--:-- Harry Stebbings: I think there is an opportunity to create a $100 billion company with a lot of specialized models in the inference. There's going to be a pullback. I'm okay with that because I think the long-term opportunity is so fucking big. There's just so much demand for it. It's like so large. I don't want to sell this company because I would just go and start Modal too. We've lost new grads going to, you know, some of the labs for like, like talking, you know, 20 plus million. I mean, these are exceptional people. Exceptional. This is 20VC with me, Harry Stebbings. And do you know what I wish I knew 12 months ago that I now know? The demand for inference, it's infinite. And we're seeing some of the biggest companies in the world be built in this space. Today, I'm thrilled to welcome one of those founders to the hot seat in the form of Eric, co-founder and CEO of Modal. Now, Modal just hit a billion in ARR. They just raised $750 million led by Excel. And they're priced at $15.75 billion today. I actually think it's a steal, by the way. But today, we dig into the inference market, what to come, what no one sees that everyone should see, and so much more. This was a phenomenal discussion with Eric.
--:-- [Ad break for Blitzy, Flex, and Vanta]
--:-- Harry Stebbings: You have now arrived at your destination. Eric, listen, dude, it is so great to have you on the show. You know, I was sitting downstairs with you chatting before and I was just like, you can feel when it's going to be a good show because people are themselves. And that was an amazing conversation. And we're going to have a lot of fun. So thank you for joining me.
--:-- Erik Bernhardsson: It's so exciting to be here. I mean, I've listened to so many episodes. It's kind of surreal to be inside of it right now.
--:-- Harry Stebbings: That's really awesome. As I said to you, you could have texted me when you started the company and maybe I would have been a little bit richer.
--:-- Erik Bernhardsson: Yeah, but you probably didn't know about me then.
--:-- Harry Stebbings: No, I didn't. But I would have welcomed investing in another Swede. I want to start with, I was talking to Zach Frankel last night. And he said about your childhood and like early indicators of success and like exceptional ability. How did you fall in love with technology? And for me as an investor, what would have made me excited in seeing your childhood?
--:-- Erik Bernhardsson: I started coding in 1992 or something like that. I was eight. I just loved it. It's one of those things where I realized you can control computers. I had a Mac Plus, one megabyte of RAM or whatever. I started making games. I mean, they were terrible. But I think back at my childhood. My friends were collecting hockey cards or whatever. That was their hobby. My hobby was programming. And now I make a lot of money from it. Isn't that kind of crazy? The fact that I can make a lot of money doing what was my hobby since I was eight? It's kind of nuts. So I'm just so grateful that I fell in love with technology and coding. Then I started doing programming competitions when I was 16, 17. So much fun.
--:-- Harry Stebbings: Modal was your first company. Why did it take so long?
--:-- Erik Bernhardsson: I think the consistent pattern in my life is I never had quite enough confidence in myself. A lot of what was missing was just the confidence, a little bit of money too. So it wasn't until I was like 36, 37 that I started Modal. I don't think I've ever wanted to necessarily start a company. It was one of those things where I just saw this big opportunity in the market. I almost thought to myself, why is no one else doing this? Such an obvious idea. That led me to think maybe I should start a company. Five years later, here we are. It's gone pretty well. In hindsight, maybe I should have started much earlier.
--:-- Harry Stebbings: Do you wish you had?
--:-- Erik Bernhardsson: I look at some of these Stanford kids and they're 21. I kind of feel like they maybe have too much confidence. They think they're going to take over the world and they're 21. I think the ideal age is maybe 32 or something like that. You have a little bit more experience. You know how to navigate people. You know how to hire people. You know how to fire people. All these things. I don't know if I would have been a good founder in my 20s.
--:-- Harry Stebbings: Before we get into the market, we were chatting downstairs. We often hear that founding companies is like eating glass. It's hard. It's painful. How do you feel about that?
--:-- Erik Bernhardsson: Dude, I hate that stuff. I don't get it. You're eating glass every day. Why are you doing it then? You expect some magic reward, some big cookie in the end. I never understood that mindset. I think it's this mindset that a lot of people have: I'm going to suffer pain, and then there's going to be this big reward in the end. I don't think about it that way. I enjoy every day I go to work. Of course, there are hard times. You have to have hard conversations, maybe fire people, maybe do hard things. But in the grand scheme of things, such is life. I enjoy life. I enjoy building a company. I don't think of it as one day we're going to flip this company. I hope to work on this for 20, 30, 40, 50 years. I'm having so much fun. I don't want to sell this company because I would just go and start Modal too.
--:-- Harry Stebbings: You really wouldn't.
--:-- Erik Bernhardsson: No, I don't. I don't think money necessarily makes you happy. I mean, a little bit. It's good to have some money. But I like building stuff. I love technology. I love coding. So much fun.
--:-- Harry Stebbings: You're such a Swede. Is that Swedish mentality?
--:-- Erik Bernhardsson: Maybe it is.
--:-- Harry Stebbings: Dude, never has an American come on before and said it's not about money.
--:-- Erik Bernhardsson: I mean, I do care about money a little bit. But maybe you're right. In Swedish mentality, it's self-actualization. Doing what you enjoy is the highest form of prestige in a certain way. It could be music, poetry, whatever. It almost doesn't matter.
--:-- Harry Stebbings: What do you do that you don't enjoy?
--:-- Erik Bernhardsson: I kind of hate fundraising, honestly. I mean, it's fine. I enjoy it when it's good people, but it's challenging. You have to say no to a lot of people. I guess that's a good problem to have.
--:-- Harry Stebbings: Oh, you have to say no to a lot of people? Oh, Eric, I'm sorry. That's a horrible thing. "Oh, Harry, you can only have 10 million, not 50 million." Oh, you've never done a deck, have you?
--:-- Erik Bernhardsson: I've never made a pitch deck, yeah. Every round we've done so far, I like to get to know people well in advance of raising money. Most recently we announced the D round yesterday with Excel. I've been speaking to Rich and Gonzalo at Excel for at least a year. At some point, we're like, actually, we could take some money. What are the terms? Let's discuss terms. And then it happened very quickly because we already had that relationship.
--:-- Harry Stebbings: How do you think about price optimization? Is it a game of getting the highest price?
--:-- Erik Bernhardsson: No, I don't think so. In later stages, it becomes a little bit more of a commodity, the money itself. But in the early days, for several reasons, one is that there's a misaligned incentive. VCs always want to put in way more money than a company needs. You just take on a lot of dilution. It's not good as a shareholder. The other thing is you actually want to hold back. It's often better to raise a lot less money at a lower valuation and then keep the VCs hungry for the next round.
--:-- Harry Stebbings: Is this not the generation, though, where actually capital is the moat and you need so much more money than you think? You said that VCs want to give you more money than the company needs. I thought AI was finally the output exhaust for venture dollars that was needed.
--:-- Erik Bernhardsson: I think there are times in the market where you are capital constrained. We have not been capital constrained for most of the time of the company. We've been extremely capital efficient. We burn only a few million a month.
