Latest / 1 to 100 / E19: AI Just Changed the Rules of SAAS with Jason Lemkin

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E19: AI Just Changed the Rules of SAAS with Jason Lemkin · 1 to 100

0:00
Awesome. All right everyone, we're really
0:01
excited to have Jason here on the show, who I've been a long
0:05
time follower of and has said multiple times that he responds
0:08
to good cold outbounds. And so I sent what I consider to
0:13
be a reasonably good cold outbound because we're fortunate
0:16
enough to have him here. Join us on SAS operators to.
0:20
Prove that it works in the age of AI it it actually works
0:24
better than ever. A good outbound.
0:27
There you go. There you go.
0:29
And also, yeah, now I get to tell my head of sales like, hey,
0:31
maybe I'm not that bad at selling.
0:33
So the yeah, we're really excited to get your perspective.
0:38
Jason has LED investments in a bunch of relevant ECOM SAS
0:42
companies. The ones that I most closely
0:44
followed actually were gorgeous. And Al Golia, Jason, as you were
0:47
mentioning before we started taping and then also revenue
0:50
cut, which is a very interesting perspective to to bring into the
0:53
conversation. And as like many of the
0:55
listeners know from us, the only revenue, sorry, the only VC
1:00
backed company here on SAS operator.
1:03
So I'm sure we're going to have a really interesting dialogue
1:06
around how SAS is evolving. What does it mean that now that
1:10
we have AI? And in particular I'm curious
1:13
Jason to get your perspective on E com, you didn't mention this
1:15
earlier, but I was also at Saster when you were
1:18
interviewing Andrew and so that was a great one.
1:22
Yeah. And so I'm like, I'm, I'm very
1:25
cognizant that you're very aware of like the different movements
1:29
that are happening in the ECOM space.
1:30
And so I'm excited to get your perspective.
1:33
So welcome. Thanks for having me so excited.
1:37
Amazing. I thought I wanted, I thought it
1:40
would help by sort of setting the stage in terms of like your
1:43
perspective of investing in general SAS or vertical SAS
1:47
versus ECOM in particular. And I was curious to just start
1:53
by getting your sense on like how would you describe the
1:56
difference between ECOM sass versus general SASS?
2:01
And I'm leaving a sort of intentionally vague, but I'll
2:05
I'll go from there. Well, look, let me step back
2:09
from it if it's, I mean, this is Captain Obvious speaking here,
2:13
but for multiple reasons. The amount of disruption that
2:18
the software industry is going through now is unprecedented and
2:21
it's it's accelerating. So the honestly we could I'll
2:26
answer all your questions, but for anybody that watches or
2:28
listens to this, the best advice I can give anybody on planet
2:31
Earth that's an entrepreneur or wants to do something in in B to
2:35
BE commerce or something. Just realized the world has
2:37
changed. AI is the accelerant.
2:39
There's also a ton of things happening at the same time.
2:43
Shopify has become the entire platform for ecommerce.
2:46
There is nothing else. Everything else has died and
2:49
Shopify is deep in AI. Shopify is rebooting what
2:52
Shopify is. And so I see way too many
2:55
entrepreneurs who want to build another app like it's 2019 or
3:00
2021 or 2022 or want to vibe code their app from Costa Rica
3:04
or wherever Jack is. You're going to fail.
3:06
You're going to fail today. There's no chance you will be
3:09
successful now. Can you build?
3:12
Do lifestyle businesses still work today?
3:13
Sort of. It's just The thing is like,
3:16
listen, there can be weird D to C niches.
3:18
We're the only person selling dried leaves on the Internet
3:21
that will work as well as they did.
3:22
But AI is creating so much competition, so much change that
3:28
I just really worry about folks that want to build the 2021
3:33
style lifestyle business. It's just brute, it's brutal out
3:38
there and it's exciting. It is exciting, but and I think
3:41
it's, it's even harder in e-commerce because everything's
3:44
compressing. There's so much more
3:45
competition. There's only one platform,
3:47
right? This platform is accelerating.
3:50
Shopify grew 30% last quarter at at almost 11 billion in revenue.
3:54
That's up from 20% a year ago. Now a lot of that's in GMV and
3:58
enterprise, which is an important subtopic, but Shopify
4:01
is accelerating at coming up on 12 billion of revenue.
4:04
It's destroying everybody else. And you better attach to those
4:08
themes, you better attach to that wave, you better attach to
4:11
AI. And in some cases, you better be
4:15
aware of the fact that as brutal as it is, a lot of folks are
4:18
working 607080 hours a week in the office building these tech
4:21
companies. And I would just be very
4:24
cautious to folks that don't, that aren't adapting or don't
4:27
want to adapt. And I, I have empathy for folks
4:30
that don't want to, right? It is hard.
4:32
Everything's harder, everything's faster.
4:35
But I just, I'm very the meta thing.
4:37
I'm just this change is accelerating.
4:39
It is accelerating in AI, it is accelerating the software.
4:42
And E com and Shopify are a radically different company than
4:45
they were 18 months, 1824 months ago.
4:47
It's just all changing. So you better be on top of it or
4:50
you're going to be steamrolled by people that are.
4:52
You're just going to be steamrolled like you can't
4:54
sleepwalk the way we did a couple years ago, right?
4:57
You can't just have like even we talked about Gorgeous and I'll
4:59
go. I mean, Gorgeous isn't even the
5:01
same company as 24 months ago at 100 million.
5:04
It's not even remotely the same. The product they had 24 months
5:06
ago would have $0.00 in revenue today.
5:10
I'm, I'm curious when you said that there's a large difference
5:12
in like the cohorts of businesses that can exist in
5:14
2021 versus now. I'm curious like how did you
5:17
categorize, for example, like lifestyle versus not lifestyle
5:20
then versus now? Like which is there a certain
5:23
cohort that you think is completely eradicated or like
5:25
how are you looking at the landscape differently?
5:27
Between I just found out right before we did this, that one of
5:29
the leading lifestyle CR OS on social media who tells everybody
5:33
to to play to play sports and work a little bit and phone it
5:37
in for for years. He just took a full time job at
5:39
an AI company. First time I took a full time
5:42
job in 10 years. This is Mr. Lifestyle, Mr. Mr.
5:48
you know, sports first, me second, sales third, telling
5:52
everyone in sales and revenue how to do it.
5:54
Just took a full time, full time in the office CRO gig and AI
5:58
company. I mean, it's just, I just,
6:00
there's just, I don't mean to get off track.
6:02
There's just so much advice on social media, right?
6:05
And I see it in some ways worst of all in kind of this D to C
6:08
into B to B space where everyone thinks they can get passive
6:11
income, that it's so easy, you know, Hey, did you guys know I
6:15
made $40,000 a month on my, on my 0 work D to C store and also
6:20
the apartments I managed with 0 work, right?
6:22
It's just like no work, right? And then my did I tell you about
6:24
my vending machines? Like they're also no work.
6:27
So I'm up to like $80,000 a month in my passive income.
6:31
Here's here's a picture of me and Tulum like and and to be
6:36
honest, and here's the thing there it that's always been
6:39
charlatans and scam artists and people selling courses.
6:41
But the truth was there was a lot of truth of that in 2021.
6:44
There was so much demand in everything right.
6:47
And it's interesting, Shopify, I just these numbers will be
6:50
obvious to any folks that read this minute or, or do it.
6:52
But you know, Toby just put up I think last week or the other
6:55
other day that E com is finally back to where it was in 2020 in
6:58
the peak of 2020. It didn't even peak in 2021.
7:00
It actually, it actually E com accelerated in 2020.
7:03
And as soon as we could leave our homes, it decelerated and
7:06
it's finally back. But now it's accelerating again.
7:09
But, but you know, there was a moment in time when it was that
7:11
easy. It, it really, it really was
7:12
that easy. So not, not to get to go into
7:14
too much, but, but those times are just, they're just behind
7:17
us. And folks will still find those
7:18
niches where the vending machines, D2C brand and
7:21
everything and, and, and, and the side hustle is acro.
