One thing we know about Elon for the last 30 years is when he hears the word more risks, he says, 'Yes, please. I'll have two.'
I think the IPO nominally will be a dud. I don't think it will trade up dramatically.
So, what do we have on the cards? SpaceX begins their $75 billion IPO road show at a whopping $1.77 trillion valuation. Next, is the future of AI always on as Sam Altman thinks? OpenAI ships Dreaming V3. Next, Apple rebuilds Siri on Google. Thank god, Siri being what it is is a disgrace as it turns on on my device. And then finally, we have RAMP raising their latest round at $44 billion.
There's always money when people aren't afraid. When things get scary, it's not that money runs out, it's that money gets scared. I'm kind of contentious of startups that need to be fat. I'm like, what's your excuse? In any business, there's only two things that happen. People are either making stuff or selling stuff. If AOL becomes the next hot thing, I mean, these guys are geniuses.
Anyone who hasn't churned from AOL now ain't churn until they die.
Ready to go.
Okay, we are back and what a week it is. We have the largest IPO road show in history. We have to start with SpaceX. Um, we're speaking, and this is important to say, Rory's going to have a fit because we're speaking on Tuesday and obviously SpaceX is going out on Thursday, and so there is going to be some time discrepancy there, and so what we say will be able to be scrutinized in intense detail by the time you're probably listening.
True. Ado to start with the interesting point. One of the things is there's usually two questions you're asking at this point: what's it going to price at and what it going to trade at. And the funny thing is, unlike 99% of IPOs, the first question's already been answered. Elon has decided that instead of doing price discovery where the bankers build the book and then they pick the price and they announce the price, you know, right at the end, the night before, the IPO pricing typically takes place the night before the trade opens. So then everybody gets to buy who participates in the IPO at that price, and then it opens next day at whatever price up or down from that. In this case, Elon has decided in advance of getting anyone's input that the number should be, I think, 135 bucks a share, which values the company at 1.8 trillion. In other words, he's kind of short-circuited the price discovery process, and instead we're not doing price discovery. I'm telling you the answer, and the only question is how much of it do you want to buy at that price? So one thing we can't get wrong is that how...
Is that a wise move? He's leaving a lot of room for markets to move in between that. That's why you normally leave it obviously as close as you can because you don't want an Iran-Israel, a Broadcom moving markets and then putting you in a precarious position. It feels unwise, but Elon is a master. So I'm not going to...
Yeah. I mean, calling someone unwise is about two days away from becoming a trillionaire is a big call, Harry. But I think what it is is, you know, it's no surprise given it's ballsy. You've got just way more error creep in. You could be wrong to the high, you could be wrong to the low, you could leave, you know, maybe all the orders flood in. You've left money on the table. Maybe on the other hand, you're struggling to get the orders in and it feels very high and it opens down. It's more risk. But the one thing we know about Elon for the last 30 years is when he hears the word more risks, he says, 'Yes, please. I'll have two.' Right? And this kind of must appeal to him. So, I'm telling you the answer in advance and I'm taking the risk and that's how he became a trillionaire. Is it wise? We'll see.
Well, obviously it's a huge amount of capital, Rory. But if it's really only 2x subscribed, or over, I'm not even sure over-subscribed is the right word. If it's only 2x, right? Plus Elon picking the price, that suggests to me, we'll see, that suggests to me this one won't pop. There's just not, you know, I do believe the day traders will drive it up ultimately, but it doesn't feel like there's an excessive demand at 2x. In most IPOs, 2x would be almost insufficient to close the IPO.
Agree. And but there's two separate things in that, Jason, you're right. I mean, one is the decision to pick a fixed price logically reduces the probability of a pop with no other information because the whole point of the banker process is to pick the price the night before that allows the pop next day, and you simply aren't doing that because you don't have the information. You're right. But then the second thing you added is some information that's come out, which is, you know, to date the book is two times covered, and your comment is that feels low compared to normal IPOs.
I mean, traditionally you want 8 to 10x to get the deal that you want, but you're not raising the vast amounts of capital Elon's raising either.
Yeah. No, it's hard to get 10x oversubscribed on 10 billion, on 75 billion.
