20VC: Will SpaceX IPO at $1.5TRN | Will Cursor Kill Figma | Lightspeed Raises $9BN | OpenAI: $1BN from Disney, New CRO & #1 App in App Store | Oracle and Broadcom Hit: Now the Time to Buy?

Tick, tick, insert $9,000,000,000.

All these leaders not IPO ing is the greatest gift of venture in our lifetimes. It's playing the growth super cycle bet today. That's the winning play.

There is nothing as terrifying as a high growth bet that slows down. This is the epicenter of the enterprise AI revolution right now. You gotta make yourself cool because 30% growth, that's what's cool. What I realized is you have to factor in what I'm now gonna refer to as the EOV, the Elon option value. You can't run the numbers on SpaceX and come up with the 1,500,000,000,000.0.

You just can't.

This is 20 VC with me, Harry Stebbings. It is my favorite show of the week. Jason Lemkin, Rory O'Driscoll, the biggest news in tech, no politics. This week, we discussed Lightspeed's $9,000,000,000 fundraise. Will Elon be able to take SpaceX public at $1,500,000,000,000?

And all the goings on that happened at OpenAI HQ, Disney's $1,000,000,000 investment topping the charts for the App Store this year, and so much more. As always, I want this show to be the best episode you listen to in a week. Let me know what we can do to make it better. Harry at twenty v c dot com. But before we dive into the show today, now most people who get scammed never talk about it.

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Boys, it is great to be back. Jason, you look very smart today. Thank you for joining us from The Beach House.

You're welcome.

Gotta have one. Gotta have one. Me and Rory are in the office, but we're we're we're back. What can

I say?

I'm just I've given up based on your tweet because I'm not in OpenAI or Anthropic, so I've decided to call it call it a day for the rest of the year, I think. Right?

Listen. You're smart, dude. What's the point otherwise? Right?

What's the point? Yeah.

Well, what's the point indeed if you don't have mega funds? Lightspeed raises $9,000,000,000 across six funds, point number one. I did, like, backward maths on it to just understand how that split up. It's about $2,000,000,000 for Venture and for Early is how that equates, then, you know, 7,000,000,000 across other vehicles, mostly growth. So the 9,000,000,000 is a bit misleading.

The question becomes to my tweet, if you're not playing the big game, do you really matter?

Kudos to Lightspeed. Right? They're playing the game on the field, and it's bad for seed VCs. I put bad in air quotes. Right?

Because whether it's two or nine, and you gotta slice these funds up to Harry's point, right, to really understand what's going on. It's not all nine for seed. It really means you don't care what you pay for seed. It just doesn't matter. And you work for speed, and let's do the math.

This is why we have 20 or 30,000,000 pre seed rounds because it just doesn't matter at that scale, does it? You just gotta get into 100,000,000,000 outcome. I'm not I'm not saying it's bad. It just continues to contribute to the side of venture.

Jason, I got to tell you, that's such a funny answer because it's kind of like it's the classic human thing. The world is ending, but what does it mean for me? Yeah, Lifespan weighs $9,000,000,000 but Jason's first comment is, What does it mean for my business? Which is just a good reminder that everything is personal. But thinking about it, to state the obvious, they earned it.

I was just thinking about the last twelve months. If you're evaluating a big multistage manager as an LP in 2025, you probably want to see them do two things. You want to see their early fund have wins eight or nine years in, maybe ten, twelve years in. And in the last two years, they had Rubrik last year and Navan this year. So an early stage deal where they were a Cedar A, go the distance.

And then the second thing you want, because you're not just going to give them half 1,000,000,000 for early stages, you want to see are they picking and concentrating in the late stage deals. And obviously, the last twelve, twenty four months, Lightspeed put, by all accounts, 1,000,000,000 in two rounds of Entropic, and that feels pretty smart right now. So if you zoom out a million miles, they did the two things that a multistage manager has to do. They had great early stage companies that they built over ten or twelve years, and they stuffed a ton of money in the hot late stage deals. Tick, tick, insert $9,000,000,000 So it all makes sense.

If you want to make this bet as an LP, that's the kind of fund you'd be looking at. Those are the success criteria to give someone $9,000,000,000

To raise $9,000,000,000 actually, can make the math barely work on paper with the exits, but you got to be in so many huge ones, Right? You have to have even forgotten Lightspeed was in a few of the IPOs we have. Otherwise, the math doesn't pencil out. But then, you know,

I just released a show on Monday with David George, and Databricks 7x a billion dollar fund for them and Coinbase 5x. That fund is 15x on a billion dollar fund.

Yes. Seats for suckers.

If you're in one of the I think in Coinbase's case, three or four largest exits and in Databricks, what looks like one of the four or five largest upcoming exits, then most math works. Right? I'm shocked to discover that if you buy the largest market cap company on the planet, you probably make money if you buy in early. Right? I mean, it's really provided you execute and get in those deals, it can work.

This is why, though, I'm always so surprised by LP's unwavering appetite for early stage managers in SF between 50 and a $100,000,000 fund size. Because to your point, Jason, what LightsB can pay at seed is completely irrelevant. They don't give a shit. 30, 40, 50, it doesn't matter. It's an entry ticket for them to see the a, the b, the c.

And so I'm just consistently surprised by LP appetite for pure seed play given, to me, the destruction of seed economics by multistage.

I don't I think that's a myth. I don't actually see that appetite. I see that appetite having faded since 2021, and I do not see a resurgence of finding tiny new managers. I don't see it. Yet they wanna find a 20 VC or a NEO or whatever, but I don't think it's easy for merchant managers.

There's no doubt that the prevalence of this kind of money must make it slightly harder at the margin for everyone further down the food chain to make money because you are competing with someone who does have the ability to and the desire to invest a lot of money in the very best companies. If you look at actually, you cited Netskope and Nivan has done an amazing job by Lightspeed. And one of the most interesting things is the aggregate return on one of them I came out with, was only a six, only a six or a 7x, but the real insight was they got $200,000,000 plus to work. That's the game they're playing with their $9,000,000,000 and it's a great game and they do it bloody well. But your point, you're right, Howard.

I do think I can't quantify it and I'm not a seed investor, but there's no doubt that the dynamics of a multistage firm mean that if they choose to, that they can swamp a seed business to some extent and just write it off as marketing.

I totally agree with that and use it as an acquisition to get into the later stage rounds as we've discussed. And and that's where Dragonair raising a $4,300,000,000 venture fund comes in. So there's more than 13,000,000,000 across those two. But have we ever seen late stage as competitive as this?

Competitive is an interesting word. I mean, the better question might be, how do you feel about the capital versus the potential return? And even though there's a lot of capital now, it's competitive, one of the attractive things about now and the reason this money is flowing, there are a lot of amazing late stage companies that look like they're growing very strongly, that are places to put that capital. 2021, it felt like that, but it turned out to be treacherous. And we'll talk about it later.

A lot of those companies, the growth just attenuated and indeed went backwards. So it was a very competitive time in 'twenty one to be in late stage growth capital, and it turned out to be a very dangerous time. It is competitive today, but I suppose one of the blessings of having OpenAI and Entropic in the market is they can soak up $60,000,000,000 of your late stage dollars and just keep on moving. So there are places to put that money. So I don't know if it will be as treacherously competitive today as it was in '21.

We'll see. The wall of money keeps on climbing up.

And maybe it's not directly to the point, but, you know, Rory made this point when we started this pod, and it's become true in spades just not that long later, which is all these leaders not IPO ing is the greatest gift of venture in our lifetimes. The greatest gift of venture capital. The fact that you can flood these top 20 companies with venture capital, keep what maybe it's not venture capital. Right? Maybe it's a fusion of of p but it doesn't matter.

The fact that the VCs are able to keep this for themselves. Of course, Lightspeed should raise 9,000,000,000 because the public markets aren't getting this. And when people used to say that they're getting ripped off, the the the retail investors, I used to scoff because most IPOs don't do well. Right? But this is a super cycle where, you know, growth is the big beneficiary of this super cycle.

It wasn't true of other super cycles, not of the soccer era and others. If you're not playing that game, you're losing to Harry's point. That's the real game. It's not just being an open AI. It's playing the growth super cycle bet today.

That's the winning play.

Totally. There's a combination of reasons for no IPOs, but no doubt one of them was vague consumer protection post 2000. And you're right, the good news is the consumer has been protected from a whole load of bad deals where you can lose 1x your money, And the bad news is they've left the entire compounding of Databricks, of SpaceX, of Entropic, of OpenAI on the table. If SpaceX goes public north of 1,000,000,000,000, if OpenAI goes public at 600 all that value has been taken in the private arena. And you're right, it's been great for, in particular, the late stage firms who've been able to get early stage venture economics on masses of money and looks to all intents and purposes, put it to work fairly profitably.

