money at 300 billion, but you got to get your conversion done first."

So, now that the conversion's done, they're going to put the money in, but already they've already had a markup before the money. Oh my god, they've had a markup before the money's gone in, right? Because Soft Bank is marking

right? Because Soft Bank is marking itself up by doing business at 500 billion in a secondary, right? So

literally you're going to wire money at 200 billion or 300 billion whatever the number is and then sec next day you can say hand on heart current valuation of this is 5 billion 500 billion so there

you go you're 40% IR in an hour do you think there will be a trillion dollar company in 2026 >> on the current trajectory maybe all I can answer is on the current trajectory and without the euphoria Jason mentioned

it's probably too because you know you do get some attenuation of growth at scale and you know at the current thing that I mean at 500 billion and you know 12 billion let's call them boring gap

revenues rather than ARR it's kind of you know 40 times gap and if it's 20 bill and 25 times AR run rate so my guess is it would take two years in the normal course but you you know you might

see that euphoria moment but it's not crazy it's not like it's never going to happen it's it's it's within the trajectory it's within the strike zone if anything like the current growth rate continues if it slows I mean as a

reminder when you're trading and we saw this in 21. If you're trading at 40 times revenues and your growth rate slows, it's it's nasty and you fall shear. But right now, they're growing so

shear. But right now, they're growing so they can get it.

>> I would love a two trillion dollar IPO.

>> That sounds great.

>> Anchor from here. Actually, the

interesting question will be the dynamics of the negotiation. Again, when

you have master corporate financio like Taylor and Sam Alman on your It'll be fun to watch the bankers beg for that.

They might pretty much do it for half nothing just to be on the biggest IPO of all times. I mean, I think technically

all times. I mean, I think technically Saudi Aramco had a kind of a couple of trillion dollar market cap, but nobody really cares. Let's get real. It's an

really cares. Let's get real. It's an

oil company in Saudi Arabia. Um, yeah,

this would be one for the ages and I think every banker on the planet will be making decks as we speak and calling on Mr. Waldman and Mr. Taylor.

>> Dude, you'd do it for free for the credit.

>> You probably would.

>> Yeah, no doubt. Um, is there anything on OpenAI that we haven't covered that we should cover? Do you think the browser,

should cover? Do you think the browser, the RSUs, anything that you're like, ah, have to cover that?

>> I mean, it's all second order stuff. We

can come back to it if we have time, but I don't know if it's I mean, that's the big story. They're free.

big story. They're free.

>> You know, the only thing that's mildly interested in the browser is just um will I I'm just waiting to see unlike Sora and such. Will the world really

care? I just wonder how many it's just

care? I just wonder how many it's just tough to keep track of how many stories tech VCs and X create. Um it's not that it's it's not that it's not interesting,

right? I mean, obviously the browser is

right? I mean, obviously the browser is where is where we live a lot of our lives, but uh it it could be like MCP.

It could end up being uh interesting, but not uh not really the game changer that uh that uh VCs and others think it'll be. We'll just see. I don't know.

it'll be. We'll just see. I don't know.

>> Right. Yeah, I haven't I it's it I don't know that it will it that uh every sing the average consumer will find it a gamecher to find a new browser um rather than type chat GBT into their browser

and get enough memory. We'll just see whether they really want it to to to uh you know pick its Spotify selections for us. I just don't know if it's a it's a

us. I just don't know if it's a it's a game changer or uh or or more uh or more of a land grab. And so we we will just see. Okay, we're going to talk about

see. Okay, we're going to talk about Andre's new funds. Andre dominates so much of the venture microphone today.

$10 billion split across $6 billion in growth, $1.5 billion in AI apps, $1.5 billion in AI infra, a billion dollars

in defense. My word, what a big raise.

in defense. My word, what a big raise.

Um, I would love to understand, is this just a new normal of General Catalyst and Lightseed and the mega platforms raising like this? Is this different?

How did you analyze this news?

>> Honestly, I thought they were small. And

what what I mean is I didn't think it was small until I saw the breakdown of the funds, right? Um at first I when we talked about this before, I'm like 10 billion. That's unprecedented, right?

billion. That's unprecedented, right?

But when I look at that in the new Sequoia fund, $200 million Sequoia seed fund. That's not that big compared to 20

fund. That's not that big compared to 20 VC. What's the 20? 20 VC is 150 out of

VC. What's the 20? 20 VC is 150 out of 400 or something, right?

>> 125. Yeah.

>> Yeah. Ror and Rori is more A and B, but it's not 200 million doesn't really get get you out of bed at scale. And then

1.5 billion for AI apps when you're investing in 11 labs and friends and and replet doesn't seem to get you doesn't really seem to get you very far. The

seed funds and the AIF fund for Sequoia and Adre were smaller than I would have expected in today's insane world where even 50 million at a YC demo day could

be a low valuation. Right. Wasn't

expecting that. Uh, no. I I thought it Look, step back. Is it the new normal?

Yes, it is.

The business model that Andre and a couple of other firms have brilliantly pursued. This is the world we live in

pursued. This is the world we live in today and as investors will live in for the next four to five years, right? I

mean somewhere down the line you'll either have the it works over across a cycle and then this will be the norm forever and you could envisage a world where this is a little like where venture becomes more like investment

banking where there's Goldman Sachs, JP Morgan and the rest of us are boutique players, right? Or the other thing that

players, right? Or the other thing that could happen is the returns from the bigger funds are slightly disappointing and kind of there's a little bit of a tilt back to more mid and small cap

ventures. But this is the dominant

ventures. But this is the dominant modality today. These are these this is

modality today. These are these this is what top dog venture investing looks like. This kind of scale, this kind of

like. This kind of scale, this kind of dollars at work and there's four or five other firms doing this.

>> Is there any excuse to that I can't compete with Sequoia. I mean I mean scale can outbid them. I think you can compete with a $200 million seed fund or a$ 1.5 billion AB fund. I think you can

compete. I I I agree the the the

compete. I I I agree the the the sentence I can't compete at a seed with Adre because of check size doesn't make sense except in one very derivative way

right because I agree at the end of the day someone's raising 10 million and you have 10 million the other guy has 10 million and of right there could be one there's one of two arguments against

what you're saying though right the two ways because there's two ways in which the the fact that one checkbook comes 10 out of let's just pick it how one checkbook comes 10 out of a $400 million

fund and one checkbook comes 10 out of a $10 billion colossus. Right? Let's just

say there's two ways in which the Colossus has an advantage. The first is they can literally decide they're not pricing this round. They're buying an option on the next round. If Harry's

trying to make his money on seed and they're simply trying to set themselves to make the money on the B, they can by definition pay a higher price because any option always trades higher than the intrinsic value of the asset in question

by virtue of the time value. So they can they can pay a quote unquote a stupid price, right? Because they have a

price, right? Because they have a different model. And then the second way

different model. And then the second way they can out they can win and I'm really internalizing this now is the wall of news, right? At the end of the day when

news, right? At the end of the day when you have a $10 billion fund, you always have [ __ ] going on. You don't talk about your bad stuff but and provided you're modestly competent and these guys are far beyond modestly competent. They're

extraordinary competent. You always have some good news in the portfolio, right?

You always have exciting things. You're

probably going to be in some winners. So

the wall >> I don't buy the wall of news anymore.

>> What? Okay,

>> I'll tell you why I don't buy a wall.

I've learned this first from Dr. Harry Stebins and now I've learned it others.

Okay, look, Harry's in some great great uh investments that he he quietly but but but relentlessly reminds us of the the the complexities and the how he says

it with his British accent. How do you say Mour in British? Mur he like he elongates the vowel or something like that, right? And he tells us all all the

that, right? And he tells us all all the great stories. What I'm saying is you

great stories. What I'm saying is you can get coverage. You don't have to write $10 million checks to be the with participation fund guy. You really

don't. You don't. You could write the scale could do 50 deals if you wanted with participation from Rory from scale who we love from the pod. So just I I

the the option thing is a bigger deal. I

just wonder if a $200 million seed fund at Sequoia, how many options can you afford before your whole fund is options? Right? That's the question. The

options? Right? That's the question. The

one thing I will say is the with participation thing does not work for publications and this is very in the weeds and granular with the with participation you playing in rounds with

smaller checks does not work unless you have an existing brand for random tier two tier three firm if you were to do with participation no the tech crunches the big

>> the end of the fifth paragraph you >> no they honestly they don't they really don't and so and so yes we do >> has a following now after this pod he's got a pretty big following Rory now would be

>> even if I did which I would stop it makes me cringe but even if I did the actually you'd be proving my point which is it's not cuz I mean what you're basically saying is that you prove what you're basically saying is worry you can

win a deal not cuz I've grafted for 30 years and returned you know frankly billions of dollars to my investors but because I'm on a [ __ ] pod. If that

sentence is true, let me finish. If that

sentence isn't true, then 100% Mark Andre was right all along. And he said it's not. I don't think in the end

it's not. I don't think in the end investing is a media business. But I do believe that, and I'm going to give them enormous credit. I I admire people who

enormous credit. I I admire people who pull off strategy, articulate a strategy, and pull it off. They tilted

the table with their media strategy. And

you know, here I am on this podcast in my little tiny humble way trying to say, "Okay, this is the new game, right?" So

I I I do disagree with you, Jason. I

think the wall And I think the wall of sound is a combination of the 10 billion and the media presence they generate and all things. I think at the margin at the

all things. I think at the margin at the margin the bigger funds are harder to beat. Right. And you just have to say

beat. Right. And you just have to say that it's not by any means impossible.

