I think Zuck's had a lonely stretch. I think it's been a tough job. There's a material chance Meta has just a monster AI product on his hands. What is on the agenda today? We have Valor Atomics sues its own pre-seed investor day one and the pro rata debate that ensued on Twitter. Then we have Meta, Zuck, and Alex Wang. The bromance is real. They're crushing it with Muse Wonder, their new model. And then big tech, they go shopping. Amazon in talks to buy Daycart and Nvidia circling around Reflection for a whopping $30 billion. This and so much more.
We roughly generated 20 plus or minus decacorns per decade for the last five decades. And we generated 42 decacorns in less than a full year of this decade.
I think everyone without massive scale is living a worse apocalypse than in March or April because no one wants to buy software. Everyone's breathing a sigh of relief. I don't think we should be breathing any size of relief. Ready to go, boys.
It is my favorite 90 minutes of the week. We have some big stories. I love the like salaciousness of this market. I remember when it was quite boring. I look back. And so we're going to start off with the news of the day. Valor Atomics sues its seed investor over pro rata. And so the backdrop here is that Day One Ventures put about a million dollars into the seed and $15 million into the A. They hold about 5% and the fight is over August's billion dollar Series B at 6 billion led by Sequoia. And basically the CEO asked every major investor to take zero Series B allocation, but there's a springback clause which basically meant that Day One wouldn't relinquish this and basically put up a bit of a fuss when everyone else didn't. How did we think about this? And is pro rata outdated in modern venture?
And just to remind everyone, pro rata simply means if you want 5% of the company, you can get 5% of any round. And so you can quote protect your ownership. Typically all major investors get that right. But it's typical also that a majority of the investors can waive it for everyone. So someone can say, hey, you know, if most of us don't want to do this because we want to do a different thing for the company that's right for the company, normally you should just be able to waive it and then those rights go away for everyone. So it cancels the problem entirely. But then you mentioned it. The second thing is you have these weird springback rights, which it's something like if we waive our pro rata rights and then one of the investors who had pro rata rights gets to put some money in, then you can say, hey, you waived, but then you took care of yourself specially. That's kind of unfair. It's not really a fair vote. So I get my springback rights too. And that's what I think they want. It was asserting at one point in time, and there's actually another level of that, but those are the two big rights.
I think as usual in these disputes, no one's 100% right. It's rare. It's rare in life. There are disputes where someone's 100% in the wrong, and even when you look back, you might say, you know what, maybe I contributed just a little bit to that. Here's my read of the situation for what it's worth. Here's the more interesting thing. What happened? I listen, we only can read the tweets, right? And I love the fact that immediately everyone was all over it saying that Day One was suing their portfolio company, which was completely wrong, right? It's quite the opposite, right? They may have hired Quinn Emanuel, now a notorious firm, but it's Valor that wants declaratory judgment to move on. They just want an answer, right? So all of a sudden X decided that Day One had sued their portfolio company, which wasn't true. The other thing that I think, if I read what Masha, who's my co-investor and owner, I don't know her that well, but I have observed her behavior, and she's a good investor. It sounds like to Rory's point, what really happened was Sequoia came in very aggressively and said, we're going to make you a great offer. We're going to make you a fast offer. It's clean. It's simple. And just like Sequoia and Index and others do, everyone has to waive their pro rata so that we can get our ownership target. And I can say as a seed investor, this happens all the time. It happens all the time. The big funds, in fact, they put in their term sheet without even checking it. Their lawyers immediately put in that my pro rata is waived in every single round. Okay. So it happened here, probably annoyed Day One because they clearly had, even though they're a $450 million total fund, they have more funds, whether it's SPV or whatever. So this annoyed them. They want to do the pro rata. So be it. And then Valor said, oh, we're actually letting one of our investors invest because they're strategic. Now, this might piss me off too. First of all, if they're strategic, they're already on the cap table. You got the strategy. You already got the strategy you need. If they're a new investor, right? If someone wants to invest and help this nuclear startup go further that's truly strategic, let them the hell in, right? But this is someone already on the cap table that wants to own more, which I get. That probably means they're adding more nominal value than your early investor, which I get, but this is the whole point, right? You're not supposed to play favorites. And so I get all of it. Having said all of this, I've observed versions of this many times. I've observed VCs suing their portfolio companies for doing the wrong thing. When founders have decided to do this, you just got to get with the program. At the end of the day, when the founders are in the wrong here, and the big funds often convince founders to do some things that are a little bit wrong, you just got to get with the program. It's not your company. You got to get with the program and agree with it.