7:24
We'll all make them $80,000 a month in passive income.
7:27
It's just like, like it's not that common today in the real
7:30
world. Like don't don't you think that
7:32
that are like cohort just got replaced by people building like
7:35
ChatGPT rappers? Like I feel like the arbiter,
7:38
like the ARB cohort of businesses are kind of just like
7:41
forever evolving. And it's like who?
7:43
Who who who that built a ChatGPT rapper in 11 minutes is doing 7
7:47
figures of revenue? I don't know any.
7:50
I mean, you were talking about like 40-40 KMO businesses.
7:53
Like maybe I think the ChatGPT rapper is already dead and
7:55
behind us. There was a moment in time when
7:59
when people didn't actually understand how the open a open
8:03
AIAAPI worked and how chat GBD worked where you could have a, a
8:07
wrapper business, right. But the problem what's happening
8:09
now is, I mean, honestly, the single best wrapper business
8:13
that I'm aware of are vibe coding applications like like
8:16
replit bolt, lovable. And there's like now there's
8:19
like 14 others, whizbat one for 80 million.
8:22
You know, these, these and I, I, I'm pretty deep into these,
8:25
these applications. And you know, when they, when
8:28
they first came out all of seven months ago, it was like super
8:30
disruptive that in a prompt you could build a whole application,
8:33
which is a little bit Sony baloney.
8:35
But now that I'm I'm deep on them and I I get it.
8:38
They're all built on clod. They all actually look identical
8:41
to a prosumer. Now there are differences,
8:43
right? But literally you could go to 20
8:45
different and there now are 20 different vibe coding apps and
8:50
they all look, the prompt looks identical.
8:52
The initial output looks identical because they're
8:54
basically just adding a little bit of fuzz on top of Claude and
8:57
Claude code. And so we could talk about that.
8:59
But my point, like there the the the lifestyle thin wrapper
9:02
business is dead too, because like it's just been obliterated
9:05
by competition. Everyone figured this out.
9:07
Everyone. Now there's gonna be thick
9:08
wrappers, maybe beyond the scope of the conversation, but all
9:12
these things that worked. Just the pace is so furious.
9:16
It's just so furious. So I, I just, I do, I mean,
9:19
build your lifestyle business. I would like to have a lifestyle
9:21
business, right? But I just just be, don't,
9:25
don't, don't be super cognizant of the competition and be very
9:30
wary of people selling you crap on LinkedIn, right?
9:33
Because just to pay the pace is on and it's accelerating.
9:37
It's accelerating, right? Toby at Shopify, Alex Carpet
9:41
Palantir just said he's going to have 10 times the revenue
9:44
because they're 4 billion is going to get to 40 billion with
9:47
fewer employees than today. Toby is at Shopify, we now have
9:51
less employees than we had 12 months ago and half of the
9:54
employees we had four years ago. It's accelerating, right?
9:56
It's accelerating in the output. And so it's just you got to be
9:59
careful not to. We all, including myself, we all
10:02
have to be careful not to be steamrolled about 'cause when
10:05
you're, when you're seeing exponential growth and you're
10:07
seeing AJ Curve, it's hard to see that, that, that creep up on
10:10
you, right? See GPT 5 just came out as we're
10:13
recording this. You know, if you're an average
10:14
person, doesn't look that different.
10:16
Like you can dismiss it, but but under the hood, the amount of
10:19
investment that's going to this platform, like you can just be
10:22
steamrolled by it. You can just just be steamrolled
10:24
by it, right? Leave an example that's probably
10:28
not even fair. But like Yacht PO, like exiting
10:31
e-mail and SMS because they can't compete with Clavio and
10:34
Shopify. Like we're gonna see fifty of
10:36
these stories, right? We think we're gonna see
10:38
consolidation of of features. We are, but we're also gonna see
10:41
folks that the competition bar has gone up and they're just
10:43
gonna start exiting things more and more 'cause they can't
10:45
compete because they can't compete.
10:47
But when the, when the products of 2021 were essentially the
10:50
same products as 2017, just with more demand, it was pretty easy
10:54
to compete, right? You could push out one feature
10:56
every year or two. That's how that's how things
10:59
evolved. But it's just, the pace is just
11:01
in so and it's just not to be repetitive.
11:05
It's just if folks can't see it, it's accelerating.
11:08
It's already fast, but it's accelerating and it's exciting,
11:11
but it's, it's, it's friggin exhausting.
11:13
I mean, I work like 80% harder than I did 12 months ago.
11:18
I've had a few exits and a few good investments.
11:21
I have to work harder. Yeah, no, I, I, you said two
11:24
things that I'm, I'm like really curious about.
11:27
And I've heard you say this before too, that like in E com,
11:29
Shopify is the entire game and it's like you build for like you
11:33
build for the Shopify ecosystem and then you like want to go
11:36
with that tailwind. And then now there's a second
11:39
tailwind like you're talking about, which is the massive
11:42
amount of investment that's going into the AI models, right?
11:45
And so like you sort of like, you know, for the listeners of
11:48
this pod, it's like there's these two massive platforms,
11:51
both of which are accelerating, right?
11:53
I mean like different scales of acceleration, but both Shopify
11:57
and and these and these models, when you have those two effects
12:01
in place, like how do you think about what are the opportunities
12:07
that what are the ways that a founder who is starting to build
12:10
a SAS company in e-commerce should be thinking about?
12:13
Like what are my must haves for building something in this space
12:17
that is going to be valuable given that I know that there is
12:20
these two massive platforms on my on my back?
12:23
Yeah, so it's a good question. I'd probably add a third.
12:25
It it the, it, it's maybe 2.5. So why does that?
12:28
Shopify is the only platform, for better or worse, you could
12:31
fight. Go go build your Woo Commerce
12:33
app and make $6 if you want, right?
12:35
Go, go see if anyone at big Commerce will respond to your
12:37
e-mail. It's just not worth your time.
12:39
Doesn't matter what the what what stat.
12:41
There's just no Rev. Like even though Woo Commerce actually has
12:44
a lot of stores, there's no revenue and it's not even a
12:47
platform like it's impossible to build for right?
12:49
So you're stuck with one platform.
12:51
AI is totally disrupting it. But the other thing that you
12:54
guys know, but but maybe entrepreneurs don't realize it's
12:57
good and bad is that, you know, it took Shopify a really long
13:00
time to get here because of because of long tail, but the
13:03
massive growth is in enterprise and big brands.
13:06
So Shopify grew 30%, but that most of that lift is from
13:11
massive GMV lift. And I think I, I don't have the
13:13
exact number in front of me, but I think that the SAS revenue,
13:16
right, the, the platform revenue only grew in the teens, right?
13:20
So, so like, so there's a lot of thing, but So what you have to
13:24
think about if you want to enter the space is Shopify was an SMB
13:27
platform for many years and it always had big brands.
13:29
It always had enterprise. It was always roughly 2570 five,
13:33
25% of its revenue came from big brands.
13:35
And then they added Shopify plus.
13:37
But at the end of the day, Toby was an engineer.
13:38
He didn't really want to do enterprise.
13:40
He didn't really want to do big customers.
13:41
OK, but it changed, right? It when Toby became a monster,
13:45
he was always a monster. But when he became a super
13:47
monster, right, and couldn't, couldn't stand 2020 laziness.
13:50
I think it's part of that. He's I've obviously deeply
13:53
leaned into the enterprise brands, right, to destroy the
13:55
competition. So it's so so there's these
13:58
three vectors. There's Shopify's the only
14:00
platform it's going more enterprise and AI is changing
14:02
it. So what does that mean for an
14:04
entrepreneur, right? I think it's weird.
14:08
One weird thing that that AI is doing that folks that aren't in
14:12
it may not see is it's making small start-ups, small
14:19
companies, small entrance, ankle biters, new entrance in every
14:23
space, new entrance that compete with the big guys.
14:25
It's actually making them somewhat more competitive.
