This Week in Startups - Deel’s growth overshadows SpyGate, Claude learned new skills, and the great “momentum is moat” debate | E2194

Episode Date: October 18, 2025

Deel’s growth overshadows SpyGate, Claude learned new skills, and the great “momentum is moat” debate | EXXXToday’s show:*Deel’s growing fast enough that investors are overlooking the espionage allegations and jumping on board anyway. (LAUNCH now owns a lil taste of Deel, so Jason is on board!)PLUS is the Mag 7 about to become the Mag 70… Why legendary investor Roelof Botha thinks VC is not an asset class… How startups can use capital as a weapon… AND Anthropic gave Claude more skills, which they hope will help pay their bills.Timestamps:(00:01:34) Jason’s excited for ski season and checking his favorite powder app, OpenSnow(00:04:02) Why Jason’s done with meetings; he’s pulling a Doug Leone!(00:06:27) Jason can tell the market’s heating up because people are starting to lose their minds.(00:09:31) How much will global AI tools one day be worth? Alex is crunching the numbers.(10:00) Miro - Help your teams get great done with Miro. Check out miro.com to find out how!(00:15:22) PREDICTION: The Mag7 is about to become the Mag70(20:00) Alphasense - Get deeper insights into your business with the power of AI search and market intelligence. Start with a free trial at https://www.alpha-sense.com/twist(00:25:36) Deel’s big raise… Why major growth overshadows spying allegations(30:00) LinkedIn Ads: Start converting your B2B audience into high quality leads today. Launch your first campaign and get $250 FREE when you spend at least $250. Go to http://LinkedIn.com/ThisWeekinStartups to claim your credit.(00:33:31) Why Roelof Botha says VC is a “return-free risk,” and not an “asset class.”(00:40:49) The two reasons why VC firms end(00:44:18) How startups can use capital as a weapon(00:57:52) Anthropic gave Claude Skills to pay the bills(01:00:51) Jason’s vision for what Grammarly could becomeSubscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.comCheck out the TWIST500: https://www.twist500.comSubscribe to This Week in Startups on Apple: https://rb.gy/v19fcpFollow Lon:X: https://x.com/lonsFollow Alex:X: https://x.com/alexLinkedIn: ⁠https://www.linkedin.com/in/alexwilhelmFollow Jason:X: https://twitter.com/JasonLinkedIn: https://www.linkedin.com/in/jasoncalacanisThank you to our partners:Miro - Help your teams get great done with Miro. Check out miro.com to find out how!Alphasense - Get deeper insights into your business with the power of AI search and market intelligence. Start with a free trial at LinkedIn Ads: Start converting your B2B audience into high quality leads today. Launch your first campaign and get $250 FREE when you spend at least $250. Go to http://LinkedIn.com/ThisWeekinStartups to claim your credit.Great TWIST interviews: Will Guidara, Eoghan McCabe, Steve Huffman, Brian Chesky, Bob Moesta, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarlandCheck out Jason’s suite of newsletters: https://substack.com/@calacanisFollow TWiST:Twitter: https://twitter.com/TWiStartupsYouTube: https://www.youtube.com/thisweekinInstagram: https://www.instagram.com/thisweekinstartupsTikTok: https://www.tiktok.com/@thisweekinstartupsSubstack: https://twistartups.substack.comSubscribe to the Founder University Podcast: https://www.youtube.com/@founderuniversity1916

But there's been like a little chaos. I can't imagine. I can tell when the market is hot because people start acting strange. We are in or we're entering into peak market right now. And one of the things that happens in a peak market is people's morals, ethics, sharp elbows on all sides of the tables. You know, management teams to their founders, founders to their management teams, founders to their VCs, VCs to their founders, lawyers, everything.

Everybody is getting a little chippy. Okay. And arguing over things that don't matter. That aren't company building. But there's so much money in the system sloshing around that I'm getting pulled into all kinds of chaos all of a sudden. This week in startups is brought to you by LinkedIn ads. Start converting your B2B audience into high quality leads today.

We'll even give you a $100 credit on your next campaign. Go to LinkedIn. in.com slash this week in startups to claim your credit, AlphaSense. Get deeper insights into your business with the power of AI search and market intelligence. Start with a free trial at Alpha dash sense.com slash twist. And Miro. Help your teams get great done with Mero. Check out Mero.com to find out how. All right, everybody. Welcome back to this week in startups. It's Friday. It's October 17th. Oh my lord.

Ski season is almost here. I open up my favorite little app, Open Snow. I pay like a Hyundai for this a year. There's like an app for everything now, Alex. And Open Snow lets me rate and rank and sort snowfall around the world. And so I sort what's going on in Japan, what's going on in all to all these different places. I love this.

Whoever these guys are. and I accidentally bought it twice. And like, yeah, so I canceled one. And then I was like, oh, I should get a refund with them. You know what I said? I don't care. I'm going to pay double because this thing is so valuable to me because it does a forecast. And you can sort by like your Epic Pass.

We talked about that before, Vail Resorts as the AibuPas. You can sort in the next five or 10 or 15 days, what's the predicted snowfall? And it's all meteorologists who work on this thing. Like literal meteorologists have formed a group. It's amazing to me the entrepreneurial spirit. And so then I sort it and it's like, okay, here's the place you could go in the next five days and get powder. And so now I'm powder chasing. It's my goal for the next five, ten years.

There's a powder chase a little bit every season. Anyway. So does that mean Japan? Does that mean a new exotic location? Can I find you in Switzerland? I mean, I think that's going to be possible. Well, I definitely am booking a two or three week trip to Japan because we're going to have an announcement that we're going to most likely be doing some stuff in Japan on the venture side of the business. It's just, we're just wrapping it up, so I don't want to pre-announce anything.

But, you know, I'll be in Saudi, December, 3rd, 4th, and 5th. Then I'll go to UAE for three days. And we're going to launch Founding University there, our pre-accelerator. Then I got to go to a speaking gig in Palm Beach. Then I got a speaking gig in Japan. And then I got to come back and do F1 for All In in Vegas. we're having a little party. And then in December, we have the all-in holiday party,

which we're going to announce a crossover with another very famous podcast in the comedy space. It looks like it's coming together. So that will be interesting. Is it an Austin-based comedy podcast? Can't say, can't say, can't say, can't say, can't say. But it's like, you know, five trips in six weeks or something crazy, so I'm going to be just all over the place.

But then back to the portfolio on my crazy schedule. you know, everybody wants to put a slot on my calendar. So then what happens is I wake up and it's just like, oh my God, what are these seven meetings? So I just decided, you know, listening to Barry Diller's, incredible autobiography, the summer. And then I had listened to Mike Govitz and I decided, you know what, I'm going to try a different approach here. No more meetings. From now on, send me the founders mobile phone number and I'm going to do a Doug Leone. Doug Leone three times a year

my phone would ring this is you know 15 years ago when I was running startups and he just Doug Leone would come up my phone oh my God I'd be like Doug Leone holy Jesus Yeah exactly well yeah and I'm just like fumbling with the phone Mr. Leone how you doing? You know and I it would be like

hey do you know this person okay yeah we're looking at an investment in it would be great if you can give him a back channel just let them know your experience with us and I'd be like, absolutely Mr. Leoni. You're like, okay, bye. You know, it's literally a 45 second thing or you'd be like, hey, you know, should we invest in this government?

Or hey, this person wants to be a board member. They said they know you, I don't know. You know, it would be like that. Or other times it would be like, oh, this is incredible things happening in the world. This person is a fan of yours. Would you like to meet them? And I'd be like, yes, sir, Mr. Leonie.

But short, very short every time I take it. Just tight. Tight, tight. short and tight and tight and uh you know like like a great espresso and um you know that's that was his thing there's a doug leone espresso call that's what i call it espresso so this is my espresso call strategy inspired by doug leone now when they send me stuff uh that i got to react to i'm just like include the founders email and phone him the last couple days i tried this new strategy which is no more meetings telefounders, I'll be in touch.

That's it. And you just call them? I just randomly call them. Yeah. No, I think this is a great strategy. I do this with friends using FaceTime video, and they absolutely hate it, and I don't care at all.