--:-- Harry Stebbings: I respect for the money. You burn a few million a month?
--:-- Erik Bernhardsson: No, I mean, up until last year. Now we have to spend a lot of money on capacity.
--:-- Harry Stebbings: How much do you burn a month now?
--:-- Erik Bernhardsson: A lot. I mean, we actually are profitable on a P&L basis, but cash flow is quite negative because we have to spend a lot of money on getting GPUs and building out capacity. That is a different period in the company and how we think about capital. Capital is... I don't want to call it a moat because I feel like people throw around that word. Moat to me has a very strict definition. But it certainly helps. Capital helps at this point.
--:-- Harry Stebbings: What's the moat definition for you?
--:-- Erik Bernhardsson: Moat to me is you go read *Seven Powers* or one of those things. I love *Seven Powers*. It's a good book. But then people read that and they get delusional. They're like, "Yeah, we're starting this company. It has all these moats." You never have moats in the early days. Google could do anything they wanted to. What are the seven? It's cornering resources, market power, whatever. None of those things happen until you're 10 years in.
--:-- Harry Stebbings: There's an old blog post I always come back to by Ben Thompson. It talks about Snap and the gingerbread man strategy. The whole point is Snap doesn't have a moat. They just run faster. They're the gingerbread man. I think that's so true for almost every startup these days. You just have to move faster than everyone else. I actually think the three things that matter when I invest are: one, team. Are they top 1%? Two, speed of product decision-making. You look at Instinct today. The speed of feature shipping is very impressive. And three is brand. I think those are the three determinants of defensibility. It's a kind of package.
--:-- Erik Bernhardsson: I kind of agree with your point. I think brand... I don't want to call it a moat, but I think the value of brand has gone up a lot.
--:-- Harry Stebbings: Can I be a dick?
--:-- Erik Bernhardsson: Yeah, please.
--:-- Harry Stebbings: Do you think Modal has done well with brand?
--:-- Erik Bernhardsson: I think pretty well. I think it's coupled with the developer experience, the product, the website, the visual identity. We just did an event in San Francisco and I thought a lot about how we package it, the event, the visual look and feel.
--:-- Harry Stebbings: But do you think you have a bigger brand than Base 10 and Fireworks?
--:-- Erik Bernhardsson: I think we have really, really good vibes. I'm terminally online. People tweet way more about Modal. I think there's a little bit more of a community. There's much better vibes around us. But I am paranoid about those companies. I am paranoid about competition. Of course I track it. I see everything that gets tweeted about our competitors. Everyone wants to be a part of the community. You know what I think people misunderstand? I love Type Safe with Jev. Everyone wants to clone Jev. No one wants to get up on stage and wear a pink fur coat and just talk about the Jevolution in an unhinged way. That to me is brand. That guy is playing the game on a whole different level. I think it's so true about companies today. You have to think about that.
--:-- Harry Stebbings: Why? Because he's authentic and different.
--:-- Erik Bernhardsson: I think so. You just have to create a personality. You have to figure out what the personality of your company is and just be consistent. Create almost a sense of movement, a sense of community. This is something cool. People want to use you because you're one of the cool products out there. They're like, "Have you tried Modal? It's pretty cool."
--:-- Harry Stebbings: What has Modal done that Base 10 and Fireworks haven't to build that?
--:-- Erik Bernhardsson: I think we started with the developer experience. We had a very clear PLG product-market fit, product-led growth in the sense that people came bottoms up. They just sign up on a product. I think the consumer background of coming from Spotify is very important in how I thought about building what's now a B2B company selling tech effectively. It's a very boring category, but having personality and having a little bit of an edge is a big part of how you create that movement, that sense of excitement, and the feeling that you're different. I wanted that to start the moment you go to a website and the moment you try the product. You just feel that it's different. The magic moment.
--:-- Harry Stebbings: Can I ask you, we've spoken about three different providers there. Inference as a market has many different speculators commenting on it. When you look at the next five years, how does the inference market play out?
--:-- Erik Bernhardsson: First of all, I think inference is going to be an enormously large market. It's the new cloud, basically. But I don't think inference in itself is the only thing you need. One of the things I feel very strongly about is it has to come with a lot of other products. It has to come with post-training, sandboxes, agentic stuff, all kinds of other types of inference like low latency inference, batch inference. Building that platform—we've been working on this for the last five years. That to me is not a moat, but it's a very hard product to build, that infrastructure.
--:-- Harry Stebbings: Why do you need to have the breadth of that product set? Otherwise you're just in a compression layer.
--:-- Erik Bernhardsson: Yeah, because otherwise you're just selling a commodity product. If you're just selling tokens for dollars, there's no switching cost. People can just switch to a different provider. It's a race to the bottom. But if you couple it with all these other things—sandboxes, post-training, reinforcement learning—you can actually create a whole set of tools. No one wants to buy a single-trick pony. People want to buy a portfolio of different things. They want to buy a whole suite of tools that lets them build amazing AI applications on top of it. The infrastructure underneath is a lot of differentiation, a lot of staying power in the markets. It's very hard to copy the infrastructure required to build all of these products.
--:-- Harry Stebbings: What does no one see about the inference market that is very obvious to you?
--:-- Erik Bernhardsson: One thing people don't see is that in the long term, there is so much gross margin opportunity in this space because you can build all these things around it. All the sandboxes, the agentic stuff, workflows, post-reinforcement learning. If you do all those things, there is so much opportunity to make money.
--:-- Harry Stebbings: Is it a market that has software margins? Because we're looking at margins now in the 25 to 40 range for traditional players. Do they go to 70% as you own more and more of the stuff?
--:-- Erik Bernhardsson: I think basically no company today has software margins anymore. What you used to see in Silicon Valley 10 years ago with 90% margins plus, I think that's basically gone. The reason is almost topological. You have this stack of vendors. Today you have applications, models, infrastructure, cloud, NVIDIA. When a customer pays a dollar at the top of the stack, it has to flow through a lot of different layers. At every layer, there's going to be 20%, 30% gross margins. So there's a lot of margin opportunity and a lot of opportunity to make a lot of money. The space is so big, but you're also splitting it across a lot of layers in the stack. The 90% software margin businesses are gone. I think Modal has an opportunity long-term to get to 40, 50, 60% margins, but we're never going to get to software margins.
--:-- Harry Stebbings: What's a wild prediction you have on the future of the inference market that many people would disagree with?
--:-- Erik Bernhardsson: I think the inference market is going to split into a lot of different things because the market got so big. I don't think anyone expected it, me included, to be so big. It's 10x or 100x bigger than I ever thought. That means there's going to be so much room for specialization: low latency, high latency, various types of fine tuning and post training. I think there's going to be some wacky new technologies that let you do it with way less resources, new hardware, all kinds of different things.
--:-- Harry Stebbings: I'm really sorry. Does that not go against what you just said about the need to own it all and have that breadth of product? If it's so much larger that you need real specialization?