Yeah. I mean, it's a different time, but if you just compare Tesla and SpaceX just for fun. Right? Tesla had to IPO. Now it was a different time.

It really barely had any revenue, but same guy running them. It IPO ed at 1,700,000,000.0, which seemed very expensive, 1,700,000,000.0. The sister company will IPO at 1,700,000,000,000.0 or 1,000,000,000,000. I mean, that that is that is the difference in time.

It's a thousand x more. You know, it's a stunning difference.

And that all went to VCs or Elon or others. None of that went to the public investors, No.

Yeah. Say what you will about Elon. You're exactly right. Anyone who chose after 2010 could have a 70% compound IRR for fifteen years. Exactly.

That product was not available for the SpaceX and Databricks.

And he chose. It's the same founder, right? Looking at his different situation, right? I'm sure he wouldn't have taken Tesla public if he had done any other choice a long time ago, but he kept SpaceX private.

Which gets to my point. I think the primary reason you go public or stay private is relative cost of capital. He had that difficult private round in Tesla where he had to frankly save the company from some fairly predatory VC behavior, as he at least recounts that I wasn't in the room, but it sounds convincing. At that point, it's like the cost of capital from these guys, the VCs, is too damn high. Let me go public.

And that's worked for him, obviously. And now the cost of capital in the public market feels higher than the private, so everyone's staying here, and we'll see how that plays out.

And speaking of kind of capital ingestion machines, the the biggest of all right now is is OpenAI and ChatGPT. As always, this could be called This Week in OpenAI,

but there was a lot

that happened. ChatGPT most downloaded app in The US. Disney investing a billion dollars into OpenAI, and then Denise Dessa leaves CEO of Slack to join as CRO. I just wanna break them up. The one that I would

ask having to give up, it's Cliff to compete. Wow. That's the flip side of the numbers

you're getting.

Almost one a day. I mean, put Sam has got a busy calendar, doesn't he?

I think we can assume that.

Yeah. Plus all those other companies.

Can we start on

it's true. Can we start on Disney investing a billion dollars into OpenAI?

I think it's one of the least interesting. First of all, a billion is not a here yeah. It's neither here nor there. My understanding is also it's a cross licensing deal. We'll get a billion in equity.

We'll give you money, and we'll get money back from you as license on the characters that we give you. So it's very round trippy. And they're leaning into allowing OpenAI as an image generator to use the Disney content to generate images. The interesting thing is that simultaneously they sent a cease and desist letter to Google for unlicensed use of the content. So I don't think it's a huge thing at all.

I think it's fairly experimental for Disney to say, Okay, we better embrace this new thing. Let's see what happens. We're effectively getting a billion dollars in equity in return for allowing these guys to play with our characters. I thought that was like a, in in the scheme of things interesting, but no op.

I thought it was a little more interesting as a content creator, which is just that we're entering the next age of beyond just ripping everybody's content off. Yep. And so I think what Disney is saying, it's a three year deal. And they're saying, look, in the next era, here's the template. And yeah, we're gonna this is like when they all take all the content creators take stuff offline on YouTube or cable.

Like, it's a negotiation. So here's the deal. The good news is OpenAI is the leading consumer player in the space. You're gonna get the leading IP in the world. You're gonna get Disney.

And here are the economics. And it and now there's a template. Just like there's a template for ESPN or Disney with YouTube. I think so. And Google, you're gonna actually and you may actually have to pay more because usually the first ones that go in get a slightly better deal.

Right? Everyone else is gonna pay worse and we're gonna ratchet up the terms to use our IP. And then in three years, we're gonna raise the rates again. It is an interesting resurgence of the value of IP in the age of AI when the first history was just rip everybody off. And it was great for all of us as consumers, but it may be the revenge of IP.

It would be interesting to see in three years, is existing quote unquote old media IP worked a lot in this new age, and is that what consumers want to use? ChatGPT's or any image generation software company, will it be worth their while licensing that IP? Will there be an economic return on it versus UGC type content? But yes, first of all, does it feel good for Disney? And then secondly, does it yield an economic return for model providers?

Do you get any extra return from having that content?

Disney's a big deal in IP, and I think in three years, no one's going be working because of AI. I know this sounds facetious. We'll be spending all our time at Disneyland because no one's electively working and the jobs are gone. We're gonna watch Disney and live in Disneyland. Right?

I liked what Bob Iger said, even though I'm not sure what it means, which is that creativity is the new productivity. There's no long tail. What we said three weeks ago doesn't matter. Right? It's the it's the constant creativity and creation of top tier assets like 20 VC that matter.

Rory, I I understand you're kind of like, it's not the most interesting. But to our point last week and before on Bannyov talking about kind of the commoditization of models and the ease of switching, with IP lock in, hopefully, I'm sure Sam is thinking like this, this is a core element that would retain consumers in a way that other people aren't thinking about.

The big picture point is that I think makes Benioff wrong in this. It's not a commodity if 800,000,000 people use it and actively go and download it on iOS. I think that is the defensible moat. How much extra? Would it be $880,000,000 if they have Mickey Mouse?

Will it be $8.20? I don't know. Will that 800 stick? But I think the big picture comment, 2025, the most downloaded app on Apple was ChatGPT. And if you look over the last ten years, it's interesting what has been the winner.

It's been two years of TikTok, two years of Timu, one year of Zoom. Guess which year, everybody? You know, 2020, the year you realized you needed Zoom. And then, you know, going back some of the kind of social media apps. Rory, do you think they will

retain the consumer over Gemini as the consumer front end?

My gut would be yes because they're all in on making it happen. And, you know, Google obviously has a lot of other ways to push Gemini, but it would be a very uninformed opinion.

I think to me, listen, that's an interesting, like, horse race question. To me, for now, the more interesting question is that OpenAI's mobile app, its growth has declined because it has to decline because we've run out of humans on planet Earth. So it'll be interesting to see whether it Robinhood's, like how well it becomes a meta app, right? Because Robinhood is on fire even though it's new new customers are only going 8%. OpenEye is gonna have to do that.

That's the whole point of bringing in ahead of apps and all of that, guess. Otherwise, it will inherently stagnate because there's, you know, stagnate around a billion or something or 1,200,000,000. So it'll just be fun to watch whether a mega app works for ChatGPT or not.

I don't know if I buy that.

I I I I think have to buy it because if you look at the numbers, the growth is down to single digits. Like, it's just it is empirically true on any source. The growth is down to single digits. Well, let's

take this thing down. Yeah. What you okay. I buy that sentence. I buy that facts are true.

You know, as senator Moynihan said, we're all entitled to our own opinion, but we all have to have the same facts. So I I'm giving you the facts, Jason. The question is, do they go from roughly 800,000,000? Out of rounding out what you're saying is, do they do what Robinhood did and stay at 800 and just sell them more shit? Or do they do what Meta did and find ways to go to 4,000,000,000 out of 5,000,000,000, pretty much every active human on the planet?

That is a big picture question. I'm not sure everyone on the planet wants to do complex AI lookups.

If you have no ads, it's tough too. They have cheap versions in India and otherwise. I don't know that they'll be as big as Meta in terms of footprint unless they want to go all in on free.

Yes, you're right. The reason I push on the Robinhood thing is I think in financial fintech, actually, in financial in general, the movie is always the same, acquire customers and then cross sell them up the wazoo, which is what Robinhood is doing. The young gambling addicted financial sector, they're going to give him any product he wants, he or she wants. The interesting question, I don't know what the cross sell would be for a consumer. I suppose the only thing you can do is drive up the percentage of the free users that opt for their conversion to the $20 a month plan.

Well, there's shopping and there's ads classic one. Right? And everyone's tried that Instagram for ecommerce ads. I'm not smart enough, but I know that that growth has slowed. There's no debate.

It'll be interesting to watch. And if it you know, there's Google versus Gemini armchair quarterback. And then maybe this is one simple reason Anthropic is better is because it doesn't have the same headwinds of already having 800,000,000 users. Like, consumer gets you there faster, but maybe Anthropic wins the bigger prize because the enterprise and the back end are just they've just gotten going.

I don't think it is the case, to take your point, there is nothing as terrifying as a high growth bet that slows down. Because what happens is you go from being valued on growth to being valued on cash flow, right? And you really would not want that to happen while you're still private. Now, don't think it is. I'm not sounding the alarm on OpenAI, I think that, but the one big risk of the staying private longer bet is that at some point someone is left holding the bag.