To be clear, say, hey, that feels unfair, but I accept. I'm not going to waste time with Mr. Quinn and Mr. Emanuel. I'm just going to go with it. Is that what you're saying?
You might even listen if you feel so wronged. And I'll tell you why I think that Day One feels wronged if you want. If you feel so wronged, maybe you do send a letter, okay? And maybe you don't hire Quinn Emanuel. Maybe you hire Stebbings and O'Driscoll because they're not quite as intimidating. Maybe once in a while you send a letter, which you shouldn't, but you do. But then you got to let it go. You just got to get in line and move on. It's not your company. It is not your cap table. And this isn't just assets. These aren't just, I mean, the founders have to work at this company for 20 years, right? That's the uncomfortable part.
But the fact that they bridged the company when no one else would, led the rounds when no one else would, and then were discarded later, you know, that can hurt. It's happened to me several times and it hurts as a human being. It does hurt as a human. I didn't have a hundred million lined up to do the Valor round, don't get me wrong, but multiple times I've had three or four portfolio companies where with a small fund I had to bridge or do an A, B or C, which I don't even have the resources to do, and then sometimes the founders just forget it even happened and that would bother me.
So I actually agree with everything you said there, Jason. The challenge is you are seeing people like Ali Povvi, who's a fantastic investor who's made a lot of money for his investors and he's brilliant, come out and say...
I nominated him last year for investor of the year, right?
They come out and say we waive our rights and we don't think it's right, and many great investors support him. There is a moving tide towards pro rata rights not being...
Yeah. But you know why he said that is because his fund doesn't need them. His fund doesn't need them.
Yeah. Yes. I mean, because you then have the Gary Tan comment on how pro rata rights is what made his IRR and I think Initialized one of his funds on Coinbase, right?
I think look, if your model is all seed and no follow, then you can waive your pro rata rights no matter what. I mean, the interesting question is will the mega fund be waiving its pro rata rights? In other words, is Sequoia coming into this round saying I'm not going to take anything on the follow-on round? So I mean, to me, I always think anything that a majority can control in a cap table which is heterogeneous where there's lots of people should be roughly fair, right? If a majority can waive pro rata rights, if it's good for the company, you know, typically two or three of the VC investors can get you there and it should all be fine would be my assumption most of the time, right? I do think for the seed guys, I mean, I'm not a seed investor obviously, but I can see why it sticks in the throat of a seed investor who takes all these risks and you know, most of the deals don't work out and only a few of them work out well and they're going to want to grab some of that when the guys coming in later say, oh, thanks for everything and now you should waive. So, I totally see that.
So, is it complete that we have to just let the big platforms come in with term sheets that automatically waive our rights?
Well, look, I would say you see, look, there's obviously many types of rounds, but I would say roughly there's two later stage rounds, okay? There is the Sequoia, Index or whomever that wants to take all of it. They have the resources, the capability, the fund size and they've been very aggressive for 20 years, right? These terms are not new. We take the whole round, everyone waves. This is not a new thing. Some funds do that and then or sometimes you'll find other investors that are growth stage that their target's 5% or 7% and all of a sudden everyone can play in the round. It really seems like there's two types and founders get really pressured to go along with the program. Look, the Sequoia brand is super powerful, right? It has been since the 1870s and you're treated with love and you're paraded in the office and you're given these days you're given a very generous evaluation set of terms, right? And you're given help and you feel great. And I just ask one ask. We have a target, Harry, and we just need to own 15% of the company, 10% of the company. I just ask that you let us do the whole thing. And nine times out of 10, founders agree to it without thinking. And maybe that's the right thing to do. Maybe it's not. But there's another category of investors that that's not their target, right? There's plenty of growth funds that isn't. And it's just the way the sharp elbows are in the industry. This is not an industry full of soft cushy elbows. And it's just a messy, messy way for it to spill out, right?
So Jason, you're on the side of Day One. Rory?
I think everyone's wrong here.
I think it went too far. I think the CEO handled it poorly and said he wished they'd never been an investor when they clearly bailed him out multiple times. That's not cool, right? And hiring Quinn Emanuel for a very aggressive investor is a step too far. They both did the wrong thing.
