# Anthropic’s $10B Raise | a16z’s $15B Fund: Is the Middle Dead in VC? | How OpenAI Could Go to Zero?

**Channel:** 20VC with Harry Stebbings
**Source:** https://www.youtube.com/watch?v=RXLJk-SyGfA
**Transcript page:** https://www.withtranscript.ai/video/RXLJk-SyGfA

## Chapters

- 0:00 — Introduction to AI Funding and Risks
- 1:01 — Analyzing Anthropic’s $10B Raise Valuation
- 8:59 — Cursor vs Claude Enterprise Competition
- 12:20 — Google-Gemini Partnership and Privacy Implications
- 16:08 — OpenAI’s Existential Risk and Funding Challenges
- 26:03 — Andreessen Horowitz’s $15B Fundraise Rationale
- 32:16 — Scaling Venture Firms: Platform Versus Boutique
- 1:01:37 — Substitution Risk in AI Infrastructure Use
- 1:09:46 — Conclusion

## Transcript

**[0:00] Speaker A:** In the early stage, you're taking uncorrelated business risk and in the late stage, you're taking 100% correlated valuation risk. If the growth is there for one more year, it looks cheap.

**[0:10] Speaker B:** Now Now this week we have a lot to cover. Anthropic's $10 billion fundraise, Xai raising $20 billion and Dreeson Horace raising $15 billion.

**[0:21] Speaker A:** I would be nervous if I was a 27 billion precursor investor, but they've created something amazing.

**[0:26] Speaker B:** If you're OpenAI, are you not slightly nervous? You're being eaten away by Anthropic. And then on the consumer side, you've got Gemini outperforming.

**[0:34] Speaker C:** Well, Well, luckily you're a nonprofit. So whoever wins is great for the global economy. Right? You don't have to worry about it as a nonprofit. It's all for the greater good. Where we have ascribed the odds of a downturn to less than zero, I think OpenAI has existential risk. It is a bet that the best of times lasts at least a decade. It's pretty interesting that Andreessen not only raised the most capital, but on a two by two, I think has the strongest founder brand.

**[0:55] Speaker A:** You can be promiscuous at the a if you have enough late stage stuff to cover it up.

**[1:01] Speaker A:** Ready to go.

**[1:13] Speaker B:** Boys. We have a big, big lineup today. We're going to start with two monster rounds. It seems the only thing anyone's talking about right now is anthropic. Anthropic raising 10 billion at a $350 billion price. I would love to hear your thoughts on this. Is this the last round before they go public? How do we feel about the price? Over to you?

**[1:35] Speaker A:** Probably yes on the first question because they've stated they want to and it feels like they can. And if someone says they want to do something and it feels like and that thing is doable, then logically it should get done. So yeah, I think it probably will be the last one before the ipo. And how do you feel about the price look when they raised at 160? I mean, I remember internalizing. We talked about it and frankly we talked about it in apashe you kind of go, big number, wow, that's the second or third largest private cap valuation ever. And then you look at the market traction and the revenue traction and you go on a revenue multiple basis. It's cheaper than some of the stuff we're doing at 200 and 100 pre because this is a company that's gone from. It's easy to remember the Numbers for Anthropic because they very kindly did them in round units of 10.

**[2:20] Speaker A:** They went from 100 million in 23 at the end of 23 run rate to a billion at the end of 24 run rate to allegedly between 9 and 10 billion at the end of 2020. So let's assume those numbers are roughly correct. They 10 x 2 years in a row, I don't know next year, do they? Let's just say they only quote only 3x. So they go to 30 billion. Right now a rule of thumb is I'm going to go now for ARR and run rate at the end to gap revenue for the year. A rule of thumb says take the opening ARR, the closing ARR and calculate the average 10 billion. 30 billion average is 20 billion. That says they do actual GAAP revenue of 20 billion next year. So it's, you know, 17 times NTM revenue. It's a much lower revenue multiple than Palantir.

**[3:06] Speaker A:** It's kind of comparable with Cloudflare, for God's sake, in the public markets. So you do that math. If the growth is there for one more year, it looks cheap. It's the old rule. It turns out you really, really can pay up for anything that goes 10x year on year. So that's the bet. And the guys who did it at 173 months ago, I'm feeling pretty smart. Now there are 2x in 4 months.

**[3:27] Speaker C:** Calculate that IRR how only raising 10 billion. It's actually a sign that, that the unit economics are probably healthy. It's not that much, it's not that much dilution. Right. So I think Anthropic's been clear that they believe that they're, they're. Their unit economics are strong. They own, they own not just enterprise, but they own code creation, they own application creation. Right. They own building everything we have spent our lives working on. And if you're building with these tools, I know it's the trite VC thing to say, but it's hard not to believe we're in the first inning and just getting going. It's literally hard not to believe it. So how that works out on a spreadsheet to how many tokens, how many trillions of revenue is complicated, but subject qualitatively and subjectively, it feels like first in.

**[4:21] Speaker B:** Jason, do you think they have the enterprise market at this point?

**[4:25] Speaker C:** Everything that I see at the API level, I mean, Claude has won it and nothing is perfectly stable in AI, we should not feel that anything's perfectly stable. But the reality is so far nothing's dented. That and it's birthed Cursor and lovable and Replit and Harvey and Lagoa. I mean these all. I mean even Cursor. Cursor is just a derivative of it. I mean there's other models as well, but it's tough to stop this train.

**[4:52] Speaker A:** Yeah, I agree. And I think you should break the market up into. I would have said two and as of yesterday I'm going to say three. And I'll tell you what I mean in a second. The enterprise market. There's the enterprise API market, which is basically selling your product to other ISVs who are building on top of it or enterprise building on top of it. They've been the premium product there for the enterprise for a long time. Because you're quote unquote, just an API. There's always a risk that as an ISV is building on top of your product. They might try and use cheaper open source models for some of the more commodified stuff. But to the extent that you need the high end part of the product, that's been the business that Anthropic Claude has been able to get so further. And that's where they started obviously at the API level.

**[5:37] Speaker A:** Now the second thing that obviously, and you know one of the biggest customers for that was the coding companies like Cursor on that. So then the second thing they've done yet within the last year is they've said, I mean, I don't think they said as malevolently as this will sound, but they're like, hey, coding is probably the single largest use case for what we make. Let's build a coding product. So they have Claude code and that's allowed them to quote unquote win at the I'm taking your win at the enterprise comment. Now they're winning not just by being the API but being the app for coders. And it's not 100% win. They're kind of competing with cursor, they're competing with GitHub, but you know, you're grabbing more money instead of maybe being 50% of the revenue of a coder because you've got gross with a gross margin of 50, you're getting 100% of the revenue because you're selling the product.

**[6:21] Speaker A:** That's the second category in which they're clearly quote unquote, the winner. I mean, my sense is their enterprise share of coding revenue is plus or minus comparable to cursor and GitHub, maybe a little lower, but Growing nicely. And then the third thing is they announced a product yesterday and caveat I haven't had to use, been able to use it yet because I'm actually here at an offset but it's early in the morning, my coffee hasn't kicked in. The product is basically it's Claude for non coders. It's the ability, it's kind of an ability. Claude workspaces, I think it's called. Don't quote, I could be wrong on that. But basically the idea is if you're doing other knowledge work other than coding, can you do it within Claude? And this is the idea that the world I think has been going in this direction. We talked a little bit about Manus last week, companies like that and there's a number of others.

**[7:10] Speaker A:** We have one obvious that AI that has kind of launched a product in that space that's just starting now. But you know, Claude Workspace, obviously the dominant one, the idea is, is that if you're building PowerPoint, if you're manipulating data, if you're doing all the other knowledge work that those of us who aren't coders do, instead of bringing the AI to the Excel spreadsheet, which is what Copilot tried to do at Microsoft, you bring all these tools into the Claude space, into the workspace and may be more efficient. Now I've read some preliminary reviews. Yeah, some. Something like, yes, this is amazing. The people who've used it more said, yeah, it's amazing, but it's a bit janky. But the idea is there. And clearly the reason I mention all this is the idea is the direction of travel is hey, don't just be, you know, don't just be called the Chatbot for enterprise, the chat interface for interface, like Chat GPT for research.

**[8:02] Speaker A:** Be the place where you do knowledge work for the other knowledge workers who are encoders, right. At a high level. And this is a zoom out comment but it's a scary one if you're Microsoft. It's like every single knowledge worker uses the Office suite. You get PowerPoint, you get Excel, you get Word, right? What is the AI version of the Office suite? And because that's a great, it's a kick ass product for Microsoft because every knowledge worker buys it. Can you imagine turning up for work and someone saying we're not going to give you a spreadsheet, a word processor or a PowerPoint. But you're like, what the fuck, right? The idea that for every knowledge worker there can be some product like this, some bundle like this is A huge ass idea. Right. And I don't think this is it yet. But the idea is clearly to the extent that you are doing knowledge work using AI, you probably will need some space to be in.

**[8:59] Speaker B:** My job is to ask. My job is to ask provocative questions. When we look at case two there you mentioned kind of Cursor and the potential impact that Claude Code has on it. I speak to many CPOs as part of 20 product and I ask them about tool usage internally. Everyone that I speak to instantly states Claude code. And the portion of people that said Cursor has gone down dramatically in the last three months. Would you feel nervous if you were Cursor and a Cursor investor?

**[9:28] Speaker A:** Depends on the price I got in at. On depends. I mean I wouldn't feel nervous if I got in at, you know, the, the round of 200 million pre because it's not going away. I mean again, there's an element of a horse race drama here. We like to get caught in the. You call it provocative, I might call it getting lost in the details. And there's no doubt that Cursor has got two large competitors, both of whom can bundle with adjacencies a Claude Code where they have a strategic dependency as well and big GitHub. So yeah, I would be nervous if I was a 27 billion pre cursor investor. But they've created something amazing. And what I always say to my CEOs is the best way, you know, you've graduated from one league is when you start competing with people one league up. It's like, you know, you're in division one of the English Premier League.

