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We have all been sold a lot of hypnosis around what's about to happen with AI. You're talking to somebody who is extremely suspect if anybody uses those initials. AGI.

Today we're joined by one of the greatest founders of the last 20 years, Mark Benny off from Salesforce.

When you look at other data clouds, Snowflake, Data Brick, Palanteer, Foundry, they're all in the three to 4 billion revenue. They're in my sites. Doctors who are using AI and they're so overrelyant on an AI that's inaccurate, they are giving their patients bad advice and becoming intellectually lazy.

Over the last 26 years, Salesforce has had more than 100 million people contact us that we've not been able to call back. We just have not had the people. This agentic sales is calling everyone back and having conversation. I don't think that there will be a piece of software that we sell that will not be agentic.

Soccer is a game played by 22 people and in the end the Germans win. In the same way, venture is a game played by 6,000 people and in the end Sequoia wins.

Ready to go, [Music] guys. I am so excited for this. And we have a special guest today. The SAS OGs are joined by the OG of SAS, Mr. Mark Benny off. So I'm so thrilled that we could make this happen. And I want to start with a really interesting one I thought which was Amazon's AGI head said there are just a thousand AI engineers that matter. And Mark I wanted to start with you on that one and say when you think >> AGI head that sounds like an oxymoron. So you're talking to somebody who is extremely suspect if anybody uses those initials AGI and you know I think that we have all been sold a lot of you know hypnosis around what's about to happen with AI and not that it couldn't happen one day we've all seen those movies you know Peter Schwarz who wrote Minority Report and War Games you know works for me he's our chief futurist but I ne you just realize that isn't the state of technology technology today. So, how about that?

>> What made you realize that? What was the penny dropping there? Because that that is >> I mean, I think that when you look at large language models, which is kind of the state-of-the-art of AI today, prompt engineering, which by the way was came out of our Salesforce AI research team, you know, large language models are two things. They are a finite set of algorithms, which have gotten a lot better for sure, you know, but incrementally better over the last, you know, 5 years. and to a relatively finite set of data that has come off the internet. And those two things together really have provide kind of the state-of-the-art lang large language models today. And when you work with these LLMs, it's very cool because you're like going, "Oh my gosh, it feels like very intelligent." Well, it kind of felt that way when I was using Eliza when I was like 16 years old on my TS80 model 1 also. You know, it was like, "Oh yeah, this was pretty accurate."

>> Yeah. It was like, "Oh, this is like a person." but it's not a person and it's not intelligent and it's not conscious and it doesn't have a childhood and it it hasn't suffered. doesn't have compassion like there's a it's not a it's not a being and I think that there is some you know uh hypnosis around kind of the state-of-the-art around AI and what is currently possible or what is about to happen and um I'm extremely suspect around that and I trying to bring people back to the reality of here's the current state of the art of AI which is amazing it is amazing but let's let's actually use it for what it can be used for and also realize, you know, the some of the the the major issues with it. And I thought I tweeted about this I guess about a week ago where I read these two articles about doctors who are using AI and they're so overreiant on an AI that's inaccurate that all of a sudden you know they are giving their patients you know bad advice and becoming intellectually lazy at the same time. And I think that is a huge warning sign for all of us around AI.

If we separate the finite from the infinite, the thing >> back to the AGI head. >> The thing that everyone feel the thing that everyone feels is finite is is talent. And Zak is paying up for talent like no one's seen before. You're seeing your mirrors getting offers at a billion dollars with bluntly very little to show for it. No disrespect to her, but other than the team. Um, do you feel the pressure to enter this talent buying frenzy in a way that we're seeing other large incumbents?

>> No. And we're not. And I'll say that, you know, we're very focused on really defining what is the next generation of the enterprise and really looking at what is working and what is not working and how do we go forward and you know tactics must dictate strategy over time in enterprise software. I'll just say like the first thing that we've been talking about now for only about eight or nine months is that we have help.salesforce.com and help.salesforce.com Salesforce.com is our agentic layer around our support and this agentic service means that there is an omni channel supervisor that is paying tension between my human support agents and my digital agents. And to that point, I've been able to reduce the number of human agents I have in support from about 9,000 to about 5,000. And why that's important is I've been able to take that headcount and then rebalance it into other parts of my company where I need more help and need more support because we're still growing. So I think that this is very, you know, exciting that it's a huge change in how our company is structured, how our technology is built and delivered to our customers. And we're customer zero. And let me give you one other crazy story to that point and you'll be the first ones to hear this story which is that and this is a little bit forgive me part of the story. Over the last 26 years Salesforce has had more than a 100 million people contact us that we've not been able to call back. They're just leads we've not been able to call back. We just have not had the people. That's just all there is to it. And it's kind of this funny thing. And you know, we have these people, we call them SDRs, you know, sales development representatives. And we just had to have that many of them. You know, we have like 15,000 salespeople, but we don't don't have that many SDRs. Well, we have this agentic sales now. And not only are we doing support, but this agentic sales is calling everyone back and having conversations with them and then deeply integrating it through the omni channel supervisor into our new agentic sales product which you're going to see at Dreamforce.

In your body language, you're saying you think you're going to sell a lot of software powered by Aentic AI in the next, you know, one to five years. That's is that the summary message here? Well, I don't think that there will be a piece of software that we sell that will not be agentic.

>> You're willing to say just as it was never on prem again in 2000, you're pretty much saying it's never nonAI agentic in 20125.

>> When you get to Dreamforce, you'll see that our our promise that humans and agents will work together. It's not just in our sales cloud. It's not just in our service cloud. It's not just in Slack.

If we look at the impact of AI today on the business, it hasn't maybe led to the lift that one would think so far. Do you think that's fair? And how do you think that changes over the next year?

>> It's so untrue and that's the funny thing. You know, here's the thing. Number one, our AI is part and parcel with our data cloud. So our data cloud, love it or hate it, the idea that you need a data cloud that's federated to all of the data sources in your company and why that is so important so that you can get all your data harmonized in one place which is why we bought Informatica also so that everything is together and now the AI can be more accurate. Go to the front of my website and you'll see agent force now in the front of our website. It has done as many customer interactions as our support agent. Why is that? Because we put our whole website into our data cloud and now people are just using this agent at the front of our website instead of clicking all the way through the the website. It makes total sense, right? So that idea, this is really important. The data cloud and AI together now is more than a billion in revenue. We talked about that on our last earnings call. It's our fastest growing cloud product whatever ever you know in 26 years and we've talked about that we have thousands I won't go through the exact numbers of customers now on agent force and the number of deployments and all of these pieces. So this is a product that a year ago we hadn't even announced. This is a product that wasn't even shipped until November of last year and that customers are still getting their head around. What software in the history of enterprise software has ever grown at that level of scale? I would cite to you. Okay, Harry, none. And I will say that this is incredible. Now, you can talk about any other new company whatever or existing. We can go through whatever it is, but this is a company that this is a company. This is a product that's breached a billion. And even when you look at other data clouds, you know, like a Snowflake or a data bricks or even a Palunteer foundry, they're all in the three to four billion dollar revenue level. They're in my sights. So, you know, I am I am on it. You know, I am like the guy in Star Wars, you know, by favorite movie in my TIE fighter, stay on target. I see where I'm going. and data and AI. This is like a huge focus of the entire company and our products and the fundamental aspect of humans and agents working together. So that's that's how I look at that. So thank you for letting me address that directly

>> when you're looking from the TIE fighter. What do you think of Palunteer's growth? Like what do you think just how do you think about it from the Salesforce perspective? We can all look at the numbers. The numbers are great, right? We can talk about defense and who knows who's spending these contracts, but how do you process that that because it's it was growing 15% or something in 2013, right? It's crazy.