So anyway, I've been doing this, and I've recaptured so much time because none of these phone calls need to be 30 minutes on your calendar. I can do four calls, five calls, four calls, in the same amount of time. Oh, yeah. And all of a sudden,

I'm so much more effective. I don't know how I didn't see this before, but anyway, it's working much better for me. But there's been like a little chaos. I can imagine. I can tell when the market is hot because people start acting strange. We are in or we're entering into peak market right now.

And one of the things that happens in a peak market is people's morals, ethics, sharp elbows on all sides of the tables, you know, management teams to their founders, founders to their management teams, founders to their VCs, VCs to their founders, lawyers, everything. Everybody is getting a little chippy.

Okay. And arguing over things that don't matter. That aren't company building, but there's so much money in the system sloshing around that I'm getting pulled into all kinds of chaos all of a sudden. And I'm like, Jason, by chippy, you mean like in the basketball sense when they say, it's getting chippy out there

because the players are getting literally more physical. There's more bumping, more shoving, more... Correct. Rounds coming together. You have a board seat. This other person wants to buy your shares, that this person wants to take the whole round. This co-founder's not pulling his way.

We want to fire him. It's just everything to get chippy, chippy. And this is because there's so much money sloshing around because things are going so well. Is my read of that? So the opportunity space. Yeah, the opportunity space. has widened.

It's not, it's no longer, oh, we are going to get a thousand seats this year for our SaaS product. It's, okay, we're going to take a category of work and automate it and make it 17 times faster for 90% less money. And so you start looking at what is possible right now. It's kind of like people underestimating how big Uber would become. Like, none of us expected, like, oh, they're going to be doing a billion rides a month, or the 10 billion rides a quarter, whatever it's, you know, turned out to be. It was like, yeah, we're going to shuttle people back and forth, you know, who want Lincoln Town cars in a more efficient fashion.

Not we're going to replace cars, et cetera. So that's the kind of realization people are having is that the stakes have gone up. And in some ways, if you look at the NBA, you brought that up, people getting chippy on the court. It's kind of like, oh, the new TV deals are coming in next year. And I don't know if you looked at it, but like the salary cap's going up, like getting a slot and getting being a starter or getting a four-year deal right next year with the salary cap, you know, going up so much, there's a lot more at stake. The stakes have gone up. And we talked about the total addressable market and you took some notes on it. But people are starting to realize, oh, what's going on here is not the software business, not apps or services.

it's the entire reinvention of labor and economy. Okay, actually, that's a really good point because Marcus and I are working on this. And do you want to see what we have so far? Sure. Okay, yeah, here we go. This is the Tam 1.0. Point, point one.

There's a lot of fun things that we need to start out here. So, Jason, you specifically asked us to take a look at working populations, percent that are employed, and then do essentially think about what's the current software spent against that population and then what does that generate for TAMs today. So just to walk you through part of this, developed nation population is about 1.4 billion. And then we pulled some data on working age and then what percentage of those people are employed? And then we had to make some assumptions like what percentage of those are daily software users. And then we applied your $3,000 per person per year

spend to come up with numbers. Same thing for the developing world and so forth. Every Wednesday night, the entire launch team meets for dinner. and brainstorming. So basically it's an executive check-in. It's our management team meeting. But all these good ideas that come from that meeting, they're useless without execution. And that's why our team uses Miro, M-I-R-O. M-I-R-O, like Hero, is the organizational tool. That's not just throwing AI at your problems. No, they offer clean, elegant solutions that will help your team get more work done faster. Take their AI sidekicks, for example. Miro has trained them to think, like product leaders,

marketers, and mentors. Just ask them to review what you're working on. They'll instantly start offering helpful feedback, letting you know what you need to clarify or where you should double down and which concepts. Just, hey, they're not working. You need to deprecate them. You can even train your own custom sidekicks to provide exactly the feedback or input that you need anywhere in your process. You know, I love a good checklist, right? So we ran our twist checklist through Miro and it told us where we could simplify and which tasks to combine to make our entire. pre-production process on this very podcast faster and simpler. So help your team get great done with Miro.

And check out Miro.com to learn more. That's M-I-R-O.com. Thank you, Miro. Yeah. And you get some pretty big numbers right now. A trillion dollars. I see that across. Yeah, developed world, 750 billion a year

in potential spend. And then the developing nations would succeed point eight billion people. You have 68% of the working age and 58% of working at point time. And their individual spend is but $240 a year in AI related software robots, whatever, which is less than a dollar a day. And the $3,000 numbers, about $10 a day on the I have spent. You got a total tam here of well over a trillion dollars. And that's just with my basic assumption that this is similar to SaaS, which could be a completely wrong framing. Well, what we did was we also did consumer AI as part of this mix, thinking about the number of people that are doing personal AI usage, because a lot of Chad GPT has been individuals purchasing it for themselves.

And then we had to beg in some other assumptions. For example, Marcus and I were just talking before the show about, well, how many of these jobs will survive? Because if AI does arrive, it makes people more efficient. You might assume there's going to be fewer people. So we had a 0.9 multiplier there. But there's just some more questions we need to sort out to get to what you're saying, to get a better, more. accurate number of what the TAM for AI is. But the back of the envelope stuff alone shows that today the possible market for AI, you know, powered software is, I mean, essentially infinite for, you know,

venture capital purposes. But we're still, we're going to make this tighter to some scenario analysis, but that's our start so far. Yeah, not a bad start. And I think this is one view. This would be what we call in our firm and we teach at Founder University and at the accelerator, a bottom up tan. Hey, we're looking at the top. total number of people who work. We're looking at what they currently spend on SaaS software and just saying, hey, a baseline estimate, a minimum estimate, if you will. This is my minimum estimate, is that we spend the same as SaaS. It might turn out that the number of people employed goes down a bit. So maybe instead of 90% of people keep in their jobs, it's 80. But the spend is 15,000 a person

five times it. Because if you look at me, yesterday I signed up, I realized we weren't on the team plan for Claude. You know, we all had individual accounts. And then I was like, wait a second, there's projects inside producer Claude. And the projects can be collaborative. So I just upgraded us. I'll get your invite out.

But just yesterday, Kabir and myself and Lon were working on some projects there. It's kind of like Google Notebook LM, where you can kind of put in sources, but you have like a common workspace. Got it. And I was like, I don't know what this costs.

I don't care. It's like, oh, you want to spend $30 a person, $360. And I was like, yes. Yes. Because then I don't have to hire the 22nd person at the company for 75K. And I don't have to do an interview process. So very dangerous place to be in terms of hiring.

If you look at it from, you know, a union, you know, a senator, you know, looking at the world. You could be kind of scared from a business building perspective. Okay, do more with less. And I'd rather spend $15,000 on software for one of our producers. than hire the $75,000 person and then have less people to manage. It's also delightful. Anyway, something's going on out there. This is the biggest opportunity of our lives.

I think that this cohort of companies, these vintages of venture capital, are going to break people's brains. I think all of the hand-wringing about, oh, there's too many unicorns, there's too much of that. I think the outliers in this group are going to be trillion, $2 trillion, $3 trillion companies faster than it, you know, took Nvidia, Microsoft, Apple, meta, Tesla, and Google to get there.

It's just going to be a velocity that, a velocity to trillion that maybe we didn't consider. And I think the Mag 7 is going to turn into the Mag 70. I think they're going to be $70 trillion companies, like in tech. Give me a time frame on that because, in a thousand years, that's going to be true by definition. I would, yeah, I would say with, you know, it's going to take like a decade to build these. In some cases, they'll be built in five, six, seven, eight years.

Or like OpenAI is going to be like the first XAI, Anthropic. You know, there's your first three. But I think there's going to be, after those three, the other 67. So those three will happen in two years, I think we both agree. Maybe three. They'll all become trillion-dollar companies in three years. and then we're going to see wave after wave after wave. Every category of software, of work is going to become a trillion-dollar company.

That means backing into it, they've got to have $50 billion, $100 billion in revenue. But let's just say, you know, in today's market 20 times, 10 or 20 times sales. So $50 to $100 billion in revenue? Sure. Something like that. And so start looking at companies and just say, can you see cursor getting to $50 billion? I can. Or some software development thing.