14:28
AI is because pre AI like if you wanted to compete with Clavio or
14:34
Gorgeous or whomever, what what were you going to launch in
14:37
2023? Like the same thing that does
14:39
last for $1.00 less. Like it's just like a few people
14:44
will pay $1.00 less for Clavio, but turns out Clavio is 80%
14:47
market share for a reason. It just wasn't worth it.
14:49
Worth it for crappier messaging. Was it to say it just wasn't
14:52
worth it? And, and that's still true
14:54
today, but but the more your application is about workflow,
14:59
the more that a really powerful AI.
15:01
Maybe even you could call it a thin wrapper.
15:03
To Zach's point, I don't really use the term, but the fact that
15:05
that that AI can be really, really good can make, can make
15:09
up for the fact that the underlying software may be
15:12
mediocre, feature poor, or or or or or or or not quite as
15:18
competitive as it would otherwise be.
15:19
And at the same time, what's happening is AI is making old
15:23
guys better. And where you see this in
15:25
e-commerce, for example, I see it with gorgeous is Zendesk is a
15:29
better company, ironically, in e-commerce than it was 18 months
15:32
ago. It's not because I mean, Zendesk
15:34
was founded in the in the 1800s, right?
15:36
It's pretty old. Like if you, if you use the web
15:38
platform, but the AI is pretty good.
15:41
The AI. So the as long as you stay at
15:43
the, at the AI level of Zendesk, it's it's much more competitive,
15:47
even forget about it with all of its competitors than it was
15:50
before. So it's just remixing
15:52
everything. So you've got to think, do I
15:55
need to go more enterprise and ecom that I might have wanted to
15:58
a few years ago where it's not my DNA, it's not my DNA, but or
16:03
if I go very SMB long tail, which is the classic home of of
16:07
e-commerce. The problem is I may get some
16:09
fake positive this my AI is good because I may get some initial
16:12
traction because the app looks really cool, but it ends up
16:15
being just there's so much competition.
16:17
The 50th app in the space. We just don't need 50 Clavios
16:21
and and 50 Gorgeous's in 5th. But they exist because of AI,
16:24
because people can make really cool, cool versions.
16:27
So it's really confusing. Everything's getting really
16:28
crowded. SMB apps are better because of
16:31
AI, but the momentum at Shopify is enterprise, right?
16:35
And they're all even if you talk to executives at Shopify, it's
16:37
all they talk about now, right, is the big brands.
16:39
That's all they talk about. So I don't know if that's a
16:43
rambling answer. It just means it's like it's,
16:46
it's a lot in flux and it and if you do SM, like if you do SMB
16:50
plus AI, your product could be a lot better than 24 months ago,
16:52
but you may have 100 competitors.
16:55
If you have enterprise, it's always harder to penetrate,
16:57
especially for like bootstraps solopreneurs.
17:00
But if you can figure that out and that you can find some white
17:02
space like you can get lift from Shopify, right?
17:06
And the thing about Shopify, it's very hard for folks that
17:09
don't see this on the outside, but you know, Shopify, Shopify
17:13
has its favorite partners. Shopfi owns what 20% of Clavia
17:16
or something like that, right? But it has a lot, it has like
17:20
1520 folks that it puts a lot of it's not all about money.
17:23
Like you can be bootstrap, but it puts a lot of money in and it
17:25
does a lot of Co marketing and joint stuff.
17:28
And you, you want to be one of those guys.
17:31
You want to be one of the that you and you certainly don't want
17:33
to be MailChimp who gets kicked out of the ecosystem.
17:36
Like that's death because there's nowhere else to go.
17:40
Belchamp thought they had somewhere else to go when they
17:41
pissed off a Shopify, but it turned out there, it didn't
17:46
work. So is that is that too Rambler
17:49
or is that helpful? Yeah.
17:52
I'm curious what you think about because I actually really like
17:54
the distinction of you're talking about like 2021
17:56
companies, for example, versus today.
17:59
So obviously a lot of businesses were built to a like a pretty
18:03
good size and now you've got this transformation that has to
18:06
happen. And in terms of how do you
18:07
compete today when you build things in an old way, like how
18:11
do you think about that in terms of, I mean, gorgeous is a good
18:13
example, right? Like they, there's had to be a
18:16
massive ship there. So what do you think about in
18:17
terms of what's defensible and what you can kind of continue to
18:20
do versus what are the things that you have to totally throw
18:23
away and and rethink? I think there are two different,
18:26
those are good questions, two different questions.
18:28
The first one, This is why being an entrepreneur is stressful
18:30
today, at least in an, in an active category.
18:33
I I believe in, in B2B defensibility is rapidly
18:37
eroding. It's and everybody knows this,
18:39
it's rapidly eroding. Brand still matters almost as
18:43
much as ever. Like listen in any category, it
18:47
doesn't even forget about software.
18:48
There's just so many products in every category.
18:51
The other day, 80% of us are going to choose by brand, OK,
18:54
15% of us are going to go a little bit further and still
18:57
choose by brand. And five of us are going to be
18:59
early adopters and find that new cool tool, right?
19:02
So, so brand does matter. It's just what's happening is
19:07
because AI is so potentially disruptive to functionality,
19:13
everyone is back in market for a new vendor for the first time in
19:16
decades. No, no, you know, until recently
19:19
you set and forget you, you picked a vendor and like you
19:23
just got better at it. The the amount of energy it
19:25
takes to RIP and replace it. It's bounded, but it's always
19:28
higher than like sales teams meet.
19:30
You know, the worst question I get is I'll write something
19:32
slightly critical, not about a vendor, just in life and I'll
19:35
get 28 CE OS and sales reps mean do you have an hour to meet to
19:39
use my CRM instead? No, I don't have the hour to
19:42
meet. Why would I switch?
19:43
And even if I did, how long is it going to take?
19:46
Are you and I always ask him, will you do all the migration?
19:48
No, who will do it? I don't know, you know, then I
19:51
get an e-mail a week later. We have a partner out in Boston
19:54
that for $80,000 will migrate your data for you over six
19:58
months. It's just like so, so there's
19:59
just it's there. There were so many soft modes in
20:03
B to B, but now with AI people are looking, hey, how can I like
20:07
in, in gorgeous space? How can I replace 70% of my
20:10
support team with AI people are? Doing that actively sourcing
20:14
applications. I, I know I don't, I'm, I, I do
20:17
love Andrew and Clayview. I don't study the company as
20:19
carefully as I should, but everyone's looking for like, how
20:21
can AI automate my marketing automation?
20:24
Not just automation that's 2024. How can AII mean?
20:27
We rolled out an AISDR tool and on that vendor, we're already
20:32
the number one vendor. It is already generated more
20:34
pipeline than any human ever has at the time.
20:36
You have to open your eyes and look at these vendors, right?
20:39
So it's putting everything in flux.
20:41
And what it is, is it like everyone is doing discovery,
20:44
enterprises are doing it formally, CI OS offices, they're
20:48
putting money into AISMDS are just looking around.
20:51
Hey, I heard about AI and like This is why some like I'm on the
20:55
board of a company called owner, which really in some ways is
20:57
e-commerce. It is a new IT is like A next
20:59
generation toast, but for marketing.
21:01
OK, they just raised it a billion.
21:02
So it's not Shopify e-commerce, but it's it's it's a restaurant
21:05
version of e-commerce. It's a vertical eyes.
21:07
I mean, listen, it's a brutally they compete with square, they
21:10
compete with toast. It's brutally competitive.
21:12
But Kyle Norton, who's one of the best CR OS man, he can get
21:15
folks on the phone in 60 seconds because in the age of AI,
21:18
everyone wants this instant ROI. Everyone wants it.
21:21
And so every deal's in play, every customer's in play.
21:23
And so if you're a leader, but you don't own the platform like
21:28
Shopify, everyone's attacking you from all sides.
21:30
The, the small guys are coming up with new AI features, even if
21:35
you're great. People are comparing vendors
21:37
when contracts are up for renewals in a way they they
21:39
never did. And everyone's just wondering
21:40
what's out there now, what's out there.
21:43
And it will eventually settle down because it is exhausting to
21:46
switch vendors, right? But I don't think it's gonna
21:48
settle down for like 36 months because there's gonna be waves
21:52
like things get more and more AI ified.
