Latest / trading places / SpaceX, Saronic, and the New Era of Defense Tech Investing | Trading Places Podcast Ep31

Transcript

SpaceX, Saronic, and the New Era of Defense Tech Investing | Trading Places Podcast Ep31 · trading places

0:00
Somebody is making a lot of money on the inside track on
0:02
these trades. Would you consider this to be
0:04
insider trading at the government level?
0:07
We have retraced all of the losses of that 10% correction
0:11
and hit new highs across the S&P 500 NASDAQ.
0:13
I think this is the fastest recovery on record, 11 trading
0:16
days after a 10% reduction. Welcome to another episode of
0:38
Trading Places. I think we're on episode 31 now.
0:40
Spring has sprung. Yeah, Tax day.
0:44
Yeah, I've got Dennis show playoffs and the NBA playoffs.
0:46
Look, my favorite playoffs. Are you talking about?
0:48
Yeah, NBA playoffs, buddy. Come on.
0:51
Let's start out with the Augment Power 20 and then we'll pick our
0:54
top 7. Let's do that.
0:56
Augment recently came out with their latest Power 20.
1:00
This is reflecting the Q1 rankings.
1:03
They update their list on a quarterly basis.
1:05
Actually, some of this is updated every week, I believe.
1:07
Anything sort of noticeable here, SpaceX, Anthropic and Roll
1:11
maybe because of trading volume is interesting.
1:14
Yep, Open Eye Eyes had some controversy and that's the one
1:17
where you're seeing a little bit of share price drop there and
1:19
Stripe and data breaks and maybe we can debate who's in that next
1:23
list of companies, but who's in your top seven?
1:26
I'm on. I think SpaceX is the number one
1:29
winner. They seem they released their
1:30
financials this week and we'll talk a bit about that, but that
1:33
seems to be game on and probably has a lot of momentum.
1:36
I think that's probably a, a really good #2 I would take open
1:40
AI off my top 7 for now. That might be, oh really, that
1:44
might be controversial, But I think the challenge for them is
1:47
they're scrambling to get to a public market.
1:49
These private markets have to reflect pre IPO activity.
1:53
And so the anticipation is, hey, when do they go public and when?
1:57
And I think it's really hard to pull that off when the team, the
2:01
strategies in a little bit of turmoil, which isn't the end of
2:03
the world, but there's so much happening with the team I
2:05
referenced this last week, but they've got, they've got Fiji
2:08
Simo and Kate Rauch, their chief marketing officer on leave.
2:11
Both of those are health scares. And and that's, you can say,
2:14
well, that happens. And, and our thoughts and wishes
2:17
are with both of them. But they've also in, in the last
2:20
couple of weeks lost Kevin Wheel, who was the head of their
2:23
science team. He resigned.
2:25
Bill Peebles left, he was a sore lead their CTO for enterprise
2:28
applications, Srini Narayaman that he left and they got Brad
2:33
Lightcap, their COO on leave. And I just think that's too
2:36
much. I've taken companies public
2:37
before, man. And when you've got that much
2:39
turmoil on the team, forget it. Like just trying to navigate the
2:42
logistics of it is going to be hard.
2:44
So I think I, I think I'd bump them off a lot of musical chairs
2:47
over there. The company's still doing 25
2:49
billion in revenue seems to be still growing, maybe not as fast
2:53
as Anthropic, but still growing. I think, you know, it's tough
2:56
when you're 1 of the world's most valuable AI properties, but
3:00
Anthropic is chasing you. That might put a little shade on
3:03
your story to be compared to Anthropic right now.
3:06
I kind of agree with you on SpaceX and Anthropic.
3:08
I think that's one and two, I'm still going to put open AI in my
3:11
third spot, but I agree with you, it's a little wobbly.
3:14
Byte Dance I think really should be a number 4.
3:17
Maybe I'm looking at it from a market cap perspective rather
3:19
than a trading volume, but I still feel like Byte Dance,
3:22
probably valued at somewhere around 5 or 600 billion, is a
3:25
pretty interesting company. Maybe not crazy growth, but I
3:29
think underestimated by a lot of people a ton of revenue for
3:32
sure. Revenues the same as Meta
3:34
profitable. They resolved their US legal
3:36
risk, I think. I don't know why they're not in
3:38
the top 7 to be honest. There's 600 billion market cap,
3:40
right? So maybe it's the China factor.
3:42
I don't, I don't know, perhaps. And then I think, you know, data
3:45
bricks and Stripe are pretty solid in that 5-6 position.
3:49
I think you have you know Stripe and data bricks and 4:00 and
3:51
6:00 I had and a rose 7:00 just because you know, it's a little
3:55
bit lower market capital. They've certainly been rising
3:57
fast and you know both in revenue and in growth.
4:01
I think you have Cerebrous in your seven spot, huh?
4:05
I think Cerebrous will do great. They have filed for an IPO this
4:08
week and so I think we know a bit more about them and they
4:10
seem to be on track. So I put them in the in the top
4:12
7 now. All right.
4:13
And then if you had three to watch the sort of crack that top
4:16
seven, I guess we, we have one company in common, which is
4:19
canvas, but I would put revolute and ramp there.
4:22
I guess you've got open your eye because you knocked them out of
4:24
the top 7, right. And then perplexity, huh?
4:27
We don't, we don't always talk about perplexity, but I guess
4:29
they're also a pretty big AI competitor.
4:31
They feel like if if Anthropic does well and the bed for AI
4:35
solidifies, then I think there's a lot of demand for these LMS
4:38
and perplexity feels like it's next in line.
4:43
Oklahoma. Wrong.
4:45
We're only using place names with a double vowel and a double
4:47
consonant. Oklahoma has two sets of double
4:50
vows, but no double consonant. Now, if you had said.
4:53
Kid. Yes.
4:55
Shut up. Aman, what's what's been
4:58
happening in the macro level, I guess, do we have a war on?