Can you see a legal or tax company getting to 50 billion in revenue globally? Yes, yes, I can. I can see it now. Yeah. All right. Well, speaking of which, our first story here is interesting, which means the two stories relate. I have to be ruthless about my time now because there's so many opportunities.

And then this is kind of like the dot-com era where, yeah, it could all blow up. There could be a blow off the top. Sure, why not? but there's going to be an Amazon and a Google, you know, and a couple of incredible companies in that, in this cohort that if you make them, there would be like my Robin Hood and my Uber investment.

So now I'm like, wait a second. You know, people said, oh, your Uber is going to be your biggest investment ever. And then, okay,

Robin Hood's coming on pretty strong here. It's like a half an Uber. I think those two might be dwarfed. I think I might hit something bigger. I think I might hit something bigger if I work hard. All right. Well, I mean, Jason,

you're famously lazy. so it's time to crack that whip on yourself and get back to work. All right, first up on the docket, Deal raised $300 million. And Jason, we've talked about Deal on the show quite a lot this year, mostly because it's been locked in a spying dispute with Ripling, another company in the HR tech space. We read through its alleged activities.

And if you believe Ripling, and they're telling another story, Deal effectively had a mole inside of Ripling. and was using that to collect information that it was using to compete with them and also hire away their staff. Crazy story. Yeah. And you and I were curious what was going to happen to the CEO, Alex, over there, who I think

you and I have both spoken to. And things slowly died down to the point to which people don't talk about this too much anymore. And now at a reasonable remove, the company's back in the capital markets. A couple of short things here. It's a series E led by Ribbet, A16Z and Coatoo. And the company just reached at 1.2 billion dollars. yearly run rate in September.

So they had their first nine figure month. And this is really awesome. They essentially had 15 to 17% EBIT on margins. So growing well, you know, way above IPO scale and adjusted profitability, a very impressive company, even given the shadow hanging over it. Yeah. So I was just trading DMs with deal. They had bought a firm that we were investors in.

I believe it was, gosh, we had two cap table software investments that kind of started bumping into each other. But I think it was cap base, got bought by deal. Yeah, it was cap base. And so in 2023, and then I think this is also public, there is a, yeah, cap base spun out now of deal. So Main Street has acquired cap base. So to the best of my understanding, I'm getting some clarity on this. I own shares and deal.

Cap base is being spun out. This other group bought it. So we're not participating in that. Cap base is a great piece of software. It was like, we're going to do your, you know, Carda like cap table. We're going to do everything leading up to it, really talented founders. And it was just kind of a bummer because we had Cap base and another Cap table software company both get in the portfolio around the same time.

And because we're an accelerator, we kind of don't, like Y Combinator, we don't have a rule around. We just make one bet in a category because you can't. When you're investing, especially in early stage startups like we do here at launch, having the best most up-to-date data at your fingertips, well, it's essential. Listen, I'm smart, but I am not an expert in every single sector, industry, or cutting-edge technology. That's why our entire team is addicted to Alpha Sense. Their market research platform has the data savvy investors need to understand what's happening in the market right now.

And their AI interviewer has been trained on over 500 million business documents, making AlphaSense the single source of truth for investors. It's capable of pulling together analyst-level deep dives on just about any topic in minutes. You want an example? Sure, I got one. We invest in a lot of robotic startups, especially companies. that are automating warehouses, fulfillment centers, even making coffee. But did you know that the biggest challenge for these startups isn't building the machines

that physically move around the packages? No. It's coordinating them with legacy systems. And using those machines alongside finely tuned computer vision to monitor inventory and keep track of which supplies are running low. Know where I learned about all this? Alpha Sense. It filled in all the gaps for me.

And, hey, we're going to start you off with a free trial right now. go to alpha dash sense.com slash twist. That's alpha dash sense.com slash twist for a free trial. Because literally a third of the companies during the accelerator, let's say in the first year of the accelerator, they pivot to something else. And a lot of times they pivot to something where they're like, oh, that person is doing something very interesting and it's working.

I want to go follow them or become a fast follower or take your own spin in a second. So it was kind of a bummer because I think some of the founders, maybe even on both sides were a little upset at me for it. And I said, oh, guys, I say this going in. But anyway, congratulations to Capase. I'm spinning out. And so all of this is to say that I have a tiny number of shares

in this company deal. And I invited Alex. I just told him congratulations and then slid into his DMs. But he's going to come on the show next week, I think. Oh, fantastic. Well, at a $1.2 billion run rate, Jason, his company is now worth roughly 14x ARR. And I just want to run the number of bikes.

It seems low for the current era. Companies are quite expensive. And this one has proven itself in global footprint and profitability. Just feels minor to me. Private companies are a voting mechanism. Public markets are a weighing mechanism. Okay. So you're voting on the future when it's a private company.

When they're public companies, then the real investors come in who are just like, tell me about the cash flow. Tell me about the debt. Okay. Let's do some discounted cash flow analysis. Okay, what's the growth rate? How do you, are you going to expand the margin or is it going to contract? What's the competitive set here?

We're no longer voting if DoorDash or Uber eats, you know, an Uber are, you know, got better management teams or better vision or, you know, people love them and their vibes are immaculate. It's just how many orders did you? What's the march? on the order. It's like just we'll put it on the scale and then we'll make a decision. Now, sometimes Palantir, Tesla, you know, uh, open door. Micro strategy. Yeah, micro strategy. They can get disconnected from fundamentals and they're no longer being weighed. Very important for investors to understand when people have stopped

weighing and they've started voting. It's totally valid to vote on a public company. You could say Alex Carp, uh, the new CEO of Open Door, Keith Rabeigh being involved or Elon a Tesla with the vision for optimist means we should stop weighing this on the past vision or what's the current business model and we should start voting on optimist we should start voting on opened door 2.0 we should start voting on Alex Carb's ability to sell into uh you know governments and and these huge deals are doing long story short um both of these companies rippling and deal are incredible businesses and they're from the era of SaaS. Very much so.

Yes. And, you know, they charge on a per employee basis, but they will move into consumption, AI disruptive products, I predict. These are companies that have good enough management teams that they'll both start moving into the AI space. But I could see both of these companies,

you know, becoming worth hundreds of billions of dollars and having a chance, if they globally become the employer of record, the HR tech of record, your entire stack for companies, it's kind of like network effects. It's going to be really cost prohibitive to try to do what Rippling and Deal do

and spin up your own unless you're, you know, Google or Tesla, in which case you will, but for everybody else below a $10 billion company, it might be just easier to use the deal or rippling stack. So congratulations. both companies are great. I know the founder of Rippling had a big falling out with a big falling out with David Sacks. So he blocks me. And I guess I got caught up in that

because Sacks and our besties. But I really, I really like the founder of Rippling too. I think they're both killers. Yeah. And whatever happened with the spying stuff, yeah, it's unfortunate. Let the courts work it out. All right. One last data point on that. The RIPLIN AAR number was 570 million earlier in 2025. They're both companies at scale, Jason, that could go public at will. So we look forward to those. 2009. So you're saying Rippling has half the revenue? According to reporting that I could find, it's much smaller than deal. But I don't really want to index too much on that because these are companies that do handle a lot of payroll. And so I would be very curious to know the exact breakdown in

essentially GMV versus net, if you will. But they both have essentially the same $17 billion valuation. So that's fascinating. I wonder why the one with twice as much revenue doesn't get a double valuation or why the one would have as much revenue, if that's true, it's a private company, it's hard to get the information. Somebody can correct us if we're wrong. Yep. Yeah. So that's why I felt like their 14.4x multiple felt a little bit low because, you know, Rippling is, you know, a $500 million valuation difference in roughly half the revenue. But, um, and it's a more, oh, by the way, we forgot to do this, but, you know, they do HR, but it's more than just payroll. It's not just ADP. They'll also do like IT services.