And we're seeing a lot of it in the class of 'twenty one. I'm holding the bag on this thing that I paid twenty, thirty times revenues because it was growing at 100%, and now it's growing at 8%. It's five years later and I can barely clear the last round price. And that it would it would be very bad for a lot of folks if OpenAI's growth slowed. There's no indication it has.

User growth maybe has slowed, to your point, Jason, but they appear to be still finding ways to monetize. But if that were to taper off, it would be a world of pain.

What about the cliff vesting ending entirely, emblematic of just the hiring wars that we're seeing? How do you think about that?

And maybe just an explanation for everyone is that typically when startups hire someone, they obviously universally give stock options, And the typical format is four year vesting, but with a one year cliff. In other words, if you leave within the first twelve months, you get nothing. And at the end of the twelfth month, you catch up on a full year's vesting, and then you vest ratably over the remaining three years. And the idea is you hire people, you go through, there's a lot of change, they leave, they don't work out early on. Do you really want to accumulate a whole lot of extra shareholders for three months vesting?

And when three months vesting was worth $10,000 you could see that. But clearly what's happened here is market pressure has said to them, hires are saying, I don't want to be here eleven months. Have you whacked me? And maybe at the current rate, I'm investing on 2 or $3,000,000. I want to know I'm going to get that.

So I think it is a sign of the times, a sign of the extraordinary sums of money you're dealing with, where even an individual contributor coming in says, $11.48, just under 25% of my total vesting package is real money. If I'm getting $10,000,000 over four years, it's $2,000,000 if it's slightly less than twelve months. And people will probably say for $2,000,000, I'm going to push back on vesting. And they've clearly decided to give.

It is. The one thing that it took me just to cap an obvious beat to get is it obviously makes leaving easier. Right? It it makes leaving because if you're leaving somewhere, you've hit your cliff. And so on the one hand, it it seems like a dumb idea, like you're creating mercenaries and perhaps you are.

But in the age in in you're asking someone that's eighteen months into somebody else to leave and wait twelve months to make a dollar, that can be a tough sell in an age of plenty, right? So, they probably also had to make so many exceptions, it stops mattering.

You're exactly right. I'm sure they had a gazillion exceptions, and at some point, the VP of HR said, guys, I I just can't be dealing with this. Let's just accept this is the market today.

Listen. Oracle, oh my god. Oracle shares plunged 15% on Friday, disappointing earnings. They've plunged 45% from September highs, 14 down in a week. They've spent 12,000,000,000 in quarterly CapEx, higher than the 8.2 that was expected.

Bulk

of it

is going to data centers dedicated to Open AI. Guys, this is above my pay grade. What's going on?

Okay. One of the reasons I like to admit I'm wrong is because it then allows me to do I told you so when I'm right. Play the tape back. I mean, I know what I got wrong this year in our conversations. This one at the time when they had that 30% pop, it was absurd, and it's just been unwound.

And the pop was because, Oh my God, you signed all this revenue, and everyone gets really excited about the RPO. That was like forty, maybe fifty, I don't know, sixty, ninety days ago, probably last quarter's announcement. And now everyone's like, Oh my God, to meet this revenue obligation, you're going to have to incur a whole lot of expenses. Well, shock horror, you just opted to enter a very capital intensive, physical data center building business to service one or two super large customers, principally OpenAI. It's a tough business, and now I think people are internalizing that.

The stock probably is now below where it was. In fact, I know it is. It's about, I think, 15% below it was just before they announced all the good news. To me, it was fun to I'm actually my real sentiment here was I knew it and I should have done those shorts. I should have bought those puts.

In retrospect, ninety days ago, we were right. It's a sugar high, a total sugar high on a huge contract that with someone who may or may not be able to afford to pay for it, that's OpenAI. And even if they can afford to pay for it, it's not a great business because it's capital intensive and not nearly as good as your existing free cash flow positive business.

So you'd say that it's returned to a normal, it's not going to rebound from here?

No. That's not what I think.

No. Oh, you do. Go for it.

I think it sounds odd, but let's let's bring Oracle and CoreWeave in together. I think they are very interesting. And if you look at the leaders, they're the weak guys. Okay? They they don't really own anything themselves.

They're at high risk of margin compression. So the market's gonna have jitters between now and an even bigger AI future. We've talked about it. It's gonna have ups and downs. It's gonna have bumps.

And it makes sense. Oracle down 46% since September. Right? CoreWeave down 60% from its high in July. It makes sense those should be have the story.

They should see the biggest impact from bumps. And there's no reason actually Listen, I'm not saying that that these are even the best companies we've ever had, but there's no reason I don't think they will rebound as the overall trends. I think these are just jitters. The overall trend, I think, still we're still anti gravity here.

And that's the key question. First of I wouldn't do a nigga shot. I'd a putt, but yes, which is the coward's way out. But you're right. I mean, you're exactly right.

These companies become the high octane bet on AI. If you think it's going to go up, you buy Google, you get 20% appreciation. But if you buy Coreweave, you're right, you could get a double. So they are the highly amplified bet because they are the marginal provider of the commodity, and they have no other business to diversify their network.

Yeah, no IP. Oracle has others, but they have no IP here.

I agree with your characterization. So I suppose, to take your point, Jason, if you think the CapEx cycle has two more years of strong legs, then you could see these guys rebound. If you think we may have found an equilibrium, but there's not much more increase up from here in order to marginal investment rates going to go down from here, then you're right, then you would be scared of owning them. That's exactly it. It's an easy way to figure out what's going on at the margin in the AI space and at the margins where the money's made.

This is my question. Is this like a micro market hiccup, small undulation that we pass over, or is it a canary in the coal mine that's foreshadowing something much bigger to come next year?

It doesn't have to be something bigger to come. It just I mean, I always think the markets, they're all it's like this person always interrogating you for truth. The markets are always trying to find out what's true, what's true, should you really be spending this money? You could argue right now the market six months ago was saying everyone should be spending money on AI and that's great. Now the market is saying, Gemini, Google, you keep going, you got a plan.

Microsoft like to see more of a plan, but yeah, you got this thing. OpenAI, we're good for it. We'll give you $40,000,000,000 Facebook not so love and then CoreWeave and Oracle, you guys, it's not clear to me why you're doing it. So it's doing a good job of kind of filtering through from the overall megatrend, which is amazing, to which of the guys have a good plan in this space and which of the guys do not. So there is a world, to answer your question, Harry, where what happens next year is Google still continues to invest in more CapEx than before, which increases overall demand, but some of these marginal players maybe can't be as aggressive as they've been.

Neither the end of the world nor a rebound is a totally plausible scenario.

That's why me and Jason have bigger social media brands than you, my friend, because we're great at binary statements. You're like the third ocean.

In the middle. In the middle. You're so right. The world is full of in the middle, and no one wants to hear it. By the way, that might explain a lot of our problems in the wider society with social media, but we'll come back to that another time.

Broadcom was another one. Lost 300,000,000,000 in market cap in forty eight hours. Investors being concerned a 21,000,000,000 order from Anthropic will drag down the margins, higher costs in the chips business. Is this a reasonable concern? An order from Anthropic seems like a fairly securitized asset to back.

Is this a reasonable concern? And a $300,000,000,000 loss in market cap seems like a an exaggeration.

I don't think it's unreasonable in the following sense. It's that one, Broadcom's an amazing story. Just an amazing story. You look at what a guy's achieved over the last ten years. It's stunning.

Its current market cap, plus or minus 1,600,000,000,000.0. As a reminder, the first trillion dollar market cap company was Apple in 2018 and now Broadcom, a company 90% of people couldn't even name or tell what it does, has a 1,600,000,000,000.0 market cap even after this correction. And I think it's trading at high teens in terms of revenue sales multiple. So it's not like it's cheap. It totally makes sense that the Anthropic order it's actually it's similar to the OpenAI Oracle discussion.

Why is Anthropic buying chips from Broadcom? Answer, They don't want to pay 75% gross margins to NVIDIA. So it totally makes sense, and so they designed this other chip and they say, Hey, dude, I'll buy this chip from you, but I'm not going give you quite as much money as I'm giving NVIDIA because if I'm going to pay full retail, I might as well go buy the designer brand. The whole point is this is meant to be Kohl's here, dude. You're meant to get lower gross margin.

So it just makes sense that it's a really good business. They'll make good coin at it, but it's not going to have quite the same margins and defensibility that you'd expect NVIDIA to have where they're imposing their architecture on their customers. Broadcom is being kind of a made to order business. They're saying, Mr. Customer, Mr.