**[10:12] Speaker A:** English Premier League and suddenly you graduate to, you know, the top division. It's champions. What is it now? Premier Division. Right. Yeah. I'm so old. I remember, I'm so old. I remember when that was Division one. But anyway, you know, you just get, you get to play against different competitors. I mean Cursor is now up against Microsoft. It's up against their own supplier, Claude. So yeah, they're playing in the big boys leagues, but are you a little scared? Yeah.

**[10:42] Speaker C:** Play for sure, I'd be a little. I would listen if I were, if I were an investor. First of all, I've given up in the age of AI. I've given up on this nerve. Nervous. Nervous osity of nervous and disruption because what can you. What can you do? I mean these products didn't. I mean none of these products even worked a year ago. How nervous can you be holding a large position in a product that didn't work a year ago. You can only be so nervous or quit the game. But even little things like. Like Anthropic cutting off xi's access to Anthropic this week. It is easy for me to imagine the business model switches right now. It's great for Anthropic to get an extra billion or so a year from Cursor. It's a great deal. It's free money. They. They repackage the product. They don't.

**[11:24] Speaker C:** I don't believe they have to sell it at any discount whatsoever. And they get another distribution channel should that change. As. As Anthropic crosses a couple trillion and 10 trillion in revenue. It's easy to imagine one. They could cut off access like that sounds aggressive. Right? Or they just might limit access to the top models. They just might limit access. They just might degrade it. We've end. So there's no reason to believe that. What's the expression? That the scorpion might not sting the. Who's the scorpion taking across the river?

**[11:57] Speaker A:** The fog of the scorpion. It's in his nature.

**[11:59] Speaker C:** Yeah. Yeah. There's no reason that the Anthropic just might sting Cursor just before it gets to the other side of the river. I don't. I think it would be naive to assume otherwise. Right. And there's many ways that the scorpion could sting the frog. It could be. It could be. The simplest way is to limit access to models. They've already done it on a limited scale with Xai and others. They could simply copy the product.

**[12:20] Speaker C:** I mean how hard is it to build an IDE that's just the same as Cursor? It's really not that hard. They can build replied and lovable too. These are not the greatest challenges of mankind. So all of them are at risk of the scorpion stinging the frog. But I would still invest.

**[12:34] Speaker A:** It is worth pointing out that when the scorpion sings the frog. The scorpion dies too. In the old Aesop's Fable and in the Crying Game, if you remember the movie. But yeah, I love it, Jason, because the first thing you said I think is just really so tr. Very helpful for me because the comment on being scared. If you're going to be uncomfortable being scared, you need to just go home.

**[13:11] Speaker B:** If we've got to be comfortable being scared. To what extent is Google choosing Gemini for Siri over the prior relationship with OpenAI? A massive deal versus a temporary moment in time where Gemini is proving to.

**[13:25] Speaker A:** Outperform Outperform the big deal. Comments are this one Google and Apple obviously have a long standing relationship where the money moves from Google to Apple for placement of search because search monetizes with advertising so therefore it's valuable to get real estate, right? So they have a long standing relationship. So it kind of makes sense that you'd go with your default relationship to make it happen, right? The odd thing is for this relationship the money may. I'm not clear on the money movement but it kind of. Because there's no advertising model maybe the odd thing is Apple might be paying Google for Gemini, I don't know. While at the same time getting paid a lot more by Google for placement on search, which is why the two products are slightly different. That could slip. If OpenAI had a model, for example that had ads in the thing, then maybe the dynamics of the money move can flip.

**[14:14] Speaker A:** But yeah, if you're in the distribution business you want to be on a billion. I mean the proof that it's worth something is Gemini. I mean app Google pays. I used to know the number. I don't 10 billion a year some absurd sum of money just to show up on the phones because it's the best distribution on the platform. So yeah, at the margin you're sad. Unless the economics were stupid. It's not like actually even cancel that comment because it's not like OpenAI blinks at bad economics. I mean those guys have an economic indifference curve that would make your head hurt. So yeah, I think it's at the margin you'd be bummed not to be honest.

**[14:47] Speaker C:** Certainly today Google feels like a far more stable partner than OpenAI. It's just the reality. It's not the OpenAI is not the only game in town anymore for Apple. The only thing I would add which you know, sometimes when I've spent time with the folks, senior folks at Google Cloud and other parts, I realize we underestimate how mission critical privacy is in the deep enterprise. We don't Talk about privacy enough. We don't talk about. And so the fact that Apple made clear that they felt this was the best solution for user privacy and that they can maintain the most data within their clouds and their systems. We can. Joe. We don't care about that with most of our startups. Yeah, we care about privacy. Hopefully it doesn't leak. Hopefully the agent doesn't expose your data publicly. But this is like, even like a lot of enterprises think they worry about whether Salesforce is secure enough.

**[15:37] Speaker C:** They want to run their CRM on their own private clouds, on their own data. Google cloud, it's not as big as AI, but they have a massive business running Salesforce on their own private clouds for customers who somehow worry Salesforce isn't secure enough. So when Apple says privacy is part of it, it's just a reminder to me there's another level here in the big enterprise that a lot of folks can't touch. We actually don't have those levels of security and privacy. We're not going to earn those deals because we're not that secure. We're not more secure than Salesforce. It's a high standard.

**[16:08] Speaker B:** If you're OpenAI, are you not slightly nervous? You're being eaten away by anthropic. You have headwinds behind them seemingly like they haven't had before, and incredible model performance. And then on the consumer side, you've got Gemini outperforming, you've got Nano Banana being incredible. And the tailwind of Google and the machine behind Google, it feels like you're being eaten at every angle combined with very high SBC and high churn, and it feels precarious.

**[16:40] Speaker C:** Well, luckily you're a nonprofit, so whoever wins is great for the. For the global economy. Right? You don't have to worry about it as a nonprofit. It's all for the greater good.

**[16:48] Speaker A:** You're not a nonprofit anymore. Stop. No, hang on, stop, Hang on, hang on. It's confusing when Harry says, first of all, just to be precise, you're not a nonprofit anymore. Your largest shareholder is a nonprofit. So to just make it even more hard, if your economic value goes down, the biggest single loser is this wonderful nonprofit called OpenAI Nonprofit, which has already made some interesting donations, which is very clever, by the way. Once you got that deal done, start dispensing some money as a charity to show it's a charity to separate the 2. So if OpenAI's value goes down, the largest loser is a charity. The second largest loser is Microsoft will survive. And as you pointed out, the third largest loser is massive. So it is a problem. But the core question is precarious is a little strong when you feel angsty and driven.

**[17:37] Speaker A:** I mean, that's why they're at code red. But a. To Jason's point, anyone who's not feeling nervous doesn't understand the game. So of course they're feeling nervous because, you know, you got to play the game. But look, I saw some. I mean, actually, I thought in the New York Times this morning I could be wrong. Simon Sebastian Maltby, who I think wrote the book on venture at one time, was kind of, oh, I think Google goes as I OpenAI goes to zero. And I think that's absurd. There's huge value here. Like, I still, you know, we all default. They have 800 million users. They'll find a model. I mean, I think that there is a model there. They have subscriptions, they have a business. It's not going to zero. The may I keep score is not. Oh, does it go to, like, the way I keep score is the relative value of anthropic to open AI is kind of the ratio of, let's call it management success from over the last three years.

**[18:24] Speaker A:** And the truth is, it's gone from, you know, 10 or eight to, you know, 10 plus to one, to much more convergent. It's now only two to one. So if you were in a race, the objective measure of success over the last three years is something like you were in the lead 10 to 1 over the other guy. You're still in the lead, but he's now only 50% behind you and coming on fast. So are you nervous? Yeah. You're bummed?

**[18:50] Speaker C:** Yeah. Yeah.

**[18:50] Speaker A:** You're You're still in the lead. Don't blow it. And I think you've got a differentiated business. I still, you know, like, for all the Gemini talk, I still enjoy the ChatGPT experience more for the kind of research I do, for example, to go on this pod. So they got something amazing and compelling there. They just need to frankly, focus, knuckle down, focus, and make it work and make it, you know, realize its potential.

**[19:16] Speaker C:** There is a very, I think there is a very simple bear case for OpenAI, though. There is a very simple bear case that it goes almost to zero, which is that shelf life of an LLM is less than 100 days. Half life is very short, and something happens. There is a macro disruption and OpenAI can't raise the capital it needs. All of its competitors. We just talked about how Anthropic has much superior margins. Gemini, massive cash flow and Xai crazy. But you know it'll get a trillion of Trump contracts. OpenAI is vulnerable to. You know. You know we joke about Macro Disrupt. Every portfolio company that didn't hit the its q4 numbers blamed macro disruptions. But it easily could. Like this cap. We've never seen this amount of capital availability ever. And it is not hard to imagine something. We've had systemic shocks in our lifetimes.

**[20:10] Speaker C:** If this was 0708 or whenever OpenAI could almost like it could die in the sense that it could not evolve when its competition could.

**[20:19] Speaker A:** One caveat. I understand your comment, which is why the old Bill Gates rule was always have two years of cash on the balance sheet like OPEX cash. If that's the case, then the way you could only get into a really tough situation is if the world went to shit just when you needed to raise more money. So they're smart people. If you're running the CFO of that company, your mental rule of thumb should be raise like crazy.

**[21:00] Speaker C:** But how do you do that if Gemini and Anthropic can keep going? How do you do that if your competitors can keep going through that? That's the thing. This isn't work workday spending a little bit less on, on making sure that the Windows 98 integration works properly. You dive into. You don't have the capital.

**[21:16] Speaker A:** But I'm. But I suppose I. You're right. J, but I rejected your first comment, which I don't believe this is the kind of user based ads at, you know, 100 days notice. I think that there is a large degree and an increasingly large degree of consumer behavior and stickiness. So yeah. Can you paint a scenario like.

**[21:33] Speaker C:** No, No, hold on just one second. Just, just imagine, okay, OpenAI needs $100 billion in the next two to three years. That is more than it has spent to date. Okay. Its spend is accelerating. Would you. Let's imagine it can't raise that and it's frozen in time. ChatGPT is essentially frozen in time today. Would you use Chat GPT from a year ago? Would you use Claude from a year ago? Nfw. You would use these products from A year ago, there's no way you would use them in. In cursor or for coding. There's no way. There's not a one in a million chance any developer would use a year old model today. They were so terrible. This company would deteriorate. So it would be like Detroit. Like it would still exist. Right. Or be like AOL and dial up. You'd still hear the shrieking. Because some people don't.