--:-- Erik Bernhardsson: Specialization by product. I think it's going to fragment into a lot of different products. We can build a lot of those products and host it all under Modal. That is very exciting because there's going to be a lot of different products that companies are going to need. For one product, they're going to need low latency inference. For one product, they're going to need batch inference. For one product, they're going to need sandboxes, which we have. For one product, they're going to do pre-training their own models. Maybe it's certain specialized audio models or whatever. We do a lot of stuff besides LM inference. That creates a lot of opportunity to basically rethink what a cloud looks like in the era of AI, deconstruct the cloud, and rebuild it for this new era of software.
--:-- Harry Stebbings: Earlier you said about building capacity with GPUs. What's it like doing that today? Is it as crazy as reports suggest?
--:-- Erik Bernhardsson: It is pretty crazy. I spent some time in March at GTC in San Jose. I would describe that as an open air drug market, but GPUs instead of drugs. You're running around talking to 500 different cloud vendors. "Do you have GPUs? Please." In the end you come out and you do a lot of deals. That's something we've had to develop the muscle for. I think part of the value prop of Modal is our customers don't have to think about that. We do the dirty work of doing all the GPU deals under the hood. We work with 25 different NeoClouds. Right now we control 0.1% or whatever of the world's compute. But my crazy long-term goal is as we control more and more of the world's compute, you can aggregate that capacity and aggregate demand on the other side and manage that capacity and demand extremely efficiently. That is something we actually think we can do. We can fill a big gap.
--:-- Harry Stebbings: What does that allow you to do, being that aggregation layer?
--:-- Erik Bernhardsson: We built a lot of our infrastructure ourselves. We don't use Kubernetes and Docker. We built our own file system, our own container runtime, our own scheduler, our own way of managing capacity. That enables us to treat all of the world's compute as one big pool of capacity. We already have many thousand paying customers, and over time it just grows. Each of those customers has very variable requirements. Their workloads vary over the day. They have bursts. Each individually, they're very unpredictable. But if you pull all of those customers together, you end up with a very smooth overall demand. That is something we can manage extremely efficiently. One of the value props of Modal, besides that we can scale up with you, is you don't even have to do capacity planning. Just come to us, we'll give you a hundred GPUs. Going back to TypeSafe, we talked to them a long time ago before they launched. They launched overnight on Modal and we weren't even aware of it. We just scaled up and gave them a ton of GPUs. It just happened automatically. That magic is something people really value with Modal. We can give them a lot of GPUs on very short notice. If you go to us, you don't have to lock up a rectangular block of GPUs over three years and know the exact number. It's pay as you go. You scale up and down. You pay per GPU second.
--:-- Harry Stebbings: How do you do GPU buying in terms of forecasting? Because you don't want to have an insane excess of supply just sitting on your books.
--:-- Erik Bernhardsson: Totally. The GPU lead times right now are about three to four months. We basically do a straight line or exponential line extrapolation. We look at an aggregate across all our customers. We have a very diversified set of customers. You can look at the demand in aggregate pretty well and predict based on monthly growth rates, which have been about 30% to 40% month-to-month for the last 12 months. You project that three to four months into the future, you end up with two to three X. You go out and buy that capacity and make sure to ramp up.
--:-- Harry Stebbings: Can you just buy that capacity?
--:-- Erik Bernhardsson: You can, yeah. I think there's a misconception that we're out of capacity. NVIDIA is shipping an insane amount of GPUs every month. I don't know how many hundred thousand Blackwells are getting installed. Prices are up for sure. You have to pay more to get the same amount of GPUs. It's an efficient market. But if you're willing to pay more than other people, you can get a lot of GPUs.
--:-- Harry Stebbings: Is there a price at which it doesn't make sense for you?
--:-- Erik Bernhardsson: Of course there is.
--:-- Harry Stebbings: But at what point?
--:-- Erik Bernhardsson: I don't think so. In fact, we're actually more long than we're short GPUs because we can charge a higher price to our customers. There's effectively a market price. It has different dynamics because we lock up longer term reservations and rent them out on slightly shorter duration. But if the underlying price goes up, people are also willing to pay more.
--:-- Harry Stebbings: What happens to the price over time? H100s were meant to depreciate and go down.
--:-- Erik Bernhardsson: I have no idea.
--:-- Harry Stebbings: Well, dude, if you have no idea, what am I meant to know? Did you see Jensen yesterday? He was in London, actually. Someone asked him this question. He said, "Obviously, supply is going to catch up with demand eventually. Then we'll see what happens with pricing. It might happen in a year. It might happen within five years." He said exactly the same thing I always tell people. Hardware prices are like gravity. Hardware prices always go down in the very long run. Right now we're in a supply shortage. That means prices have gone up. They may continue to go up for another year, two years, five years. I don't know. But eventually it will come down.
--:-- Harry Stebbings: How early are we? I run Instinct for everything. I have over 100 automations on Instinct doing things that are absolutely wild, from buying concert tickets to planning shows to helping with medication for my mother. The amount of compute I am using is Jevons Paradox times 100. If that is equivalent for many people in society, because it's accessible within WhatsApp, how early are we?
--:-- Erik Bernhardsson: I think we're very early. I think you're saying the same thing. Jevons Paradox, whatever. There's just so much latent demand for these things. Eventually we're going to start to run up against capital constraints. Interest rates are going up. We just can't build data centers fast enough. Maybe that's good. In a way, it's a guarantee against overbuild. But I also don't know if we can overbuild these things. There's just so much demand for it. I don't think you can overbuild in the next five years.
--:-- Harry Stebbings: Probably not, no.
--:-- Erik Bernhardsson: I think what could happen is people realize... Instinct is a good example. Allegedly, they don't charge or they don't make revenue yet. Clearly, Instinct can make a ton of money in the future. That's a dynamic in the market. There are a lot of companies that are not yet making money, and they're using a lot of GPUs. They just have to eventually start to make money. But that lag could take a while. We might run up against that.
--:-- Harry Stebbings: You mentioned the specialization that comes within the inference market, and we spoke about NVIDIA. We're seeing more and more specialization within the chip market. Is NVIDIA's business today stronger than ever, or actually weaker than ever as you see the fragmentation of the market into very specialized players from Cerebras to Etch to Olex to Fractile that weren't there before?
--:-- Erik Bernhardsson: I think you're trying to phrase it as one versus the other. My view is... I think Eric Vischer was actually talking about the same thing. All of these things are going to grow. I think NVIDIA is going to keep growing. They're going to keep shipping amazing chips. I think there's also going to be Cerebras and Etch and all these others shipping specialized chips. They're also going to grow. I think there's going to be markets for all of it.
--:-- Harry Stebbings: So why is Cerebras down 30%?
--:-- Erik Bernhardsson: I don't know. I don't really follow the stock market.
--:-- Harry Stebbings: You don't follow the stock market?
--:-- Erik Bernhardsson: No. I'm in a very passive buy-the-index approach. Mostly because of my own time. I don't feel like I have the energy to follow the stock market.
--:-- Harry Stebbings: To what extent is CUDA the moat that everyone says it is for NVIDIA?