So, you know, um, if you want to like, send people, of their laptop and, you know, make sure you understand what they're doing with their computers and all that stuff. Yeah, all that is kind of in this. Well, I look forward to you taking that company public and getting them off the bench, Jason. Both Twist 500 companies. Go to Twist500.com and see the top 500 private companies. And for producer Marcus, if you could let us know what percentage of those companies have been on Twist, and then I want to view on Twist 5 private companies. So twist 500.com. So twist 500.com slash, let's call it twist. Then I want to see just who's been on twist, who hasn't, and just make a running list of that and a link so people can easily see in the Twist 500. Who's been on the show? Okay. Let's keep going through the docket. Yes. So there was a really interesting interview with Rolloff Botha over on uncapped. I think it's Jack Altman's show. And you talked about this on Twitter. So I went ahead and watch it. And I think it's actually a fascinating kind of meditation. on venture capital as in asset class or not, Jason.

Mind if I play the clip? Sure. I'll see you on the other side in two and a half minutes, everybody, unless Jason says stop in which case... Two and a half minutes. Okay, here we go. We can cut it off a little bit. Okay, or maybe I'll say pause if we need to pass on a year.

Precisely. I don't think venture is an asset class. Why not? It doesn't support the numbers. So there was a lot of analysis back in the 1970s and 80s with the capital asset pricing model and people figured out that there's this asset class that supposedly has uncorrelate.

returns and a bunch of asset managers deem that they need to invest a certain percentage of their endowment or foundation or pension fund into this thing called venture capital. If you look at the data, they're basically 20 companies per year, on average, over the last 20, 30 years, then they've ended up being worth in realized exits a billion dollars or more. Just 20 companies. Despite a lot more money plowing into venture capital, we haven't seen a material change in the number of companies that are outcomes that are that large. And I think part of that is that there's a lot more talent than really interesting ideas or interesting companies to be built.

And I think we're spreading a lot of that talent thin right now, similar to what happened in 1999, by the way. Yeah. So when you look at the data, the amount of money going into venture capital right now in America is in the order of $250 billion a year. And the numbers, you know, these all estimates. Let's just say it's $250 billion a year. A lot of exits. Well, let's just do some very simple arithmetic for a second. $250 billion going in every single year.

If you assume that the firms generate 12% IRAs net, net of fees and carry, which isn't that great, by the way. I mean, over the last three or four years, the NASDAQ has compounded at 16, 17%, let's just say 12%. Not spectacular. You basically just average performance.

You'd need a 3.7x roughly. On 10 years. Oh, no, seven-year exit horizon. So I'm being a little bit aggressive. I mean, maybe it won't even be that good. So 3.7X on 250 billion. That approximates to a trillion dollars a year. Coming out.

Coming out. By the way, that means. And that's what the investors own. So let's say that the investors own two-thirds of the company to make the arithmetic simple. That's $1.5 trillion annually in company exit value. Yes. Just think about that for a second. Where's that coming from?

Well, Figma's worth what? It's a lot. It's a lot. Let's say it's worth you on 0.03 trillion. So if you start thinking in trillions and Figma gets you 0.03 trillion. You need 30, 40, 50, Figma's every year. Okay, okay. Make that arithmetic work.

You founded a company, you launched the MVP, but now you need customers. But how do you get in front of an audience of real people, not bots, who might actually have the budget and wherewithal to buy what you're selling? Well, I'm here to tell you if you're doing B2B advertising and marketing your product to businesses you need to be on LinkedIn ads. It's that simple, folks. This is not a spray and prey tactic. No, we're not trying to put your ad in front of everyone.

No. With LinkedIn, you know how. how to find the real decision makers and you can target them based on data that we all put in our LinkedIn profiles. You know, things like our title, the city we're in, the name of our company, how many people work there? And that data allows you to get in front of decision makers. We all know, LinkedIn has a billion members. Incredible. What an achievement. But 10 million of them are C-level executives, right? These are the people who are the CEOs, the CFOs, the CTOs. These are the real deal, the kind of people who, these are the people can approve a million dollar deal,

$10 million deal, $100 million deal. And LinkedIn's going to help you refine your marketing strategy. They're going to build campaigns that work for you and target the audience you need. They're also going to help you measure your ROI. So you're never wasting your resources on ads that aren't converting. I've got a special offer here for twist listeners. Wow, this one is better than the last one. Launch your first campaign and get $250 free when you spend at least $250. That's a great deal. $500 worth of ads, half price. Go to LinkedIn.com slash this week in startups to claim your credits. No spaces, no dashes.

LinkedIn.com, that's already in your browser, right? Because you're there every day. And then just put a slash at the end this week in startups, no spaces, no dashes. Thank you to our friends at LinkedIn. Yeah. Rollout goes on to say, oh, please, Justin, go forward. Well, no, I was to say he, at the Allent Summit gave exactly the same, you know, assessment of it. And, you know, a capital asset class as defined by Claude, producer Claude says, a capital asset class or simply asset class is a broad category of investments that share similar characteristics, characteristics, risk return profiles.

That's the key. And behave similarly in the market. Traditional assets include equities, fixed income, cash, cash equivalents, real estate commodities. And, you know, I asked Claude, is it, is VC actually one? And he said yes and no. Great for explaining the difference. I think that's the debate here. So got that right.

And sometimes it's considered its own distinct asset class due to its characteristic. But more people believe it's like a sub-asset class of private equity or alternative invests, you know, alternatives. And the distinction matters because it's not super predictable. You have the J curve, as we've talked about. long investment. It's illiquid. You have this very, you know, feast or famine, you know, power law and active management is a key piece of it. So anyway, Ruloff is right. And he makes a funny joke in there. He says it's a return-free risk. Yeah. Return-free risk. Yeah. He says,

you're better off investing in index funds or holding T-bills. Brutal. Well, and so then we get into the gamesmanship here. So we're all talking to our books. We're all playing a chess board. Sequoia is trying to keep the industry small, focused, and elite. Because that's how they made all their big wins, right? You don't want to chase. So they're trying to keep their fund size the same so they can have that IRA.

They're not trying to do what Indrisen is doing, which is making giant funds that, you know, revert to the mean and have lower return profiles, but more money, more capital under management. So here's your tension, Alex. which is going to have higher IRA, it's probably going to be Sequoia, because they're trying to keep it more boutiqui. Who's going to have more assets under management? Probably going to be Andreessen Horowitz

and these people just going big. But when you go big, you got to write big checks. You write big checks. Now you're in competition. You own less of the company. You got a worse deal. And so the industry, this relates to our opening preamble here

where we were talking about, hey, this could be the biggest ham. You could dwarf hams we've previously seen. So there's a big opportunity happening here. So who's Roloff speaking to? He's speaking to LPs. I think he's doing LP management in this discussion of, hey, you are an LP in venture capital. But we also have this Sequoia Heritage kind of the Sequoia Fund.

That's the public companies. So, hey, let's make a delineation here. There's venture. There's growth. And then there's us holding public equities. you are better off just owning the Mag 7 or owning the NASDAQQQ and just moving on with your life and not worrying. And you can just sleep at night because all of the stuff that comes out of venture, this huge funnel of venture, drip, drip, drip, created Mac 7, drip, drip, created the broader NASDAQ index.

So just by a tech index, maybe you're better off. So there's too many players. I was talking to somebody who's been in venture for 20 years plus, and they said it's a different game now. I'm doing seed investments, you know, put one to three million in. So now there's so many competitors that we're one of four, five, six people in a hot deal. And the founders are great at pitching and hyping things up and creating a marketplace. In fact, Y Combinator, launch, tech stars.

We're good at teaching them how to do that. So it's a key skill. So it's a key skill. They create this marketplace. And then boom, you have seed funds sometimes coming in at a 30 million, 40 million valuation. The math does not math, Alex. You can't build a three, four, five X fund. You're going to get ground down to a 1.5 to 2.5x fund.

So he said, I think what I'm going to do is in my next fund, I'm just going to be strategically looking at what's breaking out and then just buying secondaries and just, you know, waiting for the breakouts and putting money into those because he's got a stellar reputation and knows everybody.

And I was like, you know what? Yeah. Game on the field changing? Smart move. You know what I did? I was like, a lot of competition in the accelerator space. I'm going to start a pre-accelerator. Right.

Get in earlier. Play a different game. Play a different game. Found a university starting in Saudi Arabia in Riyadh, November, 3rd, 4th, and 5th. Mina.org. We were supposed to do 25, companies in the first cohort. They asked us because there's so many applications to go to 50.