**[22:15] Speaker C:** Grandma doesn't know. Grandma's fine with chat GPT from a year ago because it helps her with recipes in the kitchen. But the rest of the world's moved on to broadband.

**[22:23] Speaker A:** 2 Comments One is. Yes, it is. By the way, it is astonishing that someone just traded AOL and it still has cash flow. That was the funnest fact of the year, like literally last year. Some of that. Wow, that thing's worth a billion bucks still 20 years on.

**[22:36] Speaker C:** Get me on the Internet.

**[22:38] Speaker A:** Yeah, but I don't agree with what you're saying. I understand the point, but what you're saying. Imagine a two by two which is macro conditions good, macro conditions bad. And then the other side of the 2 by 2 is scaling laws still working. So improvement is vital versus scaling laws slow down. You're right. In a world where scaling laws are still massively working so the next model is infinitely better than the last model model and where macro is shit so they can't access the capital, then in that corner case scenario, then you're right, you could paint that scenario.

**[23:15] Speaker C:** Let me just add one more point and I don't want to take too much time here. You're the boss. I think we have returned to a moment in time. It feels like late 2020, 2021 or maybe. Rory, you can pick some other times in our careers where we have ascribed the odds of a downturn to less than zero in venture and everything. We are deploying, we are raising funds, we are deploying capital, we are doing up rounds weeks after the last one. And underlying that bet essentially is a 0% chance of things not. And look, we see it in data center use, we see it in power use and water use and ramp, but we are. And that's fine. That's. We're not paid to mitigate downside in venture startups, But I think OpenAI has existential risk. It is a bet that, that, that the best of times lasts at least a decade.

**[24:12] Speaker B:** I do have said I do think on the consumer retention element. I think you're wrong. I think people are a lot more promiscuous than we give credit for yourself and I think since, excuse me models, I definitely am. I'm a total slut for a new model.

**[24:27] Speaker A:** Yeah. Yeah.

**[24:27] Speaker B:** Since Since the new Gemini models came out, you've had a 22% drop in chat GPT usage.

**[24:32] Speaker C:** My son dropped it.

**[24:34] Speaker A:** Okay.

**[24:35] Speaker C:** Yeah. He pays for cursor and he uses and Google's free for him Google because Google's free. He doesn't want to pay 20 bucks a month for chat gbd. He pays for cursor out of his own pocket. Out of his own pocket. He pays for cursor but he doesn't pay for chat GPT anymore.

**[24:47] Speaker A:** Summary is this guy. I think it's fair some if things.

**[24:50] Speaker C:** Go Go to and remember invest in whatever your kids do. This is how you get into Snap and all these hot deals. You just, just do. So if my son's alph chat gbt. Rory, we got a short. Let's get on Calshi and just short this baby.

**[25:00] Speaker A:** Come Come on. Got it. Okay.

**[25:05] Speaker C:** It's to Harry's point. It is, it is. It is that. That that that the next generation is.

**[25:09] Speaker A:** Fickle Fickle like it this discussion is like I don't know if you ever read failure analysis of things like aircraft crashes or anything like that. What you always discover is any crash is always multifactorial. There's always more than one cause and I think what you're saying is correct. If you macro goes to shit at a point in time when they don't have a ton of capital and at that time the market for this product is still incredibly fluid at the consumer level, then if all those things happen at the same time, you have trouble. I just argued that. So it's not a stupid comment to say it can happen. It's just concatenated probabilities that I think are fairly low. I think the much more likely is that you have to moderate your ambitions and just execute on the consumer space and make it happen and build a world class business on that.

**[25:58] Speaker B:** I mean speaking of moderating ambitions, there's one firm that is not moderating their ambition.

**[26:03] Speaker B:** Our dear friends at Andreessen Horowitz. $15 billion for the new funds. I believe it was 22% of all of the dollars raised from Venture in 2025, going to them with this fundraise. It's enormous. How did we react to it? And a subsequent really underlying question, do you have to go mega big platform or, or tiny boutique to play the game in 2026?

**[26:29] Speaker C:** Listen, on the one hand, so what we've been talking about this since this pod started, right? We've been talking about massive funds and it's just all you have to do is just look at the data bricks and anthropic rounds and it's pretty easy to see why you'd want to do that. Playbook, I would say. What Andreessen. It's pretty interesting that Andreessen not only raised the most capital, but on a two by two, I think as the strongest founder brand. That's hard to do both. It's hard to do both. And it is evolved. And Andreessen, I mean, I've been around long enough to remember vaguely when it started and it was cool from day one. It was cool from now. It wasn't what it was today. Right. But I remember I had a, I had a, I had a subtenant. Mark Andreessen came into our office to meet with them, to fund them and it, you know, it was a God moment.

**[27:12] Speaker C:** Oh my God. At Mark Andreessen. Is that Mark Andreessen in the office? I'm sure it looks like Marc Andreessen and they have invested in that at many levels on the brand and I don't know how they've done it in some ways, but it has and it's gone a little bit up and down. I remember I had one founder that was pretty hot who was bummed that, you know, he, he, he, he, he got a term sheet from Andreessen and not Sequoia. But that don't happen today. That was a brief, that was the 0809 version of, of, of Andreessen. That was a brief moment. And you have returns. The returns were published. The returns are top decile. So you have the biggest fund, the top decile returns or quartile, whatever, top tier, which used to be a knock. And founders love this brand. You know, whoever was talking about fund versus firm or platform, that's, it's hard to do all of those at scale.

**[27:58] Speaker C:** Founders love it. They love it. It's, it's, it's defensible. So you might as well Hoover up 51% of the capital and then just shut down your competitors.

**[28:06] Speaker A:** Agree. I've, I've thought about this a lot in terms of the question you asked. And I have a lot to cover on this. Just heads up, right? And I think I'll give you the summary. They've won and they've won really well. And the only thing that might impact them at this point is misexecution internally. But now let's unpick this because the first question in your little notes you said is, can they make a 3x or a 5x on $15 billion?

**[28:40] Speaker A:** That's the question you asked. And everyone else starts with that question. Oh, there's just not enough exits to justify that is what they say. And it's the wrong way to think about it because I think you have to break it apart and say, first of all, is the industry at a stage now whereby that amount of capital can earn a return in total, in other words, the total capital going in. Because remember, if the total capital going in can overall earn a decent return, then it doesn't matter from the industry's perspective if that 100 billion of invested capital goes all to one firm and they invest it all, or it all goes to 100 different firms and each invest a billion dollars. The macro question is, is the overall market in equilibrium such that you can get a decent return here? Right. And then the second question is, given that, you know, like again, going back to if, if it is in equilibrium, can these guys, how much of that total money can they take and profitably deploy?

**[29:35] Speaker A:** In other words, are there dis economies or economies of scale and can they execute it well? And you know, kind of fast Forward to my 2 comments on this is a. I think the industry is roughly in equilibrium, so they can do it. And in fact, the numbers are moving in their favor. And then second comment is, so the argument on employing it at scale, I think it can make it right. So let's do the first. Yeah, they raised the question, they raised 15 billion, but they do 20% of the total. So it means the industry as a whole raise 75 billion. Right. And everyone goes, oh, there's not enough exits for that. Right. Well, rough and tough, 3x the value of exits this year, which wasn't an amazing year for exits, including healthcare, by the way, was around 300 billion. So not perfect. That's not all owned by venture, but you're kind of roughly there.

**[30:22] Speaker A:** And the other interesting. And presumably next year with the caliber of, I mean, if it's 300 billion this year and Anthropic alone goes public next year with 500 billion of exits, so the industry raised under 100 billion. This is 7. I mean, if they really raised 15 and they really are 20% of the total. That implies 75 billion of venture raised. Right. It seems to me that's a kind of number that can be digested and yield a 3x return overall. So it's not like it's stupid the amount of money. And it's actually getting better because in the last couple of years, Venture has deployed a couple of hundred billion a year and only raised about 70 to 80 billion dollars a year. Now, some of that is because some of that capital being deployed is non traditional venture, but. But it's getting harder for newer funds to raise money.

**[31:09] Speaker A:** So if you think about it, if you move on to the second question, can they deploy 20% of venture successfully? The macro trends are moving in their favor because they're raising more money at a point in time when other people are raising less. So they're getting in a relative. They're in a nice position, provided they can deploy it. So I think overall the industry is getting into equilibrium. Then the second question is how can they put it out? And there is 20% of the money last year. Right. But you've got to think of over two years. That's roughly if they raise every second year, though interest me, they raise in 24 and then 25. Let's just say every two years. That implies it's 10% of the money on a sustaining basis. Agreed. It's like you're putting out 10% of the capital. So basically they've got to get 10% of the exits.

**[31:54] Speaker A:** They got to get 10% of the Series A's, et cetera, et cetera. Now, interestingly, that work that we talked about way back last year that the partner from DST did showed over the last decade, Andreessen did roughly 10% of all Series A's that became $5 billion outcomes. So it's kind of their market share. Right. They got to get 10% of everything. Got to get 10% of the great Series A's.

**[32:16] Speaker A:** They got to get 10% of the great series B's. And provided they could execute that all the way up the stack, they make it happen. Right? Yeah. And what I realized when I did that, Jason, was like, I just literally did it this morning because I'm getting ready for our site. So I'm looking at kind of exit.

**[32:35] Speaker A:** I mean, there are two risks and we'll talk about them in a second. But you look at it, you go, it's not crazy. And then as you say, it's in part because, I mean, you said it is that they've done an amazing. And I read the Paki McCormack article and all that. I think we all, a lot of us come into this business as investors and I think they came into it as engineers and as company builders and they did a great job of solving the system. And there's a lot of leakage along the way. I mean, one of the things that was interesting in that article is you make some mistakes, you deal with a lot of negative knocks along the way, but it doesn't matter provided the model works overall. And again, I repeat, they got to get 10% of everything. Now, maybe two or three things that go wrong.