--:-- Erik Bernhardsson: I actually think it's a little overstated. I don't think CUDA itself is the moat. CUDA is actually kind of annoying to work with. It's a pretty low-level programming model. But I do think the NVIDIA ecosystem is the moat. All the kernel optimizations and the fact that Torch always supports NVIDIA much better than anything else. The open source engines like VLM and SGLang, because of that, they always support it much better. So everything is NVIDIA first today. And that's probably going to continue.
--:-- It's funny, for the last 15 years, I've been saying, "next year is the year of non-NVIDIA accelerators." It never keeps happening. I'm always wrong. NVIDIA has just shown to be incredibly good at having that staying power and dominating the market. We'll see. There's Tranium, there's TPUs, there's AMD. There's a lot of other stuff that does look quite good, and they're catching up. But I still think they're quite behind.
--:-- Harry Stebbings: To what extent are the neoclouds a friend, because they're partnered with you in a lot of cases, or a foe? I had the founder of Nebius on, and he was like, "We're coming for the inference market. We need to own the full stack." I don't mean that against him, I totally understand it. But are they friends or foes?
--:-- Erik Bernhardsson: I feel like everyone in startup land is a friend and a foe at the same time. They have this weird sort of relationship with everyone. I think some of the top neoclouds, Nebius included, are trying to move up the stack. I'm personally somewhat skeptical. I think it's very hard to be good at your core business and also try to move into a different market at the same time.
--:-- Harry Stebbings: Why would it be hard for them? What's the bear case on them being able to move into the inference layer efficiently?
--:-- Erik Bernhardsson: I'm biased, but we spent the last five years building an incredibly complex infrastructure stack. I think it's very, very hard to replicate what we built.
--:-- Harry Stebbings: What's the hardest thing?
--:-- Erik Bernhardsson: All the code and everything around the file system, the container runtime, the scheduler. Building the system that can place millions of sandboxes every minute, scale up and down many thousands of GPUs, power hundreds of thousands of tasks running concurrently. These are very hard engineering problems. I'm an infra geek, I love that stuff. It's so much fun to work on it, but these are hard problems.
--:-- Harry Stebbings: Is Nebius a better business than CoreWeave?
--:-- Erik Bernhardsson: I actually don't know. I think they've both executed extremely well. I have tremendous respect for what they've done. I think at the end of the day, the thing I have the most respect for is actually more on the financial engineering side. They're very good at that kind of stuff.
--:-- Harry Stebbings: Why do you say that?
--:-- Erik Bernhardsson: Because I think a lot of the constraint for building a neocloud very quickly is on the financial side. You need to be very good at locking in a long-term customer contract, then raising a bunch of money against it, then buying the chips, then delivering the chips, and then paying off the debt over the next few years. Doing that sort of dance with the financials is an interesting game. CoreWeave has done it exceptionally well. It's a capital game, a financial game.
--:-- Harry Stebbings: When you move a layer beneath them, we spoke about Jev, who obviously worked with Modal. We've seen incredible movement from the open source community, which has been exciting. But then you also see Haiku and Anthropic's newest models being incredibly performant and incredibly cheap. What's the benefit of open models if frontier models are almost as cheap and as efficient?
--:-- Erik Bernhardsson: I think open source is always going to have great models coming out. Let's also remember that the open source models are all moving into licensing models. They're getting better at capturing the value of those models, and that means they're going to have more funding to train better models. I really hope there are going to be European and US models, because I don't think it's a good situation that we have so many Chinese models. I have tremendous respect for all the Chinese labs—they're extremely good at what they're doing—but I think it's good for the world if there's more power spread out.
--:-- Going back to the question, there are always going to be people who want to fine-tune, who want to have more control over their models, who want to tweak the parameters for low latency or high throughput. Open source plays a big role in that. It's like Windows versus Linux.
--:-- Harry Stebbings: With the greatest of respects, do you think Europe will produce a competitive open source model?
--:-- Erik Bernhardsson: Yeah. I love Europe. I grew up in Sweden. But I do think Europe struggles with accumulating large amounts of capital. China has done that really well—they've accumulated massive amounts of human capital. The US is very good at raising enormous amounts of money and training very large models. I don't know if Europe has either of those.
--:-- Harry Stebbings: Does it matter if NVIDIA owns the open source model layer in the US with first Poolside and now Reflection?
--:-- Erik Bernhardsson: I think NVIDIA is very smart to focus on the ecosystem, building up an ecosystem. That includes propping up a lot of open source models. They probably saw an opportunity to pick up open source models. These companies are very resource intensive, very CapEx intensive. It's smart of NVIDIA to buy some of those and sponsor them effectively in order to create American-built models.
--:-- By the way, I want to take back one thing I said. Europe does have an insane amount of human capital. What Europe is very bad at is aggregating them and putting all of them at the same company. That is something the US is very good at—inspiring a mindset of ambition and huge scale.
--:-- Harry Stebbings: To the point you said earlier about not having the belief in yourself—I respectfully think if you were in the US, you might have been surrounded by influencers that told you to start a company earlier.
--:-- Erik Bernhardsson: Yeah, yeah. It's almost too much on the other side. In the US, you're encouraged to leave school, drop out. Kindergarten wasn't worth it. Exactly, yeah. I totally agree with you.
--:-- Harry Stebbings: I do want to talk about models and Jev in particular. Are we seeing the unbundling of models on a per-function basis where Jev is obviously very good for its certain tasks?
--:-- Erik Bernhardsson: I think so, and I think that's a function of what I talked about earlier. The market for inference is so large. When a market is a billion dollars, you're not going to have too many sub-markets. But when a market is starting to get 10 billion, 100 billion, you're going to have a lot of different sub-markets. Jev does classification, regression type things very, very well. And there's a large enough market for that.
--:-- Harry Stebbings: Okay. Welcome. It's your first day as a partner at 20VC Fund. We're in the investment committee. We have the opportunity to invest in Jev's new round. What's the bull case for Jev being worth 100 billion?
--:-- Erik Bernhardsson: I told you before, but I think the brand, the community, and the movement around everything they're doing is so incredible. That to me is a massive asset in this new age.
--:-- Harry Stebbings: A billion company?
--:-- Erik Bernhardsson: I think there is an opportunity to create a billion-dollar company with a lot of specialized models in the inference space.
--:-- Harry Stebbings: You would have done it at a billion?
--:-- Erik Bernhardsson: I would have done it at a billion. I think there's a pretty big outcome here. Could be an exit, could be a public company, who knows? But I do think there's a lot of upside.
--:-- Harry Stebbings: Dude, I'd love to see him ringing the bell on the New York Stock Exchange.
--:-- Erik Bernhardsson: Yeah, fantastic guy. Love that guy.
--:-- Harry Stebbings: Is he great? I mean, his charisma—you have to create a personality around your brand. You have to create this visual identity. It's obviously not the visual identity I would have picked.
--:-- Erik Bernhardsson: I hear you, but I think then you should be louder, if I'm just honest, Harry.
--:-- Harry Stebbings: Modal? No, well, yeah, but you.