I said, sure. Then I got to ask yesterday, hey, or two days and go with my management team. Can we go to six days? Absolutely not. They said, oh, come home. You know, my team's like, we got this 10 other companies. I said, absolutely not. And then I said, okay, fine, 60. This, um, it's a lot of companies, man. It's a lot of companies, but it's also, um, you know, what we do is so much work that most people aren't built for it. You have to be willing to work 60 hours a week to work in what I'm doing here, like with the team. If you're going to work 40 or 50 hours a week, we can't pull it off because there's too many companies. We need to talk to them.

So it is what it is. Jason, help me understand that the tension between there is sharp elbows because there's so much opportunity right now inside of startups and venture to roll off's point that there are only so many breakout companies. And then also the fact that, you know, across every data set that I can see, the amount of money that VCs are raising is in, pretty much precipitous decline. So it feels like there's either more money that I think in the market or more opportunity than I think in the market. But I was seeing things kind of through a pessimistic light in the near term, but then

your opening riff was it's the best time ever to be involved in technology. So what am I missing between those two polls? Yeah. That describes reality. So your entry price matters. And if the entry price is too high on average, it's hard to do the portfolio management. one of these firms, let's say a $300 million firm has 30 names in it, you know, and you wind up investing, you know, $10 million and you own on average, you know, 10% of each company, you get diluted down to 5%. Okay, so now I've got 30 names, 5%. Let's say one becomes a $10 billion company. It's incredible. You just made $500 million. So your $300 million fund is not even

2x. You could have just put your money. Now, you know how hard it is to hit a decagorn? I mean, people are like, oh, J-Cowl, spray, and pray, blah, blah, blah. Hey, man, number one company, $200 billion, number two company, $100 billion. Please say more.

Y Combinator, you want to dunk on me? Like, has Y Combinator had a company that broke $100 billion or $200 billion in valuation? I don't know, maybe. I think it was Airbnb. They were biggest. So it's really hard. And there's a lot of luck involved in this.

And like, you have to recognize it and realize the power law just rules your entire existence. And in that case, I just described a firm making 30 bets at market rates, their dilution, and then where they wind up. They have to hit. Now, let's say they do hit a $10 billion company and a $5 billion company. So you got $15 billion, and they have 5% of $15 billion. So now they have $750 million in returns. congratulations, your 2.X, you still didn't beat the index. That's if you hit a $10 billion company and a $5 billion company.

So you hit Instacart and you hit Reddit and like, oh, my God, I'm a hero. Look at that. Like every 15 companies, I hit a $5 or $10 billion thing, I'm a genius. The math doesn't work. Now, if you had invested and you own 10, you own 20%, like you used to, and then you got diluted down to 10%. Now you'd be 10% of $15 billion. you would be, you know, sitting pretty incredibly at 1.5 billion,

and your $300 million fund would be five exit, you'd be a legend. So entry price matters, and too many people chasing the same deals at too high a price means VCs lose, LPs lose. Who wins? Bounders. There you go. Hard to be too sad about that. I mean, you know.

I mean, here's the reason why it's a problem. The reason it's a problem is we need to keep the business sustainable. And it really is Darwin. You ever like, you know, there's too many fish in the pond. And the big fish start eating all the little fish. And then like, you know, all of a sudden the pond gets out of whack and some algae grows. But, you know, everybody's eating each other. It's too violent.

And then all of a sudden the ecosystem collapses. Collapses. And then everybody dies. All of the dead carcasses go to the bottom of the lake. and then the little fish and the minnows start growing because there's nobody eating them. And then you have to restart the entire cycle again. It happens in nature sometimes in lakes and bodies of water. And that happens in our industry too.

So you'll see a lot of firms that are zombie firms that are walking dead right now. They're not making new investments. They're just managing their funds. And so there'll be a lot of that happening, a lot of turnover in the space. And I can tell you, you know, there's two reasons why these VC firms end. Number one, the principal, like me or let's say SACs or whatever. They don't care to do succession planning or whatever. Maybe he does.

I'm working on it if it's a 10-year plan. But maybe they just say, you know what? Enough. These bets I'm working out to shut the firm down. And I'll just invest out of my own book, which is what Shemot did, right? Famously, he's been very public about it. So, and the other reason is you can't raise the next fund because you return 1.5x or 2x, and people are like, I don't know, I don't believe in Ventura.

anymore. The end. There's a great clip from Andreessen investor Brian Kim. He's a part of her AI apps investing team Jason and he talks to just talked to him yesterday. He's coming on the show. Oh, nice guy. I'm just pulling clips of people you just talk to. And this is all about momentum and what he kind of expects to see today and what's impressive. And then I want to get into the, the value of momentum and moats and startups. But first, let's play this 25 second clip from our man. Yeah. Two years ago. If somebody came to me and came to us, A16C and said,

oh, our company grew from zero to $2 million in run rate in three months. Are you interested? The answer is, holy . That's great. Let's dig in and understand, et cetera. Nowadays, we grew from zero to two. I'm like, how fast? Like a month?

I'm like, nah. It's being a little facetious, but okay. Yeah, so that's the gist of this. Now, this little riff from Brian got some notable pushback. Liz Wessel, she's a partner at first round, just was like, momentum is not a moat, momentous and not a moot, because this argument is that it is. I'm just curious about moats and momentum and where you stand on this conversation and argument. This is a really good pull because I hadn't seen any of this discussion.

So we talked about earlier the size of Injuristan's Fund, right, and then putting a lot of work together. And then first rounds, the antithesis of that. They were designed by my friend Josh Coppillman, Howard Morgan, and the team over there to put 250K checks in the first round. That's why they named first round. Pretty brilliant branding from the team over there. Long story short, you know, they are probably patient capital. And I think Andreessen is probably impatient capital on the spectrum,

just historically, philosophically. They literally named their incubator speed run. I think we've got out of our five or six of our, Founder University and Accelerator companies have gone to Speed Run, having good experience. It seems like a really good program. I gave a shout out to Paris program over the summer, my friend Marr over there, and Peshmont, and then Sequoia's Ark. I think Stephanie and Rulov are working on that.

And then you have 16 Z speed run. All of these, I would say, including our program's launch, Accelerator, a better option for founders now than Wycombinator. And that's not a dig at Y Combinator. I just put them in like the fifth slot now because I think you get a better deal economically and you get more bespoke experience and a lot more energy on your startup. Again, not a dig to Y Combinator, but it's a bit of a factory. And I think that's kind of why people are saying, hey, maybe there's a better way.

And I think that's why Y Combinator, frankly, is being a little defensive. We had a couple of these brouhawas coming up. They're kind of circling the wagons and attacking people. And, you know, it's kind of their vibe is to be a little cantankering. but they're facing serious competition. And the reason they're facing serious competition, and I don't have a horse in this race. We're always filled up.

You know, we do 100 investments a year. We have a hard time picking them because 20,000 applications, 100 investments, one in 200 chance of us investing. Like, gosh, I really want to invest in like one in 50. I think there's like one in 50. I would have just as good returns. So I have to build a bigger fund and a bigger team to do that. Putting it all aside.

I talked a little bit before about it being a little chippy out there. The opportunity space expands, the velocity expands, competition expands. I was talking about this VC who is like, I just can't compete or I don't want to compete in a zero-sum game where everybody loses or a game where everybody loses. That's not an infinite game. There's like a concept of an infinite game. The more you play, the more people who play, everybody just does better and better. And then there's finite games. venture in the seed rounds or series A, it's a very finite game.

But before that, and then in the growth stage, it's not a finite game. It comes an infinite game because there's an infinite number of people who want to transact the shares when they're public. And then there's an infinite number of people who want to start companies. So if you look at it like a barbell, Alex, you have infinite games on either end when you're public. Anybody come by the stock or even for Andrel right now on secondary markets or SpaceX on secondary market stripe. You can just, there seems to be a lot of ability to get in and out of those shares with SPVs. And then in the beginning, it's like, founders are like, please pay attention to me. Can anybody just return my call?

Right. A finite game in that middle section here. So there's a finite game going on here between Liz and Brian. The finite game is who gets that 500K check-in, who gets that $1 million C check-in? And so one person is saying, hey, I believe X. the person saying, I believe why, and they're in competition. But the momentum point, because Brian says, right now, momentum is the only moat. And Liz says momentum is not a moat.