21:55
We're like obviously coding was first, right, then came support
21:59
Marketing is still barely there, but it should already be
22:02
automated, right? Sales is just starting.
22:06
You know, we've replaced 80% of our sale little sales team at
22:08
Saster with AI. It's better.
22:10
It's just starting though. So like it's just so this I
22:16
maybe I'm sorry, Jeremiah, rephrase the second part of your
22:19
question, but the like, I don't think anything's truly
22:22
defensible today except brand and I think even brand is eroded
22:26
because people are in market. They're just in market.
22:28
Brand is usually people really don't go far into market, right.
22:32
You know what I'll do, I'll just do Shopify and Clayville.
22:34
That sounds good, like that's the right choice for 95% of
22:38
people, right? But now we're there, they're
22:40
like OK, Navy, Shopify, they're stuck with right?
22:43
Even Clavio, they might be like, OK, well, Clavio's great.
22:46
I love seeing my ROI. But but is there someone doing
22:50
this even better in the age of AI, right?
22:52
Why do I even have to know what a campaign is like?
22:54
Get owner for restaurants. They do single restaurants.
22:57
Is their ICP the worst, the worst of the worst?
23:00
One restaurant impossible to sell to low Acvs.
23:04
And so they use AI to completely automate all marketing
23:08
everything from campaigns to text to website building to
23:11
everything. There's nothing it's all AI
23:14
ified and that's what people are going to want, right?
23:17
And and it's a lot to build. And what was you?
23:19
You don't have an AI engineer. What was you?
23:21
Your team doesn't want to do it. What was you?
23:22
Your team is like they're not so sure your your team is like it
23:26
still hallucinates. Your team is like, well, we're
23:28
well, maybe next year. You just got to lose.
23:32
Jason, I, I have to ask this because like this, first of all,
23:36
makes total sense on the market landscape.
23:38
And, and you've said before on another podcast, you used to say
23:41
this thing that if you hit 10, you'll hit 100.
23:43
And, and this version of the market landscape suggests that
23:47
if you hit 10, it's totally not obvious if you're going to hit
23:49
100, because with increased competition comes increased
23:52
churn with people looking around more.
23:55
It's like there's, there's just it, it, it increases the
23:58
likelihood that you will plateau at various points between 10 and
24:02
100. And it used to be will now it's
24:05
can. OK, so so so 10.
24:09
Million so can hit 100. It used to be it used to be
24:14
almost inevitable if you had high NRR and a good team, it was
24:18
just they just if you had a good team that knew how to build
24:20
software and you had 100% or higher recurring revenue at 10
24:24
million, it was just math. Whether you're going 100%, sixty
24:27
percent, 72%, even 50%, just be patient, have your team keep
24:32
grinding, pumping out those features, build your brand.
24:35
You would get to 100. Just a question of what, right?
24:37
It's not it now. It's now you can, but it's it's
24:41
no longer certain. It's stressful and ever and if
24:43
you talk to any investor when you go, but we talked to VCs
24:48
that have been around a while, everyone is bragging about a
24:51
couple that they're lovables and they're a couple hot deals,
24:53
right. And then in the back rooms, in
24:55
the green rooms, in the back rooms, they're all talking about
24:57
that one at 50 million, a 100,000,200 million that's
25:00
growing 8%. And we just never saw that
25:02
before. We never 2020-2021 and late 2020
25:06
we're off the charts. In 2022 we saw some
25:09
deceleration, but it was the growth was really strong.
25:11
But we are now seeing folks that are established players that are
25:15
well known brands north of nine figures in revenue that are just
25:18
not growing that are, that are just not growing.
25:21
And it it's, it's super stressful.
25:23
It's and I think most VCs, this doesn't help founders honestly,
25:27
most VCs have given up. Most VCs have given up on moats,
25:31
They've given up on defensibility.
25:33
And because of that, what VCs are doing, and this is tough on
25:36
founders that want to raise, that want to raise capital,
25:39
they've given up on startups that are merely growing
25:42
extremely quickly. Because if you're going to give
25:44
up on moats and you're going to give up on defensibility, you
25:46
better be growing one to 100 million in six months, like
25:49
Lovable and Replit, right? Because if you're going one to
25:52
three this year and then three to seven and then 7 to 14, which
25:57
is really hard as it is, right, but you're not defensible.
26:00
It may not be worth a venture investment.
26:01
It may not be worth it because how you ever going to make
26:04
enough money to justify the risk, right?
26:06
At least the everyone's eye opening and B to B, it took a
26:09
long time was holy cow, this revenue is so sticky.
26:12
This is the classic, you know, private equity inside Vista
26:15
thing was, man, we can RIP out the whole management team at 100
26:18
million. We can fire everybody, but we
26:21
can RIP off the customers and raise prices and we got a 10
26:23
year ride out of this. It's just that that that has
26:26
become woefully unstable in AI. And so and so it's led to the
26:30
bar going up. I don't want to spend too much
26:32
time on venture capital if you want, but it has LED quite
26:35
rationally to the bar going up because if it's not defensible,
26:39
it better be growing so fast that I can mitigate this
26:42
defensibility risk. What?
26:46
What are the things that you would suggest that people should
26:49
be doing in that range? Like the like the traditional
26:52
things that people would do is like add new go to market
26:55
motions, add like you. There's a certain point at which
26:58
you would say like, OK, time to consider new product.
27:00
And again in, in the 2021 version of company building, you
27:04
would say like when you're starting to know that you're
27:06
going to hit 100, that's when you should be making sure you're
27:08
building product #2 Right. So there's like all of these
27:10
like rules of thumb, but many of which you have the like the
27:14
proponent of, right? And so like, what are the what
27:17
are the things that you need to do now basically in in this new
27:21
world? I think that you have to.
27:27
I think one thing that hasn't changed, it's just that this
27:30
pace has changed is you need what I've called a 10X feature,
27:35
but now it's probably some sort of AI driven wedge, a unique
27:39
perspective. You need, you need some flavor
27:42
in a, in a significant enough space that you and a pretty good
27:46
team have figured out how to do something that just you are, is
27:50
really good. That matters.
27:52
It's really good that matters. And it's as true as ever.
27:54
But it's just it, it's, it's, it's, it's the bar is higher
27:58
cause 'cause everyone has access to, to, to entropic and open
28:03
AIAPIS. Everyone, everyone can spool
28:05
that up in a day or a week, but you still you have to figure out
28:07
some combination of things that you can do that at least has
28:11
that Clavio isn't doing or Shopify isn't doing or Gorgeous
28:15
isn't doing whoever is very who. Remind me who else is above 9
28:17
figures in the ecosystem but the leaders are doing and maybe
28:20
they're not doing it because it's small, but what's often
28:23
happening. Another place you can find a
28:25
wedge is a term I used to kind of hate until a month or two ago
28:29
was like AI native versus non AI native startups.
28:32
And I, I found it like something that VCs would use to kind of
28:36
crap on startups that weren't founded six months ago.
28:40
But if you go back and look at most AI leaders, they were
28:42
founded before 2023, including open AI and Anthropic and and
28:46
plenty of others. So it's not that simple.
28:48
But but now what's clear to me is you know what, what, where
28:53
you can beat some of these leaders is the fact that if they
28:57
have 10,000 Shopify customers to support or 50,000 or 100,000,
29:01
whatever they have, that's just a huge amount of debt to
29:05
service, a huge amount of regular old feature request, a
29:07
huge amount of backlog. And so often times these big
29:11
guys cannot be as nimble as you, not because you're smarter or
29:14
better per SE, but because the sheer demands of keeping up with
29:19
the prior platform means they can't go all in as much on what
29:25
AI can do as you can. They can catch up.
29:26
They can, they can. They have a team.
29:28
No one's stupid. No one is stupid, right?
29:30
No one at the leaders are stupid.
29:32
But just the sheer amount of time servicing your existing
29:36
customer base, that's where you have an opportunity to start up.