--:-- Erik Bernhardsson: Yeah, I mean, that's possible. I don't think there's a personality-led cult from Modal from your perspective.
--:-- Harry Stebbings: I think that's a fair point of criticism.
--:-- Erik Bernhardsson: I think I could be out there even more. I try to tweet. I try to blog. I've been kind of bad at that recently.
--:-- Harry Stebbings: No one gives a shit about blogging.
--:-- Erik Bernhardsson: Yeah, maybe. Maybe I just need to go more unhinged on Twitter. It's founder-led marketing, basically. In the early days of Modal, that was a big part of our growth—me just tweeting all the time about what we're building. I think that's really important. Every company has to find its own go-to-market strategy. In the early days, we spent a lot of time just talking to people on Twitter, hitting people up, telling them to try the product. Half of them ended up angel investing. They're now supporters of Modal. You have to lean into what you're good at. In the early days, I did a lot of shitposting.
--:-- Harry Stebbings: Do you know, for every follower that followed me before 50,000, I would send them a personal thank you message.
--:-- Erik Bernhardsson: That's amazing. You typed it out yourself?
--:-- Harry Stebbings: Every night from 1 till 2:30 AM. I used to send a personal message. I'd say, "I see that you're from Sweden. I love the Grand Hotel. Let me know when you're in London." I would send like 50 to 100 a night.
--:-- Erik Bernhardsson: That's dedication. That's amazing.
--:-- Harry Stebbings: No, but it was the customer acquisition flywheel. They would go into the office the next day and be like, "Wow, this guy sent me a message. You should listen to his show. It's pretty good."
--:-- Erik Bernhardsson: It's smart. I love what you've been doing in terms of building up this media brand. It's fantastic. Neil Patel has a great thing: "How can I 10x the customer experience?" Let's do it. Fuck it. Let's play a game. How do I 10x the current Modal customer experience?
--:-- I think the biggest thing we need is way more products in Modal. We want to create a comprehensive experience where anything you need to do to build an AI application should be a product inside Modal. The other thing we can do is hire way more field engineers and way more sales reps. We've been behind on that. We should hire way more people that reach out to you personally and say, "Hey, I saw you got started on Modal. I saw you're working in the bio space. How can we help you? Here's some bio examples—protein folding, whatever. We work with a bunch of other similar companies."
--:-- Harry Stebbings: You seem skeptical.
--:-- Erik Bernhardsson: No, I'm not at all. I'm actually just thinking about it. I like the product ambition, but as a European, I think... we're in the B2B space.
--:-- Harry Stebbings: But do you worry about being stretched too thin? To your point on why Nebius can't do what you do so efficiently—because you're so good and you spend so much time. As you expand into all the specialities, there are players in each of them who've been doing that for years. I'm like, "Oof, Erik."
--:-- Erik Bernhardsson: I don't think that's true. I don't think they're very good, a lot of them. But I sort of agree with your higher-level premise. If there's anything that's super critical and never goes away, it's prioritization and resource allocation. You can't boil the ocean trying to do everything at the same time. You need to be extremely ruthless. Having a multi-product strategy is a very hard balance. When do you branch out into a second product or a third product? It took us four years to see success with a second product, which was sandboxes.
--:-- Harry Stebbings: Four years to see success with your second product? But you're five years to a billion in revenue.
--:-- Erik Bernhardsson: Yeah. We launched sandboxes in 2023. Didn't see a lot of success in the early days. There was some success, it wasn't horrible, but it was a relatively insignificant part of our revenue up until summer of 2025. Then models—Sonic 4.5, one of them—got really good at generating code and building whole apps. And it just exploded. Sandbox today is a $300 million run rate business, about a third of our revenue. That's been a crazy journey.
--:-- Now we're thinking about the third and the fourth product. We just launched a training product. I'm super excited about that. Working on batch products, working on reinforcement learning. We're working on all kinds of other stuff. That evolution into becoming a platform is actually happening. If you go back to the very early decks of Modal that I put together for my own thinking, it was all there. We had this market map and all these products. It ended up being very different products than we thought, but it's so important for me to focus on a category and focus on a set of solutions, not just be a single widget vendor.
--:-- Harry Stebbings: What do you know about the sandboxes market today that you wish you'd known when you started and released the first product?
--:-- Erik Bernhardsson: It's one of those products. One of the benefits of being in infrastructure, but also one of the drawbacks in a weird way, is you kind of just have to trust your gut on what are important primitives and just build amazing building blocks. We're in the space of providing building blocks. We try to look at what engineers need and not listen too carefully, because they'll ask for all kinds of random stuff. We distill it down into what are some of the building blocks.
--:-- We put out a serverless function product in 2021. It saw success in 2023 with Gen AI inference. We put out a sandbox product in 2023 because we saw a lot of people using LLMs to generate code. And then it saw success in 2025, like I said. A lot of how we think about building products has always been: let's just put out good building blocks. And then it exploded.
--:-- To answer your question: reinforcement learning, vibe coding, background agents, and maybe some other stuff too in the future. Those were things we actually didn't anticipate. Infrastructure is often like that. We didn't anticipate Stable Diffusion when we started building our serverless function product. It just happened to be the killer app.
--:-- Harry Stebbings: What's your takeaway from that?
--:-- Erik Bernhardsson: The only thing that matters is you've got to stay in the game long enough for your timing to be right. We've definitely been extremely lucky in certain ways with timing. We put out products right before we started the company in 2021. Then Stable Diffusion and ChatGPT came out in 2022. We had really good timing with that. It created so much demand and we were very well positioned. But some of it is also about building products that you anticipate will be useful in the future, things you always wanted to see. You have to trust your gut.
--:-- Harry Stebbings: You said that about resource allocation being very important as you think about this breadth of products. Where did you allocate resources where, with the benefit of hindsight, you wish you hadn't? And how do you reflect on that?
--:-- Erik Bernhardsson: I think we should have allocated more resources towards LLM inference earlier. We were a little bit on the sidelines for a while. We didn't realize how big open source inference would be. We thought it would be a race to the bottom, just a commodity space. Then DeepSeek came out and we were like, "Fuck, we have to move very fast." So we staffed up a team immediately, went from one or two people working on this to 30 people 12 months later. Now we're one of the top three providers.
--:-- Harry Stebbings: Jason Lampkin, a dear friend of mine who I do a show with every Thursday, always says that we've now reached peak open source LLM inference usage. We're going to see frontier providers bluntly provide incredibly cheap products, which they are now. US enterprises don't want to use Chinese models, and that will continue. So with those two prevailing winds, frontier will actually resurge and we will see a reduction or plateauing of the open source LLM inference market.
--:-- Erik Bernhardsson: I think that's a little bit of a fixed pie size mentality. With all due respect, I do think both spaces will grow 5x, 10x, 20x over the next 12 months and beyond. It's hard to argue which one is going to be bigger than the other, but I think both will grow in orders of magnitude over the next few years.
--:-- Harry Stebbings: 5x, 10x, 20x over the next 12 months? For sure?
