20VC: Jensen Huang Investigation: What Happens Now | Sequoia Leave London, Close Scout Program and End Evergreen Fund | NASDAQ Loses $2.5TRN in 24 hours | Anthropic targets $1.4TRN IPO valuation

Harry Stebbings: This is 20VC and it's your favorite show of the week. The only show that you have to listen to every week with Rory O'Driscoll and Jason Lemkin.

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Harry Stebbings: So what do we chat about this week? Well, big changes afoot at Sequoia as they leave London, they shut down Scouts, and they merge into one core team. Then we have Jensen Huang, been a busy boy at NVIDIA, which we will discuss in more detail. And then we have Anthropic. Where will they go out? How will it be received? And what is the impact of that on the broader AI economy? This and so much more in the show today.

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Harry Stebbings: Boys, so many things happened this week. I'm very much looking forward to hearing the different perspectives. We're going to start on Sequoia. Sequoia made a lot of changes this week. They announced, number one, they'd be departing their London office and some of the team would be moving back. Some would be moving on to different things. They announced that they were ending the scout program. They announced that they were having one team in terms of early and growth coming together. There were some personnel changes around it, but those were the core structural elements. Now, I think they're actually very meaty in their own right. I'd love to break them down.

Rory O'Driscoll: You guys know better than me, but I thought you missed the most interesting part of what I read in it was winding down the Evergreen program. I don't care about the other stuff. I mean, there's partner drama. People are going to come and go. No question in the SF Bay now, the kids from London are going to drop by the office. No question it's better to be local and close. Like 20VC is like all we can talk about all this stuff forever. But the idea, which sure feels like it's back again, that you should hold these assets for decades. Generational assets for decades. What the hell happened there? Why did we wind down the Evergreen Fund? Notwithstanding a few bumps this week with Jensen. What if they'd held all their NVIDIA stock till today? That'd be a good one. What about all their Google stock? I mean, literally, what the hell happened to the Evergreen idea? What the hell happened? This is the best idea in venture ever. You have the dominant brand. And then my understanding reading about it is the LPs weren't allowed to leave in this evergreen structure. You're pretty much stuck. So why do it? Once you got a couple hundred million or a few billion, go evergreen.

Jason Lemkin: No, actually, I thought the evergreen structure, which to remind listeners, basically said it really incentivized or almost pushed LPs to allow Sequoia to continue to hold long after a public offering because they correctly analyzed and said, no matter how well we do as a venture investor, the real money is made after the IPO. Because they've been something absurd, like 25% of the Nasdaq. So by definition, if they'd held all those stocks, they'd own a big slug of 25% of the Nasdaq. And so it's true. It's arguably almost always true that if you hold a diversified portfolio of really interesting tech assets, over the long term, they have compounded well above any kind of S&P return. So the idea of "why don't we just say we should hold them?" It wasn't illogical, and that was the thinking behind doing the Evergreen Fund. There were probably three problems with it, though.

Jason Lemkin: The first problem is they picked a horrible time to do it because they implemented it in '22, '23, which was when stocks actually turned down. And over 20 years, that doesn't matter. But if you decide to make Evergreen and hold stocks and then a year later they go down 30%, it hurts. That's the first thing. The second thing is LPs don't like it because they have different liquidity needs and you want to be able to make your own choices. And then the last thing, which is a super interesting one. You should always think about the comp plan. How do you put this? The individual partners in any venture firm can decide to hold their stock forever. And once you've cleared carry, they get all the return they're going to get from doing that. If I was lucky enough to be Sequoia and lucky enough to do Cisco and take it public in, I want to say '86 at $400 million market cap, I can hold my shares, I can distribute to my LPs, and they can make their own choices. Now, in retrospect, a lot of them would look back and go, "Oh, I wish I'd held my Cisco stock." But now you're basically trying to force LPs to take their own medicine. It's like, "Damn it, you want to sell the stock, but I'm going to make you hold it." It was just, frankly, it was complex and trying too hard. Going back to first principles, it is intellectually correct in the sense that if you hold a diversified portfolio of high-quality, Sequoia-backed venture companies that go public, you'll have lots of variability in that portfolio. But in the end, it'll be a compelling portfolio. So it wasn't a crazy insight. It's just trying too hard, too much complexity. So I think getting rid of it was just... but let's keep it simple here, people. We can still make our money. So that made sense to me. Sorry, that was a bit longer than I intended.

Harry Stebbings: No, maybe when you have a CFO running the place, it makes sense. Like it all makes sense. That's what CFOs do. It all makes sense on a spreadsheet.

Rory O'Driscoll: It was interesting. I was watching something that Ho Nam from Altos Ventures said, who talks a lot about generational investments. But he said they set up a series of continuation funds to do this so that LPs could exit if they wanted and stay in if they didn't in their funds. I assume that if you did that perfectly, other than some conflict on how those funds work, it lets folks go each way.

Jason Lemkin: Yeah. But the odd thing is you've already been fully paid for what you're doing. So now you are basically giving the LPs their vitamins. You're basically saying, "Damn it, you will hold these stocks because it's good for you. I've already made my money." So look, we're going to talk about NVIDIA in a while. And one of the things we'll mention when we get there is that there's a Sequoia partner on that board from 1993. And I bet you he's held all his stock and I bet you he's worth a couple of billion bucks. So you can do what you want to do individually, but I don't know if every LP in Sequoia would really have wanted to hold that stock from the IPO in, what was it, '95 or '96 all the way to today. So to me, that one was an easy give.

Harry Stebbings: Let's stay with Sequoia and the other stuff though. The other matter about Sequoia, I know it's Captain Obvious, but I think for founders and others, it's a reminder: the institution may be durable. No particular partner may be durable. The CFO who's the CEO is gone. All the London partners, gone. A bunch of the US partners, gone. Now, listen, this is an organization designed to make a buttload of money and it is not a nonprofit. So it all makes sense. But founders sometimes think of their VCs being more permanent than they are. I float in and out. But like most things, the longest lifespan is the founder CEO. Like Jensen. The founder CEO, odds are it will have the longest lifespan in tech.

Rory O'Driscoll: Actually, I might argue that, but your salient point is the right one. Change is the only constant there. And I give them credit for making change.

Harry Stebbings: Totally. I think London's important. I think a lot of people use this. Clearly, that's not an opinion shared by everyone, but keep going.

Rory O'Driscoll: Well, I think it actually is. And I think when you look at Eleven Labs, which is a phenomenal investment of Sequoias, and Dollar App, which is a phenomenal investment of Sequoias in London, and Odoo, a great investment in Europe too, and Bolt. I think bluntly what they're saying is Europe does have great assets, but we feel we can sufficiently cover it from the States, which I don't disagree with. One thing I will add, and there's obviously two sides to all this. I believe in being close to founders. I believe there's value in a London office we talk about, but I will say I don't get invited to all the things you do, Harry, but every elite event or dinner I'm at, Mahdi's there. Half of them, Anton's there. I mean, it's hard enough to get to the Bay from London, but it's cool. But getting there from Sweden is a PIA. You want to be in the deal and you want to close it quickly, but especially if I'm not doing the pre-seed or something. I don't think I need to go there to meet these guys. They're everywhere. And kudos to them because it's work. I would almost think Eleven Labs, and if it wasn't for Anton's accent, I would think they were Bay Area companies. I genuinely would. They're everywhere. And so I do think pre-seed, you want to be local. And you could challenge later. I genuinely believe if Marty wants Sequoia, he's there every month. You're going to meet them. And Sequoia is a good enough brand. You're going to get a shot to put a term sheet in front of them. And if you're willing to pay up, I don't know if it's so crazy. But again, pre-seed, I'm murky on this. I'm murky on pre-seed. You got to roll up your sleeves to do that job. That's the Lord's work, the pre-seed.