And then we have also Nekun, Kothari, from FPV ventures. And he says that the only moats out there are retention and a mission worth spending 10 plus years on. Now, in one hand, momentum in a revenue terms, Jason, allows you to raise more capital, hire more better people, do more marketing, and maybe went a little bit faster. but it's not a panacea. Yeah, so I think this is a really good point. Thanks for getting me back on track here.

So I was explaining the game on the field. Now we'll get to the actual issue. Is it momentum a moat? Capital as a weapon, you know, the, I saw it firsthand with Uber. People just kept wanting to own Uber shares. The number of people who tried to buy my Uber shares at $5 billion, $10 billion, $20 billion, $30 billion, $40 billion, right up the stack was crazy. And then Travis's ability to raise capital, and then that became a blocker.

You invest in Uber, you can't invest in Lyft, you invest in, you know, deal. You're not going to be an investor in Rippling or vice versa. So you can use capital as a weapon. And how that works is you can hire people at higher rates. You can spend more on marketing and your customer acquisition costs can be higher because people are like, okay, you're going to be in the J-curve, but when you get on the other side, you will

be able to raise your prices, cut your costs, etc. And the war will end, which is exactly what happened with ride chairing and other spaces. However, we had Lovellable on. The founder's smart, right? He's got a lot of competition.

So you can make the argument with Lovellable, and I'll have you make this argument. Make the argument for me, Alex, of lovable, if they're momentum and cursor, take those two. Just think from first principles here for a second. You've heard both sides of the argument. Where would you say, hey, yeah, lovable and cursor have enough momentum that people can stop them, and that's worth investing in, or sustainable growth, and having lock-in other

ways and building a company based on product market fit and reducing churn, and having that discipline is a better way to go. Go ahead. So the question is, would I rather back cursor and lovable, which are pursuing essentially a very fast momentum-based strategy or perhaps a more measured company in the same space that was taking a slower, less cash-intensive approach? More methodical, yeah. Looking at churn, you know, not trying to grow too fast, not spending $10 to make five, you know, spending $4 to make five or whatever it happens to be, not selling $100 bills for $50.

bucks. Yeah, I think three years ago, me would have said methodical. I think me now says I would back cursor and lovable compared to the other entrance in that space. There you go. So this could also be, as Bill Gurley always explains, hey, what's the game on the field right now? Yeah. So in the NBA, in the 90s, defense won championships. And Anthony, seven seconds or less, people, Steph Curry, shooting more threes. The Knicks coach, the new Knicks coach, Mike Brown, Tibbs who preceded him and got us to the Eastern Conference Finals, and the reward for that was getting fired,

was one of these defensive stalwarts, no offensive strategy, you know, very little offensive strategy. Mike Brown said, we're going to shoot 40-3s a game. So kind of getting to that Celtics level, threes per game, which I'm not crazy about watching, but I do want to win a chip. Very boring to watch. It can be like a little Chuck Fest or whatever.

And I say that as a Warriors fan, to be clear, like, I know why we're doing this. Yeah, but the Warriors, you know, they just had such a beautiful style of play that I kind of forgive it because it wasn't as Chucky. And you had Clay Thompson, the Splash Brothers and staff who were just, who, because they could also drive the lane. Anyway, putting it all aside, you know, Draymond there, the Draymond show. That's, I think, what you have to think about. So it might be that Brian's right right now and our friend at first round, Liz.

Liz and Nukunj Kothari are right last year and five years from now. So, you know, both things can be true. Nekunz, by the way, people aren't familiar with him, was a previous investor at Kowcelot before spreading off on his own fund. And Jason, just because I know you love to see charts about Uber, here is one that I just put together for you. And this right here is the break-even free cash flow. Mark, and you can see that it started off their life as a public company,

way down in the red, and I've since been consistently going on. So this is the end of the J-Curb when you do begin to rip cash out of the business. And, oh, Lord, isn't that a beautiful chart? Yeah, and it gives you such optionality that I was talking to Dara at the All-In Summit, and I said, hey, listen, you got, you're doing a $20 billion buyback. Why don't you put the $20 billion into buying a car company or, you know, I don't know, Wave or Neuro or some self-driving company, buy Volkswagen.

You know, you could buy Volkswagen for some amount of money. You could buy another brand and then just build your own cars and build a full stack like Elon's doing. It's like, we can do both. We can chew gum and walk. It's not an or. It's an end. And I was like, ooh, ooh, I love that answer.

I love that answer. And, you know, he can decide to change his mind. if he thinks the stock's worth, you know, most people think the stock's worth 110 right now or 120. Top analysts think 140, 150. The low analysts think, you know, 85 to 95 where it sits now. Putting it all aside, he can just decide, okay, in my mind, I think it's a $120 stock. I'm buying under that number. And when it gets above $120, I'm selling.

And it's very interesting. Like, Warren Buffett had and Charlie Munger had a ratio in which, I think I saw this discussion on downtown Josh Brown's compound podcast. They would buy it if it was like a $1.3 or something, some ratio. And it never got there because they publicly said, we're buying our own shares at this number. So I put in a floor where... Right, because it's self-fulfilling prophecy.

That's like a stable coin, like bounding, like people trying to keep it at the... So, I mean, literally, one of the great things that Dara could say is anything under $115 we're buying the shares. You know what's going to happen? It's going to go right to 115 or 110 or $110. Does that count as, can you do that? Is that legal? Isn't there something around?

Okay. Yeah. I mean, listen, it's just, we have a share buyback program. Here's where it gets triggered at the ratio of our earnings, you know, our price earnings ratio. If our price earnings ratio is under 25 forward looking, we're a buyer. When we're above 25 price earning ratio, we're a holder. That's it.

Yeah. By the way, just for people who are curious, Uber's worth nearly four times as much as Volkswagen, in case anyone wanted to know the ratio there. Yeah. But I think if you buy Volkswagen, you're buying a, you know, a challenged business, and it could be distracting as opposed to having 20 partners putting their cars into the network on a global basis. What else is on the docket? Next up is Anthropic introducing something called skills.

Now, usually, Jason, when an AI company drops an update or new technology, we have to read academic papers, we have to look at charts. It's all a little bit technical, a little bit jargony, and a little bit far away. In this case, what Anthropica's built is deceptively simple. So a skill is essentially a little place where you can put information for your AI model to know. So if you're a company that has a certain style guide, you can put that into a skill. If there's a bit of data you want to have, you can put that into a skill. They're very lightweight, almost like signposts for AI models to be better tuned for you.

And what Simon Wilson said about this is that. they're very, very token efficient. So if you want to steer your AI model one way or the other, and you don't want to have to consume tons and tons of tokens to do so, this is a great way to do it. Now, we don't cover every single update from the open AIs and the XAIs, but to me, this was pretty bullish because it seems like a very simple way to possibly make applied AI in the enterprise quite a lot better. And I've been thinking about the split between Anthropics growth, which is mostly predicated on its API, which is business sales. Yeah.

And OpenAI's own, which is mostly through chat GPT, which is much more consumer weighted. And as we look at these two companies, Anthropic is currently at a roughly $7 billion run rate now, expecting to get to about $9 billion by the end of the year. And today, Open AI is about 13. And so it seems that Anthropic is somewhat quietly through its improvement to its product and making things better for companies catching up to OpenAI's historic growth. And so I think skills is a good example of how they're thinking outside of the box to try to find new ways to make this stuff work better. And I expect us all to use this sort of stuff for the next year.