But I'm what I'm saying is I think Andre I think this $10 billion raise and I think by the way the structure of it actually also makes sense. the three

different individual funds and then the growth fund. And it makes sense, I

growth fund. And it makes sense, I think, both for structural investing reasons and probably also for human capital management reasons. You can give your chief lieutenants each a little

thief where they can feel in charge, which is a good way to keep them. Um, I

think the strategy I think the strategy works and as I said, provided the long-term returns are there in terms of tilting the field of play in their favor, I think it's been successful.

>> I would argue actually that there is massive advantages to them. I I get you Jason, we've got $275 million for a series A fund versus their one and a half. That is a lot more money for

half. That is a lot more money for management fees to pay great people.

That is a lot more carry. That is a lot nicer offices which founders do get wowed by like it or not they get wowed by it. That is a lot more events to host

by it. That is a lot more events to host where you can have serendipity. There

are a lot more things I think that scale and aum buys that do increase.

>> The the one of my favorite expressions is from the Russian Red Army which is quantity has equality all its own. In

other words, when you when you want to take Berlin at some point what you do is you just get two million people willing to die and you march them forward.

Right? And you know, Andre and Herds is the red army of the venture industry now. They got the 10 billion and they're

now. They got the 10 billion and they're going to march it forward, right?

>> But it's not listen, we can move on.

It's here's my point you guys didn't address. It's not of course it's 10

address. It's not of course it's 10 billion. It's 10 billion of 30% carry

billion. It's 10 billion of 30% carry and 10 billion of 2% fees and 10 billion of all this. But when you break apart the funds, I really don't think Sequoia having 200 million is that different

than what Harry has. And I don't have one and a half billion for their AI app funds. I think it's only twice as scale.

funds. I think it's only twice as scale.

So, I just don't think like air cover it's an excuse. You have to work twice as hard as they do. That sounds right.

You should have to work about twice as hard and uh but but but it's not as it's not really 10 million in a billion, right? From a when you break the funds

right? From a when you break the funds up right?

>> I agree with that. You do have to work twice as hard. I I totally agree with that. But as a comment here, again, I

that. But as a comment here, again, I mean, hard nose is as a comment, the definition of a good strategy is if you have a strategy that doesn't allow you to have to work that hard, right? And

therefore by definition having 10 billion is a good strategy. I mean I think the interesting thing and we said this before but my bigger heart is the only people for whom this might be a net

negative is the LP investors and as I say and then and we don't know that yet.

Maybe it'll be a wildly successful strategy in which case it will run the table. Or maybe it'll be at modestly

table. Or maybe it'll be at modestly successful in which case in five or seven years the LPs will start going hey you know that latest stage fund it gives me a good return but it's 12 13% and maybe I could get that in the markets

now that there's more IPOs. Maybe we

should just throttle back our allocation. We love the early stage

allocation. We love the early stage stuff. Some version of that. But until

stuff. Some version of that. But until

something like that happens for every other player in the market having 10 billion is better than not having 10 billion. Right? So that's where the game

billion. Right? So that's where the game is.

>> I do also think for everyone listening, they don't often understand the stapling that is required to be in these funds, which is if you're an LP and you want to be in the early stage fund, you will often very often with top tier brands

have to put in two times that into another fund to get that $1 in the other. And you don't get your pick of

other. And you don't get your pick of which fund. Very often you have to be

which fund. Very often you have to be across all of them.

>> Yes. And when you see that you realize that intuitively leaders of venture firms understand the concept of bundling at their core, right? Bundling and rent extraction is

right? Bundling and rent extraction is fully understood. Jason, you said about

fully understood. Jason, you said about this company uh Mccor, I think it was. I

think it might be a 20 VC company to be fair. Um, but they announced yesterday

fair. Um, but they announced yesterday they've raised uh $350 million at a $10 billion valuation led by the person who

led their last two round at $2 billion only 8 months ago which is Felicis. Now

this company has gone to 500 million in revenue faster than anyone else I believe in history. I think it was 17 months. Um, also again this is not bias.

months. Um, also again this is not bias.

I hate freaking bias shows. I sometimes

listen to them. A lot of people say it's not real revenue, it's GMV.

I wanted to hear how did you guys feel about this round, the speed of revenue acceleration. If it's real revenue, I

acceleration. If it's real revenue, I want your thoughts. It is quote unquote real revenue, right? Uh in the sense of it's, you know, they they ship things, they get paid, right? GAP requires you

to book it as revenue. Maybe step back and give people some context. Merc what

they do is they provide humans with specialist knowledge to and their customers are the large foundation model companies and what they do is they bring

this human talent to bear to help the foundation model companies train the models by providing human feed feedback you people would have heard RHF reinforcement learning through human

feedback these are the humans that do that right so if I'm open AI and I want to quote teach my n teach my latest model how to do advanced math. What I

need is a whole bunch of doctorates and PhDs who understand math that are available to pose questions to the model, judge model questions, give feedback on which answer is correct,

which answer is not. So by doing that, you effectively by giving this human feedback, I think of it as you pound the model into submission where it eventually says, "Okay, I've learned this [ __ ] by adjusting the weights."

That's what's going on here, right? It's

an astonishing amount of We think of this all as happening in Nvidia GPU chips. There's an astonishing amount of

chips. There's an astonishing amount of human training that is required to make these models work, >> right? So that's kind of the market

>> right? So that's kind of the market these guys are playing into. Right?

Scale AI which was acquired by partially acquired by Mana is in the same broad market. These guys have done Murka has

market. These guys have done Murka has done an amazing job because five years ago, as Jason said, I love the expression. Five years ago, we were

expression. Five years ago, we were labeling cats, right? And you know, you had people often overseas charged with labeling cats and not getting a lot of money. I think Merkore realized that the

money. I think Merkore realized that the market today is not labeling cats. It's

in fact answering complex physics questions. Matt questions, bio questions

questions. Matt questions, bio questions because the models know how to label cats now and what they need to do is the outer edges of human knowledge. So, it's

a very different set of humans that you need. And Murker did an amazing job of

need. And Murker did an amazing job of assembling all these kind of high-end folks and making that product available to the model companies to do it. So,

that's kind of what they do. And the and in that context, the growth quote isn't surprising because if you think about it, these model companies have grown faster than any company in human history. They're spending3400

history. They're spending3400 billion on compute. They're probably

spending34 billion dollars on RHF and they were spending zero or five years ago. It's an explosive growth market.

ago. It's an explosive growth market.

So, you know, it didn't happen in a vacuum. This happened because our

vacuum. This happened because our customers want their stuff. I actually

obviously spent quite a lot of time in the market, which will surprise you, Rory, to hear that I've been thinking uh about markets more deeply. But it all started with like talent acquisition. If

you got the talent and could provide it, fantastic. We'll pay you. That's pillar

fantastic. We'll pay you. That's pillar

one. Pillar two is get the talent.

Number one, now we want data acquisition, which is you provide it to us, not we extract it, you provide it to us. And then you measure the quality of

us. And then you measure the quality of it too. That's the second pillar. And

it too. That's the second pillar. And

now we're adding the third pillar, which is the implementation layer, which is we now expect you to not only do those first two, but we expect you to implement it efficiently and make sure our models get off the ground more

effectively. And with that, you also see

effectively. And with that, you also see increased pricing and the willingness to spend much, much more from the model providers. The other thing I will say is

providers. The other thing I will say is you have concentration of buyer unlike any other industry. Two buyers are 50% plus of every one of these labeling

providers revenue. So there is real

providers revenue. So there is real revenue concentration there. It's it's

high quality customers but you do have that dynamic as well.