Entropic, tell me what kind of chip you want and we'll make it, we'll design it, etc. But it's not the same as marketing a branded product like the Nvidia Blackwell or whatever it is. I think again, it's the same thing. The markets just got a little bit of ahead of themselves. When you type in the revenue number, you get all excited.

When you type in the EPS number, you get a little less excited and it's just this process of discovery. It's just stunning that you can drop 300,000,000,000 in a single day and still be worth 1,600,000,000.0. Let me tell you what a real crash is like. When you're still trading at high teens sales multiple, it's not like everything went cheap, Harry. It's just slightly less expensive.

It is interesting you lose so much over guiding a 100 basis points lower.

Yeah.

What's really interesting, and I'm not smart enough to fully predict this, who gets a pass on gross margins and who doesn't? If you're a Broadcom or someone, you're not getting any pass, even though you're getting massive AI spend, we're very worried. All we care about is we're worried you're gonna lose insane profitability in the semiconductor industry due to AI. Oracle got this great pass until it didn't. CoreWave gets apparently an entire pass.

OpenAI does meta dozen. I can't keep up with whom who gets the gross margin pass. All I know is we learned in Palantir some folks deserve the pass, and then we're gonna find out some don't deserve a gross margin pass. I don't know.

Roy, you you said it's it's it's not a crash, and it can get much worse, and it can go much lower. Markets are at the same p peaks as 02/2021. Apollo predicted zero public equity returns in the coming years. How did you read that, Roy?

Sure. I think you have to be very precise about what Apollo said. They said the predicted ten year return is zero. And this is a piece of work that's fairly well understood, and it's actually a very important piece. It's probably one of the things I look at most.

Vanguard send to you, they're really good about that. They basically show a correlation between entry PE and subsequent ten year return, and they show three graphs. They show your one year return, there's little or no correlation. In other words, when you buy at a high price, it can still go higher. The correlation gets stronger for five years and is strongest at ten.

In other words, if you buy at a high price, I can't tell you how you'll do next year. Maybe the stocks will keep going up and you'll feel smart. But what I can tell you for sure is the probability of making money over ten years is very correlated to your entry price. And that's the graph that Apollo showed because what they're doing, and it's what all the sensible investment houses and asset managers do, they don't make one year predictions because you can look like an idiot. And it's hard to know.

I mean, it's not just that you look like an idiot, it's actually empirically hard to know. But you can say with a high level of certainty that if you buy at a PE that's 50%, 60%, 70% higher than the long term average, your forecast return would be significantly lower. Going back to 'ninety nine, 2000, you see the same thing. You could have said things were expensive in 'ninety six, and Greenspan said they were expensive. That's when he gave his irrational exuberance, but shit kept going up for three more years.

You can't predict the short term. But what was true is by the time you were piling in in '99, it took ten years for the overall stock market to get back. So you did go zero for ten years. And even more impressively, and this is a really amazing fact, Cisco, the darling of 'ninety nine, just got back this week to its 'ninety nine stock price. So in other words, if you buy the hyper expensive company at just the wrong time, it takes twenty five years to earn it back.

That's a compelling statistic. And I think it speaks to the same thing as the Apollo comment. Now, the interesting thing is what do you do with that information? I know over the next ten years you're screwed, but it might go up next year. Do you stay in?

Do you go out and risk having a 96 moment where you leave three more years? I think you actually end up just you look at your overall asset allocation, but I don't think you go binary on it because you do have that thing of it's not predictive in the short term, but it is a warning sign. There's a reason that nice Mr. Buffett has piled up $300,000,000,000 in cash because he reads these data too, and he understands them better than most. The meta point to make that goes back to our business, because we're not public market investors, is when you look at all these private valuations that look attractive relative to the public, and they do, you have to say to yourself, they look attractive relative to a public market that it's all time high.

And a more normalized public market might well leave some of these private valuations somewhat high and dry. Now growth might save you. In a nice story, if the Apollo graph is correct, you and just get zero return for the next ten years, and that's not traumatic. That's not the way life and markets work. What tends to happen is at one point in the next two or three years, things drop 30%, and then you crawl back slowly over the rest of the decade.

If that happens, then some of these private valuations that are comped off that could feel lofty.

We mentioned Broadcom's dip on the back of many respects, but one of them being Anthropic. Anthropic announced they're launching an AI coding tool for designers. Jason, I'm super intrigued to hear your thoughts on this. So it's a UI inside the cursor browser, lets you tweak web apps, drag and drop, CSS. It's really the first move kind of up the stack, so to speak, for them.

Jason, is this the first credible threat to Figma's position where design decisions start?

You mean you well, you mean Cursor doing it. Right? Not Anthropic. Yeah. Right?

Sorry. Cursor.

Well, maybe. I think all of us need to be hyperaware of in '26 and '27 is massive convergence of categories. It's not just the old days of seven years later Datadog would decide to compete with PagerDuty, which certainly hurt them. That's that's how we grew up. Like, a couple years would go by, you know, all of a sudden now, you know, Brex is competing with its partners rather than partnering.

So he needs to get back to product full time because in 2026, 2020 says there will be no such thing as marketing software that got Klaviyo public. Marketing sales support have already converged to one agent. So it's already happening there. It's actually surprising it's taking a full twelve months to happen in coding. It's a lot of time because if you've built any apps like I have, the disconnect between design and the output, it's the most jarring thing when you get good at something.

When you get a good at replic like I am or cursor or whatever, it's you can build such cool stuff and you're like, man, the design, all looks like frigging clot artifacts. They'd all look like clot. Like I can find a vibe coded site and like 30% of the last YC class looked vibe coded to me. I could see the clot artifacts all over their page. So it kind of breaks your heart.

So the fact that it honestly took this long as a surprise. So should Cursor own that or Figma should own that or someone new, they're all gonna converge. You shouldn't have different tools for design prototyping and production. The agents are just too good. And to put differently, what I've learned is we all wanna talk to the same agent, designers, product people, engineers, DevOps.

In an ideal world, there's this meta agent where we all collaborate and work together as one company, not us all being on 11 different AIs. There's a lot of fracturing in AI. I don't know who will win. And it's probably mean to say Figma feels behind, but it is how it feels as we record. Figma is tiptoeing into vibe coding, just like Canva and others, and there is some disruption risk that the tiptoe is too slow.

I think that's awesome, Jason. That insight on the I mean, because I want to do the coding Figma thing, but also the bigger comment on wanting the single agent for everything. And that's just a huge insight because it's only become obvious to me in the last few months as I've been talking to companies, no matter how hard you try, you try and translate your prior experience into this. You have a sales SaaS company, so now you have an AI SaaS company. You have a SaaS marketing company, so now is there an AI marketing company?

And I think you're right. On a lot of these processes, the reason you have these separate siloed companies is the humans were siloed. There was a salesperson and a marketing person. But if the AI is doing everything, let's just take the customer journey. You can have a single AI agent within your company dealing with your customers as you're prospecting them, as you're selling them, as your customer supporting them after they onboard.

I've seen some companies doing that, and I'm like, Wow, that's a powerful idea. Because if you think about it, one of the shittiest things about dealing with any company is you start off with sales and you build this rapport, and they seem to know exactly what you want. And then you just get transitioned to a totally different person and you start again. And it's like you as the customer are being put through that.

It's not okay in the age of AI.

And I got to tell you, really, I'm thinking of a couple of deals I sold within the last week where what you expressed is suddenly going, You're exactly right. The single view of the customer on the customer side. So I just think that's a really powerful 2026 theme. I don't even know what it means in terms of what kind of apps are built. And I'm thinking of sales and marketing at this point, and we'll come to Figma and Curse in a second, but I just want to say you nailed it there.

Roy, can I ask you, how does that shape your thoughts when you look at investing in support tools as you have done in the past?

I think all these companies are going to expand their footprint. I think going back to the thing, the good news is there's a huge return on ROI on AI, and I do believe there is. And the bad news is I think to grab that return over time, you're going to have to be more expansive and aggressive, and you're going to be going into adjacencies much more so than in the past. It's only obvious to me now that I've started to think about it is that if you were selling software to automate work, then you probably sold to each department that did that work. But if you're selling AI software to automate an outcome, just sell to the customer who wants the outcome, and they'll be like, Yeah, I'll take all that.

So I think we have an investment in customers, we have a number of investments in AI, SalesStack. I just think over the next one to three years, there's going to be mass convergence. Just like to jump back to Jason's example, in the same way, the old line is in any company that you're either selling stuff or making stuff. Well, we just talked about the selling stuff people, but then Jason was talking about the making stuff people. The making stuff people between design and production.