29:39
What are the big, what is what is if you want to meet with, I
29:42
don't need to pick on Clayview, but obviously it's the number
29:43
two player, right? 80% market share for its core
29:46
product. You're not going to beat that.
29:48
But what are Andrew and team so busy with, with their 1.2
29:52
billion in revenue that they just can't get to it?
29:55
They just can't get to it. I mean, no one's smarter than
29:57
Andrew, right? He's so good, right?
30:00
And he knows everything and he reads everything.
30:02
He studies everything. But they're trying to get to 2
30:04
billion in revenue. He can't do everything, right?
30:06
And he's still got to get SMS fixed and he's still got to work
30:09
on e-mail delivery or I don't know what the other issues are.
30:11
The dashboard, right? So where can you be so nimble
30:15
that you can do something that just those massive installed
30:18
base keeps the leaders from doing?
30:20
And that's where you're going to win today.
30:22
The only problem is 10 other guys have the same idea.
30:24
But but that's, that's, that's always been true.
30:26
It's just instead of being one or two other guys now it's 10
30:29
because every cracked kid is coming to the SF area to build
30:33
apps that like even a couple years ago they had no interest
30:37
in building, right? Everyone's any niche that's
30:40
there, someone's going to build an AI iPad.
30:42
So but that's where you got to do where they're just too
30:44
overloaded with their install base.
30:45
It's not that Shopify or Clayville or heck Salesforce or
30:49
ServiceNow. Not all these guys know HubSpot.
30:51
You think they're stupid at HubSpot?
30:52
I mean, look at Dharmesh. He's like, look at Aaron Levy at
30:55
Box. You think these guys don't know
30:57
what's going on? I mean, Dharmesh and Aaron are
30:59
are like at the thought leadership here, right?
31:01
But, but, but HubSpot has 3 billion of revenue and Box has a
31:04
billion of revenue just to deal with keeping up with the
31:07
installed base, right? It is liberating today to have
31:10
no installed base. It's liberating.
31:14
Yeah, I agree with that. As somebody who has lots of
31:16
customers of service, it holds you back from a lot of things.
31:19
It does just because there's only so many story points,
31:22
there's only so many engineers and even a gorgeous so I love
31:25
every boarding the map. We have this debate.
31:27
It's you know how and they have a whole separate AI team and AI
31:30
support and conversational commerce is all their growth.
31:33
It's all there, but you have so many customers.
31:35
They just want this one little feature on when the FedEx return
31:39
happens and this and then you got to build that too, right?
31:42
What are you going? And it's just only it doesn't
31:43
matter how many people you hire, there's always a trade off.
31:49
One thing I'd love to your take on, do you think software
31:54
spending in general is going to rise dramatically in the years
31:57
to come? So I know we're talking about
31:58
like there's a lot. It still is.
31:59
And then all that but it. Still is, it's accelerating.
32:04
Yeah, cuz I think that's an interesting aspect of this too,
32:06
is yes, there's more competition, but as all of us
32:09
are trying to figure out how do we replace, I mean, ultimately
32:11
people are the biggest cost for most businesses.
32:13
If we're trying to look at how do we replace people with tools,
32:16
it seems like the spend on software is going to accelerate
32:20
even more than it has. But but I also know like there's
32:22
probably nuance in terms of where that goes.
32:24
So I'm curious what your thoughts are on that.
32:26
Well, look, it you will. You will hear folks who haven't
32:30
changed their products since 2021 that that tell you budgets
32:33
are tighter than ever. We're in the worst recession
32:35
since the Tulip crisis in Holland, that the world has
32:38
ended. Read the numbers.
32:41
It's just there's just we are spending more than ever in
32:45
software B to B software for but but it's not the same spent 80%
32:51
of the incremental spends going to AI and it's going for, for
32:55
some of it is still experiments. Some of it is proof of concept.
32:58
Some of it is I got to bring something in or I'm going to get
33:00
fired. There's a lot of that, right?
33:02
But a lot of it is just based around either efficiency or just
33:07
trying to solve problems where and this is in, in in a lot of
33:10
things that are sort of adjacent to e-commerce.
33:13
It's actually not going to be about efficiency.
33:14
I can give you a couple of examples.
33:16
It's about there's no humans to do the work.
33:17
There's no humans to manage my store.
33:19
There's no, I can't forget about the fact that gorgeous does AI
33:22
support. I have a bigger problem.
33:23
I can't hire anyone to to run my human support.
33:27
A lot of the next wave is not about efficiency or saving
33:29
money. It's about the fact that nobody
33:31
wants to work. So all the money's going into
33:33
that, right? For example, I'm, I'm I'm a
33:36
large investor in a company that is another one like owner that's
33:39
e-commerce adjacent, OK? It's a company called Mango
33:41
Mint. It's one of many vendors that
33:43
sells SMB software for salons, spas, doctor's offices, OK.
33:47
It's it's like a specialized version of this industry.
33:49
They're, they're past 20 million, growing 100%.
33:51
And why are they breaking out in a segment with that's not even
33:56
that big with a lot of competitors?
33:57
The main reason is because what they're particularly good at is
33:59
addressing the fact that in these offices, spas, doctor's
34:03
offices, vets offices, tattoo parlors, they can't hire anyone
34:07
to man the front desk. They can't hire anyone to pick
34:09
up the phone or move an appointment.
34:11
They just can't find the humans to do the bookkeeping.
34:14
They can't find anyone to run pay.
34:15
Just no one wants to work in these businesses, right?
34:18
So that's going to grab more and more business.
34:20
AI is. But what we don't want to do is
34:22
put more and more businesses into the same crap, more and
34:24
more money into the same crap in software.
34:27
So if you're selling the same crap as 2021, you're going to
34:30
feel like there's, there's, there's less budget.
34:32
And in fact, there's another Contra trend that's happening is
34:35
even as the dollars are going up to AI, human replaces and
34:38
efficiency. I don't have the data on SMBs,
34:41
but in bigger companies, especially in the enterprise,
34:43
folks are still, they're still under mandates to shrink the
34:46
number of vendors each year, every year they're still going
34:48
in and they're saying we have 200 SAS vendors, we have 115.
34:51
Our goal is to cut this by 10% each year.
34:54
And if you're in that bottom 10%, you're going to get cut.
34:57
You're going to get cut. And so lots of point solutions.
35:00
It's especially still crippling a lot of sales Productivity
35:03
Tools, they're still getting cut each year.
35:05
Like Gong was one of the first to hit it and then they
35:07
rebounded because they turned this around.
35:09
Like when Gong was a tool, they were one of the first to get cut
35:13
in the downturn because everyone was like, we no one ever said we
35:16
didn't love Gong. But they're like, oh, it's built
35:18
into outreach, it's built into sales opt, it's built into Zoom
35:20
info. We'll use a crappy version of
35:22
Gong not even to save money, but because our company said we had
35:26
to cut the number of vendors. So they got slaughtered by that.
35:29
Then Gong turned it around and built the entire platform that
35:31
is now bigger than their competition.
35:33
Now their competition's getting cut because it's in, right.
35:38
So there's this vendor rationalization that if you're
35:40
old school, you have to deal with.
35:42
So there's just there's these counter currency, there's tons
35:45
of money in AI, There's tons of money for efficiency.
35:48
There's there's growing amounts of money to replace humans that
35:51
are unwilling to work. The budgets are higher for
35:53
software than ever, but the budgets for 2021 software are
35:55
declining. So it's two, you know, And so
35:58
people ask, is SAS dead? It's it's like a meme for VCs.
36:02
The SAS of 2019 to 2021 is probably kind of dying.
36:05
It's kind of dead. I mean, it's geriatric.
36:07
It's on the it's not dead, but it's on the rocking chair.
36:10
But B to B software is on fire. On fire.
36:14
Anthropic 1 to 5 billion, all enterprise spend all B to B
36:17
spending six months. I mean, we've never seen that,
36:20
right? So again, I maybe I'm giving
36:24
it's, it's a lot for founders to process, but you have to
36:26
understand these conflicting currents and you have to
36:29
understand why some folks are going to say this is the world's
36:31
worst time and we're in the horrible and other folks are
36:34
like Jesus Christ, things are great.
