Latest / trading places / Anthropic at $900B, OpenAI Slipping | Sacra & Augment Power 20 Private Companies | Cohere Valuation | Ep 33

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Anthropic at $900B, OpenAI Slipping | Sacra & Augment Power 20 Private Companies | Cohere Valuation | Ep 33 · trading places

• 0:00
  Which company on your list do you think is the most, you know,
• 0:03
  stretched in terms of valuation? I think open source is going to
• 0:09
  be more and more significant. I do think that they can be
• 0:11
  businesses built around U.S. Open source.
• 0:14
  The result of that combination is I think a real AI powerhouse
• 0:18
  that's not going to be as big as open AI or entropic, but for
• 0:20
  people looking for a non-us, non Chinese alternative.
• 0:24
  The Robin Hood fund that trades at a massive disconnect to its
• 0:27
  NAV. I just, I don't think it's an
• 0:29
  institutional product. Hey, Aman, that's a snazzy
• 0:55
  shirt. You must be in some place.
• 0:57
  Cool. Where are you at the moment?
• 1:00
  Well, I'm in LA in a little bit of fundraising and speaking on
• 1:02
  some panels and somehow, I don't know, investors trust you a bit
• 1:05
  more if you're in a collared shirt and A and a jacket to see
• 1:09
  if you want to give you money a little bit more easily.
• 1:11
  I. Don't think they're going to
• 1:12
  trust you with those red earphones on, though.
• 1:15
  Well, welcome to another episode of Trading Places, the world's
• 1:20
  worst secondary BC podcast. We're going to give you all the
• 1:24
  news that's going on this week. We're going to talk a little bit
• 1:26
  about Iran, which is still going on in the Straits of Hormuz are
• 1:30
  still not open. We're going to talk about hyper
• 1:32
  scalers spending money and making money and Tropic
• 1:35
  continuing to grow at crazy numbers and raise it crazy
• 1:38
  numbers. Sam and Elon are duking it out
• 1:41
  in court. Sam's probably got his eye on
• 1:44
  their revenue targets, which they seem to be missing, but the
• 1:46
  CFO is trying to push for an IPO, not in 2076.
• 1:51
  Cerebrus IPO is happening. Founders Fund is raising money
• 1:54
  and spending on Andro. We'll cover Sierra a little bit.
• 1:58
  We'll cover Co here. And then we'll talk briefly
• 2:00
  about this really crazy bid for eBay.
• 2:02
  Let's get started with the Iran situation of global macro.
• 2:06
  I guess we're still seeing people firing in the Gulf at
• 2:09
  least a little bit. Both the US and Iran firing on
• 2:12
  ships and doesn't seem like the war is over.
• 2:16
  No, it's a ceasefire, but it's one of the most active
• 2:18
  ceasefires I've ever seen. I guess it was last week UAE
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  decided to leave OPEC, Iran is now firing on neutral countries
• 2:27
  on threatening the fire in the US. the US is threatening to
• 2:29
  walk ships through the straits, but they're definitely not open
• 2:33
  as as we sit here on Monday, oil, oil is at $105 a barrel for
• 2:37
  Brent crude and a little bit more than that for West TX
• 2:39
  intermediate. So we are definitely seeing oil
• 2:42
  prices elevated. I don't know.
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  I'm still not very optimistic on this thing ending anytime soon,
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  just given how far apart the two sides are.
• 2:48
  But it seems to be a very hostile ceasefire right now.
• 2:53
  Yeah. And I, I think some things that
• 2:54
  maybe you're not always widely reported is it's not so easy to
• 2:58
  turn back on oil infrastructure once it's been turned off.
• 3:01
  There's some oil refineries and pumps and things that might have
• 3:04
  to be shut down at some point, in which case it will take time
• 3:07
  to restart them. There's also infrastructure
• 3:09
  that's been impaired in the Middle East, particularly
• 3:13
  natural gas production refineries.
• 3:15
  I believe in Qatar, there's a little bit more damage than had
• 3:18
  been reported, I guess both in terms of Middle East countries
• 3:21
  as well as U.S. military facilities over there.
• 3:23
  So I don't think it's been an easy walk in the park, at least
• 3:27
  not as much as has been said. No, I think what's clear is Iran
• 3:31
  is suffering and the, the hit to their oil exports and revenues
• 3:35
  has cut GDP as much as by 40%. And I guess the US is hoping
• 3:39
  that that will be enough to get them to negotiate what the US
• 3:43
  really wants, which is a decision to no longer pursue
• 3:46
  nuclear weapons. But I don't know.
• 3:49
  In my experience, at least looking at the Middle East in
• 3:50
  the past, the amount of suffering that the leaders of 1
• 3:54
  government can push upon the people of that country is
• 3:56
  awfully high. And they know that the US is
• 3:58
  taking price as well, so. Seems like a giant game of
• 4:01
  chicken and nobody's blinked yet, right?
• 4:04
  And if we look to Poly market for I guess like when do we
• 4:08
  think the Strait of Hormuz traffic returns to normal?
• 4:11
  Well the end of April has passed.
• 4:12
  So that's zero for that chance. By May 15th, I think we're very
• 4:17
  little chance. How's the end of June, Dave?
• 4:20
  May 31st, not so great. June 30th.
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  Now this used to be above 50%. You can sort of see there like,
• 4:28
  you know, back in April, people thought, oh, this will be over
• 4:31
  soon, But as the time went on, we dropped below 50% kind of
• 4:36
  just a few days ago and now we're assuming to be below 40%
• 4:40
  or around 40%. That's not trending in the right
• 4:43
  direction. Now this is the first week when
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  it's really dawning on the markets and this is going to
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  take longer than this could take longer than was previously
• 4:51
  expected or communicated. So I think that's feeding into
• 4:53
  oil futures as well as the polymarket prop that's.
• 4:56
  Well, I guess we'll check back again to see if anybody's
• 4:59
  blinked by next week. On a more positive note, quite a
• 5:03
  bit of CapEx spending on cloud, on hyper scalers and on AI data
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  centers. All three big hyper scalers beat
• 5:13
  on their revenue and earnings. I guess Google, Microsoft and
• 5:16
  Amazon. Google really crushed it, right?
• 5:18
  Well, Dave, did you want the good news first or you want the
• 5:20
  bad news first? Is there bad news?
• 5:22
  I thought it was all good news. Well, I'll give you the good
• 5:26
  news. The stock markets are are
• 5:28
  hitting all time highs despite what we just said about the
• 5:30
  macro uncertainty in the Gulf stock markets, all that all time
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  highs last year, that's a lot of that is pushed by the big tech
• 5:36
  companies. These four hard lines are the
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  S&P 500, NASDAQ, Dow Jones and then the equal weight S&P.
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  The dotted line is the PVC SAS index.
• 5:45
  So that's the that's the one that's been lagging, but it did
• 5:47
  have an up week. Here's the good news.
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  If I just look at the top line for the cloud revenue and let's
• 5:51
  just focus on the big threes, Amazon Web Services, Google
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  Cloud and Azure, they all are accelerating growth.
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  They're all growing between 25 and 35% year over year.
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  They're all profitable and and all of them massively beat
• 6:03
  earnings. But here's the bad news.
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  The bad news is the other side of revenue is expense, right?
• 6:09
  And expense, in particular CapEx for the the big three plus Meta,
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  they all gave guidance in April and all of them are increasing
• 6:16
  CapEx by between 50% and 100% with the exception of Microsoft
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  who said they're going to triple CapEx in the upcoming year.
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  So you add up the CapEx from the big four, we're talking about
• 6:28
  $700 billion, a double from 2025.
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  That is now basically 2% of USGDP.
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  And you can see how the stocks didn't, the stocks performed
• 6:39
  very differently based on the CapEx.
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  Microsoft had the biggest increase in CapEx.
• 6:44
  They were slightly down. Meta doubled their CapEx and
• 6:47
  that surprised analysts. Their stock was down about 10%
• 6:50
  last week. Alphabet is actually showing, as
• 6:53
  we, as we, as you saw in the previous chart here,
• 6:55
  accelerating revenues. And so they're the ones who
• 6:57
  actually are trading up and we're the big beneficiary last
• 7:00
  week. So I guess the market believes
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  that their spend is justified, but it's really questioning now
• 7:05
  the returns on that CapEx. And I think you saw the stocks
• 7:07
  of Meta in particular and Microsoft a little bit suffer as
• 7:11
  a as a result. Well, I think you're right in
• 7:15
  highlighting that Alphabet was the big winner.
• 7:18
  And I think as results, Google stocks, Alphabet stock is up
• 7:23
  substantially. In fact, I think Alpha Alphabet,
• 7:25
  they did great over the last year has more than doubled,
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  which is kind of crazy, almost the world's most valuable
• 7:32
  company. I think NVIDIA still holds that
• 7:34
  title, but Google is a close second.
• 7:36
  On the other hand, Meta had a blowout quarter as well, at
• 7:40
  least in terms of revenue and earnings, but not, yeah, wasn't
• 7:43
  necessarily rewarded for that because of the huge CapEx.
• 7:46
  But so if you're correct, they surprised the market a little
• 7:48
  bit. If you had to sort of like think
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  about this, do you feel like that CapEx is justified?
• 7:53
  It it feels like everybody is making more money as a result of
• 7:56
  the CapEx they're spending, maybe some more than others.
• 8:00
  Yeah, even Meta, I guess that's the one that the market was most
• 8:03
  hostile to their earnings. If you just look at what they
• 8:05
  what they said, they generated 55 billion in revenue.
• 8:08
  So they beat the top line. That's a 33% year over year
• 8:11
  revenue increase and they're serving more ads and their price
• 8:15
  for ads doubling up by both by double digits.
• 8:18
  They reported $10.44 in EPS. The market estimate was 666.
• 8:23
  So they blew away top line, blew away bottom line.
• 8:25
  They're definitely getting a return for it.
• 8:27
  I guess the question though is if you continue to double CapEx
• 8:30
  on an annual basis, but those returns continue and is that
• 8:33
  justified? And I think in Meta's case in
• 8:35
  particular, they don't have a great history of CapEx and
• 8:37
  chilling returns for it. The other is because they have
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  cloud businesses do. So Meta's got a higher bar to
• 8:42
  hurdle and I think that's that's really hurting them.
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  But you know that you can't argue with Q1 results top and
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  bottom line, just a matter if this is this is continue or not
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  and that's I think that's a tough question to answer.
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  I think if you were to kind of like think about the stack,
• 8:57
  right, we have kind of like chips on the bottom.
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  You have sort of data centers above that, then you have sort
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  of other application layers on top of that.
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  We we've seen that chip companies are definitely
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  monetizing their spend in AI. There are people who are like
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  both investing in that and people buying that.
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  I think the hyper scalers we're also seeing people buy at least
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  they're, they're making money, could argue mostly from hosting
• 9:22
  the data centers right now that's Google, Microsoft and
• 9:25
  Amazon. Then you could say, well, maybe
• 9:27
  Google and Facebook, Google and Meta are monetizing their
• 9:32
  advertising with AI. Are we starting to see other
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  companies, you know, above the data center layer, you know,
• 9:37
  figure out how to use AI to monetize?