Harry Stebbings: And accepting you go back to decision, it was the right thing for them.

Rory O'Driscoll: For them. Yeah, for them. You're trading off something, which is maybe a little less coverage early on in the UK, but you'll get the good ones. And I think it's what you said, Harry. It's all about focus. We need to just get everyone in a room. We need to get our shit together. And I give them huge credit. They are always good at reinventing themselves.

Harry Stebbings: One thing I didn't really get, I always did think the scout program was relatively little lift for a very significant advantage. I was surprised to see that. I don't know if you have anything there, but that one just seemed strategically, huh.

Rory O'Driscoll: Well, it did get cloned. I think it worked better when it was a secret. They were years ahead of everybody else. I think in the early years, it wasn't to be spoken of if you were a scout. I mean, it wasn't like, I don't know if you had to sign an NDA or not, but it wasn't spoken of. It may be that simple. It just got too flat. And I just don't think that, to your point, we can talk about it forever. I just read this as not having the energy. I don't want to run a scout program with a small partnership. I don't want to run ARC, a mediocre accelerator that isn't really even Speed Run, let alone YC. I thought in the early days about running an accelerator for SaaS when our brand was the hottest thing in SaaS. I'm like, my God, I'd have to hire like 15 people. And then I'm like, I'd have to manage them. And my LPs would tell me to do this. I'm like, I'm going to jump off the roof. If I have to recruit and manage 15 folks, it's just too much. And I don't know if they have the time to do this and loop in six partners in London and a different time zone with different motivations and different economics. It was just too much. If you want to have a tight partnership.

Jason Lemkin: The other thing that I guess is part of it is obviously I'll share one other story. When Sam Blonde, who's now at Monas, was at Founders Fund for a while, I didn't understand Founders Fund when he was a partner there for a little while. I'll tell you why. I didn't understand it. It seemed like too much capital for too few partners. I didn't understand how so few people could deploy so many. But when it works, you have to have the ability and conviction to write large checks into winners. Sequoia's got some good ones. I know you can talk about what they missed out on, but if they have the conviction that every GP can easily, I put it in air quotes, easily deploy a bill or two regularly, then you don't need all this crap. It's a distraction. It's exhausting to manage the folks in ARC.

Rory O'Driscoll: I don't disagree with you at all. And Founders Fund, when you look at it, it's amazing. Founders Fund deployed the growth fund in 11 months with how many partners and with how many investing professionals? Honestly, like three to five real ones. But they're in Stripe, they're in Anduril, they're in SpaceX with that fund. And it's like no LP is complaining at the compressed deployment timeline there. It is phenomenal companies. But you're right. I mean, this is large amounts of money with very few people. I didn't even think it was possible. I'm like, how do you... No associates? How does this work? You have to be somewhat diversified early on, but you have to be widely concentrated later on. And I think Founders Fund does a really nice job of doing both. They do a lot of early stage stuff. They do a lot of little experiments. They do a lot of early deals that are small and kill them quickly. And then on the growth fund, they concentrate down from, I think, 20 investments in the first fund to seven or eight. It's exactly how you should do it.

Harry Stebbings: OK, moving swiftly on. We have NVIDIA. Jensen Huang admits to having an affair with an alleged or suspected Chinese spy. The board, as a result, opening an investigation into it as to what quite happened and what the impact of this is. This is not one I had on my bingo card. I'm going to be honest guys, thoughts?

Rory O'Driscoll: It obviously sucks on a bunch of different levels. Just to put it out there and then move on, it sucks on a personal level for him and his family. It's just all yuck because you've got personal drama going on and suddenly six billion people have an opinion on your married life after 40 years. That just sucks. Moving on from that because I'm trying to avoid comments on that, it sucks from the company perspective. This is the most consequential company in AI. I think Sean McGuire had a post basically saying, "Please don't fuck it up just because the Chinese intelligence agency did some kind of compromise." In other words, let's not lose the plot here. And in one sense, I'm sympathetic to that. It would suck to lose Jensen because I think a different CEO would run that company very differently and perhaps wouldn't have the drive to make some of these deals happen. But then you've got to say the third point is going to be an investigation. And to be very clear, it's not an investigation into a relationship. It's an investigation into compliance issues. It's an investigation into: were there breaches of security? Are there issues vis-a-vis how the government handled it? Didn't NVIDIA lobby the government, the Justice Department, to back off on a test on Megaspeed? There'll be a whole bunch of stuff like that, and it'll be messy. And there's at least some non-zero chance that the stuff that comes out is problematic. And to repeat, that sucks, because this is a world-class executive who's... Remember, taking this thing from '93 all the way to today, the longest tenured tech CEO, period, full stop. And it's hard to argue he's not a success when you've had a $5 trillion market cap.

Jason Lemkin: I think, listen, I think all politics aside, I think he needs a pass. This is too important to AI. It's too important to the US. I think this is a point a lot of folks were making one way or the other. Objectively speaking, he needs a pass. We briefly on an older pod discussed how Steve Jobs got a pass in the backdating stock option days. This isn't the same, but we needed Jobs. And I think at least for now, we need Jensen. I mean, he someday has got to retire. But it's kind of a bummer it was Megaspeed in all of this. It's kind of a bummer that it's just... it'd be nice if it were something not quite as in the center of where these GPUs should be going. Whether it's really okay to host inference and GPUs for China models in Singapore and Thailand. It's just a really unfortunate thing beyond this spying thing, which I think is... I don't think he leaked secrets. I mean, come on. It's possible. It's moronic, but it's just a bummer. It's Megaspeed, which is banned by NVIDIA now. NVIDIA even said internally, they're not going to sell them anything.

Rory O'Driscoll: Jason, I love you so much. You're like, "Why can't you just cheat with someone from SAP?" I mean, I don't think it was intentional. It's just a bummer that I think this is going to last much longer than it otherwise would. I know this is because it's so tied up with an issue that everyone's been dancing around, which is: is it okay to sidestep selling GPUs to China by just sticking them in hyperscalers or data centers a few miles away? This is something that kind of made no sense. Like, "We'll let you train all your models. We'll let you do whatever. Just please keep the chips a few miles over the border, guys." And two comments on that. One is, do you need a pass? Yes, you'd like a pass. You'd like this to go away. But just to be clear, I think because you're right, you have all sorts of national security questions. There'll be interference questions. I don't think it's easy to go away as some of the other things we talked about, the backdating options thing with Steve Jobs. I think this is more problematic. You can imagine a series of facts starting to... you also have the dynamic of the government knowing about this early. Marco Rubio having a report telling Trump, them not passing information on. There's just a whole bunch of messy stuff here. So I don't think you can assume a pass. You can hope a pass, but you can't assume it. And then the second thing is the really odd thing. The amazingly foolish thing is this. My sense, just having listened to a bunch of the interviews Jensen's done, is without any lobbying from any Chinese agent, from any entrapment agent, he wants to sell GPUs to anyone who will buy them. It was all unnecessary.