36:37
We're going faster than ever. And, and the other thing you'll
36:40
see if you talk to investors that have exposure, like a lot
36:45
of their portfolio, one interesting, you can see it on
36:47
Twitter, 'cause I saw it myself just this last quarter, this
36:50
last quarter that, that July, right?
36:52
That's just happening. The best ones are all doing
36:55
better. Gorgeous actually did better
36:57
this last quarter than the prior quarter.
36:58
As an example, owner, owner acceleration is crazy.
37:03
But revenue cat, which is has a lot of like B to CD to C
37:06
exposure rock. I mean, the chart is off, off
37:09
the charts. And so if you're tapping to
37:12
these trends the right way, these these are frigging good
37:15
times. It's just stressful because of
37:17
the amount of change. And it's stressful that there's
37:19
no moats. Yeah, that's stressful.
37:23
On that point, I am curious how you think about these companies
37:28
that have been around for 5-10 years or longer, how they should
37:31
actually go about the process of transforming into kind of an AI
37:34
first company because you can't just flip a switch, right?
37:37
There's so much that happens there in terms of people and
37:39
process and Yep, maintaining old customer bases and all of that
37:42
kind of stuff like. So how do you think about that
37:44
with the companies that you work with?
37:47
Look, I know it's not, it's neither e-commerce nor SMB, but
37:52
if you want to have your ass kicked, go look at Palantir, go
37:54
study Palantir. Palantir is, is the fastest
37:58
growing public B to B company. Now it's growing 50% at 4
38:03
billion in revenue and there's just, and it was growing 13% two
38:08
years ago. How the hell is a public
38:10
company? Do you go from 13 to 49?
38:12
Now some of this is defense contracts and something folks
38:15
think it's a troubled or toxic company or whatever.
38:17
But if you really look at it, it's all because they went ultra
38:20
deep on AI, ultra deep for real. Now they were always did machine
38:25
learning. This is the whole point.
38:26
Palantir comes originally out of learnings from PayPal about how
38:30
to mitigate fraud. And so, you know, classic AIML
38:33
was part of their DNA, but this company was on terminal on the
38:36
terminal ship to nowhere, right? And it's the greatest turn
38:40
around so far in the history of software.
38:42
So that's why I keep putting these numbers up not to tell you
38:46
to go build that turn your e-commerce B to B into defense
38:49
tech or go go just software to kill people.
38:52
But because, you know, this is a company founded in 2003.
38:55
So what's your excuse? There's not a company founded
38:58
last month. There's not a it's not lovable,
39:00
founded six months ago, founded in 2003, right?
39:04
And even Shopify, which in some ways is still early ish right on
39:07
the journey. But I mean, you know, when was
39:09
Shopify found it 2006? I don't think Toby quit, did he?
39:13
As near as I can tell. So it and and so and so maybe
39:19
this isn't a question you're asking in a way, if you're
39:21
behind, it can feel like it's too late.
39:23
All of a sudden. You felt really stable 2024
39:26
months ago. Now you're surrounded by AI
39:28
enemies that are getting all the press and getting everything and
39:31
growing faster than you. And yes, if you do nothing, you
39:33
will slowly die. Like let's not make any bones
39:36
about it, but it's not too late. If you have a brand and happy
39:39
customers, it is not too late. But you got to go now and you
39:43
got to fire everybody that doesn't want to be on that
39:45
journey. You have to fire all of them,
39:47
fire them all. If so many folks don't want it,
39:49
don't want this change, they don't.
39:52
I would say most, most don't want, most founders are willing
39:55
to do it. Most of your management team
39:57
does not want to do it. Most of your management team
39:59
wants to run the same plays they ran three years ago.
40:01
They want to hire 20 people on their team.
40:04
They don't want to learn new tools.
40:05
They want to do it from home. They want to do a hybrid thing
40:08
where they come in a couple hours a week when it's a good
40:09
time for them, but then they leave it to, to go run errands.
40:13
They just don't want to do it. And I, it sounds like I don't
40:15
respect them. I do.
40:16
That's partially me, but you got to, we got to like immediately
40:18
let all of them go. They're just going to hold you
40:21
back. You're better off with half the
40:22
company that wants to adapt to this new world than having
40:26
1050400500 people grouching because everything's harder.
40:31
Just just they're not going to make it.
40:33
Most people are not going to make this jump.
40:35
It's a brutal truth. They're not going to make the
40:37
jump to the end. Most people out there in tech
40:39
are not going to make the jump for a whole bunch of reasons.
40:43
Folks that are more seasoned don't want to change.
40:46
A lot of folks are half checked out.
40:48
A lot of folks did not work very hard for years and are unwilling
40:51
to work harder today. And I get it.
40:52
It sounds critical. It's not.
40:54
And then a weird thing is and, and this, this, this one, this
40:57
one maybe is a little controversial, but I know
40:58
because, like, I mean, my kids are in college.
41:00
None, None of their friends want to work.
41:03
It's not an Aegis thing like it's barbell like.
41:05
It may only be some people in the middle, like some folks that
41:09
are experienced may want to work but they're not willing to
41:11
change. This is true.
41:12
They may be 29 and not willing to change, or they may be 99,
41:15
but the answer is not kids in college.
41:17
This is not the answer either. It's just an existential
41:19
challenge for founders. Like you can't.
41:21
For years we've been able to solve our problems with the next
41:24
generation with interns, right? I mean, the way you know, if you
41:27
look at Farhan, who's one of the CG OS of Shopify, he's great.
41:30
He you know, he ran one of the biggest intern programs in
41:32
technology and he's so good and he's a start up founder of the
41:35
Toby acquired and so great the other day.
41:37
And he's, I don't know, thousands and thousands of like
41:40
massive. And I'd like to ask him if it
41:42
works as well today, probably for him because he gets the best
41:45
of the best. But overall, it's not a strategy
41:47
for success, right? And you see a lot of stuff in
41:50
the Press of like how hard it is to get a job in CS or something
41:53
in college today. This is like a misnomer.
41:56
It's a misnomer. I can tell you from very first
41:58
hand experience, if you're a top tier math major or CS major in
42:02
college right now, you don't, there's no need to finish.
42:05
You can get a six figure job tomorrow at an AI company.
42:07
There's little, no one cares. OK, But if you're lazy and are
42:10
taking CS and pretending to do the classes, you can get a
42:13
pretty good job in 2021. I just need an engineer.
42:16
He'll work on the blue pixel. OK, She'll get that button fixed
42:20
over the next six months. No one's in.
42:21
No one's, no one's hiring that person.
42:23
No one's hiring the person that went to derive coding school.
42:26
Coding schools are dead too, for the same reason, right?
42:29
So maybe I got a little, but it's just so much change.
42:33
It's so much change. Yeah, Jason, I, I, I want to
42:37
take, take this as an opportunity.
42:39
You've publicly documented a bunch about your vibe coding
42:42
directly and like you're the CEO of like SAS or the company and
42:47
you're investing and your vibe coding yourself.
42:50
And I know a ton of CE OS like we're all meddlers like that's
42:55
just in our DNA. So we're, we're also all vibe
42:58
coding and, and, and the question that made me wonder is
43:02
like, should CE OS be vibe coding?
43:05
And, and like, I guess like the thing that I'm the, the thing
43:08
that makes me wonder, this is like forever, like the, the, the
43:12
like way you would think about like, Hey, how you should manage
43:15
your time is like, you want to do the things that are highest
43:17
leverage and, and, and, and, and you would like say these things,
43:20
right. And if anybody wants to hear
43:23
about the other parts of Jason's vibe coding story that's like on
43:27
a great 20 BC episode, we'll skip that part of it.
43:30
I I'm I'm more curious about like, hey, what like should CE
43:34
OS be vibe coding and or should we have the expectation of our
43:38
exec team vibe coding or like whatever the equivalent of that
43:42
is? Think here's here's I think
43:47
every CEO, every founder and every member of your management
43:51
team today should be deploying one new AI tool a month.
43:55
If not, fire yourself or fire them one new tool a month.