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  Is that something that's starting to work or not so much?
• 9:43
  I think it's showing up in revenues for those big three we
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  highlighted. I don't think it's showing up at
• 9:47
  Oracle yet. I don't think it's showing up in
• 9:48
  sales force yet. I guess you could say Anthropic
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  and Open AI have had success in monetizing what what they do.
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  So the foundational models have now figured out how to generate
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  revenues, not not yet profits, but generally generating
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  revenues and positive unit economics.
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  So they're they're beginning to solve it.
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  But other than that, I think there's a very short AI agents
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  or SAS companies, you know, this is maybe a small handful that
• 10:11
  are showing some acceleration in their businesses and that's
• 10:13
  presumably turning into the bottom line as well.
• 10:16
  I think it's starting. I think the story is still, you
• 10:18
  know, very early and very improving.
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  I think with this hyperscale, there's the challenges that
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  we've just never seen, you know, 2% of USGDP coming from this AI
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  CapEx spend now. I mean, think of this way, USGDP
• 10:29
  in Q1 was growing by 2% year over year.
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  So half the growth, 3/4 of the growth of GDP is coming from AI
• 10:35
  CapEx spend right now. So we're just spending that kind
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  of money. The bar is really how to show
• 10:39
  continuing returns. And I think, I think that story
• 10:41
  is still not clear to investors. You know, there's a really
• 10:44
  interesting article by Jason Lemkin, who runs Saster.
• 10:48
  He's one of the most famous BCS in SAS.
• 10:51
  And he was talking about Atlassian and Twilio
• 10:53
  surprisingly crushing their quarter and accelerating.
• 10:56
  And you know, I think Jason talking his own book maybe, you
• 10:59
  know, trying to make people think that the SAS apocalypse is
• 11:02
  over. But what he highlighted was the
• 11:04
  fact that agentic adoption of SAS is up.
• 11:08
  And that he was pointing out that's why Twilio in particular
• 11:11
  really crushed the quarter after not having much growth in the
• 11:14
  last couple of years. But they were seeing an uptake
• 11:17
  of Twilio services by agentic use cases, maybe not so much by
• 11:22
  people on a per seat licensing basis.
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  And he said there were really kind of like almost two or three
• 11:26
  different types of use cases for SAS, but that the agentic use
• 11:32
  case for SAS was on the way up. The human use case for SAS was
• 11:36
  not on the way up. And there was so, you know, some
• 11:40
  in between use case there where maybe, you know, AI was being
• 11:42
  attached to usage that was driving things.
• 11:45
  But I thought it was a really interesting way to sort of look
• 11:48
  that, you know, the SAS market isn't uniformly being crushed,
• 11:51
  but it is being crushed from a human induced usage standpoint,
• 11:55
  maybe not as much from an agentic standpoint.
• 11:59
  Right. So he's bucketing SAS companies
• 12:01
  into 33 buckets, the the ones with agentic AI revenue
• 12:05
  acceleration that's working. And then there's a group that's
• 12:09
  like, I guess it's there's a group there where it's not
• 12:10
  working because they don't have the adoption of agents or you
• 12:13
  haven't built an agent tool that others will use and pay for.
• 12:17
  And then there's just the middle bucket where I guess in his mind
• 12:20
  that's that's unclear. You always have to have a middle
• 12:22
  bucket. I guess that's unclear if you're
• 12:23
  going to better do a three bucket method.
• 12:24
  But that sounds right. It's certainly going to create
• 12:26
  winners and losers, and they're going to bifurcate along that
• 12:28
  use of AI agents. One company that's not having
• 12:32
  any problem growing and monetizing is Anthropic.
• 12:36
  And there was rumors last week of them turning down an $800
• 12:39
  billion evaluation. There was there was them trading
• 12:41
  at a trillion dollars. It seems like they're putting
• 12:44
  together another funding round of the $900 billion evaluation,
• 12:47
  at least maybe 50 billion of that which has been spoken for
• 12:49
  already. The company also reported that
• 12:52
  they were pumping up revenue and out of $44 billion AR run rate,
• 12:57
  that's up from 33 just a month ago, kind of amazing numbers,
• 13:01
  right? I'm on.
• 13:02
  That's amazing. If there are 44 billion in ARR,
• 13:05
  so that's end of April, they were at 30 at the end of March.
• 13:08
  They've added 14 billion in ARR in April.
• 13:11
  It added 11 in the month of March.
• 13:13
  So they were at 30th end of March and then 19th the months
• 13:16
  before that. And they started the year at
• 13:18
  like 12 billion. So they are adding what is that
• 13:20
  710 now 14 billion in the last three months.
• 13:23
  And so I guess that puts them on pace for, you know, $100 billion
• 13:27
  by the end of this year. If they keep adding 10 to 15
• 13:30
  billion in ARR every month that is.
• 13:33
  That is unbelievable. Like we've never seen anything
• 13:34
  like it in in this space. First Canadian slang is hoser.
• 13:42
  It's somebody who's very Canadian, you know, heavy
• 13:45
  Canadian accent. Big hockey fan wears A tuk kind
• 13:49
  of like a redneck. Elon Musk was in court this
• 13:52
  week. There's a big lawsuit going on
• 13:54
  between Elon Musk and Open AI. So I would say that's between
• 13:58
  Elon and Sam. Elon went to court and the judge
• 14:01
  was not so amused. There was several remarks that I
• 14:04
  think got shot down by the judge.
• 14:06
  What do you what do you think about all the gossip going on
• 14:09
  from the courtroom drama? Well, it's a it is a fascinating
• 14:14
  case. It's happening right down the
• 14:16
  street in in Oakland County Court.
• 14:19
  You might remember that that Open AI was founded by both Elon
• 14:23
  and Sam Altman, and the case basically revolves around what
• 14:27
  was what was said and what was discussed at the time of the
• 14:30
  founding. Elon is basically claiming that
• 14:33
  Sam and Greg Brockman, who's also on the open air board,
• 14:36
  basically did a bait and switch and that there was there were
• 14:40
  there were going to be a not-for-profit.
• 14:41
  That's what he invested into. He wanted to, he wanted to take
• 14:44
  control of the company and then Sam and Greg took it away from
• 14:48
  them and among other things, you know, made it a for profit.
• 14:52
  I initially thought that there was just, it was a hard case for
• 14:54
  Elon because if you look at the claims, the first claim is a
• 14:57
  breach of charitable trust, which is like a contract claim.
• 14:59
  Like you have to read the contract and see what it was
• 15:01
  they promised. But ordinarily if you give
• 15:03
  somebody money and then they, you know, they change their
• 15:05
  business line. I mean, how many start-ups
• 15:07
  change their business strategy, right?
• 15:08
  They have to pivot new things. Elon's companies have changed
• 15:11
  from one business to another. That's not usually grounds for a
• 15:15
  lawsuit unless the contracts stipulated that you can't change
• 15:18
  your business line without some kind of consent or approval.
• 15:20
  And I haven't read the contract, so I don't know all that to be
• 15:23
  true. That has come out in discovery.
• 15:25
  But let's assume that, you know, that's a contract claim.
• 15:27
  The other stuff is really hard, like promissory fraud.
• 15:30
  In order to to prove constructive fraud or promise
• 15:32
  you fraud, you have to prove the other guy intended to deceive
• 15:34
  you at the time you took the money and then, you know, lied
• 15:38
  to you. And initially I thought that is
• 15:40
  a really, really hard thing to prove.
• 15:42
  Like how do you prove that somebody is lying to you when
• 15:45
  they take your money and then and then change the bargain?
• 15:48
  The only way that you can, you can lose a case like that, Dave,
• 15:51
  is if you keep a diary maybe. And that goes back to the moment
• 15:54
  you took the money and you write things in the diary like, oh, we
• 15:57
  can't do that. We would be lying to that
• 15:59
  person. And we can't change the business
• 16:01
  to a for profit later because this person would have a
• 16:04
  legitimate claim that we changed the business.
• 16:06
  I mean, God forbid somebody kept the diary and documented all
• 16:09
  this stuff. I think that is the only way
• 16:11
  that that Elon potentially wins this case.
• 16:15
  Do you know of anyone you might have kept the diary on this?
• 16:20
  I don't know, maybe Sam Alban when he kept a diary, I'm not
• 16:22
  sure. Apparently in the discovery it's
• 16:24
  coming that Greg Brockman kept a diary.
• 16:26
  I don't know why grown man keeps a diary, but if you do keep a
• 16:29
  diary, you should not be writing things in it like, you know, we
• 16:31
  shouldn't be talking like this in a investor conversation.
• 16:35
  I still think it's a tough case for Elon to win.
• 16:37
  There may be some incrementing evidence and discovery that
• 16:38
  doesn't make open air look very good.
• 16:40
  But it is a it is a fascinating case and it's it's going to go
• 16:43
  it's going to be a a bit of a he said, she said in front of an
• 16:45
  Oakland judge now. So, you know, it's hard to hard
• 16:48
  to assess what's going to happen.
• 16:50
  I think it's curious because you know, the investment, as much as
• 16:52
  I understand it was made out of a donor advised fund that Elon
• 16:56
  had put money into. And theoretically the
• 17:01
  investments that get made out of that should be made by the
• 17:03
  person who's trusting or the the DAF platform itself, not
• 17:06
  necessarily the person who's directing that.
• 17:08
  But then there was also the situation that several of Elon's
• 17:11
  companies started out in some kind of nonprofit structure with
• 17:15
  some, you know, subsidized investment and then subsequently
• 17:19
  converted to for profit. So I don't know.
• 17:21
  It seems like he's trying to argue a case that is a little
• 17:24
  bit different than what he's actually done in his own
• 17:27
  scenarios as well. He he's definitely changed
• 17:31
  directions in companies. I guess the question is in this
• 17:33
  specific company, was there a deal that said, we will, we will
• 17:36
  keep it a not-for-profit and if we change it to a for profit,
• 17:39
  you know, what's the remedy? And, and how do they get that
• 17:42
  approval? And, and, and, you know, every
• 17:43
  company is a bit different, but there's no doubt in startup
• 17:45
  land, there are all kinds of changes of business strategy
• 17:47
  and, and pivots. And Elon is no stranger to that.
• 17:50
  So it is. It does seem like a weird case
• 17:52
  to. It does seem like a weird
• 17:53
  argument for him to make. Well, if we look at Polymarket
• 17:56
  for guesses as to whether Elon is going to win this case, it
• 18:00
  seems like right now the money is against that happening.
• 18:03
  I guess probably sometimes prior to March there was maybe an even
• 18:07
  split, but it seems like since in the last month or two, it's
• 18:11
  fallen below 50%, now trending around, you know, maybe only
• 18:14
  36%. I guess we'll check back next
• 18:17
  week and see if those numbers have changed after Sam gets on
• 18:20
  the sand. Yeah, well, Sam has some other
• 18:25
  business that might be more likely to get his attention.