>> Agreed. And that was well put because it it actually speak it kind of it makes it an interesting question from an investing perspective because on the one hand there's nothing better than a customer who's got an urgent and comp

who's wellunded. We just agreed they're

who's wellunded. We just agreed they're wellunded who's got an urgent and compelling need to get a bunch of stuff done that you can help them with and wants you to grow with them. And what

you're saying is you're exactly right.

Open AI and all these people 5 years ago they had simple requests. The more the complexity goes up the more you meet that complexity as a vendor. and MKer

has done that in spades. The more

revenue you're going to give you. So,

they're going to be shoveling money at because you're solving their problems. They got they got a lot of [ __ ] to be solving. They don't need to be thinking

solving. They don't need to be thinking about this. Mr. Murker, if you can make

about this. Mr. Murker, if you can make this go away and get me, you know, 5 500 doctors and this data and this answer and integrate it to our system, I will pay you money because money I have in

spades. Time I don't got

spades. Time I don't got >> for sure. But I've got to imagine you you guys and especially Harry would know better than me. I I don't think it's stress. It may not be stress free. I

stress. It may not be stress free. I

have a portfolio company that was doing a a a vaguely similar attach to a to a large to a large AI business model where the contract was growing to uh eight figures. Okay, that renewal was

figures. Okay, that renewal was stressful AF.

>> Yes, >> nobody once you get to once you get to eight figures, okay, I know no I know these guys have more money and time than engineers, but there's a point where you turn around and you say maybe we should

do a little you know open a is building its own chips. I'm not saying this happened at Mercer Merkur or scale. I'm

just saying it's um Harry's point of having to to radically go up the value chain is both more revenue but more stress because I don't I don't I don't think anyone's just shoveling money at

uh at Data Dog and and Merkur without even thinking about the the margins. I

totally agree and that's what makes your venture fun and challenging is that you've got one I mean like you look at the checklist and you have one enormous positive great big honking market growing like a weed. you're exploding

and then you got two negatives. The

first is your margin profile is not amazing because the gross revenue is 500 million but you give 70% of it to the doctors and the mathematicians who are doing all whatever it is some percentage I'm not going to speculate and then the

second fact you have against you is massive customer concentration and at some point they're going to say I'm giving you 200 billion which means you're making 30% on that 60 million

hell maybe you do it for 40 right so from a long-term value extraction p I prefer to be you know you prefer to be open AI and have 800 million customers than to be merker and have two. Then

when you look at those positives and negative, what you say to yourself is this is fundamentally a bet that the AI capex train will keep running for two or three or four more years. If the air

capex trade slows down and like open AI is only >> enough is two to three years at least.

You're right Jason at least three to five years. In other words, that it's a

five years. In other words, that it's a permanent new thing at growth because OpenAI is not going to focus on getting efficient until it's dealt with hyperrowth. So, as long as it's not

hyperrowth. So, as long as it's not getting efficient, you probably can lean in. If it slows down, then the

in. If it slows down, then the positives, which is the growth rate goes away and then all the negatives come back to bite you. So, it's a it's if you were to say to a public or a hedge fund

guy, find me a bet that had the maximum exposure to hyper AI capex growth, this would be, you know, right up there with Nvidia. I say, "Yeah, I like this risk,

Nvidia. I say, "Yeah, I like this risk, man." You know,

man." You know, >> if you're if you're doing this at 10 billion, what are you underwriting it to? What does that math look like?

to? What does that math look like?

>> Um, I mean, as we're going to discuss later, you should be writing anything to a 3x. So you got to be 30 billion to

a 3x. So you got to be 30 billion to make it worth your while and 30 billion and you know so you know at I'm just doing the math

in my head at even at 5x revenues my god that six billion you know you're underwriting a lot of training data you know right that's that's a sobering thing >> in the short term though in the short term

>> if they're at 500 million at 10 billion growing at an unprecedented rate >> we're all ignoring gross margins in 2025 20 it's only 20 times revenue. So like

it doesn't seem this is where actually we're seeing revenue compression, right?

Which we talked about with Cliff and others. He doesn't like the revenue

others. He doesn't like the revenue compression at Canva, right? Where this

20x ARR was, was your last deal lower than that, Harry and Rory? Higher or

lower than 20x AR the last deal you did?

>> It was higher and higher. And and I and and Jason, you're exactly right.

Actually said something else there that was really insightful. your comment is there's two modes of thinking about an investment and I think it's really insightful Jason there's one mode that says pencil me out the next 5 years how

do I think end state what market do I have right and then there's the other and therefore what return are you underwriting and I think if you assume five times revenue and you want to be at 3x you're underwriting 30 billion which

means 6 billion in trading revenue which makes a man pause on the other hand you can say it's growing 5x and if the multiple just stays context and it grows 5x for another year I'll be 5x up right

and in fact that's just what happened on the last round it was at 2 billion I don't know at 100 million and now it's at 8 billion sorry 10 billion at 500

million so it's kind of the near in revenue traction is saying to everyone as long as as long as this keeps happening you can go quickly because watch you look back now I mean because you know we're talking about is is it

worth 10 billion but go back give them credit you now look at the two billion that somebody paid six, seven months ago and you're like, "Oh my god, that seems cheap because

you're like 500 million already." So

this is when when high growth happens, it it's tempting and it often pays to lean into that growth and yeah, you very quickly just like I think you know the entropic round at 67 billion earlier

this year now looks dirt cheap. If the

hyperrowth comes at the at the size of growth we're dealing with now, which is not to your point, Jason, trouble trouble double double. I can't I don't know what the word is but fipple fipple decode deckle you know I don't know

right if you grow five or 7x you can grow into almost anything so this whole thing top to bottom is one big ass bet on AI capex hyperrowth and as long as it

keeps happening you know I don't want to ch quote Chuck Prince but we all know the quote >> no we don't oh you were young then Harry Chuck Prince famously said in 2007 at

group as some some version of as long as the and keep playing. I'm just going to you got to stay on the floor and keep dancing. And it turns out you should

dancing. And it turns out you should have sat down and not danced anymore.

Obviously, given the way 2008 happened, but in other words, it's the quote of when things are working, everyone just tends to lean in.

>> Well, when things are working, everyone just tends to lean in. Baby, ramp is a fundraising machine.

They raise every few months. Yeah. I

mean, every I It's nuts. uh reports that they're raising a new round at a $30 billion valuation reportedly. I mean,

what are they doing with all the money?

Do they need it? Is this a game of customer acquisition and brand? Do we

just do rounds now to continuously stay relevant? To Jason's point, we talked

relevant? To Jason's point, we talked about this a few weeks ago on the last raise, and I have nothing to say that I feel like I just had these comments.

Yeah, there does appear to be a combination of, you know, insane demand for the pro for the co for the stock. Um, uh, an ability

to use that to create this aura of inevitability. And, you know, to some

inevitability. And, you know, to some extent, as I remind you, this is more than most companies, this is one where constant growth requires lots of capital because you're in a capital advancing

business. So you probably have, you

business. So you probably have, you know, every dollar you add of revenue takes $5 of capital because you got to finance purchases because you're effectively recreating MX. So it may well be, I haven't seen the numbers,

that there's a larger demand for capital here than the average deal, right? And

I'm sure they can leverage some of that, but if you're going to a billion dollars, you have probably have a $5 billion balance sheet. I remember doing the math at one point in time. So if

someone's lending you 4 billion of that, they're probably going to want a 1 billion equity cushion. going from 23 billion to 30 billion. I don't even consider it an up round. It's not

enough. It's not enough. No. Let's say

I'm Let's say I was a seed investor.

I've probably had a token of dilution.

Okay. So, let's imagine I'm down to to 2%. Which would be great. I have a $400

2%. Which would be great. I have a $400 million position at the last round.

Right now, it's worth 480 million with dilution after this next round. I mean,

it's a lot, but like it does it's not it's not doubling my position like a classic round is. these these little rounds 22 25 30 and then with a lot of not maybe not at rand but with a lot of

AI companies a lot of dilution or a lot of others right you could see 10% annual dilution in these companies or more you you might go from 22 to 30 and and have the same price per share it's possible

right I just don't really care about these micro stepups that look great you're like 30 billion well if the last round was at 10 impressive right if the last round's at three like mercury

impressive here I'm Like, meh, >> that's cute. But I'm I'm pushing back >> for real. For real.