Yeah, I agree. Because I think play it out here. I mean, I'm just wondering because I mean, now down in the weeds of what are you actually going to win here? Like whenever you start an argument, and I do this a lot too, you forget to ask yourself what are you going to win, right? Because first of all, you've waived your pro rata rights. So you own 5%. You're not going to get 5% of the round because someone's waived the rights, right? Once that's happened, it's all up for grabs. The springback is only proportional to how much the other person who got to come in on springback rights puts in. In other words, if the strategic got to put in 5 million, then your ratio is relative to that. So it might be a whole ton of money anyway, right? So you're suing for the right to get 10 or 15 million bucks in at 5 billion, 6 billion pre when you already own 5% of the company, which is worth $300 million. What are you doing here? Right? Even if it's $100 million, right? You have your win. Picking this fight's a mistake. Whenever you pick a fight with a founder, and occasionally you do it when you're not thinking, it's just not worth it. I'm kind of with Jason. Both people can be intellectually wrong but pragmatically right. Pragmatically this is a, you know, whine and say I'm hurt and then move on. Right. And we've left out the whole Russia Epstein dimension. There's a whole bunch of noise around that that's very Twitter-centric about Day One and I know nothing about it. I'm going to acknowledge it and I'm sure at some point it'll be used in the defense. But I think forget that, leaving that aside even, I think the pragmatic thing is what are you fighting for relative to what you already have? Why are you doing this?
That's just my, for what it's worth, that's just my life lesson is listen, if you are quote air quote wronged by a founder as a VC, raise, in fact it happened to me once with Harry years ago. Raise it, raise it once and let it go. Raise it once. I made this mistake once years ago. Around years ago, Harry doesn't even know. He wrote a small check into a company he didn't know and a very large fund. This is one of the rare cases where I wanted my pro rata. It was important to me. I don't really care after the second check, but I needed to get my second check in. And I love this guy Harry Stebbings, but I get an email that Harry's investing in the round. And I'm cut back to zero. And I'm like, I was the only investor in this company for years. I bridged you. I helped you. I've been the only one. And I love Harry, but I know he has this fabulous podcast, but why is Harry getting an allocation and I get nothing? This is a true story. And I think that when I said it that way, and I shouldn't have quite said it the way I did, it was so obviously wrong that Harry got his allocation that it really bent the relationship with the founder. It didn't break it, but it bent it, right? Because there was no good answer to why Harry gets his allocation and I don't. And it took me and I learned from that, don't even say it because the decision's been made. It doesn't matter if it's right or wrong. Let it go. It doesn't matter.
But Jason, I felt a real bond with you as a result of that. You sacrificed... this was five or six years ago. You never even knew until today.
Dude, I have no idea what company you're even talking about right now. I hope it's a good one.
But you got to let it go. You got to let it go, right? And Jason, I thought that was incredibly nuanced commentary by the way from you on that. I was very impressed. The interesting thing for this is everyone's so biased on this issue. I've never seen more crap, more selfish takes on Twitter that are seen as generous. Like, you know, I'm only a pure seed investor. I don't need pro rata, right? And then you see other folks who are like, this is the most important right, it's under the constitution of venture capital investing. You peel the layer back, everyone's biased in the answer they give, right? It's just you can't get a straight answer on this, right? The only thoughtful answer I ever heard the last time this issue came up a couple years ago, I remember what Keith Rabois wrote, which was I thought a simple answer. He's like, you could get rid of pro rata, but it's core to our business model as larger funds. Maybe it was at Founders Fund at the time, right? And he's like, I just have to pay a much lower price then worst case.
Right. If I'm investing early with an expectation I can follow on later, I'm comfortable overpaying in the early round for my pro rata. I'd have to pay like half the price I'm paying otherwise. Are you comfortable with that, founders? And the crickets, no one said, I'm willing to raise at half the price for no pro rata.
Yes, you can value an option and you're exactly right, Keith, right? You can value an option and deduct it from the price. You're exactly right.
It has a value, right? You know, and it is worth, as I said and you said it, Jason, all the people, even the mega funds who are coming in saying you guys should waive your rights ain't fixing to waive theirs, which should be a clue about the real value thereof.
You wave, but I ain't waving mine.
Moving swiftly on. I love the bromance and partnership that is Zuck and Alex W.
I just, it's like uplifting in ways. They're cool to see together. I like how they match. I like how they match. That's my favorite part. The outfits match.
Did you see Zuck drinking the Guinness in the cheeky pint and then he pulls away and it's like clear that he's never tried Guinness before and he hates it? But Meta is back at the frontier with a new model, Muse Wonder, just shy of Opus 5.5 on Independent Index. Let's start there. I don't want to add too much. How do we think about this, guys? Another meaningful movement from Meta into the model layer. Even more pros for Zuck.