5:02
Are the streets of Hormuz open or closed?
5:04
There is a temporary ceasefire. Israel and Lebanon have seized
5:09
firing on each other and that was a condition that Iran had
5:11
said to open the straights. The straights were open the
5:13
market price that in we had 13 straight up days in the market
5:17
in the NASDAQ, which is kind of amazing.
5:19
And then thing else if this weekend Iran is like reneged on
5:21
the deal and you know, it's like 2 steps forward and and one step
5:24
back. And so I think it is still a
5:26
ongoing conversation right now, but getting getting better and
5:30
the elements of a ceasefire are in place.
5:31
And obviously the market's very optimistic.
5:33
But but the recent news was that there were two ships that tried
5:36
to cross the Strait of Hormuz and they were attacked.
5:39
So I think doesn't sound open. That doesn't sound open to me.
5:42
Exactly. Well, that's one item that's
5:45
affecting macro. What else is going on in the
5:47
macro picture? Do we have tariffs or not have
5:49
tariffs and we get tariff refunds?
5:52
I think what the market is focused on right now.
5:54
So number one, I think is the this is just a chart showing how
5:57
the markets have reacted over the past 15 or so, 20 trading
6:00
days. So let's just kind of go through
6:01
the the history, those hard lines on top, the green line is
6:04
the S&P 500 equal weight and the blue line is the S&P 500.
6:08
You can see all the markets traded off to about a 10%
6:11
correction in the early part of March.
6:13
They came storming back. We have retraced all of the
6:17
losses of that 10% correction and hit new highs across the S&P
6:20
500. NASDAQ getting very close.
6:22
The Russell 2000 hit a new record and the equal weight S&P
6:25
500 actually outperformed the other markets.
6:27
I think this is the fastest recovery on record, 11 trading
6:30
days after a 10% reduction. Wait a second recovery have we
6:34
recovery the market's hitting a new high is my definition of
6:38
recovery. So 11 trading days has never
6:41
never happened before. There was a there have been a
6:43
couple of, you know, very fast V shaped recovery like this, but
6:47
this is this has been a complete turn in stock market recovery, I
6:50
guess is what you're saying. Yeah, exactly, exactly.
6:53
Now the laggard has been the you can see the purple line at the
6:56
bottom is the PVC SAS index. So the, the smaller cap tech
7:00
companies haven't, haven't really participated in this
7:03
U-turn, although the broader market has.
7:04
So the market's forward-looking. I think they're anticipating a
7:08
no, no permanent yet to oil prices.
7:11
Oil is now 85 to $88 a barrel. So it's bidding to settle down a
7:14
little bit. Futures are showing the 70s by
7:16
June. So I think those are all things
7:19
that are taking some of the heat off the off the markets.
7:23
Here's the other thing happening with the markets that we're now
7:25
seeing that I think is very positive.
7:27
Let's assume there's no, no lasting economic effects from
7:29
this Iran, I'll use the Trump term excursion, not a war, not a
7:34
military conflict, oil prices, inflation, let's say GDP growth,
7:37
all that is undamaged. Earnings are coming in really
7:40
strong for U.S. companies. The double digit earnings growth
7:43
rate on the S&P 500 and EPS, that's the forecast right now
7:47
that's being solidified and and companies that are meeting and
7:50
beating include like financials like B of A and JP Morgan Chase
7:53
semiconductors. Pepsi had a great quarter.
7:56
April 29th is a big day, Google, Meta, Apple and Amazon all
7:59
reports. So if they continue to show
8:01
progress on earnings, that'll be really positive.
8:04
And then I think the companies are just, you know, the, the
8:06
companies showing good results means that there's a by the dip
8:09
mentality and there was a huge hedge fund short squeeze at the
8:12
end of last week, which also drove markets higher.
8:15
So I think those are the fundamentals that the market's
8:17
now paying attention to and that's kind of what's driving
8:19
the recovery in the stock markets.
8:22
Well, I guess I'm sort of surprised that you think that,
8:25
you know, the market is not affected.
8:26
I, I guess my read is that, you know, price of oil drives
8:29
inflation, drives the economy. And maybe right now there's
8:33
like, not necessarily an expectation that oil prices are
8:37
going to be higher, but I can't see how oil prices aren't higher
8:40
if the Strait of Hormuz isn't reopened.
8:43
And it certainly doesn't look like that's going to be an
8:45
immediate thing. I mean, we, we might get back to
8:49
a situation where there's traffic there, but it still
8:51
seems pretty rough. Well, I think there's one group
8:54
of people that are benefiting from all this volatility in the
8:56
market and it's people betting on shorts, on oil.
9:01
Somebody shorted the oil market today by hundreds of millions of
9:05
dollars exactly 20 minutes before Trump made his
9:08
announcement that everything was going to be great.
9:10
And if you see that once, it could be a coincidence, but
9:12
that's happened at least three times, if not more since the war
9:15
began. That's a pattern.
9:17
And what that suggests is that there's ramping corruption and
9:20
insider self dealing going on with the president's up and down
9:24
predictions of what's going to happen tomorrow in the
9:27
negotiations and in the market. Amazingly, some trades on that
9:31
were happening mere minutes before these announcements by
9:34
Trump. Most recently, you know, $760
9:37
million short about 20 minutes before the compose was declared
9:40
open by Trump. Wow, what timing, what luck,
9:44
what fortune. That can't be.
9:45
That can't be. I know someone someone's really
9:47
smart perhaps or really connected to the decision
9:50
making. But this also happened on April
9:53
7th and March 23rd. These were multi $100 million
9:56
bets on shorts on oil. In some cases, just minutes if
10:00
not hours before announcements were made.
10:03
This has also been happening with, you know, tariffs in the
10:05
past. And I don't think that this is
10:09
like, you know, just random stuff.
10:10
This this seems to be highly connected to announcements made
10:13
by the government. And somebody is making a lot of
10:16
money on the inside track of these trades.