I think what he's saying there too is you could argue that instead of having a separate design function and a coding function, I think what you're saying is does that all come together over time? Is that right, Jason?

I think we're gonna have designers. I don't think we're gonna have multiple platforms. It's better if they're the same. It's so much faster, so much more efficient. I've invested in a small startup called Ally App that sort of bridges it.

It lets you vibe code your existing product and change it. And there I mean, it's early. There's already insane demand, but that's just the first step. Everyone loves Figma. Every designer I mean, I'm sure some some are grouchy, but I think I think it's up there with Klaviyo.

Yes. Everyone in ecommerce, their favorite app is Klaviyo because it just gets you more customers. Klaviyo's brought in a co CEO because their whole business model has changed. It's gonna be there in software in a year. It just doesn't make sense to have to wait days for designs to change.

And then they only sort of work in my code base. And then I've got to integrate it. All these guys added a design mode with, you know, with Google three pro or whatever it is, they all added a design mode. It's like pretty good, but it's still recycled stuff, but you could see a hint of it where now you can make a somewhat beautiful website while you vibe code. 2026 is gonna be at 50 x better.

Jason, you're you're so well informed on this. If we take that view then of the kind of collapsing of it all into one platform and one location, if that is the outcome, if I press you on saying who the winner of that will be then, who will that be? Will that be a cursor? Will that be a claw code? Will that be a Figma?

Honestly, and I know this sounds captain obvious, I honestly think it's gonna be who wants it the most. You almost have to work so hard. You have to twelve twelve nine. As hard as we're working at Cursor, and it's been great, we might have to work even harder. But maybe Figma works even harder.

I know this sounds silly, but everyone can copy each other in weeks now, not in months or years or quarters. It's who really, really wills it into existence. I don't think we can sit back as VCs and just even with our king great king making checkbooks, I don't think we can fully control the outcome. I think the ones that work that produce 10 times more output are honestly the ones that are gonna win the leaders. I don't think we can predict.

It's easy to bet in favor of Cursor over Figma because Figma took what? A decade to get to a billion? And Cursor took, you know, a year? So if we're momentum better bet bettors, we have to bet Cursor. Right?

Even though there's reasons to bet against it. Right? They don't they're not designers. They don't have the base. They don't have the customers.

But if I had to pick, I would bet on that that that rapidity today.

Is this the interim step to Carson moving down further or up, whichever way you wanna take it, into consumers and into Lovable and Rapplet Zone?

It could be. I think the only reason Cursor didn't build Rapplet or Lovable is it wasn't worth their time because they're in an even bigger, better market for the moment. Agreed. I honestly think it was just a distraction. As big as that market is is is exciting that those guys together will go to almost 500,000,000 in a year, Cursor got there in nine months.

So you you're taking your eye off the ball to invest in a high churn, frictional space when they probably have 160% effective NRR at a revenue level because nobody leaves cursor. Right? Why would you invest in a smaller high churn space when you have insane retention and you're growing even faster? It's just you'd have to and you want to have a team of triple digit number of employees.

And just intrinsically, budget for software teams, building professional enterprise grade software is just logically larger than for demo apps or prosumer apps. So maybe there's more individual users of a Lovable, or a Replis kind of in the middle. But the reality is you're accessing the big dollar spend of every software company and every enterprise company when you cursor. I don't think that the Figma market and the cursor market fully converge. The equivalent now of a Figma design is in fact someone using Replica Lovable to do a direct mockup, an interactive mockup versus just a design mockup.

But clearly between them all, there's this kind of smooshing together, and that's just really significant because what were separate markets, they're all going to be competing with each other because the prize is just so big. I thought, Jason, you did a nice blog post. I don't know if you did it or your AI machine did it, but making the point that citing the Mendlow work, which is really nice, that 50%, 60% of all the end users spend on AI right now is coding and coding related. This is the big kahuna. Everything else, even customer support, all the other stuff is everything else to a rounding error is 45%.

Software and coding related stuff is 55% of all enterprise end user spend. This is the epicenter of the enterprise AI revolution right now.

55% of AI spend is in coding. What will it be in three years?

You hope the other categories are just behind in a sense, but maybe it's intrinsic to the extreme value in a very large category of software.

Yeah, don't know, but how about this answer? I don't know the answer to that question. I can give you a quick answer to an adjacent question, which is fun, is that the total spend is 15,000,000,000 or $16,000,000,000 on apps and another $15,000,000,000 plus or minus on enterprise infrastructure, which I don't fully understand what the category is, but leave that by the buy. So the big again is end users in the enterprises are spending about, fundamental data, dollars 15,000,000,000, dollars 16,000,000,000 on AI, and the people who make AI are spending $400,000,000,000 on making AI. If that $16,000,000,000 3x or 4x last year, it's got to 3x or 4x a bunch more times before it can cover the nut on the CapEx spend.

To me, that's the most important. I'm less clear on what the mix will be, but somehow enterprises have to find not 15,000,000,000, but 150,000,000,000 of budget. Otherwise, the people investing 150,000,000,000 in CapEx are going to have a sad day when their CapEx is greater than the revenue line. So I think the overall growth is the key question.

Could I just go back to one point on Cursor versus Figma? Because I do think it's so important to founders and investors and exec I think one risk is that Cursor completely displaced Figma. We don't need it. Let let that's unlikely for a a lot

of reasons.

I think the bigger risk for so many vendors is that it maims Figma.

What does that mean,

Jason? Not the old customers don't leave. Okay? HubSpot and Box and and even Anthropic using it, they don't leave. They renew.

They don't buy as many seats, right, because the team is also using Cursor. But of course they don't churn. The logo retention remains good, but NRR drifts down and new customers, the next generation, the kids from YC, they defer that purchase because they're doing enough in Cursor. And I'm seeing this across my older portfolio that folks are maimed. Like, the existing retention's good, but the new guys are just taking enough of the new budget that your growth materially decreases.

I think this is a risk for almost every everyone that's established is you just get maimed. You don't get killed. You get maimed. And Cursor could easily maim this market. It's so big.

I think of the holy grail movie where it's just a flesh wound. Sorry. Monday. It's a deep one, though. It's the

one that never quite heals. And you sit in the board meeting, and you're like, well, we we had 15,000 customers last quarter, Rory. Now we have 15,200. Hooray. Kudos.

No no growth is miserable. Agreed.

But it's this maiming that I think people aren't a lot of founders aren't being honest about how they're being maimed by AI leaders. They're being maimed. They're not being, they're crushed is the narrative we talk about.

Jason, who else is being maimed?

Well, I mean, Atlassian is slowing down, right? GitLab is arguably being maimed. I mean, many public companies are being maimed. You've gotta be Datadog and have so many leading products in market almost not to be maimed. It looked like Mongo was being maimed until they fought until they fought back.

Right? It really looked like they're being maimed by all the new Postgres and other competitors. They're back. Although maybe they're maimed in the sense they should be growing faster given the growth of AI. Like, Mongo should be this great Broadcom like AI beneficiary, and and they are, but they're not they're they have so many competitors now.

There's so many supabases and others that are taking pockets of market share away from them that that you might not even see some of them aiming. Right? Maybe Mongo should be growing 50%. Why shouldn't it be? It was the leading platform, and the explosion of that we're building today is unprecedented.

Why isn't Mongo growing 50%?

The way you see it is you see those CIO surveys where they rank their priorities. And what happens is, you know, as AI has gone up the zeitgeist, it's gone up the priority list, just something that was number three goes to number six, and then it doesn't get funded. That's part of the SaaS slowdown that we've seen across the board in the public companies. You're not selling the new, new thing. So I'm kind of with you, Jason.

And even at the infrastructure level of the GitHub and things like that, you have to co attach to where the budget is. And if you're selling infrastructure, but you're selling it to the people who aren't doing AI, then you're going to be dealing with a slow growth secular story. If you're selling that infrastructure to Atropic and OpenAI and the JPMorgan AI initiative, you're probably gonna, you're not gonna be an AI company, but you're gonna have some of that growth rate.

I mean, maybe the most name that I can think of, it may not be fair is UiPath. Like we can say, Hey, Ui, until Daniel came back, we missed the AI wave, but it's not that simple. UI path is not hemorrhaging customers. It's back to 16% growth. Stock's up 27% this year, go Daniel, right?

It just got maimed because RPA in part got replaced with agents and AI. It got maimed. It got maimed.