Yeah, because there's no API. We can't even use it. Like it's only for internal use by Meta. So who, like this is the most performative eval I've seen to date of a never-ending spiral of performative evals. I'm not saying they're not nominally true. I'm not saying that you don't want to celebrate the team, congratulate the team. You do want to do it. Clearly the team has done good work at some level, right? But I'm for the show. I'm like, okay, look, I'll hook it up, you know? Oh, it's, you can't use it. You can use it if you're in Muse. So what's the point of a model that allegedly has parity for the same price? It's not even cheaper. And you can't use it. This is the height of a performative eval.
It's available in Muse Code. It said it had a Meta API as well. I didn't check the API. Are you saying it's not up yet?
You can't put it into your own app. No.
Okay, got it. That's a fair comment from a business impact, but nonetheless, you have to give him credit for getting, you know, at the risk of sounding like someone we all know, back in the arena. You know, they were competitive early on with open weight, then they kind of faded back way to the back of the pack, and now they're up front again, not notably with closed source models. So we've decided that if we're going to spend $100 billion, we at least be able to charge for the damn thing is the takeaway, right? And you know, it'll be interesting to see if anything comes in the enterprise business, but at the very least, you know, the Muse Instinct war will now be powered by a supermodel model. But yeah, I thought that's the takeaway. And yeah, $12 billion got you more than you thought a year ago.
Yeah. And to the body language thing, got him a right-hand man.
Yeah. And great tweets. That's what I saw on the Cheeky Pint thing. It is, I think Zuck's had a lonely stretch.
I think it's been a tough job. No, no, it's hard being a founder CEO. Totally. It's been lonely and I think it's been lonely since the beginning. It's been lonely before the IPO. I think he had Sheryl Sandberg back in the day. He's had others, but clearly he, you know, having it, it's not easy to pay someone $10 billion and have them stick around and work that hard. Like it's easier said than done, right? And it's even harder to find someone you can truly trust in that body language, right? It's key to making this work, right? I know he's got all the other folks, the Nat Freemans and the Daniel Grosses and all these guys, but hard to get a right-hand person. It's hard. So I think that's the untold story to Rory's point. This may have been a great deal for Scale, right? It may turn out, we kind of almost laughed at it when it happened. Not literally, right? But it may turn out to be the next WhatsApp or Instagram. But I, you know, the more interesting, I wasn't that impressed with the model I can't use. Hard for me to get too excited, right? The fact that, you know, it's just going to make the Muse app better though is super interesting. I really, the world changes so fast, but I think there's a material chance Meta has just a monster AI product on its hands. Just the amount of investment into it is so high. The capabilities are so high, the autonomy is so high, and now you're going to make it 10 or 15 times more powerful. I mean, you know, this could do better than the AR/VR goggle stuff.
Jason, have you tried Instinct now? I've got my 22 invites and I appreciate it, but I will for the next show.
Oh, wow. Okay. Dude, I'd be interested to hear what you think. Yeah. Rory, are you on Instinct or Muse?
Yeah. No, I try both of them. I mean, I just do boring. I don't need it to tell me, you know, the meaning of life, but I use restaurants and travel and, you know, basically, you know, what should I do and stuff. And I have a daily tech update from both of them that when I remember, I compare and contrast. So, yeah, I mean, it's a nice product. I mean, I'm deriving value from it. Yeah. A funny little story before Muse Wonder this last week, our Muse and Replit kind of like Hugging Face and the OpenAI issue set up their own private bulletin board to talk. They built it, Muse and Replit, on their own without telling us to solve some issues. And they did share it and then disclose where it was. And luckily the communications were in English, but they didn't want to wait for conversation to go back and forth. So they set up their own bulletin boards inside of Replit so they could talk and work on applications around the clock.
The amount of Muse and Instinct competitors right now is pretty astonishing.
Really. Okay, big tech goes shopping, baby. We have two rumors that are circulating. Obviously, we don't deal in rumors. So I'd love to start with the first one. Reflection, which for those that don't know is a fantastic team building open source models in the US, backed by Sequoia. I think the last round was at $25 billion or so. And the rumor is that Nvidia is buying them at a $30 billion price. This is on the back of them buying Poolside for $12 billion, which is in the open model game as well. Guys, how do we analyze Jensen further going into the open model space? And by further, just to be clear, you're reminding us that they already bought Poolside, they already have their Neotron existing model.