I mean, just so, yeah, what you're saying is, I mean, to be really direct, what you're saying is you're pricing something on a fixed price that's not taking into account demand where you're looking for a very large amount of money such that you only have a small amount of coverage. You're right. You look at those circumstances and you say there's a non-trivial chance that it pops to the downside. Is it 30%? I don't know. But if you think about it, normally bankers bend over backwards to try and have the damn thing pop, right? So they're trying to get a 10-5% pop and near 90% plus of the time it pops. But still 10% of the time it breaks IPO, they get it wrong, right? Even trying to fix the game, they get it wrong. In this case, they're not even trying to fix the game, right? And you know, time will tell on Thursday night, are they too high or too low? There is obviously by definition some probably higher than 10% chance that on the day people go, everyone who put in for it put in for it, and it's not impossible to trade something. It's just if you use mechanism A that's designed to create a pop and it works 90% of the time, and now you use a mechanism that's designed to be in that doesn't have the information to allow you to make a pop because you've done a fixed price, then by definition the probability of it going wrong goes up. That's all.
I think what will happen if that's accurate and 30% to retail, I think the IPO nominally will be a dud. I don't think it will trade up dramatically, but I do think every time there's great news, more satellites in space for SpaceX, more things, it will begin an inexorable rise up. People will be excited, especially if the upside is tied to potentially significant revenue, right, as the last announcements have been with Anthropic and Google. I just don't think it's going to pop that first week. I think there's just not enough buyers out there in this universe, or at least in this galaxy, at this price at 2x. We'll see. I haven't read anything that says those 2x are all 100% binding. I guess if they're all binding, every single order, then I guess it would lead to a pop. But typically it's not, right.
It is. I mean, when you submit an order, you know, you typically...
Yeah. Maybe they'll all get filled.
Yeah. They'll get filled.
I have it backwards. All the orders will get filled unlike a normal.
I kind of hate, I'm going to step back. I kind of hate that we got, and I caused it, so I apologize, got into the technicalities of the IPO because zoom out a million miles here. This is amazing. This is an amazing technical company. It's, you know, the iconic company of its generation. It's going to go public this week. It's a huge moment, you know.
Yeah. I mean, what do you say to Elon? Congratulations. What do you say, you know, everyone involved? Congratulations. I mean, it's just a wildly impressive company. I mean, look, I am skeptical of the valuation, but step back. I mean, you know, I've watched some of the launches on, you know, on my little, on little YouTube and I'm like, they're just so, the whole thing's so impressive. And it's, you know, at the risk of sounding a little, sorry Harry, at the risk of sounding a little partisan American, this really is an only America moment, right? Where you could, yeah, I can see your little face, Harry, but you know, who else is going to find the capital to take that kind of risk to go for it, right? And frankly, also to have a big enough capital market to fund it, a big enough addressable market to sell to. It's a great outcome. It's an amazing company. It's a real asset to America.
End of day one prediction and end of day 90 prediction.
I actually think it's an end of day...
I don't. So, you really are determined not to let him have his great moment. You just want to see, you're like those commentators in politics who won't talk policies. All they want to talk is the horse race. All you want to do is talk the horse race here, Harry, because you know that's what sells. You're such a little media... Um, but just to, I'll answer. I don't think it's knowable end of day one. I think all three scenarios are equally likely. You know, one third it just goes down just because there's weird pricing mechanism. So, they don't have demand. One third it's flat because whatever, and then one third, to your point, retail enthusiasm, it goes up. There's no information here. Now I will make a call though. I think over the next 12 months, I doubt it will retain this price there. I will make that step. I disagree with you. I think fundamental value here reasserts itself. I mean, there's two reasons I say that. One is again, I always go back to the base rate. The base rate on IPOs in general is, you know, you do see quite a lot dip. The base rate on IPO is more than 10x forward sales. Even more dip. The base rate on IPO is at 70 times forward sales. There hasn't been any, but you got to believe there's a dip. So I think valuation reasserts itself over the medium term and the probability of it being higher than the IPO price 12 months in my gut is lower, significantly lower. So I would say I haven't a clue day one. It's a tactical thing based on the mechanisms. And I think over the medium term, this amazing company might, shock horror, only be worth one shirly instead of 1.7, and it's still a huge win. That's what I think.