>> No, I I I know it's for real. I know

you. Um, but comment here. Another spin

on what you're saying is with the exception of the new AI companies, that probably is the kind of irra you should expect to get in a mature growth private

company. Right? Remember one of my

company. Right? Remember one of my insights over the last I mean sometimes I just realize the obvious is that there's really you know there's early and late stage venture and then there's venture for companies that already could

comfortably be public and I think we need a different word for that it's not even late stage it's you know private as public right could just as easily be small a midcap stock at this point in

time public right and you don't expect midcap stocks to gap up 3x in a year you expect you know the overall market will go by 11. The best companies grow 30 40%

yearonear. So I look at this and I go

yearonear. So I look at this and I go there's no reason to assume that the return to the stock should be different just cuz it's held in a different corporate structure. You know it the

corporate structure. You know it the company is the company independent if it's public or private. So I think and that's and the reason I mention this at such pedantic lent is I think as you think about these late super late growth

fund things the return they will realistically get upsent the AI lift is some version of what was the small cap high growth public market return right

so for those guys it because you you're going in Jason which correctly with your venture rule of thumb right and even on a late let's call it a late stage company doing 50 million going to 100

million it should be that two 3x step up financing event to financing event. When

you're doing a billion dollars, you're near profitable. You should be public.

near profitable. You should be public.

You're going to see these kind of step these much smaller percentage step ups because you're just in a you really are a different asset class. You're public

stocks hiding in private which is why you know the stripes most recent change was from 91 to 110. It's the same kind of thing, >> right? But did but you just said we

>> right? But did but you just said we we're still underwriting. Harry asked

you what we're underwriting to. You said

at least 3x. So, if I'm going to run into 3x and I did the last ramp, round it at ramp at 23. Me, like, it's it's not really getting me to my 3x.

>> No, listen. You you you are, dare I say it, confusing on your pronouns, right?

And let me tell you what I mean by you said we're underwriting or you you're underwriting to a three. I'm trying to underwrite to a 3x.

>> If you're running money at doing companies at 30 billion pre, you're probably not on writing to an overall 3x on your fund. Now you might get you know let's be fair the most iconic company of

its generation uh open AAI will give you a 10x but I don't think you I don't think you are underwriting to a 3x when you're doing ultra late stage billion

dollar revenue run rate $30 billion valuations and you're definitely not underwriting to a 30% IR you know right so this is what you get again go back to

there's no reason to assume that just because the companies are still private versus public that you should get more return than you would have gotten if they were public. And we know >> I'm with you.

>> Yeah.

>> Well, listen, we I just my only meta point is and Harry's made this Harry's made this in the early days like the massive dilution at Enthropic and others, right? Totally.

others, right? Totally.

>> I'm just less excited. I found that things that move the needle for my little portfolio. Some of these headline

little portfolio. Some of these headline rounds don't always do it. Like it's not always that simple, right? It's not all it could be years have gone by. There

could be a massive increases to the round, massive dilution. And you might have forgotten that the last round was was pretty high too back in 2021. Like

you might even be flattered down. It

looks great, but like I just they're not always as sexy for the IR or the markup as you might expect. That's all.

>> I I by the way I totally agree with that and I think that's because you're busy trying to turn, you know, 10 million into 100 million or 200 million, but there's someone else out there who is very happy to turn a billion into two

billion.

>> Very happy indeed. And it's going to make more money than you. Just to make it even sadder, dude. Right. Way more

money and keeping your IRA trying to keep your IRA above 40% is not easy on a later in life of the fund. It gets

really hard. Right.

>> Agree. And but for those again I go back to and for those guys a different game.

So yeah, we the the aha is to me the two biggest changes of the last 3 to 5 years have been the advent of what's happening

in AI and the transformation of the late stage and IPO marketplace to this ultra ultra late stage where companies are way beyond the IPO threshold and still

private. Those are the biggest two

private. Those are the biggest two changes in the game. I completely agree and on the second I go back to actually Jason's point on the modest size of the Andreen funds because when you take the

$6 billion growth fund minus no just pause at minus fees you're at 4.8 you've got 22 $200 million checks it it's not that much. It actually feels very

that much. It actually feels very reasonable in terms of size.

>> To their credit in that in that in that that chart that went around they did do a good job of recycling.

>> Yes.

>> They did they did an excellent job of recycling >> and recycling is good. So, we can assume they get the full six out, but fair point. It's not a lot of checks.

point. It's not a lot of checks.

>> David George is very, very good. I'm

always impressed by him. Uh, I want to move to Spray and Prey. There's

different models of venture. Um, you can be concentrated or you can be spray and prey. Spray and Prey, for those that

prey. Spray and Prey, for those that don't know, is obviously having a broadly diversified portfolio, investing in lots of different companies rather than few with more money. Um, there's

always a question of does Spray and Prey work? There was some data released by

work? There was some data released by Carter. What did the data say and how do

Carter. What did the data say and how do we think about spray and prey today?

>> I disagree. I I I read the data. I also

read Jason your blog the blog post on disaster and I think your your characterization of the your characterization of spray and pray is wrong to be very direct. I think the

data was awesome. Let's start back with the comment. The the Carter data was

the comment. The the Carter data was awesome and very pleasing. stepping off.

What it what it told people for listeners is they looked at all 547 2018 series B investments and then they did a histogram of where they come out in less than a 1x you know one to a 2x

>> oh that was series B >> so 547 and then you know 20 18% of them greater than a 5x about 10% of them greater than a 10x and one deal Figma returned 100x right and what's well

that's a pretty sizable chunk of information what's it telling you right and you know And yeah, I found it really interesting because in fact, you know, we typically do AS's and B's and very I was very happy actually by the way it

was exactly what the distribution for our fund model we think has to be which is 30%, they were actually 35 we would have said 30 less than a 1x we do wider

buckets 1 to 5x 50%, they broke that into two buckets and greater than a 5x 20%. So the distributions on 547 deals

20%. So the distributions on 547 deals match pretty much what we're saying right that's a long answer. So if you hit those three buckets correctly, the

blended return, I know it from our fund model is 3.7x gross, 3x net to the LP, right? So if you look at that business,

right? So if you look at that business, if you look at all those things and you get your and you put you get enough slots in the buckets, right, in each of the buckets, the good buckets, the 5x

bucket and the 10x bucket, you end up with a 3x net to the LP. So the first piece of good news is if you do it right, the return was available to you.

The interesting thing is to your point is the right strategy spray and pay and I I don't think that's what it and that's why I was jumping back on it. I don't think that's what it said. I mean I think it says you know

said. I mean I think it says you know you got to pick very carefully because obviously if you do a lot of deals but I mean Jason picked on the looking at the same data

Jason picked on the negative which is twothirds of all deals are less than a 2x which means they just don't help.

Correct, Jason. That was that was the point you made in the blog, right?

>> Yes.

>> And and what it says is picking is so important because if if you know if >> but did it say that?

>> I no you bug didn't say that but I'm I think the data says that >> but first of all you're right. I mean at to me the data was shocking as someone that is a concentrated investor because this is scary risk for me but it did

blend out to 3xn net plenty good right.

So, so you're right. And um but at at series B, everyone thinks they're a great picker, don't they? This isn't

preede. Everyone's a great picker at series B, right? So,

does everyone have the same logarithmic distribution across the across these deals or um I I don't know.

>> No, they probably don't. I mean, I I wouldn't say everyone I' I'd say three things. Everyone thinks they're a great

things. Everyone thinks they're a great picker. Not everyone is a great picker.

picker. Not everyone is a great picker.

But the third sentence is you have to be a great picker to win, right? Because if

you look, I was thinking at it, you kind of articulated those two strategies you can at this, you know, again faced with this opportunity set of 547 series B's

in one year, right? That's the it's a very clear data point, right? Um,

I think if you don't pick, if you if if you're not a good picker, you will end up with more. Remember to Jason's Jason's there's a different set of buckets, but his buckets are more scary.

He said twothirds of all these deals are less than 2x. If you skew, and that's on average, if you skew instead of 66%, if you skew 75 80% in that less than 2x

bucket, your math doesn't work. And it's

not that hard to be that bad because on average it's 66%. Is my point, right? It

requires a fair amount of discipline and picking to pull this off. I don't think the spray and pay strategy would work here. It might work at seed. I'm not as

here. It might work at seed. I'm not as familiar with seed, but here the cost of spraying just gets too high. The picking

doesn't work. The only way it doesn't, and I can see Harry doing his I don't agree face is I think there's actually three there's actually three approaches.

There's picking, there's spraying, and then the third one which is someone big like Andre can do which is optioning,

>> right? You can you can spray if you have

>> right? You can you can spray if you have option if you're just doing options. But

if you spray and that's the only way you make your money, the probability of being wrong is just too high. So, that's

exactly what I was going to say, which is actually in reference to an amazing graph that was released a month or so ago about seed bets by multi-stage firms and Andre did 72 seed bets compared to

scorer number two at 27. And exactly to your point there, Rory, you said you can't win without being a great picker.