Yes. You would just do I think that's a great example, genuinely, Jason, because I think you are it's kind of one of those moments where you do it in a different way if you were starting now to automate, and you'd start with an agent. You just wouldn't start by doing the thing that they do.

What do you do if you're Daniel? Daniel is one of my closest friends. What do you do if you're him?

Well, he has stabilized the ship. Growth has come back a bit. He basically checked out like a lot of folks did when times were easy, when products didn't change. He called it a day. And then how long did that last?

Eight months till they had to kick out the CEO he brought in? It wasn't even, it didn't even make it to a year.

I think what you have to do is say to yourself, there's a way you do automations in 2025. They were gigantic. UiPath's automations were very deterministic and brittle. You do exactly these three steps in exactly this order, then it works, and you can automate away humans. Now you can have a 10 step automation where you have some decisions.

The good news is there's a bunch of companies from Y Combinator on that are doing this kind of stuff, and you should buy or build enough to just take the pain and insert yourself into relevance. And I'm sure he's on it. I mean, this is a very smart man who knows what it has to take, but it's just, as we've discussed before, the hard thing isn't intellectually knowing what you have to do. The hard thing is just driving it through an organization who will invariably say, Our stuff already does that. I mean, we've looked at a lot of the companies that are the next generation companies, and you do the research and you do the reference calls, and the UiPath team will say they have something like this.

And they do, but in the eyes of the customer, it's not perceived as the new thing. You've got to change that perception. It just requires a supreme act of CEO will. I didn't like the founder mode cliche, but I've come to the conclusion it's what you're dealing with here. You just got to say we are refounding the company in the age of AI.

We are not gonna lose any of these AI first deals, and we're gonna make it happen.

You know, in a way, though, I agree with all that. I think, Daniel, as hard a job it is, he has an easier job than some. Because let me just step back to the numbers. Here's what I would do. Come 1,800,000,000.0 in ARR, but he's got 98% GRR and a 107% NRR.

Okay? So mathematically, one problem is his NRR has fallen from the 140% peak at the IPO because people aren't buying that much more for you, I bet. But he's got 98% GRR, 98% retention. He has enough time as one of the greatest b two b founders out there to build the agentic products that $2,000,000,000 of his customers wanna buy and aren't leaving. It's the same opportunity Mark Benioff has.

Now I think I would argue Mark with his megaphone is actually like an Aaron Levy is doing a better job publicly of bridging the gap, but they have the same job. We have extremely high revenue retention. People aren't leaving. No matter what anybody says, we're in the first inning for AIB2B. I can tell you why.

We're in the inning. It's brutal, but you have time. You've got six, twelve, eighteen, twenty four months to roll out high ROI agentic products, and you just gotta get enough of your $2,000,000,000 base to buy them, and you're back to 30% growth. He goes from $1.00 7 NRR to a 100 you know, Databricks has a 150% NRR at 5,000,000,000 ARR. I mean, I know it's easy to say, but that's the job.

Make those happy customers buy more of your organic product, and it doesn't have to be all of them tomorrow. It has to be more of them each each quarter, and you're back in the game.

Isn't it as simple as,

like, the Alex Rampell quote, which I love, which is, you know, can the incumbent acquire innovation before the startup acquires distribution? Exactly this point.

Yes. But you don't have infinite time, but I think everyone has time with 98% GRR in 2026, 2027. You don't have infinite time. Get rid of the CEO you brought in so you could relax. Like, go into Sergey Brin mode, but you do have time.

The game is not over.

To take that quote, I think it's a good quote, and to some extent, is quote that simple, but actually, I'm going to find myself surprisingly agreeing again with Jason on the human factor. The hard part of doing it is, can Big Co acquire innovation faster than New Co can acquire distribution? Let's take that as a construct. That's actually not the issue because they can acquire innovation if they can push it through and if a technical fund. The really hard part is there's going to be about two or three years where you're lifting the growth rate from 9% to 11 and the stock doesn't give a shit, and then 11% to 13% and the stock gives a shit, and then you're at 50%, and then the activists whine.

Because the problem is, we talked about this with Salesforce, the physics. If I have a zero revenue company and I can go to $100,000,000 that looks amazing. If I have a $2,000,000,000 revenue company and I sell them $200,000,000 of the new thing, I'm twice as big as this little sexy startup, but I've only got a 10% growth, so I'm valued at five times revenue. You've got to push that Sisyphean rock up the hill for four or five years, keep everyone motivated, and just accept that it's a grind. And that actually is the hard part, that's why I admire the CEOs.

I admire Benioff for turning up and keep doing it. I admire Dines. I admire Aaron enormously for that. They're just saying we're not gonna roll over and die because we can be relevant, and we're just gonna do what it takes. But the point I'm trying to make more then is there's not a moment of, oh, I've invented the magic thing.

We're cool too. No. The market will say, no. You're not cool. You're a $2,000,000,000 boring old company.

You gotta make yourself cool 30% growth, that's what's cool. And it's just that journey.

30% growth, that's what's cool. I love it. Daniel is also one of the biggest warrior CEOs. You know, Hoh Nam's cockroach founder. Just relent I mean, that Daniel is extraordinary.

The man survived on a dollar a day in Romania for years. I mean

You mean he was on the charts? I'm sorry. That's a a Romanian pre '89 joke.

Yeah. A pre '89 joke. Listen. You said about co attaching to budget and to AI budget. There are two that you could pick on for that from this week.

Boom Supersonic, the plane builder that gets an order from Crusoe and is raising 300,000,000 in the back of this to fund it and to open up this new line of business or Harness, which raised 240,000,000 at 5 and a half billion to automate AI's after code gap. Which one do you wanna take? Because both of them are

Harry, anyone who chooses between a supersonic plane and software infrastructure provider and chooses anyone other than option A has no soul. Of course, you got to talk about the supersonic plane. For God's sake, man, this is not even a choice. So just for context for everyone, Yaboo is just an awesome company. They are building a supersonic airplane from scratch, and they're designing both the plane and the engines.

This is a hard, hard, hard task. Even for existing plane manufacturers, typically Boeing builds planes, GE or Rolls Royce builds engines. So they're taking on the full enchilada. I love it. It's a Y Combinator company.

They got a prototype out for with less than 100 headcount. So everything in your heart wants that to work. A, because it would be great to have supersonic flight other than from Concorde and B, just because it's just an awesome entrepreneurial story. So when I saw this, I will admit, I was like, But then you do a little research, and I'd forgotten this, but Rolls Royce, it's not as crazy as it looks because what Boone said, they're also going to sell their engines to data centers for generation. And when you say it like that, it's like, you were making planes and now you're selling turbines.

But in fact, all the airline engine manufacturers, GE in The United States and Rolls Royce in Derby in The UK, I used to run a manufacturing company near there, they all do the same thing because it turns out the bulk of what it takes to build an airplane engine other than the last bit of propulsion is very similar to what it takes to build a generator. So it's not crazy at all. My guess is, this is Jason Kaptanovi's, it's a lot easier to take an engine and plop it on the ground and have it generate electricity than it is to put the same damn thing in a plane and have it generate propulsion. So it was actually not crazy at all. I don't know if it's defensive because the plane has a huge regulatory hurdle or if it's offensive because they can make more money there now, but genuine comment.

I wish him literally all the best of luck.

Well, hold on. Boom comes out of YC, cool company, quickly raises at a arguably fake billion dollar round from airlines with no revenue. December 2024, a year ago crashes down around maybe $500,000,000 valuation, but it might be worse when you think about the cram down and the and the effects. That's a tough moment. AI booms, and now you're back up to 1,500,000,000.0.

Yep. 2021, 1,000,000,000 no revenue, crashed to half of that or less at the end of last year, massive cram down round, and then back to 1,500,000,000.0. I mean, if I was an investor, I might still have whiplash, but it's great. But who knows how it looks with all that change? I'm not sure.

Crazy story. There's so many of those. We all have them. We all have the ones, a couple ones in our portfolio that actually got a big AI lift this year. Didn't know it would be boom, but it was.

Boom But you must admit, it's one thing to get an AI lift because your cool little network monitoring tool is selling to Entropic. It's quite another thing to kind of walk into the factory and say, Guys, strip those engines off those planes, slap them on a trailer and make them generate electricity for a data center down in Texas. I just love the hard engineering of it all. I would argue, I don't lump Boom into the reacceleration. I think the interesting distinction is, I think, Boom in its old and new incantation are ultra high risk, very ambitious companies versus the software centric, known business model reacceleration.