--:-- Erik Bernhardsson: Yeah.
--:-- Harry Stebbings: You just hit a billion in revenue. Well done. Does that feel pretty cool?
--:-- Erik Bernhardsson: It feels pretty cool. I don't know. I'm just a Swedish guy who grew up in a random place. For me, these numbers are absurd. But yeah, it feels great.
--:-- Harry Stebbings: It's so much money, Erik. You're so... I wasn't expecting you to be so likeable and cool.
--:-- Erik Bernhardsson: I don't know. It's a lot of zeros. How many zeros are in a billion? It's a lot. Your wealth manager will tell you.
--:-- Harry Stebbings: When you look at that, where will you be in 12 months?
--:-- Erik Bernhardsson: I don't know. What I can say is we've been growing. We grew 15x in the last 12 months. You can extrapolate that. At some point, markets just get very big and they start to slow down a little bit. But with the growth rate right now, the growth rates are not slowing down. We're growing 30%, 40% every month.
--:-- Harry Stebbings: Do you think you'll be at $4 billion?
--:-- Erik Bernhardsson: I hope to be way beyond that.
--:-- Harry Stebbings: With the greatest of respects, $15 billion then feels like quite a cheap price. I'm an investor, so this is now my ballpark. If you think you're going to be at $4 billion, say dropping $1.2 billion to the bottom line, then they actually only paid 14x end of year next year bottom line, 3x top line. That feels pretty cheap.
--:-- Erik Bernhardsson: I think it's cheap. I wouldn't do this if I didn't think we could grow and become a generational company. I think there's so much upside. I think this is one of the largest market opportunities that's ever existed. The demand for compute, the demand for AI applications, is just going to be enormous. And they're all going to need a place to run. I hope a lot of them are going to run on Modal.
--:-- Harry Stebbings: What revenue line do you not have today, or is tiny, that you think will be very significant in three to five years' time?
--:-- Erik Bernhardsson: That is a good question. I think training is something we just launched. I think that could be very large. I hope that could get to a $100 million run rate in the next six to 12 months. Post-training, similarly. Working on batch jobs. I'm very excited also about a lot of traditional data warehousing stuff: databases, workflow orchestration, feature stores, vector databases. There are just so many parts of this, and they all fit together very nicely. That's what I'm so excited about. Once you start building in this space, there are so many natural adjacencies.
--:-- This is a problem with me. I have no lack of ideas. At Modal, we have so many ideas of things we want to do. I would love to get into continuous integration. That's a very interesting space. Agent harnesses. Maybe we should train models. There are just 5,000 directions, and my ADD brain wants to run in all of them. You have to be ruthless with prioritization and only take on one or two things at the right time. But there are so many different directions we can go.
--:-- Harry Stebbings: It's amazing that your wife calls you for decisions. She must get a very incoherent answer.
--:-- Erik Bernhardsson: I know, I know.
--:-- Harry Stebbings: "What is this? There's this. I just wanted some curtains, darling."
--:-- Erik Bernhardsson: Yeah, with the curtains, I just say, "Pick one of them." We've seen The Simpsons where Rainer Wolfcastle becomes the president and they're like, "Which one do you want to pick, one through seven?" And he says, "I was born to lead, not to read. Number four."
--:-- Harry Stebbings: Can I ask, we've seen this real shift in emphasis and resource allocation from pre-training to post-training. How do you feel about that? Do you think that is the new normal?
--:-- Erik Bernhardsson: I don't know. I think post-training works because there are a lot of tasks that people do in real life that have fairly finite feedback mechanisms. Coding is a great example. You can do coding with reinforcement learning pretty well because you can run code in sandboxes. A lot of labs are running Modal sandboxes for that exact purpose. Cybersecurity is another area. Math, obviously, with Lean—we've seen some fantastic products. It's kind of incredible, all those OpenAI proofs the other day. Law, maybe to some extent, you can do eval.
--:-- I think post-training right now has such an incredible focus because you have all these tasks that traditionally only humans could do, but are actually well within reach for agents and for LLMs. But I don't know if it extends beyond that. There are a lot of tasks out there with way longer feedback loops that I don't know if post-training is quite within reach yet.
--:-- A lot of people ask me what's going to happen with software engineers in the long term. I think we're probably going to automate everything that an agent can do within 24 hours or a week. But engineers work on a longer timescale with longer feedback loops. I have a feeling that reinforcement learning is going to start to run into some limitations around that. But I've been wrong for so long, maybe I'll be wrong and it just keeps going. Eventually we can do reinforcement learning on things that take six months for a human. I don't know.
--:-- Harry Stebbings: What does the day look like in three years for an engineer?
--:-- Erik Bernhardsson: I'm extremely bullish on software engineering. I've been coding for 30 years and I've seen so many different changes: programming languages, the cloud, so many different frameworks. Every single time we make programmers more efficient, it just increases demand for software. There are so many parts of the world that desperately need software. I'm very, very bullish on software and the need for software engineering.
--:-- One of the biggest misconceptions from the outside is that development is about translating from English to code. That has never been the job of software engineers. It's to understand the requirements in the first place and be an interface between humans. You're building for humans at the end of the day, trying to figure out what that even means in terms of processes and workflows. That continuously moves up the stack. Back in the 60s, we used to write assembly and punch cards, then we moved to COBOL, then to C++, then to Python. Now we're using agents. That's definitely the biggest thing I've seen in the last 30 years. But we have many analogs and parallels throughout the history of software and computers. That makes me feel like software engineers are going to be fine for the next 10, 20 years.
--:-- Harry Stebbings: How much money do you spend on coding agents a month at Modal?
--:-- Erik Bernhardsson: I think half a million or something like that.
--:-- Harry Stebbings: How many engineers do you have?
--:-- Erik Bernhardsson: 150.
--:-- Harry Stebbings: Dude, that's so worrying. You should be token maxing more. There should be 10x that.
--:-- Erik Bernhardsson: Yeah, maybe. I don't know. Brandon McCall—did they spend 3x their human salaries on inference? Yeah, we're not quite there yet. But I will say our software engineers are extremely agent-pilled, including myself. I write code with agents all the time.
--:-- Harry Stebbings: If you're looking at an Anthropic IPO—and I'm not doing a Bloomberg thing pulling you in to ask what you think of the Anthropic IPO, I hate those—but I do think the motherlode, so to speak, is Claude Code. It's $60 billion of revenue. It largely dictates the $2 trillion price. You look at Marc Benioff, who says they spend 5% of engineers' salaries, $300 million, on Claude Code today. If that comes way down as efficiencies improve, that's a challenge. Or will that go up as it just eats more and more of engineers' workflows?
--:-- Erik Bernhardsson: It's just going to eat more. We've seen this so many times. You make something more efficient, it makes something more powerful, it just unlocks five new use cases. Demand just goes up in the end. That's the history of the last 50 years of computers and software. I wouldn't be here if I wasn't such an optimist. That's why I started a company. I'm the biggest optimist in the world about software and computers. I just love this shit. I think it's just going to keep growing.