I'm not saying Andre not great pickers.

I'm not saying anything against them, but you can if you have 72 option bets.

>> Agree. Agreed. There are three strategies. There's spring, picking, and

strategies. There's spring, picking, and optioning, right? and to to do the

optioning, right? and to to do the optioning strategy and because because the beauty about when you can option, you can afford to spray more. Optioning

allows you to spray more, right? That

you're exactly right. No, I I think it's super clear at every stage. And again,

it goes back to structurally. I mean,

once upon a time, you thought seed was all about option value and anything beyond that wasn't because we're dealing with gargantuan sums of money. It is now plausible that for some people A's and

B's are partially options. And really

it's if you're going to deploy 200 million in the growth round, you know, you don't want to be totally slipshot at the A and the B, but you can think of it as more option value, right? And that

and that's absolutely a a superpower that a wall of money gives you, right? I

can't afford to do that because most of my money goes in on my initial round. At

most 50 60% comes in followons. So I

can't afford to be wrong on 2/3 of my money to be right on one/3. That's not

going to make me a dollar, right? So,

poor me, I'm stuck having to pick.

>> Does the everex expanding outcome scenarios that we're seeing today, you before $30 billion was an insane insane valuation for a company. Now, we're kind

of like meh with RAMP, 10 billion with Mccor, and we're not blown away by it.

The outcome sizes are getting so much bigger. Does that not favor a spray

bigger. Does that not favor a spray strategy? Because all that you need to

strategy? Because all that you need to do if you're early is just get into the winners. Who cares? Not who cares, but

winners. Who cares? Not who cares, but 500k or 2 million, it doesn't matter.

Spray the 500ks cuz the only thing that matters is Mccor and Ramp and everyone are in yours. No, because

what you're doing is you're taking a plausible theory and extrap and you know and extrapolating to the point where it no longer holds true. You can spray as much as your bankroll will allow you.

The more bankroll you have to build up option value. Well, step back. You could

option value. Well, step back. You could

be talking about two things, Harry, and you got to break them apart. Are you

saying simply spray because I'm not going to make my money on followons, but it's the seed argument. I have to be in the very best deal and I have to cover wide versus concentrated to do that.

>> Mhm.

>> Right. And that's one thread. And then

the separate thread would be how much easier is the is the spray constraint if I also have option value at the back end. Right. And that's easier. There's

end. Right. And that's easier. There's

no doubt. The more option value, let's agree the following. The more option value you have at the back end because you have a $10 trillion fund, the easier it is to spray because you can amortize the cost of the losses over the one

winner. Provided you get to stick 500

winner. Provided you get to stick 500 billion in the winner, the rest is noise. But if you're a seam fund and

noise. But if you're a seam fund and you're David Tish today, who and he won't mind me calling him out. He he

explicitly does respectfully spray and prey. He does 50 plus companies plus

prey. He does 50 plus companies plus plus in a portfolio with low ownership, but my word he is in some of the biggest companies including ramp consistently.

Again, going back to the Carter data, what I like about card is it's actual data, not words. There were 547 series B's in 2018. I'm going to guess graduation rate probably about that

implies 800 A's. That probably implies 1,600 seeds. So even what you are

1,600 seeds. So even what you are poratively calling quote unquote spray and prey is doing 50 deals out of 1,600.

There's still a huge element of picking involved in that. The only people on the planet who have a structural business where they can deemphasize picking because they can write checks option

checks at scale is Y Combinator because they have a structured advantage in terms of their economics. They are the only people who've built a mass production seed business. But for

everyone else, if you're trying to pick even 50 and there's 1,600 places, right?

I mean, and we know that at the B, only 500 of them get to the B, there are 1,100 places to put that money. That

doesn't work out. It'll always be true that if you pick the single largest outlier in any vintage like if one of those deals was Figma where the B made

100 so probably the A made I can tell about about 200 and the C probably 4 500 I don't right of that order of M the numbers are available 300 right even if

it's 300 if you did an index and did every deal you know you made a 300x and you did all 1,600 deals equally it's only a 02 it's only a 02 return you

understand meas if you put a dollar into everything your Figma check doesn't quote unquote return the fund right if you did the whole industry right now

maybe an open AI would maybe there is one deal so big that it would literally return the vintage such that if you just bought the entire vintage you're good that probably happens maybe once every

decade or two right most of the time even at the seed stage if there's not an element of picking to it yeah you can't just say it's spraying is my point there's an element of picking up and

down the stack. I mean, it's funny. I

was more the Jason headline, only one in three deals double investors money per carter deal. That's a It's so sobering.

carter deal. That's a It's so sobering.

It's like it makes you remember how much of this business is disappointment. You

know, you you remember your deals. You

remember your 10 x's and your 15 x's and your 20 x's and you just forget. You

just And I think actually the best investors and >> just learn to become numb to it, Rory.

>> I don't. I get all sad. I'm a bit lame.

Um, I had a [ __ ] out I had a [ __ ] outcome this morning and I'm really like upset by it.

>> Yeah, you get vested.

>> We can, you know, I I had the I had the worst, which is a company gets bought by another company and you get stock at some insanely high price. I mean, it's

just the worst. That's not the worst.

No, the worst. Let me dude. The worst is you're on the board, you try and sell the company, it doesn't close, you're on the hook for shutdown costs, and you have to wire 300 or 400 grand just to

pay severance cost, which you should do as a board member, and you're probably legally obliged to do, and then write that money off straight away because you waited too long. That's the worst.

>> Wow. I thought my day was bad. That's

that's perspective for you kids.

>> That's why I just do everything on a safe.

[Music] I have no rights, no visibility, no financial statements, no understanding of anything. But if it goes south, it's

of anything. But if it goes south, it's >> I could just ghost them.

>> Are you serious though, Jason?

>> What?

>> No.

>> About just doing everything on a safe?

>> No, but um but the safe does have some comforts. I I do like the post money cap

comforts. I I do like the post money cap as a seed investor. I don't have to worry about the pool or other things.

Um, and I like the fact that um, it's a it's a it's a medium commitment. It's a

me like I'm not the only guy. Like I

don't always love being the only guy in the cap table, the only director. The

safe is like, listen, I'm only sort of committing, guys. Good luck to you. If

committing, guys. Good luck to you. If

it goes great, I'll invest some more. If

it doesn't, I'll I'll write cheery responses to your monthly updates. But

you didn't ask me to to you didn't ask me to get married and commit, so I'm not committed. You think I'm joking, but the

committed. You think I'm joking, but the stuff Rory talks about is awful, right?

this end of life stuff or a decade of a struggling company where you're on the board. I I I'll take the safe over that.

board. I I I'll take the safe over that.

The unsafe safe because the commitment is low back. Founders should be founders are if you're going to raise on in Saturday on a safe, you can't expect too much.

Speaking of commitment and marriage, I'm really intrigued to hear your thoughts on this one, Jason, because you've said like, "Oh, I encourage founders to sell.

I encourage founders to sell when the offer comes in."

>> So there's no regrets. So there's no regrets.

>> Synthesia, one of the hottest, fastest growing AI companies, you're now at 150 million in AR, reportedly turned down a $3 billion offer from Adobe to be acquired,

>> and they're going to be raising a new round at well north of three billion following this. Jason, if you were on

following this. Jason, if you were on the board, would you have told them sell for three billion?

>> I mean, yes. And I'm not saying it's the right decision, but one, he's been at it for a while. Like Cynthia is one of these stories like Replet and Verscell that like blew up with AI, but it's a

journey, right? And so and there's

journey, right? And so and there's competition and it's a while and um I would tell him to take it um unless you're 100% sure you're going to build a

20 billion public company, $10 billion public company. And if you are, do it.

public company. And if you are, do it.

Like, but I like to stress the test, right? Um

right? Um um so I'm not saying that's the right thing to do, but I want to be the guy that gives that advice.

>> 10 or 20 because that's two different outcomes.

>> Even 10 is not really worth it for a founder. It is worth it for the VCs.

founder. It is worth it for the VCs.

Excel gets another play, right? 3 to 10 for Excel. Here's the issue, right? 3 to

for Excel. Here's the issue, right? 3 to

10 for Excel, huge difference, right? So

let's say they own 15%. Out of a what?

$450 million fund. Who knows? Let's make

it up, right? So instead of a 1x fund returner, it could be a two or 3x. You

you make that bet as a VC all day long, right? For the founder, let's say owns

right? For the founder, let's say owns 10%. What the hell's the difference?