>> Oh, it's very cool and amazing and uh very inspiring to me that this idea that uh data a data a data cloud which is called Foundry integrated with analytics uh can be very exciting for a company. So I will say that you know our data cloud plus a new agentic tableau you know plus Informatica plus looking at a product like Mulesoft together is our data foundation and that idea we need to have all of the government certifications and they sell into parts of the market we don't sell into. So, we really have reassessed, hey, where where where are we selling? Because the US federal government is already my largest customer, right? That's our, you know, we run the Veterans Administration, the GSA, and we just won, you probably read just we just run a huge US Army contract. We beat Palunteer and but in some of the areas that they sell to and some of the people that they sell to, and I won't go through all the details cuz it's not appropriate, you know, we have not traditionally sold into those groups. So, it got our attention whether they're closing these deals and their products are so expensive. Like, have you seen their price list? It's out there online. Like, wa these prices.

>> I'm like, whoa, my prices are too low. I'm actually delivering like I'm automating the whole VA at this price. Like, what would they be charging? I mean, my prices are low compared to theirs and easier and mud products are much easier to use.

>> Yeah. So, no. So, no, he's not ignoring that $300 billion.

>> How do you think about it? No.

>> Yeah. Why would that caught my attention? I'm like, how do I get that hundred times revenue multiple? That's awesome. It's four billion in revenue. Let's keep it into perspective.

>> No. Yeah. It's a

>> It's not It's an order of magnitude smaller than we are. But I just realized that it is a as someone who was 4 billion in revenue once and is now 41 billion. It's two different companies.

>> Can I ask you one related I don't mean to go Harry, you take the agenda, but related to Palent One of the things Palanteer's gotten everyone's attention with is forward deploy engineers. Do you think that's a new concept? Are these the same people at Salesforce deploying software for the last 20 years? And is it different? How do you think about this FDE concept?

>> Oh, what a great question. I think that it's both. I think at one level, you know, we've always had and always gone to the customer and trying to solve their problem and listen to them and do our best. And we have a large sales organization and we have a large systems engineer organization. You know what that means? and we're out there talking to them and working and building the prototype. And then we also have professional services and then we have partners also and all of us are in there. But we don't have that that kind of branding of these are our four deployed engineers where now we're going to start building your product now before we've really signed a deal. And I think that idea is very cool that all of a sudden you're like in there kind of saying, "Yeah, we're going to we're going to make a bet that we're going to start, you know, doing business together. So, we're going to start building now." And I think that that is something that we can all embrace and adopt and say, "Yeah, let's let's uh have more uh more of that uh engineering resource start right at the beginning in the customer."

Fantastic. Let's do that. I want to go back I want come back to Palunteer in a minute but just going back to the first comment because you know the truth is mathematically Harry's right on the growth showing up thing which is but I think it's the law of large numbers I mean what you're saying look when you're doing 40 billion you know you said Harry it's quote not showing up in the growth numbers when you're doing 40 billion 10% is 4 billion which is the entire revenue of Palunteer the problem with this poor guy

>> thank you I didn't miss that last part Rory I'm very hard hearing my left ear Can you repeat it again?

>> I speak quickly with an Irish accent. My comment is when you're doing 40 billion, Harry's giving you grief for growing at 10%. But I'm making the point when you're doing 40 billion, 10% growth is adding 4 billion, which is an entire palunteer every year, right? So the common growth, which is, you know, mathematically true, Harry, you're right. The 10% growth is what these guys are now. You're just dealing with scale. And I think it speaks to one interesting thing which is I mean I saw a number and you may comment it's correct or not that you know you you you have 9 figure revenue already on the ARR you added nine figures of revenue on the AI deals in the last quarter. I mean, it's a $400 million AI only startup, which would be freaking amazing if we all owned it, right? It's just I mean, you're just up against the law of scale here, which speaks to even if AI is amazing, it's it's what I liked about where you started being grounded. Even if AI is amazing, I think some of these people who think it's going to transform 100 billion dollar market caps in a week are just way overestimating what it takes.

Well, we know that we are always overestimating, especially in our industry, what can happen in a year and underestimating a decade. But at the same time, it's different running a $4 million company to a $40 million company to a $400 million company to a $4 billion company to a $40 billion company. Each step change is an order of magnitude and it is completely different company. We've all seen that and all of a sudden it's like I have a different set of products. I have a different set of challenges. I have a different set of customers. But we can be inspired by everyone, can't we? Can't we? Like I think the biggest mistake is to go, "Oh," or to be dismissive, you know? We're not being dismissive, aren't we? Just being in awe and being inspired and being energized by this. I think it's like really cool.

>> Can I ask another one? uh which is like when we think about MCP uh and we think about how it changes how we engage with different products, do you think we'll want to log into SAS apps in the future or we just want our data inside of Chat GPT and it's just going to keep coming at you.

No, I like I I'll get open my heart here and just say I think this is like one of the greatest disservice >> that has been done to our whole industry and to all CIOS and all CEOs of software companies in the last 12 months is that certain executives who will not be named have said that you know oh SAS apps are just going to be CRUD databases and CRUD means create read update delete and it's like Really? Do you really think that? Because if you really think that, wow, you are really wrong. And that is crazy talk. And that is not how it works. And I don't know what software we're talking about or what applications or if you use computers anymore or if you use a phone, but I and maybe you know the whole world changes, but right now in the current world, the world that I'm in here in uh 2025, well, I'm just saying that I need apps and I need agents and I need them to work together. And yes, if you can make my job easier and better through AI, then give it to me. But to say that all of a sudden all of those apps are no longer relevant and that humans don't need apps. Like that's what we just said. Humans don't need apps, that's not true for any of us on this call and it's not true for anyone on planet Earth. And so that is why I think it was a huge disservice to the industry and got everyone anxious because certain people they'll remain nameless have a lot of credibility because they are great people actually and great executives but to say these things is nonsensical. Why Microsoft has 3% CRM market share because of nonsense

>> but I do want to disagregate two things because it's worth it. one cuz I mean even the sentence you know it's going to be a CRUD app and we're going to vibe code it take it apart we agree no one's going to build a big sophisticated app vibe coding let's just discard that discussion entirely I think the interesting question is how much of the real estate on top of Salesforce do you guys own how much do you allow other people to own you know as Jason said does a bunch of startups we've all funded one god forgive us you know for doing you know assuming salforce as a given you are the infrastructure, not this comment of you're going to be replaced. Ignore that entirely, but assume Salesforce is the infrastructure, but maybe the sales rep in their daily toil can have a better tool than Salesforce to do some of the work. Or maybe even an agent that's not owned by Salesforce can be doing the work and coordinating with Salesforce on the back end. And to me, that world is much more realistic. Do you want all that funfacing real estate on top of the Salesforce data? Do you allow other people in the ecosystem? How do you make those choices?

>> There is going to be a level of application functionality that is going to be required and there's no question that these apps that you know our users are on today are still going to be very much a part of how they do get their work done and that they operate in the flow of work in sales and service and marketing and all the examples that we've done. And then at the third level that there is going to be an agentic layer that's going to interoperate with those applications and that data and yes there will also be an ecosystem that is going to fuel all of these things as well and that the connectivity is going to happen and that it's going to be open and that you look at like the Slack ecosystem or the Salesforce app exchange the agentic layer is a huge investment opportunity you know for the whole SAS ecosystem and I hope that it's going to be built on uh Salesforce

Now, we have several agents that give daily updates in Slack.