Jason Lemkin: Yeah, this is the part that's going to backfire. There's so many clips of him pushing hard to sell these chips to China. But my point is, I don't think he was doing that because someone was lobbying him. I think he passionately believed that, and correctly, from NVIDIA's perspective. And his job is to run NVIDIA, and President Trump's job until there's another president is to run the country. And from NVIDIA's perspective, they need to sell chips to anyone who'll buy chips, because what they don't want to do is have another alternative provider based out of China eroding their market share. So my point is this: you didn't get anything by entrapping him, because for entirely logical reasons, he's been pushing that agenda pretty consistently.

Rory O'Driscoll: No, China loses big time here. China's going to lose. It's going to be harder to not only sell GPUs to China, it's going to be harder to just host them across the border. It's going to all get shut down. It was already stalled in Congress. I think it was passed by the House and not the Senate. This is not what China wants. This is bad for China.

Jason Lemkin: The only other thing I might add for others, for founders and others, maybe to get away from the salacious stuff. I was thinking about this before this. In my whole career, I've been involved in two incidents where boards did investigations with CEOs. One female, one male, actually. Nothing exactly like this, but it's all similar in some ways. It certainly wasn't Megaspeed and trans-ship GPUs. The one Captain Obvious insight is you kind of... now this won't be true of NVIDIA because it's under such scrutiny. But what level below, you kind of get who you hire in the investigation. And you guys can challenge me on this, especially you, Rory. But the input of who investigates it, who you hire, what they are, as objective as they are, are they biased in favor of an outcome? They're paid. Whether they're a law firm or investigation agency. And just be very thoughtful when you do have to do something like this, that you understand that the output may already be decided when the input begins.

Rory O'Driscoll: The only comment I'll make is, I understand what you're saying. If you're asked to run this investigation, you can set the terms of the investigation and you can choose whom you hire as attorney. That, to some extent, pre-biases it. That's arguably true. But on the other hand, and again, I think I saw someone make this point, when you're doing an investigation that you know is going to be second-guessed by a different investigation, probably done by Congress, probably done by the Department of Justice, the scrutiny level goes way up. And look, I think one comment is this is an astonishingly long-tenured board. Four of the nine board members are two of the original VCs, Mark Stevens and Tench Cox, and the original audit chair from '93, Brooke Sewell, and then the CEO of Synopsis. These are people who've been in this chair for 30 years, clearly very loyal to Jensen. I'm sure they're looking at this like they need it like a hole in the head. But people tend to be professionals. The CEO of Cooley, the law firm, is on the board and is in fact leading the investigation. Professional people, especially when they know the scrutiny coming, they're not going to just close their eyes. So unfortunately, this thing is going to run and they're going to do an investigation knowing their homework is going to be checked by someone else who's not going to be as friendly, who might be in Congress.

Jason Lemkin: For sure.

Harry Stebbings: I'm going to pull this back to the numbers that really matter, which is NASDAQ 100 loses $2.5 trillion in a day. I had hedge fund managers, friends of mine, calling me just in a tone and depressive state like I haven't seen in years. Guys, that much value eroded in such a short amount of time. Can you help me understand what happened here? What caused this? What's going on?

Rory O'Driscoll: I mean, you can start by saying it's clear proof that as the old expression goes... no, no bullshit, because that crash, we're now recording this on Tuesday. It'll be released on Thursday. The crash you're referring to happened last Thursday. Reminder: on Tuesday night, it became pretty obvious that Dems are going to win and win big. And then on Wednesday, the stock popped. So in fact, the first response was to go up. And then a day later, there was some, arguably some economic news, but then some kind of angst about data centers. So on Thursday, you pop back down. So a lot of this is fairly reactive. It's some version of, "Oh my God, we can't build data centers. All these people aren't going to let us build data centers. So well, maybe we won't sell as many chips." But I don't know how deeply thought through it was.

Harry Stebbings: So you don't see this as the AI trade cracking and showing first signs of that?

Rory O'Driscoll: I'm going to say this again. I'm going to say it every week because the AI trade doesn't crack on the supply side. It doesn't crack. It doesn't crack because their data science can't be built. It doesn't crack because NVIDIA loses market share to AMD. It doesn't crack for any of those other reasons. If the demand is there, I said this over and over, if the demand is there and that demand will be evidenced in ARR for OpenAI and Anthropic, if the demand is there, everything else will be roughly fine. There might be some companies that get ahead of themselves like CoreWeave, but it'll all be fine. So I think looking at that last Thursday and trying to extrapolate some kind of informed, "Oh, I've suddenly realized we're only going to sell 300 billion of tokens instead of 500 billion. Let the stock go down." I think you're just grasping at straws. I think a whole bunch of aggressive pods in Hedgeland got kind of nervous and got blown up because they're over their skis. And remember, the good folk at Citadel and places like that, they basically take your checkbook away at 5% and they fire you at 7.5% drawdown. So it doesn't take a lot to have a bunch of these pods just blow up. That's all that happened last week. No great thought.

Harry Stebbings: Jason, you agree with that?

Jason Lemkin: Well, I would say two things. One, we've discussed before. I think it makes sense for the markets to be nervous about this. There's a lot of assumptions. There's a lot of capital to be deployed. There's a lot of debt required. And as we're recording this, Anthropic is getting ready to, and finally getting ready to, IPO. And it's a little murky to me what happened, but it looks like they couldn't fully fill out the round. The round's $100 billion. They needed about a $20 million private placement, I think $20 billion to fill it out or so. Some of it was Google's pre-commitment repackaged, I think, as part of this round. And they had to lower the size of the round and lower the valuation. So the market is a little jittery about this, even though I think Anthropic also said they're at an $80 billion run rate right now.

Harry Stebbings: So you don't get much better than that, but they weren't oversubscribed at 100 bill. They weren't oversubscribed, or so it appears, or so it appears. No commitment.

Rory O'Driscoll: Pushing back on that, because they're not at the oversubscribed stage. We're not in that stage of the process yet. It hasn't fully priced. You're right. I actually think they've played it perfectly. Given the dynamics of what's going on, they put a recommended price of $70 to $78 a share, which is relatively low. As a reminder, the last private round was $54 a share. And we'll talk about the market cap in a second. So it's up from the last private round on a per share basis, but feels modestly priced. The whole plan, I'm sure, is to generate interest, and then if it's successful, walk it up. But it is far better in an IPO to start low and go up than to start high and come back. Because once you start coming back, everyone loses confidence and you've blown it. So I thought it was fairly clever. And from a valuation perspective, as I say, it's literally up 20%, 30% on a per share basis. The reason people are talking about $1.4 trillion versus $1 trillion is when you do a valuation on the private side, you include all the options. So the same price per share looks like a bigger pre-money. When this valuation on a public basis, they only count vested options. So that's why the newspapers say it's roughly $1 trillion today, but about $1.3 trillion, $1.4 trillion if you counted all the granted but not vested options. So to me, it all looks smart. They're beating the numbers. They're pricing it low. And the plan, I assume, is people pile in and maybe they can raise the filing range or at the very least get it done at the high end and declare victory. I think it's perfect.

Harry Stebbings: Guys, what does it go out at? I know you don't like predictions, Rory.

Rory O'Driscoll: Well, not things that can't be predicted. I mean, I think it'll be very successful. I think it's a great company.

Harry Stebbings: So you think it'll go at 1.1 and pop to 1.4?