10%. What the hell's the difference?

There's no difference, right? There's no

difference, right? We've had

billionaires on ours. You've had

billionaires, Harry. I don't think Jeff Lawson would be living a better life with half the money or twice the money.

It's the same dude. So, like that we there is a weird disconnect between three and 10 here for VCs versus founders because 1x your fund and 3x that's a lot more carry.

>> So, I would say with an Excel and index, you're absolutely right. they'll

absolutely take the risk for another turn because they have the luxury of do because they have the luxury of doing so. They don't need to return cash to

so. They don't need to return cash to LPs in the same way that maybe other managers do. If you are not a tier one

managers do. If you are not a tier one GP though, you will want to provide DPI to your investors, especi >> I don't believe that. I don't see it.

I've asked my LPs. I've asked a few others. If you're a strong manager,

others. If you're a strong manager, okay, if you have a track record and their goal is not a 3x seed fund, but if they really want 5x or north out of you, they get the game is you got to keep

playing another card. No matter what they say, I I've I I've asked my LP and I guess it's a small set. Do you want more money back? Right? even ask my most conservative LP like a university

endowment that isn't that that that is small right that has stress I ask you want your money back I mean with a gain they're like no we're just telling you we're really worried about it like we

really want DPI but we don't want it we want you to play another card so uh I think if you tell them it I I you know I I seed it into Synthesia and we've got a chance to 3x it going to tell you to go

for it that the fun it we're going to trust the fund manager's discretion here I just don't know that there's this massive Massive DPI pressure if you have a hot if you have a hot hand. I think

there's DPI pressure if you have a mediocre hand in which case so what?

Because it's not enough DPI. What the

hell's the what's the hell? This is the other thing on X. What's the hell's the point of returning 2% of 20% of your fund? Hooray. I got an exit today. I

fund? Hooray. I got an exit today. I

returned 21% of my fund. Like it's

that's just that ain't the full job friends.

>> So the first question really should be it's actually what Jason said is Victor you know I I admire Cynthia enormous as a company. We tried to contact them.

a company. We tried to contact them.

They they didn't get back to me. They

got the deal done. I'm so disappointed.

We have another investment in the space.

I love the space. I admire Cintia a ton and many of the investors there. I think

the first question is how do you feel about the business? And you threw out a statistic there. They they they said

statistic there. They they they said they're at 100 million in AR when they took the Adobe money in April. I

checked, right? And if they really have gone from 100 to 150 in less than 6 months, then I can make this conversation really quick. There's no

way they should sell cuz that thing's exploding, right? It's a great category.

exploding, right? It's a great category.

And it probably is. That probably

sounds right to me.

>> You know, even if not, even if they got, you know, doubling kind of growth, it just feels like a good category. There's

a reason we made another investment space. We like the category. we liked

space. We like the category. we liked

and I think there's you know I think there's runway there for that kind of human interface to compute. So the I always tell the CEO now would be a really good time for you a to look into

your own heart and see how you feel, right? And if there's something about

right? And if there's something about the business that's really worrying you and you haven't told us, now would be a good time to share, right? And sometimes

stuff comes out.

>> The other reason I tell CEOs this one, I I would tell Victor to sell at three billion. And it's okay if he says no. I

billion. And it's okay if he says no. I

would do it because I wanted to be the guy. Yeah.

guy. Yeah.

>> Even if it wasn't in my direct interest as a gambler, uh I would tell I I want to be the guy that has that conversation with him. There's another thing that's

with him. There's another thing that's under discussed and I've had this conversation twice with founders in the last 12 to 18 months in similar situations is um are you really an IPO

guy? This is where I there was one where

guy? This is where I there was one where I love everything about this company. I

love the founders. I love everything.

There's nothing negative. And and I told them to take the offer even though I didn't want them to as an investor. I

told them to take the offer because they said, "Are you sure? you're such a great set of founders, but I don't know if today I I see you living the living the what these public companies see co life.

Like I just don't see it the the way you have to do it, the constraints, the stress. I just don't think that's what

stress. I just don't think that's what you want to do. So I think you should take the deal because I don't know if if it's Cynthia or Cynthia Prime, you're going to get another offer like this before the IPO. That's the thing. You

have to assume it's IPO or bust. And if

you're not that guy, then you're going to bring in an outside CEO or you're going to it's just a mess. So, so that's the question I have. Do you can you really run a do you really want to run a public company for real?

>> That's an excellent question, Jason.

Genuinely, that is really an excellent because you're right. At three billion, there's not going to be a ton of people coming into view offering five. You

either got to become cash or partisan and settle down and just become the Collison brothers and compound private forever to you know to universal befoldment or you got to go public and

yeah that's it's it's a great question and it's and the fact by the way that it is perceived by so many CEOs as a pain in the butt is in my view the thing about being public that has to change

because what you're doing is you're allowing this thing to get in the way of people entrepreneurial ambitions. I

think it's a sh I think you're right that it's a pain and I think it's a shame that it's a pain and I hope it changes.

>> I mean I was at this uh Dreamforce Beni off dinner. It was great and I saw maybe

off dinner. It was great and I saw maybe 10 public company B2B cos that we know that have all been on Harry show and Rory's invested in some of them and I got and it was great and it was fun. I

got some hugs. Um believe it or not I'm a I don't give the hugs. I like to get them. Um but um man the stress on on the

them. Um but um man the stress on on the on those guy you could just smell it out of the pores you know the stress it or or more the weight they weren't stressed no one stressed right the weight the

weight of being a public it's so heavy today right we could see it when we'd had Jeff Lawson on and Cliff didn't have any of it at Canva he didn't have any of the weight crushing it's just like crushing and >> I have Mike Cannon Brooks on the show

from Atlassian >> yeah some crushing weight there too I saw it some crushing weight I saw on that one right you saw it Okay. The the

weight of being the unreasonable man.

Yeah. His co-founder calls him the unreasonable man. The guy who wills

unreasonable man. The guy who wills things into existence and and the weight of that you could see on his face.

>> And when I look at the ramp and the mercures, like these are epic companies, right? But I don't see that weight yet.

right? But I don't see that weight yet.

I'm not saying it's not it's the hardest job in the world, don't get me wrong, right? But I don't see the the deep

right? But I don't see the the deep crow's feet and and like, you know, Aaron Levy going from from going gray at 28 or whatever. I just don't see that

level of of anvil level wy coyote weight on their on their heads yet.

>> That that that'll go to something about Andreel and capital efficiency. Rory, I

just have to ask you. You said there about like, hey, we tried to get in contact with Cynthsia. They didn't get in touch. I I've learned over time if

in touch. I I've learned over time if you want to be in Andrew, the next best thing is just to pay the higher price for Andreel, not to try and

be in the next one. You said you've got the same another player in the space.

Why not just be in synthesia and do you not think this market takes the way most markets do in terms of composition and the winner acrru the most value?

>> I do I think we're it's a broadway we have a very different product. It's kind

of real-time interactivity versus um you know um asynchronous avatars. So there's

a big difference in terms of the interactions company called Tavis. So

basically instead of pre-recording an avatar saying something or having real time, you actually have real-time interactivity with the avatar. Right? So

it's it's high level it's the same conceptual trend. But I agree we because

conceptual trend. But I agree we because we looked we looked at a centa wannabe at the time. I'm not going to mention the name and we decided Cthia's one. I'm

not you're not in the business of doing modest number twos. Agreed. So you're

playing the broad trend in a different part in a different in in a related but different market. I agree. You never

different market. I agree. You never

want to do the number one wouldn't have me, I couldn't get into them or they just raised around. You had to pay up for the later round. I made that mistake in 2013. I won't mention the two

in 2013. I won't mention the two companies. You know, we had missed the

companies. You know, we had missed the rounds that were the typical scale round for company A. We actually had a chance with a lot of networking and to do a very late stage round in company A or we

could do a more normal scale round in company B in exactly the same market.

the two most head-to-head companies I've ever done. We did B, we got a 2X, we

ever done. We did B, we got a 2X, we didn't do A, we left a 15X on the table.

Literally, every time we discussed this in the offsite, one of my partners, I love I love them dearly. Oh, the

canonical example has become that decision. And I'm like, am I going to

decision. And I'm like, am I going to hear about this till I die, people?

Right. I know I got that one wrong, but they're right. They're right to mention

they're right. They're right to mention that was a you true. Exactly. You never

want to do the way behind exact same category number two if they're way behind. It's just too hard. Yes, I've

behind. It's just too hard. Yes, I've

made I've I I I I remember the week I got that learning. I can tell you where exactly where I was when I took those two phone calls. Don't do that.