And I think the answer is, as we've discussed several times, if you're in the chip business and all you know, and your biggest customers are some of your biggest customers are closed source model companies, zooming out, if you've got a pile of money that's going to go into that collective pool, it's in your interest that more of it stay with you and the chips and less of it stay with the model companies, right? So by definition, you love open source models and only one chip provider, just like on the other side of the table, the model companies love closed source models and everyone having their own chip provider, right? So it's, you know, we're friends. We're the best of friends. We lend each other a hundred billion dollars or so, but we're watching you closely and we want to be able to fight back if you get margin greedy. So it just all makes sense. Do you think it'll go through, Rory?
When you've got $5 trillion, if you want to buy something for $30 billion, you can buy something for $30 billion. Whether or not there'll be that whole pushback after the Groq thing, will the structure of an acqui-hire work now or will there be pushback? Who knows? The world is pretty busy right now. It's not like these next two months are going to be idle time for the US government. So who knows? But I think that they'll try. If you're on the board, would you say sell or would you say reject?
Or I'd hit the bid. I mean, because they're amazing companies, but the standalone business, you know, if you have an open-weight model, you know, you're relying a lot of the monetization is inference. Are you in that? I've always thought open-weight is really exciting, but how does it work monetarily? You know, if you're getting these kind of excess prices, the value to the acquirer is very high, right? And the market cap of the acquirer is very high. This might be a moment in time that doesn't come back.
It's also honestly, I have been on the other side of it. It's very stressful to say no to Nvidia knowing that they're going to directly compete with you and promote your competitor. If you don't, like we're doing this, we're investing $50 billion, $100 billion in our own open-weights model, US-based open. We're going to continue to do this, this isn't a one-off, and you have a chance to take seven or nine billion, but if you don't, we're going to be a bigger and better competitor. It's not a simple, you can say no, but it is a little scary. It's a little scary when you say no and they're going to buy other people and get bigger and bigger. It doesn't change the game, but as a founder, it certainly weighs on you when you get that build-by-our-partner sort of threatened-with-a-smile message, right? Yeah. So I would take it unless you're confident. You got to have the winning hand. And you know, we don't know where it's going to go, but you know, Salesforce announced they've got their own models that are built on Neotron and built with Nvidia. You know, you got to predict where this is going to be in 18 months with Nvidia putting all of its software engineers and all of its team behind it, right? This is a software company, not just a hardware company. And I don't know, you could imagine that the moat here between software, hardware, model is so powerful that in 12 or 18 months, why would you want to use any other sort of open-weight open model other than Nvidia's? Like today it doesn't seem logical, but I could imagine it being the case in 18 months. It's just such a perfect combination.
Does it make Thinking Machines more or less attractive at $44 billion, which is the round that they're raising now? Do you get pro rata rights in the round? Do we have a sense? Do we know?
Good question. Let me just check.
Otherwise, I'm lower substantially to Keith's point.
As long as there's either a large acquirer to get paid more or an obvious clear business model. I mean, there's examples on both sides of the table. There's companies who were last and made a ton after all the early guys sold, and there's companies where the early guys made a ton of money and then everyone after that kind of, sorry, they're still in it. It's all so situation dependent. It's useless to have an ironclad rule. You know, you just got to know what the game here is. And again, I go back to if you know, I believe Thinking Machines has grown nicely in revenue, but you've got to have a lot of clarity on revenue and revenue visibility to make that call. Now, you know, we're just going to see. I mean, by the time it's interesting, we're recording on Tuesday, publishing on Thursday, and on Wednesday, Anthropic's doing its investor meeting, and I assume the Q3 revenue numbers will leak within 24 hours. So, you know, it's not like there aren't big revenues attached to these businesses. They're the biggest revenues ever seen. But the only question is, you know, how will it shake out?
How does it shake out for, you know, one level down like Thinking Machines?
The sort of Poolside, why we're selling, memo that we just couldn't get enough compute, we just couldn't afford it, we could not keep up with the arms race. I mean, it does sort of, it's not as simple as $44 billion versus whatever. Can you even get the compute to be competitive? Like, I don't know. I don't know. You need someone that's even closer to it than I am, but my gut is no. My gut is you can't get enough compute to be competitive. Everything's being taken. Right. Even Anthropic's reaching out to Muse saying, can we get some of your computes? Right. Maybe they'll give it to Thinking Machines. I don't know. But that war has just begun. You can't even get memory, let alone compute. It's not as simple as software, right? So I don't know.