>> I need a demo of everything you're doing cuz the first time we were talking, you're like, "Yeah, I have this agent is with me on the sales call is listening. It's coaching me, you know, and that was very inspiring to me." And now you're like, "And I have a dozen agents." There is going to be a radical explosion of small and medium businesses like yours because entrepreneurs like you can do more than ever. So, while the enterprises are kind of trying to figure out, are they going to DIY it and are they going to do this or are they going to do that, look at you and look at all the entrepreneurs like you who can boom boom boom go right into the future and like we're going to see, you know, an order of magnitude more SMBs because SMBs can do more than ever.

>> Every week we hear from Jason that SDRs are screwed. that if you're 23 to 35, alapell in European terms to the trash, you know, you you don't have a future. Uh you you uh have said before in this conversation, oh human and agent and very much suggested a pairing between the two. Jason has presented an idea that in the next 12 to 24 months actually we'll see this mass exodus of the SDR class. Do you think Jason's wrong?

Well, like I said, I think that and I'll tell you what I'm doing, which is that, you know, we we have all these leads that we just just systemically have not called back and now we are. That gives me the ability now to rebalance my headcount and to really say, hey, I want to take all these folks and make them sales folks. And I think that in all of the segments of the business that we do business in, not just government, that was one segment, not just the enterprise, the high-end enterprise, the 5,000 plus world, you know, but the mid-market and the small business. We're a company that's going after all of those segments, right? We don't.

So you're saying the SDRs will remain and it'll just allow you to cater to the ones that you couldn't cater with before because Jason just to be annoying and British, but it's been

>> Well, I think Mark might be saying Mark said his support team went from 8,000 to 3,000 and he redeployed him into other areas. I think about that number. I think the same thing happened to 5,000. That's exactly right. Yeah, I think we'll redeploy he I think Salesforce I don't know how many like entry level SDRs Salesforce has, but I bet you redeploy 70% of that headcount into enterprise reps or forward deployed engineers that headcount just becomes more valued with with agent 4 sales. I bet you I bet you don't need

>> what you're saying is so important Jason because what you're saying is that the fundamental architecture of an enterprise software company in the future is not exactly as it was in the past that the fundamental architecture of the company will be different and all of us grew up in SAS and the applications and all this over the last 25 years but and so we saw how the applications have changed and evolved but now we're saying is it's not just that it's also the companies as well And that is different.

>> So Harry, did you get the answer to your question?

>> Yeah. Employment.

>> Yeah.

>> No, I don't think it's though. I mean, it's because we have this discussion every week, Mark. It's a Jason is basically the grim reaper and thinks not a single 25year-old will ever work in this town again. And you know, I I think it's grossly overly optimistic to think that you can redeploy 25y olds who aren't that passionate, don't have that many.

>> We're off on this one again.

>> And an entry level,

>> but when you're at Salesforce's scale, it's about headcount. Mark's budget's fixed. I mean, he's got 80,000 heads on a spreadsheet. That's I don't know. When I was at Adobe, it was 20,000, right? And so, if you can move those heads up the value chain, Salesforce can be a much more efficient company.

>> That is exactly right, Jason.

>> Exactly. It's a more optimistic view a than Jason's taken in the past, which is why he's contradicting, but it's a good view because I actually noticed time and time again Mark's I won't say spin, but approach on it is when Jason did his thing about he only has three people in his company, Mark's take on that was there'll be lots more entrepreneurs because of that. It's very it's super additive, which is entirely the only way you're going to sell this AI revolution, otherwise there'll be another freaking revolution if we keep pushing on this. So I I like the kind of upside related focus as we've discussed over and over again. If they're not any damn good, they're on their own. But it's at least a vaguely upsidy approach, Harry, versus, you know, Armageddon here.

>> You can go to our website and see who we're hiring. And also this narrative around that we're not going to hire any more kids out of college. This is also

>> Mark, I'm I'm aware that you're going to have to run. I do want to ask one final thing, which is just in terms of unfair questions. Rory loves me for this.

>> He's such a dick about this.

>> You have No, I'm not. I You just You just always comment. You have Open AI at 300 and you have Anthropic at 170. Which would you prefer to buy?

>> Well, I think both are actually great companies. Salesforce owns 1% of Anthropic. So, I'll just, you know, uh it's obviously a great company, very focused on the enterprise. OpenAI also is uh you know, a great company. I'm a big fan of uh you know, their leadership and what they've done. I don't know what you're paying your media training person, but you should pay them more. That was a master class in how to handle Harry being annoying. Basically, Harry, thank thank you for your question. I've complimented every I love it. He just won. You should just fold, Harry. I'll be practicing that next time. It's the nice nice about everyone. And shut up, Harry. Good job,

>> Mark. Thank you so much. You're

>> Thanks, guys. Great to see you. Byebye.

Now, and now I'm excited because these I want to dive into you. Natt Freriedman reporting to Alex Wang after not a huge amount of time. How did we analyze interpret this news of the new structure that's come to be in Meta's AI division?

>> I thought the consensus when we talked about this deal at least 10 days ago, 14 14 days ago was it was it's fine to give up billions of potential carry and funds to be in the game, right? to be a player rather than to be on the sidelines. Um, I don't want to be critical, but man, then then essentially getting undermoted uh in in a reorg, maybe it doesn't feel that way, but hiring freeze in a total reorg within 30 days, um, it's a lot to process. I might rather be running my own fund. At least it seems like a vaguely sensible org structure where you have one person in charge and then the four divisions. You have pure science, you have LLM foundation models, you have AI um applications, which I think is where Nat's running, and you have infrastructure. You know, you read the or search and go, "Yeah, that's probably how you should run it." And you got one guy in charge. And actually, the core issue is, you know, it's the same thing. Yeah. Stupid example is when you get these soccer teams where they just have so much money, you hire all these people in on the transfer market and then you got a bunch of driver and then someone's got to be the manager and figure out who's going to play what position. So it it's I don't know what promises are made. I don't know who's bent out of shape, but it seemed like a sensible thing to do. You spent, you know, $20 billion on talent. You now need to tell them what position to play and who's going to play forward, who's going to play striker, and who's going to play fullback.

>> I just don't get it. I I feel naive here. But

>> why the why

>> I don't I I don't understand if you're not why you do it. I understand you want to be in the room. I get that. But then reporting to someone else who's not Zuck, you know, for anyone that knew Nat and knew Microsoft, he was really in the grooming position to be the next CEO of Microsoft. Many understood. And now it's like to then report to someone who's not Zach in this structure. You got, you know, Yan Lun also reporting to Alex Wang as well. Um, you know, Daniel is reportedly not really there dayto-day. I'm I'm just confused by the whole structure and it just feels like wow you gave up on probably one of the best.

>> You're not I'm going to push you just be logical how you're not confused on the structure. You you're actually the structure is pretty well understood. You're confused on why he do it which is a different thing. Just be precise, right? You're confused on why someone who was highly autonomous would sign up to report to someone who reports to the CEO. That's what you're confused about.

>> Yeah.

>> Yeah.

>> Okay. I don't know. And the rationale around that for me would be like, well, actually, you know, guess what? Elon goes to Zuck when he wants to buy OpenAI and Sam Alman. It's pretty cool being in that room, which Nat would be with Alex to have that discussion and you're not if you're just another fund. That would be the reason why you'd do it. That's the only rationale I can come through.

>> I think being in the room for that a couple times is fun. And then then I'd rather run my own shop. There's only so many rooms I need to be in. Like, it's pretty fun. It's like the first IPO you're a part of. Like it's great, right? Um I you know, but I'm not sure what it's like as a VC to have 20 IPOs, but um you know, I might rather have more carry than show up to ringing the bell. I don't know. I totally get why someone who's a great operator would choose not to be a VC cuz I think if you're if you are a good operator, I always tell great operators who talk about coming into venture, don't be crazy. Your highest and best use is operating. So I actually, you know, even though it's great being a VC, if you had the ability to be the next CEO of Microsoft or be a VC, my strong advice is go be the next CEO of Microsoft. If you had So I I I I get the operating I get the ch the transition from venture to operator. It's what you said, Harry. I the question you're raising is the level at which you make the transition. It's giving up autonomy. But again, as I say, I don't know what was promised.