Yeah. So this is an interesting feature. It's kind of like memory. If you remember that feature in chat, CPT had in 3.5. Sure. But much more advanced. So you might want to say for every time I do a research report, please give me. create a Google sheet with the data in it, share it with Lon and Oliver and do this,

and email me a copy. So I'm reminded and put it in my notion table to do this, whatever it is. And then you don't have to remember to put all that stuff in. Or I work at a venture capital firm that has the podcast this week in startups. We do three episodes a week. Please make sure you understand all the topics we discussed on the show. Yada, yada, yada, yada, yada, yada. you get the idea. So that's, I think, an interesting way to look at this, which is saving time and

saving money because it will cost less tokens. Not that matters because I feel like all these products, you get more than enough tokens for business uses. So yeah, well done. I think it's more of an API question. I think if you're pulling, you know, if you're pulling Claude from their APIs, then I think the token uses just feels a little bit more important. But I'm just impressed that we're still seeing this kind of gains, but there was a funny hacker news comment. I love to read the hacker news conversation about these things, Jason. And someone said, quote, I'm kind of in stitches over this. Claude's skills are dependent upon developers writing competent documentation and keeping it up

to date, which most seemingly can't even do for actual code they write, never mind a brute force black box like an LLM. So perhaps we're going to introduce new and novel ways to have tech debt. Yeah, if you think about this product, you know, it would be good if we had like some solid examples from Anthropic of it working, because we're kind of like coming up with the ideas here. But you might have, like you said, a style, or you said, like I think, a style guide for writers. You might also have like a design guide, design language. So, okay, you know, we're launched.

We have this design. And this we can start with this design language. Here are all those files. we have a corporate policy. You have a corporate culture. Here are those documents. And then anytime we do something in the world, like so you're writing a press release,

make sure of the style guide, the design guide and the design language, and our culture document analyze it and that we loop in the heads of each of those departments and just let them know what's going on. And if there are any really, it's just you start thinking about it. It's kind of like building,

an operations team into the product. And then they're always vigilant. It's like having this vigilant group of centuries. Is that the term for guards that like adore centuries? Yeah, yeah. It's like having these centuries in each part of the kingdom, the castles. And they're saying, hey, yeah, here's the standards for accounting.

If you submit something, you can take clients. Think about expense policy. You can take clients to lunch. at up to $50 a person, but you can't take them to dinner unless they're already a customer who spends over a million dollars a year, and then you can take them up to twice a year, up to $500 a person. And then when some expense software runs, you know, have it run against the expense policy methodically.

So are skills to AI models a bit like to-do lists for humans? or policy lists like employee handbooks. I guess it could be both. I guess it's the way to look at it can be both. But all of this is to say collaboration inside of LLMs is still lacking. They're still building out the framework of how when we're, like,

Notion has all this kind of dialed in. And, you know, it's a collaborative by, you know, from the bottom up. But LLMs were not built to be collaborative from the bottom up. And I was, I was talking to the CEO of Gramerley and Coda,

which bought superhuman, and they're going to be on the program. Yeah, and he's going to be on the program again to sort of talk about some of their new features and architecture. But what's super interesting about the design of these products, sorry, I lost my train of thought. But anyway, I was talking to him about this sort of whole concept here. Oh, it was about multiplayer mode. Grammarly was always about making you a better writer.

And I kept saying to him, like, and I've been saying this for two or three years, and I pay for Grammarly for everybody on the team. I'm like, it's great that Grammarly follows us around. And we have the style guy. And you can be professional, you can be concise, and everybody's a better writer and less embarrassing stuff. But really what I want to do is be working on documents together. And I want the Gramerly to become the central hub of all knowledge

because essentially it's like a keyboard logger. So if Gramerley, you know, is watching you write the documents, somebody edit the document another person putting the charts in the document me doing the strike through or asking questions in it we would have this knowledge base based on our keystrokes that grammarly could go from being since it's following all of us all over the place it could give us some grand view of the work happening in real time imagine if i could pull up grammarily pulse i'm just making something up here but yeah it would tell me like hey by the way people are working hard on the docket.

They've got these four stories done and these two are worked on. You might want to consider that there was just breaking news about those six stories. You know, story number four, there's breaking news and the facts wrong. It could be running those what used to call cron jobs or running those agents against what's happening at the keyboard level, which is super creepy in some ways. Well, it's a work computer. I mean, if you told me to put it on my personal computer, I'd tell you to go F off. But like, I mean, on a work machine, we installed some software on our work machines. I won't get into details about that.

And for the first like two weeks, it was a little freaky. Yeah. Because, I mean, it does feel like I've got a miniature Jason on my shoulder asking me if that's two minutes of YouTube during lunch is actually necessary. And the answer is yes. But then I realize that I don't care. It's fine. I don't mind. I'm busy.

Here's where it's become super helpful. And this software, I won't give a shout out to them anyway. anyway, they're not sponsors or whatever. And I may switch this offer, so I don't want to create any hard feelings here. We just tried it for a year. But you have to lock your computers down. So I told everybody, keep your old computers. If they're under 500 bucks, I just gifted them to the employees.

So we're going to get everybody new computers faster, which is good because if you have this kind of tracking software, it's really designed for finance companies, compliance-based businesses, let's say doctors with HIPAA. Don't use your work computer for anything that's not appropriate. What it also does is it obviously is tracking. What you're doing, and you can do like crazy granular stuff. Like if you were using call center people, you could track down to the keystroke. We don't do that. It actually bogs the computer down.

But you could, what happens ultimately is the people who are using it know how much they're working and what they spend their time in. And then as an organization, it rolls up to my management team. I don't have the time to look at this, obviously. But it was a very interesting thing. When we installed it, it was to lock everything down because we have all these global partnerships I've been talking about. We need to lock this down because we also have every company's documents get sent to us. Like, you know, what if somebody's cap table leaked? Like that does happen.

It's a really bad look if a venture firm is responsible. Finance companies have to have a higher level of duty. Put that aside. Now you understand the organization is spending 42% of their time in Slack, 30% of their time in Notion. six percent of their time in grammar, whatever it is, you know, superhuman, what they're spending their time on, you can measure it, you can manage it. What also came out of that was, I was being told these three people are the hardest working people in the company, we need to promote them and give them raises. And those three people were not even in the top half. And the people in the top three,

I knew one of them and the other two, I didn't know they were the all-stars who were really making solid contributions. So it made me rethink compensation, and it made me rethink bonuses. So I did something the last two years in our bonus structure, and it's a bonus, it doesn't get paid if I don't want to do it. It's just my money. Sometimes I'll just pop a little bonus on people. And I said, you know what? Bonuses are no longer a percentage of a salary. That makes no sense to me. It should be based on, you know, when you work at a company, like, oh, you get a 2% bonus, you get a 4% bonus, cost of living, increase, all that stuff. It's kind of like... lived and died by those numbers, yeah.

I feel like it's so antiquated and antithetical to a high performance culture. So, you know, if you're running a basketball team, if somebody has the hot hand and they win you the game and they play better defense last night, you're going to give them more minutes on Friday night. You're not going to give them more minutes next year. Like, what's that about? So I said, okay, every month, take the bonus pool, the anticipated bonus pool for the year. and every month, I want you to give me the three hardest working by effort, which the software can tell you, which is people who just put in the raw number of hours. And you can kind of check it. There's no gamesmanship of it, to be totally honest. But just amongst the top third of the

company, who the top three hardest working people are. And then based on what they did, their impact. So that would recognize somebody who just works an average number of hours, or even a below average number of hours, conceivable, but they did something that really moved the needle forward. So you're recognizing the two things that actually make a difference in careers and businesses. Effort and effectiveness. And people want to argue, well, I'm getting paid to do a certain output. If I do it in 10 hours, it should be the same if I do it in 100. And it's like that argument you hear when people basically F off at work and they're, you know,

working an hour a day. They're like, well, I hit my numbers. That's all that matters. you're not paying me for 40 hours a week. It's like, well, we kind of are. It's in the documents. Literally, I am literally paying you for 40 hours a week. You want a piece job.

That's fine, but you don't get benefits. Which is why the work from home thing is being unraveled and returned to office happens because there were a group of people who felt that way. And then they would then say, well, then I'll have three jobs because if you go down that logic, as long as I give them what they wanted as output, that matters. And man, and then I just do it monthly. So everyone can get rewarded in weeks versus quarters. That's good.

Literally, we started doing, I think, in August or September, and the people who got picked were like, thank you, this is incredible. And I got a couple grand instead of waiting to the end of the year to give five for 10 grand or whatever it is. Like pretty dope. And then it sends the message I want

for the culture of the company, which is give it your full effort. Make sure you're effective. And it's not just busy work. And I leave it up to you to decide if you want to do that. But we don't have to punch a clock and like if you're doing busy work,

who gives a shit, you know? Like I had people who were like, instead of automating stuff, just doing stuff manually, so you have somebody who's incredibly expensive in the company doing customer support emails, and then there's people who make half as much and they're like doing this incredible stuff.