**[33:18] Speaker A:** Maybe three. The first is when you get bigger. If you have to do 10% of all Series A's, it just becomes a lot of deals, which means a lot of people, which means is the marginal investor any good? Can you stay good when you have 20 people writing checks versus 10? It's just hard, right? You know, I think you have to. That's a management problem. They're good managers. The second thing is, the funny thing is you say you got to get 10% of all exits, right? And the total exits. The total value of all private companies right now is about 3.6 trillion, which pleasingly, by the way, if you say 3x on invested capital, that's 1.2 trillion over 10 years. That kind of says it's got 100 billion a year, creating 300 billion a year value. If you chop off just the top three deals, you're down.

**[34:01] Speaker A:** Well, not of a trillion bucks, you go down to 2.6 trillion. So the bigger the firm, the more capital you raise. The math all works, but it's very top dependent. And again, I taught the Arctic packaging account was very good. If you miss even, like I can make my math work and not get any top 10 insights, you simply can't make this kind of map work without getting those top exits. And you don't have to get in at the A, but you know, you don't have to do the A of SpaceX, but you better show up on the cap table before they hit total because that's a trillion dollars of value that you got to get.

**[34:41] Speaker C:** Why they want that part to me seems the easiest part. Rory, you simplified in a great way, which is they need to do 10% of Series A's that matter each year. Okay, that's doable. If you have a top two brand, I think, and you have the right. You just meet with every. The jobs. To me, I don't think you can do. I don't think you do 10% of every pre seed deal. I think even YC can't. Like, that's a different question, right? It's doable. And then if you have an at one of the top three brands and you have a large enough team, their job is, I mean, even at Inside. I learned this from Teddy back in the day. Like, you get fired if we don't see every deal. It's a different question of whether we win it. We get fired if we don't see every deal.

**[35:20] Speaker C:** If Insight can do that and Vista can do that, why can't Andreessen see every single. Like, because they, they should. They have relationships with every seed manager that matters. They're out everywhere, they're close to Gary Tan and the rest of the world. Why shouldn't you see every. I mean, there'll be some from left field, right? That of course, but why shouldn't you see if your brand's strong enough, you should still see them. And then the interesting question is, why can't this, this was the, the question years, a couple years ago that I remember Andrew Bielecki from Klaviyo said is like, well, why not 90% market share? Why can't Andreessen have 40, 50%? Why not? I mean, there's conflicts, of course. Let's put conflicts aside, though. Why can't your Math scale to 50% if conflicts weren't an issue, why can't it scale to 50%?

**[36:05] Speaker A:** It's actually an interesting question, James, because, you know, if you think about where I started, you're right. You start, look, Sequoia, I mean, one of the things I was reminded, you can tell deep in their heart, they believe even if one other company, one other venture firm has a billion dollars, you're like, why are we letting them have that right? We'd really just prefer to be all us, right?

**[36:46] Speaker C:** No downside to and reason. If there's. If all I get is upside, I don't get any drama. If I sell my company, I don't get. I don't get thrown under the bus. They do my pro ratas. The worst case is I'm treated well and I get to go to these cool events. That's the worst case. Why would I not take their money?

**[37:01] Speaker A:** So you're right. Exactly right. Because it's an interesting question. If they can do 10% why can't they do 20? Right. And as yet so why can't. Yeah, exactly. So I think there's really three things that could go wrong and it's an interesting spec. One is that I think you should assume that when you have that you see all the good deals at the Series A but remember you also see all the bad deals. So the more pickers you have to have to do more of the deal the harder it gets to have all those pickers be good. You just. Your mistake rate goes up. But you can cover for that that if you do enough of the A. Right. The real thing that's the first thing. Then the second thing is as you get later you just have to concentrate in the winners. Right. You can be diversified as at the A.

**[37:43] Speaker A:** But going back to the comment is if it's 3.6 trillion of total private value and the top four companies now if SpaceX really was worth a trillion you could argue the top three companies are now 1.8. Right. You just got to make sure you concentrate down on those. And if you slip on missing you know it just gets harder to execute like you can.

**[38:07] Speaker C:** Years or every year you can. They don't have like you. I think your job is to get good at concentrate like you own fifth. I think Andreessen should target Ben and Mark actually did not WhatsApp me on this but I think your math Rory is so powerful to me 10 of Series A's combine that with Andrew by Lecky own 80% of your market or you're a failure as a founder from CEO of Klaviyo own 51% of venture. I believe conflicts are a super solvable problem for founders like law firms figure it out like you just isolate it. We have. We have three teams and Andreessen becomes known as the gold standard. There are no conflicts like you can have direct competitors and Driessen and they have solved this like there is no leakage. They have solved this problem. And so I this is a traditional vc.

**[38:49] Speaker C:** Even Sequoia has the issue. We. We don't do conflicts. Right. I remember in the early days when we met we referred Some stuff. And you guys were like, no, HubSpot's our winner. We can't have any conflicts. But I think it's a solvable issue. Then you get 51% market share, then you own, and then Sequoia and those General Catalyst guys get the scraps. If you want to build a firm and not a fund, this is what I challenge my friends to do. 51%, because your math just. I think you can solve. I think you can solve all the other issues. I genuinely think you can solve them. Andreessen hasn't had a fund below 4.4x. Gross. Gross hasn't had a fun below 3x.

**[39:23] Speaker A:** Yeah. What I like about doing this with you, Jason, is how incredibly I can go in expecting to have to make one set of comments and end up on the total opposite side. Because I was expecting to have the, oh, they can't make the mat work at 10%. And clearly I convince you they can. So now you're like it. If you could do 10, why not do 50? So what causes? Well, I think that the human fact.

**[39:45] Speaker C:** If you can access the capital.

**[39:46] Speaker A:** Well, that's actually an interesting caveat. I think there's two or three risks. One is if you're doing Series A's, the more you do, the more people you have to have. And at some point it becomes. Because the more capital you're deploying, you only have one or two moves. You either do more small deals or fewer big deals. If you're doing instead of 20 Series A's a year, you're doing 60 Series A's a year. You need X number of GPS. I think quality goes down at scale. Let me give you proof on that. Andreessen's market share is higher than benchmarks in terms of that work that I wish Rotman, the guy from dst, did, it's higher in terms of the great Series A's, right? As a percent market share, but the hit rate is much lower. So as you get bigger, you get more done, but the quality rate goes down.

**[40:34] Speaker A:** And at some point, not only your hit rate go down, you probably, therefore you have a lot more fails, right? So it's hard to scale. So if you scale from 5% market share to 10%, your hit rate goes down by a couple of points. If you go from 10 to 20 now you have the next 10% being written by less good investors. The pressure to do deals goes up. My guess is your hit rate goes down over time. So that's the way it happens at the Series A side. So I don't I think there was a natural limit to this because I mean if you look at public investing, index investing is a scale business. Stock picking is not right now we can talk about in the public markets. Is indexing the right answer? Which is why all the big money managers the public markets are indexes.

**[41:16] Speaker A:** But stock picking in general, it gets hard to be smart in a room with more than five or seven people in it. So I think there are inherent limits.

**[41:23] Speaker B:** If you are indexed in Sequoia Index reduced the fund size that they went out and raised a billion and a half circa Sequoia actually have quite constrained fund sizes. I think they're you know seed fund is around 200 million and they don't have billions and billions per vehicle. Do they have to embrace scale and say fuck it. Andreessen have set a precedent. This is a money wall game.

**[41:45] Speaker A:** There's no doubt that you can pursue a really great seed and series A strategy with plus or minus 500 million, plus or minus maybe 500 to a billion. There's no doubt about it, right? Index can do it, Sequoia can do. Everyone can do it. The math is clear. You can have five partners doing deals. So maybe another way you ask to ask the question another way is to be successful in the Series A do you also have to add this adjunct product called a shit ton of money for your growth stage where you use that money to do two things. One is to help you win series A deals because you can say to people not only would I do your Series A but I have a wall of money for later. Right? That's the implied thing. And the other advantage it gives you is just you seem bigger so you get more of everything.

**[42:27] Speaker A:** That's the question Benchmark have proven you don't Andreessen have proven that it can be great. And I think the real truth is there's multiple ways to play that series A game. And one of the ways that wasn't true at all 15, 20 years ago, but now is clearly true is co attaching a big late stage fund to your Series A firm fund, provided you execute on both of them well is a way to increase your profile. It's increase your value to founders.

**[43:05] Speaker C:** I don't believe no matter what VCs tell founders and their spiels and pitches, I don't believe founders highly value the fact that VCs can fund you through every stage. Every big fund tells you that, every index, every red point. Everyone comes in and says the good news is if we deem you worth it, we can shovel cash into you if we believe you're one of our best companies. I don't think founders go skipping down the street from south park or Sandhill when they hear that that they just. That's not my problem. Right. Getting help now and giving me the capital on the amount in terms. So I just don't think that is as defensible as winning all the A's. That is just an output of a combination of. Of pro ratas and, and, and winning, winning, winning the right to do beyond your pro rata.

**[43:53] Speaker A:** Put me down for a no on that because I think there's two ways it helps. Jason, I hear, I don't think it's dispositive for the founder, but I think it helps at the margin because it'll for a couple of reasons. One, it helped you tell the founder a story. Oh, look at the last two years. Like we do a really good job of that. Look at what is it the van or oh look how much we owned at the exit because we were there the whole way through at least.

**[44:19] Speaker C:** I don't think an average Series A founder is picking you because you diluted the founders of Navon to 5%. I don't think that's the most compelling story I've heard at a founder pitch.

**[44:29] Speaker A:** Oh, that's hard.

**[44:29] Speaker C:** They're They're picking me because I believe Mark and Ben and team are going to help me build $100 trillion company.

**[44:35] Speaker A:** The second argument, because I think the third argument's the important. I'll give you the second argument is one, you can use all the growth stage fees to fund all the platform stuff and you can decide how much or how little you believe on that. I think the third argument is the really compelling one. Watch this. It's when I have a late stage fund, I can afford to do more. I can decide I'm not clever enough to be like benchmark and pick just the good ones. Fuck it, I'll just do more of them and some of them will be great. And even if I make errors at the A, I will be able to get so much money in my winners that I can cover for my mistakes. And I'm not saying that's what any of these firms are doing. But it's clear on the mat, the more scale you do, the more errors you make.