>> Okay. We can do Andrewal capital efficiency. We can do Amazon layoffs. We

efficiency. We can do Amazon layoffs. We

can do Amazon Cloud Wars or Oracle debt.

You choose.

>> I feel bad for Roomba, but you choose.

Oh, you want to do Roomba?

>> Kind of. Kind of because this whole talk is about how everything's up and to the right. Poor Roomba gets an offer from

right. Poor Roomba gets an offer from Amazon to buy them for 1.7 billion >> and then go down the list if we >> blocked by any trust. They raised 200 billion million of debt to finance the

gap and now it's all spent and they're probably going to go bankrupt. This is

why maybe maybe maybe take the Synthesia offer. owning maybe a half dozen Roombas

offer. owning maybe a half dozen Roombas over the years. It's a tough It's a tough end to a founder journey, isn't it?

Sorry, maybe that's not the story you wanted to pick. You go ahead.

>> Do you sue the government in that case?

>> No. Cr I think in the UK it's called crown immune. It's it's hard. It's very

crown immune. It's it's hard. It's very

I mean I can't remember because you can't sue the I mean in the UK you have crown immunity where little the governments are protected from incredibly dumb acts because of the government. I think over here we have

government. I think over here we have more rights but still and I'm winging it here now now like I can't remember did they actually if the DOJ block something on antitrust g you can you can take them

to court and people and those DOJ decisions have been overturned I can't remember in this case did they take it to court or did they just decide to fold and if you decided to fold then you

probably can't sue because you had a statutory remedy and you chose not to take it I mean so again zooming out for people the story here is IA uh had a had a deal to be sold to Amazon and the FTC

led by Lena Khan chose to block that deal be because as I think Benedict Evans said in his because of an incipate monopoly in the house vacuum cleaner

marketplace very tongue and cheek right it was an absurd decision at the time.

And it only got more absurd since because unfortunately the poor company which is a consumer consumer hardware business with all the gross margin profile that that requires struggle on a

standalone basis and you're right now faces the risk of going bust. It's a

horrible and unfair outcome for which the government and Lina and the FTC is entirely responsible based on an outdated stupid and foolish paper.

There's just nothing a belie and and a foolish belief about how things work beyond doubt. It's also another I mean

beyond doubt. It's also another I mean there's there's that there's the whole how the antitrust killed the company the it's the edge of no politics rule right but not past it. It's also a reminder

that like when you going to the the M&A offer the Casia sometimes you'll get like the acquirer will pay a multiple >> that only sort of kind of makes sense a revenue multiple that makes sense for them

>> but you couldn't get and so you know when you get one of these deals it's a it's it's tragic it died but you got to take it right you got to take it. Um,

>> I don't know. If you're a Cynthia, you're looking at Dylan and Figma going, "God, do I want to put myself in that potential 18month waiting period."

>> Exactly. By which time I'll be 400 million in revenue being acquired for 3 billion. No, you think you're getting

billion. No, you think you're getting this great multiple of, oh, they're paying me 30 times revenue, but the damn thing's going to close in 18 months, by which time you might be down to 10 times, and it's just not going to feel

that much. Like, I don't think Whiz has

that much. Like, I don't think Whiz has closed yet. I could be wrong. I think it

closed yet. I could be wrong. I think it was early. the crazy one that hasn't

was early. the crazy one that hasn't closed. It's crazy, right?

closed. It's crazy, right?

>> If you think about it, everyone's like, "Yeah, you got a 2 and 1/2x in 6 months." No, you didn't. You got a 2 and

months." No, you didn't. You got a 2 and 1/2x in 2 years, right? And this antitr this prolonged antitrust process really

is kind of sand in the gears for a lot of these M&A decisions and at the margin probably pushes people to push either a push on or b in the case of the crazy deals when the acquirer only wants the

people then they do the you know the the the Silicon Valley aqua hire routine but you know when you're buying the vacuum cleaner company you want the freaking vacuums you know right >> that duration period though is also why

I think it's our responsibility as early stage managers to be much more proactive in secondary markets cuz we get cash back way sooner and the age-old thing of a 4x fund over 17 years is the same as a

2.5x fund over 10 and duration matters and time matters an IRR is king it's not the only king cuz obviously a you know a I mean back to Jason's comment the I

mean he was just sneering at a for because look in this very show Jason was going oh it's only a 30% IR ramp from the 22 billion to 30 billion from an IR perspective that looks amazing. So I

don't think I don't think IR matters. I

actually think for the record formulation of the optimization function is the maximization of multiple subject to a constraint on a minimum IRRa just

to be a total geek here. Basically you

should know what your target IRRa is and let's just say it's 25%. Let's just say right you want to maximize the multiple provided you don't dip below 25. That's

actually what you're trying to do right.

So a so for example a 30% IRRa in one year isn't as good as a 25% IRRa for four years but if you hold on too long and that 25 starts dipping to 19 181 17

then you've gone to a different place that is the rule right because in the end you want the maximum amount of capital to invest and you and you get that because you are held accountable at

the investor level at the IR basis because at some point they're looking at you they're looking at the public markets and they're saying risk adjusted I need me my 20% So it is the constraint because it's

what prevents money from coming down the spigot to you but you're actually trying to maximize your multiple. So the [ __ ] is hitting the fan at Amazon before we

do agree or disagree 10% largest layoffs in history. 10% of white collar that is

in history. 10% of white collar that is that very sizable falling behind in cloud wars from 30 50% of cloud revenues

in 2018 to 38% today. Uh Raymond James sees Amazon's AI cloud share falling to 7%. Then we had the outage, billions of

7%. Then we had the outage, billions of damage. I mean, this was a bad Fortnite.

damage. I mean, this was a bad Fortnite.

You know what? Maybe it's not fair, but what I was thinking is contrast this with Sergey Brin coming back to Google, everything else happening. Maybe maybe

this was a tough time for your founder to leave and go to Miami. Maybe this was not maybe it seemed like a very stable time to do a transition, right? I mean,

long long Jeff Bezos long time as CEO, but maybe this wasn't the perfect age of maybe stepping down just before AI hit was suboptimal for Amazon.

>> Or that's that. Yes. Or maybe it was brilliant for Jeff because maybe, you know, the hook because because you're implying in that that had he stayed all

these bad things wouldn't have happened.

And it's plausible just given his you know world top two or three entrepreneurial achievement of the last three decades. But it's just worth

three decades. But it's just worth pointing out what the two big problems they have are. The first problem is in their retail business they overinvested for co and now they're trying to replace

people with robotics because the technology is there and that's just something that had to be done right that's just that's just more of the same. And in cloud it's less that their

same. And in cloud it's less that their core AWS business has folded up. It's

like all the new compute which is 10x and 20x larger in terms of demand for these customers is AI related compute and you you know you've neither built

something compelling standalone nor have you partnered except to be fair a little bit went on. you didn't made it make a meaningful partnership and you haven't found a way to get some of that compute

right you know not clear >> but he had four years Jasse took over in July 5th 2021 Bezos checked out right at the peak >> of the last era when when products were

frozen in time for a decade when AWS was the same product for a year so are most of the companies we invested in all three of us in 2021 they were the same products as 2015 it was the great time to go to Miami because nothing was

changing in the It was just going just stock prices were going up in revenue, but the products were the same. So why wouldn't you retire? There's not going to be any

retire? There's not going to be any change.

>> Punched out at the top. No, it gets gets an A++ for marketing.

>> No, he I think he gets an F.

>> Oh god.

>> If he sold if he sold his company, you get an A+.

>> That's true.

>> But you know, like my last deal, Salesoft, December 2021, that you know, two and a half billion. That was the last deal of the era. You know, Kyle and team get an A+ for timing. This is not the same.

>> I want to congratulate Kyle. Exactly.

This is not >> This is not the same. This is punching out of 2021 and not punching back in like Sergey.

>> Cynical comment here. You're right. But

when you've got a couple hundred billion dollars, my guess is you're not maximizing money. You're maxing psychic

maximizing money. You're maxing psychic pain and joy. My guess is his psychic joy in the last three or four years doing what he's been doing has been significantly higher than the psychic pain that would have been involved in

realizing you've never done a big acquisition in your life. You got to do a huge corporate deal in AI to matter and B all those people you hired in 21 trying to do the right thing for co and

expand you all got to lay them off. So I

don't think it would my point >> DOS would lay off half his company in in Fortnite was the right thing. I don't

think you even care.