I'll tell you maybe just two thoughts. I don't know what you guys think. One is, listen, there are many great IPOs like Facebook and Google that IPOed with a whimper, right? It would not surprise me if this IPOs with a whimper at the end of the day. It doesn't matter for SpaceX. We will have multiple layers of generational wealth created. Elon will get his liquidity, right? It'll all be great whether it's a nothing burger IPO or not. I guess it might hurt OpenAI the most because they've been so aggressive on their valuations and so aggressive on their capital raise. If that means they have to cut back their aspirations for the amount of capital raise, valuation maybe doesn't matter as much, but they are related. That could be the biggest negative effect. They need so much capital too that it just could take some of the wind of the sails out of OpenAI. The other thing I'll just say briefly, I'm in Hong Kong as we record this, but before I got on a plane, I spoke to one of my LPs who's getting lots of cash here, got cash in Sarabus, getting cash in all these other deals. And it does kind of tie to a conversation we had before, which is the expectations are so high now for performance, and I think that will permeate through the ecosystem. And again, I do think it's a minor negative, but I do think it's something for founders and others to understand that it's not a free lunch, right? The bar will continue to go up after these events when LPs are looking for 7 to 8x routinely from GPs, which is hard to do, right, outside of anomalous periods of time. The expectations that GPs will have from founders continues to go up. And, you know, as this LP said to me, I don't know that little 5 to 8 billion dollar IPOs really make this math work anymore, right? And so, we've talked about it, but to hear it from a large LP, it echoed in my ears of how the bar goes up.
I don't think you can take a once in a decade event and start extrapolating it as a norm. I think in life you should take this as the once in a decade.
There's like four or five of these once in a decade events. There's going to be Anthropic, OpenAI back.
It's interesting that you say that, because the opportunity, the once in a decade, I mean, SpaceX was once in a decade. It was last decade. Reminder here, founders wrote that check in 2008, right? It's now 2026. It's 18 years ago, right? So, for that kind of huge return, I mean, yes, there's been a 10x.
When was the Merced check written again? Remind me.
The Merc 3 years ago. Yes.
So, maybe they do happen more than once a decade.
Decades seem to be shrinking. I think you're going to have one trillion dollar outcome from the last decade and two it looks like from this decade if it all happens according to plan. But my point is yes, you probably can't assume 10. You don't run your business on the expectation that every check you write is going to be a trillion dollar outcome. If you're really smart and you get one, you should say yay. Right? So I think $8 billion outcomes will make everyone perfectly bloody happy. Right? Obviously unless you have a $10 billion fund, in which case it doesn't. I mean, that's why fund size, the amount of market cap it takes. It's a Josh Kopelman thing from ages ago. You know, the venture arrogance index, whatever, right? The bigger the fund, the bigger the deal there has to be to make it work. There's nothing surprising here. Will this have knock-on effects in terms of LPs direct investing more and see an increase in fund investments from LPs? You've got Ohio teachers who will make I think over $10 million from their SpaceX.
To clarify, I know you think the entire Midwest is the same, Harry, but I think it's Ontario teachers, right?
But no, at this point, you're conflating Canada and America, which is an easy mistake to make because we're making it ourselves, starting with the president, and it does begin with O, and it's kind of in the middle. So, I understand your ignorance, but let's go back.
He's just a big Fallout player, too. Who knows?
Easy. But the bottom line is yes, Ontario Pension nailed it. I mean, they're going to make, you know, a magnificent V and there's a bunch of others. It's great. University of Washington, they have an extremely savvy CIO who, and by the way, Washington, Harry, just to confuse you further, is not in either Washington state or Washington city, but we'll keep that for now. But yeah, look, by definition, these are going to be the best co-investments ever because it's the best deal ever. I mean, there's nothing surprising in it. I know some of our LPs...
Our LPs are going to come back and go, those that will get liquidity from this go, hey, we're going to reinvest more and more.
And will all their brethren be like, hey, we're going to join this because we want the next generation even if we didn't have them?
Yes, because everyone's just going to go, wow, that looks amazing. As I say again, it's back to the extrapolation from the unique event. Of course they are because it is going to be amazing. I saw, I think in a journal this morning, I think this is the not University of Washington, Washington University, what has, again, I'm not going to confuse, like it's 10 or 15% of their endowment. It's awesome, it's awesome, right? Yes, this is the best venture capital deal ever in terms of absolute return and yeah, anyone involved is going to do really well and even if, you know, even if it dips in price, they're going to do extraordinarily well.