>> How did you think about Meta more broadly being hit hard? I mean, you know, they were down 6%. They've had a pretty meteoric just continuous rise. This was this was a blip. How did you guys take that? The big picture here is their core business is doing extraordinar. They have a very tenuous link between their core business and their AI initiative. They talk about how AI is optimizing their core business, but even I think from the discussions they said that's much more old school AI than any of the LLM stuff. So you've got this core business that's kicking off cash and then you got the CEO with Entraal power deciding to invest all this cash in this new business. So if you're trying to value the stock, your entire day is spent thinking WTF is this new business worth and is it going to eat all the cash flow? So every it's like criminology, you know, when you're looking at who lines up in red square and trying to figure out who's in charge. You just looked at this announcement and said, "I don't know what this means, but maybe it means bad, so maybe I should sell the stock off." There's just no data and there's no way of knowing. At some point it becomes up. At some point someone's going to have to explain what they're doing with this 6070 billion and how it's going to change their business. And if Zuckerberg is right like he was about Instagram and WhatsApp, everyone will go, "Yay." And if he's wrong like he was about the metaverse, everyone will go, "Oh my god, what were we thinking?" Until then, we're guessing. So, you don't think this is the beginning of a cooling of the excitement of the AI market and a dampening of market caps and a dampening of public markets in a way like some people are worried about.

How the hell would I know? I mean, I don't think implies I'm a know. Like, it's just not knowable. Let me tell you, you'll know when it's happened cuz it'll hurt, right? Right now, all you know now is things are pretty lofty. you when things are trading at 15 times earnings, you don't have to agonize all that much cuz you know if earnings blip 10%, the stock blips 5% and no one cares. When things are trading at a very pricey level, then everything that goes wrong, no matter how tiny, gets magnified through the stock price. Things are trading at a high price now, right? You don't know is that going to change in a week, a month, a year, but it's it's going to be an angsty time and until either the growth comes to fill the earnings gap or the stocks go down to reflect that. And when that happens, who the hell knows? Meta has a 1.59 beta. It's a volatile stock. I don't think we can read anything into these ups and downs because the beta is so high, right? I mean, Nvidia 2.3, right? These are insane numbers, right? And so I literally I mean even if you abstract away from that when you look at the the amount of volatility Figma's had since the IPO with not it hasn't even had a a quarter hasn't even gone out like these high beta stocks I don't know you got to be smarter than me to figure out what even a 7% 8% movement means the beta's too high a line to what I just said which is like the cooling or the lack of cooling anthropic goes from a 5 to a10 billion raise is demand just completely inexhaustible for this. I heard it was 4x overs subscribed. How did you guys react to the 5 to 10 and the 4x overs subscribed reportedly?

I mean, yes, good for them. Demand appears to be pretty damn high. You can raise, you know, it looks like you can raise 10 billion plus in a single financing in the private markets. Yeah. Open AI 40. Yeah. I mean, right now, as you say, appetite for the story, the AI story is extraordinarily strong. And most of the public's comps aren't a pure AI story. They've got kind of AI blended into something else. The Facebook, um, Google, Microsoft have at least something there. Apple has nothing there. Amazon has little there. So, there's got to be hu, if you're a fidelity type manager, you're like, "How do I get me some AI action?" There's two obvious atscale candidates and yeah, you probably can sell a lot of that stock right now and they're going to sell it. And the good news is they know what to do with the money. They can buy GPUs.

>> But is this and Harry, you would know this better than me. Maybe Rory knows it. Iconic is a lead for this round and Lightseed led the last round.

>> Yeah.

>> Okay. These are not these are not I mean maybe the underlying LPS and money is from Sovereign Wealth Funds or other. These are the standard cast of characters who can tap into vast amount of money, right? and charge vast amount of econ keep a vast amount of economics on top of it. Of course, they're going to go from five to 10. If I can deploy, why don't I deploy another five if I'm light speeded or iconic, right? Why why wouldn't you? It's the same amount of risk. Like I'm instead of light speeded putting two mill two billion in. If it's LPS, we'll give them six. Why not? I mean, literally is it's at a GP level, it's the same amount of risk, isn't it? I lose two billion, six billion. What's the difference? But I mean, I can make so much more money. I mean, you'd like look and they could I'm just to put it and they could also be right in that cold that it is going to work from here. You know it was it's an interesting exercise to try and take the entropic numbers and say what do you have to believe to believe in a 3x from here and it's frankly not impossible, right? um so yeah, I mean, a lot has to go right but a lot is going right. I mean, let's if you do that exercise, I mean, we I kind of did the thought experiment a while back and you just simply have the the growth rate over the last year or two is so fast that one of two unprecedented things is going to happen in the next year. Either a they're going to if it de accelerates at quite normal rate relative to its current growth rate. It's going to hit that kind of, you know, it's going to hit $50 billion in revenue plus cuz things that go from 1 to 9 or 10 probably go next year. I don't know that's a 10x growth. Do they go 5x? Do they go 3x?

>> Either it grows.

>> It could end next year at 40 billion, right? And it's possible. Could if it goes ends this year at nine from 1 to nine.

>> You're much better than me, Rory. What is what if you just do your your trailing velocity? What does that end up?

>> That's exact. You end up with an enormous number and you go, "Wow, that's not crazy." And then so either that happens which would be unprecedented because the amount of revenue would just be so big or they slow down faster than anything slowed down ever like it's like going yeah, you know, if you go from 10x growth to 2x growth and one says 2x growth it's amazing at that scale but it would be such a de acceleration. So when you look at the stock and you look at the price they're paying, as I say, it's it's not crazy to say that the if the growth only slows even 50%. It's still got a a kind of a trajectory and a throw path to you know tens of billions of dollars in revenue and that gets you into the valuation. So ultimately and processing through that you say to yourself at some point it's a market size question. If there's enough revenue out there, these two guys are going to get it. And then and thus in the end, as all overpriced stock, and I shouldn't say overpriced, as all highly priced stocks do that are really leaning into growth, it boils down to your assessment of is there $50 billion of demand for foundation model APIs or $500 billion of demand for foundation model APIs? And if it's the latter, they're probably going to get 40% of it and it gets them 200 million. And if it's the former, they're going to get 20 million. And a lot of these people are going to be sad.

>> What do you think it is, Rory?

>> I It's something Jason said three or four shows ago where, you know, if you start running out the numbers on what I mean, let's talk about Mark 200 billion of revenue. Salesforce is doing 40 billion. So at 100 billion, you're saying it's kind of two and a half times the size of Salesforce, which effectively has dominant market share in the CRM space. Coders have to get what Jason said um a couple of weeks ago, 10 20 grand. These agents have to work 10 or 20 grand ahead for that market size to get to that scale. If all it is is $2,000 an engineer, I don't know if you get there. Right? That was my big aha when I did the math. You actually need these things to take vast chunks out of the labor budget and be worth 20, 30, $40,000 almost ahead to the enterprise for the math to work. And you know, Jason said in some cases it will. There will be some people there will be some use cases where an enterprise will part with 20 grand, but there'll be lots where it don't. So, I don't know if I get to that 100 million plus 100 billion plus in revenue cuz I just run the math and I can't find the town. But I could be wrong and underestimating it. My guess is no. And it slows more than you think. But it's not a crazy call.