>> Well, he'll have that chance. He's you

know >> but again >> I mean had to bring in poor Dan Rosenwig out of retirement to rerun Cheg after laying off 80% of the company. They had

to bring him back. They got to bring Bezos back >> I think. And to be fair, one thing we shouldn't do here and you know you saw a lot of it with Google too is that you don't want to overcompensate. I mean if

you look at the two if you kind of like there's a bunch of bad news in one day and it is bad right? But lot going on the layout right but again going back to your position in retail is broadly good.

You're a little you know I think you become a little schlocking in terms of shopping experience but you have dominance because of your distribution and you're doubling down on that. You're

reinvesting in robotics. you're cutting

costs and you know Amazon wins in in their retail business because they can deliver [ __ ] faster than anyone else on the planet pretty much anywhere and you're doubling down on that. So that's

like a win on the comput business on the AWS business. Your problem is you just

AWS business. Your problem is you just you're not relevant in the new world. So

just knuckle down and figure that out.

To be fair of the three hyperscalers in the um pre-AI world, if you look at it, Google was able to be relevant because they had their own model. Microsoft went

and rented a model from OpenAI and now now the contract's nearly up and they they yeah they they did it to make a lot of capital gain but they didn't actually in my view really develop something compelling that they own from it and you

did nothing so you lose you you need to do something they got a set of problems on the AWS side they have to get AI relevant without frankly doing what Oracle I fear is doing which is taking

on a whole bunch of subpar economic transactions they do have a good slo of entropic not as much as Google, who I think owns 14%.

>> Google own 14% of anthropic.

>> Google. Yes. Google win. Yeah. I mean,

again, we should be promoting all these cop dev guys. They're doing great.

>> Unbelievable. I think people forget that. Um, guys, we're going to do agree

that. Um, guys, we're going to do agree or disagree. Okay. I got three

or disagree. Okay. I got three statements. Rory, you love this. Come

statements. Rory, you love this. Come

on. You can hide your hide your excitement, Rory. It's too much.

excitement, Rory. It's too much.

>> [ __ ] out of your ass. I hate it.

>> No. Oh, I know. when the previous hour and a half wasn't.

>> I did I do research how that's the difference between us.

>> Oh dear. Very fair point. Can't can't

disagree with this. Um okay, first one.

I would rather own B at 13 than RAMP at 30. Ramp is at a billion in revenue. Bra

30. Ramp is at a billion in revenue. Bra

is at 700. They're both around the break even to moving profitable phase. And

you've given me all the information except the only information I need which is what's which is what's the growth rate.

>> Bre said 50%. They just said they're going 50% now. I don't know what ramp is. This is where my cognitive bias

is. This is where my cognitive bias >> I'm going to go for Brex cuz it's lower.

>> I can't help I cannot help myself. I

can't help myself for real. You think

I'm kidding. I can't help myself. If you

and if you gave me I'm a I don't have that much money to invest. If you gave me a great deal at 100, if you gave me ramp at 100 million and Brex at 30 or 40, I'm still going to do Brex probably.

I'm probably I could assign a homework assignment that would make this actually an interesting discussion. It's watch.

We have all the data points we need. We

have the relative size, the valuation, and the growth rate of Brex right at 50%. The correct question is what growth

50%. The correct question is what growth rate should RAMP have such that you're indifferent between those two prices?

You know, if ramp is at 100, you probably want ramp. If ramp is at 50, you definitely want Brex. It's actually

the fundamental question I would argue in all of how much extra do you pay for how much extra growth. If you could buy ramp at whatever it is, 700 billion

going 50% for 13 billion. 700 million

50% growing at 13 break even.

>> That's >> and ramp 1 billion at 30 billion. There is an equilibrium growth rate that would make you indifferent between those two prices. And it's actually because it's

prices. And it's actually because it's actually a very fun exercise because it actually is the core problem you face over and over again in venture, which is how much extra do you pay for 70% growth over 60 over 50. You pay almost two to

two and a half times the revenue multiple. How much more growth would you

multiple. How much more growth would you want from that? I'm missing 700. I

>> This is your job on the show, Rory. You

got to tell me.

>> Yeah, I know. It's hard to think and talk at the same time. Keep going. You

weren't relying on us for analysis, were you, Rory? Uh,

you, Rory? Uh, >> Shaka. Yeah, I was. Keep going.

>> Shaka. Yeah, I was. Keep going.

>> Come on. Um, okay. Uh, Andre deserves the prize for best performing mega platform of the last 12 months.

>> They're going to get the prize. No

matter what I say, it doesn't matter.

They're getting the 10 billion. That's

prize enough for those guys. They'll be

fine. I

>> I've been impressed by them. I've

invested with them across the board. And

I think one thing that people often say about Andre and with absolute respect to them is they have so many people and that almost suggests that they can't all be good. They have so many people so

be good. They have so many people so like whatever. I have worked across the

like whatever. I have worked across the board with the different partners. They

are as good as the partners at smaller firms with three to five partners and they have been fantastic. Like I am a big bull on Andre now where I was a not before. I I agree they've been

before. I I agree they've been operationally excellent. I mean what

operationally excellent. I mean what they did is my I've been thinking about what they brought to the venture business from 2007 78 on is

they went into it solving the problem from the founder back with operational excellence right and on that they've delivered in spades they figured out what the founder wants they've

aggregated and delivered to him I've always said the question always is you know the the return profile of that has been excellent I mean I've seen the numbers they've been excellent the

question that was the question and they pulled it off right and for and I agree with you on the on the human capital thing they and that's why that I think it's smart the way they have I mean

obviously they just lost I can never pronounce the German name but very impressive I've heard him speak who's going to do his own thing >> yeah I mean super talented guy I heard him speak very impressed um you know

they have a constant churn and I was thinking even that's okay because they have a platform that transcends they'll find other good people they'll have um they have the little pockets to play with so they can you know they can give

you your little info world they can give you Chris his crypto world everybody can have their thing it's just like investment banks where you know you're the you're the second co-head of North America everyone's got a great title and

Mark and Ben sit at the top and life is good it's it's it's a wellfunctioning scale machine and the reput and the the

take the take 15 years ago was venture couldn't scale and it's TBD how far it can scale, but they've scaled it far more than anyone else would have thought 10 years ago. And for that, they get a

price.

>> When we sit and look at series A, we don't sit and be frightened by index or Excel or the big European players. We

sit and be frightened of Andre coming into Europe. They're the ones who beat

into Europe. They're the ones who beat you.

>> Okay, good to know.

>> Well, look, I I think you want to be you want to be in the top two choices for a founder at your stage. That's when you win in venture. Um it'd be nice if you're in every every stage and every

deal, right? Um and I think Andre has

deal, right? Um and I think Andre has elements of that today. A top two choice in so many stages from so many types of founders. YC has that in a sliver as do

founders. YC has that in a sliver as do others. If you're not, man, it's just

others. If you're not, man, it's just it's just a different game than when you're a top two choice. It's just a different game. That's what you want. So

different game. That's what you want. So

I agree with you. There's only only two people can be in the top two, right?

Final one of all the could be public but are private latestage companies. I would

rather be a shareholder today in Andreel the hottest at 50.

Agree or disagree?

And if disagree which would you rather?

>> No. One not interested in the company personally. Just personally at this

personally. Just personally at this point in life, I just want to do things I'm interested in to a fault. Not

interested in building weapons and stuff like that. Just not my vibe. Um, two, I

like that. Just not my vibe. Um, two, I don't go to enough parties in SF because if I did, and this sounds facitious, but you know what I'm joking? I'm never

really jokingly joking as it does.

There's no better brag at a party than Andrew that you did it right. It's the

ultimate founders fund brag. It's just

it's just the ultimate brag. And if I and and um you know, one of the psychic benefits of investing is bragging, right? At many levels, there's different

right? At many levels, there's different types of bragging. There's bragging

because I have a sense of worth in my life that I don't I have I'm bragging because I wrote a tiny check, but but I'm validated in my in my in my soulless job. There's so many levels of

job. There's so many levels of validation, but I just don't go to enough of those parties since 2020. So,

but if I did, uh I'd want to I'd want to have that one uh on my chips to to talk about at parties, but I don't care. And

I'm not into bombs and weapons, so I'm out on this one.

>> The amount of self-nowledge embodied in that last two minutes from Jason is just stunning. I mean, the therapy is clearly

stunning. I mean, the therapy is clearly working, dude. But you know,

working, dude. But you know, >> it's just called being happier.

>> It's I think it's actually called getting older and wiser. I love it.

>> Maybe. Maybe.

>> Listen, guys, on that incredibly hearty note, uh, thank you. This has been fantastic and I've loved it.

>> All right, rock and roll. Thank you,

Harry. Thank you, Rory.

>> Thank you,