It's time for investment committee. Jason, on the agenda for today, we have Jev and Typesafe, the parent company, raises an $870 million Series A at a $7.5 billion valuation weeks after launching Jev. Andreessen, Sequoia participating, one of the largest Series A rounds ever.
What, Jason? Will we be participating in this round at $7.5 billion? Well, listen, obviously we're lucky to get into the second close because there's plenty of money that wants to get in at 10, 12, and even 15 today. So I recommend, we can't even get our full allocation. I recommend we put in the maximum amount we can out of the fund because it's already valued more than this, right? That valuation is several weeks stale. And Jev usage has quadrupled just since Andreessen actually shook hands on the deal. So we have no choice. We have to be all in and get every share we can. I'm asking that we can get all the early investors to waive their pro rata. That's my only requirement, but we want to put in every share we can. Are we worried about competition? Are we worried that it appears that Cloudflare already has a competitive product? Are we worried that OpenAI appears to be having a competitive product? Are we worried that Anthropic could even give this away for free? Are we worried that Amazon has suggested they're building their own version of Jev? We are. But growth like this is the point of venture, boys, and if we don't do this, we should just stay home. We're raising new funds every 12 to 13 months. These are massive funds. We have to deploy it into winners. And to be clear, and we have years of data on this, not every winner wins, but you can only win by being in the winners. This is a winner. Will it be a winner in a year? I don't know. It is one of the massive breakout winners today. We're still getting to invest at $7.5 billion. We can probably do a paper mark up to 15 and tell our LPs we're geniuses. I say we buy every share, block the pro rata, and do as much founder secondary as we can.
The terrible thing about that parody is it's accurate as hell.
Totally. It's not a parody at all.
It makes you realize, yes, you can do this job in three-minute sound bites. But yeah, no, that's the story here. What... Jason, can you paint the upside for me on Jev? How does this become a wildly successful massive company? Where's the $500 billion?
I'll tell you, just at a tactical level, at a builder level, right? Which is that, you know, no models are particularly, going back to the eval, whatever, the Muse Turbo, none of these hit 90s or 100. All these models make many errors and many issues. Okay, they're not reliable. I can tell you endless issues from this week. I, you know, Jev is a classifier, which we're now in classifier 2.0, or like an AI, and it works, and it's maybe it gets 70% to 80% of carefully prompted matches right. Will the Cloudflare team keep putting as much effort in as a standalone team? Will Amazon? Will OpenRouter? Will all these people try as hard, or will these be niche products with not enough revenue that they don't have time to invest in, and that these guys at Jev just make classifiers do something they couldn't do before, get incredibly high resolution rates, and then they can expand and understand it? You know, right now it can basically answer simple, you know, you can ask relatively complicated questions, but you only get binary outputs. That's why it works so well, right? Rory or Harry? Who's my better investor? Rory. Harry. Rory. Rory. They're going to get better and better and better. And I don't know that even if the Cloudflare, Amazon teams can catch up today, when it's easy, it's easy to build what OpenRouter was six months ago today, right? But are they going to maintain that investment? And I think as VCs, we have to make this stressful investment that a core team that is very strong out of OpenAI that is doing nothing else will pull ahead from the seeming parity you can achieve today. I'm actually willing to make that bet. Because I'm using Jev a lot and I can already see that if it never changed, maybe I would swap it out, right? But if it gets better than the rest, there's no way I would change. Even just somewhat better on its evals, you would never use anything else. So I would still make that bet today that this team will do nothing else. And I don't think the inference costs are going to destroy them. I think the 750, this is a low inference model. I don't know the training cost. I think 750 gets you pretty far in this for real. I think it gets you further than it gets you Thinking Machines. It might get you two or three years of runway. So I'm cautiously bullish that a focused team, rather than four smart kids at Cloudflare, can maintain its lead and get to accuracy levels to summarize that were never possible before. That's the unlock. Jev is super fast and super cheap. Okay. And it is accurate enough to use for maybe 10% of your AI use cases. If they make it hyper accurate, it changes the game. It changes the game.
And that's the theory on the, just to get back to the numbers. If it's 20% of your total, we just said this I think two weeks ago. If total AI frontier inference is a $200 billion market, which it better be in a year or two or we're all in trouble, then 20% of that is 40 billion. And if the price of that goes down by, you know, 80%, you're still at 8 billion. And 8 billion, and if they get half of it, that's a $45 billion revenue company, which is probably worth 50 billion. That's the case. Every one of those sentences is credible. I think the biggest question is, you know, the other competition. But to Jason's point, the business is there.