• 18:29
  Open AI missed some of their revenue targets.
• 18:31
  They're not a public company, so they're not, you know,
• 18:33
  presenting estimates. But still, there's some targets
• 18:36
  they had for growth that they fell short of.
• 18:38
  That probably doesn't help the case.
• 18:40
  I, I think open the Eye has been facing a number of different,
• 18:43
  you know, questions about their story.
• 18:44
  There's been changes in, you know, the execs at opening Eye
• 18:48
  to anthropics past them on a revenue number of basis.
• 18:51
  Now it seems like open the Eye's growth is slowing.
• 18:54
  And then there's been all kinds of changes to where they're
• 18:56
  going to be spending money on data centers where they have
• 18:58
  enough money to, you know, pay for all the treatments they
• 19:00
  have. What is what is your sense of
• 19:02
  what's going on in opening eye right now?
• 19:03
  And even the CFO has raised some concerns about trying to go
• 19:06
  public in 26 and is pushing for an IPO more in 27.
• 19:10
  I think missing the revenue targets are, you know, they're
• 19:13
  kind of a, the, the target they really reported on missing or
• 19:16
  allegedly missing I guess they denied was the weekly active
• 19:18
  user number. They were targeting 1 billion at
• 19:21
  the end of last year. It seems like they didn't get
• 19:25
  there at the end of last year. I guess they're not there yet.
• 19:29
  We, we do know this, we know they haven't reported 1 billion
• 19:31
  in weekly active users. I mean, do you remember how
• 19:34
  excited we were at, at PayPal when we had 1,000,000 users?
• 19:37
  We rang a bell. I think, I think you're up on
• 19:39
  the table, you know, doing shots.
• 19:41
  I feel like there would be, there would be announcing a 1
• 19:44
  billion weekly active user number.
• 19:46
  The fact you haven't announced it yet is probably a sign that
• 19:48
  you haven't gotten there. You know, they're probably
• 19:50
  behind on the revenue targets, but they're still, they're still
• 19:53
  growing. I think it just adds to the, the
• 19:56
  FUD we talked about last week. I think the bigger issue for
• 19:58
  them is just if you look at the management team.
• 20:00
  Like this is a list of all the people on the management team,
• 20:03
  including Sam who have left in in the past 24 months.
• 20:07
  Includes their chief scientist and founder of the assets cover.
• 20:11
  Their CEO is on is on a special projects gig.
• 20:14
  You know, they lost their super live and Co lead another founder
• 20:18
  John Schulman. They abandoned Sora.
• 20:20
  So that also also resulted in some management changes.
• 20:23
  They have a couple of, you know, board members who left as well,
• 20:25
  Helen Toner and Tasha McCauley last year.
• 20:28
  They got two other people on the management team out on medical
• 20:30
  leave Fiji. And Kate, I mean that's a whole
• 20:33
  lot of people to be out on leave if you're trying to do an IPO.
• 20:36
  So it feels like that on top of maybe missing some numbers.
• 20:39
  And then just questions about that, that CapEx return that we
• 20:42
  referenced in the first part of the show with all the, all the
• 20:44
  hyperscalers that that feels like that's just a lot in front
• 20:47
  of the IPO. And then on top of that, there's
• 20:49
  the Sam open trial, right? So if it's a 5050 coin flip on
• 20:51
  the trial and the remedy is unclear and the judge will have
• 20:54
  to decide the the remedy, that's a lot of fun in front of a big
• 20:57
  IPO. Yeah.
• 21:00
  Well, there's a strong case that Sam wants to IPO as soon as
• 21:04
  possible, but I think there's probably also some question
• 21:06
  marks about how quickly they can pull that off.
• 21:08
  And at this point, whether they would even be second out the
• 21:11
  door, you know, after SpaceX. I I wonder if Anthropic is
• 21:15
  perhaps a more likely, you know, candidate to go public before
• 21:17
  then. Clicks.
• 21:22
  Clicks is just short for kilometers.
• 21:24
  How far is it from Winnipeg to Portage la Prairie?
• 21:28
  Oh, she's about, she's about 150 clicks.
• 21:31
  But or you might say she's like 6 beer.
• 21:36
  A candidate for an IPO that's definitely happening in the next
• 21:39
  few weeks is Cerebrus. And this is a company that had
• 21:43
  been trying to go public maybe a year ago, then raise some money
• 21:47
  in the private markets and is now relisted again.
• 21:50
  There's planning to raise 3 1/2 billion dollars.
• 21:52
  Seems like that's likely to be oversubscribed.
• 21:55
  Company is offering 28 million shares.
• 21:57
  I guess the market value would probably end up being around 25
• 22:01
  to 30 billion right now. Looks like around 26 billion.
• 22:04
  This is happening pretty soon next week, Ahmad.
• 22:07
  Yeah, it looks like it figured a price next week.
• 22:09
  It looks like there's had to planning on raising 3.5 billion.
• 22:12
  It'll be up to 4 billion if the over allotment is fully
• 22:15
  exercised. That price range that you
• 22:18
  highlighted 115 to 125 bucks a share could value them as much
• 22:22
  as 26.6 billion. Their last round was 23 so that
• 22:25
  you know that seems consistent. I've heard rumors a week ago
• 22:27
  that could be targeting 40 billion that seems to have
• 22:30
  scaled back a little bit, but that just may be the, the, the
• 22:33
  lead book runners are Morgan Stanley and city.
• 22:35
  They just might be gauging demand and and just making sure
• 22:38
  that the market is there. The company is like 510 million
• 22:41
  in revenue and fiscal year last year, 2000 and 2576% year over
• 22:45
  year growth rate and profitable. And you know, this is kind of
• 22:48
  the the 1 theme play if you want to make a clean AI play in the
• 22:52
  public market today, NVIDIA is obviously a clean play.
• 22:55
  Cerebrus is another clean play. Every other AI company has got
• 22:59
  some other business line tied to it.
• 23:01
  So I think they're positioning themselves in a, you know, in a
• 23:04
  really good space at A at a really good time for chips and
• 23:07
  semiconductors. And the semiconductor index
• 23:08
  system is at an all time high as we speak.
• 23:11
  So I feel like this one is going to do well.
• 23:13
  And, you know, we'll see how they trade in the in the ensuing
• 23:15
  months, but I feel like they're well positioned to go out and go
• 23:18
  out with the bang. There's been a lot of big VC
• 23:21
  raises lately and another one, Founders Fund, is raising a $6
• 23:26
  billion fund to invest in later stage startups.
• 23:30
  This is really less than a year after they raised a growth fund
• 23:32
  last year that was 4 1/2 billion.
• 23:34
  One of the things that's always been notable about Founders Fund
• 23:37
  is a lot of their capital has come from their own GPS, most
• 23:41
  notably Peter Thiel. And this is no exception.
• 23:44
  This, this fund, 1 1/2 billion of that 6 billion is coming from
• 23:47
  Founders Fund employees and investors.
• 23:49
  I I'm sure Peter is a big portion of that 1 1/2 billion.
• 23:52
  That's a pretty large bet on their own sort of investment
• 23:56
  strategy. I bet they probably have no
• 23:59
  problem raising that money. Founders on one of the early
• 24:02
  investors in SpaceX and I had pleasure working with Founders
• 24:05
  Fund for a very small amount of time back almost 1516 years ago
• 24:09
  when they first invested in SpaceX and that's been a huge
• 24:11
  investment for them. I think it's a pretty good sign,
• 24:15
  Dave, when the fund says, hey, we're raising $6 billion and you
• 24:19
  ask them, hey, what's the, what's the GP commits like?
• 24:21
  What are you and your employees and your, your, your buddies?
• 24:24
  What are they pretty good of that of that 6 billion?
• 24:26
  25% I missed. I I did not hear that correctly.
• 24:31
  25% your legally your typical fund has a one or maybe a 2% GP
• 24:35
  commit 25% that's a, that's a really strong signal that those
• 24:38
  guys will do well. And I guess they've got a great
• 24:40
  pipeline of companies already. They're putting it into top
• 24:42
  companies even as we speak. So I think that's, I think that
• 24:45
  fundraise is going to be oversubscribed.
• 24:47
  I'm sure it's already it's already done and you can't get
• 24:48
  in anymore and that fund will do great.
• 24:51
  Yeah. And another portion of that
• 24:53
  money I guess is going into Andrew and follow on capital.
• 24:57
  So and recent Horowitz and Thrive were noted last week that
• 25:01
  they were leading a $4 billion round in Andrew at 60 billion.
• 25:05
  Founders had been an early investor in the company, led by
• 25:08
  general partner Trace Stevens, but Founders Fund is putting
• 25:11
  another 600 million into this funding round as well.
• 25:16
  Yeah, that is no surprise, right?
• 25:18
  They've been in, I think literally every single round at
• 25:20
  at Andrell. And the the company was really
• 25:23
  founded with the help of Founders Fund and Trey had
• 25:25
  connections to Founders Fund. So I think that has been their
• 25:28
  MO. It's like when they find a
• 25:29
  company like that and SpaceX is another example, they'll they'll
• 25:32
  double down, triple down, quadruple down, continue to
• 25:34
  participate in those rounds. And they've obviously found a, a
• 25:37
  company that they like in, in Andrell.
• 25:38
  So they're heavy participant here.
• 25:41
  One of our last stories is kind of a big deal.
• 25:45
  Brett Taylor who was previously at Meta and then also at
• 25:51
  Salesforce and on the board of Open EI.
• 25:54
  He founded the company called Sierra to do enterprise AI.
• 25:58
  That company raised at a huge valuation when it got started.
• 26:01
  Now they're raising another billion dollars at a $15 billion
• 26:04
  valuation. This is up from 10 just last
• 26:07
  last fall, $950 million round led by Tiger Global and Google
• 26:10
  GV with participation for Benchmark, Sequoia, Green Oaks
• 26:13
  and others. That is a stellar list of
• 26:16
  investors. That is a huge valuation.
• 26:19
  Brett is certainly no stranger to being involved with different
• 26:23
  tech companies and AI companies. Pretty huge vote of confidence
• 26:26
  there. I wouldn't be surprised at all
• 26:28
  if this company broke into the, you know, top 20 companies that
• 26:31
  are being traded in secondary markets as well.
• 26:33
  This is this is for our primary round, but I I'd be surprised if
• 26:36
  it wasn't also on people's wish list for secondaries as well.
• 26:41
  It's a pretty amazing story. Sierra was founded in 2024 by by
• 26:45
  Taylor and then a Google alum Clay Baver and Taylor and Baver
• 26:50
  had a, they have a long history in customer service tech and
• 26:52
  Taylor like he spent a decade in Salesforce and then Salesforce
• 26:55
  bottom up for 750 million. So that's he's got a, he's got a
• 26:58
  great track record And Taylor, as I said, Taylor and met Baver
• 27:02
  at Google where he was serving as the CCO for, for as he's
• 27:06
  showed, been the CTO for Facebook.
• 27:07
  So he's got a long history in the, you know, in the space.