>> I can't shoot from the hip and do the math, right? Because it's so much money. It It is so much money. Um, but um, I mean, listen, we just we just had Mark Beni off here who's saying in Dreamforce they're going to launch an AISR that I guarantee you it's going to take like six to nine months to scale up, but it's going to be bonkers. Everyone's going to turn it on and that that is that will tap into a a vast amount of budget, a vast amount of cycles, a vast amount. Now, maybe some of it will be their own LLM, but it doesn't really matter for purpose of this. I mean, we're just starting this cycle, right? And it's hard to predict how much human replacement, how much new applications.

>> But let's do that exercise though. You're exactly right. Listen, they're do Salesforce is doing 40 billion a year. Say 10, I think 12 billion of that is salescloud, right? Let's say they turn this on and it's a 30 um so 12 billion. It's a 30% uplift AISDR on top of the core salescloud, which is 12 billion. So it's 3.6 billion of extra revenue, right? Let's just say that, right? which as you point out only gives the poor man another year of 10% growth but 3.6 billion in revenue let's just say LLM costs as a percent of revenue are you know expensive 20%. So that's $720 million, right? So you've just had the second largest software company on the planet turn on the most laborsaving device for their core marquee product and when it filters down to LLM revenue at $720 million, round it up to a billion. Hm. That's when you kind of go, you have to sell a lot of labor replacement to get to 100 billion. Now maybe I'm underestimating. Maybe the 30% is wrong. Could you see yourself Jason paying four times what you pay for Salesforce for an AI SDR on top of that Salesforce? Because that's what you need to

>> Well, I mean in a way we I mean in a way listen we're we're a tiny group, right? But we have four seats of Salesforce. So what do we pay? 300 bucks a month.

>> Yeah. Okay. Sorry. How tell me do the math. I I get a little tired in the afternoon. So we're paying 10 grand, 12 grand a month, 12 grand a year for Salesforce. Nominally, nominally, nominally, we're paying $500,000 for 11 AI agents.

>> Okay.

>> So, what's the ratio?

>> So, you're right. No, in your case, you get that. And then

>> I don't know whether that's whether that makes sense long-term. I don't know if it scales, but if that if a portion of that ratio were to hold, then the model the that then then it's it's a pretty cheap round.

>> Well, again, pushing it. But it's a crazy ratio, isn't it?

>> It's a because let's just even do 2:1. Let's just say for every dollar you spend on Salesforce, you spend another dollar

On top. That's 12 billion. Let's assume 20% to the LLM. That's 2.4 billion. It's real money, but it's only 2.4 billion. Yeah, but I'm spending $500k versus $20K is 20, more than 20x more, right?

To be clear, if 20x is the ratio, then you're right. Then the problem, and Harry Harry was teasing at this, but we we have to go gently with the CEO of a $40 billion run rate company. The the the tough part just is that I mean you're you're doing the right thing Rory. Salesforce may not capture that incremental $120 billion. That's the challenge. Workday may not capture it. Palunteer appears to be capturing it. That was why Mark was impressed with them. They're so if the big guys, the big guys mostly don't seem to be capturing this this agent dollar. If they do, great. But today, when we're when we're recording this, it hasn't happened yet, right? They're not capturing much. That was Harry's point.

Yeah. And even, and I'm saying, and even if they do, and I think they will. I think they're well poised to capture some of it. I think as I say, when you apply the 20% ratio and you get back down to how much revenue is it for the LLM, you struggle to add it all up. And then I'm going to make the argument against myself. And then you look at the explosion in revenue in the last year. I've never seen something grow 9x from a billion in one year. And it's it almost defi. I mean, I I always joke that Newton's law of motion applies to companies. Things in motion stay in motion. I can never remember anything going from 1 million to 9 million and then flattening out to 12, let alone 1 billion to 9 billion. You know, just a trajectory alone, it implies 30 something the following year, which would be a significant slowdown. You'd have gone from a 9x year to a 3x year. I'm just worried that the Mag 7 today have so much concentration of value in the public markets driven by AI hype and excitement, but it's very valid as we see with Anthropic revenue growth like you're talking about there, but I don't feel like we've ever had the concentration of value tied to AI in seven companies as we have today. And I am looking at it now going like, I really hope there's not a blip here. Dear Lord.

Yeah. Got it. So basically, you've done all your analysis just like everyone else. And then the last sentence says it all. I don't have the stomach to sell, crystallize my gains, and move it all to value stocks. Instead, I'm just going to let it ride and pray a little. Nice hurry. I'm not going to argue with it. It's what I'm doing, too. But where the rubber hits the road is when you do that analysis, you have to say to yourself, it's unprecedented. Do you want to make a trade? Do you want to sell down? Do you believe that it's going to revert to the norm? And intuitively,

I don't.

What?

And you don't. Now,

I do. I do believe it's going to revert to norm. I'm more pessimistic than some, right? I do believe it's going to revert to the norm. I do believe

So you're crystallizing your gains now.

I'm actually looking at it right now. In fact, I had a long conversation with someone about just given all the other dynamics about what's the best ETF for core commodities, which are the only things that survive the 70s, right? But it's a 5% play, not a. I mean, you know, I'm not going to go down that rat hole, but I again going back to the Benf, but I I think something can be amazing and still overpriced. That's perhaps the sentiment. And so I'm looking at this going, all these companies and these opportunities are amazing. I don't want to down on them because any growth from here will be just astonishing. It's just a question of is it. I mean, you asked about, I mean, I didn't plan to come here and talk about stock prices, but you asked about the Mag 7. You know, eventually you get reversion to the mean, and we're at the highest point we've ever been in terms of concentration.

I mean, it hit us hard in 2022, right? Reverting to the mean hit everyone hard.

Yeah.

Hit hit everyone hard, right? 2023 was worse, but the the the precipitous drop in 2022. We've already half forgot. I mean, not everyone's. I mean, it was brutal, and 2022 was even worse because the revenue growth was still there. Like the cloud companies were still growing at a decent percent in 2021, but the valuations fell 66%. It was brutal. It was brutal. It was reverting to the mean.

Okay. So, so we have this realization, um, and we we understand that actually, you know, good times, uh, sometimes end. And then we look at Up 27% today on amazing numbers. We have Box up. We have Octa up. Jason, can you turn up the volume where the party is going? Like this is I'm ready to put on my DJ set here.

Uh, well, actually, I don't, you know, I I need a little time to process, but I think thank God because we were just talk, you were just asking Mark Ben off why they weren't getting a lift, right, from AI. I'm glad to see that just literally this week we were seeing, um, even Octa, which had been struggling, Box, um, last the other day, Zoom, which is, you know, which is not exactly a rocket ship anywhere, but seeing growth reaccelerate because of AI. It's like, thank God, like the cavalry is coming just in time to help, um, because, uh, with the, you know, the public guys need it. The public guys need it. So I think it's heartening, but to your point, this is not this is not Anthropic growth, but it is it is reacceleration. Like reacceleration at scale to Rory's point is always epic. Like we we owe everyone a hell of kudos when they reaccelerate at scale because it's so rare. Right now we're seeing it at multiple. It's just not like Palantir reacceleration and exactly right. And maybe actually the thing the two things have in common is just to remind yourself is stock prices. Yeah. Changes in stock prices are when you get a difference between the expectation and what actually happens. And what you're seeing in some of these like bounces when people have the SAS is dead story and the markets buy into it and these things start trading at, you know, five and a half times revenue, and suddenly it's not like you, as you Jason, it's not like you grow 9x, but you beat expectations by a couple of percentage points, and suddenly you can get a nice bounce in your stock because you got a high, you know, because you're trading at a value where once the upside shift, stock's only going to one way. And it's almost like the mirror opposite of what happens to these super high things. When all the good news is priced in, when even one piece of good news goes out of the deal, you fall fast. Well, when all the bad news is, like for example, if Salesforce had a 13% Q1Q gap revenue quarter, you would see that stock bounce like you haven't seen it, right? Because it would be, oh, we priced in 10, we're suddenly getting 13. We're getting 13 at scale. Oh my god.