43:58
Now vibe coding is one way to get there.
44:00
We could chat about it. I don't think it matters if it's
44:03
to add an AI support tool, if it's an AI outbound tool.
44:06
And this doesn't mean like just telling someone on your team to
44:09
go put a credit card in. I mean deploying it because
44:12
deploying is work. You will learn so much deploying
44:16
an AI, not buying it, you'll learn nothing buying it.
44:19
You'll learn nothing if you hire an agency to go do the work for
44:22
you. I mean, deploy yourself.
44:23
Pick what This is what we're doing ourselves.
44:25
This is why we have now 6 AIS running on our on our CS team
44:28
because we're doing this like first we started with the Jason
44:31
AI, which is like a digital version of me with 2020 million
44:34
words. And that kind of blew up that I
44:35
didn't expect, right? Then we did AI to review all of
44:38
our content for our events because we had an agency that
44:40
didn't want to work anymore. So we just replaced it with our
44:43
AI content to review all the speaker promotes, all the
44:45
content, all the deck that did a better job than the humans ever
44:47
did. Then we then we had it kind of
44:50
do support. Then we had one do outbound for
44:52
sponsors. Then we had one do outbound for
44:53
tickets. Now we just added a new one this
44:55
week to do to manage inbound requests to talk to folks.
44:57
And so we're adding one each week.
45:00
And I, I went into vibe coding for a bunch of reasons, but in
45:03
that spirit as as to add a new tool to the toolkit, but don't
45:07
do it just to do it for most people.
45:11
I think you're better off picking a tool that is super AI
45:15
native and learn learning it, deploy it yourself.
45:19
All these tools are harder to get going today.
45:21
It's raw. They all.
45:23
Most importantly, if you haven't done this yourself, almost any
45:25
tool that's going to move the deal in your business is going
45:27
to take training and iteration. Like our AISDR tool it took and
45:31
we're pretty good. We're the number one on all of
45:33
their ten, almost 10 million. We're the number one client of
45:35
all of them. It took us it took us three
45:37
weeks to train it hardcore. And then every single day we
45:40
have to iterate on it. Every single day.
45:41
We have to iterate on the messaging and the feedback and
45:43
the connections every single day.
45:45
Like managing AI is just as much work as managing humans.
45:49
It's just different. So if you don't learn that
45:50
you're going to fail, right then I would say vibe code like first
45:54
implement a couple tools for real yourself.
45:56
Train them and don't complain that they don't work.
45:59
They all work if you make them good, right?
46:01
And then you're like, OK, I want to do more now.
46:03
I want to learn about vibe coding.
46:05
Now it's my general advice. My micro advice would be listen,
46:08
now that I've you guys have I code, if I, I can save you a lot
46:12
of pain by telling you that as we record this, you cannot vibe
46:15
code Clavio or Shopify. You just can't like I'm happy to
46:18
explain why. If it's fun, it's not ready.
46:21
It's it's not ready. So if you want a vibe code
46:24
because you think you can build, compete with Clavio with no
46:28
engineers don't like, you're better off learning other
46:30
applications and getting there. If you want a vibe code because
46:33
you want to have a sense of why everyone's talking about cursor,
46:37
why everyone's talking about cloud code, Why like, why is
46:40
this? How disruptive is this?
46:42
If you're curious and you want to learn, you will learn a lot
46:44
about vibe coding. You will quickly learn about
46:46
security. You'll learn about product
46:47
limitations, you'll learn about hallucinations, you'll learn
46:50
about crazy AI that lies to you and goes viral on social media.
46:54
So it's a but, but I would, I'd rather implement an AI support
46:57
or customer success or marketing or other tool 1st and and just
47:01
nail it because you're going to have to work on that tool
47:03
everyday, every day. You're gonna have to improve
47:06
every day I've. Heard you mention this AISDR
47:09
like multiple times. So I'm assuming it's like the
47:12
very top of mind one that's made the most like impact.
47:14
I'm assuming in your as a business like what, what AISDR
47:18
tool is that and like how long was that ramp period to where
47:20
it's like now making a lot of impact seemingly?
47:24
Here's Lauren. So we use a couple tools.
47:26
The one that we use the most is a company called artisan.
47:29
They're newer they're growing like a weed, but and I am a
47:32
super fan like like but I but I I I I want to be cautious to not
47:37
tell folks there's a lot of apps where I like just put on Twitter
47:40
use this app OK, like for to make cool videos Higgs field OK
47:43
to make cool pics. I use Reeve dot art for all of
47:47
my AI art. It's better than chat TV 5.
47:49
It's just cool I got you can use these in 60 seconds.
47:52
There's no risk of these ones gamma for slides.
47:55
We use like these are all great, OK, Artisan is great, but you
47:58
got to train this thing, OK. And So what I've learned for
48:04
business process AI tools like this is just there aren't even
48:08
any leaders. No, there's no gong of in this
48:10
space or better, there's no Clavio.
48:12
So pick, figure out who you think the three leaders are.
48:15
They as best you can. We're all in discovery mode
48:17
again, right? Pick them, do some diligence for
48:20
an hour to ask your friends, research the websites and then
48:24
just pick one and learn it don't matter because they're going to
48:26
change so fast. There's so much change and
48:28
you're better off taking, even if there's something better than
48:31
Artisan out there, for example, ample market, there's plenty of
48:35
others. You're better off just picking
48:36
one and becoming an expert in training it and working around
48:38
it's quirks and, and issues 'cause they all have quirks,
48:40
issues and limitations rather than trying to find some magic
48:44
solution. That's a silver bullet, right?
48:46
We, we work on this every day, this thing, right?
48:50
And every day around 7:00 AM, it loads up a bunch of meetings for
48:53
us, a bunch of pipeline, and then our two humans follow up
48:56
with it. It's great, it's perfect, but if
48:59
we didn't train it for months, it wouldn't do any of this.
49:01
We'd be one of those people grouching on social media that
49:03
AISDRS don't work right. So pick a plat, pick a leading
49:07
platform that had this, like just pick the 80%, something
49:11
you've heard of and then just learn it.
49:13
Learn it's quirks and feet. Everything's too quirky.
49:15
This is not like buying Salesforce.
49:18
Yeah, it makes a bunch of sense, Jason.
49:20
I know we're coming up on time and I want to be mindful given
49:25
that you are an active investor. Also, for people who are
49:28
building in ECOM SAS who want to raise money, what is the
49:33
biggest, let's just call it seed Series A so early, early stage.
49:37
What is the biggest piece of advice that you would have for
49:39
them today? I asked this especially because
49:43
like as an Ecom founder myself who has raised money, ECOM is
49:47
like VCs hate it. I'll just, I'll just.
49:50
Hate it more now, but they hate it more now.
49:52
What do they do? They do.
49:55
They hate it more. Now, so so so so let's just take
49:57
the context of an E com SAS founder who's who's seeking to
50:00
raise money. What what is your best advice
50:02
for them? Well, maybe just three things
50:05
then we can break. They do hate it more than now.
50:07
They hate it because it is. I mean, look, listen, e-commerce
50:11
and enterprise software are the two biggest, you know, parts of
50:15
our economy but that you can invest in.
50:16
But e-commerce is nichy. It's single platform for the
50:19
most part. No one's made any money
50:20
investing in Amazon. Not really, right?
50:23
There's not a lot of plays here. No one's really made any money
50:26
investing in Salesforce Commerce or any of that.
50:28
It's it's it's too nichy, it's too platform dependent.
50:31
There's too many Tam issues overall.
50:33
Yeah, Shopify is at at 12 billion, but you know, 70% of
50:38
that is, is, is take and GMV, this, it's not even a very big
50:42
SAS business and it has 8090% market share.
50:45
There's a lot of reasons it looks pretty crappy to invest
50:47
in, right? In the age of AI, it looks even
50:50
crappier. It looks even less interesting,
50:53
right? So I, I can't think of a single
50:55
B to BVC I've met this year that has wanted to talk about
50:58
e-commerce. Not one, not one.
51:01
Now, having said that, e-commerce is huge, right?