• 27:10
  And both of them have got great credentials and the company in
• 27:13
  like just 2 1/2 years has gone from zero to hero.
• 27:16
  So it's good to see them getting that kind of traction.
• 27:19
  Well, I think you're right. It's gone from zero to 150
• 27:21
  million in ARR in just two years and from a company that didn't
• 27:26
  exist to a $15 billion valuation in two years.
• 27:30
  That's, that's probably a rocket ship by any measure.
• 27:34
  Well, I guess certainly no slowdown in AI, enterprise AI
• 27:38
  and no slowdown in people raising money for enterprise AI
• 27:42
  companies. Man, here's an interesting AI
• 27:44
  story that isn't based on US technology, but actually a
• 27:47
  company that we're involved with, Cohere is merging with
• 27:52
  Aleph Alpha, a German AI company.
• 27:56
  I guess it's $20 billion evaluation.
• 27:57
  We were investor in Cohere maybe a year, year and a half ago.
• 28:01
  This kind of brings together to, I guess not always on your
• 28:05
  radar, AI countries, Canada and Germany to present a non USAI
• 28:11
  alternative. What do you what do you think
• 28:12
  about that strategy month? You know, we're going to deep
• 28:17
  dive more on this in Valuation Corner.
• 28:19
  Here's the basic sketch of the deal, though.
• 28:21
  So as you say, we were incohere back in 2023.
• 28:25
  We got in at A at a $2 billion evaluation.
• 28:27
  They've ended a subsequent round at at 5 and a subsequent round
• 28:31
  at a $7 billion evaluation and they are just now showing real
• 28:35
  progress on revenue. It's an AI enterprise focused
• 28:37
  LLM. They focus on a couple of very
• 28:39
  heavily regulated industries. They're based in Toronto and
• 28:42
  they now are tying up with the German company.
• 28:44
  And I think a big part of what they have to offer is that
• 28:46
  they're not American and they're not Chinese.
• 28:49
  And the two countries, when you think of AI, you think of
• 28:51
  America and China being the leaders.
• 28:53
  But there are a lot of companies, a lot of enterprises
• 28:55
  out there that may conclude we don't, we don't want to be
• 28:58
  dependent on US technology or Chinese technology.
• 29:01
  At least we want to have a 1/3 offering.
• 29:04
  And it seems like Cohere and LS Alpha have now figured out in
• 29:08
  100 position and maybe have secured for now that spot.
• 29:11
  So I think it's a pretty compelling strategy and we'll
• 29:14
  talk more about it in Valuation Corner.
• 29:16
  OK, our last story of the day involves one of our alma
• 29:20
  mater's. I'm on eBay.
• 29:23
  GameStop is making a bid to take over eBay at a $56 billion
• 29:28
  valuation. That's a value that's four times
• 29:31
  the size of GameStop. GameStop.
• 29:35
  GameStop itself, a company that was kind of a questionable story
• 29:40
  the the sort of essence of meme stocks, I guess from a few years
• 29:44
  back. I guess. 2 questions for you
• 29:47
  Iman. Do you think this is going to
• 29:49
  happen and is it crazy or not crazy to see a company like
• 29:52
  GameStop take over a company like eBay, which has been around
• 29:56
  for 25 years now, almost 30? It is a bold deal.
• 30:00
  It is not a traditional deal as as you said, I used to work at
• 30:02
  eBay and I was the chief financial officer for their
• 30:04
  North American business back in 2008 through about 2010.
• 30:08
  What what is puzzling about this deal actually is how it's
• 30:11
  financed and structured. So the strategic rationale is
• 30:13
  something like, hey, GameStop has a physical presence.
• 30:18
  Between their physical presence and ebay's digital presence,
• 30:22
  they can create this collectibles powerhouse that's
• 30:25
  multi channel and and will be a creative in value.
• 30:28
  OK, I can kind of buy that. The financing of it is weird.
• 30:31
  Like the GameStop is worth about 10 to 12 billion in market cap.
• 30:34
  eBay is about four times that. So how does, how does GameStop
• 30:38
  acquire eBay a company worth 4 times its market cap?
• 30:42
  Yeah, we'll see what happens. I, I, I hear you.
• 30:45
  I understand that. I'm I'm just trying to
• 30:47
  understand where the the rest of the money would come from.
• 30:52
  It's half cash, half stock. I'm just saying that that math
• 30:56
  doesn't get you to the to the price that you're offering.
• 31:01
  Sorry, that's a pretty straightforward question.
• 31:02
  I don't get it. Like where's the rest of the
• 31:06
  money coming from? It's a stock and cash deal.
• 31:09
  So that I guess GameStop has like 9 billion in cash in the
• 31:12
  balance sheet. They have stock worth 10
• 31:14
  billion. They have another 20 billion in
• 31:15
  debt that they've got lined up from TD Securities, so it
• 31:18
  becomes a very highly leveraged offer.
• 31:21
  I don't know if the eBay board is going to take that, but I
• 31:24
  don't know. It's interesting.
• 31:25
  That seems like a weird thing where a mouse eats an elephant
• 31:28
  and and goes. Into debt to do it, but.
• 31:31
  You know, meme stocks don't play by the same rules that you and I
• 31:34
  do, Dave. So I don't, I don't know.
• 31:36
  I'm going to say no, I don't think it happens, but I'm going
• 31:38
  to watch with some popcorn. OK.
• 31:51
  We're back with another episode of Trading Places, the world's
• 31:55
  worst and best secondary VC podcast, because we're the only
• 31:59
  VC secondary podcast have with us again are Marcelo Balzay from
• 32:04
  Sacra and Adam back again from Augment.
• 32:08
  Had you guys on the show maybe about three months ago we were
• 32:10
  talking about the Q4 Power 20. Now we've got the Q1 Power 20
• 32:16
  for folks on our show, haven't heard of you guys before, heard
• 32:19
  of your companies before or so let's start with you maybe what
• 32:22
  is SACRA know that pitch book or CD insights or any other folks
• 32:26
  out there don't know. Yeah, sure thing.
• 32:29
  Our thing is depth, right? We have a universe of companies
• 32:32
  that we cover. We look at fundamentals, we
• 32:34
  interview CEOs, we talk to management and we basically are
• 32:38
  analogous to what equity research teams are on the public
• 32:41
  market side. Adam Crawley, you're a Co
• 32:43
  founder at augment. I I guess you guys are more than
• 32:46
  just, you know, a marketplace, right?
• 32:48
  You're, you're sort of information and a market.
• 32:52
  Well, thanks for guys for coming back again on our show.
• 32:54
  We're going to focus a lot on who's in the Power 20 for Q1.
• 32:59
  Adam, if you want to kind of walk us through any major
• 33:02
  changes, any notable sort of like companies that have moved
• 33:06
  in or out of the index in the last quarter, SpaceX still top
• 33:10
  of the list, Anthropic, Androl, Open AI, Stripe data bricks,
• 33:13
  not, not too many changes there, correct?
• 33:16
  Yeah, that's fair. I mean, the first quarter was
• 33:18
  really was an anthropic story. I will say that we've had
• 33:21
  Anthropic ahead of Open AI since we started this Power 20 a
• 33:24
  couple years ago. OK.
• 33:26
  Well, you guys know way back when.
• 33:29
  Since Q2, Q 224, Adam. OK.
• 33:32
  Thank you for that. Yeah, I think the risk reward
• 33:35
  and in our eyes was was always pretty compelling with Entropic
• 33:39
  and there was just some risk in in opening eye and there's
• 33:43
  always been these lingering management issues with opening
• 33:45
  eye. And so a.
• 33:46
  Lot of C-Suite management team changes that open AI in the last
• 33:50
  quarter, right? Well, that, but even even a
• 33:52
  couple years ago when Sam was removed from the OR removed by
• 33:56
  the board. Sam was fired or they brought
• 33:59
  back in and other folks moved out.
• 34:03
  Yeah, there's always something right going on.
• 34:04
  It's usually a round of financing round so that it's not
• 34:06
  the best. There's a lot going on, yeah.
• 34:09
  So I guess if I looked down this list, no major changes, maybe a
• 34:13
  few positions up or down from Stripe Data Bricks, Revolute and
• 34:16
  Bite Dads notably, you know, Open AI, somewhat substantial
• 34:21
  drop in the share price and I guess these are as of the end of
• 34:26
  the quarter, right? Yeah, as of March 31st first
• 34:29
  quarter. OK.
• 34:30
  So there might have even been further movement in that I guess
• 34:33
  in the last couple of weeks been some kind of rough news for open
• 34:36
  AI and slowing growth rates and again, maybe some disagreements
• 34:40
  between Sam and the CFO on when is the right time to go public
• 34:44
  and what numbers are making sense.
• 34:46
  Yeah. Will you walk us back through
• 34:48
  the methodology on how you guys rank these just high level?
• 34:51
  That would be great to understand.
• 34:54
  The thing that we think differentiates these rankings
• 34:57
  from some other indexes and private markets and whatnot is
• 35:00
  that we don't look at just market activity, although the
• 35:04
  rankings are heavily weighted towards market, you know, bid
• 35:07
  ask activity, trading activity, bid ask spreads, price movement,
• 35:12
  etcetera. But we also look at fundamentals
• 35:15
  in terms of revenue and revenue growth.
• 35:17
  And we put that together into a scoring ranking that has 8 total
• 35:22
  factors. Yeah.
• 35:23
  And like Adam said, we've been doing that for this is the ninth
• 35:25
  quarter we've been doing that. Gotcha.
• 35:28
  And to your point, Dave, the question you were asking, what
• 35:30
  other like what are the bigger trends?
• 35:31
  I mean, I think continued strength in defense, we saw
• 35:36
  Saronic coming to the top 20. A shield, yeah, I think you guys
• 35:40
  had maybe highlighted that was an up and Comer and it cracked
• 35:43
  your top 20 this this quarter, right?
• 35:45
  Yeah. What did we lose?
• 35:47
  What slipped out of the top 20? Oh, I think Glean may have
• 35:50
  slipped out. XAI came out because of the the
• 35:53
  SpaceX deal. Oh, right, right.
• 35:55
  Yeah. And Glean did fall out in a
• 35:57
  previous quarter, yeah. And then there's some of the SAS
• 35:59
  companies dropping a bit, Canva starting to, to, to a bit of
• 36:04
  demand activity. And then I mean rippling, it's
• 36:07
  down a bit, but perhaps they're in a better position relative to
• 36:11
  someone like Canva. Probably Claude.
• 36:13
  Coming out with Claude Design had a big impact on a lot of
• 36:17
  design companies, particularly Figma.
• 36:19
  I think it was kind of crushed, and one of the folks at
• 36:23
  Anthropic had been on the Figma board and resigned recently, so
• 36:27
  that was kind of a double whammy.
• 36:28
  Yeah, that was interesting. I'm hopeful.
• 36:31
  Full disclosure, we we're an investor in Canada.
• 36:34
  I was, I was an investor early through 500.
• 36:36
  We're also an investor through Practical PC.