10:19
Would you consider this to be insider trading?
10:21
I guess yes, at the government level.
10:25
I mean, it depends on how the information is on who has the
10:28
information. It seems on the face of it that,
10:30
yeah, these are trades being made with material information,
10:33
presumably not not public. Here's a semi serious question.
10:36
I don't, I don't know when this happens, but it could be that
10:39
someone knows something and is front running the market and and
10:42
profiting from it. At what point does AI become
10:44
smart enough that it like figures out?
10:47
All right, here's what the president's going to say.
10:49
And you know, I'm talking like Skynet levels of, of like
10:52
innovation and creativity, but you figure out what's happening.
10:55
They can read through documents. Here's what the president's
10:57
going to say. Here's when that that post on
10:59
Truth Social is going to go public.
11:01
Let me go out and profit from this and then, you know, front
11:04
run the markets. I wonder if some nefarious AI
11:07
engine out there is is figuring this out and fronting the
11:10
markets. And then and we'll look back and
11:12
realize how how AI made a ton of money in this day and age.
11:15
I don't I don't think we need to wait, wait for AGI for that to
11:19
happen. I think you just got to buy a
11:21
ticket to Mar a Lago and you can find out what's happening.
11:24
There you go. Now that is that is really bad
11:26
for the markets and I hope that gets figured out and and
11:29
restricted and caught in the person pays the consequences,
11:32
whoever that is. Yes, unless to be within the
11:36
cabinet of the current administration or friends
11:38
administration, because I don't think, I don't think anybody's
11:40
going to jail there. Now, for a collection of
11:45
microprocessors, you're awfully touchy.
11:47
Wrong. It's just that my circuits
11:48
function better when we operate in a reality mode.
11:53
Yes, Michael. Just keep driving.
11:56
All right, moving on, we found out some new news about the
12:00
SpaceX IPOI guess there was some financials that were leaked that
12:04
indicated that the company was maybe losing money, whereas
12:07
prior to the XAI merger it was making money.
12:10
But there's just like a lot of things about this IPO that are
12:13
really unusual. Although they filed
12:16
confidentially, we haven't really seen all the financial
12:19
information for the company yet, right?
12:22
You know, the size of the company, the size of the raise
12:25
are, you know, astronomical, potentially, right, trillion
12:28
dollar evaluation evaluation, $75 billion raise, which
12:31
actually isn't that large a float for the, for a company
12:34
with a market cap that size. But the valuation on expected
12:39
revenue, which we think is about 25 billion is 75 to 80 times
12:43
revenue a bond is, is that kind of a little crazy in saying are
12:47
we are we past the realm of fundamentals now and into the
12:50
meme stocks? I, I do think it's still going
12:54
to be on fundamentals, but here's the way.
12:57
So there's nothing coming out of the financials.
12:58
I think that was new to me. What they did say was 18.6
13:02
billion in revenue. They did say a $5 billion loss.
13:05
Here's a couple things with this.
13:07
So if I just do the math on, let's say, 1.75 trillion, but
13:10
they're planning on against 18 billion revenue, that's 100 and
13:13
8X multiple of revenue. But that's a trailing number,
13:16
right? Yeah, yeah, that's exactly
13:18
right. Here's the way to understand it.
13:19
And the way we'll pitch it is we're underwriting a
13:21
reacceleration of revenue from probably 3 different sources.
13:25
And here's what we don't know because these aren't gap
13:27
financials and they're leaked. I'll point out a couple of
13:29
things. The $5 billion loss also might
13:31
be understanding their losses. Why do I say that?
13:35
Because they they only closed the merger with XAI in earlier
13:38
this year. So this is only three or four
13:40
months of losses. The cooled accounting is gone.
13:44
Cooled accounting used to be a concept where you just combine
13:46
the balance. You don't do that anymore.
13:47
So I think what they're doing is they're saying this is just the
13:50
5 billion of losses since the merger closed and that could be
13:53
a $20 billion loss for the year on an annualized basis.
13:57
But this that's all the past what's what do we look for in
14:00
the future? I think the IPO roadshow will go
14:02
like, look, we have an amazing launch business.
14:04
We have a near monopoly on it on cost effective launch.
14:07
At least that price will come down with these next Gen.
14:10
rockets like Starship. And then you know, I think we
14:13
may look back on the $250 billion acquisition for billion
14:17
dollar acquisition for XAI. And I don't know whether that'll
14:19
ever that'll ever pay off, but it there are like several
14:22
businesses under the covers. That's a legacy launch business,
14:24
which is the the Falcon 9 there is the Starling satellite
14:28
business, 10 to 11 billion in revenue growing at 50% a year at
14:30
50% EBITDA margin. So that's going to undergird the
14:33
IPO. And then the big use of proceeds
14:35
is Star Shield and government defense, which is kind of a wild
14:38
card. And SpaceX has received 22
14:40
billion in cumulative federal contracts and a lot of that's
14:43
classified. So we don't know what it is
14:44
exactly, but that's going to be a big part of their story going
14:47
forward. So I think what you have to
14:48
expect is like a much bigger revenue number in the next two
14:51
to three years from Starlink, from star shield slash
14:55
government defense, a legacy launch business, Starship, the
14:58
4th business, the capital intensive bet that SpaceX is, is
15:02
going to probably put 5 to 10 billion into this year.
15:04
And then there's an AI business. And I don't even know how to
15:06
value the AI business because I haven't seen, I haven't seen
15:08
what that looks like, but it's non zero.
15:11
And it I don't know whether it's as big as open the iron Tropic,
15:13
but it's non 0. And that's certainly going to be
15:15
part of the story. I sort of feel like this IPO is
15:19
like, hey, things are going great and valuation, trust me,
15:22
bro, it's all fine. Yeah, a lot has to break, right
15:25
to get to 2 trillion. If it gets to 1 1/2 trillion and
15:28
I don't know where it is on day one or day 180, but if it gets
15:30
to 1 1/2 trillion, that will be a huge win.