--:-- Harry Stebbings: The data market is an interesting one. We have so many players that have scaled so fast.
--:-- Erik Bernhardsson: It's incredible. If I was 20 and I just wanted to make a lot of money, I would go out and start an environment company and just sell data to frontier labs. There is so much money to be made in that space.
--:-- Harry Stebbings: Let's go a layer deeper. What would you do next? Would you specialize on a specific market?
--:-- Erik Bernhardsson: The coding space is where you see the most demand right now. If you can sell code environments to the labs, you can make a lot of money. There's a big space in that.
--:-- Harry Stebbings: Still?
--:-- Erik Bernhardsson: Still, yeah, yeah. I meet startups all the time. I angel invested in a bunch of them. They're incredible businesses. My one piece of advice is: you make a lot of money today, but is this a venture fund? Do you want to get on the venture treadmill? I'm not sure. I think these are companies that are going to make a lot of money today. I don't know if they're going to make a lot of money in the very long run, but who cares? Take the money. It's great money. It's a fantastic business today, and that's all that matters.
--:-- Harry Stebbings: There are data marketplaces and then there are data and services. When you look at the leading providers, they started as data acquirers and just sold you the data. Now they've gone full lifecycle: deployment, implementation, evaluation, monitoring, with real enterprise hand-holding. They will be that partner to ensure full implementation. That's how you expand margin and have some form of business in the long term.
--:-- Erik Bernhardsson: For sure. I think it's going to be a tough business in the very long run. But today, you can have extremely good cash flow selling these data sets.
--:-- Harry Stebbings: When we think about that kind of implementation, working with partners so closely, you and Lin from Fireworks have said about the importance of owning your own intelligence. Can you unpack how this looks? Specialized models for companies—the jury is still out. You have Harvey who says it's fantastic and amazing. Then you have Legora who say it's ridiculous, the underlying models move so fast, it's the wrong strategy.
--:-- Erik Bernhardsson: For some stuff, it's good to own your own intelligence. For other stuff, I don't think it matters. We have a lot of customers that run proprietary models on Modal. Their customers use a proprietary model. I don't think it makes sense for everyone to own their own intelligence.
--:-- Harry Stebbings: Where does it make sense for you versus not?
--:-- Erik Bernhardsson: For certain use cases, you can take an open source model, fine-tune it, and get really good performance. The nice thing is you know what the fine-tuned model is based on. It's not going to change. They're not going to take away the model from you. It's nice to have that consistency and the ability to continue to tweak it without the underlying model changing, which has happened in some cases with the frontier labs. I support that.
--:-- But I think there are many other things that matter to people. Owning your intelligence is just one thing out of many. Latency matters. Cost matters. Performance matters. Hackability matters. Having a platform of a lot of adjacent services matters too. Owning your own intelligence—yeah, I'm supportive, but there are many other things.
--:-- Harry Stebbings: Isn't that kind of going against your business?
--:-- Harry Stebbings: No, I don't think so. I mean, I love the honesty, but dude, it would be in your favor to say, "Yes, every company is going to need it, and we're the partner to help you." I kind of teed you up there and you...
--:-- Erik Bernhardsson: Well, not really. If you think about TypeSafe with Jeff, it's a highly proprietary model. I want people to use Java. It runs on Modal. We have many customers that are hosting proprietary models on Modal, serving their customers. I'm very in favor of that too. The beauty of Modal is that it's a general purpose platform and we support so many different things. If you want to use open source models, great, we'll help you. Many customers build incredible AI applications on top of open source models, fine tuning them, reinforcement learning, with a bunch of adjacent sandbox use cases or training. But there's also a lot of companies that have built highly successful businesses—Suno, Runway, TypeSafe, and many others—running their own proprietary model on Modal, and their customers don't care. That puts us in a really good spot.
--:-- Harry Stebbings: I want to ask two more questions before I do a quick fire. Modal routing—as the dear Americans say—is that a defensible business? What do you say in the UK? Routing.
--:-- Erik Bernhardsson: Routing. I love that.
--:-- Harry Stebbings: Well, the original language of America just took ours and bastardized it. But yes, my question to you: is that a defensible segment of this value chain, or is it a commoditized product that everyone just builds themselves?
--:-- Erik Bernhardsson: I think it's possible to build a successful business in model routing. I think you can do that today as a standalone product. I wonder if long-term, it has to be part of a more comprehensive platform. At the end of the day, what these companies want is evals, ways to fine-tune, more control over performance, latency, throughput. It's one of those things that makes sense today. These are very good businesses. I invested in OpenRouter personally and they had a great outcome. I actually think they could have done even better on a standalone basis. But in the very long term, it feels like one of those categories that should really be part of a larger, more comprehensive set of tools.
--:-- Harry Stebbings: Congratulations, you're on the OpenRouter board and the acquisition offer comes in. Please make the case for why they would have rejected it.
--:-- Erik Bernhardsson: OpenRouter's growth rate, revenue, and frankly the brand—they have a really strong brand. There are 500 other competitors, but the space is growing so fast and there's so much revenue. I would have told them to keep going.
--:-- Harry Stebbings: Final one. I think a really telling question is: what do you believe that does not go in the favor of your business? For example, I think seed investing today is kind of dead and bullshit. This idea of "two on 10" or slowly build for 18 months—it's kind of bad if you want to make money. But it's great if you want to develop a relationship with founders. That goes against what I do.
--:-- Erik Bernhardsson: You're against the relationship with founders?
--:-- Harry Stebbings: No, no. I'm saying the death of seed investing—the "two on 10 and build for 18 months" is dead.
--:-- Erik Bernhardsson: I understand what you're saying. So what would yours be?
--:-- Harry Stebbings: I don't know. I think one thought I have is that at some point, this AI stuff is growing so fast and we're going to go here. Then there's going to be a pullback—20%, 30% in the stock market. Everyone's going to freak out and say it's the end of the world. I'm almost certain it's going to happen, but I'm so bullish because then we're going to keep going. So that would be one thing. There's going to be a pullback. I'm okay with that because I think the long-term opportunity is so big.
--:-- Erik Bernhardsson: Do you take secondaries?
--:-- Harry Stebbings: Very little.
--:-- Erik Bernhardsson: Why?
--:-- Harry Stebbings: I personally don't need a lot of money. I'm pretty happy with life and I have enough. So personally, I actually support it for my employees though. It's quite important as a founder that you make the equity worth as much as possible. One of the ways to do that, and to tell future candidates that this isn't just paper money, this is real money, is to have a precedent of doing employee secondaries. You can point to last round and say we let employees sell this much. Up to 10%. You have to have guardrails. You don't want employees to sell too much. You want them to still have a lot of skin in the game and be very incentivized to make the company successful. But I think it's a way to create a very liquid, hard currency out of the equity.
--:-- Erik Bernhardsson: I totally agree. As you think about a talent marketplace, it's ever more competitive. It's extremely competitive out there.
--:-- Harry Stebbings: Is it nuts?