• 36:38
  Yeah, I would like to think that Canva is not as massively
• 36:41
  impacted as Figma and in fact Canva has a partnership with
• 36:44
  Anthropic. But still, I think, you know, it
• 36:47
  seems like every time, you know, Anthropic releases a sector
• 36:50
  vertical, you know, sort of connector or some kind of
• 36:53
  announcement that crushes every company in the market in that
• 36:57
  category, both public and private.
• 37:00
  Do you think that's justified or do you think that's likely to
• 37:02
  continue? Well, it also presents
• 37:04
  opportunities. If you have like insight onto
• 37:07
  the company and you really, you know, you really think they're
• 37:09
  doing great and they're going to be insulated, then it's an
• 37:12
  opportunity to find prices that may be cheaper than where the
• 37:16
  market was. Marcel, I think you had
• 37:18
  mentioned that we're starting to see maybe more physical AI and
• 37:23
  potentially other, you know, robotics hardware sort of
• 37:25
  stories. Is that?
• 37:25
  Is that true? Yeah.
• 37:27
  I mean the way I like to think about it is that, you know,
• 37:30
  these defense names kind of are like the spear tip of physical
• 37:33
  AI. They're where the applications
• 37:35
  have, you know, matured most besides self driving.
• 37:39
  But if you look at the activity that we track with augment the
• 37:43
  the physical AI names, I think there's like 9 of them that are
• 37:46
  already having significant activity in the private markets.
• 37:50
  I think it's just a matter of time before one of them breaks
• 37:53
  through. One of our companies to watch is
• 37:55
  is skilled AI, which is it's very interesting, not hardware
• 37:59
  focused, but you know, just to give a threw out a few other
• 38:04
  names that have seen activity aren't in the rankings lens yet,
• 38:08
  but just for example, Agility Robotics 1X.
• 38:12
  So, you know, this is something that's going to happen and
• 38:14
  there's increasingly, you know, more and more activity tilting
• 38:18
  in that direction, I think. Companies to watch, is that just
• 38:21
  kind of like you guys are seeing an uptick in trading activity
• 38:24
  that's kind of why it's on your radar?
• 38:25
  Is that like a good? Yeah, signals that might not,
• 38:28
  you know, justify a ranking, but definitely justify because of
• 38:32
  the trend in the movement, justify keeping an eye on these
• 38:35
  companies. Yeah, that's right.
• 38:36
  Probably it's no secret that because of the war in Iran that
• 38:41
  we're getting a lot of attention on defense related companies.
• 38:45
  So and rolls been, you know, a strong component for a while,
• 38:50
  Shield AI and now Ceronic are in that list.
• 38:52
  Do you think there's going to be more companies that crack your
• 38:55
  top 20 that are in that defense tech area as well?
• 38:58
  I mean Armada is one that on the companies to watch and founders
• 39:02
  from backing them. There seems to be some momentum
• 39:04
  behind that name. How about any of these other
• 39:07
  active positions or any price gains?
• 39:09
  What are surprises for you guys or was there no surprises?
• 39:12
  I guess Cerebrus announcing an IPO and getting a few other
• 39:16
  customers maybe no surprise their second time trying to IPO
• 39:20
  they're they're back of the list.
• 39:22
  Yeah, I think 1 interesting, interesting thing on price is
• 39:25
  that for a few quarters in a row row now, we've seen higher
• 39:28
  average price gains at the top of the rankings, you know, in
• 39:31
  the top five. And this quarter flipped where
• 39:34
  the the bottom 15 had significantly higher price gains
• 39:38
  than top five for the first time in in quite a few quarters.
• 39:42
  And, you know, I think that's, you know, a signal of names that
• 39:45
  are driving more of the long tail of activity just because
• 39:48
  the market is so concentrated in the top five names, but having,
• 39:52
  you know, price momentum of their own and a bit of a sign of
• 39:55
  maturity too, that, you know, these names can also pick up
• 39:58
  price momentum. A2 Four.
• 40:03
  Oh man, that's a case of beer. If you come into a party in the
• 40:07
  summertime and you don't have a 24, you're not getting in Bud.
• 40:11
  Or you might come with a suitcase which is just a 12.
• 40:15
  I think some other trends, you know probably the prediction
• 40:17
  market stuff we've we've seen tremendous increase in valuation
• 40:21
  in both Calcia Poly market and that's you know perhaps
• 40:25
  justified a lot of revenue that's coming into both
• 40:27
  companies. We'll see if any of the lawsuits
• 40:30
  or regulatory attempts to restrict you know sports betting
• 40:34
  have any impact there. I guess the other pretty big
• 40:37
  story that's happened kind of recently is Cursor and the
• 40:40
  announcement by Elon that they were partnering with Cursor and
• 40:44
  the potential for an acquisition there.
• 40:47
  There's a $10 billion partnership, but also an option
• 40:50
  to buy the company for 60 billion.
• 40:52
  We actually covered Cursor in our valuation corner.
• 40:55
  It did seem like a very convenient marriage.
• 40:58
  Cursor with a lot of growth in revenue and SpaceX or the XEI
• 41:01
  component of SpaceX with a lot of computes and budget.
• 41:07
  Well, how how about SpaceX? Let's just talk about that a
• 41:09
  little bit because X AI was folded in, XI itself had folded
• 41:15
  in Twitter. Now we have the potential for
• 41:19
  maybe Cursor being folded in. And then, of course, there's the
• 41:22
  discussion about whether Tesla itself might be merged with
• 41:26
  SpaceX after the IPO. What what do you guys think
• 41:29
  about the whole SpaceX story? And do you buy the valuation of
• 41:33
  the company at 1 1/2 to 2 trillion?
• 41:36
  Are are we past any kind of rational fundamental analysis at
• 41:40
  this point? It's just like meme stock and
• 41:42
  demand. I mean, I feel like he's got a,
• 41:44
  he's got a big, a big plan. And I can see him wrapping this
• 41:48
  into Tesla. I think that's probably what he
• 41:50
  will do. That's a pretty formidable,
• 41:52
  formidable competitor to Entropic.
• 41:54
  An opening eye. Yeah.
• 41:55
  And obvious for obvious reasons, the synergies with the, the
• 41:58
  robots and the autonomous driving.
• 42:01
  I won't speak to like what I think the market's going to do.
• 42:03
  We'll see if they get to 2 trillion and and how how it
• 42:05
  does. What happens for the rest of
• 42:07
  everyone else in the universe after this?
• 42:10
  This happens for SpaceX XAI, you know, and we all of a sudden
• 42:14
  we're normalized the T word trillion, you know, and it's
• 42:18
  like 1.752 trillion, which is like a really big amount of
• 42:22
  money. Like that's a really huge chunk
• 42:24
  of change. And now those those increments
• 42:26
  are just like we're just like saying them as as if it's
• 42:28
  normal. Obviously not every company can
• 42:30
  get to that. Does it help these late stage
• 42:32
  companies in their late stage journey for exit, you know,
• 42:37
  scenarios or does it does it hurt them?
• 42:38
  It's like a house in your neighborhood that comes in, it's
• 42:41
  come too high. Everyone else is trying to fetch
• 42:43
  this thing or do you think it's good?
• 42:45
  No, I mean, I think it's good depending on who you are, right?
• 42:49
  I do think that SpaceX, even putting Elon aside, is kind of
• 42:53
  an end of one kind of business. I mean, if you think about the
• 42:55
  launch business and Starlink, those are kind of like monopoly
• 42:59
  businesses, a dream monopoly business that, you know, through
• 43:03
  some lens I think could justify the valuations that are being
• 43:05
  asked for. But I think the other thing is
• 43:07
  that with XAI, with the cursor deal, I think it's just another
• 43:12
  aspect of the consolidation that's happening.
• 43:15
  You know, like earlier with this list, we also saw Grok drop out
• 43:19
  acquired by NVIDIA, Scaly Eye drop out acquired by Meta.
• 43:23
  I think we'll see more vertical integration between the model
• 43:27
  and app layers. You know, the question is, is
• 43:31
  are the app layer companies defensible enough as Anthropic
• 43:34
  and Open AI keep launching products to have enough leverage
• 43:38
  to command those those really high valuations and justify the
• 43:42
  valuations they've gotten in the private markets?
• 43:45
  Yeah, So a lot going on. And I think, I think this this
• 43:49
  kind of uncertainty does scare some folks away, especially from
• 43:52
  the app layer companies in even in these rankings.
• 43:58
  It also reminds me of the Peter Thiel conversation where he
• 44:02
  talked about like the different orders of magnitude and his
• 44:05
  limit used to be 100 billion and thinking a company would be the
• 44:08
  hardest would be good from going from 100 billion to a trillion
• 44:11
  and that being wrong and that actually being potentially the
• 44:15
  the easiest order of magnitude to solve.
• 44:17
  So like I find that interesting and it it kind of makes sense
• 44:21
  like once you have economies of scale at that point and that
• 44:24
  probably is the easier order of magnitude arguably.
• 44:29
  So I guess to use a space analogy, if you catch escape
• 44:32
  velocity, you know you can go to Infinity and beyond.
• 44:38
  Yeah, people are valuing this. The the high multiple is based
• 44:41
  on his ability to execute and the vision and telling a big
• 44:44
  story in space. You can't calculate what that
• 44:46
  market looks like. And so I think when you're
• 44:49
  telling big stories, yeah. I think we can try and calculate
• 44:52
  it and we can't seem to come up with a number of that's anywhere
• 44:55
  close to where the market is. I guess this is where, you know,
• 45:00
  Marcelo, I'd love your perspective of this
• 45:02
  conversation. Like we, we reference Sacre all
• 45:05
  the time when we're trying to do our valuation quarter and
• 45:07
  fundamental analysis. I think there's definitely some
• 45:10
  companies where we still feel comfortable with fundamentals
• 45:13
  and then there's companies where there's no way that the
• 45:16
  fundamentals justify the valuation.
• 45:18
  And we kind of just like say, OK, this is, you know, driven by
• 45:21
  a narrative or driven by some kind of meme or whatever.
• 45:25
  It's it's almost like there's two different, you know, sort of
• 45:27
  worlds to value these companies. Do you guys think that most of
• 45:31
  that Power 20 is being valued on, you know, sort of vibes or
• 45:36
  there's companies on that list that are still being, you know,
• 45:39
  valued rationally? I I think some of the companies
• 45:43
  are being valued rationally. I would argue that most of them
• 45:47
  are, yeah, there's outliers. And bottom line, I do think
• 45:51
  we're in this, this moment where it's the kind of beauty contest
• 45:56
  version of the markets versus the rational version of the
• 46:00
  markets are actually betting on, you know, who someone else will
• 46:03
  pick as, you know, the bell of the ball and trying to get ahead
• 46:06
  of that person versus, you know, making decisions on
• 46:09
  fundamentals. And you know, we've seen that
• 46:11
  happen before. But yeah, if you do some math, I
• 46:15
  think the the math is stretched. But I think as Amber said, when
• 46:20
  you look at some of the valuations that that some of the
• 46:23
  comps that are being set, whether SpaceX goes out at, you
• 46:26
  know, 2 trillion or not, it's hard to not participate in this,
• 46:31
  right? You kind of have to play, play
• 46:33
  the game. Well, I think, I think it's easy
• 46:35
  to not participate. You can just sit it out, but
• 46:38
  like nobody seems to be sitting it out.