15:33
And so obviously the last time the company raised money
15:36
formally was really at 400 billion in the market and did
15:39
tender offer there and sort of they sort of announced an $800
15:42
billion round, but that never, never really came together.
15:44
And now they're talking 1.5 trillion.
15:46
So they've done, they've done a great job talking up the
15:48
valuation and, and telling the story, if nothing else.
15:50
Well, another way that this IPO might be different from others
15:54
is I think Elon is trying to fast track the company into the
15:57
S&P 500 that that doesn't fly into the current rules of how
16:01
S&P 500 companies need to be rolled in.
16:06
But along with that, there's like an attempt to limit the
16:10
lock up period to a shorter period.
16:12
I think there's a roll out of the stock at least 30% to retail
16:17
buyers. So there's a lot of things that
16:19
are unusual about how this is going.
16:21
I don't know. I think there's probably not too
16:24
much question. This company's going to IPO in
16:26
the next few months at a number north of 1 1/2 trillion.
16:28
There's plenty of demand. Do you think it holds that
16:31
number through the end of the year?
16:33
When do you think the lock up expires and what what's going to
16:36
be supporting this company's valuation after the IPO?
16:39
So they're talking on the road showed 1.75 trillion.
16:42
So let's assume that they start. I think it's a good bet that
16:46
they get to that number if they don't have a lock up period.
16:48
So there's going to be some selling, but I don't know if
16:51
they, I don't know if that's a great move for the company that
16:53
could put pressure on the stock. I could imagine over the next
16:56
six months, so the IP OS targeting the 75 billion in in
17:00
proceeds raised that is almost three times bigger than the the
17:04
last one. That was the biggest one on
17:06
record, which is Saudi Aramco at 29 billion.
17:10
I I would think the company would be smart to just pull that
17:12
75 billion billion dollar number back to more like 50 to 75.
17:17
Make a range, let demand drive it.
17:19
The the lock up by Nelson put selling pressure.
17:21
That's something they can negotiate.
17:23
I think it's a tiny float though, right?
17:25
I mean, relative to where the size of the company would be, a
17:28
normal 10% float would be 150 billion.
17:31
Even $75 billion float is only 5%.
17:34
Now you're talking about a less than 5% float for a public.
17:37
That's right, that's right. But then the, the thing of this
17:39
way, the entire IPO market from last year in 2024 was 77 billion
17:45
for the entire venture of capital.
17:47
So you're sucking up all the money out of the out of the
17:49
world. And I think when you what I
17:51
would do if I were there CFO is I would start with 50 to 75.
17:54
Do the range, start low end of the range.
17:56
If demand is there, let it go. If it's not, don't let it go.
17:59
And then if there's no demand, just pull back on the lock up
18:02
and so you don't flood the market.
18:04
And if they manage it well, I think they can probably hold in
18:06
the mid ones. Getting to 2 trillion again,
18:09
everything's got to go right. It's got to have a, a retail
18:12
component of meme component. Your financials better be
18:14
outstanding. You better have a ton of great
18:16
surprises in the second-half of the year that you're announcing
18:18
on earnings calls. And look, Elon can do that.
18:21
He's he's the kind of leader who's done it and been there and
18:23
done that. But that's what it takes to get
18:24
to 2 trillion. I'm I'm trying to understand
18:27
what Elon's motivations here are.
18:29
Is it just this initial, you know, float and raise is the
18:32
ongoing ability to sort of use that public stock as, you know,
18:35
way to borrow money in the future that for things are going
18:38
to be spending like just seems like, you know, people are
18:40
trying to say, you know, pay attention, pay no attention to
18:42
the man behind the curtain. We'll, we'll roll out a big
18:45
allocation, 30% to retail, which, you know, might not be
18:49
valuing the company on fundamentals.
18:50
And we play a little GameStop while we're trying to like tell
18:54
the story and get our, you know, financials in order for the rest
18:57
of the year. Yeah, that might work for a
19:00
while. I'm sure he'll be a long term of
19:01
focus. But I remember the same thing
19:03
happened with Facebook and Zuckerberg in 2012.
19:05
For whatever reason, they really wanted a $100 billion valuation
19:10
and they did everything they could to get there.
19:11
And they did for like 2 weeks. And then the stock plummeted and
19:15
was I think at one point cut in half during the lock up.
19:20
But you know, now they're a $1.5 trillion company.
19:22
And obviously Zach is very happy.
19:24
So playing games in the six months I don't think is really
19:27
in the long term interest for the company.
19:28
But every every company wants to do it for whatever reason.
19:33
Should be at the foundation in about an hour.
19:35
I'm afraid there'll be a slight delay, Michael.
19:37
I'm going to have to make a pit stop very shortly.
19:40
Pit stop. But kidding around, You're not
19:42
that human. I was using the term and it's
19:44
literal sense, Michael. If you'll glance at my fuel
19:47
gauges, you'll see that I'm virtually operating on fumes.
19:50
Well, you're right. All right, moving on.
19:53
We have a new IPO that's just been filed for Cerebrus, and
19:58
this was after scrapping that IPO last year.
20:02
The company has made progress since then.
20:04
It's had a big new contract with Open AI, a few others.
20:07
They borrowed a billion dollars from Open AI, and Open AI has a
20:11
warrant to buy up to 10% of the Cerebrus stock.
20:15
Like a little bit of like scratch my back, I'll scratch
20:17
yours sort of dealing here, right.
20:21
Are you feeling better about this rubrous IPO than maybe last
20:24
year? There was some concerns about
20:25
concentration of customers with Abu Dhabi based G 42, but seems
20:31
like that's now being addressed. Short answer is yes, I do feel
20:34
much better about them than last year and better about them now
20:37
than when we covered them five weeks ago.