--:-- Erik Bernhardsson: It's nuts. The offers we see—we've lost new grads going to some of the labs for talking 20 million plus. These are exceptional people.
--:-- Harry Stebbings: What makes an exceptional new grad?
--:-- Erik Bernhardsson: Just sharp people. I know it when I see it. They're extremely hungry, hardworking. They know everything about technology.
--:-- Harry Stebbings: Where do they go? The big labs?
--:-- Erik Bernhardsson: Yeah, the big labs. OpenAI, Anthropic. They pay a lot.
--:-- Harry Stebbings: Is that it? Is that where the talent comes?
--:-- Erik Bernhardsson: There's a few other ones, but mainly those people are known for paying a lot of money. And you won't pay that much.
--:-- Harry Stebbings: We pay a lot. We can go very aggressive. We want to be out there paying 95th percentile in the market. There's a few companies that are probably going to pay a little bit more. I think we have way more upside in the equity. Going back to what I said about secondaries, I think it's important for that reason—to create a real tangible value in the currency, in the equity—that makes our offers seem very strong. Plus the fact that we have a lot of upside. Our stock seems cheap. I kind of agree. There's a lot of upside in our stock. That enables us to not necessarily have to match with the labs, but to create a compelling sales pitch for why our comp package is basically better than the labs. We're willing to go very far to get the best talent.
--:-- Harry Stebbings: Okay, we're going to do a quick fire round because otherwise I could talk to you all day. You have a great angel portfolio—OpenRouter, you mentioned Lovable before. You can put all of your money into only one.
--:-- Erik Bernhardsson: I love Turbo Puffer. I know Simon really well, a Danish guy. He's got a Scandinavian connection. Just a fantastic entrepreneur. I just love the business.
--:-- Harry Stebbings: How big can that business be?
--:-- Erik Bernhardsson: That's a good question. It is somewhat specialized. They're doing vector databases. I think it could be a very large category. If I ran that company, I would have 500 different ideas of how to expand into many adjacent things around databases, data warehouses, other types of querying systems. It could be a large category.
--:-- Harry Stebbings: What have you changed your mind on most in the last 12 months?
--:-- Erik Bernhardsson: Probably the magnitude of the sandbox space. It's kind of insane. I look at the revenue and it just keeps going up. I keep thinking it has to stop, and I'm doing some sort of reverse psychology on the revenue because it just keeps going up. I'm like, what is going on? It just keeps growing and growing. I've been wrong so many times—in a good way. It's incredible how large that space has gotten.
--:-- Harry Stebbings: What do you think is the most overheated category within AI today?
--:-- Erik Bernhardsson: Oh boy. I don't know. I don't think anything is overheated. I will say one of the things that I'm a little nervous about is companies that are dependent on continual infusion of equity capital. I would not invest in them. There's a lot of them that I would be nervous about—anything where if there's a venture capital pullback, they will struggle to raise more money. I think it's important you raise every round as if it's your last round, and there's a real path towards commercialization and revenue.
--:-- Harry Stebbings: You got two kids. Biggest lesson on being a good dad and being a good CEO?
--:-- Erik Bernhardsson: Sometimes I feel like it's kind of similar. Setting them up for success in life. I always think about the right amount to push the kids. I'm not a tiger dad, but I think you need to push them a little bit to get them exposure. I don't want to create a situation where my kids come back to me and say, "Dad, I wish you'd made me do X." But I also don't want them to say, "Dad, why did you make us do Y?" So a little bit of pushing. I make them play piano. I don't know why. But I think it's a good way to learn something that I hope when they're 20 or 30, they will actually appreciate. They don't like it that much. But you got to push them a little bit, but not too much. My parents were very lax. I discovered math and programming, and they were like, "Erik, why are you doing so much math? You should go out and play like the other kids." In a way, I actually wish they would have pushed me even harder, but I pushed myself so hard anyway, it doesn't matter. So it's that right amount of pushing.
--:-- Harry Stebbings: Why did you push yourself so hard? You're actually from a nation where you are told that it's bad to stand out. I'm forgetting that word, but I had a Swedish girlfriend. Jante Law. Where it's bad to stand out. "Don't think you're special." Why?
--:-- Erik Bernhardsson: I don't know if that's true. I think there's a lot of misconceptions about Scandinavian culture. I do think there's a lot of respect for people who follow their dream and do things—whether it's music, writing books, making furniture, art, or being an entrepreneur. I actually think there's a lot of respect for it. This self-actualization and following your dreams is highly regarded. That's the flip side of having a very lax culture—you kind of pursue people to follow their dreams. My dream was doing math and programming. I love that shit. So I did that.
--:-- Harry Stebbings: Unless you're from Norway, where a tax structure exists that basically makes it impossible to start a company.
--:-- Erik Bernhardsson: Yeah, Norway has some issues. They also barely work.
--:-- Harry Stebbings: This is very true.
--:-- Erik Bernhardsson: But we do have a sovereign wealth fund.
--:-- Harry Stebbings: Yeah, they are rich. Thank God for that. Maybe it's like the first post-economic society. I don't know.
--:-- Erik Bernhardsson: Literally almost. In multiple meanings of the word.
--:-- Harry Stebbings: Final one for you. What are you most excited for? It can be anything.
--:-- Erik Bernhardsson: I look at drug discovery for chronic conditions. Drug discovery is one of the applications I think is so incredibly cool. I can't wait to take AI-generated drugs. I'm old and my skin is getting bad. Every time I drink a beer, I feel horrible the day after. Give me all the AI-generated drugs I can take. I want to live long. I want to live a healthy life.
--:-- Harry Stebbings: Do you think that is actually a realistic future?
--:-- Erik Bernhardsson: I think so. But with the FDA and other things, it's going to take a while. I think there's just so much incredible progress today in AI-aided drug design. There's so many cool things.
--:-- Harry Stebbings: Dude, I've so enjoyed this show in a way that I honestly wasn't expecting. You've been this fun, open, charismatic. You've been amazing. So thank you so much.
--:-- Erik Bernhardsson: Thank you so much for having me. This is a lot of fun.
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--:-- Harry Stebbings: While Flex runs your finances, Vanta keeps your compliance covered. When you're building a company, you learn that trust is what closes deals. You may have the best product, but no buyers will sign these days without proof of your security. Here's what happens if you're not prepared. A prospect asks for proof of compliance. The deal stalls when you scramble. Your engineer gets pulled off the roadmap to audit prep. Every enterprise conversation turns into this horrible fire drill. That's where Vanta comes in. Vanta is the leading agentic trust platform that not only gets you compliant fast with frameworks like SOC 2, ISO 27001, HIPAA, and GDPR, but keeps you compliant by continuously monitoring your controls. So your deals keep moving and your engineers keep building. Now, access the Vanta agent everywhere you work, even if your team lives in Claude or Cursor. That's why Vanta is trusted by more than 16,000 companies like Ramp, Harvey, and Writer. Prove you're ready for business and get $1,000 off Vanta when you go to vanta.com/20VC. That's vanta.com/20VC.