What worries me in every justification for a lot of these prices is, wow, the liquidation preference is only a billion one and it's such a strategic asset with a good team that the downside protection is that'll just get bought by a great acquirer. I just hear this every single time. And maybe that's true, but not everything has a downside protection of being acquired. Does it?
It does until it does. I mean, it does until it doesn't. And that's meant to be glib, but look, in a world where you've got 12 companies above a trillion dollars, all of whom are acquisitive, all of whom are in a wild tearing hurry to build companies where time is money, then, and especially if the legal window is open, then there's going to be a lot of acquisitions. And the logic is true, right? If the market slows down, then all this stuff will go in a bad place at the same time, right? So, you know, it'll be true until it's not.
I think it's overstated. I will say today it feels like a liquidation preference in Jev is much more valuable than a thousand liquidation preferences from a thousand 2021 unicorns. Those are worthless. Many of those will end up being worthless. So we overstate the value of the liquidation preference, right, to get the deal through the committee.
But they have real value today, right?
It's just I'd rather have this liquidation preference than quite a few from 2021.
Okay. You said 2021 there, Jason. 2021, there were 34 decacorns. Yeah. We now have a record 42 startups that have become decacorns in 2026. As they say in the Simpsons cartoon, that's 2026 so far, right? With a quarter to go. Yeah. There was 34 decacorns in 2021, right? Right? So in other words, we have more decacorns than the last time things went horribly wrong. That's the first obvious description. Because if you look back at those decacorns, Miro was a decacorn in 2021. You know, Airtable was a decacorn. I don't think they'll be the same, but just worth pointing out. I think the more funny statistic is this. There are in the public markets a grand total of 98 decacorns ever, right? And if you look at them by decade, there's a scary word. It's like, and you take the private and the public decacorns as of the start of this year, we roughly generated 20 plus or minus decacorns per decade for the last five decades. And we generated, what did you say, 42 decacorns in less than a full year of this decade. Now there is some obviously market caps continually go up. All those things point in your favor. But it is stunning to think of 20 to 30 decacorns per decade and then 42 decacorns in less than a year. And you know, that does only, that does only 98 public companies. I just got to 98 above 10 billion, another 30 above 100 billion. So 130 companies in total worth 10 billion or more since the dawn of, in tech, since the dawn of American capitalism and a further 42 this year.
Right. Like scratching the obvious itch there. You're basically saying that we're in a bubble.
I don't know if I'm saying, you're trying to make me say I'm in a bubble. I just think that, well, we got the prefs as Jason points out, so we're all fine. But what you can say for certain is that production rate of decacorns is higher compared to anything we've seen before, including five decades of data in the public markets. Right. It definitely, I mean, either this is the most economically transformative event since the Industrial Revolution or we're getting a wee bit ahead of ourselves.
Which would you pick, Rory?
Maybe the better answer is this. I'm actually going to go back to the pref answer. Right. It's kind of funny because you have to remember all these private company valuations, that valuation is set by someone who does have a liq pref, right? And once you have a liq pref and you believe it exists, you can say to yourself, unlike a common stock where it trades every day, you can say it's a 1x plus option value, right? And the thing right now is option values have high value because there's a lot of, apparently three companies in this decade will become worth a trillion dollars, many will become worth 100 billion. And it's rational to say there's some nonzero probability this company becomes freaking amazing and my downside is a 1x. To make it concrete, I don't think all these stocks would trade at 10 billion or more if they all traded on the public markets.
That's not giving me an answer.
Well, we're all betting this is true, right? I mean, Menlo had some math when they raised their last fund. It was, I think it was a $3 billion fund maybe, right, to deploy the next 12 months, that they're betting they'll have at least four $25 billion plus exits to make the fund, right? That's just the math. It's not complicated, right? That they can do that like clockwork. That's the bet. The AI spend and the recent exits of the last X months justify it. Historical evidence makes it suspect. So are you living the moment or are you living as a student of history? I just don't think in venture there's a lot of upside in being a student of history, even though we have one starring on the show, which I'm grateful for, but I don't know if it gets you the huge carry checks.
And in fact, as I looked at this data, which one of my colleagues was doing for something else, I think what you actually realized you need to do is then you say, okay, if you extrapolate, what level of growth are you assuming to make this math work? Because yes, Jason, you are. In other words, because every decade it looks bigger than the last decade with the exception of the 1970s because stocks go up, right? But the question is, I mean, you made a comment, 425 billion plus outcomes, right? And in a world where there are only 130 above 10 billion ever. So there's probably only 70 above 25, right? And so you got to get four new ones. It's doable, but you can't miss a lot here, dude.