Rory O'Driscoll: Wouldn't be surprised in today's market. I mean, look, well, yesterday's market, today. Yes, in a normal market, if nothing crazy happened, yeah, I wouldn't be surprised.

Jason Lemkin: Totally. Look, it's not my gig, but for what it's worth, I think it's going to trade flat.

Harry Stebbings: Why?

Jason Lemkin: Rory's right in noting my point that it doesn't feel like the round got full out. I'm just using round for fun, right? It hasn't priced yet. They can go high into the range. They can even raise it again, I guess, if they want, right? I think there's still time. Maybe I'm wrong. I mean, retail's hard to predict. Don't get me wrong. I've been a big proponent of this, but I feel like the market is fatigued here. They couldn't raise the full $100 billion from it directly in the IPO. OpenAI fatigued its market. It was only able to raise $10 billion, right? We're just getting fatigued. This is my view. So I could be wrong. I just got my email from Robinhood saying I can finally be an Anthropic shareholder. Hooray. Very exciting. But I think we're fatigued. I think we're fatigued.

Harry Stebbings: I actually just spoke to one of the largest allocators, trillion dollar funds. And they were like, listen, I'm not worried about this $80 billion. I'm worried about the next $100 billion. Because that layer is very thin.

Rory O'Driscoll: Well, that's the same point, really, right?

Jason Lemkin: Yeah, it does seem to have been fatigued.

Harry Stebbings: How do you mean the next 100 billion? They're going to need more and more money, all of these companies, so to speak, but especially Anthropic and OpenAI. And I just don't think there's the depth of capital to continuously fund them.

Rory O'Driscoll: Again, God, it's odd that I'm being the bull here, right? I think it's been the first chance to buy a pure play, gen AI, next gen company, other than just picks and shovels. So I think there'll be wild interest. And on regards to the capital thing, I think that if they continue to grow like a weed, they'll need a lot more capital. But if the growth slows down, remember, this is a company that will have $200 billion of cash on the balance sheet, more cash on the balance sheet than any other company in America. So I think it'll be fine. I think it will, as I say, trade up well and be...

Jason Lemkin: Going back to first, it's a great company. And strategically, put it this way, all I can say for sure is if you think this is a tough discussion, you'd much prefer to be these guys than OpenAI right now.

Harry Stebbings: Why?

Jason Lemkin: Oh, God. Because they're going to get their IPO done in the next month. They're going to have the money. They're going to have the float. And they're going to be done with the private begging ball bullshit, right? And I'm willing to bet six, nine months from now, that CFO will have a convert on file. He'll raise a 50 billion. They'll do all the tricks you can do when you're a big-ass public company. They will access public capital at scale. Meanwhile, OpenAI is smaller, starting to reaccelerate, doing great stuff, but still unprofitable, still private, and still trying to raise $11 billion dollars plus retail. Tough place to be. I would much prefer to be public. I think that the exhale that you'll have if you're on the Anthropic board, when you go, oh, we're public, we've got $200 billion, we're kind of operating at a comp of break even depending on the quarter, we're done, we're golden versus I'm still private. No, it's such a better position to be in.

Rory O'Driscoll: Yeah, I assume if they can, they'll do a convert or a secondary or some sort of offering. What of the myriad of variants they'll be able to do at that scale within four to five months, if they can, right? They'll put another 40, 50, 60 billion on the balance sheet and they'll be able to, right? The float will be there and that'll hoover up that last bit of demand. It's a good point. It's just gonna be easier for them to do it. Not easy, but easier.

Jason Lemkin: Finally, to Rory's point though, it's gonna be a gift because we'll finally get quarterly real numbers. They're not gonna disclose everything, but we're gonna learn a lot more. We've had to sit around trying to figure all this crap out from CoreWeave and NVIDIA and Nebius. Now we're gonna have Anthropic every quarter having to disclose at least far more than we've ever seen before. It's a gift to all of us.

Harry Stebbings: We mentioned OpenAI and rather being public. OpenAI did come out and say, this is Greg Brockman. I think it's interesting also Greg's further prominence into the spotlight. Greg is the one who's saying a lot of these statements now, which I think is interesting and it wasn't the case before. Annualized revenue grew 70% in Q3. Enterprise doubled and became a majority of revenue, which I thought was interesting. And I mean, obviously, also Codex is crushing and really handing it to Claude Code in a lot of ways. Any note on that, them closing 11 billion at 1.25 or just would rather be Anthropic?

Jason Lemkin: No, I mean, again, you know, I don't want to be ever snide with any company. I mean, if they really did re-accelerate to 70%, that's stunning. And yeah, for that quarter, it looks like faster than Anthropic. So, you know, what's interesting now is, you know, a wildly competitive two-way race on these products. So it would be interesting to see token pricing. I mean, we're going to discover what the demand elasticity of token pricing is, because I think these guys are going to push down on pricing. I think you're already seeing some of that. And then we'll discover what is the demand elasticity of tokens. Does a 10% or 20% reduction in price, does it result in a 21% increase in usage such that revenue goes up? Or does it result in a 15% increase in usage, in which case net revenue goes down? That's what we're going to find out. Because the basis of competition will be pretty clear. Compute, capital, and token pricing.

Harry Stebbings: I think it's just interesting if they're growing at 70% now, what was it earlier in the year at the Nadir, right? 30% or something?

Jason Lemkin: Yeah, there was an 18%. It was a miserable quarter.

Rory O'Driscoll: It's just a reminder to me. I know, again, as Captain I was, when Dev was on the show from Mongo, what he said is there's no loyalty with developers. I just think we can't predict anything. We can predict that Anthropic and OpenAI will have more revenue 12 months from now than they have today. And we can predict it will be radically more. But literally running a very simple eval between Astra and Fable or Astra and Opus, it is truly trivial. And so the entire time we've done the show it's been ping pong, right? Ping pong between these guys. They both grow and it's going to continue to be ping pong. So no one else can acquire the compute they have, at least in the US. But hard to predict what the ratio will be 12 months from now. Hard to predict.

Harry Stebbings: They did also come out and say that Dots, their agent product, is very expensive and compute heavy. What do they bring to bear the question of like, is this agent proposition and consumer product about to be challenged before it really is able to hit prime time? I do think it's interesting. Maybe I guess I added that question. You and Rory kind of jumped all over me. Rory said they'll figure it out. Great startups always do. And I believe if you didn't need billions and billions of compute when Dots was available, it would be true. Harry said he'd do Instinct at 30 billion. and it was a deal to die for. I'm waiting to see. It's just these products are so good, but they're just so expensive. I misunderstood. I thought back when we started talking about this, that the cost to run Dots or Grok or Muse or Instinct was like four to five bucks. That's what it costs to run Lovable or Replit, okay? And it's VMs, it's non-persistent VMs that spool up and spool down for your website. That's what it costs those guys. And it's a good business, right? If Lovable and Replit can charge you 25 to 30, and it's a good business for even for Wix, right? At 200 million for base 44. I was wrong. This is like up to 20 bucks or 30 bucks a month to run these things. And the learning from GrokBot and Dots is we want them to do even more. My Muse is running all day long for 20 bucks a month. I mean, I know Rory thinks it doesn't matter for Meta and maybe it doesn't, but you know, everyone else is compute constrained, right? If they gave up on video for, I don't know how long they can say, we'll just have to see. I don't know, compute is going up, GPU prices are going up. There is no deflation, right? in GPUs. So I don't know if it's sustainable. We'll see. And I just think, I'm sorry to ramble, I think ultimately these products are less interesting if they're not fully persistent. If you can't run an agent as often as you want, 24-7 doing your work, it's just not that interesting. It's just an automated workflow. It's great, but it's not that interesting.