20:39
On valuation corner, as you said, they had raised 1.1
20:42
billion in the Series G last year and then another Series H,
20:45
another billion dollars in in February at the 23 billion
20:48
valuation at the time last year they pulled their IPO mainly
20:51
because something like 87% of their revenue came from Abu
20:55
Dhabi based G42. Any, anytime you see that kind
20:58
of customer concentration, you know, and, and especially with
21:01
the, I guess that regional noise around the Middle East right now
21:04
that that was cause for concern. But in recent months they've
21:09
announced an agreement with Amazon Web Services to use their
21:12
super fast Cerebrus chips and Amazon data centers.
21:15
That's great for them. And as you said, they've got the
21:17
deal with open AI to, to invest and then have the, the, the loan
21:22
turn into a, some kind of convertible equity agreement.
21:25
So I think it's a, it seems like it's a great deal for open AI to
21:28
be in on this deal. I think Serubis is now showing
21:30
the, the customer breath they needed to, they were over 500
21:33
million in revenue in 2025 and growing really, really quickly
21:36
and, and very profitable. So I think that is game on for
21:39
them. And I do actually have them in
21:40
my top 7 now for, for IP OS this year.
21:43
One of the other stories that's been happening in the last
21:45
quarter, even last year is this business, mega concentration of
21:49
capital into, you know, raised by a small number of very large
21:53
VC firms and deployed into a very small number of large
21:56
companies. And just this past week, we've
21:59
seen two big announcements. Sequoia raising $7 billion in
22:02
capital, Excel raising $5 billion in capital.
22:06
I think both of those companies are in probably the top 10 VC
22:10
funds out there. This is a list that we compiled
22:14
kind of combination of both PE investors and BC investors, but
22:18
certainly some of the largest funds out there.
22:21
No surprise, Andreessen Horowitz is on this list, Sequoia's on
22:24
this list. Some of those AUM numbers may
22:26
not be exactly current, but the companies have both raised, you
22:30
know, billions of dollars in the last year or two.
22:32
And Andreessen's case, I think, you know, $15 billion in the
22:35
last 12 months. Sequoia, again just updated that
22:39
number. So that's not 2 billion now,
22:40
it's another 7 billion, so almost 10 billion.
22:43
General Catalyst has raised 10 billion in the last few months.
22:45
Thrive has raised 10 billion in the last few months.
22:47
Lightspeed's raised $7 billion. So again, some of these
22:50
companies are not pure VC. There's definitely some folks
22:53
that have PE investments as well.
22:56
Yeah, But these firms are raising a majority capital in
23:01
the market is going to less than 20 firms and a majority of the
23:05
capital being deployed is going to a small number of companies,
23:08
especially in the last quarter with the opening eye raise.
23:10
Some of the previous raises by these other companies are, are
23:14
we worried that there's, you know, concentration of capital
23:16
to a small number of allocators and a small number of
23:19
recipients? Well, it seems like a lot of
23:23
these guys have been, these are some of the biggest funds.
23:25
Is that the biggest funds Sequoia's ever raised and the
23:27
biggest that Accel has ever raised?
23:29
I think so. Right.
23:30
I think at least in terms of individual fund sizes, yes.
23:34
Yeah, I don't know. It does feel like a lot of money
23:37
into small hands is is probably not great for the ecosystem in
23:40
the industry. And you also have the risk of
23:41
people shifting strategy to to try something to deploy all that
23:44
money, which probably doesn't work out as well for most
23:47
players. I don't know.
23:48
What do you think? Do you feel like that's does
23:49
that make you nervous to save that much money in those hands?
23:51
Are those those are smart investors for sure.
23:54
I don't know that I think it's makes me nervous.
23:57
I mean, I think these are smart and responsible investors, but
24:02
at the same time I, I do think we're playing a different game.
24:05
Like these are not the traditional fund sizes and not
24:08
the traditional check sizes that people have been deploying in
24:12
the past. We're now talking about, you
24:14
know, probably 100 million plus check sizes.
24:18
Certainly these funds are multiple billions of dollars in
24:21
a few cases, I think accelerated A sidecar fund of several 100
24:25
million just to make individual direct bets, right.
24:29
I think we saw a benchmark before raising, you know, a huge
24:33
side vehicle that was a couple $100 million just to make a
24:36
single bet on Anthropic, which again, I'm not saying those are
24:40
bad bets, but just like the dollars being deployed here,
24:43
it's almost not really venture capital anymore.
24:45
I don't know whether you would call this, you know, PE or some
24:48
other type of growth stage capital, but it's it's
24:51
definitely different than, you know, even large funds of the
24:54
past, which might have been billion dollars and you know,
24:57
writing fifty $100 million checks.
24:58
This this is just huge sizes now that really doesn't seem like
25:03
venture capital anymore. I know it is it is a different
25:07
game and and you remember how Michael Jordan did in baseball,
25:11
like 220 in the minor leagues. But if the I tell you what,
25:15
though, if the list that you're shown had like Tiger and
25:18
SoftBank at the top of the list, I'd be a little bit more
25:20
concerned than, you know, Sequoia XL.
25:23
Who'd you say benchmark like that?
25:25
That feels like maybe that'll be OK for the ecosystem.
25:28
But but it would make it would make me.
25:30
It does make me nervous that these, you know, these are
25:32
checks we've never seen before in the companies that are, I
25:35
think, just much more speculative than than what we've
25:39
seen in in, you know, in, in, in my history and venture, at least
25:42
at at a level and a scale in terms of return to capital.
25:44
That seems a lot more speculative.
25:46
So that seems that seems concerning.
25:48
One company that hasn't been maybe on the radar for everyone
25:52
is wealth management firm Iconic, sort of famously known
25:56
for managing the family office of Mark Zuckerberg and a bunch
25:58
of other Facebook folks, but now a wealth advisor for many, many
26:03
celebrities, technology folks. This article by Natasha
26:07
Masarenios on Bloomberg is a pretty deep dive into iconic.