51:06
So I think if you want to raise capital, you got to do 2 things.
51:09
You have to be able to do something that is much broader
51:12
than being a Shopify app. There's just no interest.
51:15
There's just zero you 0 interest.
51:17
You have to find something that is disruptive in commerce
51:20
overall that, you know, we could think of Stripe as an e-commerce
51:23
company in a way, right? It's disruptive, right?
51:27
So you got to think bigger than the Shopify ecosystem.
51:29
Unfortunately, to attract any investor interest, that'd be #1
51:32
or #2 and this is classic advice, right?
51:35
Just raise a little bit of money.
51:36
Solves a lot of ills. No one, No one.
51:41
At the end of the day, if you have a reasonably seasoned
51:43
investors, reasonably experienced folks, and you raise
51:45
a couple 1,000,000 bucks, I know, I know.
51:48
No, no one's, no one's going to jump off the roof, No one's
51:52
going to be breathing down your neck.
51:53
No one's going to see you as the world's biggest failure.
51:55
So bootstrapping's great, but, and I've written about versions
52:01
of this year over the years since being a disaster.
52:02
Sometimes the best approach, especially for niche businesses,
52:05
right, or businesses where you just don't know how big it's
52:07
going to be, is 1 and done. Raise a seed round a seed to
52:11
small A don't disappoint anybody, but make it last.
52:15
I mean, this funding used to be an allowance.
52:18
It's supposed to be an allowance.
52:18
Here's $3,000,000 spend 2 keep one in the bank for, for a rainy
52:22
day. And that's what you get, guys.
52:24
And then you have to get the stuff called revenue.
52:26
And then as you get the revenue, if the margins are high enough,
52:28
it adds to your bank account and it adds it up, right?
52:31
That that one round or be big are the options.
52:34
But no one wants to invest in things I've invested in today.
52:38
Like it has to be bigger, right? It has to be different.
52:40
It has to be disruptive, even if deep down it might be the same
52:42
thing, right? But thematically, there's no
52:44
interest, right? There's no interest.
52:46
And in 2021, there was a reflowering of interest, right?
52:49
That really was just based on 2022 momentum.
52:52
People didn't see it, right? But but it's very like in the
52:58
Shopify ecosystem, you could tell me maybe we could break.
53:00
But at Shopify, how many folks are doing north of 104?
53:05
Four. That's a terrible investment.
53:08
That's yeah. Who is that?
53:12
Yeah, yeah, it's, it's it's like literally Clavio yacht PO.
53:17
Yeah, you can sort of squint and say attentive and Postscript.
53:23
Also recharge it I believe is there.
53:24
Yeah, Recharge, recharge. Ocean's great.
53:26
He's on the board of Gorgeous. Yeah, recharging Gorgeous.
53:28
You could add to it. So maybe it's, I guess maybe
53:30
Attentive isn't mostly shy. I don't know.
53:31
I mean, Attentive is at a couple 100 million, right?
53:33
But it's single digits, right? So I mean, that's good, but it's
53:37
just that might have gotten some investors excited in 20/20/20
53:40
when the slope was different, but it's just not, it's, it's
53:43
too hard, right? It really investors are going to
53:45
look and they're going to be, is there really another Clavio out
53:47
there? And then they're going to be
53:49
like, do I even want like his greatest Clavio is do I really
53:52
want it? Clavio needs 80% market share on
53:54
the largest category, I guess 80% of the largest category to
53:58
win. It has 80% of the largest
54:00
category and it still has fundamental like, I mean,
54:04
Shopify has invested in Clavio, but you never know what they'll
54:06
do in a year, right? They all have their Shopify has
54:10
some this isn't necessarily bad, but Shopify has some at least
54:13
lightly competitive product with everyone in their portfolio,
54:16
don't they? Yeah.
54:18
And sometimes it's a positive because that lightly competitive
54:21
chat might get you a gorgeous customer that or that basic
54:24
e-mail in Shopify might get you like they often lead to the
54:27
upsell to the partner. So it's not, it's not the
54:29
negative you might think, but but it's, yeah, it's just not
54:34
like all these years there needs to be a flourishing ecosystem
54:37
for VCs to invest. It's not, it's not enough to
54:39
have one. It's not enough, right?
54:42
It's it's just not enough even in the Salesforce ecosystem.
54:45
And I, I should have invested in, I didn't, I never met
54:48
attendive. I should have invested in
54:49
Postscript too. When I met the founders, I did
54:51
invest in gorgeous. There's a few others I should
54:52
have done. And I was like, OK, I think
54:54
Shopify is going to blow up like Salesforce did.
54:56
I want to do a couple investments like like Salesforce
54:58
did an app exchange and that was the right idea.
55:00
But now you even look at Salesforce today, like there's
55:04
only a couple companies worth more than a billion that came
55:06
out of all the Salesforce ecosystem.
55:08
Like indirectly there's more, but out of their platform,
55:11
right, Viva's worth 30 billion. That's that's the great one by
55:14
the ex CTO of Salesforce. But there are a couple that
55:17
Salesforce bought for a billion and a billion sounds great.
55:20
But in today's world, VCs don't get out of bed for a billion
55:22
anymore. It's tough.
55:24
But the founders don't get that. They just don't get out of bed
55:27
for a billion anymore. And you can laugh, but honestly,
55:30
not only is it greed, right, but prices have gone up, OK.
55:35
I mean, I, you know, I invested at Algoli at 12.
55:38
I invested at Gorgeous at 10, right?
55:40
If those deals would have been like 50 today, you can't make
55:43
enough money with risk and time at a billion.
55:45
So like all these founders are raising huge rounds at higher
55:48
prices. Terrific.
55:50
But but investors that it just raises the bar for investors to
55:54
make money. I mean, we'll run out of time to
55:55
talk through the math, but it's harder than you think to make
55:58
money as an as AVC. It's harder than you think.
56:00
And so as inflation has heated up and competition and as
56:03
everyone at Y Combinator is raising money at 30 pre instead
56:07
of seven, it just, it just it just reverberates.
56:10
It makes it harder for normal guys.
56:12
Normal companies growing at really high rates are kind of
56:16
getting crushed by these macro trends, right?
56:18
Because you, you can only make money investing in Rep and
56:20
lovable or that's how it feels, right?
56:22
And so everyone's chasing Anthropic to put the money in,
56:25
right? And that's why you see these
56:26
ramps and Anthropics raising massive rounds 3045 days later
56:30
and TechCrunch makes son of a how could ramp go from 15 to 25
56:33
in six months, right? Well, if the company grew 80%,
56:37
that's, you know, you just can't make money.
56:39
If this little Shopify app exits at 80 million, you just, it's
56:42
just you, just you, you, you actually get fired as AVC.
56:45
It's not even just about making money.
56:46
You'll get fired. You'll, you'll get fired.
56:48
No one wants to get fired, especially if I'm a cushy job
56:50
like VC. So it's the bar's up, The bar's
56:55
up. Read the data.
56:56
I publish it on SASTR all the time from a founder's
56:58
perspective, just to give folks a sense of what the bar is and
57:01
just be caught like e-commerce is not cool to finish it up,
57:04
right? The bar's gone up and I don't
57:06
think anyone wants to invest in a Shopify app, even though
57:09
Shopify is on fire, right? So just be, do something that's
57:13
broader, do something that's, even if it's a bit of a stretch,
57:16
that's a Stripe for something, right, rather than a Shopify
57:20
widget. Amazing.
57:25
All right, Jason, thank you for coming.
57:27
This was awesome. Yeah.
57:29
Maybe went off topic a little bit, but hopefully it was
57:31
helpful. Yeah, no, I think, I mean, yeah,
57:34
it was awesome. It was awesome and and spicy,
57:37
which is great. Like, yeah.
57:41
It was just Friday. All right, well, thanks for the
57:43
time. Let me know when you have it.
57:44
I'll promote it. I'll push it out to our network
57:46
and stuff too. And I appreciate your time,
57:47
guys. Talk to you soon.
57:49
Appreciate it, Jason. Bye bye.