Speaking of a once in a lifetime or once in a decade moment, as Rory very articulately put, another once in a decade moment is obviously OpenAI filing to go public, not so confidentially. Anything to say here that we haven't covered?
The only thing I don't understand is maybe it's a question for Rory, because I don't get it. What, other than the Captain Obvious element, what's the point of hedging your bet on the timing, but filing? I mostly get it, but I don't totally get it.
Right. Yeah, oh, we may want to stay private. We want flexibility, but we're going public. I think it's actually all they're doing is being smart a little bit and managing expectation finally, right? Which is I read that as we're fine to go public. In a perfect world, we'd love to go public as quickly as we can, but if it's delayed for whatever reason, we don't want to have a whole bunch of negative stories then that says, see, it's slipping. So if you preemptively say, manage expectations and say we're filing but we're not committing to a timeline. We're not all going to be sitting here in late October going, they said they'd be going public in early November. WTF is going on. The big aha here, and we said it two weeks, everyone's suddenly gunning for the door. At some point you need the capital markets, the public capital markets because the scale involved is such that that's where you got to go and everyone's just hit that point and they're going for it. I think going back to your comment earlier on, does SpaceX, it feels like the market is very risk-on. I mean we had that little dip last week and then everyone got over it in two days. So it's as good a time as any, you know, there's no obvious, you keep cranking while you can and see if you can get it done. I mean I'm sure that they made that caveat of we'll take our time but they made that statement in the press department. My guess is in finance and legal the mandate is get this puppy done as quickly as possible so we have maximum optionality, right? And so they're with the SEC and worth pointing out by the way the SpaceX S-1 went through the SEC very quickly and normally that's, I mean I remember when that used to be a painful process with multiple iterations and it seemed to happen here extraordinarily quickly probably because we don't regulate anything anymore so go team. So you know this may all process through real quickly. In which case, brace yourself for a fun fall. Rory's on fire this morning.
Hey, gosh. I really want to touch on something kind of beneath on the product layer for OpenAI, which is, you know, Sam Altman's been driving towards kind of persistent and always on AI. They shipped Dreaming V3, biggest memory architecture upgrade since launch. I'm just intrigued, Jason, in particular, to hear your thoughts on this. Is the future of AI continuous, persistent, 24 hours a day fabric of life, always on in your mind? And how do you see this and that?
I think we all believe it. I think that, and I mean we can make fun of Apple this week basically repackaging Gemini and giving up on AI, right? If that's the way we want to view it. But that's a little piece of wanting ultimately AI to be persistent 24/7. We do want this. We already live little hints of it. And it's pretty silly that AI for the most part lives in our browser, right? Which is, if you think about it, very dated. I mean it's so dated that we still use browsers. I mean who would have, we got to get Marc Andre... I mean the fact that we still live in the era of Netscape in so many ways. So I do think it's exciting. I do think as this show continues, the, you know, whatever we would want to call it, the token apocalypse, I think it will morph into just standard business practice, right? At some point, IT budgets can only be so large. There's only so much, even if we lay off half of the, you know, unemployment, I mean employment keeps growing, we're going to have to manage spend. So there is a conflict, but I do think we're going to look back in two years and think of this non-persistent AI as almost archaic, right? As almost sort of desktop-like.
Yeah. I mean, yeah, because you threw in a lot there. We...
Several faces there for the audience listening. Rory's facial.
No, no, no. It's just that Jason, as he often does, covered a lot of different things and I'm just processing through it more slowly. Is that on the memory thing and kind of what Jason is, that it just totally makes sense, right? And the question, yeah, if you step back, you know, you have the core models and then you have what people are calling all the harness, which is all the stuff around it to make those models effective. And part of that, and it can either be in the, it should be in the model or it could in theory be in the harness, is just understanding memory so that you could, and the impact of that, and I think why Jason went to the token economics part of it is part of the thing should be you should get better answers with memory and part of the thing it should be more cost effective in terms of token because you're not passing through all the context all the time. You can perhaps, it's part of a, I mean I think a lot of the trend on these harnesses will be adding stuff to minimize your pass on frontier models and part of that will be having memory, right? It also leads to a better experience, right? I think that I actually just went in and tried to see, has it been switched on in mine yet because it just makes a ton of sense. You should know who I am after I look up 20VC podcast, you know, I'm probably here to look at my 20VC podcast research here, guys. So it just makes a ton of sense.