Yeah. It's also good to see, and maybe I'm not a total expert, but when you look at companies like lovable Replit that we over discuss, right? But this three, let's call it three or $400 million of ARR already this year, plus everybody else, right? But but the level in Replit, every time someone is using an app, they're spooling up multiple Neon or Superbase databases. Okay, the load on both of them is massive. They've never seen demand like this. Like it's massive. And so that's great for them. I mean, Neon got bought for for by Data Bricks for a billion. I I didn't even understand why at the time. Now I get it, right? Superbase is probably worth much more, right? But it's kind of a bummer, and air quotes, if it doesn't benefit from that. Like if it's all the all the Harveys and the Super Bases and like, I guess it's good for VC, but it's it's also a a terrible stability point if none of the incumbents benefit, right? Where where is Atlassian benefiting from this AI wave, right? Where is Monday benefiting? So it's heartening at a meta level to see benefiting from AI deployments. It's heartening because it means maybe our the revenue is a little more durable, right? Maybe maybe Aries's Replit investment, lovable will go 10x rather than crash and burn next year because, uh, all this stuff's enduring. Uh, it just feels so like right now, it still feels so fragile, doesn't it? All this revenue feels fragile.

No, it feels very durable. Thank you very much.

It does. Well, if you can go from 0 to 106. I mean, do you know, did you see what Wix said with what did they buy? Base 44. What's it called? The one they bought.

Yeah. Yeah. For $80 million bucks. Yeah.

Yeah. Now they did $1.2 million last week. Is that what they said they did already?

Probably a good deal then.

Oh, my deal of the century, right? And I tried it. I tried it. I actually took my site and had it rebuild it. It it looks like clawed, but not as good. I get it, right? But they're working on all the issues. But it it's just interesting if Wix can buy a a eight-person startup and then achieve that revenue velocity. It's impressive. But it also makes you think about durability, doesn't it?

It totally does. Roy, you said if if Salesforce Group, you know, 13%, not 10%, it bounced like never before. You know, we had Cler filed today to go public between a 13 and a 15 billion range. It was lower than people thought, and it was lower, I think, largely because of the 20% year-on-year growth, which is isn't great. It's it's good, but it's not great. Um, Jason, how did you interpret CL finally going out? We know that it had a $45 billion price round before. SoftBank led then a repricing to six and a half and now going public at 13 to 15. If they were growing 24% last year and now they're filing and they're growing 20, like they're at what's the rever, what's the inverse of the Mendoza line Rory? The opposite when you fall below, you can't file, right? If you fall below 20, you Rory did the Mendoza line of triple, triple, double, double or better, but there's also this hard, it's the hard deck. You can't fall below the hard deck for IPO, and it's 20% growth. And I could be wrong, like I don't know. It might be that CLA is filing just in time in the midst of this IPO wave because 24 to 420, 20 is not the reacceleration that we're seeing in some of the folks. I mean, even, even, um, you know, Netscope just filed modest reacceleration to from 30 to 33%. 30, 32% may sound modest, but it's a lot of work, right? 24 to 20, you know, Mavs hitting the hard deck again. Like, you bet you pull up, pull up, pull up, pull up.

I file, file, pull up, pull up.

Yeah, I I there is a there is a level of growth below which it's hard to file. But just to be clear, the bigger you are, the lower that growth threshold because it's nothing. It's it's simply there's a transaction level below which the Wall Street math doesn't work. So, you know, silly example, if you're doing $10 billion in revenue, they'll happily take you public with a 7% growth rate because you're just big enough to matter, right? Um, but you're right, for the typical venture deal, somewhere around 20%, you're starting to get to, you know, the multiples don't get there. But at, look, clearly at $14 billion, it's big enough to get the deal. It's it's a perfectly doable deal. So I don't think it's a question of you're going too low to matter. I think at $14 billion, it's a valid transaction. I mean, I just very different business than NetScope. It's very much a financial business. If you recollect that had that whole issue on, you know, interesting they they did that little bit of overstatement on AI and they're going to automate everything and then backed off on that. But that was interesting but not important. I think the more interesting fact was some of the early lending comments on lending, lending losses early, I think it was earlier on this year. So it's a financial services business and it lives or dies on financial services metrics and, you know, include, and you once you start to lend, you got to be good at lending. I mean, we talked about NuBank last week, which appears to be bloody good at lending, right? Clown will be just fine. It'll trade, it'll go public, whatever. Um, it'll be valued like a relatively mature financial services business. I haven't studied the S1 yet, but, you know, the guys who priced it at $6 billion were right, and the guys which is Sequoia, and the guys who priced it at $45 billion were wrong, which is SoftBank. As usual, we I mean, you'll recognize this Harry, there's a saying, you know, Gary Lker used to say that soccer is a game played by 22 people, and in the end, the Germans win. Well, in the same way, venture is a game played by 6,000 people, and in the end, Sequoia wins. You know, they won here again. They they had the big win.

Still 24 to 20% growth at less than $4 billion in revenue. Still incredible, right? But deceleration and hyping hyping as they're going public, they're million in revenue per employee. That's implicitly saying we're we're finding our rule of 40 in the bottom line, not in the top line, isn't it? I mean, that that coded message of a million per employee as growth decelerates is fairly clear to Wall Street, right? We're mature. We're mature.

Yeah, we're mature. But also, you're a financial services company. It's not even it's not the same metric. I mean, you know, I shudder to think what Jane Street or Citadel's revenue per employee would be. It's in the tens of millions, right? Yeah. I mean, this is the classic fintech company trying to make software noises. But let me give you a clue. You're a fintech company. It's all fine. It's totally worthy thing. You're a fintech company at huge scale. Well done. You built the category. You'll get the medium growth fintech valuation, and everyone with the last round will make money.

Does SoftBank just get washed?

First of all, no. And it boils down to the details in the documents. So, two comments. One is there's two there's two questions where that could have happened. At the time of the last round, I remember thinking people are going, "Oh my god, you raised you paid 45 and now you're raising money at six." Yeah, you look like an idiot, but you only took 10% dilution. So if you were an investor at 45, yeah, you you know, it sucks to take that dilution, but it doesn't it didn't the last the down round at $6 billion didn't kill the economic value of their investment. In fact, it preserved it by keeping the company alive. Now fast forward to today, you still overpaid. As we've discussed before, it boils down to what's in the docs. Do they have a My guess is they don't have a block because Sequoia are not dumb people and wouldn't have left it in. So yeah, they just overpaid and they're going to get converted and they're going to trade at 30, 40 cents on what they originally paid, and they just hope is that it bounces up from there. So they don't get washed. They just do what's called losing money. It turns out when you buy a stock at 45 and it trades at 15, you're down. I totally get you. I love that also in terms of the 6,000 players and in the end Sequoia wins. That's a that's the intro for sure. And I mean, they're going to pay you for that one, Rory. I mean, I know they had a marketing that she's going to be like, "Rory, go." Woo!

You know, it look, I mean, I started here 31 years ago, and they were doing great, and you you fast forward 31 years, they're still doing great. There's something in that. You got to hand it to them. I remember thinking when the clown round went down, and obviously there was a bunch of drama after that with Sequoia that we'll just leave out for now. Um, but I remember thinking that was a shrewd call. That was a shrewd call. You just let them raise money at $45 billion a year and a half ago, and now you're stepping in at six. Remember thinking, good investment, and it and it's going to turn out to be that.

It's too fast because it happened. You know, they not that it helped them. SoftBank did have a a ratchet, and we work this deal was not that far off at a similar valuation. They could have a ratchet here. Like I I just don't we I need one more day to find out. Right. You don't think so?