• 46:41
  You know, a year, a year ago around this time, I think SpaceX
• 46:45
  was valued at between 350 to 400 billion.
• 46:49
  You know, you kind of looked at the numbers for the growth of
• 46:52
  Starlink and the revenue coming out.
• 46:53
  I think it was maybe 15 billion last year.
• 46:55
  So, you know, 3 or 400 billion on a 15 billion of revenue isn't
• 46:59
  super crazy if you expect reasonable growth.
• 47:01
  But now we're talking about, you know, one of the half trillion
• 47:05
  to 2 trillion. I think even if you stretched,
• 47:08
  you know, your belief on where revenue ends up this year, you
• 47:12
  know, maybe top end is 303540 if you include maybe cursor in that
• 47:17
  story. We're, we're talking now, I
• 47:20
  don't know easily, you know, 80 times revenue, maybe you know,
• 47:26
  60 to 80 times revenue in those worlds that that's just a pretty
• 47:31
  big stretch. I think, I think SpaceX is an
• 47:33
  outlier here, yeah. Yeah, I guess, I guess one
• 47:37
  question for you guys is like which company on your list do
• 47:40
  you think is the most, you know, stretched in terms of valuation?
• 47:44
  I'll just mention Neurolink from a, from a fundamental analysis,
• 47:48
  it's actually trading at maybe 50 to 70% above where this price
• 47:52
  is something like 45 billion. And wow, OK, your revenue.
• 47:58
  So that one comes to mind. What do you think is the most
• 48:01
  reasonable valuation on your list here?
• 48:05
  I I think Stripe is is fairly pretty fairly valued.
• 48:09
  What keeps Stripe like in these these secondaries lists all the
• 48:12
  time, because it's always it's always there.
• 48:14
  People are always wanting. Is it just because they are they
• 48:16
  run everything for payments everywhere all the time.
• 48:20
  And that's just kind of the plumbing of of how finance works
• 48:23
  these days. Is that where the demand is safe
• 48:26
  back? Yeah.
• 48:27
  I mean, it's become a bit of a boring name.
• 48:29
  It's boring. But but it's but it's there.
• 48:32
  I mean, it's a tier one. I would say it's a top tier
• 48:34
  name, right? I mean you can look at.
• 48:36
  That I think that's just a lot of the respect that the
• 48:38
  Collisons command from the investment community and that
• 48:42
  company's just always done that's extremely well.
• 48:44
  And you might think that payments is kind of snoozy, but
• 48:48
  you know, they've really become a lot more than a payments
• 48:50
  company. They're, they're an investing an
• 48:53
  acquisition company themselves, you know, probably looking at,
• 48:57
  you know, getting into the Sablecoin business.
• 49:00
  Yep. Certainly investing in their
• 49:02
  own, you know, AI components as well.
• 49:05
  I guess I, I would really point out Bytedance and Canva as being
• 49:09
  incredibly reasonably valued. If you look at the, you know,
• 49:14
  revenue and and growth and profitability of those
• 49:16
  companies, you might suggest the reason Bytedance is not valued
• 49:21
  more highly is because of the Chinese element, even though
• 49:24
  some of the legal issues have been settled there.
• 49:27
  Yep. And then Canva, you know, as you
• 49:29
  guys, I mean observed before doing 4 billion in revenue
• 49:34
  growing at 40% or so profitable and yet you know still sort of
• 49:40
  reasonably valued at maybe only 10 times revenue there.
• 49:44
  With some of that risk you mentioned earlier, right?
• 49:47
  Yeah, I mean, you could argue, I mean Byte Dance could be a top.
• 49:50
  Maintenance revenue is equivalent to metas.
• 49:53
  Yeah, this is a beast, but it's valued at like 1/4 of of Meadow.
• 49:59
  Yeah, people still struggle with the China thing, but yeah, you
• 50:02
  could argue this will be #1. A Mickey.
• 50:08
  She's like a little little pocket thing of Crown Royal.
• 50:11
  How's it going? Oh, pretty good.
• 50:12
  We just just launched off a Mickey of Crown Royal and you
• 50:15
  know, going to give her. Do you guys have any predictions
• 50:20
  about what's the next big trend that we might be seeing in your
• 50:23
  next quarters, Power 20 or later this year?
• 50:26
  I mean, I think we're going to keep seeing consolidation,
• 50:28
  right, especially in AI, you know, names like Glean
• 50:31
  perplexity, we saw cursor already in the SpaceX deal.
• 50:36
  I think we're going to get, we're going to see more of.
• 50:37
  That, well, SpaceX is going to move out, right?
• 50:39
  But they go public, they're off your list, right?
• 50:42
  That's right. That's.
• 50:43
  Right, Anthropic, you know, before the end of the year.
• 50:45
  We'll see. We'll have a few openings.
• 50:48
  Jeff Bezos's new LOL, this project that is getting a lot of
• 50:53
  demand and you could see see that at some point.
• 50:57
  But people are people are buying it kind of with a thesis of like
• 51:01
  XAI foundational model that can scale and that has the ability
• 51:06
  to raise $100 billion over the next few years.
• 51:08
  And I think people are really making bets on that one.
• 51:12
  I'm surprised there isn't one name that's here on your list.
• 51:15
  That's pretty high profile. Travis Kalanick, who I guess has
• 51:20
  rebranded his cloud kitchens company to Adams, you know, made
• 51:24
  a pretty notable announcement maybe a month ago.
• 51:26
  I think there was a party in San Francisco that was kind of like,
• 51:29
  I don't know, the coronation or re coronation of Travis,
• 51:32
  although I think Travis has moved out of the state to show
• 51:35
  potential billionaire wealth tax passes.
• 51:38
  A lot of people might not be living in California or at least
• 51:42
  trying to avoid being seen as living in California.
• 51:45
  But do you guys think it Adams is a candidate in the future
• 51:48
  that might crack your list? Yes, most definitely.
• 51:51
  We we actually flag that internally to keep an eye on
• 51:54
  this one. It'd be interesting to see him
• 51:55
  do around. Have you heard anything about a
• 51:57
  fundraise? I think any fundraise that is
• 52:02
  done by Travis is going to be immediately snapped out by a lot
• 52:06
  of. Investors and so I, we haven't
• 52:07
  heard that yet and so I, I would be keen to, we probably will see
• 52:11
  something this year. I think one thing that's notable
• 52:14
  about Travis is he's pretty tight fisted about the the stock
• 52:19
  and who holds the stock. So maybe 1-1 more question
• 52:23
  about, you know, who's who's going to move on this list and
• 52:26
  who's your favorite pick to join the list for for next quarter?
• 52:30
  One thing we we've seen on this list is this quarter we had
• 52:34
  negative price movement on four names.
• 52:36
  I think that's the first time that's happened.
• 52:38
  I mean, a way that's good. I think, you know, the secondary
• 52:41
  markets are, you know, capable of, of of critical judgement
• 52:45
  even in a sort of euphoric time like now.
• 52:48
  Perplexity has had a few quarters in which it's being
• 52:52
  kind of pummeled relative to other names.
• 52:54
  Yeah, wouldn't be surprised to see Perplexity move down further
• 53:00
  in terms of a names joining. Yeah, again, like there's
• 53:04
  there's up and coming names like like skilled AI.
• 53:08
  I'd really like to see one of those physical AI names kind of
• 53:13
  capture, capture the lead on on, on real advancements and real
• 53:18
  proof points. That would be really cool.
• 53:20
  I think Applied Intuition is another company that's getting
• 53:23
  closer to a billion in in revenue.
• 53:26
  That's another interesting name. I don't know if you see demand
• 53:29
  on that, Adam, but. Yeah.
• 53:31
  We're, we're working on that. We're looking at.
• 53:33
  Yeah, the CEO there, Kessler Yunus, used to be at YC and he's
• 53:38
  been in the automotive industry for from a long time ago because
• 53:41
  his family lawyers grew up in the Michigan area, you know,
• 53:45
  physical AI and simulation software for vehicles, cars,
• 53:49
  trucks and defense systems. OK, well one other announcement
• 53:54
  that was made recently was in the I guess pseudo public
• 53:58
  market, but Angel List announced the launch of USVC and I guess
• 54:09
  Naval Ravikant who occasionally as visible and as prophetic as
• 54:15
  Elot or Steve Jobs. Kind of interesting on the
• 54:17
  usvc.com website, Naval is featured along with Steve Jobs
• 54:22
  and Elon. Some pretty amazing guilt by
• 54:26
  association there. Back to companies building the
• 54:29
  future before it's obvious. So USVC just launched last week
• 54:35
  or announced last week. I believe they held a webinar
• 54:38
  this morning for almost 2000 people to check that out.
• 54:42
  Some of the other, you know, fund announcements have made in
• 54:44
  the recent past. We had the launch of Robin
• 54:49
  Hood's venture fund before that, I guess Destiny, XYZ and
• 54:54
  Fundrise and even Kathy Ark's fund, Kathy Woods Fund.
• 54:59
  Ark Innovation has a combination of private and public companies.
• 55:02
  What do you, what do you guys think about, you know, the
• 55:05
  launch of these, you know, private venture capital funds
• 55:08
  available for retail investors? Seems like there's a lot of
• 55:12
  demand. Yeah, it seems like there's a
• 55:14
  lot of retail demand which which I think we all kind of know.
• 55:18
  Yeah. I mean, look at the like the,
• 55:19
  the, the Robin Hood fund that trades at a massive disconnect
• 55:23
  to A10 Avi. Just I don't think it's an
• 55:26
  institutional product. And I think there's probably
• 55:28
  interesting products to create that track the intrinsic and and
• 55:33
  trade based on that the underlying value and not maybe
• 55:36
  taking advantage of retail demand.
• 55:38
  Adam, what do you, what do you not like or like about the Robin
• 55:41
  Hood Venture Fund? Well, look, it's a, if we wanted
• 55:45
  to make a lot of money, then it's an obvious thing to do, but
• 55:48
  that's not the goal. The goal is to build products
• 55:50
  that are durable and that provide value and I think are
• 55:54
  more institutional. And it doesn't have to be
• 55:56
  institutional, though. I just, there's clearly a supply
• 56:00
  demand imbalance in in these names.
• 56:02
  And it's a it's a hack to to take advantage of a a very steep
• 56:09
  demand curve without any supply. And I don't know, it's not a
• 56:12
  product I would invest in. Got it.
• 56:15
  That's, that's some sharp commentary there.
• 56:17
  Do you have anything waiting in the wings that you guys are
• 56:19
  planning to launch or are you guys planning to offer any fund?
• 56:23
  Yes. We'll yeah, we're yeah, through
• 56:26
  we will, we will be launching some products that I think will
• 56:29
  have a different, a different look to it.