Most people know who you are now.
No, no, I'm saying, but my OpenAI sometimes does them. So yeah, it's a really, it's absolutely, it's one of the necessary to-dos and they're doing it and it's great. I just want, you pulled a face when Jason said about Apple giving up on AI with Gemini.
You're moving on to that. That was an interesting one. Ben Thompson, he did a really good piece on it this morning. I was reading, is that I think to some extent they're giving in the sense of they're paying Google a billion dollars to use their model as the default model, but reminder Google pays them I think 12 or 20, I used to know the number, $20 billion to be the default search engine, so it's a minor offset. I give them credit. I actually think that they're making some, yes it would be better if they had their own model, but they're making progress on the use cases that just make a ton of sense for the consumer. And I think it was, you, I think the amount of context you have when you're on someone's phone is such that they can, they should be able to deliver a unique and compelling consumer experience for the kind of things they demoed. And the thing about knowing context, on which Rory, it's like, it's like to your memory comment, Jason, it's like you knowing which Rory, how he's talking about knowing your calendar, knowing everything and deliver a much better experience. Now should they have been able to do it with their own model? Yeah, but the bottom line is they control the handset and for the consumer it's a pretty powerful product. So I think they're in a good position to make products. I don't think they're giving up. I actually think they're pragmatically saying we kind of screwed it up and not have our own model. But that's actually not what matters for us for Apple. What matters for us Apple is delivering an amazing experience to our consumers because if we do that they'll keep buying handsets and if keep buying handsets we can probably afford to give someone a billion bucks a year, right? So I give them credit for getting their together. I mean, yeah, it is stunning that Siri is so bad for so long. So, I think actually trying to fix it is just awesome. So, I give them credit for a step in the right direction, right? Is my takeaway from it. So, the opposite. I don't think they're giving up. I think they're doing what it needs to win coming from behind. And they have a great position.
I think it's interesting. The person you have to think about this a lot with obviously is if you're OpenAI versus if you're Anthropic because Anthropic has made the enterprise bet and OpenAI in part has made the consumer bet. And you know, I like my OpenAI subscription because I sit at my desk and I do research, but for a lot, I mean it was a great line and give Ben Thompson credit. He said very clear, I've thought it but hadn't read anyone say it clear. He said consumers don't want to work. There's not a big market for consumers in their non-working life to do a whole bunch of, you know, complex, you know, research or kind of using AI for productivity. They just want, you know, delightful experiences because they want to relax and entertain. So, I think actually, you know, the consumer space is going to be a tougher space for OpenAI. The enterprise space has really been validated because in enterprise it's all about automation, efficiency, and the consumer space, it's about experiences. Apple's well placed to do that. OpenAI's got to compete with that and compete with Google. And you know, it's a tough space, especially if Apple's getting their together.
Well, speaking of consumers not wanting to work, soon they won't have to. Uber cuts 23% of HR.
Make Jason happy. We can now...
I'm so sorry. Obviously, it's people losing jobs. It's terribly sad. But I'm the one who said no great CEO likes HR and everyone got angry at me and then everyone starts cutting HR. Anything of note here from Uber cutting 23% of HR, remote work rescinded, 3-day in-office mandate. Company denies AI played a role despite 95% of engineers using it daily. Anything of note there?