No. No. I'm not I I don't think.

I mean, if they got one in another deal at about the same price, at about the same time, at least it was discussed. At least it was discussed.

You're exactly right. It is knowable, and when I get off here, and we will feed the S1 into Chat GPT, and we'll know in an hour.

I love that. Uh, what will Netscope go out at? 700 million, are growing 33%. Last valuation was, I can't remember what it was, but where it

was around $7.4 billion in 2021, and after that, they raised some kind of weird convert that's harder to track. So that's, yeah, so it's hard not to. I mean, I think it, I don't know if there was indicative pricing, but it's a, it's a good company. It's not making money like Figma. It's losing money, but it's got, it'll be at or close to it, is my guess, or maybe even up from it. So, yeah, I think the 2021 round can exit there. Not quite out of the woods yet, but if you got a company growing at, if you got a company at $700 million, growing north of 30% with a little bit of reacceleration, it doesn't take more than a squint to see a $7 billion, you know, flat round to 21 and as being doable.

Good for them. Great company around since 2012. All congrats to Lightseed, who own a big chunk of this along with Excel, and yeah, um, we, yeah, they built a great company.

Where are you guess, what are you guessing the valuation would be?

I mean, the point is this, it's really hard to get.

Rory, he's putting it into his calculator, and he's going to tell you where he thinks it's going to be. This is like the PLG for SAS.ai. Everyone sa.ai for more

value your thoughts for you.

Yeah, Roy, what do you think it is, and then we can compare it to Jason's. I'm not going to tell you where it's going to trade day one because as we've proven with Figma, that's not knowable. What we were right about on Figma was the step up in the process. The process of this, they'll file at five or six, they'll get the man, they'll walk it up. My gut would be 7, 8ish where it trades on the first day. Who the hell knows?

Do you think it could be a bounce like Figma? The answer of course is no because I believe as I said earlier in reversion to the mean, and Figma had the largest bounce of any large-cap IPO since I think 2000. So I sincerely doubt they'll copy that. It was funny, actually, I got an email from one of the many millions of bankers. You know those marketing emails next day they all send out saying, you know, we priced XYZ IPO, and the headline was, "We successfully priced the Figma IPO." And I just so wanted to email back and say, "You priced it, but it's not clear you priced it right. My friend, successfully might be a reach here."

Going to the other end of the spectrum, guys. I don't know if you saw this, but it was astonishing for me. It was a mapping of seed rounds, and it would segmented between mega funds and boutique funds. Number one mega fund seed investor was Andreessen Horowitz with 72 seed deals compared to number two was 27. Exactly. Rory, how did you analyze that? Andreessen Horowitz just playing a totally different game. How do you think about that?

I mean, you have to say they're playing a different game. I mean, the words ipso facto, the words speak for themselves. If everybody else is doing 27 or less, and you're doing 72, then by definition, it's a different game. Yeah. I mean, we saw it again in the other interesting analysis that someone did on the Series A rounds. They are they are the they are the successful quantity provider at every stage in the thing. They're the largest capital raiser, I think, other than Insight, but Insight obviously slightly more later stage in the kind of Silicon pure Silicon Valley universe. They're the largest capital raiser at every stage. So by definition, they're doing the most deals and being the most aggressive. I mean, and so far successfully, there's, you know.

Do you think it will work out when you look at some of that we've mentioned like the Data Bricks of the world and how much that will return? It is astonishing.

The truth is this, probably if it does or it doesn't work out, it won't be because of their seed program. And that's the big aha. Like the seed program could get lost in the noise. It will work out if by virtue of their seed program, they get the small number of absolute outliers, and they stated this right back in 2009, to give them credit for wild, wild consistency. As long as they get those few number of companies that are absolutely outrageous upside performers, and they stuff a billion dollars into them like they did at Data Bricks, and they do it at the right price, it'll work out fine. Everything else is a loss leader. I mean, the seed program, it's basically like cheap milk in the supermarket. It brings in the crowds, right? You know, it's the loss leader.

Seed is for suckers apparently. No, no, no. We We said that. Jason said that last time, and then we all got. No, I mean,

Yes.

I think I think that's consistent. I think it's consistent.

I've got a friend who's a complete and he's going to make a huge amount of money from a $100 million SPV into OpenAI at 200 million.

You know, I I thought about he may be a, but he's got good sales skills because he got in sales. There's different ways to win in this business, and sales is, uh, you know, sales is part of it.

There you go.

Yeah. Sometimes you just got to sit on their steps. Just sit outside of OpenAI's office all day long. Grab Sam 11 times. The classic Sequoia playbook. Sit on your sit on your steps until you get the meeting. Don't leave without the term sheet. Now, guys, do we do we have any other news items before I do a tweet of the week where I just want to talk about one tweet which I thought was particularly interesting. Grab the zeitgeist, and I want to hear your thoughts on. Okay. Okay.

What's the tweet?

Martin Cthado. The idea that non-consensus investing is where the alpha is is actually quite dangerous in the early stage. Follow-on capital tends to be more and more consensus aligned. I thought it was a better tweet than he got credit for in the tweet in the Twitter verse, right? Um, I I saw that tweet and I I'm going to work in. He also did a really good piece on gross margins and the way people are misunderstanding that. That if we had more time, we'd talk about. And I I thought the gross margin piece was very thoughtful, and I thought that that tweet wasn't crazy. Let me tell and and I think you people then cited the cons. And yes, there's there are always outliers that are not consensual, like in 2016, the non-consensus bet would have been to do OpenAI, true, but probably, but it's also probably true that 90% of non-consensus bets would have failed entirely. And at that stage, SaaS was probably consensus, and only about 50% of SaaS bets would have failed entirely. Right? When you're on this mega trend of an architectural replatforming, a goodly amount of the correct investments to do are fairly consensus in terms of the broad macro themes, right? And I I remember, I think it was IVP years ago, I mean, like 20 years ago, they had this concept of, you know, 70% of the bets being very much on track, faster, better, cheaper, and then I remember 30% kind of brave new world bets. I don't think you could build your entire business on waiting for OpenAI, right? So I actually think his comment was more spot-on than people give credit for. I think if you look honestly about what you're doing, you don't want to be 100% consensus. You don't want to be quoted just doing AI. You want to be looking at new stuff, but at any, it's like the exploit, explore thing. I think 70% of the time you are consensus is bad. You are betting the mega trend that's probably going to last 20 years. And it can be, it could be AI. It was 20 years ago, it was SaaS. 15 years ago, it was public cloud. And I think it's, and and that's a consensus bet that paid off for 15 years, right? So I think I think his com, I'm rambling a little, but I think his comment was more correct than the 140 or 280 character comments made out. You don't want to just be consensus, but a large consensus is a bad word for arch, you know, on point with where the industry is going. He responded back to my my reaction too, which was that what I thought one of the implicit points, I mean, we've talked about this entire series of the show has been making putting money into consensus bets, right? I mean, half this AI stuff is, I thought one of the points he was making, maybe, and he agreed, was that

part of this is just if you're going to make today, you know, the 10 deals are consuming 40% of venture capital. Everyone we knew that used to do B2B deals only does AI. My point back, which he agreed, was like, if you're going to do bets outside of that, you better not count how much follow-on capital.

Agree.

They're not interested. They're not interested. And so I've done I've done several B2B plus AI deals in the last 18 months that I love that that will do great. And the advice I give to all those founders is don't expect any money.

Yeah.