**[45:17] Speaker A:** Right? And therefore the only way you can make more errors is if you have a way to come back from. And the easiest way to come back from is just to know if I to get one good Series A, I'm willing to get three or four of them wrong. Because in that good Series A, I'll do the B, C, D and E. And the other stuff gets lost in the noise. That's actually the real power of the Late stage Fund. It's clean up on aisle five. We made some whoopsies, we made some misses, but we'll just clean it up. We'll go the other three Series A's that went bust. Cost of doing business, you're down 60 million, 20 on each. You have 20 million in the good one. You put a billion in and you just 2x it, you've covered your nut. That's the real strength.

**[46:02] Speaker A:** You can be promiscuous at the A if you have enough late stage stuff to cover it up. That's the argument. And it gets back to the core thing. I think it was inside that. I think if you approach your business as an investor, and I think benchmarks are superb, I'm trying to pick the best, and I naturally gravitate to that. Let me try and be smart and pick the best. I think when you approach it as an engineer, I think those guys said, how do you engineer an overall system such that it works? And you say, I can take a little loss rate here, provided the overall system can cover for it. And it's just an approach.

**[46:33] Speaker B:** For me, the truth is, the ballooning of your growth assets means you have ever increasing price elasticity on your early assets. And so for exactly us playing the early game, they can just come in and bid 300 when we're bidding 150. Doesn't fricking matter? Because David George is going to put in a 300 million check at 3 or 4 billion. And so the more you have here, the more elasticity you have here. And that's the real alpha that you get from this. And that was my point, which Alex Rampel said on the show that we released on Monday, very simply, the middle is dead. Like every other asset class that matures, you see a boutique specialist and you see a very large platform play, and the middle hollows out. I mean this in the nicest and most loving way, Rory, because I think you're utterly brilliant.

**[47:21] Speaker B:** Are you not the middle. And how would you respond to that?

**[47:23] Speaker A:** I think first of all, in that context, you are the middle. But I think if you're going to do crudely on Aum. But I don't. And I do think that it'd be a fool. I do think there is pressure when you have firms that can raise $15 billion and that definitely creates additional pressure. And you'd be a fool not to say it. I think you have to focus because I think the word boutique doesn't just mean small. Given the stage we invest at, we can only do 20 to 30 deals per fund. We can only focus on enterprise software. We don't do consumer, we don't do crypto. You have to be good at something. At the stage we invest at, we couldn't be a $250 million quote unquote boutique because you have series A and a series B. You're going to have to be writing 20 to 30 million dollars checks with 50% reserves.

**[48:15] Speaker A:** So what you have to do at a minimum is focus on a specific set of areas and be the best at that. Let's examine what intreesn does, right? Enterprise, consumer, fintech, crypto, defense, blah. If we were trying to cover all those grounds, we'd be doomed. And it's interesting today, Alex Opelkam, he says that. But on the other hand, it's very noticeable that they've split the fund up into four funds roughly our size. To put right at you, American dynamism, roughly over a billion. Fintech and AI and apps, about a billion and a half info to billion and a half. Because implicitly, by the way, I think it was a brilliant strategy. Very Alfred Sloan. If you read the founding of gm, what they're doing is saying they're recognizing you couldn't run this as a single thing because I think you see deterioration of investment quality.

**[49:04] Speaker A:** And what they've done is they've given Martin his sandbox, they've given David Jolovich his sandbox, they've given Alex his sandbox. And each of those funds is a fricking boutique fund at a billion dollars, just like us. So no, I don't buy that. Right. A focus billion dollar fund. What they do have with the 15 billion that you don't have as a $900 million fund in the same market as their $1.5 billion AI apps fund. They have the air cover of the brand and they have the cleanup of the $5 billion late stage fund to cover for their misses. So yeah, I mean, you are competing. So that's the advantage they have. But I think to just simplistically say everyone else goes away is not just. It's interesting to have a comment but it's belied by the way they've structured their business, I think. But you have to be damn good because you have to get up every morning and say you're competing against someone who will see almost everything, who can really lean into what they want because they have it and they have the brand and the late stage money.

**[50:00] Speaker A:** So you have to get there earlier. If you wait till it's consensus or anything close to consensus, you're probably going to lose. I mean it's the Peter Thiel question because I always think if we look at the two biggest entrants in the last 30 years that are really since Benchmark in 95, Andreessen Howard figured it out as founders who were engineers and they systematized it. And I think Founders fund, even though the name is Founders, figured out who. Founders who were incredible investors and figured it out from an investor perspective. So the lens is thinking they thought it true whereas Andreessen Horowitz engineered and managed it through and they bought obviously the two successful scale entrants. And I think the comment, the Peter Thiel comment is what do you know that no one else knows? If you're doing as a quote unquote boutique or a focused firm, you have to know something and have an area that the more general funds don't have.

**[50:54] Speaker A:** Otherwise you're toast. Exactly. You have to see things earlier. It's hard, it turns out to be hard to make money.

**[50:59] Speaker B:** Did you hear that spoiler? That was Rory saying the next fund is going to be a billion five.

**[51:04] Speaker A:** It's not. Absolutely not.

**[51:08] Speaker C:** Well look, there's, there's, I think all this, I mean it's all true, right? Obviously Andreessen down to YC is, will squeeze out a lot of players like that. That, that's. You can't argue with that. The, the meta question is can you still find acorns? Can you still find diamonds in the rough? Are there any good startups that don't go through yc? Are there any of them? Are there any that Andreessen won't see? The A anthropic is on fire. But one of the co founders said in the very first time they tried to raise money, 22 out of 23 VCs said no. Now almost instantly later everyone put money in. Can you find that moment in time if the markets are so efficient in venture from the bottom end from YC to South Park Commons to HFO if those markets to Project Europe if those have become so efficient in discovery that the only thing left is inception and there are a lot of VCs that have been doing this a long time that think the only thing left is inception investing.

**[52:05] Speaker C:** Right. Because you can't compete with YC and Project Europe and HFO and South Park AR they've all locked up the market. So inceptions and may and maybe there'll be a new fund pre EF that that locks up the pre inception market like we'll go to middle school or grammar school. Yeah that feels like there is truth to that and is there still just can can you find here's my way of thinking about venture this is because this is the only thing otherwise I would return quit right I would retire are can you still find a $10 billion gem outside of the boundaries of this system or not? This is the meta question. If you cannot find a $10 billion gem then this is all a game or fees or writing riding the down the downturn of industry. If it is still possible and your fund or firm that differentiation address between fund and firm can actually still find one of those outside of the boundaries of this system then you can make an insane amount of money.

**[52:58] Speaker C:** But if not it's all performative. It's all little checks. It's all 25k checks into hot YC companies and it's all it's all a lifestyle joke on Twitter. That's the question. Can you and and will this market as it matures and it is goodness gracious matured a lot in the last couple of years will it ruthlessly create discovery for all asset classes to pre to Inception it started it's certainly all down the path to doing that right.

**[53:29] Speaker B:** In in two ways. There's two there's two founders. There's the ones who are young and want YC and then there's the serial entrepreneurs who want money and a good price and people who won't get in your way which is Andreessen, Naveen Rao Data multiple rounds before anything came public. All swallowed by Sekora and Andreessen. So the question just to add your addition is can you find any founders that don't go through either YC or or Sequoia and Andreessen with big money very early behind the scenes because they're in those insider networks. I don't know. I got in trouble last week because I tweeted the worst place to be investing is series A. You either need to be pre seed or pre IPO today to make money.

**[54:11] Speaker C:** There is one segment that will always exist in venture I think for for what it's worth and this when I look back this is where I've done a lot of investments accidentally we used to call it a second seed. You can call it whatever. When there's a glitch in the matrix, when they stumble a bit or when no one sees the reacceleration, it's hard, right? But there are moments in time where someone is the hottest company at yc. It has a couple great months, it reboots and all of a sudden it reaccelerates. 6 months, 12 months down, down, down the road. I just invest in one that but because of anthropic and friends re accelerated 2 years after yc it can happen and that is a niche but it's a narrow. I mean it happens all the time. Right, but it's a narrow one still.

**[54:56] Speaker B:** That's a hard investing ground like recognize I credit you and you're brilliant at it Jason. But doing the glitch in the matrix I see what others don't. That's tough.

**[55:06] Speaker C:** Yeah. Yeah. Owner was a glitch in the matrix when Redpoint didn't see it and I did the seed and then they came in and put every single round. Since there's a lot of glitches in the matrix they happen because the progress is not linear in the early days. Right. But if progress is linear, man, I don't think there's any hope for boutiques and buddies.

**[55:23] Speaker B:** It's not, but it almost is today. And that's kind of the weird thing with AI companies.

**[55:27] Speaker C:** It is almost.

**[55:30] Speaker A:** Comments here. Right.

**[55:34] Speaker A:** A lot of that is true and just to cite some numbers, I think roughly 20 something odd percent of unicorns have gone through Y combinators. 80 haven't. And then is it all going to be done by the good investors? We track this by round I mean typically taking 10 names as being impressive, hard to beat as I'd call them. Where you kind of go if I'm up against markets I might lose. We have a mental list of X hard to beaks and at The A it's 40 50% of total deals. The interesting it climbs steadily and by the c it's about 80%. In other words they let's call it the very hard to beat Mental list. By the time you get to the C, 80% of the time they have one of those names in the cap table. So the market is pretty efficient. Right.

**[56:19] Speaker A:** As yet, as you pointed out, Venture does a stunning job of missing the turn. I mean, if you take the two actually big turns of the last two decades, Salesforce struggled to get a dime from Venture and didn't and Entropic and OpenAI, with the amazing exception of, you know, KV Khosla didn't get Venture either. I mean the first venture round at OpenAI was 23 billion pre with Thrive and the first Venture round at antropic was 4 billion pre with Spark and Menlo. Right. So we're sitting here saying we have structurally solved all our problems. We're amazing. We got all this coverage but in the end, look in the turns out picking matters and it is noseworthy and interesting how many of the dominant companies, because they were unusual, struggled to get venture acceptance. So it's not just a given that if you cover enough ground you get it right.