• 56:31
  Yeah, the underlying names will be interesting as well.
• 56:34
  I think the USBC inherently have an issue just from the jump,
• 56:38
  which makes it feel a bit suspicious just from a if you're
• 56:42
  a non in credit investor, you've got, you know, 500 bucks in your
• 56:45
  pocket and you just want to, you want to play the game and you
• 56:48
  want to back the the world's best companies before it's
• 56:51
  obvious. But then they proceed to name
• 56:53
  the most obvious names you know. Those are pretty obvious.
• 56:57
  Open AI, Andrew, you know, like, which I think inherently is not
• 57:02
  great from marketing perspective, which I think
• 57:04
  caused a lot of stir, you know, on, on tech tech Twitter, tech X
• 57:08
  or whatever. So I, I get it, democratization
• 57:12
  of these retail markets, but doing in a way, is this the best
• 57:14
  way to do it? Is it are you if you, if you got
• 57:17
  550 bucks in your pocket, you're trying to like get into these,
• 57:20
  these names, When are you going to see your money back?
• 57:22
  I think that's the question for retail investors.
• 57:25
  I'd love to know like from your guys's perspective, you know,
• 57:28
  buyer beware, is there anything that you would caution if you
• 57:32
  are speaking to, you know, our broader audience that there are
• 57:35
  non accredited? I mean, Naval's got good access.
• 57:39
  I can sure it'll I don't I don't question that.
• 57:43
  I I think it's probably mostly like these two and 20 funds that
• 57:46
  is getting access. And so maybe it's, there's, I
• 57:49
  think there's maybe additional fees to be considered.
• 57:52
  But I mean, for an, for people that have haven't had the
• 57:56
  opportunity to invest in this asset class, I think it makes
• 57:59
  sense. I mean, it's, it's quite
• 58:01
  predictable these, these products would come.
• 58:02
  But if I'm going to build it then I would rather do something
• 58:05
  that is is more durable and and can't be all competed.
• 58:09
  Right now it seems like people are optimizing for recognizable
• 58:12
  names and demands. They may not be optimizing for
• 58:16
  long term ROI. Is that is that kind of what
• 58:18
  you're getting at? It is, you know, institutional
• 58:20
  products, durable products. I think what you're saying is
• 58:24
  things that make money. I mean, the private shares fund,
• 58:29
  I don't know if if anyone's paid attention to them, but they were
• 58:31
  one of the first ones to launch a diversified product for
• 58:34
  retail. And I think they've done a good
• 58:36
  job. It trades at AAV and it doesn't
• 58:38
  trade at a premium. And so shout out to them.
• 58:41
  I think they they were one of the first to create this product
• 58:43
  that a lot of people have been copying.
• 58:48
  A dart? That's a but.
• 58:50
  Want to go kill a dart outside or a gas bear because you're
• 58:55
  gasping for air? Marcelo, you're our valuation
• 58:59
  expert here on the panel. What do you think about the, the
• 59:02
  premium to NAB issues with some of these funds or they're
• 59:06
  trading at like 3-4 times NAB, in some cases, maybe even 8 to
• 59:10
  10 times NAB that, that doesn't seem sustainable to me.
• 59:15
  But again, we're in the realm of Elon, and, you know, maybe some
• 59:19
  of these products have a narrative that continues longer
• 59:22
  than we think. Yeah.
• 59:24
  I, I think, I definitely think that's a problem.
• 59:27
  I think there's some structural hurdles there that have to be
• 59:31
  ironed out. I mean, just to take the
• 59:32
  opposite side of this, I think that, you know, having more
• 59:36
  products out there, more experiments, definitely have to
• 59:39
  look at the fees. I thought that the USVC product
• 59:43
  had a very reasonable fee structure when I looked at it
• 59:46
  compared to some alternatives that one might encounter out
• 59:49
  there if you were, you know, trying to go out on your own as
• 59:52
  a retail investor. There's definitely a lot of fee
• 59:54
  traps. But but yeah, so a lot of buyer
• 59:57
  beware kind of signposts have to be put up.
• 59:59
  But overall, I think net, net like I think it's good, you
• 1:00:02
  know, I'll be the guy that says I think it's good for everyone
• 1:00:05
  for this sort of iteration to take place in public and and for
• 1:00:10
  the private markets. Overall, despite these these
• 1:00:13
  words. So democratization of capital
• 1:00:17
  power to the people. Anybody should have the right to
• 1:00:20
  overpay for stock and lose money, right?
• 1:00:23
  Exactly. I mean mutual funds.
• 1:00:25
  Mutual funds aren't exactly. You don't have billions to lose
• 1:00:30
  money. That's funny.
• 1:00:33
  I know and I'm just going to go like pay a 500 bucks right now
• 1:00:37
  and add Open AI investor to my LinkedIn.
• 1:00:39
  So I do appreciate the ability to be able to do that in this
• 1:00:42
  moment. Where is that right you?
• 1:00:44
  Can buy lottery tickets too. What does the future look like
• 1:00:48
  one year from now and maybe three years from now?
• 1:00:52
  Any big sort of changes you think are going to happen in the
• 1:00:55
  next 12 months? I mean, I, I'm still, I'm still
• 1:00:58
  betting on the, on open source coming this year, the US open
• 1:01:02
  source. So reflection is one that we're
• 1:01:03
  keeping an eye on. So they're expected to launch
• 1:01:07
  their model this year and there's a lot of capital behind
• 1:01:09
  that and partnerships with NVIDIA and some of the, the big
• 1:01:13
  guys. So let's see and see what that
• 1:01:14
  looks like. I agree.
• 1:01:16
  No, I agree. I'm I think open source is is
• 1:01:21
  going to be more and more significant.
• 1:01:22
  I do think that they can be businesses built around U.S.
• 1:01:26
  Open source. So if you guys see that more
• 1:01:29
  open source models are out there, does that bring the cost
• 1:01:32
  of compute, cost of training everything else down or does
• 1:01:36
  that, you know, increase people's desire to spend?
• 1:01:40
  Both, I think, right, like if it's, it's like I, I think it,
• 1:01:46
  you know, you'll see a bifurcation where people will
• 1:01:49
  send what they can, the tokens they can to open source for
• 1:01:53
  efficiency an optimization. But you know, in competitive
• 1:01:57
  scenarios where you need the high quality tokens, like folks
• 1:02:01
  will still see it as a competitive advantage to go for
• 1:02:04
  the very most frontier expensive token they can get.
• 1:02:08
  So both things can happen at the same time.
• 1:02:10
  Javon's paradox, which is, Oh yeah, right.
• 1:02:13
  When you have a, you know, lower cost, you, you might think, you
• 1:02:17
  know, people aren't going to spend as much money, but
• 1:02:19
  actually it actually increases people's desire to spend money
• 1:02:22
  as that cost comes down. AGI here.
• 1:02:24
  What do you think? What do you think, Dave?
• 1:02:28
  Is the age well, so I've been hearing from people who are
• 1:02:31
  pretty darn smart that they think AGI hits in the next 18 to
• 1:02:35
  36 months Like that was on my radar is like, Oh yeah, maybe in
• 1:02:39
  the next 5 to 10 years, you know, that hits.
• 1:02:42
  And I don't even really know what that means.
• 1:02:44
  You know, to me, I guess it means that we accelerate beyond
• 1:02:48
  any predictable sort of, you know, version of, of
• 1:02:52
  intelligence. But, you know, does it mean that
• 1:02:55
  computers or agents take over just mean that we have, you
• 1:02:58
  know, infinite energy and is. There like a committee that
• 1:03:03
  decides this or like whatever. Is there a ruler well?
• 1:03:07
  For Open AI at Microsoft, there is right.
• 1:03:09
  They they negotiated that because of that clause in the
• 1:03:12
  contract, there's going to be an outside party that decides
• 1:03:15
  whether Open AI has hit AGI or not.
• 1:03:19
  Yeah. So in that in that context.
• 1:03:21
  I made a prediction three years ago that within 10 years the
• 1:03:26
  richest person on the planet wouldn't be a person.
• 1:03:28
  And the other prediction I made is that within 10 years there
• 1:03:33
  would be a religion that's not based on a human being that is
• 1:03:37
  substantial. Those, those are kind of my 2
• 1:03:39
  sort of visions for AGI is when when the when the richest person
• 1:03:43
  isn't a person and when a computer is leading a major
• 1:03:47
  religion or an agent or is leading a major.
• 1:03:49
  Startup idea. Kind of a whole different. 18
• 1:03:55
  I'll take. I'll take the under on the 18 to
• 1:03:56
  36. You'll take the under on 18
• 1:03:58
  months. So you think we hit it faster?
• 1:04:00
  We'll see. Well, thanks again for you guys
• 1:04:02
  joining us. I hope we get to have you back
• 1:04:04
  again next quarter and see who's in or out of your Power 20.
• 1:04:07
  And we did launch our our mobile app recently.
• 1:04:10
  And so that's that's in the App Store now.
• 1:04:12
  So shout out to that. Congrats.
• 1:04:14
  Awesome. All right, You can trade on
• 1:04:18
  mobile in any time of day. Thanks, Amber.
• 1:04:20
  Thanks. Dave.
• 1:04:29
  All right. Welcome back to Another
• 1:04:30
  Evaluation Corner with Professor Aman Virgie.
• 1:04:33
  And we're here to have a very coherent session about Cohere.
• 1:04:38
  I see what you did there, Dave. See what you did there.
• 1:04:42
  We are going to talk about Cohere.
• 1:04:43
  They are a large language model, an AI enterprise company.
• 1:04:48
  Full disclosure, we are investors in Cohere PVC Two, our
• 1:04:51
  second fund invested in them in 2023, about a $2 billion
• 1:04:56
  evaluation. Their most recent price round
• 1:04:59
  was a $7 billion evaluation that was a Series D back in September
• 1:05:02
  2025. They are the $240 million
• 1:05:06
  revenue run rate that puts them at about a 35X AR multiple.
• 1:05:11
  So that already might seem aggressive.
• 1:05:13
  They are in negotiations now to do a potential acquisition of a
• 1:05:17
  German AI company called Alice Alpha at a $20 billion
• 1:05:21
  evaluation. And in that new tie up, the
• 1:05:23
  coherent investors would get something like 90% of the equity
• 1:05:26
  or thereabouts. So companies come a long way in
• 1:05:30
  a in a short amount of time. They only found it in 2019, but
• 1:05:33
  they've raised a ton of money and now seem to be positioning
• 1:05:36
  as a $20 billion plus AILOM. So let's talk about what makes
• 1:05:41
  them special. Interesting.
• 1:05:43
  First of all, they're Canadian. That's important.
• 1:05:46
  Canada, the land of Maple Leafs, Beavers and ice hockey.
• 1:05:51
  Take off, eh? No way.
• 1:05:55
  And so they are, they're backed by a bunch of hosers, including
• 1:05:59
  NVIDIA, Salesforce Ventures, CPP Investments.