Don't expect, just not like all, I can't, 80% of the folks I can refer you to are not going to take your meeting. And, um, it's a reality. And so I don't know that I mean, he was like, that's that's exactly part of the issue, right? And so it, so there there may be several layers, but if the whole industry is consensus, um, just be aware that that's the, the capital's concentrated. It's not just your buddy that put 100 million in the SPV. Everything's concentrating here, right? We

we had an IC today for a fintech business, and they scaled to 5 million ARR in a year, and the founder was great. And I said, "Guys, what why is this not moving fast? Like, what's wrong with it?" And one of my team were like, "Oh, it's not AI." And that's an example of where I I think Jason, you were spot on. It's not it's not that you shouldn't do non-consensus bets. There's a couple of different things, but that's a classic example where you should do it. You should buy it at the right price because you're not going to get the magic pixie dust next round, and you should run it capital efficiently because you're not going to get people throwing $4 billion at you.

So Roy, what you're saying is the price should reflect that it's not AI. And with that in mind, then it

Yeah, you basically it it will and should be valued on fundamentals. But if it's

that's different to what it was in the last years.

Yeah. If it's non-consensus only because it's doing something different, then by all means do it, provided you understand what's different, then you understand where you're getting into. I think the really true thing, for example, that didn't quite come out. We we talk about this when we think about our mega trends. It's one thing to say I'm going to do a deal that's not, say, in this case, not the ultimate consensus bet AI, but it's really something. You got to question if you're doing something that effectively is a bet against the mega trend, like it's a little like doing a client-server deal in 2002, right? So I think knowing what the consensus is has quite a lot of value because it also speaks to where the industry as a whole is going technically, the technical, let's call it the technical consensus, as distinct from the financial valuation consensus. Going back to what Ben said, the technical consensus is that most software is going to be agentic for the next 20 years. Do you really want to take a bet against that? I mean, because that's probably where the industry is going, and that's again where I think Martin was right about that.

I just think more tactically, if you're going to do, if Harry's going to do this fintech deal at three, what he said, 5 million ARR with good numbers, right? One issue is, are you paying an AI premium that you shouldn't, right? And and that's important. And we I built this AI calculator. I live coded it. It's pretty cool on SASAI and it shows how the premiums work for the types of companies. It's very interesting. But valuation aside, I think the bigger issue for venture is just when times are good, we take follow-on capital for granted. No one's worried about the follow-on round for Anthropic that they're throwing $10 billion, and there's not a single investor that's worried about the next round, is there? It's just greed. Okay. But most of our careers, um, we've worried about follow-on capital. I worried as a founder, capital in B2B was was scarce until as late as 2018. It was very, very scarce. It was very, very scarce. And, um, so that's just where the hell you like, like doing Harry's bet might be great, but not burning $2 million, a million bucks a month, right? Like then it's like, who the hell's going to, like, I mean, Harry's fund isn't big enough. He doesn't have billions yet. Uh, and he doesn't like to carry his investments through three or four rounds. So, you got to pass on that one. Unless the burn rate's zero, then I would do it.

Cuz it's funny when when I I agree when I I'm cuz I'm having this experience right now. When I look back at my mistakes in the last three or four years in terms of investing, you know, I I have I have actually both kinds. I have a I wish I made more consensus bets because because it's such a negative one. I wish I made more on-trend AI bets. We made a lot. I wish we'd made more because the mega trend was bigger and more dominant. But then equally, I have three or four utterly non-consensus deals that I looked at, was intrigued by, and probably should have and should have pulled the trigger on and regret. And I just saw one of them today. I'm like, "Wow, I really missed that one." But I'll say it, what you don't remember is the 90 non-consensus bets that you didn't do that just haven't worked out, right? I mean, both so both statements are true. It's just it's a lot more forgiving in the consensus marketplace because as you say, you get washed away by a, you get you get buoyed up by other people's capital, right? And it's easier in the short term to a survive long enough to get the feedback.

I'm just I've done two of my best investments I have today. I and I'm a seed investor, right? I have the smallest amount of money of these three people, right? Two of my best investments today, I had to create a round out of nothing when no one when there was no capital. I had to create it. I didn't have enough money. I had to create it.

Yeah.

I don't want to do that too many times. It's like this isn't as hard as creating Snowflake from scratch, man. But it's hard. Okay. It's hard.

Going back to the consensus comment. It's okay. I'm I'm trying to formulate here. Maybe it was It's okay to do the consensus bet, but you don't want to do the consensus bet where the odds on the consensus are lower than the accuracy of the consensus. In other words, you don't want to be you want to be AI because that's what, because we've wrestled with this, a lot of these quote consensus AI, and we're not doing them, and we can't make the prices work. You still have to be paid for. You have to assess the risk accurately. And all the quote consensus statement says is it's more likely than not that this is the direction the technology is moving. So therefore, you probably don't have that, oh my god, are you totally wrong dimension to your business, which is why you can lean in a little into this AI consensus bet versus some of the others, but you still have to get all the other right for your point. And on top of that, if you overpay beyond the dreams of man, then there's nothing you can do to save yourself. So, like everything in investing, it ends up being way more nuanced than consensus, non-consensus. The consensus bet risk, you're probably right on direction. You might ludicrously overpay. The non-consensus bit, you could be way ass wrong on, is it even going to work? You probably won't have any follow-on capital, but if you get it right, you will have a beautiful thing. You'll have a high ownership, low capital, N of one outcome. Again, as always, it turns out investing is hard, and you you can't just paint the numbers and collect 100 million bucks.

A final one. What consensus do you wish you'd done more of, Rory, or do you wish you'd done? I think I underestimated the the impact of A, the scaling laws in AI, and B, the ability of primarily Altman and some other folks to inspire belief in those scaling laws and unlock $600 billion of capex spend a year. Anything that was attached to that making AI trend has just had a wall of money for the last 5 years. It includes the foundation models. It includes Nvidia and the public markets. It includes the inference companies. Literally any I my mental model is, yeah, we have $600 billion of people, $600 billion dollars being spent making AI, and right now we have, you know, 28 or so, whatever it is, the the recent survey of apps using AI, most of which is OpenAI and Anthropic. I I underestimated. I did not think that we would be able to find $600 billion a year to spend in this space. And if you knew that was going to happen, I think you'd have looked at the inference companies. I think you'd have looked at the model companies at prices you thought were super high. I think you'd have broken glass on your financial model to try and get some of the SC, what is now the scaling law consensus. So, I suppose you could argue at the time it wasn't consensus, which maybe is the actual counterargument as I process in real time. But yeah, I regret that's the tren, that's the trend that you just almost could not have had too much on in the last year. Boys, Jason, anything to add, my man?

No, we can, uh, edit in Mark's AI and be tougher on him if you like. We can build one to together. We'll build this clone for him, and we'll be tougher. Sorry if we weren't tough enough.

Tell me, Mark, why are you so brilliant? How did Rory, my favorite question, how were you so prescient to think about this agenda?

Okay, listen. Let me be clear. I think Rory was a suck-up. I don't think I was. I think you're going to look back at mine, and you're going to say, "I had some pretty good stuff." I honestly think this. I think Rory was a suck-up, but he doesn't know Mark. I barely know him, but he doesn't know him. So, he, he, and Rory was a little tough on the on the growth. He was just nice about it. But, uh, I think you're going to like me better.

You know what I find so funny, guys? It's like, you know, who the am I? I'm a kid from London who's like done.

Mark, you've got to try harder, you young sir. Those are the companies I've advised at $41 billion in revenue have have committed a little earlier to the AI trends. Mark,

I mean, I'm kind of embracing your advice. You know, we're not trying to make people feel like, you know, there's no point taking on a guy who's just going to, you know, you want your guests to come back, right? No, I know.

I want him to buy my companies. And, um, and actually, I had genuine, I'm going to say it again. I actually thought he was more on point and balanced, admittedly salesy, than the other AI gurus who are saying it's AGI. I mean, he was just like, we're going to sell some of this to our customers, and they're going to buy it, and it'll be good.