I wouldn't lump boom in with some SaaS companies reaccelerating to 30%. There are just such dramatic risk profiles. I think the interesting question, and I'm going to tie it into the forthcoming biggest IPO ever, is how do you think as a growth investor about ambitious, hard engineering projects like BOOM, where, as we've seen, the risk of it going horribly wrong and not building a plane is quite high, and maybe you get saved by building an engine? So you go, Oh my God, that is way more risky than anything in even AI LLM land. But on the other hand, we're about to cover the big story of 2026, which is possibly the largest IPO in history, going to be a rocket company.

I think the is when those hard tech problems work and when you solve the technology problem, and if you pick the right problem, you have a wildly compelling business. But as the boom plane part of the story makes clear, they're damn hard problems.

Well, they've sold zero of either. They've sold no planes and no jet turbines for for AI power, so it's a it's a big bet.

It is a big bet. And three failed launches in in 2007 and 2008, that's probably what SpaceX looked like too. And if it works, you're a genius.

Speaking of the trillion dollar outcome and the big IPO for next year, we chatted about it. We chatted about the $800,000,000,000 secondary. Following that, pretty quickly, rumors around the $1,500,000,000,000 IPO.

It's funny. The the exact chronology last week, we recorded on a Tuesday. We talked about $800,000,000,000 being a high price for that secondary round, and I was like, Oh, that feels like a high price based on the numbers. And I'd looked at the numbers and the growth rate and some of the acceleration going on, and I'm like, Oh, 800 feels high. And then on Wednesday, before we even released a damn podcast, we see the leak that says they plan to go public at 1,500,000,000,000.0.

So I'm sure everyone piled into the 800,000,000,000 round thinking, Oh my God, it's cheap. So you can be wrong by 800,000,000,000 in a day. So I've obviously been thinking about that a lot. How do you get your head around that? The company is doing 15,000,000,016 billion dollars this year, 2025.

Starlink is the growth driver. Growth rate was down a little this year over last year. Maybe they do early mid-20s next year, so you're talking 78 times twenty twenty six revenues. What's the thought process? I was genuinely thinking, how do you talk constructively about that?

And what I realized is you have to factor in what I'm now going to refer to as the EOV, the Elon option value, because on all his public companies, you just run the math, you value what it's worth as a business with the TAM, taking it all into account, and then you look at the difference between that and what it's trading at, and that's just basically the Elon option value. If you look at Tesla, it's trading north of a trillion. It's roughly a 100 and something billion in revenue. Earnings are down. You kind of apply a normal multiple, maybe you get 300,000,000,000.

The rest is the EOV. It will be the same thing on SpaceX, and he's earned that EOV because he pulled the Starling rabbit out of the hat. It was a rocket company, and then it became a communications company. So it is credible to say in his case, as in almost no one else's case, this is one of the few people on the planet who literally might find you another trillion dollar market that wasn't in the original plan, so roll the dice. If that premium ever evaporates, oh dear God, if he were ever to die, oh my God, the stock gap would be something horrific.

What I recognize is you can't run the numbers on SpaceX and come up with the $1,500,000,000,000 You just can't. But what you can say is someone who's funded, let's be clear, the most successful car company ever, and let's not forget, also founder of OpenAI looks like the most successful AI company ever and the most successful rocket company ever. We said last week, once you're lucky, twice you're good. Three times you're freaking amazing. So I just have let go.

I've let go of valuation. I'm like, I can't figure out how it's worth 1.5, but you just apply the EOV on top of the 10X multiple and away you get, it's awesome.

You have to manifest it. That's the key you're missing. This is what he's doing. Even Harry's manifested almost a billion dollars under management. Like you can laugh, but if you have enough behind you, if you have enough magic and proof points

Totally.

You man you manifest I think he's manifesting a $1,500,000,000,000 company. And I don't know if all the kids can manifest it, but it's he's doing it. I can teach him.

I I've learned a lot.

Teach him how to manifest it. I'm I'm manifesting a beach

house in Laguna Beach.

You're a manifest Harry, you are people don't get it. You are an s tier manifestor.

I mean, then Elon would definitely be an s squared, s cubed, s to the power of 10. I mean, it just you

just have this other thing up. Yeah. It's just not even playing the same game.

You You look at the numbers and you go, you know, 15,000,000,000 plus or minus, you know, $2.04, 5,000,000,000 of space revenues, which is wonderful, capped. You've got these customers, there's a certain amount of volume, they already have 90% of the volume. Then you start estimating, well, how big can Starlink be? Dear God, let it be on every United flight soon. If anyone from United is listening, I actively avoid your planes because they don't have Starlink enough, so please fix that.

So they get all that. They get all the world broadband. You still struggle to get to anywhere close to $1,500,000,000,000 and then you just have to go. You're buying a share in probably the only person since the demise of Steve Jobs to literally not do it once, but do it three times. Jobs did it with Apple, Pixar, and then Apple again.

Elon's done it with you forget the small ones like PayPal. And then on top of that, Tesla, SpaceX as a rocket company, SpaceX as a communications company, then of course, OpenAI as the leading AI company.

He did SolarCity as well, didn't he?

He did, but that didn't matter as much. Mean, it was just a simple, humble 2,000,000,000 or $3,000,000,000 outcome, nothing among friends. So yeah, even rounding out the little ones, you just left with, It's the most impressive entrepreneurial record possibly the last thirty, forty years, as I say, with the exception of your jobs. You lean

in. No. The I I I can't get the math to work either. Right? But the one thing is I do think Elon's all over the place, unlike Sam Altman, where every single thing I think Sam says, as off the cuff as it looks, is very thoughtful.

But I think Elon talking about space based data centers is his next big play potentially. I think there's a reason he's communicating this well ahead of the IPO. I think this is the one of the big plays. I mean, it's an incredible business as it already is. I have three Starlinks.

I'm I don't know what I'm paying a lot. Right? And it's great. But if all of that starting at the beginning of the conversation of all that Oracle and CoreWeave and Nebius revenue all goes up up in the sky, deep far in the sky, that is a lot of money. And he's the only one that can do it.

He's the only one that can build data centers in space. And I don't think he's joking. And it's easier than going to Mars, or at least it's easier than getting back from Mars. It is not easier. Going to Mars is not a huge challenge.

It's getting back. So we might be underestimating the data centers in space. It's possible.

Would it be a successful IPO at $1,500,000,000,000

That's an interesting question for the buyers or the sellers. It will be the most successful IPO in human history for the sellers. I just think what founders fund are going to record on this is going to boggle the imagination. Will it be a good stock to buy at 1,500,000,000,000.0? Is that what you're asking, Harry?

I'm saying, be investor demand at 1,500,000,000,000.0 enough to satisfy it and then a stabilized period where it doesn't tank off. Gotcha.

I don't know because you're asking me to assess something that's not within the bounds of logic. I don't understand the Tesla market cap relative to the financials or even the TAM. I don't think people get that one running the numbers. So you're trying to assess the non quantifiable. So I don't know how you can come to an informed conclusion.

I don't understand the mindset of someone who would buy based on the intangible at that kind of price. I think as a rational buyer, you look at the upside downside risk and you get very nervous. But I think the same has been true of Tesla for the last five years. It's been up and down. The financial performance has been fairly mediocre for four years, but the stock has stayed up.

So you're asking me to speculate on the propensity of the marginal Elon believer to buy the stock at 1,500,000,000,000.0, and I have no way of assessing that. I think it'll be a tricky one to get done. The bankers are pitching this week. I would not envy them their task.

He does seem to have an ability that maybe no no one other than Bezos in his prime has, which is give me five years. All of Elon's dates are wrong. Everything is full self driving. Everything's behind from the Model s to the Model three to to Starlink, and everyone gives them another four to five years, and the day traders are gonna enjoy the stock. So it's just hard to predict when everyone gives you another four to five years.

They're really not trading on today's revenue or today's anything. It's a gift, but he's very good at that. He's very good at over over predicting, but ultimately delivering.

You're exactly right, Jason. It is a daunting task. Are you going to raise $30,000,000,000 which is only 2% dilution, which means it's still widely traded? Or are you going to do the typical IPO has 8% dilution? So that would be, I mean, let's do the math here, about $120,000,000,000 Is there 120,000,000,000 of raw risk capital that says, what I really need in my portfolio in 2026 is some 70x run rate revenue space investments?

Some poor banker is going to have to get on his PowerPoint, get on his private jet, and start flying around the world and saying, How much of this do you want? Now, I think in this market, I don't know how to assess who that investor is. Do the index funds buy it? Do the sovereign wealth buy it? I think there'll be a lot of consumer and retail appetite.