Rory O'Driscoll: Yeah, I hear you. Costs go down. And you're right, short compute prices go up because of supply and demand. Long compute prices go down because of Moore's Law. In the end, it'll get cheaper. It'll be fine. The question is, are you two years away or five?

Jason Lemkin: Maybe five.

Rory O'Driscoll: My intuition is, yeah, the boys at Meta can carry the cost.

Jason Lemkin: Okay. Yeah, it could be the one winner, right?

Harry Stebbings: Investment committee time. And honestly, the team edited Rory's statement last week where he said, Harry, that was so much better. That was so much more intelligently posed just for us to play in the office, which is nice. Because the way that we structure investment committees has changed within O'Driscoll-Lemkin Ventures. And so we have three deals on the table today. We have Zipline raises $1.5 billion at $21.5 billion, three times its January price. Option one. Option two, FAL doubles to $16 billion price on more than $800 million of ARR. And we have Revolut, the fintech juggernaut from London, prices at $115 billion in a secondary round, which was up 53% from their last round. Now, Mr. Lemkin, of the deals on the table.

Jason Lemkin: Yeah. Listen, I like all three of these deals. And if we really don't care about having to concentrate a strategy, and I think the fund needs to, I'd be good doing all three of these. I think these are all great deals. I think Zipline went long. I didn't get Zipline years ago. You know, this has been forever. I didn't really get doing drones in Africa. I know people love the founders. They love the company. It never made sense to me, right? But fast forward where we are today with autonomous everything, autonomous delivery, autonomous Waymos, autonomous cybercabs, Zipline appears poised to be a winner. It seems rich, but I like it better than investing in Waymo. The unit economics are better. And I think it's clearly a winner. I think we should make this bet. Revolut appears unassailable, right? And unlike the others, the margins are more attractive, right? And it seems to be going from strength to strength. It's the simplest one I could see doubling or tripling. But, you know, FAL, it's just for now. And I know Rory's right. Compute will become a commodity in three to five years. You just can't get compute today. So FAL, Fireworks and others, I have long-term concerns about these businesses. Fireworks was hacked twice this month. It's brutal. But this is unstoppable. And in venture, sometimes we just have to be tourists. We have to be part of a wave. And if you make me pick, I'm going to pick FAL because the underlying trends for the next two to three years. And I know some of the guys at Altimeter and others, I think we can flip this at 40 billion worst case. So we have more than our pref. So I'm going to do this one, but I'm cool. Unlike all the other weeks, I'm good with all three. I'm good with all three. I just don't think we get the concentration for the fund that we want. I remember Peter Thiel and my other good buddies at Founders Fund said, we got it. We got to pick, but this is the toughest week. These are good ones. The reason is they all have the right trends going for them. You know, maybe FAL with the 6% gross margins, that might be an issue, but...

Rory O'Driscoll: Is that a fact or just a snide comment?

Jason Lemkin: I don't know what it is. It's going to be pretty low. These are good ones. That's what I really believe. But obviously, FAL might be the least durable of them, right?

Rory O'Driscoll: I could flip it around and say, if we really want to go long in our Evergreen fund we just set up, we're going a little counter to the other funds. We're going to Evergreen. We can't do FAL because it's just unpredictable. But Zipline and Revolut are enduring properties. Oh, I'm starting to feel really uncomfortable about where this market's at. I want security and I want safety. And I think Revolut is the best asset by far here with by far the best founder of our generation. Give me Revolut at 115 every day. Let me compound for 10 years and I'm calling it a day.

Harry Stebbings: Jason just wants to put his money in a preferred stock of a bank. Funny enough, yeah, because, yeah, they're super interesting. I mean, look, to some extent, these were very different. I mean, they're all interesting and high quality assets, very different. I mean, let's just go to Zipline, biggest attraction of Zipline, N of one. You know, people know what they're doing, but they started off doing drone delivery of medicine in Africa. But the big business now is doing drone delivery in the United States. They have a contract with Walmart. They're doing a ton in Dallas. They're rolling out in other markets. That's the real positive here. And there's just a huge shit ton of logistics to make all that happen. The scary thing is you're probably getting, if they've done 3 million deliveries in the U.S., you probably only get $5, $10 a delivery. You've got to do a lot of deliveries to make this work. Right. So this is an amazing company. I've not seen the numbers, but my guess is you don't get there on a revenue multiple. You get there on the this is the next infrastructure play. And if people are willing to have drones drop stuff everywhere, you can make out like a bandit. And it's a big story and a plausible story. But at 21 billion, you're really leaning into that Walmart contract. So that's amazing, but scary.

Rory O'Driscoll: Yeah, that was that was sort of the Waymo. That's why I brought it up as a comp. They make sense if you ignore a bunch of things. It's hard to argue with the market position and the technology is exciting, right? But the math may not pencil out as a math pencil out to get our 3X. Agreed. And then FAL almost the opposite. It's not an N of... They have a differentiated position in video delivery versus more generic inference-based hand and fireworks and all those. But yeah, in that broad market of people doing that, you're right. The argument, Yes, there is. What you said, I think, Jason, you said the trend is your friend. Right now, the total inference market is kind of third-party inference market, in other words, excluding the foundation models, is $5 billion plus or minus, growing like a weed. So you probably get a couple of good years' growth here or there. But you would be scared that the dynamics of that industry, which is wildly attractive now, could change at scale. I mean, you'd be tempted to do that one just because it's worked so well. I mean, we looked at these inference providers early on and incorrectly about the long-term structure of this industry. It turns out you might be right on that in the end. But when demand is trebling, quadrupling every year, no one gives a shit about the long term implications. So when you look at that, you know, so at one billion, two billion, three billion, they've been great. And at 16 billion, you might be closer to the end than the beginning. So you are driven back to Harry's choice, which is maybe I'll just put it in Revolut, who are busy destroying, taking away the business of every European retail bank and taking their young customers. And the attraction about that, to your point, Harry, about the next 20 years is when you look at the demographic of their customers, I mean, Revolut, even though we call it a bank, it's mainly money movement. It doesn't do a ton of lending. But over the next 10, 20 years, all those customers who are 19 to 25 today are just going to get older. They're going to want mortgages. They're well positioned to be the biggest bank in Europe. They are obliterating European incumbents. We will see market share for Revolut, unlike we've ever seen for any historical incumbent. And we'll see a product suite much broader. And so both the depth of market and the product suite they have means that I really do think there's this as a 4X from here with the downside that we have key man risk on Nick. Do not let him leave the building. I want him near no roads, cars, any moving objects.

Harry Stebbings: OK, Jason, you mentioned Fireworks and the security incident there. Do you want to touch on that? Or we can touch on the security M&A because CrowdStrike and Palo Alto have been making...