**[57:17] Speaker A:** So I mean Coinbase, I think Andreessen did either the B or the C union squared the DA very thematically in 2012 and I think Initialized and Y Combinator did the seed. So there is an element of picking here.

**[57:30] Speaker B:** There's only an element of picking. If you believe that company growth is non linear and will continue to be. If you believe that company growth has changed to being linear and signals are clearer than they've ever been, then picking becomes less important.

**[57:42] Speaker A:** Yes. If it's incredibly obvious to everyone and then you rank to be very direct. Yeah, you're right. If it's incredibly obvious to everyone and then you rank order on, for lack of a better word, a beauty contest basis and you're probably going to rank lower than some people who have $15 billion and the guy who invented the house. Oh well, don't you can't that if that's the way to.

**[58:18] Speaker C:** I just look at the.

**[58:19] Speaker B:** I I just look at the best in Europe, which is lovable. 11 labs and lagore. I think you'd probably say it's the three kind of breakouts right now and the growth has been in and it's been entirely linear. There's been no faltering in Execution or growth. And that is different to years gone.

**[58:35] Speaker A:** By By which actually will segue nicely to remember I said there's one other risk here, right? About all these strategies. These threat let's call it the strategies unlike that involve excellent early stage investing as part of your overall strategy. But then a huge number, maybe 4 or 5x that number of dollars going into the growth rounds. The risk index strategy is that even if the execution is good, the pricing bet is still the remaining as yet unresolved question here in the sense of my comment is when everything becomes obvious in terms of market and business opportunity, valuation expands to fill the gap, to fill the vacuum. Put it another way, when it's obvious, people pay up because the only risk left to take is valuation risk. So brutally even though yes, the best firms won the beauty contest, but they win it at the top price.

**[59:30] Speaker A:** You don't get a mega discount. No one's giving a loveable lovable is not saying I'll take 6 billion when I could get 8 billion from someone else. The best firm might win the round, but they pay the market price. So the remaining embedded risk here is in all this sentence is that all these late stage valuations are 20 or 30 times and the growth persists. And if I was to pick the. If you were to pay that, if you do the. What's it, the post mortem three or four years from now, if many of these assumptions would be wrong, right? And I'm not saying it's going to happen. I'm simply saying what would that look like? You said yourself all these growth rates attenuate just a little bit and multiples come down a lot and you're just at a different place. I'm going to pick on in my view one of the best companies out there database.

**[1:00:12] Speaker A:** It's doing four and a half $5 billion, right. It's got a growth rate of 40% plus it's cash flow positive. It's a superb company. It's one of the top four companies out there. What's the current value at 100 billion it's 25ish revenues. If growth slowed to just 20% across the last two decades. 20% growth companies cash deposit trade around 6 times 6 fives are 30 so they grow 26,636.

**[1:00:46] Speaker A:** All the math here is predicated on these kind of valuations. And if the growth stays, I think the valuations stay. If the growth slows down even slightly, then you have a dislocation to the downside. And I think then some of those Strategies could feel a little painful because you're taking this utterly correlated. What I say to people is in the early stage, you're taking uncorrelated business risk, and in the late stage, you're taking 100% correlated valuation risk. And when it goes wrong, it's going to go wrong for all of them.

**[1:01:37] Speaker C:** You want to hear a small, fun example? If you talked about the best ones in Europe are lagora, 11 labs and lovable, right? So I started using 11 labs for real this week. So I built. I. I vibe coded the. My favorite thing today. It's a game for founders. It's called Founderscape AI. Try it.

**[1:01:52] Speaker A:** I I love it.

**[1:01:52] Speaker C:** Like Like 200 hours into this Founderscape, it does everything from picking your accelerator. You can join yc, you have batchmates, you struggle, you build the team, you go public. Okay, it does. It simulates everything fundraising. Let me know if you want 20 VC and scale in it as funds you can raise for. It simulates the whole thing. Like a couple hundred folks have played it. It is kind of addictive. I could tell you why. Okay, so this week I wanted to go to the next level. So your CTO joins you together, and I added 11 labs and your CTO talks to you the whole game, right? Like, you know, the team's struggling. Get your NRR up, do this with your product. And I added 11 labs and it was. It's awesome. Your CTO talks to the whole game. Okay? It's so effing good. It's a.

**[1:02:31] Speaker C:** It's a 99 out of 100 product. And I burned through $30 in credits with just a couple people in three days. Okay? So imagine thousands of people are playing this game.

**[1:02:41] Speaker A:** Okay?

**[1:02:42] Speaker C:** I I don't even. I don't have those resources. So My point is 11 labs ended last year.

**[1:02:46] Speaker A:** They. They.

**[1:02:46] Speaker C:** They They just said it. Mahdi is such a great CEO on so many levels, right? So charismatic. So good. 330 million in revenue from nothing, right? But I. If for my game, if. If I could do something, attempt the price or 50th the price, that was close to as good, I would have to switch. Like, I burned through $30 of credits on 11 labs in 48 hours with 20 players.

**[1:03:19] Speaker B:** Right, Everyone. Everyone watching this. Let's make Jason have a massive 11 labs.

**[1:03:24] Speaker A:** Yes. Yes.

**[1:03:27] Speaker C:** And. And the. And the fees do come down at scale, in all fairness. Right, but my point is, it's both shows why these companies are so explosive. Right. And also why they could be fragile. Like, it is hard to predict. Right.

**[1:03:40] Speaker B:** Jason, Jason, would you invest in 11 labs at $11 billion?

**[1:03:43] Speaker C:** I would. Listen, I mean, if the. I wouldn't. I would not.

**[1:03:47] Speaker B:** You You would not at 11 billion?

**[1:03:49] Speaker A:** They've gone.

**[1:03:49] Speaker B:** They've They've gone to 330.

**[1:03:50] Speaker C:** And And I know. And listen, I'm not a late stage investor. I'm not Andreessen. I don't have the funds. Would I invest in. In the CEO? Absolutely. Absolutely.

**[1:03:59] Speaker B:** If you were at Andreessen, would you invest?

**[1:04:00] Speaker C:** I I would. Marty's the kind of guy, like, I would just want to bet on no matter what. Right. Even if the ship went down, like, I would bet on him. Okay, so if that's all that matters. Going to. If price doesn't matter, if market dynamics don't matter, I'm in. Like, I would have loved to invest in any round just to be on the journey together, but 11 billion I'm not smart enough to take because. Because I already want to substitute out I. In less than one week even. I don't even care, Harry. For the most part. I don't care what my replit bill is. I don't even look. And I spend a lot on replit. But I was already like, maybe I need to find another. Maybe I need to try the cheaper ones in my first week. That's why I would invest at 11 billion.

**[1:04:53] Speaker B:** Jason, I'm pushing you. Is there a 3 to 5x on 11 labs from 11 billion?

**[1:04:59] Speaker C:** Yes. If the whole world uses voice, the way all the VCs talk about it and they can maintain some of their unit economics. Of course there is. Because 11 labs, what people don't get is 11 labs. Let's let you have conversations like we're having with AIs like that. That is a massive accomplishment. And anyone that wants to build an app that lets you talk to a restaurant or talk to a game and it's brilliant. The API is beautiful. I implemented it literally in 90 seconds. It's such an elegant product. You know, if you believe in voice for AI, which at least all VCs do, of course you can make the math work. It's 330 million in one year. So what's 100 times that? A lot, right? We've only scratched the surface. But I do worry, like, I think this will be the year, it'll probably be the back half of the year where we have to take substitution risks seriously in AI.

**[1:05:53] Speaker C:** This is the first time I've done it and we've talked about like we talked about these risks before, but they haven't impacted us as investors. Substitution risks. But there at some point we're not going to want to pay all of these AI fees. I can give you another example on top of each other, right? I'll give you another example. So the other thing I added to founderscape Replit includes free single sign on free login.

**[1:06:13] Speaker A:** It works.

**[1:06:14] Speaker C:** It It works in one click. So does Lovable, so does everybody else. But they all are not as slick as using a native Google product. So I went to buy Clerk. Clerk and Work OS are two of the hot products out there that use it. Like Work OS was out in the desert for years and like blew up this year like there was nobody Sunday because as it just works for Vibe coding especially. And I did the Clerk and it's pretty good. And it's 30 bucks a month. And is that a lot of money for a product that like 100 engineers probably built for a decade? No, but repl, it's only 30 bucks a month. So I was like, should I use the native one? And when Replit launches a product as good as as Cursor or Work os, I'll immediately delete it. I will immediately delete it.

**[1:06:56] Speaker C:** Right. As these platforms expand. So my only point between 11 labs and work OS and SSO and is that and Clerk is that we just haven't had to deal with any like Lagora Harvey. There's no risk we're going to substitute them for a cheaper product or 11 labs or even Claude Code. No risk. Cursor we haven't had to deal with. I think as we go on this year, this is be a stress in the system. We will genuinely Mark Benioff will actually be right. We will rotate out for cost.

**[1:07:25] Speaker A:** I think you will. I mean, I think you see some of that though. It's funny because circling back to 11 labs, we'd looked at another company. Fun stuff. We looked at another company in the kind of voice space five or six years ago because way back in the day we were investors in Nuance in the late 90s, so we'd made money in speech one. Yeah, I know how I like to occasionally remind you of things that were around before you were born. And then you. We looked at that and we did a bunch of reference calls and all their customers, especially the bigger ones that were spending two or three million dollars on this other speech company, were like, and we're going to swap it out. So we didn't do the deal. But you fast forward five or six years, they're all still on the platform.

**[1:08:03] Speaker A:** They never got around to substituting it out, which is, you know, just interesting learning. So the risk is there. And at 2 million spend, I don't think people bothered. The question is at 10 million spend, they probably would. Right. And therefore the question going back to your 11 labs doing your stunning company is so bummed. Wish, you know, I recently did it. I wish we'd seen it. I wish you'd been in it. I like that market a lot because we considered some of the others and they've just killed it. But a couple of things. One is you. I'm just going to try and take on the question in real time. I haven't done any preparation on this. 11 or 12 billion, you want to make a 3x, so you got to be worth 30 billion, right? 30 billion at scale, you're going to trade it six or seven times because that's the way life is, dude.