26:11
Over $100 billion in capital, over 20 billion that's going
26:14
into Venture. And they were a large investor
26:16
in Entropic not too long ago. So we finally become a pretty
26:21
big player in Venture. And you know, the number of
26:24
connections includes people like Tom Cruise and Pharrell
26:27
Williams, Mark Zuckerberg and Satya Nadella, Reid Hoffman and
26:32
others. So it's kind of an interesting
26:34
list of folks. I think Jensen Huang also has
26:37
signed on as a client. So these are some of the most
26:40
visible people in tech and entertainment and sports, some
26:45
of the wealthiest families around the world that are
26:47
putting money into into iconic. Yeah, it's, it's a great shop.
26:53
We've worked with them before. I wonder how much of this money
26:56
that they're deploying is directed by the clients and how
26:59
much of it is their own proprietary GPS.
27:02
They don't really disclose that in the in the Bloomberg article,
27:05
but we've seen them before here in the Valley.
27:07
They're definitely work with great people, have a great
27:10
reputation and seems like they're having a lot of success.
27:15
Michael, why do you need to socialize with so many women?
27:17
Wouldn't 1 be sufficient? It's your beginning to sound
27:20
like my mother. Yeah.
27:21
I mean, what's wrong with the little companionship, huh?
27:25
You can understand that. No, Michael, I cannot.
27:28
When you're one-of-a-kind, companionship does not compute.
27:35
Well, I'm on all this talk about IP OS, but there's a few large
27:38
companies that are still sitting on the sidelines.
27:41
I guess most notably, let's say Stripe Data Bricks and Canva.
27:45
These are all companies doing billions of dollars in revenue,
27:48
all growing, all profitable, all expected to be 2026 IP OS.
27:53
And we might still see one of them go out this year, but we
27:56
might not. Why do you think that is?
27:58
These are some of the most promising companies that were
28:00
listed as IPO candidates for 2026, but doesn't look like any
28:04
of them are going out in the first half.
28:06
No, it doesn't. Yeah, you're right.
28:08
They're all in the short list of potential candidates at the
28:11
start of the year. I think the noise and volatility
28:14
around the Iran war caused turmoil and markets in March
28:18
that probably put everyone on notice.
28:20
If I just look at IPO performance of the companies
28:22
that did big it up in 2025, it wasn't it wasn't very good.
28:25
There were a few notable outliers that did well, but most
28:27
of them are, most of them are trading underwater from where
28:30
they were before. So, so I think that was a cause
28:33
for concern. And then I think what happened
28:35
is SpaceX basically declared they want to go in June.
28:38
And once they declared that, everyone now is kind of waiting
28:40
to see how how that goes. And when you're SpaceX, you want
28:44
to raise $75 billion in an IPO. Every IPO buyer is going to line
28:48
up and get potentially fully allocated on venture with that
28:51
IPO alone. And so if SpaceX goes number
28:54
one, and then either Anthropic or Open AI go #2 and all the,
28:58
all the capital is, is pulled out of the market, then I think
29:02
these other companies are like, well, let's we can see how
29:03
those, how those go. And if there's room, you know,
29:06
at the end of the year for us, great.
29:07
But in the meantime, as I said, they're all they're doing is
29:10
like making money. They're profitable. 4 to 5 to $6
29:13
billion in ARR canvas growing at 40% plus year over year.
29:17
Data bricks similar. Why take a chance?
29:19
I guess stride, this made a very good practice if like secondary
29:22
offers and creating secondary market liquidity canvas deal
29:25
with that now every six months to a year.
29:27
I think data bricks will do it every six months.
29:29
So I guess they're probably in a position of strength, like
29:32
they're not going to push it and they're going to wait and see
29:34
how the market goes and do it on their own terms.
29:37
Yeah, I don't think any of those companies need to raise capital.
29:40
They probably have plenty of access to private capital,
29:43
whether that's equity or debt. As you mentioned, they're all
29:46
probably doing fairly frequent employee tender offers at least
29:50
maybe on an annual basis. So do they even need to go
29:53
public? I I guess I wonder if they ever
29:56
go public. It's sort of been stated by at
29:58
least Data Bricks and Canva that they will at some point.
30:02
But Stripe has even said that maybe they don't ever need to go
30:04
public. So yeah, I think those companies
30:06
could be private for at least another couple of years.
30:08
I don't know that it's a forever answer, but at least the next
30:11
year or two, I don't think there's any urgency for those
30:12
companies to to push it. All right, well, our last new
30:17
start for the day is going to be about continuation vehicles.
30:19
And I guess as a result of all these companies maybe not going
30:23
public right away, some VC funds that hit their 1012 year limits
30:29
may decide that, hey, we want to just keep managing these assets,
30:32
but they are going to need to create structural new vehicles
30:36
to manage the essence beyond the the traditional life cycle of
30:39
most VC funds and continuation vehicles have historically been
30:42
a pretty, you know, a regular structure for private equity.
30:46
I don't know if that's been as common in venture capital up
30:49
until just the last few years, but now we're seeing lots of
30:52
lots of, you know, I would call this, you know, very large
30:55
secondary market activity at the fund level where at least a
30:59
piece of some of those funds that have hit their 1012 year
31:02
limits are now being rolled into new vehicles.
31:05
That might be another five years, allow the managers that
31:08
continue charging fees and carry.
31:10
There's an opportunity for some of the LP's to either get
31:12
liquidity or roll into these new vehicles.
31:15
But now we're seeing this as a pretty, you know, big structural
31:17
shift in venture That's I, I think going to be here to stay.
31:21
Right, Right. I'm on.
31:23
Yeah, I think so. Maybe we can just define what
31:26
the continuity vehicle is in case not everyone understands
31:29
it. But it basically it's a vehicle
31:31
where the sponsors can retain control over their assets, over
31:36
the high conviction assets in their fund by raising new money
31:39
from new investors. And then they provide liquidity
31:41
to existing investors. And that way, you know, if
31:44
you're, if you're high conviction assets don't go
31:46
public, you can still cash out your early investors who might
31:49
have been with you for 5/10/15 years and bring in new fresh
31:53
capital and use, use the GP because they did manage the, the
31:55
new money. When you don't have a lot of IP,
31:58
OS or M&A, it becomes another way to provide liquidity.