Jason Lemkin: Well, I think the Fireworks thing is interesting from a security perspective. It's niche, but, you know, Fireworks has had two major breaches in this month or in the last 30 days. It's pretty bad. Two things that are interesting to me. One is that everyone's trying to steal API keys for inference. They're all trying to steal Anthropic and OpenAI keys and they have massive swarms of bots. And everyone's been hit by this, right? Railway was hit by this. North Zone or Northgate, the other competitors hit by this. They've been hit by this. And the genesis of this is trying to steal any Anthropic or OpenAI tokens you can. And I, as an individual user on Ultra, on Claude, my spending, I didn't even know, was set at $100,000 by default. So if someone stole mine because it was on Fireworks and eval, they could have charged $100,000 in minutes. That's what they do. These crime syndicates steal these, they scrub it, you can get cheap inference, and there's so much demand for it, as we're talking about, right? They can spend that $100,000 in seconds. It's gone. And that's what happened. And Fireworks was hit twice. Everybody's been hit. And any way you can get inside of someone's infra and take these keys, people are going to do it. It's the most lucrative criminal trade you can do right now, right? It's better than selling Rolexes. You still have someone's wrist in London. This is the crime of the year. And it's only going to get worse. And I know a lot of folks, I know tons of folks that have been hit similarly. I wouldn't say tons. I know multiple other folks that have been hit similarly and you're going to be hit and it's exhausting. And it's just beginning. And the flip side is, you know, it seems like going also going back to FAL, like this is terrible, right? But no one can leave. You can't replace the capacity. Where's Harvey going to go, right? Where's Stebbins, O'Driscoll and Lemkin's startup going to go? Like you just can't, all these guys just have seven figure up contracts, there's nowhere to go. But boy, everyone's going to get just more and more sophisticated to just steal your API keys. Can Harvey trust them now, right? Harvey runs on it, that they've trained their models, they've done all this, but what are we going to do? And it's just very interesting and very complicated if even Fireworks couldn't do anything about it. That was point one. Was there a second point? Oh, just that it's going to happen to everybody, man. Listen, Fireworks is not that old a company, right? So maybe as embarrassing as it is, their SecOps and DevOps team is a little bit immature, right? I guarantee you it's better than 99% of SaaS companies that just laid off their whole SecOps team last week as they're trying to get fit, right? Just everybody's going to get hit and everyone's data is going to get stolen. And again, it's great for the big guys. It's great for the big security companies. It's great for folks figuring out because it's just, I mean, everyone got hit in Black October or whatever we called it, right? Everyone is going to get worse with these swarms. Everyone said they got hit by swarms of bots, swarms of them. It's something we just haven't really seen before. Fireworks is, and you know, maybe they didn't disclose everything that happened, but they were pretty clear that these swarms are difficult to mitigate.

Rory O'Driscoll: Yeah, it's terrible. You know, this and outages were the things I, that's why I wanted to sell my last company. It's so stressful.

Harry Stebbings: Wiz said nine of the leading AI developers disclosed it as swarming incident in October alone. Nine. Wow. Unit 42 said bills are $1 million before detection. If it's 100k by default for like basically a prosumer key, pretty easy to steal a million pretty darn quickly, right? Guys, which M&A is the most interesting do we think? CrowdStrike and Palo Alto, Dialpad, Fox and Roku, the potential of Silver Lake and PIF taking out Unity?

Rory O'Driscoll: I think you have to break them up. I think you highlighted two categories of M&A that are kind a very classic, bigger company acquiring an adjacent product. And that's the CrowdStrike Palo Alto. They're all doing kind of small, you know, 400 million plus or minus, perfectly great outcomes, you know, products in agent security, which totally makes sense. You're the end-to-end platform. Agent security is the number one issue. I mean, you know, CrowdStrike and Palo Alto are consummate acquirers, and they know their job is if the new security issue is agent security, then just go do acquisitions, deal with the problem. So it's kind of in the category of incredibly obvious. I think one of my colleagues had looked at this space, and there's typically three or four companies in the space. The trick is to buy the hot one, get intercepted by CrowdStrike or Palo Alto fairly quickly. So that made sense. And then the same thing with coding agents, Meta and OpenAI buying adjacent kind of products all about the software development lifecycle, which is all just being redone from zero. So I think those two groups of acquisitions, the cyber and the coding agents, are very classic incumbent buys product to meet the needs of an evolving technology market. And it all made total sense. And great to see, because, you know, there's been a dearth of venture M&A. And it's nice to see, you know, these guys just coming in and making good offers. When you get a Dialpad buying ADA for $400 million in stock at a 21 valuation, if you're the ADA investors, are you like, yay?

Jason Lemkin: I think disclosure, we actually also sold a company to Dialpad in the past. So I have an investment in Dialpad. And we actually had a competitor to ADA, which we sold to Zoom three or four years ago. So the good news is I have some form in the space. I think if you're ADA, you are a very good pre-LLM chatbot, services chatbot, right? So the problem is you're up against the fact that you had a prior generation of technology. Maybe you've replatformed to an LLM first technology, but you kind of probably lost the wind out of your sails. So your ability to now compete with, at some level, Sierra, maybe Decagon is just hard. So I think getting acquired as part of a bigger company makes sense. You know, it just depresses me a little bit related. It's related to this. We can talk about the deal. There was some Mark Andreessen clip this week about it, and it really resonated with me, which is just, you know, when maybe a year and a half ago, folks started talking about AI native startups, it kind of triggered me. I don't really get triggered, but I mean, it got triggered to me. It's like, what magical sauce do they have using GPT-3, right? Well, these kids are so brilliant because they grew up in the age of AI. I'm like, I think a smart CTO or two can figure this stuff out, right? And indeed they can. But as we as we're rolling into 2027, guys like Ada, I'm just so disappointed that these non-AI companies can't get their acts together. They can't run their companies differently than 2021, 22, 23. They can't move faster. Their teams are stuck basically shipping at the same rate. Hooray, Bolt and LLM on. But look at poor Canva, right? Too effing slow. Everyone's too slow. And, you know, this isn't a bending spoons deal. But if you can't accelerate your team, you got to find some sort of, I guess, soft landing. I, you know, I added this to the list because everyone said this was an amazing exit. I don't view it as an exit. If there's no liquidity, I don't think it's technically an exit. It may be the right thing for both set of investors, right? Dialpad gets another player probably with 50 million of revenue that's somewhat enduring and some folks. But man, I'm just bummed that people can't get their act together. It is really true how much effing faster, quote, AI native startups are than four or five years ago. And it just, I just did an investment this week and you could pick at it a little bit. I love it. But man, the rate that they're pushing out software is maybe the fastest of anyone that I've seen. And just culturally, you know, for your portfolio, 1231 might be the time you got to kind of give up. You had two years and, you know, you get these email updates. We're going to put together next year an AI native team internally. I mean, that was your 2025 plan, guys. All these CEOs and startups, they have the right ideas. They all get it. They're just too slow. And I'm just about, I mean, I kind of have given up, right? So is this an exit for the ADA investors? I mean, I don't think it is, but it's probably the best option that's out there, right? Craig's a great CEO, right? Dialpad will find its way to an exit. They're probably at 600 million or something like that, right? It's still going to be brutal in today's IPO world, but at least they'll find a way to an exit. But man, no one can. They can't. They just can't move. They can't move like the kids these days. And kids could be older. Like it's actually not even an age thing, but it is truly a generational thing.

Rory O'Driscoll: If I was Orlando Bravo, Rory, I would be paying 50 million bucks a year to Mr. Jason Lemkin to come in and talk to our CEOs about how to make our very monolithic, old, stale organizations, AI first, make every CEO see what Jason sees, because I think that'd be the most valuable $50 million any large PE fund will spend.

Jason Lemkin: Yeah.