I just don't know how that all comes together. It will be fun to watch because it will probably be the most challenging IPO story if it's anything like that valuation. Now, the other thing you might see is the valuation gets walked back to the merely outrageous. The most impressive thing is the entrepreneurial oomph. I heard Peter Thiel speak about this years ago.

You have a big enough vision, you do get a buy on the little shit. And Elon, by having that big vision, I think has been able to paper over the cracks that would have killed many a lesser man. Good luck to him. I mean, it's great. In the end, I like my styling too.

I mean, here's one snare for what it's worth. Google anchors them with 10,000,000,000. They're already a 10% shareholder.

In for a penny, in for a pound.

They may have maybe it's a Gemini partnership in space That's part of it. They get first access to the TPUs in space. It's not, no. So they put in 10,000,000,000. It's good timing with AI.

And as soon as that is, we're running out of space in the IPO and the banks run around Google's in for 10,000,000,000, Fidelity's in for 2,000,000,000. And all of a sudden, you start to panic that you're not gonna get your shares.

If you get a call in ten minutes from Goldman Sachs or Morgan Stanley, you'll be signed up as a banker by Friday. I love it. You're exactly right. That's it's a nap maybe the best company. It's a narrative story.

And Jason's just shown how easily a narrative can change. It's not a story like a PE backed public IPO, where it's like an eight times ARR, you can get 6x coverage and at 10 times ARR, you can only get three, so the deal gets done at eight. This is a totally different thing. This is in tune with the zeitgeist. It's all narrative all the time.

And you're right, that would be a very clever way to do it.

Jason, that was fantastic.

Yeah, he should be a banker. He's exactly right.

Well, Google almost bailed out Tesla at the last hour when it almost went bankrupt. It's already happened. And Sergei's back running Google. It's just 10,000,000,000. I can tell you we we do work closely with the with a lot of the folks at Google Cloud with Saster.

They are feeling strong. We work with a lot of folks in marketing and product. I've never seen a team feel more energized in the entire decade I've worked with them. Like, they are feeling that they are winning. And so why not put a $10,000,000,000 to get my TPUs in space?

It's a good deal.

Fuck. It's nothing. It's a couple percentage points of market cap. Not crazy.

What else are they gonna do with the cash? They can't spend it like Meta does. They can't spend it that that that aggressively.

They already have engineers. They don't need to spend it on that. And Jensen's doing buybacks, so maybe he can stick a couple of billion, and there and there you are.

Maybe NVIDIA could put in five. If they do 15 together, Google and NVIDIA, and two from Fidelity, there's no room for retail. We're sold out. The round is sold out.

And the genuine common and the genuine learning is, as I said, the power of a big story. At one level, there's a little part of me, the boring, curmudgeon, numbers guy screams, this is all madness. You're all insane. And then there's another little part of you that just gets inspired by that we're sending rockets to Mars, for God's sake, and we're the telecom company that connect the whole world. This has got to matter.

Just because you brought it up on Founders Fund owning 10%, I it's just a story people forget. You know, Peter Thiel fired Elon Musk. Yes. He fired him. But he treated him like a human being, fully vested all his stock, took nothing out of his pocket, thanked him for it, and told him that was the way it was gonna be.

He treated him pretty damn well, and so when SpaceX was gonna die, he went to Founders Fund, and Peter Thiel gave him the money in an hour. It's a it's a reminder in today's age of extreme greed to be kind. He didn't just wasn't just nice to him. He accelerated all of his stock and made sure that it wasn't about money. He was appreciated.

He walked him out the door. I don't see this happening often enough. I do I do you know, I've seen two CEOs at the end of this year just quit their startups that I invested in. Be kinder. Go the extra yard like Peter did with Elon.

It may just may pay off, like owning 10% of a $1,500,000,000,000 IPO. Even for a a billionaire, it might pay off.

Yeah. Reserving the right to say, I'm not sure how much it was kindness versus Elon was also a big paid in stockholder. I think the meta point you're making is right. Two things are wildly impressive. One is the density of talent at PayPal blows the mind.

It's like you have Theil, you have Saks, etcetera, you've Reid Hoffman, it's just amazing, you have Elon. And then the second thing is, you're right, they clearly had their bumps. And the fact that they were able to be rational business people is about to pay off to the tune of $100,000,000,000 It's a great story. It's kind of one of those wow moments and good for them. It's like Harry tweeted today something about people who aren't in the very biggest deals feel totally irrelevant.

And you correctly got a whole bunch of pushback on it, Harry, because it was a bit obnoxious. But there's no doubt in a world where one investment might return 50 to $100,000,000,000 everyone else has to feel just a teeny tiny tad irrelevant compared to that return for Founders Fund. And good on them. It's a twenty year compounder at 50% plus or minus.

Okay. We're gonna do a would you rather, Roy? You love this. You've got a Figma at 17,000,000,000 or Cursor at 29. Cursor.

Would you Jason?

I'm gonna take Figma only because I don't believe Cursor's future is assured. I think a Cursor is magical. I think it's a gift to humanity for folks that have built software. If we keep doing this podcast long enough, we're gonna see I'm right about something else, which is everything's much less stable than we thought this year. The categories, the Harvey's, the cursors, these are incredible companies.

I wish I invested all of them. Don't get me wrong. We're gonna look back in twenty four months and see there was a lot less stability in these so called leaders than we thought. It's not that they were gonna go to zero, but we are so early in AI that I'm going to take Figma on this one. But it's a tough one.

It's a tough one.

Rory, you don't?

No, I don't feel the need to argue. I mean, I think that that's the beauty of money. You just make your bet and then, you you know, don't have to justify your position with English. In the end, you're right or wrong on the numbers.

Yeah. Jason doesn't need to argue. God.

I like to argue.

Let's shit on Harry's tweet and then just not argue.

I was a little argumentative last week. I hope it doesn't happen again. But, yeah, keep going with the

next one.

OpenAI at 500, Anthropic at three sixty, or Google at 2,000,000,000,000.

I have to take Google. The reason is is just the the level of I don't mean arrogance. Confidence in where they're going that I see across the team we work with. I I know it sounds small, but it's not. When I see everything's going right and the team feels it and the team knows it, how often does that happen at this scale?

Not that don't think everyone at Meta is cheering that they're crushing it. Right? Risk adjusted take Google. Wouldn't have been true a year ago. Gotta take it.

Okay. I don't know my answer yet, but actually the point is a year ago, it should have been time to take Google because the stock's up 60%. You may now be the other you may be the wrong side of that trade. You should have taken the quick pop.

I'm not a trader. Know. True enough.

I mean, it makes north of $100,000,000,000 a year, so you're buying in at 20 times plus or minus EBITDA. It clocks in north of $100,000,000,000 of profit a year. Everything else was a positive when we talked about it nine months ago, and the risk was erosion of search. All the positives have gotten better, and the erosion of search haven't happened. So yeah, you do have to give it consideration.

Ugh, this is hard. At 170, I'd have taken the onTropic. Do you think I'm I'm actually because, yeah, interesting company. OnTropic is you're giving the future round on onTropic. Has it happened at 300, but the future round at OpenAI is when would it is there another round coming on OpenAI?

They're always continuously raising. But if you were to do like live pricing on them, Anthropics would be $3.60, unless you were getting grandfathered into a prior round, like the real live price is $3.60.

The 170 bill, I take Anthropic all day every day because I think they're being way more sensible than OpenAI, and I think they will get public. And yes, at 170, at 300, you might be fully valued. I think the difference between Entropic and OpenAI is OpenAI has more ambition perhaps, but it's more likely to just get caught in the middle with commitments it can't meet. Whereas I think Entropic is very sensibly and boringly converging on profitability, will go public, and will be a very nice public company. So of the two, I take Entropic.

I'm processing on Google, and it just feels lean. I mean, you could argue they're all almost public already. You ugh.

Come on, Rory.

Shut your face. I think I'd go on Entropic. I think I'd go one of the pure plays. Even though I do agree to Google, I think I'd go one of the pure plays.

Kalshi slow fire.

Kalshi slow fire.

You know, I I like to think before I comment, so call me strange.

Don't worry. We we edit anyway. It's all good. Yeah.

Yeah. Yeah. Get rid of that one.

Boys, thank you so much. You continuously make me more and more questioning of my own questions. You know, I I've done this for ten to eleven years, Rory. I'd I never questioned my own interviewing ability until I started doing this with you. And now I'm deeply forensic on the quality of my questions.

I'm just a dick. What can I tell you? No. This is great. No.

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