And I'm like, okay, that's my job as the manager then to figure that disparity out. Now, Jason, speaking about doing half as much, I know you're carrying about half the weight that you used to. Oh, yes. That's true. And you know, it's all because of row.co and my embracing GLP life. Look at you, Alex, with the perfect segue. Um, listen, I'm Schfeldt. I just got off the scale today. It's 172.

Nice. The amount of joy when I hit that scale, it's the under 175 I feel. It's just amazing. And you know what? The food noise went away, which means I'm crisper and better on the pod. I have better arguments, I'm more in the zone when you're fat, and I was a fat bastard. Now, row.com gives me the ability to say whatever I want, within reason. I became a fat bastard, that's Brooklyn for obese. And it was very depressing for me. I don't get depressed about much. When ski season ends, when the Knicks season ends, or when, when the next season ends, or when

my weight goes up. Those are the three things that make me sad. And what a great couple of years. It's been for me because I lost 40 pounds. Thanks to GLPs. Go to row.com. And if you got insurance, you don't got insurance, they're going to help you either way. It's incredibly affordable. I didn't talk about it for the first three years. But this last year, I was talking to the CEO of Roe.com. We're on an event together, playing a little cards, talking, chewing the fat. He said, you look great. You know, how'd you do it? And I said, in GLPs. Oh, you know, we're doing GLPs. I said, that's great. I have just started speaking about it publicly.

I said, hey, I got an idea for you. Serena Williams and Charles Barkley are becoming spokespersons for the GLP movement. I said, that's great. Congratulations. What a great idea. He said, would you be a spokesperson with us? And I said, you know what? I've never done the spokesperson thing except for Athena, AthenaWow.com, to get yourself an assistant

and get a great discount on it. It's a crossover here. Sure. And I talked to my wife about it. And I said, hey, I think this is. would be like a noble thing for me to do. Just chit chat about my weight loss and be honest about it. I sleep better. I ski better. But just feel better about myself. So if you are sad, embarrassed about being a fat bastard, well, you just want to lose the extra 10, I'm not telling you

this is going to work or not. But I am telling you it work for me. I am telling you that row. Road.co is a place you can explore it with a great team. I trust them. There you go. Road.com. That is the first time I think someone has ever successfully nested a promo inside of a promo. Ladies and gentlemen, Peromoception. Well, you know, it's a good thing, too, because we just had to run payroll on gusto.com slash Jason. And I'm so focused because of my Athena assistance taking all this stuff off my to-do list. And I got such great sleep last night because I'm not snobes. and I don't need a C-CAP machine because I'm so fat.

All of these things work in a positive cycle going forward. Yeah, this is the Jason stack, if you will. This is how to go full Jason. Speaking of the stack, I should probably do something for whoop. I'm actually, you know, I stopped wearing my Apple Watch because I got into Whoop. And then I've been doing my labs, like function health and superpowers. Whoop now has labs in it. And then there's another place over here, a local place that everybody goes to to get labs.

So that's the next thing I'm going to. start talking about his labs, blood work, self-directed health care. The thing we're going to talk about next on the show, however, is what startup should build in the realm of AI? I have a question for you based on a little bit of data. So first of all, Jason, do you recall we had ramp on the show just the other day? Yeah. Mr. Eric Gleiman on?

He was great. Oh, one of the best guests we've going to have him back on. For sure. Okay, there just found it. Sorry, I've got three screens and I lost a window. So, Jason, I found this really. interesting bit of data from the Ramp team. And what this chart shows is different retention levels over time. God, here we go. Content marketing. They get free ads all the time. This is the last one.

Go ahead. You know, this content marketing strategy, it just kills me. It's like Carda's trying to do this all the time. They're like, we don't want to buy ads on the program. But we do want you to talk about all this car today. I'm just like, enough already. No more card of data. Enough. Okay. Well, But we'll sneak this one in. I'm going to just do one more of these. All right. This shows different in retention levels for AI products in the enterprise. Oh, okay.

And you see back in... This is interesting. Thank you. Back in 2022, retention was roughly 50% by the end of the year. That improved to 63% in 2023. And then 2024 up to about 80% by the end of the year. And then this year, it's tracking even better than that. So we could see much less churn in the...

the enterprise. And I think Ramp is big enough in the startup realm that they have enough companies using them to make this be reasonably directional data. I'm not trying to say that it's perfect. Okay. I'll go use Ramp. But this to me really spoke to an improvement in the ability for startups building enterprise AI products to actually retain customers long term. This contrasts with some information we've seen from Deutsche Bank about how ChatGPT, the leading consumer AI product in the world has seen its growth rate essentially flatline in Europe. And so I'm curious from your perspective, talking to founders as you do, if you recommend that if they're going to be building in the realm of AI, they should focus more on the consumer

side of things or more on the enterprise side of things. Six months ago, I would have said consumer, but now I'm not so sure. There's going to be a market for both. What you're seeing here is two phenomenons. One, there's less sampling going on and more. product market fit happening, stronger product market fit. So when new products come out, people get promiscuous when you first got your iPhone. You went into the app store when the app store launched, I think in the second or third version. And people were frisky that, oh,

buy this for a dollar, buy that for $2. But then things became subscriptions, things became $60 a year. And you kind of lock into, hey, I really like financial times, the economist, Wall Street Journal, whatever your bag is. I really like com.com. Oh, I use FitBod, you know, for my, my fitness stuff, whatever it happens to be. Or I got a subscription to Woop, I got a subscription to Function Health, they got a subscription to Fitbit. You kind of lock into your Peloton, whatever it is. So that's pretty natural over time.

And that's what you see in the retention chart. Now, in terms of Europe, that's a weird place. So there could be cultural things going on here. But putting it aside, there's also a natural audience for paid products. And when you hit it, it can be very hard to go above that natural audience. and you have to do new things to expand the audience. Netflix, perfect example. Netflix added games.

Remember, they put like a strip of games on there? Then they started doing live, and they started doing like boxing matches, UFC matches. They're doing all kinds of interesting live stuff. And then yesterday, the Ringer did a deal to bring the Ringer podcast, which are really shows that are video. They're just shows that are like the video, like here is like maybe half of broadcast quality or 80% of broadcasts, but nobody cares because it's about the content and the freshness

of it and the uniqueness of it and the depth of the experience of the hosts. So when you hit your natural rights, you try to do new things and sometimes they work, sometimes they don't. And so that's what we're generally seeing here in this data. And I've just made a new policy. Here's the new policy. New policy. We're going to use all this great data. We're going to use ramps. We're going to use ramps. going to use carters, we're going to use Zillow. But going forward, we're going to clip out who the data is from. And then we're just going to say, a leading SaaS company release some data. Here it is. Because I know what they're all doing. They're all hacking advertising. It's infuriating. It's enough already. Let me, let me, let me, let me steal man that for you in the other direction.

One of the hardest things to get in the private markets is information about, about what's going on. And companies that I think take the time to hire economists, as companies like Ramp and Carter have, and do actual rigorous analysis on a large enough data set, I think can't at times put out useful data. And we've talked about Carter before, and you'll note that we haven't had Carter data on the show in a while

because you were opposed to it. But I do think occasionally there is a chart that shows something so interesting, even with a slightly biased source, because I know they want to talk about. All right. I'll cut the difference with you. You're a mensch. I'm a business guy. I get it. You got your, you know, I was a journalist now. Like, I'm more like the publisher. So you're like the editor, the writer. I'm like the publisher's like, rah, yeah, she and get my chagong. We need to make money. And one time I says, here's what we're going to do. Okay. We're going to take the logos off. If it's absolutely great, I might, might say reveal who gave us the data. We're going to do. We're going to take the logos off. We're going to take the logos off. We're going to be able to. We're going to be. We're going to be. We're going to hack them back. I'm hacking. It's a hackback. You do know they're going to text me, not you, right? Absolutely. And they should. They should text Alex at 415-55-5-5-1-2-2.

Please. All right, everybody. End the show. Come on. Ruff it up here.