Harry Stebbings: Oh, I thought you're going to say you're going to have him talk to all the companies you want to acquire and make them so depressed about their prospects on a standalone basis that they'll sell to Orlando for three times runways.

Rory O'Driscoll: Very possibly. I mean, that would be great too for Orlando. You know what the problem is too? I've been thinking about this a little bit. Sorry, you wouldn't have to go down this rat hole for too long. Then you might think, okay, so that's true, right? The pre-AI native companies just can't get there fast enough, right? But why don't the AI guys just buy them, right? Why don't you just buy them, buy the contracts, buy the customers, and have your kids just buy them out, right? And actually, the problem is the AI native guys are just growing too quickly. It's not worth it. It's never worth doing. It's not worth it. It's not worth it. You both have to be kind of growing within a band for this to be worth it, right?

Rory O'Driscoll: It's not worth it because the truth is you buy someone else's old contracts and then you incur all their problems. And the customer is never grateful for you for solving it. It doesn't matter. So I agree. The point is, it's what you said, Jason, for all these older customers. It really is march or die. You either get with the program or you're toast. And it's not even interesting to say it anymore. It was interesting two years ago when you started saying it. Now it's just a given. So let's move on.

Jason Lemkin: OK, it's like shape up or shape out. Well, Cloudflare has kind of done that. I mean, they shaped up. 20% layoffs earlier in the year and they're crushing it at 39% growth. And then you got Freshworks crossing a billion with 30% for your employees. God, efficiency at its finest, huh? Palantir at $2 million per employee. It's very enterprise, but it's $2 million per employee, growing 98%. So we just didn't need the people. I think AI may be the excuse, and we didn't need the people. And AI opened our eyes to the reality of it when it was always staring us in the face in 2021, working 20 hours from home and doing our four side hustles. It was always true. It's just AI made it clear. I think that's the real truth.

Rory O'Driscoll: Yes. I mean, to some extent, there is probably AI leverage. But I think the real truth is, yes, especially when you've got that kind of growth. If you've got a giant secular demand pull, you don't need to do all the marginal things that you were doing in 2021 to make revenue happen. You just got to staff the machine and take the business as it comes. And therefore, you can have compelling efficiency. So I do agree. I think it is eye-opening how efficient some of these companies have been able to be, which makes sense. I mean, if you have $2 and $5 million dollar contracts like Palantir, and if revenue doubles, you probably can't hire headcount fast enough to catch up. You literally can't stop your margins going up, which is a wonderful place to be.

Jason Lemkin: The one interesting just for Cloudflare, we don't spend too much time on it, and even Twilio. Right. These are not brand new companies. Right. We're just talking about an AI native versus not. Cloudflare, maybe a more agile company, still founder run, than Twilio. Right. Which is not that. I mean, who knows what it'd be like if Jeff was still there going when he was on our show? I think it'd be even better. Putting that aside, sometimes you wonder, how big a deal are agents? Not AI, not LLMs, but agents, right? It's still in some ways niche. I run everything on agents, but it seems niche. But this is what's fueling Cloudflare from 20-some-odd percent to 39% growth at almost $4 billion in revenue. It's agents. And it's agent-expended Twilio too. And in some ways, for 2027, all I want to talk about is agents. It's just what's driving it. We had LLMs, we had inference. Those are good ones. I know we just did Fall. I feel good about the deal. It's fine. It was a good 2026 deal. But all I want to talk about is how agents are changing buying, building, sharing, learning, because it's going to be the majority of everything in our space. Agents are going to do it all. And Cloudflare is a public beneficiary of it. So going forward for the fund, if it's not an agentic beneficiary, I don't want to hear it anymore.

Harry Stebbings: Is that why Atlassian falls after it warns on seat and subscription growth? Is that it? If it's not agentic, I don't...

Jason Lemkin: Yeah, listen, we all love Mike, but his idea that was how critical the front end and the UX is on the 20VC, I just didn't love it. I mean, agents don't care. They don't care about your UX and your UI, and they don't care about any of this stuff. Humans do, but they're a declining percent of everybody's user base. The percent that are humans is declining. Even in vertical B2B, it's declining.

Rory O'Driscoll: Yeah, I mean, you talk at last year, and they had the April of last year, the world is ending, and then it exploded in the back half of the year. Probably a relief rally. And now it's a little bit like, OK, you're not dying immediately, but the new trend is not your friend because the new trend is agents, not engineers. And that means the seat license thing is brought into question. But still up on the year.

Harry Stebbings: Jason, you said about Canva earlier in a challenge bucket, as well as Figma falling below $10 billion for the first time in a long time. I think today it's about $10.2 billion. Any thoughts there?

Jason Lemkin: Well, my meta thought is, and again, I don't want to talk about politics. Well, we have a new Congress and we're going to have a new chair of the banking committee and others. We haven't had a change in the executive branch. I am worried even with that, antitrust gets harder. I mean, Figma, listen, I know maybe Dylan's happier running the company. He may well be, right? You know him, Harry. I don't know him. He may well be, right? But man, it would just eat at me. Not every day because you got to move on in life, but we've now fallen into the single-digit billions. When I had $20 billion plus a big, I think a big package for him and others, right? Plus instant liquidity for the investors in what, 2022? I mean, this is just a tough one on the lifetime IRR, right? And do you really think you'll get back to $40 or $50 billion? Do you really think agents are going to be using Figma? Even though the numbers are great for Figma, right? The trends are not ideal. And it just, so I just worry antitrust is going to get harder and that we had this brief window where it was good. And if it gets harder, man, it's just a bummer for everyone in the venture ecosystem. It's a bummer.

Rory O'Driscoll: I agree. At the same time, just to commemorate success, I mean, you are dealing with a 40% plus or minus revenue grower, very strong free cash flow, even though they're still happening positive. So the trends are good. And the whole hit was because they're spending more on AI. So that's going to have more gross margin hits. So yes, I agree. It's a thing they tell you when you have these M&A discussions and someone says the old boring statement, but it's actually boring because it's true. Hey, you're getting an offer of X now. If you turn down X, you could work for the next three years, do an amazing job because Dylan has done an amazing job. Grow your damn company 40% a year. Get it to free cash flow positive. Get the damn thing public. And at the end of that, you're going to be worth half what you are today. You know, no one ever said capitalism was fair or easy. And that often is the argument for taking that preemptive offer, which obviously they did, except for the government wouldn't let them. But you're right, Jason. It's going to psychically hurt. I don't know well enough to know how it gnaws at him. But yes, I'm doing all this to get back to half what I had for free in 2022.

Jason Lemkin: It's also really hard when you go into these companies, if you visit them, right, you'll see it really is hard to retain people. It creates a malaise over it for the top performers, right? You can fix it with RSUs and you can fix a little bit with additional grants and targeted stuff. But there is just this malaise at folks. I mean, Figma, like, OK, we can talk. I want to talk about a second point about whether seat businesses are stable. But yeah, almost 40% growth at its scale. You can't argue with it, right? It's S tier. But with the stock so far down, this malaise sets in. It sets in. And as founders, you can hunker down. I'm still worth a billion, right? Or whatever, $500 million to it. What the hell does it matter? It's not liquid anyway, right? This is my life's work. But man, that malaise, it's just hard to pull out of it, right? And it's hard to attract new people, right? So you double down on the existing folks. And I don't have an answer to this one when the malaise sets in. It's just tough.