Well, look, HR and recruiting, right, which let's consider them different, are the easiest things to cut, right? They're, recruiting is, you know, you always see any big tech leader stumble a little bit and they lay off 30% of the recruiting department. Well, you're going to, you often want them back. I always wonder, I always think this is, I mean, it makes sense on paper, right? The HR one will be interesting. I mean, we've put out a call for someone to report to our AI VP of marketing, and I've gotten my head cut off a lot on social media for that by people not, it's okay, not really listening to what I'm saying about that. But I do think HR is one of these areas that in many parts of it will be better managed by AI. I think an AI can be a better VP of HR for certain parts of the job than a biased human. I think there are advantages to having an AI VP of HR. Not, I don't want to get rid of all of the humans or even lay people off, but an AI VP of HR can evaluate every single thing you've ever done, every little bit of your work, all of your issues, whether an AI VP of HR can figure out, hey, maybe it really is your idiot boss, Jason. You know, maybe that really is the problem. It's not you. An AI VP of HR can find out a lot of things and process of ass. So I don't, I think it's an under-discussed area versus other areas, but it should be massively disrupted.
The big picture question in all these areas is, you know, how much efficiency do you get? My gut, it felt 23%. I doubt everyone is automating and saving 23% using AI in the non-engineering departments because adoption there isn't as strong as engineering. Do I think there's some? Of course I do. So my bottom line is, my guess is some portion of this is quote-unquote AI automation. I doubt it's 20% because I'm always calibrating off, you know, what is, I mean it's what percent, it's the Dario number, what percentage of quote-unquote knowledge work is going to be automated and it's knowledge work tasks and then knowledge jobs. Is it 5, is it 10, is it 50 as Dario has said? 23% felt like a lot but whatever. Again, what you don't know is how much of it is just too many folks there and they're just partly rationalizing. So it's a data point. I mean, I think the other data point from Uber is far more interesting, right? Which is not the AI for HR, but the AI for autonomous driving, that they continue to make progress on autonomous driving.
Which stat was that, Rory?
No, there's the one you'd mentioned. I'm sorry. You'd made a point there that they're actually rolling out some more autonomous driving experience in Europe in Madrid, I think. Right. So, you know, and they're kind of partnering with, I think it's a WeRide or some of the technology providers, but you know, it's the...
The big, I mean, you know, if you want to talk automation, driving is one of the biggest targets in terms of the number of humans that do that job. And you know, when you see Uber making experimental progress on robo taxi in Europe, you know, it's something obviously to keep an eye on.
It's all, it's worth pointing out this stuff is still moving way slower than I think people anticipated. It hasn't been, you know, Waymo in San Francisco resulting in, you know, Waymos everywhere within 6 months. It's been a long steady progress for Waymo and Uber's doing what it should do, which is it obviously, this is, I mean the Travis Kalanick devotees would say the failure, the cutting of their autonomous project in 2016 or 17 was a fatal error for Uber. I'm not sure. I think 10 years later they can pick up the thread, which is what they're doing, and catch up on that because it's not like the technology tipped like a domino. But I think they're smart to now start, you know, pushing robo taxis and partnering with technology providers. And this is the, because, you know, the question on the Uber stock is always, oh my god, is robo taxi existential, which is the bad scenario, or the good scenario is lots of people build robo taxi technology and Uber is in a wonderful position to be the coordinating thing because it's the app we use and if they just add 10,000 robo taxis to the fleet, then things continue just fine. Frankly, it's good to see the Europeans do something. I mean, I said this respectfully, Harry, but typically, you know, Europe is the slow technical laggard, especially on stuff like that. So, go Madrid.
Should we discuss the Revolut 115 billion, 115 billion, you know?
I think you're doing that, I'm going to push it. I think you're doing that defensively. You felt I was dissing on you in Europe and you're basically implicitly saying, 'Oh, look at Revolut. It's amazing.'
Correct. Correct. And it is amazing. And you know why it exists? Because the European banks, unlike the American banks in general, are so crappy. There's a reason that Revolut's worth 115 billion. Because the incumbent European banks were fat, dumb, and happy and making margin off their customers. And there's a reason why Chime is worth 5 billion. Still a great outcome, by the way. That's because the US banks on average are a little more efficient.
That's also why Nubank is such a valuable business because...
The Brazilian banks were inefficient. I think all these fintechs, they can be, I mean it really is a, I mean it's proven markets, it's a function of how egregiously priced the incumbents are. And you know, Europe especially when it had non-single currency, you had all this foreign exchange because you guys aren't into Euro, you had, you know, the FX charges, you had all this transfer stuff and Revolut just blew a hole through that. So I think it's amazing and I know you're a big fan of the CEO and I think it's, I wish them all the best and pound those old school European banks into the dirt.