That's what Andreessen got so right. People, when we started our investing, well, maybe pre my investing career, but people mocked Andreessen in the early days for overpaying and doing this wrong and saying we have to be in all the winners. And they just did the math. Yes, you have to be in all the winners and even a lot of the winners you won't make money in because you'll overpay, but the super winners will make up for all of it. It's just basic. And all the Yahoos mocked them and they were completely right. The price of overpaying for a winner is being in the super winner.
Well, talking of super winners, Jason, do you want to come back to the investment committee? We can do a deep dive. Damis, the legend that is Damisaris,
raised about $10 billion, give or take, from Thrive a matter of months ago. Now, Isomorphic Labs, his company, in talks to raise at a $40 to $50 billion price. We can do this. I mean, generational talent is generational pricing today. Certainly, as much as I believe in the GPT teams and the TypeScript teams, he's going to pull together a team like never been seen since the dawn of mankind in artificial intelligence. Maybe he fails. Maybe he's had enough of it. Maybe he's enjoyed life in London too much, too many posh clubs. But I think I've seen the fire, and it is a scary bet. We have our liquidation preference, and no one will be able to assemble a set of talent like this. This is the next and last generational chance to cherry-pick the best of the best of the best, and this is the job. I think.
The interesting thing about this company will be that unlike the vast bulk of the revenues that come from the foundation models, where it's, you know, intelligence automation, where the value capture is replace labor, right here the value capture is not replace labor, it's actually make science discoveries, right? Because, you know, when you discover, when you do a molecule, if you automate the $500 million of science spend that you pay science wages to, that's not really going to cut it. What you really want to do is, you know, when you create the $200 billion drug, you want to get 10% of that on a royalty basis. So it's kind of as the models devour all the knowledge worker dollars that are available to them in terms of direct replacement, at some point they're going to have to monetize via creating whole new things with their intelligence. And yeah, it's a lot more credible today just given the amount of math, the recent work they did on math, which, as one mathematician correctly pointed out, isn't really that — yeah, you don't actually get paid a whole ton for solving Stokes-Navier or whatever it is, but if you can discover the next GLP drug, that's a winner because those things do make money. So it's kind of — it will be interesting to see. I have in the past said it's hard to get the drug companies to extract meaningful royalties when they still got to do phase one, phase two, phase three, and many of these companies end up being drug companies down the line. It'll be interesting to see what happens here, but it's where there's a big pile of money if you can extract the value, not just from a labor percentage. Sorry, that was a long one.
No, no, I think we're all going to be on 10 GLP-1-like drugs in a few years. And I think, you know, we never really got the full story on Anthropic's wet lab. I think the potential here is even greater than is led on. I think the potential for drug discovery is probably massive. And, you know, we're going from weirdos microdosing to finding out we're all going to have a set of drugs that dramatically extend longevity and quality of life. And yeah, if they can radically accelerate it, own the IP, and have other people do the hard work, maybe AI really can reboot the entire industry fairly rapidly. Not all of it. Of course not all of it. Not the trials, not the rest, but man, if you could get a GLP-1 out five years faster.
Jason, do you actually buy that? I don't mean that cynically. You think that's the drug stuff?
Yeah. Only very recently did I buy it. I thought it was wackos and Brian Johnson and crap. What's that?
What caused you to change your mindset?
Because the medical evidence for GLP-1s is so profound. It's so for heart disease, for so many other things. And I think our ability to tailor drugs to extend longevity is the massive market. It's better than inference. You know, if you talk to any physicians at the cutting edge now, they're all saying to anybody, like, your hip or whatever, just don't hurt the other one. Like, just get there — like, in another couple years, the amount of longevity we're going to be able to achieve is so much higher. That I just think the wackos, the microdosers of SF and Brian Johnson made me skeptical. But just the overwhelming evidence of the benefits that almost everyone should be on a GLP-1, right? And the fact that we're going to get better and better at figuring all this stuff out. I mean, we are just walking sets of cancer and heart disease and other things that, having material impacts, will radically extend longevity.
There's a whole sequence of steps before you even have, you know, adequately good molecule identification with some understanding of how it works, and then you still have all the different bio phases. So, as I say, I do believe it'll be harder to capture value than you think, but I'm really glad they're trying.