**[1:08:48] Speaker A:** Get over. Right? So that's 5 billion of revenue. Right. In speech. And that's a lot, you know, I mean, the Office windows Office is. I used to know this 50, 60 billion, but it's a big slug of revenue. Right? And if you think about that, what's been brilliant about 11 labs, that I think gives them a chance to escape. I'm going to call it the gravitational pullback of substitution. Because Jason is right. If that revenue comes from Epic Games putting voice in all their games and they're paying Epic Games half a billion dollars. Epic Games is going to design them out or they're going to grind them on cost or there's going to be a competitor. They have the best product, but it's going to be a competitor. If on the other hand, it comes from literally tens of thousands of people using voice, where no one person is spending more than 20 grand or 30 grand, or even consumers spending 500 bucks, then you have much more ability to build a defensible business.

**[1:09:46] Speaker A:** So to do the deal at 11 billion, and I haven't thought about it until literally on the fly, you have to believe in a very distributed market where there's not just high end people, it's not just the total dollars, but are the total dollars concentrated in a small number of people where you're a white label provider, where you do have some pricing pressure, or lots and lots of people with voice? There might be. It's not crazy to be clear, because they've proven the exciting thing about the $330 billion of revenue. They've already proven large numbers of adopters, not small numbers of super customers. So it's kind of like you're allowed to search something exists if you've proven it already exists by doing it. So basically you got to just believe that that trend continues. So it's not crazy, but it's, it's a lot of annual spend.

**[1:10:34] Speaker A:** You have to believe in, you know, three, five years from now, I don't know, but it's a lot of momentum.

**[1:10:41] Speaker C:** I just think nuance was a While ago, literally 11 labs is the best API. 11 labs is the best. I mean, there's a lot of good ones out there today. It's the best API I've worked with. Okay, without question, the best API. The fact that I could implement 11 labs myself, not a developer, in less than five minutes, maybe even three minutes, says to me me and Repley might be able to add another vendor, even split it, if I could do it in five minutes.

**[1:11:17] Speaker A:** But, but, but, but you, you, you made the interesting assumption that I actually thought you're gonna say the exact opposite because you said how easy it was to adopt. And you're right. If the other product has just the same ease of adoption and quality, then yes, it's easy to swap between them. But maybe you picked 11 labs precisely because it was the only one that had the easy to adopt.

**[1:11:40] Speaker C:** Million in a year. It's the best product, it's great, It May be fragile.

**[1:11:47] Speaker A:** Yeah, what you're saying, and I think it's a good point what you say, when does the best, how far can you get on absolutely the best product and absolutely the most ease of adoption. I mean Stripe would say a pretty long way. I mean they got to 5 billion on that, right? And yeah, I mean that's the question. I worry less going back to your early point on gross margins, the cost to them.

**[1:12:14] Speaker B:** I do want to discuss and Rory, you can bounce when you have to because I know that you've got to run to your off site but it is all over Twitter and I don't want us to move into politics, I want us to stay on startups around this. So I'm going to deliberately point this to our industry. But we've seen obviously the wealth tax being implemented. Brin joins Page in leaving California.

**[1:12:35] Speaker C:** You mean the entrepreneur's tax? Not the wealth tax, the entrepreneurs tax.

**[1:12:38] Speaker B:** So the entrepreneur's tax.

**[1:12:39] Speaker C:** Yes, Yes, just, just, just so we take politics out of it, the entrepreneur's tax.

**[1:12:43] Speaker B:** We've seen Chamath say that now a trillion. I think it was reported 700 billion of 2 trillion now is gone already.

**[1:12:53] Speaker B:** How does this impact very specifically our industry and how significant is this?

**[1:12:59] Speaker A:** Actually, Actually, I actually meant to read the text and I didn't get around to it yesterday, but I would make two comments. One is all wealth taxes underperform what the people project they'll raise because it tends to be very mobile and it's very hard to tax that and people can move. So Norway, France, a bunch of people have introduced them. They invariably unwrap, you unwind them because you get much less than you think. That's the first comment and then the second specific comment where I've read it but I haven't read the core text is one of the weird things about this tax is they estimate your ownership based on your voting control. And what that means is because a lot of these founders have these super voting shares and I would say that's something I didn't agree with 10 years ago and I've changed my mind totally.

**[1:13:50] Speaker A:** I think it's good in the public markets that founders have voting control. They're getting assessed as if they owe more than they do. So instead of being 5% of what they actually have, it's 5% of your voting control. And if you've got 10x votes, that's now 50% of your actual money. So are you going to sit in California if you're worth $2 billion and say to yourself, I'm going to give a billion dollars for the privilege of living here? I don't think so. You're going to leave. So I think it's going to be fairly pernicious to what we're doing here. And look, I think invariably it's unsympathetic, the sight of rich people leaving a state just because they don't want to pay more money at a time if people feel strapped and it's inherently an unsympathetic thing and it's easy if you're the rank and file to say screw those guys, they should pony up.

**[1:14:41] Speaker A:** But I think this isn't a category of dumb ideas who in trying to overreach will end up getting less. And I think especially in taxation, the way you should approach it is not ideological or we'll make them pay, it's much more. How can I cost efficiently milk this cow, right? And I think this is going to be inefficient because I think, you know, the super rich will leave.

**[1:15:02] Speaker C:** I think it's much, much more clever and worse than it looks. It's much worse than it looks because you have to read what's happening. This is a Trojan horse. This is not about a one time 5% wealth tax. The goal of the proponents of this bill, everything that has been behind it, this coalition which has already passed similar propositions in the past, Prop 55 and others, is that this will then transition to an annual tax. Of course it will. You cannot solve an annual health care gap with a one time tax. It sounds good. So first they need to get through the issues here and pass it once. And then the goal is it's 1% or more forever then the goal. It has already been written, this has already been attempted to be passed three times. Then the goal is to lower it in phases to 50 million and 25 million.

**[1:15:49] Speaker C:** Threshold that if you have 25 million of paper wealth based on the last round price of your startup, 50 to 25 million, you will pay a 1% wealth tax. That is the end goal. This is just state stage. One of the ultimate plan. As bad as it is with paid, it's already going to fail. If the only goal was economic, it's not going to work. Right, because we've already had four leading billionaires leave. But the goal is this becomes an Annual wealth tax on 25 to 50 million of paper net worth. And so I say this will end up being leave for the Series B, leave before the Series B. Because if I'm the founder of GC AI or 11 Labs and I'm doing a Series B at 500, I'm going to pay the wealth tax right now. As it's. As the goal it is to implement it, I'm going to pay it.

**[1:16:39] Speaker C:** And you can say, well, Gavin Newsom says it won't happen, or, but, but no, like the voters in California are going to vote all this stuff in. And so what I think happens if, if you just want to know what I think, because I think this is. It's much deeper than it looks. And so it's not just people. People feel bad for billionaires, okay? Very few people actually feel bad for billionaires. The goal is to hit folks with paper wealth of 25 million. And I think if it passes and the next bill gets put up, it will likely pass. I think founders will begin to massively exit in 2027 before the next one goes up, because there's going to be a second if this passes and a third. So this is not a. This is not one and done. This is just the start. It's just the start of what the coalition behind this wants to do.

**[1:17:28] Speaker C:** It's crystal clear. They've already put a bill up three times to lower this to 50 million. One billion is a retrenchment to get it done this year because they couldn't get 50 million passed. A $50 million wealth tax. It's a disaster. If this actually happens, people will finally flee.

**[1:17:42] Speaker A:** Yes, they will. And I think the voters. I'm going to be optimistic here. I think.

**[1:17:49] Speaker A:** I think one or two things happen. Sense prevails and it gets shot down. If that happens, it's already been an own goal because we've lost people who've left California in advance of this. And that's just stupid. The second thing you write, Jason, is it gets passed, then a bunch of people do leave, because then it gets real and you start seeing other people leave. And then the voters face this other choice two years from now when they put up another bill to lower it a lot, which will cause even more people to leave, and they either vote for that or not. And, you know, I don't believe you can. You can't stop stupid. But I actually don't think the voters are stupid. I think the default is. I mean, look, I don't love the California referendum system, but it's crazy propositions. Hang on, hang on.

**[1:18:28] Speaker A:** We do. But it's worth pointing out, most of the time they say no because I think I don't love. The great thing about the referendum system is it's dumb as rocks. So I actually think the default California voter goes in to say no. So my guess is in the. My guess, and maybe I'm being optimistic, my guess is in the end this loses. But you sit back and you go, even trying to do it has had an economic cost because if you have those kind of assets that you're subject to it. Yeah, this is a. This is not an idea that a revenue. It's not even revenue maximizing if you were a revenue. Let's just say you hated rich people. You hated them, but at the same time you also passionately want to fund healthcare and those two things, and you believe both. And you're a rational human being.

**[1:19:15] Speaker A:** When you look at a wealth tax, you say to yourself, if my goal is to fund healthcare, I don't do the wealth tax because it's actually not the rational way to get more money. There are lots of things you can do to tax people at the point of sale, et cetera, et cetera. We can talk about it if you have more time. So you're right, Jason. This is not a rational act by people trying to maximize dollars.

**[1:19:37] Speaker A:** It's a lashy outy thing. I'm very optimistic that voter will defeat it, but it'll still have had a cost and it's kind of dumb. And on that note, I gotta duck out, guys. I gotta go and actually work and figure out how my poor little boutique firm can survive in this harsh and cruel world that we live in.

**[1:19:53] Speaker B:** Okay, you go, dude. I do just want to stay with you on this, this one. Just because you said. There are a couple of things I really want to understand because I don't understand this. I'm sure if it happens, Jason, how likely is this to actually happen?