32:01
As the chart shows the you know, there, there seems to be a lot
32:04
of LP's who like this structure, which is, which is great like
32:08
100 and 115 billion in market and and capital pulled in last
32:13
year is by far the biggest ever. Most of that is GP LED
32:17
transaction volume. So it seems like it's become a
32:19
structure that people now understand.
32:21
LP seem to like it. There's every incentive for GP
32:24
to want to continue to run assets that are that are that
32:26
they think will continue to grow.
32:27
So it seems like it's become a part of the landscape now.
32:31
Yeah, I think particularly when these are single asset vehicle
32:35
where there's one high quality asset that can be, you know,
32:37
specifically priced, you're going to see a lot of that.
32:40
There's also multi asset vehicles where maybe at least a
32:43
few of the assets are high quality, but maybe there's some
32:46
other stuff that's maybe a little bit, you know, skeptical
32:48
that's thrown inside along there.
32:50
But these are, you know, definitely been regular vehicles
32:53
for private equity for several years.
32:56
And now I think we're starting to see them also become part of
32:58
the venture, you know, life landscape as well.
33:01
Well, that's it for today's news section.
33:03
We'll be covering a little bit more serotic in the upcoming
33:05
valuation corner as well. Michael.
33:13
Yeah, Kit. C is beyond your grasp and D is
33:17
beyond your vision. I didn't know you had perfect
33:20
pitch. It's a cross I have to bear.
33:23
You do it so well. Thank you.
33:32
Welcome to another episode of Valuation Corner with Professor
33:35
Aman. Virgie, I bet you're feeling a
33:37
little defensive today. A little bit defensive, Yeah,
33:41
indeed. That's a, that's a perfect
33:43
Segway into Seronic. We know we've done a couple of
33:47
these valuation corners now on Andrel, on on Shields.
33:51
And there's another company that I want to put on your radar
33:54
called Seronic that is selling to the US military and some of
33:58
our allies. They just cracked the Augment
34:00
top 20, Dave. They're #20 on the list right
34:02
now. They just raised a $9 billion
34:04
evaluation about a week and a half ago, maybe two weeks, still
34:08
working on the round. I thought we could do a deep
34:09
dive on him. So what is Sironic?
34:12
I should say? First of all, we're looking at
34:14
them as a, as a fund investment for PVC.
34:16
So this is not investment advice.
34:18
This is just our opinion. But we'll share with you what we
34:20
know about the company and what I like about them and why they
34:23
might be in the top 20 now. They are a designer and builder
34:27
of naval hardware, software and AI technologies that creates a
34:31
single scalable platform for naval battleships.
34:35
They finished around at the end of March, but they're still
34:37
working on it. It's a series D led by Kleiner
34:39
Perkins. It's a $9.25 billion evaluation.
34:42
They've raised about two sixths to date.
34:44
If you include that money, companies have about a $400
34:46
million revenue run rate. So they've got some good
34:50
progress on financials, primarily selling the US
34:52
military. Got a little graphic here in the
34:55
bottom left about one of my favorite novels, Jules Verne and
34:58
20,000 leagues under the sea. I thought that was appropriate
35:00
for for the segment. It turns out Saronic does not do
35:04
submarines. That's the one thing they don't
35:05
do yet. They just do naval vessels, but
35:08
service vehicles. So we'll, I guess we'll put
35:10
that, you know, submarine on their, on their road map.
35:13
We'll talk about the management team a little bit here.
35:15
The the the founder and CEO is Dino Mavruka season 11 year Navy
35:19
SEAL. He kind of went from the Seals
35:20
to Vista Equity Partners. So he went from being a a combat
35:24
soldier to a private equity guy, probably has some battles to
35:28
pick and, and fights and in private equity, but hopefully
35:32
hasn't killed anyone doing that. His Co is COO and Co founder is
35:35
Doug Lambert and then Pat Dupriest is the CFO.
35:38
It looks like a really solid management team from our
35:40
conversations with investors in the company.
35:42
That's a real positive for the company.
35:45
They've done a great job raising money so far at a Series A and
35:47
series B levels. This is going back about, you
35:50
know, four to six years now. They were able to get
35:52
investments from a 16 from from A16Z, from 8 VC Lightspeed and
35:57
then people like .72 and Caffeinated Capital.
36:00
So it's a really good group of series A&B investors.
36:03
They did a series CA little while ago from General Catalysts
36:05
and now moving upscale. More money, more capital and a
36:08
just a really good investor to take you through a series CI
36:11
don't think you'd get any better than General Catalyst.
36:13
And then the late the latest round of the Series D, now
36:16
they're thinking about the use of proceeds being much more
36:19
intense, probably going public or an acquisition down the road.
36:23
Kleiner Perkins is a, again, a grade A investor for that sort
36:25
of stuff and divided invest somewhere to the list and a 16
36:29
and APC have followed on. So there's some conviction
36:32
there. I mentioned the companies had a
36:34
$400 million revenue run rate as if the first three months of the
36:38
year, you might say, well, wait a second.
36:41
That sounds like a pretty expensive multiple for a defense
36:43
contractor that's over 20 times revenues.
36:45
And indeed you'd be right. As we are thinking about the
36:48
company, we are looking at the pipeline with the next couple
36:51
years seem to hold. This is just a map of what their
36:54
product sales and pipeline looks like.
36:56
I'll talk a bit more about the products in a second.
36:57
But the the one that's driving most of the sales right now is a
37:00
Corsair, which is a small boat they're launching A Marauder
37:04
later on this year. That's going to be a big driver
37:06
of sales. And then it's going to be a few
37:08
other vehicles that they're putting in.