Rory O'Driscoll: The one thing I would say, Rory, listen, again, I'm not an expert in the public markets. I'm not even an amateur, but I truly believe if you look at all the most impacted companies, right, they are seat-based ones that the markets do not believe will benefit from agents and AI. And I believe Figma, unless it radically changes, it's going to be in the doldrums, relatively speaking, right? They are multiple still like seven or eight, but it's going to be in the doldrums because people believe seat models at Monday, at HubSpot, they're just terminal. The markets believe these companies, not that they're going to die, maybe terminal's wrong, but that more and more is going to be agent driven and they'll bid up Cloudflare and Twilio, well, you know, moldy oldie Twilio. And I don't see any way that the seat-based guys are coming back.

Harry Stebbings: But Jason, okay. So you are the new CEO of Figma. What do you do differently then? I hear all you, what do you do differently?

Jason Lemkin: Well, okay. First of all, I think I knew like 10 months ago, right? When the world changed. I'm not close enough to do Figma today, right? I will say this, the agentic design, the ability to go into an agent, into Claude, into Replit, into whatever, and say, I want a perfectly designed end-to-end experience for my app. That does not exist today. Design mode in these apps are a joke. I use them all the day. I use Replit's Canvas design today. It's a joke. Claude design is really neat and it's built in. It's still kind of a joke. Lovable and Replit are both at a billion. They are great tools for product people, but for design, they are a joke. So it's not too late to do that, but you would have to just own it. Like I would go all in on agentic design. We will deliver, you know, a notion. I just pick notion because it's famous for, we will build you agentically, your app, every page, every element of it will be as good as Notion or better using our AI and our agents. And it's going to cost us a lot of basis points. It's going to cost us a lot of gross margins. And we're going to have to cut a bunch of things for our enterprise customers, which is where all our growth is. But if we don't do this, we'll be like Adobe. Like we'll have our role, our workflow role, but we won't, we'll be part of the past because agents will bypass us.

Rory O'Driscoll: You know, we talked a little bit when Cloud Design launched. I generally think, and I use all these products every day. Don't get me wrong. Thank you for they exist. They are a joke from a design perspective. They're a C minus. So there's still a chance, but you can't do it at the Canva pace. I actually agree. And, you know, we've looked at the creative market, and I'm instinctively not creative. But one of the things we did was we worked with two or three graphic designers and literally watched them do their work and had them do the same task in Canva, Figma, and then some of the modern video editing tools. And it's exactly what you saw, Jason, is that when they fall into one of these modern ones that's very agentic based, it all just goes quicker. They just type in what they want, and it shows the node display. And when you just look at that flow, I mean, because then you ask them, well, what was the experience like in each of these three or four different products? And you get some version of it just happened easier. It was easier to launch and just do it seamlessly with the agent. And you didn't get experience, isn't it? Figma make and Figma, whatever the other one is. Right. There's two different ones, depending on if it's kind of graphic or coding time stuff. But, yes, you have to start with the product and really make it for that customer, really make it super usable.

Harry Stebbings: Tim, is there any that I've missed? The wealth tax we can talk about? I mean, lucky us, all the billionaires can come back home. It is always fun to watch California. You know, the country swung Dem like we haven't seen Dem swing since 1974. It was a real, we're done with these people. We're voting for the other guys, top to bottom. I mean, you know, we're running, we might have a Dem senator from Mississippi. It's an amazing swing. And at the same time, California, the most prototypically Dem state in the country, at some stage said, yeah, we're doing all that, guys, but we're not doing this. We're not doing this wealth tax thing, which is really interesting.

Rory O'Driscoll: What's the takeaway from that then? I'm a Brit. I think one, there's generally a suspicion of propositions. We talked about this six months ago. There's generally a no bias in propositions because I think Californians recognize it's an incredibly stupid way to make legislation. So there is kind of default. And then on top of that, I think the no vote won the argument, right? I think they made good noise. And look, it's impressive because no one in 2026 is going to say, yeah, I love me those tech bros. I love me those tech billionaires. But as yet, you know, give credit to the Google founders. Give credit to Stry. They were able to make the case, look, this is just not good, right? You'll lose these people. They'll go to another state. You'll lose their income tax. You'll end up net down. And I think fundamentally, I always say that I think the voters are smarter than we ever give them credit for. And they basically said, yeah, we're going to get rid of the old lot. We're going to vote, make a clear signal we're done with what we have in Washington, but we're just not going to screw things up totally here, people. Because it was a no on that one. That didn't pass. And then the one that banned them doing it again, which was, I think, Prop 42 or whatever, the one after that actually passed, the one that says, not only are we not doing a wealth tax, but you can't try and do it again. So I think it was a very emphatic mid-50s vote, but it was a clear, please don't do this. So a big loss for the side that wanted to. I thought it was good.

Jason Lemkin: The only thing I might add is, you know, Sergey and friends did outspend the unions 10 to 1. I do think that impacts propositions, if nothing else.

Harry Stebbings: Hey, especially propositions about money.

Jason Lemkin: Exactly. I think it's a very, I think, I genuinely think this was very important because, listen, I, and again, I don't network the way Harry does. I don't have his network. But I spoke to two quiet billionaire founders, but not CEOs, who were both planning to leave. Not the Zucks. They were already planning to leave when this happened. And it's not just about this. It almost ties back to the beginning of this conversation with Sequoia and London. I mean, it's just a bummer if the best people leave California. It's even a modest bummer that Elon, politics decided that Elon left and went to Texas. It makes sense for his current businesses. It was going to happen anyway. It's a modest bummer. The more and more folks that just leave, it's not just billionaires. These are not passive wealth managers managing strings of laundromats. These are folks building, right? You don't want them leaving California. You just don't want it. And I genuinely believe that this past, it would have sent a clear message that California is toxic to the most successful entrepreneurs. Parker said it from Ripley and others. And I think it would have, I genuinely believe it would have had a domino effect. Not as big. It's easy to say things on Twitter, not as big as they said, but I knew folks already planning to leave. It's just not good for the center of AI and wealth. I mean, Anthropic's going to generate the average Anthropic employee $41 million in the IPO. The average employee. And that's average, $41 million. You want to kill that? You want that to go to Miami? You really don't. You really don't. $41 million, the average employee. More wealth created in this IPO. Far more wealth than any other IPO that's ever been created for employees. The founders are down to 1% each, 1 point something percent. But crazy, right? Crazy. $216 billion going to current employees and $160 billion in the pool.

Rory O'Driscoll: Wow, that's real money.

Jason Lemkin: Yeah, it's real money. Nothing like that. You don't want them leaving. I think Anthropic is a hot enough company, like it needed to be here, but maybe they could have moved. Maybe they still could have attracted some talent to the beach. It's possible. But I think even if the company doesn't move, people can move when they're making their tax decisions.

Rory O'Driscoll: So we agree. There's nothing more to say. It collapsed. As I say, super interesting to see it collapse in the context of an otherwise massive blue swing, which I would argue is, as I say, shows people were awake and voting for a clear centrist majority.

Harry Stebbings: They're all good. This $41 million average for Anthropic, right? Founders are each selling $264 million, which I don't think is a big deal, right? But it's pretty crazy.

Jason Lemkin: It is. Good for them.

Harry Stebbings: Wow. All right, boys. Rock and roll. What a busy week, huh? Thank you so much for joining me.

Rory O'Driscoll: No problem. See you soon.

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