**[1:20:05] Speaker C:** So strange things have been passed. Strange things have passed and the only thing that stops them from not getting passed is we're all kind of lazy and we all vote no in general. But you whip folks up into a frenzy. It doesn't matter what anyone in the governor or the legislature says. It only needs 50 plus 1. It is direct California. It's, it's, it's wonderful and terrible and crazy. It has a type of direct democracy that the rest of the country doesn't have. So all you need, you can go around everybody get people upset about billionaires, and many people should be upset about billionaires and you just need half and plus one and it passes. And so that is why no matter, it doesn't matter what people say or think, you just need half plus one.

**[1:20:46] Speaker B:** Okay. It happens and it passes.

**[1:20:48] Speaker C:** Yes. Yes.

**[1:20:49] Speaker B:** What happens then?

**[1:20:50] Speaker C:** Well, this is my point and listen, I'm not, as you know, I'm not, I'm not a billionaire and I'm not going to get there. I had a chance, but I won't be a billionaire. And so I don't have the same perspective as Chamathanos. But I do think everyone's mostly missing this point, which is that this is not a one time thing. This is. There is a group of folks behind. I don't want to get political, but there's a group of folks behind it that have been working on this for many years. Of course they have. This doesn't come out of the blue. Right. They've been trying to pass a version of this for five years. They finally figured out this is step one. Let's make it all about the billionaires. Right? This is the easy one. It's easy to bash on the built the rich billionaires when we have a very bifurcated time when the wealthy are getting wealthier and jobs are also going away.

**[1:21:33] Speaker C:** It's an easy one to win. That's why I think Rory's wrong, because everyone feels like the rich are getting, the billionaires are getting. They're all, they were all in Saint Barts over the holidays, but our company's doing layoffs doesn't feel very good. So I'm going to vote to tax those guys. And if it was just one tax, then as bad as it is with Larry and Sergey and Peter Thiel leaving, it was. It would at least be a bounded thing, right? It would be bound to thing. But this is a is, this is a. This is just phase one of the plan. Phase two is it happens every year. Of course it's not going to happen once. This is how you put a bow tie on something to make it look good. It's just once. Of course it's going to happen every year. And the prior versions of this bill and the one they want to keep passing has already lowered it to 50 million and then 25 million net worth.

**[1:22:17] Speaker C:** And it is on illiquid assets based on the last round in venture. So how many deals have you done, Harry, where the last round was at 250 million or more and the founders had material ownership like a lot in the age of AI. Right. And so I do think if this goes as far as the folks that have backing it want, you could have a Detroit in the Silicon Valley. Like when it becomes a meme to do YC or to do South Park Common, but then build, you know, get your money, build your team and then leave. That could be the meme. Like come to Dogpatch, do yc, stay a year, build up your team and then leave.

**[1:23:00] Speaker B:** Who wins from this?

**[1:23:01] Speaker C:** This.

**[1:23:02] Speaker B:** In any loss, there is often a winner. Is there a state where everyone goes which wins?

**[1:23:08] Speaker C:** The answer is the ones that almost won in 2020 and 2021. It's that simple. Because there wasn't enough gravity to get people to go to Miami outside of, you know, some hedge funds and others. And there wasn't enough gravity to go to Austin because it's really not that nice there. But obviously they will win because we already saw it happen.

**[1:23:26] Speaker A:** Right? Right?

**[1:23:26] Speaker C:** It's It's just the yo yo bounced back up when AI came out, right. It wasn't worth it to be in Miami or Austin when AI came back out. Right.

**[1:23:34] Speaker B:** Jason, would you leave?

**[1:23:36] Speaker C:** Well, here, listen, first of all, I'm not starting from scratch, right? So bear in mind, like I think that is an important. You know, it's crazy that to me that Sergey Brinlaught because he's driving AI at Google, based in the Bay Area, right. Larry Page, I get. And Peter Thiel is managing money. I don't know. I, you know, I've thought about it every year since 2020 when it didn't matter for two years where you were. I thought about it. I'm on the edge. The co. I'm not a billionaire, but the cost, the financial cost to me to remain in California is super high. Like what I pay to live here in taxes and others. It's. And it's worth it. But if I had to pay a wealth tax when it goes down to these lower thresholds every year, I would, I would leave it. Of course that doesn't matter.

**[1:24:22] Speaker C:** You could argue. You could. What I. So I thought about it a lot. What I. It would push me over the edge because then every year I'm paying this massive tax on top of 50% tax that I pay in California already, or 40% on long term capital gains. It's the highest taxes in the country already. And then there's a wealth tax on top of or every year I got to pay 1 to 2% of everything. Like one year. It's actually not like, who cares one year. But what if it's 10 years? Like that compounds to a lot. Right? We need Rory to do the math, but that compounds to 15 to 20% of your net worth is going to be gone until it gets increased. So you got to go to Miami or Austin at some point in your career. Right? So I think, so I think I would go.

**[1:25:01] Speaker C:** But, but what I worry more about and, and I wrote this and it already had 500,000 views in a day. I worry that the, that it just makes sense to leave after the series B, you should just leave. And I, I don't. I, and I think YC will get their 7% and, and, and the, the funds will still stay. But you'll just leave. You'll just leave. It's a terrible idea to leave SF in the age of AI, but I don't think it's as bad as going to Monaco or Dubai or weird stuff. Like, I, I don't think that's the best way to build a startup from Dubai or Monaco. I'm, I'm pretty sure that's suboptimal. But we may go back to distributed teams. We did learn how to do it. It's suboptimal. We may not be all rto. We learned a lot of skills that now we're putting on the back burner.

**[1:25:48] Speaker C:** But we know how to do these things. We know how to build distributed teams, we know how to work remotely, we know how to do these things. They're not as good, but if it becomes what we do, we will just adjust. We will adjust. It's not that big a deal in tech. We are not dealing with a meta issue that wealth, the wealth gap's just going to spread in the age of AI. It's going to get vaster and vaster and the social implications. And, you know, we're all, we're really, you know, we're worried about layoffs and AI taking people's jobs. But people are, you know, when these come, you know, when you and I first met Harry, a billion dollars was a good exit. When you and I first met, it was a great exit. Right now, 100 billion doesn't feel like that much, does it?

**[1:26:29] Speaker C:** I mean, it's crazy. But that's also 100 times more wealth for the founders, maybe even more. Maybe even more realistically. Right. And so that is just a gap that we, we're, we kind of hide from And I, I brought it up on the pod. We didn't do it. But when every billionaire was in St. Barts competing with their yachts over the holidays, man, when, when that gets retweeted, it's, it's hard for not everyone to feel like they want to tax the F out of everybody. It's gross. It's. It's gross, right? It's tacky. It's gross.

**[1:26:58] Speaker B:** And when you think about the labor displacement which you spoke about in terms of it really showing up in labor numbers this year, I think you have a real problem. And I think that's probably one of my biggest concerns right now. Especially in the uk you see the disparity of welches between London and everyone else.

**[1:27:13] Speaker C:** It's going to grow.

**[1:27:14] Speaker B:** It's terrifying.

**[1:27:15] Speaker C:** But But it's actually worse than that, I think. And some of this we can't do anything about is that I think even for B2B, grounded in what we do, I think we're going to normalize around a million dollars to $2 million per employee. Okay, that's. I mean replit 200 employees at 300 million in revenue. How many does 11 labs have? We can look it up. It's probably not that many. Right. So as we are able to do startups with a fifth the headcount we used to. That's just. Even in our little ecosystem, it's, it's, it's going to lead to malaise because we just don't need that many people. It's not about displacing or AI replace. We just. When we, when we can get to 1 to 2 million in revenue per it, that's just. We just don't need that many people.

**[1:27:59] Speaker B:** That with the amount of millionaires that are made from Nvidia's market cap today who are employees. And does that not pose a dispersion of wealth because of the expansion of market caps?

**[1:28:08] Speaker C:** It is somewhat dispersed. I forget. We can look it up. How many, how many millionaires they have? 20,000 deca millionaires or something like that? Something like that, yeah. And it has already perverted housing markets in the Bay Area and lots of things. But it's not, it's not happy. Okay. One in three employees in Nvidia is now worth 20 million or more. One in three, okay. 18, 000 folks in Nvidia are worth 25 million or more. I, I'm in Palo Alto now. There are literally zero houses for sale. There's no. Because it's instantly Bought up. Right. There's nothing. Right. And so okay, so on the one hand you can say great, there's 20, 000 more people worth 20 million Nvidia. But the, what it also means is that is, is there's so many types of inflation and there's financial inflation and there's life inflation, the types of education that those folks can afford, the types of housing they can afford.

**[1:29:01] Speaker C:** The way it changes the, you know, the, the, the, the, the wealth at the mall, at the Stanford Mall in Palo Alto is like nothing like just a couple years ago. And that's going to breed a lot of contempt where yeah, if you're one of the folks at Nvidia and you made 20 or 30 million, you're feeling great. If you just got laid off from a SaaS company growing 15%, what are you going to do? Harry? What are you going to do when you got laid off from a previously high flying public SaaS company growing 4%? What are you going to do when. Who's going to hire you? I mean, no, the problem is nobody. And like we, we, we, you know, we, we're, we're, we, we've got to tap into this zeitgeist and this wealth generation. But I think that I, I do think there is a level of social unrest that will, will grow over the coming years.

**[1:29:45] Speaker C:** And it's wor me and I think this bill is part of it and it, and I get why I think people, that's why I think it's only the first one. Because I think each year that goes by people are going to be more and more angry at the AI Deca millionaires and sent to millionaires. They're going to get angrier. They work just as hard. And I got laid off from Zoom and it's been 12 months, I can't find a job. I was a VP. It's not going to feel very good, is it? It's already not feeling good on LinkedIn. Right. I'm already seeing folks as we record this. You know what happens in January. Everyone's saying I've moved on from my company. Company. Those are the folks that got fired. You can see them. I've decided after 27 years at Microsoft, I've decided January 15th is my last day.

**[1:30:26] Speaker C:** No, everyone that, that congratulation on January that you know, they were, they were moved out and it's part of life. But what, what happens when the next job is impossible?

**[1:30:36] Speaker B:** I'm worried on that, on that sunny disposition. Dude, it's always a pleasure. I so appreciate you.