37:09
It looks like they could be on pace for a billion dollars in
37:11
2027 in sales and maybe, you know, two to three times that in
37:16
2028, although now we're getting pretty far out in terms of
37:19
forecasting stuff. But that's essentially what
37:21
they're what they're building. They just landed a $392 million
37:25
Navy contract for autonomous surface vehicles.
37:28
So that gives you a, a good sense for the type of boats that
37:31
they're building and who they're selling to.
37:33
And, you know, they're basically able to demonstrate now that
37:36
their product works and that the Navy is buying more and more of
37:39
it. The flagship of their product
37:41
lineup is the Corsair. It's a 24 foot autonomous
37:45
service vehicle. It's really the backbone to the
37:47
current product offering. It's an autonomous ship that
37:50
can, you know, it can basically navigate complex environments
37:52
and, and leave around obstacles and execute missions, all that
37:56
without constant human input. Based on that Navy contract that
37:59
has showed you the, the price for that thing is about $1.2
38:03
million per vessel. So they're able to generate
38:07
hundreds of 1,000,000. Now by selling that Corsair,
38:10
which sort of, if you think it's like a military analogy, that's
38:12
sort of like the infantry troops on the ground doing the battle.
38:16
Their big one now is the Marauder coming online.
38:18
That's more of like a supply truck as opposed to the Corsair.
38:21
But just like the infantry, the Marauder is 180 feet.
38:24
It's they call it a medium unmanned service vehicle, a
38:27
service vessel. It is heavy duty logistics.
38:29
It is like capable of operating for months and taking things
38:32
like shipping containers with fuels and munitions and gas and
38:35
and supplying Americans or allied soldiers who are in these
38:39
naval battles. So really important piece of
38:41
that supply chain. And those two things are driving
38:43
most of the sales. There's a bunch of other stuff
38:45
in their, in their product road map.
38:47
If you look at it, they had besides the Corsair and the
38:49
Marauder, you can expect The Mirage, which is like the think
38:51
of it like your special forces 40 foot boat, you know, 50 plus
38:56
knots, very good at stealth and interdiction because it's a it's
38:58
a shallow vessel. And then the one that they
39:01
aren't building, but I hope they do, is the kit, which is like a
39:04
talking car. Can you imagine?
39:05
There was they have talking car with, with a, with a turbo boost
39:09
and self aware laser weapons. And it can even hack, you know,
39:11
casinos and and and play music. And if you can put that in 1982
39:15
Pontiac Trans Am and keep the keep the price point down and
39:18
look cool, I think that would be, I think that'll be awesome,
39:21
Dave. That's not, that's actually the
39:22
Night Industries 2000. That's not actually a Ceronic
39:25
vehicle, but but the boy can hope.
39:27
So there is, I think, I think that's the case for Ceronic.
39:30
It's, you know, it's 400 million in revenue run rate right now.
39:34
It's on its way to 1 to 3 billion in the next couple of
39:36
years. They have something that works.
39:38
The Navy seems to like it. They're also selling, I think
39:40
not just to the US Navy, but to the UK and potentially
39:43
Australia. Again, we have a lot of
39:45
information by the company that's not, that's not public,
39:47
so I'm not sharing any of that. But from what we've seen of the
39:49
road map and the team, it looks like it's a well positioned
39:52
company. And I'll just remind you of the
39:54
USI know we're not at war with Iran.
39:57
What was it an excursion? We have a are we not at war?
40:02
I, I can't, well, I have to check, check what day it is to
40:05
figure that out. I think the word, I think, I
40:07
don't know what the legal term is, but we have, we have 4
40:10
deployed, you know, soldiers and, and, and naval vessels.
40:14
In the states of Hormuz, our military defense budget last
40:17
year was 895 billion. President Trump is asking for
40:22
1.5 trillion. I don't know if Congress goes to
40:24
1.5 trillion, but budgets are going up.
40:26
Budgets are going up in Europe. That seems like a little bit of
40:28
a stretch, but certainly a big number and likely to be a big
40:31
number for a while going forward.
40:33
So I, I agree with you. There's clearly money being
40:35
spent on defense and with Androl, with Shield and with
40:38
Saronic, I think we're going to see, you know, a lot of
40:40
potential, a lot of growth. Yeah.
40:42
And then the other reminder is, you know, Europe, which are the
40:46
European defence budgets have been between 1 1/2 and 2% of
40:49
GDP. NATO has said 2%.
40:51
Very few European countries, if any are, are hitting it, but
40:54
they all want to get to 2% plus. And so I think as the US allies
40:57
begin to ramp up spending and these companies that we've
41:00
highlighted and a row, Shield and now Saronic are selling to
41:03
US allies, notably the UK and Australia.
41:06
But if this technology works, it'll be something I think all
41:08
the NATO will want to do. There's a long pathway ahead for
41:12
what this company wants to do. And I think that 8 or $9 billion
41:15
number for their valuation, that's a pretty healthy number.
41:17
But in terms of a multiple, but it really is I think going to
41:21
be, it's going to look reasonable once all these
41:23
financial solidify for this year and those contracts get signed.
41:25
So that was my pick for valuation corner.
41:28
It's Saronic. All right.
41:29
Well, I, I know we're looking at making an investment in the
41:32
company out of our fund and maybe we'll have more to share
41:36
on that in the future indeed. Come on.
41:46
Trading Places is closed. What?
41:49
What's going on? Am I fired?
41:50
All. I changed my mind.
41:51
I changed my mind. It's open.
41:53
Oh, we're back open again. All right.
41:55
Wait, No, no, it's closed again. It's closed.
41:59
Don't worry. I'm sure we'll open again in the
42:01
next 24 hours. Something for you, something for
42:05
me. Get that big beautiful tax
42:06
refund in the door. Don't spend it all in one place.
42:09
This is the best time of the year, Dave.
42:11
Tax refund, maybe a tariffs refund, you know, Yes, even
42:14
better.