• 1:06:02
  That's the that's the you should keep playing those sound
• 1:06:06
  effects. That's great that, that makes it
• 1:06:07
  so fun. I'm, I grew up in Canada, so I'm
• 1:06:10
  allowed to joke about them. You shouldn't, you shouldn't
• 1:06:12
  make fun of the Canadian. They're also backed by the
• 1:06:16
  Ontario Pension Plan and, and CPP investments of the Canadian
• 1:06:19
  Pension Plan, which was sort of the sort of Canada's
• 1:06:22
  superannuation fund. Not quite, but Canadians who put
• 1:06:24
  their money into their pension plans are allowed to that, that
• 1:06:27
  money, some of that goes into venture.
• 1:06:29
  And so that's become one of their, one of their big players.
• 1:06:31
  It's important to know that they're Canadian because a a big
• 1:06:34
  part of their pitch, as you'll see in a minute, is it kind of
• 1:06:37
  stems from the Canadian heritage.
• 1:06:38
  These are the founders. Aiden Gomez is the Co founder
• 1:06:41
  CEO. He went to the University of
• 1:06:43
  Toronto, got a degree. He's also educated at Oxford.
• 1:06:45
  He's got some DNA and and tie insurance to Google Brain.
• 1:06:49
  That's important for reasons we'll discover in a second.
• 1:06:51
  Nick Frost is a Co founder. He was also at Google Brain.
• 1:06:54
  In fact, he was employee number one working in Toronto for Jeff
• 1:07:00
  and and Ivan Jang is the other Co founder.
• 1:07:02
  He's also University of Toronto. I never went to the University
• 1:07:05
  of Toronto. I grew up in Toronto.
• 1:07:06
  I went to University of Toronto high schools, which is the
• 1:07:08
  school that they that they run. But there's obviously a lot of
• 1:07:11
  DNA and from UFTA, couple of these guys met and worked at
• 1:07:15
  Google Brain, which it's kind of the Google, you know, deep Line
• 1:07:18
  project back from 2013 or so. Jeff Henson was one of the key
• 1:07:22
  folks who ran that program. If you don't know who Jeff
• 1:07:24
  Henson is, people call him the godfather of AI.
• 1:07:27
  He contributed a ton to the field of AI research in the 60s
• 1:07:30
  and 70s when it was, it was all but dead and nobody thought it
• 1:07:34
  could work. And the neural networks were
• 1:07:35
  passe and, and nobody was investing in it.
• 1:07:38
  And he was a big one of the big contributors.
• 1:07:40
  And, and so some of this team is coming from that Google Brain
• 1:07:43
  DNA. The company was only founded in
• 1:07:45
  2019. That really turned on revenue in
• 1:07:48
  June 2023, just as we made our investment.
• 1:07:51
  By the end of 2023, there were a 13 million ARR, you know, by the
• 1:07:55
  end of 2024, by the middle of 2024, there were around 2022
• 1:07:58
  million ARR. We were looking at it saying,
• 1:08:00
  you know, revenue is progressing, but but kind of
• 1:08:02
  slowly is this going to going to pay off?
• 1:08:04
  At the end of 2024, they had 62 million in ARR and now they're
• 1:08:08
  they're saying they're at 240 million.
• 1:08:10
  So they're 4X to the revenue just in the past year alone and
• 1:08:14
  that three extra revenue from the year before that.
• 1:08:17
  So exploding revenue and they've gotten some, some real progress
• 1:08:20
  with enterprise customers. What do they do?
• 1:08:23
  Why are they hitting it all of a sudden?
• 1:08:24
  Well, they really specialize in a couple of things.
• 1:08:26
  It's enterprise grade retrieval, augmented generation and they
• 1:08:30
  have a focus on first of all, enterprise first and second,
• 1:08:33
  data sovereignty. They really allow companies like
• 1:08:35
  the World Bank of Canada or Fujitsu large, you know,
• 1:08:39
  national corporations or government regulated companies,
• 1:08:42
  government regulated industries to keep their own data.
• 1:08:45
  They never use customer data to train base models and they allow
• 1:08:48
  you to run their own your keep your own data on their own
• 1:08:51
  private servers or computers. And so they, they are basically
• 1:08:55
  a very strong play in a field where other companies are
• 1:08:58
  putting their stuff in the cloud and using data to trade models.
• 1:09:01
  You can think of them as Switzerland, not literally the
• 1:09:04
  Canadian, but metaphorically they're like Switzerland.
• 1:09:06
  They really believe in cloud agnostic flexibility.
• 1:09:09
  So open AI has got very strong ties to to Microsoft Anthropic,
• 1:09:12
  very strong ties to Google and Amazon go here.
• 1:09:15
  It works with everybody, all those guys plus, you know,
• 1:09:17
  Oracle and Salesforce, whoever else.
• 1:09:19
  So they're they're able to position themselves in, in a
• 1:09:23
  space that is very attractive for very highly regulated
• 1:09:25
  businesses where sharing data and having that flexibility at a
• 1:09:29
  premium. Most of the customers from
• 1:09:31
  finance, healthcare and government.
• 1:09:32
  Now they've got customers like the World Bank of Canada, one of
• 1:09:35
  the big 5 banks in Canada, Evercore, Humana, Blue Cross
• 1:09:38
  Blue Shield and and Daisiger health Plan.
• 1:09:41
  They're all customers as well as Dell, Oracle, SAP and Fujitsu.
• 1:09:45
  So really strong list of customers, exploding revenue.
• 1:09:48
  This is really important, I think, for why they're getting
• 1:09:50
  in bed with Alif Alfa. They're a sovereign AI provider,
• 1:09:53
  and they're really targeting governments who are seeking
• 1:09:55
  alternatives to US controlled infrastructure like Google or
• 1:09:59
  Open AI or Microsoft. And so their pitch is, hey,
• 1:10:02
  we're not American, we're not Chinese.
• 1:10:05
  And when you think of AI and AI leadership, that's those are the
• 1:10:08
  two countries you think of, right?
• 1:10:09
  It's basically the US and China. But there's a big chunk of the
• 1:10:12
  world that doesn't want the US and China to have the entire
• 1:10:15
  market share. So Cohere brings revenue
• 1:10:18
  customers, a lot of talent at a foundational LM.
• 1:10:21
  They're based in Toronto, Canada.
• 1:10:22
  Alice Alpha is a German company, not quite as far along in terms
• 1:10:26
  of their foundational model, but they do have a technical
• 1:10:28
  backbone and the infrastructure as well as German talent.
• 1:10:32
  And then their investor, the Schwartz Group is bringing $600
• 1:10:34
  million in structured financing into the new deal.
• 1:10:37
  So the result of that combination is, is I think a
• 1:10:41
  real AI powerhouse that's going to be in the conversation.
• 1:10:44
  That's not going to be as big as open AI or anthropic.
• 1:10:46
  But for people looking for a non-us, non Chinese alternative,
• 1:10:49
  I think they're positioning themselves in a solid place.
• 1:10:52
  Just to recap on who their investors were.
• 1:10:53
  So their seed investors were S 32 and Radical Ventures.
• 1:10:57
  Jeff Hinton, who I just talked about the Google Brain guy, the
• 1:11:00
  the godfather of AI. If you check him out on Google,
• 1:11:03
  by the way, and and listen to what he says now about AI, he is
• 1:11:05
  a doomer. He thinks AI is going to take
• 1:11:07
  over the world and computers going to get smart and shut
• 1:11:09
  things down. And we have to very tightly
• 1:11:11
  regulate. He is, he is definitely on the
• 1:11:13
  side of AI is he has a lot more potential for harm than good and
• 1:11:17
  he has to be very, very careful. Somehow he became a seed
• 1:11:20
  investor in this company very early on.
• 1:11:21
  And even though he's a doomer, he's still profiting to a large
• 1:11:25
  degree as a result of this company.
• 1:11:26
  So, you know, good on him to make money out of something that
• 1:11:30
  he he fears and loads. The other big investors in the
• 1:11:33
  Series A Mike Volpe at Index, I was at Sonos and their CFO Mike
• 1:11:37
  Volpe was the lead investor at Sonos and Index Ventures.
• 1:11:39
  Terrific investor and and a big win for Index Venture Tiger was
• 1:11:43
  in the series BA $1 billion valuation there.
• 1:11:46
  And then the latest stage investors in the latest round.
• 1:11:48
  Inovia Capital is a very big Canadian VC firm.
• 1:11:51
  They are, they've been the lead in the last round and have been
• 1:11:54
  probably now the leading Canadian venture capital firm in
• 1:11:57
  that country. I believe they're core
• 1:11:58
  headquartered Montreal where they have Toronto and Montreal
• 1:12:01
  presence and then NVIDIA and Salesforce fetches are the other
• 1:12:03
  other big investors. So it's a great list of
• 1:12:06
  investors, a lot of very strong seed investors, really, really
• 1:12:08
  good series A&BV CS welcome scale and now strategics to help
• 1:12:13
  them with finish the acquisition and and potentially go public
• 1:12:16
  someday. So big win for Co here, you
• 1:12:18
  know, exploding revenue. I think cashing in on maybe
• 1:12:21
  trying to find the trying to be the non-us, non China
• 1:12:24
  alternative. I think a lot of governments and
• 1:12:26
  a lot of corporates will go for that.
• 1:12:27
  So good outcome for this company I think.
• 1:12:30
  I think you probably have hit on what seems to be an attractive
• 1:12:33
  strategy there is that EU and Canada, maybe UK would be more
• 1:12:37
  likely to use this product than given the recent EU US
• 1:12:42
  relationship kind of breaking down, it might not be as easy
• 1:12:45
  for those folks to decide to go with USAI vendors.
• 1:12:48
  Right, or at least spread their bets and have a have a back up
• 1:12:51
  plan, right. And I think I think maybe you
• 1:12:53
  know the Middle East as well, well.
• 1:12:55
  Thanks for that coverage, Iman, and I guess I hope this one does
• 1:12:58
  well since it's in our portfolio talking.
• 1:13:01
  Our own book, but that's that's the way we like to do it, Dave.
• 1:13:09
  I think the the sound bite for Amazon used to be you know, your
• 1:13:12
  margin is my opportunity. I I wonder what anthropics sound
• 1:13:16
  bite is. You know, your non proprietary
• 1:13:19
  data is my opportunity, I think. Yeah, Adam Ogwen is a
• 1:13:26
  marketplace. I guess you guys are an index
• 1:13:28
  and a publication. Not to be too trendy and too
• 1:13:33
  foul mouthed here, but have you ever played that game, Mary
• 1:13:35
  Kill? If you had to, which of those
• 1:13:38
  three businesses would you kill? Well, maybe the marketing you
• 1:13:43
  said probably. Marketplace an index.
• 1:13:47
  You know the marketing marketplace.
• 1:13:48
  We need the marketplace. Oh, right.
• 1:13:49
  Right. Start business, Yeah, we would
• 1:13:51
  keep the keep the marketplace. That's the that's where we make
• 1:13:55
  the money. That's that's where, that's
• 1:13:56
  where you're going to marry, right?
• 1:13:59
  Yes.